<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 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.
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
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<PAGE>
Securities registered pursuant to Section 12(b) of the Act:1
Each of the following classes or series of securities registered pursuant to
Section 12(b) of the Act is registered on the New York Stock Exchange.
Title of each class Registrant
Common Stock, $5 par value The Southern Company
Company obligated mandatorily redeemable preferred
securities, $25 liquidation amount
7.75% Cumulative Quarterly Income Preferred Securities 2
7 1/8% Trust Originated Preferred Securities 3
6.875% Cumulative Quarterly Income Preferred Securities 4
---------------------------------------------------
Class A preferred, cumulative, $25 stated capital Alabama Power Company
5.20% Series 5.83% Series
Senior Notes
7 1/8% Series A 7% Series C
7% Series B 6.75% Series J
Company obligated mandatorily redeemable preferred
securities, $25 liquidation amount
7.375% Trust Preferred Securities 5
7.60% Trust Originated Preferred Securities 6
---------------------------------------------------
Senior Notes Georgia Power Company
6 7/8% Series A 6 5/8% Series D
6.60% Series B
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Trust Preferred Securities 7 7.60% Trust Preferred Securities 8
7.75% Cumulative Quarterly Income Preferred Securities 9
6.85% Trust Preferred Securities 10
------------------------------------------------------
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- --------
1 As of December 31, 1999.
2 Issued by Southern Company Capital Trust III and guaranteed by The Southern
Company.
3 Issued by Southern Company Capital Trust IV and guaranteed by The Southern
Company.
4 Issued by Southern Company Capital Trust V and guaranteed by The Southern
Company.
5 Issued by Alabama Power Capital Trust I and guaranteed by Alabama Power
Company.
6 Issued by Alabama Power Capital Trust II and guaranteed by Alabama Power
Company.
7 Issued by Georgia Power Capital Trust I and guaranteed by Georgia Power
Company.
8 Issued by Georgia Power Capital Trust II and guaranteed by Georgia Power
Company.
9 Issued by Georgia Power Capital Trust III and guaranteed by Georgia Power
Company.
10 Issued by Georgia Power Capital Trust IV and guaranteed by Georgia Power
Company.
<PAGE>
Company obligated mandatorily Gulf Power Company
redeemable preferred securities,
$25 liquidation amount
7.625% Cumulative Quarterly Income Preferred Securities 11
7.00% Cumulative Quarterly Income Preferred Securities 12
------------------------------------------------------
Depositary preferred shares, each Mississippi Power Company
representing one-fourth of a share
of preferred stock,
cumulative, $100 par value
6.32% Series 6.65% Series
Company obligated mandatorily redeemable
preferred securities, $25 liquidation amount
7.75% Trust Originated Preferred Securities 13
---------------------------------------------------
Company obligated mandatorily Savannah Electric and Power Company
redeemablepreferred securities,
$25 liquidation amount
6.85% Trust Preferred Securities 14
Securities registered pursuant to Section 12(g) of the Act:15
Title of each class Registrant
Preferred stock, cumulative, $100 par value Alabama Power Company
4.20% Series 4.60% Series 4.72% Series
4.52% Series 4.64% Series 4.92% Series
Class A preferred, cumulative, $100,000 stated capital
Auction (1993 Series)
Class A preferred, cumulative, $100 stated capital
Auction (1988 Series)
----------------------------------------------------------
Preferred stock, cumulative, $100 stated value Georgia Power Company
$4.60 Series (1954)
----------------------------------------------------------
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- --------
11 Issued by Gulf Power Capital Trust I and guaranteed by Gulf Power Company.
12 Issued by Gulf Power Capital Trust II and guaranteed by Gulf Power Company.
13 Issued by Mississippi Power Capital Trust I and guaranteed by Mississippi
Power Company.
14 Issued by Savannah Electric Capital Trust I and guaranteed by Savannah
Electric and Power Company.
15 As of December 31, 1999.
<PAGE>
Preferred stock, cumulative, $100 par value Gulf Power Company
4.64% Series 5.44% Series
5.16% Series
----------------------------------------------------------
Preferred stock, cumulative, $100 par value Mississippi Power Company
4.40% Series4.60% Series
4.72% Series7.00% Series
----------------------------------------------------------
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___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )
Aggregate market value of voting stock held by non-affiliates of
The Southern Company at February 29, 2000: $14.4 billion. Each of such other
registrants is a wholly-owned subsidiary of The Southern Company and has no
voting stock other than its common stock. A description of registrants' common
stock follows:
<TABLE>
<CAPTION>
Description of Shares Outstanding
Registrant Common Stock at February 29, 2000
<S> <C> <C>
The Southern Company Par Value $5 Per Share 649,563,507
Alabama Power Company Par Value $40 Per Share 5,608,955
Georgia Power Company No Par Value 7,761,500
Gulf Power Company No Par Value 992,717
Mississippi Power Company Without Par Value 1,121,000
Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
</TABLE>
Documents incorporated by reference: specified portions of The
Southern Company's Proxy Statement relating to the 2000 Annual Meeting of
Stockholders are incorporated by reference into PART III.
This combined Form 10-K 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.
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<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
PART I
<S> <C>
Item 1 Business
The SOUTHERN System.................................................................................. I-2
Integrated Southeast Utilities....................................................................... I-2
Southern Energy...................................................................................... I-2
Other Business....................................................................................... I-3
Certain Factors Affecting the Industry............................................................... I-3
Construction Programs................................................................................ I-4
Year 2000............................................................................................ I-5
Financing Programs................................................................................... I-6
Fuel Supply.......................................................................................... I-7
Territory Served by the Integrated Southeast Utilities............................................... I-9
Competition.......................................................................................... I-12
Regulation........................................................................................... I-13
Rate Matters......................................................................................... I-15
Employee Relations................................................................................... I-17
Item 2 Properties............................................................................................. I-18
Item 3 Legal Proceedings...................................................................................... I-24
Item 4 Submission of Matters to a Vote of Security Holders.................................................... I-24
Executive Officers of SOUTHERN......................................................................... I-25
PART II
Item 5 Market for Registrants' Common Equity and Related Stockholder Matters.................................. II-1
Item 6 Selected Financial Data................................................................................ II-2
Item 7 Management's Discussion and Analysis of Results of Operations
and Financial Condition.............................................................................. II-2
Item 7A Quantitative and Qualitative Disclosures about Market Risk............................................. II-2
Item 8 Financial Statements and Supplementary Data............................................................ II-3
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................................................. II-4
PART III
Item 10 Directors and Executive Officers of the Registrants................................................... III-1
Item 11 Executive Compensation................................................................................ III-13
Item 12 Security Ownership of Certain Beneficial Owners and
Management.......................................................................................... III-30
Item 13 Certain Relationships and Related Transactions........................................................ III-35
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K......................................................................................... IV-1
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
DEFINITIONS
When used in Items 1 through 5 and Items 10 through 14, the
following terms will have the meanings indicated. Other defined
terms specific only to Item 11 are found on page III-13.
Term Meaning
<S> <C>
AEC........................................... Alabama Electric Cooperative, Inc.
AFUDC......................................... Allowance for Funds Used During Construction
ALABAMA....................................... Alabama Power Company
Alicura....................................... Hidroelectrica Alicura, S.A. (Argentina)
AMEA.......................................... Alabama Municipal Electric Authority
APEA.......................................... Applicant Prepared Environmental Assessment
CEMIG......................................... Companhia Energetica de Minas Gerais
CEPA.......................................... Consolidated Electric Power Asia
Clean Air Act................................. Clean Air Act Amendments of 1990
Dalton........................................ City of Dalton, Georgia
DOE........................................... United States Department of Energy
Edelnor....................................... Empresa Electrica del Norte Grande, S.A. (Chile)
EMF........................................... Electromagnetic field
Energy Act.................................... Energy Policy Act of 1992
Energy Solutions.............................. Southern Company Energy Solutions, Inc.
Entergy Gulf States........................... Entergy Gulf States Utilities Company
EPA........................................... United States Environmental Protection Agency
EWG........................................... Exempt wholesale generator
FERC.......................................... Federal Energy Regulatory Commission
FPC........................................... Florida Power Corporation
FP&L.......................................... Florida Power & Light Company
Freeport...................................... Freeport Power Company (Bahamas)
FUCO.......................................... Foreign utility company
GEORGIA....................................... Georgia Power Company
GULF.......................................... Gulf Power Company
Holding Company Act........................... Public Utility Holding Company Act of 1935, as amended
IBEW.......................................... International Brotherhood of Electrical Workers
integrated Southeast utilities................ ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
IPP........................................... Independent power producer
IRS........................................... Internal Revenue Service
JEA........................................... Jacksonville Electric Authority
MEAG.......................................... Municipal Electric Authority of Georgia
MISSISSIPPI................................... Mississippi Power Company
Mobile Energy................................. Mobile Energy Services Company, LLC
NRC........................................... Nuclear Regulatory Commission
OPC........................................... Oglethorpe Power Corporation
PSC........................................... Public Service Commission
RTO........................................... Regional Transmission Organization
RUS........................................... Rural Utility Service (formerly Rural Electrification
Administration)
ii
<PAGE>
DEFINITIONS
(continued)
SAVANNAH...................................... Savannah Electric and Power Company
SCEM.......................................... Southern Company Energy Marketing, L.P.
SCS........................................... Southern Company Services, Inc. (the system
service company)
SEC........................................... Securities and Exchange Commission
SEGCO......................................... Southern Electric Generating Company
SEPA.......................................... Southeastern Power Administration
SERC.......................................... Southeastern Electric Reliability Council
SMEPA......................................... South Mississippi Electric Power Association
SOUTHERN...................................... The Southern Company
Southern Energy............................... Southern Energy, Inc.
Southern LINC................................. Southern Communications Services, Inc.
Southern Nuclear.............................. Southern Nuclear Operating Company, Inc.
SOUTHERN system............................... SOUTHERN, the integrated Southeast utilities, SEGCO,
Southern Energy, Southern Nuclear, SCS, Southern LINC, Energy
Solutions and other subsidiaries
TVA........................................... Tennessee Valley Authority
WPD........................................... Western Power Distribution (United Kingdom)
(formerly South Western Electricity plc)
iii
</TABLE>
<PAGE>
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K includes forward-looking and 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 information; 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; potential business strategies,
including acquisitions or dispositions of assets or businesses, internal
restructuring or other restructuring options, 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 Southern Energy and
other subsidiaries and the success of efforts to invest in and develop new
opportunities; and other factors discussed elsewhere herein and in other reports
filed from time to time by the registrants with the SEC.
iv
<PAGE>
PART I
Item 1. BUSINESS
SOUTHERN was incorporated under the laws of Delaware on November 9, 1945.
SOUTHERN is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. SOUTHERN owns all
the outstanding common stock of ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH, each of which is an operating public utility company. The integrated
Southeast utilities supply electric service in the states of Alabama, Georgia,
Florida, Mississippi and Georgia, respectively. More particular information
relating to each of the integrated Southeast utilities is as follows:
ALABAMA is a corporation organized under the laws of the State of Alabama
on November 10, 1927, by the consolidation of a predecessor Alabama Power
Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had had a continuous existence since its
incorporation in 1906.
GEORGIA was incorporated under the laws of the State of Georgia on June
26, 1930, and admitted to do business in Alabama on September 15, 1948.
GULF is a corporation which was organized under the laws of the State of
Maine on November 2, 1925, and admitted to do business in Florida on
January 15, 1926, in Mississippi on October 25, 1976, and in Georgia on
November 20, 1984.
MISSISSIPPI was incorporated under the laws of the State of Mississippi on
July 12, 1972, was admitted to do business in Alabama on November 28,
1972, and effective December 21, 1972, by the merger into it of the
predecessor Mississippi Power Company, succeeded to the business and
properties of the latter company. The predecessor Mississippi Power
Company was incorporated under the laws of the State of Maine on November
24, 1924, and was admitted to do business in Mississippi on December 23,
1924, and in Alabama on December 7, 1962.
SAVANNAH is a corporation existing under the laws of the State of Georgia;
its charter was granted by the Secretary of State on August 5, 1921.
SOUTHERN also owns all the outstanding common stock of Southern Energy,
Southern LINC, Southern Nuclear, SCS, Energy Solutions and other direct and
indirect subsidiaries. Southern Energy acquires, develops, builds, owns and
operates power production and delivery facilities and provides a broad range of
energy-related services to utilities and industrial companies in selected
countries around the world. Southern Energy businesses include independent power
projects, integrated utilities, a distribution company, and energy trading and
marketing businesses outside the southeastern United States. A further
description of Southern Energy's business and organization follows later in this
section under "Southern Energy." Southern LINC provides digital wireless
communications services to SOUTHERN's integrated Southeast utilities and also
markets these services to the public within the Southeast. Southern Nuclear
provides services to ALABAMA and GEORGIA's nuclear plants. Energy Solutions
develops new business opportunities related to energy products and services.
ALABAMA and GEORGIA each own 50% of the outstanding common stock of SEGCO.
SEGCO owns electric generating units with an aggregate capacity of 1,019,680
kilowatts at Plant Gaston on the Coosa River near Wilsonville, Alabama, and
ALABAMA and GEORGIA are each entitled to one-half of SEGCO's capacity and
energy. ALABAMA acts as SEGCO's agent in the operation of SEGCO's units and
furnishes coal to SEGCO as fuel for its units. SEGCO also owns three 230,000
volt transmission lines extending from Plant Gaston to the Georgia state line at
which point connection is made with the GEORGIA transmission line system.
Reference is also made to Note 14 to the financial statements of SOUTHERN in
Item 8 herein for additional information regarding SOUTHERN's segment and
related information.
I-1
<PAGE>
The SOUTHERN System
Integrated Southeast Utilities
The transmission facilities of each of the integrated Southeast utilities are
connected to the respective company's own generating plants and other sources of
power and are interconnected with the transmission facilities of the other
integrated Southeast utilities and SEGCO by means of heavy-duty high voltage
lines. (In the case of GEORGIA's integrated transmission system, see Item 1 -
BUSINESS - "Territory Served by the Integrated Southeast Utilities" herein.)
Operating contracts covering arrangements in effect with principal
neighboring utility systems provide for capacity exchanges, capacity purchases
and sales, transfers of economy energy and other similar transactions.
Additionally, the integrated Southeast utilities have entered into voluntary
reliability agreements with the subsidiaries of Entergy Corporation, Florida
Electric Power Coordinating Group and TVA and with Carolina Power & Light
Company, Duke Energy Corporation, South Carolina Electric & Gas Company and
Virginia Electric and Power Company, each of which provides for the
establishment and periodic review of principles and procedures for planning and
operation of generation and transmission facilities, maintenance schedules, load
retention programs, emergency operations, and other matters affecting the
reliability of bulk power supply. The integrated Southeast utilities have joined
with other utilities in the Southeast (including those referred to above) to
form the SERC to augment further the reliability and adequacy of bulk power
supply. Through the SERC, the integrated Southeast utilities are represented on
the National Electric Reliability Council.
An intra-system interchange agreement provides for coordinating operations
of the power producing facilities of the integrated Southeast utilities and the
capacities available to such companies from non-affiliated sources and for the
pooling of surplus energy available for interchange. Coordinated operation of
the entire interconnected system is conducted through a central power supply
coordination office maintained by SCS. The available sources of energy are
allocated to the integrated Southeast utilities to provide the most economical
sources of power consistent with good operation. The resulting benefits and
savings are apportioned among the integrated Southeast utilities.
Reference is made to each registrant's "Management's Discussion and Analysis
- - Future Earnings Potential" in Item 7 for information relating to the FERC's
final rule issued on December 20, 1999, relating to RTOs.
SCS has contracted with SOUTHERN, each integrated Southeast utility,
Southern Energy, various of the other subsidiaries, Southern Nuclear and SEGCO
to furnish, at cost and upon request, the following services: general executive
and advisory services, power pool operations, general engineering, design
engineering, purchasing, accounting, finance and treasury, taxes, insurance and
pensions, corporate, rates, budgeting, public relations, employee relations,
systems and procedures and other services with respect to business and
operations. Southern Energy, Energy Solutions and Southern LINC have also
secured from the integrated Southeast utilities certain services which are
furnished at cost.
Southern Nuclear has contracts with ALABAMA to operate the Farley Nuclear
Plant, and with GEORGIA to operate Plants Hatch and Vogtle. See Item 1 -
BUSINESS - "Regulation - Atomic Energy Act of 1954" herein.
Southern Energy
SOUTHERN continues to consider new business opportunities, particularly those
which allow use of the expertise and resources developed through its regulated
utility experience. These endeavors began in 1981 and are conducted through
Southern Energy and other subsidiaries. Southern Energy is a global company
engaged in electricity generation and distribution, integrated utility
operations and energy marketing. Southern Energy is one of the world's largest
independent power producers with ownership interests in generating facilities
with a total capacity of 28,000 megawatts, of which Southern Energy has net
ownership or control of over 14,000 megawatts. In addition, Southern Energy has
projects under construction or advanced development in which it will have
additional net ownership interests totaling 5,000 megawatts. SOUTHERN has filed
with the SEC a request to invest up to nearly $6 billion in Southern Energy's
domestic and international business. The current SEC authority is $4.1 billion,
I-2
<PAGE>
of which $2.7 billion has been invested as of December 31, 1999. For additional
information relating to Southern Energy's business strategy, reference is made
to Item 7, SOUTHERN's "Management's Discussion and Analysis - Future Earnings
Potential" herein.
Approximately 60% of the net megawatts of generating capacity currently
owned by Southern Energy is located in the United States, with the remainder in
England, Germany, the Philippines, China, Brazil, Argentina, Chile, the Bahamas
and Trinidad and Tobago. In the United States during 1999, Southern Energy
completed the acquisition of 3,065 megawatts from Pacific Gas & Electric Company
in California and 1,794 megawatts from Orange & Rockland Utilities, Inc. and
Consolidated Edison Company of New York, Inc. in the State of New York. These
North American acquisitions, together with acquisitions completed prior to 1999,
are a component of Southern Energy's strategy of investing in generating assets
which are expected to be linked to Southern Energy's trading and marketing
activities. Also in 1999, Southern Energy completed the acquisition of a 9.99%
ownership interest in Shandong International Power Development Company Limited
which currently owns generating facilities in China with installed capacity of
4,435 megawatts.
In 1999, Mobile Energy, an indirect subsidiary of SOUTHERN, and its direct
parent filed petitions for Chapter 11 bankruptcy relief in the U.S. Bankruptcy
Court for the Southern District of Alabama. For additional information regarding
this matter, reference is made to Item 3 - LEGAL PROCEEDINGS herein.
See Item 2 - PROPERTIES - "Other Electric Properties - Southern Energy"
herein for additional information relating to these and other Southern Energy
projects.
In addition, Southern Energy is a leading energy marketer in North America
through its 60% interest in SCEM, a joint venture between Southern Energy and
Vastar Resources, Inc. formed for the purpose of marketing and trading energy
and energy-linked commodities, including electricity, natural gas, oil, coal and
emission allowances. Southern Energy has also opened an office in Amsterdam, The
Netherlands, in order to market and trade energy in European markets.
SOUTHERN continues to consider various business strategies and restructuring
options to enhance shareholder value with respect to its investment in Southern
Energy.
Other Business
Energy Solutions is focusing on new and existing programs to enhance customer
satisfaction and efficiency and stockholder value, such as: Good Cents, an
energy efficiency program for electric utility customers; Energy Services,
providing total energy solutions to industrial and commercial customers; Heat
Pump financing for residential customers; and telecommunications operations and
security monitoring for both commercial and residential customers.
In 1995, Southern LINC began serving SOUTHERN's integrated Southeast
utilities and marketing its services to non-affiliates within the Southeast. Its
system covers approximately 130,000 square miles and combines the functions of
two-way radio dispatch, cellular phone, short text and numeric messaging and
wireless data transfer.
These continuing efforts to invest in and develop new business opportunities
offer the potential of earning returns which may exceed those of rate-regulated
operations. However, these activities also involve a higher degree of risk.
SOUTHERN expects to make substantial investments over the period 2000-2002 in
these and other new businesses.
Certain Factors Affecting the Industry
Various factors are currently affecting the electric utility industry in
general, including increasing competition and the regulatory changes related
thereto, costs required to comply with environmental regulations, and the
potential for new business opportunities (with their associated risks) outside
of traditional rate-regulated operations. The effects of these and other factors
on the SOUTHERN system are described herein. Particular reference is made to
Item 1 - BUSINESS - "Southern Energy", "Other Business", "Competition" and
"Environmental Regulation." See also "Cautionary Statement Regarding
Forward-Looking Information."
I-3
<PAGE>
Construction Programs
The subsidiary companies of SOUTHERN are engaged in continuous construction
programs to accommodate existing and estimated future loads on their respective
systems. Construction additions or acquisitions of property during 2000 through
2002 by the integrated Southeast utilities, SEGCO, SCS, Southern LINC and
Southern Energy are estimated as follows: (in millions)
------------------------------ -------- --------- ----------
2000 2001 2002
-------- --------- ----------
ALABAMA $ 831 $743 $ 860
GEORGIA 1,244 1,511 1,485
GULF 106 232 90
MISSISSIPPI 84 54 61
SAVANNAH 26 30 36
SEGCO 15 41 69
SCS 30 24 20
Southern LINC 53 27 10
Southern Energy* 578 1,044 1,222
Other 49 134 88
=========================== =========== ========= ==========
SOUTHERN system $3,016 $3,840 $3,941
=========================== =========== ========= ==========
*These construction estimates do not include amounts which may be expended
by Southern Energy on future power production projects or by any subsidiaries
created to effect such future projects. (See Item 1 - BUSINESS - "Southern
Energy" herein.)
I-4
<PAGE>
<TABLE>
<CAPTION>
Estimated construction costs in 2000 are expected to be apportioned approximately as follows: (in millions)
---------------------------- ----------------------- ----------- ------------- ---------- ---------------------------
SOUTHERN Southern
system* Energy ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
----------------------- ----------- ------------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New generation $641 $ - $240 $ 368 $26 $ 7 $-
Other generating
facilities including
associated plant
substations 864 442 140 229 17 16 5
New business 372 - 139 176 25 22 10
Transmission 420 10 143 225 16 25 1
Joint line and substation 54 - - 47 7 - -
Distribution 289 103 89 73 9 7 8
Nuclear fuel 93 - 32 61 - - -
General plant 283 23 48 65 6 7 2
----------------------- ----------- ------------- ---------- ---------------------------
$3,016 $578 $831 $1,244 $106 $84 $26
======================= =========== ============= ========== ===========================
</TABLE>
*Southern LINC, SCS and other businesses plan capital additions to general
plant in 2000 of $53 million, $30 million and $49 million, respectively, while
SEGCO plans capital additions of $15 million to generating facilities. (See Item
1 - BUSINESS "Southern Energy" and "Other Business" herein.)
The construction programs are subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include: changes in business conditions; acquisitions of
additional generating assets; revised load growth estimates; changes in
environmental regulations; changes in existing nuclear plants to meet new
regulatory requirements; increasing costs of labor, equipment and materials; and
cost of capital. In addition, there can be no assurance that costs related to
capital expenditures will be fully recovered.
The integrated Southeast utilities have approximately 5,200 megawatts of
combustion turbine generating capacity scheduled to be placed in service by
2002. Approximately 1,400 megawatts of this new capacity will be dedicated to
the wholesale market. Southern Energy has approximately 1,000 megawatts of owned
capacity under construction. Significant construction of transmission and
distribution facilities and the upgrading of generating plants will be
continuing for the business in the Southeast. (See Item 2 - PROPERTIES - "Other
Electric Properties - Southern Energy" herein for additional information
relating to facilities under development.)
In 1991, the Georgia legislature passed legislation which requires GEORGIA
and SAVANNAH each to file an Integrated Resource Plan for approval by the
Georgia PSC. Under the plan rules, the Georgia PSC must pre-certify the
construction of new power plants and new purchase power contracts. (See Item 1 -
BUSINESS - "Rate Matters - Integrated Resource Planning" herein.)
See Item 1 - BUSINESS - "Regulation - Environmental Regulation" herein for
information with respect to certain existing and proposed environmental
requirements and Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein for
additional information concerning ALABAMA's and GEORGIA's joint ownership of
certain generating units and related facilities with certain non-affiliated
utilities.
Year 2000
Reference is made to each registrant's "Management's Discussion and Analysis -
Year 2000 Challenge" in Item 7 herein for information relating to Year 2000
issues.
I-5
<PAGE>
Financing Programs
The amount and timing of additional equity capital to be raised in 2000, as well
as subsequent years, will be contingent on SOUTHERN's investment opportunities.
Equity capital can be provided from any combination of public offerings, private
placements, or SOUTHERN's stock plans. Any portion of the common stock required
during 2000 for SOUTHERN's stock plans that is not provided from the issuance of
new stock will be acquired on the open market in accordance with the terms of
such plans.
The integrated Southeast utilities plan to obtain the funds required for
construction and other purposes from sources similar to those used in the past,
which were primarily from internal sources. However, the type and timing of any
financings -- if needed -- will depend on market conditions and regulatory
approval. Historically the integrated Southeast utilities have relied on
issuances of first mortgage bonds and preferred stock, in addition to pollution
control revenue bonds issued for their benefit by public authorities, to meet
their long-term external financing requirements. Recently, financings have
consisted of unsecured debt and trust preferred securities.
In addition, future projects undertaken by subsidiaries of Southern Energy,
as with existing projects, will generally be financed with an appropriate mix of
debt that is non-recourse to SOUTHERN and equity.
Short-term debt is often utilized as appropriate at SOUTHERN and the
integrated Southeast utilities.
The maximum amounts of short-term or term-loan indebtedness authorized by
the appropriate regulatory authorities are shown on the following table:
Amount Outstanding at
Authorized December 31, 1999
-------------- ---------------------
(in millions)
ALABAMA $ 750 (1) $ 97
GEORGIA 1,700 (2) 636
GULF 300(1) 55
MISSISSIPPI 350(1) 138
SAVANNAH 90(2) 64
SOUTHERN 2,000(1) 1,075
------------------ -------------- -- -------------------
Notes:
(1) ALABAMA's authority is based on authorization received from the Alabama
PSC, which expires December 31, 2000. No SEC authorization is required for
ALABAMA. GULF, MISSISSIPPI and SOUTHERN have received SEC authorization to issue
from time to time short-term and/or term-loan notes to banks and commercial
paper to dealers in the amounts shown through December 31, 2003, December 31,
2002 and March 31, 2001, respectively.
(2) GEORGIA and SAVANNAH have received SEC authorization to issue from time
to time short-term and term-loan notes to banks and commercial paper to dealers
in the amounts shown through December 31, 2002. Authorization for term-loan
indebtedness is also required by the Georgia PSC. At December 31, 1999, GEORGIA
had remaining authority of $376 million expiring December 31, 2000. SAVANNAH
received authority from the Georgia PSC for $70 million expiring December 31,
2000.
Reference is made to Note 5 to the financial statements for SOUTHERN,
ALABAMA, GULF, MISSISSIPPI and SAVANNAH and Note 9 to the financial statements
for GEORGIA in Item 8 herein for information regarding the registrants' credit
arrangements.
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<PAGE>
Fuel Supply
The integrated Southeast utilities' and SEGCO's supply of electricity is derived
predominantly from coal. The sources of generation for the years 1997 through
1999 and the estimates for 2000 are shown below:
Oil and
ALABAMA Coal Nuclear Hydro Gas
--------- ---------- --------- ---------
1997 72% 20% 8% *%
1998 72 18 8 2
1999 72 20 5 3
2000 69 18 7 6
GEORGIA
1997 75 22 2 1
1998 73 22 3 2
1999 75 22 1 2
2000 74 22 3 1
GULF
1997 100 ** ** *
1998 98 ** ** 2
1999 97 ** ** 3
2000 98 ** ** 2
MISSISSIPPI
1997 85 ** ** 15
1998 80 ** ** 20
1999 81 ** ** 19
2000 81 ** ** 19
SAVANNAH
1997 87 ** ** 13
1998 76 ** ** 24
1999 78 ** ** 22
2000 89 ** ** 11
SEGCO
1997 100 ** ** *
1998 100 ** ** *
1999 100 ** ** *
2000 100 ** ** *
SOUTHERN system***
1997 77 17 4 2
1998 76 16 4 4
1999 78 17 2 3
2000 76 16 4 4
---------- ------- --------- ---------- --------- ---------
*Less than 0.5%.
**Not applicable.
***Amounts shown for the SOUTHERN system are weighted averages of the integrated
Southeast utilities and SEGCO.
The average costs of fuel in cents per net kilowatt-hour generated for 1997
through 1999 are shown below:
1997 1998 1999
-------------- ------------- -------------
ALABAMA 1.49 1.54 1.44
GEORGIA 1.32 1.36 1.34
GULF 1.99 1.69 1.60
MISSISSIPPI 1.54 1.62 1.65
SAVANNAH 2.27 2.33 2.20
SEGCO 1.51 1.53 1.77
SOUTHERN
System* 1.46 1.48 1.45
- ------------------- -------------- ------------- -------------
* Amounts shown for the SOUTHERN system are weighted averages of the
integrated Southeast utilities and SEGCO.
See SELECTED FINANCIAL DATA in Item 6 herein for each registrant's source
of energy supply.
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<PAGE>
As of February 11, 2000, the integrated Southeast utilities had stockpiles
of coal on hand at their respective coal-fired plants which represented an
estimated 25.8 days of recoverable supply for bituminous coal and 54.1 days for
sub-bituminous coal. It is estimated that approximately 66.9 million tons of
coal will be consumed in 2000 by the integrated Southeast utilities (including
those units GEORGIA owns jointly with OPC, MEAG and Dalton and operates for FP&L
and JEA and the units ALABAMA owns jointly with AEC). The integrated Southeast
utilities currently have 38 coal contracts. These contracts cover remaining
terms of up to 12 years. Approximately 26% of 2000 estimated coal requirements
will be purchased in the spot market. Management has set a goal whereby the spot
market should be utilized, absent the transition from coal contract expirations,
for 20 to 30% of the SOUTHERN system's coal supply. Additionally, it has been
determined that the inventory targets will be approximately 32 nameplate days of
recoverable supply for the heavy burn season between June 1 and September 30 and
25 nameplate days for the remaining periods. During 1999, the integrated
Southeast utilities' and SEGCO's average price of coal delivered was
approximately $34.77 per ton.
In 1999, the weighted average sulfur content of all coal purchased by the
integrated Southeast utilities for use in the coal-fired facilities was 0.83%
sulfur. This sulfur level allowed the integrated Southeast utilities to remain
well below the limits as set forth by Phase I of the Clean Air Act. Phase II
sulfur dioxide and nitrogen oxide limits began in 2000. The integrated Southeast
utilities have secured sufficient quantities of lower sulfur coal to help meet
the more stringent Phase II sulfur requirements in conjunction with the sulfur
dioxide allowances banked in Phase I. As more and more strict environmental
regulations are proposed that impact the utilization of coal, the fuel mix will
be monitored to insure that sufficient quantities of the proper type of coal or
natural gas are in place to remain in compliance with applicable laws and
regulations. See Item 1 BUSINESS - "Regulation - Environmental Regulation"
herein.
Changes in fuel prices are generally reflected in fuel adjustment clauses
contained in rate schedules. See Item 1 - BUSINESS -
"Rate Matters - Rate Structure" herein.
The integrated Southeast utilities have renegotiated, bought out or
otherwise terminated various coal supply contracts. For more information on
certain of these transactions, see Note 5 to the financial statements of GULF in
Item 8 herein.
ALABAMA and GEORGIA have numerous contracts covering a portion of their
nuclear fuel needs for uranium, conversion services, enrichment services and
fuel fabrication. These contracts have varying expiration dates and most are
short to medium term (less than 10 years). Management believes that sufficient
capacity for nuclear fuel supplies and processing exists to preclude the
impairment of normal operations of the SOUTHERN system's nuclear generating
units.
ALABAMA and GEORGIA have contracts with the DOE that provide for the
permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of
spent fuel in January 1998, as required by the contracts, and the companies are
pursuing legal remedies against the government for breach of contract.
Sufficient storage capacity currently is available to permit operation into 2003
at Plant Hatch, into 2017 at Plant Vogtle, and into 2009 and 2013 at Plant
Farley units 1 and 2, respectively. Activities for adding dry cask storage
capacity and for potentially increasing spent fuel pool rack capacity at Plant
Hatch during 2000 are in progress. Planning for additional on-site spent fuel
storage capacity at Plant Farley is also in progress, with the intent to place
additional on-site spent fuel storage capacity in operation as early as 2005. In
addition, through Southern Nuclear, ALABAMA and GEORGIA are members of Private
Fuel Storage, LLC, a joint utility effort to develop a private spent fuel
storage facility for temporary storage of spent nuclear fuel. This facility is
planned to begin operation as early as 2003.
The Energy Act imposed upon utilities with nuclear plants, including ALABAMA
and GEORGIA, obligations for the decontamination and decommissioning of federal
nuclear fuel enrichment facilities. See Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.
I-8
<PAGE>
Territory Served by the Integrated Southeast Utilities
The territory in which the integrated Southeast utilities provide electric
service comprises most of the states of Alabama and Georgia together with the
northwestern portion of Florida and southeastern Mississippi. In this territory
there are non-affiliated electric distribution systems which obtain some or all
of their power requirements either directly or indirectly from the integrated
Southeast utilities. The territory has an area of approximately 120,000 square
miles and an estimated population of approximately 11 million.
ALABAMA is engaged, within the State of Alabama, in the generation and
purchase of electricity and the distribution and sale of such electricity at
retail in over 1,000 communities (including Anniston, Birmingham, Gadsden,
Mobile, Montgomery and Tuscaloosa) and at wholesale to 15 municipally-owned
electric distribution systems, 11 of which are served indirectly through sales
to AMEA, and two rural distributing cooperative associations. ALABAMA also
supplies steam service in downtown Birmingham. ALABAMA also sells, and
cooperates with dealers in promoting the sale of, electric appliances.
GEORGIA is engaged in the generation and purchase of electricity and the
distribution and sale of such electricity within the State of Georgia at retail
in over 600 communities, as well as in rural areas, and at wholesale currently
to OPC, MEAG, the City of Dalton and the City of Hampton.
GULF is engaged, within the northwestern portion of Florida, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail in 71 communities (including Pensacola, Panama City and
Fort Walton Beach), as well as in rural areas, and at wholesale to a
non-affiliated utility and a municipality. GULF also sells electric appliances.
MISSISSIPPI is engaged in the generation and purchase of electricity and the
distribution and sale of such energy within the 23 counties of southeastern
Mississippi, at retail in 123 communities (including Biloxi, Gulfport,
Hattiesburg, Laurel, Meridian and Pascagoula), as well as in rural areas, and at
wholesale to one municipality, six rural electric distribution cooperative
associations and one generating and transmitting cooperative.
SAVANNAH is engaged, within a five-county area in eastern Georgia, in the
generation and purchase of electricity and the distribution and sale of such
electricity at retail and, as a member of the SOUTHERN system power pool, the
transmission and sale of wholesale energy.
For information relating to kilowatt-hour sales by classification for each
registrant, reference is made to "Management's Discussion and Analysis-Results
of Operations" in Item 7 herein. Also, for information relating to the sources
of revenues for the SOUTHERN system and each of the integrated Southeast
utilities, reference is made to Item 6 herein.
A portion of the area served by the integrated Southeast utilities adjoins
the area served by TVA and its municipal and cooperative distributors. An Act of
Congress limits the distribution of TVA power, unless otherwise authorized by
Congress, to specified areas or customers which generally were those served on
July 1, 1957.
The RUS has authority to make loans to cooperative associations or
corporations to enable them to provide electric service to customers in rural
sections of the country. There are 71 electric cooperative organizations
operating in the territory in which the integrated Southeast utilities provide
electric service at retail or wholesale.
One of these, AEC, is a generating and transmitting cooperative selling
power to several distributing cooperatives, municipal systems and other
customers in south Alabama and northwest Florida. AEC owns generating units with
approximately 840 megawatts of nameplate capacity, including an undivided
ownership interest in ALABAMA's Plant Miller Units 1 and 2. AEC's facilities
were financed with RUS loans secured by long-term contracts requiring
distributing cooperatives to take their requirements from AEC to the extent such
energy is available. Two of the 14 distributing cooperatives operating in
ALABAMA's service territory obtain a portion of their power requirements
directly from ALABAMA.
I-9
<PAGE>
Four electric cooperative associations, financed by the RUS, operate within
GULF's service area. These cooperatives purchase their full requirements from
AEC and SEPA. A non-affiliated utility also operates within GULF's service area
and purchases its full requirements from GULF.
ALABAMA and GULF have entered into separate agreements with AEC involving
interconnection between the respective systems. The delivery of capacity and
energy from AEC to certain distributing cooperatives in the service areas of
ALABAMA and GULF is governed by SOUTHERN's AEC Network Transmission Service
Agreement. The rates for this service to AEC are based on the negotiated
agreement on file with the FERC. See Item 2 - PROPERTIES - "Jointly-Owned
Facilities" herein for details of ALABAMA's joint-ownership with AEC of a
portion of Plant Miller.
MISSISSIPPI has an interchange agreement with SMEPA, a generating and
transmitting cooperative, pursuant to which various services are provided,
including the furnishing of protective capacity by MISSISSIPPI to SMEPA. SMEPA
has a generating capacity of 821,000 kilowatts and a transmission system
estimated to be 1,480 miles in length.
There are 43 electric cooperative organizations operating in, or in areas
adjoining, territory in the State of Georgia in which GEORGIA provides electric
service at retail or wholesale. Three of these organizations obtain their power
from TVA and one from other sources. Since July 1, 1975, OPC has supplied the
requirements of the remaining 39 of these cooperative organizations from
self-owned generation acquired from GEORGIA and, until September 1991, through
partial requirements purchases from GEORGIA. GEORGIA entered into a power
coordination agreement with OPC pursuant to which, effective in September 1991,
OPC ceased to be a partial requirements wholesale customer of GEORGIA. Instead,
OPC began the purchase of 1,250 megawatts of capacity from GEORGIA through 1999,
subject to reduction or extension by OPC, and may satisfy the balance of its
needs through purchases from others. OPC decreased its purchases of capacity by
250 megawatts each in September 1997, 1998 and 1999. Under the amended 1995
Integrated Resource Plan approved by the Georgia PSC in March 1997, the
resources associated with the decreased purchases by OPC in 1997, 1998 and 1999
will be used to meet the needs of GEORGIA's retail customers through 2004. In
April 1999, a new power supply agreement was implemented between GEORGIA and
OPC. Pursuant to this agreement, OPC will purchase 250 megawatts of steam
capacity through March 2006, 250 megawatts of peaking capacity through August of
2000, and 125 megawatts of peaking capacity from September 2000 through August
2001.
There are 65 municipally-owned electric distribution systems operating in
the territory in which the integrated Southeast utilities provide electric
service at retail or wholesale.
AMEA was organized under an act of the Alabama legislature and is comprised
of 11 municipalities. In 1986, ALABAMA entered into a firm power purchase
contract with AMEA entitling AMEA to scheduled amounts of capacity (to a maximum
of 100 megawatts) for a period of 15 years commencing September 1, 1986. In
October 1991, ALABAMA entered into a second firm power purchase contract with
AMEA entitling AMEA to scheduled amounts of additional capacity (to a maximum 80
megawatts) for a period of 15 years commencing October 1, 1991. In both
contracts the power is being sold to AMEA for its member municipalities that
previously were served directly by ALABAMA as wholesale customers. Under the
terms of the contracts, ALABAMA received payments from AMEA representing the net
present value of the revenues associated with the respective capacity
entitlements. See Note 7 to ALABAMA's financial statements in Item 8 herein for
further information on these contracts.
Forty-eight municipally-owned electric distribution systems and one
county-owned system receive their requirements through MEAG, which was
established by a state statute in 1975. MEAG serves these requirements from
self-owned generation facilities acquired from GEORGIA and purchases from
others. In August 1997, a power coordination agreement was implemented between
GEORGIA and MEAG that replaced the partial requirements tariff pursuant to which
GEORGIA previously sold wholesale energy to MEAG. Since 1977, Dalton has filled
its requirements from generation facilities acquired from GEORGIA and through
partial requirements purchases. One municipally-owned electric distribution
system's full requirements are served under a market-based contract by GEORGIA.
(See Item 2 - PROPERTIES - "Jointly-Owned Facilities" herein.)
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<PAGE>
GULF and MISSISSIPPI provide wholesale requirements for one municipal system
each.
GEORGIA has entered into substantially similar agreements with Georgia
Transmission Corporation (formerly OPC's transmission division), MEAG and Dalton
providing for the establishment of an integrated transmission system to carry
the power and energy of each. The agreements require an investment by each party
in the integrated transmission system in proportion to its respective share of
the aggregate system load. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities"
herein.)
SCS, acting on behalf of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH,
also has a contract with SEPA (a federal power marketing agency) providing for
the use of those companies' facilities at government expense to deliver to
certain cooperatives and municipalities, entitled by federal statute to
preference in the purchase of power from SEPA, quantities of power equivalent to
the amounts of power allocated to them by SEPA from certain United States
government hydroelectric projects.
The retail service rights of all electric suppliers in the State of Georgia
are regulated by the 1973 State Territorial Electric Service Act. Pursuant to
the provisions of this Act, all areas within existing municipal limits were
assigned to the primary electric supplier therein on March 29, 1973 (451
municipalities, including Atlanta, Columbus, Macon, Augusta, Athens, Rome and
Valdosta, to GEORGIA; 115 to electric cooperatives; and 50 to publicly-owned
systems). Areas outside of such municipal limits were either to be assigned or
to be declared open for customer choice of supplier by action of the Georgia PSC
pursuant to standards set forth in the Act. Consistent with such standards, the
Georgia PSC has assigned substantially all of the land area in the state to a
supplier. Notwithstanding such assignments, the Act provides that any new
customer locating outside of 1973 municipal limits and having a connected load
of at least 900 kilowatts may receive electric service from the supplier of its
choice. (See also Item 1 - BUSINESS - "Competition" herein.)
Under and subject to the provisions of its franchises and concessions and
the 1973 State Territorial Electric Service Act, SAVANNAH has the full but
nonexclusive right to serve the City of Savannah, the Towns of Bloomingdale,
Pooler, Garden City, Guyton, Newington, Oliver, Port Wentworth, Rincon, Tybee
Island, Springfield, Thunderbolt, Vernonburg, and in conjunction with a
secondary supplier, the Town of Richmond Hill. In addition, SAVANNAH has been
assigned certain unincorporated areas in Chatham, Effingham, Bryan, Bulloch and
Screven Counties by the Georgia PSC. (See also Item 1 - BUSINESS - "Competition"
herein.)
Pursuant to the 1956 Utility Act, the Mississippi PSC issued "Grandfather
Certificates" of public convenience and necessity to MISSISSIPPI and to six
distribution rural cooperatives operating in southeastern Mississippi, then
served in whole or in part by MISSISSIPPI, authorizing them to distribute
electricity in certain specified geographically described areas of the state.
The six cooperatives serve approximately 300,000 retail customers in a
certificated area of approximately 10,300 square miles. In areas included in a
"Grandfather Certificate," the utility holding such certificate may, without
further certification, extend its lines up to five miles; other extensions
within that area by such utility, or by other utilities, may not be made except
upon a showing of, and a grant of a certificate of, public convenience and
necessity. Areas included in such a certificate which are subsequently annexed
to municipalities may continue to be served by the holder of the certificate,
irrespective of whether it has a franchise in the annexing municipality. On the
other hand, the holder of the municipal franchise may not extend service into
such newly annexed area without authorization by the Mississippi PSC.
Long-Term Power Sales Agreements
Reference is made to Note 7 to the financial statements for SOUTHERN, ALABAMA,
GEORGIA, GULF and MISSISSIPPI in Item 8 herein for information regarding
contracts for the sales of capacity and energy to non-territorial customers.
I-11
<PAGE>
Competition
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Act. The Energy Act
allows IPPs to access a utility's transmission network in order to sell
electricity to other utilities. This enhances the incentive for IPPs to build
cogeneration plants for a utility's large industrial and commercial customers,
and sell energy generation to other utilities. Also, electricity sales for
resale rates are being driven down by wholesale transmission access and numerous
potential new energy suppliers, including power marketers and brokers. The
integrated Southeast utilities are aggressively working to maintain and expand
their share of wholesale sales in the Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry continues to
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of a company to recover its investments, including the regulatory
assets described in Note 1 to each registrant's respective financial statements,
could have a material adverse effect on such company's financial condition and
results of operations. The integrated Southeast utilities are attempting to
minimize or reduce their cost exposure. Reference is made to Note 3 to the
financial statements for SOUTHERN under "Alabama Power Rate Adjustment
Procedures" and "Georgia Power 1998 Retail Rate Order" for information regarding
these efforts.
Reference is made to each registrant's "Management's Discussion and Analysis
- - Future Earnings Potential" in Item 7 for information relating to the FERC's
final rule issued on December 20, 1999, relating to RTOs.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, if the integrated Southeast utilities do not remain low-cost
producers and provide quality service, then energy sales could be adversely
affected, and this could significantly erode earnings. Reference is made to each
registrant's "Management's Discussion and Analysis - Future Earnings Potential"
in Item 7 herein for further discussion of competition.
To adapt to a less regulated, more competitive environment and to enhance
shareholder value, SOUTHERN continues to evaluate and consider a wide array of
potential business strategies. These strategies may include business
combinations, acquisitions involving other utility or non-utility businesses or
properties, internal restructuring or other restructuring options, disposition
of certain assets or businesses, or some combination thereof. Furthermore,
SOUTHERN may engage in other new business ventures that arise from competitive
and regulatory changes in the utility industry. Pursuit of any of the above
strategies, or any combination thereof, may significantly affect the business
operations and financial condition of SOUTHERN. (See Item 1 BUSINESS - "Southern
Energy" and "Other Business" herein.)
As a result of the foregoing factors, SOUTHERN has experienced increasing
competition for available off-system sales of capacity and energy from
neighboring utilities and alternative sources of energy. Additionally, the
future effect of cogeneration and small-power production facilities on the
SOUTHERN system cannot currently be determined but may be adverse.
ALABAMA currently has cogeneration contracts in effect with twelve
industrial customers. Under the terms of these contracts, ALABAMA purchases
excess generation of such companies. During 1999, ALABAMA purchased
approximately 94 million kilowatt-hours from such companies at a cost of $2.2
million.
I-12
<PAGE>
GEORGIA currently has contracts in effect with six small power producers
whereby GEORGIA purchases their excess generation. During 1999, GEORGIA
purchased 3.9 million kilowatt-hours from such companies at a cost of $638,000.
In June 1998, GEORGIA entered into a 30-year purchased power agreement for
electricity from a 300-megawatt cogeneration facility. Payments are subject to
reductions for failure to meet minimum capacity output. During 1999, GEORGIA
purchased 705.2 million kilowatt-hours at a cost of $39 million from this
facility. Reference is made to Note 4 to the financial statements for GEORGIA in
Item 8 herein for information regarding purchased power commitments.
GULF currently has agreements in effect with four industrial customers
pursuant to which GULF purchases "as available" energy from customer-owned
generation. During 1999, GULF purchased 162 million kilowatt-hours from such
companies for $5.0 million.
In 1996, MISSISSIPPI entered into agreements to purchase options for summer
peaking power for the years 1997 through 2000. Reference is made to Note 5 to
the financial statements for MISSISSIPPI in Item 8 herein for information
regarding fuel and purchased power commitments.
SAVANNAH currently has cogeneration contracts in effect with six large
customers. Under the terms of these contracts, SAVANNAH purchases excess
generation of such companies. During 1999, SAVANNAH purchased 28 million
kilowatt-hours from such companies at a cost of $2.8 million.
The competition for retail energy sales among competing suppliers of energy
is influenced by various factors, including price, availability, technological
advancements and reliability. These factors are, in turn, affected by, among
other influences, regulatory, political and environmental considerations,
taxation and supply.
The integrated Southeast utilities have experienced, and expect to continue
to experience, competition in their respective retail service territories in
varying degrees as the result of self-generation (as described above) and fuel
switching by customers and other factors. (See also Item 1 - BUSINESS -
"Territory Served by the Integrated Southeast Utilities" herein for information
concerning suppliers of electricity operating within or near the areas served at
retail by the integrated Southeast utilities.)
Regulation
State Commissions
The integrated Southeast utilities are subject to the jurisdiction of their
respective state regulatory commissions, which have broad powers of supervision
and regulation over public utilities operating in the respective states,
including their rates, service regulations, sales of securities (except for the
Mississippi PSC) and, in the cases of the Georgia PSC and Mississippi PSC, in
part, retail service territories. (See Item 1 - BUSINESS - "Rate Matters" and
"Territory Served by the Integrated Southeast Utilities" herein.)
Holding Company Act
SOUTHERN is registered as a holding company under the Holding Company Act, and
it and its subsidiary companies are subject to the regulatory provisions of said
Act, including provisions relating to the issuance of securities, sales and
acquisitions of securities and utility assets, services performed by SCS and
Southern Nuclear, and the activities of certain of SOUTHERN's special purpose
subsidiaries.
While various proposals have been introduced in Congress regarding the
Holding Company Act, the prospects for legislative reform or repeal are
uncertain at this time.
Federal Power Act
The Federal Power Act subjects the integrated Southeast utilities and SEGCO to
regulation by the FERC as companies engaged in the transmission or sale at
wholesale of electric energy in interstate commerce, including regulation of
accounting policies and practices.
ALABAMA and GEORGIA are also subject to the provisions of the Federal Power
Act or the earlier Federal Water Power Act applicable to licensees with respect
to their hydroelectric developments. Among the hydroelectric projects subject to
licensing by the FERC are 14 existing ALABAMA generating stations having an
I-13
<PAGE>
aggregate installed capacity of 1,582,725 kilowatts and 18 existing GEORGIA
generating stations having an aggregate installed capacity of 1,074,696
kilowatts.
GEORGIA received a new, 40-year license for the Flint River Project
effective November 1, 1999. GEORGIA has also started the relicensing process for
the Middle Chattahoochee Project. This project consists of the Goat Rock,
Oliver, and North Highlands facilities.
GEORGIA and OPC also have a license, expiring in 2027, for the Rocky
Mountain Plant, a pure pumped storage facility of 847,800 kilowatt capacity
which began commercial operation in 1995. (See Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein and Note 3 to SOUTHERN's and GEORGIA's
financial statements in Item 8 herein for additional information.)
Licenses for all projects, excluding those discussed above, expire in the
period 2007-2033 in the case of ALABAMA's projects and in the period 2005-2036
in the case of GEORGIA's projects.
Upon or after the expiration of each license, the United States Government,
by act of Congress, may take over the project, or the FERC may relicense the
project either to the original licensee or to a new licensee. In the event of
takeover or relicensing to another, the original licensee is to be compensated
in accordance with the provisions of the Federal Power Act, such compensation to
reflect the net investment of the licensee in the project, not in excess of the
fair value of the property taken, plus reasonable damages to other property of
the licensee resulting from the severance therefrom of the property taken.
Atomic Energy Act of 1954
ALABAMA, GEORGIA and Southern Nuclear are subject to the provisions of the
Atomic Energy Act of 1954, as amended, which vests jurisdiction in the NRC over
the construction and operation of nuclear reactors, particularly with regard to
certain public health and safety and antitrust matters. The National
Environmental Policy Act has been construed to expand the jurisdiction of the
NRC to consider the environmental impact of a facility licensed under the Atomic
Energy Act of 1954, as amended.
NRC operating licenses currently expire in June 2017 and March 2021 for
Plant Farley units 1 and 2, respectively, in August 2014 and June 2018 for Plant
Hatch units 1 and 2, respectively, and in January 2027 and February 2029 for
Plant Vogtle units 1 and 2, respectively.
On February 29, 2000, Southern Nuclear, on behalf of GEORGIA, filed a
license renewal application with the NRC for Plant Hatch units 1 and 2. If
approved, the operating license will be extended to August 6, 2034 for Plant
Hatch unit 1 and until June 13, 2038 for Plant Hatch unit 2.
Reference is made to Notes 1 and 12 to SOUTHERN's, Notes 1 and 12 to
ALABAMA's and Notes 1 and 5 to GEORGIA's financial statements in Item 8 herein
for information on nuclear decommissioning costs and nuclear insurance.
Additionally, Note 3 to GEORGIA's financial statements
contains information regarding nuclear performance standards imposed by the
Georgia PSC that may impact retail rates.
Environmental Regulation
The integrated Southeast utilities, SEGCO and Southern Energy's domestic
operations are subject to federal, state and local environmental requirements
which, among other things, control emissions of particulates, sulfur dioxide and
nitrogen oxides into the air; the use, transportation, storage and disposal of
hazardous and toxic waste; and discharges of pollutants, including thermal
discharges, into waters of the United States. The integrated Southeast
utilities, SEGCO and Southern Energy expect to comply with such requirements,
which generally are becoming increasingly stringent, through technical
improvements, the use of appropriate combinations of low-sulfur fuel and
chemicals, addition of environmental control facilities, changes in control
techniques and reduction of the operating levels of generating facilities.
Failure to comply with such requirements could result in the complete shutdown
of individual facilities not in compliance as well as the imposition of civil
and criminal penalties.
Reference is made to each registrant's "Management's Discussion and
Analysis" in Item 7 herein for a discussion of the Clean Air Act and other
environmental legislation and proceedings, including a pending lawsuit brought
on behalf of the EPA.
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<PAGE>
The integrated Southeast utilities', SEGCO's and Southern Energy's estimated
capital expenditures for environmental quality control facilities for the years
2000, 2001 and 2002 are as follows: (in millions)
--------------------- --- ---------- ---------- -----------
2000 2001 2002
---------- ---------- -----------
ALABAMA $ 28 $ 78 $ 72
GEORGIA 161 268 298
GULF 2 2 9
MISSISSIPPI - - 7
SAVANNAH 1 2 2
SEGCO 4 31 55
Southern Energy 29 38 69
--------------------- --- ---------- ---------- -----------
Total $225 $419 $512
===================== === ========== ========== ===========
*The foregoing estimates are included in the current construction programs.
(See Item 1 - BUSINESS - "Construction Programs" herein.)
Additionally, each integrated Southeast utility and SEGCO has incurred costs
for environmental remediation of various sites. Reference is made to each
registrant's "Management's Discussion and Analysis" in Item 7 herein for
information regarding the registrants' environmental remediation efforts. Also,
see Note 3 to SOUTHERN's and GEORGIA's financial statements in Item 8 herein for
information regarding the identification of sites that may require environmental
remediation by GEORGIA and Note 3 to MISSISSIPPI's financial statements in Item
8 herein for information regarding a site that will require environmental
remediation by MISSISSIPPI.
The integrated Southeast utilities, SEGCO and Southern Energy are unable to
predict at this time what additional steps they may be required to take as a
result of the implementation of existing or future quality control requirements
for air, water and hazardous or toxic materials, but such steps could adversely
affect system operations and result in substantial additional costs.
International Regulation
Southern Energy's international operations are subject to the jurisdiction of
numerous governmental agencies in the countries in which its projects are
located with respect to environmental and other regulatory matters. Generally,
many of the countries in which Southern Energy conducts and will conduct
business have recently developed or are in the process of developing new
regulatory and legal structures to accommodate private and foreign-owned
businesses. These regulatory and legal structures and their interpretation by
applicable administrative agencies are relatively new and sometimes limited, and
more detailed rules and procedures may be issued in the future. The
interpretation of existing rules can also be expected to evolve over time. In
addition, as Southern Energy acquires additional projects in various countries,
it will be affected by the environmental and other regulatory restrictions of
such countries.
The outcome of the matters mentioned above under "Regulation" cannot now be
determined, except that these developments may result in delays in obtaining
appropriate licenses for generating facilities, increased construction and
operating costs, or reduced generation, the nature and extent of which, while
not determinable at this time, could be substantial.
Rate Matters
Rate Structure
The rates and service regulations of the integrated Southeast utilities are
uniform for each class of service throughout their respective service areas.
Rates for residential electric service are generally of the block type based
upon kilowatt-hours used and include minimum charges.
Residential and other rates contain separate customer charges. Rates for
commercial service are presently of the block type and, for large customers, the
billing demand is generally used to determine capacity and minimum bill charges.
These large customers' rates are generally based upon usage by the customer
including those with special features to encourage off-peak usage. Additionally,
the integrated Southeast utilities are allowed by their respective PSCs to
negotiate the terms and compensation of service to large customers. Such terms
and compensation of service, however, are subject to final PSC approval.
ALABAMA, GEORGIA and SAVANNAH are allowed by state law to recover fuel and net
purchased energy costs through fuel cost recovery provisions which are adjusted
to reflect increases or decreases in such costs. GULF recovers from retail
I-15
<PAGE>
customers costs of fuel, net purchased power, energy conservation and
environmental compliance through provisions which are adjusted to reflect
increases or decreases in such costs. GULF's recovery of these costs is based
upon an annual projection - any over/under recovery during such period is
reflected in a subsequent annual period with interest. With respect to
MISSISSIPPI's retail rates, fuel and purchased power costs above base levels
included in the various rate schedules are billed to such customers under the
fuel and energy adjustment clause. The adjustment factors for MISSISSIPPI's
retail and wholesale rates are generally levelized based on the estimated energy
cost for the year, adjusted for any actual over/under collection from the
previous year. Revenues are adjusted for differences between recoverable fuel
costs and amounts actually recovered in current rates.
Rate Proceedings
Reference is made to Note 3 to each registrant's financial statements in Item 8
herein for a discussion of rate matters. Reference is also made to GULF's
"Management's Discussion and Analysis - Future Earnings Potential" in Item 7
herein for a discussion of recent Florida PSC matters.
Integrated Resource Planning
GEORGIA and SAVANNAH must file Integrated Resource Plans for approval by the
Georgia PSC. The plans must specify how GEORGIA and SAVANNAH each intends to
meet the future electrical needs of their customers through a combination of
demand-side and supply-side resources. The Georgia PSC must pre-certify these
new resources. Once certified, all prudently incurred construction costs and
purchased power costs will be recoverable through rates.
In July 1998, the Georgia PSC approved GEORGIA's and SAVANNAH's 1998
Integrated Resource Plans as filed, with minor modifications. The approved plans
identify resource needs of approximately 800 megawatts to 1,200 megawatts
starting in the summer of 2002. As a result, GEORGIA and SAVANNAH issued a joint
request for proposals for their collective needs of 800 megawatts to 1,200
megawatts for 2002 and 2003. The bids were evaluated against self-build options,
and a Certification Filing for the selected resources was approved by the
Georgia PSC in March 2000. The selected resources for retail needs in Georgia
are: (1) a 7-year purchased power agreement with the West Georgia Generating
Company for 310 megawatts starting in 2002, increasing to 465 megawatts in 2005,
and terminating in May 2009; and (2) a 7 1/2-year purchased power agreement for
two 568 megawatt combined cycle units to be located at Plant Wansley starting in
2002 and terminating at the end of 2009. SAVANNAH has a 7-year purchased power
agreement with GEORGIA for 200 megawatts of the 1,136 megawatt addition at Plant
Wansley starting in 2002 and terminating in 2009. After 2009, this capacity will
be available to the wholesale market.
Environmental Cost Recovery Plans
GULF and MISSISSIPPI both have retail rate mechanisms that provide for recovery
of environmental compliance costs. For a description of these plans, see Note 3
to each of GULF's and MISSISSIPPI's financial statements in Item 8 herein.
I-16
<PAGE>
Employee Relations
The companies of the SOUTHERN system had a total of 32,949 employees on their
payrolls at December 31, 1999.
-------------------------------- --- -------------------------
Employees
at
December 31, 1999
-------------------------
ALABAMA 6,792
GEORGIA 8,961
GULF 1,339
MISSISSIPPI 1,328
SAVANNAH 533
SCS 3,572
Southern Energy* 6,680
Southern Nuclear 3,018
Other 726
-------------------------------- --- -------------------------
Total 32,949
================================ === =========================
*Includes 5,282 employees on international payrolls.
The integrated Southeast utilities have separate agreements with local
unions of the IBEW generally covering wages, working conditions and procedures
for handling grievances and arbitration. These agreements apply with certain
exceptions to operating, maintenance and construction employees.
ALABAMA has agreements with the IBEW on a three-year contract extending to
August 14, 2001. Upon notice given at least 60 days prior to that date,
negotiations may be initiated with respect to agreement terms to be effective
after such date.
GEORGIA has an agreement with the IBEW covering wages and working
conditions, which is in effect through June 30, 2002.
GULF has an agreement with the IBEW on a three-year contract extending to
August 15, 2001.
MISSISSIPPI has an agreement with the IBEW on a four-year contract extending
to August 16, 2002.
SAVANNAH has four-year labor agreements with the IBEW and the Office and
Professional Employees International Union that expire April 15, 2003 and
December 1, 2003, respectively.
Southern Energy has a labor contract with the United Steel Workers that
extends to January 1, 2004 at its State Line facility in Hammond, Indiana.
Southern Energy Canal located in Sandwich, Massachusetts, and Southern
Energy Kendall located in Cambridge, Massachusetts, both subsidiaries of
Southern Energy, have contracts with the Utilities Workers' Union of America
which expire on June 1, 2001 and March 1, 2001, respectively. Also, Southern
Energy New York has a contract with the IBEW which expires on June 1, 2000.
Currently, Southern Energy New York is in negotiations with the IBEW.
Southern Nuclear has agreements with the IBEW on separate three-year
contracts extending to August 15, 2001 for Plant Farley and to June 30, 2002 for
Plants Hatch and Vogtle. Upon notice given at least 60 days prior to these
dates, negotiations may be initiated with respect to agreement terms to be
effective after such dates.
Southern Nuclear also has an agreement with the United Plant Guard Workers
of America for security officers at Plant Hatch extending to September 30, 2001.
Upon notice given at least 60 days prior to that date, negotiations may be
initiated with respect to agreement terms to be effective after such date.
The agreements also subject the terms of the pension plans for the companies
discussed above to collective bargaining with the unions at five-year intervals.
I-17
<PAGE>
Item 2. PROPERTIES
Electric Properties - The Integrated Southeast Utilities
The integrated Southeast utilities and SEGCO, at December 31, 1999, operated 33
hydroelectric generating stations, 33 fossil fuel generating stations and three
nuclear generating stations. The amounts of capacity owned by each company are
shown in the table below.
------------------------- -------------------------------------
Nameplate
Generating Station Location Capacity (1)
------------------------- ------------------- -----------------
(Kilowatts)
Fossil Steam
Gadsden Gadsden, AL 120,000
Gorgas Jasper, AL 1,221,250
Barry Mobile, AL 1,525,000
Chickasaw Chickasaw, AL 40,000
Greene County Demopolis, AL 300,000 (2)
Gaston Unit 5 Wilsonville, AL 880,000
Miller Birmingham, AL 2,532,288 (3)
---------
ALABAMA Total 6,618,538
---------
Arkwright Macon, GA 160,000
Atkinson Atlanta, GA 180,000
Bowen Cartersville, GA 3,160,000
Branch Milledgeville, GA 1,539,700
Hammond Rome, GA 800,000
McDonough Atlanta, GA 490,000
McManus Brunswick, GA 115,000
Mitchell Albany, GA 170,000
Scherer Macon, GA 750,924 (4)
Wansley Carrollton, GA 925,550 (5)
Yates Newnan, GA 1,250,000
---------
GEORGIA Total 9,541,174
---------
Crist Pensacola, FL 1,045,000
Lansing Smith Panama City, FL 305,000
Scholz Chattahoochee, FL 80,000
Daniel Pascagoula, MS 500,000 (6)
Scherer Unit 3 Macon, GA 204,500 (4)
-----------
GULF Total 2,134,500
---------
Eaton Hattiesburg, MS 67,500
Sweatt Meridian, MS 80,000
Watson Gulfport, MS 1,012,000
Daniel Pascagoula, MS 500,000 (6)
Greene County Demopolis, AL 200,000 (2)
-----------
MISSISSIPPI Total 1,859,500
-----------
------------------------- -----------------------------------------
Nameplate
Generating Station Location Capacity
---------------------- ------------------------- ------------------
(Kilowatts)
McIntosh Effingham County, GA 163,117
Kraft Port Wentworth, GA 281,136
Riverside Savannah, GA 102,278
-----------
SAVANNAH Total 546,531
-----------
Gaston Units 1-4 Wilsonville, AL
SEGCO Total 1,000,000 (7)
-----------
Total Fossil Steam 21,700,243
-----------
Nuclear Steam
Farley Dothan, AL
ALABAMA Total 1,720,000
-----------
Hatch Baxley, GA 899,612 (8)
Vogtle Augusta, GA 1,060,240 (9)
-----------
GEORGIA Total 1,959,852
-----------
Total Nuclear Steam 3,679,852
-----------
Combustion Turbines
Greene County Demopolis, AL
ALABAMA Total 720,000
-----------
Arkwright Macon, GA 30,580
Atkinson Atlanta, GA 78,720
Bowen Cartersville, GA 39,400
Intercession City Intercession City, FL 47,333 (10)
McDonough Atlanta, GA 78,800
McIntosh
Units 1,2,3,4,7,8 Effingham County, GA 480,000
McManus Brunswick, GA 481,700
Mitchell Albany, GA 118,200
Robins Warner Robins, GA 160,000
Wilson Augusta, GA 354,100
Wansley Carrollton, GA 26,322 (5)
----------
GEORGIA Total 1,895,155
----------
Lansing Smith
Unit A Panama City, FL 39,400
Pea Ridge
Units 1-3 Pea Ridge, FL 14,250
------
GULF Total 53,650
------
Chevron Cogenerating
Station Pascagoula, MS 147,292 (11)
Sweatt Meridian, MS 39,400
Watson Gulfport, MS 39,360
---------
MISSISSIPPI Total 226,052
---------
------------------------------------------------- -----------------
I-18
<PAGE>
--------------------------- -------------------- -----------------
Nameplate
Generating Station Location Capacity
--------------------------- -------------------- -----------------
(Kilowatts)
Boulevard Savannah, GA 59,100
Kraft Port Wentworth, GA 22,000
McIntosh
Units 5&6 Effingham County, 160,000
GA -------
SAVANNAH Total 241,100
-------
Gaston (SEGCO) Wilsonville, AL 19,680 (7)
---------
Total Combustion Turbines 3,155,637
---------
Hydroelectric Facilities
Weiss Leesburg, AL 87,750
Henry Ohatchee, AL 72,900
Logan Martin Vincent, AL 128,250
Lay Clanton, AL 177,000
Mitchell Verbena, AL 170,000
Jordan Wetumpka, AL 100,000
Bouldin Wetumpka, AL 225,000
Harris Wedowee, AL 135,000
Martin Dadeville, AL 154,200
Yates Tallassee, AL 32,000
Thurlow Tallassee, AL 58,000
Lewis Smith Jasper, AL 157,500
Bankhead Holt, AL 45,125
Holt Holt, AL 40,000
----------
ALABAMA Total 1,582,725
----------
Barnett Shoals
(Leased) Athens, GA 2,800
Bartletts Ferry Columbus, GA 173,000
Goat Rock Columbus, GA 26,000
Lloyd Shoals Jackson, GA 14,400
Morgan Falls Atlanta, GA 16,800
North Highlands Columbus, GA 29,600
Oliver Dam Columbus, GA 60,000
Rocky Mountain Rome, GA 215,256 (12)
Sinclair Dam Milledgeville, GA 45,000
Tallulah Falls Clayton, GA 72,000
Terrora Clayton, GA 16,000
Tugalo Clayton, GA 45,000
Wallace Dam Eatonton, GA 321,300
Yonah Toccoa, GA 22,500
6 Other Plants 18,080
----------
GEORGIA Total 1,077,736
----------
Total Hydroelectric Facilities 2,660,461
----------
Total Generating Capacity 31,196,193
==========
------------------------------------------------ -----------------
Notes:
(1) For additional information regarding facilities jointly-owned with
non-affiliated parties, see Item 2 - PROPERTIES -
"Jointly-Owned Facilities" herein.
(2) Owned by ALABAMA and MISSISSIPPI as
tenants in common in the proportions of 60% and 40%, respectively.
(3) Excludes the capacity owned by AEC.
(4) Capacity shown for GEORGIA is 8.4% of Units 1 and 2 and 75% of Unit 3.
Capacity shown for GULF is 25% of Unit 3.
(5) Capacity shown is GEORGIA's portion (53.5%) of total plant capacity.
(6) Represents 50% of the plant which is owned as tenants in common by
GULF and MISSISSIPPI.
(7) SEGCO is jointly-owned by ALABAMA and GEORGIA. (See Item 1 - BUSINESS
herein.)
(8) Capacity shown is GEORGIA's portion (50.1%) of total plant capacity.
(9) Capacity shown is GEORGIA's portion (45.7%) of total plant capacity.
(10) Capacity shown represents 33-1/3% of total plant capacity. GEORGIA
owns a 1/3 interest in the unit with 100% use of the
unit from June through September. FPC operates the unit.
(11) Generation is dedicated to a single industrial customer.
(12) Capacity shown is GEORGIA's portion (25.4%) of total plant capacity.
OPC operates the plant.
I-19
<PAGE>
Except as discussed below under "Titles to Property," the principal plants
and other important units of the integrated Southeast utilities and SEGCO are
owned in fee by the respective companies. It is the opinion of management of
each such company that its operating properties are adequately maintained and
are substantially in good operating condition.
MISSISSIPPI owns a 79-mile length of 500-kilovolt transmission line which is
leased to Entergy Gulf States. The line, completed in 1984, extends from Plant
Daniel to the Louisiana state line. Entergy Gulf States is paying a use fee over
a forty-year period covering all expenses and the amortization of the original
$57 million cost of the line. At December 31, 1999, the unamortized portion of
this cost was $35 million.
The all-time maximum demand on the integrated Southeast utilities and SEGCO
was 30,578,200 kilowatts and occurred in August 1999. This amount excludes
demand served by capacity retained by MEAG and Dalton and excludes demand
associated with power purchased from OPC and SEPA by its preference customers.
The reserve margin for the integrated Southeast utilities and SEGCO at that time
was 8.5%. For additional information on peak demands, reference is made to Item
6 - SELECTED FINANCIAL DATA herein.
ALABAMA and GEORGIA will incur significant costs in decommissioning their
nuclear units at the end of their useful lives. (See Item 1 - BUSINESS -
"Regulation - Atomic Energy Act of 1954" and Note 1 to SOUTHERN's, ALABAMA's and
GEORGIA's financial statements in Item 8 herein.)
I-20
<PAGE>
Other Electric Properties - Southern Energy
Through special purpose subsidiaries, SOUTHERN owns interests in or operates
independent power production facilities and foreign utility companies. The
generating capacity of these utilities (or facilities) at December 31, 1999, was
as follows:
<TABLE>
<CAPTION>
Facilities in Operation
------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity Percent
Facility Location Units Owned Operated Ownership Type
-------------------- --------------------------- --------- ------------ ----------------------------------------------
<S> <C> <C> <C> <C> <C>
Alicura Argentina 4 551 (1) 1,000 55.14 (1) Hydro
BEWAG Germany 15 428 - 26.00 Coal
BEWAG Germany 14 340 - 26.00 Oil & Gas
Birchwood Virginia 1 111 222 50.00 Coal (2)
CEPA China 3 634 - 32.00 Coal
CEPA Philippines 2 641 735 87.22 Coal
CEPA Philippines 3 189 210 90.10 Oil
CEPA China 16 443 - 9.99 Coal
CEPA Philippines 2 1,119 1,218 91.90 Coal
CEPA Philippines 1 100 100 100.00 Oil
CEPA Philippines 4 15 15 100.00 Diesel
CEMIG Brazil 34 194 - 3.60 Hydro
CEMIG Brazil 2 5 - 3.60 Thermal
CEMIG Brazil 1 - - 3.60 Wind
Edelnor Chile 2 281 341 82.34 Coal
Edelnor Chile 37 103 125 82.34 Diesel & Hydro
Freeport Grand Bahamas 8 79 126 62.50 Oil
Penal Trinidad and Tobago 5 92 236 39.00 Gas
Port of Spain Trinidad and Tobago 6 120 308 39.00 Gas
Pt. Lisas Trinidad and Tobago 10 247 634 39.00 Gas
State Line Indiana 2 490 490 100.00 Coal
SE California California 13 3,065 3,065 100.00 Oil & Gas
SE New York New York 16 1,794 1,794 100.00 Oil, Gas, Coal &
Hydro
SE New Maine and Massachusetts 8 1,245 1,236 100.00 Oil & Gas
England
SEI Wichita Falls Texas 4 80 80 100.00 Gas
WPD United Kingdom 10 71 - 3.77 Gas
WPD United Kingdom 8 6 12 49.00 Oil & Gas
WPD United Kingdom 2 3 - 22.00 Wind
WPD United Kingdom 2 - 2 - Oil
==============================================================================================================================
Total Capacity 12,446 11,949
==============================================================================================================================
</TABLE>
I-21
<PAGE>
Notes: (1) Represents megawatts of capacity under a concession
agreement expiring in the year 2023. In early 2000, Southern
Energy announced an agreement to sell Alicura, its
Argentinean assets, substantially at the adjusted carrying value
with no material gain or loss expected to be recognized in 2000.
(2) Cogeneration facility.
<TABLE>
<CAPTION>
Facilities Under Construction
-------------------------------------------------------------------------------------------------------------------------------
Megawatts of Capacity -----------------
Percent
Facility Location Units Own Operate Ownership Type
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEI Wisconsin Wisconsin 2 306 306 100.00 Gas
SEI Texas Texas 3 550 550 100.00 Gas
Edelnor Chile 1 206 250 82.34 Gas
--------------------------------------------------------------------------------------------------------------------------------
Total Capacity 1,062 1,106
================================================================================================================================
</TABLE>
Jointly-Owned Facilities
ALABAMA and GEORGIA have sold and GEORGIA has purchased undivided interests in
certain generating plants and other related facilities to or from non-affiliated
parties. The percentages of ownership resulting from these transactions are as
follows:
<TABLE>
<CAPTION>
Total Percentage Ownership
---------------- -------- ------------ -------- --------- ------------ --------
Capacity ALABAMA AEC GEORGIA OPC MEAG DALTON FPC
-------------- ---------------- -------- ------------ -------- --------- ------------ --------
(Megawatts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Miller
Units 1 and 2 1,320 91.8% 8.2% -% -% -% -% -%
Plant Hatch 1,796 - - 50.1 30.0 17.7 2.2 -
Plant Vogtle 2,320 - - 45.7 30.0 22.7 1.6 -
Plant Scherer
Units 1 and 2 1,636 - - 8.4 60.0 30.2 1.4 -
Plant Wansley 1,779 - - 53.5 30.0 15.1 1.4 -
Rocky Mountain 848 - - 25.4 74.6 - - -
Intercession City, FL 142 - - 33.3 - - - 66.7
----------------------------- -------------- -- ---------------- -------- ------------ -------- --------- ------------ --------
</TABLE>
ALABAMA and GEORGIA have contracted to operate and maintain the respective
units in which each has an interest (other than Rocky Mountain and Intercession
City, as described below) as agent for the joint owners.
In addition, GEORGIA has commitments regarding a portion of a 5 percent
interest in Plant Vogtle owned by MEAG that are in effect until the later of
retirement of the plant or the latest stated maturity date of MEAG's bonds
issued to finance such ownership interest. The payments for capacity are
required whether any capacity is available. The energy cost is a function of
each unit's variable operating costs. Except for the portion of the capacity
payments related to the 1987 and 1990 write-offs of Plant Vogtle costs, the cost
of such capacity and energy is included in purchased power from non-affiliates
in GEORGIA's Statements of Income in Item 8 herein.
In December 1988, GEORGIA and OPC entered into a joint ownership agreement
for the Rocky Mountain plant under which GEORGIA agreed to retain its present
investment in the project and OPC agreed to finance, complete and operate the
facility. In 1995, the plant went into commercial operation. GEORGIA's ownership
is 25.4 percent. On January 14, 1998, the Georgia PSC ordered that the Company
I-22
<PAGE>
be allowed approximately $108 million of its $142 million investment in the
plant in rate base as of December 31, 1998. GEORGIA appealed the Georgia PSC's
order. Under the rate order approved by the Georgia PSC on December 18, 1998,
GEORGIA accepted the rate base allowance and, in December 1998, GEORGIA recorded
a charge to earnings of $21 million, after taxes, associated with the write-down
of the plant. Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial
statements in Item 8 herein for additional information regarding the Rocky
Mountain plant.
In 1994, GEORGIA and FPC entered into a joint ownership agreement regarding
the Intercession City combustion turbine unit. The unit began commercial
operation in January 1997, and is operated by FPC. GEORGIA owns a one-third
interest in the unit, with use of 100% of the capacity from June through
September. FPC has the capacity the remainder of the year.
Titles to Property
The integrated Southeast utilities' and SEGCO's interests in the principal
plants (other than certain pollution control facilities, one small hydroelectric
generating station leased by GEORGIA and the land on which five combustion
turbine generators of MISSISSIPPI are located, which is held by easement) and
other important units of the respective companies are owned in fee by such
companies, subject only to the liens of applicable mortgage indentures (except
for SEGCO) and to excepted encumbrances as defined therein. The integrated
Southeast utilities own the fee interests in certain of their principal plants
as tenants in common. (See Item 2 - PROPERTIES - "Jointly-Owned Facilities"
herein.) Properties such as electric transmission and distribution lines and
steam heating mains are constructed principally on rights-of-way which are
maintained under franchise or are held by easement only. A substantial portion
of lands submerged by reservoirs is held under flood right easements. In
substantially all of its coal reserve lands, SEGCO owns or will own the coal
only, with adequate rights for the mining and removal thereof.
I-23
<PAGE>
Item 3. LEGAL PROCEEDINGS
(1) United States of America v. ALABAMA, GEORGIA and SCS (United States
District Court for the Northern District of Georgia)
Reference is made to Note 3 in each of the registrant's financial
statements in Item 8 herein.
(2) Sullivan v. ALABAMA et al.
(Circuit Court of Jefferson County, Alabama)
Reference is made to Note 3 to SOUTHERN's and ALABAMA's financial
statements in Item 8 herein under the captions "Alabama Power Lake Martin
Litigation" and "Lake Martin Litigation", respectively.
(3) GEORGIA has been designated as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act with
respect to a site in Brunswick, Georgia.
Reference is made to Note 3 to SOUTHERN's and GEORGIA's financial
statements in Item 8 herein under the captions "Georgia Power Potentially
Responsible Party Status" and "Other Environmental Contingencies,"
respectively.
(4) In re: Mobile Energy Services Company, LLC; In re: Mobile Energy
Services Holdings, Inc.
(U.S. Bankruptcy Court for the Southern District of Alabama).
Reference is made to Note 3 to SOUTHERN's financial statements in Item 8
herein under the caption "Mobile Energy Services Petition for
Bankruptcy".
(5) State of Minas Gerais v. Southern Electric Brasil Participacoes Ltda.
(Appellate Court of the State of Minas Gerais)
Reference is made to Note 3 to SOUTHERN's financial statements in Item 8
herein under the caption "Southern Energy Brazilian Investment".
See Item 1 - BUSINESS - "Construction Programs," "Fuel Supply," "Regulation
- - Federal Power Act" and "Rate Matters" as well as Note 3 to each registrant's
financial statements in Item 8 herein for a description of certain other
administrative and legal proceedings discussed therein.
Additionally, each of the integrated Southeast utilities, Southern Energy,
SCS, Southern Nuclear, Energy Solutions and Southern LINC are, in the normal
course of business, engaged in litigation or administrative proceedings that
include, but are not limited to, acquisition of property, injuries and damages
claims, and complaints by present and former employees.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
None.
I-24
<PAGE>
EXECUTIVE OFFICERS OF SOUTHERN
(Identification of executive officers of SOUTHERN is inserted in Part I in
accordance with Regulation S-K, Item 401(b), Instruction 3.) The ages of the
officers set forth below are as of December 31, 1999.
A. W. Dahlberg
Chairman, Chief Executive Officer, and Director
Age 59
Elected Director in 1985 and Chairman and Chief Executive Officer effective
March 1995. Also served as President from January 1994 to June 1999.
H. Allen Franklin
President, Chief Operating Officer and Director
Age 55
Elected Director in 1988 and President and Chief Operating Officer effective
June 1999. Previously served as President and Chief Executive Officer of GEORGIA
from January 1994 to June 1999.
S. Marce Fuller
Executive Vice President
Age 39
Elected in 1999. She also has served as President and Chief Executive Officer of
Southern Energy since July 1999. Previously Executive Vice President of Southern
Energy from October 1998 to July 1999; Senior Vice President from May 1996 to
October 1998; and Vice President from February 1994 to May 1996. Also served as
President and Chief Executive Officer of SCEM from February 1998 to November
1999.
Elmer B. Harris
Executive Vice President and Director
Age 60
Elected Director in 1989 and Executive Vice President in 1991. He also has
served as President and Chief Executive Officer of ALABAMA since 1989.
David M. Ratcliffe
Executive Vice President
Age 51
Elected in 1999. He also has served as President and Chief Executive Officer of
GEORGIA since June 1999. Previously served as Executive Vice President and Chief
Financial Officer of GEORGIA from March 1998 to June 1999; Senior Vice President
of SOUTHERN from March 1995 to March 1998; and as President and Chief Executive
Officer of MISSISSIPPI from 1991 to March 1995.
Stephen A. Wakefield
Senior Vice President and General Counsel
Age 59
Elected in 1997. Previously, he was a partner at the law firm of Akin, Gump,
Strauss, Hauer & Feld, LLP from July 1991 through August 1997.
W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
Age 60
Elected in 1986. He also has served as Executive Vice President of SCS since
1986.
C. Alan Martin
Vice President
Age 51
Elected in 1998; served as Chief Marketing Officer for the SOUTHERN system.
Previously Vice President of Human Resources of SOUTHERN from 1995 to February
1998. Effective January 1, 2000; elected Executive Vice President of ALABAMA.
Charles D. McCrary
Vice President
Age 48
Elected in 1998; serves as Chief Production Officer for the SOUTHERN system. He
also serves as Executive Vice President of GEORGIA since May 1998. Previously,
he served as Executive Vice President of ALABAMA from 1994 through April 1998.
W. G. Hairston, III
Age 54
President and Chief Executive Officer of Southern Nuclear since 1993.
The officers of SOUTHERN were elected for a term running from June 1, 1999
for one year until the next annual meeting of directors or until their
successors are elected and have qualified, except for Ms. Fuller who was elected
October 18, 1999.
I-25
PART II
Item 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The common stock of SOUTHERN is listed and traded on the New York
Stock Exchange. The stock is also traded on regional exchanges across
the United States. High and low stock prices, per the New York Stock
Exchange Composite Tape during each quarter for the past two years
were as follows:
------------------------ ----------- --- --------------
High Low
----------- --------------
1999
First Quarter $29-5/8 $23-1/4
Second Quarter 29-3/16 22-3/4
Third Quarter 28 25
Fourth Quarter 27-1/8 22-1/16
1998
First Quarter $28-11/16 $23-15/16
Second Quarter 29 25-1/16
Third Quarter 29-13/16 25-1/4
Fourth Quarter 31-9/16 27-3/16
-------------------- --------------- --- --------------
There is no market for the other registrants' common stock, all of
which is owned by SOUTHERN. On February 29, 2000, the closing price
of SOUTHERN's common stock was $22-3/16.
(b) Number of SOUTHERN's common stockholders
at December 31, 1999:
174,179
Each of the other registrants have one common stockholder, SOUTHERN.
(c) Dividends on each registrant's common stock are payable at the
discretion of their respective board of directors. The dividends on
common stock paid and/or declared by SOUTHERN and the operating
affiliates to their stockholder(s) for the past two years were as
follows: (in thousands)
------------------- --------- ------------- ----------
Registrant Quarter 1999 1998
------------------- --------- ------------- ----------
SOUTHERN First $233,879 $232,449
Second 233,445 233,623
Third 228,690 233,763
Fourth 225,470 233,506
ALABAMA First 98,000 90,400
Second 98,400 90,500
Third 99,700 90,800
Fourth 103,500 95,400
GEORGIA First 133,100 132,100
Second 133,700 132,300
Third 135,500 132,700
Fourth 140,700 139,500
GULF First 15,000 14,100
Second 15,100 14,100
Third 15,300 14,100
Fourth 15,900 14,900
MISSISSIPPI First 13,800 12,700
Second 13,800 12,800
Third 14,000 12,800
Fourth 14,500 13,400
SAVANNAH First 6,200 5,800
Second 6,200 5,800
Third 6,300 5,800
Fourth 6,500 6,100
------------------- --------- ------------- ----------
The dividend paid per share by SOUTHERN was 33.5(cent) for each quarter of
1998 and 1999. The dividend paid on SOUTHERN's common stock for the first
quarter of 2000 was 33.5(cent) per share.
The amount of dividends on their common stock that may be paid by the
subsidiary registrants is restricted in accordance with their first mortgage
bond indenture. The
II-1
<PAGE>
amounts of earnings retained in the business and the amounts restricted against
the payment of cash dividends on common stock at December 31, 1999, were as
follows:
-------------------- ------------------ --- --------------
Retained Restricted
Earnings Amount
------------------ --------------
(in millions)
ALABAMA $1,225 $ 796
GEORGIA 1,778 897
GULF 163 127
MISSISSIPPI 172 118
SAVANNAH 111 68
Consolidated 4,232 2,003
-------------------- ------------------ --- --------------
Item 6. SELECTED FINANCIAL DATA
SOUTHERN. Reference is made to information under the heading "Selected
Consolidated Financial and Operating Data," contained herein at pages II-46 and
II-47.
ALABAMA. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-78 and II-79.
GEORGIA. Reference is made to information under the heading "Selected Financial
and Operating Data," contained herein at pages II-111 and II-112.
GULF. Reference is made to information under the heading "Selected Financial
and Operating Data," contained herein at pages II-140 and II-141.
MISSISSIPPI. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-169 and II-170.
SAVANNAH. Reference is made to information under the heading "Selected
Financial and Operating Data," contained herein at pages II-195 and II-196.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
SOUTHERN. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-8 through II-19.
ALABAMA. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-51 through II-58.
GEORGIA. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-83 through II-90.
GULF. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-116 through II-123.
MISSISSIPPI. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-145 through II-151.
SAVANNAH. Reference is made to information under the heading "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contained herein at pages II-174 through II-180.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to information in SOUTHERN's "Management's Discussion and
Analysis - Derivative Financial Instruments" and to Note 1 to SOUTHERN's
financial statements under the headings "Financial Instruments for Non-Trading
Activities" and "Financial Instruments for Trading Activities" contained herein
on pages II-15 through II-16 and II-31 through II-32, respectively.
Reference is also made to "Management's Discussion and Analysis - Exposure to
Market Risks" in Item 7 of ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
contained herein at pages II-55, II-87, II-120, II-148, and II-177,
respectively.
II-2
<PAGE>
<TABLE>
<CAPTION>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO 1999 FINANCIAL STATEMENTS
Page
The Southern Company and Subsidiary Companies:
<S> <C>
Report of Independent Public Accountants................................................................................ II-7
Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997.................................. II-20
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997.............................. II-21
Consolidated Balance Sheets at December 31, 1999 and 1998............................................................... II-22
Consolidated Statements of Capitalization at December 31, 1999 and 1998................................................. II-24
Consolidated Statements of Common Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997.................................................................................... II-26
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 1999, 1998 and 1997.................................................................................... II-26
Notes to Financial Statements........................................................................................... II-27
ALABAMA:
Report of Independent Public Accountants .............................................................................. II-50
Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................................... II-59
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997........................................... II-60
Balance Sheets at December 31, 1999 and 1998 ........................................................................... II-61
Statements of Capitalization at December 31, 1999 and 1998 ............................................................. II-63
Statements of Common Stockholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997..................................................................................... II-65
Notes to Financial Statements........................................................................................... II-66
GEORGIA:
Report of Independent Public Accountants................................................................................ II-82
Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................................... II-91
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997........................................... II-92
Balance Sheets at December 31, 1999 and 1998 ........................................................................... II-93
Statements of Capitalization at December 31, 1999 and 1998 ............................................................. II-95
Statements of Common Stockholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997..................................................................................... II-97
Notes to Financial Statements........................................................................................... II-98
GULF:
Report of Independent Public Accountants................................................................................ II-115
Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................................... II-124
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997........................................... II-125
Balance Sheets at December 31, 1999 and 1998 ........................................................................... II-126
Statements of Capitalization at December 31, 1999 and 1998 ............................................................. II-128
Statements of Common Stockholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997..................................................................................... II-129
Notes to Financial Statements........................................................................................... II-130
II-3
<PAGE>
Page
MISSISSIPPI:
Report of Independent Public Accountants................................................................................ II-144
Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................................... II-152
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997........................................... II-153
Balance Sheets at December 31, 1999 and 1998 ........................................................................... II-154
Statements of Capitalization at December 31, 1999 and 1998 ............................................................. II-156
Statements of Common Stockholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997..................................................................................... II-158
Notes to Financial Statements........................................................................................... II-159
SAVANNAH:
Report of Independent Public Accountants................................................................................ II-173
Statements of Income for the Years Ended December 31, 1999, 1998 and 1997............................................... II-181
Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997........................................... II-182
Balance Sheets at December 31, 1999 and 1998 ........................................................................... II-183
Statements of Capitalization at December 31, 1999 and 1998 ............................................................. II-185
Statements of Common Stockholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997..................................................................................... II-186
Notes to Financial Statements........................................................................................... II-187
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
II-4
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
FINANCIAL SECTION
II-5
<PAGE>
MANAGEMENT'S REPORT
Southern Company and Subsidiary Companies 1999 Annual Report
The management of Southern Company has prepared -- and is responsible for -- the
consolidated financial statements and related information included in this
report. These statements were prepared in accordance with generally accepted
accounting principles appropriate in the circumstances and necessarily include
amounts that are based on the best estimates and judgments of management.
Financial information throughout this annual report is consistent with the
financial statements.
The company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The company's system of internal accounting controls is evaluated on an
ongoing basis by the company's internal audit staff. The company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of five directors who
are not employees, provides a broad overview of management's financial reporting
and control functions. Periodically, this committee meets with management, the
internal auditors, and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.
Management believes that its policies and procedures provide reasonable
assurance that the company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the consolidated financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of Southern Company and its subsidiary companies in conformity
with generally accepted accounting principles.
/s/A. W. Dahlberg
A. W. Dahlberg
Chairman and Chief Executive Officer
/s/W. L. Westbrook
W. L. Westbrook
Financial Vice President, Chief Financial Officer,
and Treasurer
February 16, 2000
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Southern Company:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of Southern Company (a Delaware corporation) and
subsidiary companies as of December 31, 1999 and 1998, and the related
consolidated statements of income, comprehensive income, common stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements (pages II-20 through
II-45) referred to above present fairly, in all material respects, the financial
position of Southern Company and subsidiary companies as of December 31, 1999
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
II-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Southern Company and Subsidiary Companies 1999 Annual Report
Results of Operations
Overview of Consolidated Earnings
Southern Company's 1999 earnings of $1.28 billion or $1.86 per share established
a new record high. Higher earnings were primarily driven by strong growth in the
competitive energy supply business outside the southeastern United States. The
traditional business of selling electricity in the Southeast continued to remain
strong. However, reported earnings in both 1999 and 1998 reflected significant
items not related to the normal day-to-day business activities. After excluding
these items, earnings for 1999 were $1.30 billion or $1.90 per share compared
with $1.23 billion or $1.76 per share in 1998.
Southern Energy, Inc. (Southern Energy) is the Southern Company subsidiary
that owns and manages its international operations and develops and owns its
competitive energy supply business in North America outside the Southeast.
Southern Energy earnings accounted for approximately 26 percent of Southern
Company's reported net income in 1999. Amortization of goodwill related to
Southern Energy investments reduced earnings per share by 5 cents in 1999 and 4
cents in 1998.
A reconciliation of reported earnings to earnings excluding non-day to day
business items and the related explanations are as follows:
Consolidated Earnings
Net Income Per Share
------------- --------------
1999 1998 1999 1998
------------- --------------
(in millions)
Earnings as reported $1,276 $ 977 $1.86 $1.40
- ---------------------------------------------------------------
Gain on asset sale (78) - (.11) -
Write down of assets:
South American
investments - 200 - .29
Rocky Mountain
plant - 21 - .03
Mobile Energy 69 - .10 -
Work force reductions 50 20 .07 .03
Other (14) 7 (.02) .01
- ---------------------------------------------------------------
Total adjustments 27 248 .04 .36
- ---------------------------------------------------------------
Earnings as adjusted $1,303 $1,225 $1.90 $1.76
===============================================================
Amount and
percent change $78 6.4% $0.14 8.0%
- ---------------------------------------------------------------
Southern Energy sold the supply business of South Western Electricity in
1999, and the remaining distribution business was renamed Western Power
Distribution. In 1999, Southern Energy recorded an asset impairment related to
Mobile Energy Services -- see Note 3 to the financial statements. Southern
Energy's write down of assets in 1998 related to investments in Argentina and
Chile not meeting financial expectations, which resulted in an announced plan to
sell these assets. In 1998, Georgia Power wrote down its investment in the Rocky
Mountain pumped storage hydroelectric plant as a result of a settlement related
to its 1998 retail rate proceeding. Work force reduction programs began in late
1999 for Bewag, a German utility in which Southern Energy has a 26 percent
ownership interest. Also, the traditional business recorded costs related to
workforce reductions in 1998.
Discussion of the results of operations are separated between the traditional
business of the integrated Southeast utilities and Southern Energy.
Integrated Southeast Utilities
The five integrated Southeast utilities provide electric service in four states.
These utilities are Alabama Power, Georgia Power, Gulf Power, Mississippi Power,
and Savannah Electric. They comprise Southern Company's principal business
segment with earnings of $1.1 billion in 1999. A condensed income statement for
this business segment is as follows:
Increase (Decrease)
Amount From Prior Year
------ --------------------
1999 1999 1998
- ---------------------------------------------------------------
(in millions)
Operating revenues $9,125 $(238) $675
- ---------------------------------------------------------------
Fuel 2,328 7 117
Purchased power 409 13 182
Other operation
and maintenance 2,430 4 252
Depreciation
and amortization 961 (328) 134
Taxes other than
income taxes 521 13 7
Write down of assets - (34) 34
- ---------------------------------------------------------------
Total operating expenses 6,649 (325) 726
- ---------------------------------------------------------------
Operating income 2,476 87 (51)
Other income (8) (84) 93
- ---------------------------------------------------------------
Earnings before
interest and taxes 2,468 3 42
Interest charges and other 720 41 48
Income taxes 675 (28) 16
- ---------------------------------------------------------------
Net income $1,073 $ (10) $ (22)
===============================================================
II-8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Revenues
Operating revenues changed in 1999 and 1998 as a result of the following
factors:
Increase (Decrease)
From Prior Year
------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Retail --
Growth and price changes $ 166 $258
Rate reductions (352) -
Weather (86) 178
Fuel cost recovery and other 86 189
- ---------------------------------------------------------------
Total retail (186) 625
- ---------------------------------------------------------------
Sales for resale --
Within service area (24) (2)
Outside service area (49) 12
- ---------------------------------------------------------------
Total sales for resale (73) 10
Other operating revenues 21 40
- ---------------------------------------------------------------
Operating revenues $(238) $675
===============================================================
Percent change (2.5)% 7.8%
- ---------------------------------------------------------------
Retail revenues of $8.1 billion in 1999 declined as a result of a Georgia
Power rate reduction effective January 1999. For additional information, see
Note 3 to the financial statements under "Georgia Power 1998 Retail Rate Order."
Customer growth in the Southeast somewhat offset the rate decrease. In 1998,
retail revenues increased sharply, up 8.2 percent compared with the prior year.
Continued growth in the traditional service area and the positive impact of
weather on energy sales were the predominant factors causing the rise in
revenues in 1998. Under fuel cost recovery provisions, fuel revenues generally
equal fuel expenses -- including the fuel component of purchased energy -- and
do not affect net income.
Sales for resale revenues within the service area were $350 million in 1999,
down 6.5 percent from the prior year. This sharp decline resulted primarily from
supplying less electricity under contractual agreements with certain wholesale
customers in 1999, and a slight reduction in these revenues is expected in 2000.
Revenues from sales for resale within the service area were $374 million in
1998, down 0.7 percent from the prior year.
Energy sales for resale outside the service area are predominantly unit power
sales under long-term contracts to Florida utilities. Economy sales and amounts
sold under short-term contracts are also sold for resale outside the service
area. Revenue from long-term unit power contracts have both a capacity and
energy component. Capacity revenues reflect the recovery of fixed costs and a
return on investment under the contracts. Energy is generally sold at variable
cost. The capacity and energy components of the unit power contracts were as
follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Capacity $174 $196 $203
Energy 157 152 183
- ---------------------------------------------------------------
Total $331 $348 $386
===============================================================
Capacity revenues in 1999 and 1998 declined each year as a result of
adjustments and true-ups related to contractual pricing. No significant declines
in capacity are scheduled until the termination of the contracts in 2010.
Energy Sales
The changes in revenues for the traditional business in the Southeast are
influenced heavily by the amount of energy sold each year. Kilowatt-hour sales
for 1999 and the percent change by year were as follows:
Amount Percent Change
(billions of ------- ----------------------------
kilowatt-hours) 1999 1999 1998 1997
- ----------------------------------------------------------------
Residential 43.4 (0.2)% 10.9% (2.2)%
Commercial 43.4 4.0 7.2 2.5
Industrial 56.2 1.6 2.1 2.6
Other 0.9 1.6 3.1 (1.1)
-----
Total retail 143.9 1.7 6.2 1.1
Sales for resale --
Within service area 9.4 (4.1) (0.4) (9.6)
Outside service area 13.0 (0.4) (5.6) 27.7
-----
Total 166.3 1.2 4.7 2.2
================================================================
The rate of increase in 1999 total retail energy sales was significantly
lower than in 1998. Although the total number of residential customers served
increased by 61,000 during the year, residential energy sales experienced a
decline as a result of milder weather in 1999. The rate of growth in 1998 retail
II-9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
energy sales was the highest one-year increase since 1986. Also, residential
energy sales registered the highest annual increase in over two decades as a
result of hotter-than-normal weather. Commercial and industrial sales, both in
1999 and 1998, continued to show slight gains in excess of the national
averages. This reflects the strength of business and economic conditions in
Southern Company's traditional service area in the southeastern United States.
Energy sales to retail customers are projected to increase at an average annual
rate of 2.2 percent during the period 2000 through 2010.
Sales to customers outside the service area declined by 0.4 percent in 1999
and by 5.6 percent in 1998 when compared with the respective prior year. The
declines in sales were influenced by weather and fluctuations in prices for oil
and natural gas, the primary fuel sources for utilities with which the company
has long-term contracts. When oil and gas prices fall below a certain level,
these customers can generate electricity to meet their requirements more
economically. However, these fluctuations in energy sales under long-term
contracts have minimal effects on earnings because Southern Company is paid for
dedicating specific amounts of its generating capacity to these utilities
outside the service area.
Expenses
Operating expenses of $6.6 billion for 1999 decreased $325 million. This decline
was primarily attributable to $308 million less accelerated depreciation of
plant being recorded in accordance with the 1998 Georgia Power rate order as
referred to earlier. The costs to produce and deliver electricity for the
traditional business in the Southeast for 1999 increased by $68 million to meet
higher energy demands. All other operating and maintenance expenses declined by
$44 million as a result of continued cost control programs.
In 1998, operating expenses of $7.0 billion increased $726 million compared
with the prior year. The costs to produce and deliver electricity for the
traditional business in 1998 increased by $359 million to meet higher energy
demands. Non-production operation and maintenance expenses increased $192
million in 1998. Accelerated depreciation of certain assets increased $157
million when compared with 1997.
Fuel costs constitute the single largest expense for the integrated Southeast
utilities. The mix of fuel sources for generation of electricity is determined
primarily by system load, the unit cost of fuel consumed, and the availability
of hydro and nuclear generating units. The amount and sources of generation and
the average cost of fuel per net kilowatt-hour generated -- within the
traditional business service area -- were as follows:
1999 1998 1997
- ----------------------------------------------------------------
Total generation
(billions of kilowatt-hours) 165 164 160
Sources of generation
(percent) --
Coal 78 77 77
Nuclear 17 16 17
Hydro 2 4 4
Oil and gas 3 3 2
Average cost of fuel per net
kilowatt-hour generated
(cents) -- 1.45 1.48 1.46
- ----------------------------------------------------------------
Total fuel and purchased power costs of $2.7 billion in 1999 increased only
$20 million while total energy sales increased 2.0 billion kilowatt-hours
compared with the amounts recorded in 1998. Continued efforts to control energy
costs helped lower the average cost of fuel per net kilowatt-hour generated in
1999. In 1998, fuel and purchased power costs increased $299 million as a result
of 7.4 billion more kilowatt-hours being sold than in 1997.
Total interest charges and other financing costs in 1999 decreased $41
million from amounts reported in the previous year. The decline reflected
additional refinancing of debt in 1999. Alabama Power and Georgia Power -- in
accordance with their respective rate making procedures -- recorded additional
accelerated amortization of premium on reacquired debt of $85 million in 1999,
$33 million in 1998, and no additional amounts in 1997. Interest charges and
other financing costs increased in 1998 as a result of the additional
amortization being recorded.
II-10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Southern Energy
Southern Energy's domestic and international operations provided much of
Southern Company's strong financial growth in 1999. A condensed income statement
for Southern Company's other significant business segment is as follows:
Increase (Decrease)
Amount From Prior Year
------- ---------------------
1999 1999 1998
- ----------------------------------------------------------------
(in millions)
Operating revenues $2,268 $ 365 $(1,934)
- ----------------------------------------------------------------
Fuel and purchased power 937 38 (1,996)
Other operation
and maintenance 477 131 (22)
Depreciation
and amortization 322 88 40
Taxes other than
income taxes 89 2 16
Write down of assets 69 (239) 308
- ----------------------------------------------------------------
Total operating expenses 1,894 20 (1,654)
- ----------------------------------------------------------------
Operating income 374 345 (280)
Gain on asset sales 313 272 17
Other income 433 99 100
- ----------------------------------------------------------------
Earnings before
interest and taxes 1,120 716 (163)
Interest charges and other 666 178 97
Income taxes 126 249 (298)
- ----------------------------------------------------------------
Net income $ 328 $ 289 $ 38
================================================================
Southern Energy recorded several significant items not related to the normal
day-to-day business activities in both 1999 and 1998 as discussed earlier.
Excluding these one time items, earnings were $355 million and $239 million in
1999 and 1998, respectively.
Southern Energy develops and owns competitive energy supply businesses around
the world. Domestic assets include a 60 percent interest in a top ten energy
trading and marketing business. International operations are principally located
in China, Philippines, England, Germany, Netherlands, Brazil, Chile, Argentina,
Bahamas, and Trinidad and Tobago.
Earnings by major geographical area -- excluding the one time items -- are as
follows:
Increase (Decrease)
Amount From Prior Year
------ --------------------
1999 1999 1998
- ----------------------------------------------------------------
(in millions)
Asia $175 $107 $27
Europe 142 9 62
North America 81 78 14
South America 1 (16) 8
Corporate and other (44) (62) 16
- ----------------------------------------------------------------
Revenues in 1999 increased 19 percent primarily as a result of acquisitions
in North America of some 6,100 megawatts of generating facilities in late 1998
and in 1999. Also, approximately 1,100 megawatts of owned generating capacity in
Asia went into commercial operation in late 1999.
In 1998, Southern Energy's revenues declined because its energy trading and
marketing operations -- $2.0 billion in 1997 -- were deconsolidated as of
January 1, 1998, when Southern Energy's joint venture with Vastar Resources,
Inc. (Vastar) became effective. Because of Vastar's significant participation
rights in the joint venture, the equity method of accounting is required. This
results in Southern Energy's share of the joint venture's earnings being
reported in other income in 1999 and 1998. Southern Energy's revenues in 1998 of
$1.9 billion increased by $48 million compared with comparable revenues in 1997
that exclude energy trading and marketing. This increase resulted primarily from
operations of assets obtained in domestic acquisitions.
The decline in 1998 operating expenses corresponds to the decrease in
revenues resulting primarily from the deconsolidation of the energy trading and
marketing operations as discussed earlier. Approximately $2.0 billion of these
expenses were recorded in 1997 purchased power expenses. Operating expenses and
interest charges increased in 1999 as a result of acquisitions and new
facilities being placed into service.
II-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Effects of Inflation
Southern Company's traditional business of the integrated Southeast utilities is
subject to rate regulation and income tax laws that are based on the recovery of
historical costs. Therefore, inflation creates an economic loss because the
company is recovering its costs of investments in dollars that have less
purchasing power. While the inflation rate has been relatively low in recent
years, it continues to have an adverse effect on Southern Company because of the
large investment in utility plant with long economic lives. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of Southern Company's future
earnings depends on numerous factors. The two major factors are the growth of
Southern Energy's operations and the ability of the integrated Southeast
utilities to achieve energy sales growth in a less regulated, more competitive
environment.
The traditional business or the five Southeast utilities currently operate as
vertically integrated companies providing electricity to customers within the
traditional service area of the southeastern United States. Prices for
electricity provided to retail customers are set by state public service
commissions under cost-based regulatory principles. Retail rates and earnings
are reviewed and adjusted periodically within certain limitations based on
earned return on equity. See Note 3 to the financial statements for additional
information about these and other regulatory matters.
Future earnings for the traditional business in the near term will depend
upon growth in energy sales, which is subject to a number of factors. These
factors include weather, competition, new short and long-term contracts with
neighboring utilities, energy conservation practiced by customers, the
elasticity of demand, and the rate of economic growth in the traditional service
area.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers and sell energy generation
to other utilities. Also, electricity sales for resale rates are being driven
down by wholesale transmission access and numerous potential new energy
suppliers, including power marketers and brokers. Southern Company's integrated
utilities are aggressively working to maintain and expand their share of
wholesale sales in the southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry continues to
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of a company to recover its investments, including the regulatory
assets described in Note 1 to the financial statements, could have a material
adverse effect on financial condition and results of operations.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, if Southern Company's integrated Southeast utilities do not remain
low-cost producers and provide quality service, then energy sales growth could
be limited, and this could significantly erode earnings.
II-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
To adapt to a less regulated, more competitive environment, Southern Company
continues to evaluate and consider a wide array of potential business
strategies. These strategies may include business combinations, acquisitions
involving other utility or non-utility businesses or properties, internal
restructuring, disposition of certain assets, or some combination thereof.
Furthermore, Southern Company may engage in other new business ventures that
arise from competitive and regulatory changes in the utility industry. Pursuit
of any of the above strategies, or any combination thereof, may significantly
affect the business operations and financial condition of Southern Company.
On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued
its final rule on Regional Transmission Organizations (RTOs). The order
encourages utilities owning transmission systems to form RTOs on a voluntary
basis. To facilitate the development of RTOs, the FERC will convene regional
conferences for utilities, customers, and other members of the public to discuss
the formation of RTOs. In addition to participating in the regional conferences,
utilities owning transmission systems, including Southern Company, are required
to make a filing by October 15, 2000. The filing must contain either a proposal
for RTO participation or a description of the efforts made to participate in an
RTO, the reasons for non-participation, any obstacles to participation, and any
plans for further work toward participation. The RTOs that are proposed in the
filings should be operational by December 15, 2001. Southern Company is
evaluating this issue and formulating its response. The outcome of this matter
cannot now be determined.
The Energy Act amended the Public Utility Holding Company Act of 1935 (PUHCA)
to allow holding companies to form exempt wholesale generators and foreign
utility companies to sell power largely free of regulation under PUHCA. These
entities are able to sell power to affiliates -- under certain restrictions --
and to own and operate power generating facilities in other domestic and
international markets. To take advantage of existing and evolving opportunities,
Southern Energy -- founded in 1981 -- is focused on several key international
and domestic business lines, including energy trading and marketing,
distribution, and stand-alone generation. As the energy marketplace evolves,
Southern Energy continues to position the company as a major competitor. At
December 31, 1999, Southern Energy's total assets were $13.9 billion, and it had
ownership or control of over 14,000 megawatts of generating capacity. It has
another 5,000 megawatts under construction or advanced development.
In 1999, Southern Energy refined its business strategy to focus on a few key
geographic regions of the world. Its Asian subsidiary will focus primarily on
China, India, and the Philippines, while also pursuing opportunities in more
developed countries such as Australia and Singapore. In Europe, Southern Energy
will concentrate efforts in the countries that make up the North-South corridor
of continental Europe -- Scandinavia, Italy, Switzerland, Germany, the
Netherlands, and select countries in Eastern Europe. In South America, the
company is in the process of exiting Argentina and Chile and is reviewing
whether or not it will pursue additional opportunities in Brazil. In North
America, the company will target its efforts on four U.S. regions -- the
Northeast, the Midwest, Texas/Louisiana, and California/Desert Southwest -- and
also will pursue opportunities in Canada.
In the United States, Southern Energy plans to acquire, build, or gain access
to some 20,000 megawatts of generating capacity over the next several years in
order to ensure its success in the evolving competitive wholesale energy supply
business. Currently, Southern Energy owns or controls approximately 8,500
megawatts of capacity in the four targeted regions, with an additional 4,100
megawatts under construction or advanced development. All of these assets will
be closely linked with Southern Energy's energy trading and marketing business,
Southern Company Energy Marketing (SCEM).
In 1998, Southern Energy and Vastar completed the combination of their energy
trading and marketing activities to form a joint venture, SCEM. SCEM has the
rights to market virtually all of Vastar's natural gas production over a period
of 10 years. Southern Energy's current ownership interest in SCEM is 60 percent.
On July 1, 2001, this ownership interest will automatically increase to 75
percent. Southern Energy has the right -- exercisable during fiscal year 2002 --
to acquire an additional 5 percent interest from Vastar for $80 million. Also,
Vastar has the right -- exercisable in the period from December 1, 2002 through
January 2, 2003 -- to sell its remaining interest in SCEM to Southern Energy.
The price will range from $130 million to $210 million depending on the interest
owned by Vastar at that time, plus certain other contractual considerations.
II-13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Southern Company has filed with the Securities and Exchange Commission (SEC)
a request to invest up to nearly $6 billion in Southern Energy's domestic and
international business. The current SEC authority is $4.1 billion, of which $2.7
billion has been invested as of December 31, 1999.
Southern Company is involved in various matters being litigated. See Note 3
to the financial statements for information regarding material issues that could
possibly affect future earnings.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry -- including Southern Company's --
regarding the recognition, measurement, and classification in the financial
statements of decommissioning costs for nuclear generating facilities. In
response to these questions, the Financial Accounting Standards Board (FASB) has
decided to review the accounting for liabilities related to the retirement of
long-lived assets, including nuclear decommissioning. If the FASB issues new
accounting rules, the estimated costs of retiring Southern Company's nuclear and
other facilities may be required to be recorded as liabilities in the
Consolidated Balance Sheets. Also, the annual provisions for such costs could
change. Because of the company's current ability to recover asset retirement
costs through rates, these changes would not have a significant adverse effect
on results of operations. See Note 1 to the financial statements under
"Depreciation and Nuclear Decommissioning" for additional information.
The integrated Southeast utilities 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 regulatory assets
and liabilities that are not specifically recoverable, and determine if any
other assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
New Accounting Standard
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 2001. This statement
establishes accounting and reporting standards for derivative instruments --
including certain derivative instruments embedded in other contracts -- and for
hedging activities. Southern Company 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.
Year 2000 Challenge
The work undertaken by Southern Company subsidiaries to prepare critical
computer systems and other date sensitive devices to function correctly in the
Year 2000 was successful. There were no material incidents reported and no
disruption of electric service within the service area of the traditional
business. There were no reports of significant events regarding third parties
that impacted revenues or expenses.
For the traditional business, original projected total costs for Year 2000
readiness were approximately $91 million. Final projected costs are $94 million
of which $3 million is projected to be spent in 2000 and $6 million was billed
to non-affiliated companies. These costs include labor necessary to identify,
test, and renovate affected devices and systems, and costs for reporting
requirements to state and federal agencies. From its inception through December
31, 1999, the Year 2000 program costs, recognized primarily as expense, amounted
to $85 million based on Southern Company's ownership interest.
Also, Southern Energy experienced no material incidents or disruption of
electric service for its domestic and international operations. In addition to
the traditional business costs, Southern Energy's final costs for Year 2000
readiness were approximately $17 million -- based on their ownership interest.
Southern Energy's original projected costs were $24 million.
II-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
FINANCIAL CONDITION
Overview
Southern Company's financial condition continues to remain strong. In 1999, the
integrated Southeast utilities' earnings were at the high end of their allowed
range of return on equity, and Southern Energy reported strong earnings growth
in 1999. These factors drove the record consolidated net income of $1.3 billion
in 1999. Consolidated net income -- excluding non-recurring charges -- in 1999
increased $78 million compared with the prior year. In January 1999, Southern
Company modified its dividend policy to lower, over time, the previously
targeted payout ratio of approximately 75 percent down to 50 percent. The
quarterly dividend declared in January 2000 continued to be maintained at
33 1/2 cents per share, or $1.34 annually. This action allows more
internally generated funds to be reinvested in the company, which is expected to
increase long-term shareholder value. This policy supports Southern Company's
strategic goal to become the best investment in the electric utility business.
Gross property additions to utility plant were $2.6 billion in 1999. The
majority of funds needed for gross property additions since 1996 has been
provided from operating activities. Southern Energy acquired $1.3 billion of
generating assets in 1999 and sold the supply system of South Western
Electricity -- Southern Energy owned 49 percent -- for $256 million. The
Consolidated Statements of Cash Flows provide additional details.
Derivative Financial Instruments
Southern Company is exposed to market risks, including changes in interest
rates, currency exchange rates, and certain commodity prices. To manage the
volatility attributable to these exposures, the company nets the exposures to
take advantage of natural offsets and enters into various derivative
transactions for the remaining exposures pursuant to the company's policies in
areas such as counterparty exposure and hedging practices. Generally, company
policy is that derivatives are to be used only for hedging purposes. Derivative
positions are monitored using techniques that include market valuation and
sensitivity analysis.
The company's market risk exposures relative to interest rate changes and
currency exchange fluctuations, as discussed later, have not changed materially
versus the previous reporting period. In addition, the company is not aware of
any facts or circumstances that would significantly impact such exposures in the
near-term.
Interest rate swaps are used to hedge underlying debt obligations. These
swaps hedge specific debt issuances and qualify for hedge accounting. The
interest rate differential is reflected as an adjustment to interest expense
over the life of the instruments. Additionally, the company has interest rate
swaps in foreign currencies. These swaps are designated as hedges of the
company's related debt issuance in the same currency.
If the company sustained a 100 basis point change in interest rates for all
variable rate debt in all currencies, the change would affect annualized
interest expense by approximately $27 million at December 31, 1999. Based on the
company's overall interest rate exposure at December 31, 1999, including
derivative and other interest rate sensitive instruments, a near-term 100 basis
point change in interest rates would not materially affect the consolidated
financial statements.
The company has investments in the United Kingdom and Germany. To hedge its
net investment in these countries, the company uses long-term cross-currency
agreements to reduce a substantial portion of its exposure to fluctuations in
the British pound sterling and German Deutschemark. As a result of these swaps,
a 10 percent sustained decline of the British pound sterling and German
Deutschemark versus the U.S. dollar would not materially affect the consolidated
financial statements.
The company also has investments in various emerging market countries where
the net investments are not hedged, including Argentina, Chile, Trinidad and
Tobago, Bahamas, Philippines, and China. The company relies on either currency
pegs or contractual or regulatory links to the U.S. dollar to mitigate currency
risk attributable to these investments.
II-15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Also, the company has currency exposure related to its investment in
Companhia Energetica de Minas Gerais (CEMIG) which has not been hedged. Revenues
at CEMIG and dividends from CEMIG are denominated in Brazilian reals; however, a
significant portion of debt incurred to finance CEMIG is required to be repaid
in other currencies. The devaluation of the real in January 1999 resulted in a
net reduction in other comprehensive income of $83 million.
Based on availability and economics, the company also uses currency swaps and
forward agreements to hedge dollar-denominated debt issued by subsidiaries with
a functional currency other than the U.S. dollar. These swaps offset the dollar
cash flows, thereby effectively converting debt to the respective company's
reporting currency. Gains and losses related to qualified hedges of foreign
currency firm commitments are deferred and included in the basis of the
underlying transactions. To the extent that a qualifying hedge is terminated or
ceases to be effective as a hedge, any deferred gains and losses to that point
continue to be deferred and are included in the basis of the underlying
transaction.
In addition to the non-trading activities, the company is exposed to market
risks through its electricity, natural gas, and energy trading business in North
America and Europe. The North American trading business is primarily conducted
through the company's joint venture relationship with Vastar. While this joint
venture relationship is accounted for under the equity method of accounting,
Southern Company -- through guarantees it has made jointly with Vastar -- is
exposed to market risk. Southern Company and Vastar have agreed to indemnify
each other against losses under such guarantees in proportion to their
respective ownership shares of the joint venture. At December 31, 1999,
outstanding guarantees related to the estimated fair value of net contractual
commitments were approximately $146 million. Based upon the joint venture's
statistical analysis of its credit risk, Southern Company's potential exposure
under these contractual commitments would not materially differ from the
estimated fair value. The joint venture's gross revenues and cost of sales were
$12.0 billion and $11.9 billion for 1999, respectively; and $9.2 billion and
$9.1 billion for 1998, respectively.
In 1999, Southern Energy created a European trading operation in Amsterdam.
The business provides risk management services associated with the energy
industry to its customers in the European market.
To estimate and manage the market risk of its trading and marketing
portfolios, the trading businesses employ a daily Value at Risk (VAR)
methodology. VAR is used to describe a probabilistic approach to measuring the
exposure to market risk. VAR models are relatively sophisticated. However, the
quantitative risk information is limited by the parameters established in
creating the model. The instruments being evaluated may have features that may
trigger a potential loss in excess of calculated amounts if the changes in
commodity prices exceed the confidence level of the model used. The calculation
utilizes the standard deviation of seasonally adjusted historical changes in the
value of the market risk sensitive commodity-based financial instruments to
estimate the amount of change (i.e., volatility) in the current value of these
instruments that could occur at a specified confidence level over a specified
holding interval. The parameters used in the calculation include holding
intervals ranging from 5 days to 3 months, depending upon the type of
instrument, the term of the instrument, the liquidity of the underlying market,
and other factors. The models employ a 95 percent confidence level based on
historical price movement. Based on VAR analysis of the overall commodity price
risk exposure of the trading businesses at December 31, 1999, management does
not anticipate a materially adverse effect on the company's consolidated
financial statements as a result of market fluctuations.
Due to cost-based rate regulations, the integrated Southeast utilities have
limited exposure to market volatility in interest rates, commodity fuel prices,
and prices of electricity. To mitigate residual risks relative to movements in
electricity prices, the companies enter into fixed price contracts for the
purchase and sale of electricity through the wholesale electricity market.
Realized gains and losses are recognized in the income statement as incurred. At
December 31, 1999, exposure from these activities was not material to the
consolidated financial statements.
For additional information, see Note 1 to the financial statements under
"Financial Instruments for Non-Trading and Trading Activities."
Capital Structure
Southern Company's ratio of common equity to total capitalization -- including
short-term debt -- was 32.7 percent in 1999, compared with 37.4 percent in 1998,
and 38.6 percent in 1997.
II-16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
During 1999, the integrated Southeast utilities sold, through public
authorities, $349 million of pollution control revenue bonds. In addition,
capital and preferred securities of $250 million were issued in 1999. The
companies continued to reduce financing costs by retiring higher-cost bonds and
preferred stock. Retirements of bonds, including maturities, totaled $1.2
billion during 1999, $1.7 billion during 1998, and $507 million during 1997. As
a result, the composite interest rate on long-term debt decreased from 6.9
percent at December 31, 1996 to 6.5 percent at December 31, 1999. Retirements of
preferred stock totaled $86 million during 1999, $239 million during 1998, and
$660 million during 1997.
In April 1999, Southern Company announced the repurchase of up to 50 million
shares of its common stock over a two-year period through open market or
privately negotiated transactions. The program did not establish a target stock
price or timetable for specific repurchases. Under this program, 32.8 million
shares were repurchased through December 31, 1999. Funding for the program was
provided from Southern Company's commercial paper program. At the close of 1999,
the company's common stock market value was 23 1/2 per share, compared with book
value of $13.82 per share. The market-to-book value ratio was 170 percent at the
end of 1999, compared with 207 percent at year-end 1998, and 186 percent at
year-end 1997.
Capital Requirements for Construction
The construction program of Southern Company is budgeted at $3.0 billion for
2000, $3.8 billion for 2001, and $3.9 billion for 2002. Actual construction
costs may vary from this estimate because of changes in such factors as:
business conditions; environmental regulations; nuclear plant regulations; load
projections; the cost and efficiency of construction labor, equipment, and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered.
The integrated Southeast utilities have approximately 5,200 megawatts of
combustion turbine generating capacity scheduled to be placed in service by
2002. Approximately 1,400 megawatts of this new capacity will be dedicated to
the wholesale market. Southern Energy has approximately 1,000 megawatts of owned
capacity under construction. Significant construction of transmission and
distribution facilities and upgrading of generating plants will be continuing
for the traditional business in the Southeast.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately $2.1
billion will be required by the end of 2002 for present improvement fund
requirements and maturities of long-term debt. Also, the subsidiaries will
continue to retire higher-cost debt and preferred stock and replace these
obligations with lower-cost capital if market conditions permit.
Environmental Matters
On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil
action in the U.S. District Court against Alabama Power, Georgia Power, and the
system service company. The complaint alleges violations of the prevention of
significant deterioration and new source review provisions of the Clean Air Act
with respect to five coal-fired generating facilities in Alabama and Georgia.
The civil action requests penalties and injunctive relief, including an order
requiring the installation of the best available control technology at the
affected units. The EPA concurrently issued to the integrated Southeast
utilities a notice of violation related to 10 generating facilities, which
includes the five facilities mentioned previously. In early 2000, the EPA filed
a motion to amend its complaint to add the violations alleged in its notice of
violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as
defendants. 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 Company believes that its integrated
utilities complied with applicable laws and the EPA's regulations and
interpretations in effect at the time the work in question took place. The Clean
Air Act authorizes civil penalties of up to $27,500 per day per violation at
each generating unit. Prior to January 30, 1997, the penalty was $25,000 per
day. An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
In November 1990, the Clean Air Act was signed into law. Title IV of the
Clean Air Act -- the acid rain compliance provision of the law -- significantly
affected Southern Company. Specific reductions in sulfur dioxide and nitrogen
oxide emissions from fossil-fired generating plants are required in two phases.
II-17
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Phase I compliance began in 1995 and initially affected 28 generating units of
Southern Company. As a result of the company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I nitrogen oxide and sulfur dioxide
emissions compliance totaled approximately $300 million.
For Phase II sulfur dioxide compliance, Southern Company currently uses
emission allowances and increased fuel switching. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired units
as necessary to meet Phase II limits and ozone non-attainment requirements for
metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone
non-attainment requirements increased total estimated construction expenditures
by approximately $105 million.
The States of Georgia and Alabama have proposed or drafted rules to address
one-hour ozone non-attainment in the Atlanta and Birmingham areas. Additional
nitrogen oxide emission controls will be required on certain generating plants
by May 1, 2003. It is expected that seven generating plants will be affected in
the Atlanta area and two plants in the Birmingham area. Additional construction
expenditures for compliance with these new rules are currently estimated at
approximately $850 million.
A significant portion of costs related to the acid rain and ozone
nonattainment provision of the Clean Air Act is expected to be recovered through
existing ratemaking provisions. However, there can be no assurance that all
Clean Air Act costs will be recovered.
In July 1997, the EPA revised the national ambient air quality standards for
ozone and particulate matter. This revision makes the standards significantly
more stringent. In September 1998, the EPA issued the final regional nitrogen
oxide reduction rule to the states for implementation. The final rule affects 22
states, including Alabama and Georgia. The EPA's July 1997 standards and the
September 1998 rule are being challenged in the courts by several states and
industry groups. Implementation of the final state rules for these three
initiatives could require substantial further reductions in nitrogen oxide and
sulfur dioxide emissions from fossil-fired generating facilities and other
industries in these states. Additional compliance costs and capital expenditures
resulting from the implementation of these rules and standards cannot be
determined until the results of legal challenges are known, and the states have
adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: additional controls for hazardous
air pollutant emissions; control strategies to reduce regional haze; and
hazardous waste disposal requirements. The impact of any new standards will
depend on the development and implementation of applicable regulations.
Southern Company must comply with other environmental laws and regulations
that cover the handling and disposal of hazardous waste. Under these various
laws and regulations, the subsidiaries could incur substantial costs to clean up
properties. The subsidiaries conduct studies to determine the extent of any
required cleanup costs and have recognized in their respective financial
statements costs to clean up known sites. These costs for Southern Company
amounted to $4 million in 1999, $6 million in 1998, and $4 million in 1997.
Additional sites may require environmental remediation for which the
subsidiaries may be liable for a portion or all required cleanup costs. See Note
3 to the financial statements for information regarding Georgia Power's
potentially responsible party status at a site in Brunswick, Georgia.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation -- if
II-18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
any -- will depend on the subsequent development and implementation of
applicable regulations. In addition, the potential exists for liability as the
result of lawsuits alleging damages caused by electromagnetic fields.
Sources of Capital
The amount and timing of additional equity capital to be raised in 2000 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital can be provided from any combination of
public offerings, private placements, or the company's stock plans.
The integrated Southeast utilities plan to obtain the funds required for
construction and other purposes from sources similar to those used in the past,
which were primarily from internal sources. However, the type and timing of any
financings -- if needed -- will depend on market conditions and regulatory
approval. In recent years, financings primarily have utilized unsecured debt and
trust preferred securities.
To meet short-term cash needs and contingencies, Southern Company had at the
beginning of 2000 approximately $466 million of cash and cash equivalents and
$5.7 billion of unused credit arrangements with banks.
Cautionary Statement Regarding Forward-Looking
Information
Southern Company's 1999 Annual Report contains forward-looking and historical
information. The company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information. 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 the subsidiary companies; potential business strategies --
including acquisitions or dispositions of assets or internal restructuring --
that may be pursued by the company; state and federal rate regulation in the
United States; changes in or application of environmental and other laws and
regulations to which the company 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 Southern Energy and the success of efforts to invest in and
develop new opportunities; and other factors discussed in the reports --
including Form 10-K -- filed from time to time by the company with the SEC.
II-19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Operating Revenues:
Retail sales $ 8,086 $ 8,272 $ 7,647
Sales for resale 823 896 886
Southern Energy revenues 2,268 1,903 3,837
Other revenues 408 332 241
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 11,585 11,403 12,611
- -----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 2,720 2,371 2,281
Purchased power 954 1,243 3,033
Other 2,199 2,112 1,930
Maintenance 945 887 763
Depreciation and amortization 1,307 1,539 1,367
Taxes other than income taxes 612 599 572
Write down of assets 69 342 -
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 8,806 9,093 9,946
- -----------------------------------------------------------------------------------------------------------------------------
Operating Income 2,779 2,310 2,665
Other Income:
Interest income 164 243 152
Gain on asset sales 315 59 24
Equity in earnings of unconsolidated subsidiaries 94 123 35
Other, net 94 (2) -
- -----------------------------------------------------------------------------------------------------------------------------
Earnings Before Interest, Minority Interests, and Income Taxes 3,446 2,733 2,876
- -----------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 698 712 678
Interest on notes payable 183 108 112
Amortization of debt discount, premium, and expense, net 125 65 34
Other interest charges 53 68 49
Minority interests in subsidiaries 183 80 29
Distributions on capital and preferred securities of subsidiaries 182 149 120
Preferred dividends of subsidiaries 20 25 43
- -----------------------------------------------------------------------------------------------------------------------------
Total interest charges and other, net 1,444 1,207 1,065
- -----------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 2,002 1,526 1,811
Income taxes 726 549 839
- -----------------------------------------------------------------------------------------------------------------------------
Consolidated Net Income $ 1,276 $ 977 $ 972
=============================================================================================================================
Common Stock Data:
Average number of shares of common stock outstanding (in millions) 685 697 685
Basic and diluted earnings per share of common stock $1.86 $1.40 $1.42
Cash dividends paid per share of common stock $1.34 $1.34 $1.30
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-20
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Southern Company and Subsidiary Companies 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Operating Activities:
Consolidated net income $ 1,276 $ 977 $ 972
Adjustments to reconcile consolidated net income
to net cash provided from operating activities --
Depreciation and amortization 1,522 1,773 1,592
Deferred income taxes and investment tax credits 137 (22) (5)
Gain on asset sales (315) (61) (25)
Write down of assets 69 342 -
Equity in earnings of unconsolidated subsidiaries (94) (123) (35)
Other, net 172 (76) (29)
Changes in certain current assets and liabilities
excluding effects from acquisitions --
Receivables, net (213) 151 (229)
Fossil fuel stock (26) (35) 53
Materials and supplies (50) (10) 21
Accounts payable (147) (17) 138
Other 392 (151) 172
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 2,723 2,748 2,625
- ---------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (2,560) (2,005) (1,859)
Southern Energy business and asset acquisitions, net of cash acquired (1,800) (998) (2,925)
Sales of property 285 281 32
Other (139) 86 (13)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,214) (2,636) (4,765)
- ---------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 2,131 (353) 509
Proceeds --
Other long-term debt 2,646 2,973 2,499
Capital and preferred securities 250 435 1,321
Preferred stock - 200 -
Common stock 24 234 360
Redemptions --
First mortgage bonds (890) (1,487) (168)
Other long-term debt (957) (599) (802)
Capital and preferred securities (100) - -
Preferred stock (86) (239) (660)
Common stock repurchased (862) (125) -
Payment of common stock dividends (921) (933) (889)
Other (150) 53 126
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 1,085 159 2,296
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (406) 271 156
Cash and Cash Equivalents at Beginning of Year 872 601 445
- ---------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 466 $ 872 $ 601
===========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $1,011 $998 $876
Income taxes $642 $839 $823
Southern Energy business and asset acquisitions --
Fair value of assets acquired $1,832 $1,072 $4,768
Less cash paid 1,800 998 2,925
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities assumed $ 32 $ 74 $1,843
===========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
At December 31, 1999 and 1998
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------
Assets 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 466 $ 872
Special deposits 72 87
Receivables, less accumulated provisions for uncollectible accounts
of $59 million in 1999 and $113 million in 1998 1,652 1,692
Unrecovered retail fuel clause revenue 244 105
Fossil fuel stock, at average cost 311 252
Materials and supplies, at average cost 585 515
Other 199 183
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 3,529 3,706
- -----------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service 36,763 35,169
Less accumulated provision for depreciation 14,076 13,239
- -----------------------------------------------------------------------------------------------------------------------
22,687 21,930
Nuclear fuel, at amortized cost 227 217
Construction work in progress 1,630 1,782
- -----------------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment 24,544 23,929
- -----------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries 1,376 1,549
Property rights, net of accumulated amortization of
$227 million in 1999 and $169 million in 1998 2,202 1,185
Goodwill, net of accumulated amortization of
$164 million in 1999 and $106 million in 1998 2,106 2,125
Other intangibles, net of accumulated amortization of
$13 million in 1999 and $1 million in 1998 447 154
Nuclear decommissioning trusts, at fair value 658 516
Leveraged leases 556 264
Other 580 374
- -----------------------------------------------------------------------------------------------------------------------
Total other property and investments 7,925 6,167
- -----------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 987 1,036
Prepaid pension costs 590 491
Debt expense, being amortized 145 129
Premium on reacquired debt, being amortized 217 294
Other 459 439
- -----------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 2,398 2,389
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $38,396 $36,191
=======================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-22
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (continued)
At December 31, 1999 and 1998
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
Current Liabilities:
Securities due within one year $ 576 $ 1,526
Notes payable 3,915 1,828
Accounts payable 895 1,027
Customer deposits 133 125
Taxes accrued --
Income taxes 155 49
Other 264 299
Interest accrued 281 233
Vacation pay accrued 120 112
Other 794 542
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 7,133 5,741
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements) 11,747 10,472
- -----------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,505 4,481
Deferred credits related to income taxes 640 715
Accumulated deferred investment tax credits 693 723
Employee benefits provisions 513 474
Prepaid capacity revenues 80 96
Other 460 609
- -----------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 6,891 7,098
- -----------------------------------------------------------------------------------------------------------------------
Minority interests in subsidiaries 725 535
- -----------------------------------------------------------------------------------------------------------------------
Company or subsidiary obligated mandatorily redeemable
capital and preferred securities (See accompanying statements) 2,327 2,179
- -----------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries (See accompanying statements) 369 369
- -----------------------------------------------------------------------------------------------------------------------
Common stockholders' equity (See accompanying statements) 9,204 9,797
- -----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $38,396 $36,191
=======================================================================================================================
Commitments and Contingent Matters (Notes 1, 2, 3, 4, 5, 7, 12, and 13)
- -----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-23
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
Long-Term Debt of Subsidiaries:
First mortgage bonds --
Maturity Interest Rates
------- -------------
<S> <C> <C> <C> <C> <C>
1999 6.13% to 8.67% $ - $ 373
2000 6.00% to 8.67% 200 209
2001 8.67% - 9
2002 8.67% - 10
2003 6.13% to 8.67% 325 635
2004 6.60% to 8.67% 35 45
2005 through 2009 6.07% to 8.67% 105 165
2010 through 2014 8.67% - 80
2015 through 2019 8.67% - 38
2020 through 2024 7.30% to 9.00% 559 764
2025 through 2026 6.88% to 7.88% 117 137
- -----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 1,341 2,465
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term notes payable --
6.13% to 11.00% due 1999-2002 - 437
6.38% to 11.00% due 2000-2002 279 -
5.35% to 9.75% due 2003-2004 901 361
5.49% to 10.50% due 2005 760 551
6.80% to 9.70% due 2006 593 582
5.76% to 10.25% due 2007 583 447
3.07% to 10.56% due 2008-2015 1,605 959
6.38% to 8.12% due 2018-2038 801 803
6.63% to 7.13% due 2039-2048 1,029 729
Adjustable rates (3.81% to 8.63% at 1/1/00)
due 1999-2007 1,887 1,958
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term notes payable 8,438 6,827
- -----------------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
4.38% to 6.75% due 2000-2026 617 954
Variable rates (3.70% to 4.85% at 1/1/00)
due 2011-2025 120 639
Non-collateralized:
5.25% to 7.25% due 2003-2034 263 110
Variable rates (3.50% to 6.03% at 1/1/00)
due 2011-2037 1,510 880
- -----------------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 2,510 2,583
- -----------------------------------------------------------------------------------------------------------------------------------
Capitalized lease obligations 97 135
- -----------------------------------------------------------------------------------------------------------------------------------
Unamortized debt premium (discount), net (63) (98)
- -----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $800 million) 12,323 11,912
Less amount due within one year 576 1,440
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 11,747 10,472 49.7% 45.9%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11-24
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1999 and 1998
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions) (percent of total)
<S> <C> <C> <C> <C>
Company or Subsidiary Obligated Mandatorily
Redeemable Capital and Preferred Securities:
$25 liquidation value --
6.85% to 7.00% 435 235
7.13% to 7.38% 297 297
7.60% to 7.63% 415 415
7.75% 649 649
8.14% to 9.00% 481 583
Auction rate (6.42% at 1/1/00) 50 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total company or subsidiary obligated mandatorily
redeemable capital and preferred securities (annual
distribution requirement -- $176 million) 2,327 2,179 9.8 9.6
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock of Subsidiaries:
$100 par or stated value --
4.20% to 7.00% 99 135
$25 par or stated value --
5.20% to 5.83% 200 200
Adjustable and auction rates -- at 1/1/00:
4.22% to 4.50% 70 120
- -----------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $19 million) 369 455
Less amount due within one year - 86
- -----------------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock of subsidiaries
excluding amount due within one year 369 369 1.6 1.6
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stockholders' Equity:
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Issued -- 1999: 701 million shares
-- 1998: 700 million shares
Treasury -- 1999: 35 million shares
-- 1998: 2 million shares
Par value 3,503 3,499
Paid-in capital 2,480 2,463
Treasury, at cost (919) (58)
Retained earnings 4,232 3,878
Accumulated other comprehensive income (92) 15
- -----------------------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity 9,204 9,797 38.9 42.9
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $23,647 $22,817 100.0% 100.0%
===================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-25
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
Southern Company and Subsidiary Companies 1999 Annual Report
Common Stock Accumulated
--------------------------------------- Other
Par Paid In Retained Comprehensive
Value Capital Treasury Earnings Income Total
- -------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $3,385 $2,053 $ - $3,764 $ 14 $9,216
Net income - - - 972 - 972
Other comprehensive income - - - - (7) (7)
Stock issued 82 278 - - - 360
Cash dividends - - - (889) - (889)
Other - - - (5) - (5)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 3,467 2,331 - 3,842 7 9,647
Net income - - - 977 - 977
Other comprehensive income - - - - 8 8
Stock issued 32 132 70 - - 234
Stock repurchased, at cost - - (125) - - (125)
Cash dividends - - - (933) - (933)
Other - - (3) (8) - (11)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 3,499 2,463 (58) 3,878 15 9,797
Net income - - - 1,276 - 1,276
Other comprehensive income - - - - (107) (107)
Stock issued 4 17 1 - - 22
Stock repurchased, at cost - - (861) - - (861)
Cash dividends - - - (921) - (921)
Other - - (1) (1) - (2)
- -------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $3,503 $2,480 $(919) $4,232 $ (92) $9,204
=========================================================================================================================
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Southern Company and Subsidiary Companies 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
(in millions)
Consolidated Net Income $1,276 $977 $972
Other comprehensive income:
Foreign currency translation adjustments (165) 12 (10)
Less applicable income taxes (benefits) (58) 4 (3)
- --------------------------------------------------------------------------------------------------------------------------
Consolidated Comprehensive Income $1,169 $985 $965
==========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Southern Company and Subsidiary Companies 1999 Annual Report
1. Summary of Significant Accounting
Policies
General
Southern Company is the parent company of five integrated Southeast utilities, a
system service company, Southern Communications Services (Southern LINC),
Southern Company Energy Solutions, Southern Energy, Inc. (Southern Energy),
Southern Nuclear Operating Company (Southern Nuclear), and other direct and
indirect subsidiaries. The integrated Southeast utilities -- Alabama Power,
Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric -- provide
electric service in four states. Contracts among the integrated Southeast
utilities -- related to jointly owned generating facilities, interconnecting
transmission lines, and the exchange of electric power --are regulated by the
Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange
Commission (SEC). The system service company provides, at cost, specialized
services to Southern Company and subsidiary companies. Southern LINC provides
digital wireless communications services to the integrated Southeast utilities
and also markets these services to the public within the Southeast. Southern
Company Energy Solutions develops new business opportunities related to energy
products and services. Southern Nuclear provides services to Southern Company's
nuclear power plants. Southern Energy acquires, develops, builds, owns, and
operates power production and delivery facilities and provides a broad range of
energy-related services to utilities and industrial companies in selected
countries around the world. Southern Energy businesses include independent power
projects, integrated utilities, a distribution company, and energy trading and
marketing businesses outside the southeastern United States.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both the company and its subsidiaries are
subject to the regulatory provisions of the PUHCA. The integrated Southeast
utilities also are subject to regulation by the FERC and their respective state
public service commissions. The companies follow generally accepted accounting
principles and comply with the accounting policies and practices prescribed by
their respective commissions. The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
estimates, and the actual results may differ from those estimates. All material
intercompany items have been eliminated in consolidation.
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis. The equity method is used for subsidiaries
in which the company has significant influence but does not control. Certain
prior years' data presented in the consolidated financial statements have been
reclassified to conform with the current year presentation.
Regulatory Assets and Liabilities
The integrated Southeast utilities are subject to the provisions of Financial
Accounting Standards Board (FASB) Statement No. 71, Accounting for the Effects
of Certain Types of Regulation. Regulatory assets represent probable future
revenues associated with certain costs that are expected to be recovered from
customers through the ratemaking process. Regulatory liabilities represent
probable future reductions in revenues associated with amounts that are expected
to be credited to customers through the ratemaking process. Regulatory assets
and (liabilities) reflected in the Consolidated Balance Sheets at December 31
relate to the following:
1999 1998
- ---------------------------------------------------------------
(in millions)
Deferred income tax charges $ 987 $1,036
Premium on reacquired debt 217 294
Department of Energy assessments 52 57
Vacation pay 87 81
Postretirement benefits 33 36
Deferred income tax credits (640) (715)
Storm damage reserves (29) (24)
Other, net 144 162
- ---------------------------------------------------------------
Total $ 851 $ 927
===============================================================
In the event that a portion of a company's operations is no longer subject to
the provisions of FASB Statement No. 71, the company would be required to write
off related regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.
II-27
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Revenues and Fuel Costs
Revenues are accrued for service rendered but unbilled at the end of each fiscal
period. Fuel costs are expensed as the fuel is used. Electric rates for the
integrated Southeast utilities include provisions to adjust billings for
fluctuations in fuel costs, the energy component of purchased power costs, and
certain other costs. Revenues are adjusted for differences between recoverable
fuel costs and amounts actually recovered in current regulated rates.
Southern Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.
Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $137
million in 1999, $133 million in 1998, and $144 million in 1997. Alabama Power
and Georgia Power have contracts with the U.S. Department of Energy (DOE) that
provide for the permanent disposal of spent nuclear fuel. The DOE failed to
begin disposing of spent fuel in January 1998 as required by the contracts, and
the companies are pursuing legal remedies against the government for breach of
contract. Sufficient storage capacity currently is available to permit operation
into 2003 at Plant Hatch, into 2017 at Plant Vogtle, and into 2009 and 2013 at
Plant Farley units 1 and 2, respectively. Activities for adding dry cask storage
capacity and for potentially increasing spent fuel pool rack capacity at Plant
Hatch during 2000 are in progress. Planning for additional on-site spent fuel
storage capacity at Plant Farley is also in progress, with the intent to place
additional on-site spent fuel storage capacity in operation as early as 2005. In
addition, through Southern Nuclear, Alabama Power and Georgia Power are members
of Private Fuel Storage, LLC, a joint utility effort to develop a private spent
fuel storage facility for temporary storage of spent nuclear fuel. This facility
is planned to begin operation as early as the year 2003.
Also, the Energy Policy Act of 1992 required the establishment of a Uranium
Enrichment Decontamination and Decommissioning Fund, which is funded in part by
a special assessment on utilities with nuclear plants. This assessment is being
paid over a 15-year period, which began in 1993. This fund will be used by the
DOE for the decontamination and decommissioning of its nuclear fuel enrichment
facilities. The law provides that utilities will recover these payments in the
same manner as any other fuel expense. Alabama Power and Georgia Power -- based
on its ownership interests -- estimate their respective remaining liability at
December 31, 1999, under this law to be approximately $28 million and $21
million. These obligations are recorded in the Consolidated Balance Sheets.
Depreciation and Nuclear Decommissioning
Depreciation of the original cost of plant in service is provided primarily by
using composite straight-line rates, which approximated 3.5 percent in 1999 and
3.4 percent in 1998 and 1997. When property subject to depreciation is retired
or otherwise disposed of in the normal course of business, its cost -- together
with the cost of removal, less salvage -- is charged to the accumulated
provision for depreciation. Minor items of property included in the original
cost of the plant are retired when the related property unit is retired.
Depreciation expense includes an amount for the expected costs of
decommissioning nuclear facilities and removal of other facilities.
Georgia Power recorded additional depreciation of electric plant amounting to
$314 million in 1998 and $159 million in 1997. Georgia Power did not record any
additional depreciation in 1999. See Note 3 under "Georgia Power 1998 Retail
Rate Order" for additional information.
The Nuclear Regulatory Commission (NRC) requires all licensees operating
commercial power reactors to establish a plan for providing, with reasonable
assurance, funds for decommissioning. Alabama Power and Georgia Power have
external trust funds to comply with the NRC's regulations. Amounts previously
recorded in internal reserves are being transferred into the external trust
funds over periods approved by the respective state public service commissions.
The NRC's minimum external funding requirements are based on a generic estimate
of the cost to decommission the radioactive portions of a nuclear unit based on
the size and type of reactor. Alabama Power and Georgia Power have filed plans
II-28
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
with the NRC to ensure that -- over time -- the deposits and earnings of the
external trust funds will provide the minimum funding amounts prescribed by the
NRC.
Site study cost is the estimate to decommission a specific facility as of the
site study year, and ultimate cost is the estimate to decommission a specific
facility as of its retirement date. The estimated costs of decommissioning --
both site study costs and ultimate costs -- based on the most current study as
of December 31, 1999, for Alabama Power's Plant Farley and Georgia Power's
ownership interests in plants Hatch and Vogtle were as follows:
Plant Plant Plant
Farley Hatch Vogtle
- ---------------------------------------------------------------
Site study basis (year) 1998 1997 1997
Decommissioning periods:
Beginning year 2017 2014 2027
Completion year 2031 2027 2038
- ---------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $629 $372 $317
Non-radiated structures 60 33 44
- ---------------------------------------------------------------
Total $689 $405 $361
===============================================================
(in millions)
Ultimate costs:
Radiated structures $1,868 $722 $ 922
Non-radiated structures 178 65 129
- ---------------------------------------------------------------
Total $2,046 $787 $1,051
===============================================================
Significant assumptions:
Inflation rate 4.5% 3.6% 3.6%
Trust earning rate 7.0 6.5 6.5
- ---------------------------------------------------------------
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, or changes in the assumptions used
in making these estimates. Rates used in the assumptions were approved by the
respective public service commissions.
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the respective state public service commissions. The amount
expensed in 1999 and fund balances were as follows:
Plant Plant Plant
Farley Hatch Vogtle
- ---------------------------------------------------------------
(in millions)
Amount expensed in 1999 $18 $17 $9
Accumulated provisions:
External trust funds,
at fair value $287 $222 $149
Internal reserves 40 22 12
- ---------------------------------------------------------------
Total $327 $244 $161
===============================================================
Alabama Power's decommissioning costs for ratemaking are based on the site
study. Effective January 1, 1999, the Georgia Public Service Commission
(GPSC)increased Georgia Power's annual provision for decommissioning expenses to
$26 million. This amount is based on the NRC generic estimate to decommission
the radioactive portion of the facilities as of 1997. The estimates are $526
million and $438 million for plants Hatch and Vogtle, respectively. The ultimate
costs associated with the 1997 NRC minimum funding requirements are $1.1 billion
and $1.3 billion for plants Hatch and Vogtle, respectively. Alabama Power and
Georgia Power expect their respective state public service commissions to
periodically review and adjust, if necessary, the amounts collected in rates for
the anticipated cost of decommissioning.
Income Taxes
Southern Company uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost less regulatory
disallowances and impairments. Original cost includes: materials; labor; minor
items of property; appropriate administrative and general costs; payroll-related
costs such as taxes, pensions, and other benefits; and the estimated cost of
funds used during construction. The cost of maintenance, repairs, and
II-29
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
replacement of minor items of property is charged to maintenance expense. The
cost of replacements of property -- exclusive of minor items of property -- is
capitalized.
Property Rights
Property rights primarily consist of leasehold interests in Southern Energy's
Asian power generation facilities that are developed under build, operate, and
transfer agreements with the government-owned utility. These construction costs
for Southern Energy are initially recorded as construction work in progress, and
- -- after completion -- they are recorded as leasehold interests. These costs are
amortized over the period -- ranging from 12 to 29 years -- that the facility is
operated before transfer to the government-owned utility.
Goodwill and Other Intangible Assets
Goodwill, which represents the excess of cost over the fair value of assets of
businesses acquired, is amortized on a straight-line basis over periods from 30
to 40 years. Other intangible assets are amortized on a straight-line basis over
periods from 15 to 30 years.
Leveraged Leases
Southern Energy has several leveraged lease agreements -- ranging from 21 to 30
years -- that primarily relate to international energy generation, distribution,
and transportation assets. The investment income earned from these leveraged
leases is immaterial for all periods presented.
Impairment of Long-Lived Assets and Intangibles
Southern Company evaluates long-lived assets -- including goodwill and
identifiable intangibles -- when events or changes in circumstances indicate
that the carrying value of such assets may not be recoverable. The determination
of whether an impairment has occurred is based on an estimate of undiscounted
future cash flows attributable to the assets, as compared to the carrying value
of the assets. If an impairment has occurred, the amount of the impairment
recognized is determined by estimating the fair value of the assets and
recording a provision for loss if the carrying value is greater than the fair
value. For assets identified as held for sale, the carrying value is compared to
their estimated fair value less the cost to sell in order to determine if an
impairment provision is required. Until the assets are disposed of, their
estimated fair value is reevaluated when circumstances or events change.
Cash and Cash Equivalents
For purposes of the consolidated financial statements, temporary cash
investments are considered cash equivalents. Temporary cash investments are
securities with original maturities of 90 days or less.
Materials and Supplies
Generally, materials and supplies include the costs of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Foreign Currency Translation
Assets and liabilities of Southern Energy's international operations, where the
local currency is the functional currency, have been translated at year-end
exchange rates, and revenues and expenses have been translated using average
exchange rates prevailing during the year. Adjustments resulting from
translation have been recorded in other comprehensive income. The financial
statements of international operations, where the U.S. dollar is the functional
currency, reflect certain transactions denominated in the local currency that
have been remeasured in U.S. dollars. The remeasurement of local currencies into
U.S. dollars creates gains and losses from foreign currency transactions that
are included in consolidated net income. Gains and losses on foreign currency
transactions are not material for all periods presented.
Comprehensive Income
Comprehensive income -- consisting of net income and foreign currency
translation adjustments net of taxes -- is presented in the consolidated
financial statements. The objective of the statement is to report a measure of
all changes in common stock equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners.
II-30
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Financial Instruments for Non-Trading Activities
Non-trading derivative financial instruments are used to hedge exposures to
fluctuations in interest rates, foreign currency exchange rates, and certain
commodity prices. Gains and losses on qualifying hedges are deferred and
recognized either in income or as an adjustment to the carrying amount of the
hedged item when the transaction occurs.
The company utilizes interest rate swaps and cross currency interest rate
swaps to minimize borrowing costs by changing the interest rate and currency of
the original borrowing. For qualifying hedges, the interest rate differential is
reflected as an adjustment to interest expense over the life of the swaps.
Southern Energy's international operations are exposed to the effects of
foreign currency exchange rate fluctuations. To protect against this exposure,
currency swaps are used to hedge the net investment in certain foreign
subsidiaries, which has the effect of converting foreign currency cash inflows
into U.S. dollars at fixed exchange rates. Gains or losses on these currency
swaps, designated as hedges of net investments, are offset against the
translation effects reflected in other comprehensive income. Non-trading hedging
activities are classified in the same category as the item hedged in the
company's cash flow statement.
Non-trading financial derivative instruments held at December 31, 1999, were
as follows:
Year of Unrecognized
Maturity or Notional Gain
Type Termination Amount (Loss)
- ------------------------------- --------------------------
(in millions)
Interest rate
swaps: 2000-2012 $1,910 $(3)
2001-2012 (pound)600 $(49)
2002-2007 DM691 $(5)
Cross currency
swaps 2001-2007 (pound)414 $(11)
Cross currency
swaption 2003 DM435 $11
- -----------------------------------------------------------------
(pound) - Denotes British pound sterling.
DM - Denotes Deutschemark.
The company is exposed to losses related to financial instruments in the
event of counterparties' nonperformance. The company has established controls to
determine and monitor the creditworthiness of counterparties in order to
mitigate the company's exposure to counterparty credit risk. The company is
unaware of any counterparties that will fail to meet their obligations.
Other Southern Company financial instruments for which the carrying amount
did not equal fair value at December 31 were as follows:
Carrying Fair
Amount Value
- --------------------------------------------------------------
(in millions)
Long-term debt:
At December 31, 1999 $12,226 $11,557
At December 31, 1998 11,777 11,626
Capital and preferred securities:
At December 31, 1999 2,327 2,015
At December 31, 1998 2,179 2,288
- --------------------------------------------------------------
The fair values for long-term debt and capital and preferred securities were
based on either closing market price or closing price of comparable instruments.
Financial Instruments for Trading Activities
During 1999, Southern Energy created an energy trading company in Amsterdam,
which provides risk management services associated with the energy industry to
its customers in the European market. These services are provided primarily
through a variety of exchange-traded energy contracts including forward
contracts, futures contracts, option contracts, and financial swap agreements.
These contractual commitments, which represent risk management assets and
liabilities, are accounted for using the mark-to-market method of accounting.
Accordingly, they are reflected at fair value, net of future delivery costs, in
the Consolidated Balance Sheets.
Net unrealized gains from risk management services are immaterial at December
31, 1999. The volumetric weighted average maturity of the contractual
commitments was 1.35 years. The net notional amount of the risk management
assets and liabilities at December 31, 1999 was 5.3 billion kilowatt-hours. The
notional amount is indicative only of the volume of activity and not of the
amount exchanged by the parties to the financial instruments. Consequently,
II-31
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
these amounts are not a measure of market risk. The averages for 1999 were based
on month-end balances. The fair value of these assets and liabilities at
December 31, 1999 was $1 million and $5 million, respectively.
The Amsterdam trading operations involve elements of credit risk. The trading
operation has attempted to mitigate this risk by establishing controls to
determine and monitor the creditworthiness of counterparties. The company
monitors credit risk on both an individual and group counterparty basis.
Accordingly, the company does not anticipate any material impact to its
financial position or results of operations as a result of counterparty
nonperformance.
2. Retirement Benefits
Southern Company has defined benefit, trusteed, pension plans that cover
substantially all employees. In the United States, Southern Company provides
certain medical care and life insurance benefits for retired employees.
Substantially all these employees may become eligible for such benefits when
they retire. The integrated Southeast utilities fund trusts to the extent
required by their respective regulatory commissions. The measurement date for
plan assets and obligations is September 30 for each year.
Pension Plans
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
-------------------
1999 1998
- --------------------------------------------------------------
(in millions)
Balance at beginning of year $4,170 $3,701
Service cost 111 99
Interest cost 265 273
Benefits paid (213) (201)
Actuarial (gain) loss (251) 298
- --------------------------------------------------------------
Balance at end of year $4,082 $4,170
==============================================================
Plan Assets
-----------------
1999 1998
- --------------------------------------------------------------
(in millions)
Balance at beginning of year $5,978 $5,931
Actual return on plan assets 1,008 223
Employer contributions - 4
Benefits paid (308) (180)
- --------------------------------------------------------------
Balance at end of year $6,678 $5,978
==============================================================
The accrued pension costs recognized in the Consolidated Balance Sheets were
as follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $ 2,596 $ 1,808
Unrecognized transition obligation (76) (89)
Unrecognized prior service cost 149 119
Unrecognized net gain (2,079) (1,347)
- ---------------------------------------------------------------
Prepaid asset recognized in the
Consolidated Balance Sheets $ 590 $ 491
===============================================================
Components of the pension plans' net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Service cost $ 111 $ 99 $ 94
Interest cost 265 273 271
Expected return on
plan assets (451) (425) (394)
Recognized net gain (42) (47) (42)
Net amortization 2 (9) (9)
- ---------------------------------------------------------------
Net pension cost (income) $(115) $(109) $ (80)
===============================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
--------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $1,037 $ 935
Service cost 21 18
Interest cost 69 69
Benefits paid (36) (35)
Actuarial (gain) loss (95) 50
- ----------------------------------------------------------------
Balance at end of year $ 996 $1,037
================================================================
II-32
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Plan Assets
------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $336 $294
Actual return on plan assets 36 8
Employer contributions 60 69
Benefits paid (37) (35)
- ---------------------------------------------------------------
Balance at end of year $395 $336
===============================================================
The accrued postretirement costs recognized in the Consolidated Balance
Sheets were as follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $(601) $(701)
Unrecognized transition obligation 203 219
Unrecognized prior service cost 1 -
Unrecognized net loss (gain) 11 117
Fourth quarter contributions 25 30
- ---------------------------------------------------------------
Accrued liability recognized in the
Consolidated Balance Sheets $(361) $(335)
===============================================================
Components of the postretirement plans' net periodic cost were as follows:
1999 1998 1997
- --------------------------------------------------------------
(in millions)
Service cost $ 21 $ 18 $ 18
Interest cost 69 69 66
Expected return on
plan assets (26) (21) (18)
Recognized net gain 2 2 3
Net amortization 15 14 17
- --------------------------------------------------------------
Net postretirement cost $ 81 $ 82 $ 86
==============================================================
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefits were:
1999 1998
- ---------------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00 4.25
Long-term return on plan assets 8.50 8.50
- ---------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.50 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows:
1 Percent 1 Percent
Increase Decrease
- ----------------------------------------------------------------
(in millions)
Benefit obligation $73 $(62)
Service and interest costs 6 (5)
- ----------------------------------------------------------------
Work Force Reduction Programs
Southern Company has incurred additional costs for work force reduction
programs. The costs related to these programs were $30 million, $32 million, and
$50 million for the years 1999, 1998, and 1997, respectively. In addition,
certain costs of these programs were deferred and are being amortized in
accordance with regulatory treatment.
3. CONTINGENCIES AND REGULATORY
MATTERS
Alabama Power Lake Martin Litigation
On November 30, 1998, total judgments of nearly $53 million were entered in
favor of five plaintiffs against Alabama Power and two large textile
manufacturers. The plaintiffs alleged that the manufacturers had discharged
certain polluting substances into a stream that empties into Lake Martin, a
hydroelectric reservoir owned by Alabama Power, and that such discharges had
reduced the value of the plaintiffs' residential lots on Lake Martin. Of the
total amount of the judgments, $155 thousand was compensatory damages and the
remainder was punitive damages. The damages were assessed against all three
defendants jointly. Alabama Power has appealed these judgments to the Supreme
Court of Alabama. While Alabama Power believes that these judgments should be
reversed or set aside, the final outcome of this matter cannot now be
determined.
Additional actions have been filed by other land owners in the same
subdivision on Lake Martin against the same defendants, including Alabama Power.
The plaintiffs assert substantially the same allegations as in the current
proceeding being appealed. The final outcome of these actions cannot now be
determined.
II-33
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Georgia Power Potentially Responsible Party Status
In January 1995, Georgia Power and four other unrelated entities were notified
by the Environmental Protection Agency (EPA) that they have been designated as
potentially responsible parties under the Comprehensive Environmental Response,
Compensation, and Liability Act with respect to a site in Brunswick, Georgia. As
of December 31, 1999, Georgia Power had recorded approximately $5 million in
cumulative expenses associated with the site. This represents Georgia Power's
agreed-upon share of the removal and remedial investigation and feasibility
study costs.
The final outcome of this matter cannot now be determined. However, based on
the nature and extent of Georgia Power's activities relating to the site,
management believes that the company's portion of any remaining remediation
costs should not be material to the financial statements.
Environmental Litigation
On November 3, 1999, the EPA brought a civil action in the U.S. District Court
against Alabama Power, Georgia Power, and the system service company. The
complaint alleges violations of the prevention of significant deterioration and
new source review provisions of the Clean Air Act with respect to five
coal-fired generating facilities in Alabama and Georgia. The civil action
requests penalties and injunctive relief, including an order requiring the
installation of the best available control technology at the affected units. The
Clean Air Act authorizes civil penalties of up to $27,500 per day, per violation
at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per
day.
The EPA concurrently issued to the integrated Southeast utilities a notice of
violation related to 10 generating facilities, which includes the five
facilities mentioned previously. In early 2000, the EPA filed a motion to amend
its complaint to add the violations alleged in its notice of violation, and to
add Gulf Power, Mississippi Power, and Savannah Electric as defendants. The
complaint and notice of violations 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 Company believes that its integrated utilities complied with
applicable laws and the EPA's regulations and interpretations in effect at the
time the work in question took place.
An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
Mobile Energy Services Petition for Bankruptcy
On January 14, 1999, Mobile Energy Services Company, LLC (MESC) -- an indirect
subsidiary of Southern Company -- filed a petition for Chapter 11 bankruptcy
relief in the U.S. Bankruptcy Court. As a result of the bankruptcy filing, the
investment in MESC was deconsolidated. MESC is the owner and operator of a
facility that generates electricity, produces steam, and processes black liquor
as part of a pulp and paper complex in Mobile, Alabama. This action was in
response to Kimberly-Clark Tissue Company's (Kimberly-Clark) announcement in May
1998 of plans to close its pulp mill, effective September 1, 1999. The pulp mill
had historically provided 50 percent of MESC's revenues.
As a result of settlement discussions with Kimberly-Clark and MESC's
bondholders, Southern Company recorded in September 1999 an after-tax write down
of $69 million, primarily representing Southern Company's investment in MESC. At
December 31, 1999, MESC had total assets of $395 million and senior debt
outstanding of $193 million of first mortgage bonds and $73 million related to
tax-exempt bonds. In connection with MESC's bond financings, Southern Company
provided certain limited guarantees, in lieu of funding debt service and
maintenance reserve accounts with cash. As of December 31, 1999, Southern
Company had paid $38 million pursuant to the guarantees. Southern Company
continues to have guarantees outstanding of certain potential environmental and
other obligations of MESC that represent a maximum contingent liability of $21
million at December 31, 1999.
MESC, an unofficial committee of its bondholders, and Kimberly-Clark have
reached a tentative agreement to settle disputes arising from the shutdown of
Kimberly-Clark's pulp mill in Mobile, Alabama, and to reconfigure energy
services at the site. MESC has reached a separate agreement with Southern Energy
to develop and operate a 165-megawatt cogeneration facility at the site,
including providing a combustion turbine for such facility. The bankruptcy court
approved both agreements.
II-34
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
The finalization of the proposed settlement between MESC and Kimberly-Clark
requires further agreements to be negotiated between the parties and certain
other conditions to be met, including having a plan of reorganization for MESC
be approved by the bankruptcy court and become effective by no later than
October 30, 2000. If these conditions, as well as others set out in the
settlement agreement filed with the bankruptcy court, are not met, then the
proposed settlement would no longer be effective. The final outcome of this
matter cannot now be determined.
Southern Energy Brazilian Investment
In September 1999, a Brazilian appellate court granted a temporary injunction
that suspended the effectiveness of a shareholders' agreement for Companhia
Energetica de Minas Gerais (CEMIG). This ruling suspends the shareholders'
agreement -- including Southern Energy's super majority voting rights -- while
the action to determine the validity of the agreement is litigated in the lower
court. Southern Energy intends to pursue its legal rights in this matter and to
have all of its rights restored regarding CEMIG. Southern Energy does not
anticipate that this temporary suspension of the shareholders' agreement will
have a significant effect on its financial condition or results of operation.
Alabama Power Rate Adjustment Procedures
In November 1982, the Alabama Public Service Commission (APSC) adopted rates
that provide for periodic adjustments based upon Alabama Power's earned return
on end-of-period retail common equity. The rates also provide for adjustments to
recognize the placing of new generating facilities in retail service. Both
increases and decreases have been placed into effect since the adoption of these
rates. The rate adjustment procedures allow a return on common equity range of
13 percent to 14.5 percent and limit increases or decreases in rates to 4
percent in any calendar year.
In June 1995, the APSC issued a rate order granting Alabama Power's request
for gradual adjustments to move toward parity among customer classes. This order
also calls for a moratorium on any periodic retail rate increases (but not
decreases) until July 2001.
In December 1995, the APSC issued an order authorizing Alabama Power to
reduce balance sheet items -- such as plant and deferred charges -- at any time
the company's actual base rate revenues exceed the budgeted revenues. In April
1997, the APSC issued an additional order authorizing Alabama Power to reduce
balance sheet asset items. This order authorizes the reduction of such items up
to an amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by Alabama Power. In 1998,
Alabama Power -- in accordance with the 1995 rate order -- recorded $33 million
of additional amortization of premium on reacquired debt. Alabama Power did not
record any additional amounts in 1999 or 1997.
The ratemaking procedures will remain in effect until the APSC votes to
modify or discontinue them.
Georgia Power Investment in Rocky Mountain
In its 1985 financing order, the GPSC concluded that completion of the Rocky
Mountain pumped storage hydroelectric plant in 1991 as then planned was not
economically justifiable and reasonable and withheld authorization for Georgia
Power to spend funds from approved securities issuances on the plant. In 1988,
Georgia Power and Oglethorpe Power Corporation (OPC) entered into a joint
ownership agreement for OPC to assume responsibility for the construction and
operation of the plant. The plant went into commercial operation in 1995.
In June 1996, the GPSC initiated a review of this plant. On January 14, 1998,
the GPSC ordered that Georgia Power be allowed to include approximately $108
million of its $142 million investment in rate base as of December 31, 1998. In
December 1998, Georgia Power recorded a write down of $34 million -- $21 million
after taxes -- on its investment in Rocky Mountain as a result of the GPSC's
1998 retail rate order discussed later. This matter is now concluded.
Georgia Power 1998 Retail Rate Order
As required by the GPSC, Georgia Power filed a general rate case in 1998. On
December 18, 1998, the GPSC approved a new three-year rate order for Georgia
Power. Under the terms of the order, Georgia Power's earnings will continue to
be evaluated against a retail return on common equity range of 10 percent to
12.5 percent. Georgia Power's annual retail rates were decreased by $262 million
effective January 1, 1999, and by an additional $24 million effective January 1,
2000. In addition, the order provided for $85 million annually to be applied to
accelerated amortization or depreciation of assets, and up to an additional $50
million annually in 2000 and 2001 of any earnings above the 12.5 percent return.
In 1999, Georgia Power -- in accordance with the rate order -- recorded $85
million of additional amortization of premium on reacquired debt.
II-35
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Two-thirds of any additional earnings above the 12.5 percent return in any
year will be applied to rate reductions and the remaining one-third retained by
Georgia Power. In 1999, Georgia Power's return was above 12.5 percent, and
accordingly, it recorded $79 million as an estimate of revenues to be refunded
to customers in 2000. During the term of the order, Georgia Power will not file
for a general base rate increase unless its projected retail return on common
equity falls below 10 percent. Georgia Power is required to file a general rate
case on July 1, 2001. At that time, the GPSC would be expected to determine
whether the rate order should be continued, modified, or discontinued.
4. CONSTRUCTION PROGRAM
Southern Company is engaged in continuous construction programs, currently
estimated to total some $3.0 billion in 2000, $3.8 billion in 2001, and $3.9
billion in 2002. The construction programs are subject to periodic review and
revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include: changes in business
conditions; acquisition of additional generating assets; revised load growth
estimates; changes in environmental regulations; changes in existing nuclear
plants to meet new regulatory requirements; increasing costs of labor,
equipment, and materials; and cost of capital. At December 31, 1999, significant
purchase commitments were outstanding in connection with the construction
program. The integrated Southeast utilities have approximately 5,200 megawatts
of combustion turbine generating capacity scheduled to be placed in service by
2002. Southern Energy has under construction approximately 1,000 megawatts of
owned capacity. In addition, significant construction will continue related to
transmission and distribution facilities and the upgrading of generating plants.
See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING AND COMMITMENTS
Financing
The amount and timing of additional equity capital to be raised in 2000 -- as
well as in subsequent years -- will be contingent on Southern Company's
investment opportunities. Equity capital may be provided from any combination of
public offerings, private placements, or the company's stock plans.
The integrated Southeast utilities' construction programs are expected to be
financed primarily from internal sources. Short-term debt is often utilized and
the amounts available are discussed below. The companies may issue additional
long-term debt and preferred securities primarily for debt maturities and for
redeeming higher-cost securities if market conditions permit.
Bank Credit Arrangements
At the beginning of 2000, unused credit arrangements with banks totaled $5.7
billion, of which $3.1 billion expires during 2000, $1.1 billion during 2001 and
2002, and $1.5 billion during 2003 and 2004. The following table outlines the
credit arrangements by company:
Amount of Credit
-------------------------------------
Expires
--------------------
2001 &
Company Total Unused 2000 beyond
- -------- ---------------------------------------
(in millions)
Alabama Power $ 907 $ 907 $ 517 $ 390
Georgia Power 1,252 1,252 752 500
Gulf Power 103 103 103 -
Mississippi Power 104 104 104 -
Savannah Electric 61 26 26 -
Southern Company 2,000 2,000 1,000 1,000
Southern Energy 3,021 1,256 574 682
Other 60 51 51 -
- --------------------------------------------------------------
Total $7,508 $5,699 $3,127 $2,572
==============================================================
Approximately $2.5 billion of the credit facilities allows for term loans
ranging from one to three years. Most of the agreements include stated borrowing
rates but also allow for competitive bid loans.
All of the credit arrangements require payment of commitment fees based on
the unused portion of the commitments or the maintenance of compensating
balances with the banks. These balances are not legally restricted from
withdrawal. Of the total $5.7 billion in unused credit, $1.85 billion, $1.0
billion, $800 million, and $780 million are syndicated credit arrangements of
Southern Company, Georgia Power, Southern Energy, and Alabama Power,
respectively. These facilities also require the payment of agent fees.
II-36
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
A portion of the $5.7 billion unused credit with banks is allocated to
provide liquidity support to the companies' variable rate pollution control
bonds. The amount of variable rate pollution control bonds requiring liquidity
support as of December 31, 1999, was $674 million.
In addition, the companies from time to time borrow under uncommitted lines
of credit with banks. Also, Southern Company, Alabama Power, Georgia Power, and
Southern Energy borrow through commercial paper programs that have the liquidity
support of committed bank credit arrangements.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of the generating plants, Southern
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels, and other financial commitments.
Also, Southern Company has entered into various long-term commitments for the
purchase of electricity. Total estimated long-term obligations at December 31,
1999, were as follows:
Purchased
Year Fuel Power
- ----- ------------------------
(in millions)
2000 $1,629 $ 81
2001 1,351 81
2002 1,153 97
2003 1,012 99
2004 872 95
2005 and thereafter 3,429 1,006
- ---------------------------------------------------------------
Total commitments $9,446 $1,459
===============================================================
Operating Leases
Southern Company has operating lease agreements with various terms and
expiration dates. These expenses totaled $67 million, $56 million, and $36
million for 1999, 1998, and 1997, respectively. At December 31, 1999, estimated
minimum rental commitments for noncancelable operating leases were as follows:
Year Amounts
- ---- ------------
(in millions)
2000 $ 64
2001 83
2002 89
2003 82
2004 82
2005 and thereafter 526
- ------------------------------------------------------------------
Total minimum payments $926
==================================================================
Long-Term Service Agreements
Southern Energy has entered into several long-term service agreements for the
maintenance and repair of its combustion turbine or combined cycle generating
plants. These agreements may be terminated in the event a planned construction
project is canceled. At December 31, 1999, the annual amounts committed are as
follows:
Year Amounts
- ---- ---------------
(in millions)
2000 $ 3
2001 8
2002 28
2003 51
2004 62
2005 and thereafter 591
- ----------------------------------------------------------------
Total minimum payments $743
================================================================
Energy Trading and Marketing Commitments
In 1998, Southern Energy and Vastar Resources (Vastar) completed the combination
of their energy trading and marketing activities to form a joint venture,
Southern Company Energy Marketing (SCEM). SCEM buys and sells physical and
financial energy commodities and financial instruments and provides
energy-related products and services. SCEM's gross revenues and cost of sales
for 1999 were $12.0 billion and $11.9 billion, respectively.
Southern Energy's current ownership interest in SCEM is 60 percent. The
equity method of accounting is used because of Vastar's significant
II-37
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
participation rights. On July 1, 2001, this ownership interest will
automatically increase to 75 percent. Southern Energy has the right --
exercisable during fiscal year 2002 -- to acquire an additional 5 percent
interest from Vastar for $80 million. Also, Vastar has the right -- exercisable
in the period from December 1, 2002 through January 2, 2003 -- to sell its
remaining interest in SCEM to Southern Energy. The price will range from $130
million to $210 million depending on the interest owned by Vastar at that time,
plus certain other contractual considerations.
Southern Company and Vastar have separately made guarantees to certain
counterparties regarding performance of contractual commitments by SCEM.
Southern Company and Vastar have agreed to indemnify each other against losses
under such guarantees in proportion to their respective ownership shares of
SCEM. At December 31, 1999, outstanding guarantees related to the estimated fair
value of net contractual commitments were approximately $146 million. Based upon
SCEM's statistical analysis of its credit risk, Southern Company's potential
exposure under these contractual commitments would not materially differ from
the estimated fair value.
Southern Energy has guaranteed certain minimum annual cash distributions,
subject to exclusions, payable by SCEM to Vastar. For 1999, this distribution,
after adjustments, was $17 million. These distributions before any adjustments
total $85 million for the period 2000-2002.
Assets Subject to Lien
Each of Southern Company's subsidiaries is organized as a legal entity, separate
and apart from Southern Company and its other subsidiaries. The subsidiary
companies' mortgages, which secure the first mortgage bonds issued by the
companies, constitute a direct first lien on substantially all of the companies'
respective fixed property and franchises. There are no agreements or other
arrangements among the subsidiary companies under which the assets of one
company have been pledged or otherwise made available to satisfy obligations of
Southern Company or any of its other subsidiaries.
6. JOINT OWNERSHIP AGREEMENTS
Alabama Power owns an undivided interest in units 1 and 2 of Plant Miller and
related facilities jointly with Alabama Electric Cooperative, Inc.
Georgia Power owns undivided interests in plants Vogtle, Hatch, Scherer, and
Wansley in varying amounts jointly with OPC, the Municipal Electric Authority of
Georgia, the city of Dalton, Georgia, Florida Power &Light Company (FP&L), and
Jacksonville Electric Authority (JEA). In addition, Georgia Power has joint
ownership agreements with OPC for the Rocky Mountain project and with Florida
Power Corporation (FPC) for a combustion turbine unit at Intercession City,
Florida.
At December 31, 1999, Alabama Power's and Georgia Power's ownership and
investment (exclusive of nuclear fuel) in jointly owned facilities with the
above entities were as follows:
Jointly Owned Facilities
----------------------------------------
Percent Amount of Accumulated
Ownership Investment Depreciation
--------- ---------------------------
(in millions)
Plant Vogtle
(nuclear) 45.7% $3,297 $1,630
Plant Hatch
(nuclear) 50.1 857 604
Plant Miller
(coal)
Units 1 and 2 91.8 740 297
Plant Scherer
(coal)
Units 1 and 2 8.4 112 51
Plant Wansley
(coal) 53.5 299 145
Rocky Mountain
(pumped storage) 25.4 169 66
Intercession City
(combustion turbine) 33.3 11 *
- ---------------------------------------------------------------
*Less than $1 million.
Alabama Power and Georgia Power have contracted to operate and maintain the
jointly owned facilities -- except for the Rocky Mountain project and
Intercession City -- as agents for their respective co-owners. The companies'
proportionate share of their plant operating expenses is included in the
corresponding operating expenses in the Consolidated Statements of Income.
7. Long-Term Power Sales Agreements
The integrated Southeast utilities have long-term contractual agreements for the
sale of capacity and energy to certain non-affiliated utilities located outside
the system's service area. These agreements -- expiring at various dates
II-38
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
discussed below -- are firm and pertain to capacity related to specific
generating units. Because the energy is generally sold at cost under these
agreements, profitability is primarily affected by revenues from capacity sales.
The capacity revenues amounted to $174 million in 1999, $196 million in 1998,
and $203 million in 1997.
Unit power from specific generating plants is currently being sold to FP&L,
FPC, JEA, and the city of Tallahassee, Florida. Under these agreements,
approximately 1,600 megawatts of capacity is scheduled to be sold in 2000.
Thereafter, these sales will decline to some 1,500 megawatts and remain at that
approximate level -- unless reduced by FP&L, FPC, and JEA for the periods after
2000 with a minimum of three years notice -- until the expiration of the
contracts in 2010.
8. INCOME TAXES
At December 31, 1999, the tax-related regulatory assets and liabilities were
$987 million and $640 million, respectively. These assets are attributable to
tax benefits flowed through to customers in prior years and to taxes applicable
to capitalized AFUDC. These liabilities are attributable to deferred taxes
previously recognized at rates higher than current enacted tax law and to
unamortized investment tax credits.
Details of income tax provisions are as follows:
1999 1998 1997
- --------------------------------------------------------------
(in millions)
Total provision for income taxes:
Federal --
Current $ 486 $ 451 $ 547
Deferred -- current year 186 195 188
-- reversal of
prior years (145) (208) (160)
- --------------------------------------------------------------
527 438 575
- --------------------------------------------------------------
State --
Current 85 106 104
Deferred -- current year 16 28 15
-- reversal of
prior years (10) (31) (19)
- --------------------------------------------------------------
91 103 100
- --------------------------------------------------------------
International 108 8 164
- --------------------------------------------------------------
Total $ 726 $ 549 $ 839
==============================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1999 1998
- --------------------------------------------------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $3,439 $3,315
Property basis differences 1,516 1,667
Other 585 403
- --------------------------------------------------------------
Total 5,540 5,385
- --------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 102 104
Other property basis differences 221 239
Deferred costs 134 132
Pension and other benefits 90 79
Other 420 293
- ---------------------------------------------------------------
Total 967 847
- ---------------------------------------------------------------
Net deferred tax liabilities 4,573 4,538
Portion included in current assets, net (68) (57)
- ---------------------------------------------------------------
Accumulated deferred income taxes
in the Consolidated Balance Sheets $4,505 $4,481
===============================================================
Deferred investment tax credits are amortized over the lives of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Consolidated Statements of Income. Credits amortized in this
manner amounted to $35 million in 1999, $38 million in 1998, and $30 million in
1997. At December 31, 1999, all investment tax credits available to reduce
federal income taxes payable had been utilized.
A reconciliation of the federal statutory income tax rate -- which excludes
the effect of minority interests and preferred dividends -- to the effective
income tax rate is as follows:
1999 1998 1997
- ---------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.8 4.1 3.4
Non-deductible book
depreciation 1.3 4.1 2.3
Differences in foreign tax rates (5.1) (6.4) -
Windfall profits tax - - 8.0
Difference in prior years'
deferred and current tax rate (0.9) (1.3) (1.5)
Other (0.2) (1.8) (1.9)
- ---------------------------------------------------------------
Effective income tax rate 32.9% 33.7% 45.3%
===============================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis.
II-39
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
The undistributed earnings of foreign subsidiaries aggregated $435
million as of December 31, 1999, and these subsidiaries' earnings are not
subject to U.S. income tax until distributed. Of the total undistributed
earnings, provisions for U.S. taxes have not been made on $210 million related
to earnings that are intended to be reinvested indefinitely.
9. COMMON STOCK
Stock Repurchase Programs
In April 1999, Southern Company's Board of Directors approved the repurchase of
up to 50 million shares of Southern Company's common stock over a two-year
period through open market or privately negotiated transactions. The program did
not establish a target stock price or timetable for specific repurchases. Under
this program, 32.8 million shares have been repurchased through December 31,
1999. Funding for the program was provided from Southern Company's commercial
paper program.
In July 1998, Southern Company's Board of Directors authorized the company 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
Company's various stockholder, employee, and outside director stock purchase
plans. Under the program, 4.4 million shares were repurchased and 2.4 million
shares were reissued.
Shares Reserved
At December 31, 1999, a total of 47 million shares was reserved for issuance
pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside
Directors Stock Plan, and the Performance Stock Plan.
Performance Stock Plan
As of December 31, 1999, 355 current and former employees participated in the
Performance Stock Plan. The maximum number of shares of common stock that may be
issued under the plan may not exceed 40 million. The prices of options granted
to date have been at the fair market value of the shares on the dates of grant.
Options granted to date become exercisable pro rata over a maximum period of
three years from the date of grant. Options outstanding will expire no later
than 10 years after the date of grant, unless terminated earlier by the Southern
Company Board of Directors in accordance with the plan. Stock option activity in
1998 and 1999 for the plan is summarized below:
Shares Average
Subject Option Price
To Option Per Share
- --------------------------------------------------------------
Balance at December 31, 1997 5,399,506 $21.15
Options granted 1,659,519 27.03
Options canceled (23,495) 23.18
Options exercised (604,238) 20.21
- --------------------------------------------------------------
Balance at December 31, 1998 6,431,292 22.77
Options granted 2,108,818 26.56
Options canceled (27,995) 25.54
Options exercised (56,708) 19.51
- --------------------------------------------------------------
Balance at December 31, 1999 8,455,407 $23.73
==============================================================
Shares reserved for future grants:
At December 31, 1997 38,241,376
At December 31, 1998 36,598,001
At December 31, 1999 34,515,156
- --------------------------------------------------------------
Options exercisable:
At December 31, 1998 2,653,591
At December 31, 1999 4,525,349
- --------------------------------------------------------------
Southern Company accounts for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25. Accordingly, no
compensation expense has been recognized.
The pro forma impact on earnings of fair-value accounting for options granted
- -- as required by FASB Statement No. 123, Accounting for Stock-Based
Compensation -- is less than 1 cent per share and is not significant to the
consolidated financial statements.
Earnings Per Share
FASB Statement No. 128, Earnings per Share, simplifies the methodology for
computing both basic and diluted earnings per share. The only difference in the
two methods for computing Southern Company's per share amounts is attributable
to outstanding options under the Performance Stock Plan. The effect of the stock
options was determined using the treasury stock method. Consolidated net income
as reported was not affected. Shares used to compute diluted earnings per share
are as follows:
Average Common Stock Shares
------------------------------
1999 1998 1997
- --------------------------------------------------------------
(in thousands)
As reported shares 685,163 696,944 685,033
Effect of options 580 739 201
- --------------------------------------------------------------
Diluted shares 685,743 697,683 685,234
==============================================================
II-40
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Common Stock Dividend Restrictions
The income of Southern Company is derived primarily from equity in earnings of
its subsidiaries. At December 31, 1999, consolidated retained earnings included
$3.5 billion of undistributed retained earnings of the subsidiaries. Of this
amount, $2.0 billion was restricted against the payment by the subsidiary
companies of cash dividends on common stock under terms of bond indentures.
10. CAPITAL AND PREFERRED SECURITIES
Company or subsidiary obligated mandatorily redeemable capital and preferred
securities have been issued by special purpose financing entities of Southern
Company and its subsidiaries. Substantially all the assets of these special
financing entities are junior subordinated notes issued by the related company
seeking financing. Each of these companies considers that the mechanisms and
obligations relating to the capital or preferred securities issued for its
benefit, taken together, constitute a full and unconditional guarantee by it of
the respective special financing entities' payment obligations with respect to
the capital or preferred securities. At December 31, 1999, capital securities of
$950 million and preferred securities of $1.4 billion were outstanding. Southern
Company guarantees the notes related to $950 million of capital securities
issued on its behalf.
11. LONG-TERM DEBT DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1999 1998
- --------------------------------------------------------------
(in millions)
Bond improvement fund requirements $ 14 $ 23
Less:
Portion to be satisfied by certifying
property additions 9 14
- --------------------------------------------------------------
Cash requirements 5 9
First mortgage bond maturities
and redemptions 200 868
Other long-term debt maturities 371 563
- --------------------------------------------------------------
Total $576 $1,440
==============================================================
The first mortgage bond improvement fund requirements amount to 1 percent of
each outstanding series of bonds authenticated under the indentures prior to
January 1 of each year, other than those issued to collateralize pollution
control revenue bonds and other obligations. The requirements may be satisfied
by depositing cash or reacquiring bonds, or by pledging additional property
equal to 166 2/3 percent of such requirements.
With respect to the collateralized pollution control revenue bonds, the
integrated Southeast utilities have authenticated and delivered to trustees a
like principal amount of first mortgage bonds as security for obligations under
installment sale or loan agreements. The principal and interest on the first
mortgage bonds will be payable only in the event of default under the
agreements.
Improvement fund requirements and/or serial maturities through 2004
applicable to other long-term debt are as follows: $371 million in 2000; $501
million in 2001; $1.0 billion in 2002; $435 million in 2003; and $1.46 billion
in 2004.
12. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, Alabama Power and Georgia Power
maintain agreements of indemnity with the NRC that, together with private
insurance, cover third-party liability arising from any nuclear incident
occurring at the companies' nuclear power plants. The act provides funds up to
$9.5 billion for public liability claims that could arise from a single nuclear
incident. Each nuclear plant is insured against this liability to a maximum of
$200 million by private insurance, with the remaining coverage provided by a
mandatory program of deferred premiums that could be assessed, after a nuclear
incident, against all owners of nuclear reactors. A company could be assessed up
to $88 million per incident for each licensed reactor it operates, but not more
than an aggregate of $10 million per incident to be paid in a calendar year for
each reactor. Such maximum assessment, excluding any applicable state premium
taxes, for Alabama Power and Georgia Power -- based on its ownership and buyback
interests -- is $176 million and $178 million, respectively, per incident, but
not more than an aggregate of $20 million per company to be paid for each
incident in any one year.
Alabama Power and Georgia Power are members of Nuclear Electric Insurance
Limited (NEIL), a mutual insurer established to provide property damage
insurance in an amount up to $500 million for members' nuclear generating
facilities.
II-41
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
Additionally, both companies have policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional costs that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week -- starting 12 weeks after the outage -- for
one year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if losses
each year exceed the accumulated funds available to the insurer under that
policy. The current maximum annual assessments for Alabama Power and Georgia
Power under the three NEIL policies would be $19 million and $21 million,
respectively.
For all on-site property damage insurance policies for commercial nuclear
power plants, the NRC requires that the proceeds of such policies shall be
dedicated first for the sole purpose of placing the reactor in a safe and stable
condition after an accident. Any remaining proceeds are to be applied next
toward the costs of decontamination and debris removal operations ordered by the
NRC, and any further remaining proceeds are to be paid either to the company or
to its bond trustees as may be appropriate under the policies and applicable
trust indentures.
All retrospective assessments -- whether generated for liability, property,
or replacement power -- may be subject to applicable state premium taxes.
13. ACQUISITIONS AND ASSET SALES
Acquisitions
Southern Energy completed several acquisitions in both 1999 and 1998. In 1999, a
$801 million acquisition of 3,065 megawatts of generating capacity from Pacific
Gas &Electric in northern California was completed. Additionally, Southern
Energy acquired 1,794 megawatts of generating capacity from Orange and Rockland
Utilities Inc. and Consolidated Edison Inc. for $476 million. A 9.9 percent
interest in Shandong International Power Development Company was purchased in
1999 for $107 million.
Southern Energy paid $537 million in 1998 to Commonwealth Electric for 1,245
megawatts of generating capacity. Also in 1998, Southern Energy acquired a 3.6
percent economic interest in CEMIG -- a Brazilian utility -- for $274 million.
Assets Sold
Southern Energy's significant asset sales in 1999 and 1998 related to its United
Kingdom subsidiary South Western Electricity (SWEB). The supply system of SWEB
was sold in 1999 for $256 million of which Southern Energy owned 49 percent. The
remaining distribution business was renamed Western Power Distribution. In 1998,
Southern Energy sold a 26 percent interest in SWEB for $170 million.
Assets for Sale
In December 1998, Southern Energy designed and implemented a plan to dispose of
its Argentinean and Chilean investments. As a result, Southern Energy recorded
an after-tax write down of approximately $200 million in 1998 to reflect the
difference between the carrying value of these assets and the estimated fair
value of the businesses. Southern Energy estimated the fair value of the
businesses held for sale based upon bids received from prospective buyers, if
available, or the discounted expected future cash flows to be generated by the
assets. The adjusted carrying value of these assets held for disposal at
December 31, 1999 was $92 million. These assets impacted the Consolidated
Statements of Income as follows:
Operating Operating Consolidated
Year Revenues Income Net Income
- ---- -----------------------------------------
(in millions)
1999 $171 $23 $2
1998 180 37 5
1997 180 37 5
Depreciation expense was suspended beginning January 1999, and the after-tax
amount of depreciation recorded in 1998 was $16 million. Southern Energy has
been actively pursuing and/or negotiating with potential buyers for its assets
in Argentina and Chile. In early 2000, Southern Energy announced an agreement to
sell its Argentinean assets substantially at the adjusted carrying value with no
material gain or loss expected to be recognized in 2000.
II-42
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
14. SEGMENT AND RELATED INFORMATION
Southern Company's principal business segment is the five integrated Southeast
utilities that provide electric service in four states. The other reportable
business segment is Southern Energy, which includes international operations and
the competitive energy supply businesses in North America outside the Southeast.
Intersegment revenues are not material. Financial data for business segments,
products and services, and geographic areas are as follows:
<TABLE>
<CAPTION>
Business Segments
Integrated Southern Energy All
Southeast ------------------------------------------ Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- ---- -------------------------------------------------------------------------------------------------
(in millions)
1999
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 9,125 $1,532 $ 736 $ 2,268 $ 222 $ (30) $11,585
Depreciation and amortization 961 261 61 322 24 - 1,307
Interest income 64 88 86 174 42 (116) 164
Net interest charges 700 264 219 483 136 (78) 1,241
Income taxes 675 85 41 126 (62) (13) 726
Write down of generating assets - - 69 69 - - 69
Net income from equity
method subsidiaries - 100 (6) 94 - - 94
Segment net income (loss) 1,073 346 (18) 328 (101) (24) 1,276
Total assets 25,251 9,370 4,502 13,872 461 (1,188) 38,396
Investments in equity
method subsidiaries 11 1,195 171 1,366 - (1) 1,376
Gross property additions 1,854 447 232 679 27 - 2,560
Increase in goodwill - - 48 48 - - 48
- -----------------------------------------------------------------------------------------------------------------------------------
Integrated Southern Energy All
Southeast -------------------------------------------- Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- ----- -------------------------------------------------------------------------------------------------
(in millions)
1998
- ----
Operating revenues $ 9,363 $1,766 $ 137 $ 1,903 $ 166 $ (29) $11,403
Depreciation and amortization 1,289 216 18 234 16 - 1,539
Interest income 150 86 61 147 57 (111) 243
Net interest charges 654 318 91 409 97 (58) 1,102
Income taxes 703 (101) (22) (123) (12) (19) 549
Write down of generating assets 34 308 - 308 - - 342
Net income from equity
method subsidiaries 2 126 (5) 121 - - 123
Segment net income (loss) 1,083 23 16 39 (110) (35) 977
Total assets 24,420 9,578 2,869 12,447 1,438 (2,114) 36,191
Investments in equity
method subsidiaries 10 1,363 176 1,539 - - 1,549
Gross property additions 1,298 586 63 649 58 - 2,005
Increase in goodwill - 30 261 291 - - 291
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-43
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
<TABLE>
<CAPTION>
Integrated Southern Energy All
Southeast -------------------------------------------- Other Reconciling
Year Utilities International Domestic Total (Note) Eliminations Consolidated
- ---- --------------------------------------------------------------------------------------------------
(in millions)
1997
- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $ 8,688 $1,748 $2,089 $ 3,837 $ 98 $ (12) $12,611
Depreciation and amortization 1,156 179 15 194 17 - 1,367
Interest income 51 96 42 138 21 (58) 152
Net interest charges 588 289 73 362 84 (41) 993
Income taxes 687 181 (6) 175 (17) (154) 691
Windfall profits tax - 148 - 148 - - 148
Net income from equity
method subsidiaries 1 41 7 48 - (14) 35
Segment net income (loss) 1,105 (4) 5 1 (123) (11) 972
Total assets 24,796 9,225 1,832 11,057 1,225 (1,823) 35,255
Investments in equity
method subsidiaries 10 1,024 134 1,158 - - 1,168
Gross property additions 1,080 720 1 721 58 - 1,859
Increase in goodwill - 1,649 - 1,649 - - 1,649
- -----------------------------------------------------------------------------------------------------------------------------------
(Note) The all other category includes parent Southern Company, 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. Amounts for Southern Energy exclude interest
expense to parent Southern Company.
</TABLE>
<TABLE>
<CAPTION>
Products and Services
Revenues
------------------------------------------------------------------------------------------------------------------
Integrated
Southeast Utilities Southern Energy
--------------------------------------------- ----------------------------------------------------------------
Energy
Trading And
Year Retail Wholesale Other Total Generation Distribution Marketing Other Total
- ---- ------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $8,086 $823 $216 $9,125 $1,222 $ 976 $ - $70 $2,268
1998 8,272 896 195 9,363 578 1,273 - 52 1,903
1997 7,647 886 155 8,688 513 1,282 1,982 60 3,837
- -----------------------------------------------------------------------------------------------------------------------------------
Geographic Areas
Revenues
----------------------------------------------------------------------------------------------------
International
-------------------------------------------------------------
All
Year Domestic Europe Asia Other Total Consolidated
- ---- ----------------------------------------------------------------------------------------------------
(in millions)
1999 $10,053 $ 976 $342 $214 $1,532 $11,585
1998 9,637 1,273 273 220 1,766 11,403
1997 10,863 1,282 247 219 1,748 12,611
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-44
<PAGE>
NOTES (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
<TABLE>
<CAPTION>
Long-Lived Assets
--------------------------------------------------------------------------------------------------
International
-----------------------------------------------------------------------------
All
Year Domestic Europe Asia Other Total Consolidated
- ---- --------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
1999 $24,266 $2,449 $4,029 $1,725 $8,203 $32,469
1998 22,005 2,463 3,772 1,856 8,091 30,096
1997 21,282 2,428 3,628 1,888 7,944 29,226
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Summarized quarterly financial data for 1999 and 1998 are as follows:
Per Common Share
-------------------------------------------------------
Operating Operating Consolidated Price Range
Quarter Ended Revenues Income Net Income Earnings Dividends High Low
- -------------- ------------------------------------ --------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
March 1999 $2,442 $ 485 $224 $0.32 $0.335 29 5/8 23 1/4
June 1999 2,791 668 314 0.45 0.335 29 3/16 22 3/4
September 1999 3,736 1,109 615 0.90 0.335 28 25
December 1999 2,616 517 123 0.19 0.335 27 1/8 22 1/16
March 1998 $2,495 $ 573 $242 $0.35 $0.335 28 11/16 23 15/16
June 1998 2,913 648 270 0.39 0.335 29 25 1/16
September 1998 3,457 1,068 517 0.74 0.335 29 13/16 25 1/4
December 1998 2,538 21 (52) (0.08) 0.335 31 9/16 27 3/16
- ---------------------------------------------------------------------------------------------------------------------------
Southern Company's business is influenced by seasonal weather conditions.
Earnings for the fourth quarter 1998 declined by $221 million, or 32 cents per share, as a result of write downs in certain
generating assets as discussed in notes 3 and 13.
</TABLE>
II-45
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1995-1999
Southern Company and Subsidiary Companies 1999 Annual Report
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in millions) $11,595 $11,403 $12,611 $10,358 $9,180
Consolidated Net Income (in millions) $1,276 $977 $972 $1,127 $1,103
Basic and Diluted Earnings Per Share of Common Stock $1.86 $1.40 $1.42 $1.68 $1.66
Cash Dividends Paid Per Share of Common Stock $1.34 $1.34 $1.30 $1.26 $1.22
Return on Average Common Equity (percent) 13.43 10.04 10.30 12.53 13.01
Total Assets (in millions) $38,396 $36,191 $35,255 $30,230 $30,522
Gross Property Additions (in millions) $2,560 $2,005 $1,859 $1,229 $1,401
Southern Energy Business and Asset Acquisitions $1,800 $998 $2,925 $- $1,416
- ----------------------------------------------------------------------------------------------------------------------------
Capitalization (in millions):
Common stock equity $ 9,204 $ 9,797 $ 9,647 $ 9,216 $ 8,772
Preferred stock and securities 2,696 2,548 2,237 1,402 1,432
Long-term debt 11,747 10,472 10,274 7,938 8,274
- ----------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year $23,647 $22,817 $22,158 $18,556 $18,478
============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 38.9 42.9 43.5 49.7 47.5
Preferred stock and securities 11.4 11.2 10.1 7.6 7.7
Long-term debt 49.7 45.9 46.4 42.7 44.8
- ----------------------------------------------------------------------------------------------------------------------------
Total excluding amounts due within one year 100.0 100.0 100.0 100.0 100.0
============================================================================================================================
Other Common Stock Data:
Book value per share (year-end) $13.82 $14.04 $13.91 $13.61 $13.10
Market price per share:
High 29 5/8 31 9/16 26 1/4 25 7/8 25
Low 22 1/16 23 15/16 19 7/8 21 1/8 19 3/8
Close 23 1/2 29 1/16 25 7/8 22 5/8 24 5/8
Market-to-book ratio (year-end) (percent) 170.0 207.0 186.0 166.2 188.0
Price-earnings ratio (year-end) (times) 12.6 20.8 18.2 13.5 14.8
Dividends paid (in millions) $921 $933 $889 $846 $811
Dividend yield (year-end) (percent) 5.7 4.6 5.0 5.6 5.0
Dividend payout ratio (percent) 72.2 95.6 91.5 75.1 73.5
Shares outstanding (in thousands):
Average 685,163 696,944 685,033 672,590 665,064
Year-end 665,796 697,747 693,423 677,036 669,543
Stockholders of record (year-end) 174,179 187,053 200,508 215,246 225,739
- -----------------------------------------------------------------------------------------------------------------------------
Customers for Integrated Southeast Utilities
(year-end) (in thousands):
Residential 3,339 3,277 3,220 3,157 3,100
Commercial 513 497 479 464 450
Industrial 15 15 16 17 17
Other 4 5 5 5 5
- -----------------------------------------------------------------------------------------------------------------------------
Total 3,871 3,794 3,720 3,643 3,572
=============================================================================================================================
Employees (year-end):
Traditional business 26,269 25,206 24,682 25,034 26,452
Southern Energy 6,680 6,642 5,620 3,743 5,430
- -----------------------------------------------------------------------------------------------------------------------------
Total 32,949 31,848 30,302 28,777 31,882
=============================================================================================================================
</TABLE>
II-46
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Southern Company and Subsidiary Companies 1999 Annual Report
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in millions):
Residential $ 3,105 $ 3,163 $ 2,837 $ 2,894 $2,840
Commercial 2,743 2,763 2,595 2,559 2,485
Industrial 2,237 2,267 2,139 2,136 2,206
Other 1 79 76 76 72
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 8,086 8,272 7,647 7,665 7,603
Sales for resale within service area 350 374 376 409 399
Sales for resale outside service area 473 522 510 429 415
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 8,909 9,168 8,533 8,503 8,417
Southern Energy 2,268 1,903 3,837 1,683 643
Other revenues 408 332 241 172 120
- ----------------------------------------------------------------------------------------------------------------------------
Total $11,585 $11,403 $12,611 $10,358 $9,180
============================================================================================================================
Kilowatt-Hour Sales (in millions):
Residential 43,402 43,503 39,217 40,117 39,147
Commercial 43,387 41,737 38,926 37,993 35,938
Industrial 56,210 55,331 54,196 52,798 51,644
Other 945 929 903 911 863
- ----------------------------------------------------------------------------------------------------------------------------
Total retail 143,944 141,500 133,242 131,819 127,592
Sales for resale within service area 9,440 9,847 9,884 10,935 9,472
Sales for resale outside service area 12,929 12,988 13,761 10,777 9,143
- ----------------------------------------------------------------------------------------------------------------------------
Total 166,313 164,335 156,887 153,531 146,207
============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.15 7.27 7.23 7.21 7.25
Commercial 6.32 6.62 6.67 6.74 6.91
Industrial 3.98 4.10 3.95 4.04 4.27
Total retail 5.62 5.85 5.74 5.81 5.96
Sales for resale 3.68 3.92 3.75 3.86 4.38
Total sales 5.36 5.58 5.44 5.54 5.76
Average Annual Kilowatt-Hour
Use Per Residential Customer 13,107 13,379 12,296 12,824 12,722
Average Annual Revenue Per Residential Customer $937.81 $972.89 $889.50 $925.12 $922.83
Plant Nameplate Capacity Owned (year-end) (megawatts) 31,197 31,161 31,146 31,076 30,733
Maximum Peak-Hour Demand (megawatts):
Winter 25,203 21,108 22,969 22,631 21,422
Summer 30,578 28,934 27,334 27,190 27,420
System Reserve Margin (at peak) (percent) 8.5 12.8 15.0 14.0 9.4
Annual Load Factor (percent) 59.2 60.0 59.4 62.3 59.5
Plant Availability (percent):
Fossil-steam 83.3 85.2 88.2 86.4 86.7
Nuclear 89.9 87.8 88.8 89.7 88.3
- ----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 73.1 72.8 74.7 73.3 72.5
Nuclear 15.7 15.4 16.5 16.7 16.4
Hydro 2.3 3.9 4.3 4.1 4.1
Oil and gas 2.8 3.3 1.7 1.5 1.7
Purchased power 6.1 4.6 2.8 4.4 5.3
- ----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
============================================================================================================================
</TABLE>
II-47
<PAGE>
ALABAMA POWER COMPANY
FINANCIAL SECTION
II-48
<PAGE>
MANAGEMENT'S REPORT
Alabama Power Company 1999 Annual Report
The management of Alabama Power Company has prepared -- and is responsible for
- -- the financial statements and related information included in this report.
These statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on the best estimates and judgments of management. Financial
information throughout this annual report is consistent with the financial
statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of directors who are
not employees, provides a broad overview of management's financial reporting and
control functions. Periodically, this committee meets with management, the
internal auditors and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations and cash flows
of Alabama Power Company in conformity with generally accepted accounting
principles.
/s/Elmer B. Harris
Elmer B. Harris
President
and Chief Executive Officer
/s/William B. Hutchins, III
William B. Hutchins, III
Executive Vice President,
Chief Financial Officer, and Treasurer
February 16, 2000
II-49
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Alabama Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Alabama Power Company (an Alabama corporation and a wholly owned subsidiary
of Southern Company) as of December 31, 1999 and 1998, and the related
statements of income, common stockholder's equity, and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements (pages 11-59 through 11-77)
referred to above present fairly, in all material respects, the financial
position of Alabama Power Company as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/Arthur Andersen LLP
Birmingham, Alabama
February 16, 2000
II-50
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Alabama Power Company 1999 Annual Report
RESULTS OF OPERATIONS
Earnings
Alabama Power Company's 1999 net income after dividends on preferred stock was
$400 million, representing a $23 million (6 percent) increase from the prior
year. This improvement is primarily attributable to a decrease in amortization
related to premiums paid to reacquire debt pursuant to an Alabama Public Service
Commission (APSC) order. See Note 3 to the financial statements under "Retail
Rate Adjustment Procedures" for additional details.
In 1998, earnings were $377 million, representing a 0.3 percent increase
from the prior year. This increase was due to increased retail energy sales as a
result of hot weather in the second quarter of 1998, compared to very mild
weather for the same period in 1997 and a strong economy in the Company's
service territory. However, earnings were offset by an increase in non-fuel
operation and maintenance expenses and an increase in the amortization related
to premiums paid to reacquire debt pursuant to an APSC order.
The return on average common equity for 1999 was 13.85 percent compared to
13.63 percent in 1998, and 13.76 percent in 1997.
Revenues
Operating revenues for 1999 were $3.4 billion, reflecting a slight decrease from
1998. The following table summarizes the principal factors that have affected
operating revenues for the past three years:
Increase (Decrease) From Prior Year
-----------------------------------------
1999 1998 1997
-----------------------------------------
(in thousands)
Retail --
Growth and price
changes $ 27,893 $ 75,642 $ 33,813
Weather (17,871) 55,282 (22,973)
Fuel cost recovery
and other 20,418 138,944 31,353
- ---------------------------------------------------------------------
Total retail 30,440 269,868 42,193
- ---------------------------------------------------------------------
Sales for resale --
Non affiliates (33,596) 17,950 39,354
Affiliates (11,123) (58,233) (54,825)
- ---------------------------------------------------------------------
Total sales for resale (44,719) (40,283) (15,471)
Other operating
revenues 13,380 7,677 1,614
- ---------------------------------------------------------------------
Total operating
revenues $ (899) $237,262 $ 28,336
=====================================================================
Percent change (0.03)% 7.53% 0.91%
- ---------------------------------------------------------------------
Retail revenues of $2.8 billion in 1999 increased
$30 million (1.1 percent) from the prior year, compared with an increase of $270
million (10.7 percent) in 1998. The primary contributors to the increase in
revenues in 1999 were continued growth in the Company's service territory, as
well as an increase in fuel revenues. These increases were offset by the effect
of milder temperatures in 1999 as compared to 1998.
The $13 million (25.2 percent) increase in other operating revenues in 1999
as compared to 1998 was due primarily to an increase in steam sales in
conjunction with the operation of the Company's co-generation facilities. The
increase is the result of two new co-generation facilities placed in service in
1999.
Retail revenues in 1998 increased $270 million (10.7 percent) over 1997. The
predominant factors causing the rise in revenues in 1998 were the positive
impact of weather on energy sales, continued growth throughout the state, and
II-51
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
increased fuel revenues. Fuel revenues were higher in 1998 as compared to 1997
due to higher fuel costs and an increase in purchased power. Fuel revenues
generally represent the direct recovery of fuel expense, including the fuel
component of purchased energy, and therefore have no effect on net income.
Energy sales for resale outside the service area are predominantly unit
power sales under long-term contracts to Florida utilities. Economy sales and
amounts sold under short-term contracts are also sold for resale outside the
service area. Revenues from long-term power contracts have both a capacity and
energy component. Capacity revenues reflect the recovery of fixed costs and a
return on investment under the contracts. Energy is generally sold at variable
cost. These capacity and energy components of the unit power contracts were as
follows:
1999 1998 1997
-------------------------------------------
(in millions)
Capacity $122 $142 $136
Energy 112 118 135
------------------------------------------------------------
Total $234 $260 $271
=============================================================
Capacity revenues from non-affiliates decreased 13.9 percent in 1999
compared to the prior year. This decrease is attributable to the lowering of the
equity return under formula rate contracts, as well as other adjustments and
true-ups related to contractual pricing. Capacity revenues from non-affiliates
in 1998 increased 4.1 percent compared to 1997.
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from year to year depending on
demand and the availability and cost of generating resources at each company.
These transactions did not have a significant impact on earnings.
Kilowatt-hour (KWH) sales for 1999 and the percent change by year were as
follows:
KWH Percent Change
-------------------------------------------
1999 1999 1998 1997
-------------------------------------------
(millions)
Residential 15,699 (0.6)% 10.2% (1.8)%
Commercial 12,314 3.4 5.1 3.9
Industrial 21,943 1.7 4.2 3.6
Other 201 2.3 8.3 (6.3)
-----------
Total retail 50,157 1.4 6.2 1.9
Sales for resale -
Non-affiliates 12,438 5.0 (3.2) 29.9
Affiliates 5,032 (15.8) (33.5) (12.6)
-----------
Total 67,627 0.5% (0.9)% 3.7%
- ------------------------------------------------------------------
The increases in 1999 and 1998 retail energy sales were primarily due to the
strength of business and economic conditions in the Company's service area. In
1998, residential energy sales experienced a 10.2 percent increase over the
prior year primarily as a result of hot weather in the second quarter, compared
to very mild weather in the second quarter of 1997. Assuming normal weather,
sales to retail customers are projected to grow approximately 2.9 percent
annually on average during 2000 through 2004.
Expenses
Total operating expenses of $2.5 billion for 1999 were down $13.4 million or 0.5
percent compared with 1998. This decrease was mainly due to a $15 million
decrease in fuel and purchased power costs and a $23 million decrease in
maintenance expense, offset by an increase in taxes other than income taxes of
$12 million.
Total operating expenses of $2.5 billion for 1998 were up $203 million or
8.8 percent compared with 1997. This increase was mainly due to a $107 million
increase in purchased power expenses, accompanied by a $58 million increase in
maintenance expense.
Fuel costs constitute the single largest expense for the Company. The mix of
fuel sources for generation of electricity is determined primarily by system
load, the unit cost of fuel consumed, and the availability of hydro and nuclear
generating units. The amount and sources of generation and the average cost of
II-52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
fuel per net KWH generated were as follows:
----------------------------
1999 1998 1997
----------------------------
Total generation
(billions of KWHs) 63 63 65
Sources of generation
(percent) --
Coal 72 72 72
Nuclear 20 18 20
Hydro 5 8 8
Oil & Gas 3 2 *
Average cost of fuel per net
KWH generated
(cents) -- 1.44 1.54 1.49
- ----------------------------------------------------------------
* Not meaningful because of minimal generation from fuel source.
Total fuel and purchased power costs of $1.1 billion in 1999 decreased $15
million (1 percent), while total energy sales increased 329 million kilowatt
hours (0.5 percent) compared with the amounts recorded in 1998. Continued
efforts to control energy costs helped lower the average cost of fuel per net
kilowatt hour generated in 1999.
Fuel and purchased power costs in 1998 increased $111 million (11 percent)
over 1997 due primarily to lower levels of nuclear and hydro generation, which
were replaced by the use of peaking units and purchased power.
Purchased power consists primarily of purchases from affiliates in the
Southern electric system. Purchased power transactions among the Company and its
affiliates will vary from period to period depending on demand, the
availability, and the variable production cost of generating resources at each
company.
The 7.5 percent decrease in maintenance expense in 1999 as compared to 1998
is primarily attributable to a decrease in distribution expenses. The 23.8
percent increase in maintenance expenses in 1998 is attributable to (i) an
increase in the maintenance of overhead lines, (ii) the write-off of obsolete
steam and nuclear generating plant inventory, and (iii) additional accruals to
partially replenish the natural disaster reserve.
Depreciation and amortization expense increased 2.6 percent in 1999 and
1998. These increases reflect additions to property, plant, and equipment.
Taxes other than income taxes increased $12 million (6.0 percent) in 1999 as
compared to 1998. This increase is attributable to increases in real and
personal property taxes and public utility license taxes.
Total net interest and other charges decreased $38 million (12.3 percent) in
1999. This decrease results primarily from a decrease in the amortization of
premiums on reacquired debt pursuant to an APSC order. Total net interest and
other charges increased $55.7 million (22 percent) in 1998 primarily due to an
increase in the amortization of premiums on reacquired debt, pursuant to an APSC
order. See Note 3 to the financial statements under "Retail Rate Adjustment
Procedures" for additional details.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plants with long economic lives. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations, such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors, including the ability of the Company to achieve energy sales
growth in a less regulated, more competitive environment.
The Company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
state of Alabama. Prices for electricity provided by the Company to retail
customers are set by the APSC under cost-based regulatory principles.
II-53
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. Traditionally, these factors have
included weather, competition, new short and long-term contracts with
neighboring utilities, energy conservation practiced by customers, the
elasticity of demand, and the rate of economic growth in the Company's
traditional service area.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and/or commercial customers and sell excess energy
generation to other utilities. Also, electricity sales for resale rates are
being driven down by wholesale transmission access and numerous potential new
energy suppliers, including power marketers and brokers. The Company is
aggressively working to maintain and expand its share of wholesale business in
the Southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry continues to
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Alabama, Florida, Georgia, and Mississippi, none have been enacted to date.
Enactment would require numerous issues to be resolved, including significant
ones relating to transmission pricing and recovery of any stranded investments.
The inability of the Company to recover its investments, including the
regulatory assets described in Note 1 to the financial statements, could have a
material adverse effect on the financial condition and results of operations.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, if the Company does not remain a low-cost producer and provide
quality service, then energy sales growth could be limited, and this could
significantly erode earnings.
On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued
its final rule on Regional Transmission Organizations (RTOs). The order
encourages utilities owning transmission systems to form RTOs on a voluntary
basis. To facilitate the development of RTOs, the FERC will convene regional
conferences for utilities, customers, and other members of the public to discuss
the formation of RTOs. In addition to participating in the regional conferences,
utilities owning transmission systems, including Southern Company, are required
to make a filing by October 15, 2000. The filing must contain either a proposal
for RTO participation or a description of the efforts made to participate in an
RTO, the reasons for non-participation, any obstacles to participation, and any
plans for further work toward participation. The RTOs that are proposed in the
filings should be operational by December 15, 2001. The Company is evaluating
this issue and formulating its response. The outcome of this matter cannot
presently be determined.
Rates to retail customers served by the Company are regulated by the APSC.
Rates for the Company can be adjusted periodically within certain limitations
based on earned retail rate of return compared with an allowed return. In June
1995, the APSC issued an order granting the Company's request for gradual
adjustments to move toward parity among customer classes. This order also calls
for a moratorium on any periodic retail rate increases (but not decreases) until
2001.
In December 1995, the APSC issued an order authorizing the Company to reduce
balance sheet items -- such as plant and deferred charges -- at any time the
Company's actual base rate revenues exceed the budgeted revenues. In April 1997,
the APSC issued an additional order authorizing the Company to reduce balance
sheet asset items. This order authorizes the reduction of such items up to an
amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by the Company. See Note 3 to
the financial statements for
II-54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
information about this and other matters.
The Company is involved in various matters being litigated. See Note 3 to
the financial statements for information regarding material issues that could
possibly affect future earnings.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry --
including the Company -- regarding the recognition, measurement, and
classification in the financial statements of decommissioning costs for nuclear
generating facilities. In response to these questions, the Financial Accounting
Standards Board (FASB) has decided to review the accounting for liabilities
related to the retirement of long-lived assets, including nuclear
decommissioning. If the FASB issues new accounting rules, the estimated costs of
retiring the Company's nuclear and other facilities may be required to be
recorded as liabilities in the Balance Sheets. Also, the annual provisions for
such costs could change. Because of the Company's current ability to recover
asset retirement costs through rates, these changes would not have a significant
adverse effect on results of operations. See Note 1 to the financial statements
under "Depreciation and Nuclear Decommissioning" for additional information.
The Company is 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 the Company's operations is no longer subject to these provisions,
the Company would be required to write off related regulatory assets and
liabilities that are not specifically recoverable, and determine if any other
assets have been impaired. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities" for additional information.
New Accounting Standard
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 1, 2001. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
Year 2000 Challenge
The work undertaken by the Company to prepare critical computer systems and
other date sensitive devices to function correctly in the Year 2000 was
successful. There were no material incidents reported and no disruption of
electric service within the service area. There were no reports of significant
events regarding third parties that impacted revenues or expenses.
For the Company, original projected total costs for Year 2000 readiness,
including the Company's share of costs of Southern Nuclear Operating Company,
were approximately $36 million; revised projected costs are $33 million. These
costs include labor necessary to identify, test, and renovate affected devices
and systems, and costs for fulfilling reporting requirements to state and
federal agencies. From its inception through December 31, 1999, the Year 2000
program costs, recognized primarily as expense, amounted to $32 million.
Exposure to Market Risk
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates, commodity fuel prices, and prices of electricity.
To mitigate residual risks relative to movements in electricity prices, the
Company enters into fixed price contracts for the purchase and sale of
electricity through the wholesale electricity market. Realized gains and losses
are recognized in the income statement as incurred. At December 31, 1999,
exposure from these activities was not material to the Company's financial
position, results of operations, or cash flows. Also, based on the Company's
overall interest rate exposure at December 31, 1999, a near-term 100 basis point
change in interest rates would not materially affect the financial statements.
II-55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
FINANCIAL CONDITION
Overview
The Company's financial condition remained stable in 1999. This stability is the
continuation over recent years of growth in retail energy sales and cost control
measures combined with a significant lowering of the cost of capital, achieved
through the refinancing and/or redemption of higher-cost long-term debt and
preferred stock.
The Company had gross property additions of $809 million in 1999. The
majority of funds needed for gross property additions for the last several years
have been provided from operating activities, principally from earnings and
non-cash charges to income such as depreciation and deferred income taxes. The
Statements of Cash Flows provide additional details.
Capital Structure
The Company's ratio of common equity to total capitalization -- including
short-term debt -- was 42.4 percent in 1999 and 1998, and 44.7 percent in 1997.
During 1999, the Company issued $650 million of senior notes, the proceeds
of which were used primarily to redeem first mortgage bonds and repay short-term
indebtedness, and the Company redeemed $50 million of preferred stock.
Additionally, in February 1999, Alabama Power Capital Trust III, of which
the Company owns all of the common securities, issued $50 million of auction
rate mandatorily redeemable preferred securities. See Note 9 to the financial
statements for additional information.
Capital Requirements
Capital expenditures are estimated to be $831 million for 2000, $743 million for
2001, and $860 million for 2002. See Note 4 to the financial statements for
additional details.
Actual construction costs may vary from estimates because of changes in such
factors as: business conditions; environmental regulations; nuclear plant
regulations; load projections; the cost and efficiency of construction labor,
equipment, and materials; and the cost of capital. In addition, there can be no
assurance that costs related to capital expenditures will be fully recovered.
Other Capital Requirements
In addition to the funds needed for the capital budget, approximately $100
million will be required by the end of 2000 for maturities of first mortgage
bonds. Also, the Company will continue to retire higher-cost debt and preferred
stock and replace these obligations with lower-cost capital if market conditions
permit.
Environmental Matters
On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil
action against the Company in the U. S. District Court. 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 the Company's Plants Miller, Barry and Gorgas. The civil action requests
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 Company relating to these
specific facilities, as well as Plants Greene County and Gaston. In early 2000,
the EPA filed a motion to amend its complaint to add the violations alleged in
its notice of violation. The complaint and the notice of violation are similar
to those brought against and issued to several other electric utilities. The
complaint and the notice of violation allege that the Company failed to secure
necessary permits or install additional pollution control equipment when
performing maintenance and construction at coal burning plants constructed or
under construction prior to 1978. The Company believes that it complied with
applicable laws and EPA regulations and interpretations in effect at the time
the work in question took place. The Clean Air Act authorizes civil penalties
of up to $27,500 per day per violation at each generating unit. Prior to
January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this
matter could require substantial capital expenditures that cannot be determined
at this time and possibly require payment of substantial penalties. This could
affect future results of operations, cash flows, and possibly financial
condition if such costs are not recovered through regulated rates.
II-56
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
In November 1990, the Clean Air Act was signed into law. Title IV of the
Clean Air Act -- the acid rain compliance provision of the law - significantly
affected the integrated Southeast utilities of Southern Company, including
Alabama Power. Specific reductions in sulfur dioxide and nitrogen oxide
emissions from fossil-fired generating plants are required in two phases. Phase
I compliance began in 1995 and initially affected 28 generating units of
Southern Company. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $25
million for the Company.
For Phase II sulfur dioxide compliance, the Company currently uses emission
allowances and increased fuel switching, and/or the installation of flue gas
desulfurization equipment at selected plants. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired units
as necessary to meet Phase II limits. Compliance for Phase II increased total
estimated construction expenditures in 1999 by approximately $65 million.
The State of Alabama and the EPA are currently evaluating draft plans to
reach attainment with the one hour standard for ozone in the Birmingham
non-attainment area. Provisions of that plan would require nitrogen oxide
reductions at certain Company facilities by May 2003. The Company estimates the
capital cost to comply with the plan to be approximately $138 million, all of
which remains to be spent.
A significant portion of costs related to the acid rain and ozone
non-attainment provision of the Clean Air Act is expected to be recovered
through existing ratemaking provisions. However, there can be no assurance that
all Clean Air Act costs will be recovered.
In July 1997, the EPA revised the national ambient air quality standards for
ozone and particulate matter. This revision makes the standards significantly
more stringent. In September 1998, the EPA issued the final regional nitrogen
oxide reduction rule to the states for implementation. The final rule affects 22
states including Alabama. The EPA's July 1997 standards and the September 1998
rule are being challenged in the courts by several states and industry groups.
Implementation of the final state rules for these three initiatives could
require substantial further reductions in nitrogen oxide and sulfur dioxide
emissions from fossil-fired generating facilities and other industries in these
states. Additional compliance costs and capital expenditures resulting from the
implementation of these rules and standards cannot be determined until the
results of legal challenges are known, and the states have adopted their final
rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: additional controls for hazardous
air pollutant emissions and control strategies to reduce regional haze. The
impact of any new standards will depend on the development and implementation of
applicable regulations.
In addition to rules and pending changes to rules under the Clean Air Act,
the Company must comply with other environmental laws and regulations including
water discharge permits, solid and hazardous waste disposal, use of materials
controlled by the Toxic Substances Control Act, and reporting requirements under
the Comprehensive Environmental Response, Compensation, and Liability Act. Under
these various requirements and regulations, the Company could incur costs to
implement water discharge requirements, clean up properties containing hazardous
substances, or replace equipment rendered useless by changing requirements. The
exact impact of any requirements would depend on specific regulatory actions and
cannot be determined at this time.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of the Company's operations. The full impact of any such changes
cannot be determined at this time.
II-57
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Alabama Power Company 1999 Annual Report
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation -- if
any -- will depend on the subsequent development and implementation of
applicable regulations. In addition, the potential exists for liability as the
result of lawsuits alleging damages caused by electromagnetic fields.
Sources of Capital
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. The Company has no restrictions on the
amounts of unsecured indebtedness it may incur. However, to issue additional
first mortgage bonds and preferred stock, the Company must comply with certain
earnings coverage requirements designated in its mortgage indenture and
corporate charter. The Company's coverages are at a level that would permit any
necessary amount of security sales at current interest and dividend rates.
As required by the Nuclear Regulatory Commission and as ordered by the APSC,
the Company has established external trust funds for nuclear decommissioning
costs. In 1994, the Company also established an external trust fund for
postretirement benefits as ordered by the APSC. The cumulative effect of funding
these items over a long period will diminish internally funded capital and may
require capital from other sources. For additional information concerning
nuclear decommissioning costs, see Note 1 to the financial statements under
"Depreciation and Nuclear Decommissioning."
Cautionary Statement Regarding Forward-Looking
Information
The Company's 1999 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information. 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 Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by Southern Company; state and federal rate regulation; changes in or
application of environmental and other laws and regulations to which the Company
is subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; and other
factors discussed in the reports--including Form 10-K--filed from time to time
by the Company with the Securities and Exchange Commission.
II-58
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Alabama Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Retail sales $2,811,117 $2,780,677 $2,510,809
Sales for resale --
Non-affiliates 415,377 448,973 431,023
Affiliates 92,439 103,562 161,795
Other revenues 66,541 53,161 45,484
- ------------------------------------------------------------------------------------------------------------------------
Total operating revenues 3,385,474 3,386,373 3,149,111
- ------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 855,632 900,309 896,014
Purchased power --
Non-affiliates 93,204 92,998 41,795
Affiliates 180,563 150,897 95,538
Other 531,696 527,954 510,203
Maintenance 277,724 300,383 242,691
Depreciation and amortization 347,574 338,822 330,377
Taxes other than income taxes 204,645 193,049 185,062
- ------------------------------------------------------------------------------------------------------------------------
Total operating expenses 2,491,038 2,504,412 2,301,680
- ------------------------------------------------------------------------------------------------------------------------
Operating Income 894,436 881,961 847,431
Other Income (Expense):
Interest income 55,896 68,553 37,844
Equity in earnings of unconsolidated subsidiaries (Note 6) 2,650 5,271 5,250
Other, net (24,861) (37,050) (39,506)
- ------------------------------------------------------------------------------------------------------------------------
Earnings Before Interest and Income Taxes 928,121 918,735 851,019
- ------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 191,895 192,426 167,172
Interest on notes payable 9,865 11,012 22,787
Amortization of debt discount, premium and expense, net (Note 3) 11,159 42,494 9,645
Other interest charges 32,316 40,008 31,250
Distributions on preferred securities of subsidiary (Note 9) 24,662 22,354 21,763
- ------------------------------------------------------------------------------------------------------------------------
Total interest charges and other, net 269,897 308,294 252,617
- ------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 658,224 610,441 598,402
Income taxes (Note 8) 241,880 218,575 207,877
- ------------------------------------------------------------------------------------------------------------------------
Net Income 416,344 391,866 390,525
Dividends on Preferred Stock 16,464 14,643 14,586
- ------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 399,880 $ 377,223 $ 375,939
========================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-59
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Alabama Power Company 1999 Annual Report
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 416,344 $ 391,866 $ 390,525
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 403,332 425,167 394,572
Deferred income taxes and investment tax credits, net 29,039 79,430 (12,429)
Other, net (12,661) (66,739) (11,353)
Changes in certain current assets and liabilities --
Receivables, net 33,509 49,747 (30,268)
Fossil fuel stock (1,344) (9,052) 7,518
Materials and supplies (17,968) 11,932 6,191
Accounts payable (38,556) 26,583 (9,745)
Energy cost recovery, retail (97,869) (95,427) 7,108
Other 5,930 (9,803) 13,318
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 719,756 803,704 755,437
- -------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (809,044) (610,132) (451,167)
Other (72,218) (52,940) (51,791)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (881,262) (663,072) (502,958)
- -------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 96,824 (306,882) (57,971)
Proceeds --
Other long-term debt 751,650 1,462,990 258,800
Preferred securities 50,000 - 200,000
Preferred stock - 200,000 -
Capital contributions from parent company 204,347 30,000 -
Redemptions --
First mortgage bonds (470,000) (771,108) (74,951)
Other long-term debt (104,836) (107,776) (951)
Preferred stock (50,000) (88,000) (184,888)
Payment of preferred stock dividends (15,788) (15,596) (22,524)
Payment of common stock dividends (399,600) (367,100) (339,600)
Other (15,864) (66,869) (16,024)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 46,733 (30,341) (238,109)
- -------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (114,773) 110,291 14,370
Cash and Cash Equivalents at Beginning of Period 134,248 23,957 9,587
- -------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 19,475 $ 134,248 $ 23,957
=========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $229,305 $234,360 $209,919
Income taxes (net of refunds) 170,121 188,942 207,653
- -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
II-60
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Alabama Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------
Assets 1999 1998
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 19,475 $ 134,248
Receivables --
Customer accounts receivable 265,900 272,872
Unrecovered retail fuel clause revenue 168,627 70,758
Other accounts and notes receivable 42,137 32,394
Affiliated companies 40,083 39,981
Accumulated provision for uncollectible accounts (4,117) (1,855)
Refundable income taxes 17,997 52,117
Fossil fuel stock, at average cost 84,582 83,238
Materials and supplies, at average cost 167,637 149,669
Other 46,011 45,550
- -----------------------------------------------------------------------------------------------------------------
Total current assets 848,332 878,972
- -----------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service (Note 1) 11,783,078 11,352,838
Less accumulated provision for depreciation 4,901,384 4,666,513
- -----------------------------------------------------------------------------------------------------------------
6,881,694 6,686,325
Nuclear fuel, at amortized cost 106,836 95,575
Construction work in progress 715,153 525,359
- -----------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment 7,703,683 7,307,259
- -----------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries (Note 6) 34,891 34,298
Nuclear decommissioning trusts (Note 1) 286,653 232,183
Other 12,156 12,915
- -----------------------------------------------------------------------------------------------------------------
Total other property and investments 333,700 279,396
- -----------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 330,405 362,953
Prepaid pension costs 213,971 169,393
Debt expense, being amortized 9,563 8,602
Premium on reacquired debt, being amortized 83,895 83,440
Department of Energy assessments (Note 1) 27,685 31,088
Other 97,470 104,595
- -----------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 762,989 760,071
- -----------------------------------------------------------------------------------------------------------------
Total Assets $9,648,704 $9,225,698
=================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-61
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Alabama Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity 1999 1998
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Liabilities:
Securities due within one year (Note 11) $ 100,943 $ 521,209
Notes payable 96,824 -
Accounts payable --
Affiliated 91,315 79,844
Other 140,842 188,074
Customer deposits 31,704 29,235
Taxes accrued --
Income taxes 100,569 82,219
Other 18,295 17,559
Interest accrued 26,365 38,166
Vacation pay accrued 30,112 28,390
Other 84,267 79,095
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 721,236 1,063,791
- ------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements) 3,190,378 2,646,566
- ------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 1,240,344 1,202,971
Deferred credits related to income taxes (Note 8) 265,102 315,735
Accumulated deferred investment tax credits 260,367 271,611
Employee benefits provisions 82,298 81,115
Prepaid capacity revenues (Note 7) 79,703 96,080
Other 155,901 149,250
- ------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 2,083,715 2,116,762
- ------------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes (See accompanying statements) (Note 9) 347,000 297,000
- ------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock (See accompanying statements) 317,512 317,512
- ------------------------------------------------------------------------------------------------------------------
Common stockholder's equity (See accompanying statements) 2,988,863 2,784,067
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $9,648,704 $9,225,698
==================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-62
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Alabama Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
-------- --------------
<S> <C> <C> <C> <C> <C>
August 1, 1999 6.375% $ - $ 170,000
March 1, 2000 6.00% 100,000 100,000
January 1, 2003 7.00% - 125,000
February 1, 2003 6.75% - 175,000
2023 through 2024 7.30% - 9.00% 500,000 500,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 600,000 1,070,000
- ----------------------------------------------------------------------------------------------------------------------------------
Senior notes --
5.35% due November 15, 2003 156,200 156,200
7.125% due August 15, 2004 250,000 -
5.49% due November 1, 2005 225,000 225,000
7.125% due October 1, 2007 200,000 -
5.375% due October 1, 2008 160,000 160,000
6.25% to 7.125% due 2010-2048 1,207,622 1,008,800
- ----------------------------------------------------------------------------------------------------------------------------------
Total senior notes 2,198,822 1,550,000
- ----------------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
5.50% to 6.50% due 2023-2024 24,400 126,050
Variable rates (4.75% to 4.85% at 1/1/00)
due 2015-2017 89,800 89,800
Non-collateralized:
7.25% due 2003 - 1,000
Variable rates (3.50% to 6.03% at 1/1/00)
due 2021-2028 425,940 324,290
- ----------------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 540,140 541,140
- ----------------------------------------------------------------------------------------------------------------------------------
Capitalized lease obligations 5,111 6,119
- ----------------------------------------------------------------------------------------------------------------------------------
Unamortized debt premium (discount), net (52,752) (49,484)
- ----------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $215.9 million) 3,291,321 3,117,775
Less amount due within one year 100,943 471,209
- ----------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year $3,190,378 $2,646,566 46.6% 43.8%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-63
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued) At December 31, 1999 and 1998
Alabama Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Company Obligated Mandatorily
Redeemable Preferred Securities:
$25 liquidation value --
7.375% $ 97,000 $97,000
7.60% 200,000 200,000
Auction rate (6.42% at 1/1/00) 50,000 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $25.6 million) 347,000 297,000 5.1 4.9
- ----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par or stated value --
4.20% to 4.92% 47,512 47,512
$25 par or stated value --
5.20% to 5.83% 200,000 200,000
Auction rates -- at 1/1/00
4.22% to 4.50% 70,000 120,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $15.9 million) 317,512 367,512
Less amount due within one year - 50,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 317,512 317,512 4.6 5.2
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity:
Common stock, par value $40 per share --
Authorized - 6,000,000 shares
Outstanding - 5,608,955 shares in 1999 and 1998
Par value 224,358 224,358
Paid-in capital 1,538,992 1,334,645
Premium on Preferred Stock 99 99
Retained earnings 1,225,414 1,224,965
- ----------------------------------------------------------------------------------------------------------------------------------
Total common stockholder's equity 2,988,863 2,784,067 43.7 46.1
- ----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $6,843,753 $6,045,145 100.0% 100.0%
==================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-64
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
Alabama Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
Premium on
Common Paid-In Preferred Retained
Stock Capital Stock Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $224,358 $1,304,645 $146 $1,185,128 $2,714,277
Net income after dividends on preferred stock - - - 375,939 375,939
Cash dividends on common stock - - - (339,600) (339,600)
Other - - (47) - (47)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 224,358 1,304,645 99 1,221,467 2,750,569
Net income after dividends on preferred stock - - - 377,223 377,223
Capital contributions from parent company - 30,000 - - 30,000
Cash dividends on common stock - - - (367,100) (367,100)
Other - - - (6,625) (6,625)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 224,358 1,334,645 99 1,224,965 2,784,067
Net income after dividends on preferred stock - - - 399,880 399,880
Capital contributions from parent company - 204,347 - - 204,347
Cash dividends on common stock - - - (399,600) (399,600)
Other - - - 169 169
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $224,358 $1,538,992 $99 $1,225,414 $2,988,863
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-65
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Alabama Power Company 1999 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Alabama Power Company (the Company) is a wholly owned subsidiary of Southern
Company, which is the parent company of five integrated Southeast utilities,
Southern Company Services (SCS), Southern Communications Services (Southern
LINC), Southern Company Energy Solutions, Southern Energy, Inc. (Southern
Energy), Southern Nuclear Operating Company (Southern Nuclear), and other direct
and indirect subsidiaries. The integrated Southeast utilities --Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company,
and Savannah Electric and Power Company-- provide electric service in four
states. Contracts among the integrated Southeast utilities - related to
jointly-owned generating facilities, interconnecting transmission lines, and the
exchange of electric power -- are regulated by the Federal Energy Regulatory
Commission (FERC) and/or the Securities and Exchange Commission (SEC). SCS
provides, at cost, specialized services to Southern Company and its subsidiary
companies. Southern LINC provides digital wireless communications services to
the integrated Southeast utilities and also markets these services to the public
within the Southeast. Southern Company Energy Solutions develops new business
opportunities related to energy products and services. Southern Nuclear provides
services to Southern Company's nuclear power plants. Southern Energy acquires,
develops, builds, owns, and operates power production and delivery facilities
and provides a broad range of energy-related services to utilities and
industrial companies in selected countries around the world. Southern Energy
businesses include independent power projects, integrated utilities, a
distribution company, and energy trading and marketing businesses outside the
southeastern United States.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. The Company is also
subject to regulation by the FERC and the Alabama Public Service Commission
(APSC). The Company follows generally accepted accounting principles (GAAP) and
complies with the accounting policies and practices prescribed by its respective
regulatory commissions. The preparation of financial statements in conformity
with GAAP requires the use of estimates, and the actual results may differ from
those estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Related-Party Transactions
The Company has an agreement with SCS under which the following services are
rendered to the Company at cost: general and design engineering, purchasing,
accounting and statistical, finance and treasury, tax, information resources,
marketing, auditing, insurance and pension, human resources, systems and
procedures, and other services with respect to business and operations and power
pool transactions. Costs for these services amounted to $218 million, $201
million, and $154 million during 1999, 1998, and 1997, respectively.
The Company also has an agreement with Southern Nuclear to operate Plant
Farley and provide the following nuclear-related services at cost: general
executive and advisory services; general operations, management and technical
services; administrative services including procurement, accounting,
statistical, and employee relations; and other services with respect to business
and operations. Costs for these services amounted to $135 million, $137 million,
and $117 million during 1999, 1998, and 1997, respectively.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process.
II-66
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
Regulatory assets and (liabilities) reflected in the Balance Sheets at
December 31 relate to the following:
1999 1998
-----------------------
(in millions)
Deferred income tax charges $ 330 $ 363
Deferred income tax credits (265) (316)
Premium on reacquired debt 84 83
Department of Energy assessments 28 31
Vacation pay 30 28
Natural disaster reserve (19) (19)
Other, net 59 51
- ----------------------------------------------------------------
Total $ 247 $ 221
================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of FASB Statement No. 71, the Company would be required to
write off related regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair values.
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Alabama, and to wholesale customers in the southeast. The
Company accrues revenues for services rendered but unbilled at the end of each
fiscal period. Fuel costs are expensed as the fuel is used. The Company's
electric rates include provisions to adjust billings for fluctuations in fuel
and the energy component of purchased power costs. Revenues are adjusted for
differences between recoverable fuel costs and amounts actually recovered in
current regulated rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continue to average less than 1 percent of revenues.
Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $63
million in 1999, $59 million in 1998, and $68 million in 1997. The Company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of
spent fuel in January 1998 as required by the contract, and the Company is
pursuing legal remedies against the government for breach of contract.
Sufficient storage capacity currently is available to permit operation into 2009
and 2013 at Plant Farley units 1 and 2, respectively. Planning for additional
on-site spent fuel storage capacity at Plant Farley is in progress, with the
intent to place additional on-site spent fuel storage capacity in operation as
early as 2005. In addition, through Southern Nuclear, the Company is a member of
Private Fuel Storage, LLC, a joint utility effort to develop a private spent
fuel storage facility for temporary storage of spent nuclear fuel. This facility
is planned to begin operation as early as the year 2003.
Also, the Energy Policy Act of 1992 required the establishment of a Uranium
Enrichment Decontamination and Decommissioning Fund, which is funded in part by
a special assessment on utilities with nuclear plants. This assessment will be
paid over a 15-year period, which began in 1993. This fund will be used by the
DOE for the decontamination and decommissioning of its nuclear fuel enrichment
facilities. The law provides that utilities will recover these payments in the
same manner as any other fuel expense. The Company estimates its remaining
liability at December 31, 1999, under this law to be approximately $28 million.
This obligation is recognized in the accompanying Balance Sheets.
Depreciation and Nuclear Decommissioning
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
3.2 percent in 1999 and 1998, and 3.3 percent in 1997. When property subject to
depreciation is retired or otherwise disposed of in the normal course of
business, its cost -- together with the cost of removal, less salvage -- is
charged to the accumulated provision for depreciation. Minor items of property
included in the original cost of the plant are retired when the related property
unit is retired. Depreciation expense includes an amount for the expected cost
of decommissioning nuclear facilities and removal of other facilities.
Nuclear Regulatory Commission (NRC) regulations require all licensees
operating commercial nuclear power reactors to establish a plan for providing,
with reasonable assurance, funds for decommissioning. The Company has
II-67
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
established external trust funds to comply with the NRC's regulations. Amounts
previously recorded in internal reserves are being transferred into the external
trust funds over periods approved by the APSC. The NRC's minimum external
funding requirements are based on a generic estimate of the cost to decommission
the radioactive portions of a nuclear unit based on the size and type of
reactor. The Company has filed plans with the NRC to ensure that -- over time --
the deposits and earnings of the external trust funds will provide the minimum
funding amounts prescribed by the NRC.
Site study cost is the estimate to decommission the facility as of the site
study year, and ultimate cost is the estimate to decommission the facility as of
retirement date. The estimated costs of decommissioning -- both site study costs
and ultimate costs -- based on the most current study for Plant Farley were as
follows:
Site study basis (year) 1998
Decommissioning periods:
Beginning year 2017
Completion year 2031
-------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $ 629
Non-radiated structures 60
-------------------------------------------------------------
Total $ 689
=============================================================
(in millions)
Ultimate costs:
Radiated structures $ 1,868
Non-radiated structures 178
-------------------------------------------------------------
Total $ 2,046
=============================================================
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, or changes in the assumptions used
in making estimates.
Annual provisions for nuclear decommissioning are based on an annuity method
as approved by the APSC. The amount expensed in 1999 and fund balances as of
December 31, 1999 were:
(in millions)
Amount expensed in 1999 $ 18
-------------------------------------------------------------
Accumulated provisions:
External trust funds, at fair value $ 287
Internal reserves 40
-------------------------------------------------------------
Total $ 327
=============================================================
All of the Company's decommissioning costs are approved for ratemaking.
Significant assumptions include an estimated inflation rate of 4.5 percent and
an estimated trust earnings rate of 7.0 percent. The Company expects the APSC to
periodically review and adjust, if necessary, the amounts collected in rates for
the anticipated cost of decommissioning.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes
and provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property.
Allowance For Funds Used During Construction
(AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The composite rate used to determine the amount of
allowance was 8.8 percent in 1999, 9.0 percent in 1998, and 5.8 percent in 1997.
AFUDC, net of income tax, as a percent of net income after dividends on
preferred stock was 4.7 percent in 1999, 1.8 percent in 1998, and 0.8 percent in
1997.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Original cost
includes: materials; labor; minor items of property; appropriate administrative
and general costs; payroll-related costs such as taxes, pensions, and other
II-68
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
benefits; and the estimated cost of funds used during construction. The cost of
maintenance, repairs and replacement of minor items of property is charged to
maintenance expense. The cost of replacements of property (exclusive of minor
items of property) is capitalized.
Financial Instruments
The Company's financial instruments for which the carrying amount did not
approximate fair value at December 31 are as follows:
Carrying Fair
Amount Value
-------------------------
(in millions)
Long-term debt:
At December 31, 1999 $3,286 $3,045
At December 31, 1998 3,112 3,195
Preferred Securities:
At December 31, 1999 347 299
At December 31, 1998 297 307
--------------------------------------------------------------
The fair value for long-term debt and preferred securities was based on
either closing market prices or closing prices of comparable instruments.
Cash and Cash Equivalents
For purposes of the financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Materials and Supplies
Generally, materials and supplies include the cost of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Natural Disaster Reserve
In September 1994, in response to a request by the Company, the APSC issued an
order allowing the Company to establish a Natural Disaster Reserve. Regulatory
treatment allows the Company to accrue $250 thousand per month, until the
maximum accumulated provision of $32 million is attained. However, in December
1995, the APSC approved higher accruals to restore the reserve to its authorized
level whenever the balance in the reserve declines below $22.4 million. At
December 31, 1999, the reserve balance was $19 million.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed, pension plans that cover
substantially all employees. The Company provides certain medical care and life
insurance benefits for retired employees. Substantially all employees may become
eligible for such benefits when they retire. The Company funds trusts to the
extent deductible under federal income tax regulations or to the extent required
by the APSC and FERC. The measurement date for plan assets and obligations is
September 30 of each year.
The weighted average rates assumed in the actuarial calculations for both
the pension and postretirement benefit plans were:
1999 1998
- ---------------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00 4.25
Long-term return on plan assets 8.50 8.50
- ---------------------------------------------------------------
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $868 $813
Service cost 23 22
Interest cost 57 59
Benefits paid (51) (51)
Actuarial (gain) loss and
employee transfers (24) 25
- ---------------------------------------------------------------
Balance at end of year $873 $868
===============================================================
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $1,461 $1,521
Actual return on plan assets 245 9
Benefits paid (51) (51)
Employee transfers (8) (18)
- ---------------------------------------------------------------
Balance at end of year $1,647 $1,461
===============================================================
II-69
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
The accrued pension costs recognized in the Balance Sheets were as
follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $ 774 $ 593
Unrecognized transition obligation (25) (30)
Unrecognized prior service cost 36 39
Unrecognized net actuarial gain (571) (433)
- ---------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 214 $ 169
===============================================================
Components of the pension plans' net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Service cost $ 23 $ 22 $ 20
Interest cost 57 59 58
Expected return on plan assets (109) (102) (95)
Recognized net actuarial gain (14) (16) (13)
Net amortization (2) (2) (2)
- ---------------------------------------------------------------
Net pension income $ (45) $ (39) $(32)
===============================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $278 $252
Service cost 5 5
Interest cost 18 19
Benefits paid (10) (12)
Actuarial (gain) loss and
employee transfers (27) 14
- ---------------------------------------------------------------
Balance at end of year $264 $278
===============================================================
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in millions)
Balance at beginning of year $137 $125
Actual return on plan assets 18 4
Employer contributions 16 20
Benefits paid (10) (12)
- ---------------------------------------------------------------
Balance at end of year $161 $137
===============================================================
The accrued postretirement costs recognized in the Balance Sheets were
as follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $(103) $(141)
Unrecognized transition obligation 53 57
Unrecognized net actuarial
(gain) loss (12) 22
Fourth quarter contributions 8 8
- ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $ (54) $ (54)
===============================================================
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Service cost $ 5 $ 5 $ 4
Interest cost 18 18 18
Expected return on plan assets (11) (9) (7)
Net amortization 4 4 4
- ---------------------------------------------------------------
Net postretirement cost $ 16 $ 18 $ 19
===============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.50 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows:
1 Percent 1 Percent
Increase Decrease
- ---------------------------------------------------------------
(in millions)
Benefit obligation $ 17 $ (15)
Service and interest costs 1 (1)
===============================================================
Work Force Reduction Programs
The Company has incurred additional costs for work force reduction programs. The
costs related to these programs were $5.6 million, $19.4 million and $33.0
million for the years 1999, 1998 and 1997, respectively. In addition, certain
costs of these programs were deferred and are being amortized in accordance with
regulatory treatment. The unamortized balance of these costs was $1.2 million at
December 31, 1999.
II-70
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
3. CONTINGENCIES AND REGULATORY
MATTERS
Lake Martin Litigation
On November 30, 1998, total judgments of nearly $53 million were entered in
favor of five plaintiffs against the Company and two large textile
manufacturers. The plaintiffs alleged that the manufacturers had discharged
certain polluting substances into a stream that empties into Lake Martin, a
hydroelectric reservoir owned by the Company, and that such discharges
had reduced the value of the plaintiffs' residential lots on Lake Martin. Of the
total amount of the judgments, $155 thousand was compensatory damages and the
remainder was punitive damages. The damages were assessed against all three
defendants jointly. The Company has appealed these judgments to the Supreme
Court of Alabama. While the Company believes that these judgments should be
reversed or set aside, the final outcome of this matter cannot now be
determined.
Additional actions have been filed by other landowners in the same
subdivision on Lake Martin against the same defendants, including the Company.
The plaintiffs assert substantially the same allegations as in the current
proceeding being appealed. The final outcome of these actions cannot now be
determined.
Environmental Protection Agency Litigation
On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil
action against the Company in the U. S. District Court. The complaint alleges
violations of the prevention of significant deterioration and new source review
provision of the Clean Air Act with respect to coal-fired generating facilities
at the Company's Plants Miller, Barry and Gorgas. The civil action requests
penalties and injunctive relief, including an order requiring the installation
of the best available control technology at the affected units beginning at the
point of the alleged violations. The EPA concurrently issued a notice of
violation to the Company relating to these specific facilities, as well as
Plants Greene County and Gaston. In early 2000, the EPA filed a motion to
amend its complaint to add the violations alleged in its notice of violation.
The complaint and the notice of violation are similar to those brought against
and issued to several other electric utilities. The complaint and the notice of
violation allege that the Company failed to secure necessary permits or install
additional pollution control equipment when performing maintenance and
construction at coal burning plants constructed or under construction prior to
1978. The Company 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. The Clean Air Act authorizes civil penalties of up to $27,500 per day per
violation at each generating unit. Prior to January 30, 1997, the penalty was
$25,000 per day. An adverse outcome of this matter could require substantial
capital expenditures that cannot be determined at this time and possibly require
payment of substantial penalties. This could affect future results of
operations, cash flows, and possibly financial condition if such costs are not
recovered through regulated rates.
Retail Rate Adjustment Procedures
In November 1982, the APSC adopted rates that provide for periodic adjustments
based upon the Company's earned return on end-of-period retail common equity.
The rates also provide for adjustments to recognize the placing of new
generating facilities in retail service. Both increases and decreases have been
placed into effect since the adoption of these rates. The rate adjustment
procedures allow a return on common equity range of 13.0 percent to 14.5 percent
and limit increases or decreases in rates to 4 percent in any calendar year.
In June 1995, the APSC issued a rate order granting the Company's request
for gradual adjustments to move toward parity among customer classes. This order
also calls for a moratorium on any periodic retail rate increases (but not
decreases) until July 2001.
In December 1995, the APSC issued an order authorizing the Company to reduce
balance sheet items -- such as plant and deferred charges -- at any time the
Company's actual base rate revenues exceed the budgeted revenues. In April 1997,
the APSC issued an additional order authorizing the Company to reduce balance
sheet asset items. This order authorizes the reduction of such items up to an
amount equal to five times the total estimated annual revenue reduction
resulting from future rate reductions initiated by the Company. In 1998, the
Company - in accordance with the 1995 rate order - recorded $33 million of
additional amortization of premium on reacquired debt. The Company did not
record any additional amounts in 1999 or 1997.
II-71
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
The Company's ratemaking procedures will remain in effect until the APSC
votes to modify or discontinue them.
4. CAPITAL BUDGET
The Company's capital expenditures are currently estimated to total $831 million
in 2000, $743 million in 2001, and $860 million in 2002. Some of the more
significant items included in the Company's capital budget are as follows:
(i) The Company is replacing all six steam generators at Plant Farley. The
estimated remaining costs associated with this project, which will be
completed in 2001, amount to $100 million.
(ii) The Company is also constructing and installing 1,075 megawatts of capacity
and associated substation facilities at Plant Barry. Half of the capacity
is scheduled to go in service in 2000, with the remainder going in service
in 2001. The remaining projected expenditures related to these facilities
are $181 million.
(iii)Cogeneration facilities, with a capacity of 200 megawatts, are being
constructed in Theodore, Alabama, and will go in service in 2001. The
estimated remaining costs associated with this project total $81 million.
(iv) The capital budget reflects $472 million related to projected generation
capacity scheduled to be placed into service in 2003 and beyond.
In addition to the above items, significant construction will continue
related to transmission and distribution facilities and the upgrading of
generating plants.
The capital budget is subject to periodic review and revision, and actual
capital costs incurred may vary from estimates because of changes in such
factors as: business conditions; environmental regulations; nuclear plant
regulations; load projections; the cost and efficiency of construction labor,
equipment, and materials; and the cost of capital. In addition, there can be no
assurance that costs related to capital expenditures will be fully recovered.
5. FINANCING AND COMMITMENTS
General
To the extent possible, the Company's construction program is expected to be
financed primarily from internal sources. Short-term debt is often utilized and
the amounts available are discussed below. The Company may issue additional
long-term debt and preferred securities for debt maturities, redeeming
higher-cost securities, and meeting additional capital requirements.
Financing
The ability of the Company to finance its capital budget depends on the amount
of funds generated internally and the funds it can raise by external financing.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. The Company has no restrictions on the
amounts of unsecured indebtedness it may incur. However, to issue additional
first mortgage bonds and preferred stock, the Company must comply with certain
earnings coverage requirements designated in its mortgage indenture and
corporate charter. The most restrictive of these provisions requires, for the
issuance of additional first mortgage bonds, that before-income-tax earnings, as
defined, cover pro forma annual interest charges on outstanding first mortgage
bonds at least twice; and for the issuance of additional preferred stock, that
gross income available for interest cover pro forma annual interest charges and
preferred stock dividends at least one and one-half times. The Company's
coverages are at a level that would permit any necessary amount of security
sales at current interest and dividend rates.
Bank Credit Arrangements
The Company maintains committed lines of credit in the amount of $907 million
(including $418 million of such lines which are dedicated to funding purchase
obligations relating to variable rate pollution control bonds). Of these lines,
$517 million expire at various times during 2000 and $390 million expire in
2004. In certain cases, such lines require payment of a commitment fee based on
the unused portion of the commitment or the maintenance of compensating balances
with the banks. Because the arrangements are based on an average balance, the
II-72
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
Company does not consider any of its cash balances to be restricted as of any
specific date. Moreover, the Company borrows from time to time pursuant to
arrangements with banks for uncommitted lines of credit.
At December 31, 1999, the Company had regulatory approval to have
outstanding up to $750 million of short-term borrowings.
Assets Subject to Lien
The Company's mortgage, as amended and supplemented, securing the first mortgage
bonds issued by the Company, constitutes a direct lien on substantially all of
the Company's fixed property and franchises.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels and other financial commitments.
Total estimated long-term obligations at December 31, 1999, were as follows:
Year Commitments
- ---- ----------------
(in millions)
2000 $ 715
2001 672
2002 561
2003 469
2004 472
2005 - 2026 2,019
- ---------------------------------------------------------------
Total commitments $4,908
===============================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $17.8 million in 1999, $5.8 million
in 1998, and $3.0 million in 1997. At December 31, 1999, estimated minimum
rental commitments for noncancellable operating leases were as follows:
Year Commitments
- ---- -----------------
(in millions)
2000 $ 20.0
2001 19.6
2002 19.2
2003 18.8
2004 18.4
2005 - 2017 64.3
- --------------------------------------------------------------
Total minimum payments $160.3
==============================================================
6. JOINT OWNERSHIP AGREEMENTS
The Company and Georgia Power Company own equally all of the outstanding capital
stock of Southern Electric Generating Company (SEGCO), which owns electric
generating units with a total rated capacity of 1,020 megawatts, together with
associated transmission facilities. The capacity of these units is sold equally
to the Company and Georgia Power Company under a contract which, in substance,
requires payments sufficient to provide for the operating expenses, taxes,
interest expense and a return on equity, whether or not SEGCO has any capacity
and energy available. The term of the contract extends automatically for
two-year periods, subject to either party's right to cancel upon two year's
notice. The Company's share of expenses totaled $92 million in 1999, $74 million
in 1998 and $73 million in 1997, and is included in "Purchased power from
affiliates" in the Statements of Income.
In addition, the Company has guaranteed unconditionally the obligation of
SEGCO under an installment sale agreement for the purchase of certain pollution
control facilities at SEGCO's generating units, pursuant to which $24.5 million
principal amount of pollution control revenue bonds are outstanding. Georgia
Power Company has agreed to reimburse the Company for the pro rata portion of
such obligation corresponding to its then proportionate ownership of stock of
SEGCO if the Company is called upon to make such payment under its guaranty.
II-73
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
At December 31, 1999, the capitalization of SEGCO consisted of $50 million
of equity and $72 million of long-term debt on which the annual interest
requirement is $4.3 million. SEGCO paid dividends totaling $4.3 million in 1999,
$8.7 million in 1998, and $10.6 million in 1997, of which one-half of each was
paid to the Company. SEGCO's net income was $5.4 million, $7.5 million, and $8.5
million for 1999, 1998 and 1997, respectively.
The Company's percentage ownership and investment in jointly-owned
generating plants at December 31, 1999, follows:
Total
Megawatt Company
Facility (Type) Capacity Ownership
--------------------- ---------------- -------------
Greene County 500 60.00% (1)
(coal)
Plant Miller
Units 1 and 2 1,320 91.84% (2)
(coal)
----------------------------------------------------------
(1) Jointly owned with an affiliate, Mississippi Power Company.
(2) Jointly owned with Alabama Electric Cooperative, Inc.
Company Accumulated
Facility Investment Depreciation
--------------------- -------------- ---------------
(in millions)
Greene County $ 97 $ 45
Plant Miller
Units 1 and 2 740 297
----------------------------------------------------------
7. LONG-TERM POWER SALES AGREEMENTS
General
The Company and the operating affiliates of Southern Company have entered into
long-term contractual agreements for the sale of capacity and energy to certain
non-affiliated utilities located outside the system's service area. These
agreements -- expiring at various dates discussed below -- are firm and pertain
to capacity related to specific generating units. Because the energy is
generally sold at cost under these agreements, profitability is primarily
affected by revenues from capacity sales. The Company's capacity revenues
amounted to $122 million in 1999, $142 million in 1998, and $136 million in
1997.
Unit power from Plant Miller is being sold to Florida Power Corporation
(FPC), Florida Power & Light Company (FP&L), Jacksonville Electric Authority
(JEA) and the City of Tallahassee, Florida. Under these agreements,
approximately 1,250 megawatts of capacity are scheduled to be sold through 2000.
Thereafter, these sales will remain at that approximate level -- unless reduced
by FP&L, FPC, and JEA for the periods after 2000 with a minimum of three years
notice -- until the expiration of the contracts in 2010.
Alabama Municipal Electric Authority (AMEA)
Capacity Contracts
In August 1986, the Company entered into a firm power sales contract with AMEA
entitling AMEA to scheduled amounts of capacity (to a maximum 100 megawatts) for
a period of 15 years commencing September 1, 1986 (1986 Contract). In October
1991, the Company entered into a second firm power sales contract with AMEA
entitling AMEA to scheduled amounts of additional capacity (to a maximum 80
megawatts) for a period of 15 years commencing October 1, 1991 (1991 Contract).
In both contracts the power will be sold to AMEA for its member municipalities
that previously were served directly by the Company as wholesale customers.
Under the terms of the contracts, the Company received payments from AMEA
representing the net present value of the revenues associated with the
respective capacity entitlements, discounted at effective annual rates of 9.96
percent and 11.19 percent for the 1986 and 1991 contracts, respectively. These
payments are being recognized as operating revenues and the discounts are being
amortized to other interest expense as scheduled capacity is made available over
the terms of the contracts.
In order to secure AMEA's advance payments and the Company's performance
obligation under the contracts, the Company issued and delivered to an escrow
agent first mortgage bonds representing the maximum amount of liquidated damages
payable by the Company in the event of a default under the contracts. No
principal or interest is payable on such bonds unless and until a default by the
Company occurs. As the liquidated damages decline under the contracts, a portion
of the bonds equal to the decreases are returned to the Company. At December 31,
1999, $81.5 million of such bonds was held by the escrow agent under the
contracts.
8. INCOME TAXES
At December 31, 1999, the tax-related regulatory assets and liabilities were
$330 million and $265 million, respectively. These assets are attributable to
tax benefits flowed through to customers in prior years and to taxes applicable
II-74
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
to capitalized AFUDC. These liabilities are attributable to deferred taxes
previously recognized at rates higher than current enacted tax law and to
unamortized investment tax credits.
Details of the income tax provisions are as follows:
1999 1998 1997
--------------------------------
(in millions)
Total provision for income taxes:
Federal --
Current $194 $123 $197
Deferred --
Current year (6) 59 33
Reversal of prior years 30 13 (44)
- -----------------------------------------------------------------
218 195 186
- -----------------------------------------------------------------
State --
Current 19 16 23
Deferred --
Current year 1 5 1
Reversal of prior years 4 2 (2)
- -----------------------------------------------------------------
24 23 22
- -----------------------------------------------------------------
Total $242 $218 $208
=================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1999 1998
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $ 884 $ 861
Property basis differences 419 435
Fuel cost adjustment 65 29
Premium on reacquired debt 31 29
Pensions 60 50
Other 11 17
- -----------------------------------------------------------------
Total 1,470 1,421
- -----------------------------------------------------------------
Deferred tax assets:
Capacity prepayments 24 28
Other deferred costs 25 25
Postretirement benefits 22 20
Unbilled revenue 13 16
Other 63 56
- -----------------------------------------------------------------
Total 147 145
- -----------------------------------------------------------------
Net deferred tax liabilities 1,323 1,276
Portion included in current liabilities, net (83) (73)
- -----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $1,240 $1,203
=================================================================
Deferred investment tax credits are amortized over the lives of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $11 million in 1999, 1998, and 1997. At December 31, 1999, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1999 1998 1997
--------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income tax,
net of federal deduction 2.4 2.5 2.4
Non-deductible book
depreciation 1.6 1.5 1.5
Differences in prior years'
deferred and current tax rates (1.3) (1.6) (2.3)
Other (0.9) (1.6) (1.9)
- ---------------------------------------------------------------
Effective income tax rate 36.8% 35.8% 34.7%
===============================================================
II-75
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
Statutory business trusts formed by the Company, of which the Company owns all
the common securities, have issued mandatorily redeemable preferred securities
as follows:
Date of Maturity
Issue Amount Rate Notes Date
---------------------------------------------------
(millions) (millions)
Trust I 1/1996 $ 97 7.375% $100 3/2026
Trust II 1/1997 200 7.60 206 12/2036
Trust III 2/1999 50 Auction 52 2/2029
Substantially all of the assets of each trust are junior subordinated notes
issued by the Company in the respective approximate principal amounts set forth
above. In February 1999, Alabama Power Capital Trust III (Trust III), of which
the Company owns all of the common securities, issued $50 million of auction
rate mandatorily redeemable preferred securities. The distribution rate of these
variable securities was 6.42% at January 1, 2000.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of the Trusts' payment obligations with respect to the
preferred securities.
The Trusts are subsidiaries of the Company and, accordingly, are
consolidated in the Company's financial statements.
10. OTHER LONG-TERM DEBT
Pollution control obligations represent installment purchases of pollution
control facilities financed by funds derived from sales by public authorities of
revenue bonds. The Company is required to make payments sufficient for the
authorities to meet principal and interest requirements of such bonds. With
respect to $215.9 million of such pollution control obligations, the Company has
authenticated and delivered to the trustees a like principal amount of first
mortgage bonds as security for its obligations under the installment purchase
agreements. No principal or interest on these first mortgage bonds is payable
unless and until a default occurs on the installment purchase agreements.
In 1997, 1998, and 1999 the Company issued unsecured senior notes. The senior
notes are, in effect, subordinated to all secured debt of the Company, including
its first mortgage bonds.
The estimated aggregate annual maturities of capitalized lease obligations
through 2004 are as follows: $0.9 million in 2000, $0.8 million in 2001, $0.9
million in 2002, $0.9 million in 2003 and $1.0 million in 2004.
11. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt and preferred stock due within one year at
December 31 is as follows:
1999 1998
------------------------
(in thousands)
First mortgage bond maturities
and redemptions $100,000 $470,000
Other long-term debt maturities
(Note 10) 943 1,209
-------------------------------------------------------------
Total long-term debt due within
one year 100,943 471,209
-------------------------------------------------------------
Preferred stock to be redeemed - 50,000
-------------------------------------------------------------
Total $100,943 $521,209
=============================================================
The annual first mortgage bond improvement fund requirement is 1 percent
of the aggregate principal amount of bonds of each series authenticated, so long
as a portion of that series is outstanding, and may be satisfied by the deposit
of cash and/or reacquired bonds, the certification of unfunded property
additions or a combination thereof.
12. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988 (the Act), the Company maintains
agreements of indemnity with the NRC that, together with private insurance,
cover third-party liability arising from any nuclear incident occurring at Plant
Farley. The Act provides funds up to $9.5 billion for public liability claims
II-76
<PAGE>
NOTES (continued)
Alabama Power Company 1999 Annual Report
that could arise from a single nuclear incident. Plant Farley is insured against
this liability to a maximum of $200 million by private insurance, with the
remaining coverage provided by a mandatory program of deferred premiums which
could be assessed, after a nuclear incident, against all owners of nuclear
reactors. The Company could be assessed up to $88 million per incident for each
licensed reactor it operates but not more than an aggregate of $10 million per
incident to be paid in a calendar year for each reactor. Such maximum
assessment, excluding any applicable state premium taxes, for the Company is
$176 million per incident but not more than an aggregate of $20 million to be
paid for each incident in any one year.
The Company is a member of Nuclear Electric Insurance Limited (NEIL), a
mutual insurer established to provide property damage insurance in an amount up
to $500 million for members' nuclear generating facilities.
Additionally, the Company has policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional cost that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week (starting 12 weeks after the outage) for one
year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if
losses each year exceed the accumulated funds available to the insurer under
that policy. The current maximum annual assessments for the Company under the
three NEIL policies would be $19 million.
For all on-site property damage insurance policies for commercial nuclear
power plants, the NRC requires that the proceeds of such policies shall be
dedicated first for the sole purpose of placing the reactor in a safe and stable
condition after an accident. Any remaining proceeds are to be applied next
toward the costs of decontamination and debris removal operations ordered by
the NRC, and any further remaining proceeds are to be paid either to the
Company or to its bond trustees as may be appropriate under the policies and
applicable trust indentures.
All retrospective assessments, whether generated for liability, property or
replacement power may be subject to applicable state premium taxes.
13. COMMON STOCK DIVIDEND
RESTRICTIONS
The Company's first mortgage bond indenture contains various common stock
dividend restrictions that remain in effect as long as the bonds are
outstanding. At December 31, 1999, retained earnings of $796 million were
restricted against the payment of cash dividends on common stock under terms of
the mortgage indenture.
14. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
Summarized quarterly financial data for 1999 and 1998 are as follows:
Net Income
After
Dividends
Quarter Operating Operating on Preferred
Ended Revenues Income Stock
- -------------------- --------------------------------------------
(in millions)
March 1999 $ 714 $162 $ 63
June 1999 823 209 93
September 1999 1,116 388 201
December 1999 733 136 43
March 1998 $ 717 $173 $ 66
June 1998 864 235 95
September 1998 1,058 342 174
December 1998 748 132 42
- -----------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions.
II-77
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999
Alabama Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands) $3,385,474 $3,386,373 $3,149,111 $3,120,775 $3,024,774
Net Income after Dividends
on Preferred Stock (in thousands) $399,880 $377,223 $375,939 $371,490 $360,894
Cash Dividends
on Common Stock (in thousands) $399,600 $367,100 $339,600 $347,500 $285,000
Return on Average Common Equity (percent) 13.85 13.63 13.76 13.75 13.61
Total Assets (in thousands) $9,648,704 $9,225,698 $8,812,867 $8,733,846 $8,744,360
Gross Property Additions (in thousands) $809,044 $610,132 $451,167 $425,024 $551,781
- ----------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $2,988,863 $2,784,067 $2,750,569 $2,714,277 $2,690,374
Preferred stock 317,512 317,512 255,512 340,400 440,400
Company obligated mandatorily
redeemable preferred securities 347,000 297,000 297,000 97,000 -
Long-term debt 3,190,378 2,646,566 2,473,202 2,354,006 2,374,948
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $6,843,753 $6,045,145 $5,776,283 $5,505,683 $5,505,722
==================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 43.7 46.1 47.6 49.3 48.9
Preferred stock 4.6 5.3 4.4 6.2 8.0
Company obligated mandatorily
redeemable preferred securities 5.1 4.9 5.2 1.7 -
Long-term debt 46.6 43.7 42.8 42.8 43.1
- ----------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0
==================================================================================================================================
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+ A+
Duff & Phelps AA- AA- AA- AA- A+
Preferred Stock -
Moody's a2 a2 a2 a2 a2
Standard and Poor's A- A A A A
Duff & Phelps A A A+ A+ A
Unsecured Long-Term Debt -
Moody's A2 A2 A2 - -
Standard and Poor's A A A - -
Duff & Phelps A+ A+ A+ - -
==================================================================================================================================
Customers (year-end):
Residential 1,120,574 1,106,217 1,092,161 1,073,559 1,058,197
Commercial 188,368 182,738 177,362 171,827 166,480
Industrial 4,897 5,020 5,076 5,100 5,338
Other 735 733 728 732 725
- ----------------------------------------------------------------------------------------------------------------------------------
Total 1,314,574 1,294,708 1,275,327 1,251,218 1,230,740
==================================================================================================================================
Employees (year-end): 6,792 6,631 6,531 6,865 7,261
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-78
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Alabama Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands):
Residential $ 1,145,646 $1,133,435 $ 997,507 $ 998,806 $ 997,069
Commercial 807,098 779,169 724,148 696,453 670,453
Industrial 843,090 853,550 775,591 759,628 805,596
Other 15,283 14,523 13,563 13,729 13,619
- ---------------------------------------------------------------------------------------------------------------------------------
Total retail 2,811,117 2,780,677 2,510,809 2,468,616 2,486,737
Sales for resale - non-affiliates 415,377 448,973 431,023 391,669 370,140
Sales for resale - affiliates 92,439 103,562 161,795 216,620 127,730
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 3,318,933 3,333,212 3,103,627 3,076,905 2,984,607
Other revenues 66,541 53,161 45,484 43,870 40,167
- ---------------------------------------------------------------------------------------------------------------------------------
Total $3,385,474 $3,386,373 $3,149,111 $3,120,775 $3,024,774
=================================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 15,699,081 15,794,543 14,336,408 14,593,761 14,383,231
Commercial 12,314,085 11,904,509 11,330,312 10,904,476 10,043,220
Industrial 21,942,889 21,585,117 20,727,912 19,999,258 19,862,577
Other 201,149 196,647 180,389 192,573 186,848
- ---------------------------------------------------------------------------------------------------------------------------------
Total retail 50,157,204 49,480,816 46,575,021 45,690,068 44,475,876
Sales for resale - non-affiliates 12,437,599 11,840,910 12,329,480 9,491,237 8,046,189
Sales for resale - affiliates 5,031,781 5,976,099 8,993,326 10,292,066 6,705,174
- ---------------------------------------------------------------------------------------------------------------------------------
Total 67,626,584 67,297,825 67,897,827 65,473,371 59,227,239
=================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.30 7.18 6.96 6.84 6.93
Commercial 6.55 6.55 6.39 6.39 6.68
Industrial 3.84 3.95 3.74 3.80 4.06
Total retail 5.60 5.62 5.39 5.40 5.59
Sales for resale 2.91 3.10 2.78 3.07 3.38
Total sales 4.91 4.95 4.57 4.70 5.04
Residential Average Annual
Kilowatt-Hour Use Per Customer 14,097 14,370 13,254 13,705 13,686
Residential Average Annual
Revenue Per Customer $1,028.76 $1,031.21 $922.21 $937.95 $948.71
Plant Nameplate Capacity
Ratings (year-end) (megawatts) 11,151 11,151 11,151 11,151 10,831
Maximum Peak-Hour Demand (megawatts):
Winter 8,863 7,757 8,478 8,413 7,958
Summer 10,739 10,329 9,778 9,912 10,090
Annual Load Factor (percent) 59.7 62.9 62.7 61.3 59.2
Plant Availability (percent):
Fossil-steam 80.4 85.6 86.3 86.6 88.3
Nuclear 91.0 80.2 88.8 90.5 81.1
- ---------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 64.1 65.3 65.7 67.0 67.1
Nuclear 17.8 16.3 17.9 18.5 17.1
Hydro 4.7 6.9 7.5 7.1 7.0
Oil and gas 1.1 1.5 0.7 0.4 0.4
Purchased power -
From non-affiliates 4.5 3.3 2.4 2.4 2.7
From affiliates 7.8 6.7 5.8 4.6 5.7
- ---------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
=================================================================================================================================
</TABLE>
II-79
<PAGE>
GEORGIA POWER COMPANY
FINANCIAL SECTION
II-80
<PAGE>
MANAGEMENT'S REPORT
Georgia Power Company 1999 Annual Report
The management of Georgia Power Company has prepared this annual report and is
responsible for the financial statements and related information. These
statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances, and necessarily include amounts
that are based on the best estimates and judgments of management. Financial
information throughout this annual report is consistent with the financial
statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that the books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls based upon the recognition that the cost of the
system should not exceed its benefits. The Company believes that its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, which is composed of three
directors who are not employees, provides a broad overview of management's
financial reporting and control functions. At least three times a year this
committee meets with management, the internal auditors, and the independent
public accountants to ensure that these groups are fulfilling their obligations
and to discuss auditing, internal control and financial reporting matters. The
internal auditors and the independent public accountants have access to the
members of the audit committee at any time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted with a high standard of
business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations and cash flows
of Georgia Power Company in conformity with generally accepted accounting
principles.
/s/David M. Ratcliffe
David M. Ratcliffe
President and Chief
Executive Officer
/s/Thomas A. Fanning
Thomas A. Fanning
Executive Vice President,
Treasurer and Chief
Financial Officer
February 16, 2000
II-81
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Georgia Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Georgia Power Company (a Georgia corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1999 and 1998, and the related statements
of income, common stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements (pages 11-91 through 11-110)
referred to above present fairly, in all material respects, the financial
position of Georgia Power Company as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
II-82
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Georgia Power Company 1999 Annual Report
RESULTS OF OPERATIONS
Earnings
Georgia Power Company's 1999 earnings totaled $541 million, representing a $29
million (5.1 percent) decrease from 1998. This earnings decrease is primarily
due to the recognition of interest income in 1998 as a result of the resolution
of tax issues with the Internal Revenue Service (IRS). Earnings from normal
operations increased due primarily to lower accelerated depreciation under the
1998 Georgia Public Service Commission (GPSC) rate order, sales growth and
decreased financing costs, partially offset by retail rate reductions under the
new order and lower wholesale revenues. Earnings for 1998 totaled $570 million,
representing a $24 million (4.0 percent) decrease from 1997. This earnings
decrease resulted primarily from higher operating expenses, accelerated
depreciation charges pursuant to a previous GPSC retail accounting order ending
December 1998, lower wholesale revenues, and the write-off of a portion of the
Rocky Mountain plant investment. These decreases to earnings were partially
offset by higher retail revenues, lower financing costs and the effect of the
IRS settlement.
Revenues
The following table summarizes the factors impacting operating revenues for the
1997-1999 period:
Increase (Decrease)
From Prior Year
--------------------------------
1999 1998 1997
--------------------------------
Retail - (in millions)
1998 GPSC rate order $(262) $ - $ -
Revenue subject to refund (79) - -
Sales growth 102 174 62
Weather (53) 101 (74)
Fuel cost recovery and other 44 45 (33)
- --------------------------------------------------------------------
Total retail (248) 320 (45)
- --------------------------------------------------------------------
Sales for resale -
Non-affiliates (49) (23) 1
Affiliates (5) 43 3
- --------------------------------------------------------------------
Total sales for resale (54) 20 4
- --------------------------------------------------------------------
Other operating revenues 21 13 10
- --------------------------------------------------------------------
Total operating revenues $(281) $ 353 $ (31)
====================================================================
Percent change (5.9)% 8.0% (0.7)%
- --------------------------------------------------------------------
Retail revenues of $4.1 billion in 1999 decreased $248 million (5.8 percent)
primarily due to retail rate reductions under the 1998 GPSC rate order. Pursuant
to the order, in 1999 the Company also recorded $79 million of revenue subject
to refund for estimated earnings above 12.5 percent retail return on common
equity. Refunds will be made to customers in 2000. See Note 3 to the financial
statements under "Retail Rate Orders" for additional information. Retail
revenues of $4.3 billion in 1998 increased $320 million (8.0 percent) from 1997
primarily due to higher energy sales to residential and commercial customers.
Fuel revenues generally represent the direct recovery of fuel expense,
including the fuel component of purchased energy, and do not affect net income.
Wholesale revenues from sales to non-affiliated utilities decreased in 1999
and 1998 and were as follows:
1999 1998 1997
-------------------------------
(in millions)
Outside service area -
Long-term contracts $ 55 $ 51 $ 71
Other sales 74 93 79
Inside service area 81 115 132
- ---------------------------------------------------------------
Total $ 210 $ 259 $ 282
===============================================================
Revenues from long-term contracts outside the service area increased
slightly in 1999 due to increased energy sales and decreased in 1998 primarily
due to lower capacity charges and decreased energy sales. See Note 7 to the
financial statements for further information regarding these sales. Revenues
from other sales outside the service area decreased in 1999 and increased in
1998 primarily due to the effect of power marketing activities and were
generally offset by a corresponding decrease and increase, respectively, in
purchased power from non-affiliates. Wholesale revenues from customers within
the service area decreased in 1999 and 1998 primarily due to a decrease in
revenues under a power supply agreement with Oglethorpe Power Corporation (OPC).
Revenues from sales to affiliated companies within the Southern electric
system, as well as purchases of energy, will vary from year to year depending on
demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.
II-83
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
Other operating revenues increased $21 million (21 percent) primarily due to
increased revenues from equipment rentals. In 1998, other operating revenues
increased $13 million (14.9 percent) primarily due to increased revenues from
the transmission of electricity.
Kilowatt-hour (KWH) sales for 1999 and the percent change by year were as
follows:
Percent Change
----------------------------
1999
KWH 1999 1998 1997
--------- -----------------------------
(in billions)
Residential 19.4 (0.4)% 12.6% (3.0)%
Commercial 23.7 3.7 8.2 1.5
Industrial 27.3 0.1 2.2 1.9
Other 0.6 1.5 1.0 0.4
--------
Total retail 71.0 1.1 6.9 0.4
--------
Sales for resale -
Non-affiliates 5.0 (21.4) (5.2) (13.6)
Affiliates 1.8 (11.9) 19.4 44.6
--------
Total sales for resale 6.8 (19.1) (0.3) (6.0)
--------
Total sales 77.8 (1.0) 6.0 (0.3)
========
- ------------------------------------------------------------------
Residential sales decreased 0.4 percent in 1999 due to moderate summer
temperatures, while commercial sales increased 3.7 percent due to strong
regional economic growth. Industrial sales remained fairly constant. Residential
and commercial sales increased in 1998 12.6 percent and 8.2 percent,
respectively, and industrial sales increased slightly by 2.2 percent. The
increases are attributed primarily to sales growth and hotter temperatures in
the summer months.
Expenses
Fuel costs constitute the single largest expense for the Company. The mix of
fuel sources for generation of electricity is determined primarily by system
load, the unit cost of fuel consumed, and the availability of hydro and nuclear
generating units. The amount and sources of generation and the average cost of
fuel per net KWH generated were as follows:
1999 1998 1997
-------------------------
Total generation
(billions of KWH) 69.3 69.1 66.5
Sources of generation
(percent) --
Coal 75.5 73.3 74.8
Nuclear 21.6 21.6 21.8
Hydro 1.0 2.6 2.7
Oil and gas 1.9 2.5 0.7
Average cost of fuel per net
KWH generated
(cents) -- 1.34 1.36 1.32
- ---------------------------------------------------------------
Fuel expense increased 0.3 percent in 1999 due to a slight increase in
generation, partially offset by a lower average cost of fuel. Fuel expense
increased 7.0 percent in 1998 primarily due to an increase in generation to meet
higher energy demands and a higher average cost of fuel.
Purchased power expense decreased slightly in 1999. Purchased power expense
in 1998 increased $70 million (21.9 percent) over the prior year primarily due
to higher energy demands and power marketing activities. As discussed earlier,
the expense associated with energy purchased for power marketing activities is
generally offset by revenue when resold to non-affiliates.
Other operation and maintenance expenses increased 1.6 percent in 1999
primarily due to increased generating plant maintenance, partially offset by a
reduction in the charges related to the implementation of a customer service
system in 1998, decreased year 2000 readiness costs, and decreased employee
benefit provisions. Other operation and maintenance expenses increased 15.5
percent in 1998 primarily due to expenses related to the customer service system
discussed above, modification of certain information systems for year 2000
compliance discussed below, an increase in outage costs at generating
facilities, and increased line maintenance.
II-84
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
Depreciation and amortization decreased $346 million in 1999 primarily due
to higher depreciation charges recognized in 1998 under the prior GPSC
accounting order and the completion in 1998 of the amortization of deferred
Plant Vogtle costs. Depreciation and amortization increased $121 million in 1998
primarily due to accelerated depreciation of generating plant pursuant to the
previous retail accounting order and an increase in plant-in-service. See Note 3
to the financial statements under "Retail Rate Orders" for additional
information.
As a result of the 1998 retail rate order, the Company recorded a $34
million pre-tax write-off associated with a portion of its investment in the
Rocky Mountain plant in 1998. See Note 3 to the financial statements under
"Rocky Mountain Status" for additional information.
Interest income decreased in 1999 primarily due to the 1998 recognition of
$73 million in interest income resulting from the resolution of tax issues with
the IRS and the State of Georgia. Other, net decreased in 1999 due primarily to
increased bad debt expense related to consumer energy efficiency improvement
financing.
Financing costs decreased in 1999 and 1998. These changes were primarily due
to the refinancing or retirement of securities. The Company refinanced or
retired $775 million and $754 million of securities in 1999 and 1998,
respectively. Dividends on preferred stock decreased $4 million and $13 million
in 1999 and 1998, respectively. Pursuant to the new three-year retail rate order
which the Company began operating under on January 1, 1999, the Company recorded
$85 million in accelerated amortization of premium on reacquired debt. Other
interest charges decreased $12 million in 1999 primarily due to the recognition
in 1998 of interest related to tax issues. Distributions on preferred securities
of subsidiary companies increased $11 million and $7 million in 1999 and 1998,
respectively, primarily due to the issuance of additional mandatorily redeemable
preferred securities in 1999 and 1997.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plants with long economic life. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
FUTURE EARNINGS POTENTIAL
The results of operations for the past three years are not necessarily
indicative of future earnings. The level of future earnings depends on numerous
factors including regulatory matters and energy sales.
The Company currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in the
State of Georgia. Prices for electricity provided by the Company to retail
customers are set by the GPSC under cost-based regulatory principles.
On January 1, 1999, the Company began operating under a new three-year
retail rate order. The Company's earnings will continue to be evaluated against
a retail return on common equity range of 10 percent to 12.5 percent, with rate
reductions of $262 million in 1999 and an additional reduction of $24 million in
2000. The order provides for $85 million in each year, plus up to $50 million of
any earnings above the 12.5 percent return during the second and third years, to
be applied to accelerated amortization or depreciation of assets. Two-thirds of
any additional earnings above the 12.5 percent return will be applied to rate
reductions, with the remaining one-third retained by the Company. Pursuant to
the order, in 1999 the Company recorded $85 million in accelerated amortization
of premium on reacquired debt. The Company also recorded $79 million of revenue
subject to refund for estimated earnings above 12.5 percent. Refunds will be
made to customers in 2000. The Company will not file for a general base rate
increase unless its projected retail return on common equity falls below 10
percent, and will be required to file a general rate case on July 1, 2001 in
response to which the GPSC would be expected to determine whether the rate order
should be continued, modified, or discontinued. See Note 3 to the financial
statements under "Retail Rate Orders" for additional information.
II-85
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
Growth in energy sales is subject to a number of factors which traditionally
have included changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, weather,
competition, initiatives to increase sales to existing customers, and the rate
of economic growth in the Company's service area. Assuming normal weather,
retail sales growth from 1999 is projected to be approximately 2.9 percent
annually on average during 2000 through 2002.
The Company has entered into two purchase power agreements scheduled to
begin after 1999. The first agreement is for five years and will begin in June
2000. The agreement is for approximately 215 megawatts, and capacity payments
are estimated to be between $7 million and $8 million each year. The second
agreement is for seven years and will begin in June 2002. The agreement is for
approximately 310 megawatts during the first three years and approximately 465
megawatts during the remaining four years. Capacity payments are estimated to be
between $16 million and $17 million in each of the first three years and then
between $23 million and $24 million in each of the last four years of the
contract.
The Company is constructing a ten unit, 800 megawatt combustion turbine
peaking power plant that will serve the wholesale market. Units one through
eight will begin operation in 2000; units nine and ten will begin operation in
2001. The Company also plans to construct a 570 megawatt combined cycle unit
that will begin operation in 2002 and will also serve the wholesale market. The
Company has entered into wholesale contracts to sell 560 megawatts of the new
capacity. The Company is also planning to construct two 568 megawatt combined
cycle units at Plant Wansley, to begin operation in 2002. The Company has
applied to the GPSC for certification of these units to serve retail customers.
Savannah Electric (also a wholly-owned subsidiary of Southern Company) will
purchase 200 megawatts of capacity from these units. See Note 4 to the financial
statements under "Construction Program" for additional information.
Compliance costs related to current and future environmental laws,
regulations, and litigation could affect earnings if such costs are not fully
recovered. See "Environmental Issues" for further discussion of these matters.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. The Company is aggressively working to maintain and expand its
share of wholesale sales in the Southeastern power markets. Although the Energy
Act does not permit retail customer access, it was a major catalyst for the
current restructuring and consolidation taking place within the utility
industry.
On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued
its final rule on Regional Transmission Organizations (RTOs). The order
encourages utilities owning transmission systems to form RTOs on a voluntary
basis. To facilitate the development of RTOs, the FERC will convene regional
conferences for utilities, customers, and other members of the public to discuss
formation of RTOs. In addition to participating in the regional conferences,
utilities owning transmission systems, including the Company, are required to
make a filing by October 15, 2000. The filing must contain either a proposal for
RTO participation or a description of the efforts made to participate in an RTO,
the reasons for non-participation, any obstacles to participation, and any plans
for further work toward participation. The RTOs that are proposed in the filings
should be operational by December 15, 2001. The Company is evaluating the issue
and the outcome cannot now be determined.
The Company continues to compete with other electric suppliers within the
state. In Georgia, most new retail customers with at least 900 kilowatts of
connected load may choose their electricity supplier. Numerous federal and state
initiatives are in varying stages to promote wholesale and retail competition
across the nation. Among other things, these initiatives allow customers to
choose their electricity provider. As these initiatives materialize, the
structure of the utility industry could radically change. Some states have
approved initiatives that result in a separation of the ownership and/or
operation of generating facilities from the ownership and/or operation of
transmission and distribution facilities. While the GPSC has held workshops to
discuss retail competition and industry restructuring, there has been no
proposed or enacted legislation to date in Georgia. Enactment would require
numerous issues to be resolved, including significant ones relating to
II-86
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
transmission pricing and recovery of costs. The GPSC plans to release a report
on an initial assessment of the range of potential stranded costs in 2000. The
inability of the Company to recover all its costs, including the regulatory
assets described in Note 1 to the financial statements, could have a material
effect on the financial condition of the Company. The Company is attempting to
reduce regulatory assets and other costs through the three-year retail rate
order. See Note 3 to the financial statements under "Retail Rate Orders" for
additional information.
Unless the Company remains a low-cost producer and provides quality service,
the Company's retail energy sales growth could be limited as competition
increases. Conversely, continuing to be a low-cost producer could provide
opportunities to increase market share and profitability in markets that evolve
with changing regulation.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
The staff of the Securities and Exchange Commission has questioned certain
of the current accounting practices of the electric utility industry - including
the Company'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 liabilities related to the retirement of long-lived assets,
including nuclear decommissioning. If the FASB issues new accounting rules, the
estimated costs of retiring the Company's nuclear and other facilities may be
required to be recorded as liabilities in the Balance Sheets. Also, the annual
provisions for such costs could change. Because of the Company's current ability
to recover asset retirement costs through rates, these changes would not have a
significant adverse effect on results of operations. See Note 1 to the financial
statements under "Depreciation and Nuclear Decommissioning" for additional
information.
Year 2000 Challenge
The work undertaken by the Company to prepare critical computer systems and
other date sensitive devices to function correctly in the Year 2000 was
successful. There were no material incidents reported and no disruption of
electric service within the service area. There were no reports of significant
events regarding third parties that impacted revenues or expenses.
For the Company, original projected total costs for Year 2000 readiness,
including the Company's share of costs of Southern Nuclear Operating Company,
were approximately $38 million. These costs include labor necessary to identify,
test, and renovate affected devices and systems, and costs for reporting
requirements to state and federal agencies. From its inception through December
31, 1999, the Year 2000 program costs, recognized as expense, amounted to $41
million. An additional $2 million is projected to be spent in 2000.
Exposure to Market Risks
Due to cost-based rate regulation, the Company currently has limited exposure to
market volatility in interest rates and prices of electricity. See the
discussion above for potential changes in industry structure. To mitigate
residual risks relative to movements in electricity prices, the Company enters
into fixed price contracts for the purchase and sale of electricity through the
wholesale electricity market. Realized gains and losses are recognized in the
income statement as incurred. At December 31, 1999, exposure from these
activities was not material to the Company's financial position, results of
operations, or cash flows. Also, based on the Company's overall interest rate
exposure at December 31, 1999, a near-term 100 basis point change in interest
rates would not materially affect the financial statements.
New Accounting Standard
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 2001. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
II-87
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
FINANCIAL CONDITION
Plant Additions
In 1999 gross utility plant additions were $790 million. These additions were
primarily related to transmission and distribution facilities, the purchase of
nuclear fuel and the construction of additional combustion turbine and combined
cycle units. The funds needed for gross property additions are currently
provided from operations, short or long-term debt, and from equity from
Southern. The Statements of Cash Flows provide additional details.
Financing Activities
In 1999 the Company continued to lower its financing costs by refinancing
higher-cost issues. New issues during 1997 through 1999 totaled $1.8 billion and
retirement or repayment of securities totaled $2.2 billion.
Special purpose subsidiaries of the Company have issued mandatorily
redeemable preferred securities. See Note 9 to the financial statements under
"Preferred Securities" for additional information.
Composite financing rates for long-term debt, preferred stock and preferred
securities for the years 1997 through 1999, as of year-end, were as follows:
1999 1998 1997
----------------------------------
Composite interest rate
on long-term debt 5.48% 5.64% 6.11%
Composite preferred
stock dividend rate 4.60 5.52 5.18
Composite preferred
securities dividend rate 7.49 7.89 7.89
- ------------------------------------------------------------------
Liquidity and Capital Requirements
Cash provided from operations decreased by $206 million in 1999, primarily due
to lower retail revenues.
The Company estimates that construction expenditures for the years 2000
through 2002 will total $1.2 billion, $1.5 billion and $1.5 billion,
respectively. Investments in additional combustion turbine and combined cycle
generating units, transmission and distribution facilities, enhancements to
existing generating plants, and equipment to comply with environmental
requirements are planned.
Cash requirements for improvement fund requirements, redemptions announced,
and maturities of long-term debt are expected to total $168 million during 2000
through 2002.
As a result of requirements by the Nuclear Regulatory Commission, the
Company has established external trust funds for the purpose of funding nuclear
decommissioning costs. The amount to be funded is $30 million each year in 2000,
2001 and 2002. For additional information concerning nuclear decommissioning
costs, see Note 1 to the financial statements under "Depreciation and Nuclear
Decommissioning."
Sources of Capital
The Company expects to meet future capital requirements primarily using funds
generated from operations and equity funds from Southern and, if needed, by the
issuance of new debt and equity securities, term loans, and short-term
borrowings. To meet short-term cash needs and contingencies, the Company had
approximately $1.3 billion of unused credit arrangements with banks at the
beginning of 2000. See Note 9 to the financial statements under "Bank Credit
Arrangements" for additional information.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have also consisted of
unsecured debt and trust preferred securities. In this regard, the Company
II-88
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
sought and obtained stockholder approval in 1997 to amend its corporate charter
eliminating restrictions on the amounts of unsecured indebtedness it may incur.
If the Company chooses to issue first mortgage bonds or preferred stock, it
is required to meet certain coverage requirements specified in its mortgage
indenture and corporate charter. The Company's ability to satisfy all coverage
requirements is such that it could issue new first mortgage bonds and preferred
stock to provide sufficient funds for all anticipated requirements.
ENVIRONMENTAL ISSUES
Clean Air Act
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- significantly
impacted the operating companies of Southern Company, including Georgia Power.
Specific reductions in sulfur dioxide and nitrogen oxide emissions from
fossil-fired generating plants are required in two phases. Phase I compliance
began in 1995 and initially affected 28 generating units in the Southern
electric system. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants in the Southern electric system are affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
units by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Georgia Power's Phase I compliance totaled
approximately $167 million.
For Phase II sulfur dioxide compliance, Southern Company currently uses
emission allowances and increased fuel switching. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired units
as necessary to meet Phase II limits and ozone non-attainment requirements for
metropolitan Atlanta through 2000. Compliance for Phase II and initial ozone
non-attainment requirements increased total construction expenditures by $38
million.
The State of Georgia submitted a plan for nitrogen oxide emission reductions
in Atlanta's ozone non-attainment area on October 29, 1999. The Environmental
Protection Agency (EPA) found this plan to be deficient and required the State
to address the shortfalls of the plan. Based on the revised plan approved by the
Georgia Department of Natural Resources on January 26, 2000, the Company
estimates its capital expenditures to comply with the plan to be approximately
$713 million through 2003, of which $705 million remains to be spent. It is
still uncertain at this time what additional controls may be required at the
Company's plants beyond the recently submitted plan.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
Environmental Protection Agency Litigation
On November 3, 1999, the EPA brought a civil action in the U.S. District Court
for the Northern District of Georgia. 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 the Company's
Bowen and Scherer plants. The civil action requests 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 Company relating to these two plants. In early 2000, the
EPA filed a motion to amend its complaint to add the violations alleged in its
notice of violation. The complaint and the notice of violation are similar to
those brought against and issued to several other electric utilities. The
complaint and the notice of violation allege that the Company 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. The Company 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. The Clean Air Act authorizes civil
penalties of up to $27,500 per day per violation at each generating unit. Prior
to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this
matter could require substantial capital expenditures that cannot be determined
at this time and possibly require payment of substantial penalties. This could
affect future results of operations, cash flows and possibly financial condition
unless such costs can be recovered through regulated rates.
II-89
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Georgia Power Company 1999 Annual Report
Other Environmental Issues
In July 1997, the EPA revised the national ambient air quality standards for
ozone and particulate matter. This revision makes the standards significantly
more stringent. In September 1998, the EPA issued the final regional nitrogen
oxide rule to the states for implementation. The final rule affects 22 states
including Georgia. The EPA's July 1997 standards and the September 1998 rule are
being challenged in the courts by several states and industry groups.
Implementation of the final state rules for these three initiatives could
require substantial further reductions in nitrogen oxide and sulfur dioxide
emissions from fossil-fired generating facilities and other industries in these
states. Additional compliance costs and capital expenditures resulting from the
implementation of these rules and standards cannot be determined until the
results of legal challenges are known, and the states have adopted their final
rules.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. The Company conducts studies to determine the extent of any
required clean-up costs and has recognized in the financial statements costs to
clean up known sites. These costs for the Company amounted to $4 million, $6
million and $4 million in 1999, 1998 and 1997, respectively. Additional sites
may require environmental remediation for which the Company may be liable for a
portion of or all required clean-up costs. See Note 3 to the financial
statements under "Other Environmental Contingencies" for information regarding
the Company's potentially responsible party status at a site in Brunswick,
Georgia, and the status of sites listed on the State of Georgia's hazardous site
inventory.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: nitrogen oxide emission control strategies
for ozone non-attainment areas; additional controls for hazardous air pollutant
emissions; control strategies to reduce regional haze; and hazardous waste
disposal requirements. The impact of any new standards will depend on the
development and implementation of applicable regulations.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of the Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields and other environmental and health concerns could
significantly affect the Company. The impact of new legislation -- if any --
will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electromagnetic fields.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION
The Company's 1999 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information. 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 Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by Southern Company; state and federal rate regulation; changes in or
application of environmental and other laws and regulations to which the Company
is subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; and other
factors discussed in the reports--including Form 10-K--filed from time to time
by the Company with the Securities and Exchange Commission.
II-90
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, 1997
Georgia Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Retail sales $4,050,088 $4,298,217 $3,978,299
Sales for resale --
Non-affiliates 210,104 259,234 282,365
Affiliates 76,426 81,606 38,708
Other revenues 120,057 99,196 86,345
- ----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 4,456,675 4,738,253 4,385,717
- ----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 919,876 917,119 857,269
Purchased power --
Non-affiliates 214,573 229,960 143,409
Affiliates 174,989 161,003 177,240
Other 784,359 819,589 702,159
Maintenance 411,983 358,218 317,199
Depreciation and amortization 467,966 813,802 693,217
Taxes other than income taxes 202,853 204,623 207,192
Write down of Rocky Mountain plant - 33,536 -
- ----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 3,176,599 3,537,850 3,097,685
- ----------------------------------------------------------------------------------------------------------------------------
Operating Income 1,280,076 1,200,403 1,288,032
Other Income (Expense):
Interest income 5,583 79,578 10,581
Equity in earnings of unconsolidated subsidiaries 2,721 3,735 4,266
Other, net (47,986) (38,277) (29,822)
- ----------------------------------------------------------------------------------------------------------------------------
Earnings Before Interest and Income Taxes 1,240,394 1,245,439 1,273,057
- ----------------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 162,303 180,746 194,344
Interest on notes payable 19,787 12,213 7,795
Amortization of debt discount, premium and expense, net (Note 3) 100,115 13,366 14,179
Other interest charges, net (2,336) 9,988 1,292
Distributions on preferred securities of subsidiary 65,774 54,327 47,369
- ----------------------------------------------------------------------------------------------------------------------------
Total interest charges and other, net 345,643 270,640 264,979
- ----------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 894,751 974,799 1,008,078
Income taxes 351,639 398,632 395,155
- ----------------------------------------------------------------------------------------------------------------------------
Net Income 543,112 576,167 612,923
Dividends on Preferred Stock 1,729 5,939 18,927
- ----------------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 541,383 $ 570,228 $ 593,996
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-91
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Georgia Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 543,112 $ 576,167 $ 612,923
Adjustments to reconcile net income to net
cash provided from operating activities --
Depreciation and amortization 578,878 867,637 674,286
Deferred income taxes and investment tax credits, net (34,930) (93,005) (21,425)
Allowance for equity funds used during construction (734) (3,235) (6,012)
Amortization of deferred Plant Vogtle costs - 50,412 120,577
Other, net 43,555 (6,781) 1,991
Changes in certain current assets and liabilities --
Receivables, net 21,665 (25,453) 13,387
Inventories (32,582) (11,156) 39,748
Payables 13,095 47,862 (10,007)
Taxes accrued (2,832) 22,139 (3,596)
Energy cost recovery, retail (26,862) (7,649) (20,103)
Other 93,620 (15,142) (30,026)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 1,195,985 1,401,796 1,371,743
- ----------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (790,464) (499,053) (475,921)
Other (27,454) 67,031 16,223
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (817,918) (432,022) (459,698)
- ----------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 295,389 (25,378) (64,266)
Proceeds --
Senior notes 100,000 495,000 -
Pollution control bonds 238,000 89,990 284,700
Preferred securities 200,000 - 364,250
Capital contributions from parent company 155,777 235 85
Retirements --
First mortgage bonds (404,000) (558,250) (60,258)
Pollution control bonds (235,000) (89,990) (284,700)
Preferred securities (100,000) - -
Preferred stock (36,231) (106,064) (356,392)
Capital distributions to parent company - (270,000) (205,000)
Special deposits -- redemption funds - - 44,454
Payment of preferred stock dividends (984) (9,137) (26,917)
Payment of common stock dividends (543,000) (536,600) (520,000)
Other (29,630) (26,641) (20,024)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (359,679) (1,036,835) (844,068)
- ----------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 18,388 (67,061) 67,977
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of Year 16,272 83,333 15,356
- ----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $34,660 $16,272 $83,333
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $ 247,050 $ 269,524 $ 258,298
Income taxes (net of refunds) 394,457 480,318 427,596
- --------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-92
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Georgia Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------
Assets 1999 1999
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 34,660 $ 16,272
Receivables --
Customer accounts receivable 438,161 439,420
Other accounts and notes receivable 102,544 99,574
Affiliated companies 16,006 16,817
ccumulated provision for uncollectible accounts (7,000) (5,500)
Fossil fuel stock, at average cost 126,298 104,133
Materials and supplies, at average cost 253,894 243,477
Other 63,990 73,280
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 1,028,553 987,473
- -------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service 15,798,624 15,441,146
Less accumulated provision for depreciation 6,538,574 6,109,331
- -------------------------------------------------------------------------------------------------------------------------
9,260,050 9,331,815
Nuclear fuel, at amortized cost 119,288 121,169
Construction work in progress (Note 4) 425,975 189,849
- -------------------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment 9,805,313 9,642,833
- -------------------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries (Note 4) 25,024 24,360
Nuclear decommissioning trusts 371,914 284,536
Other 33,766 34,781
- -------------------------------------------------------------------------------------------------------------------------
Total other property and investments 430,704 343,677
- -------------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 590,893 604,488
Prepaid pension costs 145,801 103,606
Debt expense, being amortized 55,824 51,261
Premium on reacquired debt, being amortized 99,331 173,858
Other 120,441 126,422
- -------------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 1,012,290 1,059,635
- -------------------------------------------------------------------------------------------------------------------------
Total Assets $12,276,860 $12,033,618
=========================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-93
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Georgia Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Liabilities:
Securities due within one year (Note 9) $ 155,772 $ 435,085
Notes payable 636,241 340,852
Accounts payable --
Affiliated 76,591 75,774
Other 346,785 326,317
Customer deposits 74,695 69,584
Taxes accrued --
Income taxes 7,914 15,801
Other 127,414 122,359
Interest accrued 58,665 60,187
Vacation pay accrued 38,143 34,443
Other 153,767 66,350
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,675,987 1,546,752
- ---------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt (See accompanying statements) 2,688,358 2,744,362
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 2,202,565 2,249,613
Deferred credits related to income taxes (Note 8) 267,083 284,017
Accumulated deferred investment tax credits (Note 8) 367,114 381,914
Employee benefits provisions 181,529 177,148
Other 151,812 160,863
- ---------------------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 3,170,103 3,253,555
- ---------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily Redeemable Preferred
Securities Of Subsidiary Trusts Holding Company Junior
Subordinated Notes (See accompanying statements) 789,250 689,250
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock (See accompanying statements) 14,952 15,527
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity (See accompanying statements) 3,938,210 3,784,172
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $12,276,860 $12,033,618
=================================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-94
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Georgia Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
--------- ---------------
<S> <C> <C> <C> <C> <C>
September 1, 1999 6.125% $ - $ 195,000
March 1, 2000 6.00% 100,000 100,000
April 1, 2003 6.625% 200,000 200,000
August 1, 2003 6.35% 75,000 75,000
2005 6.07% 10,000 10,000
2008 6.875% 50,000 50,000
2023 through 2025 7.55% to 7.95% 57,000 266,000
- ----------------------------------------------------------------------------------------------------------
Total first mortgage bonds 492,000 896,000
- ----------------------------------------------------------------------------------------------------------
Pollution control bonds -- (Note 9)
Maturity Interest Rates
-------- --------------
2000 4.375% 50,000 50,000
2005 5.00% 57,000 57,000
2011 Variable (3.95% at 1/1/00) 10,450 10,450
2018-2019 6.00% to 6.35% 13,100 63,100
2020-2024 5.75% to 6.25% 192,270 377,270
2022-2024 Variable (3.70% to 5.05% at 1/1/00) 352,490 352,490
2025 6.00% to 6.10% 145,115 145,115
2025-2029 Variable (3.70% to 5.05% at 1/1/00) 475,765 475,765
2030-2034 Variable (3.70% to 5.05% at 1/1/00) 140,000 140,000
2034 5.25% to 5.45% 238,000 -
- ----------------------------------------------------------------------------------------------------------
Total pollution control bonds 1,674,190 1,671,190
- ----------------------------------------------------------------------------------------------------------
Senior notes -- (Note 9)
Maturity Interest Rates
-------- --------------
December 1, 2005 5.50% 150,000 150,000
December 31, 2038 6.60% 200,000 200,000
March 31, 2039 6.625% 100,000 -
December 31, 2047 6.875% 145,000 145,000
- ----------------------------------------------------------------------------------------------------------
Total senior notes 595,000 495,000
- ----------------------------------------------------------------------------------------------------------
Other long-term debt (Note 9) 85,851 86,280
- ----------------------------------------------------------------------------------------------------------
Unamortized debt discount, net (2,911) (4,679)
- ----------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $156,062,000) 2,844,130 3,143,791
Less amount due within one year (Note 9) 155,772 399,429
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt excluding amount due within one year $2,688,358 $2,744,362 36.2 % 38.0 %
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-95
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1999 and 1998
Georgia Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 9):
<S> <C> <C> <C> <C>
$25 liquidation value -- 9.00% $ - $ 100,000
$25 liquidation value -- 7.75% 225,000 225,000
$25 liquidation value -- 7.60% 175,000 175,000
$25 liquidation value -- 7.75% 189,250 189,250
$25 liquidation value -- 6.85% 200,000 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $59,104,000) 789,250 689,250 10.6 9.5
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock, without par value:
Authorized -- 55,000,000 shares
Outstanding -- 149,520 shares at December 31, 1999
Outstanding -- 511,834 shares at December 31, 1998
$100 stated value --
4.60% to 6.60% 14,952 51,183
- ----------------------------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock (annual dividend
requirement -- $688,000) 14,952 51,183
Less amount due within one year (Note 9) - 35,656
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock excluding amount due within one year 14,952 15,527 0.2 0.2
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity:
Common stock, without par value --
Authorized -- 15,000,000 shares
Outstanding -- 7,761,500 shares 344,250 344,250
Paid-in capital 1,815,983 1,660,206
Premium on preferred stock 40 158
Retained earnings (Note 9) 1,777,937 1,779,558
- -----------------------------------------------------------------------------------------------------------------------------------
Total common stockholder's equity (See accompanying statement) 3,938,210 3,784,172 53.0 52.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $ 7,430,770 $ 7,233,311 100.0 % 100.0 %
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-96
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1999, 1998, 1997
Georgia Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------
Premium on
Common Paid-In Preferred Retained
Stock Capital Stock Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $344,250 $2,134,886 $ 371 $1,674,774 $4,154,281
Net income after dividends on preferred stock - - - 593,996 593,996
Capital distributions to parent company - (205,000) - - (205,000)
Capital contributions from parent company - 85 - - 85
Cash dividends on common stock - - - (520,000) (520,000)
Preferred stock transactions, net - - (211) (3,423) (3,634)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 344,250 1,929,971 160 1,745,347 4,019,728
Net income after dividends on preferred stock - - - 570,228 570,228
Capital distributions to parent company - (270,000) - - (270,000)
Capital contributions from parent company - 235 - - 235
Cash dividends on common stock - - - (536,600) (536,600)
Preferred stock transactions, net - - (2) 583 581
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 344,250 1,660,206 158 1,779,558 3,784,172
Net income after dividends on preferred stock - - - 541,383 541,383
Capital contributions from parent company - 155,777 - - 155,777
Cash dividends on common stock - - - (543,000) (543,000)
Preferred stock transactions, net - - (118) (4) (122)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $344,250 $1,815,983 $ 40 $1,777,937 $3,938,210
==============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-97
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Georgia Power Company 1999 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
The Company is a wholly owned subsidiary of Southern Company, which is the
parent company of five integrated Southeast utilities, Southern Company Services
(SCS), a system service company, Southern Communications Services (Southern
LINC), Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating
Company (Southern Nuclear), Southern Company Energy Solutions, and other direct
and indirect subsidiaries. The integrated Southeast utilities (Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company,
and Savannah Electric and Power Company) provide electric service in four
states. Contracts among the integrated Southeast utilities - related to jointly
owned generating facilities, interconnecting transmission lines, and the
exchange of electric power -- are regulated by the Federal Energy Regulatory
Commission (FERC) or the Securities and Exchange Commission (SEC). SCS provides,
at cost, specialized services to Southern Company and subsidiary companies.
Southern LINC provides digital wireless communications services to the operating
companies and also markets these services to the public within the Southeast.
Southern Company Energy Solutions develops new business opportunities related to
energy products and services. Southern Nuclear provides services to Southern
Company's nuclear power plants. Southern Energy acquires, develops, builds,
owns, and operates power production and delivery facilities and provides a broad
range of energy-related services to utilities and industrial companies in
selected countries around the world. Southern Energy's businesses include
independent power projects, integrated utilities, a distribution company, and
energy trading and marketing businesses outside the Southeastern United States.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of this act. The Company is also
subject to regulation by the FERC and the Georgia Public Service Commission
(GPSC). The Company follows generally accepted accounting principles (GAAP) and
complies with the accounting policies and practices prescribed by the respective
regulatory commissions. The preparation of financial statements in conformity
with GAAP requires the use of estimates, and the actual results may differ from
these estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Related-Party Transactions
The Company has an agreement with SCS under which the following services are
rendered to the Company at cost: general and design engineering, purchasing,
accounting and statistical, finance and treasury, tax, information resources,
marketing, auditing, insurance and pension, human resources, systems and
procedures, and other services with respect to business and operations and power
pool operations. Costs for these services amounted to $253 million, $251
million, and $218 million during 1999, 1998, and 1997, respectively.
The Company has an agreement with Southern Nuclear under which the following
nuclear-related services are rendered to the Company at cost: general executive
and advisory services; general operations, management and technical services;
administrative services including procurement, accounting and statistical,
employee relations, and systems and procedures services; strategic planning and
budgeting services; and other services with respect to business and operations.
Costs for these services amounted to $270 million, $269 million, and $220
million during 1999, 1998, and 1997, respectively.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues associated with
certain costs that are expected to be recovered from customers through the
ratemaking process. Regulatory liabilities represent probable future reductions
in revenues associated with amounts that are expected to be credited to
customers through the ratemaking process. Pursuant to the terms of the GPSC's
1998 rate order, the Company recorded $85 million in 1999 of additional
amortization of premium on reacquired debt. See Note 3 under "Retail Rate
Orders" for additional information. Regulatory assets and (liabilities)
reflected in the Company's Balance Sheets at December 31 relate to the
following:
II-98
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
1999 1998
-----------------------
(in millions)
Deferred income taxes $ 591 $ 604
Deferred income tax credits (267) (284)
Premium on reacquired debt 99 174
Corporate building lease 54 53
Vacation pay 47 44
Postretirement benefits 33 36
Department of Energy assessments 24 26
Deferred nuclear outage costs 26 24
Other, net 3 12
- ---------------------------------------------------------------
Total $ 610 $ 689
===============================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of Statement No. 71, the Company would be required to write
off related regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine if any impairment to other assets exists, including plant, and
write down the assets, if impaired, to their fair value.
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Georgia, and to wholesale customers in the Southeast.
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. Fuel costs are expensed as the fuel is used. The Company's
electric rates include provisions to adjust billings for fluctuations in fuel
costs, the energy component of purchased power costs, and certain other costs.
Revenues are adjusted for differences between recoverable fuel costs and amounts
actually recovered in current rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts averaged less than 1 percent of revenues.
Fuel expense includes the amortization of the cost of nuclear fuel and a
charge, based on nuclear generation, for the permanent disposal of spent nuclear
fuel. Total charges for nuclear fuel included in fuel expense amounted to $74
million in 1999, $74 million in 1998, and $76 million in 1997. The Company has a
contract with the U.S. Department of Energy (DOE) that provides for the
permanent disposal of spent nuclear fuel. The DOE failed to begin disposing of
spent fuel in January 1998 as required by the contracts, and the Company is
pursuing legal remedies against the government for breach of contract.
Sufficient storage capacity currently is available to permit operation into 2003
at Plant Hatch and into 2017 at Plant Vogtle. Plant Vogtle's spent fuel storage
capacity includes the installation in 1998 of additional rack capacity.
Activities for adding dry cask storage capacity and potentially additional spent
fuel pool rack capacity at Plant Hatch during 2000 are in progress. In addition,
through Southern Nuclear, Georgia Power is a member of Private Fuel Storage,
LLC, a joint utility effort to develop a private spent fuel storage facility for
temporary storage of spent nuclear fuel. This facility is planned to begin
operation as early as the year 2003.
Also, the Energy Policy Act of 1992 required the establishment of a Uranium
Enrichment Decontamination and Decommissioning Fund, which is to be funded in
part by a special assessment on utilities with nuclear plants. This fund will be
used by the DOE for the decontamination and decommissioning of its nuclear fuel
enrichment facilities. The assessment will be paid over a 15-year period, which
began in 1993. The law provides that utilities will recover these payments in
the same manner as any other fuel expense. The Company -- based on its ownership
interests -- estimates its remaining liability under this law at December 31,
1999, to be approximately $21.4 million. This obligation is recorded in the
accompanying Balance Sheets.
Depreciation and Nuclear Decommissioning
Depreciation of the original cost of depreciable utility plant in service is
provided primarily by using composite straight-line rates, which approximated
3.3 percent in 1999, 3.2 percent in 1998, and 3.1 percent in 1997. In addition,
the Company recorded accelerated depreciation of electric plant of $314 million
in 1998 and $159 million in 1997. The Company did not record any accelerated
depreciation in 1999. These charges are recorded in the accumulated provision
for depreciation. See Note 3 under "Retail Rate Orders" for additional
information. When property subject to depreciation is retired or otherwise
disposed of in the normal course of business, its cost -- together with the cost
of removal, less salvage -- is charged to the accumulated provision for
depreciation. Minor items of property included in the original cost of the plant
are retired when the related property unit is retired. Depreciation expense
includes an amount for the expected costs of decommissioning nuclear facilities
and removal of other facilities.
II-99
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Nuclear Regulatory Commission (NRC) regulations require all licensees
operating commercial nuclear power reactors to establish a plan for providing,
with reasonable assurance, funds for decommissioning. The Company has
established external trust funds to comply with the NRC's regulations. Amounts
previously recorded in internal reserves are being transferred into the external
trust funds over a set period of time as ordered by the GPSC. Earnings on the
trust funds are considered in determining decommissioning expense. The NRC's
minimum external funding requirements are based on a generic estimate of the
cost to decommission the radioactive portions of a nuclear unit based on the
size and type of reactor. The Company has filed plans with the NRC to ensure
that -- over time -- the deposits and earnings of the external trust funds will
provide the minimum funding amounts prescribed by the NRC.
Site study cost is the estimate to decommission the facility as of the
site study year, and ultimate cost is the estimate to decommission the facility
as of its retirement date. The estimated site study costs based on the most
current study and ultimate costs assuming an inflation rate of 3.6 percent for
the Company's ownership interests are as follows:
Plant Plant
Hatch Vogtle
----------------------
Site study basis (year) 1997 1997
Decommissioning periods:
Beginning year 2014 2027
Completion year 2027 2038
- ---------------------------------------------------------------
(in millions)
Site study costs:
Radiated structures $372 $317
Non-radiated structures 33 44
- ---------------------------------------------------------------
Total $405 $361
===============================================================
(in millions)
Ultimate costs:
Radiated structures $722 $ 922
Non-radiated structures 65 129
- -------------------------------------------------------------
Total $787 $1,051
=============================================================
The decommissioning cost estimates are based on prompt dismantlement and
removal of the plant from service. The actual decommissioning costs may vary
from the above estimates because of changes in the assumed date of
decommissioning, changes in NRC requirements, changes in the assumptions used in
making estimates, changes in regulatory requirements, changes in technology, and
changes in costs of labor, materials, and equipment.
Annual provisions for nuclear decommissioning expense are based on an
annuity method as approved by the GPSC. The amounts expensed in 1999 and fund
balance as of December 31, 1999 were:
Plant Plant
Hatch Vogtle
- ---------------------------------------------------------------
(in millions)
Amount expensed in 1999 $ 17 $ 9
===============================================================
(in millions)
Accumulated provisions:
External trust funds, at fair value $222 $149
Internal reserves 22 12
- ---------------------------------------------------------------
Total $244 $161
===============================================================
Effective January 1, 1999, the GPSC increased the annual provision for
decommissioning expenses to $26 million from $20 million in 1998 and 1997. This
amount is based on the NRC generic estimate to decommission the radioactive
portion of the facilities as of 1997 of $526 million and $438 million for plants
Hatch and Vogtle, respectively. The ultimate costs associated with the 1997 NRC
minimum funding requirements are $1.1 billion and $1.3 billion for plants Hatch
and Vogtle, respectively. Significant assumptions include an estimated inflation
rate of 3.6 percent and an estimated trust earnings rate of 6.5 percent. The
Company expects the GPSC to periodically review and adjust, if necessary, the
amounts collected in rates for the anticipated cost of decommissioning.
Income Taxes
The Company uses the liability method of accounting for deferred income taxes
and provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property.
II-100
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. For the years 1999, 1998 and 1997, the average AFUDC rates
were 5.61 percent, 6.71 percent and 7.60 percent, respectively. AFUDC, net of
taxes, as a percentage of net income after dividends on preferred stock, was
less than 2.0 percent for 1999, 1998, and 1997.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost, less regulatory
disallowances and impairments. Original cost includes: materials; labor;
payroll-related costs such as taxes, pensions, and other benefits; and the cost
of funds used during construction. The cost of maintenance, repairs, and
replacement of minor items of property is charged to maintenance expense. The
cost of replacements of property (exclusive of minor items of property) is
capitalized.
Cash and Cash Equivalents
For purposes of the financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amounts did not
approximate fair value at December 31 were as follows:
Carrying Fair
Amount Value
------------------------
Long-term debt: (in millions)
At December 31, 1999 $2,758 $2,604
At December 31, 1998 3,058 3,105
Preferred securities:
At December 31, 1999 789 680
At December 31, 1998 689 716
- --------------------------------------------------------------
The fair values for securities were based on either closing market prices or
closing prices of comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost of transmission, distribution
and generating plant materials. Materials are charged to inventory when
purchased and then expensed or capitalized to plant, as appropriate, when
installed.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed pension plans that cover substantially
all employees. The Company provides certain medical care and life insurance
benefits for retired employees. Substantially all these employees may become
eligible for such benefits when they retire. The Company funds postretirement
trusts to the extent required by the GPSC and FERC. The measurement date for
plan assets and obligations is September 30 of each year.
The weighted average rates assumed in the actuarial calculations for both
the pension and postretirement benefit plans were:
1999 1998
- -----------------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00 4.25
Expected long-term return on plan
assets 8.50 8.50
- -----------------------------------------------------------------
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1999 1998
- ----------------------------------------------------------------
(in millions)
Balance at beginning of year $1,217 $1,119
Service cost 33 30
Interest cost 80 82
Benefits paid (57) (55)
Actuarial (gain) loss and
employee transfers (68) 41
- ----------------------------------------------------------------
Balance at end of year $1,205 $1,217
================================================================
II-101
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Plan Assets
---------------------------
1999 1998
- ----------------------------------------------------------------
(in millions)
Balance at beginning of year $1,859 $1,931
Actual return on plan assets 313 11
Benefits paid (57) (55)
Employee transfers (8) (28)
- ----------------------------------------------------------------
Balance at end of year $2,107 $1,859
================================================================
The accrued pension costs recognized in the Balance Sheets
were as follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $ 902 $ 642
Unrecognized transition obligation (30) (35)
Unrecognized prior service cost 41 45
Unrecognized net actuarial gain (767) (548)
- ---------------------------------------------------------------
Prepaid asset recognized in the
Balance Sheets $ 146 $ 104
===============================================================
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Service cost $ 33 $ 30 $ 30
Interest cost 80 82 82
Expected return on plan assets (137) (127) (121)
Recognized net actuarial gain (17) (20) (18)
Net amortization (1) (1) (1)
- ---------------------------------------------------------------
Net pension income $ (42) $ (36) $ (28)
===============================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
---------------------------
1999 1998
- ----------------------------------------------------------------
(in millions)
Balance at beginning of year $464 $435
Service cost 8 7
Interest cost 30 32
Benefits paid (19) (16)
Actuarial loss and employee
transfers (45) 6
- ----------------------------------------------------------------
Balance at end of year $438 $464
=================================================================
Plan Assets
---------------------------
1999 1998
- ----------------------------------------------------------------
(in millions)
Balance at beginning of year $150 $122
Actual return on plan assets 11 4
Employer contributions 35 40
Benefits paid (19) (16)
- ----------------------------------------------------------------
Balance at end of year $177 $150
================================================================
The accrued postretirement costs recognized in the Balance Sheets were
as follows:
1999 1998
- ---------------------------------------------------------------
(in millions)
Funded status $(261) $(314)
Unrecognized transition obligation 122 131
Unrecognized net actuarial loss 10 57
Fourth quarter contributions 14 19
- ---------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $(115) $(107)
===============================================================
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
(in millions)
Service cost $ 8 $ 7 $ 7
Interest cost 30 32 32
Expected return on plan assets (10) (9) (7)
Recognized net actuarial loss 1 1 1
Net amortization 9 9 9
- ---------------------------------------------------------------
Net postretirement cost $ 38 $40 $42
===============================================================
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.50 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows:
1 Percent 1 Percent
Increase Decrease
- ---------------------------------------------------------------
(in millions)
Benefit obligation $ 36 $ (30)
Service and interest costs 3 (3)
===============================================================
II-102
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
3. CONTINGENCIES & REGULATORY MATTERS
Retail Rate Orders
On December 18, 1998, the GPSC approved a new three-year rate order for the
Company. Under terms of the order, earnings will continue to be evaluated
against a retail return on common equity range of 10 percent to 12.5 percent.
Retail rates were decreased by $262 million on an annual basis effective January
1, 1999, and by an additional $24 million effective January 1, 2000. The order
further provides for $85 million in each year, plus up to $50 million of any
earnings above the 12.5 percent return during the second and third years, to be
applied to accelerated amortization or depreciation of assets. Two-thirds of any
additional earnings above the 12.5 percent return will be applied to rate
reductions, with the remaining one-third retained by the Company. Pursuant to
the order, in 1999 the Company recorded $85 million in accelerated amortization
of premium on reacquired debt. The Company also recorded $79 million of revenue
subject to refund for estimated earnings above 12.5 percent retail return on
common equity. Refunds will be made to customers in 2000. This refund is
presented in the financial statements under other current liabilities on the
Balance Sheet. The Company will not file for a general base rate increase unless
its projected retail return on common equity falls below 10 percent, and is
required to file a general rate case on July 1, 2001, in response to which the
GPSC would be expected to determine whether the rate order should be continued,
modified, or discontinued.
Under a previous three-year accounting order ending December 1998, the
Company's earnings were evaluated against a retail return on common equity range
of 10 percent to 12.5 percent. Earnings above 12.5 percent were used to
accelerate the amortization of regulatory assets or depreciation of electric
plant. Additionally, the Company was required to record $14 million annually of
accelerated depreciation of electric plant. During 1998 and 1997, for earnings
above the 12.5 percent retail return, the Company recorded charges of $292
million and $135 million, respectively. These charges are presented in the
financial statements as depreciation expense of electric plant and as an
addition to the accumulated provision for depreciation.
Environmental Protection Agency (EPA) Litigation
On November 3, 1999, the EPA brought a civil action in the U.S. District Court
for the Northern District of Georgia. 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 the Company's
Bowen and Scherer plants. The civil action requests penalties and injunctive
relief, including an order requiring the installation of the best available
control technology at the affected units beginning at the point of the alleged
violations. The Clean Air Act authorizes civil penalties of up to $27,500 per
day, per violation at each generating unit. Prior to January 30, 1997, the
penalty was $25,000 per day.
The EPA concurrently issued a notice of violation to the Company relating to
these two plants. In early 2000, the EPA filed a motion to amend its complaint
to add the violations alleged in its notice of violation. The complaint and the
notice of violation are similar to those brought against and issued to several
other electric utilities. The complaint and the notice of violation allege that
the Company 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. The Company 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
An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows and possibly financial condition unless such costs can be recovered
through regulated rates.
Other Environmental Contingencies
The State of Georgia submitted a plan for nitrogen oxide emission reductions in
Atlanta's ozone non-attainment area on October 29, 1999. The EPA found this plan
to be deficient and required the State to address the shortfalls of the plan.
Based on the revised plan approved by the Georgia Department of Natural
Resources on January 26, 2000, the Company estimates its capital costs to comply
with the plan to be approximately $713 million through 2003, of which $705
million remains to be spent. It is still uncertain at this time what additional
controls may be required at the Company's plants beyond the recently submitted
plan.
In January 1995, the Company and four other unrelated entities were notified
by the EPA that they have been designated as potentially responsible parties
under the Comprehensive Environmental Response, Compensation and Liability Act
II-103
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
with respect to a site in Brunswick, Georgia. As of December 31, 1999, the
Company has recognized approximately $5 million in cumulative expenses
associated with this site. This represents the Company's agreed upon share of
removal and remedial investigation and feasibility study costs. The final
outcome of this matter cannot now be determined. However, based on the nature
and extent of the Company's activities relating to the site, management believes
that the Company's portion of any remaining remediation costs should not be
material.
In compliance with the Georgia Hazardous Site Response Act of 1993, the
State of Georgia was required to compile an inventory of all known or suspected
sites where hazardous wastes, constituents or substances have been disposed of
or released in quantities deemed reportable by the State. In developing this
list, the State identified several hundred properties throughout the State,
including 31 sites which may require environmental remediation that were either
previously or are currently owned by the Company. The majority of these sites
are electrical power substations and power generation facilities. The Company
has remediated ten electrical substations on the list at a cumulative cost of
approximately $3 million through December 31, 1999. The State has removed from
the list two power generation facilities following the assessment which
indicated no remediation was necessary. In addition, the Company has recognized
approximately $26 million in cumulative expenses through December 31, 1999 for
the assessment of the remaining sites on the list and the anticipated clean-up
cost for 12 sites that the Company plans to remediate. Any cost of remediating
the remaining sites cannot presently be determined until such studies are
completed for each site and the State determines whether remediation is
required. If all listed sites were required to be remediated, the Company could
incur expenses of up to approximately $6 million in additional clean-up costs
and construction expenditures of up to approximately $37 million to develop new
waste management facilities or install additional pollution control devices.
The accrued costs for environmental remediation obligations are not
discounted to their present value.
Rocky Mountain Status
In June 1996, the GPSC initiated a review of the Rocky Mountain plant. On
January 14, 1998, the GPSC ordered that the Company be allowed approximately
$108 million of its $142 million investment in the plant in rate base as of
December 31, 1998. Under the rate order approved by the GPSC on December 18,
1998, the Company accepted the rate base allowance and, in December 1998,
recorded a charge to earnings of $21 million, after taxes, associated with the
write-down of the plant.
Tax Litigation
In August 1997, Southern Company and the Internal Revenue Service (IRS) entered
into a settlement agreement related to tax issues for the years 1984 through
1987. The agreement received final approval by the Joint Congressional Committee
on Taxation in June 1998 and as a result, the Company recognized interest income
in 1998 of $69 million. The refund by the IRS has been made and this matter is
now concluded.
Additionally, the Company received a refund from the State of Georgia
pertaining to the same issues and recognized an additional $4 million in
interest income in 1998.
Nuclear Performance Standards
The GPSC has adopted a nuclear performance standard for the Company's nuclear
generating units under which the performance of plants Hatch and Vogtle is
evaluated every three years. The performance standard is based on each unit's
capacity factor as compared to the average of all comparable U.S. nuclear units
operating at a capacity factor of 50 percent or higher during the three-year
period of evaluation. Depending on the performance of the units, the Company
could receive a monetary award or penalty under the performance standards
criteria.
In January 1997, the GPSC approved a performance award of approximately
$11.7 million for performance during the 1993-1995 period. This award was
collected through the retail fuel cost recovery provision and recognized in
income over the 36-month period ending in December 1999. In February 2000, the
GPSC approved a performance award of approximately $7.8 million for performance
during the 1996-1998 period. This award is being collected through the retail
fuel cost recovery provision and recognized in income over a 36-month period
that began in January 2000.
II-104
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
4. COMMITMENTS
Construction Program
The Company is constructing a ten unit, 800 megawatt combustion turbine peaking
power plant. Units one through eight will begin operation in 2000; units nine
and ten will begin operation in 2001. The Company also plans to construct a 570
megawatt combined cycle unit that will begin operation in 2002, and an addition
of two 568 megawatt combined cycle units at Plant Wansley, to begin operation in
2002. In addition, significant construction of transmission and distribution
facilities, and projects to upgrade and extend the useful life of generating
plants and to remain in compliance with environmental requirements will
continue. The Company currently estimates property additions to be approximately
$1.2 billion in 2000, $1.5 billion in 2001, and $1.5 billion in 2002.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from estimates because of numerous factors,
including, but not limited to, changes in business conditions, load growth
estimates, environmental regulations, and regulatory requirements.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into various long-term commitments for the procurement of
fossil and nuclear fuel. In most cases, these contracts contain provisions for
price escalations, minimum purchase levels and other financial commitments.
Total estimated long-term fossil and nuclear fuel commitments at December 31,
1999 were as follows:
Minimum
Year Obligations
- ---- ------------
(in millions)
2000 $ 659
2001 475
2002 381
2003 328
2004 300
2005 and beyond 787
- ----------------------------------------------------------------
Total minimum obligations $2,930
================================================================
Additional commitments for coal and for nuclear fuel will be required in the
future to supply the Company's fuel needs.
Purchased Power Commitments
The Company and an affiliate, Alabama Power Company, own equally all of the
outstanding capital stock of Southern Electric Generating Company (SEGCO), which
owns electric generating units with a total rated capacity of 1,020 megawatts,
as well as associated transmission facilities. The capacity of the units has
been sold equally to the Company and Alabama Power Company under a contract
which, in substance, requires payments sufficient to provide for the operating
expenses, taxes, debt service and return on investment, whether or not SEGCO has
any capacity and energy available. The term of the contract extends
automatically for two-year periods, subject to either party's right to cancel
upon two year's notice. The Company's share of expenses included in purchased
power from affiliates in the Statements of Income, is as follows:
1999 1998 1997
---------------------------------
(in millions)
Energy $51 $45 $45
Capacity 29 30 30
- --------------------------------------------------------------
Total $80 $75 $75
==============================================================
Kilowatt-hours 3,338 3,146 3,038
- --------------------------------------------------------------
The Company has commitments regarding a portion of a 5 percent interest in
Plant Vogtle owned by MEAG that are in effect until the latter of the retirement
of the plant or the latest stated maturity date of MEAG's bonds issued to
finance such ownership interest. The payments for capacity are required whether
or not any capacity is available. The energy cost is a function of each unit's
variable operating costs. Except as noted below, the cost of such capacity and
energy is included in purchased power from non-affiliates in the Company's
Statements of Income. Capacity payments totaled $57 million, $56 million, and
$54 million in 1999, 1998, and 1997, respectively. The current projected Plant
Vogtle capacity payments are:
Year Capacity Payments
- ---- ----------------------
(in millions)
2000 $ 60
2001 59
2002 58
2003 58
2004 55
2005 and beyond 594
- ----------------------------------------------------------------
Total capacity payments $ 884
================================================================
II-105
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Portions of the payments noted above relate to costs in excess of Plant
Vogtle's allowed investment for ratemaking purposes. The present value of these
portions was written off in 1987 and 1990.
The Company has entered into other various long-term commitments for the
purchase of electricity. Estimated total long-term obligations at December 31,
1999 were as follows:
Year Other Obligations
- --- ----------------------
(in millions)
2000 $ 21
2001 22
2002 39
2003 41
2004 40
2005 and beyond 412
- ----------------------------------------------------------------
Total other obligations $ 575
================================================================
Operating Leases
The Company has entered into coal rail car rental agreements with various terms
and expiration dates. These expenses totaled $11 million for 1999, $13 million
for 1998, and $11 million for 1997. At December 31, 1999, estimated minimum
rental commitments for these noncancelable operating leases were as follows:
Year Minimum Obligations
- ---- --------------------------
(in millions)
2000 $ 12
2001 13
2002 13
2003 13
2004 13
2005 and beyond 115
- -----------------------------------------------------------------
Total minimum obligations $ 179
=================================================================
5. NUCLEAR INSURANCE
Under the Price-Anderson Amendments Act of 1988, the Company maintains
agreements of indemnity with the NRC that, together with private insurance,
cover third-party liability arising from any nuclear incident occurring at the
Company's nuclear power plants. The act provides funds up to $9.5 billion for
public liability claims that could arise from a single nuclear incident. Each
nuclear plant is insured against this liability to a maximum of $200 million by
private insurance, with the remaining coverage provided by a mandatory program
of deferred premiums that could be assessed, after a nuclear incident, against
all owners of nuclear reactors. The Company could be assessed up to $88 million
per incident for each licensed reactor it operates but not more than an
aggregate of $10 million per incident to be paid in a calendar year for each
reactor. Such maximum assessment for the Company, excluding any applicable state
premium taxes, -- based on its ownership and buyback interests -- is $178
million per incident but not more than an aggregate of $20 million to be paid
for each incident in any one year.
The Company is a member of Nuclear Electric Insurance Limited (NEIL), a
mutual insurer established to provide property damage insurance in an amount up
to $500 million for members' nuclear generating facilities.
Additionally, the Company has policies that currently provide
decontamination, excess property insurance, and premature decommissioning
coverage up to $2.25 billion for losses in excess of the $500 million primary
coverage. This excess insurance is also provided by NEIL.
NEIL also covers the additional costs that would be incurred in obtaining
replacement power during a prolonged accidental outage at a member's nuclear
plant. Members can be insured against increased costs of replacement power in an
amount up to $3.5 million per week -- starting 12 weeks after the outage -- for
one year and up to $2.8 million per week for the second and third years.
Under each of the NEIL policies, members are subject to assessments if
losses each year exceed the accumulated funds available to the insurer under
that policy. The current maximum annual assessments for the Company under the
three NEIL policies would be $21 million.
For all on-site property damage insurance policies for commercial nuclear
power plants, the NRC requires that the proceeds of such policies should be
dedicated first for the sole purpose of placing the reactor in a safe and stable
condition after an accident. Any remaining proceeds are to be applied next
toward the costs of decontamination and debris removal operations ordered by the
NRC, and any further remaining proceeds are to be paid either to the Company or
to its bond trustees as may be appropriate under the policies and applicable
trust indentures.
All retrospective assessments, whether generated for liability, property or
replacement power, may be subject to applicable state premium taxes.
II-106
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
6. JOINT OWNERSHIP AGREEMENTS
Except as otherwise noted, the Company has contracted to operate and maintain
all jointly owned generating facilities. The Company includes its proportionate
share of plant operating expenses in the corresponding operating expenses in the
Statements of Income.
The Company jointly owns the Rocky Mountain pumped storage hydroelectric
plant with OPC who is the operator of the plant. The Company also jointly owns
Plant McIntosh with Savannah Electric and Power Company who operates the plant.
The Company and Florida Power Corporation (FPC) jointly own a combustion turbine
unit operated by FPC.
At December 31, 1999, the Company's percentage ownership and investment
(exclusive of nuclear fuel) in jointly owned facilities in commercial operation,
were as follows:
Company Accumulated
Facility (Type) Ownership Investment Depreciation
- --------------------------------------------------------------------
(in millions)
Plant Vogtle (nuclear) 45.7% $3,297* $1,630
Plant Hatch (nuclear) 50.1 857 604
Plant Wansley (coal) 53.5 299 145
Plant Scherer (coal)
Units 1 and 2 8.4 112 51
Unit 3 75.0 544 193
Plant McIntosh
Common Facilities 75.0 19 1
(combustion-turbine)
Rocky Mountain 25.4 169* 66
(pumped storage)
Intercession City 33.3 11 **
(combustion-turbine)
- --------------------------------------------------------------------
* Investment net of write-offs.
** Less than $1 million.
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the other integrated Southeast utilities of Southern Company
have long-term contractual agreements for the sale of capacity and energy to
non-affiliated utilities located outside the system's service area. These
agreements consist of firm unit power sales pertaining to capacity from specific
generating units. Because energy is generally sold at cost under these
agreements, it is primarily the capacity revenues that affect the Company's
profitability.
The Company's capacity revenues were as follows:
Year Revenues Capacity
-------------------------------------
(in millions) (megawatts)
1999 $ 32 162
1998 32 162
1997 42 159
-------------------------------------
Unit power from specific generating plants is being sold to Florida Power &
Light Company (FP&L), FPC, Jacksonville Electric Authority (JEA), and the City
of Tallahassee, Florida. Under these agreements, the Company sold approximately
162 megawatts of capacity in 1999 and is scheduled to sell approximately 124
megawatts of capacity in 2000. After 2000, capacity sales will decline to
approximately 101 megawatts -- unless reduced by FP&L, FPC, and JEA -- until the
expiration of the contracts in 2010.
8. INCOME TAXES
At December 31, 1999, tax-related regulatory assets were $591 million and
tax-related regulatory liabilities were $267 million. The assets are
attributable to tax benefits flowed through to customers in prior years and to
taxes applicable to capitalized AFUDC. The liabilities are attributable to
deferred taxes previously recognized at rates higher than current enacted tax
law and to unamortized investment tax credits.
Details of the federal and state income tax provisions are as follows:
1999 1998 1997
-------------------------------
Total provision for income taxes: (in millions)
Federal:
Currently payable $ 333 $415 $352
Deferred -
Current year 114 131 49
Reversal of prior years (148) (218) (68)
Deferred investment tax
credits - 7 -
- -----------------------------------------------------------------
299 335 333
- -----------------------------------------------------------------
State:
Currently payable 54 77 65
Deferred -
Current year 5 18 8
Reversal of prior years (11) (31) (11)
Deferred investment tax
credits 5 - -
- -----------------------------------------------------------------
53 64 62
- -----------------------------------------------------------------
Total 352 399 395
=================================================================
II-107
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1999 1998
-------------------
(in millions)
Deferred tax liabilities:
Accelerated depreciation $1,766 $1,670
Property basis differences 729 854
Other 155 158
- -----------------------------------------------------------------
Total 2,650 2,682
- -----------------------------------------------------------------
Deferred tax assets:
Other property basis differences 200 211
Federal effect of state deferred taxes 93 95
Other deferred costs 109 96
Disallowed Plant Vogtle buybacks 22 23
Other 26 21
- -----------------------------------------------------------------
Total 450 446
- -----------------------------------------------------------------
Net deferred tax liabilities 2,200 2,236
Portion included in current assets 3 13
- -----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $2,203 $2,249
=================================================================
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $20 million in 1999, $22 million in 1998, and $15 million in 1997.
At December 31, 1999, all investment tax credits available to reduce federal
income taxes payable had been utilized.
A reconciliation of the federal statutory tax rate to the effective income
tax rate is as follows:
1999 1998 1997
--------------------------
Federal statutory rate 35% 35% 35%
State income tax, net of
federal deduction 4 4 4
Non-deductible book
depreciation 2 6 4
Other (2) (4) (4)
- ---------------------------------------------------------------
Effective income tax rate 39% 41% 39%
===============================================================
Southern Company and its subsidiaries file a consolidated federal income tax
return. Under a joint consolidated income tax agreement, each subsidiary's
current and deferred tax expense is computed on a stand-alone basis.
9. CAPITALIZATION
First Mortgage Bond Indenture & Charter Restrictions
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
The Company's first mortgage bond indenture contains various restrictions
that remain in effect as long as the bonds are outstanding. At December 31,
1999, $881 million of retained earnings and paid-in capital was unrestricted for
the payment of cash dividends or any other distributions under terms of the
mortgage indenture. If additional first mortgage bonds are issued, supplemental
indentures in connection with those issues may contain more stringent
restrictions than those currently in effect.
Preferred Securities
Statutory business trusts formed by the Company, of which the Company owns all
the common securities, have issued mandatorily redeemable preferred securities
as follows:
Date of Maturity
Issue Amount Rate Notes Date
---------------------------------------------------
(millions) (millions)
Trust I 8/1996 $225.00 7.75% $232 6/2036
Trust II 1/1997 175.00 7.60 180 12/2036
Trust III 6/1997 189.25 7.75 195 3/2037
Trust IV 2/1999 200.00 6.85 206 3/2029
Substantially all of the assets of each trust are junior subordinated notes
issued by the Company in the respective approximate principal amounts set forth
above.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of the Trusts' payment obligations with respect to the
preferred securities.
The Trusts are subsidiaries of the Company, and accordingly are consolidated
in the Company's financial statements.
II-108
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Pollution Control Bonds
The Company has incurred obligations in connection with the sale by public
authorities of tax-exempt pollution control revenue bonds. The Company has
authenticated and delivered to trustees an aggregate of $457.5 million of its
first mortgage bonds outstanding at December 31, 1999, which are pledged as
security for its obligations under pollution control revenue contracts. No
interest on these first mortgage bonds is payable unless and until a default
occurs on the installment purchase or loan agreements.
Senior Notes
The Company incurred debt in connection with the issuance of unsecured senior
notes. The senior notes are, in effect, subordinated to all secured debt of the
Company, including its first mortgage bonds.
Bank Credit Arrangements
At the beginning of 2000, the Company had unused credit arrangements with banks
totaling $1.3 billion, of which $752 million expires at various times during
2000, and $500 million expires at April 24, 2003.
Of the total $1.3 billion in unused credit, $1 billion is a syndicated
credit arrangement with $500 million expiring April 20, 2000, and $500 million
expiring April 24, 2003. Both agreements provide the option of converting
borrowings into two-year term loans upon expiration date. The agreements contain
stated borrowing rates but also allow for competitive bid loans. In addition,
the agreements require payment of commitment fees based on the unused portions
of the commitments. Annual fees are also paid to the agent bank.
Approximately $162 million of the $752 million arrangements expiring during
2000 allow for two-year term loans executable upon expiration date of the
facilities. The $30 million credit arrangement expiring at May 1, 2000, allows
for term loans of up to three years. All of the arrangements include stated
borrowing rates but also allow for negotiated rates. These agreements also
require payment of commitment fees based on the unused portion of the
commitments or the maintenance of compensating balances with the banks. These
balances are not legally restricted from withdrawal.
These unused credit arrangements provide liquidity support to the Company's
variable rate pollution control bonds. The amount of variable rate pollution
control bonds outstanding requiring that liquidity support as of December 31,
1999, was $250 million.
In addition, the Company borrows under uncommitted lines of credit with
banks and through a $500 million commercial paper program that has the liquidity
support of committed bank credit arrangements. Average compensating balances
held under these committed facilities were not material in 1999.
Other Long-Term Debt
Assets acquired under capital leases are recorded in the Balance Sheets as
utility plant in service, and the related obligations are classified as
long-term debt. At December 31, 1999 and 1998, the Company had a capitalized
lease obligation for its corporate headquarters building of $87 million with an
interest rate of 8.1 percent. The lease agreement provides for payments that are
minimal in early years and escalate through the first 21 years of the lease. For
ratemaking purposes, the GPSC has treated the lease as an operating lease and
has allowed only the lease payments in cost of service. The difference between
the accrued expense and the lease payments allowed for ratemaking purposes is
being deferred as a cost to be recovered in the future as ordered by the GPSC.
At December 31, 1999 and 1998, the interest and lease amortization deferred on
the Balance Sheets are $54 million and $53 million, respectively.
Assets Subject to Lien
The Company's mortgage dated as of March 1, 1941, as amended and supplemented,
securing the first mortgage bonds issued by the Company, constitutes a direct
lien on substantially all of the Company's fixed property and franchises.
II-109
<PAGE>
NOTES (continued)
Georgia Power Company 1999 Annual Report
Securities Due Within One Year
A summary of the improvement fund requirements and scheduled maturities and
redemptions of securities due within one year at December 31 is as follows:
1999 1998
------------------
(in millions)
Bond improvement fund requirements $ 5 $ 9
Capital lease - current portion 1 -
First mortgage bond maturities
and redemptions 100 390
Pollution control bond maturities
and redemptions 50 -
- ---------------------------------------------------------------
Total long-term debt 156 399
Preferred stock - 36
- ---------------------------------------------------------------
Total $156 $435
===============================================================
The Company's first mortgage bond indenture includes an improvement fund
requirement that amounts to 1 percent of each outstanding series of bonds
authenticated under the indenture prior to January 1 of each year, other than
those issued to collateralize pollution control obligations. The requirement may
be satisfied by June 1 of each year by depositing cash, reacquiring bonds, or by
pledging additional property equal to 1 2/3 times the requirement.
Redemption of Securities
The Company plans to continue, to the extent possible, a program of redeeming or
replacing debt and preferred stock in cases where opportunities exist to reduce
financing costs. Issues may be repurchased in the open market or called at
premiums as specified under terms of the issue. They may also be redeemed at
face value to meet improvement fund requirements, to meet replacement provisions
of the mortgage, or through use of proceeds from the sale of property pledged
under the mortgage. In general, for the first five years a series of first
mortgage bonds is outstanding, the Company is prohibited from redeeming for
improvement fund purposes more than 1 percent annually of the original issue
amount.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial information for 1999 and 1998 is as follows:
Net Income
After
Dividends on
Operating Operating Preferred
Quarter Ended Revenues Income Stock
- ---------------------------------------------------------------------
(in millions)
--------------------------------------------
March 1999 $ 931 $224 $ 92
June 1999 1,092 299 138
September 1999 1,466 557 296
December 1999 968 200 15
March 1998 $ 984 $257 $ 106
June 1998 1,226 286 137
September 1998 1,530 514 255
December 1998 998 143 72
- ---------------------------------------------------------------------
Under the 1998 rate order, the Company recorded $85 million of accelerated
amortization which was recorded monthly throughout 1999 as an operating expense.
See Note 3 to the financial statements under "Retail Rate Orders" for additional
information. In December 1999, in accordance with the order, the Company
reclassified this $85 million to amortization of premium on reacquired debt. The
1999 fourth quarter operating income reflects this reclassification.
The quarterly operating income data above has been reclassified to reflect
the Company's current presentation of income tax expense.
The Company's business is influenced by seasonal weather conditions.
II-110
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999
Georgia Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands) $4,456,675 $4,738,253 $4,385,717 $4,416,779 $4,405,338
Net Income after Dividends
on Preferred Stock (in thousands) $541,383 $570,228 $593,996 $580,327 $608,862
Cash Dividends
on Common Stock (in thousands) $543,000 $536,600 $520,000 $475,500 $451,500
Return on Average Common Equity (percent) 14.02 14.61 14.53 13.73 14.43
Total Assets (in thousands) $12,276,860 $12,033,618 $12,573,728 $13,006,635 $13,470,275
Gross Property Additions (in thousands) $790,464 $499,053 $475,921 $428,220 $480,449
- --------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $3,938,210 $3,784,172 $4,019,728 $4,154,281 $4,299,012
Preferred stock 14,952 15,527 157,247 464,611 692,787
Company obligated mandatorily
redeemable preferred securities 789,250 689,250 689,250 325,000 100,000
Long-term debt 2,688,358 2,744,362 2,982,835 3,200,419 3,315,460
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $7,430,770 $7,233,311 $7,849,060 $8,144,311 $8,407,259
================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 53.0 52.3 51.2 51.0 51.1
Preferred stock 0.2 0.2 2.0 5.7 8.2
Company obligated mandatorily
redeemable preferred securities 10.6 9.5 8.8 4.0 1.2
Long-term debt 36.2 38.0 38.0 39.3 39.5
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0
================================================================================================================================
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1 A1
Standard and Poor's A+ A+ A+ A+ A+
Duff & Phelps AA- AA- AA- AA- AA-
Preferred Stock -
Moody's a2 a2 a2 a2 a2
Standard and Poor's A- A A A A
Duff & Phelps A+ A+ A+ A+ A
Unsecured Long-Term Debt -
Moody's A2 A2 A2 A2 A2
Standard and Poor's A A A A A
Duff & Phelps A+ A+ A+ A+ A+
================================================================================================================================
Customers (year-end):
Residential 1,632,450 1,596,488 1,561,675 1,531,453 1,500,024
Commercial 229,524 221,180 211,672 205,087 198,624
Industrial 8,958 9,485 9,988 10,424 10,796
Other 3,060 3,034 2,748 2,645 2,568
- --------------------------------------------------------------------------------------------------------------------------------
Total 1,873,992 1,830,187 1,786,083 1,749,609 1,712,012
================================================================================================================================
Employees (year-end): 8,961 8,371 8,354 10,346 11,061
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-111
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Georgia Power Company 1999 Annual Report
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands):
Residential $ 1,410,099 $1,486,699 $ 1,326,787 $ 1,371,033 $ 1,337,060
Commercial 1,527,880 1,591,363 1,493,353 1,486,586 1,449,108
Industrial 1,143,001 1,170,881 1,110,311 1,118,633 1,141,766
Other (30,892) 49,274 47,848 47,060 44,255
- -------------------------------------------------------------------------------------------------------------------------------
Total retail 4,050,088 4,298,217 3,978,299 4,023,312 3,972,189
Sales for resale - non-affiliates 210,104 259,234 282,365 281,580 290,302
Sales for resale - affiliates 76,426 81,606 38,708 35,886 76,906
- -------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 4,336,618 4,639,057 4,299,372 4,340,778 4,339,397
Other revenues 120,057 99,196 86,345 76,001 65,941
- -------------------------------------------------------------------------------------------------------------------------------
Total $4,456,675 $4,738,253 $4,385,717 $4,416,779 $4,405,338
===============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 19,404,709 19,481,486 17,295,022 17,826,451 17,307,399
Commercial 23,715,485 22,861,391 21,134,346 20,823,073 19,844,999
Industrial 27,300,355 27,283,147 26,701,685 26,191,831 25,286,340
Other 551,451 543,462 538,163 536,057 493,720
- -------------------------------------------------------------------------------------------------------------------------------
Total retail 70,972,000 70,169,486 65,669,216 65,377,412 62,932,458
Sales for resale - non-affiliates 5,060,931 6,438,891 6,795,300 7,868,342 6,591,841
Sales for resale - affiliates 1,795,243 2,038,400 1,706,699 1,180,207 2,738,947
- -------------------------------------------------------------------------------------------------------------------------------
Total 77,828,174 78,646,777 74,171,215 74,425,961 72,263,246
===============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.27 7.63 7.67 7.69 7.73
Commercial 6.44 6.96 7.07 7.14 7.30
Industrial 4.19 4.29 4.16 4.27 4.52
Total retail 5.71 6.13 6.06 6.15 6.31
Sales for resale 4.18 4.02 3.78 3.51 3.94
Total sales 5.57 5.90 5.80 5.83 6.00
Residential Average Annual
Kilowatt-Hour Use Per Customer 12,006 12,314 11,171 11,763 11,654
Residential Average Annual
Revenue Per Customer $872.47 $939.73 $857.01 $904.70 $900.28
Plant Nameplate Capacity
Ratings (year-end) (megawatts) 14,474 14,437 14,437 14,367 14,344
Maximum Peak-Hour Demand (megawatts):
Winter 11,568 11,959 10,407 10,410 9,819
Summer 14,575 13,923 13,153 12,914 12,828
Annual Load Factor (percent) 58.9 58.7 57.4 62.2 59.6
Plant Availability (percent):
Fossil-steam 84.3 86.0 85.8 85.2 85.8
Nuclear 89.3 91.6 88.8 89.3 91.8
- -------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 63.0 62.3 64.3 60.4 63.0
Nuclear 18.0 18.3 18.8 18.2 19.3
Hydro 0.9 2.2 2.2 2.2 2.5
Oil and gas 1.6 2.2 0.6 0.5 0.6
Purchased power -
From non-affiliates 6.6 6.5 2.7 5.6 7.7
From affiliates 9.9 8.5 11.4 13.1 6.9
- -------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
===============================================================================================================================
</TABLE>
II-112
<PAGE>
GULF POWER COMPANY
FIANANCIAL SECTION
II-113
<PAGE>
MANAGEMENT'S REPORT
Gulf Power Company 1999 Annual Report
The management of Gulf Power Company has prepared -- and is responsible for --
the financial statements and related information included in this report. These
statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on the best estimates and judgments of management. Financial
information throughout this annual report is consistent with the financial
statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of directors who are
not employees, provides a broad overview of management's financial reporting and
control functions. Periodically, this committee meets with management, the
internal auditors, and the independent public accountants to ensure that these
groups are fulfilling their obligations and to discuss auditing, internal
controls, and financial reporting matters. The internal auditors and independent
public accountants have access to the members of the audit committee at any
time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Gulf Power Company in conformity with generally accepted accounting
principles.
/s/Travis J. Bowden
Travis J. Bowden
President
and Chief Executive Officer
/s/Arlan E. Scarbrough
Arlan E. Scarbrough
Chief Financial Officer
February 16, 2000
II-114
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gulf Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Gulf Power Company (a Maine corporation and a wholly owned subsidiary of
Southern Company) as of December 31, 1999 and 1998, and the related statements
of income, common stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements (pages 11-124 through II-139)
referred to above present fairly, in all material respects, the financial
position of Gulf Power Company as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
II-115
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1999 Annual Report
RESULTS OF OPERATIONS
Earnings
Gulf Power Company's 1999 net income after dividends on preferred stock was
$53.7 million, a decrease of $2.8 million from the previous year. In 1998,
earnings were $56.5 million, down $1.1 million when compared to 1997. The
decrease in earnings in 1999, as well as 1998, was primarily a result of higher
expenses than in the prior year.
Revenues
Operating revenues increased in 1999 and 1998 when compared to 1998 and 1997,
respectively. The following table summarizes the factors impacting operating
revenues for the past three years:
Increase (Decrease)
From Prior Year
---------------------------------------
1999 1998 1997
---------------------------------------
(in thousands)
Retail --
Growth and
price change $10,348 $15,021 $ 4,005
Weather (7,879) 6,656 (5,277)
Regulatory cost
recovery and other 1,173 (34,179) (7,837)
- --------------------------------------------------------------------
Total retail 3,642 (12,502) (9,109)
- --------------------------------------------------------------------
Sales for resale--
Non-affiliates 461 (1,804) 496
Affiliates 23,468 25,882 (1,002)
- --------------------------------------------------------------------
Total sales for resale 23,929 24,078 (506)
Other operating
revenues (3,990) 13,086 1,106
- --------------------------------------------------------------------
Total operating
revenues $23,581 $24,662 $(8,509)
====================================================================
Percent change 3.6% 3.9% (1.3)%
- --------------------------------------------------------------------
Retail revenues of $512.8 million in 1999 increased $3.6 million, or 0.7
percent, from the prior year due primarily to an increase in the number of
retail customers served by the Company. Retail revenues for 1998 decreased $12.5
million, or 2.4 percent, when compared to 1997 due primarily to the recovery of
lower fuel costs. The price per ton of coal, which is the Company's primary fuel
source, was lower in 1998 as the costs related to prior year coal contract
renegotiations were fully amortized and a major coal contract price was reduced.
See Note 5 to the financial statements under "Fuel Committments" for further
information.
The 1999 increase in regulatory cost recovery and other retail revenues over
1998 is primarily attributable to the recovery of increased purchased power
capacity costs. The 1998 decrease in regulatory cost recovery and other retail
revenues over 1997 is primarily attributable to decreased fuel costs as
mentioned previously. Regulatory cost recovery and other includes recovery
provisions for fuel expense and the energy component of purchased power costs;
energy conservation costs; purchased power capacity costs; and environmental
compliance costs. The recovery provisions generally equal the related expenses
and have no material effect on net income. See Notes 1 and 3 to the financial
statements under "Revenues and Regulatory Cost Recovery Clauses" and
"Environmental Cost Recovery," respectively, for further information.
Sales for resale were $128.5 million in 1999, an increase of $24 million, or
23 percent, over 1998 primarily due to additional energy sales to affiliated
companies, which is discussed below. Revenues from sales to utilities outside
the service area under long-term contracts consist of capacity and energy
components. Capacity revenues reflect the recovery of fixed costs and a return
on investment under the contracts. Energy is generally sold at variable cost.
The capacity and energy components under these long-term contracts were as
follows:
1999 1998 1997
----------------------------------------
(in thousands)
Capacity $19,792 $22,503 $24,899
Energy 20,251 14,556 18,160
- -------------------------------------------------------------
Total $40,043 $37,059 $43,059
=============================================================
Declining capacity revenues are due primarily to the decline in net plant
investment related to these sales. In addition, the decline in 1999 reflects a
reduction in the authorized rate of return on the equity component of the
investment.
Sales to affiliated companies vary from year to year depending on demand and
the availability and cost of generating resources at each company. These sales
have little impact on earnings.
II-116
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Gulf Power Company 1999 Annual Report
Other operating revenues decreased in 1999 and increased in 1998 due
primarily to adjustments to reflect differences between recoverable costs and
the amounts actually reflected in current rates. See Notes 1 and 3 to the
financial statements under "Revenues and Regulatory Cost Recovery Clauses" and
"Environmental Cost Recovery," respectively, for further discussion.
Energy Sales
Kilowatt-hour sales for 1999 and the percent changes by year were as follows:
KWH Percent Change
------------- -------------------------------
1999 1999 1998 1997
------------- -------------------------------
(millions)
Residential 4,471 0.8% 7.7% (1.0)%
Commercial 3,223 3.6 7.4 3.2
Industrial 1,846 0.7 (3.7) 5.3
Other 19 0.0 4.7 1.6
-------------
Total retail 9,559 1.7 5.2 1.6
Sales for resale
Non-affiliates 1,562 16.4 (12.4) (0.2)
Affiliates 2,512 42.9 107.3 19.5
-------------
Total 13,633 9.0 10.5 2.5
==================================================================
In 1999, total retail energy sales increased due to increases from 1998 in
the number of residential, commercial and industrial customers. Total energy
sales increased in 1998 when compared to 1997 due to higher temperatures when
compared to the milder-than-normal temperatures in 1997 and due to increases in
the number of residential and commercial customers. The decrease in industrial
energy sales in 1998 when compared to 1997 primarily reflects the shut down of a
major industrial customer's plant site and temporary production delays of other
industrial customers. See "Future Earnings Potential" for information on the
Company's initiatives to remain competitive and to meet conservation goals set
by the Florida Public Service Commission (FPSC).
An increase in energy sales for resale to non-affiliates of 16.4 percent in
1999 when compared 1998 and a decrease of 12.4 percent in 1998 when compared to
1997 are primarily related to unit power sales under long-term contracts to
other Florida utilities and bulk power sales under short-term contracts to other
non-affiliated utilities. Energy sales to affiliated companies vary from year to
year as mentioned previously.
Expenses
Total operating expenses in 1999 increased $26.8 million, or 5.1 percent, over
the amount recorded in 1998 due primarily to higher fuel and purchased power
expenses, offset by lower other operation expenses. In 1998, total operating
expenses increased $26.5 million, or 5.3 percent, from 1997. The increase was
due primarily to higher fuel, purchased power, and maintenance expenses offset
by lower other operation expenses.
Fuel expenses in 1999, when compared to 1998, increased $11.5 million, or 5.9
percent. In 1998, fuel expenses increased $16.6 million, or 9.2 percent, when
compared to 1997. The increases were the result of increased generation
resulting from a higher demand for energy, while average fuel costs decreased as
noted below.
Purchased power expenses increased in 1999 by $13.2 million, or 30.2 percent,
over 1998 and purchased power expenses for 1998 increased over 1997 by $6.9
million, or 18.8 percent, due to a higher demand for energy in both years.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1999 1998 1997
-------------------------------
Total generation
(millions of kilowatt-hours) 13,095 11,986 10,435
Sources of generation
(percent)
Coal 97.4 98.0 99.6
Oil and gas 2.6 2.0 0.4
Average cost of fuel per net
kilowatt-hour generated
(cents)-- 1.60 1.69 1.99
- ---------------------------------------------------------------------
Other operation expenses decreased $4.3 million, or 3.6 percent, in 1999 from
the 1998 level and $7.3 million, or 5.7 percent, in 1998 from the 1997 level due
to a decrease in the amortization costs of prior year payments related to
renegotiations of coal supply contracts. The 1998 decrease was partially offset
by higher implementation costs of a new customer accounting system, increased
costs related to the Year 2000 program and an increase in the accrual to the
accumulated provision for property damage.
II-117
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
Depreciation and amortization expense increased $5.5 million, or 9.2 percent,
in 1999 when compared to 1998 due primarily to a reduction in the amortization
of gains from the 1998 sale of emission allowances.
Maintenance expenses in 1998 increased by $9.3 million, or 19.4 percent, over
1997 due primarily to scheduled maintenance at Plant Crist and Plant Smith and
increased transmission and distribution maintenance.
Interest on long-term debt in 1999 increased $1.7 million, or 8.4 percent,
when compared to 1998 due primarily to two first mortgage bonds maturing in 1998
and being replaced by senior notes at a slightly higher interest rate, and the
issuance of $50 million of senior notes in August 1999. In 1998, interest on
long-term debt decreased $2.0 million, or 9.1 percent, from 1997 mostly due to a
decrease in interest expense on pollution control bonds refinanced in 1997 and
two long-term bank notes that matured in 1998. This decrease was partially
offset by an increase in interest due to the replacement in 1998 of the two
maturing first mortgage bonds with senior notes at a slightly higher interest
rate.
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its cost of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plant with long economic lives. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations, such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from energy sales growth to a potentially less
regulated and more competitive environment.
Gulf Power currently operates as a vertically integrated utility providing
electricity to customers within its traditional service area located in
northwest Florida. Prices for electricity provided by the Company to retail
customers are set by the FPSC.
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. Traditionally, these factors have
included weather, competition, changes in contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, and the
rate of economic growth in the Company's service area. In early 1999, the FPSC
Staff and the Company became involved in serious discussions primarily related
to reducing the Company's authorized rate of return. On October 1, 1999 the
Office of Public Counsel, the Coalition for Equitable Rates, the Florida
Industrial Power Users Group, and the Company jointly filed a petition to
resolve the issues. The stipulation included a reduction to retail base rates of
$10 million annually and provides for revenues to be shared within set ranges
for 1999 through 2002. Customers would receive two-thirds of any revenue within
the ranges and the Company would retain one-third. For calendar year 2000, the
Company's retail base rate revenues in excess of $352 million up to $368 million
will be shared between the Company and its retail customers on the
one-third/two-thirds basis. Retail base rate revenues above $368 million for
calendar year 2000 will be refunded to the Company's customers. These set ranges
increase gradually until the expiration of the plan. The Sharing Plan will be in
place until the earlier of the in-service date of Smith Unit 3 or December 31,
2002. The parties could not agree on the appropriate Return on Equity (ROE).
Consequently, the Company filed a request to prospectively reduce its authorized
ROE range from 11 to 13 percent to 10.5 to 12.5 percent in order to help ensure
that the FPSC would approve the stipulation. Both the stipulation and the ROE
request were approved by the Commission on October 5, 1999, with an effective
date of November 4, 1999.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Company is positioning the business to meet the challenge of
this major change in the traditional practice of selling electricity. The Energy
Act allows independent power producers (IPPs) to access the Company's
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
transmission network in order to sell electricity to other utilities. This
enhances the incentive for IPPs to build cogeneration plants for industrial and
commercial customers and sell energy generation to other utilities. The Company
has and will continue to evaluate opportunities to partner and participate in
profitable cogeneration projects. In 1998, partnering with one of the Company's
largest industrial customers, construction was completed on 15 megawatts of
Company-owned cogeneration on the customer's plant site. Also, electricity sales
for resale rates are being driven down by wholesale transmission access and
numerous potential new energy suppliers, including power marketers and brokers.
The Company is aggressively working to maintain and expand its share of
wholesale sales in the southeastern power markets.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry continues to
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Florida, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on financial
condition and results of operation. The Company is attempting to minimize or
reduce its cost exposure.
Continuing to be a low-cost producer could provide opportunities to increase
market share and profitability in markets that evolve with changing regulation.
Conversely, if the Company does not remain a low-cost producer and provide
quality service, the Company's energy sales growth could be limited, and this
could significantly erode earnings.
In 1996, the FPSC approved a new optional Commercial/Industrial Service Rider
(CISR), which is applicable to the rate schedules for the Company's largest
existing and potential customers who are able to show they have viable
alternatives to purchasing the Company's energy services. The CISR, approved as
a pilot program, provides the flexibility needed to enable the Company to offer
its services in a more competitive manner to these customers. The publicity of
the CISR ruling, increased competitive pressures, and general awareness of
customer choice pilots and proposals across the country have stimulated interest
on the part of customers in custom tailored offerings. The Company has
participated in one-on-one discussions with many of these customers, and has
negotiated and executed two Contract Service Agreements within the CISR pilot
program. The pilot program ends in September of 2000 and the company is
currently reviewing its options.
Every five years the FPSC establishes numeric demand side management goals.
The Company proposed numeric goals for the ten-year period from 2000 to 2009.
The proposed goals consisted of the total, cost-effective winter and summer peak
demand (kilowatts) and annual energy (kilowatt-hour) savings reasonably
achievable from demand side management for the residential and
commercial/industrial classes. The Company submitted its 2000 Demand Side
Management Plan to the FPSC on December 29, 1999. The plan describes the
Company's proposed programs it will employ to reach the numeric goals. The plan
relies heavily on innovative pricing and energy efficient construction. The FPSC
is expected to issue its final order on the Company's 2000 Demand Side
Management Plan in mid-April 2000.
On December 20, 1999, the Federal Energy Regulatory Commission (FERC) issued
its final rule on Regional Transmission Organizations (RTOs). The order
encourages utilities owning transmission systems to form RTOs on a voluntary
basis. To facilitate the development of RTOs, the FERC will convene regional
conferences for utilities, customers, and other members of the public to discuss
the formation of RTOs. In addition to participating in the regional conferences,
utilities owning transmission systems, including Southern Company, are required
to make a filing by October 15, 2000. The filing must contain either a proposal
for RTO participation or a description of the efforts made to participate in an
RTO, the reasons for non-participation, any obstacles to participation, and any
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
plans for further work toward participation. The RTOs that are proposed in the
filings should be operational by December 15, 2001. Southern Company is
evaluating this issue and formulating its response. The outcome of this matter
cannot now be determined.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters." Also, Florida legislation adopted in 1993 that provides
for recovery of prudent environmental compliance costs is discussed in Note 3 to
the financial statements under "Environmental Cost Recovery."
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
statements under "Regulatory Assets and Liabilities" for additional information.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statements as incurred. At December 31, 1999, exposure from these activities was
not material to the Company's financial position, results of operations, or cash
flows. Also, based on the Company's overall interest rate exposure at December
31, 1999, a near-term 100 basis point change in interest rates would not
materially affect the Company's financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 1, 2001. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. Adoption of this statement is not expected to have a
material impact on the Company's financial statements.
Year 2000 Challenge
The work undertaken by the Company to ensure that all critical computer systems
and other date sensitive devices would function correctly in the Year 2000 was
successful. There were no material incidents reported and no disruption of
electric service within the service area of the Company. There were no reports
of significant events regarding third parties that impacted revenues or
expenses.
The Company's original projected total costs for Year 2000 readiness were
approximately $5 million. Final projected costs were also $5 million with no
material costs remaining to be spent in 2000. From its inception through
December 31, 1999, the Year 2000 program costs, recognized primarily as expense,
amounted to $5 million, of which $2 million was recorded in 1999.
FINANCIAL CONDITION
Overview
The Company's financial condition continues to be very solid. During 1999, gross
property additions were $69.8 million. Funds for the property additions were
provided by operating activities. See the Statements of Cash Flows for further
details.
Financing Activities
In 1999, the Company sold $50 million of senior notes and long-term bank notes
totaling $27 million were retired. The remaining proceeds from this issuance
were used to reduce short-term borrowing requirements. See the Statements of
Cash Flows for further details.
Composite financing rates for the years 1997 through 1999 as of year end were
as follows:
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
1999 1998 1997
-----------------------------
Composite interest rate on
long-term debt 6.0% 6.1% 5.9%
Composite rate on
trust preferred securities 7.3% 7.3% 7.6%
Composite preferred stock
dividend rate 5.1% 5.1% 6.1%
- -----------------------------------------------------------------
The composite interest rate on long-term debt decreased in 1999 primarily due
to lower interest rates on variable rate pollution control bonds.
Capital Requirements for Construction
The Company's gross property additions, including those amounts related to
environmental compliance, are budgeted at $428 million for the three years
beginning in 2000 ($106 million in 2000, $232 million in 2001, and $90 million
in 2002). These amounts include $198.8 million for the years 2000 through 2002
for the estimated cost of a 574 megawatt combined cycle gas unit to be located
in the eastern portion of its service area. The unit is expected to have an
in-service date of June 2002. The remaining property additions budget is
primarily for maintaining and upgrading transmission and distribution facilities
and generating plants. Actual construction costs may vary from this estimate
because of changes in such factors as: business conditions; environmental
regulations; load projections; the cost and efficiency of construction labor,
equipment, and materials; and the cost of capital. In addition, there can be no
assurance that costs related to capital expenditures will be fully recovered.
Other Capital Requirements
The Company will continue to retire higher-cost debt and preferred securities
and replace these securities with lower-cost capital as market conditions and
terms of the instruments permit.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- significantly
affected the Company. Specific reductions in sulfur dioxide and nitrogen oxide
emissions from fossil-fired generating plants are required in two phases. Phase
I compliance began in 1995 and initially affected 28 generating units of
Southern Company. As a result of Southern Company's compliance strategy, an
additional 22 generating units were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $300
million for Southern Company, including approximately $42 million for Gulf
Power.
For Phase II sulfur dioxide compliance, Southern Company currently uses
emission allowances and increased fuel switching. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired units
as required to meet Phase II limits and ozone non-attainment requirements.
Compliance for Phase II and initial ozone non-attainment requirements increased
total estimated construction expenditures by approximately $105 million. Phase
II compliance is not expected to have a material impact on Gulf Power.
Following adoption of legislation in April of 1992 allowing electric
utilities in Florida to seek FPSC approval of their Clean Air Act Compliance
Plans, Gulf Power filed its petition for approval. The FPSC approved the
Company's plan for Phase I compliance, deferring until a later date approval of
its Phase II Plan.
In 1993, the Florida Legislature adopted legislation that allows a utility to
petition the FPSC for recovery of prudent environmental compliance costs that
are not being recovered through base rates or any other recovery mechanism. The
legislation is discussed in Note 3 to the financial statements under
"Environmental Cost Recovery." Substantially all of the costs for the Clean Air
Act and other new environmental legislation discussed below are expected to be
recovered through the Environmental Cost Recovery Clause.
In July 1997, the Environmental Protection Agency (EPA) revised the national
ambient air quality standards for ozone and particulate matter. This revision
makes the standards significantly more stringent. In September 1998, the EPA
issued the final regional nitrogen oxide reduction rule to the states for
implementation. The final rule affects 22 states, including Alabama and Georgia.
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
See Note 6 to the financial statements under "Joint Ownership Agreements"
related to the Company's ownership interest in Georgia Power's Plant Scherer
Unit No. 3. The EPA's July 1997 standards and the September 1998 rule are being
challenged in the courts by several states and industry groups. Implementation
of the final state rules for these three initiatives could require substantial
further reductions in nitrogen oxide and sulfur dioxide emissions from
fossil-fired generating facilities and other industries in these states.
Additional compliance costs and capital expenditures resulting from the
implementation of these rules and standards cannot be determined until the
results of legal challenges are known, and the states have adopted their final
rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: nitrogen oxide emission control
strategies for ozone non-attainment areas; additional controls for hazardous air
pollutant emissions; and hazardous waste disposal requirements. The impact of
any new standards will depend on the development and implementation of
applicable regulations.
On November 3, 1999, the EPA brought a civil action in the U.S. District
Court against Alabama Power, Georgia Power, and the system service company. The
complaint alleges violations of the prevention of significant deterioration and
new source review provisions of the Clean Air Act with respect to five
coal-fired generating facilities in Alabama and Georgia. The civil action
requests penalties and injunctive relief, including an order requiring the
installation of the best available control technology at the affected units. The
EPA concurrently issued to the integrated Southeast utilities a notice of
violation related to 10 generating facilities, including the five facilities
mentioned previously and the Company's Plants Crist and Scherer. See Note 6 to
the financial statements under "Joint Ownership Agreements" related to the
Company's ownership interest in Georgia Power's Plant Scherer Unit No. 3. In
early 2000, the EPA filed a motion to amend its complaint to add the violations
alleged in its notice of violation, and to add Gulf Power, Mississippi Power,
and Savannah Electric as defendants. 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 Company believes that its integrated
utilities complied with applicable laws and the EPA's regulations and
interpretations in effect at the time the work in question took place. The
Clean Air Act authorizes civil penalties of up to $27,500 per day per violation
at each generating unit. Prior to January 30, 1997, the penalty was $25,000 per
day. An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
Gulf Power must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur substantial costs to clean up properties.
The Company conducts studies to determine the extent of any required cleanup
costs and has recognized in the financial statements costs to clean up known
sites. For additional information, see Note 3 to the financial statements under
"Environmental Cost Recovery."
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of the Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electric and magnetic fields, and other environmental health concerns
could significantly affect the Company. The impact of new legislation -- if any
- -- will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electric and magnetic fields.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gulf Power Company 1999 Annual Report
Sources of Capital
At December 31, 1999, the Company had approximately $15.8 million of cash and
cash equivalents and $41.5 million of unused committed lines of credit with
banks to meet its short-term cash needs. Refer to the Statements of Cash Flows
for details related to the Company's financing activities. See Note 5 to the
financial statements under "Bank Credit Arrangements" for additional
information.
The Company historically has relied on issuances of first mortgage bonds and
preferred stock, in addition to pollution control revenue bonds issued for its
benefit by public authorities, to meet its long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. In this regard, the Company sought and
obtained stockholder approval in 1997 to amend its corporate charter eliminating
restrictions on the amounts of unsecured indebtedness it may incur.
If the Company chooses to issue first mortgage bonds or preferred stock, it
is required to meet certain coverage requirements specified in its mortgage
indenture and corporate charter. The Company's ability to satisfy all coverage
requirements is such that it could issue new first mortgage bonds and preferred
stock to provide sufficient funds for all anticipated requirements.
Cautionary Statement Regarding Forward-Looking
Information
The Company's 1999 Annual Report contains forward-looking and historical
information. The Company cautions that there are various important factors that
could cause actual results to differ materially from those indicated in the
forward-looking information. 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 Company's markets; potential business strategies -- including
acquisitions or dispositions of assets or internal restructuring -- that may be
pursued by the company; state and federal rate regulation; changes in or
application of environmental and other laws and regulations to which the company
is subject; political, legal and economic conditions and developments; financial
market conditions and the results of financing efforts; changes in commodity
prices and interest rates; weather and other natural phenomena; and other
factors discussed in the reports -- including Form 10-K -- filed from time to
time by the Company with the Securities and Exchange Commission.
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Gulf Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Retail sales $512,760 $509,118 $521,619
Sales for resale --
Non-affiliates 62,354 61,893 63,697
Affiliates 66,110 42,642 16,760
Other revenues 32,875 36,865 23,780
- -----------------------------------------------------------------------------------------------------------
Total operating revenues 674,099 650,518 625,856
- -----------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 209,031 197,462 180,843
Purchased power --
Non-affiliates 46,332 29,369 11,938
Affiliates 10,703 14,445 24,955
Other 114,670 119,011 126,266
Maintenance 57,830 57,286 47,988
Depreciation and amortization 64,589 59,129 57,874
Taxes other than income taxes 51,782 51,462 51,775
- -----------------------------------------------------------------------------------------------------------
Total operating expenses 554,937 528,164 501,639
- -----------------------------------------------------------------------------------------------------------
Operating Income 119,162 122,354 124,217
Other Income (Expense):
Interest income 1,771 931 1,203
Other, net (1,357) (2,339) (992)
- -----------------------------------------------------------------------------------------------------------
Earnings Before Interest and Income Taxes 119,576 120,946 124,428
- -----------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 21,375 19,718 21,699
Interest on notes payable 2,371 1,190 891
Amortization of debt discount, premium and expense, net 1,989 2,100 2,281
Other interest charges 1,126 2,548 2,076
Distributions on preferred securities of subsidiary 6,200 6,034 2,804
- -----------------------------------------------------------------------------------------------------------
Total interest charges and other, net 33,061 31,590 29,751
- -----------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 86,515 89,356 94,677
Income taxes (Note 8) 32,631 32,199 33,450
- -----------------------------------------------------------------------------------------------------------
Net Income 53,884 57,157 61,227
Dividends on Preferred Stock 217 636 3,617
- -----------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 53,667 $ 56,521 $ 57,610
===========================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Gulf Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 53,884 $ 57,157 $ 61,227
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 68,721 69,633 72,860
Deferred income taxes and investment tax credits, net (6,609) (4,684) (7,047)
Other, net 3,735 3,463 4,831
Changes in certain current assets and liabilities --
Receivables, net (10,484) 11,308 (692)
Fossil fuel stock (5,656) (4,917) 9,056
Materials and supplies (2,063) 609 1,618
Accounts payable (2,023) 823 1,398
Other 7,030 (18,471) 22,296
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 106,535 114,921 165,547
- --------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (69,798) (69,731) (54,289)
Other (8,856) 5,990 509
- --------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (78,654) (63,741) (53,780)
- --------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 23,500 (15,500) 22,000
Proceeds --
Other long-term debt 50,000 50,000 60,930
Preferred securities - 45,000 40,000
Capital contributions from parent company 2,294 522 -
Retirements --
First mortgage bonds - (45,000) (25,000)
Other long-term debt (27,074) (8,326) (56,902)
Preferred stock - (9,455) (75,911)
Payment of preferred stock dividends (271) (792) (5,370)
Payment of common stock dividends (61,300) (67,200) (64,600)
Other (246) (4,167) (3,014)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (13,097) (54,918) (107,867)
- --------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 14,784 (3,738) 3,900
Cash and Cash Equivalents at Beginning of Period 969 4,707 807
- --------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 15,753 $ 969 $ 4,707
==========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $27,670 $28,044 $26,558
Income taxes (net of refunds) 29,462 38,782 36,010
- --------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Gulf Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------
Assets 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 15,753 $ 969
Receivables --
Customer accounts receivable 55,108 49,067
Other accounts and notes receivable 4,325 3,514
Affiliated companies 7,104 3,442
Accumulated provision for uncollectible accounts (1,026) (996)
Fossil fuel stock, at average cost 29,869 24,213
Materials and supplies, at average cost (Note 1) 30,088 28,025
Regulatory clauses under recovery (Note 1) 11,611 9,737
Other 5,354 9,725
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 158,186 127,696
- ---------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service (Notes 1 and 6) 1,853,664 1,809,901
Less accumulated provision for depreciation 821,970 784,111
- ---------------------------------------------------------------------------------------------------------------------
1,031,694 1,025,790
Construction work in progress 34,164 34,863
- ---------------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment 1,065,858 1,060,653
- ---------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,481 588
- ---------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 8) 25,264 25,308
Prepaid pension costs (Note 2) 17,734 13,770
Debt expense, being amortized 2,526 2,565
Premium on reacquired debt, being amortized 17,360 18,883
Other 20,086 18,438
- ---------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 82,970 78,964
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $1,308,495 $1,267,901
=====================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Gulf Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Liabilities:
Securities due within one year (Note 10) $ - $ 27,000
Notes payable 55,000 31,500
Accounts payable --
Affiliated 14,878 19,756
Other 22,581 23,697
Customer deposits 12,778 12,560
Taxes accrued --
Income taxes 4,889 -
Other 7,707 7,432
Interest accrued 9,255 5,184
Vacation pay accrued 4,199 4,035
Other 4,961 10,051
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 136,248 141,215
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements) 367,449 317,341
- ----------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 162,776 166,118
Deferred credits related to income taxes (Note 8) 49,693 52,465
Accumulated deferred investment tax credits 27,712 29,632
Employee benefits provisions 31,735 28,594
Other 21,333 15,648
- ----------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 293,249 292,457
- ----------------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes (See accompanying statements) 85,000 85,000
- ----------------------------------------------------------------------------------------------------------------------
Preferred stock (See accompanying statements) 4,236 4,236
- ----------------------------------------------------------------------------------------------------------------------
Common stockholder's equity (See accompanying statements) 422,313 427,652
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $1,308,495 $1,267,901
======================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Gulf Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
--------- -------------
<S> <C> <C> <C> <C> <C>
July 1, 2003 6.125% $ 30,000 $ 30,000
November 1, 2006 6.50% 25,000 25,000
January 1, 2026 6.875% 30,000 30,000
- ------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 85,000 85,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-term notes payable --
7.05% due August 15, 2004 50,000 -
7.50% due June 30, 2037 20,000 20,000
6.70% due June 30, 2038 49,926 50,000
Adjustable rate (5.72% at 1/1/99)
due November 20, 1999 - 27,000
- ------------------------------------------------------------------------------------------------------------------------------
Total long-term notes payable 119,926 97,000
- ------------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
Pollution control revenue bonds --
Collateralized with first mortgage bonds:
5.25% to 6.30% due 2006-2026 108,700 108,700
Variable rate (3.70% at 1/1/00)
due 2024 20,000 20,000
Collateralized with other property:
Variable rate (3.75% at 1/1/00)
due 2022 40,930 40,930
- ------------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 169,630 169,630
- ------------------------------------------------------------------------------------------------------------------------------
Unamortized debt premium (discount), net (7,107) (7,289)
- ------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $22.5 million) 367,449 344,341
Less amount due within one year (Note 10) - 27,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 367,449 317,341 41.8% 38.0%
- ------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities: (Note 9)
$25 liquidation value --
7.00% 45,000 45,000
7.625% 40,000 40,000
- ------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $6.2 million) 85,000 85,000 9.7 10.2
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value
4.64% to 5.44% 4,236 4,236
- ------------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $0.2 million) 4,236 4,236
Less amount due within one year - -
- ------------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 4,236 4,236 0.5 0.5
- ------------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity:
Common stock, without par value --
Authorized and Outstanding -
992,717 shares in 1999 and 1998 38,060 38,060
Paid-in capital 221,254 218,960
Premium on preferred stock 12 12
Retained earnings (Note 11) 162,987 170,620
- ------------------------------------------------------------------------------------------------------------------------------
Total common stockholder's equity 422,313 427,652 48.0 51.3
- ------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $878,998 $834,229 100.0% 100.0%
==============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-128
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
Gulf Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
Premium on
Common Paid-In Preferred Retained
Stock Capital Stock Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $38,060 $218,437 $81 $179,180 $435,758
Net income after dividends on preferred stock - - - 57,610 57,610
Cash dividends on common stock - - - (64,600) (64,600)
Other - 1 (69) 18 (50)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 38,060 218,438 12 172,208 428,718
Net income after dividends on preferred stock - - - 56,521 56,521
Capital contributions from parent company - 522 - - 522
Cash dividends on common stock - - - (57,200) (57,200)
Other - - - (909) (909)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 38,060 218,960 12 170,620 427,652
Net income after dividends on preferred stock - - - 53,667 53,667
Capital contributions from parent company - 2,294 - - 2,294
Cash dividends on common stock - - - (61,300) (61,300)
- -----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $38,060 $221,254 $12 $162,987 $422,313
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-129
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1999 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Gulf Power Company is a wholly owned subsidiary of Southern Company, which is
the parent company of five integrated Southeast utilities, a system service
company, Southern Communications Services (Southern LINC), Southern Company
Energy Solutions, Southern Energy, Inc. (Southern Energy), Southern Nuclear
Operating Company (Southern Nuclear), and other direct and indirect
subsidiaries. The integrated Southeast utilities -- Alabama Power, Georgia
Power, Gulf Power, Mississippi Power, and Savannah Electric -- provide electric
service in four states. Gulf Power Company provides electric service to the
northwest panhandle of Florida. Contracts among the integrated Southeast
utilities -- related to jointly owned generating facilities, interconnecting
transmission lines, and the exchange of electric power --are regulated by the
Federal Energy Regulatory Commission (FERC) and/or the Securities and Exchange
Commission (SEC). The system service company provides, at cost, specialized
services to Southern Company and subsidiary companies. Southern LINC provides
digital wireless communications services to the operating companies and also
markets these services to the public within the Southeast. Southern Company
Energy Solutions develops new business opportunities related to energy products
and services. Southern Nuclear provides services to Southern Company's nuclear
power plants. Southern Energy acquires, develops, builds, owns, and operates
power production and delivery facilities and provides a broad range of
energy-related services to utilities and industrial companies in selected
countries around the world. Southern Energy businesses include independent power
projects, integrated utilities, a distribution company, and energy trading and
marketing businesses outside the southeastern United States.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. The Company is also
subject to regulation by the FERC and the Florida Public Service Commission
(FPSC). The Company follows generally accepted accounting principles and
complies with the accounting policies and practices prescribed by the FPSC and
the FERC. The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates, and the actual
results may differ from those estimates.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Related-Party Transactions
The Company has an agreement with Southern Company Services, Inc. (a wholly
owned subsidiary of Southern Company) under which the following services are
rendered to the company at cost: general and design engineering, purchasing,
accounting and statistical, finance and treasury, tax, information resources,
marketing, auditing, insurance and pension, human resources, systems and
procedures, and other services with respect to business and operations and power
pool operations. Costs for these services amounted to $43 million, $40 million,
and $36 million during 1999, 1998, and 1997, respectively.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to the following:
II-130
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Gulf Power Company 1999 Annual Report
1999 1998
--------------------------
(in thousands)
Deferred income tax debits $25,264 $ 25,308
Deferred loss on reacquired
debt 17,360 18,883
Environmental remediation 5,745 7,076
Vacation pay 4,199 4,035
Regulatory clauses under (over)
recovery, net 8,486 3,700
Accumulated provision for
property damage (5,528) (1,605)
Deferred income tax credits (49,693) (52,465)
Other, net (1,255) (480)
- ------------------------------------------------------------------
Total $ 4,578 $ 4,452
==================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of FASB Statement No. 71, the Company would be required to
write off related regulatory assets and liabilities that are not specifically
recoverable through regulated rates. In addition, the Company would be required
to determine any impairment to other assets, including plant, and write down the
assets, if impaired, to their fair value.
Revenues and Regulatory Cost Recovery Clauses
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its service area located in northwest
Florida and to wholesale customers in the Southeast.
The Company accrues revenues for service rendered but unbilled at the end of
each fiscal period. The Company has a diversified base of customers and no
single customer or industry comprises 10 percent or more of revenues. For all
periods presented, uncollectible accounts averaged significantly less than 1
percent of revenues.
Fuel costs are expensed as the fuel is used. The Company's retail electric
rates include provisions to periodically adjust billings for fluctuations in
fuel costs, the energy component of purchased power costs, and certain other
costs. The Company also has similar retail cost recovery clauses for energy
conservation costs, purchased power capacity costs, and environmental compliance
costs. Revenues are adjusted monthly for differences between recoverable costs
and amounts actually reflected in current rates.
Depreciation and Amortization
Depreciation of the original cost of plant in service is provided primarily by
using composite straight-line rates, which approximated 3.8 percent in 1999 and
1998 and 3.6 percent in 1997. The increase in 1998 is attributable to new
depreciation rates, which were approved by the FPSC in 1998. When property
subject to depreciation is retired or otherwise disposed of in the normal course
of business, its cost -- together with the cost of removal, less salvage -- is
charged to the accumulated provision for depreciation. Minor items of property
included in the original cost of the plant are retired when the related property
unit is retired. Also, the provision for depreciation expense includes an amount
for the expected cost of removal of facilities.
Income Taxes
The Company uses the liability method of accounting for income taxes and
provides deferred income taxes for all significant income tax temporary
differences. Investment tax credits utilized are deferred and amortized to
income over the average lives of the related property. The Company is included
in the consolidated federal income tax return of Southern Company.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Original cost
includes: materials; labor; minor items of property; appropriate administrative
and general costs; payroll-related costs such as taxes, pensions, and other
benefits; and the estimated cost of funds used during construction. The cost of
maintenance, repairs, and replacement of minor items of property is charged to
maintenance expense. The cost of replacements of property (exclusive of minor
items of property) is charged to utility plant.
Cash and Cash Equivalents
Temporary cash investments are considered cash equivalents. Temporary cash
investments are securities with original maturities of 90 days or less.
II-131
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
Financial Instruments
The Company's financial instruments for which the carrying amount did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
---------------------------
(in thousands)
Long-term debt:
At December 31, 1999 $367,449 $349,791
At December 31, 1998 $344,341 $357,100
Capital trust preferred
securities:
At December 31, 1999 $85,000 $69,092
At December 31, 1998 $85,000 $89,400
- --------------------------------------------------------------
The fair values for long-term debt and preferred securities were based on
either closing market prices or closing prices of comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
Provision for Injuries and Damages
The Company is subject to claims and suits arising in the ordinary course of
business. As permitted by regulatory authorities, the Company provides for the
uninsured costs of injuries and damages by charges to income amounting to $1.2
million annually. The expense of settling claims is charged to the provision to
the extent available. The accumulated provision of $1.8 million and $1.3 million
at December 31, 1999 and 1998, respectively, is included in other current
liabilities in the accompanying Balance Sheets.
Provision for Property Damage
The Company provides for the cost of repairing damages from major storms and
other uninsured property damages. This includes the full cost of storm and other
damages to its transmission and distribution lines and the cost of uninsured
damages to its generation and other property. The expense of such damages is
charged to the provision account. At December 31, 1999 and 1998, the accumulated
provision for property damage was $5.5 million and $1.6 million, respectively.
In 1995, the FPSC approved the Company's request to increase the amount of its
annual accrual to the accumulated provision for property damage account from
$1.2 million to $3.5 million and approved a target level for the accumulated
provision account between $25.1 and $36.0 million. The FPSC has also given the
Company the flexibility to increase its annual accrual amount above $3.5
million, when the Company believes it is in a position to do so. The Company
accrued $5.5 million in 1999 and $6.5 million in 1998 to the accumulated
provision for property damage. The Company charged $1.6 million to the provision
account in 1999. Charges to the provision account during 1998 totaled $4.2
million, which included $3.4 million related to Hurricane Georges.
2. RETIREMENT BENEFITS
The Company has a defined benefit, trusteed, non-contributory pension plan that
covers substantially all regular employees. The Company provides certain medical
care and life insurance benefits for retired employees. Substantially all
employees may become eligible for these benefits when they retire. Trusts are
funded to the extent required by the Company's regulatory commissions. The
measurement date for plan assets and obligations is September 30 for each year.
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $143,012 $130,794
Service cost 4,490 4,107
Interest cost 9,440 9,572
Benefits paid (6,862) (6,663)
Actuarial loss (gain) and
employee transfers (8,113) 5,202
- ---------------------------------------------------------------
Balance at end of year $141,967 $143,012
===============================================================
II-132
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $212,934 $222,196
Actual return on plan assets 35,971 1,310
Benefits paid (6,862) (6,663)
Employee transfers (558) (3,909)
- ---------------------------------------------------------------
Balance at end of year $241,485 $212,934
===============================================================
The accrued pension costs recognized in the Balance Sheets were as follows:
1999 1998
- ---------------------------------------------------------------
(in thousands)
Funded status $99,518 $ 69,922
Unrecognized transition
obligation (4,323) (5,043)
Unrecognized prior
service cost 4,495 4,869
Unrecognized net gain (81,956) (55,978)
- ---------------------------------------------------------------
Prepaid asset recognized
in the Balance Sheets $17,734 $13,770
===============================================================
Components of the pension plan's net periodic cost were as follows:
1999 1998 1997
- -----------------------------------------------------------------
Service cost $4,490 $ 4,107 $ 3,897
Interest cost 9,440 9,572 9,301
Expected return on
plan assets (15,968) (14,827) (13,675)
Recognized net gain (1,579) (1,891) (1,656)
Net amortization (347) (347) (347)
- -----------------------------------------------------------------
Net pension income $(3,964) $(3,386) $ (2,480)
=================================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $49,303 $39,669
Service cost 1,087 946
Interest cost 3,261 3,123
Benefits paid (1,177) (1,068)
Actuarial (loss) gain and
employee transfers (4,464) 3,614
Amendments - 3,019
- ---------------------------------------------------------------
Balance at end of year $48,010 $49,303
===============================================================
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $9,603 $9,455
Actual return on plan assets 1,525 54
Employer contributions 1,245 1,162
Benefits paid (1,177) (1,068)
- ---------------------------------------------------------------
Balance at end of year $11,196 $9,603
===============================================================
The accrued postretirement costs recognized in the Balance Sheets were as
follows:
1999 1998
- ---------------------------------------------------------------
(in thousands)
Funded status $(36,814) $(39,700)
Unrecognized transition
obligation 4,723 5,079
Unrecognized prior
service cost 2,741 2,900
Unrecognized net loss 2,620 8,187
Fourth quarter contributions 300 -
- ---------------------------------------------------------------
Accrued liability recognized
in the Balance Sheets $(26,430) $(23,534)
===============================================================
II-133
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
Components of the postretirement plan's net periodic cost were as follows:
1999 1998 1997
- ---------------------------------------------------------------
Service cost $1,087 $ 946 $ 896
Interest cost 3,261 3,123 2,845
Expected return on
plan assets (794) (717) (641)
Transition obligation 356 356 356
Prior service cost 159 119 -
Recognized net loss 264 128 184
- ---------------------------------------------------------------
Net postretirement cost $4,333 $3,955 $3,640
===============================================================
The weighted average rates assumed in the actuarial calculations for both the
pension plan and postretirement benefits were:
1999 1998
- --------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00% 4.25%
Long-term return on plan
assets 8.50% 8.50%
- --------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.5 percent through the year 2005, and
remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows (in thousands):
1 Percent 1 Percent
Increase Decrease
- ---------------------------------------------------------------
Benefit obligation $3,627 $(3,086)
Service and interest costs $320 $(269)
===============================================================
Work Force Reduction Programs
The Company recorded costs related to work force reduction programs of $0.2
million in 1999, $2.8 million in 1998, and $1.4 million in 1997. The Company has
also incurred its pro rata share for the costs of affiliated companies'
programs. The costs related to these programs were $0.6 million for 1999, $0.2
million for 1998, and $1.3 million for 1997. The Company has expensed all costs
related to these work force reduction programs.
3. CONTINGENCIES AND REGULATORY
MATTERS
Environmental Cost Recovery
In April 1993, the Florida Legislature adopted legislation for an Environmental
Cost Recovery Clause (ECRC), which allows a utility to petition the FPSC for
recovery of all prudent environmental compliance costs that are not being
recovered through base rates or any other recovery mechanism. Such environmental
costs include operation and maintenance expense, emission allowance expense,
depreciation, and a return on invested capital.
In January 1994, the FPSC approved the Company's initial petition under the
ECRC for recovery of environmental costs. Initially, recovery under the ECRC was
determined semi-annually. The FPSC approved annual recovery periods beginning
with the October 1996 through September 1997 period. As of January 1999, the
annual recovery period is on a calendar-year basis as approved by the FPSC in
May 1998. Recovery includes a true-up of the prior period and a projection of
the ensuing period. During 1999 and 1998, the Company recorded ECRC revenues of
$11.6 million and $8.0 million, respectively.
At December 31, 1999, the Company's liability for the estimated costs of
environmental remediation projects for known sites was $5.7 million. These
estimated costs are expected to be expended from 2000 through 2006. These
projects have been approved by the FPSC for recovery through the ECRC discussed
above. Therefore, the Company recorded $1.2 million in current assets and
current liabilities and $4.5 million in deferred assets and deferred liabilities
representing the future recoverability of these costs.
Environmental Litigation
On November 3, 1999, the Environmental Protection Agency (EPA) brought a civil
action in the U.S. District Court against Alabama Power, Georgia Power, and the
system service company. The complaint alleges violations of the prevention of
significant deterioration and new source review provisions of the Clean Air Act
II-134
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
with respect to five coal-fired generating facilities in Alabama and Georgia.
The civil action requests penalties and injunctive relief, including an order
requiring the installation of the best available control technology at the
affected units. The Clean Air Act authorizes civil penalties of up to $27,500
per day, per violation at each generating unit. Prior to January 30, 1997, the
penalty was $25,000 per day.
The EPA concurrently issued to the integrated Southeast utilities a notice of
violation related to 10 generating facilities, including the five facilities
mentioned previously and the Company's Plants Crist and Scherer. See Note 6
under "Joint Ownership Agreements" related to the Company's ownership interest
in Georgia Power's Plant Scherer Unit No. 3. In early 2000, the EPA filed a
motion to amend its complaint to add the violations alleged in its notice of
violation, and to add Gulf Power, Mississippi Power, and Savannah Electric as
defendants. 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 Company believes that its integrated utilities complied with
applicable laws and the EPA's regulations and interpretations in effect at the
time the work in question took place.
An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, the cost of which
is currently estimated to total $106 million in 2000, $232 million in 2001, and
$90 million in 2002. The construction program is subject to periodic review and
revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include changes in business
conditions; revised load growth estimates; changes in environmental regulations;
increasing costs of labor, equipment, and materials; and cost of capital. At
December 31, 1999, significant purchase commitments were outstanding in
connection with the construction program. The Company has budgeted $198.8
million for the years 2000 through 2002 for the estimated cost of a 574 megawatt
combined cycle gas unit to be located in the eastern portion of its service
area. The unit is expected to have an in-service date of June 2002. The Company
will continue its construction program related to transmission and distribution
facilities and the upgrading and extension of the useful lives of generating
plants.
See Management's Discussion and Analysis under "Environmental Matters" for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING AND COMMITMENTS
General
Current projections indicate that funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations; the sale of additional long-term unsecured debt, pollution
control bonds, and preferred securities; bank notes; and capital contributions
from Southern Company. In addition, the Company may issue additional long-term
debt and preferred securities primarily for debt maturities and redemptions of
higher-cost securities.
Bank Credit Arrangements
At December 31, 1999, the Company had $41.5 million of lines of credit with
banks subject to renewal June 1 of each year, all of which remained unused. In
addition, the Company has two unused committed lines of credit totaling $61.9
million that were established for liquidity support of its variable rate
pollution control bonds. In connection with these credit lines, the Company has
agreed to pay commitment fees and/or to maintain compensating balances with the
banks. The compensating balances, which represent substantially all of the cash
of the Company except for daily working funds and like items, are not legally
restricted from withdrawal. In addition, the Company has bid-loan facilities
with seven major money center banks that total $130 million, of which $50
million was committed at December 31, 1999.
11-135
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
Assets Subject to Lien
The Company's mortgage, which secures the first mortgage bonds issued by the
Company, constitutes a direct first lien on substantially all of the Company's
fixed property and franchises.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into long-term commitments for the procurement of fuel. In
most cases, these contracts contain provisions for price escalations, minimum
purchase levels, and other financial commitments. Total estimated long-term
obligations at December 31, 1999 were as follows:
Year Fuel
--------- ----------------
(in millions)
2000 $89
2001 70
2002 86
2003 90
2004 91
2005 - 2026 508
----------------------------------------------------------
Total commitments $934
==========================================================
In 1988, the Company made an advance payment of $60 million to a coal
supplier under an arrangement to lower the cost of future coal purchased under
an existing contract. This payment was fully amortized to expense on a per ton
basis as of March 1998.
In December 1995, the Company made another payment of $22 million to the same
coal supplier under an arrangement to lower the cost of future coal and/or to
suspend the purchase of coal under an existing contract for 25 months. This
payment was fully amortized to expense on a per ton basis as of March 1998.
The amortization expense of these contract renegotiations was recovered
through the fuel cost recovery clause discussed under "Revenues and Regulatory
Cost Recovery Clauses" in Note 1.
Lease Agreements
In 1989, the Company and Mississippi Power jointly entered into a twenty-two
year operating lease agreement for the use of 495 aluminum railcars. In 1994, a
second lease agreement for the use of 250 additional aluminum railcars was
entered into for twenty-two years. Both of these leases are for the
transportation of coal to Plant Daniel. At the end of each lease term, the
Company has the option to renew the lease. In 1997, three additional lease
agreements for 120 cars each were entered into for three years, with a monthly
renewal option for up to an additional nine months.
The Company, as a joint owner of Plant Daniel, is responsible for one half of
the lease costs. The lease costs are charged to fuel inventory and are allocated
to fuel expense as the fuel is used. The Company's share of the lease costs
charged to fuel inventories was $2.8 million in 1999 and $2.8 million in 1998.
The annual amounts for 2000 through 2004 are expected to be $2.1 million, $1.7
million, $1.7 million, $1.7 million, and $1.8 million, respectively, and after
2004 are expected to total $14.4 million.
6. JOINT OWNERSHIP AGREEMENTS
The Company and Mississippi Power jointly own Plant Daniel, a steam-electric
generating plant located in Jackson County, Mississippi. In accordance with an
operating agreement, Mississippi Power acts as the Company's agent with respect
to the construction, operation, and maintenance of the plant.
The Company and Georgia Power jointly own Plant Scherer Unit No. 3. Plant
Scherer is a steam-electric generating plant located near Forsyth, Georgia. In
accordance with an operating agreement, Georgia Power acts as the Company's
agent with respect to the construction, operation, and maintenance of the unit.
The Company's pro rata share of expenses related to both plants is included
in the corresponding operating expense accounts in the Statements of Income.
II-136
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
At December 31, 1999, the Company's percentage ownership and its investment
in these jointly owned facilities were as follows:
Plant Scherer Plant
Unit No. 3 Daniel
(coal-fired) (coal-fired)
-----------------------------
(in thousands)
Plant In Service $185,714(1) $231,041
Accumulated Depreciation $66,193 $113,687
Construction Work in Progress $276 $2,621
Nameplate Capacity (2)
(megawatts) 205 500
Ownership 25% 50%
- ------------------------------------------------------------------
(1) Includes net plant acquisition adjustment.
(2) Total megawatt nameplate capacity:
Plant Scherer Unit No. 3: 818
Plant Daniel: 1,000
7. LONG-TERM POWER SALES AGREEMENTS
The Company and the other operating affiliates have long-term contractual
agreements for the sale of capacity and energy to certain non-affiliated
utilities located outside the system's service area. The unit power sales
agreements are firm and pertain to capacity related to specific generating
units. Because the energy is generally sold at cost under these agreements,
profitability is primarily affected by revenues from capacity sales. The
capacity revenues from these sales were $19.8 million in 1999, $22.5 million in
1998, and $24.9 million in 1997. Declining capacity revenues are due primarily
to the decline in net plant investment related to these sales. In addition, the
decline in 1999 reflects a reduction in the authorized rate of return on the
equity component of the investment.
Unit power from specific generating plants of Southern Company is currently
being sold to Florida Power Corporation (FPC), Florida Power & Light Company
(FP&L), Jacksonville Electric Authority (JEA), and the City of Tallahassee,
Florida. Under these agreements, 214 megawatts of net dependable capacity were
sold by the Company during 1999. Sales will decrease to 209 megawatts per year
in 2000 and remain at that level -- unless reduced by FP&L, FPC, and JEA for the
periods after 2000 with a minimum of three years notice -- until the expiration
of the contracts in 2010.
Capacity and energy sales to FP&L, the Company's largest single customer,
provided revenues of $24.3 million in 1999, $22.3 million in 1998, and $25.4
million in 1997, or 3.6 percent, 3.4 percent, and 4.1 percent of operating
revenues, respectively.
8. INCOME TAXES
At December 31, 1999, the tax-related regulatory assets to be recovered from
customers were $25.3 million. These assets are attributable to tax benefits
flowed through to customers in prior years and to taxes applicable to
capitalized allowance for funds used during construction. At December 31, 1999,
the tax-related regulatory liabilities to be credited to customers were $49.7
million. These liabilities are attributable to deferred taxes previously
recognized at rates higher than current enacted tax law and to unamortized
investment tax credits.
Details of the federal and state income tax provisions are as follows:
1999 1998 1997
------------------------------------
(in thousands)
Total provision for income taxes:
Federal--
Current $33,973 $31,746 $34,522
Deferred --current year 16,776 18,485 19,297
--reversal of
prior years (22,883) (22,952) (25,778)
- --------------------------------------------------------------------
27,866 27,279 28,041
- --------------------------------------------------------------------
State--
Current 5,267 5,137 5,975
Deferred --current year 2,474 2,745 2,868
--reversal of
prior years (2,976) (2,962) (3,434)
- --------------------------------------------------------------------
4,765 4,920 5,409
- --------------------------------------------------------------------
Total $32,631 $32,199 $33,450
====================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
11-137
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
1999 1998
--------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $168,662 $155,833
Property basis differences 6,000 20,330
Other 18,272 17,645
- ---------------------------------------------------------------------
Total 192,934 193,808
- ---------------------------------------------------------------------
Deferred tax assets:
Federal effect of state deferred taxes 9,293 9,509
Postretirement benefits 8,456 7,644
Other 12,526 10,702
- ---------------------------------------------------------------------
Total 30,275 27,855
- ---------------------------------------------------------------------
Net deferred tax liabilities 162,659 165,953
Less current portion, net (117) (165)
- ---------------------------------------------------------------------
Accumulated deferred income
taxes in the Balance Sheets $162,776 $166,118
=====================================================================
Deferred investment tax credits are amortized over the lives of the related
property with such amortization normally applied as a credit to reduce
depreciation and amortization in the Statements of Income. Credits amortized in
this manner amounted to $1.9 million in 1999, $1.9 million in 1998, and $2.2
million in 1997. At December 31, 1999, all investment tax credits available to
reduce federal income taxes payable had been utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1999 1998 1997
----------------------------
Federal statutory rate 35% 35% 35%
State income tax,
net of federal deduction 4 4 4
Non-deductible book
depreciation 1 1 1
Difference in prior years'
deferred and current tax rate (2) (2) (1)
Other, net - (2) (4)
- ----------------------------------------------------------------
Effective income tax rate 38% 36% 35%
================================================================
The Company and the other subsidiaries of Southern Company file a
consolidated federal tax return. Under a joint consolidated income tax
agreement, each subsidiary's current and deferred tax expense is computed on a
stand-alone basis.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In January 1997, Gulf Power Capital Trust I (Trust I), of which the Company owns
all of the common securities, issued $40 million of 7.625 percent mandatorily
redeemable preferred securities. Substantially all of the assets of Trust I are
$41 million aggregate principal amount of the Company's 7.625 percent junior
subordinated notes due December 31, 2036.
In January 1998, Gulf Power Capital Trust II (Trust II), of which the Company
owns all of the common securities, issued $45 million of 7.0 percent mandatorily
redeemable preferred securities. Substantially all of the assets of Trust II are
$46 million aggregate principal amount of the Company's 7.0 percent junior
subordinated notes due December 31, 2037.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of payment obligations with respect to the preferred
securities of Trust I and Trust II. Trust I and Trust II are subsidiaries of the
Company, and accordingly are consolidated in the Company's financial statements.
10. SECURITIES DUE WITHIN ONE YEAR
A summary of the improvement fund requirement and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1999 1998
----------------------
(in thousands)
Bond improvement fund requirement $850 $ 850
Less portion to be satisfied by
certifying property additions 850 850
- -----------------------------------------------------------------
Cash requirement - -
Maturities of first mortgage bonds - -
Current portion of other long-term
debt - 27,000
- -----------------------------------------------------------------
Total $ - $27,000
=================================================================
The first mortgage bond improvement fund requirement amounts to 1 percent of
each outstanding series of bonds authenticated under the indenture prior to
January 1 of each year, other than those issued to collateralize pollution
control revenue bond obligations. The requirement may be satisfied by depositing
11-138
<PAGE>
NOTES (continued)
Gulf Power Company 1999 Annual Report
cash, reacquiring bonds, or by pledging additional property equal to 1 and 2/3
times the requirement.
11. COMMON STOCK DIVIDEND
RESTRICTIONS
The Company's first mortgage bond indenture contains various common stock
dividend restrictions which remain in effect as long as the bonds are
outstanding. At December 31, 1999, retained earnings of $127 million were
restricted against the payment of cash dividends on common stock under the terms
of the mortgage indenture.
12. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1999 and 1998 are as follows:
Net Income
After Dividends
Operating Operating on Preferred
Quarter Ended Revenues Income Stock
- --------------------------------------------------------------------
(in thousands)
March 1999 $134,506 $15,665 $ 4,799
June 1999 166,815 29,253 13,226
September 1999 218,264 54,429 28,582
December 1999 154,514 19,815 7,060
March 1998 $140,950 $19,387 $ 6,853
June 1998 177,130 33,232 13,364
September 1998 199,377 49,837 26,989
December 1998 133,061 19,898 9,315
- --------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and the
timing of rate changes, among other factors.
II-139
<PAGE>
<TABLE>
<CAPTION>
ELECTED FINANCIAL AND OPERATING DATA 1995-1999
Gulf Power Company 1999 Annual Report
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands) 674,099 $650,518 $625,856 $634,365 $619,077
Net Income after Dividends
on Preferred Stock (in thousands) $53,667 $56,521 $57,610 $57,845 $57,154
Cash Dividends
on Common Stock (in thousands) $61,300 $57,200 $64,600 $58,300 $46,400
Return on Average Common Equity (percent) 12.63 13.20 13.33 13.27 13.27
Total Assets (in thousands) 308,495 $1,267,901 $1,265,612 $1,308,366 $1,341,859
Gross Property Additions (in thousands) $69,798 $69,731 $54,289 $61,386 $63,113
- -------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity 422,313 $427,652 $428,718 $435,758 $436,242
Preferred stock 4,236 4,236 13,691 65,102 89,602
Company obligated mandatorily
redeemable preferred securities 85,000 85,000 40,000 - -
Long-term debt 367,449 317,341 296,993 331,880 323,376
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 878,998 $834,229 $779,402 $832,740 $849,220
===============================================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.0 51.3 55.0 52.3 51.4
Preferred stock 0.5 0.5 1.8 7.8 10.5
Company obligated mandatorily
redeemable preferred securities 9.7 10.2 5.1 - -
Long-term debt 41.8 38.0 38.1 39.9 38.1
- -------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0
===============================================================================================================================
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1 A1
Standard and Poor's AA- AA- AA- A+ A+
Duff & Phelps AA- AA- AA- AA- A+
Preferred Stock -
Moody's a2 a2 a2 a2 a2
Standard and Poor's A- A A A A
Duff & Phelps A A+ A+ A+ A
Unsecured Long-Term Debt -
Moody's A2 A2 A2 - -
Standard and Poor's A A A - -
Duff & Phelps A+ A+ A+ - -
===============================================================================================================================
Customers (year-end):
Residential 315,240 307,077 300,257 291,196 283,421
Commercial 47,728 46,370 44,589 43,196 41,281
Industrial 267 257 267 278 278
Other 319 268 264 162 134
- -------------------------------------------------------------------------------------------------------------------------------
Total 363,554 353,972 345,377 334,832 325,114
===============================================================================================================================
Employees (year-end): 1,339 1,328 1,328 1,384 1,501
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-140
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Gulf Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Operating Revenues (in thousands):
<S> <C> <C> <C> <C> <C>
Residential $ 277,311 $276,208 $ 277,609 $ 285,498 $ 276,155
Commercial 165,871 160,960 164,435 164,181 159,260
Industrial 67,404 69,850 77,492 78,994 81,606
Other 2,174 2,100 2,083 2,056 1,993
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 512,760 509,118 521,619 530,729 519,014
Sales for resale - non-affiliates 62,354 61,893 63,697 63,201 60,413
Sales for resale - affiliates 66,110 42,642 16,760 17,762 18,619
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 641,224 613,653 602,076 611,692 598,046
Other revenues 32,875 36,865 23,780 22,673 21,031
- ------------------------------------------------------------------------------------------------------------------------------
Total $674,099 $650,518 $625,856 $634,365 $619,077
==============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 4,471,118 4,437,558 4,119,492 4,159,924 4,014,142
Commercial 3,222,532 3,111,933 2,897,887 2,808,634 2,708,243
Industrial 1,846,237 1,833,575 1,903,050 1,808,086 1,794,754
Other 19,296 18,952 18,101 17,815 17,345
- ------------------------------------------------------------------------------------------------------------------------------
Total retail 9,559,183 9,402,018 8,938,530 8,794,459 8,534,484
Sales for resale - non-affiliates 1,561,972 1,341,990 1,531,179 1,534,097 1,396,474
Sales for resale - affiliates 2,511,983 1,758,150 848,135 709,647 759,341
- ------------------------------------------------------------------------------------------------------------------------------
Total 13,633,138 12,502,158 11,317,844 11,038,203 10,690,299
==============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.20 6.22 6.74 6.86 6.88
Commercial 5.15 5.17 5.67 5.85 5.88
Industrial 3.65 3.81 4.07 4.37 4.55
Total retail 5.36 5.41 5.84 6.03 6.08
Sales for resale 3.15 3.37 3.38 3.61 3.67
Total sales 4.70 4.91 5.32 5.54 5.59
Residential Average Annual
Kilowatt-Hour Use Per Customer 14,318 14,577 13,894 14,457 14,148
Residential Average Annual
Revenue Per Customer $888.01 $907.35 $936.30 $992.17 $973.35
Plant Nameplate Capacity
Ratings (year-end) (megawatts) 2,188 2,188 2,174 2,174 2,174
Maximum Peak-Hour Demand (megawatts):
Winter 2,085 2,040 1,844 2,136 1,732
Summer 2,161 2,146 2,032 1,961 2,040
Annual Load Factor (percent) 55.2 55.3 55.5 51.4 53.0
Plant Availability Fossil-Steam (percent): 87.2 87.6 91.0 91.8 84.0
- ------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 89.8 89.2 87.1 87.8 86.8
Oil and gas 2.5 2.0 0.4 0.5 0.4
Purchased power -
From non-affiliates 5.9 5.5 3.5 2.7 4.0
From affiliates 1.8 3.3 9.0 9.0 8.8
- ------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
==============================================================================================================================
</TABLE>
II-141
<PAGE>
MISSISSIPPI POWER COMPANY
FINANCIAL SECTION
II-142
<PAGE>
MANAGEMENT'S REPORT
Mississippi Power Company 1999 Annual Report
The management of Mississippi Power Company has prepared--and is responsible
for--the financial statements and related information included in this report.
These statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on best estimates and judgments of management. Financial information
throughout this annual report is consistent with the financial statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based upon recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting control maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the internal audit staff. The Company's independent public
accountants also consider certain elements of the internal control system in
order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of four directors
who are not employees, provides a broad overview of management's financial
reporting and control functions. Periodically, this committee meets with
management, the internal auditors, and the independent public accountants to
ensure that these groups are fulfilling their obligations and to discuss
auditing, internal controls, and financial reporting matters. The internal
auditors and independent public accountants have access to the members of the
audit committee at any time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Mississippi Power Company in conformity with generally accepted accounting
principles.
/s/Dwight H. Evans
Dwight H. Evans
President and Chief Executive Officer
/s/Michael W. Southern
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
February 16, 2000
II-143
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mississippi Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Mississippi Power Company (a Mississippi corporation and a wholly owned
subsidiary of Southern Company) as of December 31, 1999 and 1998, and the
related statements of income, common stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements (pages II-152 through II-168)
referred to above present fairly, in all material respects, the financial
position of Mississippi Power Company as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
II-144
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Mississippi Power Company 1999 Annual Report
RESULTS OF OPERATIONS
Earnings
Mississippi Power Company's 1999 net income after dividends on preferred stock
of $54.8 million remained relatively flat when compared to 1998. In 1998,
earnings were $55.1 million, up $1.1 million from the prior year. This change is
primarily attributable to higher retail and wholesale revenues.
Revenues
The following table summarizes the factors impacting operating revenues for the
past three years:
Increase (Decrease)
From Prior Year
----------------------------------
1999 1998 1997
----------------------------------
(in thousands)
Retail --
Change in base
rates (PEP and
ECO Plan) $ 792 $ 335 $ 3,177
Sales growth 7,876 4,787 109
Weather (1,404) 7,091 (1,118)
Fuel cost
recovery
and other 19,603 13,112 948
--------------------------------------------------------------
Total retail 26,867 25,325 3,116
--------------------------------------------------------------
Sales for resale --
Non-affiliates 9,778 16,084 5,464
Affiliates 1,161 8,142 (11,606)
--------------------------------------------------------------
Total sales for
resale 10,939 24,226 (6,142)
Other operating
revenues 67 1,992 2,585
--------------------------------------------------------------
Total operating
revenues $37,873 $51,543 $ (441)
==============================================================
Percent change 6.4% 9.5% (0.1)%
--------------------------------------------------------------
Retail revenues of $469 million in 1999 increased 6.1 percent from 1998.
This increase resulted primarily from continued growth in the service area and a
true-up of the unbilled revenue estimate. Retail revenues for 1998 reflected a
6.1 percent increase over the prior year due to the continued growth in the
service area and the positive impact of weather on energy sales.
Fuel revenues generally represent the direct recovery of fuel expense
including purchased power. Therefore, changes in recoverable fuel expenses are
offset with corresponding changes in fuel revenues and have no effect on net
income.
Energy sales to non-affiliates include economy sales and amounts sold under
short-term contracts. Sales for resale to non-affiliates are influenced by those
utilities' own customer demand, plant availability, and the cost of their
predominant fuels.
Included in sales for resale to non-affiliates are revenues from rural
electric cooperative associations and municipalities located in southeastern
Mississippi. Energy sales to these customers increased 10.2 percent in 1999 and
9.8 percent in 1998, with the related revenues rising 12.1 percent and 11.3
percent, respectively. The customer demand experienced by these utilities is
determined by factors very similar to Mississippi Power's. Revenues from other
sales outside the service area increased in 1999 and 1998 primarily due to power
marketing activities. These increases were offset by increases in purchased
power from non-affiliates and, as a result, had no significant effect on net
income.
Sales to affiliated companies within the Southern electric system will vary
from year to year depending on demand and the availability and cost of
generating resources at each company. These sales have no material impact on
earnings.
Below is a breakdown of kilowatt-hour sales for 1999 and the percent change
for the last three years:
1999 Percent Change
----------- ------------------------------
KWH 1999 1998 1997
(in
millions)
Residential 2,248 - 10.3% (2.0)%
Commercial 2,848 8.5 9.0 4.0
Industrial 4,407 18.2 (6.4) 0.6
Other 40 0.8 - 2.6
Total retail 9,543 10.4 2.0 0.9
Sales for
Resale --
Non-affiliates 3,256 3.1 9.1 6.2
Affiliates 540 (2.2) 15.2 (31.0)
----------
Total 13,339 8.0 4.3 0.2
==================================================================
II-145
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
Total retail sales increased 10.4 percent from 1998 primarily because of
continued growth in the service area, industrial customers' recovery from last
year's hurricane and a true-up of the unbilled revenue estimate. The unbilled
revenue true-up amounted to approximately 3.5 percent of the total increase.
Residential sales decreased slightly in 1999 due to the mild weather in the
spring and winter periods, while commercial and industrial sales increased by
8.5 percent and 18.2 percent, respectively. Increased tourism and strong growth
impacted commercial sales, while industrial sales were impacted by increased
production by several larger industrial customers. Residential and commercial
sales increased in 1998 by 10.3 percent and 9.0 percent, respectively, due to
sales growth and higher than normal temperatures in the summer months. Sales to
industrial customers decreased by 6.4 percent primarily due to a large
industrial customer being shut down because of damages incurred from Hurricane
Georges.
The Company anticipates continued growth in energy sales as the economy
improves within its service area. The casino industry and ancillary services,
such as lodging, food, transportation, etc., are some of the factors that may
influence the economy of the Company's service area. Also, energy demand is
expected to grow as a result of a larger and more fully employed population.
Expenses
Total operating expenses were $513 million in 1999 reflecting an increase of $33
million or 6.9 percent over the prior year. The increase was due primarily to
higher fuel costs. In 1998, total operating expenses increased by 10.6 percent
over the prior year due primarily to higher fuel expenses, higher maintenance
and higher other operation costs.
Fuel costs are the single largest expense for the Company. Fuel expenses in
1999 increased 10.3 percent due to an increase in generation resulting from a
higher demand for energy. In 1999, expenses related to purchased power from
non-affiliates increased 18.3 percent, while expenses related to purchased power
from affiliates decreased 14.0 percent which, in total, resulted in a slight
increase when compared to 1998. Energy purchased for power marketing activities
was resold to non-affiliated third parties and had no significant effect on net
income. Sales and purchases among Mississippi Power and its affiliates will
vary from period to period depending on demand and the availability and
variable production cost at each generating unit in the Southern electric
system.
In 1998, fuel costs increased because of a 3.1 percent increase in
generation and a higher average cost of fuel. The increased generation was due
to higher demand for energy across the Southern electric system. Expenses
related to purchased power from non-affiliates increased, and expenses related
to purchased power from affiliates decreased. Further, the higher demand for
energy resulted in higher purchased power costs from non-affiliates.
The amount and sources of generation and the average cost of fuel per net
kilowatt-hour generated were as follows:
1999 1998 1997
-------------------------
Total generation
(millions of kilowatt
hours) 11,599 10,610 10,289
Sources of generation
(percent) --
Coal 81 80 85
Gas 19 20 15
Average cost of fuel per net
kilowatt-hour generated
(cents) -- 1.65 1.62 1.54
- --------------------------------------------------------------
Other operation expenses increased 13.9 percent in 1999 primarily due to the
amortization of costs associated with the workforce reduction plan and higher
distribution expenses. In 1998, other operation expense increased 7.5 percent
due to continuing expenses related to a new customer service system,
modification of certain information systems for year 2000 readiness, and costs
related to workforce reduction programs. Maintenance expenses decreased 6.6
percent in 1999 due to reduced scheduled maintenance. In 1999, depreciation and
amortization expenses increased 3.7 percent primarily due to growth in plant
investment. Comparisons of taxes other than income taxes for 1999 and 1998 show
increases of 4.2 percent and 4.4 percent, respectively, due to higher municipal
franchise taxes resulting from higher retail revenues. Interest expense
increased due to additional interest related to notes payable and interest
accrued on tax audit issues.
II-146
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
Effects of Inflation
Mississippi Power is subject to rate regulation and income tax laws that are
based on the recovery of historical costs. Therefore, inflation creates an
economic loss because the Company is recovering its costs of investments in
dollars that have less purchasing power. While the inflation rate has been
relatively low in recent years, it continues to have an adverse effect on the
Company because of the large investment in utility plant with long economic
lives. Conventional accounting for historical costs does not recognize this
economic loss or the partially offsetting gain that arises through financing
facilities with fixed-money obligations, such as long-term debt and preferred
securities. Any recognition of inflation by regulatory authorities is reflected
in the rate of return allowed.
Future Earnings Potential
The results of operations for the past three years 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
and more competitive environment. Expenses are subject to constant review and
cost control programs. See Note 2 to the financial statements under "Workforce
Reduction Programs" for information regarding the Company's workforce reduction
plan of 1997. The Company is also maximizing the utility of invested capital and
minimizing the need for additional capital by refinancing, managing the size of
its fuel stockpile, raising generating plant availability and efficiency, and
aggressively controlling the construction budget.
The Company currently operates as a vertically integrated company providing
electricity to customers within its traditional service area located in
southeastern Mississippi. Prices for electricity provided by the Company to
retail customers are set by the Mississippi Public Service Commission (MPSC)
under cost-based regulatory principles. The Federal Energy Regulatory Commission
(FERC) regulates the Company's wholesale rate schedules, power sales contracts
and transmission facilities.
Operating revenues will be affected by any changes in rates under the
Performance Evaluation Plan (PEP), the Company's performance based ratemaking
plan, and the ECO Plan. PEP has proven to be a stabilizing force on electric
rates, with only moderate changes in rates taking place. The ECO Plan provides
for recovery of costs (including costs of capital) associated with environmental
projects approved by the MPSC, most of which are required to comply with Clean
Air Act Amendments of 1990 (Clean Air Act) regulations. The ECO Plan is operated
independently of PEP. Compliance costs related to the Clean Air Act could affect
earnings if such costs cannot be recovered. The Company's 1999 ECO Plan was
approved, as filed, in 1999 and resulted in a slight decrease in customer
prices. The Company filed its 2000 ECO Plan in January, 2000 and, if approved as
filed, will result in a slight decrease in customer prices. Refer to Note 3 to
the financial statements under "Litigation and Regulatory Matters" for
additional information. The Clean Air Act and other important environmental
items are discussed later under "Environmental Matters".
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include weather,
competition, changes in contracts with neighboring utilities, energy
conservation practiced by customers, the elasticity of demand, and the rate of
economic growth in Mississippi Power's service area. Currently, the Company is
negotiating with certain of its wholesale customers a change in rates and has
committed to them that any agreement reached would be effective January 1, 2000.
At this time, no agreement has been reached and the ultimate amount of any rate
change cannot now be determined.
The electric utility industry in the United States is currently undergoing a
period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows Independent Power Producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
a utility's large industrial and commercial customers and sell energy generation
to other utilities. Also, wholesale transmission access and numerous potential
new energy suppliers, including power marketers and brokers, are driving down
electricity sales for resale rates. The Company is aggressively working to
maintain and expand its share of wholesale sales in the southeastern power
markets.
Although the Energy Act does not permit retail transmission access, it was a
major catalyst for the current restructuring and consolidation taking place
II-147
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
within the utility industry. Numerous federal and state initiatives are in
various stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. While restructuring initiatives are being discussed in Mississippi, none
have been enacted to date. Enactment would require numerous issues to be
resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of Mississippi Power to
recover its investment, including regulatory assets, could have a material
adverse effect on the financial condition of the Company.
The Company is attempting to minimize or reduce its cost exposure.
Continuing to be a low-cost producer could provide significant opportunities to
increase market share and profitability in markets that evolve with changing
regulation. Conversely, unless Mississippi Power remains a low-cost producer and
provides quality service, the Company's retail energy sales growth could be
limited, and this could significantly erode earnings. The Company is subject to
the provisions of Financial Accounting Standards Board (FASB) Statement No. 71,
Accounting for the Effects of Certain Types of Regulation. In the event that a
portion of the Company's operation is no longer subject to these provisions, the
Company would be required to write off related regulatory assets and liabilities
that are not specifically recoverable, and determine if any other assets have
been impaired. See Note 1 to the financial statements under "Regulatory Assets
and Liabilities" for additional information.
On December 20, 1999, the FERC issued its final ruling on Regional
Transmission Organizations (RTOs). The order encourages utilities owning
transmission systems to form RTOs on a voluntary basis. To facilitate the
development of RTOs, the FERC will convene regional conferences for utilities,
customers, and other members of the public to discuss the formation of RTOs. In
addition to participating in the regional conferences, utilities owning
transmission systems, including the Company, are required to make a filing by
October 15, 2000. The filing must contain either a proposal for RTO
participation or a description of the efforts made to participate in an RTO, the
reasons for non-participation, any obstacles to participation, and any plans for
further work toward participation. The RTOs that are proposed in the filings
should be operational by December 15, 2001. The Company is evaluating the issue
and formulating its response. The outcome of this matter cannot now be
determined.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statements as incurred. At December 31, 1999, exposure from these activities was
not material to the Company's financial position, results of operation, or cash
flow. Also, based on the Company's overall interest rate exposure at December
31, 1999, a near-term 100 basis point change in interest rates would not
materially affect the financial statements.
New Accounting Standard
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 1, 2001. This statement
establishes accounting and reporting standards for derivative instruments -
including certain derivative instruments embedded in other contracts - and for
hedging activities. The Company 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.
Year 2000
Year 2000 Challenge
The work undertaken by the Company to prepare critical computer systems and
other date sensitive devices to function correctly in the Year 2000 was
successful. There were no material incidents reported and no disruption of
electric service within the service area of the Company. There were no reports
of significant events regarding third parties that impacted revenues or
expenses.
For the Company, original projected total costs for Year 2000 readiness were
approximately $5 million. These costs include labor necessary to identify, test,
and renovate affected devices and systems, and costs for reporting requirements
to state and federal agencies. From its inception through December 31, 1999, the
II-148
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MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
Year 2000 program costs, recognized primarily as expense, amounted to
approximately $5 million.
FINANCIAL CONDITION
Overview
The principal change in Mississippi Power's financial condition during 1999 was
the addition of approximately $76 million to utility plant. Funding for these
additions and other capital requirements were derived primarily from operations.
The Statements of Cash Flows provide additional details.
Financing Activity
In 1999, the Company sold $9.4 million of pollution control bonds. Additionally,
the Company retired and reissued unsecured debt of $50 million. See the
Statements of Cash Flows for further details.
Composite financing rates have remained relatively flat for the years 1997
through 1999. As of year-end for each year respectively, the composite rates
were as follows:
1999 1998 1997
----------------------------
Composite interest rate on
long-term debt 6.19% 6.14% 6.16%
Composite preferred stock
dividend rate 6.33% 6.33% 6.33%
Composite interest rate on
preferred securities 7.75% 7.75% 7.75%
------------------------------------------------------------
In 1999, the Company signed an Agreement for Lease and a Lease Agreement
with Escatawpa Funding ("Escatawpa"), a limited partnership, that calls for the
Company to design and construct, as agent for Escatawpa, a 1,064 megawatt
natural gas combined cycle facility. It is anticipated that the total project
will cost approximately $406 million, and upon project completion in mid 2001,
the Company intends to lease the facility for an initial term of approximately
10 years. It is anticipated that the annual lease payments will approximate $32
million during the initial term.
Capital Structure
At year-end 1999, the Company's ratio of common equity to total capitalization,
excluding long-term debt due within one year, decreased from 52.1 percent in
1998, to 50.2 percent.
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$199 million ($84 million in 2000, $54 million in 2001, and $61 million in
2002). The major emphasis within the construction program will be on the upgrade
of existing facilities.
Revisions to projected construction expenditures may be necessary because of
factors such as changes in business conditions, revised load projections, the
availability and cost of capital, changes in environmental regulations, and
alternatives such as leasing.
Other Capital Requirements
In addition to the funds required for the Company's construction program,
approximately $80.1 million will be required by the end of 2002 for present
sinking fund requirements and maturities of long-term debt. Mississippi Power
plans to continue, when economically feasible, to retire higher cost debt and
preferred stock and replace these obligations with lower-cost capital if market
conditions permit.
Environmental Matters
On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil
action in the U.S. District Court against Alabama Power Company, Georgia Power
Company and the system service company. The complaint alleges violations of the
prevention of significant deterioration and new source review provisions of the
Clean Air Act with respect to five coal-fired generating facilities in Alabama
and Georgia. The civil action requests penalties and injunctive relief,
including an order requiring the installation of the best available control
technology at the affected units. The EPA concurrently issued to the integrated
Southeast utilities a notice of violation related to 10 generating facilities,
which includes the five facilities mentioned previously, and the Company's
plants Watson and Greene County. In early 2000, the EPA filed a motion to amend
its complaint to add the violations alleged in its notice of violation, and to
add Gulf Power, Mississippi Power, and Savannah Electric as defendants.
II-149
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
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 Company believes that its integrated utilities complied with
applicable laws and the EPA's regulations and interpretations in effect at the
time the work in question took place. The Clean Air Act authorizes civil
penalties of up to $27,500 per day per violation at each generating unit. Prior
to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this
matter could require substantial capital expenditures that cannot be determined
at this time and possibly require payment of substantial penalties. This could
affect future results of operations, cash flows, and possibly the Company's
financial condition unless such costs can be recovered through regulated rates.
In November 1990, the Clean Air Act was signed into law. Title IV of the
Clean Air Act -- the acid rain compliance provision of the law -- significantly
affected Mississippi Power and other subsidiaries of Southern Company. Specific
reductions in sulfur dioxide and nitrogen oxide emissions from fossil-fired
generating plants were required in two phases. Phase I compliance began in 1995
and initially affected 28 generating plants in the Southern electric system. As
a result of Southern Company's compliance strategy, an additional 22 generating
units were brought into compliance with Phase I requirements. Phase II
compliance started in 2000, and all fossil-fired generating plants are now
affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I compliance totaled approximately $65
million for Mississippi Power.
For Phase II sulfur dioxide compliance, Southern Company currently uses
emission allowances and increased fuel switching. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired units
as necessary to meet Phase II limits and ozone non-attainment requirements.
Compliance for Phase II and initial ozone non-attainment requirements increased
total estimated construction expenditures by approximately $105 million. Phase
II compliance is not expected to have a material impact on Mississippi Power.
Mississippi Power's ECO Plan is designed to allow recovery of costs of
compliance with the Clean Air Act, as well as other environmental statutes and
regulations. The MPSC reviews environmental projects and the Company's
environmental policy through the ECO Plan. Under the ECO Plan, any increase in
the annual revenue requirement is limited to 2 percent of retail revenues.
Mississippi Power's management believes that the ECO Plan provides for recovery
of the Clean Air Act costs. See Note 3 to the financial statements under
"Environmental Compliance Overview Plan" for additional information.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
In July 1997, the EPA revised the national ambient air quality standards for
ozone and particulate matter. This revision made the standards significantly
more stringent. In September 1998, the EPA issued the final regional nitrogen
oxide rules to the states for implementation. The final rules affect 22 states
that at present does not include Mississippi. The EPA is presently evaluating
whether or not to bring an additional 15 states under this regional haze rule.
Mississippi is one of those new 15 states. The EPA's July 1997 standards and the
September 1998 rule are being challenged in the courts by several states and
industry groups. Implementation of the final state rules could require
substantial further reductions in nitrogen oxide emissions from fossil-fired
generating facilities and other industry in these states. Implementation of the
standards could result in significant additional compliance costs and capital
expenditures that cannot be determined until the results of legal challenges are
known, and the states have adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various matters including: emission control strategies for ozone
non-attainment areas; additional controls for hazardous air pollutant emissions;
and hazardous waste disposal requirements. The impact of any new standards will
depend on the development and implementation of applicable regulations.
II-150
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1999 Annual Report
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites, the Company conducts
studies, when possible, to determine the extent of any required cleanup costs.
Should remediation be determined to be probable, reasonable estimates of costs
to clean up such sites are developed and recognized in the financial statements.
A currently owned site where manufactured gas plant operations were located
prior to the Company's ownership was substantially remediated in 1999. See Note
3 to the financial statements under "Environmental Compliance Overview Plan" for
additional information.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; and the Endangered
Species Act. Changes to these laws could affect many areas of the Company's
operations. The full impact of any such changes cannot be determined at this
time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect the Company. The impact of new legislation -- if any
- -- will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for lawsuits alleging damages
caused by electromagnetic fields or other environmental concerns. The likelihood
or outcome of such potential lawsuits cannot be determined at this time.
Sources of Capital
To meet short-term cash needs and contingencies, the Company had at December 31,
1999 approximately $173 thousand of cash and cash equivalents and approximately
$104.3 million of unused committed credit agreements. The Company had $57.5
million of short term notes payable outstanding at year end 1999.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from sources similar to those used in the past. These sources were primarily the
issuances of first mortgage bonds and preferred securities, in addition to
pollution control revenue bonds issued for the Company's benefit by public
authorities. The Company issued unsecured debt in 1998. In this regard,
Mississippi Power sought and obtained stockholder approval in 1998 to amend its
corporate charter eliminating restrictions on the amounts of unsecured
indebtedness the Company may incur.
Mississippi Power is required to meet certain coverage requirements
specified in its mortgage indenture and corporate charter to issue new first
mortgage bonds and preferred stock. The Company's coverage ratios are high
enough to permit, at present interest rate levels, any foreseeable security
sales. The amount of securities which the Company will be permitted to issue in
the future will depend upon market conditions and other factors prevailing at
that time.
Cautionary Statement Regarding Forward-Looking
Information
This annual report, including the foregoing Management's Discussion and
Analysis, contains forward-looking and historical information. The Company
cautions that there are various important factors that could cause actual
results to differ materially from those indicated in the forward-looking
information; 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 Company's
markets; potential business strategies -- including acquisitions or dispositions
of assets or internal restructuring -- that may be pursued by the Company; state
and federal rate regulation; changes in or application of environmental and
other laws and regulations to which the Company is subject; political, legal and
economic conditions and developments; financial market conditions and the
results of financing efforts; changes in commodity prices and interest rates;
weather and other natural phenomena; and other factors discussed in the reports
(including Form 10-K) filed from time to time by the Company with the SEC.
II-151
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Mississippi Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues:
Retail sales $469,434 $442,567 $417,242
Sales for resale --
Non-affiliates 131,004 121,225 105,141
Affiliates 19,446 18,285 10,143
Other revenues 13,120 13,054 11,062
- ----------------------------------------------------------------------------------------------------------------------
Total operating revenues 633,004 595,131 543,588
- ----------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 172,686 156,539 142,059
Purchased power --
Non-affiliates 40,080 33,872 14,536
Affiliates 31,007 36,037 37,794
Other 125,291 109,993 102,365
Maintenance 47,085 50,404 47,302
Depreciation and amortization 49,206 47,450 45,574
Taxes other than income taxes 47,893 45,965 44,034
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 513,248 480,260 433,664
- ----------------------------------------------------------------------------------------------------------------------
Operating Income 119,756 114,871 109,924
Other Income:
Interest income 273 947 857
Other, net 1,675 2,498 2,368
- ----------------------------------------------------------------------------------------------------------------------
Earnings Before Interest and Income Taxes 121,704 118,316 113,149
- ----------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 20,455 20,567 19,856
Interest on notes payable 2,750 943 96
Amortization of debt discount, premium and expense, net 1,432 1,446 1,577
Other interest charges 3,332 790 574
Distributions on preferred securities of subsidiary 2,796 2,796 2,369
- ----------------------------------------------------------------------------------------------------------------------
Total interest charges and other, net 30,765 26,542 24,472
- ----------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 90,939 91,774 88,677
Income taxes 34,117 34,664 31,380
- ----------------------------------------------------------------------------------------------------------------------
Net Income 56,822 57,110 57,297
Dividends on Preferred Stock 2,013 2,005 3,287
- ----------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 54,809 $ 55,105 $ 54,010
======================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Mississippi Power Company 1999 Annual Report
- -------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 56,822 $ 57,110 $ 57,297
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 53,427 51,517 49,661
Deferred income taxes and investment tax credits, net (4,143) 11,620 (1,809)
Other, net 5,531 (12,175) 3,206
Changes in certain current assets and liabilities --
Receivables, net (39,304) (5,486) (8,583)
Fossil fuel stock (9,379) (5,767) 1,517
Materials and supplies (1,903) 717 1,631
Accounts payable 1,391 (389) 8,357
Other 14,206 (4,061) 3,980
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 76,648 93,086 115,257
- -------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (75,888) (68,231) (55,375)
Other 1,009 (324) (489)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (74,879) (68,555) (55,864)
- -------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 44,500 13,000 -
Proceeds --
Other long-term debt 59,400 103,520 -
Preferred securities - - 35,000
Preferred stock - - -
Capital contributions from parent company 2,028 85 -
Retirements --
First mortgage bonds - (75,000) -
Other long-term debt (50,456) (13,020) (10)
Preferred stock - (87) (42,518)
Payment of preferred stock dividends (2,013) (2,005) (3,287)
Payment of common stock dividends (56,100) (51,700) (49,400)
Other (282) (2,429) (1,804)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (2,923) (27,636) (62,019)
- -------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents (1,154) (3,105) (2,626)
Cash and Cash Equivalents at Beginning of Period 1,327 4,432 7,058
- -------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 173 $ 1,327 $ 4,432
===============================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $25,486 $26,133 $22,297
Income taxes (net of refunds) 39,729 26,847 33,450
- -------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Mississippi Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------
Assets 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 173 $ 1,327
Receivables --
Customer accounts receivable 61,274 37,871
Other accounts and notes receivable 23,490 12,495
Affiliated companies 16,097 10,946
Accumulated provision for uncollectible accounts (697) (621)
Fossil fuel stock, at average cost 25,797 16,418
Materials and supplies, at average cost 20,638 18,735
Other 10,013 10,616
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 156,785 107,787
- ---------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment:
In service 1,601,399 1,553,112
Less accumulated provision for depreciation 626,841 583,957
- ---------------------------------------------------------------------------------------------------------------------
974,558 969,155
Construction work in progress 68,721 51,517
- ---------------------------------------------------------------------------------------------------------------------
Total property, plant, and equipment 1,043,279 1,020,672
- ---------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,389 979
- ---------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 21,557 22,697
Prepaid pension costs 2,488 -
Debt expense, being amortized 4,355 4,409
Premium on reacquired debt, being amortized 8,154 9,304
Workforce reduction plan - 12,748
Other 13,129 11,009
- ---------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 49,683 60,167
- ---------------------------------------------------------------------------------------------------------------------
Total Assets $1,251,136 $1,189,605
=====================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-154
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Mississippi Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity 1999 1998
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Liabilities:
Securities due within one year $ 30,020 $ 50,020
Notes payable 57,500 13,000
Accounts payable --
Affiliated 17,002 8,788
Other 43,105 47,113
Customer deposits 3,749 3,272
Taxes accrued --
Income taxes 6,865 1,124
Other 35,534 31,379
Interest accrued 6,733 2,955
Vacation pay accrued 5,218 4,717
Other 7,497 11,448
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 213,223 173,816
- --------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements) 321,802 292,744
- --------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 139,564 143,852
Deferred credits related to income taxes 34,765 37,277
Accumulated deferred investment tax credits 24,695 25,913
Employee benefits provisions 34,268 34,148
Workforce reduction plan 11,272 13,051
Other 12,770 10,764
- --------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 257,334 265,005
- --------------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding company junior
subordinated notes (See accompanying statements) 35,000 35,000
- --------------------------------------------------------------------------------------------------------------------
Preferred stock (See accompanying statements) 31,809 31,809
- --------------------------------------------------------------------------------------------------------------------
Common stockholder's equity (See accompanying statements) 391,968 391,231
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $1,251,136 $1,189,605
====================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-155
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Mississippi Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
-------- --------------
<S> <C> <C> <C> <C> <C>
June 1, 2023 7.45% $ 35,000 $ 35,000
March 1, 2004 6.60% 35,000 35,000
December 1, 2025 6.875% 30,000 30,000
- -----------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 100,000 100,000
- -----------------------------------------------------------------------------------------------------------------------------
Long-term notes payable --
6.05% due May 1, 2003 35,000 35,000
6.75% due June 30, 2038 54,564 55,000
Adjustable rates (6.61% to 6.78% at 1/1/00)
due 1999-2002 80,000 80,000
- -----------------------------------------------------------------------------------------------------------------------------
Total long-term notes payable 169,564 170,000
- -----------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
5.65% to 5.80% due 2007-2023 26,785 26,805
Variable rates (3.90% at 1/1/00)
due 2020-2025 10,600 33,900
Non-collateralized:
Variable rates (3.90% to 4.00% at 1/1/00)
due 2020-2028 46,220 13,520
- -----------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 83,605 74,225
- -----------------------------------------------------------------------------------------------------------------------------
Unamortized debt premium (discount), net (1,347) (1,461)
- -----------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $21.9 million) 351,822 342,764
Less amount due within one year 30,020 50,020
- -----------------------------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year $321,802 $292,744 41.2% 39.0%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION (continued)
At December 31, 1999 and 1998
Mississippi Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Company Obligated Mandatorily
Redeemable Preferred Securities:
$25 liquidation value --
7.75% $ 35,000 $ 35,000
- -----------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $2.7 million) 35,000 35,000 4.5 4.7
- -----------------------------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value
4.40% to 7.00% 31,809 31,809
- -----------------------------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $2.0 million) 31,809 31,809
Less amount due within one year - -
- -----------------------------------------------------------------------------------------------------------------------------
Total excluding amount due within one year 31,809 31,809 4.1 4.2
- -----------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity:
Common stock, without par value --
Authorized - 1,130,000 shares
Outstanding - 1,121,000 shares in 1999 and 1998 37,691 37,691
Paid-in capital 181,502 179,474
Premium on preferred stock 326 326
Retained earnings 172,449 173,740
- -----------------------------------------------------------------------------------------------------------------------------
Total common stockholder's equity 391,968 391,231 50.2 52.1
- -----------------------------------------------------------------------------------------------------------------------------
Total Capitalization $780,579 $750,784 100.0% 100.0%
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
Mississippi Power Company 1999 Annual Report
- ----------------------------------------------------------------------------------------------------------------------------
Premium on
Common Paid-In Preferred Retained
Stock Capital Stock Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $37,691 $179,389 $372 $166,282 $383,734
Net income after dividends on preferred stock - - - 54,010 54,010
Cash dividends on common stock - - - (49,400) (49,400)
Other - - (45) (475) (520)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 37,691 179,389 327 170,417 387,824
Net income after dividends on preferred stock - - - 55,105 55,105
Capital contributions from parent company - 85 - - 85
Cash dividends on common stock - - - (51,700) (51,700)
Other - - (1) (82) (83)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 37,691 179,474 326 173,740 391,231
Net income after dividends on preferred stock - - - 54,809 54,809
Capital contributions from parent company - 2,028 - - 2,028
Cash dividends on common stock - - - (56,100) (56,100)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $37,691 $181,502 $326 $172,449 $391,968
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-158
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Mississippi Power Company 1999 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Mississippi Power Company is a wholly owned subsidiary of Southern Company,
which is the parent company of five integrated Southeast utilities, Southern
Company Services (SCS), Southern Communications Services (Southern LINC),
Southern Energy, Inc. (Southern Energy), Southern Nuclear Operating Company
(Southern Nuclear), Southern Energy Solutions, and other direct and indirect
subsidiaries. The integrated Southeast utilities -- Alabama Power Company,
Georgia Power Company, Gulf Power Company, Mississippi Power Company, and
Savannah Electric and Power Company -- provide electric service in four
southeastern states. Contracts among the integrated Southeast utilitis related
to jointly owned generating facilities, interconnecting transmission lines, and
the exchange of electric power--are regulated by the Federal Energy Regulatory
Commission (FERC) and/or the Securities and Exchange Commission (SEC). The
system service company provides, at cost, specialized services to Southern
Company and the subsidiary companies. Southern LINC provides digital wireless
communications services to the integrated Southeast utilities and also markets
these services to the public within the Southeast. Southern Company Energy
Solutions develops new business opportunities related to energy products and
services. Southern Nuclear provides services to Southern Company's nuclear power
plants. Southern Energy acquires, develops, builds, owns, and operates power
production and delivery facilities and provides a broad range of energy-related
servies to utilities and industrial companies in selected countries around the
world. Southern Energy businesses include independent power projects, integrated
utilities, a distribution company, and energy trading and marketing businesses
outside the southeastern United States.
Southern Company is registered as a holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). Both Southern Company and its subsidiaries
are subject to the regulatory provisions of the PUHCA. Mississippi Power is also
subject to regulation by the FERC and the Mississippi Public Service Commission
(MPSC). The Company follows generally accepted accounting principles and
complies with the accounting policies and practices prescribed by the respective
commissions. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates and the
actual results may differ from those estimates.
Prior years' data presented in the financial statements have been
reclassified to conform with the current year presentation.
Related-Party Transactions
The Company has an agreement with SCS under which the following services are
rendered to the Company at cost: general and design engineering, purchasing,
accounting and statistical, finance and treasury, tax, information resources,
marketing, auditing, insurance and pension, human resources, systems and
procedures, and other services with respect to business and operations and power
pool operations. Costs for these services amounted to $45.5 million, $43.9
million, and $34.5 million during 1999, 1998, and 1997, respectively.
Regulatory Assets and Liabilities
Mississippi Power is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
1999 1998
-------------------------
(in thousands)
Deferred income tax charges $ 21,557 $ 22,697
Vacation pay 5,218 4,717
Workforce reduction plan of
1997 - 12,748
Premium on reacquired debt 8,154 9,304
Deferred environmental costs 323 1,500
Property damage reserve (3,082) (910)
Deferred income tax credits (34,765) (37,277)
Other, net (672) (2,538)
- ----------------------------------------------------------------
Total $ (3,267) $ 10,241
================================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of FASB Statement No. 71, the Company would be required to
write off the net regulatory assets and liabilities related to that portion of
II-159
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NOTES (continued)
Mississippi Power Company 1999 Annual Report
operations that are not specifically recoverable through regulated rates. In
addition, the Company would be required to determine any impairment to other
assets, including plant, and write down the assets, if impaired, to their fair
value.
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area located
within the state of Mississippi, and to wholesale customers in the Southeast.
Mississippi Power accrues revenues for service rendered but unbilled at the
end of each fiscal period. The Company's retail and wholesale rates include
provisions to adjust billings for fluctuations in fuel costs, the energy
component of purchased power costs and certain other costs. Retail rates also
include provisions to adjust billings for fluctuations in costs for ad valorem
taxes and certain qualifying environmental costs. Revenues are adjusted for
differences between actual allowable amounts and the amounts included in rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts continued to average less than 1 percent of revenues.
Depreciation
Depreciation of the original cost of plant in service is provided primarily by
using composite straight-line rates which approximated 3.3 percent in 1999.
When property subject to depreciation is retired or otherwise disposed of in the
normal course of business, its cost -- together with the cost of removal, less
salvage -- is charged to the accumulated provision for depreciation. Minor
items of property included in the original cost of the plant are retired when
the related property unit is retired. Depreciation expense includes an amount
for the expected cost of removal of facilities.
Income Taxes
Mississippi Power uses the liability method of accounting for deferred income
taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Property, Plant and Equipment
Property, plant, and equipment is stated at original cost. Original cost
includes: materials; labor; minor items of property; appropriate administrative
and general costs; payroll-related costs such as taxes, pensions, and other
benefits; and the estimated cost of funds used during construction, if
applicable. The cost of maintenance, repairs, and replacement of minor items of
property is charged to maintenance expense except for the maintenance of coal
cars and a portion of the railway track maintenance, which are charged to fuel
stock. The cost of replacements of property (exclusive of minor items of
property) is capitalized.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
The Company's financial instruments for which the carrying amount did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
---------------------------
(in millions)
Long-term debt
At December 31, 1999 $353 $334
At December 31, 1998 $343 $348
Capital trust preferred
securities:
At December 31, 1999 $35 $30
At December 31, 1998 35 36
- --------------------------------------------------------------
The fair value for long-term debt and preferred securities was based on
either closing market price or closing price of comparable instruments.
II-160
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
Materials and Supplies
Generally, materials and supplies include the cost of transmission, distribution
and generating plant materials. Materials are charged to inventory when
purchased and then expensed or capitalized to plant, as appropriate, when used
or installed.
Provision for Property Damage
Mississippi Power is self-insured for the cost of storm, fire and other
uninsured casualty damage to its property, including transmission and
distribution facilities. As permitted by regulatory authorities, the Company
accrues for the cost of such damage by charging expense and crediting an
accumulated provision. The cost of repairing damage resulting from such events
that individually exceed $50 thousand is charged to the accumulated provision.
Effective November 1999, an order from the MPSC increased the maximum Property
Damage Reserve from $18 million to $23 million and allows an annual accrual of
up to $4.6 million. In 1999, the Company provided for such costs by charges to
income of $4.4 million, which is an increase of $2.9 million when compared to
the $1.5 million allowed in both 1998 and 1997. As of December 31, 1999, the
accumulated provision amounted to $3.1 million.
2. RETIREMENT BENEFITS
Mississippi Power has a defined benefit, trusteed, pension plan that covers
substantially all employees. The Company provides certain medical care and
life insurance benefits for retired employees. Substantially all these
employees may become eligible for such benefits when they retire. The Company
funds trusts to the extent required by the MPSC. The measurement date for plan
assets and obligations is September 30 for each year.
Pension Plan
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
----------------------------
1999 1998
- -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $142,807 $132,131
Service cost 4,415 3,848
Interest cost 9,377 9,613
Benefits paid (8,050) (7,845)
Actuarial (gain) loss and
employee transfers (8,619) 5,060
- -----------------------------------------------------------------
Balance at end of year $139,930 $142,807
=================================================================
Plan Assets
----------------------------
1999 1998
- -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $198,100 $207,457
Actual return on plan assets 33,216 1,252
Benefits paid (8,050) (7,845)
Employee transfers (1,779) (2,764)
- -----------------------------------------------------------------
Balance at end of year $221,487 $198,100
=================================================================
The accrued pension costs recognized in the Balance Sheets were as follows:
1999 1998
- --------------------------------------------------------------------
(in thousands)
Funded status $ 81,557 $ 55,293
Unrecognized transition obligation (3,814) (4,359)
Unrecognized prior service cost 4,991 5,405
Unrecognized net gain (80,246) (56,590)
- --------------------------------------------------------------------
Prepaid asset (liability) recognized
in the Balance Sheets $2,488 $ (251)
====================================================================
II-161
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ------------------------------------------------------------------
(in thousands)
Service cost $ 4,415 $ 3,848 $ 4,015
Interest cost 9,377 9,613 9,407
Expected return on
plan assets (14,681) (13,817) (12,805)
Recognized net gain (1,721) (1,956) (1,729)
Net amortization (131) (131) (119)
- ------------------------------------------------------------------
Net pension income $(2,741) $ (2,443) $ (1,231)
==================================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
----------------------------
1999 1998
- -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $47,260 $43,417
Service cost 982 806
Interest cost 3,105 3,162
Benefits paid (2,256) (2,302)
Actuarial loss and
employee transfers (3,701) 2,177
- -----------------------------------------------------------------
Balance at end of year $45,390 $47,260
=================================================================
Plan Assets
----------------------------
1999 1998
- -----------------------------------------------------------------
(in thousands)
Balance at beginning of year $12,779 $12,189
Actual return on plan assets 1,818 176
Employer contributions 2,657 2,716
Benefits paid (2,256) (2,302)
- -----------------------------------------------------------------
Balance at end of year $14,998 $12,779
=================================================================
The accrued postretirement costs recognized in the Balance Sheets were as
follows:
1999 1998
- --------------------------------------------------------------------
(in thousands)
Funded status $(30,392) $(34,481)
Unrecognized transition obligation 4,621 4,967
Unrecognized net loss (gain) (3,406) 1,010
Fourth quarter contributions 931 577
- --------------------------------------------------------------------
Accrued liability recognized in the
Balance Sheets $(28,246) $(27,927)
====================================================================
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ------------------------------------------------------------------
(in thousands)
Service cost $ 981 $ 806 $ 867
Interest cost 3,105 3,162 2,922
Expected return on
plan assets (1,100) (989) (815)
Recognized net (gain) loss - - (7)
Net amortization 346 346 362
- ------------------------------------------------------------------
Net postretirement cost $3,332 $3,325 $3,329
==================================================================
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefits were:
1999 1998
---------------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00 4.25
Long-term return on plan assets 8.50 8.50
---------------------------------------------------------------
II-162
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
An additional assumption used in measuring the accumulated postretirement
benefit obligation was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.50 percent through the year 2005 and
remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would increase the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows:
1 Percent 1 Percent
Increase Decrease
- -----------------------------------------------------------------
(in thousands)
Benefit obligation $2,983 $(2,551)
Service and interest costs 258 (219)
- -----------------------------------------------------------------
Workforce Reduction Programs
In 1997, approximately one hundred employees of Mississippi Power accepted
the terms of a workforce reduction plan. The total cost to be incurred in
connection with this voluntary plan was expected to be $18.2 million, including
a $2.5 million pension and postretirement benefits curtailment loss. The MPSC
approved the deferral and amortization of these program costs over a period not
to exceed 60 months beginning no later than July 1998. At December 31, 1999, the
Company has completely amortized the $18.2 million.
3. LITIGATION AND REGULATORY MATTERS
Environmental Litigation
On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil
action in the U.S. District Court against Alabama Power Company, Georgia Power
Company and the system service company. The complaint alleges violations of the
prevention of significant deterioration and new source review provisions of the
Clean Air Act with respect to five coal-fired generating facilities in Alabama
and Georgia. The civil action requests penalties and injunctive relief,
including an order requiring the installation of the best available control
technology at the affected units. The EPA concurrently issued to the integrated
Southeast utilities a notice of violation related to 10 generating facilities,
which includes the five facilities mentioned previously, and the Company's
plants Watson and Greene County. In early 2000, the EPA filed a motion to amend
its complaint to add the violations alleged in its notice of violation, and to
add Gulf Power, Mississippi Power, and Savannah Electric as defendants. 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 Company believes that its integrated utilities complied with
applicable laws and the EPA's regulations and interpretations in effect at the
time the work in question took place. The Clean Air Act authorizes civil
penalties of up to $27,500 per day per violation at each generating unit. Prior
to January 30, 1997, the penalty was $25,000 per day. An adverse outcome of this
matter could require substantial capital expenditures that cannot be determined
at this time and possibly require payment of substantial penalties. This could
affect future results of operations, cash flows, and possibly the Company's
financial condition unless such costs can be recovered through regulated rates.
Retail Rate Adjustment Plans
Mississippi Power's retail base rates are set under a Performance Evaluation
Plan (PEP) approved by the MPSC in 1994. PEP was designed with the objective
that the plan would reduce the impact of rate changes on the customer and
provide incentives for Mississippi Power to keep customer prices low. PEP
includes a mechanism for sharing rate adjustments based on the Company's ability
to maintain low rates for customers and on the Company's performance as measured
by three indicators that emphasize price and service to the customer. PEP
provides for semiannual evaluations of Mississippi Power's performance-based
return on investment. Any change in rates is limited to 2 percent of retail
revenues per evaluation period. PEP will remain in effect until the MPSC
modifies or terminates the plan. In September 1996, the MPSC, under PEP,
approved a retail revenue increase of $4.5 million (1.06 percent of annual
retail revenue) which became effective in October 1996. There were no PEP retail
revenue changes for 1999, 1998 or 1997.
Environmental Compliance Overview Plan
The MPSC approved Mississippi Power's Environmental Compliance Overview Plan
(ECO) in 1992. The plan establishes procedures to facilitate the MPSC's overview
of the Company's environmental strategy and provides for recovery of costs
(including costs of capital) associated with environmental projects approved by
II-163
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
the MPSC. Under the ECO Plan any increase in the annual revenue requirement is
limited to 2 percent of retail revenues. However, the plan also provides for
carryover of any amount over the 2 percent limit into the next year's revenue
requirement. In 1997, the Company's filing with the MPSC under the ECO Plan
resulted in an annual retail rate increase of $0.9 million. In 1998 and 1999,
the Company's ECO filing resulted in a small decrease in customer prices in each
year. The Company filed its 2000 ECO Plan in January, and if approved as filed,
will result in a small decrease in customer prices.
Mississippi Power conducts studies, when possible, to determine the extent
of any required environmental remediation. Should such remediation be determined
to be probable, reasonable estimates of costs to clean up such sites are
developed and recognized in the financial statements. A currently owned site
where manufactured gas plant operations were located prior to the Company's
ownership has been investigated and substantially remediated. The remedial plan
was approved by the Mississippi Department of Environmental Quality. Remediation
of this site began in 1999 and is scheduled to be completed in early 2000. The
Company expects the total remediation costs to be approximately $2.0 million,
with approximately $1.5 million recovered from other parties and the balance
through the ECO Plan. The Company recovers such costs under the ECO Plan as they
are incurred, as provided for in the Company's 1995 ECO Order. As of December
31, 1999, the balance in the liability and regulatory asset accounts was $0.3
million.
Approval for New Capacity
In January 1998, the Company was granted a Certificate of Public Convenience
and Necessity by the MPSC to build approximately 1,000 megawatts of combined
cycle generation at the Company's Plant Daniel site, to be placed in service by
June 2001. In December 1998, the Company requested approval to transfer the
ownership rights under the certificate to Escatawpa Funding, Limited
Partnership, which will lease the facility to the Company (see Note 5, Financing
and Commitments). The Company also requested approval from the MPSC to exclude
the costs of the new facility from retail rate base and to assign the Company's
existing generating capacity to its retail business, beginning in 2001. In
January 1999, the Company and Mississippi Public Utility Staff entered a
stipulation covering the details of cost allocation and ratemaking to effect
this change. In February 1999, the Commission held hearings on this matter and
subsequently granted the Company's request, as modified by the stipulation.
4. CONSTRUCTION PROGRAM
Mississippi Power is engaged in continuous construction programs, the costs of
which are currently estimated to total $84 million in 2000, $54 million in 2001,
and $61 million in 2002. The construction program is subject to periodic review
and revision, and actual construction costs may vary from the above estimates
because of numerous factors. These factors include changes in business
conditions; revised load growth estimates; changes in environmental regulations;
increasing costs of labor, equipment and materials; and cost of capital.
Significant construction will continue related to transmission and distribution
facilities, and the upgrading of generating plants.
5. FINANCING AND COMMITMENTS
Financing
Mississippi Power's construction program is expected to be financed from
internal and other sources, such as the issuance of additional long-term debt
and preferred securities and the receipt of capital contributions from Southern
Company.
The amounts of long-term debt and preferred securities that can be issued in
the future will be contingent on market conditions, the maintenance of adequate
earnings levels, regulatory authorizations, and other factors.
In 1999, the Company signed an Agreement for Lease and a Lease Agreement
with Escatawpa Funding ("Escatawpa"), a limited partnership, that calls for the
Company to design and construct, as agent for Escatawpa, a 1,064 megawatt
natural gas combined cycle facility. It is anticipated that the total project
will cost approximately $406 million, and upon project completion in mid 2001,
the Company intends to lease the facility for an initial term of approximately
10 years. It is anticipated that the annual lease payments will approximate $32
million during the initial term.
II-164
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
Bank Credit Arrangements
At December 31, 1999, Mississippi Power had total committed credit agreements
with banks for $104.3 million. At year-end 1999, the unused portion of these
committed credit agreements was $104.3 million. These credit agreements expire
at various dates in 2000. Some of these agreements allow short-term borrowings
to be converted into term loans, payable in 12 equal quarterly installments,
with the first installment due at the end of the first calendar quarter after
the applicable termination date or at an earlier date at the Company's option.
In connection with these credit arrangements, the Company agrees to pay
commitment fees based on the unused portions of the commitments or to maintain
compensating balances with the banks. At December 31, 1999, the Company had
$57.5 million of short-term borrowings outstanding.
Assets Subject to Lien
Mississippi Power's mortgage indenture dated as of September 1, 1941, as amended
and supplemented, which secures the first mortgage bonds issued by the Company,
constitutes a direct first lien on substantially all of the Company's fixed
property and franchises.
Lease Agreements
In 1984, Mississippi Power and Gulf States Utilities (now Entergy Corp.) entered
into a forty-year transmission facilities agreement whereby Entergy began paying
a use fee to the Company covering all expenses relative to ownership and
operation and maintenance of a 500 kV line, including amortization of its
original $57 million cost. For the three years ended 1999 use fees collected
under this agreement, net of related expenses, amounted to approximately $3
million each year, and are included within Other Income in the Statements of
Income.
In 1989, Mississippi Power entered into a twenty-two year lease agreement
for the use of 495 aluminum railcars. In 1994, a second lease agreement for the
use of 250 additional aluminum railcars was also entered into for twenty-two
years. The Company has the option to purchase the 745 railcars at the greater
of lease termination value or fair market value, or to renew the leases at the
end of the lease term. In 1997, a third lease agreement for the use of 360
railcars was also entered into for three years, with a monthly renewal option
for up to an additional nine months. All of these leases, totaling 1,105
railcars, were for the transport of coal at Plant Daniel.
Gulf Power, as joint owner of Plant Daniel, is responsible for one half of
the lease cost. The Company's share (50%) of the leases, charged to fuel
stock, was $2.8 million in 1999, $2.8 million in 1998, and $2.0 million in
1997. The Company's annual lease payments for 2000 through 2004 will average
approximately $1.8 million and after 2004, lease payments total in aggregate
approximately $14.4 million.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of its generating plants,
Mississippi Power has entered into various long-term commitments for the
procurement of fuel. In most cases, these contracts contain provisions for price
escalations, minimum production levels, and other financial commitments.
Total estimated obligations at December 31, 1999, were as follows:
Year Fuel
- ----------- ----------
(in millions)
2000 $147
2001 121
2002 124
2003 125
2004 9
2005 - 2026 115
- ---------------------------------------------------
Total commitments $641
- ---------------------------------------------------
Additional commitments for fuel will be required in the future to supply the
Company's fuel needs.
In 1996, Mississippi Power entered into agreements to purchase options for
summer peaking power for the years 1997 through 2000. The Company has purchased
options from power marketers for up to 250 megawatts of peaking power in 1997;
300 megawatts in 1998; 250 megawatts in 1999; and 400 megawatts in 2000. For the
years ended 1999, 1998 and 1997 Mississippi Power exercised its options to
purchase 250 megawatts, 300 megawatts and 250 megawatts of peaking capacity,
respectively. In June 1997, the MPSC approved Mississippi Power's request that
it be allowed to earn a return on the capacity portion of this agreement. In
1999, Mississippi Power exercised its option to purchase 400 megawatts of summer
peaking capacity for the year 2000.
II-165
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
6. JOINT OWNERSHIP AGREEMENTS
Mississippi Power and Alabama Power own as tenants in common Units 1 and 2 at
Plant Greene County located in Alabama; and Mississippi Power and Gulf Power
own as tenants in common Units 1 and 2 at Plant Daniel located in Mississippi.
At December 31, 1999, Mississippi Power's percentage ownership and
investment in these jointly owned facilities were as follows:
Company's
Generating Total Percent Gross Accumulated
Plant Capacity Ownership Investment Depreciation
--------- ------------------------------------------------
(Megawatts) (in thousands)
Greene
County
Units 1 and 2 500 40% $61,050 $29,636
Daniel
Units 1 and 2 1,000 50% $225,761 $103,213
------------------------------------------------------------------
Mississippi Power's share of plant operating expenses is included in the
corresponding operating expenses in the Statements of Income.
7. LONG-TERM POWER SALES AGREEMENTS
Mississippi Power and the other utility affiliates of Southern Company have
long-term contractual agreements for the sale of capacity and energy to certain
non-affiliated utilities located outside the system's service area. Because the
energy is generally sold at cost under these agreements, profitability is
primarily affected by revenues from capacity sales. The Company's capacity
revenues under these agreements were not material during the periods reported.
8. INCOME TAXES
At December 31, 1999, the tax-related regulatory assets and liabilities were $22
million and $35 million, respectively. These assets are attributable to tax
benefits flowed through to customers in prior years and to taxes applicable to
capitalized AFUDC. These liabilities are attributable to deferred taxes
previously recognized at rates higher than current enacted tax law and to
unamortized investment tax credits.
Details of the federal and state income tax provisions are shown below:
1999 1998 1997
----------------------------------
(in thousands)
Total provision for
income taxes
Federal --
Current $33,379 $20,500 $27,651
Deferred --current year 3,747 7,007 8,171
--reversal of
prior years (7,720) 2,435 (9,236)
-----------------------------------------------------------------
29,406 29,942 26,586
-----------------------------------------------------------------
State --
Current 4,881 2,544 5,537
Deferred --current year 738 1,568 1,756
--reversal of
prior years (908) 610 (2,499)
-----------------------------------------------------------------
4,711 4,722 4,794
-----------------------------------------------------------------
Total 34,117 34,664 31,380
=================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities are as follows:
1999 1998
-----------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $154,698 $153,768
Basis differences 8,967 9,642
Other 23,108 26,038
---------------------------------------------------------------
Total 186,773 189,448
---------------------------------------------------------------
Deferred tax assets:
Other property
basis differences 21,003 22,391
Pension and
other benefits 9,608 9,441
Property insurance 3,419 1,526
Unbilled fuel 4,846 2,080
Other 11,071 14,406
---------------------------------------------------------------
Total 49,947 49,844
---------------------------------------------------------------
Net deferred tax
liabilities 136,826 139,604
Portion included in
current assets, net 2,738 4,248
---------------------------------------------------------------
Accumulated deferred
income taxes in the
Balance Sheets $139,564 $143,852
===============================================================
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<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
Deferred investment tax credits are amortized over the lives of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $1.2 million in 1999, 1998, and 1997. At December 31, 1999, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1999 1998 1997
----------------------------------
Federal statutory rate 35.00% 35.00% 35.00%
State income tax, net of
federal deduction 3.37 3.34 3.51
Non-deductible book
depreciation .77 .47 .47
Other (1.62) (1.04) (3.60)
------------------------------------------------------------------
Effective income tax rate 37.52% 37.77% 35.38%
==================================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis.
9. COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
In February 1997, Mississippi Power Capital Trust I (Trust I), of which the
Company owns all the common securities, issued $35 million of 7.75 percent
mandatorily redeemable preferred securities. Substantially all of the assets of
Trust I are $36 million aggregate principal amount of the Company's 7.75 percent
junior subordinated notes due February 15, 2037.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of the Trusts' payment obligations with respect to the
preferred securities.
The Trust is a subsidiary of the Company, and accordingly is consolidated in
the Company's financial statements.
10. LONG-TERM DEBT DUE WITHIN ONE YEAR
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt due within one year is as follows:
1999 1998
-------------------
(in thousands)
Bond improvement fund requirement $1,000 $1,000
Less: Portion to be satisfied by
certifying property additions 1,000 1,000
---------------------------------------------------------------
Cash sinking fund requirement - -
Redemptions of first mortgage bonds - -
Current portion of other long-term debt 30,000 50,000
Pollution control bond cash
sinking fund requirements 20 20
---------------------------------------------------------------
Total $30,020 $50,020
===============================================================
The first mortgage bond improvement fund requirement is one percent of each
outstanding series authenticated under the indenture of Mississippi Power prior
to January 1 of each year, other than first mortgage bonds issued as collateral
security for certain pollution control obligations. The requirement must be
satisfied by June 1 of each year by depositing cash or reacquiring bonds, or by
pledging additional property equal to 166-2/3 percent of such requirement.
11. COMMON STOCK DIVIDEND RESTRICTIONS
Mississippi Power's first mortgage bond indenture and the corporate charter
contain various common stock dividend restrictions. At December 31, 1999,
approximately $118 million of retained earnings was restricted against the
payment of cash dividends on common stock under the most restrictive terms of
the mortgage indenture or corporate charter.
II-167
<PAGE>
NOTES (continued)
Mississippi Power Company 1999 Annual Report
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1999 and 1998 are as follows:
Net Income
After Dividends
Operating Operating On Preferred
Quarter Ended Revenues Income Stock
- --------------------------------------------------------------------
(in thousands)
March 1999 $122,435 $18,122 $7,193
June 1999 158,590 31,289 14,953
September 1999 201,594 51,609 27,313
December 1999 150,385 18,736 5,350
March 1998 $122,156 $20,299 $8,388
June 1998 156,612 30,126 13,713
September 1998 191,699 50,948 28,309
December 1998 124,664 13,498 4,696
- --------------------------------------------------------------------
Mississippi Power's business is influenced by seasonal weather conditions
and the timing of rate changes.
II-168
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999
Mississippi Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands)* $633,004 $595,131 $543,588 $544,029 $516,553
Net Income after Dividends
on Preferred Stock (in thousands) $54,809 $55,105 $54,010 $52,723 $52,531
Cash Dividends
on Common Stock (in thousands) $56,100 $51,700 $49,400 $43,900 $39,400
Return on Average Common Equity (percent) 14.00 14.15 14.00 13.90 14.26
Total Assets (in thousands) $1,251,136 $1,189,605 $1,166,829 $1,142,327 $1,148,953
Gross Property Additions (in thousands) $75,888 $68,231 $55,375 $61,314 $67,570
- ---------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $391,968 $391,231 $387,824 $383,734 $374,884
Preferred stock 31,809 31,809 31,896 74,414 74,414
Company obligated mandatorily
redeemable preferred securities 35,000 35,000 35,000 - -
Long-term debt 321,802 292,744 291,665 326,379 288,820
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $780,579 $750,784 $746,385 $784,527 $738,118
=================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 50.2 52.1 52.0 48.9 50.8
Preferred stock 4.1 4.2 4.3 9.5 10.1
Company obligated mandatorily
redeemable preferred securities 4.5 4.7 4.7 - -
Long-term debt 41.2 39.0 39.0 41.6 39.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0
=================================================================================================================================
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 Aa3 Aa3 Aa3 Aa3
Standard and Poor's AA- AA- AA- A+ A+
Duff & Phelps AA- AA- AA- AA- AA-
Preferred Stock -
Moody's a1 a1 a1 a1 a1
Standard and Poor's A- A A A A
Duff & Phelps A+ A+ A+ A+ A+
=================================================================================================================================
Customers (year-end):
Residential 157,592 156,530 156,650 154,630 154,014
Commercial 31,837 31,319 31,667 30,366 29,903
Industrial 546 587 642 639 642
Other 202 200 200 200 194
- ---------------------------------------------------------------------------------------------------------------------------------
Total 190,177 188,636 189,159 185,835 184,753
=================================================================================================================================
Employees (year-end): 1,328 1,230 1,245 1,363 1,421
- ---------------------------------------------------------------------------------------------------------------------------------
* 1999 data includes the true-up of the unbilled revenue estimates.
</TABLE>
II-169
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Mississippi Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands)*:
Residential $ 159,945 $157,642 $ 138,608 $ 137,055 $ 134,286
Commercial 153,936 145,677 134,208 131,734 131,034
Industrial 151,244 135,039 140,233 141,324 140,947
Other 4,309 4,209 4,193 4,013 3,914
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 469,434 442,567 417,242 414,126 410,181
Sales for resale - non-affiliates 131,004 121,225 105,141 99,596 91,820
Sales for resale - affiliates 19,446 18,285 10,143 21,830 7,691
- --------------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 619,884 582,077 532,526 535,552 509,692
Other revenues 13,120 13,054 11,062 8,477 6,861
- --------------------------------------------------------------------------------------------------------------------------------
Total $633,004 $595,131 $543,588 $544,029 $516,553
================================================================================================================================
Kilowatt-Hour Sales (in thousands)*:
Residential 2,248,255 2,248,915 2,039,042 2,079,611 2,040,608
Commercial 2,847,342 2,623,276 2,407,520 2,315,860 2,242,163
Industrial 4,407,445 3,729,166 3,981,875 3,960,243 3,813,456
Other 40,091 39,772 40,508 39,297 38,559
- --------------------------------------------------------------------------------------------------------------------------------
Total retail 9,543,133 8,641,129 8,468,945 8,395,011 8,134,786
Sales for resale - non-affiliates 3,256,175 3,157,837 2,895,182 2,726,993 2,493,519
Sales for resale - affiliates 539,939 552,142 478,884 693,510 243,554
- --------------------------------------------------------------------------------------------------------------------------------
Total 13,339,247 12,351,108 11,843,011 11,815,514 10,871,859
================================================================================================================================
Average Revenue Per Kilowatt-Hour (cents)*:
Residential 7.11 7.01 6.80 6.59 6.58
Commercial 5.41 5.55 5.57 5.69 5.84
Industrial 3.43 3.62 3.52 3.57 3.70
Total retail 4.92 5.12 4.93 4.93 5.04
Sales for resale 3.96 3.76 3.42 3.55 3.84
Total sales 4.65 4.71 4.50 4.53 4.69
Residential Average Annual
Kilowatt-Hour Use Per Customer * 14,301 14,376 13,132 13,469 13,307
Residential Average Annual
Revenue Per Customer * $1,017.42 $1,007.68 $892.68 $887.66 $875.69
Plant Nameplate Capacity
Ratings (year-end) (megawatts) 2,086 2,086 2,086 2,086 2,086
Maximum Peak-Hour Demand (megawatts):
Winter 2,125 1,740 1,922 2,030 1,637
Summer 2,439 2,339 2,209 2,117 2,095
Annual Load Factor (percent) 59.6 58.0 59.1 60.7 60.0
Plant Availability Fossil-Steam (percent): 91.0 90.0 92.4 91.8 92.1
- --------------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 69.4 66.5 70.5 70.4 58.0
Oil and gas 15.9 14.5 12.5 12.0 15.2
Purchased power -
From non-affiliates 6.2 8.0 3.0 6.5 2.4
From affiliates 8.5 11.0 14.0 11.1 24.4
- --------------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
================================================================================================================================
* 1999 data includes the true-up of the unbilled revenue estimates.
</TABLE>
II-170
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
FINANCIAL SECTION
II-171
<PAGE>
MANAGEMENT'S REPORT
Savannah Electric and Power Company 1999 Annual Report
The management of Savannah Electric and Power Company has prepared--and is
responsible for--the financial statements and related information included in
this report. These statements were prepared in accordance with generally
accepted accounting principles appropriate in the circumstances and necessarily
include amounts that are based on the best estimates and judgments of
management. Financial information throughout this annual report is consistent
with the financial statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based on a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting controls maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the Company's internal audit staff. The Company's independent
public accountants also consider certain elements of the internal control system
in order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of five directors
who are not employees, provides a broad overview of management's financial
reporting and control functions. Periodically, this committee meets with
management, the internal auditors and the independent public accountants to
ensure that these groups are fulfilling their obligations and to discuss
auditing, internal controls and financial reporting matters. The internal
auditors and the independent public accountants have access to the members of
the audit committee at any time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Savannah Electric and Power Company in conformity with generally accepted
accounting principles.
/s/G. Edison Holland, Jr
G. Edison Holland, Jr.
President
and Chief Executive Officer
/s/K. R. Willis
K. R. Willis
Vice President,
Treasurer, Chief Financial Officer
and Assistant Secretary
February 16, 2000
II-172
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Savannah Electric and Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Savannah Electric and Power Company (a Georgia corporation and a wholly owned
subsidiary of Southern Company) as of December 31, 1999 and 1998, and the
related statements of income, common stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements (pages II-181 through II-194)
referred to above present fairly, in all material respects, the financial
position of Savannah Electric and Power Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
II-173
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Savannah Electric and Power Company 1999 Annual Report
RESULTS OF OPERATIONS
Earnings
Savannah Electric and Power Company's net income after dividends on preferred
stock for 1999 totaled $23.1 million, representing a decrease of $0.6 million or
2.4 percent from the prior year. Earnings were down primarily due to lower
non-operating revenues.
In 1998, earnings were $23.6 million, representing a $0.2 million, or 0.9
percent decrease from the prior year. This was principally the result of a
decrease in other income, net.
Revenues
Total revenues for 1999 were $251.6 million, reflecting a 1.1 percent decrease
when compared to 1998. The following table summarizes the factors affecting
operating revenues for the past three years:
Increase (Decrease)
From Prior Year
--------------------------------------
1999 1998 1997
--------------------------------------
Retail -- (in thousands)
Growth and price
changes $ 5,633 $ (479) $ 7,664
Weather (5,257) 8,336 (6,186)
Fuel cost recovery
and other (438) 15,012 (10,002)
-----------------------------------------------------------------
Total retail (62) 22,869 (8,524)
-----------------------------------------------------------------
Sales for resale--
Non-affiliates (1,153) 1,081 1,469
Affiliates 1,135 964 (1,078)
-----------------------------------------------------------------
Total sales for resale (18) 2,045 391
-----------------------------------------------------------------
Other operating revenues (2,781) 3,264 336
-----------------------------------------------------------------
Total operating revenues $(2,861) $ 28,178 $ (7,797)
=================================================================
Percent change (1.1)% 12.5% (3.3)%
-----------------------------------------------------------------
Retail revenues were relatively unchanged in 1999 when compared to 1998.
Reduced demand for energy in the industrial sector and a base rate decrease to
the small business customers partially offset by increased demand in the
residential and commercial sectors contributed to this variance.
In 1998, retail revenues increased by 10.4 percent over the prior year due
primarily to unusually hot summer weather that resulted in increased energy
sales to residential and commercial customers. A base rate decrease to the small
business customer class, ordered by the Georgia Public Service Commission
(GPSC), was effective in July 1998. See Note 3 to the financial statements for
additional information.
Under the Company's fuel cost recovery provisions, fuel revenues--including
the fuel component of purchased energy--generally equal fuel expense and have no
effect on earnings.
Revenues from sales to utilities outside the service area under long-term
contracts consist of capacity and energy components. Revenues from these sales
were not material during the three-year period.
Sales to affiliated companies within the Southern electric system vary from
year to year depending on demand and the availability and cost of generating
resources at each company. These sales do not have a significant impact on
earnings.
Energy Sales
Changes in revenues are influenced heavily by the amount of energy sold each
year. Kilowatt-hour (KWH) sales for 1999 and the percent change by year were as
follows:
KWH Percent Change
------------ -----------------------------
1999 1999 1998 1997
------------ -----------------------------
(in millions)
Residential 1,579 2.6% 7.8% (1.9)%
Commercial 1,288 4.2 6.9 1.3
Industrial 713 (20.7) 2.1 5.1
Other 133 1.1 5.3 (1.4)
------------
Total retail 3,713 (2.5) 6.0 0.8
Sales for resale--
Non-affiliates 51 (3.3) (43.5) 2.9
Affiliates 77 31.8 7.2 30.4
------------
Total 3,841 (2.0)% 4.8 % 1.2 %
=====================================================================
Total retail energy sales in 1999 were down by 2.5% from the prior year
reflecting reduced energy sales of 20.7% to industrial customers due to the
shut-down of one industrial customer's facilities in late 1998 and completed
construction of a steam turbine unit by another industrial customer. These
reductions were partially mitigated by increased energy sales of 2.6% and 4.2%
to residential and commercial customers, respectively.
In 1998, total retail energy sales were up 6.0% over the prior year,
reflecting the impact of the hotter-than-normal weather on energy sales to
II-174
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
residential and commercial customers and high demand from an industrial
customer.
Expenses
Total operating expenses for 1999 were $201.5 million, a slight increase of $1.2
million from the prior year due primarily to increases in purchased power from
non- affiliates and depreciation and amortization. Purchased power from
non-affiliates increased due principally to higher demand for energy and
increased costs associated with these power purchases. Maintenance expenses
decreased this year compared to 1998 due to repair costs in 1998 related to a
major turbine dismantle inspection. Depreciation and amortization increased
reflecting additional depreciation charges related to the GPSC's accounting
order. See Note 3 to the financial statements for additional information on the
GPSC's 1998 accounting order.
In 1998, total operating expenses were $200.3 million reflecting a $27.7
million increase from 1997. Major components of this increase included a $17.5
million increase in fuel, a $7.1 million increase in purchased power from
non-affiliates, and a $5.5 million increase in maintenance expense. These
increases, however, were partially offset by a $6.4 million decrease in
purchased power from affiliates. The increase in fuel expense was primarily
attributed to higher demand for energy. The increase in purchased power from
non-affiliates primarily resulted from increased power marketing activities.
Maintenance expenses were higher primarily due to scheduled turbine dismantle
inspection costs. The decline in purchased power from affiliates was due
primarily to an increase in internal generation reflecting system load growth.
Fuel and purchased power costs constitute the single largest expense for
the Company. The mix of energy supply is determined primarily by system load,
the unit cost of fuel consumed, and the availability of units.
The amount and sources of energy supply and the total average cost of
energy supply were as follows:
1999 1998 1997
--------------------------
Total energy supply
(millions of KWHs) 4,039 4,182 3,964
Sources of energy supply
(percent) --
Coal 45 42 34
Oil 2 1 -
Gas 10 12 5
Purchased Power 43 45 61
Total average cost of
energy supply (cents) 2.44 2.35 2.02
- -----------------------------------------------------------------
Effects of Inflation
The Company is subject to rate regulation and income tax laws that are based on
the recovery of historical costs. Therefore, inflation creates an economic loss
because the Company is recovering its costs of investments in dollars that have
less purchasing power. While the inflation rate has been relatively low in
recent years, it continues to have an adverse effect on the Company because of
the large investment in utility plant with long economic lives. Conventional
accounting for historical cost does not recognize this economic loss nor the
partially offsetting gain that arises through financing facilities with
fixed-money obligations such as long-term debt and preferred securities. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from energy sales growth to a less regulated, more
competitive environment.
Savannah Electric currently operates as a vertically integrated utility
providing electricity to customers within the traditional service area of
southeastern Georgia. Prices for electricity provided by the Company to retail
customers are set by the GPSC. Prices for electricity relating to jointly owned
generating facilities, interconnecting transmission lines, and the exchange of
electric power are set by the Federal Energy Regulatory Commission (FERC).
II-175
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
Future earnings in the near term will depend upon growth in energy sales,
which is subject to a number of factors. These factors include weather,
competition, new short and long-term contracts with neighboring utilities,
energy conservation practiced by customers, the elasticity of demand, and the
rate of economic growth in the Company's service area.
The electric utility industry in the United States is currently undergoing
a period of dramatic change as a result of regulatory and competitive factors.
Among the primary agents of change has been the Energy Policy Act of 1992
(Energy Act). The Energy Act allows independent power producers (IPPs) to access
the Company's transmission network in order to sell electricity to other
utilities. This enhances the incentive for IPPs to build cogeneration plants for
industrial and commercial customers and sell energy generation to other
utilities. Also, electricity sales for resale rates are being driven down by
wholesale transmission access and numerous potential new energy suppliers,
including power marketers and brokers. The Company is positioning the business
to meet the challenge of this major change in the traditional practice of
selling electricity.
Although the Energy Act does not permit retail customer access, it was a
major catalyst for the current restructuring and consolidation taking place
within the utility industry. Numerous federal and state initiatives are in
varying stages to promote wholesale and retail competition. Among other things,
these initiatives allow customers to choose their electricity provider. As these
initiatives materialize, the structure of the utility industry could radically
change. Some states have approved initiatives that result in a separation of the
ownership and/or operation of generating facilities from the ownership and/or
operation of transmission and distribution facilities. While various
restructuring and competition initiatives have been or are being discussed in
Georgia, none have been enacted to date. Enactment would require numerous issues
to be resolved, including significant ones relating to transmission pricing and
recovery of any stranded investments. The inability of the Company to recover
its investments, including the regulatory assets described in Note 1 to the
financial statements, could have a material adverse effect on financial
condition and results of operation. The Company is attempting to minimize or
reduce its cost exposure.
Continuing to be a low-cost producer could provide opportunities to
increase market share and profitability in markets that evolve with changing
regulation. Conversely, if the Company does not remain a low-cost producer and
provide quality service, then energy sales growth could be limited, and this
could significantly erode earnings.
Compliance costs related to current and future environmental laws and
regulations could affect earnings if such costs are not fully recovered. The
Clean Air Act and other important environmental items are discussed later under
"Environmental Matters."
Rates to retail customers served by the Company are regulated by the GPSC.
As part of the Company's rate settlement in 1992, it was informally agreed that
the Company's earned rate of return on common equity should be 12.95 percent. In
1998, the GPSC issued a four-year accounting order settling its review of the
Company's earnings. See Note 3 to the financial statements for additional
information.
On December 20, 1999, the FERC issued its final rule on Regional
Transmission Organizations (RTOs). The order encourages utilities owning
transmission systems to form RTOs on a voluntary basis. To facilitate the
development of RTOs, the FERC will convene regional conferences for utilities,
customers, and other members of the public to discuss the formation of RTOs. In
addition to participating in the regional conferences, utilities owning
transmission systems, including the Company, are required to make a filing by
October 15, 2000. The filing must contain either a proposal for RTO
participation or a description of the efforts made to participate in an RTO, the
reasons for non-participation, any obstacles to participation, and any plans for
further work toward participation. The RTOs that are proposed in the filings
should be operational by December 15, 2001. The Company is evaluating this issue
and formulating its response. The outcome of this matter cannot now be
determined.
The Company is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities that are not specifically recoverable, and
determine if any other assets have been impaired. See Note 1 to the financial
II-176
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
statements under "Regulatory Assets and Liabilities" for additional information.
Exposure to Market Risks
Due to cost-based rate regulation, the Company has limited exposure to market
volatility in interest rates and prices of electricity. To mitigate residual
risks relative to movements in electricity prices, the Company enters into fixed
price contracts for the purchase and sale of electricity through the wholesale
electricity market. Realized gains and losses are recognized in the income
statement as incurred. At December 31, 1999, exposure from these activities was
not material to the Company's financial statements. Also, based on the Company's
overall interest rate exposure at December 31, 1999, a near-term 100 basis point
change in interest rates would not materially affect the financial statements.
New Accounting Standards
The FASB has issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities, which must be adopted by January 1, 2001. This statement
establishes accounting and reporting standards for derivative instruments --
including certain derivative instruments embedded in other contracts -- and for
hedging activities. The Company has not yet quantified the impact of adopting
this statement on its financial statements; however, the adoption could increase
volatility in earnings.
Year 2000 Challenge
The work undertaken by the Company to prepare critical computer systems and
other date sensitive devices to function correctly in the Year 2000 was
successful. There were no material incidents reported and no disruption of
electric service within the service area. There were no reports of significant
events regarding third parties that impacted revenues or expenses.
Original projected total costs for Year 2000 readiness were approximately
$1.2 million. Final projected costs are $1.3 million of which $0.1 million is
projected to be spent in 2000. These costs include labor necessary to identify,
test, and renovate affected devices and systems, and costs for reporting
requirements to state and federal agencies. From its inception through December
31, 1999, the Year 2000 program costs, recognized as expense, amounted to $1.2
million.
FINANCIAL CONDITION
Overview
The principal change in the Company's financial condition in 1999 was the
addition of $29.8 million to utility plant. The funds needed for gross property
additions are currently provided from operating activities, principally from
earnings and non-cash charges to income such as depreciation and deferred income
taxes and from financing activities. See Statements of Cash Flows for additional
information.
Capital Structure
As of December 31, 1999, the Company's capital structure consisted of 48.3
percent common stockholders' equity, 11.0 percent trust preferred securities,
and 40.7 percent long-term debt, excluding amounts due within one year. The
Company's long-term financial objective for capitalization ratios is to maintain
a capital structure of common stockholders' equity at 48 percent, preferred
securities at 10 percent and debt at 42 percent.
Maturities and retirements of long-term debt were $16 million in 1999,
$30 million in 1998 and $14 million in 1997. Included in the 1999 maturities and
retirements is the purchase by Savannah Electric of all $15 million outstanding
of its 7 7/8% Series First Mortgage Bonds due May 1, 2025.
During 1998, the Company issued $30 million of Series A 6 5/8% senior
retail intermediate bonds maturing in 2015. The Company used these proceeds to
redeem the remaining amount of its 8.30% first mortgage bonds due in 2022. Also
in 1998, the Company redeemed all of its 1,400,000 shares of 6.64% Series
Preferred Stock at a redemption price of $25 per share, plus accrued dividends
through the date of redemption. In December 1998, Savannah Electric Capital
Trust I, of which the Company owns all of the common securities, issued $40
million of 6.85% mandatorily redeemable preferred securities.
II-177
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
The composite interest rates and dividend rates for the years 1997 through
1999 as of year-end were as follows:
1999 1998 1997
-------------------------------
Composite interest rates
on long-term debt 6.4% 6.5% 6.9%
Preferred stock dividend rate -% -% 6.6%
Trust preferred securities
dividend rate 6.9% 6.9% -%
- -----------------------------------------------------------------
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$91.8 million ($25.6 million in 2000, $30.4 million in 2001, and $35.8 million
in 2002). Actual construction costs may vary from this estimate because of
factors such as changes in: business conditions; environmental regulations; load
projections; the cost and efficiency of construction labor, equipment and
materials; and the cost of capital. In addition, there can be no assurance that
costs related to capital expenditures will be fully recovered. Construction of
transmission and distribution facilities and upgrading of generating plants will
be continuing.
Other Capital Requirements
In addition to the funds needed for the construction program, approximately
$31.8 million will be needed by the end of 2002 for maturities of long-term debt
and present sinking fund requirements.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act--the acid rain compliance provision of the law--significantly affected
the Company and other subsidiaries of Southern Company. Specific reductions in
sulfur dioxide and nitrogen oxide emissions from fossil-fired generating plants
are required in two phases. Phase I compliance began in 1995 and initially
affected 28 generating units of Southern Company. As a result of Southern
Company's compliance strategy, an additional 22 generating units, which included
four of the Company's units, were brought into compliance with Phase I
requirements. Phase II compliance is required in 2000, and all fossil-fired
generating plants will be affected.
Southern Company achieved Phase I sulfur dioxide compliance at the affected
plants by switching to low-sulfur coal, which required some equipment upgrades.
Construction expenditures for Phase I nitrogen oxide and sulfur dioxide
emissions compliance totaled approximately $2 million for Savannah Electric.
For Phase II sulfur dioxide compliance, Southern Company currently uses
emission allowances and increased fuel switching. Also, equipment to control
nitrogen oxide emissions was installed on additional system fossil-fired plants
as necessary to meet Phase II limits and ozone non-attainment requirements.
Compliance for Phase II and initial ozone non-attainment requirements increased
total estimated construction expenditures by approximately $105 million. Phase
II compliance is not expected to have a material impact on Savannah Electric.
A significant portion of costs related to the acid rain provision of the
Clean Air Act is expected to be recovered through existing ratemaking
provisions. However, there can be no assurance that all Clean Air Act costs will
be recovered.
On November 3, 1999, the Environmental Protection Agency (EPA), brought a
civil action in the U.S. District Court against Alabama Power, Georgia Power
and the system service company. The complaint alleges violations of the
prevention of significant deterioration and new source review provisions of the
Clean Air Act with respect to five coal-fired generating facilities in
Alabama and Georgia. The EPA concurrently issued to the integrated Southeast
utilities a notice of violation related to 10 generating facilities, which
includes the five facilities mentioned previously and the Company's Plant Kraft.
In early 2000, the EPA filed a motion to amend its complaint to add the
violations alleged in its notice of violation, and to add Gulf Power,
Mississippi Power, and Savannah Electric as defendants. 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
Company believes that its integrated utilities complied with applicable laws
and the EPA's regulations and interpretations in effect at the time the work in
question took place. The Clean Air Act authorizes civil penalties of up to
$27,500 per day per violation at each generating unit. Prior to January 30,
1997, the penalty was $25,000 per
II-178
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
day. An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
In July 1997, the EPA revised the national ambient air quality standards
for ozone and particulate matter. This revision makes the standards
significantly more stringent. In September 1998, the EPA issued the final
regional nitrogen oxide rules to the states for implementation. The final rule
affects 22 states including Georgia. The EPA's July 1997 standards and the
September 1998 rule are being challenged in the courts by several states and
industry groups. Implementation of the final state rules for these three
initiatives could require substantial further reductions in nitrogen oxide and
sulfur dioxide emissions from fossil-fired generating facilities and other
industries in these states. Additional compliance costs and capital expenditures
resulting from the implementation of these rules and standards cannot be
determined until the results of legal challenges are known, and the states have
adopted their final rules.
The EPA and state environmental regulatory agencies are reviewing and
evaluating various other matters including: additional controls for hazardous
air pollutant emissions; control strategies to reduce regional haze; and
hazardous waste disposal requirements. The impact of new standards will depend
on the development and implementation of applicable regulations.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur substantial costs to clean up properties
currently or previously owned. The Company conducts studies to determine the
extent of any required cleanup costs and will recognize in the financial
statements any costs to clean up known sites.
Several major pieces of environmental legislation are being considered for
reauthorization or amendment by Congress. These include: the Clean Air Act; the
Clean Water Act; the Comprehensive Environmental Response, Compensation, and
Liability Act; the Resource Conservation and Recovery Act; the Toxic Substances
Control Act; and the Endangered Species Act. Changes to these laws could affect
many areas of Southern Company's operations. The full impact of any such changes
cannot be determined at this time.
Compliance with possible additional legislation related to global climate
change, electromagnetic fields, and other environmental and health concerns
could significantly affect Southern Company. The impact of new legislation--if
any--will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential exists for liability as the result of
lawsuits alleging damages caused by electromagnetic fields.
Sources of Capital
At December 31, 1999, the Company had $6.6 million of cash and $26.2 million of
unused short-term and revolving credit arrangements with banks to meet its
short-term cash needs and to provide additional interim funding for the
Company's construction program. Revolving credit arrangements total $20 million,
of which $10 million expires December 31, 2001 and $10 million expires December
31, 2002.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulation, will be derived
from sources similar to those used in the past. These sources were primarily
from the issuances of first mortgage bonds, other long-term debt, and preferred
stock, in addition to pollution control revenue bonds issued for the Company's
benefit by public authorities, to meet long-term external financing
requirements. Recently, the Company's financings have consisted of unsecured
debt and trust preferred securities. The Company is required to meet certain
earnings coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. The Company's
coverage ratios are sufficiently high to permit, at present interest rate
levels, any foreseeable security sales. In 1998, the Company obtained
stockholder approval to amend the corporate charter including the elimination of
the restrictions on the amount of unsecured indebtedness allowed. The amount of
securities which the Company will be permitted to issue in the future will
depend upon market conditions and other factors prevailing at that time.
II-179
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Savannah Electric and Power Company 1999 Annual Report
Cautionary Statement Regarding Forward-Looking Information
Savannah Electric and Power Company's 1999 Annual Report contains
forward-looking and historical information. The Company cautions that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking information. 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 Company's markets; potential business
strategies--including acquisitions or dispositions of assets or internal
restructuring--that may be pursued by the Company; state and federal rate
regulation; changes in or application of environmental and other laws and
regulations to which the Company is subject; political, legal and economic
conditions and developments; financial market conditions and the results of
financing efforts; changes in commodity prices and interest rates; weather and
other natural phenomena; and other factors discussed in the reports--including
Form 10-K--filed from time to time by the Company with the Securities and
Exchange Commission.
II-180
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998, and 1997
Savannah Electric and Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Revenues (Note 1):
Retail sales $242,265 $242,327 $219,458
Sales for resale --
Non-affiliates 3,395 4,548 3,467
Affiliates 4,151 3,016 2,052
Other revenues 1,783 4,564 1,300
- --------------------------------------------------------------------------------------------------------------------
Total operating revenues 251,594 254,455 226,277
- --------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 50,530 53,021 35,563
Purchased power --
Non-affiliates 14,398 9,460 2,347
Affiliates 33,398 35,687 42,107
Other 50,341 49,055 47,735
Maintenance 16,333 18,711 13,236
Depreciation and amortization (Notes 1 and 3) 23,841 22,032 20,152
Taxes other than income taxes 12,690 12,342 11,494
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 201,531 200,308 172,634
- --------------------------------------------------------------------------------------------------------------------
Operating Income 50,063 54,147 53,643
Other Income (Expense):
Interest income 169 384 279
Other, net (663) (1,698) (542)
- --------------------------------------------------------------------------------------------------------------------
Earnings Before Interest and Income Taxes 49,569 52,833 53,380
- --------------------------------------------------------------------------------------------------------------------
Interest Charges and Other:
Interest on long-term debt 9,300 10,383 10,907
Interest on notes payable 879 278 172
Amortization of debt discount, premium and expense, net 948 853 739
Other interest charges 811 341 205
Distributions on preferred securities of subsidiary 2,740 167 -
- --------------------------------------------------------------------------------------------------------------------
Total interest charges and other, net 14,678 12,022 12,023
- --------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 34,891 40,811 41,357
Income taxes (Notes 1 and 6) 11,808 15,101 15,186
- --------------------------------------------------------------------------------------------------------------------
Net Income 23,083 25,710 26,171
Dividends on Preferred Stock - 2,066 2,324
- --------------------------------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 23,083 $ 23,644 $ 23,847
====================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-181
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
Savannah Electric and Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 23,083 $ 25,710 $ 26,171
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 25,454 23,531 21,083
Deferred income taxes and investment tax credits, net (3,353) 7,011 3,841
Other, net (47) (89) (2,816)
Changes in certain current assets and liabilities --
Receivables, net (5,999) (9,875) (1,938)
Fossil fuel stock (2,125) 221 687
Materials and supplies (1,906) 484 1,033
Accounts payable 1,133 470 (1,608)
Other 1,731 (4,859) 3,366
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 37,971 42,604 49,819
- ------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (29,833) (18,071) (18,846)
Other (1,715) 1,617 (1,418)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (31,548) (16,454) (20,264)
- ------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Increase (decrease) in notes payable, net 34,300 - (5,000)
Proceeds --
Other long-term debt - 30,000 13,870
Preferred securities - 40,000 -
Capital contribution from parent company 1,099 - -
Retirements --
First mortgage bonds (15,800) (30,000) -
Other long-term debt (481) (478) (14,303)
Preferred stock - (35,000) -
Payment of preferred stock dividends - (2,556) (2,324)
Payment of common stock dividends (25,200) (23,500) (20,500)
Other 250 (4,798) (368)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (5,832) (26,332) (28,625)
- ------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 591 (182) 930
Cash and Cash Equivalents at Beginning of Period 5,962 6,144 5,214
- ------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 6,553 $ 5,962 $ 6,144
========================================================================================================================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $14,212 $12,198 $11,619
Income taxes (net of refunds) 12,647 9,666 11,150
- ------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
</TABLE>
II-182
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Savannah Electric and Power Company 1999 Annual Report
- -------------------------------------------------------------------------------------------------------------------
Assets 1999 1998
- -------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,553 $ 5,962
Receivables --
Customer accounts receivable 20,752 18,030
Unrecovered retail fuel clause revenue 21,089 17,628
Other accounts and notes receivable 3,505 3,543
Affiliated companies 1,195 1,388
Accumulated provision for uncollectible accounts (237) (284)
Fossil fuel stock, at average cost 7,109 4,984
Materials and supplies, at average cost (Note 1) 8,402 6,496
Other 2,869 4,772
- -------------------------------------------------------------------------------------------------------------------
Total current assets 71,237 62,519
- -------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment:
In service (Notes 1 and 8) 804,096 781,964
Less accumulated provision for depreciation 360,639 341,930
- -------------------------------------------------------------------------------------------------------------------
443,457 440,034
Construction work in progress 6,561 2,908
- -------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 450,018 442,942
- -------------------------------------------------------------------------------------------------------------------
Other Property and Investments 1,506 1,420
- -------------------------------------------------------------------------------------------------------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes (Note 6) 16,063 17,130
Cash surrender value of life insurance for deferred compensation plans 16,305 14,179
Prepaid pension costs (Note 2) 1,201 3,281
Debt expense, being amortized 3,155 3,554
Premium on reacquired debt, being amortized 8,385 8,570
Other 2,348 2,204
- -------------------------------------------------------------------------------------------------------------------
Total deferred charges and other assets 47,457 48,918
- -------------------------------------------------------------------------------------------------------------------
Total Assets $570,218 $555,799
===================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-183
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
At December 31, 1999 and 1998
Savannah Electric and Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholder's Equity 1999 1998
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Current Liabilities:
Securities due within one year (Note 8) $ 704 $ 689
Notes payable 34,300 -
Accounts payable --
Affiliated 4,632 5,014
Other 11,118 10,833
Customer deposits 5,426 5,224
Taxes accrued --
Income taxes 3,046 2,467
Other 3,013 2,891
Interest accrued 3,237 3,815
Vacation pay accrued 2,142 1,978
Other 5,742 6,700
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 73,360 39,611
- ------------------------------------------------------------------------------------------------------------------
Long-term debt (See accompanying statements) 147,147 163,443
- ------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 6) 80,318 82,778
Deferred credits related to income taxes (Note 6) 19,687 21,349
Accumulated deferred investment tax credits (Note 6) 11,280 11,943
Deferred compensation plans 10,624 9,788
Employee benefits provisions (Note 2) 7,805 7,620
Other 5,150 3,402
- ------------------------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 134,864 136,880
- --------------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding company junior
subordinated notes (See accompanying statements) (Note 7) 40,000 40,000
- ------------------------------------------------------------------------------------------------------------------
Common stockholder's equity (See accompanying statements) 174,847 175,865
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $570,218 $555,799
==================================================================================================================
The accompanying notes are an integral part of these balance sheets.
</TABLE>
II-184
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CAPITALIZATION
At December 31, 1999 and 1998
Savannah Electric and Power Company 1999 Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
Long-Term Debt (Note 8):
First mortgage bonds --
Maturity Interest Rates
-------- --------------
<S> <C> <C> <C> <C> <C>
July 1, 2003 6.375% $20,000 $20,000
May 1, 2006 6.90% 20,000 20,000
July 1, 2023 7.40% 24,200 25,000
May 1, 2025 7.875% - 15,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 64,200 80,000
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term notes payable --
6.88% due June 1, 2001 10,000 10,000
6.625% due March 17, 2015 30,000 30,000
Adjustable rates (6.28% and 6.66% at 1/1/00)
due 2001 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term notes payable 60,000 60,000
- ------------------------------------------------------------------------------------------------------------------------------------
Other long-term debt --
Pollution control revenue bonds --
Collateralized:
Variable rates (4.00% at 1/1/99)
due 2016 - 4,085
Non-collateralized:
Variable rates (3.65% to 3.95% at 1/1/00)
due 2016-2037 17,955 13,870
- ------------------------------------------------------------------------------------------------------------------------------------
Total other long-term debt 17,955 17,955
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalized lease obligations 5,696 6,177
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement -- $9.5 million) 147,851 164,132
Less amount due within one year (Note 8) 704 689
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt excluding amount due within one year 147,147 163,443 40.7% 43.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily
Redeemable Preferred Securities (Note 7):
$25 liquidation value --
6.85% 40,000 40,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total (annual distribution requirement -- $2.7 million) 40,000 40,000 11.0 10.5
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stockholder's Equity (Note 9):
Common stock, par value $5 per share --
Authorized - 16,000,000 shares
Outstanding - 10,844,635 shares
Par value 54,223 54,223
Paid-in capital 9,787 8,688
Retained earnings 110,837 112,954
- ------------------------------------------------------------------------------------------------------------------------------------
Total common stockholder's equity 174,847 175,865 48.3 46.4
- ------------------------------------------------------------------------------------------------------------------------------------
Total Capitalization $361,994 $379,308 100.0% 100.0%
====================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-185
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1999, 1998, and 1997
Savannah Electric and Power Company 1999 Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------
Common Paid-In Retained
Stock Capital Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $54,223 $8,688 $109,373 $172,284
Net income after dividends on preferred stock - - 23,847 23,847
Cash dividends - - (20,500) (20,500)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 54,223 8,688 112,720 175,631
Net income after dividends on preferred stock - - 23,644 23,644
Cash dividends - - (23,500) (23,500)
Other - - 90 90
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 54,223 8,688 112,954 175,865
Net income after dividends on preferred stock - - 23,083 23,083
Capital contributions from parent company - 1,099 - 1,099
Cash dividends - - (25,200) (25,200)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 (Note 9) $54,223 $9,787 $110,837 $174,847
=================================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
II-186
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Savannah Electric and Power Company 1999 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
General
Savannah Electric and Power Company (the Company), is a wholly owned subsidiary
of Southern Company, which is the parent company of five integrated Southeast
utilities, Southern Company Services, Inc. (SCS), Southern Communications
Services (Southern LINC), Southern Company Energy Solutions, Southern Energy,
Inc. (Southern Energy), Southern Nuclear Operating Company (Southern Nuclear),
and other direct and indirect subsidiaries. The integrated Southeast utilities
provide electric service in four states. Contracts among the integrated
Southeast utilities--related to jointly owned generating facilities,
interconnecting transmission lines, and the exchange of electric power--are
regulated by the Federal Energy Regulatory Commission (FERC) and/or the
Securities and Exchange Commission. SCS, a system service company provides, at
cost, specialized services to Southern Company and subsidiary companies.
Southern LINC provides digital wireless communications services to the operating
companies and also markets these services to the public within the Southeast.
Southern Company Energy Solutions develops new business opportunities related to
energy products and services. Southern Nuclear provides services to Southern
Company's nuclear power plants. Southern Energy acquires, develops, builds, owns
and operates power production and delivery facilities and provides a broad range
of energy-related services to utilities and industrial companies in selected
countries around the world. Southern Energy businesses include independent power
projects, integrated utilities, a distribution company, and energy trading and
marketing businesses outside the southeastern United States.
Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. The Company
also is subject to regulation by the FERC and the Georgia Public Service
Commission (GPSC). The Company follows generally accepted accounting principles
and complies with the accounting policies and practices prescribed by the GPSC.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates, and the actual results may
differ from those estimates.
Certain prior years' data presented in the financial statements has been
reclassified to conform with the current year presentation.
Related-Party Transactions
The Company has an agreement with SCS under which the following services are
rendered to the Company at cost: general and design engineering, purchasing,
accounting and statistical, finance and treasury, tax, information resources,
marketing, auditing, insurance and pension, human resources, systems and
procedures, and other services with respect to business and operations and power
pool operations. Costs for these services amounted to $16.0 million, $15.3
million, and $13.3 million during 1999, 1998, and 1997, respectively.
Regulatory Assets and Liabilities
The Company is subject to the provisions of Financial Accounting Standards Board
(FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are expected to be credited
to customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets at December 31 relate to:
1999 1998
--------------------------
(in thousands)
Deferred income tax charges $ 16,063 $ 17,130
Premium on reacquired debt 8,385 8,570
Deferred income tax credits (19,687) (21,349)
Storm damage reserves (1,392) (1,580)
Accelerated depreciation (3,000) (1,000)
- ---------------------------------------------------------------
Total $ 369 $ 1,771
===============================================================
In the event that a portion of the Company's operations is no longer
subject to the provisions of FASB Statement No. 71, the Company would be
required to write off related regulatory assets and liabilities that are not
specifically recoverable through regulated rates. In addition, the Company would
be required to determine if any impairment to other assets exists, including
plant, and write down the assets, if impaired, to their fair value.
II-187
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
Revenues and Fuel Costs
The Company currently operates as a vertically integrated utility providing
electricity to retail customers within its traditional service area of
southeastern Georgia, and to wholesale customers in the Southeast.
Revenues are accrued for service rendered but unbilled at the end of each
fiscal period. Fuel costs are expensed as the fuel is used. Electric rates for
the Company include provisions to adjust billings for fluctuations in fuel
costs, the energy component of purchased power costs, and certain other costs.
Revenues are adjusted for differences between recoverable fuel costs and amounts
actually recovered in current regulated rates.
The Company has a diversified base of customers. No single customer or
industry comprises 10 percent or more of revenues. For all periods presented,
uncollectible accounts averaged less than 1 percent of revenues.
In 1999, the GPSC approved increases of slightly over three-tenths of a cent
per kilowatt-hour in the Company's fuel allowance.
Depreciation and Amortization
Depreciation of the original cost of plant in service is provided primarily by
using composite straight-line rates, which approximated 3.0 percent in 1999, and
2.9 percent in 1998 and 1997. When property subject to depreciation is retired
or otherwise disposed of in the normal course of business, its cost--together
with the cost of removal, less salvage--is charged to the accumulated provision
for depreciation. Minor items of property included in the original cost of the
plant are retired when the related property unit is retired. Depreciation
expense includes an amount for the expected cost of removal of certain
facilities. See Note 3 to the financial statements for more information.
Income Taxes
The Company, which is included in the consolidated federal income tax return
filed by Southern Company, uses the liability method of accounting for deferred
income taxes and provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Allowance for Funds Used During Construction
(AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The composite rates used by the Company to calculate AFUDC
were 6.26 percent in 1999, 8.00 percent in 1998 and 9.24 percent in 1997.
Property, Plant and Equipment
Property, plant and equipment is stated at original cost less regulatory
disallowances and impairments. Original cost includes: materials; labor; minor
items of property; appropriate administrative and general costs; payroll-related
costs such as taxes, pensions, and other benefits; and the estimated cost of
funds used during construction. The cost of maintenance, repairs, and
replacement of minor items of property is charged to maintenance expense. The
cost of replacements of property (exclusive of minor items of property) is
capitalized.
Cash and Cash Equivalents
For purposes of the financial statements, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
II-188
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
Financial Instruments
The Company's financial instruments for which the carrying amounts did not equal
fair value at December 31 were as follows:
Carrying Fair
Amount Value
--------------------------
(in millions)
Long-term debt:
At December 31, 1999 $142 $136
At December 31, 1998 158 162
Trust preferred securities:
At December 31, 1999 $40 $31
At December 31, 1998 40 40
The fair values for long-term debt and preferred securities were based on
either closing market prices or closing prices of comparable instruments.
Materials and Supplies
Generally, materials and supplies include the costs of transmission,
distribution, and generating plant materials. Materials are charged to inventory
when purchased and then expensed or capitalized to plant, as appropriate, when
installed.
2. RETIREMENT BENEFITS
The Company has defined benefit, trusteed, non-contributory pension plans that
cover substantially all employees. The Company provides certain medical care and
life insurance benefits for retired employees. Substantially all these employees
may become eligible for such benefits when they retire. The Company funds trusts
to the extent required by the GPSC. The measurement date for plan assets and
obligations is September 30 of each year.
Pension Plans
Changes during the year in the projected benefit obligations and in the fair
value of plan assets were as follows:
Projected
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $59,207 $51,720
Service cost 1,746 1,495
Interest cost 3,893 3,806
Benefits paid (3,414) (3,392)
Actuarial (gain) loss and
employee transfers (1,856) 4,343
Amendments 385 1,235
- ---------------------------------------------------------------
Balance at end of year $59,961 $59,207
===============================================================
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $49,630 $50,630
Actual return on plan assets 8,168 171
Employer contributions - 2,464
Benefits paid (3,414) (3,392)
Employee transfers 96 (243)
- ---------------------------------------------------------------
Balance at end of year $54,480 $49,630
===============================================================
The accrued pension costs recognized in the Balance Sheets were as
follows:
1999 1998
- -----------------------------------------------------------------
(in thousands)
Funded status $(5,481) $(9,577)
Unrecognized transition
obligation 178 266
Unrecognized prior service cost 2,996 2,874
Unrecognized net loss 3,508 9,718
- -----------------------------------------------------------------
Prepaid asset recognized in
the Balance Sheets $ 1,201 $ 3,281
=================================================================
II-189
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- -----------------------------------------------------------------
(in thousands)
Service cost $1,746 $1,495 $1,393
Interest cost 3,893 3,806 3,556
Expected return on plan
assets (4,063) (3,992) (3,782)
Recognized net loss 152 2 475
Net amortization 352 334 280
- -----------------------------------------------------------------
Net pension cost $2,080 $1,645 $1,922
=================================================================
Postretirement Benefits
Changes during the year in the accumulated benefit obligations and in the fair
value of plan assets were as follows:
Accumulated
Benefit Obligations
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $23,556 $20,899
Service cost 404 348
Interest cost 1,549 1,528
Benefits paid (756) (839)
Actuarial (gain) loss and
employee transfers (1,849) 1,620
- ---------------------------------------------------------------
Balance at end of year $22,904 $23,556
===============================================================
Plan Assets
---------------------------
1999 1998
- ---------------------------------------------------------------
(in thousands)
Balance at beginning of year $3,803 $3,110
Actual return on plan assets 476 85
Employer contributions 1,731 1,447
Benefits paid (756) (839)
- ---------------------------------------------------------------
Balance at end of year $5,254 $3,803
===============================================================
The accrued postretirement costs recognized in the Balance Sheets were as
follows:
1999 1998
- ---------------------------------------------------------------
(in thousands)
Funded status $(17,650) $(19,753)
Unrecognized transition
obligation 6,419 6,913
Unrecognized net loss 3,311 5,444
Fourth quarter contributions 1,336 1,152
- ---------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $(6,584) $ (6,244)
===============================================================
Components of the plans' net periodic cost were as follows:
1999 1998 1997
- ----------------------------------------------------------------
(in thousands)
Service cost $ 404 $ 348 $ 319
Interest cost 1,549 1,528 1,499
Expected return on plan assets (345) (276) (211)
Recognized net loss 152 104 125
Net amortization 494 494 494
- ----------------------------------------------------------------
Net postretirement cost $2,254 $2,198 $2,226
================================================================
The weighted average rates assumed in the actuarial calculations for both
the pension plans and postretirement benefits were:
1999 1998
- ---------------------------------------------------------------
Discount 7.50% 6.75%
Annual salary increase 5.00 4.25
Long-term return on plan assets 8.50 8.50
- ---------------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
benefit obligations was a weighted average medical care cost trend rate of 7.74
percent for 1999, decreasing gradually to 5.50 percent through the year 2005,
and remaining at that level thereafter. An annual increase or decrease in the
assumed medical care cost trend rate of 1 percent would affect the accumulated
benefit obligation and the service and interest cost components at December 31,
1999 as follows:
II-190
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
1 Percent 1 Percent
Increase Decrease
- ---------------------------------------------------------------
(in thousands)
Benefit obligation $1,316 $(1,244)
Service and interest costs 106 (100)
===============================================================
The Company has a supplemental retirement plan for certain executive
employees. The plan is unfunded and payable from the general funds of the
Company. The Company has purchased life insurance on participating executives,
and plans to use these policies to satisfy this obligation. Benefit costs
associated with this plan were $0.5 million for 1999, and $0.4 million for 1998
and 1997.
Work Force Reduction Program
In 1997, the Company incurred a $1.9 million, one-time charge to other operation
expense for costs related to the implementation of a work force reduction
program.
3. REGULATORY MATTERS
On November 3, 1999, the Environmental Protection Agency (EPA), brought a civil
action in the U.S. District Court against Alabama Power, Georgia Power
and the system service company. The complaint alleges violations of the
prevention of significant deterioration and new source review provisions of the
Clean Air Act with respect to five coal-fired generating facilities in Alabama
and Georgia. The EPA concurrently issued to the integrated Southeast utilities a
notice of violation related to 10 generating facilities, which includes the five
facilities mentioned previously and the Company's Plant Kraft. In early 2000,
the EPA filed a motion to amend its complaint to add the violations alleged in
its notice of violation, and to add Gulf Power, Mississippi Power, and Savannah
Electric as defendants. 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 Company believes that its integrated
utilities complied with applicable laws and the EPA's regulations and
interpretations in effect at the time the work in question took place. The Clean
Air Act authorizes civil penalties of up to $27,500 per day per violation at
each generating unit. Prior to January 30, 1997, the penalty was $25,000 per
day. An adverse outcome of this matter could require substantial capital
expenditures that cannot be determined at this time and possibly require payment
of substantial penalties. This could affect future results of operations, cash
flows, and possibly financial condition if such costs are not recovered through
regulated rates.
Rates to retail customers served by the Company are regulated by the GPSC.
As part of the Company's rate settlement in 1992, it was informally agreed that
the Company's earned rate of return on common equity should be 12.95 percent.
In 1998, the GPSC approved a four-year accounting order for the Company.
Under this order, the Company will reduce the electric rates of its small
business customers by approximately $11 million over the next four years. The
Company will also expense an additional $1.95 million in storm damage accruals
and accrue an additional $8 million in depreciation on generating assets over
the term of the order. The additional depreciation will be accumulated in a
regulatory liability account to be available to mitigate any potential stranded
costs. In addition, the Company has discretionary authority to provide up to an
additional $0.3 million per year in storm damage accruals and up to an
additional $4.0 million in depreciation expense over the four years. The Company
is also precluded from asking for a rate increase except upon significant
changes in economic conditions, new laws, or regulations. There will be a
quarterly monitoring of the Company's earnings performance.
4. CONSTRUCTION PROGRAM
The Company is engaged in a continuous construction program, currently estimated
to total $25.6 million in 2000, $30.4 million in 2001, and $35.8 million in
2002. The construction program is subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include: changes in business conditions; revised load
growth estimates; changes in environmental regulations; increasing costs of
labor, equipment, and materials; and changes in cost of capital. The Company
does not have any traditional baseload generating plants under construction.
However, construction related to transmission and distribution facilities and
the upgrading of generating plants will continue.
II-191
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
5. FINANCING AND COMMITMENTS
General
To the extent possible, the Company's construction program is expected to be
financed from internal sources and from the issuance of additional long-term
debt and capital contributions from Southern Company.
The amounts of long-term debt and preferred securities that can be issued
in the future will be contingent on market conditions, the maintenance of
adequate earnings levels, regulatory authorizations, and other factors.
Bank Credit Arrangements
At the end of 1999, unused credit arrangements with six banks totaled $26.2
million and expire at various times during 2000.
The Company has revolving credit arrangements of $20 million, of which $10
million expires December 31, 2001 and $10 million expires December 31, 2002.
These agreements allow short-term borrowings to be converted into term loans,
payable in 12 equal quarterly installments, with the first installment due at
the end of the first calendar quarter after the applicable termination date or
at an earlier date at the Company's option.
In connection with these credit arrangements, the Company agrees to pay
commitment fees based on the unused portions of the commitments.
Assets Subject to Lien
As amended and supplemented, the Company's Indenture of Mortgage, which secures
the first mortgage bonds issued by the Company, constitutes a direct first lien
on substantially all of the Company's fixed property and franchises. A second
lien for $10 million of bank debt is secured by a portion of the Plant Kraft
property and a second lien for $34 million in bank notes is secured by a portion
of the Plant McIntosh property.
Fuel and Purchased Power Commitments
To supply a portion of the fuel requirements of its generating plants, the
Company has entered into long-term commitments for the procurement of fuel. In
most cases, these contracts contain provisions for price escalations, minimum
purchase levels, and other financial commitments. The Company has fuel
commitments of $15 million and $9 million for 2000 and 2001, respectively.
In 1999, the Company entered into a purchased power agreement for 200
megawatts of capacity from Georgia Power Company's combined cycle combustion
turbine units currently under construction at Plant Wansley and due to begin
operation in 2002.
Operating Leases
The Company has rental agreements with various terms and expiration dates.
Rental expenses totaled $0.5 million for 1999, $1.1 million for 1998 and $1.2
million for 1997.
At December 31, 1999, estimated future minimum lease payments for
noncancelable operating leases were as follows:
Rental Commitments
--------------------
(in thousands)
2000 $ 483
2001 483
2002 483
2003 483
2004 483
2005 and thereafter $6,485
- -------------------------------------------------------------
6. INCOME TAXES
At December 31, 1999, tax-related regulatory assets and liabilities were $16.1
million and $19.7 million, respectively. The assets are attributable to tax
benefits flowed through to customers in prior years and to taxes applicable to
capitalized AFUDC. The liabilities are attributable to deferred taxes previously
recognized at rates higher than current enacted tax law and to unamortized
investment tax credits.
II-192
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
Details of income tax provisions are as follows:
1999 1998 1997
--------------------------------
(in thousands)
Total provision for income taxes
Federal --
Currently payable $12,968 $ 6,763 $ 9,743
Deferred -- current year 354 8,377 4,522
-- reversal of
prior years (3,683) (2,565) (1,381)
- ------------------------------------------------------------------
9,639 12,575 12,884
- ------------------------------------------------------------------
State --
Currently payable 2,193 1,327 1,603
Deferred -- current year (34) 1,174 569
-- reversal of
prior years 10 25 130
- ------------------------------------------------------------------
2,169 2,526 2,302
- ------------------------------------------------------------------
Total $11,808 $15,101 $15,186
==================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows:
1999 1998
--------------------
Deferred tax liabilities: (in thousands)
Accelerated depreciation $73,400 $75,187
Property basis differences 6,917 7,591
Other 12,031 10,187
- ----------------------------------------------------------------
Total 92,348 92,965
- ----------------------------------------------------------------
Deferred tax assets:
Pension and other benefits 6,925 4,892
Other 2,935 2,828
- ----------------------------------------------------------------
Total 9,860 7,720
- ----------------------------------------------------------------
Net deferred tax liabilities 82,488 85,245
Portions included in current assets, net (2,170) (2,467)
- ----------------------------------------------------------------
Accumulated deferred income taxes
in the Balance Sheets $80,318 $82,778
================================================================
Deferred investment tax credits are amortized over the lives of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $0.7 million in 1999, 1998 and 1997. At December 31, 1999, all
investment tax credits available to reduce federal income taxes payable had been
utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
1999 1998 1997
-----------------------------
Federal statutory tax rate 35% 35% 35%
State income tax, net of
federal income tax benefit 4 4 4
Other (5) (2) (2)
----------------------------------------------------------------
Effective income tax rate 34% 37% 37%
================================================================
Southern Company files a consolidated federal income tax return. Under a
joint consolidated income tax agreement, each subsidiary's current and deferred
tax expense is computed on a stand-alone basis.
7. CUMULATIVE PREFERRED STOCK AND
TRUST PREFERRED SECURITIES
In November 1998, the Company redeemed all of its 1,400,000 shares of 6.64%
Series Preferred Stock at a redemption price of $25 per share, plus accrued
dividends through the date of redemption.
In December 1998, Savannah Electric Capital Trust I, of which the Company
owns all of the common securities, issued $40 million of 6.85% mandatorily
redeemable preferred securities. Substantially all of the assets of the Trust
are $40 million aggregate principal amount of the Company's 6.85% junior
subordinated notes due December 31, 2028.
The Company considers that the mechanisms and obligations relating to the
preferred securities, taken together, constitute a full and unconditional
guarantee by the Company of payment obligations with respect to the preferred
securities of Savannah Electric Capital Trust I.
Savannah Electric Capital Trust I is a subsidiary of the Company, and
accordingly is consolidated in the Company's financial statements.
8. LONG-TERM DEBT AND LONG-TERM DEBT
DUE WITHIN ONE YEAR
The Company's Indenture related to its First Mortgage Bonds is unlimited as to
the authorized amount of bonds which may be issued, provided that required
property additions, earnings and other provisions of such Indenture are met.
II-193
<PAGE>
NOTES (continued)
Savannah Electric and Power Company 1999 Annual Report
Maturities and retirements of long-term debt were $16 million in 1999,
$30 million in 1998 and $14 million in 1997. Included in the 1999 maturities and
retirements is the purchase by Savannah Electric of all $15 million outstanding
of its 7 7/8% Series First Mortgage Bonds due May 1, 2025.
In 1998, the Company issued $30 million of Series A 6 5/8% senior retail
intermediate bonds maturing in 2015. The Company used these proceeds to redeem
the remaining amount of its 8.30% first mortgage bonds due in 2022.
Assets acquired under capital leases are recorded as utility plant in
service, and the related obligation is classified as other long-term debt.
Leases are capitalized at the net present value of the future lease payments.
However, for ratemaking purposes, these obligations are treated as operating
leases, and as such, lease payments are charged to expense as incurred.
A summary of the sinking fund requirements and scheduled maturities and
redemptions of long-term debt due within one year at December 31 is as follows:
1999 1998
---------------------
(in thousands)
Bond sinking fund requirement $650 $800
Less:
Portion to be satisfied by
certifying property additions 650 -
Reacquired bonds and/or cash deposits - 800
- -------------------------------------------------------------------
Cash sinking fund requirement - -
Other long-term debt maturities 704 689
- -------------------------------------------------------------------
Total $704 $689
===================================================================
The first mortgage bond improvement (sinking) fund requirements amount to 1
percent of each outstanding series of bonds authenticated under the Indenture
prior to January 1 of each year, other than those issued to collateralize
pollution control and other obligations. The requirements may be satisfied by
depositing cash or reacquiring bonds, or by pledging additional property equal
to 1 2/3 times the requirements.
The sinking fund requirements of first mortgage bonds were satisfied by
cash redemption in 1999 and 1998. It is anticipated that the 2000 requirement
will be satisfied by certifying property additions. Sinking fund requirements
and/or maturities through 2004 applicable to long-term debt are as follows: $0.7
million in 2000; $30.6 million in 2001; $0.5 million in 2002; $20.4 million in
2003; and $0.4 million in 2004.
9. COMMON STOCK DIVIDEND RESTRICTIONS
The Company's Indenture contains certain limitations on the payment of cash
dividends on common stock. At December 31, 1999, approximately $68 million of
retained earnings was restricted against the payment of cash dividends on common
stock under the terms of the Indenture.
10. QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
Summarized quarterly financial data for 1999 and 1998 are as follows (in
thousands):
Net Income After
Operating Operating Dividends on
Quarter Ended Revenues Income Preferred Stock
- ------------------------------------------------------------------
March 1999 $47,098 $ 5,637 $ 1,209
June 1999 61,692 12,495 5,268
September 1999 91,849 27,081 13,705
December 1999 50,955 4,850 2,901
March 1998 $48,381 $ 8,277 $ 2,426
June 1998 69,616 17,269 7,807
September 1998 84,224 24,777 12,518
December 1998 52,234 3,824 893
- ------------------------------------------------------------------
The Company's business is influenced by seasonal weather conditions and a
seasonal rate structure, among other factors.
The quarterly operating income information above has been reclassified to
reflect the Company's current presentation of income tax expense.
II-194
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999
Savannah Electric and Power Company 1999 Annual Report
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands) $251,594 $254,455 $226,277 $234,074 $225,729
Net Income after Dividends
on Preferred Stock (in thousands) $23,083 $23,644 $23,847 $23,940 $23,395
Cash Dividends
on Common Stock (in thousands) $25,200 $23,500 $20,500 $19,600 $17,600
Return on Average Common Equity (percent) 13.16 13.45 13.71 14.08 14.20
Total Assets (in thousands) $570,218 $555,799 $547,352 $544,900 $524,662
Gross Property Additions (in thousands) $29,833 $18,071 $18,846 $28,950 $26,503
- --------------------------------------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $174,847 $175,865 $175,631 $172,284 $167,812
Preferred stock - - 35,000 35,000 35,000
Company obligated mandatorily
redeemable preferred securities 40,000 40,000 - - -
Long-term debt 147,147 163,443 142,846 164,406 153,679
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $361,994 $379,308 $353,477 $371,690 $356,491
================================================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.3 46.4 49.7 46.4 47.1
Preferred stock - - 9.9 9.4 9.8
Company obligated mandatorily
redeemable preferred securities 11.0 10.5 - - -
Long-term debt 40.7 43.1 40.4 44.2 43.1
- --------------------------------------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0 100.0 100.0
================================================================================================================================
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1 A1 A1
Standard and Poor's AA- AA- AA- A+ A+
Preferred Stock -
Moody's a2 a2 a2 a2 a2
Standard and Poor's A- A A A A
================================================================================================================================
Customers (year-end):
Residential 112,891 110,437 109,092 106,657 104,624
Commercial 15,433 15,328 14,233 13,877 13,339
Industrial 67 63 64 65 65
Other 417 377 1,129 1,097 1,048
- --------------------------------------------------------------------------------------------------------------------------------
Total 128,808 126,205 124,518 121,696 119,076
================================================================================================================================
Employees (year-end): 533 542 535 571 584
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
II-195
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL AND OPERATING DATA 1995-1999 (continued)
Savannah Electric and Power Company 1999 Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (in thousands):
Residential $ 112,371 $109,393 $ 96,587 $ 101,607 $ 95,208
Commercial 88,449 86,231 78,949 80,494 75,117
Industrial 32,233 37,865 35,301 37,077 36,040
Other 9,212 8,838 8,621 8,804 8,386
- -----------------------------------------------------------------------------------------------------------------------------
Total retail 242,265 242,327 219,458 227,982 214,751
Sales for resale - non-affiliates 3,395 4,548 3,467 1,998 1,851
Sales for resale - affiliates 4,151 3,016 2,052 3,130 7,200
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 249,811 249,891 224,977 233,110 223,802
Other revenues 1,783 4,564 1,300 964 1,927
- -----------------------------------------------------------------------------------------------------------------------------
Total $251,594 $254,455 $226,277 $234,074 $225,729
=============================================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,579,068 1,539,792 1,428,337 1,456,651 1,402,148
Commercial 1,287,832 1,236,337 1,156,078 1,141,218 1,099,570
Industrial 713,448 900,012 881,261 838,753 887,141
Other 132,555 131,142 124,490 126,215 126,057
- -----------------------------------------------------------------------------------------------------------------------------
Total retail 3,712,903 3,807,283 3,590,166 3,562,837 3,514,916
Sales for resale - non-affiliates 51,548 53,294 94,280 91,610 87,747
Sales for resale - affiliates 76,988 58,415 54,509 41,808 63,731
- -----------------------------------------------------------------------------------------------------------------------------
Total 3,841,439 3,918,992 3,738,955 3,696,255 3,666,394
=============================================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 7.12 7.10 6.76 6.98 6.79
Commercial 6.87 6.97 6.83 7.05 6.83
Industrial 4.52 4.21 4.01 4.42 4.06
Total retail 6.52 6.36 6.11 6.40 6.11
Sales for resale 5.87 6.77 3.71 3.84 5.98
Total sales 6.50 6.38 6.02 6.31 6.10
Residential Average Annual
Kilowatt-Hour Use Per Customer 14,100 14,061 13,231 13,771 13,478
Residential Average Annual
Revenue Per Customer $1,003.39 $998.94 $894.73 $960.58 $915.15
Plant Nameplate Capacity
Ratings (year-end) (megawatts) 788 788 788 788 788
Maximum Peak-Hour Demand (megawatts):
Winter 719 582 625 666 630
Summer 875 846 802 811 811
Annual Load Factor (percent) 51.2 54.9 54.3 53.1 52.9
Plant Availability Fossil-Steam (percent): 72.8 72.9 93.7 77.6 83.3
- -----------------------------------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 44.6 41.6 34.4 27.7 23.9
Oil and gas 12.3 12.9 5.2 3.1 5.9
Purchased power -
From non-affiliates 5.3 3.4 1.4 2.1 2.3
From affiliates 37.8 42.1 59.0 67.1 67.9
- -----------------------------------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0 100.0 100.0
=============================================================================================================================
</TABLE>
II-196
<PAGE>
PART III
Items 10, 11, 12 and 13 for SOUTHERN are incorporated by reference to ELECTION
OF DIRECTORS in SOUTHERN's definitive Proxy Statement relating to the 2000
annual meeting of stockholders. The ages of directors and executive officers in
Item 10 set forth below are as of December 31, 1999.
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANTS
ALABAMA
Identification of directors of ALABAMA.
Elmer B. Harris (1)
President and Chief Executive Officer
Age 60
Served as Director since 3-1-89
Whit Armstrong (2)
Age 52
Served as Director since 9-24-82
David J. Cooper, Sr. (2)
Age 54
Served as Director since 4-24-98
H. Allen Franklin (2)
Age 55
Served as Director since 10-22-99
R. Kent Henslee (2)
Age 64
Served as Director since 10-22-99
Carl E. Jones, Jr. (2)
Age 59
Served as Director since 4-22-88
Patricia M. King (2)
Age 54
Served as Director since 7-25-97
James K. Lowder (2)
Age 50
Served as Director since 7-25-97
Wallace D. Malone, Jr. (2)
Age 63
Served as Director since 6-22-90
Thomas C. Meredith (2)
Age 58
Served as Director since 10-23-98
Mayer Mitchell (2)
Age 66
Served as Director since 10-22-99
William V. Muse (2)
Age 60
Served as Director since 2-26-93
John T. Porter (2)
Age 68
Served as Director since 10-22-93
Robert D. Powers (2)
Age 49
Served as Director since 1-24-92
Andreas Renschler (2)
Age 41
Served as Director since 1-23-98
C. Dowd Ritter (2)
Age 52
Served as Director since 7-25-97
James H. Sanford (2)
Age 55
Served as Director since 8-1-83
John C. Webb, IV (2)
Age 57
Served as Director since 4-22-77
(1) Previously served as Director of ALABAMA from 1980 to 1985.
(2) No position other than Director.
Each of the above is currently a director of ALABAMA, serving a term running
from the last annual meeting of ALABAMA's stockholder (April 23, 1999) for one
year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Franklin, Mr. Henslee and Mr. Mitchell, whose
elections were effective on the date indicated.
III-1
<PAGE>
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of ALABAMA acting solely in their capacities as such.
Identification of executive officers of ALABAMA.
Elmer B. Harris (1)
President, Chief Executive Officer and Director
Age 60
Served as Executive Officer since 3-1-89
Banks H. Farris
Executive Vice President
Age 64
Served as Executive Officer since 12-3-91
Michael D. Garrett
Executive Vice President
Age 50
Served as Executive Officer since 3-1-98
William B. Hutchins, III
Executive Vice President, Chief Financial Officer
and Treasurer
Age 56
Served as Executive Officer since 12-3-91
C. Alan Martin
Executive Vice President
Age 51
Served as Executive Officer since 1-1-00
Jerry L. Stewart
Senior Vice President
Age 50
Served as Executive Officer since 7-23-99
(1) Previously served as executive officer of ALABAMA from 1979 to 1985.
Each of the above is currently an executive officer of ALABAMA, serving a
term running from the last annual meeting of the directors (April 23, 1999) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Martin and Mr. Stewart, whose elections were effective
on the dates indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
ALABAMA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Elmer B. Harris - President and Chief Executive Officer since 1989. Director
of SOUTHERN and AmSouth Bancorporation.
Whit Armstrong - President, Chairman of the Board and Chief Executive Officer of
The Citizens Bank, Enterprise, Alabama. Also, President, Chairman of the Board
and Chief Executive Officer of Enterprise Capital Corporation, Inc.
David J. Cooper, Sr. - President of Cooper/T. Smith Corporation, a maritime
company with a core business of stevedoring and tugboats. Director of Cooper/T.
Smith Corporation and subsidiaries. Chairman of the Board, American Equity
Underwriters, Inc., Mobile, Alabama.
H. Allen Franklin - President and Chief Operating Officer of SOUTHERN. He
previously served as President and Chief Executive Officer of GEORGIA from 1994
to 1999. Director of GEORGIA and GULF.
R. Kent Henslee - Managing Partner of the law firm of Henslee, Robertson &
Strawn, L.L.C., Gadsden, Alabama.
Carl E. Jones, Jr. - President and Chief Executive Officer of Regions Financial
Corporation, Birmingham, Alabama.
Patricia M. King - President and Chief Executive Officer of King Motor Co.,
Inc., King's Highway, Inc. and King Imports, Inc., Anniston, Alabama.
James K. Lowder - President and Chief Executive Officer of The Colonial Company
(real estate development and sales), Montgomery, Alabama.
III-2
<PAGE>
Wallace D. Malone, Jr. - Chairman and Chief Executive Officer of SouthTrust
Corporation, bank holding company, Birmingham, Alabama.
Thomas C. Meredith - Chancellor of The University of Alabama System,
Tuscaloosa, Alabama. Director of ATMOS Energy Corporation, Dallas, Texas.
Mayer Mitchell - President of Mitchell Brothers, Inc. (real estate and
investments), Mobile, Alabama. Director of The Banc Corporation, Birmingham,
Alabama.
William V. Muse - President of Auburn University, Auburn, Alabama.
John T. Porter - Pastor of Sixth Avenue Baptist Church, Birmingham, Alabama.
Robert D. Powers - President of The Eufaula Agency, Inc. (real estate and
insurance), Eufaula, Alabama.
Andreas Renschler - President of Mcc smart Gmbh, Germany, a division of Daimler
Chrysler.
C. Dowd Ritter - Chairman, President, Chief Executive Officer of AmSouth
Bancorporation and AmSouth Bank, Birmingham, Alabama.
James H. Sanford - Chairman, HOME Place Farms Inc. (diversified farmers and
ginners), Prattville, Alabama. President, Autauga Quality Cotton Association,
Prattville, Alabama. Chairman of the Board, Sylvest Farms of Georgia, Inc.,
College Park, Georgia. Chairman of the Board, Sylvest Farms, Inc., Montgomery,
Alabama.
John C. Webb, IV - President, Webb Lumber Company, Inc. (wholesale lumber and
wood products sales), Demopolis, Alabama.
Banks H. Farris - Executive Vice President - Customer Service since 1994.
Responsible for providing the overall management of human resources, information
resources, power delivery and marketing departments, customer service centers
and the six geographic divisions.
Michael D. Garrett - Executive Vice President - External Affairs since 1998. He
previously served as Senior Vice President of External Affairs from February
1994 to March 1998. Responsible for governmental relations, environmental,
public relations, economic development, corporate real estate and corporate
services.
William B. Hutchins, III - Executive Vice President and Chief Financial Officer
since 1991. Treasurer was added to his responsibilities in 1998. Responsible for
financial and accounting operations, corporate planning and treasury operations.
C. Alan Martin - Executive Vice President - External Affairs since January 2000.
He previously served as Executive Vice President and Chief Marketing Officer for
SOUTHERN from 1998 to 1999. Responsible for governmental relations,
environmental, public relations, economic development, corporate real estate and
corporate services.
Jerry L. Stewart - Senior Vice President - Fossil and Hydro Generation since
1999. He previously served as Vice President of Fuel Services for SCS from 1992
to 1999. Responsible for providing overall management of the Fossil Generation,
Hydro Generation, Power Generation Support and Fuels Department.
Involvement in certain legal proceedings.
None.
III-3
<PAGE>
GEORGIA
Identification of directors of GEORGIA.
David M. Ratcliffe
President and Chief Executive Officer
Age 51
Served as Director since 6-1-99
Daniel P. Amos (1)
Age 48
Served as Director since 5-21-97
Juanita P. Baranco (1)
Age 50
Served as Director since 5-21-97
William A. Fickling, Jr. (1)
Age 67
Served as Director since 4-18-73
H. Allen Franklin (1)
Age 55
Served as Director since 1-1-94
L. G. Hardman III (1)
Age 60
Served as Director since 6-25-79
James R. Lientz, Jr. (1)
Age 56
Served as Director since 7-21-93
Zell Miller (1)
Age 68
Served as Director since 2-17-99
G. Joseph Prendergast (1)
Age 54
Served as Director since 1-20-93
Herman J. Russell (1)
Age 69
Served as Director since 5-18-88
William Jerry Vereen (1)
Age 59
Served as Director since 5-18-88
Carl Ware (1) (2)
Age 56
Served as Director since 2-15-95
(1) No position other than Director.
(2) Previously served as Director of GEORGIA
from 1980 to 1991.
Each of the above is currently a director of GEORGIA, serving a term running
from the last annual meeting of GEORGIA's stockholder (May 19, 1999) for one
year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Ratcliffe, who was elected on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of GEORGIA acting solely in their capacities as such.
Identification of executive officers of GEORGIA.
David M. Ratcliffe
President, Chief Executive Officer and Director
Age 51
Served as Executive Officer since 3-1-98
William C. Archer, III
Executive Vice President - External Affairs
Age 51
Served as Executive Officer since 4-6-95
Thomas A. Fanning
Executive Vice President, Treasurer and
Chief Financial Officer
Age 42
Served as Executive Officer since 6-12-99
Gene R. Hodges
Executive Vice President - Customer Operations
Age 61
Served as Executive Officer since 11-19-86
Wayne T. Dahlke
Senior Vice President - Power Delivery
Age 58
Served as Executive Officer since 4-19-89
III-4
<PAGE>
James K. Davis
Senior Vice President - Corporate Relations
Age 59
Served as Executive Officer since 10-1-93
Robert H. Haubein
Senior Vice President - Fossil/Hydro Power
Age 59
Served as Executive Officer since 2-19-92
Leonard J. Haynes
Senior Vice President - Marketing
Age 49
Served as Executive Officer since 10-13-98
Fred D. Williams
Senior Vice President - Resource Policy & Planning
Age 55
Served as Executive Officer since 11-18-92
Each of the above is currently an executive officer of GEORGIA, serving a
term running from the last annual meeting of the directors (May 19, 1999) for
one year until the next annual meeting or until his successor is elected and
qualified, except for Mr. Fanning, who was elected on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
GEORGIA acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationship
None.
Business experience.
David M. Ratcliffe - President and Chief Executive Officer of GEORGIA since June
1999. He previously served as Executive Vice President, Treasurer and Chief
Financial Officer from 1998 to 1999. Senior Vice President of External Affairs
for SOUTHERN from 1995 to 1998. Director of Mississippi Chemical Corporation.
Daniel P. Amos - President and Chief Executive Officer, American Family Life
Assurance Company, Incorporated (AFLAC), Columbus, Georgia. Director, AFLAC
Incorporated (and subsidiaries), CIT Group and Greystone Capital Partners,
I.L.P.
Juanita P. Baranco - Business owner of Baranco Automotive Group. Director of
Federal Reserve Bank of Atlanta and John H. Harland Company, Decatur, Georgia.
William A. Fickling, Jr. - Chairman of the Board, Chief Executive Officer of
Beech Street Corporation (provider of managed care services) since 1989. He
previously served as President from 1995 to 1996.
H. Allen Franklin - President and Chief Operating Officer of SOUTHERN since
1999. He previously served as President and Chief Executive Officer of GEORGIA
from 1994 to 1999. Director of ALABAMA and GULF.
L. G. Hardman III - Chairman of the Board and Chief Executive Officer of First
Commerce Bancorp, Inc. Chairman of the Board of The First National Bank of
Commerce, Georgia and Chairman of the Board, President and Treasurer of
Harmony Grove Mills, Inc. (real estate investments). Director of SOUTHERN.
James R. Lientz, Jr. - President, Bank of America (formerly NationsBank)
Mid-South Banking Group since 1993. Director of Cerulean Companies, Inc. and
Blue Cross/Blue Shield of Georgia.
Zell Miller - Former Governor of Georgia. He served two terms as Governor of the
State of Georgia, leaving office in January 1999. He previously served as
Lieutenant Governor of Georgia. Director of Albany-based Gray Communications,
Atlanta-based Post Properties, Atlanta-based Law Companies Group and United
Community Banks, Inc., Blairsville, GA.
G. Joseph Prendergast - President and Chief Operating Officer, Wachovia
Corporation and Wachovia Bank, N.A., Winston Salem, North Carolina since April
1999. He previously served as Senior Executive Vice President, Wachovia
Corporation, heading the banking division comprising the companies' consumer
and corporate banking activities and Wachovia Bank, N.A. Director of Willamette
Industries, Inc.
III-5
<PAGE>
Herman J. Russell - Chairman and Chief Executive Officer of H. J. Russell &
Company (construction), Atlanta, Georgia. Chairman of the Board, Citizens
Trust Bank, Atlanta, Georgia. Director of Citizens Bancshares Corporation and
National Service Industries, Atlanta, Georgia.
William Jerry Vereen - President, Treasurer, Chief Executive Officer, and
Director of Riverside Manufacturing Company (manufacture and sale of uniforms),
Moultrie, Georgia. Director of Gerber Scientific, Inc., Textile Clothing
Technology Corporation, Cerulean Companies, Inc. and Blue Cross/Blue Shield of
Georgia.
Carl Ware - Executive Vice President, The Coca-Cola Company since January 2000.
He previously served as President, Africa Group, The Coca-Cola Company.
Director of Charlotte-based Coca-Cola Bottling Co. Consolidated.
William C. Archer, III - Executive Vice President - External Affairs since
September 1995. He previously served as Senior Vice President of External
Affairs from April 1995 to September 1995. Vice President of Human Resources for
SCS from 1992 to 1995. Responsible for governmental and regulatory affairs,
corporate relations, land department, environmental affairs, corporate
communications, risk management, corporate security, regulatory and litigation
support, corporate concerns and economic development.
Thomas A. Fanning - Executive Vice President, Treasurer and Chief Financial
Officer since June 1999. He previously served as Senior Vice President of
Strategy for SOUTHERN from June 1998 to June 1999. Senior Vice President and
Chief Information Officer for SOUTHERN from March 1995 to 1998. Vice President,
Treasurer and Assistant Secretary for SCS from January to March 1995.
Responsible for accounting, corporate secretary, finance and procurement.
Gene R. Hodges - Executive Vice President - Customer Operations, Power Delivery
and Safety since 1992. Responsible for the northern and southern regions and
power delivery, customer service, region safety and labor relations' areas.
Wayne T. Dahlke - Senior Vice President - Power Delivery since 1992. Responsible
for transmission and construction, planning and projects, distribution, forestry
and right of way services and system operations.
James K. Davis - Senior Vice President - Corporate Relations since 1993.
Responsible for corporate relations and consumer affairs.
Robert H. Haubein - Senior Vice President - Fossil/ Hydro Power since 1994.
Responsible for fossil/hydro power generation, labor relations, safety and
health.
Leonard J. Haynes - Senior Vice President - Marketing since 1998. He previously
served as Vice President of Marketing from October 1995 to November 1998.
Responsible for GEORGIA's and SAVANNAH's Power Marketing organizations as well
as SOUTHERN's national accounts organization.
Fred D. Williams - Senior Vice President - Resource Policy and Planning since
1997. He previously served as Senior Vice President of Wholesale Power Marketing
from 1995 to 1997. Senior Vice President of Bulk Power Markets from 1992 to
August 1995. Responsible for managing the supply needs for retail and wholesale
customers and developing policy and recommendations for future industry
structure.
Involvement in certain legal proceedings.
None.
III-6
<PAGE>
GULF
Identification of directors of GULF.
Travis J. Bowden
President and Chief Executive Officer
Age 61
Served as Director since 2-1-94
Fred C. Donovan, Sr. (1)
Age 59
Served as Director since 1-18-91
H. Allen Franklin (1)
Age 55
Served as Director since 6-29-99
W. Deck Hull, Jr. (1)
Age 67
Served as Director since 10-14-83
Joseph K. Tannehill (1)
Age 66
Served as Director since 7-19-85
Barbara H. Thames (1)
Age 59
Served as Director since 2-28-97
(1) No position other than Director.
Each of the above is currently a director of GULF, serving a term running
from the last annual meeting of GULF's stockholder (June 29, 1999) for one year
until the next annual meeting or until a successor is elected and qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of GULF acting solely in their capacities as such.
Identification of executive officers of GULF.
Travis J. Bowden
President, Chief Executive Officer and Director
Age 61
Served as Executive Officer since 2-1-94
Francis M. Fisher, Jr.
Vice President - Power Delivery and Customer Operations
Age 51
Served as Executive Officer since 5-19-89
John E. Hodges, Jr.
Vice President - Marketing and Employee/External Affairs
Age 56
Served as Executive Officer since 5-19-89
Robert G. Moore
Vice President - Power Generation and Transmission
Age 50
Served as Executive Officer since 7-25-97
Arlan E. Scarbrough
Vice President - Finance
Age 63
Served as Executive Officer since 9-21-77
Each of the above is currently an executive officer of GULF, serving a term
running from the last annual meeting of the directors (July 23, 1999) for one
year until the next annual meeting or until his successor is elected and
qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
GULF acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Travis J. Bowden - President and Chief Executive Officer since 1994.
Fred C. Donovan, Sr. - President of Baskerville - Donovan, Inc., an
architectural and engineering firm, Pensacola, Florida.
III-7
<PAGE>
H. Allen Franklin - President and Chief Operating Officer of SOUTHERN since
1999. He previously served as President and Chief Executive Officer of GEORGIA
from 1994 to 1999. Director of ALABAMA and GEORGIA.
W. Deck Hull, Jr. - President and Director of Hull Company, Panama City, Florida
since 1997. He previously served as Vice Chairman of the SunTrust Bank, West
Florida, Panama City, Florida from 1993 to 1997.
Joseph K. Tannehill - President, Chairman and Chief Executive Officer of
Tannehill International Industries, Inc., Lynn Haven, Florida since 1991.
Chairman and Chief Executive Officer of Merrick Industries, Inc., Lynn Haven,
Florida since 1991. Director of Regions Bank of North Florida, Panama City,
Florida.
Barbara H. Thames - Chief Operating Officer of West Florida Regional Medical
Center, Pensacola, Florida (a-for-profit Healthcare Corporation) since 1998. She
previously served as Chief Executive Officer of Santa Rosa Medical Center,
Milton, Florida.
Francis M. Fisher, Jr. - Vice President - Power Delivery and Customer Operations
since 1996. He previously served as Vice President of Employee and External
Relations from 1989 to 1996. Responsible for power delivery, customer
operations, corporate real estate, and total quality management and serves as
compliance officer.
John E. Hodges, Jr. - Vice President - Marketing and Employee/External Affairs
since 1996. He previously served as Vice President of Customer Operations from
1989 to 1996. Responsible for corporate communications, marketing, governmental
affairs, economic development, safety and health, employee relations and human
resources-coastal region.
Robert G. Moore - Vice President - Power Generation and Transmission of GULF and
Vice President of Fossil Generation of SCS since 1997. He previously served as
Plant Manager of Plant Bowen at GEORGIA. Responsible for the generation and
transmission of electricity and bulk power marketing efforts.
Arlan E. Scarbrough - Vice President - Finance since 1980. Responsible for all
accounting, financial and regulatory matters.
Involvement in certain legal proceedings.
None.
III-8
<PAGE>
MISSISSIPPI
Identification of directors of MISSISSIPPI.
Dwight H. Evans
President and Chief Executive Officer
Age 51
Served as Director since 3-27-95
Edwin E. Downer (1)
Age 68
Served as Director since 4-24-84
Robert S. Gaddis (1)
Age 68
Served as Director since 1-21-86
Linda T. Howard (1)
Age 56
Served as Director since 2-24-99
Aubrey K. Lucas (1)
Age 65
Served as Director since 4-24-84
Malcolm Portera (1)
Age 53
Served as Director since 4-6-99
George A. Schloegel (1)
Age 59
Served as Director since 7-26-95
Philip J. Terrell (1)
Age 46
Served as Director since 2-22-95
N. Eugene Warr (1)
Age 64
Served as Director since 1-21-86
(1) No position other than Director.
Each of the above is currently a director of MISSISSIPPI, serving a term
running from the last annual meeting of MISSISSIPPI's stockholder (April 6,
1999) for one year until the next annual meeting or until a successor is elected
and qualified.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of MISSISSIPPI acting solely in their capacities as
such.
Identification of executive officers of MISSISSIPPI.
Dwight H. Evans
President, Chief Executive Officer and Director
Age 51
Served as Executive Officer since 3-27-95
H. E. Blakeslee
Vice President - Customer Services and Retail Marketing
Age 59
Served as Executive Officer since 1-25-84
Mark S. Lynch
Vice President - Power Generation and Delivery
Age 46
Served as Executive Officer since 10-1-99
Don E. Mason
Vice President - External Affairs and Corporate Services
Age 58
Served as Executive Officer since 7-27-83
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
Age 47
Served as Executive Officer since 1-1-95
Each of the above is currently an executive officer of MISSISSIPPI, serving
a term running from the last annual meeting of the directors (April 28, 1999)
for one year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Lynch, who was elected on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
MISSISSIPPI acting solely in their capacities as such.
III-9
<PAGE>
Identification of certain significant employees.
None.
Family relationships.
None.
Business experience.
Dwight H. Evans - President and Chief Executive Officer since 1995. He
previously served as Executive Vice President of External Affairs of GEORGIA
from 1989 to 1995.
Edwin E. Downer - Business consultant specializing in economic analysis,
management controls and procedural studies, Meridian, Mississippi.
Robert S. Gaddis - Chairman of the Advisory Board of Trustmark National Bank,
Laurel, Mississippi.
Linda T. Howard - President of Howard Industries, Inc., Laurel, Mississippi.
Aubrey K. Lucas - President Emeritus and Distinguished Professor of Higher
Education at the University of Southern Mississippi, Hattiesburg, Mississippi.
Malcolm Portera - President, Mississippi State University, Starkville,
Mississippi.
George A. Schloegel - President and Chief Executive Officer of Hancock Bank.
President, Chief Executive Officer and Director of Hancock Bank Securities
Corporation. Vice Chairman of Hancock Holding Company. Director of Hancock
Bank of Mississippi and Hancock Bank of Louisiana.
Philip J. Terrell - Superintendent of Schools, Pass Christian Public School
District, Pass Christian, Mississippi; and adjunct Professor of Education at
William Carey College, Gulfport, Mississippi.
N. Eugene Warr - Retailer, Gulfport, Mississippi. Director of Coast
Community Bank, formerly SouthTrust Bank of Mississippi, Biloxi,
Mississippi.
H. E. Blakeslee - Vice President - Customer Services and Retail Marketing
since 1984. Responsible for rate design, revenue forecasting, marketing,
district operations, corporate compliance, distribution engineering, customer
accounting, vehicle maintenance centers and customer call center.
Mark S. Lynch - Vice President - Power Generation and Delivery since 1999. He
previously served as President and Chief Executive Officer of Empresa Electrica
del Norte Grande, S.A. from 1996 to 1999. Responsible for generating plants,
environmental quality, fuel services, power generation technical services,
transmission, system planning, bulk power contracts, system operations and
control, system protection and real estate.
Don E. Mason - Vice President - External Affairs and Corporate Services since
1983. Responsible for external affairs, corporate communications, security, risk
management, economic development and general services, as well as the human
resources function.
Michael W. Southern - Vice President, Secretary, Treasurer and Chief Financial
Officer since 1995. He previously served as Director of Corporate Finance of SCS
from 1994 to 1995. Responsible for accounting, secretary/treasury, corporate
planning, procurement and information resources.
Involvement in certain legal proceedings.
None.
III-10
<PAGE>
SAVANNAH
Identification of directors of SAVANNAH.
G. Edison Holland, Jr.
President and Chief Executive Officer
Age 47
Served as Director since 7-15-97
Gus H. Bell (1)
Age 62
Served as Director since 7-20-99
Archie H. Davis (1)
Age 58
Served as Director since 2-18-97
Walter D. Gnann (1)
Age 64
Served as Director since 5-17-83
Robert B. Miller, III (1)
Age 54
Served as Director since 5-17-83
Arnold M. Tenenbaum (1)
Age 63
Served as Director since 5-17-77
(1) No position other than Director.
Each of the above is currently a director of SAVANNAH, serving a term
running from the last annual meeting of SAVANNAH's stockholder (May 18, 1999)
for one year until the next annual meeting or until a successor is elected and
qualified, except for Mr. Bell, who was elected on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he or she was or is to be
selected as a director or nominee, other than any arrangements or understandings
with directors or officers of SAVANNAH acting solely in their capacities as
such.
Identification of executive officers of SAVANNAH.
G. Edison Holland, Jr.
President, Chief Executive Officer and Director
Age 47
Served as Executive Officer since 7-15-97
Lewis A. Jeffers
Vice President - Power Generation
Age 44
Served as Executive Officer since 11-2-99
W. Miles Greer
Vice President - Customer Operations and External Affairs
Age 56
Served as Executive Officer since 11-20-85
Kirby R. Willis
Vice President, Treasurer, Chief Financial Officer
and Assistant Corporate Secretary
Age 48
Served as Executive Officer since 1-1-94
Each of the above is currently an executive officer of SAVANNAH, serving a
term running from the meeting of the directors held on July 20, 1999 for the
ensuing year, except for Mr. Jeffers who was elected on the date indicated.
There are no arrangements or understandings between any of the individuals
listed above and any other person pursuant to which he was or is to be selected
as an officer, other than any arrangements or understandings with officers of
SAVANNAH acting solely in their capacities as such.
Identification of certain significant employees.
None.
Family relationships
None.
Business experience.
G. Edison Holland, Jr. - President and Chief Executive Officer since 1997. He
previously served as Vice President of Power Generation/Transmission and
Corporate Counsel of GULF from 1995 to 1997. Served as a partner in the law
firm of Beggs & Lane from 1979 to 1997. Director of SunTrust Bank of Savannah.
Gus H. Bell, III - President and Chief Executive Officer of Hussey, Gay, Bell
and DeYoung, Inc., (specializing in environmental, industrial, structural,
architectural and civil engineering), Savannah, Georgia. Director of SunTrust
Bank of Savannah.
III-11
<PAGE>
Archie H. Davis - President and Chief Executive Officer of
The Savannah Bancorp and The Savannah Bank, N.A., Savannah, Georgia. Member of
the Board of Directors of Thomaston Mills, Thomaston, Georgia..
Walter D. Gnann - President of Walt's TV, Appliance and Furniture Co., Inc.,
Springfield, Georgia.
Robert B. Miller, III - President of American Building Systems, Inc., Savannah,
Georgia.
Arnold M. Tenenbaum - President and Director of Chatham Steel Corporation.
Director of First Union Bank of Georgia, First Union Bank of Savannah and
Cerulean Corporation.
W. Miles Greer - Vice President - Customer Operations and External Affairs since
1998. He previously served as Vice President of Marketing and Customer Service
from 1994 to 1998. Responsible for customer services, transmission and
distribution, engineering, system operation and external affairs.
Lewis A. Jeffers - Vice President - Power Generation since 1999. He previously
served as General Manager of Power Generation from February 1999 to November
1999; General Manager for Plants Smith and Scholz at GULF from May 1996 through
January 1999; and Assistant General Manager at ALABAMA for Plant Barry from
September 1993 to May 1996. Responsible for operations and maintenance of Plants
Kraft, Riverside and McIntosh.
Kirby R. Willis - Vice President, Treasurer and Chief Financial Officer since
1994 and Assistant Corporate Secretary effective 1998. Responsible primarily for
accounting, financial, labor relations, corporate services, corporate
compliance, environmental and safety activities.
Involvement in certain legal proceedings.
None
Section 16(a) Beneficial Ownership Reporting
Compliance.
MISSISSIPPI's Mr. Lynch filed an Initial Statement of Beneficial Ownership of
Equity Securities on Form 3, late.
III-12
<PAGE>
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Tables. The following tables set forth information
concerning any Chief Executive Officer and the four most highly compensated
executive officers whose total annual salary and bonus exceeded $100,000 during
1999 for each of the integrated Southeast utilities (ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SAVANNAH).
Key terms used in this Item will have the following meanings:-
AME.............................Above-market earnings on deferred compensation
ESP.............................Employee Savings Plan
ESOP............................Employee Stock Ownership Plan
SBP.............................Supplemental Benefit Plan
ERISA...........................Employee Retirement Income Security Act
<TABLE>
<CAPTION>
ALABAMA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Elmer B. Harris
President, 1999 550,674 97,125 15,301 31,341 330,618 29,800
Chief Executive 1998 545,102 192,751 19,060 29,411 249,971 30,180
Officer, 1997 500,700 101,002 20,453 35,648 247,224 30,172
Director
Banks H. Farris 1999 306,954 46,723 16,342 13,485 205,980 16,439
Executive Vice 1998 275,822 32,631 8,530 11,473 178,829 14,764
President 1997 247,170 37,500 7,218 13,513 155,313 14,379
William B.
Hutchins, III
Executive Vice 1999 256,665 36,365 9,573 11,246 152,585 13,804
President, 1998 237,532 34,646 3,010 8,118 132,472 12,678
Chief Financial 1997 217,756 31,400 1,383 9,834 115,170 12,441
Officer
</TABLE>
See next page for footnotes.
III-13
<PAGE>
<TABLE>
<CAPTION>
ALABAMA
SUMMARY COMPENSATION TABLE
(Continued)
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Garrett 4 1999 256,211 36,375 21,268 11,249 132,434 13,496
Executive Vice 1998 221,731 57,026 12,389 7,800 105,866 11,558
President 1997 - - - - - -
Jerry L. Stewart4 1999 182,097 26,996 1,884 6,340 122,003 9,794
Senior Vice President 1998 - - - - - -
1997 - - - - - -
1 Tax reimbursement by ALABAMA and certain personal benefits.
2 Payouts made in 1998, 1999 and 2000 for the four-year performance periods ending December 31, 1997, 1998 and 1999,
respectively.
3 ALABAMA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under
which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
Elmer B. Harris $5,691 $897 $23,212
Banks H. Farris 7,401 897 8,141
William B. Hutchins, III 6,603 897 6,304
Michael D. Garrett 5,691 897 6,908
Jerry L. Stewart 7,200 897 1,697
4 Messrs. Garrett and Stewart were named executive officers effective April 24, 1998 and July 23, 1999, respectively.
</TABLE>
III-14
<PAGE>
<TABLE>
<CAPTION>
GEORGIA
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Allen Franklin 4
President, 1999 603,658 126,000 31,023 71,153 375,137 32,654
Chief Executive 1998 564,329 237,502 7,078 30,521 283,629 31,590
Officer, Director 1997 511,505 129,426 14,219 36,544 280,513 31,350
David M. Ratcliffe
President, 1999 388,819 85,389 16,051 24,110 321,983 20,885
Chief Executive 1998 339,672 62,700 3,934 14,039 218,175 12,255
Officer, Director 1997 313,152 50,515 10,828 17,086 207,322 18,342
Robert H. 1999 278,502 59,882 11,801 11,209 152,585 13,693
Haubein, Jr. 1998 239,448 35,683 1,922 8,175 132,472 13,007
Senior Vice President 1997 220,358 35,683 657 9,952 115,170 11,981
Gene R. Hodges 1999 243,487 44,086 12,538 10,604 152,585 13,259
Executive 1998 244,284 42,595 4,543 8,317 132,472 13,087
Vice President 1997 228,336 39,058 5,544 10,271 126,075 13,111
Thomas A. Fanning 5
Executive Vice
President, Treasurer 1999 233,644 48,312 4,504 10,458 152,585 12,396
and Chief 1998 - - - - - -
Financial Officer 1997 - - - - - -
William C. Archer 1999 220,706 40,120 16,609 7,972 152,585 11,844
Executive 1998 216,246 121,261 67,940 7,390 132,472 11,404
Vice President 1997 197,870 40,054 3,410 8,953 84,048 11,280
1 Tax reimbursement by GEORGIA on certain personal benefits, including $64,679 in 1998 for Mr. Archer related to a cash award.
2 Payouts made in 1998, 1999 and 2000 for the four-year performance periods ending December 31, 1997, 1998 and 1999,
respectively.
3 GEORGIA contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan
under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
H. Allen Franklin $6,242 $897 $25,515
David M. Ratcliffe 7,301 897 12,687
Robert H. Haubein, Jr. 6,647 897 6,149
Gene R. Hodges 7,200 897 5,162
Thomas A. Fanning 7,200 897 4,299
William C. Archer 5,838 897 5,109
4 Mr. Franklin resigned as President and Chief Executive Officer of GEORGIA to become Chief Operating Officer of SOUTHERN
effective June, 1999. He was replaced by Mr. Ratcliffe effective June, 1999.
5 Mr. Fanning was named an executive officer effective June 12, 1999.
</TABLE>
III-15
<PAGE>
<TABLE>
<CAPTION>
GULF
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Travis J. Bowden
President, 1999 332,482 40,229 10,199 14,514 251,300 18,171
Chief Executive 1998 329,280 35,121 3,839 13,583 218,175 18,068
Officer, Director 1997 306,584 33,933 2,842 16,694 207,322 17,888
Arlan E. Scarbrough 1999 199,142 14,839 6,557 7,181 111,258 10,641
Vice President 1998 196,661 18,071 3,253 6,721 96,594 10,218
1997 180,642 18,212 1,440 8,142 84,048 10,235
John E. Hodges, Jr. 1999 194,832 14,518 8,556 7,026 111,258 10,470
Vice President 1998 192,765 17,680 915 6,575 96,594 10,014
1997 178,428 17,989 2,418 8,042 91,977 10,185
Francis M. 1999 177,934 13,259 6,508 6,417 111,258 9,558
Fisher, Jr. 1998 175,719 16,147 240 6,005 96,594 9,329
Vice President 1997 160,783 16,274 479 7,275 84,048 9,182
Robert G. Moore 1999 161,641 22,981 13,949 5,829 97,722 8,569
Vice President 1998 159,332 18,626 525 4,881 72,767 8,325
1997 149,926 23,474 - 4,741 46,551 7,550
1 Tax reimbursement by GULF on certain personal benefits.
2 Payouts made in 1998, 1999 and 2000 for the four-year performance periods ending December 31, 1997,
1998 and 1999, respectively.
3 GULF contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan under
which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
Travis J. Bowden $6,779 $897 $10,495
Arlan E. Scarbrough 6,526 897 3,218
John E. Hodges, Jr. 6,390 897 3,183
Francis M. Fisher, Jr. 6,276 897 2,385
Robert G. Moore 6,699 897 973
</TABLE>
III-16
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dwight H. Evans
President, Chief 1999 288,494 43,702 3,375 12,614 251,300 15,507
Executive 1998 283,195 42,603 5,051 11,693 218,175 15,291
Officer, Director 1997 262,678 39,643 3,830 14,303 126,075 15,025
H. E. Blakeslee 1999 207,769 37,649 8,070 7,481 111,258 11,254
Vice President 1998 207,416 36,202 47 7,068 96,594 10,979
1997 192,029 38,863 697 8,687 91,977 10,991
Andrew J.
Dearman, III 4 1999 173,490 71,648 10,527 5,843 103,585 8,543
Vice President 1998 159,713 41,031 600 4,893 83,087 8,343
1997 141,393 21,008 2,083 5,871 42,903 21,354
Don E. Mason 1999 203,584 36,891 821 7,330 111,258 10,243
Vice President 1998 203,234 29,560 4,497 6,926 96,594 10,757
1997 188,126 41,889 839 8,512 84,048 10,675
Michael W. Southern
Vice President
Chief Financial 1999 189,117 34,369 8,891 6,469 103,585 9,590
Officer, Secretary, 1998 174,334 34,130 - 5,997 83,087 8,978
Treasurer 1997 155,151 31,406 1,590 6,281 65,768 8,757
Mark S. Lynch 5 1999 174,833 18,940 16 6,178 111,258 9,566
Vice President 1998 - - - - - -
1997 - - - - - -
1 Tax reimbursement by MISSISSIPPI on certain personal benefits.
2 Payouts made in 1998, 1999 and 2000 for the four-year performance periods ending December 31, 1997,
1998 and 1999, respectively.
3 MISSISSIPPI contributions to the ESP, ESOP, and non-pension related accruals under the SBP (ERISA excess plan
under which accruals are made to offset Internal Revenue Code imposed limitations under the ESP and ESOP) for the following:-
Name ESP ESOP SBP
Dwight H. Evans $6,697 $897 $7,913
H. E. Blakeslee 5,691 897 4,666
Andrew J. Dearman, III 6,567 897 1,079
Don E. Mason 5,691 897 3,655
Michael W. Southern 5,691 897 3,002
Mark S. Lynch 7,200 897 1,469
4 Effective September 1999, Mr. Dearman transferred to Southern Energy into the position of Senior Vice President and Chief
Technical Officer.
5 Mr. Lynch was named an executive officer effective October 1, 1999.
</TABLE>
III-17
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Number of
Securities Long-
Name Underlying Term
and Other Annual Stock Incentive All Other
Principal Compensation Options Payouts Compensation
Position Year Salary($) Bonus($) ($)1 (Shares) ($)2 ($)3
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Edison
Holland, Jr.
President, 1999 254,914 42,626 21,588 8,375 166,052 13,392
Chief Executive 1998 233,330 26,019 17,309 7,951 128,608 8,246
Officer, Director 1997 202,413 26,231 3,046 8,640 91,977 49,892
W. Miles Greer 1999 168,713 21,322 1,874 6,130 79,476 15,150
Vice President 1998 160,207 16,054 13 4,901 69,000 13,179
1997 138,643 16,294 805 4,924 60,636 10,740
Kirby R. Willis
Vice President, 1999 156,068 19,546 259 5,028 79,476 11,767
Chief Financial 1998 155,236 15,554 13 4,748 69,000 10,581
Officer, Treasurer 1997 134,794 15,915 182 4,809 60,636 9,322
Lewis A. Jeffers 4 1999 134,538 19,023 379 3,809 63,146 6,972
Vice President 1998 - - - - - -
1997 - - - - - -
1 Tax reimbursement by SAVANNAH on certain personal benefits, including membership fees of $11,669 for
Mr. Holland, Jr. in 1998.
2 Payouts made in 1998, 1999 and 2000 for the four-year performance periods ending December 31, 1997, 1998
and 1999, respectively.
3 SAVANNAH contributions to the ESP, under Section 401(k) of the Internal Revenue Code, ESOP, and SBP or AME for
the following:-
Name ESP ESOP SBP or AME
G. Edison Holland, Jr. $6,983 $897 $5,512
W. Miles Greer 6,698 897 7,555
Kirby R. Willis 5,674 897 5,196
Lewis A. Jeffers 6,036 897 39
In 1997, Mr. Holland received a one-time lump-sum payment of $38,654, given in connection with his appointment
to his current position.
4 Mr. Jeffers was named an executive officer effective November 2, 1999.
</TABLE>
III-18
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1999
Stock Option Grants. The following table sets forth all stock option grants to
the named executive officers of each operating subsidiary during the year ending
December 31, 1999.
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
-----------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 31,341 1.5 26.5625 05/01/2009 197,135
Banks H. Farris 13,485 0.6 26.5625 06/01/2005 59,873
William B. Hutchins, III 11,246 0.5 26.5625 07/19/2009 70,737
Michael D. Garrett 11,249 0.5 26.5625 07/19/2009 70,756
Jerry L. Stewart 6,340 0.3 26.5625 07/19/2009 39,879
GEORGIA
H. Allen Franklin 71,153 3.4 26.5625 07/19/2009 447,552
David M. Ratcliffe 24,110 1.1 26.5625 07/19/2009 151,652
Robert H. Haubein, Jr. 11,209 0.5 26.5625 07/19/2009 70,505
Gene R. Hodges 10,604 0.5 26.5625 04/01/2008 62,352
Thomas A. Fanning 10,458 0.5 26.5625 07/19/2009 65,781
William C. Archer 7,972 0.4 26.5625 07/19/2009 50,144
GULF
Travis J. Bowden 14,514 0.7 26.5625 09/01/2008 85,342
Arlan E. Scarbrough 7,181 0.3 26.5625 11/01/2006 35,618
John E. Hodges, Jr. 7,026 0.3 26.5625 07/19/2009 44,194
Francis M. Fisher, Jr. 6,417 0.3 26.5625 07/19/2009 40,363
Robert G. Moore 5,829 0.3 26.5625 07/19/2009 36,664
See next page for footnotes.
</TABLE>
III-19
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1999
Individual Grants Grant Date Value
# of % of Total
Securities Options Exercise
Underlying Granted to or
Options Employees in Base Price Expiration Grant Date
Name Granted1 Fiscal Year2 ($/Sh)1 Date1 Present Value($)3
-----------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 12,614 0.6 26.5625 07/19/2009 79,342
H. E. Blakeslee 7,481 0.4 26.5625 07/19/2009 47,055
Andrew J. Dearman, III 5,843 0.3 26.5625 07/19/2009 36,752
Don E. Mason 7,330 0.3 26.5625 07/19/2009 46,106
Michael W. Southern 6,469 0.3 26.5625 07/19/2009 40,690
Mark S. Lynch 6,178 0.3 26.5625 07/19/2009 38,860
SAVANNAH
G. Edison Holland, Jr. 8,375 0.4 26.5625 07/19/2009 52,679
W. Miles Greer 6,130 0.3 26.5625 07/19/2009 38,558
Kirby R. Willis 5,028 0.2 26.5625 07/19/2009 31,626
Lewis A. Jeffers 3,809 0.2 26.5625 07/19/2009 23,959
1 Performance Stock Plan grants were made on July 19, 1999, and vest annually at a rate of one-third on the anniversary date of
the grant. Grants fully vest upon termination because of death, total disability, or retirement and expire the earlier of five
years after such event or their normal expiration date. The exercise price is the average of the high and low fair market value
of SOUTHERN's common stock on the date granted. Options may be transferred to family trusts and family limited partnerships. In
accordance with the terms of the Performance Stock Plan, Mr. Bowden's unexercised options expire on September 1, 2008, five years
after his normal retirement date; Mr. Farris' unexercised options expire on June 1, 2005, five years after his normal retirement
date; Mr. Harris' unexercised options expire on May 1, 2009, five years after his normal retirement date; Mr. Gene R. Hodges'
unexercised options expire on April 1, 2008, five years after his normal retirement date; and Mr. Scarbrough's unexercised
options expire on November 1, 2006, five years after his normal retirement date.
2 A total of 2,108,818 stock options were granted in 1999.
3 Value was calculated using the Black-Scholes option valuation model. The actual value, if any, ultimately realized depends on
the market value of SOUTHERN's common stock at a future date. Significant assumptions used to calculate this value: price
volatility - 20.74%; risk-free rate of return - 5.79%; dividend opportunity -50%; time to exercise - 10 years; reductions for
probability of forfeiture before vesting - 7.79%; and reductions for probability of forfeiture before expiration - 13.40%. These
assumptions reflect the effects of cash dividend equivalents paid to participants under the Performance Dividend Plan assuming
targets are met.
</TABLE>
III-20
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
Aggregated Stock Option Exercises. The following table sets forth information
concerning options exercised during the year ending December 31, 1999, by the
named executive officers and the value of unexercised options held by them as of
December 31, 1999.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C> <C>
Elmer B. Harris 4,718 71,802 219,394/70,733 915,188/30,688
Banks H. Farris - - 38,372/28,070 66,409/11,351
William B. Hutchins, III - - 43,701/22,100 113,519/8,458
Michael D. Garrett - - 11,596/20,918 16,443/6,946
Jerry L Stewart - - 16,843/14,169 23,814/6,151
GEORGIA
H. Allen Franklin - - 191,114/111,645 700,904/31,389
David M. Ratcliffe 3,984 53,908 85,160/42,959 307,716/14,711
Robert H. Haubein, Jr. - - 37,975/22,166 81,698/8,558
Gene R. Hodges - - 38,577/21,876 81,361/8,856
Thomas A. Fanning - - 16,422/20,560 22,818/7,872
William C. Archer - - 20,538/17,833 28,079/7,690
GULF
Travis J. Bowden - - 19,094/32,878 24,772/14,393
Arlan E. Scarbrough - - 9,292/16,184 12,007/7,011
John E. Hodges, Jr. - - 24,796/15,877 38,885/6,926
Francis M. Fisher, Jr. - - 7,853/14,264 10,158/6,166
Robert G. Moore - - 12,039/11,680 16,514/4,064
See next page for footnotes.
</TABLE>
III-21
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED STOCK OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End($)1
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($)2 Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C>
Dwight H. Evans - - 55,961/28,385 136,976/12,332
H. E. Blakeslee - - 31,701/16,982 66,471/7,463
Andrew J. Dearman, III - - 12,920/12,108 18,323/4,926
Don E. Mason - - 20,994/16,639 29,511/7,311
Michael W. Southern - - 15,139/13,930 20,562/5,396
Mark S. Lynch - - 10,336/13,490 11,447/5,367
SAVANNAH
G. Edison Holland, Jr. - - 40,342/18,475 105,982/7,440
W. Miles Greer - - 12,505/12,104 17,221/4,225
Kirby R. Willis - - 11,770/10,777 16,256/4,097
Lewis A. Jeffers - - 0/3,809 0/0
1 This represents the excess of the fair market value of SOUTHERN's common stock of $23.50 per share, as of December 31, 1999,
above the exercise price of the options. The Exercisable column reports the "value" of options that are vested and therefore
could be exercised. The Unexercisable column reports the "value" of options that are not vested and therefore could not be
exercised as of December 31, 1999.
2 The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value
of the shares at the time of exercise over the exercise price.
</TABLE>
III-22
<PAGE>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1999
Long-Term Incentive Plans. The following table sets forth the long-term
incentive plan awards made to the named executive officers for the performance
period January 1, 1999 through December 31, 2002.
<TABLE>
<CAPTION>
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- ---------------------------------------------------------------------------------------------------------------
ALABAMA
<S> <C> <C> <C> <C> <C>
Elmer B. Harris 321,879 4 years 160,940 321,879 643,758
Banks H. Farris 128,474 4 years 64,237 128,474 256,948
William B. Hutchins, III 95,170 4 years 47,585 95,170 190,340
Michael D. Garrett 82,601 4 years 41,301 82,601 165,203
Jerry L. Stewart 76,095 4 years 38,048 76,095 152,190
GEORGIA
H. Allen Franklin 438,499 4 years 219,250 438,499 876,998
David M. Ratcliffe 200,827 4 years 100,414 200,827 401,654
Robert H. Haubein, Jr. 95,170 4 years 47,585 95,170 190,340
Gene R. Hodges 95,170 4 years 47,585 95,170 190,340
Thomas A. Fanning 95,170 4 years 47,585 95,170 190,340
William C. Archer 95,170 4 years 47,585 95,170 190,340
GULF
Travis J. Bowden 156,741 4 years 78,370 156,741 313,482
Arlan E. Scarbrough 69,394 4 years 34,697 69,394 138,788
John E. Hodges, Jr. 69,394 4 years 34,697 69,394 138,788
Francis M. Fisher, Jr. 69,394 4 years 34,697 69,394 138,788
Robert G. Moore 60,952 4 years 30,476 60,952 121,903
</TABLE>
See next page for footnotes.
III-23
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLANS - AWARDS IN 1999
Estimated Future Payouts under
Non-Stock Price-Based Plans
Performance or
Other Period
Number of Until Maturation Threshold Target Maximum
Name Units (#)1 or Payout ($)2 ($)2 ($)2
- ----------------------------------------------------------------------------------------------------------------
MISSISSIPPI
<S> <C> <C> <C> <C> <C>
Dwight H. Evans 156,741 4 years 78,370 156,741 313,482
H. E. Blakeslee 69,394 4 years 34,697 69,394 138,788
Andrew J. Dearman, III 64,608 4 years 32,304 64,608 129,215
Don E. Mason 69,394 4 years 34,697 69,394 138,788
Michael W. Southern 64,608 4 years 32,304 64,608 129,215
Mark S. Lynch 69,394 4 years 34,697 69,394 138,788
SAVANNAH
G. Edison Holland, Jr. 103,570 4 years 51,785 103,570 207,139
W. Miles Greer 49,571 4 years 24,786 49,571 99,142
Kirby R. Willis 49,571 4 years 24,786 49,571 99,142
Lewis A. Jeffers 39,385 4 years 19,692 39,385 78,770
1 A performance unit is a method of assigning a dollar value to a performance award opportunity. Under the
Executive Productivity Improvement Plan, the number of units granted to Messrs. Harris and Franklin is 65% of the average of
Messrs. Harris' and Franklin's base salary range mid-points. All other executive officers listed in this table are participants
in the Productivity Improvement Plan of SOUTHERN, the number of units granted to these named executive officers is based on the
weighted average of the base salary mid-points as of December 31 for each calendar year in the four-year computation period. No
awards are paid unless the participant remains employed by the company through the end of the performance period.
2 The threshold, target and maximum value of a unit is 50 percent, 100 percent and 200 percent, respectively. These
percentages can vary based on SOUTHERN's return on common equity and total shareholder return relative to selected groups of
electric and gas utilities. If certain minimum performance relative to the selected groups is not achieved, there will be no
payout; nor is there a payout if the current earnings of SOUTHERN are not sufficient to fund the dividend rate paid in the last
calendar year. The Plan provides that in the discretion of the committee, extraordinary income may be excluded for purposes of
calculating the amount available for the payment of awards. All awards are payable in cash at the end of the performance period.
</TABLE>
III-24
<PAGE>
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Pension Plan Table. The following table sets forth the estimated annual pension
benefits payable at normal retirement age under SOUTHERN's qualified Pension
Plan, as well as supplemental benefits, based on the stated compensation and
years of service with the SOUTHERN system for the named executives at ALABAMA,
GEORGIA, GULF and MISSISSIPPI and Mr. Holland at SAVANNAH. Compensation for
pension purposes is limited to the average of the highest three of the final 10
years' compensation -- base salary plus the excess of annual and long-term
incentive compensation over 25 percent of base salary (reported under column
titled "Salary", "Bonus", and "Long-Term Incentive Payouts" in the Summary
Compensation Tables on pages III-13 through III-18).
The amounts shown in the table were calculated according to the final
average pay formula and are based on a single life annuity without reduction for
joint and survivor annuities (although married employees are required to have
their pension benefits paid in one of various joint and survivor annuity forms,
unless the employee elects otherwise with the spouse's consent) or computation
of the Social Security offset which would apply in most cases. This offset
amounts to one-half of the estimated Social Security benefit (primary insurance
amount) in excess of $3,900 per year times the number of years of accredited
service, divided by the total possible years of accredited service to normal
retirement age.
<TABLE>
<CAPTION>
Years of Accredited Service
Remuneration 15 20 25 30 35 40
- ------------ -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000
300,000 76,500 102,000 127,500 153,000 178,500 204,000
500,000 127,500 170,000 212,500 255,000 297,500 340,000
700,000 178,500 238,000 297,500 357,000 416,500 476,000
900,000 229,500 306,000 382,500 459,000 535,500 612,000
1,100,000 280,500 374,000 467,500 561,000 654,500 748,000
1,300,000 331,500 442,000 552,500 663,000 773,500 884,000
</TABLE>
As of December 31, 1999, the applicable compensation levels and years
of accredited service are presented in the following tables:
ALABAMA
Compensation Accredited
Name Level Years of Service
Elmer B. Harris $878,724 40
Banks H. Farris 429,312 40
William B. Hutchins, III 348,304 33
Michael D. Garrett 309,688 31
Jerry L. Stewart 257,848 26
III-25
<PAGE>
GEORGIA
Compensation Accredited
Name Level Years of Service
H. Allen Franklin $967,132 28
David M. Ratcliffe 583,968 28
Robert H. Haubein, Jr. 344,444 32
Gene R. Hodges 356,788 35
Thomas A. Fanning 329,728 18
William C. Archer 323,200 28
GULF
Compensation Accredited
Name Level Years of Service
Travis J. Bowden1 $505,372 33
Arlan E. Scarbrough 257,876 36
John E. Hodges, Jr. 257,548 33
Francis M. Fisher, Jr. 240,780 28
Robert G. Moore 210,200 26
MISSISSIPPI
Compensation Accredited
Name Level Years of Service
Dwight H. Evans $448,124 28
H. E. Blakeslee 288,660 34
Andrew J. Dearman, III 229,043 24
Don E. Mason 281,516 33
Michael W. Southern 244,592 24
Mark S. Lynch 262,193 10
SAVANNAH
Compensation Accredited
Name Level Years of Service
G. Edison Holland, Jr.2 $336,428 16
W. Miles Greer 157,144 15
Kirby R. Willis 149,479 25
Lewis A. Jeffers 124,064 20
1 The number of accredited years of service includes 10 years credited to
Mr. Bowden pursuant to a supplemental pension agreement.
2 The number of accredited years of service includes 9 years and 3 months
credited to Mr. Holland pursuant to a supplemental pension agreement.
III-26
<PAGE>
Effective January 1, 1998, SAVANNAH merged its pension plan into the
SOUTHERN Pension Plan. SAVANNAH also has in effect a supplemental executive
retirement plan for certain of its executive employees. The plan is designed to
provide participants with a supplemental retirement benefit, which, in
conjunction with social security and benefits under SOUTHERN's qualified pension
plan, will equal 70 percent of the highest three of the final 10 years' average
annual earnings (excluding incentive compensation).
The following table sets forth the estimated combined annual pension
benefits under SOUTHERN's pension and SAVANNAH's supplemental executive
retirement plans in effect during 1999 which are payable to SAVANNAH's named
executives, except Mr. Holland who participates in the plans described on page
III-25, upon retirement at the normal retirement age after designated periods of
accredited service and at a specified compensation level.
Years of Accredited Service
Remuneration 15 25 35
- -------------------------- -- -- --
$ 90,000 $ 63,000 $ 63,000 $ 63,000
120,000 84,000 84,000 84,000
150,000 105,000 105,000 105,000
180,000 126,000 126,000 126,000
210,000 147,000 147,000 147,000
260,000 182,000 182,000 182,000
280,000 196,000 196,000 196,000
300,000 210,000 210,000 210,000
320,000 224,000 224,000 224,000
340,000 238,000 238,000 238,000
III-27
<PAGE>
Compensation of Directors.
Standard Arrangements. The following table presents compensation paid
to the directors, during 1999 for service as a member of the board of directors
and any board committee(s), except that employee directors received no fees or
compensation for service as a member of the board of directors or any board
committee. All or a portion of these fees payable in cash may be deferred under
the Deferred Compensation Plan until membership on the board is terminated or
may be payable in SOUTHERN common stock at the election of the director.
<TABLE>
<CAPTION>
ALABAMA GEORGIA GULF MISSISSIPPI SAVANNAH
<S> <C> <C> <C> <C> <C>
Cash Retainer Fee $17,000 $20,000 $10,000 $10,000 $10,000
Stock Retainer Fee $3,000 $3,000 $2,000 $2,000 $2,000
Meeting Fee 900 900 750 750 750
Committees:
Audit 900 900 750 750 750
Compensation 900 900 750 750 750
Executive 900 900 - - 750
Finance - 900 - 750 -
Nominating 900 - - - -
Nuclear Safety 900 - - - -
Nuclear Operations
Overview - 1,800 - - -
</TABLE>
Effective January 1, 1997, the Outside Directors Pension Plan (the
"Plan") was terminated and benefits payable under the Plan were frozen.
Non-employee directors serving as of January 1, 1997, were given a one-time
election to receive a Plan benefit buy-out equal to the actuarial present value
of future Plan benefits or receive benefits under the terms of the Plan at the
annual retainer rate in effect on December 31, 1996. Directors who elected to
receive the benefit buy-out were required to defer receipt of that amount under
the Deferred Compensation Plan until termination from board membership.
Directors who elected to continue to participate under the terms of the Plan are
entitled to benefits upon retirement from the board on the retirement date
designated in the respective companies' by-laws. The annual benefit payable is
based upon length of service and varies from 75 percent of the annual retainer
in effect on December 31, 1996, if the participant has at least 60 months of
service on the board of one or more system companies, to 100 percent if the
participant has at least 120 months of such service. Payments will continue for
the greater of the lifetime of the participant or 10 years.
Other Arrangements. No director received other compensation for
services as a director during the year ending December 31, 1999 in addition to
or in lieu of that specified by the standard arrangements specified above.
III-28
<PAGE>
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
Each registrant has adopted SOUTHERN's Change in Control Plan which is
applicable to certain of its officers, and has entered into individual change in
control agreements with its most highly compensated executive officers. If an
executive is involuntarily terminated, other than for cause, within two years
following a change in control of SOUTHERN the agreements provide for:
o lump sum payment of two or three times annual compensation, o up to five
years' coverage under group health and life insurance plans, o immediate vesting
of all stock options and stock appreciation rights previously granted, o payment
of any accrued long-term and short-term bonuses and dividend equivalents, and o
payment of any excise tax liability incurred as a result of payments made under
the agreement.
A change in control is defined under the agreements as:
o acquisition of at least 20 percent of the SOUTHERN's stock,
o a change in the majority of the members of the SOUTHERN's board of
directors,
o a merger or other business combination that results in SOUTHERN's
shareholders immediately before the merger owning less than 65 percent of
the voting power after the merger, or
o a sale of substantially all the assets of SOUTHERN.
If a change in control affects only a subsidiary of SOUTHERN, these
payments would only be made to executives of the affected subsidiary who are
involuntarily terminated as a result of that change in control.
SOUTHERN also has amended its short- and long-term incentive plans to
provide for pro-rata payments at not less than target-level performance if a
change in control occurs and the plans are not continued or replaced with
comparable plans.
On February 28, 1998, SOUTHERN and GEORGIA entered into a Deferred
Compensation Agreement with Mr. Franklin. On the fifth anniversary of the
Agreement, if still employed by SOUTHERN or one of its subsidiaries, Mr.
Franklin will receive the cash value of the number of shares of common stock
that could have been purchased for $500,000 on February 28, 1998, and on which
dividends were reinvested throughout the five-year period. If certain
performance goals are met, Mr. Franklin also will receive the estimated income
tax expense on the compensation. Mr. Franklin may elect to defer receipt of the
award until termination of employment. GEORGIA assigned this agreement to SCS
effective July 8, 1999.
Report on Repricing of Options.
None.
Compensation Committee Interlocks and Insider Participation.
None.
III-29
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. SOUTHERN is the beneficial
owner of 100% of the outstanding common stock of registrants: ALABAMA, GEORGIA,
GULF, MISSISSIPPI and SAVANNAH.
- -------------------------------------------------------------------------------
Amount and
Name and Address Nature of Percent
of Beneficial Beneficial of
Title of Class Owner Ownership Class
- -------------------------------------------------------------------------------
Common Stock The Southern Company 100%
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Registrants:
ALABAMA 5,608,955
GEORGIA 7,761,500
GULF 992,717
MISSISSIPPI 1,121,000
SAVANNAH 10,844,635
Security Ownership of Management. The following table shows the number of shares
of SOUTHERN common stock and operating subsidiary preferred stock owned by the
directors, nominees and executive officers as of December 31, 1999. It is based
on information furnished by the directors, nominees and executive officers. The
shares owned by all directors, nominees and executive officers as a group
constitute less than one percent of the total number of shares of the respective
classes outstanding on December 31, 1999.
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
- ------------------ -------------- --------------------------
ALABAMA
Whit Armstrong SOUTHERN Common 17,972
David J. Cooper, Sr. SOUTHERN Common 1,191
H. Allen Franklin SOUTHERN Common 220,337
Elmer B. Harris SOUTHERN Common 260,741
R. Kent Henslee SOUTHERN Common 4,019
Carl E. Jones, Jr. SOUTHERN Common 12,249
Patricia M. King SOUTHERN Common 306
James K. Lowder SOUTHERN Common 6,241
III-30
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
- ------------------ -------------- --------------------------
Wallace D. Malone, Jr. SOUTHERN Common 627
Thomas C. Meredith SOUTHERN Common 416
Mayer Mitchell SOUTHERN Common 19
William V. Muse SOUTHERN Common 726
John T. Porter SOUTHERN Common 1,181
Robert D. Powers SOUTHERN Common 726
Andreas Renschler SOUTHERN Common 1,223
C. Dowd Ritter SOUTHERN Common 306
James H. Sanford SOUTHERN Common 658
John C. Webb, IV SOUTHERN Common 12,925
Banks H. Farris SOUTHERN Common 43,485
Michael D. Garrett SOUTHERN Common 18,216
William B. Hutchins, III SOUTHERN Common 59,771
C. Alan Martin SOUTHERN Common 5,320
Jerry L. Stewart SOUTHERN Common 24,221
The directors, nominees,
and executive officers
as a group SOUTHERN Common 692,874
GEORGIA
Daniel P. Amos SOUTHERN Common 297
Juanita P. Baranco SOUTHERN Common 297
W. A. Fickling, Jr. SOUTHERN Common 1,245
III-31
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
- ------------------ -------------- --------------------------
H. Allen Franklin SOUTHERN Common 220,337
L. G. Hardman III SOUTHERN Common 17,422
James R. Lientz, Jr. SOUTHERN Common 1,271
Zell Miller SOUTHERN Common 373
G. Joseph Prendergast SOUTHERN Common 1,331
Herman J. Russell SOUTHERN Common 2,962
W. J. Vereen SOUTHERN Common 5,628
Carl Ware SOUTHERN Common 800
William C. Archer, III SOUTHERN Common 27,794
Thomas A. Fanning SOUTHERN Common 23,726
Robert H. Haubein, Jr. SOUTHERN Common 40,381
Gene R. Hodges SOUTHERN Common 56,540
David M. Ratcliffe SOUTHERN Common 95,158
The directors, nominees
and executive officers
as a group SOUTHERN Common 629,177
GULF
Travis J. Bowden SOUTHERN Common 29,368
Fred C. Donovan, Sr. SOUTHERN Common 526
H. Allen Franklin SOUTHERN Common 220,337
W. Deck Hull, Jr. SOUTHERN Common 3,164
Joseph K. Tannehill SOUTHERN Common 4,541
III-32
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
- ------------------ -------------- --------------------------
Barbara H. Thames SOUTHERN Common 247
Francis M. Fisher, Jr. SOUTHERN Common 14,873
John E. Hodges, Jr. SOUTHERN Common 48,551
Robert G. Moore SOUTHERN Common 24,517
Arlan E. Scarbrough SOUTHERN Common 26,396
The directors, nominees
and executive officers
as a group SOUTHERN Common 372,520
MISSISSIPPI
Edwin E. Downer SOUTHERN Common 5,289
Dwight H. Evans SOUTHERN Common 79,309
Robert S. Gaddis SOUTHERN Common 2,143
Linda T. Howard SOUTHERN Common 66
Malcolm Portera SOUTHERN Common 59
George A. Schloegel SOUTHERN Common 589
Philip J. Terrell SOUTHERN Common 945
N. Eugene Warr SOUTHERN Common 1,081
H. E. Blakeslee SOUTHERN Common 36,328
Mark S. Lynch SOUTHERN Common 70
Don E. Mason SOUTHERN Common 45,019
Michael W. Southern SOUTHERN Common 19,730
The directors, nominees
and executive officers
as a group SOUTHERN Common 190,628
III-33
<PAGE>
Name of Directors,
Nominees and Number of Shares
Executive Officers Title of Class Beneficially Owned (1) (2)
- ------------------ -------------- --------------------------
SAVANNAH
Gus H. Bell, III SOUTHERN Common 38
Archie H. Davis SOUTHERN Common 275
Walter D. Gnann SOUTHERN Common 1,757
G. Edison Holland, Jr. SOUTHERN Common 43,065
Robert B. Miller, III SOUTHERN Common 536
Arnold M. Tenenbaum SOUTHERN Common 890
Lewis A. Jeffers SOUTHERN Common 7,923
W. Miles Greer SOUTHERN Common 15,900
Kirby R. Willis SOUTHERN Common 17,992
The directors, nominees
and executive officers
as a group SOUTHERN Common 88,377
Changes in control. SOUTHERN and the operating affiliates know of no
arrangements which may at a subsequent date result in any change in control.
_______________________
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security and/or investment
power with respect to a security (i.e., the power to dispose of, or to
direct the disposition of, a security).
(2) The shares shown include shares of SOUTHERN common stock of which certain
directors and executive officers have the right to acquire beneficial
ownership within 60 days pursuant to the Executive Stock Plan, as follows:
Mr. Blakeslee, 31,701 shares; Mr. Evans, 55,961 shares; Mr. Farris, 38,372
shares; Mr. Franklin, 191,114 shares; Mr. Greer, 12,505 shares; Mr. Harris,
219,394 shares; Mr. Haubein, 37,975 shares; Mr. G. R. Hodges, 38,577
shares; Mr. J. E. Hodges, 24,796 shares; Mr. Holland, 40,342 shares; Mr.
Hutchins, 43,701 shares; Mr. Mason, 20,994 shares; Mr. Southern, 15,139
shares, and Mr. Willis, 11,770 shares. Also included are shares of
SOUTHERN common stock held by the spouses of the following directors: Mr.
Gaddis, 1,200 shares; Mr. Hardman, 100 shares; and Mr. Harris, 310 shares.
Also included are shares of common stock held in the Southern Company
Deferred Stock Trust of which certain directors have the power to direct
the voting, as follows: Mr. Hardman, 7,461 shares.
III-34
<PAGE>
Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
ALABAMA
Transactions with management and others.
Mr. Whit Armstrong is President, Chairman and Chief Executive Officer of
The Citizens Bank, Enterprise, Alabama; Mr. Carl E. Jones, Jr. is President and
Chief Executive Officer of Regions Financial Corporation, Birmingham, Alabama;
Mr. Wallace D. Malone is Chairman and Chief Executive Officer of SouthTrust
Corporation, Birmingham, Alabama. Mr. C. Dowd Ritter is Chairman, President
and Chief Executive Officer of AmSouth Bancorporation and AmSouth Bank,
Birmingham, Alabama. During 1999, these banks furnished a number of regular
banking services in the ordinary course of business to ALABAMA. ALABAMA intends
to maintain normal banking relations with all the aforesaid banks in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GEORGIA
Transactions with management and others.
Mr. L. G. Hardman III is Chairman of the Board of The First National Bank
of Commerce, Georgia; Mr. James R. Lientz, Jr. is President of Bank of America
Mid-South Banking Group, Atlanta, Georgia; Mr. G. Joseph Prendergast is
President and Chief Operating Officer, Wachovia Corporation and Wachovia Bank,
N.A., Winston Salem, North Carolina, and Mr. Herman J. Russell is Chairman of
the Board of Citizens Trust Bank, Atlanta, Georgia. During 1999, these banks
furnished a number of regular banking services in the ordinary course of
business to GEORGIA. GEORGIA intends to maintain normal banking relations with
all the aforesaid banks in the future.
In 1999, GEORGIA leased a building from Riverside Manufacturing Co. for
$86,925. Also, Riverside Manufacturing sold to GEORGIA fire retardant uniforms
for $134,464. Mr. William J. Vereen is Chief Executive Officer, President,
Treasurer and Director of Riverside Manufacturing Co.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
GULF
Transactions with management and others.
In 1999, GULF paid to Merrick Industries, Inc. and Merrick Environmental
Technology, Inc., $560,712 for coal handling equipment and air pollution control
equipment. Mr. Tannehill is Chairman and Chief Executive Officer of both
companies.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
MISSISSIPPI
Transactions with management and others.
Mr. Robert S. Gaddis is Chairman of the Advisory Board of Trustmark
National Bank, Laurel, Mississippi; Mr. George A. Schloegel is President of
Hancock Bank, Gulfport, Mississippi. During 1999, these banks furnished a
number of regular banking services in the ordinary course of business to
MISSISSIPPI. MISSISSIPPI intends to maintain normal banking relations with the
aforesaid banks in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-35
<PAGE>
SAVANNAH
Transactions with management and others.
Mr. Archie Davis is President of The Savannah Bank, N.A., Savannah,
Georgia; During 1999, this bank furnished a number of regular banking services
in the ordinary course of business to SAVANNAH. SAVANNAH intends to maintain
normal banking relations with the aforesaid bank in the future.
Certain business relationships.
None.
Indebtedness of management.
None.
Transactions with promoters.
None.
III-36
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report on this Form
10-K:
(1) Financial Statements:
Reports of Independent Public Accountants on the financial statements
for SOUTHERN and Subsidiary Companies, ALABAMA, GEORGIA, GULF,
MISSISSIPPI and SAVANNAH are listed under Item 8 herein.
The financial statements filed as a part of this report for SOUTHERN
and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH are listed under Item 8 herein.
(2) Financial Statement Schedules:
Reports of Independent Public Accountants as to Schedules for SOUTHERN
and Subsidiary Companies, ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SAVANNAH are included herein on pages IV-11 through IV-16.
Financial Statement Schedules for SOUTHERN and Subsidiary Companies,
ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH are listed in the
Index to the Financial Statement Schedules at page S-1.
(3) Exhibits:
Exhibits for SOUTHERN, ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH
are listed in the Exhibit Index at page E-1.
(b) Reports on Form 8-K during the fourth quarter of 1999 were as follows:
None.
IV-1
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
A. W. Dahlberg
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
W. L. Westbrook
Financial Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
Directors:
Dorrit J. Bern Elmer B. Harris
Thomas F. Chapman Donald M. James
A. D. Correll David J. Lesar
H. Allen Franklin Zack T. Pate
L. G. Hardman III Gerald J. St. Pe'
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
ALABAMA POWER COMPANY
By: Elmer B. Harris, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Elmer B. Harris
President, Chief Executive Officer and Director
(Principal Executive Officer)
William B. Hutchins, III
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
Art P. Beattie
Vice President, and Comptroller
(Principal Accounting Officer)
Directors:
Whit Armstrong Thomas C. Meredith
David J. Cooper Mayer Mitchell
H. Allen Franklin William V. Muse
R. Kent Henslee John T. Porter
Carl E. Jones, Jr. Robert D. Powers
Patricia M. King C. Dowd Ritter
James K. Lowder James H. Sanford
Wallace D. Malone, Jr. John Cox Webb, IV
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
IV-2
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
David M. Ratcliffe
President, Chief Executive Officer and Director
(Principal Executive Officer)
Thomas A. Fanning
Executive Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
Cliff S. Thrasher
Vice President, Comptroller and Chief Accounting Officer
(Principal Accounting Officer)
Directors:
Daniel P. Amos Zell Miller
Juanita P. Baranco G. Joseph Prendergast
William A. Fickling, Jr. Herman J. Russell
H. Allen Franklin William Jerry Vereen
L. G. Hardman III Carl Ware
James R. Lientz, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. The signature of the
undersigned company shall be deemed to relate only to matters having reference
to such company and any subsidiaries thereof.
GULF POWER COMPANY
By: Travis J. Bowden, President and
Chief Executive Officer
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Travis J. Bowden
President, Chief Executive Officer and Director
(Principal Executive Officer)
Arlan E. Scarbrough
Vice President - Finance
(Principal Financial and Accounting Officer)
Directors:
Fred C. Donovan, Sr. Joseph K. Tannehill
H. Allen Franklin Barbara H. Thames
W. Deck Hull, Jr.
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
IV-3
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
Dwight H. Evans
President, Chief Executive Officer and Director
(Principal Executive Officer)
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Edwin E. Downer Malcolm Portera
Robert S. Gaddis George A. Schloegel
Linda T. Howard Philip J. Terrell
Aubrey K. Lucas Gene Warr
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of Section 13 or 15(d) 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
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. The signature of each of the
undersigned shall be deemed to relate only to matters having reference to the
above-named company and any subsidiaries thereof.
G. Edison Holland, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
Kirby R. Willis
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Directors:
Gus H. Bell, III Robert B. Miller, III
Archie H. Davis Arnold M. Tenenbaum
Walter D. Gnann
By: Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: March 24, 2000
IV-4
<PAGE>
Arthur Andersen LLP
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of The
Southern Company and its subsidiaries and the related financial statement
schedule, included in this Form 10-K, into The Southern Company's previously
filed Registration Statement File Nos. 2-78617, 33-3546, 33-30171, 33-51433,
33-54415, 33-57951, 33-58371, 33-60427, 333-09077, 333-44127, 333-44261,
333-64871 and 333-31808.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 2000
IV-5
<PAGE>
Arthur Andersen LLP
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of Alabama
Power Company and the related financial statement schedule, included in this
Form 10-K, into Alabama Power Company's previously filed Registration Statement
File No. 333-67453.
/s/ Arthur Andersen LLP
Birmingham, Alabama
March 22, 2000
IV-6
<PAGE>
Arthur Andersen LLP
Exhibit 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of Georgia
Power Company and the related financial statement schedule, included in this
Form 10-K, into Georgia Power Company's previously filed Registration Statement
File Nos. 333-43895 and 333-75193.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 2000
IV-7
<PAGE>
Arthur Andersen LLP
Exhibit 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of Gulf Power
Company and the related financial statement schedule, included in this Form
10-K, into Gulf Power Company's previously filed Registration Statement File
Nos. 33-50165 and 333-42033.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 2000
IV-8
<PAGE>
Arthur Andersen LLP
Exhibit 23(e)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of
Mississippi Power Company and the related financial statement schedule, included
in this Form 10-K, into Mississippi Power Company's previously filed
Registration Statement File No. 333-45069.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 2000
IV-9
<PAGE>
Arthur Andersen LLP
Exhibit 23(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 16, 2000 on the financial statements of Savannah
Electric and Power Company and the related financial statement schedule,
included in this Form 10-K, into Savannah Electric and Power Company's
previously filed Registration Statement File No. 333-46171.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 22, 2000
IV-10
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To The Southern Company:
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of The Southern Company
and its subsidiaries included in this Form 10-K, and have issued our report
thereon dated February 16, 2000. Our audits were made for the purpose of forming
an opinion on those statements taken as a whole. The schedule listed under Item
14(a)(2) herein as it relates to The Southern Company and its subsidiaries (page
S-2) is the responsibility of The Southern Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
IV-11
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Alabama Power Company:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Alabama Power Company included in
this Form 10-K, and have issued our report thereon dated February 16, 2000. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed under Item 14(a)(2) herein as it relates to
Alabama Power Company (page S-3) is the responsibility of Alabama Power
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Birmingham, Alabama
February 16, 2000
IV-12
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Georgia Power Company:
We have audited in accordance with auditing standards generally accepted
in the United States, the financial statements of Georgia Power Company included
in this Form 10-K, and have issued our report thereon dated February 16, 2000.
Our audits were made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed under Item 14(a)(2) herein as it relates
to Georgia Power Company (page S-4) is the responsibility of Georgia Power
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
IV-13
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Gulf Power Company:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Gulf Power Company included in
this Form 10-K, and have issued our report thereon dated February 16, 2000. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed under Item 14(a)(2) herein as it relates to Gulf
Power Company (page S-5) is the responsibility of Gulf Power Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
IV-14
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Mississippi Power Company:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Mississippi Power Company
included in this Form 10-K, and have issued our report thereon dated February
16, 2000. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed under Item 14(a)(2) herein as
it relates to Mississippi Power Company (page S-6) is the responsibility of
Mississippi Power Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
IV-15
<PAGE>
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To Savannah Electric and Power Company:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of Savannah Electric and Power
Company included in this Form 10-K, and have issued our report thereon dated
February 16, 2000. Our audits were made for the purpose of forming an opinion on
those statements taken as a whole. The schedule listed under Item 14(a)(2)
herein as it relates to Savannah Electric and Power Company (page S-7) is the
responsibility of Savannah Electric and Power Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 2000
IV-16
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Schedule Page
<S> <C>
II Valuation and Qualifying Accounts and Reserves
1999, 1998 and 1997
The Southern Company and Subsidiary Companies.......................................................... S-2
Alabama Power Company.................................................................................. S-3
Georgia Power Company.................................................................................. S-4
Gulf Power Company..................................................................................... S-5
Mississippi Power Company.............................................................................. S-6
Savannah Electric and Power Company.................................................................... S-7
Schedules I through V not listed above are omitted as not applicable or not
required. Columns omitted from schedules filed have been omitted because the
information is not applicable or not required.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
----------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------- ------------------------ -------------- ------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $112,511 $55,042 $(11,805) $96,838 (1) $ 58,910
1998.......................... 77,056 64,789 6,325 35,659 (1) 112,511
1997.......................... 31,587 35,930 36,290 (2) 26,751 (1) 77,056
- -------------------
</TABLE>
Notes:
(1) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off. (2) Includes the addition of a
Purchased Reserve in the amount of $37,000 related to the acquisition of
CEPA.
S-2
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------ ------------------------------------- ------------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $1,855 $13,995 $- $11,733 (Note) $4,117
1998.......................... 2,272 7,702 - 8,119 (Note) 1,855
1997.......................... 1,171 8,580 - 7,479 (Note) 2,272
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
---------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
----------------------------------- ----------------------- -------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $5,500 $14,406 $- $12,906 (Note) $7,000
1998.......................... 3,000 17,856 - 15,356 (Note) 5,500
1997.......................... 4,000 7,888 - 8,888 (Note) 3,000
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------ ------------------------ --------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $996 $2,230 $- $2,200 (Note) $1,026
1998.......................... 796 2,288 - 2,088 (Note) 996
1997.......................... 789 1,350 - 1,343 (Note) 796
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
--------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
------------------------------------ ------------------------- -------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $621 $1,964 $ - $1,888 (Note) $697
1998.......................... 698 1,510 31 1,618 (Note) 621
1997.......................... 839 1,128 56 1,325 (Note) 698
- -------------------
Note: Represents write-off of accounts considered to be uncollectible, less recoveries of amounts previously written off.
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Stated in Thousands of Dollars)
Additions
-------------------------------------
Balance at Beginning Charged to Charged to Other Balance at End
Description of Period Income Accounts Deductions of Period
-------------------------------------- ---------------------- ------------ ------------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
Provision for uncollectible
accounts
1999.......................... $284 $594 $- $641 (Note) $237
1998.......................... 354 417 - 487 (Note) 284
1997.......................... 632 192 - 470 (Note) 354
- -------------------
Note: Represents write-off of accounts receivable considered to be uncollectible, less recoveries of amounts previously written
off.
</TABLE>
S-7
<PAGE>
EXHIBIT INDEX
The following exhibits indicated by an asterisk preceding the exhibit number
are filed herewith. The balance of the exhibits have heretofore been filed with
the SEC, respectively, as the exhibits and in the file numbers indicated and are
incorporated herein by reference. The exhibits marked with a pound sign are
management contracts or compensatory plans or arrangements required to be filed
herewith and required to be identified as such by Item 14 of Form 10-K.
Reference is made to a duplicate list of exhibits being filed as a part of this
Form 10-K, which list, prepared in accordance with Item 601 of Regulation S-K of
the SEC, immediately precedes the exhibits being physically filed with this Form
10-K.
(1) Underwriting Agreements
GEORGIA
(c) - Distribution Agreement dated November 29, 1995
between GEORGIA and Lehman Brothers Inc.; Donaldson,
Lufkin & Jenrette Securities Corporation; J. P. Morgan
Securities Inc.; Salomon Brothers Inc and Smith Barney
Inc. relating to $300,000,000 First Mortgage Bonds
Secured Medium-Term Notes. (Designated in GEORGIA's
Form 10-K for the year ended December 31, 1995, as
Exhibit 1(c).)
(3) Articles of Incorporation and By-Laws
SOUTHERN
(a) 1 - Composite Certificate of Incorporation of SOUTHERN,
reflecting all amendments thereto through January 5,
1994. (Designated in Registration No. 33-3546 as
Exhibit 4(a), in Certificate of Notification, File No.
70-7341, as Exhibit A and in Certificate of
Notification, File No. 70-8181, as Exhibit A.)
(a) 2 - By-laws of SOUTHERN as amended effective October 21,
1991, and as presently in effect. (Designated in Form
U-1, File No. 70-8181, as Exhibit A-2.)
ALABAMA
(b) 1 - Charter of ALABAMA and amendments thereto through
August 10, 1998. (Designated in Registration Nos.
2-59634 as Exhibit 2(b), 2-60209 as Exhibit 2(c),
2-60484 as Exhibit 2(b), 2-70838 as Exhibit 4(a)-2,
2-85987 as Exhibit 4(a)-2, 33-25539 as Exhibit 4(a)-2,
33-43917 as Exhibit 4(a)-2, in Form 8-K dated
February 5, 1992, File No. 1-3164, as Exhibit 4(b)-3,
in Form 8-K dated July 8, 1992, File No. 1-3164, as
Exhibit 4(b)-3, in Form 8-K dated October 27, 1993,
File No. 1-3164, as Exhibits 4(a) and 4(b), in Form
8-K dated November 16, 1993, File No. 1-3164, as
Exhibit 4(a), in Certificate of Notification, File
No. 70-8191, as Exhibit A, in ALABAMA's Form 10-K for
the year ended December 31, 1997, File No. 1-3164, as
Exhibit 3(b)2 and Form 8-K dated August 10, 1998,
File No. 1-3164, as Exhibit 4.4.)
E-1
<PAGE>
(b) 2 - By-laws of ALABAMA as amended effective July 23, 1993,
and as presently in effect. (Designated in Form U-1,
File No. 70-8191, as Exhibit A-2.)
GEORGIA
(c) 1 - Charter of GEORGIA and amendments thereto through
January 26, 1998. (Designated in Registration Nos.
2-63392 as Exhibit 2(a)-2, 2-78913 as Exhibits
4(a)-(2) and 4(a)-(3), 2-93039 as Exhibit 4(a)-(2),
2-96810 as Exhibit 4(a)-2, 33-141 as Exhibit 4(a)-(2),
33-1359 as Exhibit 4(a)(2), 33-5405 as Exhibit 4(b)(2),
33-14367 as Exhibits 4(b)-(2) and 4(b)-(3), 33-22504
as Exhibits 4(b)-(2), 4(b)-(3) and 4(b)-(4), in
GEORGIA's Form 10-K for the year ended December 31,
1991, File No. 1-6468, as Exhibits 4(a)(2) and 4(a)(3),
in Registration No. 33-48895 as Exhibits 4(b)-(2) and
4(b)-(3), in Form 8-K dated December 10, 1992,
File No. 1-6468 as Exhibit 4(b), in Form 8-K dated
June 17, 1993, File No. 1-6468, as Exhibit 4(b), in
Form 8-K dated October 20, 1993, File No. 1-6468, as
Exhibit 4(b) and in GEORGIA's Form 10-K for the year
ended December 31, 1997, File No. 1-6468, as
Exhibit 3(c)2.)
(c) 2 - By-laws of GEORGIA as amended effective July 18,
1990, and as presently in effect. (Designated in
GEORGIA's Form 10-K for the year ended December 31,
1990, File No. 1-6468, as Exhibit 3.)
GULF
(d) 1 - Restated Articles of Incorporation of GULF and
amendments thereto through January 28, 1998.
(Designated in Registration No. 33-43739 as Exhibit
4(b)-1, in Form 8-K dated January 15, 1992, File No.
0-2429, as Exhibit 1(b), in Form 8-K dated August 18,
1992, File No. 0-2429, as Exhibit 4(b)-2, in Form 8-K
dated September 22, 1993, File No. 0-2429, as
Exhibit 4, in Form 8-K dated November 3, 1993, File
No. 0-2429, as Exhibit 4 and in GULF's Form 10-K for
the year ended December 31, 1997, File No. 0-2429, as
Exhibit 3(d)2.)
(d) 2 - By-laws of GULF as amended effective July 26, 1996,
and as presently in effect. (Designated in Form U-1,
File No. 70-8949, as Exhibit A-2(c).)
MISSISSIPPI
(e) 1 - Articles of Incorporation of MISSISSIPPI, articles of
merger of Mississippi Power Company (a Maine
corporation) into MISSISSIPPI and articles of
amendment to the articles of incorporation of
MISSISSIPPI through December 31, 1997. (Designated in
Registration No. 2-71540 as Exhibit 4(a)-1, in Form
U5S for 1987, File No. 30-222-2, as Exhibit B-10, in
Registration No. 33-49320 as Exhibit 4(b)-(1), in Form
8-K dated August 5, 1992, File No. 0-6849, as
Exhibits 4(b)-2 and 4(b)-3, in Form 8-K dated August
4, 1993, File No. 0-6849, as Exhibit 4(b)-3, in Form
8-K dated August 18, 1993, File No. 0-6849, as
Exhibit 4(b)-3 and in MISSISSIPPI's Form 10-K for the
year ended December 31, 1997, File No. 0-6849, as
Exhibit 3(e)2.)
E-2
<PAGE>
(e) 2 - By-laws of MISSISSIPPI as amended effective April 2,
1996, and as presently in effect. (Designated in Form
U5S for 1995, File No. 30-222-2, as Exhibit B-10.)
SAVANNAH
(f) 1 - Charter of SAVANNAH and amendments thereto through
December 2, 1998. (Designated in Registration Nos.
33-25183 as Exhibit 4(b)-(1), 33-45757 as Exhibit 4
(b)-(2), in Form 8-K dated November 9, 1993, File No.
1-5072, as Exhibit 4(b) and in SAVANNAH's Form 10-K
for the year ended December 31, 1998, as
Exhibit 3(f)2.)
(f) 2 - By-laws of SAVANNAH as amended effective February 16,
1994, and as presently in effect. (Designated in
SAVANNAH's Form 10-K for the year ended December 31,
1993, as Exhibit 3(f)2.)
(4) Instruments Describing Rights of Security Holders, Including Indentures
SOUTHERN
(a) 1 - Subordinated Note Indenture dated as of February 1,
1997, among SOUTHERN, Southern Company Capital
Funding, Inc. and Bankers Trust Company, as Trustee,
and indentures supplemental thereto dated as of
February 4, 1997. (Designated in Registration Nos.
333-28349 as Exhibits 4.1 and 4.2 and 333-28355 as
Exhibit 4.2.)
(a) 2 - Subordinated Note Indenture dated as of June 1, 1997,
among SOUTHERN, Southern Company Capital Funding, Inc.
and Bankers Trust Company, as Trustee, and indentures
supplemental thereto through that dated as of December
23, 1998. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1997, File No. 1-3526, as
Exhibit (4)(a)2, in Form 8-K dated June 18, 1998, File
No. 1-3526, as Exhibit 4.2 and in Form 8-K dated
December 18, 1998, File No. 1-3526, as Exhibit 4.4.)
(a) 3 - Amended and Restated Trust Agreement of Southern
Company Capital Trust I dated as of February 1, 1997.
(Designated in Registration No. 333-28349 as
Exhibit 4.6)
(a) 4 - Amended and Restated Trust Agreement of Southern
Company Capital Trust II dated as of February 1, 1997.
(Designated in Registration No. 333-28355 as
Exhibit 4.6)
(a) 5 - Amended and Restated Trust Agreement of Southern
Company Capital Trust III dated as of June 1, 1997.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1997, File No. 1-3526, as Exhibit
(4)(a)5.)
(a) 6 - Amended and Restated Trust Agreement of Southern
Company Capital Trust IV dated as of June 1, 1998.
(Designated in Form 8-K dated June 18, 1998, File No.
1-3526, as Exhibit 4.5.)
E-3
<PAGE>
(a) 7 - Amended and Restated Trust Agreement of Southern
Company Capital Trust V dated as of December 1, 1998.
(Designated in Form 8-K dated December 18, 1998, File
No. 1-3526, as Exhibit 4.7A.)
(a) 8 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust I dated as of
February 1, 1997. (Designated in Registration No.
333-28349 as Exhibit 4.10)
(a) 9 - Capital Securities Guarantee Agreement relating to
Southern Company Capital Trust II dated as of
February 1, 1997. (Designated in Registration No.
333-28355 as Exhibit 4.10)
(a) 10 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust III dated as of June 1,
1997. (Designated in SOUTHERN's Form 10-K for the
year ended December 31, 1997, File No. 1-3526, as
Exhibit (4)(a)8.)
(a) 11 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust IV dated as of June 1,
1998. (Designated in Form 8-K dated June 18, 1998,
File No. 1-3626, as Exhibit 4.8.)
(a) 12 - Preferred Securities Guarantee Agreement relating to
Southern Company Capital Trust V dated as of
December 1, 1998. (Designated in Form 8-K dated
December 18, 1998, File No. 1-3526, as Exhibit 4.11A.)
ALABAMA
(b) 1 - Indenture dated as of January 1, 1942, between ALABAMA
and The Chase Manhattan Bank (formerly Chemical Bank),
as Trustee, and indentures supplemental thereto
through that dated as of December 1, 1994.
(Designated in Registration Nos. 2-59843 as Exhibit
2(a)-2, 2-60484 as Exhibits 2(a)-3 and 2(a)-4, 2-60716
as Exhibit 2(c), 2-67574 as Exhibit 2(c), 2-68687 as
Exhibit 2(c), 2-69599 as Exhibit 4(a)-2, 2-71364 as
Exhibit 4(a)-2, 2-73727 as Exhibit 4(a)-2, 33-5079 as
Exhibit 4(a)-2, 33-17083 as Exhibit 4(a)-2, 33-22090
as Exhibit 4(a)-2, in ALABAMA's Form 10-K for the year
ended December 31, 1990, File No. 1-3164, as
Exhibit 4(c), in Registration Nos. 33-43917 as
Exhibit 4(a)-2, 33-45492 as Exhibit 4(a)-2, 33-48885
as Exhibit 4(a)-2, 33-48917 as Exhibit 4(a)-2, in
Form 8-K dated January 20, 1993, File No. 1-3164, as
Exhibit 4(a)-3, in Form 8-K dated February 17, 1993,
File No. 1-3164, as Exhibit 4(a)-3, in Form 8-K dated
March 10, 1993, File No. 1-3164, as Exhibit 4(a)-3, in
Certificate of Notification, File No. 70-8069, as
Exhibits A and B, in Form 8-K dated June 24, 1993,
File No. 1-3164, as Exhibit 4, in Certificate of
Notification, File No. 70-8069, as Exhibit A, in
Form 8-K dated November 16, 1993, File No. 1-3164, as
Exhibit 4(b), in Certificate of Notification,
File No. 70-8069, as Exhibits A and B, in Certificate
of Notification, File No. 70-8069, as Exhibit A, in
Certificate of Notification, File No. 70-8069, as
Exhibit A and in Form 8-K dated November 30,
1994, File No. 1-3164, as Exhibit 4.)
(b) 2 - Subordinated Note Indenture dated as of January 1,
1996, between ALABAMA and The Chase Manhattan Bank
(formerly Chemical Bank), as Trustee, and indenture
supplemental thereto dated as of January 1, 1996.
(Designated in Certificate of Notification, File No.
70-8461, as Exhibits E and F.)
E-4
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<TABLE>
<CAPTION>
<S> <C> <C>
(b) 3 - Subordinated Note Indenture dated as of January 1, 1997, between ALABAMA and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through that dated as of February 25, 1999. (Designated in
Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibits 4.1 and 4.2 and in Form 8-K dated
February 18, 1999, File No. 3164, as Exhibit 4.2.)
(b) 4 - Senior Note Indenture dated as of December 1, 1997,
between ALABAMA and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through
that dated September 30, 1999. (Designated in Form 8-K
dated December 4, 1997, File No. 1-3164, as Exhibits
4.1 and 4.2, in Form 8-K dated February 20, 1998, File
No. 1-3164, as Exhibit 4.2, in Form 8-K dated April 17,
1998, File No. 1-3164, as Exhibit 4.2, in Form 8-K
dated August 11, 1998, File No. 1-3164, as Exhibit 4.2,
in Form 8-K dated September 8, 1998, File No. 1-3164,
as Exhibit 4.2, in Form 8-K dated September 16, 1998,
File No. 1-3164, as Exhibit 4.2, in Form 8-K dated
October 7, 1998, File No. 1-3164, as Exhibit 4.2, in
Form 8-K dated October 28, 1998, File No. 1-3164, as
Exhibit 4.2, in Form 8-K dated November 12, 1998, File
No. 1-3164, as Exhibit 4.2, in Form 8-K dated May 19,
1999, File No. 1-3164, as Exhibit 4.2, in Form 8-K
dated August 13, 1999, File No. 1-3164, as Exhibit 4.2
and in Form 8-K dated September 21, 1999, File No.
1-3164, as Exhibit 4.2.)
(b) 5 - Amended and Restated Trust Agreement of Alabama
Power Capital Trust I dated as of January 1, 1996.
(Designated in Certificate of Notification, File No.
70-8461, as Exhibit D.)
(b) 6 - Amended and Restated Trust Agreement of Alabama
Power Capital Trust II dated as of January 1, 1997.
(Designated in Form 8-K dated January 9, 1997, File No.
1-3164, as Exhibit 4.5.)
(b) 7 - Amended and Restated Trust Agreement of Alabama Power Capital Trust III dated as of February 1, 1999.
(Designated in Form 8-K dated February 18, 1999, File No. 1-3164, as Exhibit 4.5.)
(b) 8 - Guarantee Agreement relating to Alabama Power Capital Trust I dated as of January 1, 1996. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit G.)
(b) 9 - Guarantee Agreement relating to Alabama Power Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-3164, as Exhibit 4.8.)
(b) 10 - Guarantee Agreement relating to Alabama Power Capital Trust III dated as of February 1, 1999.
(Designated in Form 8-K dated February 18, 1999, File No. 1-3164, as Exhibit 4.8.)
GEORGIA
(c) 1 - Indenture dated as of March 1, 1941, between
GEORGIA and The Chase Manhattan Bank (formerly Chemical
Bank), as Trustee, and indentures supplemental thereto
dated as of March 1, 1941, March 3, 1941 (3
indentures),
E-5
<PAGE>
March 6, 1941 (139 indentures), March 1, 1946 (88
indentures) and December 1, 1947, through October 15,
1995. (Designated in Registration Nos. 2-4663 as
Exhibits B-3 and B-3(a), 2-7299 as Exhibit 7(a)-2,
2-61116 as Exhibit 2(a)-3 and 2(a)-4, 2-62488 as
Exhibit 2(a)-3, 2-63393 as Exhibit 2(a)-4, 2-63705 as
Exhibit 2(a)-3, 2-68973 as Exhibit 2(a)-3, 2-70679 as
Exhibit 4(a)-(2), 2-72324 as Exhibit 4(a)-2, 2-73987 as
Exhibit 4(a)-(2), 2-77941 as Exhibits 4(a)-(2) and
4(a)-(3), 2-79336 as Exhibit 4(a)-(2), 2-81303 as
Exhibit 4(a)-(2), 2-90105 as Exhibit 4(a)-(2), 33-5405
as Exhibit 4(a)-(2), 33-14367 as Exhibits 4(a)-(2) and
4(a)-(3), 33-22504 as Exhibits 4(a)-(2), 4(a)-(3) and
4(a)-(4), 33-32420 as Exhibit 4(a)-(2), 33-35683 as
Exhibit 4(a)-(2), in GEORGIA's Form 10-K for the year
ended December 31, 1990, File No. 1-6468, as Exhibit
4(a)(3), in Form 10-K for the year ended December 31,
1991, File No. 1-6468, as Exhibit 4(a)(5), in
Registration No. 33-48895 as Exhibit 4(a)-(2), in Form
8-K dated August 26, 1992, File No. 1-6468, as Exhibit
4(a)-(3), in Form 8-K dated September 9, 1992, File No.
1-6468, as Exhibits 4(a)-(3) and 4(a)-(4), in Form 8-K
dated September 23, 1992, File No. 1-6468, as Exhibit
4(a)-(3), in Form 8-A dated October 12, 1992, as
Exhibit 2(b), in Form 8-K dated January 27, 1993, File
No. 1-6468, as Exhibit 4(a)-(3), in Registration No.
33-49661 as Exhibit 4(a)-(2), in Form 8-K dated July
26, 1993, File No. 1-6468, as Exhibit 4, in Certificate
of Notification, File No. 70-7832, as Exhibit M, in
Certificate of Notification, File No. 70-7832, as
Exhibit C, in Certificate of Notification, File No.
70-7832, as Exhibits K and L, in Certificate of
Notification, File No. 70-8443, as Exhibit C, in
Certificate of Notification, File No. 70-8443, as
Exhibit C, in Certificate of Notification, File No.
70-8443, as Exhibit E, in Certificate of Notification,
File No. 70-8443, as Exhibit E, in Certificate of
Notification, File No. 70-8443, as Exhibit E, in
GEORGIA's Form 10-K for the year ended December 31,
1994, File No. 1-6468, as Exhibits 4(c)2 and 4(c)3, in
Certificate of Notification, File No. 70-8443, as
Exhibit C, in Certificate of Notification, File No.
70-8443, as Exhibit C, in Form 8-K dated May 17, 1995,
File No. 1-6468, as Exhibit 4 and in GEORGIA's Form
10-K for the year ended December 31, 1995, File No.
1-6468, as Exhibits 4(c)2, 4(c)3, 4(c)4, 4(c)5 and
4(c)6.)
(c) 2 - Indenture dated as of December 1, 1994, between GEORGIA and Trust Company Bank, as Trustee and indentures
supplemental thereto through that dated as of December 15, 1994. (Designated in Certificate of
Notification, File No. 70-8461, as Exhibits E and F.)
(c) 3 - Subordinated Note Indenture dated as of August 1, 1996, between GEORGIA and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through January 1, 1997. (Designated in Form 8-K dated August
21, 1996, File No. 1-6468, as Exhibits 4.1 and 4.2 and in Form 8-K dated January 9, 1997, File No. 1-6468,
as Exhibit 4.2.)
(c) 4 - Subordinated Note Indenture dated as of June 1, 1997, between GEORGIA and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through that dated as of February 25, 1999. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibits D and E and Form 8-K dated February 17, 1999,
File No. 1-6468, as Exhibit 4.4.)
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(c) 5 - Senior Note Indenture dated as of January 1, 1998, between GEORGIA and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through that dated as of February 22, 2000. (Designated in
Form 8-K dated January 21, 1998, File No. 1-6468, as Exhibits 4.1 and 4.2, in Forms 8-K each dated
November 19, 1998, File No. 1-6468, as Exhibit 4.2, in Form 8-K dated March 3, 1999, File No. 1-6469 as
Exhibit 4.2 and in Form 8-K dated February 15, 2000, File No. 1-6469 as Exhibit 4.2.)
(c) 6 - Amended and Restated Trust Agreement of Georgia Power Capital Trust I dated as of August 1, 1996.
(Designated in Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit 4.5.)
(c) 7 - Amended and Restated Trust Agreement of Georgia Power Capital Trust II dated as of January 1, 1997.
(Designated in Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.5.)
(c) 8 - Amended and Restated Trust Agreement of Georgia Power Capital Trust III dated as of June 1, 1997.
(Designated in Certificate of Notification, File No. 70-8461, as Exhibit C.)
(c) 9 - Amended and Restated Trust Agreement of Georgia Power Capital Trust IV dated as of February 1, 1999.
(Designated in Form 8-K dated February 17, 1999, as Exhibit 4.7-A)
(c) 10 - Guarantee Agreement relating to Georgia Power Capital Trust I dated as of August 1, 1996. (Designated in
Form 8-K dated August 21, 1996, File No. 1-6468, as Exhibit 4.8.)
(c) 11 - Guarantee Agreement relating to Georgia Power Capital Trust II dated as of January 1, 1997. (Designated in
Form 8-K dated January 9, 1997, File No. 1-6468, as Exhibit 4.8.)
(c) 12 - Guarantee Agreement relating to Georgia Power Capital Trust III dated as of June 1, 1997. (Designated in
Certificate of Notification, File No. 70-8461, as Exhibit F.)
(c) 13 - Guarantee Agreement relating to Georgia Power Capital Trust IV dated as of February 1, 1999.(Designated in
Form 8-K dated February 17, 1999, as Exhibit 4.11-A.)
GULF
(d) 1 - Indenture dated as of September 1, 1941, between GULF and The Chase Manhattan Bank (formerly The Chase
Manhattan Bank (National Association)), as Trustee, and indentures supplemental thereto through
November 1, 1996.(Designated in Registration Nos. 2-4833 as Exhibit B-3, 2-62319 as Exhibit 2(a)-3,
2-63765 as Exhibit 2(a)-3, 2-66260 as Exhibit 2(a)-3, 33-2809 as Exhibit 4(a)-2, 33-43739 as Exhibit
4(a)-2, in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429, as Exhibit 4(b), in
Form 8-K dated August 18, 1992, File No. 0-2429, as Exhibit 4(a)-3, in Registration No. 33-50165 as
Exhibit 4(a)-2, in Form 8-K dated July 12, 1993, File No.0-2429, as Exhibit 4, in Certificate of
Notification, File No. 70-8229, as Exhibit A, in Certificate of Notification, File No. 70-8229, as
Exhibits E and F, in Form 8-K dated January 17, 1996, File No. 0-2429, as Exhibit 4, in Certificate of
Notification, File No. 70-8229, as Exhibit A, in Certificate of Notification, File No. 70-8229, as
Exhibit A and in Form 8-K dated November 6, 1996, File No. 0-2429, as Exhibit 4.)
E-7
(d) 2 - Subordinated Note Indenture dated as of January 1, 1997, between GULF and The Chase Manhattan Bank, as
Trustee, and indentures supplemental thereto through that dated as of January 1, 1998. (Designated in Form
8-K dated January 27, 1997, File No. 0-2429, as Exhibits 4.1 and 4.2, in Form 8-K dated July 28, 1997, File
No. 0-2429, as Exhibit 4.2 and in Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.2.)
(d) 3 - Senior Note Indenture dated as of January 1, 1998, between GULF and The Chase Manhattan Bank, as Trustee,
and indenture supplemental thereto dated as of August 24, 1999. (Designated in Form 8-K dated June 17,
1998, File No. 0-2429, as Exhibits 4.1 and 4.2 and in Form 8-K dated August 17, 1999, File No. 0-2429, as
Exhibit 4.2.)
(d) 4 - Amended and Restated Trust Agreement of Gulf Power Capital Trust I dated as of January 1, 1997.(Designated
in Form 8-K dated January 27, 1997, File No. 0-2429, as Exhibit 4.5.)
(d) 5 - Amended and Restated Trust Agreement of Gulf Power Capital Trust II dated as of January 1, 1998.(Designated
in Form 8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.5.)
(d) 6 - Guarantee Agreement relating to Gulf Power Capital Trust I dated as of January 1, 1997.(Designated in Form
8-K dated January 27, 1997, File No. 0-2429, as Exhibit 4.8.)
(d) 7 - Guarantee Agreement relating to Gulf Power Capital Trust II dated as of January 1, 1998.(Designated in Form
8-K dated January 13, 1998, File No. 0-2429, as Exhibit 4.8.)
MISSISSIPPI
(e) 1 - Indenture dated as of September 1, 1941, between MISSISSIPPI and Bankers Trust Company, as Successor
Trustee, and indentures supplemental thereto through December 1, 1995. (Designated in Registration Nos.
2-4834 as Exhibit B-3, 2-62965 as Exhibit 2(b)-2, 2-66845 as Exhibit 2(b)-2, 2-71537 as Exhibit 4(a)-(2),
33-5414 as Exhibit 4(a)-(2), 33-39833 as Exhibit 4(a)-2, in MISSISSIPPI's Form 10-K for the year ended
December 31, 1991, File No. 0-6849, as Exhibit 4(b), in Form 8-K dated August 5, 1992, File No. 0-6849,
as Exhibit 4(a)-2, in Second Certificate of Notification, File No. 70-7941, as Exhibit I, in MISSISSIPPI's
Form 8-K dated February 26, 1993, File No. 0-6849, as Exhibit 4(a)-2, in Certificate of Notification,
File No. 70-8127, as Exhibit A, in Form 8-K dated June 22, 1993, File No. 0-6849, as Exhibit 1, in
Certificate of Notification, File No. 70-8127, as Exhibit A, in Form 8-K dated March 8, 1994, File No.
0-6849, as Exhibit 4, in Certificate of Notification, File No. 70-8127, as Exhibit C and in Form 8-K dated
December 5, 1995, File No. 0-6849, as Exhibit 4.)
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<PAGE>
(e) 2 - Senior Note Indenture dated as of May 1, 1998 between MISSISSIPPI and Bankers Trust Company, as Trustee and
indentures supplemental thereto through May 20, 1998. (Designated in Form 8-K dated May 14, 1998, File No.
0-6849, as Exhibits 4.1, 4.2(a) and 4.2(b).)
(e) 3 - Subordinated Note Indenture dated as of February 1, 1997, between MISSISSIPPI and Bankers Trust Company, as
Trustee, and indenture supplemental thereto dated as of February 1, 1997. (Designated in Form 8-K dated
February 20, 1997, File No. 0-6849, as Exhibits 4.1 and 4.2.)
(e) 4 - Amended and Restated Trust Agreement of Mississippi Power Capital Trust I dated as of February 1, 1997.
(Designated in Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibit 4.5.)
(e) 5 - Guarantee Agreement relating to Mississippi Power Capital Trust I dated as of February 1, 1997.(Designated
in Form 8-K dated February 20, 1997, File No. 0-6849, as Exhibit 4.8.)
SAVANNAH
(f) 1 - Indenture dated as of March 1, 1945, between SAVANNAH and The Bank of New York, New York, as Trustee, and
indentures supplemental thereto through May 1, 1996. (Designated in Registration Nos. 33-25183 as Exhibit
4(a)-(1), 33-41496 as Exhibit 4(a)-(2), 33-45757 as Exhibit 4(a)-(2), in SAVANNAH's Form 10-K for the year
ended December 31, 1991, File No. 1-5072, as Exhibit 4(b), in Form 8-K dated July 8, 1992, File No. 1-5072,
as Exhibit 4(a)-3, in Registration No. 33-50587 as Exhibit 4(a)-(2), in Form 8-K dated July 22, 1993, File
No. 1-5072, as Exhibit 4, in Form 8-K dated May 18, 1995, File No. 1-5072, as Exhibit 4 and in Form 8-K
dated May 23, 1996, File No. 1-5072, as Exhibit 4.)
(f) 2 - Senior Note Indenture dated as of March 1, 1998 between SAVANNAH and The Bank of New York, as Trustee and
indenture supplemental thereto dated as of March 1, 1998. (Designated in Form 8-K dated March 9, 1998,
File No. 1-5072, as Exhibits 4.1 and 4.2.)
(f) 3 - Subordinated Note Indenture dated as of December 1, 1998, between SAVANNAH and The Bank of New York, as
Trustee, and indenture supplemental thereto dated as of December 9, 1998. (Designated in Form 8-K dated
December 3, 1998, File No. 1-5072, as Exhibit 4.3 and 4.4.)
(f) 4 - Amended and Restated Trust Agreement of Savannah Electric Capital Trust I dated as of December 1, 1998.
(Designated in Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit 4.7.)
(f) 5 - Guarantee Agreement relating to Savannah Electric Capital Trust I dated as of December 1, 1998.
(Designated in Form 8-K dated December 3, 1998, File No. 1-5072, as Exhibit 4.11.)
E-9
<PAGE>
(10) Material Contracts
SOUTHERN
(a) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO
and SOUTHERN and Amendment No. 1 dated as of September 6, 1985 between SCS and SOUTHERN. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(a) and in
SOUTHERN's Form 10-K for the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(3).)
(a) 2 - Service contract dated as of July 17, 1981, between SCS and SEI. (Designated in SOUTHERN's Form 10-K for
the year ended December 31, 1985, File No. 1-3526, as Exhibit 10(a)(2).)
(a) 3 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. (Designated in SAVANNAH's Form 10-K
for the year ended December 31, 1987, File No. 1-5072, as Exhibit 10-p.)
(a) 4 - Service contract dated as of January 15, 1991, between SCS and Southern Nuclear. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1991, File No. 1-3526, as Exhibit 10(a)(4).)
(a) 5 - Service contract dated as of December 12, 1994, between SCS and Mobile Energy Services Company, Inc.
(Designated in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526, as Exhibit
10(a)58.)
(a) 6 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988,
File No. 1-5072, as Exhibit 10(b).)
(a) 7 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2
dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. (Designated in
Registration No. 2-59634 as Exhibit 5(c), in GEORGIA's Form 10-K for the year ended December 31, 1982, File
No. 1-6468, as Exhibit 10(d)(2) and in ALABAMA's Form 10-K for the year ended December 31, 1994, File No.
1-3164, as Exhibit 10(b)18.)
(a) 8 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. (Designated in
Registration No. 2-61116 as Exhibit 5(d).)
(a) 9 - Edwin I. Hatch Nuclear Plant Purchase and Ownership
Participation Agreement dated as of January 6, 1975,
between GEORGIA and OPC. (Designated in Form 8-K for
January, 1975, File No. 1-6468, as Exhibit (b)(1).)
(a) 10 - Edwin I. Hatch Nuclear Plant Operating Agreement
dated as of January 6, 1975, between GEORGIA and OPC.
(Designated in Form 8-K for January, 1975, File No.
1-6468, as Exhibit (b)(3).)
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<PAGE>
(a) 11 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between
GEORGIA and OPC. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No.
1-6468, as Exhibit 10(g).)
(a) 12 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between
GEORGIA and OPC. (Designated in Certificate of Notification, File No. 70-5592, as Exhibit A.)
(a) 13 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. (Designated in
Certificate of Notification, File No. 70-5592, as Exhibit B.)
(a) 14 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976,
between GEORGIA, MEAG and Dalton. (Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as
Exhibit (b)(1).)
(a) 15 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and
Dalton. (Designated in Form 8-K for February 1977, File No. 1-6468, as Exhibit (b)(2).)
(a) 16 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of
August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton.
(Designated in Form U-1, File No. 70-5792, as Exhibit B-1 and in Form 8-K for January 1977,
File No. 1-6468, as Exhibit (B)(3).)
(a) 17 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-5792, as Exhibit B-2.)
(a) 18 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption Agreement
dated as of November 16, 1983, between GEORGIA and MEAG. (Designated in GEORGIA's Form 10-K for the year
ended December 31, 1983, File No. 1-6468, as Exhibit 10(k)(4).)
(a) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between
GEORGIA and MEAG. (Designated in Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(2).)
(a) 20 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG.(Designated in
Form 8-K dated as of July 5, 1977, File No. 1-6468, as Exhibit (b)(4).)
(a) 21 - Nuclear Operating Agreement between Southern
Nuclear and GEORGIA dated as of July 1, 1993.
(Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1997, File No. 1-3526, as Exhibit
10(a)21.)
(a) 22 - Pseudo Scheduling and Services Agreement between
GEORGIA and MEAG dated as of April 8, 1997. (Designated
in SOUTHERN's Form 10-K for the year ended December 31,
1997, File No. 1-3526, as Exhibit 10(a)22.)
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<PAGE>
(a) 23 - Plant Hal Wansley Purchase and Ownership
Participation Agreement dated as of April 19, 1977,
between GEORGIA and Dalton. (Designated in Form 8-K
dated as of June 13, 1977, File No. 1-6468, as Exhibit
(b)(3).)
(a) 24 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton.
(Designated in Form 8-K dated as of June 13, 1977, File No. 1-6468, as Exhibit (b)(7).)
(a) 25 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of
May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986,
Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among
GEORGIA, OPC, MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-3, in SOUTHERN's
Form 10-K for the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(2), in SOUTHERN's Form
10-K for the year ended December 31, 1989, File No. 1-3526, as Exhibit 10(n)(2) and in SOUTHERN's Form
10-K for the year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)54.)
(a) 26 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment
No. 1 dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC,
MEAG and Dalton. (Designated in Form U-1, File No. 70-6481, as Exhibit B-4, in SOUTHERN's Form 10-K for
the year ended December 31, 1987, File No. 1-3526, as Exhibit 10(o)(4) and in SOUTHERN's Form 10-K for the
year ended December 31, 1993, File No. 1-3526, as Exhibit 10(a)55.)
(a) 27 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and
MEAG. (Designated in Form U-1, File No. 70-6481, as Exhibit B-1.)
(a) 28 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton.
(Designated in Form U-1, File No. 70-6481, as Exhibit B-2.)
(a) 29 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of
March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988,
between GEORGIA and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-4, in SOUTHERN's Form
10-K for the year ended December 31, 1987, as Exhibit 10(o)(2) and in SOUTHERN's Form 10-K for the year
ended December 31, 1989, as Exhibit 10(n)(2).)
(a) 30 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA
and GULF. (Designated in Form U-1, File No. 70-6573, as Exhibit B-5.)
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<PAGE>
(a) 31 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement
by and among GEORGIA, FP&L and JEA, dated as of December 31, 1990 and Amendment No. 1 dated as of June 15,
1994. (Designated in Form U-1, File No. 70-7843, as Exhibit B-1 and in SOUTHERN's Form 10-K for the year
ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)60.)
(a) 32 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA, dated as of
December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. (Designated in Form U-1, File No.
70-7843, as Exhibit B-2 and in SOUTHERN's Form 10-K for the year ended December 31, 1994, File No. 1-3526,
as Exhibit 10(a)61.)
(a) 33 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18,
1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. (Designated in MISSISSIPPI's Form 10-K
for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(c)(2) and in GEORGIA's Form 10-K for
the year ended December 31, 1982, File No. 1-6468, as Exhibit 10(r)(3).)
(a) 34 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984
and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS.
(Designated in GEORGIA's Form 10-K for the year ended December 31, 1982, File No. 1-6468, as Exhibit
10(s)(2), in SOUTHERN's Form 10-K for the year ended December 31, 1984, File No. 1-3526, as Exhibit 10(r)
(2) and in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as Exhibit 10(s)(2).)
(a) 35 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988, File No.
1-5072, as Exhibit 10(d).)
(a) 36 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988,
File No. 1-5072, as Exhibit 10(e).)
(a) 37 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1988,
File No. 1-5072, as Exhibit 10(f).)
(a) 38 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990,
File No. 1-6468, as Exhibit 10(x).)
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<PAGE>
(a) 39 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429,
as Exhibit 10(1).)
(a) 40 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. (Designated in GULF's Form 10-K for the year ended December 31, 1991, File No. 0-2429,
as Exhibit 10(m).)
(a) 41 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18,
1988, between OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988,
File No. 1-6468, as Exhibit 10(x).)
(a) 42 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between
OPC and GEORGIA. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1988,
File No. 1-6468, as Exhibit 10(y).)
(a) 43 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric
Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. (Designated in Form
U-1, File No. 70-7609, as Exhibit B-1.)
(a) 44 - Operating Agreement for Joint Ownership Interest
in the James H. Miller, Jr. Steam Electric Generating
Plant Units One and Two dated November 18, 1988,
between ALABAMA and AEC. (Designated in Form U-1, File
No. 70-7609, as Exhibit B-2.)
(a) 45 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment
No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. (Designated in MISSISSIPPI's Form 10-K
for the year ended December 31, 1981, File No. 0-6849, as Exhibit 10(f), in MISSISSIPPI's Form 10-K for the
year ended December 31, 1982, File No. 0-6849, as Exhibit 10(f)(2) and in MISSISSIPPI's Form 10-K for the
year ended December 31, 1983, File No. 0-6849, as Exhibit 10(f)(3).)
* (a) 46 - Long Term Transaction Service Agreement between GEORGIA and OPC dated as of February 29, 1999.
(a) 47 - Revised and Restated Coordination Services Agreement between and among GEORGIA, OPC and Georgia Systems
Operations Corporation dated as of September 10, 1997. (Designated in SOUTHERN's Form 10-K for the year
ended December 31, 1997, File No. 1-3526, as Exhibit 10(a)48.)
(a) 48 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC,
MEAG and Dalton dated as of July 1, 1993. (Designated in SOUTHERN's Form 10-K for the year ended December
31, 1993, File No. 1-3526, as Exhibit 10(a)49.)
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<PAGE>
(a) 49 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA
and OPC dated as of November 12, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31,
1990, File No. 1-6468, as Exhibit 10(ff).)
(a) 50 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of
December 7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No.
1-6468, as Exhibit 10(gg).)
(a) 51 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December
7, 1990. (Designated in GEORGIA's Form 10-K for the year ended December 31, 1990, File No. 1-6468, as
Exhibit 10(hh).)
(a) 52 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS.
(Designated in SOUTHERN's Form 10-K for the year ended December 31, 1992, File No. 1-3526, as Exhibit
10(a)53.)
(a) 53 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton,
GULF, FP&L and JEA. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No.
1-3526, as Exhibit 10(a)56.)
(a) 54 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and
SAVANNAH dated as of December 15, 1992. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1993, File No. 1-3526, as Exhibit 10(a)57.)
(a) 55 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15,
1992. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1993, File No. 1-3526, as
Exhibit 10(a)58.)
(a) 56 - Power Purchase Agreement dated as of December 3,
1993 between GEORGIA and FPC. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1993, File
No. 1-3526, as Exhibit 10(a)59.)
(a) 57 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as of
December 23, 1991. (Designated in Form U-1, File No. 70-7530, as Exhibit B-7.)
# (a) 58 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998.
(Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as
Exhibit 10(a)59.)
# * (a) 59 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective
January 1, 1999.
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<PAGE>
(a) 60 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1998, File No. 1-3526 as Exhibit 10(a)61.)
* (a) 61 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan.
(a) 62 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. (Designated in SOUTHERN's Form 10-K for the year ended
December 31, 1998, File No. 1-3526 as Exhibit 10(a)62.)
* (a) 63 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan.
(a) 64 - The Southern Company Performance Pay Plan, Amended
and Restated effective January 1, 1998. (Designated in
SOUTHERN's Form 10-K for the year ended December 31,
1998, File No. 1-3526 as Exhibit 10(a)63.)
# * (a) 65 - The Deferred Compensation Plan for the Directors of The Southern Company, Amended and Restated effective
February 17, 1997.
# (a) 66 - The Southern Company Outside Directors Pension Plan. (Designated in SOUTHERN's Form 10-K for the year
ended December 31, 1994, File No. 1-3526, as Exhibit 10(a)77.)
# (a) 67 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998.
(Designated in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as
Exhibit 10(a)66.)
# (a) 68 - The Southern Company Outside Directors Stock Plan and First Amendment thereto. (Designated in Registration
No. 33-54415 as Exhibit 4(c) and in SOUTHERN's Form 10-K for the year ended December 31, 1995, File No.
1-3526, as Exhibit 10(a)79.)
# (a) 69 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto.
(Designated in SOUTHERN's Form 10-K for the year ended December 31, 1995, File No. 1-3526, as Exhibit
10(a)80.)
# * (a) 70 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999.
(a) 71 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1996, File No.
1-3526, as Exhibit 10(a)83, in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No. 1-3526,
as Exhibit 10(a)79 and in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as
Exhibit 10(a)71.)
* (a) 72 - Amendment Number Four to The Southern Company Pension Plan.
E-16
<PAGE>
# (a) 73 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. (Designated in
Registration No. 333-31808 as Exhibit 4(c).)
# * (a) 74 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective
January 1, 1999.
# (a) 75 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. (Designated in SOUTHERN's Form 10-K for the year ended December 31, 1997, File No.
1-3526, as Exhibit 10(a)82 and in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No.
1-3526 as Exhibit 10(a)76.)
# * (a) 76 - Amendment Number Seven to The Southern Company Performance Sharing Plan.
# (a) 77 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. (Designated
in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)77.)
# * (a) 78 - Amendment Number One to The Southern Company Supplemental Benefit Plan.
(a) 79 - Southern Company Change in Control Severance Plan, effective December 7, 1998. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)78.)
* (a) 80 - Amendment Number One to Southern Company Change in Control Severance Plan.
# (a) 81 - Southern Company Executive Change in Control
Severance Plan, effective December 7, 1998. (Designated
in SOUTHERN's Form 10-K for the year ended December 31,
1998, File No. 1-3526 as Exhibit 10(a)79.)
# * (a) 82 - Amendment Number One to Southern Company Executive Change in Control Severance Plan.
# (a) 83 - Deferred Compensation Agreement between
SOUTHERN, GEORGIA and Henry Allen Franklin. (Designated
in SOUTHERN's Form 10-K for the year ended December 31,
1998, File No. 1-3526 as Exhibit 10(a)80.)
# * (a) 84 - Amendment Number One and Assignment to SCS of Deferred Compensation Agreement between SOUTHERN, GEORGIA and
Henry Allen Franklin.
# (a) 85 - Deferred Compensation Agreement between SOUTHERN, Southern Nuclear and William G. Hairston III. (Designated
in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)81.)
# (a) 86 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Warren Y. Jobe. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)82.)
# * (a) 87 - Deferred Compensation Agreement between SOUTHERN, Southern Energy Resources, Inc. and Gale E. Klappa and
First Amendment and Assignment to SCS.
E-17
<PAGE>
# * (a) 88 - Deferred Compensation Agreement between SOUTHERN, Southern Energy Resources, Inc. and S. Marce Fuller.
# (a) 89 - Change in Control Agreement between SOUTHERN, GULF and Travis J. Bowden. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)84.)
# (a) 90 - Change in Control Agreement between SOUTHERN, SCS and A. W. Dahlberg. (Designated in SOUTHERN's Form 10-K
for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)85.)
# (a) 91 - Change in Control Agreement between SOUTHERN, MISSISSIPPI and Dwight H. Evans. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)87.)
# (a) 92 - Change in Control Agreement between SOUTHERN, ALABAMA and Banks Harry Farris. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)88.)
# * (a) 93 - Change in Control Agreement between SOUTHERN, SCS and Henry Allen Franklin.
# (a) 94 - Change in Control Agreement between SOUTHERN, Southern Nuclear and William G. Hairston, III. (Designated
in SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)90.)
# (a) 95 - Change in Control Agreement between SOUTHERN, ALABAMA and Elmer B. Harris. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)91.)
# (a) 96 - Change in Control Agreement between SOUTHERN, SAVANNAH and G. Edison Holland, Jr. (Designated in
SOUTHERN's Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)92.)
# (a) 97 - Change in Control Agreement between SOUTHERN, SCS and C. Alan Martin. (Designated in SOUTHERN's Form 10-K
for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)93.)
# (a) 98 - Change in Control Agreement between SOUTHERN, SCS and Charles Douglas McCrary. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)94.)
# (a) 99 - Change in Control Agreement between SOUTHERN, GEORGIA and David M. Ratcliffe. (Designated in SOUTHERN's
Form 10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)95.)
# (a) 100 - Change in Control Agreement between SOUTHERN, SCS and Stephen A. Wakefield. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)96.)
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<PAGE>
# (a) 101 - Change in Control Agreement between SOUTHERN, SCS and W. Lawrence Westbrook. (Designated in SOUTHERN's Form
10-K for the year ended December 31, 1998, File No. 1-3526 as Exhibit 10(a)97.)
# * (a) 102 - Change in Control Agreement between SOUTHERN, SCS and Gale E. Klappa.
# * (a) 103 - Change in Control Agreement between SOUTHERN, Southern Energy Resources, Inc. and S. Marce Fuller and First
Amendment thereto.
# * (a) 104 - Separation Agreement For Thomas G. Boren.
ALABAMA
(b) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO
and SOUTHERN and Amendment No. 1 dated as of September 6, 1985 between SCS and SOUTHERN. See Exhibit
10(a)1 herein.
(b) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(b) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2
dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7
herein.
(b) 4 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18,
1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein.
(b) 5 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30,
1984 and Amendment No. 2, dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and
SCS. See Exhibit 10(a)34 herein.
(b) 6 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)35 herein.
(b) 7 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(b) 8 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein.
(b) 9 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
E-19
<PAGE>
(b) 10 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
(b) 11 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
(b) 12 - Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Certificate of Notification,
File No. 70-7212, as Exhibit B.)
(b) 13 - 1991 Firm Power Purchase Contract between ALABAMA and AMEA. (Designated in Form U-1, File No. 70-7873, as
Exhibit B-1.)
(b) 14 - Purchase and Ownership Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric
Generating Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)43
herein.
(b) 15 - Operating Agreement for Joint Ownership Interest in the James H. Miller, Jr. Steam Electric Generating
Plant Units One and Two dated November 18, 1988, between ALABAMA and AEC. See Exhibit 10(a)44 herein.
(b) 16 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS. See
Exhibit 10(a)52 herein.
(b) 17 - Operating Agreement for the Joseph M. Farley Nuclear Plant between ALABAMA and Southern Nuclear dated as
of December 23, 1991. See Exhibit 10(a)57 herein.
# (b) 18 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)58 herein.
# * (b) 19 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)59 herein.
(b) 20 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. See Exhibit 10(a)60 herein.
* (b) 21 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan. See Exhibit
10(a)61 herein.
(b) 22 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit 10(a)62 herein.
* (b) 23 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(b) 24 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1998. See Exhibit
10(a)64 herein.
E-20
<PAGE>
# (b) 25 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)67 herein.
# (b) 26 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)66 herein.
# (b) 27 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See
Exhibit 10(a)69 herein.
(b) 28 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. See Exhibit 10(a)71 herein.
* (b) 29 - Amendment Number Four to The Southern Company Pension Plan. See Exhibit 10(a)72 herein.
# * (b) 30 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. See Exhibit
10(a)73 herein.
# * (b) 31 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)74 herein.
# * (b) 32 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999. See
Exhibit 10(a)70 herein.
# (b) 33 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. See Exhibit 10(a)75 herein.
# * (b) 34 - Amendment Number Seven to The Southern Company Performance Sharing Plan. See Exhibit 10(a)76 herein.
# (b) 35 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)77 herein.
# * (b) 36 - Amendment Number One to The Southern Company Supplemental Benefit Plan. See Exhibit 10(a)78 herein.
(b) 37 - Southern Company Change in Control Severance Plan, effective December 7, 1998. See Exhibit 10(a)79 herein.
* (b) 38 - Amendment Number One to Southern Company Change in Control Severance Plan. See Exhibit 10(a)80 herein.
# (b) 39 - Southern Company Executive Change in Control Severance Plan, effective December 7, 1998. See Exhibit
10(a)81 herein.
# * (b) 40 - Amendment Number One to Southern Company Executive Change in Control Severance Plan. See Exhibit 10(a)82
herein.
# (b) 41 - Change in Control Agreement between SOUTHERN, ALABAMA and Banks Harry Farris. See Exhibit 10(a)92 herein.
E-21
<PAGE>
# (b) 42 - Change in Control Agreement between SOUTHERN, ALABAMA and Elmer B. Harris. See Exhibit 10(a)95 herein.
# (b) 43 - Supplemental Pension Agreement between ALABAMA, GULF and Travis J. Bowden. (Designated in ALABAMA's Form
10-K for the year ended December 31, 1998, File No. 1-3164, as Exhibit 10(b)40.)
# * (b) 44 - Deferred Compensation Plan for Directors of Alabama Power Company, Amended and Restated as of April 25,
1997.
GEORGIA
(c) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO
and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN. See Exhibit
10(a)1 herein.
(c) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(c) 3 - Agreement dated as of January 27, 1959, Amendment No. 1 dated as of October 27, 1982 and Amendment No. 2
dated November 4, 1993 and effective June 1, 1994, among SEGCO, ALABAMA and GEORGIA. See Exhibit 10(a)7
herein.
(c) 4 - Joint Committee Agreement dated as of August 27, 1976, among GEORGIA, OPC, MEAG and Dalton. See Exhibit
10(a)8 herein.
(c) 5 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of January 6, 1975,
between GEORGIA and OPC. See Exhibit 10(a)9 herein.
(c) 6 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of January 6, 1975, between GEORGIA and OPC. See
Exhibit 10(a)10 herein.
(c) 7 - Revised and Restated Integrated Transmission System Agreement dated as of November 12, 1990, between
GEORGIA and OPC. See Exhibit 10(a)11 herein.
(c) 8 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of March 26, 1976, between
GEORGIA and OPC. See Exhibit 10(a)12 herein.
(c) 9 - Plant Hal Wansley Operating Agreement dated as of March 26, 1976, between GEORGIA and OPC. See Exhibit
10(a)13 herein.
(c) 10 - Edwin I. Hatch Nuclear Plant Purchase and Ownership Participation Agreement dated as of August 27, 1976,
between GEORGIA, MEAG and Dalton. See Exhibit 10(a)14 herein.
(c) 11 - Edwin I. Hatch Nuclear Plant Operating Agreement dated as of August 27, 1976, between GEORGIA, MEAG and
Dalton. See Exhibit 10(a)15 herein.
E-22
<PAGE>
(c) 12 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase and Ownership Participation Agreement dated as of
August 27, 1976 and Amendment No. 1 dated as of January 18, 1977, among GEORGIA, OPC, MEAG and Dalton. See
Exhibit 10(a)16 herein.
(c) 13 - Alvin W. Vogtle Nuclear Units Number One and Two Operating Agreement dated as of August 27, 1976, among
GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)17 herein.
(c) 14 - Alvin W. Vogtle Nuclear Units Number One and Two Purchase, Amendment, Assignment and Assumption
Agreement dated as of November 16, 1983, between GEORGIA and MEAG. See Exhibit 10(a)18 herein.
(c) 15 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of August 27, 1976, between
GEORGIA and MEAG. See Exhibit 10(a)19 herein.
(c) 16 - Plant Hal Wansley Operating Agreement dated as of August 27, 1976, between GEORGIA and MEAG. See Exhibit
10(a)20 herein.
(c) 17 - Nuclear Operating Agreement between Southern Nuclear and GEORGIA dated as of July 1, 1993. See Exhibit
10(a)21 herein.
(c) 18 - Pseudo Scheduling and Services Agreement between GEORGIA and MEAG dated as of April 8, 1997. See Exhibit
10(a)22 herein.
(c) 19 - Plant Hal Wansley Purchase and Ownership Participation Agreement dated as of April 19, 1977, between
GEORGIA and Dalton. See Exhibit 10(a)23 herein.
(c) 20 - Plant Hal Wansley Operating Agreement dated as of April 19, 1977, between GEORGIA and Dalton. See Exhibit
10(a)24 herein.
(c) 21 - Plant Robert W. Scherer Units Number One and Two Purchase and Ownership Participation Agreement dated as of
May 15, 1980, Amendment No. 1 dated as of December 30, 1985, Amendment No. 2 dated as of July 1, 1986,
Amendment No. 3 dated as of August 1, 1988 and Amendment No. 4 dated as of December 31, 1990, among
GEORGIA, OPC, MEAG and Dalton. See Exhibit 10(a)25 herein.
(c) 22 - Plant Robert W. Scherer Units Number One and Two Operating Agreement dated as of May 15, 1980, Amendment
No. dated as of December 3, 1985 and Amendment No. 2 dated as of December 31, 1990, among GEORGIA, OPC,
MEAG and Dalton. See Exhibit 10(a)26 herein.
(c) 23 - Plant Robert W. Scherer Purchase, Sale and Option Agreement dated as of May 15, 1980, between GEORGIA and
MEAG. See Exhibit 10(a)27 herein.
(c) 24 - Plant Robert W. Scherer Purchase and Sale Agreement dated as of May 16, 1980, between GEORGIA and Dalton.
See Exhibit 10(a)28 herein.
E-23
<PAGE>
(c) 25 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of
March 1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988,
between GEORGIA and GULF. See Exhibit 10(a)29 herein.
(c) 26 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA
and GULF. See Exhibit 10(a)30 herein.
(c) 27 - Plant Robert W. Scherer Unit No. Four Amended and Restated Purchase and Ownership Participation Agreement
by and among GEORGIA, FP&L and JEA dated as of December 31, 1990 and Amendment No. 1 dated as of June 15,
1994. See Exhibit 10(a)31 herein.
(c) 28 - Plant Robert W. Scherer Unit No. Four Operating Agreement by and among GEORGIA, FP&L and JEA dated as of
December 31, 1990 and Amendment No. 1 dated as of June 15, 1994. See Exhibit 10(a)32 herein.
(c) 29 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May
18, 1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein.
(c) 30 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1, dated August 30, 1984
and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS.
See Exhibit 10(a)34 herein.
(c) 31 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)35 herein.
(c) 32 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(c) 33 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein.
(c) 34 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
(c) 35 - Power Purchase Agreement dated as of December 3, 1993 between GEORGIA and FPC. See Exhibit 10(a)56 herein.
(c) 36 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
(c) 37 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
E-24
<PAGE>
(c) 38 - Rocky Mountain Pumped Storage Hydroelectric Project Ownership Participation Agreement dated November 18,
1988, between OPC and GEORGIA. See Exhibit 10(a)41 herein.
(c) 39 - Rocky Mountain Pumped Storage Hydroelectric Project Operating Agreement dated November 18, 1988, between
OPC and GEORGIA. See Exhibit 10(a)42 herein.
* (c) 40 - Long Term Transaction Service Agreement between GEORGIA and OPC dated as of November 12, 1990. See Exhibit
10(a)46 herein.
(c) 41 - Revised and Restated Coordination Services Agreement between and among GEORGIA, OPC and Georgia
Systems Operations Corporation dated as of September 10, 1997. See Exhibit 10(a)47 herein.
(c) 42 - Amended and Restated Nuclear Managing Board Agreement for Plant Hatch and Plant Vogtle among GEORGIA, OPC,
MEAG and Dalton dated as of July 1, 1993. See Exhibit 10(a)48 herein.
(c) 43 - Integrated Transmission System Agreement, Power Sale and Coordination Umbrella Agreement between GEORGIA
and OPC dated as of November 12, 1990. See Exhibit 10(a)49 herein.
(c) 44 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and Dalton dated as of
December 7, 1990. See Exhibit 10(a)50 herein.
(c) 45 - Revised and Restated Integrated Transmission System Agreement between GEORGIA and MEAG dated as of December
7, 1990. See Exhibit 10(a)51 herein.
(c) 46 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton,
GULF, FP&L and JEA. See Exhibit 10(a)53 herein.
(c) 47 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and
SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)54 herein.
(c) 48 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated as of December 15,
1992. See Exhibit 10(a)55 herein.
(c) 49 - Certificate of Limited Partnership of Georgia Power Capital. (Designated in Certificate of Notification,
File No. 70-8461, as Exhibit B.)
(c) 50 - Amended and Restated Agreement of Limited Partnership of Georgia Power Capital, dated as of December 1,
1994. (Designated in Certificate of Notification, File No. 70-8461, as Exhibit C.)
(c) 51 - Action of General Partner of Georgia Power Capital creating the Series A Preferred Securities. (Designated
in Certificate of Notification, File No. 70-8461, as Exhibit D.)
E-25
<PAGE>
(c) 52 - Guarantee Agreement of GEORGIA dated as of December 1, 1994, for the benefit of the holders from time to
time of the Series A Preferred Securities. (Designated in Certificate of Notification, File No. 70-8461,
as Exhibit G.)
# (c) 53 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)58 herein.
# * (c) 54 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)59 herein.
(c) 55 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. See Exhibit 10(a)60 herein.
* (c) 56 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan. See Exhibit
10(a)61 herein.
(c) 57 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit 10(a)62 herein.
* (c) 58 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(c) 59 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1998. See Exhibit
10(a)64 herein.
# (c) 60 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)67 herein.
# (c) 61 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)66 herein.
# (c) 62 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See
Exhibit 10(a)69 herein.
(c) 63 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. See Exhibit 10(a)71 herein.
* (c) 64 - Amendment Number Four to The Southern Company Pension Plan. See Exhibit 10(a)72 herein.
# * (c) 65 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. See Exhibit
10(a)73 herein.
# * (c) 66 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)74 herein.
# * (c) 67 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999. See
Exhibit 10(a)70 herein.
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<PAGE>
# (c) 68 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. See Exhibit 10(a)75 herein.
# * (c) 69 - Amendment Number Seven to The Southern Company Performance Sharing Plan. See Exhibit 10(a)76 herein.
# (c) 70 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)77 herein.
# * (c) 71 - Amendment Number One to The Southern Company Supplemental Benefit Plan. See Exhibit 10(a)78 herein.
(c) 72 - Southern Company Change in Control Severance Plan, effective December 7, 1998. See Exhibit 10(a)79 herein.
* (c) 73 - Amendment Number One to Southern Company Change in Control Severance Plan. See Exhibit 10(a)80 herein.
# (c) 74 - Southern Company Executive Change in Control Severance Plan, effective December 7, 1998. See Exhibit
10(a)81 herein.
# * (c) 75 - Amendment Number One to Southern Company Executive Change in Control Severance Plan. See Exhibit 10(a)82
herein.
# (c) 76 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Henry Allen Franklin. See Exhibit 10(a)83
herein.
# * (c) 77 - Amendment Number One and Assignment to SCS of Deferred Compensation Agreement between SOUTHERN, GEORGIA and
Henry Allen Franklin. See Exhibit 10(a)84 herein.
# (c) 78 - Deferred Compensation Agreement between SOUTHERN, GEORGIA and Warren Y. Jobe. See Exhibit 10(a)86 herein.
# (c) 79 - Change in Control Agreement between SOUTHERN, GEORGIA and David M. Ratcliffe. See Exhibit 10(a)99 herein.
# (c) 80 - Supplemental Pension Agreement between GEORGIA and Warren Y. Jobe. (Designated in GEORGIA's Form 10-K for
the year ended December 31, 1998, File No. 1-6468, as Exhibit 10(c)77.)
# * (c) 81 - Deferred Compensation Plan For Directors of Georgia Power Company, Amended and Restated Effective November
19, 1986 and all amendments thereto through Amendment Number Three.
E-27
<PAGE>
GULF
(d) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO
and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN. See Exhibit
10(a)1 herein.
(d) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(d) 3 - Plant Robert W. Scherer Unit Number Three Purchase and Ownership Participation Agreement dated as of March
1, 1984, Amendment No. 1 dated as of July 1, 1986 and Amendment No. 2 dated as of August 1, 1988, between
GEORGIA and GULF. See Exhibit 10(a)29 herein.
(d) 4 - Plant Robert W. Scherer Unit Number Three Operating Agreement dated as of March 1, 1984, between GEORGIA
and GULF. See Exhibit 10(a)30 herein.
(d) 5 - Plant Scherer Managing Board Agreement dated as of December 31, 1990 among GEORGIA, OPC, MEAG, Dalton,
GULF, FP&L and JEA. See Exhibit 10(a)53 herein.
(d) 6 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18,
1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein.
(d) 7 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984
and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS.
See Exhibit 10(a)34 herein.
(d) 8 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)35 herein.
(d) 9 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(d) 10 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein.
(d) 11 - Agreement between GULF and AEC, effective August 1, 1985. (Designated in GULF's Form 10-K for the year
ended December 31, 1985, File No. 0-2429, as Exhibit 10(g).)
(d) 12 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
E-28
<PAGE>
(d) 13 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
(d) 14 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
# (d) 15 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)58 herein.
# * (d) 16 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)59 herein.
(d) 17 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. See Exhibit 10(a)60 herein.
* (d) 18 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan. See Exhibit
10(a)61 herein.
(d) 19 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit 10(a)62 herein.
* (d) 20 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(d) 21 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1998. See Exhibit
10(a)64 herein.
# (d) 22 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)67 herein.
# (d) 23 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)66 herein.
# (d) 24 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See
Exhibit 10(a)69 herein.
(d) 25 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. See Exhibit 10(a)71 herein.
* (d) 26 - Amendment Number Four to The Southern Company Pension Plan. See Exhibit 10(a)72 herein.
# (d) 27 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)77 herein.
# * (d) 28 - Amendment Number One to The Southern Company Supplemental Benefit Plan. See Exhibit 10(a)78 herein.
E-29
<PAGE>
(d) 29 - Southern Company Change in Control Severance Plan, effective December 7, 1998. See Exhibit 10(a)79 herein.
* (d) 30 - Amendment Number One to Southern Company Change in Control Severance Plan. See Exhibit 10(a)80 herein.
# (d) 31 - Southern Company Executive Change in Control Severance Plan, effective December 7, 1998. See Exhibit
10(a)81 herein.
# * (d) 32 - Amendment Number One to Southern Company Executive Change in Control Severance Plan. See Exhibit 10(a)82
herein.
# (d) 33 - Change in Control Agreement between SOUTHERN, GULF and Travis J. Bowden. See Exhibit 10(a)89 herein.
# * (d) 34 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. See Exhibit
10(a)73 herein.
# * (d) 35 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)74 herein.
# * (d) 36 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999. See
Exhibit 10(a)70 herein.
# (d) 37 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. See Exhibit 10(a)75 herein.
# * (d) 38 - Amendment Number Seven to The Southern Company Performance Sharing Plan. See Exhibit 10(a)76 herein.
# (d) 39 - Supplemental Pension Agreement between SAVANNAH, GULF and G. Edison Holland, Jr. (Designated in GULF's
Form 10-K for the year ended December 31, 1998, File No. 0-2429, as Exhibit 10(d)35.)
# (d) 40 - Supplemental Pension Agreement between ALABAMA, GULF and Travis J. Bowden. See Exhibit 10(b)43 herein.
# * (d) 41 - Deferred Compensation Plan For Directors of Gulf Power Company, Amended and Restated Effective January 1,
1987 and all amendments thereto through Amendment Number Three.
MISSISSIPPI
(e) 1 - Service contracts dated as of January 1, 1984, between SCS and ALABAMA, GEORGIA, GULF, MISSISSIPPI, SEGCO
and SOUTHERN and Amendment No. 1 dated as of September 6, 1985, between SCS and SOUTHERN.
See Exhibit 10(a)1 herein.
E-30
<PAGE>
(e) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(e) 3 - Amended and Restated Unit Power Sales Agreement dated February 18, 1982 and Amendment No. 1 dated May 18,
1982, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS. See Exhibit 10(a)33 herein.
(e) 4 - Amended and Restated Unit Power Sales Agreement dated May 19, 1982, Amendment No. 1 dated August 30, 1984,
and Amendment No. 2 dated October 30, 1987, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI and SCS.
See Exhibit 10(a)34 herein.
(e) 5 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)35 herein.
(e) 6 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(e) 7 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein.
(e) 8 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
(e) 9 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
(e) 10 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
(e) 11 - Transmission Facilities Agreement dated February 25, 1982, Amendment No. 1 dated May 12, 1982 and Amendment
No. 2 dated December 6, 1983, between Gulf States and MISSISSIPPI. See Exhibit 10(a)45 herein.
(e) 12 - Long Term Transmission Service Agreement between Entergy Power, Inc. and ALABAMA, MISSISSIPPI and SCS.
See Exhibit 10(a)52 herein.
# (e) 13 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)58 herein.
# * (e) 14 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)59 herein.
E-31
<PAGE>
(e) 15 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. See Exhibit 10(a)60 herein.
* (e) 16 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan. See Exhibit
10(a)61 herein.
(e) 17 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit 10(a)62 herein.
* (e) 18 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
(e) 19 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1998. See Exhibit
10(a)64 herein.
# (e) 20 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)67 herein.
# (e) 21 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)66 herein.
# (e) 22 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See
Exhibit 10(a)69 herein.
(e) 23 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. See Exhibit 10(a)71 herein.
* (e) 24 - Amendment Number Four to The Southern Company Pension Plan. See Exhibit 10(a)72 herein.
# (e) 25 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)77 herein.
# * (e) 26 - Amendment Number One to The Southern Company Supplemental Benefit Plan. See Exhibit 10(a)78 herein.
(e) 27 - Southern Company Change in Control Severance Plan, effective December 7, 1998. See Exhibit 10(a)79 herein.
* (e) 28 - Amendment Number One to Southern Company Change in Control Severance Plan. See Exhibit 10(a)80 herein.
# (e) 29 - Southern Company Executive Change in Control Severance Plan, effective December 7, 1998. See Exhibit
10(a)81 herein.
# * (e) 30 - Amendment Number One to Southern Company Executive Change in Control Severance Plan. See Exhibit 10(a)82
herein.
E-32
<PAGE>
# (e) 31 - Change in Control Agreement between SOUTHERN, MISSISSIPPI and Dwight H. Evans. See Exhibit 10(a)91 herein.
# * (e) 32 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. See Exhibit
10(a)73 herein.
# * (e) 33 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)74 herein.
# * (e) 34 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999. See
Exhibit 10(a)70 herein.
# (e) 35 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. See Exhibit 10(a)75 herein.
# * (e) 36 - Amendment Number Seven to The Southern Company Performance Sharing Plan. See Exhibit 10(a)76 herein.
# * (e) 37 - Deferred Compensation Plan for Directors of Mississippi Power Company, Amended and Restated Effective
January 1, 2000.
SAVANNAH
(f) 1 - Service contract dated as of March 3, 1988, between SCS and SAVANNAH. See Exhibit 10(a)3 herein.
(f) 2 - Interchange contract dated October 28, 1988, effective January 1, 1989, between ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)6 herein.
(f) 3 - Unit Power Sales Agreement dated July 19, 1988, between FPC and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)35 herein.
(f) 4 - Amended Unit Power Sales Agreement dated July 20, 1988, between FP&L and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)36 herein.
(f) 5 - Amended Unit Power Sales Agreement dated August 17, 1988, between JEA and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)37 herein.
(f) 6 - Unit Power Sales Agreement dated December 8, 1990, between Tallahassee and ALABAMA, GEORGIA, GULF,
MISSISSIPPI, SAVANNAH and SCS. See Exhibit 10(a)38 herein.
(f) 7 - Transition Energy Agreement dated December 31, 1990, between JEA and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)39 herein.
E-33
<PAGE>
(f) 8 - Transition Energy Agreement dated December 31, 1990, between FP&L and ALABAMA, GEORGIA, GULF, MISSISSIPPI,
SAVANNAH and SCS. See Exhibit 10(a)40 herein.
(f) 9 - Plant McIntosh Combustion Turbine Purchase and Ownership Participation Agreement between GEORGIA and
SAVANNAH dated as of December 15, 1992. See Exhibit 10(a)54 herein.
(f) 10 - Plant McIntosh Combustion Turbine Operating Agreement between GEORGIA and SAVANNAH dated December 15, 1992.
See Exhibit 10(a)55 herein.
# (f) 11 - The Southern Company Productivity Improvement Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)58 herein.
# * (f) 12 - The Southern Company Executive Productivity Improvement Plan, Amended and Restated effective January 1,
1999. See Exhibit 10(a)59 herein.
(f) 13 - The Southern Company Employee Savings Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Three. See Exhibit 10(a)60 herein.
* (f) 14 - Amendment Number Four and Amendment Number Five to The Southern Company Employee Savings Plan. See Exhibit
10(a)61 herein.
(f) 15 - The Southern Company Employee Stock Ownership Plan, Amended and Restated effective January 1, 1997 and all
amendments thereto through Amendment Number Two. See Exhibit 10(a)62 herein.
* (f) 16 - Amendment Number Three to The Southern Company Employee Stock Ownership Plan. See Exhibit 10(a)63 herein.
# (f) 17 - Supplemental Executive Retirement Plan of SAVANNAH, Amended and Restated effective January 1, 1996 and all
amendments thereto through Amendment Number Two. (Designated in SAVANNAH's Form 10-K for the year ended
December 31, 1995, File No. 1-5072, as Exhibit 10(f)17, in SAVANNAH's Form 10-K for the year ended December
31, 1996, File No. 1-5072, as Exhibit 10(f)20 and in SAVANNAH's Form 10-K for the year ended December 31,
1997, File No. 1-5072, as Exhibit 10(f)18.)
# (f) 18 - Deferred Compensation Plan for Key Employees of SAVANNAH and all amendments thereto through Amendment
Number Three. (Designated in SAVANNAH's Form 10-K for the year ended December 31, 1994, File No. 1-5072,
as Exhibit 10(f)17, in SAVANNAH's Form 10-K for the year ended December 31, 1995, File No. 1-5072, as
Exhibit 10(f)19, in SAVANNAH's Form 10-K for the year ended December 31, 1996, File No. 1-5072, as Exhibit
10(f)22 and in SAVANNAH's Form 10-K for the year ended December 31, 1998, File No. 1-5072, as Exhibit
10(f)17.)
(f) 19 - The Southern Company Performance Pay Plan, Amended and Restated effective January 1, 1998. See Exhibit
10(a)64 herein.
E-34
<PAGE>
# (f) 20 - The Southern Company Outside Directors Pension Plan. See Exhibit 10(a)66 herein.
# (f) 21 - Deferred Compensation Plan for Directors of SAVANNAH. (Designated in SAVANNAH's Form 10-K for the year
ended December 31, 1997, File No. 1-5072, as Exhibit 10(f)23.)
# (f) 22 - Outside Directors Stock Plan for Subsidiaries of The Southern Company and First Amendment thereto. See
Exhibit 10(a)69 herein.
(f) 23 - The Southern Company Pension Plan, effective as of January 1, 1997 and all amendments thereto through
Amendment Number Three. See Exhibit 10(a)71 herein.
* (f) 24 - Amendment Number Four to The Southern Company Pension Plan. See Exhibit 10(a)72 herein.
# (f) 25 - The Southern Company Supplemental Benefit Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)77 herein.
# * (f) 26 - Amendment Number One to The Southern Company Supplemental Benefit Plan. See Exhibit 10(a)79 herein.
(f) 27 - Southern Company Change in Control Severance Plan, effective December 7, 1998. See Exhibit 10(a)79 herein.
* (f) 28 - Amendment Number One to Southern Company Change in Control Severance Plan. See Exhibit 10(a)80 herein.
# (f) 29 - Southern Company Executive Change in Control Severance Plan, effective December 7, 1998. See
Exhibit 10(a)81 herein.
# * (f) 30 - Amendment Number One to Southern Company Executive Change in Control Severance Plan. See Exhibit 10(a)82
herein.
# (f) 31 - Change in Control Agreement between SOUTHERN, SAVANNAH and G. Edison Holland, Jr. See Exhibit 10(a)96
herein.
# (f) 32 - The Southern Company Deferred Compensation Plan, Amended and Restated effective January 1, 1998. See
Exhibit 10(a)67 herein.
# * (f) 33 - The Southern Company Performance Stock Plan, Amended and Restated effective July 19, 1999. See Exhibit
10(a)73 herein.
# * (f) 34 - The Southern Company Supplemental Executive Retirement Plan, Amended and Restated effective
January 1, 1999. See Exhibit 10(a)74 herein.
# * (f) 35 - The Southern Company Performance Dividend Plan, Amended and Restated effective January 1, 1999. See Exhibit
10(a)70 herein.
E-35
<PAGE>
# (f) 36 - The Southern Company Performance Sharing Plan effective January 1, 1997 and all amendments thereto through
Amendment Number Six. See Exhibit 10(a)75 herein.
# * (f) 37 - Amendment Number Seven to The Southern Company Performance Sharing Plan. See Exhibit 10(a)76 herein.
# (f) 38 - Supplemental Pension Agreement between SAVANNAH, GULF and G. Edison Holland, Jr. See Exhibit 10(d)38
herein.
(21) Subsidiaries of Registrants
SOUTHERN
* (a) - Subsidiaries of Registrant.
ALABAMA
* (b) - Subsidiaries of Registrant.
GEORGIA
* (c) - Subsidiaries of Registrant.
GULF
* (d) - Subsidiaries of Registrant.
MISSISSIPPI
* (e) - Subsidiaries of Registrant.
SAVANNAH
* (f) - Subsidiaries of Registrant.
(23) Consents of Experts and Counsel
SOUTHERN
* (a) - The consent of Arthur Andersen LLP is contained herein at page IV-5.
ALABAMA
* (b) - The consent of Arthur Andersen LLP is contained herein at page IV-6.
GEORGIA
* (c) - The consent of Arthur Andersen LLP is contained herein at page IV-7.
E-36
<PAGE>
GULF
* (d) - The consent of Arthur Andersen LLP is contained herein at page IV-8.
MISSISSIPPI
* (e) - The consent of Arthur Andersen LLP is contained herein at page IV-9.
SAVANNAH
* (f) - The consent of Arthur Andersen LLP is contained herein at page IV-10.
(24) Powers of Attorney and Resolutions
SOUTHERN
* (a) - Power of Attorney and resolution.
ALABAMA
* (b) - Power of Attorney and resolution.
GEORGIA
* (c) - Power of Attorney and resolution.
GULF
* (d) - Power of Attorney and resolution.
MISSISSIPPI
* (e) - Power of Attorney and resolution.
SAVANNAH
* (f) - Power of Attorney and resolution.
(27) Financial Data Schedule
SOUTHERN
(a) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 1-3526, as Exhibit 27.)
ALABAMA
(b) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 1-3164, as Exhibit 27.)
E-37
<PAGE>
GEORGIA
(c) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 1-6468, as Exhibit 27.)
GULF
(d) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 0-2429, as Exhibit 27.)
MISSISSIPPI
(e) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 0-6849, as Exhibit 27.)
SAVANNAH
(f) - Financial Data Schedule. (Designated in Form 8-K dated February 16, 2000, File No. 1-5072, as Exhibit 27.)
</TABLE>
E-38
Exhibit 10(a)46
LONG TERM TRANSACTION SERVICE AGREEMENT
UNDER SOUTHERN COMPANIES' FEDERAL ENERGY REGULATORY COMMISSION
ELECTRIC TARIFF VOLUME NO. 4
MARKET-BASED RATE TARIFF
between
GEORGIA POWER COMPANY
and
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP CORPORATION)
Dated as of February 26, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I: DEFINITIONS...................................................2
1.1 Certain Definitions...............................................2
1.2 Interpretation....................................................11
ARTICLE II: SALE OF ELECTRIC CAPACITY...................................11
2.1 Sale and Amount of Capacity......................................11
2.2 Price of Capacity.................................................11
ARTICLE III: SALE OF ELECTRIC ENERGY....................................12
3.1 Sale and Delivery of Energy.......................................12
3.2 Price of Energy...................................................13
ART. IV: SHORT TERM RESOURCE COMMITMENT AND ENERGY UTILIZATION..........14
4.1 Availability......................................................14
4.2 Energy Utilization Schedules......................................15
4.3 Changes to Utilization Schedules..................................15
4.4 Minimum Utilization Notice........................................16
4.5 Minimum Utilization Duration......................................17
4.6 Maximum Utilization Hours.........................................18
4.7 Energy Utilization................................................18
4.8 Recall of Short Term Resources....................................19
4.9 Delivery of and Payment for Energy................................20
4.10 Hourly Energy Rate Information Obligations.......................20
ARTICLE V: LT RESOURCE COMMITMENT AND ENERGY UTILIZATION................21
5.1 Availability......................................................21
5.2 LT Steam Resource Commitment Schedules............................22
5.3 Changes to LT Steam Resource Commitment Schedules.................22
5.4 LT Steam Resource Minimum Commitment Notice.......................23
5.5 LT Steam Resource Minimum Decommitment Notice.....................24
5.6 LT Steam Resource Minimum Downtime................................25
5.7 LT Peaking Resource Deemed Committed..............................25
5.8 Energy Utilization Schedules......................................26
5.9 Changes to Utilization Schedules..................................27
5.10 Minimum Utilization Notice.......................................28
5.11 Minimum Utilization Levels.......................................30
5.12 Maximum Utilization Levels.......................................31
5.13 LT Steam Resource Ramping........................................31
5.14 Energy Utilization...............................................32
5.15 Reduction of Load Carrying Capability............................33
5.16 Delivery of and Payment for Energy...............................36
5.17 Emergency Decommitment...........................................36
5.18 RCSA Treatment...................................................36
ARTICLE VI: BILLING AND COLLECTIONS.....................................36
6.1 Capacity Billing and Payment......................................37
6.2 Energy Billing and Payment........................................37
6.3 Billing Disputes and Final Accounting.............................38
6.4 Availability of Records...........................................41
6.5 Implementation Costs..............................................41
6.6 Failure to Make Payments..........................................42
6.7 Limited Withholding of Payments...................................43
ARTICLE VII: CERTAIN CAPACITY AND ENERGY SALE MATTERS...................44
7.1 Service Rendered..................................................44
7.2 Resale............................................................44
7.3 Character of Transactions.........................................45
7.4 Constancy of Supply...............................................45
7.5 Market Rate Tariff................................................46
7.6 Termination of the BPSA...........................................47
7.7 FERC Modification of Formulary Rates Under the BPSA...............48
ARTICLE VIII: TERM OF AGREEMENT.........................................48
8.1 Term..............................................................48
8.2 Conditions For Effectiveness......................................49
8.3 EMCs' Approval of any LT Resource as a Non-Recourse Resource......50
8.4 FERC Changes; Rights to Terminate.................................51
8.5 Purchases After Expiration, Termination or Reduction..............52
ARTICLE IX: MISCELLANEOUS PROVISIONS....................................53
9.1 Approvals.........................................................53
9.2 Assignment........................................................53
9.3 Georgia Power's Agent.............................................54
9.4 No Partnership....................................................54
9.5 Successors and Assigns............................................54
9.6 No Third Party Benefit............................................54
9.7 No Consequential Damages..........................................54
9.8 No Affiliate Liability............................................55
9.9 Disclaimer of Warranty............................................55
9.10 Time of Essence; No Waiver.......................................55
9.11 Amendments.......................................................56
9.12 Notice...........................................................56
9.13 Counterparts.....................................................57
9.14 Articles and Section Headings....................................57
9.15 Including........................................................57
9.16 Governing Law....................................................57
9.17 Necessary Authorization..........................................58
ARTICLE X: EVENT OF DEFAULT AND TERMINATION.............................58
10.1. Event of Default................................................58
10.2 Rights Under Agreement...........................................60
10.3 Termination Upon Default.........................................61
EXHIBIT A Member Systems: Oglethorpe Power Corporation
SCHEDULE A SHORT TERM RESOURCE
SCHEDULE B LONG TERM PEAKING RESOURCE
SCHEDULE C LONG TERM STEAM RESOURCE
<PAGE>
LONG TERM TRANSACTION SERVICE AGREEMENT
UNDER SOUTHERN COMPANIES' FEDERAL ENERGY REGULATORY COMMISSION
ELECTRIC TARIFF VOLUME NO. 4
MARKET-BASED RATE TARIFF
This Agreement is entered into this 26th day of February, 1999, by and
between GEORGIA POWER COMPANY, a corporation organized and existing under the
laws of the State of Georgia ("Georgia Power" and/or "Seller"); and OGLETHORPE
POWER CORPORATION (AN ELECTRIC MEMBERSHIP CORPORATION), organized and existing
under the laws of the State of Georgia ("Oglethorpe Power" and/or "Purchaser").
In consideration of the mutual covenants and agreements herein, Georgia Power
and Oglethorpe Power (collectively the "Parties") hereby agree as follows:
W I T N E S S E T H:
WHEREAS, Georgia Power is engaged in the sale of wholesale electric
power and has received authorization from the Federal Energy Regulatory
Commission to provide services at market-based rates in accordance with Southern
Companies' Electric Tariff Volume No. 4 Market-Based Rate Tariff (the "Tariff");
WHEREAS, Oglethorpe Power is an electric utility, rural electric
cooperative, municipality, power authority, or agency, or other entity engaged
in the purchase of power at wholesale;
WHEREAS, Oglethorpe Power is not affiliated with Georgia Power or any
of the operating company affiliates of Georgia Power;
WHEREAS, the Parties desire to set forth the terms and conditions upon
which the sale of electric power and related services may be conducted between
the Parties; and
WHEREAS, Oglethorpe Power intends that the capacity and energy to be
purchased by it from Georgia Power hereunder shall replace the capacity and
energy that Oglethorpe Power is currently purchasing from Georgia Power under
the Block Power Sale Agreement between Georgia Power and Oglethorpe Power dated
as of November 12, 1990 ("BPSA"),
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein set forth, and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, Georgia
Power and Oglethorpe Power, each intending to be legally bound, hereby agree as
follows:
ARTICLE I
DEFINITIONS
.........1.1......Certain Definitions. In addition to the initially capitalized
terms and phrases defined in the preamble of this Agreement, the following
initially capitalized terms and phrases as and when used in this Agreement shall
have the respective meanings set forth below:
(1) "Affiliate" - means, for any specified corporation, any
other entity directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
corporation. For purposes of this definition, "control" when used with
respect to any entity means the power to direct the management and
policies of such entity, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
(2) "Availability Factor" - means, at any given point in time,
for any LT Resource, the value stated in Part 5 of each respective LT
Schedule.
(3) "Change in Law" - means a material change in, or material
change in the interpretation of, or the enactment, promulgation or
issuance of, any constitution, character, act, statute, regulation,
ordinance, order, ruling or rule, or material change in the specified
standards or objective criteria contained in a permit, license or other
approval, which standards or criteria must be met in order for a Unit
to generate energy, or other legislative or administrative action of
any Governmental Authority of competent jurisdiction, or a final
decree, judgment or order of a court of competent jurisdiction,
including temporary restraining orders, or litigation, which occurs
subsequent to January 15, 1999.
(4) "Day" - means a calendar day, commencing at one (1) minute
prior to 12:01 a.m. (Operating Time) of each such calendar day and
ending at one (1) minute after 11:59 p.m. (Operating Time) of such
calendar day.
(5) "Electric Membership Corporations" or "EMCs" - means any
one or more of those electric membership corporations identified in
Exhibit "A" attached hereto and incorporated herein by this reference
(for so long as and to the extent that such EMC or its successor
remains a member of Oglethorpe Power).
(6) "FERC" - means the Federal Energy Regulatory Commission or
any Governmental Authority succeeding to the powers and functions
thereof under the Federal Power Act.
(7) "Federal Power Act" - means the Federal Power Act, 16
U.S.C.A.ss.ss. 791a-828c, as the same may hereafter be amended from
time to time.
(8) "Georgia Territorial Resource Requirements" - means, at
any given time, the total energy requirements of the ITS (determined as
the sum of generation and power flows in on tie lines less power flows
out on tie lines) minus "OPC Territorial Load" (as such term is defined
and used in the RCSA).
(9) "Governmental Authority" - means any local, state,
regional or federal administrative, legal, judicial or executive
agency, commission, department or other such entity.
(10) "Hour" - means one (1) of the twenty-four (24)
clock-hours of a Day. "Hourly" - has a meaning correlative to that of
Hour.
(11) "Hourly Energy Rate" - means, for the Short Term Resource
for each Hour during the Term, the amount, in dollars per megawatt-hour
($/MWH), calculated by Georgia Power for the Short Term Resource for
such Hour as provided in Part 4 of Schedule A attached hereto.
(12) "IIC" - means that certain document, The Southern Company
System Intercompany Interchange Contract dated October 31, 1988, among
Georgia Power and certain of its Affiliates, accepted in FERC Docket
No. ER89-48-000, as the same has been and may hereafter be amended, or
any successor contract among Georgia Power and its Affiliates for
coordinated operations.
(13) "ITS" - means the "Integrated Transmission System" as
such term is defined in the Revised ITSA.
(14) "Interest Rate" - means the rate per annum equal to the
lesser of:
(i) the highest interest rate allowed by law, in
accordance with O.C.G.A. ss. 7-4-2(a)(1); or
(ii) two (2) percent plus the prime rate, as stated
in the Wall Street Journal on the date payment is due.
(15) "Joint Committee" - means the Joint Committee for
Planning and Operations established under that certain Joint Committee
Agreement among Georgia Power, Oglethorpe Electric Membership
Corporation (Oglethorpe Power's predecessor) and certain other
entities, dates as of August 27, 1976, as amended.
(16) "Level A" - means the generator voltage side of each
step-up or station service transformer of each generation facility of
Georgia Power or other entity that supplies power directly into the
ITS.
(17) "Level A to B-1 Loss Factors" - means factors intended to
reflect energy loss from Level A to Level B-1 for generation, as
adopted by the Joint Committee.
(18) "Level B-1" - means the transmission voltage side of each
step-up transformer of each generation facility of Georgia Power or
other entity that supplies power directly into the ITS, or any points
of interconnection where power flows into the ITS.
(19) "Load Carrying Capability" - means, for each LT Resource
at any given time during the Term, subject to adjustment in accordance
with Section 5.15, the product, expressed in whole megawatts (MW), of:
(i) the Resource Capacity of such LT Resource at such
time, in megawatts (MW); times (ii) the Availability
Factor of such LT Resource at such time.
(20) "LT Peaking Resource" - means the long term peaking
resource described in Schedule B attached hereto.
(21) "LT Resources" - means both the LT Peaking Resource and
the LT Steam Resource.
(22) "LT Schedule" - means one of Schedules B or C attached
hereto.
(23) "LT Steam Resource" - means the long term steam resource
described in Schedule C attached hereto.
(24) "Minimum Operating Level" - means, for the LT Steam
Resource at any given time during the Term, the product, expressed in
whole megawatts (MW), of:
(i) the Resource Capacity at such time, in megawatts
(MW); times (ii) Forty one-hundredths (0.40).
"Minimum Operating Level" - means, for each LT Peaking Resource at any
given time during the Term, zero (-0-) megawatts (MW).
(25) "Month" - means a calendar month, commencing at one (1)
minute prior to 12:01 a.m. (Operating Time) on one of January 1,
February 1, March 1, April 1, May 1, June 1, July 1, August 1,
September 1, October 1, November 1 and December 1 and ending at one (1)
minute after 11:59 p.m. (Operating Time) of the succeeding January 31,
February 28 or 29 (during a leap year), March 31, April 30, May 31,
June 30, July 31, August 31, September 30, October 31, November 30 or
December 31. "Monthly" - has a meaning correlative to that of Month.
(26) "Monthly Capacity Charge" - means, for a given Resource,
the Monthly amount owed by Oglethorpe Power to Georgia Power for the
capacity of such Schedule, in dollars per Month ($/Mo), as the same is
calculated by Georgia Power for such Resource for each Month during the
Term as provided in Sections 2.2(b) and (c).
(27) "Monthly Capacity Payment" - means the Monthly payment
owed by Oglethorpe Power to Georgia Power for the capacity purchased by
Oglethorpe Power hereunder, in dollars per Month ($/Mo), as the same is
calculated by Georgia Power for each Month during the Term as provided
in Section 2.2(a).
(28) "Monthly Capacity Rate" - means, for each LT Resource for
each Month of a given Year, the amount, in dollars per kilowatt-month
($/KW-Mo), as set forth in Part 3 of the Schedule associated with such
LT Resource.
(29) "Monthly Energy Charge" - means, for a given Resource,
the Monthly amount owed by Oglethorpe Power to Georgia Power for energy
scheduled from such Resource, in dollars per Month ($/Mo), as the same
is calculated by Georgia Power for such Resource for each Month during
the Term as provided in Sections 3.2(b) and (c).
(30) "Monthly Energy Payment" - means the Monthly payment owed
by Oglethorpe Power to Georgia Power for energy scheduled by Oglethorpe
Power hereunder, in dollars per Month ($/Mo), as the same is calculated
by Georgia Power for each Month during the Term as provided in Section
3.2(a).
(31) "Monthly Energy Rate" - means, for a given LT Resource
for each Month during the Term, the amount, in dollars per
megawatt-hour ($/MWH), calculated by Georgia Power for such Resource
for such Month as provided in Part 4 of the Schedule associated with
such LT Resource.
(32) "Operating Time" - means the time standard used to
dispatch, schedule and control the control area of which Georgia Power
is a part, currently central prevailing time. Oglethorpe Power shall be
noticed of any changes in the time standard used for Operating Time.
(33) "Prudent Utility Practices" - means, at a particular
time, any of the practices, methods and acts engaged in or approved by
a significant portion of the electric utility industry prior to such
time, or any of the practices, methods and acts which, in the exercise
of reasonable judgment in light of the facts known at the time the
decision was made, could have been expected to accomplish the desired
results at the lowest reasonable cost consistent with good business
practices, reliability, safety and expedition. Prudent Utility
Practices is not intended to be limited to the optimum practice, method
or act to the exclusion of all others, but rather to be a spectrum of
possible practices, methods or acts expected to accomplish the desired
results, having due regard for, among other things, manufacturers'
warranties and the requirements of Governmental Authorities of
competent jurisdiction and the requirements of this Agreement.
(34) "Quarter Hour" - means any one of the 15 minute
increments starting on each Hour, at 15 minutes past each Hour, at 30
minutes past each Hour and at 45 minutes past each Hour.
(35) "Resource" - means any one (1) of the Short Term
Resources or the LT Resources. The Resources under this Agreement shall
be deemed "OPC Resources" (as such term is defined and used in the
RCSA).
(36) "Resource Capacity" - means the amount of capacity, in
megawatts (MW), associated with such Resource as specified in the
notices given by Oglethorpe Power pursuant to Part 2 of each respective
Schedule plus the Remainder, if any, as specified in Part 2 of Schedule
B or C.
(37) "Revised Coordination Services Agreement" or "RCSA" -
means that certain Revised and Restated Coordination Services Agreement
between and among Georgia Power, Oglethorpe Power and GSOC dated as of
September 10, 1997, as may be amended.
(38) "Revised ITSA" - means that certain Revised and Restated
Integrated Transmission System Agreement between Georgia Power and
Oglethorpe Power dated as of November 12, 1990, and each of the similar
agreements between Georgia Power and the Municipal Electric Authority
of Georgia and between Georgia Power and the City of Dalton, Georgia,
as may be amended.
(39) "RUS" - means the Rural Utilities Service, an agency of
the United States Department of Agriculture, or any Governmental
Authority succeeding to the powers and functions thereof.
(40) "Schedule" - means one (1) of the schedules, designated
Schedule A, B or C for sale of capacity and associated energy attached
to this Agreement and incorporated herein by reference.
(41) "Short Term Resource" - means one (1) of the short term
resources described in Schedule A attached hereto.
(42) "Southern Control Area" - means the electric service area
encompassed by tie lines, including, but not limited to, the pseudo tie
lines (as defined by NERC's "Terms Used in the Policies"), between the
operating company affiliates of The Southern Company (Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power
Company, and Savannah Electric and Power Company) and other utilities.
(43) "Southern Dispatch" - means the ability of Southern
Company Services, Inc. (or other Affiliate of Georgia Power) to
schedule and control, directly or indirectly, manually or
automatically, the output of a generation facility in the Southern
Control Area in order to increase or decrease the electricity delivered
from such generation facility into the electric system with which it is
interconnected.
(44) "Term" - means the term of this Agreement specified in
Section 8.1.
(45) "Umbrella Agreement" - means that certain ITSA, Power
Sale and Coordination Umbrella Agreemententered into between Georgia
Power and Oglethorpe Power as of November 12, 1990.
(46) "Unit" - means any one (1) of the generation facilities
identified in the LT Schedules.
(47) "Unit Power Sales ("UPS")" - means sales pursuant to the
following specific agreements: (1) Unit Power Sales Agreement between
Florida Power Corporation and Alabama Power Company, Georgia Power
Company, Gulf Power Company, Mississippi Power Company, Savannah
Electric and Power Company and Southern Company Services, Inc. dated as
of July 19, 1988; (2) Unit Power Sales Agreement between Florida Power
& Light Company and Alabama Power Company, Georgia Power Company, Gulf
Power Company, Mississippi Power Company, Savannah Electric and Power
Company and Southern Company Services, Inc. dated as of July 20, 1988;
(3) Unit Power Sales Agreement between Jacksonville Electric Authority
and Alabama Power Company, Georgia Power Company, Gulf Power Company,
Mississippi Power Company, Savannah Electric and Power Company and
Southern Company Services, Inc. dated as of August 17, 1988; and (4)
Unit Power Sales Agreement between City of Tallahassee and Alabama
Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company and Southern Company
Services, Inc. dated as of December 8, 1990.
(48) "Week" - means each period of seven (7) Days, commencing
at one (1) minute prior to 12:01 a.m. (Operating Time) of each Monday
and ending at one (1) minute after 11:59 p.m. (Operating Time) of each
succeeding Sunday.
(49) "Year" - means a calendar year, commencing at one (1)
minute prior to 12:01 a.m. (Operating Time) of each January 1 and
ending at one (1) minute after 11:59 p.m. (Operating Time) of each
succeeding December 31.
1.2 Interpretation. In this Agreement and the Schedules hereto, unless
the context otherwise requires:
(a) words generally importing the singular shall include the
plural and vice versa.
(b) the term "entity" includes corporations, limited liability
companies, partnerships, associations and governmental authorities.
ARTICLE II
SALE OF ELECTRIC CAPACITY
2.1......Sale and Amount of Capacity. Georgia Power agrees to sell to
Oglethorpe Power, and Oglethorpe Power agrees to purchase from Georgia Power,
during each Year of the Term (or portion thereof that is within the Term), an
amount of capacity equal to that specified in Schedules A, B and C.
2.2......Price of Capacity.
(a) Oglethorpe Power shall pay Georgia Power for each Month of
the Term a Monthly Capacity Payment, in dollars per Month ($/Mo), that
is equal to the summation of the Monthly Capacity Charge of each
Resource for such Month.
(b) For each Short Term Resource, the Monthly Capacity Charge,
in dollars per Month ($/Mo), for any given Month is stated in Part 3 of
Schedule A.
(c) For each LT Resource, the Monthly Capacity Charge, in
dollars per Month ($/Mo), for any given Month is equal to the product
of:
(1) the Resource Capacity, in megawatts (MW), of such
LT Resource during the immediately previous Month; times
(2) the Monthly Capacity Rate for such LT Resource
for such previous Month, in dollars per kilowatt-month
($/KW-Mo); times
(3) one thousand (1,000).
ARTICLE III
SALE OF ELECTRIC ENERGY
3.1......Sale and Delivery of Energy.
(a) Georgia Power agrees to sell to Oglethorpe Power, and
Oglethorpe Power agrees to purchase from Georgia Power, all energy
scheduled by Oglethorpe Power pursuant to this Agreement.
(b) Subject to Section 6.6, Oglethorpe Power may commit and
schedule energy utilization of each Resource, in amounts determined
from time to time in Oglethorpe Power's discretion, in accordance with
the provisions of Articles IV and V. Any final commitment or energy
utilization schedule made by Oglethorpe Power pursuant to this
Agreement shall constitute an obligation to accept and purchase energy
utilization of the Resources as so scheduled (or as deemed to have been
so scheduled under the provisions of Articles IV and V), and Oglethorpe
Power shall be obligated to pay for such energy utilization at the
prices determined pursuant to Section 3.2.
(c) Georgia Power agrees to deliver energy scheduled by
Oglethorpe Power hereunder, and Oglethorpe Power shall accept such
energy, at Level B-1, as and when scheduled by Oglethorpe Power;
provided, however, that Georgia Power shall not be required to deliver
any such scheduled energy, if the schedule does not comply with the
provisions of Articles IV and V or if such nondelivery is permissible
under Section 6.6. Georgia Power may serve Oglethorpe Power's schedules
with energy from any resources available to Georgia Power, in Georgia
Power's sole discretion.
3.2......Price of Energy.
(a) Oglethorpe Power shall pay Georgia Power during each Month
of the Term a Monthly Energy Payment, in dollars per Month ($/Mo), that
is equal to the summation of the Monthly Energy Charge of each Resource
for such Month.
(b) For each Short Term Resource, the Monthly Energy Charge,
in dollars per Month ($/Mo), for any given Month is equal to the
summation, over all Hours of the previous Month, of the product of:
(1) the amount of energy in megawatt-hours (MWH)
deemed to have been utilized by Oglethorpe Power (under
Section 4.7) from the Short Term Resource during each Hour of
the previous Month; times
(2) the Hourly Energy Rate, in dollars per
megawatt-hour ($/MWH), for the Short Term Resource for such
Hour.
(c) For each LT Resource, the Monthly Energy Charge, in
dollars per Month ($/Mo), for any given Month is equal to the product
of:
(1) the summation of the amount of energy, in
megawatt-hours per Month (MWH/Mo), deemed to have been
utilized by Oglethorpe Power (under Section 5.14) from such LT
Resource during each Hour of the previous Month; times
(2) the Monthly Energy Rate, in dollars per
megawatt-hour ($/MWH), for such LT Resource for such previous
Month.
(d) Georgia Power shall provide to Oglethorpe Power the
Monthly Energy Rate as calculated by Georgia Power as provided in Part
4 of the LT Schedules for each LT Resource associated with a LT
Schedule, that is in effect for such Month, for each Month, by the
third (3rd) business Day prior to the last Day of the immediately
previous Month.
ARTICLE IV
SHORT TERM RESOURCE COMMITMENT AND ENERGY UTILIZATION
4.1 Availability.
(a) Each of Oglethorpe Power's Short Term Resources shall be
deemed to be available during each Hour of each Day of each Week during the Term
at the respective then current Resource Capacity of such Short Term Resource, as
long as Schedule A is effective under this Agreement. The deemed availability of
a given Short Term Resource shall change automatically from time to time during
the Term to reflect any recall of the Short Term Resources pursuant to Section
4.8.
(b) Commencing upon the effective date of Schedule A's
termination under this Agreement, Oglethorpe Power may no longer at any time
schedule any energy utilization from the Short Term Resources.
4.2 Energy Utilization Schedules. Oglethorpe Power shall provide
Georgia Power or its agent on or before 9:30 a.m. (Operating Time) of each Day,
a schedule of Oglethorpe Power's anticipated utilization for each Hour during
the immediately following Day from each Short Term Resource, subject to the
provisions of this Section 4.2 and Sections 4.4, 4.5 and 4.6 concerning minimum
utilization notice, minimum utilization duration, and maximum utilization Hours.
If Oglethorpe Power provides more than one (1) schedule for its anticipated
utilization of the Short Term Resources for the immediately following Day, the
schedule last received by Georgia Power or its agent on or before 9:30 a.m.
(Operating Time) shall be deemed the effective schedule and all previous
schedules submitted for such Day shall be deemed ineffective. Georgia Power
shall use reasonable best efforts to notify Oglethorpe Power that such
utilization schedule has been deemed ineffective as soon as practicable
following such event.
4.3 Changes to Utilization Schedules.
(a) If Oglethorpe Power has submitted a valid utilization
schedule for one or more Short Term Resources pursuant to Section 4.2 for a
given Day, Oglethorpe Power may make changes to its schedule of utilization from
the Short Term Resources for such given Day from time to time during such Day,
in Oglethorpe Power's discretion, subject to the provisions of this Section 4.3
and of Sections 4.4, 4.5 and 4.6 concerning minimum utilization notice, minimum
utilization duration, and maximum utilization Hours.
(b) Oglethorpe Power shall use good faith efforts to notify
Georgia Power or its agent of such changes as soon as practicable after
Oglethorpe Power decides to make any such changes. Such notices shall contain
information regarding which Short Term Resource Oglethorpe Power wishes to add
to or delete from its utilization schedule for the Short Term Resources during
each Hour affected by such changes. Except as required in Section 4.3(c), if
Oglethorpe Power notifies Georgia Power of the intent to add or delete more than
one (1) Short Term Resource in any given Hour, such notice shall be deemed
ineffective. Georgia Power shall use reasonable best efforts to notify
Oglethorpe Power that such utilization schedule has been deemed ineffective as
soon as practicable following such event.
(c) Oglethorpe Power shall be required to make such changes to
its energy utilization schedules from time to time during a Day to reflect any
recalls made by Georgia Power or its agent, pursuant to Section 4.8, of the
Short Term Resources. Oglethorpe Power shall make changes as and when directed
by Georgia Power or its agent. Oglethorpe Power shall be deemed to have reduced
its energy utilization schedule from such a Short Term Resource, automatically
as and when, and to such level of energy as Georgia Power or its agent deems
appropriate under the circumstances and Section 4.8 (including without
limitation zero (-0-)), whether or not Oglethorpe Power has made such changes as
aforesaid. Any changes to Oglethorpe Power's utilization schedules made or
deemed to have been made pursuant to this Section 4.3(c) shall be treated as
"energy scheduled . . . but not delivered" pursuant to Section 4.8(c).
4.4 Minimum Utilization Notice.
(a) Oglethorpe Power must give Georgia Power or its agent at
least twenty (20) minutes' prior notice that Oglethorpe Power wishes to utilize
energy from a Short Term Resource during an Hour in order to actually utilize
energy from such Short Term Resource during such Hour.
(b) Once Oglethorpe Power has given Georgia Power or its agent
notice pursuant to Section 4.2 or 4.3 that Oglethorpe Power wishes to utilize
energy from a given Short Term Resource in a given Hour, Oglethorpe Power may
delete such Short Term Resource from its utilization schedule for such Hour only
until twenty (20) minutes prior to such Hour.
(c) Oglethorpe Power's schedule of energy utilization from all
Short Term Resources during a given Hour shall become final at twenty (20)
minutes prior to such Hour and shall not thereafter be subject to change by
Oglethorpe Power.
(d) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to Section 4.2 or 4.3 that Oglethorpe Power wishes to schedule
energy utilization from a given Short Term Resource upon less than twenty (20)
minutes' prior notice, then such energy utilization notice shall be deemed
ineffective as to such Short Term Resource for such Hour (even if Oglethorpe
Power complied with the provisions of Sections 4.5 and 4.6 concerning minimum
utilization duration and maximum utilization Hours). Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such utilization
schedule has been deemed ineffective as soon as practicable following such
event.
4.5 Minimum Utilization Duration. If any Short Term Resource is
utilized during a given Day, then Oglethorpe Power must always schedule energy
utilization from each such Short Term Resource at no less than six (6)
consecutive Hours. If Oglethorpe Power gives Georgia Power or its agent notice
pursuant to Sections 4.2 or 4.3 that Oglethorpe Power wishes to schedule any
Short Term Resource such that such Short Term Resource is being utilized less
than six (6) consecutive Hours, then Oglethorpe Power shall nevertheless be
deemed to have scheduled energy utilization from such Short Term Resource for a
period of six (6) consecutive Hours starting with the first Hour scheduled for
such Short Term Resource in said notice. Georgia Power shall use reasonable best
efforts to notify Oglethorpe Power that such utilization schedule has been
deemed changed as soon as practicable following such event.
4.6 Maximum Utilization Hours. Oglethorpe Power may not schedule energy
utilization from the Short Term Resources in excess of 2500 Hours during the
Term of this Agreement. For purposes of determining such 2500 Hours of maximum
energy utilization, if Oglethorpe Power schedules one (1) or more Short Term
Resource in a given Hour, such Hour shall count as one (1) Hour of energy
utilization. If Oglethorpe Power gives Georgia Power or its agent notice
pursuant to Sections 4.2 or 4.3 that Oglethorpe Power wishes to schedule any
Short Term Resource such that the Short Term Resources are being utilized in
excess of 2500 Hours during the Term of this Agreement, such notice shall be
ineffective. Georgia Power shall use reasonable best efforts to notify
Oglethorpe Power that such utilization schedule has been deemed ineffective as
soon as practicable following such event.
4.7 Energy Utilization. For purposes of calculating both the Monthly
Energy Charge for each of the Short Term Resources and the "Actual Hourly
Resource Utilization" (as such term is defined and used in the RCSA) associated
with each of the Short Term Resources, Oglethorpe Power shall be deemed to have
utilized during each Hour all energy either:
(1) shown on Oglethorpe Power's final energy utilization
schedule (under Section 4.4(c)) during each such Hour for such Short
Term Resource, except as such energy utilization schedule may have been
deemed ineffective under Section 4.2, 4.3(b), 4.4(d) or 4.6.
(2) deemed to have been scheduled by Oglethorpe Power during
each such Hour from such Short Term Resource under Section 4.3(c) or
4.5.
4.8 Recall of Short Term Resources.
(a) If Georgia Power or its agent determines in its sole
discretion that it is necessary or appropriate to interrupt (i) Georgia Power
retail interruptible load (retail electric service currently provided pursuant
to Tariffs IS-Standard-1 and IS-SBG-1 on file with the Georgia Public Service
Commission), or (ii) firm sale obligations executed prior to this Agreement,
then the Short Term Resources may, in Georgia Power's sole discretion, be
interrupted upon thirty (30) minutes' prior notice. Such notice shall specify
the event(s) used to determine the recall.
(b) Oglethorpe Power agrees that, in such event, it will
immediately change (or allow the change of by Georgia Power or its agent) its
energy utilization from the Short Term Resources, as provided in Section 4.3. In
addition, in such event, Oglethorpe Power agrees that it will take any and all
actions necessary or appropriate to accomplish the foregoing including, without
limitation, shedding load served by the Short Term Resources. Oglethorpe Power
may recommence serving load shed by Oglethorpe Power pursuant to this Section
4.8 when Georgia Power or its agent advises Oglethorpe Power that it is
appropriate to do so in light of system security needs.
(c) Georgia Power agrees that, if the Short Term Resources are
reduced pursuant to this Section 4.8 such that the Monthly ratio of actual
energy delivered during such Month, in megawatt-hours (MWH), divided by the sum
of the actual energy delivered during such Month plus the energy scheduled
during such Month but not delivered due to interruption pursuant to this Section
4.8, excluding increases in scheduled utilization pursuant to Section 4.3 in an
Hour in which the Southern Control Area has declared a System Alert Level 1-A or
higher (as determined in accordance with the Southern Sub-Region Security
Coordinator Agreement), expressed in megawatt-hours (MWH), is less than
ninety-five one-hundredths (0.95), then Georgia Power shall give Oglethorpe
Power a credit in the following Monthly invoice in an amount for the Short Term
Resources that is determined in accordance with Part 5 of Rate Schedule A.
4.9 Delivery of and Payment for Energy. Georgia Power's and Oglethorpe
Power's respective rights and obligations concerning the delivery of and payment
for final energy utilization scheduled by Oglethorpe Power from the Short Term
Resources during any given Hour of the Term shall be as set forth in Article
III.
4.10 Hourly Energy Rate Information Obligations.
(a) By 5:00 p.m. (Operating Time) of each Day in which
Oglethorpe Power has submitted a valid schedule for utilization of energy from
any of the Short Term Resources pursuant to Sections 4.2 through 4.6, Georgia
Power will provide, to Oglethorpe Power, estimates of the expected Hourly Energy
Rates for each Hour of the following Day together with an assessment of the
probability of a recall pursuant to Section 4.8 during the following Day. At
least thirty (30) minutes prior to each Hour of such following Day, Georgia
Power will provide, to Oglethorpe Power, the Hourly Energy Rates effective for
such Hour, provided such Hour is not subject to interruption pursuant to Section
4.8.
(b) Oglethorpe Power agrees to treat such Hourly Energy Rates
and estimates as confidential data consistent with the provisions of Article XV
of the RCSA. Specifically, Oglethorpe Power shall not disclose such Hourly
Energy Rates or estimates to any other person, agent or entity, including, but
not limited to, LG&E Energy Marketing, Morgan Stanley Capital Group, Inc. or any
other power marketer, provided, however, Oglethorpe Power may disclose actual
Hourly Energy Rates associated with the final energy utilization to the EMCs to
the extent necessary for billing and audit purposes after receipt of the invoice
rendered pursuant to Section 6.2. Oglethorpe Power will discuss with Georgia
Power the form and substance of such Hourly Energy Rates information that
Oglethorpe Power intends to disclose to the EMCs prior to such disclosure;
provided, however, Oglethorpe Power has no obligation to discuss disclosure of
such information when such disclosure occurs during an audit by an EMC of a bill
rendered by Oglethorpe Power to such EMC.
ARTICLE V
LT RESOURCE COMMITMENT AND ENERGY UTILIZATION
5.1 Availability.
(a) Each of Oglethorpe Power's LT Resources shall be deemed to
be available during each Hour of each Day of each Week during the Term at the
respective then current Load Carrying Capability of such LT Resource, as long as
the respective LT Schedule is effective under this Agreement. The deemed
availability of a given LT Resource shall change automatically from time to time
during the Term to reflect any changes in the Load Carrying Capability of any of
the LT Resources under Section 5.15.
(b) Commencing upon the effective date of Schedule B's
termination under this Agreement, the LT Peaking Resource shall no longer be
deemed committed and Oglethorpe Power may no longer at any time schedule any
energy utilization from the LT Peaking Resource.
5.2 LT Steam Resource Commitment Schedules.
Oglethorpe Power shall provide Georgia Power or its agent on
or before 1:30 p.m. (Operating Time) of the Friday prior to the commencement of
each Week during the Term, a schedule for each Hour of each Day of the
immediately following Week indicating Oglethorpe Power's expected commitment for
the LT Steam Resource.
5.3 Changes to LT Steam Resource Commitment Schedules.
(a) Oglethorpe Power may make changes to its commitment
schedule of the LT Steam Resource for a given Week from time to time during such
Week, in Oglethorpe Power's discretion, subject to the provisions of this
Section 5.3 and of Sections 5.4, 5.5 and 5.6 concerning minimum notice periods
for commitment and decommitment and minimum downtime.
(b) Oglethorpe Power shall use good faith efforts to notify
Georgia Power or its agent of such changes as soon as practicable after
Oglethorpe Power decides to make any such changes.
(c) Notwithstanding Section 5.3(b), Oglethorpe Power shall
provide Georgia Power or its agent on or before 1:30 p.m. (Operating Time) of
each Day during the Term, notice of any such changes to Oglethorpe Power's then
current commitment schedule of the LT Steam Resource for the immediately
following one (1) Day. Notice of any such changes provided by Oglethorpe Power
pursuant to this Section 5.3(c) shall be deemed to satisfy the requirements of
Section 5.3(b). If Oglethorpe Power provides more than one (1) schedule for its
anticipated commitment of the LT Steam Resource for the immediately following
one (1) Day, the schedule last received by Georgia Power or its agent on or
before 1:30 p.m. (Operating Time) shall be deemed the effective schedule and all
previous schedules submitted for such Day shall be deemed ineffective.
5.4 LT Steam Resource Minimum Commitment Notice.
(a) Oglethorpe Power must give Georgia Power or its agent at
least twelve (12) Hours' prior notice that it wishes to commit the LT Steam
Resource in order to actually commit such LT Steam Resource.
(b) Once Oglethorpe Power has given Georgia Power or its agent
notice pursuant to Section 5.2 or 5.3 that Oglethorpe Power wishes to commit the
LT Steam Resource, Oglethorpe Power may delete the LT Steam Resource from its
then current commitment schedule only until twelve (12) Hours prior to the first
(1st) Hour during which Oglethorpe Power has notified Georgia Power that
Oglethorpe Power wishes the LT Steam Resource to be committed. If Oglethorpe
Power does not delete the LT Steam Resource from its then current commitment
schedule (by notice provided pursuant to Section 5.2 or 5.3) prior to the
commencement of the twelfth (12th) Hour preceding such first (1st) Hour of
commitment, then Oglethorpe Power shall be deemed to have committed the LT Steam
Resource, commencing with such first (1st) Hour, and may thereafter decommit the
LT Steam Resource only pursuant to and as allowed by Sections 5.2, 5.3, 5.5 and
5.17.
(c) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to Section 5.2 or 5.3 that Oglethorpe Power wishes to commit the
LT Steam Resource upon less than twelve (12) Hours' prior notice, then such
commitment notice shall be ineffective as to the LT Steam Resource (even if
Oglethorpe Power complied with the provisions of Section 5.6 concerning minimum
downtime). Georgia Power shall use reasonable best efforts to notify Oglethorpe
Power that such commitment schedule has been deemed ineffective as soon as
practicable following such event.
(d) Notwithstanding Sections 5.4(a) and 5.4(b), a commitment
of the LT Steam Resource shall not be effective unless Oglethorpe Power also
complies with the provisions of Section 5.6 concerning minimum downtime.
5.5 LT Steam Resource Minimum Decommitment Notice.
(a) Unless permitted pursuant to Section 5.17, Oglethorpe
Power must give Georgia Power or its agent at least four (4) Hours' prior notice
that Oglethorpe Power wishes to decommit the LT Steam Resource in order to
actually decommit the LT Steam Resource.
(b) Once Oglethorpe Power has given Georgia Power or its agent
notice pursuant to Section 5.2 or 5.3 that Oglethorpe Power wishes to decommit
the LT Steam Resource, Oglethorpe Power may retain the LT Steam Resource on its
then current commitment schedule only until four (4) Hours prior to the first
(1st) Hour during which Oglethorpe Power has noticed Georgia Power that
Oglethorpe Power wishes the LT Steam Resource to be decommitted. If Oglethorpe
Power does not retain the LT Steam Resource on its then current commitment
schedule (by notice provided pursuant to Section 5.2 or 5.3) prior to the fourth
(4th) Hour preceding such first (1st) Hour of decommitment, then Oglethorpe
Power shall be deemed to have decommitted the LT Steam Resource, commencing with
such first (1st) Hour, and may thereafter again commit the LT Steam Resource
only pursuant to and as allowed by Sections 5.2, 5.3, 5.4 and 5.6.
(c) If Oglethorpe Power gives Georgia Power notice pursuant to
Section 5.2 or 5.3 that Oglethorpe Power wishes to decommit the LT Steam
Resource upon less than four (4) Hours' prior notice, then such decommitment
notice shall be ineffective as to the LT Steam Resource. Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such commitment schedule
has been deemed ineffective as soon as practicable following such event.
5.6 LT Steam Resource Minimum Downtime.
(a) Oglethorpe Power may not commit the LT Steam Resource
until at least twenty-four (24) Hours following the first (1st) effective Hour
of the LT Steam Resource's most recent decommitment.
(b) If Oglethorpe Power notifies Georgia Power or its agent
pursuant to Section 5.2 or 5.3 that Oglethorpe Power wishes to commit the LT
Steam Resource following the expiration of fewer than twenty-four (24) Hours,
then such commitment notice shall be ineffective as to the LT Steam Resource
(even if Oglethorpe Power complied with the provisions of Section 5.4 concerning
minimum commitment notice). Georgia Power shall use reasonable best efforts to
notify Oglethorpe Power that such commitment schedule has been deemed
ineffective as soon as practicable following such event.
5.7 LT Peaking Resource Deemed Committed. The LT Peaking Resource shall
be deemed committed at all times during the Term, as long as Schedule B has not
terminated pursuant to this Agreement. Sections 5.2 through 5.6 shall not apply
to the LT Peaking Resource.
5.8 Energy Utilization Schedules.
(a) Oglethorpe Power shall provide Georgia Power or its agent
on or before 1:30 p.m. (Operating Time) of each Day, a schedule of Oglethorpe
Power's anticipated energy utilization during the immediately following Day from
the committed LT Resources. If Oglethorpe Power provides more than one (1)
schedule for its anticipated utilization of the LT Steam Resource for the
immediately following one (1) Day, the schedule last received by Georgia Power
or its agent on or before 1:30 p.m. (Operating Time) shall be deemed the
effective schedule and all previous schedules submitted for such Day shall be
deemed ineffective.
(b) The energy utilization schedules provided by Oglethorpe
Power for each Day pursuant to Section 5.8(a) shall contain information
regarding the amount of energy, in megawatt-hours per Hour (MWH/H), that
Oglethorpe Power expects to utilize from each of the committed LT Resources
during each Quarter Hour of such Day.
(c) Each of Oglethorpe Power's energy utilization schedules
shall be consistent on an Hour by Hour basis with Oglethorpe Power's then
current commitment schedule of the LT Steam Resource for such Hour. Oglethorpe
Power may not include the LT Steam Resource in an energy utilization schedule
for a given Hour of a given Day, if the LT Steam Resource has not been properly
committed by Oglethorpe Power for such Hour pursuant to Sections 5.2 through
5.6.
(d) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to this Section 5.8 that Oglethorpe Power wishes to schedule
energy utilization from the LT Steam Resource for a given Hour, when the LT
Steam Resource has not been properly committed by Oglethorpe Power for such Hour
pursuant to Sections 5.2 through 5.6, then such energy utilization notice shall
be ineffective as to the LT Steam Resource for such Hour (even if Oglethorpe
Power complied with the provisions of Sections 5.10, 5.11, 5.12 and 5.13
concerning minimum utilization notice, minimum utilization levels, maximum
utilization levels and ramping). Georgia Power shall use reasonable best efforts
to notify Oglethorpe Power that such utilization schedule has been deemed
ineffective as soon as practicable following such event.
5.9 Changes to Utilization Schedules.
(a) Oglethorpe Power may make changes to its schedule of
energy utilization from the committed LT Resources for a given Day from time to
time during such Day, in Oglethorpe Power's discretion, subject to the
provisions of this Section 5.9 and of Sections 5.10, 5.11, 5.12 and 5.13
concerning minimum utilization notice, minimum utilization levels, maximum
utilization levels and ramping.
(b) Oglethorpe Power shall use good faith efforts to notify
Georgia Power or its agent of such changes as soon as practicable after
Oglethorpe Power decides to make any such changes. Such notices shall contain
information regarding the increases or decreases in the amount of energy, in
megawatt-hours per Hour (MWH/H), that Oglethorpe Power expects to utilize from
each of the committed LT Resources during each Quarter Hour affected by such
changes.
(c) Oglethorpe Power shall be required to make such changes to
its energy utilization schedules from time to time during a Day to reflect any
changes made by Georgia Power or its agent, pursuant to Section 5.15, to the
Load Carrying Capability of a LT Resource. Oglethorpe Power shall make such
changes as and when directed by Georgia Power or its agent. Oglethorpe Power
shall be deemed to have reduced its energy utilization schedule from such a LT
Resource, automatically as and when, and to such level of energy as Georgia
Power or its agent deems appropriate under the circumstances and Section 5.15
(including without limitation zero (-0-)), whether or not Oglethorpe Power has
made such changes as aforesaid.
(d) Oglethorpe Power's energy utilization schedules, as
changed (or as deemed to have been changed) by Oglethorpe Power from time to
time pursuant to this Section 5.9, shall always continue to be consistent on an
Hour by Hour basis with Oglethorpe Power's then current commitment schedule of
the LT Steam Resource. Oglethorpe Power may not pursuant to this Section 5.9 add
the LT Steam Resource to any energy utilization schedule for a given Hour of a
given Day, if the LT Steam Resource has not been properly committed by
Oglethorpe Power for such Hour pursuant to Sections 5.2 through 5.6.
(e) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to this Section 5.9 that Oglethorpe Power wishes to schedule
energy utilization from the LT Steam Resource for a given Hour, when the LT
Steam Resource has not been properly committed by Oglethorpe Power for such Hour
pursuant to Sections 5.2 through 5.6, then such energy utilization notice shall
be ineffective as to the LT Steam Resource for such Hour (even if Oglethorpe
Power complied with the provisions of Sections 5.10, 5.11, 5.12 and 5.13
concerning minimum utilization notice, minimum utilization levels, maximum
utilization levels and ramping). Georgia Power shall use reasonable best efforts
to notify Oglethorpe Power that such utilization schedule has been deemed
ineffective as soon as practicable following such event.
5.10 Minimum Utilization Notice.
(a) Oglethorpe Power must give Georgia Power or its agent at
least one (1) Quarter Hour's prior notice that Oglethorpe Power wishes to
utilize energy from a LT Resource during a Quarter Hour in order to actually
utilize energy from such LT Resource during such Quarter Hour.
(b) Once Oglethorpe Power has given Georgia Power or its agent
notice pursuant to Section 5.8 or 5.9 that Oglethorpe Power wishes to utilize
energy from a given committed LT Resource in a given Quarter Hour at a given
level of energy, Oglethorpe Power may increase or decrease the level of energy
at which such LT Resource is to be utilized during such Quarter Hour only until
one (1) Quarter Hour prior to such Quarter Hour.
(c) Oglethorpe Power's schedule of energy utilization from all
committed LT Resources during a given Quarter Hour shall become final at the
commencement of the immediately preceding Quarter Hour and shall not thereafter
be subject to increase or decrease by Oglethorpe Power.
(d) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to Section 5.8 or 5.9 that Oglethorpe Power wishes to schedule
energy utilization from a given LT Resource upon less than one (1) Quarter
Hour's prior notice, then such energy utilization notice shall be ineffective as
to such LT Resource for such Quarter Hour (even if Oglethorpe Power complied
with the provisions of Sections 5.11, 5.12 and 5.13 concerning minimum
utilization levels, maximum utilization levels and ramping). Georgia Power shall
use reasonable best efforts to notify Oglethorpe Power that such utilization
schedule has been deemed ineffective as soon as practicable following such
event.
(e) If Oglethorpe Power gives Georgia Power or its agent
notice pursuant to Section 5.8 or 5.9 that Oglethorpe Power wishes to schedule
energy utilization from the LT Peaking Resource in a given Quarter Hour (Y) that
is not equal to the energy utilization scheduled in the immediately previous
Quarter Hour (X), then for the immediately following Quarter Hour (Z),
Oglethorpe Power must schedule the identical utilization as scheduled for the
given Quarter Hour (Y). If in such following Quarter Hour (Z) Oglethorpe Power
schedules energy utilization from the LT Peaking Resource that is not identical
to that scheduled for the given Quarter Hour (Y), then Oglethorpe Power shall
nevertheless be deemed to have scheduled energy utilization from the LT Peaking
Resource in such following Quarter Hour (Z) at such level of energy equal to the
given Quarter Hour's (Y's) utilization schedule. Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such utilization has
been deemed scheduled as soon as practicable following such event.
5.11 Minimum Utilization Levels.
(a) If the LT Steam Resource is committed during a given Hour,
then Oglethorpe Power must always schedule energy utilization from the LT Steam
Resource at no less than its then current Minimum Operating Level. If the LT
Steam Resource is committed during an Hour, but Oglethorpe Power does not
schedule energy utilization from the LT Steam Resource during each Quarter Hour
or schedules energy utilization from the LT Steam Resource at less than its then
current Minimum Operating Level, then Oglethorpe Power shall nevertheless be
deemed to have scheduled energy utilization from the LT Steam Resource at its
then current Minimum Operating Level. Georgia Power shall use reasonable best
efforts to notify Oglethorpe Power that such utilization has been deemed
scheduled as soon as practicable following such event.
(b) This Section 5.11 shall not apply to the LT Peaking
Resource.
5.12 Maximum Utilization Levels. Oglethorpe Power may not schedule
energy utilization from any committed LT Resource during any Quarter Hour at any
level of energy in excess of the then current Load Carrying Capability of such
LT Resource. If Oglethorpe Power schedules energy utilization from a given LT
Resource during a Quarter Hour at a level of energy that is in excess of the
then current Load Carrying Capability of such LT Resource, then Oglethorpe Power
shall nevertheless be deemed to have scheduled energy utilization from such LT
Resource at such level of energy equal to the then current Load Carrying
Capability of such LT Resource. Georgia Power shall use reasonable best efforts
to notify Oglethorpe Power that such utilization has been deemed scheduled as
soon as practicable following such event.
5.13 LT Steam Resource Ramping.
(a) During the first (1st) Hour after the commencement of a commitment
of a LT Steam Resource pursuant to and as allowed by Sections 5.2, 5.3, 5.4 and
5.6, Oglethorpe Power must schedule energy utilization from the LT Steam
Resource at a level of energy that is equal to the then current Minimum
Operating Level of the LT Steam Resource. If Oglethorpe Power schedules energy
utilization from the LT Steam Resource during such an Hour at a level of energy
greater than or less than such level of energy, then Oglethorpe Power shall
nevertheless be deemed to have scheduled energy utilization from the LT Steam
Resource at such level of energy for such Hour. Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such utilization has
been deemed scheduled as soon as practicable following such event.
(b) During the first (1st) Hour after the commencement of a
decommitment of the LT Steam Resource pursuant to and as allowed by Sections
5.2, 5.3 and 5.5, Oglethorpe Power must schedule energy utilization from the LT
Steam Resource at a level of energy that is equal to the then current Minimum
Operating Level of the LT Steam Resource. If Oglethorpe Power schedules energy
utilization from the LT Steam Resource during such an Hour at a level of energy
less than or greater than such level of energy, then Oglethorpe Power shall
nevertheless be deemed to have scheduled energy utilization from the LT Steam
Resource at such level of energy for such Hour. Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such utilization has
been deemed scheduled as soon as practicable following such event.
(c) During the second (2nd) Hour after the commencement of a
decommitment of the LT Steam Resource pursuant to and as allowed by Sections
5.2, 5.3 and 5.5, and thereafter unless and until the LT Steam Resource is again
committed pursuant to and as allowed by Sections 5.2, 5.3, 5.4 and 5.6,
Oglethorpe Power may not schedule energy utilization from the LT Steam Resource
at any level of energy. If Oglethorpe Power schedules energy utilization from
the LT Steam Resource during any such Hour or Hours, then Oglethorpe Power shall
nevertheless be deemed not to have scheduled any energy utilization from the LT
Steam Resource at all for any or all of such Hours. Georgia Power shall use
reasonable best efforts to notify Oglethorpe Power that such utilization has
been deemed scheduled as soon as practicable following such event.
(d) This Section 5.13 shall not apply to the LT Peaking Resource. 5.14
Energy Utilization. For purposes of calculating both the Monthly Energy Charge
for each of the LT Resources and the "Actual Hourly Resource Utilization"
associated with each of the LT Resources (as such term is defined and used in
the RCSA), Oglethorpe Power shall be deemed to have utilized during each Hour
the average of all energy either:
(1) shown on Oglethorpe Power's final energy utilization
schedule (under Section 5.10(c)) during each Quarter Hour of such Hour
for such LT Resource, except as such energy utilization schedule may
have been deemed ineffective under Section 5.8(a), 5.8(d), 5.9(e) or
5.10(d); or
(2) deemed to have been scheduled by Oglethorpe Power during
each Quarter Hour of such Hour from such LT Resource under Section
5.9(c), 5.10(e), 5.11(a), 5.12, 5.13(a), 5.13(b) or 5.13(c).
5.15 Reduction of Load Carrying Capability.
(a) If Georgia Power or its agent determines in its sole
discretion that it is necessary or appropriate for the Georgia system to shed
firm territorial requirements load, determined consistent with NERC guidelines,
then the Load Carrying Capability of one (1) or more of the LT Resources that
are committed at the time of such load shedding shall automatically be reduced
by the amounts computed by Georgia Power or its agent as provided in Sections
5.15(b) and 5.15(c) until such time as Georgia Power advises Oglethorpe Power
that Oglethorpe Power can recommence serving load as provided in Section
5.15(d).
(b) The reduction ratio to be used in computing Oglethorpe
Power's reduction amount shall be equal to the quotient of:
(1) the summation of the then current Load Carrying
Capability of each of the LT Resources that are committed at the time
of such load shedding; divided by
(2) the sum of:
(i) Georgia Territorial Resource
Requirements at such time (not including its
obligations to serve Oglethorpe Power under this
Agreement); plus
(ii) the summation determined under Section
5.15(b)(1).
(c) Oglethorpe Power's aggregate reduction amount, in megawatts (MW),
shall be equal to the product of:
(1) the aggregate amount of load that Georgia Power
or its agent determines in its discretion is necessary or appropriate
for the Georgia system to shed; times
(2) the reduction ratio computed by Georgia Power or
its agent pursuant to Section 5.15(b).
The Load Carrying Capability of the one (1), of the LT Resources that are
committed at the time of such load shedding, which has the highest then current
Monthly Energy Rate, shall then automatically be reduced by the amount of such
reduction amount until the Load Carrying Capability of such LT Resource is equal
to the then current Minimum Operating Level of such LT Resource. If a portion of
such reduction amount remains unapplied, then the Load Carrying Capability of
the other LT Resource shall be automatically reduced by Georgia Power or its
agent, until all of the reduction amount has been applied. The Load Carrying
Capability of such LT Resources will be reduced below each such LT Resource's
respective Minimum Operating Level, in a manner corollary to the foregoing, if a
portion of such reduction amount remains unapplied after each of such LT
Resource's Load Carrying Capability has been reduced to such LT Resource's
Minimum Operating Level.
(d) Oglethorpe Power agrees that, in such event, it will
immediately change (or allow the change of by Georgia Power or its agent) its
energy utilization from the LT Resources, as provided in Section 5.9. In
addition, in such event, Oglethorpe Power agrees that it will take any and all
actions necessary or appropriate to accomplish the foregoing, including, but not
limited to, shedding load served by the LT Resources. Oglethorpe Power may
recommence serving load shed by Oglethorpe Power pursuant to this Section 5.15
when Georgia Power or its agent advises Oglethorpe Power that it is appropriate
to do so in light of system security needs.
(e) Georgia Power agrees that, if the Load Carrying Capability
of any one or more LT Resources is reduced pursuant to this Section 5.15, then
Georgia Power shall give Oglethorpe Power a credit in the following Monthly
invoice in an amount for each such LT Resource that is equal to the product of:
(1) Oglethorpe Power's aggregate reduction amount, in
megawatts (MW), as determined pursuant to Section 5.15(c);
times
(2) the quotient of:
(i) the Monthly Capacity Rate(s) for each of
the LT Resources whose Load Carrying Capability was
reduced pursuant to Section 5.15(c) (applied by
Georgia Power in portions as necessary to accommodate
the provisions of Section 5.15(c)), for the Month in
which such load shedding occurs, in dollars per
kilowatt-month ($/KW-Mo); divided by
(ii) the number of Hours in such Month;
times (3) the number of Hours in the period over
which such load shedding occurred; times (4) one
thousand (1,000).
5.16 Delivery of and Payment for Energy. Georgia Power's and Oglethorpe
Power's respective rights and obligations concerning the delivery of and payment
for energy utilization scheduled by Oglethorpe Power from the LT Resources
during any given Hour of the Term shall be as set forth in Article III.
5.17 Emergency Decommitment. Notwithstanding the provisions of Section
5.5, if all "OPC Off-System Resources" (as such term is defined and used in the
RCSA) have been interrupted pursuant to Section 8.1 of the RCSA and Oglethorpe
Power continues to have surplus energy as defined in Article XII of the RCSA,
Oglethorpe Power may decommit the LT Steam Resource on one (1) Quarter Hour's
prior notice to Georgia Power, effective at the start of any subsequent Quarter
Hour.
5.18 RCSA Treatment.
(a) The LT Steam Resource shall be deemed "Qualifying
Resources - Spinning" (as such term is defined and used in Sections 11.5 and
11.6 of the RCSA).
(b) Fifteen (15) percent of the LT Peaking Resource shall be
deemed "Qualifying Resources - Supplemental" (as such term is defined and used
in Section 11.6 of the RCSA).
(c) The "Difference" utilized in the calculation of the
"Back-Up Capacity Charge" (as such terms are defined and used in Section 12.3 of
the RCSA) shall include the difference between (i) the sum of the Actual Hourly
Resource Utilization of all LT Resources, less (ii) the sum of the then current
Load Carrying Capability of all LT Resources.
ARTICLE VI
BILLING AND COLLECTIONS
6.1 Capacity Billing and Payment.
(a) As promptly as practicable after the commencement of each
Month during the Term, Georgia Power shall send Oglethorpe Power an invoice
stating the Monthly Capacity Payment for such Month.
(b) All such Monthly Capacity Payments shall be due and
payable on or before the tenth (10th) Day after Oglethorpe Power's receipt of
such invoice. If such tenth (10th) Day after Oglethorpe Power's receipt is not a
banking Day, then payment shall be due on the next succeeding banking Day.
Oglethorpe Power shall make payment to Georgia Power in accordance with such
invoices on or before the date due in immediately available funds through wire
transfer of funds or other means acceptable to Georgia Power. If Oglethorpe
Power does not make a Monthly Capacity Payment on or before such tenth (10th)
Day, then interest shall be added to the overdue payment, from the date such
overdue payment was due until such overdue payment together with interest is
paid, which interest shall accrue in simple interest terms per annum at the
Interest Rate.
(c) The procedure set forth in Sections 6.1(a) and 6.1(b) for
Oglethorpe Power's payment to Georgia Power of Monthly Capacity Payments is
subject to periodic temporary modification for phase-in of an increase or
decrease in the Monthly Capacity Charges, if and as provided for in Part 6 of
the Schedules in the event that a Monthly Capacity Charge should become subject
to an adjustment as provided for in said Part 6 of said Schedule.
6.2 Energy Billing and Payment.
(a) As promptly as practicable after the commencement of each
Month during the Term, Georgia Power shall send Oglethorpe Power an invoice
stating the Monthly Energy Payment for such Month, together with a statement of
any other amounts then due by Oglethorpe Power to Georgia Power pursuant to the
provisions of this Agreement.
(b) All invoices of Monthly Energy Payments shall be due and
payable on or before the tenth (10th) Day after Oglethorpe Power's receipt of
such invoice. If such tenth (10th) Day after Oglethorpe Power's receipt is not a
banking Day, then payment shall be due on the next succeeding banking Day.
Oglethorpe Power shall make payment to Georgia Power in accordance with such
invoices on or before the date due in immediately available funds through wire
transfer of funds or other means acceptable to Georgia Power. If Oglethorpe
Power does not make a Monthly Energy Payment on or before such tenth (10th) Day,
then interest shall be added to the overdue payment, from the date such overdue
payment was due until such overdue payment together with interest is paid, which
interest shall accrue in simple interest terms per annum at the Interest Rate.
(c) With each Monthly energy invoice Georgia Power will
provide Oglethorpe Power a Monthly statement of the Monthly Energy Rates and
Hourly Energy Rates upon which the Monthly Energy Payment was based. Georgia
Power may combine its Monthly capacity and energy invoices into a single
invoice, in Georgia Power's discretion.
(d) The procedure set forth in Sections 6.2(a) and 6.2(b) for
Oglethorpe Power's payment to Georgia Power of Monthly Energy Payments is
subject to periodic temporary modification for phase-in of an increase or
decrease in the Monthly Energy Rates, if and as provided for in Part 6 of the LT
Schedules in the event that a Monthly Energy Rate should become subject to an
adjustment as provided for in said Part 6 of said LT Schedule.
6.3 Billing Disputes and Final Accounting.
(a) If Oglethorpe Power questions or contests the amount of
any payment claimed by Georgia Power to be due pursuant to this Agreement,
Oglethorpe Power may make such payment under protest and thereafter shall be
reimbursed by Georgia Power for any amount in error after the settlement of such
question or contest, in accordance with this Section 6.3; provided, however,
that no disagreement or dispute of any kind between Oglethorpe Power and Georgia
Power concerning any matter, including, without limitation, the amount of any
payment due from Oglethorpe Power or the correctness of any charge made by
Georgia Power to Oglethorpe Power, shall permit Oglethorpe Power to delay or
withhold any payment pursuant to this Agreement except as specifically otherwise
provided for in Section 6.7.
(b) In the event that Oglethorpe Power, by timely notice to
Georgia Power, questions or contests the correctness of any such charge or
credit, Georgia Power shall promptly review the questioned charge or credit and
shall notify Oglethorpe Power, within sixty (60) Days following receipt by
Georgia Power of such notice from Oglethorpe Power, of the amount of any error
and the amount of any payment or reimbursement that Oglethorpe Power is required
to make or is entitled to receive in respect of such alleged error. Not later
than the fifth (5th) banking Day after receipt by Oglethorpe Power of such
notice from Georgia Power as to the amount of any payment that Oglethorpe Power
is required to make, Oglethorpe Power shall make payment to Georgia Power in
immediately available funds. If Georgia Power is required to make any
reimbursement to Oglethorpe Power, Georgia Power shall notify Oglethorpe Power
of the amount of such reimbursement and the need to send an invoice to Georgia
Power for such reimbursement and make such reimbursement not later than the
fifth (5th) banking Day after Georgia Power receives an invoice from Oglethorpe
Power in the amount of such required reimbursement. Payments and reimbursements
made by either Oglethorpe Power or Georgia Power under this Section 6.3(b) shall
include interest from the later of the date the original payment was received or
the date the original payment was due until the date such payment or
reimbursement together with interest is made, which interest shall accrue in
simple interest terms per annum at the Interest Rate. Oglethorpe Power shall
have until the one hundred eightieth (180th) Day after receipt of an invoice to
question or contest the correctness of any charge or credit made to Oglethorpe
Power during such Month pursuant to Section 6.1 or 6.2, after which time the
correctness of all such charges and credits shall be conclusively presumed.
(c) If Oglethorpe Power disputes Georgia Power' resolution
under Section 6.3(b) of any question or contest by Oglethorpe Power of the
correctness of any charge or credit made to Oglethorpe Power pursuant to Section
6.1 or 6.2, then at Oglethorpe Power's request Georgia Power and Oglethorpe
Power agree to use their reasonable best efforts to achieve a mutually
acceptable solution to such dispute. In the event that either Georgia Power or
Oglethorpe Power believes that any such efforts by Georgia Power and Oglethorpe
Power have been or will be unsuccessful, then it may submit such dispute to, for
resolution by, the Joint Committee. If the Joint Committee fails to resolve such
dispute by the third (3rd) regularly scheduled meeting following the meeting at
which Georgia Power or Oglethorpe Power first submitted such dispute to the
Joint Committee, then either Oglethorpe Power or Georgia Power may submit such
dispute to, for resolution by, the respective Chief Executive Officers of
Oglethorpe Power and Georgia Power. If the Chief Executive Officers fail to
resolve such dispute within a reasonable period of time after it is submitted to
them, then either Oglethorpe Power or Georgia Power may resort to any remedy, at
law or in equity, that may be available therefor. If either Georgia Power or
Oglethorpe Power submits such dispute to the Joint Committee, then neither of
them shall thereafter have any further obligation to use its reasonable best
efforts to achieve a mutually acceptable solution as aforesaid.
(d) Notwithstanding the foregoing provisions of this Section
6.3, if Oglethorpe Power is then in default in respect of any payments required
to be made under this Agreement, Georgia Power may withhold such reimbursement.
(e) Georgia Power will provide Oglethorpe Power with such
information as is reasonably required by Oglethorpe Power in order to account
for payments made pursuant to this Section 6.3 on Oglethorpe Power's books.
6.4 Availability of Records. Georgia Power will for each Month of the
Term, at all times prior to the end of such one hundred eighty (180) Day period
set forth in Section 6.3(b), make available to Oglethorpe Power, subject to the
confidentiality provisions of Article XV of the RCSA, and Oglethorpe Power may
audit such books and records of Georgia Power as are necessary for Oglethorpe
Power to verify the basis for and amounts of adjustments to Short Term Resource
energy utilization made pursuant to Section 4.8 and to LT Resources' Load
Carrying Capability pursuant to Section 5.15, and to calculate the Monthly
Capacity Payments and Monthly Energy Payments and thereby to verify the accuracy
of the amounts billed to Oglethorpe Power pursuant to Sections 6.1 and 6.2. No
payment made pursuant to the provisions of this Article VI shall constitute a
waiver of any right of Oglethorpe Power under Section 6.3 to question or contest
the correctness of any charge or credit by Georgia Power or to dispute Georgia
Power's resolution of any such question or contest.
6.5 Implementation Costs. Oglethorpe Power hereby agrees to reimburse
Georgia Power for all costs incurred by Georgia Power or its agent (except
attorney's fees) in connection with implementing this Agreement or the rates and
procedures provided for herein. Oglethorpe Power shall pay Georgia Power the
amount of such costs within ten (10) Days after Georgia Power delivers an
invoice therefor to Oglethorpe Power. The provisions of 6.2(b), 6.3, 6.4 and 6.6
shall apply to the payment and verification of such invoice. Georgia Power
agrees that Georgia Power may not duplicate its recovery of any costs both under
this Section 6.5 and under Section 16.1 of the RCSA.
6.6 Failure to Make Payments.
(a) If Oglethorpe Power fails to pay when due the full amounts
of any payment(s) required by Sections 6.1, 6.2, 6.3 or 6.5 then:
(1) Oglethorpe Power shall have no right to any
capacity or energy hereunder, or to exercise any of its rights under
this Agreement; and
(2) if the RCSA is then in effect, the LT Schedules
shall be deemed not to be "Qualifying Resources - Spinning" or
"Qualifying Resources - Supplemental" and the "Difference" utilized in
the calculation of the "Back-Up Capacity Charge" shall exclude all LT
Schedules (as such terms are defined and used in the RCSA);
from the date such overdue payment(s) were due until Oglethorpe Power has paid
the full amounts of all such overdue payments to Georgia Power (including,
without limitation, interest) as required by said Sections 6.1, 6.2, 6.3 and
6.5.
(b) Georgia Power agrees that, if Oglethorpe Power pays to
Georgia Power such overdue payment(s) during the five (5) Day period allowed for
curing a failure to make payment provided for in Section 10.1(a) (including,
without limitation, interest) and undertakes to recommence making its other
payments to Georgia Power as and when due hereunder, Georgia Power will
recommence supplying capacity and energy to Oglethorpe Power hereunder no later
than the end of the five (5) Day period provided for in Section 10.1(a).
(c) In addition to the rights granted in Sections 6.3, 6.6(a),
and Article X, Georgia Power may take any action, at law or in equity, to
enforce this Agreement and to recover any and all unrecovered damages and
expenses and other losses, costs and liabilities (including, without limitation,
reasonable attorneys' fees and expenses) incurred or suffered by Georgia Power
as a result of or in connection with any default in payment by Oglethorpe Power
under this Agreement.
6.7 Limited Withholding of Payments.
(a) If Oglethorpe Power questions or contests the amount of any payment
claimed by Georgia Power in any Month to be due pursuant to this Agreement,
which amount is more than twice as large as the highest amount previously
claimed by Georgia Power to be due pursuant to this Agreement in any other Month
of the Term, then Oglethorpe Power may withhold payment of the lesser of:
(1) the disputed portion of such amount; or
(2) that portion of such amount which is in excess of twice
such highest Monthly amount previously claimed by Georgia Power to be
due pursuant to this Agreement.
(b) If Oglethorpe Power acquires the right under Section 6.7(a) to
withhold any portion of a payment claimed by Georgia Power to be due pursuant to
this Agreement and chooses to exercise such right, then Oglethorpe Power shall
immediately notify Georgia Power that it is questioning or contesting the
correctness of such amount and shall also nevertheless tender to Georgia Power
on a timely basis under Sections 6.1 and 6.2 that portion of such amount which
Oglethorpe Power is not permitted to withhold under Section 6.7(a). Georgia
Power and Oglethorpe Power shall then resolve such dispute in accordance with
the procedure provided in Sections 6.3(b) and 6.3(c). If Oglethorpe Power is
required pursuant to the resolution of such dispute to pay any portion of the
withheld amount to Georgia Power, then interest shall be added to the portion so
to be paid, from the date such payment was due until such payment together with
interest is paid, which interest shall accrue in simple interest terms per annum
at the Interest Rate.
ARTICLE VII
CERTAIN CAPACITY AND ENERGY SALE MATTERS
7.1 Service Rendered. Georgia Power shall provide and Oglethorpe Power
shall pay for capacity and energy pursuant to the Tariff, the terms of this
Agreement and the Schedules attached hereto. To the extent the terms and
conditions of the Tariff are inconsistent with those set forth in this Agreement
or in the Schedules, the provisions of this Agreement and Schedules shall
control.
7.2 Resale. Oglethorpe Power shall have the right to resell any part or
all of the Resource Capacity or any or all of the energy scheduled by Oglethorpe
Power hereunder, to any person or entity, subject to the terms and conditions of
this Agreement. Oglethorpe Power hereby indemnifies and holds Georgia Power and
its agent harmless from and against any and all losses, costs, liabilities,
damages and expenses (including, without limitation, attorneys' fees and
expenses) of any kind incurred or suffered by Georgia Power or its agent
pursuant to, as a result of or in connection with any such resale of capacity,
energy or both, except for losses, costs, liabilities, damages and expenses
(including, without limitation, attorneys' fees and expenses) incurred or
suffered by Georgia Power or its agent as a direct result of any action of
Georgia Power that is not Prudent Utility Practices or of Georgia Power's or its
agents' willful misconduct. This Section 7.2 does not give Oglethorpe Power any
rights to assign or delegate this Agreement or any of its rights or obligations
hereunder, which Oglethorpe Power acknowledges that it may do only as allowed by
Section 9.2.
7.3 Character of Transactions. The sale by Georgia Power to Oglethorpe
Power of capacity and associated energy under this Agreement does not constitute
either:
(1) a sale, lease, transfer or conveyance of an ownership
interest in or to any generation facilities or resources, including
without limitation the Units; or
(2) a dedication of ownership or an entitlement to the
capacity or output of any generation facilities or resources, including
without limitation the Units.
Furthermore, Oglethorpe Power acknowledges and agrees that Georgia Power or its
agent shall have the sole authority, which Georgia Power or its agent may
exercise in its discretion, to manage, control, operate and maintain all of the
Units. (Georgia Power acknowledges, however, that this Section 7.3 is not
intended and shall not be construed to reduce Oglethorpe Power's rights to
capacity and energy under Article II, III, IV or V.)
7.4 Constancy of Supply.
(a) Georgia Power does not guarantee or warrant that Georgia
Power will supply a constant or uninterrupted supply of capacity or energy under
this Agreement. Oglethorpe Power hereby agrees that Georgia Power is not
required to make capacity available to Oglethorpe Power under this Agreement at
all times during the Term or to deliver under this Agreement a constant or
uninterrupted supply of energy.
(b) For actions taken pursuant to Sections 4.8 and 5.15,
Georgia Power shall not be in breach of this Agreement by reason of, and shall
have no liability whatsoever to Oglethorpe Power for, any failure to make
capacity available hereunder, or for any failure to deliver or any interruption
in the delivery of energy hereunder or for any deficiency in the quality of
service hereunder.
(c) For any other actions taken pursuant to this Agreement,
Georgia Power shall not be in breach of this Agreement by reason of, and shall
have no liability whatsoever to Oglethorpe Power for, any failure to make
capacity available hereunder, or for any failure to deliver or any interruption
in the delivery of energy hereunder or for any deficiency in the quality of
service hereunder; provided, however, the foregoing exculpatory clause of this
Section 7.4(c) shall not apply to any such failure that is the direct result of
any action of Georgia Power that (i) is not Prudent Utility Practices, (ii) is
of Georgia Power's or its agent's willful misconduct, or (iii) is done for
purely economic reasons.
7.5 Market Rate Tariff.
(a) It is the expressed intent of the Parties that this
Agreement and the attached Schedules be accepted by the FERC as a sale pursuant
to the Tariff without any modifications of its charges, terms and conditions and
without additional filing requirements. If, at any time, the FERC does not allow
this Agreement to function pursuant to the Tariff or requires any cost of
service support for any charges hereunder, Oglethorpe Power agrees to actively
support and pursue acceptance by the FERC of all charges and terms as stated in
this Agreement. If, at any time, the FERC orders any changes to any charges or
terms hereunder or any refunds, including, but not limited to, interest or
penalties, other than penalties resulting from actions by Georgia Power or its
agent that are not Prudent Utility Practices or that constitute willful
misconduct, Oglethorpe Power agrees that Georgia Power shall have the right to
file one or more unilateral changes to the charges and terms hereunder to
recover the revenues, as closely as practicable, intended by this Agreement in
its original form.
(b) Oglethorpe Power agrees to actively support any and all
such changes and to cooperate with and assist Georgia Power in securing
acceptance by the FERC of any and all such changes, in as expeditious a manner
as is practicable, to the extent such changes do not result in higher charges to
Oglethorpe Power than the charges intended by this Agreement in its original
form. The obligations pursuant to this Section 7.5 shall survive termination of
this Agreement and any of the Schedules.
(c) Georgia Power and Oglethorpe Power each agrees that,
except as expressly permitted under Sections 7.5, 7.6, 7.7, 8.4, 8.5, and 9.1 of
the Agreement, or to effectuate a change as permitted in Part 6 of each of the
Schedules, it shall not seek to modify this Agreement or any related Schedule
under Sections 205 or 206 of the Federal Power Act or any other provision of
law, except with the consent of both Parties or as required to comply with an
order of a Governmental Authority with jurisdiction over this Agreement.
7.6 Termination of the BPSA.
(a) It is the expressed intent of the Parties that the BPSA be
terminated effective with the commencement of service pursuant to Section 8.1 of
this Agreement. The Parties shall take all steps reasonably necessary to
terminate the BPSA including, but not limited to, the FERC's acknowledgment
thereof, without the necessity for any filings or other justifications for any
charges rendered under the BPSA.
(b) The Parties expressly agree that termination of the BPSA
pursuant to this Section 7.6 shall constitute expiration of the BPSA pursuant to
its own terms as contemplated under the Umbrella Agreement, Section 3.4.
7.7 FERC Modification of Formulary Rates Under the BPSA. If, at any
time, the FERC orders any changes to any charges rendered under the BPSA or any
refunds, including, but not limited to, interest or penalties, other than
penalties resulting from actions by Georgia Power or its agent that are not
Prudent Utility Practices or that constitute willful misconduct, Oglethorpe
Power agrees that Georgia Power shall have the right to file one or more
unilateral changes to the charges and terms hereunder to recover the revenues,
as closely as practicable, intended by the BPSA in its original form.
Furthermore, Oglethorpe Power agrees to actively support any and all such
changes and to cooperate with and assist Georgia Power in securing acceptance by
the FERC of any and all such changes, in as expeditious a manner as is
practicable, to the extent such changes do not result in higher charges to
Oglethorpe Power than the charges intended by the BPSA in its original form.
This obligation shall survive termination of this Agreement and any of the
Schedules.
ARTICLE VIII
TERM OF AGREEMENT
8.1 Term. The term of this Agreement shall begin on the date first
written above and shall continue inclusive through one (1) minute after 11:59
p.m. (Operating Time) on March 31, 2006. Service under this Agreement shall
commence, subject to the conditions included in Section 8.2, at one (1) minute
prior to 12:01 a.m. (Operating Time) on April 1, 1999. Oglethorpe Power shall
have the option of terminating this Agreement, prior to commencement of service
under this Agreement, by written notice delivered to Georgia Power by close of
business on March 26, 1999, provided, however, that Oglethorpe Power must
provide evidence, acceptable in form and substance to Georgia Power, that the
EMCs have not subscribed to at least fifty megawatts (50MW), in aggregate, of
the LT Resources. The provisions of Article VI shall survive termination of this
Agreement to the extent necessary to render final bills and permit auditing and
resolution of disputes, if any, with respect to such final bills in accordance
with the provisions of Article VI.
8.2 Conditions for Effectiveness. The respective obligations hereunder
of Georgia Power to sell capacity and energy to Oglethorpe Power, and of
Oglethorpe Power to purchase capacity and energy from Georgia Power, are
conditioned upon:
(1) The receipt by Georgia Power of acceptance by the FERC of
this Agreement, without modification, as a service agreement pursuant
to the Tariff.
(2) The receipt by Georgia Power of acceptance by the FERC of
termination of the BPSA, without modification, effective with the
commencement of service pursuant to this Agreement.
(3) If a Governmental Authority other than FERC properly
asserts jurisdiction regarding approval of this Agreement, the receipt
of any required approvals of this Agreement, without modification by
such Governmental Authority.
(4) For the LT Resources, the receipt by Oglethorpe Power of
approval by at least seventy-five percent (75%) of its board of
directors and approval by at least seventy-five percent (75%) of its
EMCs of this Agreement.
Georgia Power and Oglethorpe Power shall cooperate with each other, as the other
may reasonably request, in connection with the procurement of such acceptance
from the FERC and any required approvals of any Governmental Authorities.
8.3 EMCs' Approval of any LT Resource as a Non-Recourse Resource.
(a) If condition (4) of Section 8.2 is not met for any of the
LT Resources, but the EMCs approve said LT Resource(s) as a Non-Recourse
Resource (as such term is defined in Section 8.3(c) herein), the Parties agree
to amend this Agreement, as necessary, to obtain approval of such Non-Recourse
Resource by Oglethorpe Power and its approving members on or before June 30,
1999. Oglethorpe Power and its approving members shall execute separate
definitive agreements for the resale of capacity and energy purchased by
Oglethorpe Power under the amended Agreement as a Non-Recourse Resource and
further, in the case of those approving members who are borrowers from the RUS,
obtain approval by the RUS of such members' agreements with Oglethorpe Power on
or before June 30, 1999. If any LT Resource is approved as a Non-Recourse
Resource, the amended Agreement shall include a provision that there is no
recourse for Oglethorpe Power's monetary obligations under the amended Agreement
with respect to such Non-Recourse Resource, directly or indirectly, to the
general credit of Oglethorpe Power or to any property, revenues or agreements of
Oglethorpe Power, other than the revenues received by Oglethorpe Power under its
separate contracts with its members who have subscribed for the resale of energy
and capacity from the Non-Recourse Resource. If any LT Resource is approved as a
Non-Recourse Resource, then, with respect to that Non-Recourse Resource only,
the approving members shall execute additional agreements, as reasonably
required, directly with Georgia Power for their respective purchases, or shall
guarantee Oglethorpe Power's obligations, and shall provide such credit
assurance as Georgia Power may reasonably require. One or more of such approving
members may contract directly with Georgia Power concerning such Non-Recourse
Resource similar to the LT Resource described in this Agreement on such terms as
the parties may mutually agree.
(b) In the event that either of the LT Resources is approved
as a Non-Recourse Resource, the effective date for commencement of service with
respect to such Non-Recourse Resource shall be July 1, 1999, and the term for
such Non-Recourse Resource shall be reduced by 3 Months, (i.e., the termination
dates will be unchanged). Furthermore, if the LT Peaking Resource is a
Non-Recourse Resource, its Monthly Capacity Rate for the period July 1, 1999,
through March 31, 2000, shall be three and twenty-five one-hundredths dollars
per kilowatt-month ($3.25/kW-Mo), and if the LT Steam Resource is a Non-Recourse
Resource, its Monthly Capacity Rate for the period July 1, 1999, through March
31, 2000, shall be four and fifty one-hundredths dollars per kilowatt-month
($4.50/kW-Mo).
(c) "Non-Recourse Resource" means an agreement for the
purchase of capacity and energy which is: approved by less than seventy-five
percent (75%) of Oglethorpe Power's board of directors, approved by less than
seventy-five percent (75%) of Oglethorpe Power's members, fully subscribed by
the subset of Oglethorpe Power's members who are approving members, and
supported only by the credit of and revenues from sales to such approving
members, with no recourse to the general credit or other property of Oglethorpe
Power and its members.
8.4 FERC Changes; Rights to Terminate.
Either Georgia Power or Oglethorpe Power may terminate this
Agreement, in its respective sole discretion, following the issuance of a final
unappealed order by the FERC or any other final action by any Governmental
Authority properly asserting jurisdiction over this Agreement either rejecting
this Agreement or accepting this Agreement in a modified form (so that this
Agreement is not in substantially the agreed-upon and filed form). Georgia Power
or Oglethorpe Power may elect to exercise such right to terminate only within
the thirty (30) Day period following the expiration of all periods within which
an appeal of such an Order could be filed by any person or entity. If Georgia
Power or Oglethorpe Power elects to exercise such right to terminate, then the
electing party shall deliver a written notice of such election to the other
within the aforementioned period, and this Agreement will be deemed to have been
terminated effective upon the date of the other's receipt of such written
notice.
8.5 Purchases After Expiration, Termination or Reduction.
Oglethorpe Power agrees that this Agreement (and the capacity
and energy rates provided for herein and in the Schedules hereto) will expire at
each end of the Term and that this Agreement (and the capacity and energy rates
provided for herein and in the Schedules hereto) shall terminate effective as of
the date determined in accordance with Section 8.4 or 10.3, if such Section
becomes operative and is exercised by either Georgia Power or Oglethorpe Power.
Oglethorpe Power further agrees that it will not seek to purchase any capacity
or associated energy or to schedule any transactions under this Agreement after
the date of expiration or termination determined as aforesaid.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Approvals. Oglethorpe Power and Georgia Power agree to use their
best efforts to apply for promptly and to pursue diligently any required
approvals from Governmental Authorities for the consummation of the transactions
contemplated hereby or for the giving of effect to the expiration of this
Agreement or any termination of this Agreement on the date determined in
accordance with Section 8.5 (which obligation of Oglethorpe Power shall be in
addition to its undertakings under Section 8.5). This provision is not intended
to subject this Agreement to the jurisdiction of any Governmental Authority that
does not have such jurisdiction over this Agreement at the time of execution of
this Agreement.
9.2 Assignment.
(a) Neither Oglethorpe Power nor Georgia Power may sell,
assign or otherwise transfer any or all of this Agreement or its respective
rights, or delegate any or all of its respective obligations, under this
Agreement, at any time, without the prior written consent of the other in each
instance; provided, however, that neither Georgia Power nor Oglethorpe Power may
unreasonably withhold its consent to any conveyance by the other of a security
interest in this Agreement as security for bonds or other obligations issued or
to be issued; provided, further, that Georgia Power may assign this Agreement
and its respective rights, and delegate its respective obligations, under this
Agreement to a generation Affiliate succeeding to substantially all of Georgia
Power's interests in the Units, without the consent of Oglethorpe Power.
(b) Notwithstanding Section 9.2(a), actions identified herein
as being accomplished by Georgia Power may be accomplished either by Georgia
Power or by its agent.
9.3 Georgia Power's Agent. Wherever this Agreement requires Oglethorpe
Power to provide information, schedules, notice or the like to, or to take
direction from, Georgia Power or its agent, Oglethorpe Power shall provide
information, schedules, notice or the like to, or take direction from, whichever
of Georgia Power, its agent or both that Georgia Power may direct from time to
time.
9.4 No Partnership. Oglethorpe Power and Georgia Power do no intend for
this Agreement to, and this Agreement shall not, create any joint venture,
partnership, association taxable as a corporation, or other entity for the
conduct of any business for profit.
9.5 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon any respective successors and assigns of Oglethorpe Power
and Georgia Power.
9.6 No Third Party Benefit. Nothing in this Agreement shall be
construed to create any duty, obligation or liability of Georgia Power to any
person or entity not a party to this Agreement.
9.7 No Consequential Damages. Notwithstanding any other provision of
this Agreement, neither Georgia Power nor Oglethorpe Power shall be liable to
the other for indirect, incidental or consequential damages (including without
limitation replacement capacity or energy) under, arising out of, due to or in
connection with its performance or nonperformance of this Agreement or any of
its obligations herein, whether based on contract, tort (including without
limitation negligence), strict liability, warranty or otherwise.
9.8 No Affiliate Liability. Notwithstanding any other provision of this
Agreement, no Affiliate of Georgia Power (including without limitation any
Affiliate of Georgia Power acting as Georgia Power's agent where Georgia Power's
agent is given certain authorities hereunder) shall have any liability
whatsoever for any party's performance, nonperformance or delay in performance
under this Agreement unless such Affiliate of Georgia Power has been assigned
this Agreement as a generation Affiliate succeeding to substantially all of
Georgia Power's interests in the Units in accordance with Section 9.2(a).
9.9 Disclaimer of Warranty. GEORGIA POWER, ON BEHALF OF ITSELF, EACH OF
ITS AFFILIATES AND EACH OF THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS,
AGENTS, SUCCESSORS AND ASSIGNS, HEREBY DISCLAIMS ANY AND ALL EXPRESS, IMPLIED OR
STATUTORY WARRANTIES CONCERNING EITHER OR BOTH THE CAPACITY OR ENERGY TO BE SOLD
BY GEORGIA POWER HEREUNDER OR CONCERNING ANY INFORMATION FURNISHED BY OR FOR ANY
ONE OR MORE OF THEM, INCLUDING WITHOUT LIMITATION ANY AND ALL WARRANTIES AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AVAILABILITY, ACCURACY,
QUALITY, QUANTITY OR OTHERWISE.
9.10 Time of Essence; No Waiver.
(a) Time is of the essence of this Agreement.
(b) Neither Georgia Power's nor Oglethorpe Power's failure to
enforce any provision or provisions of this Agreement shall in any way be
construed as a waiver of any such provision or provisions as to any future
violation thereof, nor prevent it from enforcing each and every other provision
of this Agreement at such time or at any time thereafter. The waiver by either
Georgia Power or Oglethorpe Power of any right or remedy shall not constitute a
waiver of its right to assert said right or remedy, at any time thereafter, or
any other rights or remedies available to it at the time of or any time after
such waiver.
9.11 Amendments. This Agreement may be amended by and only by a written
instrument duly executed by each of Oglethorpe Power and Georgia Power, which
has received all approvals of Governmental Authorities or competent jurisdiction
necessary for the effectiveness thereof.
9.12 Notice.
(a) Any notice, request, consent or other communication
permitted or required by this Agreement other than the operations-related
notices described in Section 9.12(b) shall be in writing and shall be deemed
given on the Day hand-delivered to the officer identified below, or the third
(3rd) Day after the same is deposited as certified mail, prepaid, with the
United States Postal Service, and if given to Georgia Power shall be addressed
to:
Georgia Power Company
c/o Southern Company Services, Inc.
270 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Vice President-Southern Wholesale Energy
and if given to Oglethorpe Power shall be addressed to:
Oglethorpe Power Corporation
2100 East Exchange Place
P.O. Box 1349
Tucker, Georgia 30085-1349
Attention: Vice President-Power Marketing
unless Georgia Power or Oglethorpe Power shall have designated a different
officer or address for itself by notice to the other.
(b) Any operations-related notice, request, consent or other
communication permitted or required by this Agreement in Articles IV and V will
be by direct electronic transfer between the Parties or their respective
designees, to the maximum extent practicable, and, if otherwise necessary, may
be by telephone, facsimile, or any other electronic medium all mutually
acceptable to the Parties. The Parties agree to provide to each other, on or
before April 1, 1999, written notice identifying the appropriate electronic
transfer address and other such electronic media information, including the
preferred means for acknowledging receipt of notice. Operations-related notices
shall be deemed given at the time received by the receiving Party.
9.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.14 Articles and Section Headings. The descriptive headings of the
various Articles, Sections and Parts of this Agreement and the Schedules hereto
have been inserted for convenience of reference only and shall in no way modify
or restrict any of the terms or provisions hereof.
9.15 Including. Wherever the term "including" is used in this Agreement
and the Schedules hereto, such term shall not be construed as limiting the
generality of any statement, clause, phrase or term.
9.16 Governing Law. The validity, interpretation and performance of
this Agreement and each of its provisions shall be governed by the laws of the
State of Georgia (without giving effect to the principles of conflict of laws).
9.17 Necessary Authorization. Subject to the conditions listed in
Section 8.2, each Party represents that it has the necessary corporate and legal
authority to enter into this Agreement and to perform each and every duty and
obligation imposed herein, including those set forth under the Schedules, and
that this Agreement, when executed by the duly authorized representative of each
Party, represents a valid, binding and enforceable legal obligation of such
Party and that the consummation of the transactions contemplated herein will not
violate any organizational documents, agreements or any applicable laws. Each
individual affixing a signature to this Agreement represents and warrants that
he or she has been duly authorized to execute this Agreement on behalf of the
Party he or she represents, and that by signing the Agreement, a valid, binding
and enforceable legal obligation of said Party has been created.
ARTICLE X
EVENT OF DEFAULT AND TERMINATION
10.1 Event of Default. "Event of Default" means the occurrence of any
of the following events with respect to a Party (the "Defaulting Party", the
other Party being the "Non-Defaulting Party"):
(a) the Defaulting Party fails to make any payment which it is
obligated to make pursuant to this Agreement to the Non-Defaulting Party;
provided, however, the Non-Defaulting Party shall give the Defaulting Party
written notice of such payment deficiency and at least five (5) Days from the
date of such written notice to make the required payment before declaring the
payment deficiency an Event of Default;
(b) any representation or warranty of the Defaulting Party
pursuant to this Agreement shall prove to have been false or misleading in any
material respect when made or deemed made unless (i) the fact, circumstances or
condition that is the subject of such representation or warranty is made true
within twenty (20) Days after notice thereof has been given to the Defaulting
Party and (ii) such cure removes any adverse effect on the Non-Defaulting Party
of such fact, circumstance or condition being otherwise than as first
represented;
(c) the Defaulting Party;
(i) makes a general assignment or arrangement for the
benefit of its creditors;
(ii) (A) files a petition or otherwise commences,
authorizes, or acquiesces in the commencement of a proceeding
or cause under any bankruptcy or similar law for the
protection of creditors or (B) has such petition filed or
proceeding commenced against it and, in the case of a petition
filed or proceeding commenced against it, such petition or
proceeding results in a judgment of insolvency or bankruptcy
or the entry of any order for relief or the making of an order
for the winding-up or liquidation of such entity, or is not
dismissed, discharged, stayed or restrained within five (5)
business Days of the filing or commencement thereof;
(iii) otherwise becomes bankrupt or insolvent;
(iv) fails or is unable or admits in writing its
inability generally to pay its debts as they become due;
(v) is dissolved (other than pursuant to a
consolidation, acquisition, amalgamation or merger);
(vi) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, acquisition, amalgamation or merger);
(vii) seeks or becomes subject to the appointment of
an administrator, provisional liquidator, conservator,
receiver, trustee, custodian or other similar official for all
or substantially all of its assets;
(viii) has a secured party take possession of all or
substantially all of its assets, or has a distress, execution,
attachment, sequestration or other legal process levied,
enforced or sued on or against all or substantially all of its
assets and subject secured party maintains possession, or any
such process is not dismissed, discharged, stayed or
restrained, in each case within thirty (30) Days thereafter;
(ix) causes or is subject to any event with respect
to it which, under the applicable laws of any jurisdiction,
has an analogous effect to any of the events specified in
clauses (c) (i) to (viii) (inclusive); or
(x) takes any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the
foregoing acts.
(d) the Defaulting Party fails to perform or observe any
material obligation of such Party under this Agreement, which such
failure materially and adversely affects the ability of such Party to
perform its obligations under this Agreement, and such failure
continues for sixty (60) Days after written notice of such default is
given by the other Party;
10.2 Rights Under Agreement. Except as otherwise provided herein, each
Party reserves to itself all rights, counterclaims, and other defenses which it
is or may be entitled to arising from or out of the Agreement.
10.3 Termination Upon Default. Upon the occurrence of an Event of
Default, the Non-Defaulting Party shall have the right to terminate this
Agreement upon written notice to the Defaulting Party in addition to any other
right or remedy the Non-Defaulting Party may have under this Agreement or at
law, except as otherwise limited by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
"Georgia Power"
GEORGIA POWER COMPANY
By:
Name: Fred D. Williams
Title: Senior Vice President
"Oglethorpe Power"
OGLETHORPE POWER CORPORATION
(AN ELECTRIC MEMBERSHIP CORPORATION)
By:
Name: Jerry J. Saacks
Title: Chief Operating Officer
[SIGNATURE PAGE:
LONG TERM TRANSACTION SERVICE AGREEMENT
between
GEORGIA POWER COMPANY
and
OGLETHORPE POWER CORPORATION
Dated as of February 26, 1999]
<PAGE>
EXHIBIT A
Member Systems:
Oglethorpe Power Corporation
Altamaha Electric Membership Corporation
Amicalola Electric Membership Corporation
Canoochee Electric Membership Corporation
Carroll Electric Membership Corporation
The Central Georgia Electric Membership Corporation
Coastal Electric Membership Corporation
Cobb Electric Membership Corporation
Colquitt Electric Membership Corporation
Coweta-Fayette Electric Membership Corporation
Excelsior Electric Membership Corporation
Flint Electric Membership Corporation
Grady Electric Membership Corporation
GreyStone Power Corporation, An Electric Membership Corporation
Habersham Electric Membership Corporation
Hart Electric Membership Corporation
Irwin Electric Membership Corporation
Jackson Electric Membership Corporation
Jefferson Energy Cooperative, An Electric Membership Corporation
Lamar Electric Membership Corporation
Little Ocmulgee Electric Membership Corporation
Middle Georgia Electric Membership Corporation
Mitchell Electric Membership Corporation
Ocmulgee Electric Membership Corporation
Oconee Electric Membership Corporation
Okefenoke Rural Electric Membership Corporation
Pataula Electric Membership Corporation
Planters Electric Membership Corporation
Rayle Electric Membership Corporation
The Satilla Rural Electric Membership Corporation
Sawnee Electric Membership Corporation
Slash Pine Electric Membership Corporation
Snapping Shoals Electric Membership Corporation
Sumter Electric Membership Corporation
Three Notch Electric Membership Corporation
Tri-County Electric Membership Corporation
Troup Electric Membership Corporation
Upson County Electric Membership Corporation
Walton Electric Membership Corporation
Washington Electric Membership Corporation
<PAGE>
SCHEDULE A
SHORT TERM RESOURCE
1. General and Definitions.
-----------------------
This Schedule A is attached to and incorporated into that
certain Long Term Transaction Service Agreement Under Southern Companies'
Federal Energy Regulatory Commission Electric Tariff Volume No. 4 Market-Based
Rate Tariff between Georgia Power Company and Oglethorpe Power Corporation (An
Electric Membership Corporation) dated as of February 26, 1999 ("the
Agreement"). Georgia Power and Oglethorpe Power have agreed in the Agreement
that Oglethorpe Power will pay for the capacity and energy associated with the
Short Term Resources on a Monthly basis utilizing the rates and methodologies
determined in accordance with this Schedule A. All initially capitalized terms
and phrases used in this Schedule A, but not expressly defined herein, shall
have the respective meanings ascribed to them in the Agreement.
2. Capacity and Term.
-----------------
Georgia Power offers to sell to Oglethorpe Power, subject to
the terms of the Agreement, capacity and associated energy, from one (1) or more
of five (5) fifty megawatt (50 MW) Short Term Resources, designated "ST-1",
"ST-2", ST-3", "ST-4" and "ST-5", for the period commencing one (1) minute prior
to 12:01 a.m. (Operating Time) on June 1, 1999 and continuing through one (1)
minute after 11:59 p.m.(Operating Time) on May 31, 2000. Oglethorpe Power shall
specify how many of the Short Term Resources it commits to purchase for the
above specified period in a written notice to be delivered to Georgia Power on
or before March 26, 1999. Such notice shall be incorporated herein by this
reference. This Schedule A shall terminate at one (1) minute after 11:59 p.m.
(Operating Time) on May 31, 2000.
3. Monthly Capacity Charge.
-----------------------
For each Short Term Resource purchased by Oglethorpe Power
pursuant to the notice incorporated above, Oglethorpe Power shall pay a Monthly
Capacity Charge, in dollars per Month ($/Mo), in accordance with the following
schedule:
June 1999 -- $362,500
July - September 1999 -- $662,500
October 1999 - May 2000 -- $75,000
4. Hourly Energy Rate.
------------------
(a) The Hourly Energy Rate for energy purchases associated
with the Short Term Resources shall be the product, expressed in dollars per
megawatt-hour rounded to the nearest one-hundredth ($0.00/MWH) of (i) one and
one-tenth (1.1) and (ii) Southern Marginal Cost, where Southern Marginal Cost is
defined as the incremental energy cost of Southern Dispatch after serving all
Southern Control Area obligations and actual Unit Power Sales' base, alternate,
supplemental and replacement schedules but prior to serving any other sales
outside the Southern Control Area, which costs shall include fuel expense,
variable operating and maintenance expense, fuel handling expense, emissions
allowance value, and other appropriate energy-related costs, including, but not
limited to, energy purchases, as permitted by the IIC and as determined prior to
the applicable Hour. The Hourly Energy Rate for energy utilization from "Excess
Short Term Resources" (as determined below) shall be increased by the
difference, if such difference is greater than zero (0), expressed in dollars
per megawatt-hour rounded to the nearest one-hundredth ($0.00),
(1) the higher of (i) one and one tenth (1.1) times the
highest Hourly (excluding multi-hour transactions) off-system
transaction price disclosed by Georgia Power, if any, in effect for
such Hour (either a purchase or a sale) or (ii) "System Marginal Cost"
(as such term is defined and used in the RCSA) for such Hour plus ten
dollars per megawatt-hour ($10/MWH), minus
(2) the sum, (i) the current Monthly Capacity Charge, in
dollars per Month ($/Mo) for the Short Term Resources divided by the
product of fifty megawatts (50 MW), the number of weekdays in such
Month and sixteen (16) Hours per Day, plus (ii) one and one tenth (1.1)
times the Southern Marginal Cost for such Hour.
Any off-system transaction price disclosed by Georgia Power shall be treated
consistently with the confidentiality provisions of Article XV of the RCSA.
(b) If the net of the "OPC Off-System Transactions," sales
plus exports minus purchases minus imports (as such term is defined and used in
the RCSA), is less than fifty megawatts (50 MW) during the Hour containing the
greatest "OPC Territorial Load" (as such term is defined and used in the RCSA)
during a given Day, then no Short Term Resources are deemed to be Excess Short
Term Resources during such Day. If the number of Short Term Resources scheduled
during the Hour containing the greatest OPC Territorial Load during a given Day
is less than the net OPC Off-System Transactions during such Hour, expressed in
megawatt-hours (MWH), divided by, fifty megawatts (50 MW), with any resulting
fraction being truncated to an integer value, then all of the Short Term
Resources are deemed to be Excess Short Term Resources during such Day.
Otherwise, the number of Short Term Resources that are not deemed to be Excess
Short Term Resources during a given Day equals (i) the number of Short Term
Resources scheduled during the Hour containing the greatest OPC Territorial
Load, minus (ii) the net OPC Off-System Transactions during such Hour, expressed
in megawatt-hours (MWH), divided by, fifty megawatts (50 MW), with any resulting
fraction being truncated to an integer value. In any given Hour, Short Term
Resources that are not Excess Short Term Resources shall be deemed scheduled
first.
5. Performance Guarantee.
---------------------
If the provisions of Section 4.8(c) of the Agreement
are applicable for a given Month and the calculation detailed therein
results in a value less than ninety-five one-hundredths (0.95), the
credit due Oglethorpe Power in the following Monthly invoice shall be
calculated as the product of (i) the difference between ninety-five
one-hundredths (0.95) and the value calculated pursuant to Section
4.8(c) of the Agreement expressed to three (3) decimal places, times
(ii) the sum of the kilowatt (kW) capacity associated with the Short
Term Resources purchased by Oglethorpe Power pursuant to the notice
incorporated above, times (iii) if such Month is June, July, August or
September, thirteen and twenty-five one-hundredths dollars per kilowatt
($13.25/kW), otherwise, one and fifty one-hundredths dollars per
kilowatt ($1.50/kW).
6. Change in Law.
-------------
The Parties acknowledge that a Change in Law, including, but
not limited to, environmental laws and regulations and energy taxes applicable
to wholesale sales, but specifically excluding any other taxes, may
significantly change (increase or decrease) Georgia Power's costs in providing
the service described above. In the event of such a Change in Law, either Party
may give notice to the other Party that Georgia Power's costs have changed
significantly and may initiate negotiations to modify this Schedule to reflect
such changes in costs. If the Parties have not negotiated and agreed upon an
amendment to this Schedule within 90 Days, either Party shall have the right to
initiate a dispute resolution process as follows: (i) Georgia Power shall make a
good faith calculation of the effect of such change and adjust the billing
accordingly, (ii) Oglethorpe may pay under protest, (iii) a mutually agreeable
individual ("Accountant") shall calculate the appropriate adjustment to reflect
the change in cost, and billings will be adjusted accordingly, and (iv) the
Parties shall split Accountant's fee for rendering such service. If the Parties
cannot reach agreement on a mutually agreeable individual, then the head of the
utilities practice group at Arthur Andersen will be used.
<PAGE>
SCHEDULE B
LONG TERM PEAKING RESOURCE
1. General and Definitions.
-----------------------
This Schedule B is attached to and incorporated into that
certain Long Term Transaction Service Agreement Under Southern Companies'
Federal Energy Regulatory Commission Electric Tariff Volume No. 4 Market-Based
Rate Tariff between Georgia Power Company and Oglethorpe Power Corporation (An
Electric Membership Corporation) dated as of February 26, 1999 ("the
Agreement"). Georgia Power and Oglethorpe Power have agreed in the Agreement
that Oglethorpe Power will pay for the capacity and energy associated with the
LT Peaking Resource on a Monthly basis utilizing the rates and methodologies
determined in accordance with this Schedule B. All initially capitalized terms
and phrases used in this Schedule B, but not expressly defined herein, shall
have the respective meanings ascribed to them in the Agreement.
2. Capacity and Term.
-----------------
Georgia Power offers to sell to Oglethorpe Power, subject to
the terms of the Agreement, capacity and associated energy, from one (1) two
hundred fifty megawatt (250 MW) LT Peaking Resource. Oglethorpe Power shall
specify how many megawatts (MW), in increments of fifty megawatts (50 MW), of
the LT Peaking Resource it commits to purchase for the period commencing one (1)
minute prior to 12:01 a.m. (Operating Time) on April 1, 1999 and continuing
through one (1) minute after 11:59 p.m. (Operating Time) on March 31, 2003 in a
written notice to be delivered to Georgia Power on or before March 26, 1999.
Such notice shall be incorporated herein by this reference. Oglethorpe Power
shall purchase the "Remainder", determined by the difference, if any, between
two hundred fifty megawatts (250 MW) and the quantity specified in the above
incorporated notice, for the period commencing one (1) minute prior to 12:01
a.m. (Operating Time) on April 1, 1999 and continuing through one (1) minute
after 11:59 p.m. (Operating Time) on August 31, 2000 and Oglethorpe Power shall
purchase one-half the Remainder for the period commencing one (1) minute prior
to 12:01 a.m. (Operating Time) on September 1, 2000 and continuing through one
(1) minute after 11:59 p.m. (Operating Time) on August 31, 2001. This Schedule B
shall terminate at one (1) minute after 11:59 p.m. (Operating Time) on March 31,
2003.
3. Monthly Capacity Rate.
---------------------
The Monthly Capacity Rate, expressed in hundredths of dollars
per kilowatt-month ($0.00/kW-Mo), for the combined LT Peaking Resource shall be
determined each Month as:
(1) the sum of:
(a) the product of:
(i) the then current megawatts (MW) associated
with the Remainder
(ii) for each Month in 1999, four dollars per
kilowatt-month ($4.00/kW-Mo) for each Month
in 2000, four and twenty-five one-hundredths
dollars per kilowatt-month ($4.25/kW-Mo) for
each Month in 2001, four and fifty
one-hundredths dollars per kilowatt-month
($4.50/kW-Mo)
(b) the product of:
(i) the megawatts (MW) purchased by Oglethorpe
Power pursuant to the notice incorporated
above
(ii) the rate determined below
(2) divided by the sum of:
(a) the then current megawatts (MW) associated with the
Remainder
(b) the megawatts (MW) purchased by Oglethorpe Power
pursuant to the notice incorporated above.
The rate for the megawatts (MW) purchased by Oglethorpe Power pursuant to the
notice incorporated above for the Months of April 1999 through March 2000 shall
be three and forty-four one-hundredths dollars per kilowatt-month ($3.44/kW-Mo).
The rate, expressed in hundredths of dollars per kilowatt-month ($0.00/kW-Mo),
for such capacity for each succeeding April through March period shall be
determined as (i) three and fifty-five one-hundredths dollars per kilowatt-month
($3.55/kW-Mo), multiplied by (ii) the Gross Domestic Product Implicit Price
Deflator, relative to a 1992 base year, as reported in the Survey of Current
Business published by the Bureau of Economic Analysis United States Department
of Commerce, Washington, D. C. ("GDPIPD") for the first quarter of the then
current calendar Year as last reported prior to April 30 of such Year, divided
by (iii) 113.070, the GDPIPD for the last quarter of 1998. If the GDPIPD
methodology is revised or ceases to be reported, the Parties agree to adopt a
comparable escalator through the process detailed in Part 6 of this Schedule B.
4. Monthly Energy Rate.
-------------------
The Monthly Energy Rate, expressed in hundredths of dollars
per megawatt-hour ($0.00/MWH), for the LT Peaking Resource shall be determined
each Month as the sum, over each of the Units identified in the following table,
of the product of:
(1) each Unit's energy rate for such Month, expressed in
hundredths of dollars per megawatt-hour ($0.00/MWH),
determined as the sum of:
(a) the product of:
(i) the average heat rate for each Unit,
expressed in millions of British Thermal
Units per megawatt-hour (MMBTU/MWH), derived
from "Informational Schedule No. 2 (Energy
Costs by Sources)" of the IIC in effect for
such Month
(ii) the replacement fuel cost for each Unit for
such Month, in dollars per million British
Thermal Units ($/MMBTU), determined as (i)
the prevailing then current spot market
quotes for oil purchases or (ii) the
prevailing then current spot market quotes
for gas purchases; as calculated by Georgia
Power or its agent, and as possibly adjusted
by Georgia Power or its agent, in its
discretion, for either or both market
volatility and transportation and delivery
costs (Georgia Power's and its agent's
current practice as of the date of the
Agreement is to calculate these estimates of
replacement oil and gas prices on a Monthly
basis, but Georgia Power may change the
exact period to be used in such calculations
in Georgia Power's or its agent's reasonable
discretion)
(b) the variable operations and maintenance expense rate
for each Unit, expressed in dollars per megawatt-hour
($/MWH), as shown in "Informational Schedule No. 2
(Energy Costs by Sources)" of the IIC in effect for
such Month
(c) the fuel handling expense rate for each Unit,
expressed in dollars per megawatt-hour ($/MWH), as
shown in "Informational Schedule No. 2 (Energy Costs
by Sources)" of the IIC in effect for such Month
(d) other energy related costs for each Unit, expressed
in dollars per megawatt-hour ($/MWH), properly
determined in accordance with FERC/NERC procedures
(2) the factor for such Unit from the following table
- --------------------------------------- ----------------------------------
Unit Factor
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Arkwright 5A 0.014288
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Atkinson 5A 0.034264
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Atkinson 5B 0.034264
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Bowen 6 0.034264
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Gaston A 0.008640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McDonough 3A 0.034264
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McDonough 3B 0.034264
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 3A 0.045576
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 3B 0.045576
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 3C 0.045576
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4A 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4B 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4C 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4D 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4E 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
McManus 4F 0.046640
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Mitchell 4A 0.034304
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Mitchell 4B 0.034304
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Mitchell 4C 0.034304
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5A 0.047712
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5B 0.047712
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5C 0.047712
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5D 0.047712
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5E 0.047712
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Wilson 5F 0.047712
- --------------------------------------- ----------------------------------
(3) one (1) divided by the Level A to B-1 Loss Factor for such
Unit.
5. Availability Factor.
-------------------
The Availability Factor, expressed in hundredths (0.00), for
the combined LT Peaking Resource shall be determined each Month as:
(1) the sum of:
(a) the product of:
(i) the then current megawatts (MW) associated
with the Remainder
(ii) 0.86
(b) the product of:
(i) the megawatts (MW) purchased by Oglethorpe
Power pursuant to the notice incorporated
above
(ii) 0.92
(2) divided by the sum of:
(a) the then current megawatts (MW) associated with the
Remainder
(b) the megawatts (MW) purchased by Oglethorpe Power
pursuant to the notice incorporated above.
6. Change in Law.
-------------
The Parties acknowledge that a Change in Law, including, but
not limited to, environmental laws and regulations and energy taxes applicable
to wholesale sales, but specifically excluding any other taxes, may
significantly change (increase or decrease) Georgia Power's costs in providing
the service described above. In the event of such a Change in Law, either Party
may give notice to the other Party that Georgia Power's costs have changed
significantly and may initiate negotiations to modify this Schedule to reflect
such changes in costs. If the Parties have not negotiated and agreed upon an
amendment to this Schedule within 90 Days, either Party shall have the right to
initiate a dispute resolution process as follows: (i) Georgia Power shall make a
good faith calculation of the effect of such change and adjust the billing
accordingly, (ii) Oglethorpe may pay under protest, (iii) a mutually agreeable
individual ("Accountant") shall calculate the appropriate adjustment to reflect
the change in cost, and billings will be adjusted accordingly, and (iv) the
Parties shall split Accountant's fee for rendering such service. If the Parties
cannot reach agreement on a mutually agreeable individual, then the head of the
utilities practice group at Arthur Andersen will be used.
<PAGE>
SCHEDULE C
LONG TERM STEAM RESOURCE
1. General and Definitions.
-----------------------
This Schedule C is attached to and incorporated into that
certain Long Term Transaction Service Agreement Under Southern Companies'
Federal Energy Regulatory Commission Electric Tariff Volume No. 4 Market-Based
Rate Tariff between Georgia Power Company and Oglethorpe Power Corporation (An
Electric Membership Corporation) dated as of February 26, 1999 ("the
Agreement"). Georgia Power and Oglethorpe Power have agreed in the Agreement
that Oglethorpe Power will pay for the capacity and energy associated with the
LT Steam Resource on a Monthly basis utilizing the rates and methodologies
determined in accordance with this Schedule C. All initially capitalized terms
and phrases used in this Schedule C, but not expressly defined herein, shall
have the respective meanings ascribed to them in the Agreement.
2. Capacity and Term.
-----------------
Georgia Power offers to sell to Oglethorpe Power, subject to
the terms of the Agreement, capacity and associated energy, from one (1) two
hundred fifty megawatt (250 MW) LT Steam Resource. Oglethorpe Power shall
specify how many megawatts (MW), in increments of fifty megawatts (50 MW), of
the LT Steam Resource it commits to purchase for the period commencing one (1)
minute prior to 12:01 a.m. (Operating Time) on April 1, 1999 and continuing
through one (1) minute after 11:59 p.m. (Operating Time) on March 31, 2006 in a
written notice to be delivered to Georgia Power on or before March 26, 1999.
Such notice shall be incorporated herein by this reference. Oglethorpe Power
shall purchase the "Remainder", determined by the difference, if any, between
two hundred fifty megawatts (250 MW) and the quantity specified in the above
incorporated notice, for the period commencing one (1) minute prior to 12:01
a.m. (Operating Time) on April 1, 1999 and continuing through one (1) minute
after 11:59 p.m. (Operating Time) on August 31, 1999. This Schedule C shall
terminate at one (1) minute after 11:59 p.m. (Operating Time) on March 31, 2006.
3. Monthly Capacity Rate.
---------------------
The Monthly Capacity Rate, expressed in hundredths of dollars
per kilowatt-month ($0.00/kW-Mo), for the combined LT Steam Resource shall be
determined each Month as:
(1) the sum of:
(a) the product of:
(i) the then current megawatts (MW) associated
with the Remainder
(ii) for each Month in 1999, eight and
twenty-five one-hundredths dollars per
kilowatt-month ($8.25/kW-Mo)
(b) the product of:
(i) the megawatts (MW) purchased by Oglethorpe
Power pursuant to the notice incorporated
above
(ii) the rate determined below
(2) divided by the sum of:
(a) the then current megawatts (MW) associated with the
Remainder
(b) the megawatts (MW) purchased by Oglethorpe Power
pursuant to the notice incorporated above.
The rate for the megawatts (MW) purchased by Oglethorpe Power pursuant to the
notice incorporated above for the Months of April 1999 through March 2000 shall
be five and forty-four one-hundredths dollars per kilowatt-month ($5.44/kW-Mo).
The rate, expressed in hundredths of dollars per kilowatt-month ($0.00/kW-Mo),
for such capacity for each succeeding April through March period shall be
determined as (i) six dollars per kilowatt-month ($6.00/kW-Mo), multiplied by
(ii) the Gross Domestic Product Implicit Price Deflator, relative to a 1992 base
year, as reported in the Survey of Current Business published by the Bureau of
Economic Analysis United States Department of Commerce, Washington, D. C.
("GDPIPD") for the first quarter of the then current calendar Year as last
reported prior to April 30 of such Year, divided by (iii) 113.070, the GDPIPD
for the last quarter of 1998. If the GDPIPD methodology is revised or ceases to
be reported, the Parties agree to adopt a comparable escalator through the
process detailed in Part 6 of this Schedule C.
4. Monthly Energy Rate.
-------------------
The Monthly Energy Rate, expressed in hundredths of dollars
per megawatt-hour ($0.00/MWH), for the LT Steam Resource shall be determined
each Month as the sum, over each of the Units identified in the following table,
of the product of:
(1) each Unit's energy rate for such Month, expressed in
hundredths of dollars per megawatt-hour ($0.00/MWH),
determined as the sum of:
(a) the product of:
(i) the average heat rate for each Unit,
expressed in millions of British Thermal
Units per megawatt-hour (MMBTU/MWH), derived
from "Informational Schedule No. 2 (Energy
Costs by Sources)" of the IIC in effect for
such Month
(ii) the sum of:
-- the blended replacement fuel cost
for each Unit for such Month, in
dollars per million British Thermal
Units ($/MMBTU), determined as (i)
the actual delivered fuel cost for
such Unit for the immediately
previous approximately thirty (30)
Day period, and (ii) the projected
delivered fuel cost for such Unit
for the current approximately
thirty (30) Day period; as
calculated by Georgia Power or its
agent, and as possibly adjusted by
Georgia Power or its agent, in its
discretion, for the time value of
money (Georgia Power's and its
agent's current practice as of the
date of the Agreement is to
calculate such actual and projected
delivered fuel costs on a Monthly
basis, but Georgia Power may change
the exact approximately thirty (30)
Day time period to be used in such
calculations in Georgia Power's or
its agent's reasonable discretion)
-- the emissions allowance cost for
each Unit for such Month, in
dollars per million British Thermal
Units ($/MMBTU), determined as (i)
the per unit sulfur content of the
fuel used to determine the blended
replacement fuel cost above, times
(ii) two (2), the conversion by
weight of sulfur to sulfur dioxide,
divided by (iii) the heat content,
expressed in millions of British
Thermal Units per ton (MMBTU/ton),
of the fuel used to determine the
blended replacement fuel cost
above, times (iv) the value
assigned to emissions allowances,
in dollars per ton ($/ton), for
such Month in accordance with the
IIC
(b) the variable operations and maintenance expense rate
for each Unit, expressed in dollars per megawatt-hour
($/MWH), as shown in "Informational Schedule No. 2
(Energy Costs by Sources)" of the IIC in effect for
such Month
(c) the fuel handling expense rate for each Unit,
expressed in dollars per megawatt-hour ($/MWH), as
shown in "Informational Schedule No. 2 (Energy Costs
by Sources)" of the IIC in effect for such Month
(d) other energy related costs for each Unit, expressed
in dollars per megawatt-hour ($/MWH), properly
determined in accordance with FERC/NERC procedures
(2) the factor for such Unit from the following table
- --------------------------------------- ----------------------------------
Unit Factor
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Branch 1 0.083404
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Branch 3 0.373292
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Branch 4 0.374552
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Hammond 1 0.083508
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
Hammond 3 0.085244
- --------------------------------------- ----------------------------------
(3) one (1) divided by the Level A to B-1 Loss Factor for such
Unit.
5. Availability Factor.
-------------------
The Availability Factor, expressed in hundredths (0.00), for
the combined LT Steam Resource shall be determined each Month as:
(1) the sum of:
(a) the product of:
(i) the then current megawatts (MW) associated
with the Remainder
(ii) 0.86
(b) the product of:
(i) the megawatts (MW) purchased by Oglethorpe
Power pursuant to the notice incorporated
above
(ii) for the Months of June, July and August,
0.92 for all other Months, 0.84
(2) divided by the sum of:
(a) the then current megawatts (MW) associated with the
Remainder
(b) the megawatts (MW) purchased by Oglethorpe Power
pursuant to the notice incorporated above.
6. Change in Law.
-------------
The Parties acknowledge that a Change in Law, including, but
not limited to, environmental laws and regulations and energy taxes applicable
to wholesale sales, but specifically excluding any other taxes, may
significantly change (increase or decrease) Georgia Power's costs in providing
the service described above. In the event of such a Change in Law, either Party
may give notice to the other Party that Georgia Power's costs have changed
significantly and may initiate negotiations to modify this Schedule to reflect
such changes in costs. If the Parties have not negotiated and agreed upon an
amendment to this Schedule within 90 Days, either Party shall have the right to
initiate a dispute resolution process as follows: (i) Georgia Power shall make a
good faith calculation of the effect of such change and adjust the billing
accordingly, (ii) Oglethorpe may pay under protest, (iii) a mutually agreeable
individual ("Accountant") shall calculate the appropriate adjustment to reflect
the change in cost, and billings will be adjusted accordingly, and (iv) the
Parties shall split Accountant's fee for rendering such service. If the Parties
cannot reach agreement on a mutually agreeable individual, then the head of the
utilities practice group at Arthur Andersen will be used.
Exhibit 10(a)59
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1999
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
Purposes
The purposes of the Southern Company Executive Productivity Improvement
Plan (the "Plan") are to provide a financial incentive which will focus the
efforts of certain executives on areas that will have a direct and significant
influence on corporate performance and to provide the potential for levels of
compensation that will enhance the Employing Companies' abilities to attract,
retain and motivate such executives. In order to achieve these objectives, the
Plan will be based upon corporate performance.
This Amendment and Restatement shall be effective as of January 1,
1999.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Salary" shall mean base salary or wages paid to a
Participant before deductions for taxes, social security, etc., including all
amounts contributed by an Employing Company to The Southern Electric System
Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf
of a Participant, amounts contributed by any Employing Company to The Southern
Company Employee Savings Plan as Elective Employer Contributions, as said term
is defined in Section 4.1 therein, pursuant to the Participant's exercise of his
deferral option made in accordance with Section 401(k) of the Internal Revenue
Code, and amounts contributed to the Southern Company Deferred Compensation
Plan, but excluding all awards under the Southern Company Performance Pay Plan
and the Southern Company Executive Productivity Improvement Plan, overtime pay,
shift differential and substitution pay. For Computation Periods beginning on or
before January 1, 1998, Annual Salary shall be the Participant's Annual Salary
as of the first day of the Computation Period. For Computation Periods beginning
January 1, 1999 and thereafter, Annual Salary shall be the weighted average
Annual Salary determined as of the last day of each of the four years within the
Computation Period.
1.2 Average ROE" shall mean the mathematical result obtained by (a)
calculating the return on equity for each year in the Computation Period, (b)
adding the return on equity calculations for all years in the Computation
Period; and (c) dividing the total by the number of years in the Computation
Period.
1.3 "Award" shall mean the Award Opportunity or Award Units multiplied
by the Performance Unit Value determined under Sections 3.2 and 3.4 of the Plan.
1.4 "Award Opportunity" shall mean the award opportunity determined
under Section 3.1 of the Plan.
1.5 "Award Unit" shall mean the unit opportunity determined under
Section 3.3 of the Plan.
1.6 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.7 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.8 "Business Combination" shall mean a reorganization, merger or
consolidation or sale of Southern Company or a sale of all or substantially all
of Southern Company's assets.
1.9 "Chief Executive Officer" shall mean the individual designated as
such by the Board of Directors of an Employing Company and of Southern Company.
1.10 "Committee" or "Compensation Committee" shall mean the
Compensation Committee of the Board of Directors of Southern Company or the
Employing Company.
1.11 "Common Stock" shall mean the common stock of Southern Company.
1.12 "Computation Period" shall mean a four-year period commencing on
the first day of the initial year of participation and thereafter it shall mean
a four-year period commencing the first day of January each year made up of the
ROE Computation Period and the TSR Computation Period, if any, respectively.
1.13 "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but not
limited to, any required approvals by the corporation's shareholders and board
of directors, the transfer of legal and beneficial title to securities or assets
and the final approval of the transaction by any applicable domestic or foreign
governments or agencies.
1.14 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.15 "Employing Company" shall mean Southern Company Services, Inc., or
any other affiliate or subsidiary (direct or indirect) of Southern Company,
which the Board of Directors may from time to time determine to bring under the
Plan and which shall adopt the Plan, and any successor of any of them.
1.16 "Executive Employee" shall mean any person who is currently
employed by an Employing Company who is a "covered employee" as that term is
defined in Section 162(m) of the Internal Revenue Code (the "Code") who is
designated as an Executive Employee by the Compensation Committee and such other
persons employed by an Employing Company as the Compensation Committee in its
discretion shall designate.
1.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.18 "Grade Level" shall mean the evaluation assigned under the job
evaluation system. For Computation Periods beginning on or before January 1,
1998, Grade Level shall be the Participant's Grade Level as of the first day of
the Computation Period. For Computation Periods beginning January 1, 1999 and
thereafter, Grade Level shall be the weighted average Grade Level determined as
of the last day of each of the four years within the Computation Period.
1.19 "Grade Level Value" shall mean the assigned dollar value within
the Annual Salary range for a Grade Level in a Computation Period, upon which
awards are based.
1.20 "Group" shall have the meaning set forth in Section 14(d) of the
Exchange Act.
1.21 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company's shareholders was approved by a vote of at least 75% of the
directors then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
1.22 "Non-Adopting Employer" shall mean any subsidiary or affiliate of
Southern Company which is not an Employing Company.
1.23 "Participant" shall mean an Executive Employee who satisfies the
criteria referred to in Article II at the beginning of a Computation Period.
1.24 "Payment Date" shall mean the date the check evidencing the Award
is endorsed by an authorized person of an Employing Company.
1.25 "Percentage of Total Award" shall have the meaning ascribed in
Exhibits B and E hereof.
1.26 "Plan" shall mean the Southern Company Executive Productivity
Improvement Plan, as described herein or as may be amended from time to time.
1.27 "Plan Termination" shall mean the termination of the Plan by
Southern Company or an Employing Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that, on aggregate, the post-Southern Change in Control plan is an
equitable substitute or replacement of the pre-Southern Change in Control Plan,
and that such substitute or alternative plan provides substantially similar
target opportunities and a substantially similar level of performance
difficulty.
1.28 "Prior Plan" shall mean the Plan as amended and restated effective
January 1, 1995.
1.29 "Southern Board" shall mean the board of directors of Southern
Company.
1.30 "Southern Change in Control" shall mean any of the following:
(a) The acquisition by any Person of Beneficial Ownership of
20% or more of Southern Company's Voting Securities; provided, however,
that for purposes of this subsection (a), the following acquisitions of
Southern Company's Voting Securities shall not constitute a Change in
Control:
(i) any acquisition directly from Southern Company;
(ii) any acquisition by Southern Company;
(iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by Southern Company
or any corporation Controlled by Southern Company;
(iv) any acquisition by a qualified pension plan or
publicly held mutual fund;
(v) any acquisition by an Employee or Group composed
exclusively of Employees; or
(vi) any Business Combination which would not
otherwise constitute a Change in Control because of the
application of clauses (i), (ii) and (iii) of Section 1.30(c);
(b) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(c) Consummation of a Business Combination, unless, following such
Business Combination, all of the following three conditions are met:
(i) all or substantially all of the individuals and entities
who held Beneficial Ownership, respectively, of Southern Company's
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, 65% or more of the combined
voting power of the Voting Securities of the corporation surviving or
resulting from such Business Combination, (including, without
limitation, a corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern Company's
Voting Securities or all or substantially all of Southern Company's
assets) (such surviving or resulting corporation to be referred to as
"Surviving Company"), in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Southern Company's Voting Securities;
(ii) no Person (excluding any corporation resulting from such
Business Combination, any qualified pension plan, publicly held mutual
fund, Group composed exclusively of Employees or employee benefit plan
(or related trust) of Southern Company, its subsidiaries or Surviving
Company) holds Beneficial Ownership, directly or indirectly, of 20% or
more of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors of Surviving Company were members of the Incumbent Board at
the earlier of the date of execution of the initial agreement, or of
the action of the Southern Board, providing for such Business
Combination.
1.31 "Southern Company" shall mean The Southern Company.
1.32 "Southern Termination" shall mean the following:
(a) The consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The sale or other disposition of all or substantially all
of Southern Company's assets; or
(c) The acquisition by any Person of Beneficial Ownership of
all of Southern Company's Voting Securities such that Southern
Company's Voting Securities are no longer publicly traded;
in each case under circumstances where the Surviving Company of the
company acquiring Southern Company's assets or Voting Securities dies
not adopt an "equitable arrangement" (as defined in Section 1.27
hereof) in the form of a replacement plan.
1.33 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of an Employing Company; provided,
however, that for purposes of this Section 1.33, any acquisition by an
Employee, or Group composed entirely of Employees, any qualified
pension plan, any publicly held mutual fund or any employee benefit
plan (or related trust) sponsored or maintained by Southern Company or
any corporation Controlled by Southern Company shall not constitute a
Change in Control;
(b) Consummation of a reorganization, merger or consolidation
of an Employing Company (an "Employing Company Business Combination"),
in each case, unless, following such Employing Company Business
Combination, Southern Company Controls the corporation surviving or
resulting from such Employing Company Business Combination; or
(c) Consummation of the sale or other disposition of all or
substantially all of the assets of an Employing Company to an entity
which Southern Company does not Control.
1.34 "Subsidiary Employee" shall mean an Executive Employee of an
Employing Company which has undergone a Subsidiary Change in Control.
1.35 "ROE Computation Period" shall have the meaning ascribed in
Section 3.1 hereof
1.36 "ROE Peer Group Companies" shall mean the companies set forth on
Exhibit C attached hereto and as may be revised from time to time by the
Committee to reflect mergers, acquisitions, reorganizations, etc. of such
companies.
1.37 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful and reasonable instructions given to him or her
by the Employing Company without reasonable excuse;
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice or impair the good name
and standing of the Company or any Employing Company or would
bring the Company or any Employing Company into contempt,
ridicule or would reasonably shock or offend any community in
which the Company or any Employing Company is located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.38 "Total Shareholder Return" or "TSW' shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in TSR
Peer Group Common Stock, as the case may be, as determined by measuring the
total dividends which would have been paid on such Common Stock or TSR Peer
Group Common Stock by reinvesting such dividends on a quarterly basis in
additional shares of Common Stock or TSR Peer Group Common Stock, as the case
may be, and the total gain or loss on such Common Stock or Peer Group Common
Stock as if such stock had been sold at the closing price on the last day of the
respective Computation Period.
1.39 "TSR Computation Period" shall have the meaning ascribed in
Section 3.3 hereof.
1.40 "TSR Peer Group Common Stock" shall mean the common stock of the
Peer Group, Companies.
1.41 "TSR Peer Group Companies" shall mean those Companies designated
by Goldman Sachs in its "Selected Electric Utility Industry Report" as the
approximately 80 Utility Peer Group Companies as published quarterly and as
composed from time to time. In the event that Goldman Sachs no longer publishes
the 80 Utility Peer Group Companies, the Committee shall choose such other and
similar list of national peer group companies as published by a similarly
nationally recognized firm.
1.42 "Value of Performance Unit" shall have the meaning ascribed in
Exhibits B and E attached hereto.
1.43 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE II
Participants
2.1 Participation. Participation in the Plan shall be limited to
Executive Employees of the Employing Companies.
2.2 Reduction in Grade Level. Any Participant who ceases to be an
Executive Employee prior to the close of a Computation Period shall receive an
Award for the Computation Period ending on December 31st of the year in which
such Participant ceased to be an Executive Employee and shall forfeit any Award
for any other Computation Periods that have not closed as of the date the
Participant ceases to be an Executive Employee.
2.3 Termination of Employment. If a Participant's employment is
terminated by reason of death, disability or retirement, such Participant or his
or her estate shall be eligible to receive an Award for the Computation Period
ending in the year of such death, disability or retirement unless such death,
disability or retirement shall have occurred on January 1 in which case the
Participant or his or her estate shall only be entitled to an Award for the
Computation Period ending December 31 of the previous year. Any Participant who
terminates employment for any other reason shall receive only any unpaid Award
for a completed Computation Period and shall not be eligible to receive an Award
for the Computation Period ending in the year of such termination of employment.
2.4 Transfer to Non-Adopting Employer. Notwithstanding the provisions
of Section 2.3 above, in the case of an individual transferring from an
Employing Company to a Non-Adopting Employer any Award paid for any Computation
Period not yet closed as of the date of a Participant's transfer shall be paid
to the Participant by the Employing Company from which the Participant is
transferring on the following basis:
(i) 100% of the Award for the Computation Period ending in the
year of transfer;
(ii) 75% of the Award for the Computation Period ending in the
first year following the year of transfer;
(iii) 50% of the Award for the Computation Period ending in
the second year following the year of transfer; and
(iv) 25% of the Award for the Computation Period ending in the
third year following the year of transfer.
Such transferring Participant shall receive no award for any Computation Period
which has not begun on the date of the Participant's transfer or if such
Participant shall no longer be in an eligible Grade Level after such transfer.
Any Awards payable under this Section 2.4 shall be based on the Grade
Level at the time of transfer.
2.5 Transfer from Non-Adopting Employer. In the case of an individual
transferring from a Non-Adopting Employer to an Employing Company whose Grade
Level and length of service at the Non-Adopting Employer would have caused the
Employee to have been a Participant in the Plan if the Non-Adopting Employer
were an Employing Company and whose Grade Level after the transfer would enable
the Employee to participate in the Plan, such individual shall be deemed to have
been employed by an Employing Company while employed with the Non-Adopting
Employer and shall, for any Computation Period ending after such transfer, be
deemed a Participant in the Plan as if the Non-Adopting Employer was an
Employing Company.
Any Awards payable under this Section 2.5 shall be based on the Grade
Levels at the Employing Company.
2.6 Termination for Cause. Notwithstanding any other provision of this
Plan, a Participant whose employment is Terminated for Cause shall forfeit any
and all unpaid Awards under this Plan.
2.7 Promotion. The administration of Awards for Participants who are
promoted or transferred from one Grade Level included in the Plan to another
Grade Level included in the Plan shall be based on the Participant's Grade Level
Value on the last day of the Computation Period for which an Award is being
granted. For the Computation Periods ending December 31, 1995, December 31,
1996, December 31, 1997 and December 31, 1998 a Participant's Grade Level Value
for determining Awards shall be the Participant's Grade Level Value on January
1, 1995.
2.8 Maximum Award. Notwithstanding any other provision of this Plan,
the maximum Award for any Computation Period payable to any Participant shall be
two million dollars ($2,000,000).
2.9 1995 Participants. Any individual who initially becomes a
Participant in the Plan as of January 1, 1995 shall be considered to have been
participating in the Plan as of January 1, 1993 for purposes of determining
benefits payable for any Computation Period that began or begins on or after
January 1, 1993 and such Participant will therefore be eligible for an Award
equal to seventy-five percent (75%) of the Award Opportunity for the Computation
Period ending December 31, 1995.
2.10 Post-1995 Participants. In the case of an individual who becomes a
Participant subsequent to January 1, 1995, said Participant will participate in
each Computation Period which ends not less than two (2) years after becoming a
Participant.
ARTICLE III
Corporate Financial Performance Award
3.1 ROE Computation Period. For Computation Period years beginning
before January 1, 1997 (the "ROE Computation Period"), the Award Opportunity for
each Participant shall be based upon either his Grade Level Value (as determined
based on his Grade Level at the beginning of such period) or, in the Committee's
discretion, upon his Annual Salary at the beginning of such period and in either
case shall range from fifteen percent (15%) to sixty-five percent (65%) of such
Grade Level Value or Annual Salary, as applicable. The Award Opportunity for
each Grade Level or Annual Salary shall be determined in accordance with the
chart set forth in Exhibit A hereof.
3.2 ROE Ranking. Each Award Opportunity granted in the ROE Computation
Period shall be multiplied by the Value of Performance Unit factor and the
Percentage of Total Award factor set forth in Exhibit B hereof, which is based
on Southern Company's Average ROE ranking during the ROE Computation Period as
compared to the Average ROE ranking of the ROE Peer Group Companies to determine
a Participant's Award. The return on common equity of the ROE Peer Group
Companies shall be determined annually by an independent certified public
accountant based on generally accepted accounting principles and shall be
properly adjusted and annualized by such accountant so that each ROE Peer Group
Company return on common equity may be accurately compared to that of Southern
Company.
3.3 TSR Computation Period. For Computation Period years beginning on
or after January 1, 1997 (the "TSR Computation Period"), the Award Units for
each Participant shall be based upon either his Grade Level Value or, in the
Committee's discretion, upon his Annual Salary and, in either case shall range
from fifteen percent (15%) to sixty-five percent (65%) of such Grade Level Value
or Annual Salary, as applicable. The Award Units for each Grade Level or Annual
Salary shall be determined in accordance with the charts set forth in Exhibit D
hereof
3.4 TSR Ranking. Each Award Unit granted in the TSR Computation Period
shall be multiplied by the Value of Performance Unit factor and the Percentage
of Total Award factor set forth in Exhibit E hereof which is based on Total
Shareholder Return of Southern Company as compared to the Total Shareholder
Return for the TSR Peer Group Companies. The Total Shareholder Return of
Southern Company and the TSR Peer Group Companies shall be determined annually
by an independent certified public accountant and shall be properly adjusted and
amortized by such accountant so that each TSR Peer Group Company's total
shareholder return may be accurately compared to that of Southern Company.
3.5 Insufficient Earnings. Notwithstanding the above provisions, an
Award will not be granted for any Computation Period ending with the calendar
year in which the current earnings of Southern Company are less than the amount
necessary to fund the dividends on its Common Stock at the rate such dividends
were paid for the immediately preceding calendar year.
3.6 Extraordinary Income. In the exercise of negative discretion, the
Compensation Committee may calculate the Award for one or more Computation
Period(s) without regard to any extraordinary income item (but not loss)
otherwise recorded by Southern Company or any Employing Company, provided such
determination that an item of income is extraordinary is made by the Committee
prior to the close of the Computation Period.
3.7 Payment. The Awards to the Participants will be paid in cash as
soon as is practicable after all evaluations are completed. An Award payment may
not be deferred under this Plan. In the event an Award was deferred under the
Prior Plan, such deferral shall be governed by the terms of the Prior Plan.
ARTICLE IV
Change in Control
4.1 Southern Change in Control. Notwithstanding any other provision of
this Plan to the contrary, in the event of a Plan Termination within the two (2)
year period following a Southern Change in Control, each Participant who is an
Executive Employee on the date of the Plan Termination shall be entitled to
receive within thirty (30) days of the Plan Termination, cash in an amount equal
to his Award Opportunity or Award Units, as the case may be, for the Computation
Period in which the Plan Termination shall have occurred, at a target Value of
Performance Unit of $ 1.00, prorated for each Computation Period by the number
of months which have passed since the beginning of the Computation Period until
the date of the Plan Termination.
4.2 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control to another Employing
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash in an amount equal to his Award Opportunity, or Award
Units, as the case may be, for the Computation Period in which the Subsidiary
Change in Control shall have occurred, at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of months which have
passed since the beginning of the Computation Period until the date of the
Subsidiary Change in Control.
4.3 Southern Termination. Notwithstanding any other provision of this
Plan to the contrary, in the event of a Southern Termination, if the Plan or an
equitable replacement thereto (as described in Section 1.27 hereof) remains
effective on December 31st of the Plan Year in which the Southern Change in
Control shall have occurred, the Plan or Replacement Plan shall operate with
respect to the Performance Period then ended in accordance with its terms, but
in no event shall the Value of Performance Unit under the Plan or similar factor
under a replacement plan for such Performance Period be less than $1.00 or
target performance, respectively.
ARTICLE V
Miscellaneous Provisions
5.1 No Assignment. Neither the Participant, his beneficiary, nor his
personal representative shall have any rights to commute, sell, assign, transfer
or otherwise convey the right to receive any payments hereunder, which payments
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments of this
Plan shall be void and have no effect.
5.2 No Reserve. The Employing Company shall not reserve or otherwise
set aside funds for the payments of Awards deferred in accordance with the Prior
Plan.
5.3 Plan Amendment. Except for the provisions of Article IV hereof,
which may not be amended, modified or terminated following a Southern Change in
Control, Subsidiary Change in Control or a Southern Termination, the Plan may be
amended, modified, or terminated by the Board of Directors in its sole
discretion at any time and from time to time; provided, however, that no such
amendment, modification, or termination shall impair any rights to payments
which have been deferred under the Prior Plan prior to such amendment,
modification, or termination.
5.4 Additional Benefits. It is expressly understood and agreed that the
Awards made in accordance with the Plan are in addition to any other benefits or
compensation to which a Participant may be entitled or for which he may be
eligible, whether funded or unfunded, by reason of his employment with the
Employing Company.
5.5 Withholding. There shall be deducted from the payment of each Award
under the Plan the amount of any tax required by any governmental authority to
be withheld and paid over by the Employing Company to such governmental
authority for the account of the person entitled to such distribution.
5.6 Effect On Other Benefits. Any Awards paid to a Participant while
employed by an Employing Company shall not be considered in the calculation of
the Participant's benefits under any other employee welfare or pension benefit
plan maintained by an Employing Company, unless otherwise specifically provided
therein.
5.7 Governing Law. This Plan, and all its rights under it, shall be
governed by and construed in accordance with the laws of the State of Georgia.
5.8 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No. 16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting,), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall be void and ineffective in such a manner and to the extent that
by eliminating such provision or provisions of this Plan, Pooling Accounting
would be required for such Change in Control transaction.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby amends and restates the Southern Company Executive
Productivity Improvement Plan this ____ day of ______________, 1999 to be
effective January 1, 1999.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By:
Tommy Chisholm
Secretary
[CORPORATE SEAL]
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT A
Award Opportunity
Grade Level Value Award Opportunity
Percentage of Grade Level Value
or Annual Salary
President/CEO 50/65%
15 50%
14 45%
13 40%
12 35%
11 30%
10 25%
9 25%
8 20%
7 15%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT B
AWARD PERCENTAGE SCHEDULE
Position Ranking
Value of
Performance Unit 12-14 15-17 18 - 20
$ Companies Companies Companies
- ---------------- --------- --------- ---------
$2.00 Top Top Top
1.80 1.0 1.0 1.0
1.60 2.0 2.0 2.0
1.40 2.5 3.0 3.0
1.20 3.0 4.0 4.0
1.00 4.0 4.5 5.0
.90 4.5 5.0 6.0
.80 5.0 6.0 7.0
.70 6.0 7.0 8.0
.60 6.5 8.0 9.0
.50 7.0 8.5 10.0
0 Below 7.0 Below 8.5 Below 10
Percentage Of Total Award Factor
Computation Period Ending Factor
December 31, 1997 75%
December 31, 1998 50%
December 31, 1999 25%
Thereafter 0%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT C
ROE Peer Group Companies
<PAGE>
Allegheny Energy, Inc.
Alliant Energy Corporation
Ameren Corporation
American Electric Power Company
Baltimore Gas & Electric Company
BEC Energy
Carolina Power & Light Company
Central & South West Corporation
CILCORP. Inc.
Cinergy Corporation
Cleco Corporation
Conectiv CIV
CMS Energy Corporation
Commonwealth Energy System
Consolidated Edison, Inc.
Dominion Resources, Inc.
DPL, Inc.
DQE, Inc.
DTE Energy Company
Duke Energy Corporation
Eastern Utilities Associates Edison International Energy East Corporation
Entergy Corporation FirstEnergy Corporation Florida Progress Corporation FPL
Group, Inc.
GPU, Inc.
Hawaiian Electric Industries, Inc.
Houston Industries, Inc.
IDACORP, Inc.
Illinova Corporation
Interstate Energy Corporation
IPALCO Enterprises, Inc.
Washington Water Power Co.
Western Resources, Inc.
WPS Resources Corp.
Kansas City Power & Light Company
Keyspan Energy Corporation
LG&E Energy Corporation
MDU Resources
MidAmerican Energy Holdings Co.
Minnesota Power Company
Montana Power Company
Nevada Power Co.
New Century Energies, Inc.
New England Electric System
Niagara Mohawk Power Corp.
NIPSCO Industries, Inc.
Northeast Utilities Co.
Northern States Power Co.
OGE Energy Corp.
Orange & Rockland Utilities, Inc.
PG&E Corp.
PacifiCorp
PECO Energy Co.
Pinnacle West Capital Corp.
Potomac Electric Power Co.
PP&L Resources, Inc.
Public Service Co. of New Mexico
Public Service Enterprise Group, Inc.
Puget Sound Energy, Inc.
Rochester Gas & Electric Corp.
SCANA Corp.
Sierra Pacific Resources
SIGCORP, Inc.
TECO Energy, Inc.
Texas Utilities Company
Unicom Corp.
Unisource Energy Corp.
United Illuminating Company
UtiliCorp. United, Inc.
Wisconsin Energy Corp.
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT D
Award Units
Grade Level Value Award Units
Percentage of Grade Level Value
or Annual Salary
President/CEO 50/65%
15 50%
14 45%
13 40%
12 35%
11 30%
10 25%
9 25%
8 20%
7 15%
<PAGE>
SOUTHERN COMPANY
EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
EXHIBIT E
Performance Unit Factor*
Value of Unit Percentile of Southern TSR
vs.
--
Investor Utility
$ 2.00 90th and above
$ 1.50 70th
$ 1.00 50th
$ .50 30th
$ .00 Below 30th
*The Value of Unit for performance levels falling between the percentiles listed
above shall be interpolated on a straight line basis for any given calendar
year.
Percentage Of Total Award Factor
Computation Period Ending Factor
December 31, 1997 25%
December 31, 1998 50%
December 31, 1999 75%
Thereafter 100%
Exhibit 10(a)61
FOURTH AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of January 1, 1997; and
WHEREAS, the Committee desires to amend the Plan to provide for the
participation in the Plan by certain former employees of Orange and Rockland
Utilities, Inc. and Pacific Gas and Electric, Inc. who become employed by
Southern Energy Resources, Inc.; and
WHEREAS, the Committee desires to amend the Plan to allow for the
trust-to-trust transfer of account balances from the Orange and Rockland
Utilities, Inc. Management Employees' Savings Plan; and
WHEREAS, the Committee desires to clarify Plan language concerning the
delegation of authority to appoint investment managers; and
WHEREAS, the Committee desires to amend the definition of "Eligible
Rollover Distribution" to comply with recent changes in the law; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of the date hereof, Article III shall be amended by adding
a new Section 3.8 thereto as follows and by redesignating existing Section 3.8
as Section 3.10:
3.8 Former Orange and Rockland Utilities, Inc. Employees.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of Orange and Rockland Utilities, Inc.
("O&R") who is employed by Southern Energy Resources, Inc. and is set
forth on a schedule of employees acknowledged by the Committee, such
employee shall be given credit for service with O&R for eligibility
purposes and may elect to become a Participant as of any Enrollment
Date commencing on or after the date such employee meets the
eligibility requirements under Section 3.1 of the Plan.
II.
Effective as of the date hereof, Article III shall be amended by adding
a new Section 3.9 thereto as follows:
3.9 Former Pacific Gas and Electric, Inc. Employees.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of Pacific Gas and Electric, Inc. ("PG&E")
who is employed by Southern Energy Resources, Inc. and is set forth on
a schedule of employees acknowledged by the Committee, such employee
shall be given credit for service with PG&E for eligibility purposes
and may elect to become a Participant as of any Enrollment Date
commencing on or after the date such employee meets the eligibility
requirements under Section 3.1 of the Plan.
III.
Effective as of the date hereof, a new Article XIX shall be added as follows:
ARTICLE XIX
SPECIAL REQUIREMENTS FOR ACCOUNT BALANCES
ATTRIBUTABLE TO ACCRUED BENEFITS TRANSFERRED FROM
THE ORANGE AND ROCKLAND UTILITIES, INC.
MANAGEMENT EMPLOYEES' SAVINGS PLAN (THE "O&R PLAN")
19.1 Acceptance of Trust-to-Trust Transfer. The Plan may
accept a trust-to-trust transfer of an account from the O&R Plan for
each Participant who was a participant in the O&R Plan immediately
prior to the date of the acquisition of Orange and Rockland Utilities,
Inc. ("O&R") ("Effective Date"), who becomes employed by Southern
Energy Resources, Inc. immediately thereafter, and who elects on a form
acceptable to the Committee to make such a transfer. Such account shall
be known as the Participant's "O&R Transferred Account" and shall be
subject to the requirements of this Article XIX.
19.2 Treatment of O&R Transferred Account. The O&R Transferred
Account shall not be maintained as a separate bookkeeping account but,
instead, shall be treated as follows:
(a) Voluntary Participant Contributions. The portion
of the Transferred Account attributable to Employee After-Tax
Contributions, as that term is defined under the O&R Plan,
shall be treated as Voluntary Participant Contributions under
this Plan.
(b) Elective Employer Contributions. The portion of
the Transferred Account attributable to (1) Pre-Tax
Contributions, as that term is defined under the O&R Plan; and
(2) Transferred Employer PAYSOP Contributions, as that term is
defined under the O&R Plan; and (3) Hourly Savings Plan
Contributions, as that term is defined under the O&R Plan,
shall be treated as Elective Employer Contributions under this
Plan.
(c) Employer Matching Contributions. The portion of
the Transferred Account attributable to Company Matching
Contributions, as that term is defined under the O&R Plan,
shall be treated as Employer Matching Contributions under this
Plan.
(d) Rollover Contributions. The portion of the
Transferred Account attributable to Rollover Contributions, as
that term is defined under the O&R Plan, shall be treated as
Rollover Contributions under this Plan.
19.3 Investment and In-Service Withdrawals of Employer
Matching Contributions. In determining a Participant's ability to
invest Employer Matching Contributions under Section 8.3(b) and to
withdraw Employer Matching Contributions under Section 11.1(a)(4), a
Participant shall be given credit for any participation in the O&R
Plan.
19.4 Loans from O&R Transferred Accounts. The Transferred
Accounts may include loans made under the O&R Plan and shall be
amortized in accordance with the loan note(s) provided upon transfer.
With respect to Section 11.7(b), any loans transferred shall be
considered in determining the limits thereunder.
19.5 Code Section 411(d)(6) Protected Benefits.
Notwithstanding any of the foregoing, the provisions of this Article
XIX shall not decrease a Participant's accrued benefit, except to the
extent permitted under Section 412(c)(8) of the Code, and shall not
reduce or eliminate Code Section 411(d)(6) protected benefits. The
Committee shall disregard any part of this Article XIX or the Plan to
the extent that application of such would fail to satisfy this
paragraph. If the Committee disregards any portion of this Article XIX
or the Plan because it would eliminate a protected benefit, the
Committee shall maintain a schedule of any such impacted early
retirement option or other optional forms of benefit and the Plan shall
continue such for the affected Participants.
IV.
Effective as of March 25, 1999, Section 13.14 of the Plan shall be
amended by deleting such section in its entirety and replacing it with the
following:
13.14 Management of Assets. The Committee shall not have
responsibility with respect to control or management of the assets of
the Plan. The Trustee shall have the sole responsibility for the
administration of the assets of the Plan as provided in the Trust
Agreement, except to the extent that an investment advisor (who
qualifies as an Investment Manager as that term is defined in ERISA)
who is appointed by the Pension Fund Investment Review Committee shall
have responsibility for the management of the assets of the Plan, or
some part thereof (including powers to acquire and dispose of the
assets of the Plan, or some part thereof).
V.
Effective as of March 25, 1999, Section 14.1 of the Plan shall be
amended by deleting such section in its entirety and replacing it with the
following:
14.1 Trustee. The Company has entered into a Trust Agreement
with the Trustee to hold the funds necessary to provide the benefits
set forth in the Plan. If the Board of Directors so determines, the
Company may enter into a Trust Agreement or Trust Agreements with
additional trustees. Any Trust Agreement may be amended by the Company
from time to time in accordance with its terms. Any Trust Agreement
shall provide, among other things, that all funds received by the
Trustee thereunder will be held, administered, invested, and
distributed by the Trustee, and that no part of the corpus or income of
the Trust held by the Trustee shall be used for or diverted to purposes
other than for the exclusive benefit of Participants or their
Beneficiaries, except as otherwise provided in the Plan. Any Trust
Agreement may also provide that the investment and reinvestment of the
Trust Fund, or any part thereof may be carried out in accordance with
directions given to the Trustee by any Investment Manager or Investment
Managers (as that term is defined in ERISA) who may be appointed by the
Pension Fund Investment Review Committee. The Board of Directors may
remove any Trustee or any successor Trustee, and any Trustee or any
successor Trustee may resign. Upon removal or resignation of a Trustee,
the Board of Directors shall appoint a successor Trustee.
VI.
Effective as of the date hereof, Section 2.30 of the Plan shall be
amended by deleting such section in its entirety and replacing it with the
following:
2.30. "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution does not
include: (a) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee, the joint lives (or
joint life expectancies) of the Distributee and the Distributee's
Beneficiary, or for a specified period of 10 years or more; (b) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; (c) the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion
from net unrealized appreciation with respect to employer securities);
and (d) for distributions on or after January 1, 2000, any hardship
distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.
Except as amended herein by this Fourth Amendment, the Plan shall
remain in full force and effect as amended and restated by the Company prior to
the adoption of this Fourth Amendment.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Employee Savings Plan Committee, has adopted this
Fourth Amendment to The Southern Company Employee Savings Plan this ____ day of
_________________________, 1999 to be effective as of such date unless stated
otherwise herein.
EMPLOYEE SAVINGS PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
<PAGE>
FIFTH AMENDMENT TO THE
SOUTHERN COMPANY EMPLOYEE SAVINGS PLAN
WHEREAS, the Employee Savings Plan Committee ("Committee") heretofore
adopted the amendment and restatement of The Southern Company Employee Savings
Plan ("Plan"), effective as of January 1, 1997; and
WHEREAS, the Committee desires to amend the Plan to allow Eligible
Employees to make a Rollover Contribution to the Plan within 18 months of
employment; and
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective as of January 1, 2000, Section 4.11 of the Plan shall be
amended by deleting such Section and substituting a new Section 4.11 as follows:
4.11 Rollovers from Other Plans. An Eligible Employee who is
hired or rehired on or after April 1, 1997 and has received a
distribution of his interest in a retirement plan of a former employer
under circumstances meeting the requirements of Section 402(c)(4) of
the Code relating to eligible rollover distributions from qualified
trusts may elect to deposit all or any portion (as designated by such
Eligible Employee) of the amount of such distribution as a Rollover
Contribution to this Plan. A Rollover Contribution may be made only
within 60 days following the date the Eligible Employee receives the
distribution from the plan of his former employer (or within such
additional period as may be provided under Section 408 of the Code if
the Eligible Employee shall have made a timely deposit of the
distribution in an individual retirement account) and within 12 months
of the date of his employment or reemployment with an Employing
Company. Notwithstanding the preceding sentence, effective January 1,
2000, a Rollover Contribution may be made only within 60 days following
the date the Eligible Employee receives the distribution from the plan
of his former employer (or within such additional period as may be
provided under Section 408 of the Code if the Eligible Employee shall
have made a timely deposit of the distribution in an individual
retirement account) and within 18 months after the date of his
employment or reemployment with an Employing Company. In addition to
the foregoing, an Eligible Employee described in Section 3.5 may elect
to make a Rollover Contribution to this Plan without regard to his date
of employment, provided that such Rollover Contribution is deposited
with this Plan within the period beginning April 1, 1997 and ending
June 30, 1997 and which otherwise satisfies the requirements of this
Section 4.11.
The Committee shall establish rules and procedures to
implement this Section 4.11, including without limitation, such
procedures as may be appropriate to permit the Committee to verify the
tax qualified status of the plan of the former employer and compliance
with any applicable provisions of the Code relating to such
contributions. The amount contributed to the Trustee pursuant to this
Section 4.11 shall be placed in the Eligible Employee's Rollover
Contribution subaccount for the benefit of the Eligible Employee
pursuant to Section 9.1. The Eligible Employee shall have a fully
vested interest in the balance of his Rollover Contribution subaccount
at all times and such Rollover Contribution subaccount shall share in
the earnings, gains, and losses of the Trust Fund as set forth in
Article IX of the Plan. An Employee shall be entitled to a distribution
of his Rollover Contribution subaccount pursuant to the applicable
provisions of Articles XI and XII hereof.
II.
Except as amended herein by this Fifth Amendment, the Plan shall remain
in full force and effect as amended and restated by the Company prior to the
adoption of this Fifth Amendment.
IN WITNESS WHEREOF, the Employee Savings Plan Committee, through its
duly authorized member, has adopted this Fifth Amendment to The Southern Company
Employee Savings Plan pursuant to a Committee resolution, this ________ day of
______________________, 1999 to be effective as of such date unless stated
otherwise herein.
EMPLOYEE SAVINGS PLAN COMMITTEE:
Christopher C. Womack
Exhibit 10(a)63
THIRD AMENDMENT TO THE
SOUTHERN COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Employee Stock Ownership Plan ("Plan"), originally
effective as of January 1, 1976 and has most recently amended and restated the
Plan effective as of January 1, 1997; and
WHEREAS, the Employee Stock Ownership Plan Committee ("Committee")
desires to amend the Plan to exclude certain former employees of Orange and
Rockland Utilities, Inc. who become employed by Southern Energy Resources, Inc.
from participating in the Plan; and
WHEREAS, the Committee desires to amend the Plan to provide for the
participation in the Plan by certain former employees of Pacific Gas and
Electric Company who become employed by Southern Energy Resources, Inc.; and
WHEREAS, the Committee desires to amend the Plan to allow audit fees
incurred by the Plan and the Trust to be paid from the Trust assets; and
WHEREAS, the Committee is authorized pursuant to Section 11.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows to be
effective as provided herein:
I.
Effective as of the date hereof, Section 2.20 of the Plan shall be
amended by adding a new Subparagraph (5) thereto as follows:
(5) An Employee who is described in Section 3.8 of the Plan.
II.
Effective as of the date hereof, Article III of the Plan shall be
amended by adding a new Section 3.8 thereto as follows and by redesignating
existing Section 3.8 as Section 3.10:
3.8 Former Orange and Rockland Utilities, Inc. Employees.
Notwithstanding any other provision of the Plan to the contrary, a
former employee of Orange and Rockland Utilities, Inc. ("O&R") who is
employed by Southern Energy Resources, Inc. and who is set forth on a
schedule of employees acknowledged by the Committee shall not be
eligible to participate in the Plan..
III.
Effective as of the date hereof, Article III shall be amended by adding
a new Section 3.9 thereto as follows:
3.9 Former Pacific Gas and Electric Company Employees.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a former employee of Pacific Gas and Electric Company
("PG&E") who is employed by Southern Energy Resources, Inc. and is set
forth on a schedule of employees acknowledged by the Committee, such
employee shall be given credit for service with PG&E for eligibility
purposes and shall become a Participant on the Enrollment Date
commencing on or after the date such employee meets the eligibility
requirements under Section 3.1 of the Plan.
IV.
Effective as of March 25, 1999, Section 9.12 shall be amended by
deleting such Section in its entirety and replacing it with the following:
9.12 Expenses of Plan and Trust Fund. The expenses of
establishment and administration of the Plan and the Trust Fund shall
be paid by the Company or the Employing Companies. Notwithstanding the
foregoing, to the extent provided in the Trust Agreement, certain
administrative expenses may be paid from the Trust Fund either directly
or through reimbursement of the Company or the Employing Companies. All
fees of the auditors related to the audit of the Plan or the Trust Fund
shall be paid from the Trust Fund either directly or through
reimbursement of the Company or the Employing Companies. Any expenses
directly related to the investments of the Trust Fund, such as stock
transfer taxes, brokerage commissions, or other charges incurred in the
acquisition or disposition of such investments, shall be paid from the
Trust Fund and shall be deemed to be part of the cost of such
securities or deducted in computing the proceeds therefrom, as the case
may be. Taxes, if any, on any assets held or income received by the
Trustee and transfer taxes on the transfer of Common Stock from the
Trustee to a Participant or his Beneficiary shall be charged
appropriately against the Accounts of Participants as the Committee
shall determine. Any expenses paid by the Company pursuant to Section
9.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as
determined by the Committee.
Except as amended herein by this Third Amendment, the Plan shall remain
in full force and effect.
<PAGE>
IN WITNESS WHEREOF, Southern Company Services, Inc. through the duly
authorized members of the Employee Stock Ownership Plan Committee has adopted
this Third Amendment to The Southern Company Employee Stock Ownership Plan this
_____ day of ________________, 1999, to be effective as of such date unless
stated otherwise herein.
EMPLOYEE STOCK OWNERSHIP
PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
Exhibit 10(a)65
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF THE SOUTHERN COMPANY
Amended and Restated Effective February 17, 1997
<PAGE>
SECTION I
Definitions
1.1 "Beneficiary Election" means the designation by the Director of the
person or persons to whom distributions are made from the Plan upon the
death of the director pursuant to Section 7.
1.2 "Board" or "Board of Directors" means the Board of Directors of the
Company.
1.3 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
1.4 "Committee" means the Governance Committee of the Board, or such other
committee as may be designated by the Board to be responsible for
administering the Plan.
1.5 "Common Stock" means the common stock of the Company, including any
shares into which it may be split, subdivided, or combined.
1.6 "Common Stock Investment Account" means the bookkeeping account
established pursuant to Section 6.2 in which a Director may elect to
defer compensation or make investments, and includes amounts credited
thereto to reflect the reinvestment of dividends.
1.7 "Company" means The Southern Company, and any successor thereto.
1.8 "Compensation Payment Date" means the date on which compensation,
including cash retainer, meeting fees, and the Stock Retainer, is
payable to a Director or compensation would otherwise be payable to a
Director if an election to defer such compensation had not been made.
1.9 "Deferred Compensation Account" means the Prime Rate Investment
Account, the Common Stock Investment Account, and/or the Deferred Stock
Account.
1.10 "Deferred Pension Election" means the election by a Director under
Section 5.3 in connection with the deferral of receipt of the
Director's Pension Benefit until termination from the Board.
1.11 "Deferred Stock Account" means the bookkeeping account established
under Section 6.3 on behalf of a Director and includes shares of Common
Stock credited thereto to reflect the reinvestment of dividends
pursuant to Section 6.3(a)(iii).
1.12 "Director" means a member of the Board.
1.13 "Directors' Stock Trust" means The Southern Company Directors' Deferred
Stock Trust established between the Company and Reliance Trust Company.
1.14 "Distribution Election" means the designation by a Director of the
manner of distribution of the amounts and quantities held in the
Director's Deferred Compensation Accounts upon the director's
termination from the Board of Directors pursuant to Section 5.4.
1.15 "Market Value" means the average of the high and low prices of the
Common Stock, as published in the Wall Street Journal in its report of
New York Stock Exchange composite transactions, on the date such Market
Value is to be determined, as specified herein (or the average of the
high and low sale prices on the trading day immediately preceding such
date if the Common Stock is not traded on the New York Stock Exchange
on such date).
1.16 "Pension Benefit" means the U.S. dollar amount of the
actuarially-determined present value of benefits based on a Director's
expected service at the required retirement date under The Southern
Company Outside Directors Pension Plan, as calculated as of the
Termination Date, plus accrued earnings on such amount calculated as if
invested at the Prime Interest Rate from the Termination Date, until
such amount is invested in Deferred Compensation Accounts pursuant to
the provisions of Section 5.3.
1.17 "Pension Benefit Investment Date" means the date to be determined by
the Committee, as of which the Director's Pension Benefit will be
credited to a Deferred Compensation Account in accordance with the
director's Deferred Pension Election under Section 5.3.
1.18 "Plan" means the Deferred Compensation Plan for Directors of The
Southern Company as from time to time in effect.
1.19 "Plan Period" shall mean the period designated in Section 4.
1.20 "Prime Interest Rate" means the prime rate of interest as published in
the Wall Street Journal.
1.21 "Prime Rate Investment Account" means the bookkeeping account
established pursuant to Section 6.1 in which a Director may elect to
defer compensation or make investments, the investment return on which
is computed at the Prime Interest Rate.
1.22 "Stock Retainer" means the annual Board retainer fee that the Board has
determined to credit to a Director's Deferred Stock Account.
1.23 "Termination Date" means January 1, 1997, the date as of which The
Southern Company Outside Directors Pension Plan was effectively
terminated.
Where the context requires, words in the masculine gender shall include the
feminine gender, words in the singular shall include the plural, and words in
the plural shall include the singular.
SECTION 2
Purpose
The Plan provides a method of deferring payment to a Director of his
compensation until a date following the termination of his membership on the
Board of Directors.
SECTION 3
Eligibility
An individual who serves as a Director and is not otherwise actively employed by
the Company or any of its subsidiaries or affiliates is eligible to participate
in the Plan.
SECTION 4
Plan Periods
The first Plan Period under this amended and restated plan shall begin April 1,
1997. Said first Plan Period shall be a nine-month period and all subsequent
Plan periods shall be on a calendar year basis, except that the initial Plan
Period applicable to any person elected to the Board who was not a Director on
the preceding December 31, shall begin on the first day of such Director's
membership on the Board.
SECTION 5
Elections
5.1 Cash Compensation
(a) Prior to the beginning of a Plan Period, a Director may direct
that payment of all or any portion of cash compensation that
otherwise would be paid to the Director for the Plan Period,
be deferred in amounts as designated by the Director, and
credited to (i) a Prime Rate Investment Account, (ii) a Common
Stock Investment Account, or (iii) a Deferred Stock Account.
Upon the Director's termination from the Board of Directors,
such deferred compensation and accumulated investment return
held in the Director's Deferred Compensation Accounts shall be
distributed to the Director in accordance with the Director's
Distribution Election and the provisions of Section 7.
(b) An election to defer cash compensation is irrevocable. Such an
election shall continue from Plan Period to Plan Period unless
the Director changes his election to defer cash compensation
paid in a future Plan Period prior to the beginning of such
future Plan Period.
(c) Cash compensation deferred under this Section 5.1 shall be
invested in Deferred Compensation Accounts as directed by the
Director on the Compensation Payment Date.
5.2 Stock Retainer
Director compensation designated as Stock Retainer shall be credited to
the Director's Deferred Stock Account as of the Compensation Payment
Date. Upon the Director's termination from the Board of Directors, such
compensation and accumulated investment return held in the Director's
Deferred Stock Account shall be distributed to the Director in
accordance with the Director's Distribution Election and the provisions
of Section 7.
<PAGE>
5.3 Deferred Pension Election
Any Director, who has a Pension Benefit as of the Termination Date,
must make a single one-time election, on or before March 31, 1997, to
credit all of his Pension Benefit into a Deferred Compensation Account.
The Pension Benefit will be credited on the Pension Benefit Investment
Date, at the election of the Director, to (i) a Prime Rate Investment
Account, (ii) a Common Stock Investment Account, or (iii) a Deferred
Stock Account. Upon the Director's termination from the Board of
Directors, such Pension Benefit and accumulated investment return held
in the Director's Deferred Compensation Accounts shall be distributed
to the Director in accordance with the Director's Distribution Election
and the provisions of Section 7.
5.4 Distribution Election
(a) Prior to the establishment of a Deferred Compensation Account
for a Director under this amended and restated plan, the
Director may elect that upon termination from the Board of
Directors the values and quantities held in the Directors
Deferred Compensation Accounts be distributed to the Director,
pursuant to the provisions of Section 7, in a single
distribution or in a series of annual installments not to
exceed ten (10). The time for the commencement of distribution
shall not be later than the first day of the month coinciding
with or next following the second anniversary of termination
of Board membership.
(b) A Distribution Election is irrevocable except that a Director
may amend the Distribution Election then in effect not prior
to the 390th day nor later than the 360th day prior to his
termination of Board membership.
5.5 Beneficiary Election
A Director or former Director may designate a beneficiary to receive
distributions from the Plan in accordance with the provisions of
Section 7 upon the death of the director. The Beneficiary Election may
be changed by a Director or former Director at any time, and without
the consent of the prior Beneficiary.
5.6 Form of Election
All elections pursuant to the provisions of this Section 5 of the Plan
shall be made in writing to the Secretary of the Company on a form or
forms available upon request from the Secretary.
<PAGE>
SECTION 6
Accounts
6.1 Prime Rate Investment Account
A Prime Rate Investment Account shall be established for each Director
electing deferral or investment at the Prime Interest Rate. The amount
directed by the Director to such account shall be credited to it as of
the Pension Benefit Investment Date or Compensation Payment Date, as
applicable, and credited thereafter with interest computed using the
Prime Interest Rate. Interest shall be computed from the date such
compensation is credited to the account and compounded quarterly at the
end of each calendar quarter. The Prime Interest Rate in effect on the
first day of a calendar quarter shall be deemed the Prime Interest Rate
in effect for that entire quarter. Interest shall accrue and compound
on any balance until the amount credited to the account is fully
distributed.
6.2 Common Stock Investment Account
The Common Stock Investment Account established for each Director
electing deferral or investment at the Common Stock investment rate
shall be credited with the number of shares (including fractional
shares rounded to the nearest ten-thousandth) of Common Stock which
could have been purchased on the Pension Benefit Investment Date or the
Compensation Payment Date, as applicable, based on the Market Value as
of such date. On the date of the payment of dividends on the Common
Stock, the Director's Common Stock Investment Account shall be credited
with additional shares (including fractional shares rounded to the
nearest ten-thousandth) of Common Stock, as follows:
(a) In the case of cash dividends, such additional shares as would
have been purchased as of the Common Stock dividend payment
date as if the credited shares had been outstanding and
dividends reinvested thereon under the Southern Investment
Plan;
(b) In the case of dividends payable in property other than cash
or Common Stock, such additional shares as could be purchased
at the Market Value as of the date of payment with the fair
market value of the property which would have been payable if
the credited shares had been outstanding; and
(c) In the case of dividends payable in Common Stock, such
additional shares as would have been payable on the credited
shares if they had been outstanding.
6.3 Deferred Stock Account
(a) A Director's Deferred Stock Account will be credited:
(i) with the number of shares of Common Stock (rounded to
the nearest ten thousandth of a share) determined by
dividing the amount subject to deferral or investment
in the Deferred Stock Account by the average price
paid by the Trustee of the Directors' Stock Trust for
shares of Common Stock with respect to the Pension
Benefit Investment Date or the Compensation Payment
Date, as applicable, as reported by the Trustee, or,
if the Trustee shall not at such time purchase any
shares of Common Stock, by the Market Value on such
date;
(ii) as of the date on which Stock Retainer is paid, with
the number of shares of Common Stock (rounded to the
nearest ten thousandth of a share) determined by
dividing the amount of the Stock Retainer by the
average price paid by the Trustee of the Directors'
Stock Trust for shares of Common Stock with respect
to such payment date, as reported by the Trustee, or,
if the Trustee shall not at such time purchase any
shares of Common Stock, by the Market Value on such
date; and
(iii) as of each date on which dividends are paid on the
Common Stock, with the number of shares of Common
Stock (rounded to the nearest ten thousandth of a
share) determined by multiplying the number of shares
of Common Stock credited in the Director's Deferred
Stock Account on the dividend record date, by the
dividend rate per share of Common Stock, and dividing
the product by the price per share of Common Stock
attributable to the reinvestment of dividends on the
shares of Common Stock held in the Directors' Stock
Trust on the applicable dividend payment date or, if
the Trustee of the Directors' Stock Trust has not
reinvested in shares of Common Stock on the
applicable dividend reinvestment date, the product
shall be divided by the Market Value on the dividend
payment date.
(b) If the Company enters into transactions involving stock
splits, stock dividends, reverse splits or any other
recapitalization transactions, the number of shares of Common
Stock credited to a Director's Deferred Stock Account will be
adjusted (rounded to the nearest ten thousandth of a share) so
that the Director's Deferred Stock Account reflects the same
equity percentage interest in the Company after the
recapitalization as was the case before such transaction.
(c) If at least a majority of the Company's stock is sold or
exchanged by its shareholders pursuant to an integrated plan
for cash or property (including stock of another corporation)
or if substantially all of the assets of the Company are
disposed of and, as a consequence thereof, cash or property is
distributed to the Company's shareholders, each Director's
Deferred Stock Account will, to the extent not already so
credited under this Section 6.3, be (i) credited with the
amount of cash or property receivable by a Company shareholder
directly holding the same number of shares of Common Stock as
is credited to such Director's Deferred Stock Account and (ii)
debited by that number of shares of Common Stock surrendered
by such equivalent Company shareholder.
(d) Each Director who has a Deferred Stock Account also shall be
entitled to provide directions to the Committee to cause the
Committee to similarly direct the Trustee of the Director's
Stock Trust to vote, on any matter presented for a vote to the
shareholders of the Company, that number of shares of Common
Stock held by the Director's Stock Trust equivalent to the
number of shares of Common Stock credited to the Director's
Deferred Stock Account. The Committee shall arrange for
distribution to all Directors in a timely manner of all
communications directed generally to the shareholders of the
Company as to which their votes are solicited.
SECTION 7
Distributions
7.1 Upon termination of a Director's membership on the Board, the amount
credited to a Director's Deferred Compensation Accounts will be paid to
the Director or his beneficiary, as applicable. The amount credited to
a Director's Prime Rate Investment Account and Common Stock Investment
Account shall be paid in cash and the amount credited to his Deferred
Stock Account shall, except as otherwise provided in Section 6.3(c),
Section 8, or to the extent the Company is otherwise, in the reasonable
judgment of the Committee, precluded from doing so, be paid in shares
of Common Stock (with any fractional share interest therein paid in
cash to the extent of the then Market Value thereof). Such payments
shall be from the general assets of the Company (including the
Directors' Stock Trust) in accordance with this Section 7.
7.2 Unless other arrangements are specified by the Committee on a uniform
and nondiscriminatory basis, deferred amounts shall be paid in the form
of (i) a lump sum payment, or (ii) in approximately equal annual
installments, as elected by the Director pursuant to the provision of
Section 5.4; provided, however, that payments shall be made only in a
single lump sum if payment commences due to termination for cause. Such
payments shall be made (or shall commence) as soon as practicable
following the termination of Board membership or, if so elected in the
Distribution Election, up to twenty-four (24) months following such
termination.
In the event a Director elected to receive the balance of his Deferred
Compensation Accounts in a lump sum, distribution shall be made on the
first day of the month selected by the Director on his Distribution
Election, or as soon as reasonably possible thereafter. If the Director
elected to receive annual installments, the first payment shall be made
on the first day of the month selected by a Director, or as soon as
reasonably possible thereafter, and shall be equal to the balance in
the Director's Deferred Compensation Accounts on such date divided by
the number of annual installment payments. Each subsequent annual
payment shall be an amount equal to the balance in the Director's
Deferred Compensation Accounts on the date of payment divided by the
number of remaining annual payments and shall be paid on the
anniversary of the preceding date of payment. The Market Value of any
shares of Common Stock credited to a Director's Common Stock Investment
Account shall be determined as of the twenty-fifth (25th) day of the
month immediately preceding the date of any lump sum or installment
distribution.
Upon the death of a Director, or a former Director prior to the payment
of all amounts credited to the Director's Deferred Compensation
Accounts, the unpaid balance shall be paid in the sole discretion of
the Committee (i) in a lump sum to the designated beneficiary of such
Director or former Director within thirty (30) days of the date of
death (or as soon as reasonably possible thereafter) or (ii) in
accordance with the Distribution Election made by such Director or
former Director. In the event a beneficiary designation has not been
made, or the designated beneficiary is deceased or cannot be located,
payment shall be made to the estate of the Director or former Director.
The Market Value of any shares of Common Stock credited to a Director's
Common Stock Investment Account shall be determined as of the
twenty-fifth (25th) day of the month immediately preceding the date of
any lump sum or installment distribution.
SECTION 8
General Provisions
8.1 The Company shall make no provision for the funding of any Deferred
Compensation Accounts payable hereunder that (i) would cause the Plan
to be a funded plan for purposes of section 404(a)(5) of the Code or
(ii) would cause the Plan to be other than an "unfunded and unsecured
promise to pay money or other property in the future" under Treasury
Regulations ss. 1.83-3(e); and, except to the extent specified in the
Directors' Stock Trust following a "change of control" (as defined in
the Directors' Stock Trust) of the Company, the Company shall have no
obligation to make any arrangement for the accumulation of funds to pay
any amounts under this Plan. Subject to the restrictions of the
preceding sentence and in Section 8.3 herein, the Company, in its sole
discretion, may establish one or more grantor trusts described in
Treasury Regulations ss. 1.677(a)-I(d) to accumulate funds and/or
shares of Common Stock to pay amounts under this Plan, provided that
the assets of such trust shall be required to be used to satisfy the
claims of the Company's general creditors in the event of the Company's
bankruptcy or insolvency.
8.2 In the event that the Company shall decide to establish an advance
accrual reserve on its books against the future expense of payments
from any Deferred Compensation Accounts, such reserve shall not under
any circumstances be deemed to be an asset of this Plan but, at all
times, shall remain a part of the general assets of the Company,
subject to claims of the Company's creditors.
8.3 A person entitled to any amount under this Plan shall be a general
unsecured creditor of the Company with respect to such amount.
Furthermore, a person entitled to a payment or distribution with
respect to a Deferred Compensation Account, shall have a claim upon the
Company only to the extent of the balance in his Deferred Compensation
Accounts.
8.4 All commissions, fees and expenses that may be incurred in operating
the Plan and any related trust established in accordance with Section
8.1 herein (including the Directors' Stock Trust) will be paid by the
Company.
8.5 Notwithstanding any other provision of this Plan: (i) elections under
this Plan may only be made by Directors while they are directors of the
Company; (with the exception of the designation of beneficiaries) and
(ii) distributions otherwise payable to a Director in the form of
Common Stock shall be delayed and/or instead paid in cash in an amount
equal to the fair market value thereof if such payment in Common Stock
would violate any federal or State securities laws (including Section
16(b) of the Securities Exchange Act of 1934, as amended) and/or rules
and regulations promulgated thereunder.
8.6 Directors, their legal representatives and their beneficiaries shall
have no right to anticipate, alienate, sell, assign, transfer, pledge
or encumber their interests in the Plan, nor shall such interests be
subject to attachment, garnishment, levy or execution by or on behalf
of creditors of the Directors or of their beneficiaries.
SECTION 9
Administration
Subject to the express provisions of the Plan, the Committee shall have the
exclusive right to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations necessary or
advisable for the administration of the Plan. The decisions, actions and records
of the Committee shall be conclusive and binding upon the Company and all
persons having or claiming to have any right or interest in or under the Plan.
The Committee may delegate to such officers, employees or departments of the
Company such authority, duties, and responsibilities of the Committee as it, in
its sole discretion, considers necessary or appropriate for the proper and
efficient operation of the Plan, including, without limitation, (i)
interpretation of the Plan, (ii) approval and payment of claims, and (iii)
establishment of procedures for administration of the Plan.
<PAGE>
SECTION 10
Amendment, Termination and Effective Date
10.1 Amendment of the Plan
Subject to the provisions of Section 10.3 herein, the Plan may be
wholly or partially amended or otherwise modified at any time by
written action of the Board of Directors.
10.2 Termination of the Plan
Subject to the provisions of Section 10.3 herein, the Plan may be
terminated at any time by written action of the Board of Directors.
10.3 No Impairment of Benefits
Notwithstanding the provisions of Sections 10.1 and 10.2, herein no
amendment to or termination of the Plan shall impair any rights to
benefits which have accrued hereunder.
10.4 Governing Law
This Plan shall be construed in accordance with and governed by the
laws of the State of Georgia.
IN WITNESS WHEREOF, the Plan, as amended and restated effective
February 17, 1997, has been executed pursuant to resolutions of the Board of
Directors of The Southern Company, this ____ day of _______________, 1997.
THE SOUTHERN COMPANY
By: ________________________________
Attest:
By: ___________________________
Exhibit 10(a)70
SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
AMENDED AND RESTATED
TROUTMAN SANDERS LLP
NationsBank Plaza
600 Peachtree Street, N.E., Suite 5200
Atlanta, Georgia 30308
(404) 885-3000
Effective January 1, 1999
<PAGE>
SOUTHERN COMPANY
PERFORMANCE DIVIDEND PLAN
Purposes
The purposes of the Southern Company Performance Dividend Plan are to
provide a financial incentive which will focus the efforts of certain key
employees on areas which will have a direct and significant influence on
corporate performance and to provide the potential for levels of compensation
which will enhance the Employing Companies' abilities to attract, retain and
motivate such key employees. In order to achieve these objectives, the Plan will
be based upon corporate performance as measured by total shareholder return or
such other performance measure which the Committee may determine under the terms
of the Plan.
ARTICLE I
Definitions
For purposes of the Plan, the following terms shall have the following
meanings unless a different meaning is plainly required by the context:
1.1 "Annual Dividend" shall mean the aggregate, annual dividend
declared by Southern Company on Common Stock for the Plan Year in which an Award
is made.
1.2 "Award" shall mean the awards granted pursuant to Article IV
hereof.
1.3 "Beneficial Ownership" shall mean beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act.
1.4 "Board of Directors" shall mean the Board of Directors of Southern
Company Services, Inc.
1.5 "Business Combination" shall mean a reorganization, merger or
consolidation of Southern Company or sale or other disposition of all or
substantially all of the assets of Southern Company.
1.6 "Committee" shall mean the Compensation Committee of the Board of
Directors of Southern Company.
1.7 "Common Stock" shall mean the common stock of Southern Company.
1.8 "Computation Period" shall mean a four-year period commencing the
first day of January of each year, provided, however, that the Computation
Period for the first three years beginning in the year of the effective date of
the Plan shall be one year, two years and three years, respectively, beginning
January 1, 1997.
1.9 "Consummation" shall mean the completion of the final act necessary
to complete a transaction as a matter of law, including, but not limited to, any
required approvals by the corporation's shareholders and board of directors, the
transfer of legal and beneficial title to securities or assets and the final
approval of the transaction by any applicable domestic or foreign governments or
agencies.
1.10 "Control" shall mean, in the case of a corporation, Beneficial
Ownership of more than 50% of the combined voting power of the corporation's
Voting Securities, or in the case of any other entity, Beneficial Ownership of
more than 50% of such entity's voting equity interests.
1.11 "Employing Company" shall mean those affiliates or subsidiaries of
the Southern Company (direct or indirect) which have one or more employees to
whom the Board of Directors or any committee thereof has granted an option under
the Southern Company Performance Stock Plan provided that such affiliate or
subsidiary adopts the Plan.
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.13 "Group" shall mean group within the meaning of Section 14(d) of
the Exchange Act.
1.14 "Incumbent Board" shall mean those individuals who constitute the
Southern Board as of the Effective Date plus any individual who shall become a
director subsequent to such date whose election or nomination for election by
Southern Company's shareholders was approved by a vote of at least 75% of the
directors then comprising the Incumbent Board. Notwithstanding the foregoing, no
individual who shall become a director of the Southern Board subsequent to the
Effective Date whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11 of the
Regulations promulgated under the Exchange Act) with respect to the election or
removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Southern Board shall be a
member of the Incumbent Board.
1.15 "Key Employee" shall mean any person who is or was employed by an
Employing Company who has been granted Stock Options.
1.16 "Participant" shall mean a Key Employee who satisfies the criteria
set forth in Article III.
1.17 "Payment Date" shall mean the date the check evidencing an Award
is endorsed by an authorized person of an Employing Company.
1.18 "Peer Group Common Stock" shall mean the common stock of the Peer
Group Companies.
1.19 "Peer Group Companies" shall mean those Companies designated by
Goldman Sachs as the 80 Utility Peer Group Companies as published quarterly and
as composed from time to time. In the event that Goldman Sachs no longer
publishes the 80 Utility Peer Group Companies, the Committee shall choose such
other and similar list of national peer group companies as published by a
similarly nationally recognized firm.
1.20 "Performance Based" shall mean compensation which qualifies as
"performance based" within the meaning of Code Section 162(m)(4)(c) and the
regulations thereunder.
1.21 "Permanent Disability" shall mean such permanent disability as
defined in The Southern Company Pension Plan.
1.22 "Person" shall mean any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act.
1.23 "Phantom Stock" shall mean phantom shares of Common Stock as
defined by The Southern Company Deferred Compensation Plan.
1.24 "Plan" shall mean the Southern Company Performance Dividend Plan.
1.25 "Plan Termination" shall mean the termination of the Plan by
Southern Company or an Employing Company following a Southern Change in Control
unless an equitable arrangement (embodied in an ongoing substitute or
replacement plan) has been made with respect to the Plan in connection with the
Southern Change in Control. For purposes of this Plan, an ongoing substitute or
alternative plan shall be considered an "equitable arrangement" if a nationally
recognized compensation consulting firm chosen by the Committee opines in
writing that the post-Southern Change in Control plan is an equitable substitute
or replacement of the Plan, and that such substitute or alternative plan
provides substantially similar target opportunities and a substantially similar
level of performance difficulty.
1.26 "Plan Year" shall mean the calendar year.
1.27 "Retirement" shall mean the termination of employment with an
Employing Company under the terms of The Southern Company Pension Plan or such
other retirement or early retirement plan or arrangement which the Committee
shall adopt and make available to a Participant.
1.28 "Southern Board" shall mean the Board of Directors of The Southern
Company.
1.29 "Southern Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern Company's Voting
Securities; provided, however, that for purposes of this subsection
(i), the following acquisitions of Southern's Voting Securities shall
not constitute a Change in Control:
(A) any acquisition directly from Southern Company;
(B) any acquisition by Southern Company;
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Southern or any
corporation controlled by Southern Company;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund;
(E) any acquisition by an Employee or Group composed
exclusively of Employees; or
(F) any Business Combination which would not
otherwise constitute a change in control because of the
application of clauses (A), (B) and (C) of Section 1.29(iii).
(ii) A change in the composition of the Southern Board whereby
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority of the Southern Board; or
(iii) Consummation of a Business Combination, unless,
following such Business Combination, all of the following three
conditions are met:
(A) all or substantially all of the individuals and
entities who held Beneficial Ownership, respectively, of
Southern Company's Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the Voting
Securities of the corporation surviving or resulting from such
Business Combination, (including, without limitation, a
corporation which as a result of such transaction holds
Beneficial Ownership of all or substantially all of Southern
Company's Voting Securities or all or substantially all of
Southern Company's assets) (such surviving or resulting
corporation to be referred to as "Surviving Company"), in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of Southern
Company's Voting Securities;
(B) no Person (excluding any corporation resulting
from such Business Combination, qualified pension plan,
publicly held mutual fund, Group composed exclusively of
Employees or employee benefit plan (or related trust) of
Southern Company, its subsidiaries or Surviving Company) holds
Beneficial Ownership, directly or indirectly, of 20% or more
of the combined voting power of the then outstanding Voting
Securities of Surviving Company except to the extent that such
ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board
of directors of Surviving Company were members of the
Incumbent Board at the earlier of the date of execution of the
initial agreement, or of the action of the Southern Board,
providing for such Business Combination.
1.30 "Southern Company" shall mean The Southern Company.
1.31 "Subsidiary Change in Control" shall mean the following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of a Subsidiary Change in Control
Company; provided, however, that for purposes of this Subsection 1.31,
any acquisition by an Employee, or Group composed entirely of
Employees, any qualified pension plan, publicly held mutual fund or any
employee benefit plan (or related trust) sponsored or maintained by
Southern Company or any corporation Controlled by Southern Company
shall not constitute a Change in Control;
(ii) Consummation of a reorganization, merger or consolidation
of a Subsidiary Change in Control Company (an "Employing Company
Business Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Company Controls the corporation
surviving or resulting from such Employing Company Business
Combination; or
(iii) Consummation of the sale or other disposition of all or
substantially all of the assets of a Subsidiary Change in Control
Company to an entity which Southern Company does not Control.
1.32 "Subsidiary Change in Control Company" shall mean an Employing
Company which has been authorized to and has adopted the Southern Company change
in control program.
1.33 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or
consolidation of Southern Company under circumstances where either (i)
Southern Company is not the surviving corporation or (ii) Southern
Company's Voting Securities are no longer publicly traded;
(b) The Consummation of a sale or other disposition of all or
substantially all of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of
Beneficial Ownership of all of Southern Company's Voting Securities
such that Southern Company's Voting Securities are no longer publicly
traded.
1.34 "Subsidiary Employee" shall mean an Employee of a Subsidiary
Change in Control Company which has undergone a Subsidiary Change in Control.
1.35 "Stock Option" shall mean those options to acquire Common Stock
awarded to Participants pursuant to the Southern Company Performance Stock Plan.
1.36 "Termination for Cause" or "Cause" shall mean the termination of a
Participant's employment by an Employing Company under any of the following
circumstances:
(a) The Participant willfully neglects or refuses to discharge
his or her duties to the Employing Company as an employee or refuses to
comply with any lawful or reasonable instructions given to him or her
by the Employing Company without reasonable excuse; or
(b) The Participant is guilty of gross misconduct. For
purposes of this Plan, the following acts shall constitute gross
misconduct:
(i) any act involving fraud or dishonesty or breach
of appropriate regulations of competent authorities;
(ii) the carrying out of any activity or the making
of any statement which would prejudice and/or reduce the good
name and standing of Southern Company or an Employing Company
or would bring Southern Company or an Employing Company into
contempt, ridicule or would reasonably shock or offend any
community in which Southern Company or an Employing Company is
located;
(iii) attendance at work in a state of intoxication
or otherwise being found in possession at his or her workplace
of any prohibited drug or substance, possession of which would
amount to a criminal offense;
(iv) assault or other act of violence against any
employee or other person during the course of the
Participant's employment; and
(v) conviction of any felony or misdemeanor involving
moral turpitude.
1.37 "Total Shareholder Return" or "TSR' shall mean the total amount an
investor would receive by investing $100 per quarter in Common Stock or in Peer
Group Common Stock, as the case may be, as determined by measuring the total
dividends which would have been paid on such Common Stock or Peer Group Common
Stock by reinvesting such dividends on a quarterly basis in additional shares of
Common Stock or Peer Group Common Stock as the case may be and the total gain or
loss on such Common Stock or Peer Group Common Stock as if such stock had been
sold at the closing price on the last day of the respective Computation Period.
1.38 "Voting Securities" shall mean the outstanding voting securities
of a corporation entitling the holder thereof to vote generally in the election
of such corporation's directors.
Where the context requires, words in the masculine gender shall include
the feminine and neuter genders, words in the singular shall include the plural,
and words in the plural shall include the singular.
ARTICLE II
Plan Administration
2.1 The Plan shall be administered by the Committee. The Committee is
authorized to establish such rules and to appoint such agents as it deems
appropriate for the proper administration of the Plan, and to make such
determinations and to take such steps in connection with the Plan or the
benefits provided hereunder as it deems necessary or advisable.
2.2 Plan Interpretation. The Committee shall have the exclusive
authority to interpret the Plan. The decision of the Committee with respect to
any question arising as to the grant of an Award to a Participant in the Plan,
the amount, term, form, and time of payment of Awards under the Plan, or any
other matter concerning the Plan shall be final, conclusive, and binding on both
Southern Company and the Participants.
ARTICLE III
Participants
3.1 Participation in the Plan shall be limited to Key Employees of the
Employing Companies, or in the case of death, their estates or beneficiaries,
holding Stock Options as of the last day of any Computation Period.
3.2 Any Participant who terminates his or her employment with an
Employing Company and who is not immediately re-employed with an affiliate of an
Employing Company prior to the Payment Date of any Award due under this Plan for
reasons other than death, Permanent Disability, or Retirement shall forfeit any
Award due under this Plan. If a Participant terminates his or her employment by
reason of death, Permanent Disability or Retirement, such Participant or his or
her estate or representative shall continue to be eligible to receive Awards
with respect to any Stock Options which remain outstanding in accordance with
their terms.
3.3 Notwithstanding any other provision of this Plan, no Participant
whose employment is terminated by an Employing Company for Cause shall be
eligible to receive an Award under this Plan.
3.4 Notwithstanding any other provision of this Plan, the maximum Award
for any Plan Year payable to any Participant with respect to Stock Options
awarded during such Plan Year shall be six million dollars ($6,000,000).
3.5 In the case of an individual who becomes a Participant subsequent
to January 1, 1997, such Participant shall participate in each Computation
Period which ends not less than two (2) years after becoming a Participant. A
new four-year measuring period shall begin each year in order to recognize the
need to link objectives over longer periods of time, to recognize changes in the
operating environment, and to encourage Participants to make long-term
decisions.
ARTICLE IV
Performance Dividend Award
4.1 Each Participant shall receive an Award on the last day of each
Computation Period which shall be based upon the number of vested and unvested,
outstanding Stock Options held by the Participant on the last day of such
Computation Period multiplied by the Annual Dividend multiplied by the Payout
Percentage determined in accordance with the following schedule:
Percentile of Southern TSR Payout Percentage
Versus Peer Group TSR
90th and above 100%
70th 75%
50th 50%
30th 25%
Below 30th 0%
The Payout Percentage for performance levels falling between the percentiles
listed above shall be interpolated on a straight line basis for any given Plan
Year. The Committee may increase the Payout Percentage by up to a factor of two
(2) with respect to such Participants and under such circumstances as the
Committee in its discretion shall deem appropriate.
4.2 The Payout Percentage set forth herein shall be based on Southern
Company's Total Shareholder Return during a Computation Period as compared to
the Total Shareholder Return ranking of the Peer Group Companies for such
Computation Period. The Total Shareholder Return of the Peer Group Companies
shall be determined annually by an independent certified public accountant and
shall be properly adjusted and annualized by such accountant so that the Peer
Group Companies' Total Shareholder Return may be accurately compared to that of
Southern Company.
4.3 Notwithstanding the above provisions, an Award shall not be granted
for any Computation Period ending with the Plan Year in which the current
earnings of Southern Company are less than the amount necessary to fund
dividends on its Common Stock at the rate such dividends were paid for the
immediately preceding Plan Year.
4.4 Awards shall be paid in cash on or before the 15th day of the third
month following the last day of the Computation Period or, with respect to those
Participants who are otherwise eligible to participate in the Southern Company
Deferred Compensation Plan, may be deferred by exercising an option to do so no
later than 12 months before any amount would otherwise be distributed pursuant
to this Section 4.4. If an election is made to defer the receipt of the amount
of any Award, such amount shall be deemed to be invested in Phantom Stock.
Dividend equivalents earned on such Phantom Stock shall be automatically
invested in additional shares of Phantom Stock.
ARTICLE V
Change in Control and Southern Termination
5.1 Southern Change in Control. Notwithstanding any other provision of
this Plan to the contrary, in the event of a Plan Termination within two (2)
years following a Southern Change in Control, each Participant who is an
employee of his Employing Company on the date of such Plan Termination shall be
entitled to receive within thirty (30) days of the Plan Termination, cash for
each Award held as of such date, based on actual performance under Section 4.1
hereof determined as of the date of the Plan Termination, and the Annual
Dividend declared prior to the date of the Plan Termination.
5.2 Subsidiary Change in Control. Notwithstanding any other provision
of this Plan to the contrary, in the event of a Subsidiary Change in Control,
each Subsidiary Employee on the date of such Change in Control whose employment
is not transferred upon such Subsidiary Change in Control, to another Employing
Company shall be entitled to receive within thirty (30) days of the Subsidiary
Change in Control, cash for each Award held as of such date, based on actual
performance under Section 4.1 hereof determined as of the date on which the
Subsidiary Change in Control shall have occurred, and the Annual Dividend
declared prior to the date of the Subsidiary Change in Control.
5.3 Southern Termination. Notwithstanding any other provision of this
Plan to the contrary, in the event of a Southern Termination, each Participant
who is an employee of his Employing Company on the date of such Southern
Termination shall be entitled to receive within thirty (30) days of the Southern
Termination, cash for each Award held as of such date, based on actual
performance under Section 4.1 hereof determined as of the date on which the
Southern Termination shall have occurred, and the Annual Dividend declared prior
to the date of the Southern Termination.
ARTICLE VI
Miscellaneous Provisions
6.1 Neither the Participant, his or her beneficiary, nor his or her
personal representative shall have any rights to commute, sell, assign, transfer
or otherwise convey the right to receive any payments hereunder, which payments
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payments under
this Plan shall be void and have no effect.
6.2 An Employing Company shall neither reserve nor otherwise set aside
funds for the payments of any Awards under this Plan.
6.3 Except for the provisions of Article V, which may not be amended,
modified or terminated following a Southern Change in Control, a Subsidiary
Change in Control or a Southern Termination, the Plan may be amended, modified,
or terminated by the Board of Directors in its sole discretion at any time and
from time to time; provided, however, that no such amendment, modification, or
termination shall impair any rights to payments which have accrued under the
Plan prior to such amendment, modification, or termination.
6.4 It is expressly understood and agreed that Awards made in
accordance with the Plan are in addition to any other benefits or compensation
to which a Participant may be entitled or for which he or she may be eligible,
whether funded or unfunded, by reason of his or her employment with an Employing
Company.
6.5 There shall be deducted from the payment of each Award under the
Plan the amount of any tax required by any governmental authority to be withheld
and paid over by an Employing Company to such governmental authority for the
account of the person entitled to such distribution.
6.6 Any Awards paid to a Participant while employed by an Employing
Company shall not be considered in the calculation of the Participant's benefits
under any other employee welfare or pension benefit plan maintained by an
Employing Company, unless otherwise specifically provided therein.
6.7 This Plan, and all rights under it, shall be governed by and
construed in accordance with the laws of the State of Georgia.
6.8 Pooling Accounting. Notwithstanding anything to the contrary
herein, if, but for any provision of this Plan, a Change in Control transaction
would otherwise be accounted for as a pooling-of-interests under APB No. 16
("Pooling Accounting") (after giving effect to any and all other facts and
circumstances affecting whether such Change in Control transaction would use
Pooling Accounting), such provision or provisions of this Plan which would
otherwise cause the Change in Control transaction to be ineligible for Pooling
Accounting shall automatically be void and ineffective in such a manner and to
the extent that by eliminating such provision or provisions of this Plan,
Pooling Accounting would be required for such Change in Control transaction and
Pooling Accounting is in fact used for such Change in Control transaction.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officers, hereby adopts the Southern Company Performance Dividend
Plan this _____ day of ______________ 1999 to be effective January 1, 1999.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
Attest:
By:
Its:
Exhibit 10(a)72
FOURTH AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the
"Company") heretofore adopted The Southern Company Pension Plan (the "Plan"), as
amended and restated effective January 1, 1997;
WHEREAS, the Company desires to amend the Plan to grant prior service
credit to certain employees formerly employed by Pacific Gas and Electric
Company ("PG&E") and to provide for an offset of the PG&E retirement benefit;
WHEREAS, the Company desires to amend the Plan to grant prior service
and benefit credit to certain employees formerly employed by Orange and Rockland
Utilities, Inc. ("O&R") and to provide for an offset of the O&R retirement
benefit;
WHEREAS, the Company also desires to make certain clarifying changes to
the Plan; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan
to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be
effective as provided herein:
1.
Effective January 1, 1997, Section 15.2(d) of the Plan shall be amended
by replacing the term "Early Retirement Date" with the term "earlier Retirement
Date" in each place where such term appears.
2.
Effective January 1, 1997, Section 15.3 of the Plan is amended by
deleting such Section in its entirety and replacing it with the following:
15.3 Early Retirement Reduction.
(a) With respect to Employees described in Section 15.1(a) and
(b) who retire before their Normal Retirement Date, the monthly amount
of Retirement Income provided in Section 15.2 shall be reduced in
accordance with Section 5.5. With respect to Employees described in
Section 15.1(c), the monthly amount of Retirement Income provided in
Section 15.2 shall be reduced in accordance with Section 5.5 except
that the term "five-tenths of one percent (0.5%)" shall replace the
term "three-tenths of one percent (0.3%)" where it appears in the first
paragraph thereof.
(b) Notwithstanding paragraph (a) above, if a former Employee
subject to Section 15.1(c)(1) who is eligible to receive Retirement
Income is reemployed by an Affiliated Employer, his Retirement Income
accrued prior to his original termination from service shall be
determined in accordance with the terms of the Plan in effect as of
such termination. In the event that an Employee described in the
preceding sentence accrues additional Retirement Income in accordance
with Section 15.2 after his reemployment, such Retirement Income shall
be subject to Sections 15.2(c) and the second sentence of Section
15.3(a).
3.
Effective January 1, 1995, Section 16.1(a)(3) of the Plan shall be
amended to read as follows:
(3) With respect to determining the Social Security Offset and the
level income option set forth in the last paragraph of Section 5.5, the
actual salary history of the Scheduled Employee during his employment
with any Affiliated Employer and with Scott Paper Company shall be
utilized. If the actual salary history is not available from Scott
Paper Company, such history shall be estimated in accordance with
Section 5.4.
4.
Effective January 1, 1999, Section 16.1(c)(1) of the Plan shall be
amended by replacing the phrase "eligible to become a Participant" with the
phrase "included in the Plan" and Section 16.1(c)(4) shall be amended to read as
follows:
(4) For purposes of calculating Retirement Income, such CES Employee's
actual salary history with CES shall be included. With respect to
determining the Social Security Offset and the level income option set
forth in the last paragraph of Section 5.5, if the actual salary
history is not available from CES, such history shall be estimated in
accordance with Section 5.4.
5.
Effective April 1, 1999, Article XVI of the Plan shall be amended by
adding the following to the end thereof:
(d) Former Pacific Gas and Electric Company Employees.
(1) Effective April 1, 1999, notwithstanding any other
provision of the Plan to the contrary, any former employees of Pacific
Gas and Electric Company ("PG&E") who were employed by Southern Energy
Resources, Inc. and are set forth on a schedule of employees
acknowledged by the Retirement Board (hereinafter "PG&E Employees")
shall be included in the Plan as of the first day of the month
coincident with or next following the later of the PG&E Employee's
employment date or the date on which he first completes an Eligibility
Year of Service as provided in Paragraph (5) below.
(2) PG&E Employees who (A) were actively employed by PG&E on
January 1, 1997 and (B) attain their fortieth (40th) birthday on or
before January 1, 2002 shall not be subject to provisions of Article XV
of the Plan.
(3) If and when a PG&E Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, he shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and his
service for benefit purposes as defined and accrued under the Pacific
Gas and Electric Company Retirement Plan (the "PG&E Plan") which shall
be treated as if Accredited Service under this Plan. To calculate such
PG&E Employee's Retirement Income, the PG&E Employee's Accrued
Retirement Income, as determined in accordance with Section 5.1, shall
first be reduced by the Employee's accrued benefit in the PG&E Plan,
determined as if he retired from PG&E on his Normal Retirement Date, as
defined in the PG&E Plan on April 1, 1999. Thereafter, such PG&E
Employee's Retirement Income shall be subject to applicable reductions,
if any, in accordance with Article V, Section 8.1 and Section 8.2, as
appropriate.
(4) For purposes of calculating Retirement Income, such PG&E
Employee's actual salary history with PG&E shall be included. With
respect to determining the Social Security Offset and the level income
option set forth in the last paragraph of Section 5.5, if the actual
salary history is not available from PG&E, such history shall be
estimated in accordance with Section 5.4.
(5) For vesting and participation purposes, such PG&E Employee
shall be entitled to receive Vesting and Eligibility Years of Service
as provided under the Plan and, in addition, shall be entitled to
vesting and eligibility service equal to such service as defined and
accrued under the PG&E Plan.
6.
Effective July 1, 1999, Article XVI of the Plan shall be amended by
adding the following to the end thereof:
(e) Former Orange and Rockland Utilities, Inc. Employees.
(1) Effective July 1, 1999, notwithstanding any other
provision of the Plan to the contrary, any former employees of Orange
and Rockland Utilities, Inc. ("O&R") who were employed by Southern
Energy Resources, Inc. and are set forth on a schedule of employees
acknowledged by the Retirement Board (hereinafter "O&R Employees")
shall be included in the Plan as of the first day of the month
coincident with or next following the later of the O&R Employee's
employment date or the date on which he first completes an Eligibility
Year of Service as provided in Paragraph (8) below.
(2) Notwithstanding anything in the Plan to the contrary, the
monthly Retirement Income payable to an O&R Employee shall be a monthly
Retirement Income determined as a single life annuity commencing on his
Normal Retirement Date equal to (A) the Allowance payable to such O&R
Employee as defined under the Employees' Retirement Plan of Orange and
Rockland Utilities, Inc. ("O&R Plan") on June 30, 1999 ("Closing Date")
and as accrued under the O&R Plan for periods prior to the Closing Date
("O&R Benefit") and (B) one-twelfth (1/12) of two percent (2%) of the
O&R Employee's Earnings received during each year of Accredited Service
under the Plan for periods beginning on and after the Closing Date. In
addition, for purposes of (B) above, immediately prior to an O&R
Employee's separation from the service of an Employing Company, such
O&R Employee shall be credited with two additional years of Accredited
Service, with Earnings credited during each of these two additional
years of Accredited Service equal to his Earnings at the time he
separates from service.
(3) Notwithstanding anything in the Plan to the contrary, the
Early Retirement Date of an O&R Employee under the Plan shall be the
first day of the month following the date such O&R Employee retires on
or after his fifty-fifth (55th) birthday, provided such O&R Employee
has accrued ten (10) or more years of Accredited Service. For such
purpose, the O&R Employee's Credited Service for periods prior to April
8, 1999, and Eligible Service for periods on and after April 8, 1999
and prior to the Closing Date, as such service is defined and accrued
under the O&R Plan, shall be treated as Accredited Service under this
Plan. The amount of such O&R Employee's Retirement Income shall be
determined in accordance with Paragraph (2) above, reduced by one-third
of one-percent (.333%) for each complete calendar month by which the
commencement date precedes the first day of the month following the O&R
Employee's sixtieth (60th) birthday. The reduction in the preceding
sentence shall be in lieu of the reduction described in Section 5.5. No
reduction of an O&R Employee's Retirement Income shall be made,
however, if the sum of such O&R Employee's number of years of
Accredited Service (including his Eligible Service under the O&R Plan
prior to the Closing Date) and his age as of his Early Retirement Date
equals or exceeds eighty-five (85).
(4) In addition to the other benefits described herein, an O&R
Employee who retires from service after his Early Retirement Date and
whose Retirement Income commences after his sixtieth (60) birthday and
before his sixty-second (62nd) birthday shall receive a supplemental
payment of six hundred dollars ($600.00) for each month beginning on
the date his Retirement Income commences. Such supplemental payments
shall cease after payment is made for the month which includes such O&R
Employee's sixty-second (62nd) birthday or the month during which the
O&R Employee dies, whichever is earlier. This supplemental payment
shall not be paid as an optional form of payment under the Plan and
shall not be payable to any Provisional Payee. Notwithstanding the
foregoing, in any event, the supplemental payment shall not be paid
under this Plan to the extent that a supplemental payment is payable
under the O&R Plan.
(5) The Retirement Income payable to an O&R Employee who is
entitled to receive Retirement Income in accordance with Article VIII
shall be determined in accordance with paragraph (2). Such O&R Employee
may elect to receive his vested Retirement Income as of the first day
of any month after his fifty-fifth (55th) birthday provided such O&R
Employee has accrued ten (10) or more years of Accredited Service or as
of his Normal Retirement Date. For such purpose, the O&R Employee's
Credited Service for periods prior to April 8, 1999, and Eligible
Service for periods on and after April 8, 1999 and prior to the Closing
Date, as such service is defined and accrued under the O&R Plan, shall
be treated as Accredited Service under this Plan. Such Retirement
Income shall be reduced by one-half of one-percent (.5%) for each
calendar month by which the commencement date precedes the first day of
the month following the O&R Employee's sixty-fifth (65th) birthday. The
reduction in the preceding sentence shall be in lieu of the reduction
described in Section 8.2.
(6) For purposes of calculating the level income option set
forth in the last paragraph of Section 5.5 , the actual pay history of
an O&R Employee with O&R shall be utilized. If the actual pay history
is not available from O&R, such history shall be estimated in
accordance with Section 5.4.
(7) If and when an O&R Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, his Retirement Income shall be offset by the
largest O&R Benefit payable under the O&R Plan as of (A) the Closing
Date, (B) the date such O&R Employee's benefits commence under this
Plan or (C) any date during the period beginning on the Closing Date
and ending on the date such O&R Employee's benefits commence under this
Plan. Notwithstanding the preceding sentence, in the event that an O&R
Employee is not eligible to receive an O&R Benefit prior to his
sixty-fifth (65th) birthday, the amount of the offset shall (A) in the
event that the O&R Employee's Retirement Income commences prior to his
sixty-fifth (65th) birthday, be reduced when he attains his sixty-fifth
(65th) birthday by the largest O&R Benefit payable to such O&R
Employee, regardless of whether such O&R Benefit actually commences
when he attains his sixty-fifth (65th) birthday, or (B) in the event
that the O&R Employee's Retirement Income commences on or after he
attains his sixty-fifth (65th) birthday, be reduced by the amount of
the O&R Benefit payable to such O&R Employee at the time his Retirement
Income commences, regardless of whether his O&R Benefit commences at
such time. Any reduction described above shall be made after an O&R
Employee's Retirement Income is adjusted in accordance with Article V,
or Section 8.1 and Section 8.2, as appropriate. The offsets set forth
in this Paragraph shall be further described in an Offset Summary
adopted by the Retirement Board, which shall be used as a reference to
calculate the amount of the O&R Plan offsets.
(8) For purposes of vesting and participation, an O&R Employee
shall accrue service as provided under the Plan and, in addition, shall
be entitled to service credit for these purposes equal to his Eligible
Service as defined and accrued under the O&R Plan prior to the Closing
Date.
(9) For purposes of Paragraph (2) above, Earnings shall have
the same meaning as set forth in Section 1.13 of the Plan modified as
follows: (A) during a Plan Year in which an O&R Employee is employed,
Earnings shall include the rate of salary or wages actually paid to
such O&R Employee, plus actual annual incentive payments made to the
O&R Employee for which he is eligible; (B) for the two year period
credited in accordance with the last sentence of Paragraph (2),
Earnings shall have the same meaning as set forth in (A) above, except
that it shall be based on such O&R Employee's rate of salary or wages
in effect as of his separation from service.
7.
Effective January 1, 1997, Section 1.14(a) of the Georgia Power Company
Schedule and Section 1.13(a) of the Southern Nuclear Operating Company, Inc.
Schedule shall be amended by replacing the term "nuclear plan premium" with the
term "nuclear plant premium" in each place where such term appears.
8.
Except as amended herein by this Fourth Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly
authorized officer, has adopted this Fourth Amendment to The Southern Company
Pension Plan pursuant to resolutions of the Board of Directors of Southern
Company Services, Inc. this ____ day of ___________________, 1999, to be
effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
Title:
ATTEST
By: ________________________
Its: ________________________
Exhibit 10(a)74
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Amended and Restated Effective January 1, 1999
<PAGE>
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption: Southern Company Services, Inc. hereby adopts The
Southern Company Supplemental Executive Retirement Plan as amended and restated
January 1, 1999 (the "Plan"). The Plan was initially established effective
January 1, 1997. The Plan shall be an unfunded deferred compensation arrangement
whose benefits shall be paid solely from the general assets of the Company.
1.2 Purpose: The Plan is designed to provide deferred compensation
benefits primarily for a select group of management or highly compensated
employees which are not otherwise payable under The Southern Company Pension
Plan as a result of the exclusion of incentive pay from the definition of
earnings set forth under such plan.
<PAGE>
ARTICLE II - DEFINITIONS
2.1 "Administrative Committee" shall mean the Retirement Board of the
Pension Plan.
2.2 "Affiliated Employer" shall mean any corporation which is a member
of the controlled group of corporations of which The Southern Company is the
common parent corporation which the Board of Directors may from time to time
determine to bring under the Plan and which shall adopt the Plan, and any
successor of any of them.
2.3 "Beneficiary" shall mean any person, estate, trust or organization
entitled to receive any payment under the Plan upon the death of a Participant.
2.4 "Board of Directors" shall mean the Board of Directors of the
Company. 2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time. 2.6 "Company" shall mean Southern Company Services, Inc.
2.7 "Effective Date" shall mean January 1, 1997.
2.8 "Employee" shall mean any person who is employed by an Affiliated
Employer excluding any persons represented by a collective bargaining agent.
2.9 "Incentive Pay" shall mean all awards earned while an Employee
under any incentive pay plans sponsored by an Affiliated Employer as shall be
determined by the Board from time to time and set forth in Appendix B attached
hereto, provided such incentive award was earned on and after January 1, 1994.
If a person was formerly represented by a collective bargaining agent with
respect to any corporation which is a member of the controlled group of
corporations of which The Southern Company is the common parent and such person
subsequently becomes an Employee, incentive awards described in the preceding
sentence shall include awards earned on and after January 1, 1994 while
represented by such collective bargaining agent.
2.10 "Participant" shall mean an Employee or former Employee of an
Affiliated Employer who is eligible to participate in the Plan pursuant to
Sections 4.1 and 4.2.
2.11 "Pension Plan" shall mean The Southern Company Pension Plan, as
amended from time to time. 2.12 "Plan" shall mean The Southern Company
Supplemental Executive Retirement Plan, as amended from time to time.
2.13 "Plan Year" shall mean the calendar year.
2.14 "SERP Benefit" shall mean the benefit described in Section 5.1.
2.15 "Supplemental Pension Benefit" shall mean the pension benefit, if
any, that is payable to a Participant under a group and/or individual
supplemental benefit plan of an Affiliated Employer (as such term is defined
therein).
Where the context requires, the definitions of all terms set forth in
the Pension Plan shall apply with equal force and effect for purposes of
interpretation and administration of the Plan, unless said terms are otherwise
specifically defined in the Plan. The masculine pronoun shall be construed to
include the feminine pronoun and the singular shall include the plural, where
the context so requires.
<PAGE>
ARTICLE III - ADMINISTRATION OF PLAN
3.1 Administrator. The general administration of the Plan shall be
placed in the Administrative Committee.
3.2 Powers. The Administrative Committee shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan more particularly set forth herein. The Administrative
Committee shall have the discretionary authority to interpret the Plan and shall
determine all questions arising in the administration, interpretation and
application of the Plan. Any such determination by it shall be conclusive and
binding on all persons. It may adopt such regulations as it deems desirable for
the conduct of its affairs. It may appoint such accountants, counsel, actuaries,
specialists and other persons as it deems necessary or desirable in connection
with the administration of this Plan, and shall be the agent for the service of
process.
3.3 Duties of the Administrative Committee.
(a) The Administrative Committee is responsible for the daily
administration of the Plan. It may appoint other persons or entities to
perform any of its fiduciary functions. The Administrative Committee
and any such appointee may employ advisors and other persons necessary
or convenient to help it carry out its duties, including its fiduciary
duties. The Administrative Committee shall have the right to remove any
such appointee from his position. Any person, group of persons or
entity may serve in more than one fiduciary capacity.
(b) The Administrative Committee shall maintain accurate and
detailed records and accounts of Participants and of their rights under
the Plan and of all receipts, disbursements, transfers and other
transactions concerning the Plan. Such accounts, books and records
relating thereto shall be open at all reasonable times to inspection
and audit by persons designated by the Administrative Committee.
(c) The Administrative Committee shall take all steps
necessary to ensure that the Plan complies with the law at all times.
These steps shall include such items as the preparation and filing of
all documents and forms required by any governmental agency;
maintaining adequate Participants' records; recording and transmission
of all notices required to be given to Participants and their
Beneficiaries; the receipt and dissemination, if required, of all
reports and information received from an Affiliated Employer; securing
of such fidelity bonds as may be required by law; and doing such other
acts necessary for the proper administration of the Plan. The
Administrative Committee shall keep a record of all of its proceedings
and acts, and shall keep all such books of account, records and other
data as may be necessary for proper administration of the Plan.
3.4 Indemnification. The Company shall indemnify the Administrative
Committee against any and all claims, losses, damages, expenses and liability
arising from an action or failure to act, except when the same is finally
judicially determined to be due to gross negligence or willful misconduct. The
Company may purchase at its own expense sufficient liability insurance for the
Administrative Committee to cover any and all claims, losses, damages and
expenses arising from any action or failure to act in connection with the
execution of the duties as Administrative Committee. No member of the
Administrative Committee shall receive any compensation from the Plan for his
service as such.
<PAGE>
ARTICLE IV - ELIGIBILITY
4.1 Eligibility Requirements. All Employees who are determined to be
eligible to participate in the Plan in accordance with Section 4.2 whose
benefits under the Pension Plan are limited by the exclusion of Incentive Pay
from the definition of Earnings thereunder (or their spouses, as the case may
be) shall be eligible to receive benefits under the Plan provided such Employees
are (a) participating in the Plan at the time they terminate from an Affiliated
Employer and are retirement eligible or (b) die while in active service while
with an Affiliated Employer provided each such Employee's spouse is eligible to
receive a survivor benefit under Article VII of the Pension Plan at each
eligible Employee's death. Notwithstanding the foregoing sentence, any former
Employee who is rehired by an Affiliated Employer on or after January 1, 1997,
shall also be required to complete one (1) year of continuous paid service with
an Affiliated Employer before being eligible to participate in the Plan.
4.2 Determination of Eligibility. The Administrative Committee shall
determine which Employees are eligible to participate. Upon becoming a
Participant, an Employee shall be deemed to have assented to the Plan and to any
amendments hereafter adopted. The Administrative Committee shall be authorized
to rescind the eligibility of any Participant if necessary to ensure that the
Plan is maintained primarily for the purpose of providing deferred compensation
to a select group of management or highly compensated employees under the
Employee Retirement Income Security Act of 1974, as amended.
<PAGE>
ARTICLE V - BENEFITS
5.1 SERP Benefit.
(a) Subject to Article XV of the Pension Plan, a Participant shall be
entitled to a monthly SERP Benefit equal to:
(1) 1.70% (1.0% if subject to Article XV of the Pension
Plan) of the Participant's Average Monthly Earnings
multiplied by his years (and fraction of a year) of
Accredited Service to his Retirement Date, death or
other termination of service, including a Social
Security Offset, as adjusted, if necessary, under the
terms of the Pension Plan for commencement prior to
the Participant's Normal Retirement Date; less
(2) such Participant's Retirement Income that is payable
under the Pension Plan; less
(3) such Participant's Supplemental Pension Benefit.
(b) For purposes of Section 5.1(a)(1), the Participant's Average
Monthly Earnings shall be calculated based on the Participant's Earnings that
are considered under the Pension Plan in calculating his Retirement Income, but
without regard to the limitation of Section 401(a)(17) of the Code, and
including the following additional amounts:
(1) any portion of such Participant's base pay that he
may have elected to defer under The Southern Company
Deferred Compensation Plan, but excluding Incentive
Pay he deferred under such plan; and
(2) any Incentive Pay which was earned as of the
applicable Plan Year in excess of 25% of the
Participant's corresponding base pay for the
applicable Plan Year determined under this Section
5.1(b).
In addition, to determine the Plan Years which produce the highest monthly
average to calculate Average Monthly Earnings under the Plan, a Participant's
Earnings should include those additional amounts provided for in Section 5.1(b).
(c) For purposes of Section 5.1(a)(1), the Participant's years of
Accredited Service shall include any deemed Accredited Service provided under
the terms of any agreement concerning supplemental pension payments between the
Participant and an Affiliated Employer.
(d) To the extent that a Participant's Retirement Income under the
Pension Plan is recalculated as a result of an amendment to the Pension Plan in
order to increase the amount of his Retirement Income, the Participant's SERP
Benefit shall also be recalculated in order to properly reflect such increase in
determining payments of the Participant's SERP Benefit made on or after the
effective date of such increase.
5.2 Distribution of Benefits.
(a) The SERP Benefit, as determined in accordance with Section 5.1,
shall be payable in monthly increments on the first day of the month
concurrently with the Participant's Retirement Income under the Pension Plan.
The form in which the SERP Benefit is paid will be the same as elected by the
Participant under the Pension Plan except that the amount of the monthly benefit
will be modified at the appropriate time based on the commencement of payments
as follows. Payments shall be adjusted to include three components:
(1) The amount necessary to pay the tax due under the
Federal Insurance Contributions Act with respect to
the accrued SERP Benefit determined upon retirement
(or such other appropriate "resolution date" as
defined under Treasury Regulation Section
31.3121(v)-2) calculated in accordance with Section
5.1;
(2) The amount estimated to pay the federal and state
income tax withholding liability due on the amount
paid under paragraph (1) above; and
(3) An adjusted monthly benefit determined on an
actuarially equivalent basis in accordance with the
terms of the Pension Plan which takes into account
the amounts paid under paragraph (1) and (2) above
and taking into account the form of benefit elected
by the Participant under the Pension Plan.
Upon adjustment, the remaining monthly payments shall equal the amount described
in paragraph (3) above. The Beneficiary of a Participant's Pension Benefit shall
be the same as the Provisional Payee, if any, of the Participant's Retirement
Income under the Pension Plan.
5.3 Allocation of SERP Benefit Liability. In the event that a
Participant eligible to receive a SERP Benefit has been employed at more than
one Affiliated Employer, the SERP Benefit liability shall be apportioned so that
each such Affiliated Employer is obligated in accordance with Section 5.4 to
cover the percentage of the total SERP Benefit as determined below. Each
Affiliated Employer's share of the SERP Benefit liability shall be calculated by
multiplying the SERP Benefit by a fraction where the numerator of such fraction
is the pay, as defined by the Administrative Committee, received by the
Participant at the respective Affiliated Employer multiplied by the Accredited
Service earned by the Participant at the respective Affiliated Employer and
where the denominator of such fraction is the sum of all numerators calculated
for each respective Affiliated Employer for which the Participant has been
employed. In the event that a Participant receives additional Accredited Service
in accordance with Section 5.1(c), for purposes of determining liability under
this Section 5.3, such Accredited Service shall be allocated to each Affiliated
Employer which has contracted with the Participant in accordance with such
contract and this allocation will be utilized to adjust the appropriate
components of the fraction in the preceding sentence in determining each
Affiliated Employer's share of the SERP benefit liability.
5.4 Funding of Benefits. The Company shall not reserve or otherwise set
aside funds for the payment of its obligations under the Plan, and such
obligations shall be paid solely from the general assets of the Company.
5.5 Withholding. There shall be deducted from the payment of any SERP
Benefit due under the Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Company to such governmental
authority for the account of the Participant or Beneficiary entitled to such
payment.
<PAGE>
ARTICLE VI - MISCELLANEOUS
6.1 Assignment. Neither the Participant, his Beneficiary nor his legal
representative shall have any rights to sell, assign, transfer or otherwise
convey the right to receive the payment of any SERP Benefit due hereunder, which
payment and the right thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to payment under
the Plan shall be null and void and of no effect.
6.2 Amendment and Termination. The Plan may be amended or terminated at
any time by the Board of Directors, provided that no amendment or termination
shall cause a forfeiture or reduction in any benefits accrued as of the date of
such amendment or termination.
6.3 No Guarantee of Employment. Participation hereunder shall not be
construed as creating any contract of employment between an Affiliated Employer
and a Participant, nor shall it limit the right of an Affiliated Employer to
suspend, terminate, alter or modify, whether or not for cause, the employment
relationship between the Affiliated Employer and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, to the extent such laws are not
otherwise superseded by the laws of the United States.
<PAGE>
IN WITNESS WHEREOF, the Plan has been executed by duly authorized
officers of Southern Company Services, Inc. pursuant to resolutions of the Board
of Directors of Southern Company Services, Inc. this 15th day of April, 1999.
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
Its:____________________________________
ATTEST:
By: ____________________________
Its: ____________________________
<PAGE>
APPENDIX A
THE SOUTHERN COMPANY SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
AFFILIATED COMPANIES AS OF JULY 1, 1998
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
<PAGE>
APPENDIX B
THE SOUTHERN COMPANY SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
INCENTIVE PAY PLANS
Effective as of January 1, 1999, all awards under the following
incentive pay plans shall be counted for purposes of Section 2.9 of the Plan:
The Southern Company Performance Pay Plan
The Southern Company Productivity Improvement Plan
The Southern Company Executive Productivity Improvement Plan
Georgia Power Company 1998 Customer Partnership Teams Incentive Plan
Georgia Power Company 1998 Residential Customer Partnership Team
Incentive Plan Georgia Power Company 1998 Northwest Region Residential
Sales Team Incentive Plan Georgia Power Company Customer Choice Group
1998 Compensation Plan Georgia Power Company Olympic Project Management
Group 1998 Short Term Incentive Plan
Southern Company National Accounts 1998 Incentive Plan
Southern Company Energy Solutions, Inc. 1998 Officer and Staff
Incentive Compensation Plan
Southern Linc Short Term Incentive Plan
Exhibit 10(a)76
SEVENTH AMENDMENT TO THE
SOUTHERN COMPANY
PERFORMANCE SHARING PLAN
WHEREAS, Southern Company Services, Inc. ("Company") heretofore adopted
The Southern Company Performance Sharing Plan ("Plan"), effective as of January
1, 1997; and
WHEREAS, the Performance Sharing Plan Committee ("Committee") desires
to amend the Plan in order to clarify that certain transferred employees are not
eligible to participate in the Plan; and
WHEREAS, the Committee desires to amend the Plan to exclude certain
former employees of Orange and Rockland Utilities, Inc. who became employed by
Southern Energy Resources, Inc.; and
WHEREAS, the Committee desires to amend the Plan to clarify the
forfeiture provisions in the Plan; and
WHEREAS, the Committee desires to amend the Plan to allow audit fees
incurred by the Plan and the Trust to be paid from the Trust assets; and
WHEREAS, the Committee desires to amend the Plan to clarify Plan
language concerning the delegation of authority to appoint and remove investment
managers; and
WHEREAS, the Committee desires to amend the Plan to revise the list of
incentive pay treated as compensation under the Plan; and
WHEREAS, the Committee is authorized pursuant to Section 12.1 of the
Plan to amend the Plan at any time, provided that the amendment does not involve
a substantial increase in cost to any Employing Company or is necessary or
desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, to be
effective as provided herein:
I.
Effective January 1, 1999, Article II, Section 2.19 shall be amended by
adding new Sections (u) and (v) after the phrase ""Eligible Employee" shall not
include:" as follows:
(u) an Employee who is described in Section 3.8 of the Plan;
(v) an Employee who has been previously employed by an Employing
Company, transferred to Southern Company Energy Marketing, L.P.,
subsequently transfers back to an Employing Company, and is not
described in paragraph (a) of Section 15.1 of The Southern Company
Pension Plan;
II.
Effective as of the date hereof, Article III of the Plan shall be
amended by adding a new Section 3.8 thereto as follows:
3.8 Former Orange and Rockland Utilities, Inc. Employees.
Notwithstanding any other provision of the Plan to the contrary, a
former employee of Orange and Rockland Utilities, Inc. ("O&R") who is
employed by Southern Energy Resources, Inc. and who is set forth on a
schedule of employees acknowledged by the Committee shall not be
eligible to participate in the Plan. In the event any such employee is
allowed to participate in the Plan in the future, such employee shall
be entitled, for vesting purposes hereunder, to years of vesting
service accrued under the Employees' Retirement Plan of Orange and
Rockland Utilities, Inc. ("O&R Pension Plan") on or after January 1,
1997, in addition to any Years of Service accrued under this Plan.
III.
Effective as of January 1, 1999, Section 8.2 shall be amended by
deleting such Section in its entirety and replacing it with the following:
8.2 Forfeitures. That portion of the Account to which the
Participant is not entitled shall be credited to the Suspense Account
(which will always share in earnings or losses of the Trust) and shall
be used to offset future Employer Contributions. Such offset shall take
place as of the last day of the Plan Year in which the Forfeiture
occurs.
IV.
Effective as of March 25, 1999, Section 10.12 shall be amended by
deleting such Section in its entirety and replacing it with the following:
10.12 Expenses of Plan and Trust Fund. The expenses of
establishment and administration of the Plan and the Trust Fund shall
be paid by the Company or the Employing Companies. Notwithstanding the
foregoing, to the extent provided in the Trust Agreement, certain
administrative expenses may be paid from the Trust Fund either directly
or through reimbursement of the Company or the Employing Companies. All
fees of the auditors related to the audit of the Plan or the Trust Fund
shall be paid from the Trust Fund either directly or through
reimbursement of the Company or the Employing Companies. Any expenses
directly related to the investments of the Trust Fund, such as stock
transfer taxes, brokerage commissions, or other charges incurred in the
acquisition or disposition of such investments, shall be paid from the
Trust Fund (or from the particular Investment Fund to which such fees
or expenses relate) and shall be deemed to be part of the cost of such
securities or deducted in computing the proceeds therefrom, as the case
may be. Investment management fees for the Investment Funds shall be
paid from the particular Investment Fund to which they relate either
directly or through reimbursement of the Company or the Employing
Companies unless the Company or the Employing Companies do not elect to
receive reimbursement for payment of such expenses. Taxes, if any, on
any assets held or income received by the Trustee shall be charged
appropriately against the Accounts of Participants as the Committee
shall determine. Any expenses paid by the Company pursuant to Section
10.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as
determined by the Committee.
V.
Effective as of March 25, 1999, Section 10.14 of the Plan shall be
amended by deleting such Section in its entirety and replacing it with the
following:
10.14 Management of Assets. The Committee shall not have
responsibility with respect to control or management of the assets of
the Plan. The Trustee shall have the sole responsibility for the
administration of the assets of the Plan as provided in the Trust
Agreement, except to the extent that an investment advisor (who
qualifies as an Investment Manager as defined in ERISA) who is
appointed by the Pension Fund Investment Review Committee shall have
responsibility for the management of the assets of the Plan, or some
part thereof (including powers to acquire and dispose of the assets of
the Plan, or some part thereof).
VI.
Effective as of the date hereof, Section 11.1 of the Plan shall be
amended by deleting such Section in its entirety and replacing it with the
following:
11.1 Trustee. The Company has entered into a Trust Agreement
with the Trustee to hold the funds necessary to provide the benefits
set forth in the Plan. If the Board of Directors so determines, the
Company may enter into a Trust Agreement or Trust Agreements with
additional trustees. Any Trust Agreement may be amended by the Company
from time to time in accordance with its terms. Any Trust Agreement
shall provide, among other things, that all funds received by the
Trustee thereunder will be held, administered, invested, and
distributed by the Trustee, and that no part of the corpus or income of
the Trust held by the Trustee shall be used for or diverted to purposes
other than for the exclusive benefit of Participants or their
Beneficiaries, except as otherwise provided in the Plan. Any Trust
Agreement may also provide that the investment and reinvestment of the
Trust Fund, or any part thereof may be carried out in accordance with
directions given to the Trustee by any Investment Manager or Investment
Managers (as defined in ERISA) who are appointed by the Pension Fund
Investment Review Committee. The Board of Directors may remove any
Trustee or any successor Trustee, and any Trustee or any successor
Trustee may resign. Upon removal or resignation of a Trustee, the Board
of Directors shall appoint a successor Trustee.
VII.
Effective as of January 1, 1999, Appendix B shall be modified in the
form attached hereto.
Except as amended herein by this Seventh Amendment, the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly
authorized members of the Performance Sharing Committee, has adopted this
Seventh Amendment to The Southern Company Performance Sharing Plan this _____
day of ________________, 1999, to be effective as of such date unless stated
otherwise herein.
PERFORMANCE SHARING PLAN COMMITTEE:
Christopher C. Womack
Robert A. Bell
W. Dean Hudson
<PAGE>
APPENDIX B - INCENTIVE PAY PLANS
Effective as of January 1, 1999, all awards under the following
incentive pay plans shall be counted as compensation for purposes of Section
2.12 of the Plan:
o The Southern Company Performance Pay Plan
o The Southern Company Productivity Improvement Plan
o The Southern Company Executive Productivity Improvement Plan
o Georgia Power Company Customer Choice Group Incentive Compensation Plan
o Georgia Power Company Customer Partnership Teams Incentive Plan
o Georgia Power Company Residential Customer Partnership Team Incentive Plan
o Merchandise Sales Business Unit Incentive Plan (APC/Gulf)
o Southern Company Energy Solutions Officer and Staff Incentive
Compensation Plan
o Southern Company Energy Solutions PowerCall Security Incentive Compensation
Plan (Installation & Service Technicians)
o Southern Company National Accounts Incentive Compensation Plan
o Southern LINC Annual Incentive Plan
o Southern LINC Regional Sales Managers Incentive Plan
Exhibit 10(a)78
FIRST AMENDMENT TO
THE SOUTHERN COMPANY
SUPPLEMENTAL BENEFIT PLAN
WHEREAS, Southern Company Services, Inc. ("Company") has established
The Southern Company Supplemental Benefit Plan ("Plan") to provide deferred
compensation benefits primarily for a select group of management or highly
compensated employees which are not otherwise payable under tax qualified plans
of the Southern Company as a result of certain statutory limitations provided
under the Internal Revenue Code; and
WHEREAS, the Company, through its Board of Directors, has reserved unto
itself the authority to amend the Plan at any time; and
WHEREAS, the Company wishes to provide for the withholding of the Old
Age, Survivors and Disability Insurance portion of the tax due under the Federal
Insurance Contributions Act from payments of Pension Benefits as that term is
defined under the Plan.
Accordingly, the Plan is hereby amended in the following particulars,
to be effective as set forth below:
1.
Effective January 1, 1999, amend Section 5.3(a)(1) of the Plan by
deleting said Section in its entirety and substituting the following in lieu
thereof:
5.3(a)(1) The amount necessary to pay the tax due under the
Federal Insurance Contributions Act with respect to
the accrued Pension Benefit determined upon
retirement (or such other appropriate "resolution
date" as defined under Treasury Regulation Section
31.3121(v)-2) calculated in accordance with Section
5.1;
2.
All parts of the Plan not inconsistent herewith are hereby ratified and
affirmed.
IN WITNESS WHEREOF, this First Amendment has been executed by a duly
authorized officer of Southern Company Services, Inc. pursuant to resolutions of
the Board of Directors of the Company this 15th day of April, 1999.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By:
Its:
Exhibit 10(a)80
FIRST AMENDMENT TO
THE SOUTHERN COMPANY
CHANGE IN CONTROL SEVERANCE PLAN
WHEREAS, effective December 7, 1998, Southern Company Services, Inc.
("Company") established the Southern Company Change in Control Severance Plan
("Plan") to provide certain benefits to eligible employees that may be
terminated from employment following a change in control as contemplated
therein; and
WHEREAS, the Company, through its Board of Directors, previously
authorized the adoption of this Plan; and
WHEREAS, the Company desires to make a clarifying amendment regarding
certain eligible employees' right to benefits under the Southern Energy
Resources, Inc. Deferred Incentive Compensation Plan.
NOW, THEREFORE, the Plan is hereby amended in the following particulars
to be effective December 7, 1998 as set forth below:
1.
Section 2.9-A is added thereto as follows:
2.9-A "DIC Plan" shall mean the Southern Energy
Resources, Inc. Deferred Incentive Compensation Plan or any
successor thereto which is considered an "equitable
arrangement" thereof, as such plans may be amended from time
to time.
2.
Section 3.2(k) is added thereto as follows:
3.2(k) DIC Plan. The provisions of this Section
3.2(k) shall apply to any Participant who, as of the date of
the Change in Control, was a participant in the DIC Plan, the
defined terms of which are incorporated into this Section
3.2(k) by reference. Provided a Participant is not entitled to
benefits under Article V of the DIC Plan, if the DIC Plan is
in place through Participant's Termination Date and to the
extent that Participant is entitled to participate therein,
any of the Participant's Awards as of the Termination Date
which are not then vested shall become fully vested and
Participant shall be entitled to receive cash in the amount
equal to Participant's Account as of his Termination Date.
Notwithstanding anything in the DIC Plan to the contrary, the
investment return on the Awards determined in accordance with
Section 3.1 of the DIC Plan for any Plan Year following a
Change in Control of Southern or its Employing Company shall
be no less than the investment return determined in accordance
with Section 3.1 of the DIC Plan as of the date of such Change
in Control with respect to those Accounts which are
outstanding as of the date of such Change in Control.
IN WITNESS WHEREOF, this First Amendment has been executed by a duly
authorized officer of Southern Company Services, Inc. pursuant to resolutions of
the Board of Directors of the Company this ____ day of _______________________,
1999.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By:
Its:
Exhbit 10(a)82
FIRST AMENDMENT TO
THE SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN
WHEREAS, effective December 7, 1998, Southern Company Services, Inc.
("Company") established the Southern Company Executive Change in Control
Severance Plan ("Plan") to provide certain benefits to eligible employees that
may be terminated from employment following a change in control as contemplated
therein; and
WHEREAS, the Company, through its Board of Directors, previously
authorized the adoption of this Plan; and
WHEREAS, the Company desires to make a clarifying amendment regarding
certain eligible employees' right to benefits under the Southern Energy
Resources, Inc. Deferred Incentive Compensation Plan.
NOW, THEREFORE, the Plan is hereby amended in the following particulars
to be effective December 7, 1998 as set forth below:
1.
Section 2.11-A is added thereto as follows:
2.11-A "DIC Plan" shall mean the Southern Energy
Resources, Inc. Deferred Incentive Compensation Plan or any
successor thereto which is considered an "equitable
arrangement" thereof, as such plans may be amended from time
to time.
2.
Section 3.2(k) is added thereto as follows:
3.2(k) DIC Plan. The provisions of this Section
3.2(k) shall apply to any Participant who, as of the date of
the Change in Control, was a participant in the DIC Plan, the
defined terms of which are incorporated into this Section
3.2(k) by reference. Provided a Participant is not entitled to
benefits under Article V of the DIC Plan, if the DIC Plan is
in place through Participant's Termination Date and to the
extent that Participant is entitled to participate therein,
any of the Participant's Awards as of the Termination Date
which are not then vested shall become fully vested and
Participant shall be entitled to receive cash in the amount
equal to Participant's Account as of his Termination Date.
Notwithstanding anything in the DIC Plan to the contrary, the
investment return on the Awards determined in accordance with
Section 3.1 of the DIC Plan for any Plan Year following a
Change in Control of Southern or its Employing Company shall
be no less than the investment return determined in accordance
with Section 3.1 of the DIC Plan as of the date of such Change
in Control with respect to those Accounts which are
outstanding as of the date of such Change in Control.
IN WITNESS WHEREOF, this First Amendment has been executed by a duly
authorized officer of Southern Company Services, Inc. pursuant to resolutions of
the Board of Directors of the Company this ____ day of _______________________,
1999.
SOUTHERN COMPANY SERVICES, INC.
By:
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By:
Its:
Exhibit 10(a)84
FIRST AMENDMENT TO AND ASSIGNMENT OF
DEFERRED COMPENSATION AGREEMENT
THIS FIRST AMENDMENT TO AND ASSIGMENT OF DEFERRED COMPENSATION
AGREEMENT ("Amendment") made and entered into by and between The Southern
Company ("Southern"), Georgia Power Company (the "Company"), Southern Company
Services, Inc. ("SCS") and Henry Allen Franklin ("Mr. Franklin"), effective as
of the 8th day of July, 1999.
W I T N E S S E T H:
WHEREAS, the parties entered into that certain Deferred Compensation
Agreement (the "Agreement") effective February 27, 1998;
WHEREAS, the employment of Mr. Franklin has been transferred to SCS;
WHEREAS, the parties wish to amend and assign the Agreement in
connection with such transfer of employment;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Pursuant to Section 15 of the Agreement, the Company
assigns the Agreement to SCS and SCS shall be the Company for all
purposes thereunder.
2. Pursuant to Section 15 of the Agreement, the profitability
goals are amended as set forth on Exhibit A hereof to reflect Mr.
Franklin's position with SCS.
IN WITNESS WHEREOF, this First Amendment to and Assignment of Deferred
Compensation Agreement has been executed by the parties, this ___ day of
_____________, 1999.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN COMPANY SERVICES, INC.
By:
GEORGIA POWER COMPANY
By: ______________________________
MR. FRANKLIN
------------------------------
Henry Allen Franklin
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Southern Company's "core business" shall earn its assigned share of
The Southern Company's Earnings Per Share Goal for each of the calendar years in
the Performance Period. Achievement of the goal shall be assessed annually by
the Chairman of The Southern Company and documented in Exhibit B.
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
Exhibit 10(a)87
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between The Southern Company ("Southern"), Southern Energy
Resources, Inc. (the "Company") and Gale E. Klappa ("Mr. Klappa").
W I T N E S S E T H:
WHEREAS, Mr. Klappa is an Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Mr. Klappa to
increase the profitability of the Company and to provide Mr. Klappa an interest
in the Company's overall profitability, and to provide Mr. Klappa with
additional deferred compensation for service he has or will provide the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Retention Bonus.
a. General Nature of Award. Subject to the terms and
conditions of this Agreement, the Company shall establish and maintain
on behalf of Mr. Klappa an account on the Company's books and records
(the "Account") which, if Mr. Klappa continues to be an employee of the
Company, or any affiliate or subsidiary of Southern (as set forth in
Paragraph 5 hereof), shall entitle Mr. Klappa to receive on July 1,
2003 (the period from the effective date of the Agreement through July
1, 2003 to be referred to as the "Performance Period") an amount equal
to the then Market Value (as defined below) of the equivalent of Two
Hundred Sixty Thousand Dollars ($260,000.00) of Market Value of
Southern's common stock deemed to have been purchased as of the
effective date of this Agreement, including reinvested dividends
thereon, increased, if certain profitability goals are met, by
estimated income tax expenses.
b. Investment.
(1) As of the date hereof, the Company shall credit
to Mr. Klappa's Account that number of deemed shares
(including fractional shares) of Southern's common stock
("Common Stock") as shall equal $260,000.00 in Market Value
(as defined herein) determined as of the effective date of
this Agreement (such hypothetical shares to be referred to
herein as the "Phantom Stock"). For purposes of this
Agreement, "Market Value" shall mean the average closing price
of the Common Stock as reported by the New York Stock Exchange
for the ten trading days immediately preceding the respective
valuation date.
(2) As of the day of each calendar quarter in which
occurs the payment of dividends on Common Stock, there shall
be credited to Mr. Klappa's Account such additional shares of
Phantom Stock (including fractional shares) as could have been
purchased at the Market Value on such day as follows:
(a) In the case of cash dividends, such
additional shares of Phantom Stock as could have been
purchased with the dividends payable on the number of
shares of Phantom Stock credited to the Account
immediately prior to the dividend;
(b) In the case of dividends payable in
property other than cash or Common Stock, such
additional shares of Phantom Stock as could have been
purchased with the fair market value of the property
which would have been payable as dividends on the
number of shares of Phantom Stock credited to the
Account immediately prior to the dividend; or
(c) In the case of dividends payable in
Common Stock, such additional shares of Phantom Stock
as would have been payable on the number of shares of
Phantom Stock credited to the Account immediately
prior to the dividend.
(3) In the event that the number of outstanding
shares of Common Stock is changed through merger,
consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of 2%)
or other change in the capital structure of Southern without
consideration, or upon the occurrence of any other
extraordinary corporate event involving the Common Stock
causing a reduction in the value of the Common Stock, such as
a corporate spin off or split up, the number of shares of
Phantom Stock credited to the Account shall be proportionately
adjusted by the Company so as to preserve the value of the
Account immediately prior to such event.
c. Vesting of Account. The Market Value of Mr. Klappa's
Account shall vest on July 1, 2003 (the "Vesting Date"), provided Mr.
Klappa is then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern.
d. Valuation of Account. The value of Mr. Klappa's Account on
any date shall be based on the Market Value on such date multiplied by
the number of shares of Phantom Stock then credited to the Account,
provided, however, that if the profitability goals established for the
Company and for Mr. Klappa by the Chief Executive Officers of Southern
and the Company have been equaled or exceeded during the Performance
Period as set forth on Exhibit A, and as annually documented on Exhibit
B of this Agreement (the "Profitability Goals"), the value of the
Account shall be increased upon payout to cover Mr. Klappa's federal
and state income tax expense as reasonably estimated by the Company for
the year of payout (the "Tax Gross-up"). Failure to meet the
Profitability Goals for the Performance Period shall result in the
forfeiture of the Tax Gross-up, provided, however, that the Chief
Executive Officers of Southern and the Company may, in their sole
discretion, determine after the close of the Performance Period, that
as a result of overall Company profitability and individual performance
during the entire Performance Period, all or a portion of the value of
the Tax Gross-up shall nevertheless be paid.
e. Payment of Account Balance. Provided that Mr. Klappa is
then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern, and, with respect to the Tax Gross-up amount,
has also achieved the Profitability Goals, the Company shall pay to Mr.
Klappa the value of his Account, and, if applicable, the Tax Gross-up
amount, in cash within ten (10) days of the Vesting Date.
f. Election to Defer. By written election filed with
Southern's Vice President, Human Resources no less than thirteen (13)
months prior to the Vesting Date, Mr. Klappa may defer all or a portion
of the amount to be received under this Agreement by having such amount
contributed on his account to The Southern Company Deferred
Compensation Plan, in accordance with the terms and conditions of such
Plan.
g. Death, Permanent Disability, Termination Without Cause,
Termination for Good Reason, or Continued Employment Following a Change
in Control. In the event of Mr. Klappa's termination of employment with
the Company prior to the payout of the value of the Account for reasons
of death, permanent disability, termination by the Company without
Cause, or termination of employment by Mr. Klappa for Good Reason
following a Change in Control, or, if prior to the payout of the value
of the Account Mr. Klappa continues employment with the Company, any
Southern Subsidiary, or any employer that succeeds to all or
substantially all of the assets of the Company, Southern, or any
Southern Subsidiary following a Change in Control, the Company shall
pay to Mr. Klappa, or his estate in the event of death, the value of
the Account determined as of the date of such termination or Change in
Control, plus, if the Profitability Goals have been met as of such
date, the Tax Gross-up amount. For purposes of this Paragraph 1.g., the
terms Cause, Change in Control, Good Reason, and Southern Subsidiary
shall have the meaning set forth in that certain Change in Control
Agreement, dated June 17, 1999, as amended from time to time, between
Southern, the Company and Mr. Klappa (the "Change in Control
Agreement"), the defined terms of which are incorporated in this
Paragraph 1.g. by reference thereto.
h. Assignability. Neither Mr. Klappa, his estate, his
beneficiaries, nor his legal representative shall have any rights to
commute, sell, assign, transfer or otherwise convey the right to
receive the payment under this Paragraph 1, which payment and the
rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to such
payment shall be void and have no effect.
2. Value Creation Plan. In the event Mr. Klappa transfers his
employment to an affiliate of Southern, and pursuant to the Southern Energy
Resources, Inc. Value Creation Plan (the "Plan") he has Indexed Rights that have
not vested at the time of such transfer, and the Administrative Committee for
the Plan fails to take action to provide Mr. Klappa relief from Section 4.5 of
the Plan to the extent it provides for forfeiture of unvested Indexed Rights
upon termination from the Company for reasons other than Cause and provide that
any of Mr. Klappa's unvested Indexed Rights shall continue to vest as long as
Mr. Klappa remains employed by an affiliate of Southern, then the Company shall
pay Mr. Klappa an amount equal to what he would have received had such Indexed
Rights continued to vest following his transfer to an affiliate of Southern,
become vested and been exercised by Mr. Klappa within the time period that would
have existed under the Plan for such exercise. In determining such amount, the
method that would have applied under the Plan shall be used.
3. Publicity; No Disparaging Statement. Except as otherwise provided in
Paragraph 6 hereof, Mr. Klappa, Southern and the Company covenant and agree that
they shall not engage in any communications which shall disparage one another or
interfere with their existing or prospective business relationships.
4. Non-Disclosure.
a. Definitions. For purposes of this Paragraph 4, the
following terms shall have the following meanings:
(1) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental subdivision,
association, firm, corporation or other entity.
(2) "Affiliate" shall mean the following Entities:
(a) any Entity which owns an Interest (as defined below) in
the Company either directly or indirectly through any other
Entity, (b) any Entity an Interest in which is owned directly
or indirectly by any Entity which owns directly or indirectly
an Interest in the Company or (c) any Entity in which the
Company owns an Interest either directly or indirectly through
any other Entity. For purposes of this Agreement, the term
"Interest" shall include any equity interest in an Entity in
an amount equal to or greater than 30% of the Entity's total
outstanding equity interests.
(3) "Confidential Information" shall mean proprietary
and confidential data or information other than Trade Secrets
(as defined below), which is valuable to, and related to the
business of, the Company, its Affiliates or non-affiliated
Entities with whom the Company or its Affiliates has or have
business relationships (collectively, "Third Parties"), and
the details of which are generally unknown to the public or to
the Company's competitors, including, without limitation,
information regarding the Company's employees, business
strategies, models and systems, customers, suppliers, partners
and affiliates, gained by Mr. Klappa as a result of his
affiliation with the Company or its Affiliates, and other
items that the Company or its Affiliates may from time to time
mark or otherwise identify as confidential.
(4) "Trade Secrets" shall mean information of or
related to the Company, its Affiliates or Third Parties which
(a) derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to
maintain its secrecy; it being agreed that such information
includes, without limitation, technical and non-technical
data, a formula, a pattern, a compilation, a program, a
device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans or a list of actual or
potential customers or suppliers.
(5) "Intellectual Property" shall mean all work
product, property, data, documentation, "know-how", concepts
or plans, inventions, discovery, compositions, innovations,
computer programs, improvements, techniques, processes,
designs, article of manufacture or information of any kind, or
any new or useful improvements of any of the foregoing and any
Trade Secrets, patents, copyrights, Confidential Information,
mask work, trademark or service mark, relating in any way to
the Company or its Affiliates and its or their business
prepared, conceived, revised, discovered, developed, or
created by Mr. Klappa for the Company or its Affiliates or by
using the Company's or its Affiliates' time, personnel,
facilities, equipment, knowledge, information, resources, or
material.
b. Nondisclosure; Ownership of Proprietary Property.
(1) Nondisclosure. In recognition of the Company's
need to protect its legitimate business interests, Mr. Klappa
hereby acknowledges that he has been given access to valuable
Trade Secrets and Confidential Information; and he hereby
covenants and agrees that he will use the Trade Secrets and
Confidential Information for the Company's business purposes
only, and that he will not for any reason, in any fashion,
form or manner, other than as instructed by a duly authorized
representative of the Company, copy, disclose, disseminate,
communicate, transfer or otherwise convey to any Entity any
item: (a) which is a Trade Secret, for so long as such item
remains a trade secret under applicable law; or (b) which is
Confidential Information, other than Trade Secrets, for a
period of three (3) years from his termination.
(2) Notification of Unauthorized Disclosure. Mr.
Klappa shall exercise his best efforts to ensure the continued
confidentiality of all Trade Secrets and Confidential
Information known by, disclosed or made available to him. He
shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets or Confidential
Information of which he becomes aware. Mr. Klappa shall assist
the Company, to the extent necessary, in the procurement or
protection of the Company's or its Affiliates' rights to or in
any Intellectual Property, Trade Secrets or Confidential
Information and, upon the Company's request, shall assist, to
the extent necessary, in the procurement or protection of any
Third Party's rights to or in any Intellectual Property, Trade
Secrets or Confidential Information.
(3) Ownership. To the greatest extent possible, any
and all Intellectual Property shall be deemed to be "work made
for hire" (as defined in the Copyright Act, 17 U.S.C.A. ss.ss.
101 et seq.), and Mr. Klappa hereby unconditionally and
irrevocably transfers and assigns to the Company or its
Affiliates all rights, title and interest he currently has or
in the future may have by operation of law or otherwise in or
to any Intellectual Property, including, without limitation,
all patents, copyrights, trademarks, service marks and other
Intellectual Property rights and agrees that the Company or
its Affiliates shall have the exclusive world-wide ownership
of such Intellectual Property, and that no Intellectual
Property shall be treated as or deemed to be a "joint work"
(as defined by the Copyright Act) of Mr. Klappa and the
Company, its Affiliates or otherwise. Mr. Klappa agrees to
execute and deliver to the Company or its Affiliates any
transfers, assignments, documents or other instruments which
the Company or its Affiliates may deem necessary or
appropriate to vest complete title and ownership of any
Intellectual Property, and all rights therein, exclusively in
the Company or its Affiliates, as the case may be.
(4) Return of Materials. Upon Mr. Klappa's
termination, or at any point after that time upon the specific
request of the Company, he shall return to the Company all
written or descriptive materials of any kind belonging or
relating to the Company or its Affiliates, including, without
limitation, any Intellectual Property, Confidential
Information and Trade Secrets, in his possession.
5. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Mr. Klappa's employment by the Company is
terminated and he shall become immediately re-employed by Southern or a
subsidiary or an affiliate of Southern, the Company shall assign this Agreement
to Southern or such subsidiary or affiliate, Southern shall accept such
assignment or cause such affiliate or subsidiary to accept such assignment, such
assignee shall become the "Company" for all purposes hereunder, and the
profitability goals set forth on Exhibit A hereof shall be amended to
appropriately reflect the performance of such assignee. In the event of such
assignment, the expense of this Paragraph 1 of this Agreement shall be shared
pro rata by the Company and any such assignee based upon the number of months
after the effective date of this Agreement that Mr. Klappa is employed by the
Company, and/or Southern and/or such affiliate or subsidiary of Southern, as the
case may be, but the expense of Paragraph 2 shall be the sole responsibility of
the Company.
6. Confidentiality and Legal Process. Mr. Klappa represents and agrees
that he will keep the terms, amount and fact of this Agreement confidential and
that he will not hereafter disclose any information concerning this Agreement to
any one other than his personal agents, including, but not limited to, any past,
present, or prospective employee or applicant for employment with Company.
Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit
Mr. Klappa from performing any duty or obligation that shall arise as a matter
of law. Specifically, Mr. Klappa shall continue to be under a duty to truthfully
respond to matter of law. Specifically, Mr. Klappa shall continue to be under a
duty to truthfully respond to any legal and valid subpoena or other legal
process. This Agreement is not intended in any way to proscribe Mr. Klappa's
right and ability to provide information to any federal, state or local
government in the lawful exercise of such governments' governmental functions.
7. Successors And Assigns; Applicable Law. Except as otherwise provided
in Paragraph 1.h., this Agreement shall be binding upon and inure to the benefit
of Mr. Klappa and his heirs, administrators, representatives, executors,
successors and assigns, and shall be binding upon and inure to the benefit of
Southern, the Company and their officers, directors, employees, agents,
shareholders, parent corporation and affiliates, and their respective
predecessors, successors, assigns, heirs, executors and administrators and each
of them, and to their heirs, administrators, representatives, executors,
successors and assigns. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Georgia, United States of America
(without giving effect to principles of conflicts of laws).
8. Complete Agreement. This Agreement shall constitute the full and
complete Agreement between the parties concerning its subject matter and fully
supersedes any and all other prior Agreements or understandings between the
parties concerning the subject matter hereof. This Agreement shall not be
modified or amended except by a written instrument signed by both Mr. Klappa and
an authorized representative of Southern and the Company.
9. Severability. The unenforceability or invalidity of any particular
provision of this Agreement shall not affect its other provisions, and to the
extent necessary to give such other provisions effect, they shall be deemed
severable.
10. Waiver Of Breach; Specific Performance. The waiver of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other breach. Each of the parties to this Agreement will be entitled to
enforce its or his rights under this Agreement, specifically, to recover damages
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its or his favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its or his sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
11. Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Mr. Klappa may be entitled to receive the
value of his benefit under the terms and conditions of this Agreement, the
assets from which such amount may be paid shall at all times be subject to the
claims of the Company's creditors.
12. No Effect On Other Arrangements. It is expressly understood and
agreed that the payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Mr. Klappa may be entitled or for
which he may be eligible, whether funded or unfunded, by reason of his
employment with the Company.
13. Tax Withholding. There shall be deducted from each payment under
this Agreement the amount of any tax required by any governmental authority to
be withheld and paid over by the Company to such governmental authority for the
account of Mr. Klappa.
14. Compensation. Any compensation contributed on behalf of Mr. Klappa
under this Agreement shall not be considered "compensation," as the term is
defined in The Southern Company Employee Savings Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or
The Southern Company Pension Plan. Payments under this Agreement shall not be
considered wages, salaries or compensation under any other employee benefit
plan.
15. No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, modify, whether or not for cause, the employment relationship
of Mr. Klappa and the Company.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
first listed above, effective this ____ day of ___________, 1999.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN ENERGY RESOURCES, INC.
By:
Mr. Klappa
------------------------------
<PAGE>
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Southern Company shall earn its Earnings Per Share Goal for each of
the calendar years in the Performance Period.
Achievement of the goals shall be assessed annually by the Chief
Executive Officers of Southern and the Company and documented in Exhibit B of
this Agreement.
<PAGE>
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
<PAGE>
FIRST AMENDMENT TO AND ASSIGNMENT OF
DEFERRED COMPENSATION AGREEMENT
THIS FIRST AMENDMENT TO AND ASSIGMENT OF DEFERRED COMPENSATION
AGREEMENT ("Amendment") made and entered into by and between The Southern
Company ("Southern"), Southern Energy Resources, Inc. (the "Company"), Southern
Company Services, Inc. ("SCS") and Gale F. Klappa ("Mr. Klappa"), effective as
of the 6th day of October, 1999.
W I T N E S S E T H:
WHEREAS, the parties entered into that certain Deferred Compensation
Agreement (the "Agreement") effective October 5, 1999;
WHEREAS, the employment of Mr. Klappa has been transferred to SCS;
WHEREAS, the parties wish to amend and assign the Agreement in
connection with such transfer of employment;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Pursuant to Section 5 of the Agreement, the Company assigns
the Agreement to SCS and SCS shall be the Company for all purposes
thereunder. Notwithstanding the foregoing, as provided in Sections 2
and 5 of the Agreement with respect to the Value Creation Plan,
Southern Energy Resources, Inc. shall retain the expense related to
Section 2.
2. Pursuant to Section 5 of the Agreement, Exhibit A is
amended to provide that achievement of the profitability goal shall be
documented by the Chairman of The Southern Company.
IN WITNESS WHEREOF, this First Amendment to and Assignment of Deferred
Compensation Agreement has been executed by the parties, this ___ day of
_____________, 2000.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN COMPANY SERVICES, INC.
By:
SOUTHERN ENERGY RESOURCES, INC.
By: ______________________________
MR. KLAPPA
------------------------------
Gale F. Klappa
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Southern Company shall earn its Earnings Per Share Goal for each of
the calendar years in the Performance Period. Achievement of the goal shall be
assessed annually by the Chairman of The Southern Company and documented in
Exhibit B.
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
Exhibit 10(a)88
DEFERRED COMPENSATION AGREEMENT
THIS DEFERRED COMPENSATION AGREEMENT ("Agreement") made and entered
into by and between The Southern Company ("Southern"), Southern Energy
Resources, Inc. (the "Company") and S. Marce Fuller ("Ms. Fuller").
W I T N E S S E T H:
WHEREAS, Ms. Fuller is an Officer of the Company;
WHEREAS, the Company and Southern wish to encourage Ms. Fuller to
increase the profitability of the Company and to provide Ms. Fuller an interest
in the Company's overall profitability, and to provide Ms. Fuller with
additional deferred compensation for service she has or will provide the
Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Retention Bonus.
a. General Nature of Award. Subject to the terms and
conditions of this Agreement, the Company shall establish and maintain
on behalf of Ms. Fuller an account on the Company's books and records
(the "Account") which, if Ms. Fuller continues to be an employee of the
Company, or any affiliate or subsidiary of Southern (as set forth in
Paragraph 4 hereof), shall entitle Ms. Fuller to receive on July 1,
2003 (the period from the effective date of the Agreement through July
1, 2003 to be referred to as the "Performance Period") an amount equal
to the then Market Value (as defined below) of the equivalent of Four
Hundred Thousand Dollars ($400,000.00) of Market Value of Southern's
common stock deemed to have been purchased as of the effective date of
this Agreement, including reinvested dividends thereon, increased, if
certain profitability goals are met, by estimated income tax expenses.
b. Investment.
(1) As of the date hereof, the Company shall credit
to Ms. Fuller's Account that number of deemed shares
(including fractional shares) of Southern's common stock
("Common Stock") as shall equal $400,000.00 in Market Value
(as defined herein) determined as of the effective date of
this Agreement (such hypothetical shares to be referred to
herein as the "Phantom Stock"). For purposes of this
Agreement, "Market Value" shall mean the average closing price
of the Common Stock as reported by the New York Stock Exchange
for the ten trading days immediately preceding the respective
valuation date.
(2) As of the day of each calendar quarter in which
occurs the payment of dividends on Common Stock, there shall
be credited to Ms. Fuller's Account such additional shares of
Phantom Stock (including fractional shares) as could have been
purchased at the Market Value on such day as follows:
(a) In the case of cash dividends, such
additional shares of Phantom Stock as could have been
purchased with the dividends payable on the number of
shares of Phantom Stock credited to the Account
immediately prior to the dividend;
(b) In the case of dividends payable in
property other than cash or Common Stock, such
additional shares of Phantom Stock as could have been
purchased with the fair market value of the property
which would have been payable as dividends on the
number of shares of Phantom Stock credited to the
Account immediately prior to the dividend; or
(c) In the case of dividends payable in
Common Stock, such additional shares of Phantom Stock
as would have been payable on the number of shares of
Phantom Stock credited to the Account immediately
prior to the dividend.
(3) In the event that the number of outstanding
shares of Common Stock is changed through merger,
consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of 2%)
or other change in the capital structure of Southern without
consideration, or upon the occurrence of any other
extraordinary corporate event involving the Common Stock
causing a reduction in the value of the Common Stock, such as
a corporate spin off or split up, the number of shares of
Phantom Stock credited to the Account shall be proportionately
adjusted by the Company so as to preserve the value of the
Account immediately prior to such event.
c. Vesting of Account. The Market Value of Ms. Fuller's
Account shall vest on July 1, 2003 (the "Vesting Date"), provided Ms.
Fuller is then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern.
d. Valuation of Account. The value of Ms. Fuller's Account on
any date shall be based on the Market Value on such date multiplied by
the number of shares of Phantom Stock then credited to the Account,
provided, however, that if the profitability goals established for the
Company and for Ms. Fuller by the Chief Executive Officer of Southern
have been equaled or exceeded during the Performance Period as set
forth on Exhibit A, and as annually documented on Exhibit B of this
Agreement (the "Profitability Goals"), the value of the Account shall
be increased upon payout to cover Ms. Fuller's federal and state income
tax expense as reasonably estimated by the Company for the year of
payout (the "Tax Gross-up"). Failure to meet the Profitability Goals
for the Performance Period shall result in the forfeiture of the Tax
Gross-up, provided, however, that the Chief Executive Officer of
Southern may, in his sole discretion, determine after the close of the
Performance Period, that as a result of overall Company profitability
and individual performance during the entire Performance Period, all or
a portion of the value of the Tax Gross-up shall nevertheless be paid.
e. Payment of Account Balance. Provided that Ms. Fuller is
then an employee of the Company, Southern, or an affiliate or
subsidiary of Southern, and, with respect to the Tax Gross-up amount,
has also achieved the Profitability Goals, the Company shall pay to Ms.
Fuller the value of her Account, and, if applicable, the Tax Gross-up
amount, in cash within ten (10) days of the Vesting Date.
f. Election to Defer. By written election filed with
Southern's Vice President, Human Resources no less than thirteen (13)
months prior to the Vesting Date, Ms. Fuller may defer all or a portion
of the amount to be received under this Agreement by having such amount
contributed on her account to The Southern Company Deferred
Compensation Plan, in accordance with the terms and conditions of such
Plan.
g. Death, Permanent Disability, Termination Without Cause,
Termination for Good Reason, or Continued Employment Following a Change
in Control. In the event of Ms. Fuller's termination of employment with
the Company prior to the payout of the value of the Account for reasons
of death, permanent disability, termination by the Company without
Cause, or termination of employment by Ms. Fuller for Good Reason
following a Change in Control, or, if prior to the payout of the value
of the Account Ms. Fuller continues employment with the Company, any
Southern Subsidiary, or any employer that succeeds to all or
substantially all of the assets of the Company, Southern, or any
Southern Subsidiary following a Change in Control, the Company shall
pay to Ms. Fuller, or her estate in the event of death, the value of
the Account determined as of the date of such termination or Change in
Control, plus, if the Profitability Goals have been met as of such
date, the Tax Gross-up amount. For purposes of this Paragraph 1.g., the
terms Cause, Change in Control, Good Reason, and Southern Subsidiary
shall have the meaning set forth in that certain Change in Control
Agreement, dated June 17, 1999, as amended from time to time, between
Southern, the Company and Ms. Fuller (the "Change in Control
Agreement"), the defined terms of which are incorporated in this
Paragraph 1.g. by reference thereto.
h. Assignability. Neither Ms. Fuller, her estate, her
beneficiaries, nor her legal representative shall have any rights to
commute, sell, assign, transfer or otherwise convey the right to
receive the payment under this Paragraph 1, which payment and the
rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to assign or transfer the right to such
payment shall be void and have no effect.
2. Publicity; No Disparaging Statement. Except as otherwise provided in
Paragraph 5 hereof, Ms. Fuller, Southern and the Company covenant and agree that
they shall not engage in any communications which shall disparage one another or
interfere with their existing or prospective business relationships.
3. Non-Disclosure.
a. Definitions. For purposes of this Paragraph 3, the
following terms shall have the following meanings:
(1) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental subdivision,
association, firm, corporation or other entity.
(2) "Affiliate" shall mean the following Entities:
(a) any Entity which owns an Interest (as defined below) in
the Company either directly or indirectly through any other
Entity, (b) any Entity an Interest in which is owned directly
or indirectly by any Entity which owns directly or indirectly
an Interest in the Company or (c) any Entity in which the
Company owns an Interest either directly or indirectly through
any other Entity. For purposes of this Agreement, the term
"Interest" shall include any equity interest in an Entity in
an amount equal to or greater than 30% of the Entity's total
outstanding equity interests.
(3) "Confidential Information" shall mean proprietary
and confidential data or information other than Trade Secrets
(as defined below), which is valuable to, and related to the
business of, the Company, its Affiliates or non-affiliated
Entities with whom the Company or its Affiliates has or have
business relationships (collectively, "Third Parties"), and
the details of which are generally unknown to the public or to
the Company's competitors, including, without limitation,
information regarding the Company's employees, business
strategies, models and systems, customers, suppliers, partners
and affiliates, gained by Ms. Fuller as a result of her
affiliation with the Company or its Affiliates, and other
items that the Company or its Affiliates may from time to time
mark or otherwise identify as confidential.
(4) "Trade Secrets" shall mean information of or
related to the Company, its Affiliates or Third Parties which
(a) derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable
by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to
maintain its secrecy; it being agreed that such information
includes, without limitation, technical and non-technical
data, a formula, a pattern, a compilation, a program, a
device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans or a list of actual or
potential customers or suppliers.
(5) "Intellectual Property" shall mean all work
product, property, data, documentation, "know-how", concepts
or plans, inventions, discovery, compositions, innovations,
computer programs, improvements, techniques, processes,
designs, article of manufacture or information of any kind, or
any new or useful improvements of any of the foregoing and any
Trade Secrets, patents, copyrights, Confidential Information,
mask work, trademark or service mark, relating in any way to
the Company or its Affiliates and its or their business
prepared, conceived, revised, discovered, developed, or
created by Ms. Fuller for the Company or its Affiliates or by
using the Company's or its Affiliates' time, personnel,
facilities, equipment, knowledge, information, resources, or
material.
<PAGE>
b. Nondisclosure; Ownership of Proprietary Property.
(1) Nondisclosure. In recognition of the Company's
need to protect its legitimate business interests, Ms. Fuller
hereby acknowledges that she has been given access to valuable
Trade Secrets and Confidential Information; and she hereby
covenants and agrees that she will use the Trade Secrets and
Confidential Information for the Company's business purposes
only, and that she will not for any reason, in any fashion,
form or manner, other than as instructed by a duly authorized
representative of the Company, copy, disclose, disseminate,
communicate, transfer or otherwise convey to any Entity any
item: (a) which is a Trade Secret, for so long as such item
remains a trade secret under applicable law; or (b) which is
Confidential Information, other than Trade Secrets, for a
period of three (3) years from her termination.
(2) Notification of Unauthorized Disclosure. Ms.
Fuller shall exercise her best efforts to ensure the continued
confidentiality of all Trade Secrets and Confidential
Information known by, disclosed or made available to her. She
shall immediately notify the Company of any unauthorized
disclosure or use of any Trade Secrets or Confidential
Information of which she becomes aware. Ms. Fuller shall
assist the Company, to the extent necessary, in the
procurement or protection of the Company's or its Affiliates'
rights to or in any Intellectual Property, Trade Secrets or
Confidential Information and, upon the Company's request,
shall assist, to the extent necessary, in the procurement or
protection of any Third Party's rights to or in any
Intellectual Property, Trade Secrets or Confidential
Information.
(3) Ownership. To the greatest extent possible, any
and all Intellectual Property shall be deemed to be "work made
for hire" (as defined in the Copyright Act, 17 U.S.C.A. ss.ss.
101 et seq.), and Ms. Fuller hereby unconditionally and
irrevocably transfers and assigns to the Company or its
Affiliates all rights, title and interest she currently has or
in the future may have by operation of law or otherwise in or
to any Intellectual Property, including, without limitation,
all patents, copyrights, trademarks, service marks and other
Intellectual Property rights and agrees that the Company or
its Affiliates shall have the exclusive world-wide ownership
of such Intellectual Property, and that no Intellectual
Property shall be treated as or deemed to be a "joint work"
(as defined by the Copyright Act) of Ms. Fuller and the
Company, its Affiliates or otherwise. Ms. Fuller agrees to
execute and deliver to the Company or its Affiliates any
transfers, assignments, documents or other instruments which
the Company or its Affiliates may deem necessary or
appropriate to vest complete title and ownership of any
Intellectual Property, and all rights therein, exclusively in
the Company or its Affiliates, as the case may be.
(4) Return of Materials. Upon Ms. Fuller's
termination, or at any point after that time upon the specific
request of the Company, she shall return to the Company all
written or descriptive materials of any kind belonging or
relating to the Company or its Affiliates, including, without
limitation, any Intellectual Property, Confidential
Information and Trade Secrets, in her possession.
4. Transfer of Employment to Southern or a Southern Subsidiary or
Affiliate. In the event that Ms. Fuller's employment by the Company is
terminated and she shall become immediately re-employed by Southern or a
subsidiary or an affiliate of Southern, the Company shall assign this Agreement
to Southern or such subsidiary or affiliate, Southern shall accept such
assignment or cause such affiliate or subsidiary to accept such assignment, such
assignee shall become the "Company" for all purposes hereunder, and the
profitability goals set forth on Exhibit A hereof shall be amended to
appropriately reflect the performance of such assignee. In the event of such
assignment, the expense of this Agreement shall be shared pro rata by the
Company and any such assignee based upon the number of months after the
effective date of this Agreement that Ms. Fuller is employed by the Company,
and/or Southern and/or such affiliate or subsidiary of Southern, as the case may
be.
5. Confidentiality and Legal Process. Ms. Fuller represents and agrees
that she will keep the terms, amount and fact of this Agreement confidential and
that she will not hereafter disclose any information concerning this Agreement
to any one other than her personal agents, including, but not limited to, any
past, present, or prospective employee or applicant for employment with Company.
Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit
Ms. Fuller from performing any duty or obligation that shall arise as a matter
of law. Specifically, Ms. Fuller shall continue to be under a duty to truthfully
respond to matter of law. Specifically, Ms. Fuller shall continue to be under a
duty to truthfully respond to any legal and valid subpoena or other legal
process. This Agreement is not intended in any way to proscribe Ms. Fuller's
right and ability to provide information to any federal, state or local
government in the lawful exercise of such governments' governmental functions.
6. Successors And Assigns; Applicable Law. Except as otherwise provided
in Paragraph 1.h., this Agreement shall be binding upon and inure to the benefit
of Ms. Fuller and her heirs, administrators, representatives, executors,
successors and assigns, and shall be binding upon and inure to the benefit of
Southern, the Company and their officers, directors, employees, agents,
shareholders, parent corporation and affiliates, and their respective
predecessors, successors, assigns, heirs, executors and administrators and each
of them, and to their heirs, administrators, representatives, executors,
successors and assigns. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Georgia, United States of America
(without giving effect to principles of conflicts of laws).
7. Complete Agreement. This Agreement shall constitute the full and
complete Agreement between the parties concerning its subject matter and fully
supersedes any and all other prior Agreements or understandings between the
parties concerning the subject matter hereof. This Agreement shall not be
modified or amended except by a written instrument signed by both Ms. Fuller and
an authorized representative of Southern and the Company.
8. Severability. The unenforceability or invalidity of any particular
provision of this Agreement shall not affect its other provisions, and to the
extent necessary to give such other provisions effect, they shall be deemed
severable.
9. Waiver Of Breach; Specific Performance. The waiver of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any other breach. Each of the parties to this Agreement will be entitled to
enforce its or her rights under this Agreement, specifically, to recover damages
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its or her favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its or her sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
10. Unsecured General Creditor. The Company shall neither reserve nor
specifically set aside funds for the payment of its obligations under this
Agreement, and such obligations shall be paid solely from the general assets of
the Company. Notwithstanding that Ms. Fuller may be entitled to receive the
value of her benefit under the terms and conditions of this Agreement, the
assets from which such amount may be paid shall at all times be subject to the
claims of the Company's creditors.
11. No Effect On Other Arrangements. It is expressly understood and
agreed that the payments made in accordance with this Agreement are in addition
to any other benefits or compensation to which Ms. Fuller may be entitled or for
which she may be eligible, whether funded or unfunded, by reason of her
employment with the Company.
12. Tax Withholding. There shall be deducted from each payment under
this Agreement the amount of any tax required by any governmental authority to
be withheld and paid over by the Company to such governmental authority for the
account of Ms. Fuller.
13. Compensation. Any compensation contributed on behalf of Ms. Fuller
under this Agreement shall not be considered "compensation," as the term is
defined in The Southern Company Employee Savings Plan, The Southern Company
Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan or
The Southern Company Pension Plan. Payments under this Agreement shall not be
considered wages, salaries or compensation under any other employee benefit
plan.
14. No Guarantee of Employment. No provision of this Agreement shall be
construed to affect in any manner the existing rights of the Company to suspend,
terminate, alter, modify, whether or not for cause, the employment relationship
of Ms. Fuller and the Company.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
first listed above, effective this ____ day of ___________, 1999.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN ENERGY RESOURCES, INC.
By:
Ms. Fuller
------------------------------
<PAGE>
Exhibit A
Deferred Compensation Agreement
Schedule of Profitability Goals
For Performance Period
The Company shall achieve a Corporate Performance Factor under the
Southern Energy Resources, Inc. Short Term Incentive Plan of at least 1.0 for
each of the calendar years 2000, 2001 and 2002 and an average of 1.5 for such
three-year period.
Achievement of the goals shall be assessed annually by the Chief
Executive Officer of Southern and documented in Exhibit B of this Agreement.
<PAGE>
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
Exhibit 10(a)93
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company"), and Mr. Henry Allen Franklin ("Mr. Franklin").
W I T N E S S E T H:
WHEREAS, Mr. Franklin entered into an agreement with Southern and
Georgia Power Company dated February 17, 1999, providing certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or Georgia Power Company (the "February 17, 1999 Agreement")
WHEREAS, Mr. Franklin became an employee and Officer of the Company
effective July 8, 1999 and ceased to be an employee of Georgia Power Company;
WHEREAS, the Company wishes to provide to Mr. Franklin certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or the Company; and
WHEREAS, the parties agree that this Agreement supersedes the February
17, 1999 Agreement in its entirety;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Franklin's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Franklin or any
Group of which Mr. Franklin is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Franklin, any Group of which Mr. Franklin is a party,
any Group composed exclusively of Company employees,
any qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination.
(iv) The Consummation of an acquisition by any Person
of Beneficial Ownership of 50% or more of the combined voting
power of the then outstanding Voting Securities of the
Company; provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Franklin, any
Group composed exclusively of employees of the Company, any
Group of which Mr. Franklin is a party, any qualified pension
plan (or related trust), any publicly held mutual fund, any
employee benefit plan (or related trust) sponsored or
maintained by Southern or any Southern Subsidiary shall not
constitute a Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Franklin or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "Effective Date" shall mean the date of execution of this
Agreement.
(l) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary
negotiation; and
(vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Good Reason" shall mean, without Mr. Franklin's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Franklin's position or in the nature or
status of his responsibilities from those in effect
immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Franklin's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Franklin's annual base salary rate plus target
bonus under the PPP Plan (except for a less than ten percent
(10%), across-the-board reduction of annual base salary rate
plus target bonus under the PPP Plan similarly affecting at
least ninety-five percent (95%) of the Executive Employees of
the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Franklin participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Franklin's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Franklin's work
location to a location more than fifty (50) miles from the
office where Mr. Franklin is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Franklin's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Franklin of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Franklin's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Franklin's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Franklin under
the Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Franklin was participating immediately prior to
the Change in Control; or the failure by the Company to
provide Mr. Franklin with the number of paid vacation days to
which Mr. Franklin is entitled on the basis of years of
service with the Company in accordance with the Company's
normal vacation policy in effect immediately prior to the
Change in Control (except for across-the-board plan or
vacation policy changes or plan terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term
"Executive Employee" shall mean employees of the Company of
Grade Level 10 or above.
(o) "Group" shall have the meaning set forth in Section 14(d)
of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan
covering Mr. Franklin, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Franklin, as such plan may be amended
from time to time.
(r) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during
which Mr. Franklin has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement
thereto, as such plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(w) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(y) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors
and assigns.
(aa) "Southern Board" shall mean the board of directors of
Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Franklin's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Franklin
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Franklin's Total
Disability or from Mr. Franklin's retirement or any such
actual or anticipated failure resulting from termination by
Mr. Franklin for Good Reason) after a written demand for
substantial performance is delivered to him by the Southern
Board, which demand specifically identifies the manner in
which the Southern Board believes that he has not
substantially performed his duties; or
(ii) The willful engaging by Mr. Franklin in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Mr. Franklin's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at his workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Mr. Franklin shall be deemed
"willful" unless done, or omitted to be done, by Mr. Franklin not in
good faith and without reasonable belief that his action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Franklin shall not be
deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr.
Franklin and an opportunity for him, together with counsel, to be heard
before the Southern Board), finding that, in the good faith opinion of
the Southern Board, Mr. Franklin was guilty of conduct set forth above
in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the
particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr.
Franklin's employment with the Company is terminated; provided,
however, that solely for purposes of Paragraph 2.(c) hereof, the
Termination Date shall be the effective date of his retirement pursuant
to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Franklin's total
disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Mr. Franklin's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Franklin has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Franklin's employment is involuntarily
terminated by the Company at any time during the two year period
following a Change in Control for reasons other than Cause, or if Mr.
Franklin voluntarily terminates his employment with the Company for
Good Reason at any time during the two year period following a Change
in Control, Mr. Franklin shall be entitled to receive the benefits
described in this Agreement upon the Company's receipt of an effective
Waiver and Release. Notwithstanding anything to the contrary herein,
Mr. Franklin shall not be eligible to receive benefits under this
Agreement if Mr. Franklin:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Franklin an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Franklin under Code Section 280G exceeds three (3) times Mr.
Franklin's "base amount" (as such term is defined under Code Section
280G ("Base Amount")) by ten percent (10%) or more; provided further,
that if no 280G Gross-up is paid, the Severance Amount shall be capped
at three (3) times Mr. Franklin's Base Amount, less all other
"parachute payments" (as such term is defined under Code Section 280G)
received by Mr. Franklin, less one dollar (the "Capped Amount"), if the
Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise
would have been the Severance Amount, reduced by HI Tax, Income Tax and
Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Franklin shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Franklin's Years of
Service, not to exceed five (5) years. If Mr. Franklin elects
to receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Franklin's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Franklin's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Franklin pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Franklin in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Franklin in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Franklin
or his dependents may elect. In the event that Mr.
Franklin or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Franklin or his dependents by virtue of the
provisions of Paragraph 2.(c)(i) shall terminate,
except as may otherwise be required by law, and shall
not be renewed.
(ii) Mr. Franklin shall be entitled to receive cash
in an amount equal to the Company's and Mr. Franklin's cost of
premiums for three (3) years of coverage under the Group
Health Plan and Group Life Insurance Plan in accordance with
the terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Franklin meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Franklin's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Franklin is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Franklin under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Franklin's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Franklin under the
Performance Stock Plan as of the Termination Date
shall lapse, and such other Awards shall become free
of all restrictions, limitations or conditions and
become fully vested and transferable to the full
extent of the original grant.
(ii) Performance Pay Plan. Provided Mr. Franklin is
not entitled to benefits under Article V of the PPP Plan, (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Franklin's Termination Date and to the extent Mr. Franklin
is entitled to participate therein, Mr. Franklin shall be
entitled to receive cash in an amount equal to a prorated
payout of his Incentive Pay Awards under the PPP Plan for the
Performance Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan and
prorated by the number of months which have passed since the
beginning of the Performance Period until the Termination
Date.
(iii) PIP Plan. Provided Mr. Franklin is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Franklin's Termination Date and to the extent Mr. Franklin is
entitled to participate therein, Mr. Franklin shall be
entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the
Termination Date shall have occurred at a target Value of
Performance Unit of $1.00, prorated for each Computation
Period by the number of months which have passed since the
beginning of each of the Computation Periods until the
Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Franklin
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Franklin's Termination Date and
to the extent Mr. Franklin is entitled to participate therein,
Mr. Franklin shall be entitled to receive cash for each Award
held by Mr. Franklin on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Franklin is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Franklin is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Franklin is entitled to participate therein, Mr. Franklin
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Franklin's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria.
(e) Payment of Benefits. Any amounts due under this Agreement
shall be paid in one (1) lump sum payment as soon as administratively
practicable following the later of: (i) Mr. Franklin's Termination
Date, or (ii) upon Mr. Franklin's tender of an effective Waiver and
Release to the Company in the form of Exhibit B attached hereto and the
expiration of any applicable revocation period for such waiver. In the
event of a dispute with respect to liability or amount of any benefit
due hereunder, an effective Waiver and Release shall be tendered at the
time of final resolution of any such dispute when payment is tendered
by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Franklin's death prior to the payment of all amounts due under this
Agreement, Mr. Franklin's estate shall be entitled to receive as due
any amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Franklin
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Franklin's
favor, the Company shall reimburse Mr. Franklin's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Franklin shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Franklin's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Franklin for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Franklin's favor, the Company shall
reimburse Mr. Franklin's legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Franklin's employment
by the Company is terminated during the two year period following a Change in
Control and Mr. Franklin accepts employment by Southern, a Southern Subsidiary,
or any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Franklin is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr.
Franklin hereunder shall not be reduced or suspended if Mr. Franklin accepts
such subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Franklin's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Franklin, in the case of the Company,
or to the Southern Board, in the case of Mr. Franklin.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Franklin, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Franklin.
All other costs of arbitration shall be borne equally by Mr. Franklin
and the Company, provided, however, that the Company shall reimburse
such fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Franklin's favor and Mr. Franklin is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Franklin under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Franklin.
(c) Assignment. Mr. Franklin shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this ____ day of __________________, _____.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. FRANKLIN
-----------------------------
Henry Allen Franklin
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Henry Allen Franklin
65%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Henry Allen
Franklin upon the occurrence of an event that triggers eligibility for severance
benefits under the Change in Control Agreement, as described in Paragraph 2(a)
of such agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Henry Allen Franklin, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Henry Allen Franklin
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
Exhibit 10(a)102
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Company Services, Inc.
(the "Company"), and Mr. Gale E. Klappa ("Mr. Klappa").
W I T N E S S E T H:
WHEREAS, Mr. Klappa entered into an agreement with Southern and
Southern Energy Resources, Inc. dated December 10, 1998, providing certain
severance benefits under certain circumstances following a change in control (as
defined herein) of Southern or Southern Energy Resources, Inc. (the "1998
Agreement);
WHEREAS, Mr. Klappa became an employee and Officer of the Company
effective October 6, 1999, and ceased to be an employee of Southern Energy
Resources, Inc.;
WHEREAS, the Company wishes to provide to Mr. Klappa certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company; and
WHEREAS, the parties agree that this Agreement supersedes the 1998
Agreement in its entirety;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Klappa's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Mr. Klappa or any
Group of which Mr. Klappa is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Mr.
Klappa, any Group of which Mr. Klappa is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination.
(iv) The Consummation of an acquisition by any Person
of Beneficial Ownership of 50% or more of the combined voting
power of the then outstanding Voting Securities of the
Company; provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Mr. Klappa, any Group
composed exclusively of employees of the Company, any Group of
which Mr. Klappa is a party, any qualified pension plan (or
related trust), any publicly held mutual fund, any employee
benefit plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not constitute a
Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Klappa or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Company Services, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "DIC Plan" shall mean the Southern Energy Resources, Inc.
Deferred Incentive Compensation Plan or replacement thereto, as such
plans may be amended from time to time.
(l) "Effective Date" shall mean the date of execution of this
Agreement.
(m) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal
setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary
negotiation; and
(vi) office support and job search resources.
(n) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(o) "Good Reason" shall mean, without Mr. Klappa's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Mr. Klappa's position or in the nature or status
of his responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Mr.
Klappa's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Mr. Klappa's annual base salary rate plus target bonus
under the PPP Plan (except for a less than ten percent (10%),
across-the-board reduction of annual base salary rate plus
target bonus under the PPP Plan similarly affecting at least
ninety-five percent (95%) of the Executive Employees of the
Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Klappa participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Klappa's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company). For purposes of this Paragraph
1.(o), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Klappa's work
location to a location more than fifty (50) miles from the
office where Mr. Klappa is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Klappa's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Klappa of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(o)(iv) shall not be a waiver of Mr. Klappa's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Klappa's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Mr. Klappa under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Mr. Klappa was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Mr. Klappa with the number of paid vacation days to which Mr.
Klappa is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(o), the term
"Executive Employee" shall mean those employees of the Company
of Grade Level 10 or above.
(p) "Group" shall have the meaning set forth in Section 14(d)
of the Exchange Act.
(q) "Group Health Plan" shall mean the group health plan
covering Mr. Klappa, as such plan may be amended from time to time.
(r) "Group Life Insurance Plan" shall mean the group life
insurance program covering Mr. Klappa, as such plan may be amended from
time to time.
(s) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(t) "Month of Service" shall mean any calendar month during
which Mr. Klappa has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(u) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(v) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement thereto, as such
plans may be amended from time to time.
(w) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(x) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(y) "Performance Pay Plan" or "PPP Plan" shall mean the
Southern Company Performance Pay Plan or any replacement thereto, as
such plans may be amended from time to time.
(z) "Productivity Improvement Plan" or "PIP Plan" shall mean
the Southern Company Productivity Improvement Plan or replacement
thereto, as such plans may be amended from time to time.
(aa) "Southern" shall mean The Southern Company, its
successors and assigns.
(bb) "Southern Board" shall mean the board of directors of
Southern.
(cc) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(dd) "Termination for Cause" or "Cause" shall mean the
termination of Mr. Klappa's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Mr. Klappa
substantially to perform his duties with the Company (other
than any such failure resulting from Mr. Klappa's Total
Disability or from Mr. Klappa's retirement or any such actual
or anticipated failure resulting from termination by Mr.
Klappa for Good Reason) after a written demand for substantial
performance is delivered to him by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that he has not substantially
performed his duties; or
(ii) The willful engaging by Mr. Klappa in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or dishonesty in
the course of Mr. Klappa's employment by the Company;
(B) the willful carrying out of any activity or the
making of any statement which would materially prejudice or
impair the good name and standing of the Company, Southern or
any Southern Subsidiary or would bring the Company, Southern
or any Southern Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the Company,
Southern or such Southern Subsidiary is located;
(C) attendance at work in a state of intoxication or
otherwise being found in possession at his workplace of any
prohibited drug or substance, possession of which would amount
to a criminal offense;
(D) violation of the Company's policies on drug and
alcohol usage, fitness for duty requirements or similar
policies as may exist from time to time as adopted by the
Company's safety officer;
(E) assault or other act of violence against any
person during the course of employment; or
(F) indictment of any felony or any misdemeanor
involving moral turpitude.
No act or failure to act by Mr. Klappa shall be deemed
"willful" unless done, or omitted to be done, by Mr. Klappa not in good
faith and without reasonable belief that his action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Mr. Klappa shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Mr. Klappa
and an opportunity for him, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Mr. Klappa was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(dd) and specifying the
particulars thereof in detail.
(ee) "Termination Date" shall mean the date on which Mr.
Klappa's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of his retirement pursuant to the
terms of the Pension Plan.
(ff) "Total Disability" shall mean Mr. Klappa's total
disability within the meaning of the Pension Plan.
(gg) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(hh) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(ii) "Year of Service" shall mean Mr. Klappa's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Klappa has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Mr. Klappa's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Mr. Klappa
voluntarily terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Mr. Klappa shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Mr. Klappa
shall not be eligible to receive benefits under this Agreement if Mr.
Klappa:
(i) voluntarily terminates his employment with the
Company for other than Good Reason;
(ii) has his employment terminated by the Company for
Cause;
(iii) accepts the transfer of his employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern, or any Southern Subsidiary under
circumstances where such refusal would not amount to Good
Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Klappa meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Klappa an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Klappa under Code Section 280G exceeds three (3) times Mr. Klappa's
"base amount" (as such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further, that if no
280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Mr. Klappa's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by Mr.
Klappa, less one dollar (the "Capped Amount"), if the Capped Amount,
reduced by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and Excise
Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Klappa meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, he shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Mr. Klappa shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and his monthly premium under such plan, for a
period of six (6) months for each of Mr. Klappa's Years of
Service, not to exceed five (5) years. If Mr. Klappa elects to
receive this extended medical coverage, he shall also be
entitled to elect coverage under the Group Health Plan for his
dependents who were participating in the Group Health Plan on
Mr. Klappa's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Mr. Klappa's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Klappa pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Klappa in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Klappa in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Mr. Klappa or
his dependents may elect. In the event that Mr.
Klappa or his dependents become eligible to be
covered, by virtue of re-employment or otherwise, by
any employer-sponsored group health plan or is
eligible for coverage under any government-sponsored
health plan during the above period, coverage under
the Company's Group Health Plan available to Mr.
Klappa or his dependents by virtue of the provisions
of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed.
(ii) Mr. Klappa shall be entitled to receive cash in
an amount equal to the Company's and Mr. Klappa's cost of
premiums for three (3) years of coverage under the Group
Health Plan and Group Life Insurance Plan in accordance with
the terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Klappa meets the eligibility
requirements of Paragraph 2.(a) hereof he shall be entitled to the
following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Mr. Klappa's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Klappa is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Klappa under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Mr. Klappa's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Mr. Klappa under the Performance
Stock Plan as of the Termination Date shall lapse,
and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant.
(ii) Performance Pay Plan. Provided Mr. Klappa is not
entitled to benefits under Article V of the PPP Plan, (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Klappa's Termination Date and to the extent Mr. Klappa is
entitled to participate therein, Mr. Klappa shall be entitled
to receive cash in an amount equal to a prorated payout of his
Incentive Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by the
number of months which have passed since the beginning of the
Performance Period until the Termination Date.
(iii) PIP Plan. Provided Mr. Klappa is not entitled
to benefits under Article IV of the PIP Plan (the defined
terms of which are incorporated in this Paragraph 2.(d)(iii)
by reference), if the PIP Plan is in place through Mr.
Klappa's Termination Date and to the extent Mr. Klappa is
entitled to participate therein, Mr. Klappa shall be entitled
to receive cash in an amount equal to his Award Opportunity
for the Computation Periods in which the Termination Date
shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Computation Period by the number of
months which have passed since the beginning of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Klappa
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iv) by reference), if the Performance Dividend
Plan is in place through Mr. Klappa's Termination Date and to
the extent Mr. Klappa is entitled to participate therein, Mr.
Klappa shall be entitled to receive cash for each Award held
by Mr. Klappa on his Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(v) shall apply if and to the extent
that Mr. Klappa is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. Klappa is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Mr. Klappa is entitled to participate therein, Mr. Klappa
shall receive cash in an amount equal to his award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Mr. Klappa's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria.
(vi) DIC Plan. Provided Mr. Klappa is not entitled to
benefits under Article V of the DIC Plan (the defined terms of
which are incorporated into this Paragraph 2(d)(vi) by
reference), if the DIC Plan is in place through Mr. Klappa's
Termination Date and to the extent that Mr. Klappa is entitled
to participate therein, any of Mr. Klappa's Awards as of the
Termination Date which are not then vested shall become fully
vested and Mr. Klappa shall be entitled to receive cash in the
amount equal to Mr. Klappa's Account as of his Termination
Date. Notwithstanding anything in the DIC Plan to the
contrary, the investment return on the Awards determined in
accordance with Section 3.1 of the DIC Plan for any Plan Year
following a Change in Control shall be no less than the
investment return determined in accordance with Section 3.1 of
the DIC Plan as of the date of such Change in Control with
respect to those Accounts which are outstanding as of the date
of such Change in Control.
(e) Payment of Benefits. Any amounts due under this Agreement
shall be paid in one (1) lump sum payment as soon as administratively
practicable following the later of: (i) Mr. Klappa's Termination Date,
or (ii) upon Mr. Klappa's tender of an effective Waiver and Release to
the Company in the form of Exhibit B attached hereto and the expiration
of any applicable revocation period for such waiver. In the event of a
dispute with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered at the
time of final resolution of any such dispute when payment is tendered
by the Company.
(f) Benefits in the Event of Death. In the event of Mr.
Klappa's death prior to the payment of all amounts due under this
Agreement, Mr. Klappa's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Mr. Klappa
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Mr. Klappa's
favor, the Company shall reimburse Mr. Klappa's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Klappa shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Mr. Klappa's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Klappa for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Klappa's favor, the Company shall
reimburse Mr. Klappa's legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Klappa's employment by
the Company is terminated during the two year period following a Change in
Control and Mr. Klappa accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Mr. Klappa is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, he shall have no duty or
obligation to seek other employment following his Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Klappa
hereunder shall not be reduced or suspended if Mr. Klappa accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Mr. Klappa's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. Klappa, in the case of the Company, or
to the Southern Board, in the case of Mr. Klappa.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Mr. Klappa, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Klappa.
All other costs of arbitration shall be borne equally by Mr. Klappa and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Mr. Klappa's favor and Mr. Klappa is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Mr. Klappa under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Mr. Klappa.
(c) Assignment. Mr. Klappa shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting), such provision or provisions of this Agreement which would
otherwise cause the Change in Control transaction to be ineligible for
Pooling Accounting shall be void and ineffective in such a manner and
to the extent that by eliminating such provision or provisions of this
Agreement, Pooling Accounting would be required for such Change in
Control transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, _____.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES,
INC.
By: ____________________________________
MR. KLAPPA
-----------------------------
Gale E. Klappa
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Mr. Gale E. Klappa
45 %
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Gale E. Klappa
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Gale E. Klappa, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Company Services,
Inc.
(collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
Gale E. Klappa
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By:
Date:
Exhibit 10(a)103
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by
and between The Southern Company ("Southern"), Southern Energy Resources, Inc.
(the "Company") and Ms. S. Marce Fuller ("Ms. Fuller") is effective December 10,
1998.
W I T N E S S E T H:
WHEREAS, Ms. Fuller is the Executive Vice President of the Company;
WHEREAS, the Company wishes to provide to Ms. Fuller certain severance
benefits under certain circumstances following a change in control (as defined
herein) of Southern or the Company;
WHEREAS, the Company previously entered into an Agreement dated
December 10, 1998 with Ms. Fuller providing these benefits; WHEREAS, the Company
desires to clarify that certain additional benefits not set forth in this
previous Agreement but authorized by the Company are available to Ms. Fuller
under the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan
in the event of a change in control (as defined herein);
WHEREAS, the parties agree that the prior Agreement dated December 10,
1998 is, therefore, void and that this Agreement supersedes it in its entirety.
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Annual Compensation" shall mean Ms. Fuller's highest
annual base salary rate for the twelve (12) month period immediately
preceding the date of the Change in Control plus market level target
annual bonus as set forth on Exhibit A hereof.
(b) "Beneficial Ownership" shall mean beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger
or consolidation of Southern or sale or other disposition of all or
substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person
of Beneficial Ownership of 20% or more of Southern's Voting
Securities; provided, however, that for purposes of this
Paragraph 1.(e)(i), the following acquisitions of Southern's
Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension
plan or publicly held mutual fund;
(E) any acquisition by a Group composed
exclusively of employees of Southern, or any Southern
Subsidiary;
(F) any acquisition by Ms. Fuller or any
Group of which Ms. Fuller is a party; or
(G) any Business Combination which would not
otherwise constitute a change in control because of
the application of clauses (A), (B) and (C) of
Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern
Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the
Southern Board;
(iii) Consummation of a Business Combination,
provided, however, that such a Business Combination shall not
constitute a Change in Control if all three (3) of the
following conditions are met:
(A) all or substantially all of the
individuals and entities who held Beneficial
Ownership, respectively, of Southern's Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
65% or more of the combined voting power of the
Voting Securities of the corporation surviving or
resulting from such Business Combination, (including,
without limitation, a corporation which as a result
of such transaction holds Beneficial Ownership of all
or substantially all of Southern's Voting Securities
or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be
referred to as "Surviving Company"), in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of Southern's
Voting Securities;
(B) no Person (excluding any corporation
resulting from such Business Combination, any
employee benefit plan (or related trust) of Southern,
any Southern Subsidiary or Surviving Company, Ms.
Fuller, any Group of which Ms. Fuller is a party, any
Group composed exclusively of Company employees, any
qualified pension plan (or related trust) or any
publicly held mutual fund) holds Beneficial
Ownership, directly or indirectly, of 20% or more of
the combined voting power of the then outstanding
Voting Securities of Surviving Company except to the
extent that such ownership existed prior to the
Business Combination; and
(C) at least a majority of the members of
the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the
date of execution of the initial agreement, or of the
action of the Southern Board, providing for such
Business Combination.
(iv) The Consummation of an acquisition by any Person
of Beneficial Ownership of 50% or more of the combined voting
power of the then outstanding Voting Securities of the
Company; provided, however, that for purposes of this
Paragraph 1.(e)(iv), any acquisition by Ms. Fuller, any Group
composed exclusively of employees of the Company, any Group of
which Ms. Fuller is a party, any qualified pension plan (or
related trust), any publicly held mutual fund, any employee
benefit plan (or related trust) sponsored or maintained by
Southern or any Southern Subsidiary shall not constitute a
Change in Control;
(v) Consummation of a reorganization, merger or
consolidation of the Company (an "Employing Company Business
Combination"), in each case, unless, following such Employing
Company Business Combination, Southern Controls the
corporation or other entity surviving or resulting from such
Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of
all or substantially all of the assets of the Company to a
corporation or other entity which Southern does not Control.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Ms. Fuller or her dependents may be entitled pursuant to
Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Southern Energy Resources, Inc., its
successors and assigns.
(i) "Consummation" shall mean the completion of the final act
necessary to complete a transaction as a matter of law, including, but
not limited to, any required approvals by the corporation's
shareholders and board of directors, the transfer of legal and
beneficial title to securities or assets and the final approval of the
transaction by any applicable domestic or foreign governments or
governmental agencies.
(j) "Control" shall mean, in the case of a corporation,
Beneficial Ownership of more than 50% of the combined voting power of
the corporation's Voting Securities, or in the case of any other
entity, Beneficial Ownership of more than 50% of such entity's voting
equity interests.
(k) "DIC Plan" shall mean the Southern Energy Resources, Inc.
Deferred Incentive Compensation Plan or replacement thereto, as such
plans may be amended from time to time.
(l) "Effective Date" shall mean the date of execution of this
Agreement.
(m) "Employee Outplacement Program" shall mean the program
established by the Company from time to time for the purpose of
assisting participants covered by the plan in finding employment
outside of the Employing Company which provides for the following
services:
(i) self-assessment, career decision and goal
setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary
negotiation; and
(vi) office support and job search resources.
(n) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(o) "Good Reason" shall mean, without Ms. Fuller's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental
alteration in Ms. Fuller's position or in the nature or status
of her responsibilities from those in effect immediately prior
to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%)
or more by the Company in either of the following: (i) Ms.
Fuller's annual base salary rate as in effect immediately
prior to the Change in Control (except for a less than ten
percent (10%), across-the-board annual base salary rate
reduction similarly affecting at least ninety-five percent
(95%) of the Executive Employees of the Company); or (ii) the
sum of Ms. Fuller's annual base salary rate plus target bonus
under the Company's Short Term Plan (except for a less than
ten percent (10%), across-the-board reduction of annual base
salary rate plus target bonus under the Short Term Plan
similarly affecting at least ninety-five percent (95%) of the
Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Ms. Fuller participates or is a
party as of the date of the Change in Control or the
elimination of Ms. Fuller's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company); For purposes of this Paragraph
1.(o), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Ms. Fuller's work
location to a location more than fifty (50) miles from the
office where Ms. Fuller is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Ms. Fuller's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Ms.
Fuller of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(o)(iv) shall not be a waiver of Ms. Fuller's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Ms. Fuller's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any
action by the Company which would directly or indirectly
materially reduce the benefits enjoyed by Ms. Fuller under the
Company's retirement, life insurance, medical, health and
accident, disability, deferred compensation or savings plans
in which Ms. Fuller was participating immediately prior to the
Change in Control; or the failure by the Company to provide
Ms. Fuller with the number of paid vacation days to which Ms.
Fuller is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation
policy in effect immediately prior to the Change in Control
(except for across-the-board plan or vacation policy changes
or plan terminations similarly affecting at least ninety-five
percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(o), the term
"Executive Employee" shall mean employees of the Company whose
annual base salary is $130,000 or more.
(p) "Group" shall have the meaning set forth in Section 14(d)
of the Exchange Act.
(q) "Group Health Plan" shall mean the group health plan
covering Ms. Fuller, as such plan may be amended from time to time.
(r) "Group Life Insurance Plan" shall mean the group life
insurance program covering Ms. Fuller, as such plan may be amended from
time to time.
(s) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of the Effective Date plus any
individual who shall become a director subsequent to such date whose
election or nomination for election by Southern's shareholders was
approved by a vote of at least 75% of the directors then comprising the
Incumbent Board. Notwithstanding the foregoing, no individual who shall
become a director of the Southern Board subsequent to the Effective
Date whose initial assumption of office occurs as a result of an actual
or threatened election contest (within the meaning of Rule 14a-11 of
the Regulations promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Southern Board shall be a member of the Incumbent Board.
(t) "Month of Service" shall mean any calendar month during
which Ms. Fuller has worked at least one (1) hour or was on approved
leave of absence while in the employ of the Company or any affiliate or
subsidiary of Southern.
(u) "Pension Plan" shall mean The Southern Company Pension
Plan, as such plan may be amended from time to time.
(v) "Performance Dividend Plan" shall mean the Southern
Company Performance Dividend Plan or any replacement
thereto, as such plans may be amended from time to time.
(w) "Performance Stock Plan" shall mean the Southern Company
Performance Stock Plan or any replacement thereto, as such plans may be
amended from time to time.
(x) "Person" shall mean any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(y) "Southern" shall mean The Southern Company, its successors
and assigns.
(z) "Southern Board" shall mean the board of directors of
Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other
entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the
termination of Ms. Fuller's employment by the Company upon the
occurrence of any of the following:
(i) The willful and continued failure by Ms. Fuller
substantially to perform her duties with the Company (other
than any such failure resulting from Ms. Fuller's Total
Disability or from Ms. Fuller's retirement or any such actual
or anticipated failure resulting from termination by Ms.
Fuller for Good Reason) after a written demand for substantial
performance is delivered to her by the Southern Board, which
demand specifically identifies the manner in which the
Southern Board believes that she has not substantially
performed her duties; or
(ii) The willful engaging by Ms. Fuller in conduct
that is demonstrably and materially injurious to the Company,
monetarily or otherwise, including, but not limited to any of
the following:
(A) any willful act involving fraud or
dishonesty in the course of Ms. Fuller's employment
by the Company;
(B) the willful carrying out of any activity
or the making of any statement which would materially
prejudice or impair the good name and standing of the
Company, Southern or any Southern Subsidiary or would
bring the Company, Southern or any other Southern
Subsidiary into contempt, ridicule or would
reasonably shock or offend any community in which the
Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of
intoxication or otherwise being found in possession
at her workplace of any prohibited drug or substance,
possession of which would amount to a criminal
offense;
(D) violation of the Company's policies on
drug and alcohol usage, fitness for duty requirements
or similar policies as may exist from time to time as
adopted by the Company's safety officer;
(E) assault or other act of violence against
any person during the course of employment; or
(F) indictment of any felony or any
misdemeanor involving moral turpitude.
No act or failure to act by Ms. Fuller shall be deemed
"willful" unless done, or omitted to be done, by Ms. Fuller not in good
faith and without reasonable belief that her action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, Ms. Fuller shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to her a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the Southern Board
called and held for such purpose (after reasonable notice to Ms. Fuller
and an opportunity for her, together with counsel, to be heard before
the Southern Board), finding that, in the good faith opinion of the
Southern Board, Ms. Fuller was guilty of conduct set forth above in
clause (i) or (ii) of this Paragraph 1.(bb) and specifying the
particulars thereof in detail.
(cc) "Termination Date" shall mean the date on which Ms.
Fuller's employment with the Company is terminated; provided, however,
that solely for purposes of Paragraph 2.(c) hereof, the Termination
Date shall be the effective date of her retirement pursuant to the
terms of the Pension Plan.
(dd) "Total Disability" shall mean Ms. Fuller's total
disability within the meaning of the Pension Plan.
(ee) "Value Creation Plan" shall mean the Southern Energy
Resources, Inc. Value Creation Plan or any replacement thereto, as such
plans may be amended from time to time.
(ff) "Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to vote
generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release
attached hereto as Exhibit B.
(hh) "Year of Service" shall mean Ms. Fuller's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Ms. Fuller has a break in her service with the Company, she
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
2. Severance Benefits.
(a) Eligibility. Except as otherwise provided in this
Paragraph 2.(a), if Ms. Fuller's employment is involuntarily terminated
by the Company at any time during the two year period following a
Change in Control for reasons other than Cause, or if Ms. Fuller
voluntarily terminates her employment with the Company for Good Reason
at any time during the two year period following a Change in Control,
Ms. Fuller shall be entitled to receive the benefits described in this
Agreement upon the Company's receipt of an effective Waiver and
Release. Notwithstanding anything to the contrary herein, Ms. Fuller
shall not be eligible to receive benefits under this Agreement if Ms.
Fuller:
(i) voluntarily terminates her employment with the
Company for other than Good Reason;
(ii) has her employment terminated by the Company for
Cause;
(iii) accepts the transfer of her employment to
Southern, any Southern Subsidiary or any employer that
succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with
the Company, any Southern Subsidiary, or any
employer that succeeds to all or substantially all of the
assets of the Company, Southern, or any Southern Subsidiary
under circumstances where such refusal would not amount to
Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other
voluntary or involuntary severance or separation program
maintained by the Company; provided however, that the receipt
of benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Ms. Fuller meets the eligibility
requirements of Paragraph 2.(a) hereof, she shall be entitled to a cash
severance benefit in an amount equal to three times her Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Ms. Fuller an additional amount calculated by
determining the amount of tax under Code Section 4999 that she
otherwise would have paid on any Excess Parachute Payment with respect
to the Change in Control and dividing such amount by a decimal
determined by adding the tax rate under Code Section 4999 ("Excise
Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax")
and federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Ms. Fuller under Code Section 280G exceeds three (3) times Ms. Fuller's
"base amount" (as such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further, that if no
280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Ms. Fuller's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by Ms.
Fuller, less one dollar (the "Capped Amount"), if the Capped Amount,
reduced by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and Excise
Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Ms. Fuller meets the eligibility
requirements of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided to certain
retirees pursuant to the terms of the Pension Plan, the Group Health
Plan and the Group Life Insurance Plan, she shall be entitled to the
benefits set forth in this Paragraph 2.(c).
(i) Ms. Fuller shall be eligible to participate in
the Company's Group Health Plan, upon payment of both the
Company's and her monthly premium under such plan, for a
period of six (6) months for each of Ms. Fuller's Years of
Service, not to exceed five (5) years. If Ms. Fuller elects to
receive this extended medical coverage, she shall also be
entitled to elect coverage under the Group Health Plan for her
dependents who were participating in the Group Health Plan on
Ms. Fuller's Termination Date (and for such other dependents
as may be entitled to coverage under the provisions of the
Health Insurance Portability and Accountability Act of 1996)
for the duration of Ms. Fuller's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of the
Group Health Plan.
(A) The extended medical coverage afforded
to Ms. Fuller pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Ms. Fuller in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Ms. Fuller in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if she fails to pay her premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided
under Paragraph 2.(c)(i) shall be a part of and not
in addition to any COBRA Coverage which Ms. Fuller or
her dependent may elect. In the event that Ms. Fuller
or her dependent becomes eligible to be covered, by
virtue of re-employment or otherwise, by any
employer-sponsored group health plan or is eligible
for coverage under any government-sponsored health
plan during the above period, coverage under the
Company's Group Health Plan available to Ms. Fuller
or her dependent by virtue of the provisions of
Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be
renewed.
(ii) Ms. Fuller shall be entitled to receive cash in
an amount equal to the Company's and Ms. Fuller's cost of
premiums for three (3) years of coverage under the Group
Health Plan and Group Life Insurance Plan in accordance with
the terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Ms. Fuller meets the eligibility
requirements of Paragraph 2.(a) hereof she shall be
entitled to the following benefits under the Company's incentive plans:
(i) Stock Option Plan.
(A) Any of Ms. Fuller's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Ms. Fuller is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such action would result
in liability to Ms. Fuller under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules of Section 16(b)
of the Exchange Act shall be effective as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral
limitations applicable to any of Ms. Fuller's
Restricted Stock as of the Termination Date shall
lapse, and such Restricted Stock shall become free of
all restrictions and limitations and become fully
vested and transferable to the full extent of the
original grant.
(C) The restrictions and deferral
limitations and other conditions applicable to any
other Awards held by Ms. Fuller under the Performance
Stock Plan as of the Termination Date shall lapse,
and such other Awards shall become free of all
restrictions, limitations or conditions and become
fully vested and transferable to the full extent of
the original grant.
(ii) Performance Dividend Plan. Provided Ms. Fuller
is not entitled to benefits under the Performance Dividend
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(ii) by reference), if the Performance Dividend
Plan is in place through Ms. Fuller's Termination Date and to
the extent Ms. Fuller is entitled to participate therein, Ms.
Fuller shall be entitled to receive cash for each Award held
by Ms. Fuller on her Termination Date, based on actual
performance under Section 4.1 of the Performance Dividend Plan
determined as of the most recently completed calendar quarter
of the Performance Period in which the Termination Date shall
have occurred, and the Annual Dividend declared prior to the
Termination Date.
(iii) Value Creation Plan. Any of Ms. Fuller's
Appreciation Rights or Indexed Rights under the Value Creation
Plan (the defined terms of which are incorporated in this
Paragraph 2.(d)(iii) by reference) which are outstanding as of
the Termination Date and which are not then exercisable and
vested, shall become fully exercisable and fully vested to the
full extent of the original grant. Notwithstanding anything in
the Value Creation Plan to the contrary, Share Value with
respect to any Appreciation Rights or Indexed Rights held by
Ms. Fuller following her Termination Date shall be no less
than the Share Value as of the date of the Change in Control
of Southern or the Company, as the case may be.
(iv) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(i) shall apply if and to the extent
that Ms. Fuller is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Ms. Fuller is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the extent
Ms. Fuller is entitled to participate therein, Ms. Fuller
shall receive cash in an amount equal to her award under the
Company's "short term incentive plan" for the annual
performance period in which the Termination Date shall have
occurred, at Ms. Fuller's target performance level and
prorated by the number of months which have passed since the
beginning of the annual performance period until her
Termination Date. For purposes of this Paragraph 2.(d)(iv) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing
by the Company which provides for annual, recurring
compensatory bonuses based upon articulated performance
criteria.
(v) DIC Plan. Provided Ms. Fuller is not entitled to
benefits under Article V of the DIC Plan (the defined terms of
which are incorporated into this Paragraph 2(d)(v) by
reference), if the DIC Plan is in place through Ms. Fuller's
Termination Date and to the extent that Ms. Fuller is entitled
to participate therein, any of Ms. Fuller's Awards as of the
Termination Date which are not then vested shall become fully
vested and Ms. Fuller shall be entitled to receive cash in the
amount equal to Ms. Fuller's Account as of her Termination
Date. Notwithstanding anything in the DIC Plan to the
contrary, the investment return on the Awards determined in
accordance with Section 3.1 of the DIC Plan for any Plan Year
following a Change in Control shall be no less than the
investment return determined in accordance with Section 3.1 of
the DIC Plan as of the date of such Change in Control with
respect to those Accounts which are outstanding as of the date
of such Change in Control.
(e) Payment of Benefits. Any amounts due under this Agreement
shall be paid in one (1) lump sum payment as soon as administratively
practicable following the later of: (i) Ms. Fuller's Termination Date,
or (ii) upon Ms. Fuller's tender of an effective Waiver and Release to
the Company in the form of Exhibit B attached hereto and the expiration
of any applicable revocation period for such waiver. In the event of a
dispute with respect to liability or amount of any benefit due
hereunder, an effective Waiver and Release shall be tendered at the
time of final resolution of any such dispute when payment is tendered
by the Company.
(f) Benefits in the Event of Death. In the event of Ms.
Fuller's death prior to the payment of all amounts due under this
Agreement, Ms. Fuller's estate shall be entitled to receive as due any
amounts not yet paid under this Agreement upon the tender by the
executor or administrator of the estate of an effective Waiver and
Release.
(g) Legal Fees. In the event of a dispute between Ms. Fuller
and the Company with regard to any amounts due hereunder, if any
material issue in such dispute is finally resolved in Ms. Fuller's
favor, the Company shall reimburse Ms. Fuller's legal fees incurred
with respect to all issues in such dispute in an amount not to exceed
fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Ms. Fuller shall be
eligible to participate in the Employee Outplacement Program, which
program shall not be less than six (6) months duration measured from
Ms. Fuller's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Ms. Fuller for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Ms. Fuller's favor, the Company shall
reimburse Ms. Fuller's legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Ms. Fuller's employment by
the Company is terminated during the two year period following a Change in
Control and Ms. Fuller accepts employment by Southern, a Southern Subsidiary, or
any employer that succeeds to all or substantially all of the assets of the
Company, Southern or any Southern Subsidiary, the Company shall assign this
Agreement to Southern, such Southern Subsidiary, or successor employer, Southern
shall accept such assignment or cause such Southern Subsidiary or successor
employer to accept such assignment, and such assignee shall become the "Company"
for all purposes hereunder.
4. No Mitigation. If Ms. Fuller is otherwise eligible to receive
benefits under Paragraph 2 of this Agreement, she shall have no duty or
obligation to seek other employment following her Termination Date and, except
as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Ms. Fuller
hereunder shall not be reduced or suspended if Ms. Fuller accepts such
subsequent employment.
5. Arbitration.
(a) Any dispute, controversy or claim arising out of or
relating to the Company's obligations to pay severance benefits under
this Agreement, or the breach thereof, shall be settled and resolved
solely by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") except as
otherwise provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for severance benefits
and the arbitrators' award shall be final and binding. The provisions
of this Paragraph 5 are not intended to apply to any other disputes,
claims or controversies arising out of or relating to Ms. Fuller's
employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice
of demand for arbitration to Ms. Fuller, in the case of the Company, or
to the Southern Board, in the case of Ms. Fuller.
(c) The arbitration shall be held in Atlanta, Georgia. The
arbitrators shall apply the law of the State of Georgia, to the extent
not preempted by federal law, excluding any law which would require the
application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15)
business days following service of the demand for arbitration. The
number of arbitrators shall be three. One arbitrator shall be appointed
by Ms. Fuller, one arbitrator shall be appointed by the Company, and
the two arbitrators shall appoint a third. If the arbitrators cannot
agree on a third arbitrator within thirty (30) business days after the
service of demand for arbitration, the third arbitrator shall be
selected by the AAA.
(e) The arbitration filing fee shall be paid by Ms. Fuller.
All other costs of arbitration shall be borne equally by Ms. Fuller and
the Company, provided, however, that the Company shall reimburse such
fees and costs in the event any material issue in such dispute is
finally resolved in Ms. Fuller's favor and Ms. Fuller is reimbursed
legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the
rules that govern any arbitration between them, they will abide by and
perform any award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of a court
having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude any court having jurisdiction from issuing and
enforcing in any lawful manner such temporary restraining orders,
preliminary injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate pending the conclusion of arbitration proceedings pursuant
to this Agreement regardless of whether an arbitration proceeding under
this Paragraph 5 has begun. The parties further agree that nothing
herein shall prevent any court from entering and enforcing in any
lawful manner such judgments for permanent equitable relief as may be
necessary to prevent harm to a party's interests or as otherwise may be
appropriate following the issuance of arbitral awards pursuant to this
Agreement.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion
shall determine otherwise, the benefits payable to Ms. Fuller under
this Agreement shall not be funded in any manner and shall be paid by
the Company out of its general assets, which assets are subject to the
claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of
any benefit due under this Agreement the amount of any tax required by
any governmental authority to be withheld and paid over by the Company
to such governmental authority for the account of Ms. Fuller.
(c) Assignment. Ms. Fuller shall have no rights to sell,
assign, transfer, encumber, or otherwise convey the right to receive
the payment of any benefit due hereunder, which payment and the rights
thereto are expressly declared to be nonassignable and nontransferable.
Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or
terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia, to
the extent not preempted by federal law, disregarding any provision of
law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the
contrary herein, if, but for any provision of this Agreement, a Change
in Control transaction would otherwise be accounted for as a
pooling-of-interests under APB No.16 ("Pooling Accounting") (after
giving effect to any and all other facts and circumstances affecting
whether such Change in Control transaction would use Pooling
Accounting,), such provision or provisions of this Agreement which
would otherwise cause the Change in Control transaction to be
ineligible for Pooling Accounting shall be void and ineffective in such
a manner and to the extent that by eliminating such provision or
provisions of this Agreement, Pooling Accounting would be required for
such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of __________________, 199__.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN ENERGY RESOURCES,
INC.
By: ____________________________________
MS. FULLER
------------------------------------
S. Marce Fuller
<PAGE>
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Ms. S. Marce Fuller
50%
<PAGE>
Exhibit B
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Ms. S. Marce Fuller
upon the occurrence of an event that triggers eligibility for severance benefits
under the Change in Control Agreement, as described in Paragraph 2(a) of such
agreement.
<PAGE>
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, S. Marce Fuller, understand that I am entitled to receive the
severance benefits described in Section 2 of the Change in Control Agreement
(the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand
that the benefits I will receive under the Agreement are in excess of those I
would have received from The Southern Company and Southern Energy Resources,
Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil
Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended,
the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably
waive and release all claims, of any kind whatsoever, whether known or unknown
in connection with any claim which I ever had, may have, or now have against The
Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, Savannah Electric and Power Company,
Southern Communication Services, Inc., Southern Company Services, Inc., Southern
Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern
Nuclear Operating Company, Inc. and other direct or indirect subsidiaries of The
Southern Company and their past, present and future officers, directors,
employees, agents and attorneys. Nothing in this Waiver shall be construed to
release claims or causes of action under the Age Discrimination in Employment
Act or the Energy Reorganization Act of 1974, as amended, which arise out of
events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand
and agree that I will respect the proprietary and confidential nature of any
information I have obtained in the course of my service with the Company or any
subsidiary or affiliate of The Southern Company. However, nothing in this Waiver
shall prohibit me from engaging in protected activities under applicable law or
from communicating, either voluntary or otherwise, with any governmental agency
concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am
already entitled to under any workers' compensation laws or under any retirement
plan or welfare benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, which is sponsored by or adopted by the
Company and/or any of its direct or indirect subsidiaries; however, I understand
and acknowledge that nothing herein is intended to or shall be construed to
require the Company to institute or continue in effect any particular plan or
benefit sponsored by the Company and the Company hereby reserves the right to
amend or terminate any of its benefit programs at any time in accordance with
the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing,
among other things, any claims to benefits under any and all bonus, severance,
workforce reduction, early retirement, outplacement, or any other similar type
plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from
anyone of my choosing regarding this Waiver, including my attorney, and my
accountant or tax advisor. Prior to signing this Waiver, I have been given the
opportunity and sufficient time to seek such advice, and I fully understand the
meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to
consider whether or not I desire to enter this Waiver. I was not coerced,
threatened or otherwise forced to sign this Waiver. I have made my choice to
sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may
have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this
____ day of ____________________, in the year _____.
S. Marce Fuller
Sworn to and subscribed to me this ____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
By: _________
Date: _________
<PAGE>
FIRST AMENDMENT TO CHANGE IN CONTROL AGREEMENT
THIS FIRST AMENDMENT TO CHANGE IN CONTROL AGREEMENT ("Amendment") made
and entered into by and between The Southern Company ("Southern"), Southern
Energy Resources, Inc. (the "Company"), and Ms. S. Marce Fuller ("Ms. Fuller"),
effective as of the 20th day of July, 1999.
W I T N E S S E T H:
WHEREAS, the parties entered into that certain Change in Control
Agreement (the "Agreement") effective December 10, 1998;
WHEREAS, Ms. Fuller was promoted to Chief Executive Officer of the
Company effective July 20, 1999;
WHEREAS, the parties wish to amend the Agreement in connection with
such promotion;
NOW, THEREFORE, in consideration of the premises, and the agreements of
the parties set forth in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Exhibit A of the Agreement is deleted in its entirety and
the attached new Exhibit A is substituted in its place.
IN WITNESS WHEREOF, this First Amendment to Change in Control Agreement
has been executed by the parties, this ___ day of _____________, 1999.
THE SOUTHERN COMPANY
By: ______________________________
SOUTHERN ENERGY RESOURCES, INC.
By:
MS. FULLER
------------------------------
S. Marce Fuller
Exhibit A
CHANGE IN CONTROL AGREEMENT
Target Annual Bonus for
Ms. S. Marce Fuller
65%
Exhibit B
Deferred Compensation Agreement
Annual Documentation of Profitability Goals
For Performance Period
Exhibit 10(a)104
SEPARATION AGREEMENT FOR
THOMAS G. BOREN
THIS SEPARATION AGREEMENT ("Agreement"), made and entered by and
between THE SOUTHERN COMPANY, SOUTHERN ENERGY RESOURCES, INC. and their
affiliates ("Company") and THOMAS G. BOREN ("Employee").
W I T N E S S E T H
WHEREAS, Employee has been employed by Company for approximately thirty
(30) years; and WHEREAS, Company and Employee wish to agree finally and amicably
to the terms of Employee terminatinghis employment with the Company; and
WHEREAS, the parties desire to set forth their respective rights and
obligations attendant to such termination; and
WHEREAS, Employee is a member of a select group of management or highly
compensated employee of the Company; and
WHEREAS, the Company desires to provide Employee with severance
compensation in consideration for certain reasonable restrictive covenants set
forth in this Agreement; and
WHEREAS, Employee agrees that he has obtained Confidential Information,
Trade Secrets and Work Product, each as defined in this Agreement, during his
employment with the Company; and
WHEREAS, the parties desire to have Employee be subject to certain
reasonable non-disclosure, non-solicitation and non-competition restrictions in
order to protect the Company's legitimate business interests; and
WHEREAS, the parties desire to delineate their respective rights,
duties, and obligations, and desire complete accord and satisfaction of all
claims arising from Employee's employment and its termination, with appropriate
releases.
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby covenant and agree as follows:
1. Termination of Employee.
Effective July 31, 1999 (hereinafter the "Effective Date of
Termination"), Employee is retiring from his current position as Chief Executive
Officer of Southern Energy, Inc., and Executive Vice President of The Southern
Company. Employee has no further privileges, duties or obligations in such
capacity, nor as an agent of the Company.
2. Severance Benefits and Other Consideration.
Employee is entitled to the customary retirement benefits accrued by
Employee under the terms of the employee benefit plans maintained by the Company
in which Employee participated, which benefits shall not be inconsistent with
those set forth on Exhibit 1 of this Agreement. In exchange for the receipt of
the fully executed original of this Agreement and Employee's retirement with
Company, Company also agrees to pay to Employee:
(a) A lump sum severance payment in the amount of $750,000, to be
paid at separation after the Employee's release herein is
effective, subject to appropriate deductions as required by
law.
(b) A payment in an amount determined by reference to the 1999
award that Employee could have received under the Southern
Energy Resources, Inc. Short-Term Incentive Plan, pro-rated
based on the Effective Date of Termination, and payable no
later than March 15, 2000. For purposes of determining this
amount, the corporate component will be determined under the
normal procedures for this Plan, and the individual component
will be paid at 100% of the targeted amount.
(c) Under the Southern Energy Resources, Inc. Deferred Incentive
Compensation Plan, Employee will be paid his vested awards
determined as of the Effective Date of Termination by June
30th after the year in which each of Employee's deferral
elections in effect for such awards ends.
(d) Under the Southern Energy Resources, Inc. Deferred Incentive
Compensation Plan, Employee will continue to vest in
outstanding and unvested awards determined as of the Effective
Date of Termination. Each award will be paid by June 30th
after the year in which each such award vests.
(e) Under the Southern Energy Resources, Inc. Value Creation Plan,
Employee will continue to vest in Employee's outstanding,
unvested Appreciation Rights and Index Rights as of the
Effective Date of Termination (estimated to be approximately
1,033,053). Employee must exercise all such Appreciation
Rights by no later than the end of the first exercise window
period following the year the last Appreciation Right vests
and each such Indexed Right no later than the end of the first
exercise window period following the year in which the last
Appreciation Right vests. Employee may exercise vested
Appreciation and Index rights anytime prior to the date the
last Appreciation Rights vests.
(f) Under the Southern Energy Resources, Inc. Value Creation Plan,
Employee will be entitled to exercise Employee's vested
Appreciation Rights determined as of the Effective Date of
Termination (estimated to be approximately 69,814) anytime
prior to, but no later than the end of the first exercise
window period after the date upon which the last unvested
Appreciation Right described in Paragraph 2(e) vests.
Employee will not vest and will forfeit unpaid portion of those
payments described in Paragraph 2(b) and (d) of this Agreement in the event
Employee breaches this Agreement prior to the payment dates for those amounts.
Employee will not vest and will forfeit those awards described in Paragraph 2(e)
and (f) of this Agreement in the event Employee breaches this Agreement prior to
the last date for exercise of those awards. Upon Employee's satisfaction of the
covenants set forth in Paragraph 4 of this Agreement, any remaining benefits
under this Paragraph 2 shall no longer be subject to forfeiture. In no event
will the Employee be required to repay any amounts that have been paid to
Employee prior to any breach except pursuant to an action at law or in equity
for money damages as described in Paragraph 11 hereof.
Employee shall only be entitled to the benefit payments set forth above
that become due and payable between Employee's Effective Date of Termination and
his death. Upon the death of Employee, unpaid amounts set forth above shall be
payable to Employee's heirs or assigns.
Except as provided in Paragraph 3(c), Employee covenants and agrees
that the amounts and considerations set forth in this Paragraph 2 are in full
satisfaction of all sums owed to Employee, if any, by the Company, and
constitute good and complete consideration for his release contained in
Paragraph 3(a) hereof and for Employee's obligations and other covenants set
forth in Paragraph 4 and elsewhere in this Agreement. Employee agrees that the
Agreement is providing him certain benefits to which he would otherwise not be
entitled, including those set forth in Paragraph 2(a), (b), (c), (d), except in
part with respect to vested awards, (e) and (f), except in part with regard to
vested awards.
Employee represents that he is legally and wholly responsible for any
and all required taxes, fees, or other deductions required by law arising from
this Agreement and the aforementioned payments which may accrue now or at any
time in the future. Company shall make appropriate state and federal income tax,
FICA and FUTA withholding, from such payments as required by state and/or
federal law. In the event that the Company shall believe that Employee is in
breach of this Agreement, the Company shall give Employee written notice of such
breach and the facts and circumstances supporting such belief. Employee shall
have fourteen (14) days from his receipt of such notice to cure such default and
avoid a default or breach of this Agreement by Employee.
Company agrees that it will not take any action specifically intended
to disadvantage Employee in regard to the computation, exercise or payment of
the benefits included in this Paragraph 2, and will treat Employee as the
Company generally treats its employees or former employees with regard to such
benefits.
3. General Release by Employee.
(a) As a material inducement to the Company to enter into this
Agreement, Employee does hereby remise, release and forever discharge the
Company and its officers, directors, employees, agents, shareholders, parent
corporation and affiliates, and their respective predecessors, successors, and
assigns (collectively, "Releasees"), of and from all manner of actions and
causes of action, suits, debts, claims and demands whatsoever at law or in
equity, known or unknown, actual or contingent, including, but not limited to,
any claims which have been asserted, or could be asserted now or in the future,
against any Releasees arising under any and all federal, state or local laws and
any common law claims, and including, but not limited to, any claims Employee
may have pursuant to the Age Discrimination in Employment Act and any claims to
benefits under any and all bonus, incentive offer letters, employment
agreements, severance, workforce reduction, early retirement, outplacement, or
any other similar type plan sponsored by the Company, now or hereafter
recognized (collectively, "Claims"), which he ever had or now has or may in the
future have by reason of any matter, cause or thing arising out of his
employment relationship and privileges, his serving as an employee of the
Company and/or the termination of his employment relationship and/or affiliation
as employee of the Company as of the date of this Agreement against each of the
Releasees; provided, however, that the foregoing shall not release the Company
from any of its obligations under this Agreement. Notwithstanding the foregoing,
Employee does not release any Claims under the Age Discrimination in Employment
Act that may arise after his execution of this Agreement.
(b) Employee represents that he has not assigned or
transferred, or purported to assign or transfer, any Claims or any portion
thereof or interest therein to any party prior to the date of this Agreement.
(c) Employee and the Company agree that by signing this
Agreement, Employee is not releasing his claim to any benefits under any
employee benefit plan maintained by the Company payable upon normal retirement
in which Employee participated prior to the Effective Date of Termination.
4. Non-Disclosure, Non-Solicitation and Non-Competition Provisions.
(a) Preamble. As a material inducement to the Company to enter into
this Agreement, and its recognition of the valuable experience, knowledge and
proprietary information Employee gained from his employment with the Company,
Employee warrants and agrees he will abide by and adhere to the following
Non-Disclosure, Non-Solicitation and Non-Competition Provisions.
(b) Definitions. For purposes of this Paragraph 4, the following terms
shall have the following meanings:
(i) "Confidential Information" shall mean the proprietary
and confidential data or information belonging to or
pertaining to the Company, other than "Trade Secrets"
(as defined below), which is of tangible or
intangible value to the Company, and that is not
generally known to the public but is treated as
confidential or secret by the Company and is
generally known only to the Company and those of its
employees, independent contractors or agents to whom
such information must be confided for business
purposes, regarding the products, services,
contractual arrangements, customers, suppliers, and
partners of the Company gained by Employee as a
result of his employment with the Company.
Confidential Information shall also include other
items that the Company may from time to time mark or
otherwise identify as confidential if it satisfies
the definition of Confidential Information set forth
above.
(ii) "Entity" shall mean any business, individual,
partnership, joint venture, agency, governmental
subdivision, association, firm, corporation or other
entity.
(iii) "Territory" shall include Georgia, Alabama,
Mississippi, and Florida.
(iv) "Trade Secrets" shall mean information of the Company
which (A) derives economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use; and (B) is the subject of efforts
that are reasonable under the circumstances to
maintain its secrecy; it being agreed that such
information includes, without limitation, technical
and non-technical data, a formula, a pattern, a
compilation, a program, a device, a method, a
technique, a drawing, a process, financial data,
financial plans, product plans or a list of actual or
potential customers or suppliers or any other
information which is defined as a "trade secret"
under applicable law.
(v) "Work Product" shall mean all tangible work product,
property, data, documentation, "know-how," concepts
or plans, inventions, discovery, compositions,
innovations, computer programs, improvements,
techniques, processes, designs, article of
manufacture or information of any kind, or any new or
useful improvements of any of the foregoing and any
Trade Secrets, patents, copyrights, Confidential
Information, mask work, trademark or service mark,
relating in any way to the Company and its or their
business prepared, conceived, revised discovered,
developed, or created by Employee for the Company or
by using the Company's time, personnel, facilities,
equipment, knowledge, information, resources or
material.
(c) Nondisclosure: Ownership of Proprietary Property.
(i) In recognition of the need of the Company to protect
its legitimate business interests, Employee hereby
covenants and agrees that: (a) with regard to each
item constituting all or any portion of a Trade
Secret at all times such information remains a "trade
secret" under applicable law and (b) with regard to
any Confidential Information, for a period ending
upon the earlier of (x) the date such information no
longer qualifies as Confidential Information under
applicable law or (y) three (3) years following the
Effective Date of Termination (hereafter the
"Nondisclosure Period"), Employee shall regard and
treat Trade Secrets and all Confidential Information
as strictly confidential and wholly-owned by the
Company and shall not, for any reason, in any
fashion, either directly or indirectly, use, sell,
lend, lease, distribute, license, give, transfer,
assign, show, disclose, disseminate, reproduce, copy,
misappropriate or otherwise communicate any such item
or information to any third party or Entity for any
purpose other than in accordance with this Agreement
or as required by applicable law. Employee shall
exercise all reasonable best efforts to ensure the
continued confidentiality of all Trade Secrets and
Confidential Information of the Company known by,
disclosed to or made available to Employee in
connection with his employment relationship with the
Company or any other past or present relationship
with the Company. Employee shall immediately notify
the Company of any unauthorized disclosure or use of
any Trade Secrets or Confidential Information of
which Employee becomes aware. Employee shall assist
the Company, to the extent reasonably necessary at
the Company's expense, in the procurement of any
protection of the Company's rights to or in any of
the Trade Secrets or Confidential Information.
(ii) All Work Product shall be owned exclusively by the
Company. To the greatest extent possible, any Work
Product shall be deemed to be "work made for hire"
(as defined in the Copyright Act, 17 U.S.C.A.ss. 101
et seq., as amended), and Employee hereby
unconditionally and irrevocably transfers and assigns
to the Company all right, title and interest Employee
currently has or may have by operation of law or
otherwise in or to any Work Product, including,
without limitation, all patents, copyrights,
trademarks, trade secrets, service marks and other
intellectual property rights. Employee agrees to
execute and deliver to the Company any transfers,
assignments, documents or other instruments which the
Company may reasonably deem necessary or appropriate,
from time to time, to vest complete title and
ownership of any and all Work Product, and all
associated intellectual property and other rights
therein, exclusively in the Company.
(iii) Employee represents and agrees that he will keep the
terms and amount of this Agreement completely
confidential, and except to his personal agents
(including accountants, tax advisors, wife, financial
planners and attorneys) or to the extent required by
law, he will not hereafter disclose this information
concerning this Agreement to anyone, including, but
not limited to, any past, present, or prospective
employee or applicant for employment with the
Company. Employee may only disclose to future,
potential employers of Employee that he participates
in a separation arrangement with the Company which
imposes certain restrictions on him related to such
future, potential employment and the specifics of
those restrictions.
(iv) Employee agrees that he shall not hereafter seek or
accept any re-employment with the Company.
(d) Non-Solicitation Of Employees.
Employee agrees, during the three years following the
Employee's Effective Date of Termination, that he will not, either directly or
indirectly, alone or in conjunction with any other person or entity, actively
recruit, engage in passive hiring efforts, solicit, attempt to solicit, or
induce any person who, during such three year period, or within one year prior
to Employee's separation from employment, was a salaried employee of Southern
Energy Resources, Inc., or its parent or any of its subsidiaries, or was an
officer of The Southern Company or any of its affiliates (other than Southern
Energy, Inc.) to leave or cease such employment for any reason whatsoever or
hire or engage the services of such person in any business substantially similar
or competitive with that in which The Southern Company or any of its affiliates
were engaged during such employment.
(e) Non-Competition.
Employee and Company expressly covenant and agree that the
scope, Territory, time and other restrictions contained in this Agreement
constitute the most reasonable and equitable restrictions possible to protect
the business interest of the Company given: (i) the business of the Company;
(ii) the competitive nature of the Company's industry; and (iii) that Employee's
skills are such that he could easily find alternative, commensurate employment
or consulting work in his field which would not violate any of the provisions of
this Agreement. Therefore, for a period of two years from the Effective Date of
Termination, Employee agrees (A) not to participate in any regulatory,
administrative or judicial hearing or proceeding that has as a subject any
aspect of the Company's growth or expansion plans, unless Employee is required
to do so by law, (B) not to accept employment, or be engaged as a director,
consultant, agent or representative in any capacity, however described, of El
Paso Energy Corporation, Sonat, Inc., Duke Energy Corporation, Enron or Columbia
Energy Corporation or any of their affiliates (the "Specified Companies),
provided, however, Employee may become such an employee, director, consultant,
agent or representative of any such Specified Company if the entity by which
Employee is employed and/or serves as a director is acquired by or merged with
any one of the Specified Companies during the two year period following the
Effective Date of Termination, (C) not to accept employment or be engaged as a
director, consultant, agent or representative in any capacity, however
described, of any entity engaged, in any way, in constructing an electric
generating plant which will be in commercial operation within the Territory
within two years from the Effective Date of Termination, unless on behalf of an
entity that owns or operates an existing electric generating plant within the
Territory as of the Effective Date of Termination, and (D) if Employee becomes
employed by, or otherwise engaged by, an entity that is engaged, in any way, in
constructing an electric generating plant that will be in commercial operation
within the Territory within three years of the Effective Date of Termination,
not to participate in the bidding, permitting, construction or public relations
activities regarding such plant.
5. Return Of Company Property. Employee shall immediately return to the
Company all property of the Company that he took possession of during the term
of his employment and which he has not already returned to the Company and all
documents and materials constituting or containing Trade Secrets or Confidential
Information of the Company or Work Product including, without limitation, credit
cards, keys, financial records, contracts, manuals, correspondence, files,
documents, drafts of any document, disks an other documents and media,
regardless of form, and copies of any of the foregoing.
6. Cooperation. The parties agree that as a result of Employee's duties
and activities during his employment, Employee's reasonable availability may be
necessary for the Company to meaningfully respond to or address actual or
threatened litigation, or government inquires or investigations, or required
filings with state, federal or foreign agencies (hereinafter "Company Matters").
Upon request of the Company, and at any point following the Effective Date of
Termination, Employee will make himself available to the Company for reasonable
periods consistent with his future employment, if any, by other Entities and
will cooperate with its agents and attorneys as reasonably required by such
Company Matters. The Company will reimburse Employee for any reasonable
out-of-pocket expenses associated with providing such cooperation.
7. Publicity; No Disparaging Statement. Employee and the Company
covenant and agree that they shall not engage in any communications which shall
disparage one another or interfere with their existing or prospective business
relationships. The only exception to the foregoing shall be in those
circumstances (a) in which Employee, the Company or any of the Releasees is
obligated to provide information in response to an investigation by a duly
authorized governmental entity, in response to legal process, or in response to
a request for information from an officer, director or shareholder of the
Company or (b) in which a party initiates a legal proceeding to enforce the
terms of this Agreement.
8. Successors And Assigns; Applicable Law. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs, administrators,
representatives, executors, successors and assigns, and shall be binding upon
and inure to the benefit of Releasees and each of them, and to their heirs,
administrators, representatives, executors, successors and assigns. THIS
AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS).
9. Complete Agreement. This Agreement shall constitute the full and
complete Agreement between the parties concerning its subject matter and fully
supersedes any and all other prior agreements or understandings between the
parties whether written or oral. This Agreement shall not be modified or amended
except by a written instrument signed by both Employee and an authorized
representative of the Company.
10. Severability. The unenforceability or invalidity of any particular
provision of this Agreement shall not affect its other provisions, and to the
extent necessary to give such other provisions effect, they shall be deemed
severable. If any court determines that any provision of Paragraph 4 hereof is
unenforceable because of the duration or scope of such provision, such court
shall have the power to reduce the scope or duration of such provision as the
case may be, and in its reduced form, such provision shall then be enforceable.
11. Waiver Of Breach; Remedies. The waiver of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
breach. Each of the parties to this Agreement will be entitled to enforce its
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and exercise all other rights existing
in its favor. The parties hereto agree and acknowledge that any breach of the
provisions of this Agreement, including, but not limited to, any prohibited
competition or any disclosure or use of Trade Secrets or Confidential
Information by Employee, would be wrongful and cause immediate significant,
continuing and irreparable injury and damage to the Company that is not
compensable by money damages. Should Employee breach or threaten to breach any
provision of this Agreement, the Company shall be entitled to stop payments
under this Agreement and seek immediate relief and remedies in a court of
competent jurisdiction (including, but not limited to, damages, preliminary or
permanent injunctive relief and an accounting for all profits and benefits
arising out of Employee's breach), cumulative of and in addition to any other
rights or remedies to which the Company may be entitled by this Agreement, at
law or in equity.
12. No Admission Of Liability. This Agreement shall not in any way be
construed as an admission by the Company or Employee of any improper actions or
liability whatsoever as to one another, and each specifically disclaims any
liability to or improper actions against the other or any other person, on the
part of itself, its employees, or its agents.
13. Voluntary Signing Of Agreement. Employee warrants, represents and
agrees that he has been encouraged in writing to seek advice from anyone of his
choosing regarding this Agreement, including his attorney, accountant, or tax
advisor prior to his signing it; that this Agreement represents written notice
to do so; that he has been given the opportunity and sufficient time to seek
such advice; and that he fully understands the meaning and contents of this
Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY TAKE UP TO TWENTY-ONE (21) DAYS TO
CONSIDER WHETHER OR NOT HE DESIRES TO ENTER INTO THIS AGREEMENT. He further
represents and warrants that he was not coerced, threatened or otherwise forced
to sign this Agreement, and that each signature appearing hereinafter is
voluntary and genuine.
. 13. Ability to Revoke Agreement. EMPLOYEE UNDERSTANDS THAT HE MAY REVOKE THIS
AGREEMENT BY NOTIFYING THE COMPANY IN WRITING OF SUCH REVOCATION WITHIN SEVEN
(7) DAYS OF HIS EXECUTION OF THIS AGREEMENT AND THAT THIS AGREEMENT IS NOT
EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. HE UNDERSTANDS THAT
UPON THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD THIS AGREEMENT WILL BE BINDING
UPON HIM AND HIS HEIRS, ADMINISTRATORS, REPRESENTATIVES, EXECUTORS, SUCCESSORS
AND ASSIGNS AND WILL BE IRREVOCABLE.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the dates described below.
"COMPANY"
THE SOUTHERN COMPANY AND ITS AFFILIATES
____________________________________ By:____________________________________
Date_____ _________
Title:_________________________________
Title:
I UNDERSTAND THAT BY SIGNING THIS AGREEMENT, I AM GIVING UP RIGHTS I
MAY HAVE. I UNDERSTAND THAT I DO NOT HAVE TO SIGN THIS AGREEMENT.
__________________ "EMPLOYEE"
____________________________________ By:________________________________
Date
<PAGE>
Exhibit 1 to Boren Severance Agreement
Normal Benefits Upon Retirement
- -------------------------------------------------------------------------------
SEI's Short-term Incentive Plan -- $0
o 1999 award forfeited due to separation prior to Normal Retirement (age
65)
Southern's Voluntary Deferred Compensation Plan - About $30,000
o Any amounts will be paid according to last effective form of payment
election
SEI's Mandatory Deferred Incentive Compensation Plan - About $242,000 o Amount
payable in a single sum upon termination
o Nonvested amounts lost due to separation before Normal Retirement
(value today about $531,000)
Value Creation Plan - 69,812 SAR awards o Includes normal and indexed SARs o
Exercisable within 30 days of separation
o Current value approximately $121,000 as of July 15, 1999
o Remaining 1,033,055 awards forfeited due to nonvested separation prior
to Normal Retirement
Nonqualified Stock Options - 89,097 awards o Full vesting of all nonvested
options upon retirement o Exercisable within 36 months of retirement o Current
value approximately $365,000 as of July 15, 1999
o Continued eligibility for performance dividend payments for all options
granted after 1996
Pension - About $12,325 per month
o Includes tax-qualified and supplemental pension benefits
o Expressed as single life annuity (other forms of payment available with
appropriate adjustment) o Anticipates retirement and benefit
commencement on August 1, 1999 o 1999 incentives reflected at $0
ESP/ESOP - About $352,000 as of July 14, 1999
o Includes qualified and supplemental account balances
o Payable at or after retirement in accordance with plans' provisions and
employee's elections
Retiree Medical and Life Insurance - Coverage
o Coverages pursuant to terms of "cap" plans
o Coverages subject to affirmative coverage election, payment of required
contributions, and amendment/termination by company
Relevant Notes
o All amounts subject to appropriate taxation.
o All amounts are based on separation from service on July 31, 1999.
o Amounts are based on best available information but are still
approximate due to limited access to information at the current time.
Amounts will be verified and, if necessary, adjusted once all relevant
information is accessible.
Exhibit 10(b)44
DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF ALABAMA POWER COMPANY
As Amended and Restated as of
April 25, 1997
ARTICLE I
DEFINITIONS
1.1 Board of Directors shall mean the Board of Directors of Alabama
Power Company.
1.1A Accrued Pension means the U.S. dollar amount of the
actuarially-determined present value of the accrued and unpaid past service
pension benefits under The Southern Company Outside Directors Pension Plan (the
"Directors Pension Plan") of a Director acting as such at and as of December 31,
1996, as calculated as of the termination date of the Directors Pension Plan
(the "Termination Date"), taking into account the Director's age and years and
months of past service and such other assumptions as shall be reasonable and
uniformly applied to all Directors.
1.2 Company shall mean Alabama Power Company.
1.3 Common Stock shall mean the Common Stock of Southern Company.
1.4 Compensation shall mean the compensation payable to the Directors
of the Company and shall include retainer fees and meeting fees, as determined
from time to time by the Board of Directors, except such term shall not include
Common Stock payable to a Director under the Outside Directors Stock Plan for
Subsidiaries of Southern Company.
1.5 Compensation Committee shall mean the Compensation Committee
appointed by the Board of Directors.
1.6 Deferred Compensation Account shall mean the account established
pursuant to Section 7.1 for a Director who elects to participate in the Plan.
1.7 Director shall mean a member of the Board of Directors and shall
include an Advisory Director.
1.8 Market Value shall mean the average of the high and low prices of
the Common Stock, as published in the Wall Street Journal in its report of New
York Stock Exchange composite transactions, on the date such Market Value is to
be determined, as specified herein (or the average of the high and low sale
prices on the trading day immediately preceding such date if the Common Stock is
not traded on the New York Stock Exchange on such date).
<PAGE>
1.9 Plan shall mean this Deferred Compensation Plan for the Directors
of Alabama Power Company.
1.10 Plan Period shall mean the period designated in Article V.
ARTICLE II
PURPOSE
2.1 The Plan provides a method of deferring payment to a Director of
his Compensation as fixed from time to time by the Board of Directors, until
termination of his service on the Board.
ARTICLE III
ELIGIBILITY
3.1 An individual who serves as a Director and is not otherwise
actively employed by the Company or any of its subsidiaries shall be eligible to
participate in the Plan.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Compensation Committee of the
Board of Directors as appointed from time to time. The Compensation Committee
shall have the power to interpret the Plan and, subject to its provisions, to
make all determinations necessary or desirable for the Plan's administration.
ARTICLE V
PLAN PERIODS
5.1 The first Plan Period shall commence the first day of the month
which begins at least thirty (30) days following the date a Director is elected
to that position. Said first Plan Period shall continue until the end of the
calendar year during which the Director was elected to that position and all
subsequent Plan Periods shall be on a calendar year basis.
ARTICLE VI
PARTICIPATION
6.1 Prior to the beginning of any Plan Period, a Director may elect to
participate in the Plan by directing that payment of all or any part of the
Compensation which would otherwise be paid to the Director in the next
succeeding Plan Period be deferred until the Director terminates his membership
on the Board of Directors.
6.2 The deferred payment shall be computed by the Company in accordance
with one of the following methods as elected by the Director:
<PAGE>
(a) The amount deferred shall be treated as a sum certain to which the
Company will add in lieu of interest an amount equal to the prime rate of
interest set by AmSouth Bank, N.A. Interest shall be computed as if credited
from the date such Compensation would otherwise have been paid and shall be
compounded quarterly at the end of each calendar quarter. The prime rate in
effect on the first day of each calendar quarter shall be deemed the prime rate
in effect for each calendar quarter. Interest will be treated as if accrued and
will be compounded on any balance until such amount is fully distributed.
(b) The amount deferred shall be treated as though invested in Common
Stock and the number of shares (including fractional shares) credited to the
Director's Deferred Compensation Account shall be based on the Market Value of
the Common Stock as of the date the Compensation would otherwise have been paid.
As of each date of payment of dividends on the Common Stock, there shall be
credited with respect to shares of Common Stock in the Director's Deferred
Compensation Account such additional shares (including fractional shares) of
Common Stock as follows:
(i) In the case of cash dividends, such additional shares as could be
purchased at the Market Value as of the dividend payment date with the dividends
which would have been payable if the credited shares had been outstanding;
(ii) In the case of dividends payable in property other than cash or
Common Stock, such additional shares as could be purchased at the Market Value
as of the payment date with the fair market value of the property which would
have been payable if the credited shares had been outstanding; or
(iii) In the case of dividends payable in Common Stock, such additional
shares as would have been payable on the credited shares if they had been
outstanding.
6.3 The election to defer payment of all or any part of the
Compensation ("Deferral Election") and the method by which the Company shall
compute the deferred payment in accordance with Section 6.2 shall be made by
written notice on a form prescribed by the Compensation Committee and delivered
to the Secretary of the Company prior to the first day of a Plan Period. At the
time of the initial election made under this Article VI, the Director shall
elect the form of payment to be received upon termination of his membership on
the Board of Directors, such form of payment to be either (1) a lump sum
distribution, or (2) annual or quarterly installments, over a period not to
exceed fifteen (15) years and the time for commencement of distribution of
payment, which shall not be later than the first day of the month coinciding
with or next following the second anniversary of the termination of his
membership on the Board of Directors. The Deferral Election shall be irrevocable
and shall continue from year to year unless the Director terminates
participation or changes the election regarding future payments by submitting a
written request to the Secretary on a form prescribed by the Compensation
Committee. Although a Director may submit such a written request at any time
during the calendar year, the effective date of such a termination of
participation or change in the Deferral Election shall not affect amounts
previously deferred.
<PAGE>
The initial Deferral Election made after the effective date of this Amendment
Three with respect to (a) the method of payment, whether it be lump sum or
installments, including the number of installments selected, and (b) the time
for commencement of distribution of a Director's Deferred Compensation Account
may not be revoked and shall govern the distribution of a Director's Deferred
Compensation Account, except as provided in Section 6.6. This Amendment Number
Three shall have no affect on the payment of benefits to Directors who completed
service prior to the effective day of this Amendment, and their benefits shall
be payable in accordance with the terms of the Plan prior to this Amendment.
6.4 A Director who has filed a termination of election may thereafter
file a new election to participate to be effective as of the first day of the
Plan Period subsequent to the filing of such new election. A new election is
subject to all requirements for participation contained in this Article VI of
the Plan. The new election shall not affect amounts previously deferred.
6.5 Any Director, who has an Accrued Pension as of the Termination
Date, may make a single one-time election, on or before June 1, 1997 in writing
and on a form prescribed by the Compensation Committee, to convert his or her
Accrued Pension into a deferred pension account under the Plan (a "Deferred
Pension Account"). Upon making a deferred pension election (a "Deferred Pension
Election"), a new Deferred Pension Account will be established in the Director's
name and will be credited with the amount of his or her Accrued Pension so
converted. Once made, a Deferred Pension Election cannot be changed or revoked.
A Deferred Pension Election shall defer the starting date for the payment of the
designated amount of the Director's Accrued Pension, and any investment return
credited thereon, until the termination of the Director's membership on the
Board. In the event of any such Deferred Pension Election, the form of payment
of any distribution (i.e., in a lump sum or in approximately equal quarterly or
annual installments over a period not to exceed fifteen (15) years) and the
starting date of such distribution (which may not be later than the date which
is twenty-four (24) months following the date of termination of membership on
the Board), shall be elected at the same time. Except as otherwise provided by
the Plan, such form of payment and time of payment election shall not be changed
or revoked.
6.6 Except as provided below, with the approval of the Compensation
Committee, a Director may amend a prior Deferral Election on a form prescribed
by the Compensation Committee not prior to the 390th day nor later than the
360th day prior to his termination of membership on the Board of Directors in
order to change (a) the form, and/or (b) the time for commencement of the
distribution of his Deferred Compensation Account in accordance with the terms
of the Plan; provided, however, that any Director whose election is restricted
by the Securities and Exchange Act of 1934, as amended, with respect to equity
securities of The Southern Company, shall not be permitted to amend his Deferral
Election if such an amendment would be restricted by Rule 16 of the Securities
and Exchange Act of 1934, as amended.
<PAGE>
Any such amendment to a prior Deferral Election, as described in this Section
6.6, shall be contingent upon the Director's completion of his term of
membership on the Board of Directors, except in the event of the disability or
death of such Director.
ARTICLE VII
DEFERRED COMPENSATION ACCOUNTS
7.1 An account shall be established on the Company books for each
Director electing deferral, which shall be designated as the Deferred
Compensation Account of said Director. The amounts computed in accordance with
Article VI shall be credited to the account.
7.2 At the end of each Plan Period, a report shall be issued to each
Director who has a Deferred Compensation Account which sets forth the amount and
the Market Value of any shares of Common Stock (and fractions thereof) reflected
in such account.
ARTICLE VIII
DISTRIBUTION OF ACCOUNTS
8.1 When a Director terminates his membership on the Board of
Directors, said Director shall be entitled to receive the entire amount and the
market value of any shares of Common Stock (and fractions thereof) reflected in
his Deferred Compensation Account as computed in accordance with Section 6.2,
payable in cash in accordance with his deferral election pursuant to Section
6.3. No portion of a Director's Deferred Compensation Account shall be
distributed in Common Stock. In the event a Director shall have elected to
receive the balance of his Deferred Compensation Account in a lump sum,
distribution shall be made following his termination of membership on the Board
in accordance with his election regarding time of payment of benefits. In the
alternative, the Director may irrevocably elect by written notice to the
Secretary of the company to receive quarterly or annual installments of the
deferred amount. The installments shall not extend over a period longer than
fifteen (15) years. The election shall be part of the initial election to defer
the payment of Compensation. The payment or payments shall be in cash. In the
event the Director shall have elected to receive installments, the first payment
shall commence in accordance with his election regarding the time of payment of
benefits and shall be an amount equal to the balance in the Director's Deferred
Compensation Account on such date divided by the number of installment payments.
Each subsequent payment shall be an amount equal to the balance of the
Director's Account on the payment date divided by the number of remaining
payments. Notwithstanding a Directors election to receive his Deferred
Compensation Account balance in installments, the Compensation Committee, upon
request of the Director or his legal representative, and in its sole discretion,
may accelerate the payment or any such installments for cause, such as financial
hardship or financial emergency. The Market Value of any shares of Common Stock
credited to a Director's Deferred Compensation Account shall be determined as of
the twenty-fifth (25th) day of the month immediately preceding the date of any
lump sum or installment distribution.
<PAGE>
8.2 Upon the death of a Director, or a former Director prior to the
payment of all amounts credited to said Director's Deferred Compensation
Account, the entire unpaid balance shall be paid to the designated beneficiary
of such Director or former Director within thirty (30) days of the date of death
or as soon as reasonably possible thereafter. In the event a beneficiary
designation is not on file or the designated beneficiary is deceased or cannot
be located, payment shall be made to the estate of the Director or former
Director.
8.3 The beneficiary designation referred to above may be changed by a
Director or former Director at any time, and without the consent of the prior
beneficiary, on a form to be provided by the Secretary of the Company.
ARTICLE IV
MISCELLANEOUS
9.1 No Director or Beneficiary shall have any right to sell, assign,
transfer, encumber or otherwise convey the right to receive payment of any
benefit payable hereunder, which payment and the right thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.
9.2 The Company shall not reserve or otherwise set aside funds for the
payment of its obligations hereunder, which obligations will be paid from the
general assets of the Company. Notwithstanding that a Director shall be entitled
to receive the entire amount in his Deferred Compensation Account as provided in
Section 8.1, any amounts credited to a Director's Account to be paid to such
Director shall at all times be subject to the claims of the Company's creditors.
9.3 The Board of Directors may terminate the Plan at any time or may,
from time to time, amend the Plan; provided, however, that no such amendment or
termination shall impair any rights to payments which had been deferred under
the Plan prior to the termination or amendment.
9.4 This Plan shall be construed in accordance with and governed by the
laws of the State of Alabama.
Exhibit 10(c)81
DEFERRED COMPENSATION PLAN
FOR
DIRECTORS OF GEORGIA POWER COMPANY
Amended and Restated Effective November 19,1986
Article I -- Definitions
1.1 "Account" shall mean the Deferred Compensation Account established for
each Director electing to participate in the Plan pursuant to Article
VI.
1.2 "Board of Directors" or "Board" shall mean the Board of Directors of
Georgia Power Company.
1.3 "Common Stock" shall mean the common stock of The Southern Company.
1.4 "Company" shall mean Georgia Power Company.
1.5 "Compensation" shall mean the compensation payable to the Directors of
the Company, including retainer fees and meeting fees, as determined
from time to time by the Board of Directors.
1.6 "Deferral Election" shall mean the written election by a Director to
defer payment of all or a portion of his Compensation under the Plan
pursuant to Article VI.
1.7 "Director" shall mean a member of the Board of Directors and shall
include an Advisory Director.
1.8 "Investment Election" shall mean the written election by a Director to
have his deferred Compensation invested pursuant to Section 7.2 or
Section 7.3.
1.9 "Market Value" shall mean the average of the high and low sale prices
of the Common Stock, as published in The Wall Street Journal in its
report of New York Stock Exchange composite transactions, on the date
such Market Value is to be determined, as specified herein (or the
average of the high and low sale prices on the trading day immediately
preceding such date if the Common Stock is not traded on the New York
Stock Exchange on such date).
1.10 "Plan" shall mean the Deferred Compensation Plan for Directors of
Georgia Power Company.
1.11 "Plan Period" shall mean the Period designated in Article V.
Article II--Purpose
2.1 The Plan provides a method of deferring payment to a Director of his
Compensation until a date following the termination of his membership
on the Board of Directors.
Article III--Eligibility
3.1 An individual who serves as a Director and is not otherwise actively
employed by the Company or any of its subsidiaries or affiliates shall
be eligible to participate in the Plan.
Article IV--Administration
4.1 The Plan shall be administered by the Compensation Committee of the
Board of Directors, as appointed from time to time. The Compensation
Committee shall have the power to interpret the Plan and, subject to
its provisions, to make all determinations necessary or desirable for
the Plan's administration.
Article V--Plan Periods
5.1 The first Plan Period shall commence April 1, 1982. Said first Plan
Period shall be a nine-month period and all subsequent Plan Periods
shall be on a calendar year basis, except that the initial Plan period
applicable to any person elected to fill a vacancy on the Board of
Directors who was not a Director on the preceding December 31 shall
begin on the first day of such Director's membership on the Board of
Directors.
Article VI--Participation
6.1 Prior to the beginning of any Plan Period, a Director may elect to
participate in the Plan by directing that payment of all or any part of
the Compensation which would otherwise be paid to the Director in the
next succeeding Plan Period be deferred until the Director terminates
his membership on the Board of Directors and elects to commence
distribution of his Deferred Compensation Account pursuant to the terms
of the Plan.
6.2 The Deferral Election shall be in writing on a form prescribed by the
Compensation Committee and shall state (a) that the Director wishes to
make an election to defer payment of his Compensation, (b) the
percentage dollar amount of Compensation to be deferred, (c) the method
of payment, which shall be the payment of a lump sum or a series of
annual payments not to exceed ten (10), and (d) the time for
commencement of distribution of his Account balance, which shall be not
later than the first day of the month coinciding with or next following
the second anniversary of the termination of his membership on the
Board of Directors. Each Director making a Deferral Election in
accordance with the terms of the Plan, and his successors, heirs and
assigns shall be bound as to any action taken pursuant to the terms
thereof and to the terms of the Plan.
6.3 The Deferral Election shall be made by written notice delivered to the
Secretary of the Company prior to the first day of the next succeeding
Plan Period and shall be effective on the first day of such succeeding
Plan Period. The Deferral Election made in accordance with this Article
shall be irrevocable. Such Deferral Election shall continue from Plan
Period to Plan Period unless the Director terminates participation or
changes the Deferral Election regarding future payments by submitting a
written request to the Secretary of the Company on a form prescribed by
the Compensation Committee. Any such termination or change shall become
effective as of the first day of the Plan Period next following the
Plan Period in which such request is given. A termination of
participation in the Plan or change in Deferral Election regarding
future payments shall not affect amounts previously deferred. The
initial Deferral Election made after the effective date of this
Amendment and Restatement with respect to (a) the method of payment,
whether it be lump sum or installments, including the number of
installments selected, and (b) the time for commencement of
distribution of a Participant's Account may not be revoked and shall
govern the distribution of a Participant's Account, except as provided
in Section 6.5.
6.4 A Director who has filed a termination of Deferral Election may
thereafter file a new Deferral Election to participate for Plan Periods
subsequent to the Plan Period of the filing of such Deferral Election.
The new Deferral Election shall not affect amounts previously deferred.
6.5 A Director may amend a prior Deferral Election on a form prescribed by
the Compensation Committee not prior to the sixtieth (60th) day nor
later than the thirtieth (30th) day prior to his termination on the
Board of Directors in order to change (a) the form, and/or (b) the time
for commencement of his Deferred Compensation Account in accordance
with the terms of the Plan.
Article VII--Deferred Compensation Accounts
7.1 An Account shall be established on the Company books for each Director
electing to defer all or a portion of his Compensation, which shall be
credited with (a) any Compensation deferred in accordance with Article
VI and (b) pursuant to each Director's Investment Election, the amounts
computed in accordance with Section 7.2 and/or the number of shares
computed in accordance with Section 7.3.
7.2 The Deferred Compensation Account of each Director electing to invest
his deferred Compensation for a Plan Period pursuant to this Section
7.2 shall be credited with an amount computed by the Company by
treating the amount deferred as a sum certain to which the Company will
add in lieu of interest an amount equal to the prime rate of interest
set by The First National Bank of Atlanta. Interest shall be computed
as if credited from the date such Compensation would otherwise have
been paid and shall be compounded quarterly at the end of each calendar
quarter. The prime rate in effect on the first day of each calendar
quarter shall be deemed the prime rate in effect for each calendar
quarter. Interest will be treated as if accrued and will be compounded
on any balance until such amount is fully distributed.
7.3 The Deferred Compensation Account of each Director electing to invest
his Deferred Compensation for a Plan Period pursuant to this Section
7.3 shall be credited with the number of shares (including fractional
shares) of Common Stock which could have been purchased on the date
such Deferred Compensation otherwise would have been paid based upon
the Common Stock's Market Value. As of each date of payment of
dividends on the Common Stock, there shall be credited with respect to
shares of Common Stock in the Director's Deferred Compensation Account
such additional shares(including fractional shares) of Common Stock as
follows:
(a) In the case of cash dividends, such additional shares as could
be purchased at the Market Value as of the dividend payment
date with the dividends which would have been payable if the
credited shares had been outstanding;
(b) In the case of dividends payable in property other than cash
or Common Stock, such additional shares as could be purchased
at the Market Value as of the payment date with the fair
market value of the property which would have been payable if
the credited shares had been outstanding; or
(c) In the case of dividends payable in Common Stock, such
additional shares as would have been payable on the credited
shares if they had been outstanding.
7.4 The Investment Election by a Director with respect to his Deferred
Compensation Account shall be made in writing on a form prescribed by
the Compensation Committee. Any Investment Election shall be delivered
to the Secretary of the Company prior to the first day of the next
succeeding Plan Period and shall be effective on the first day of such
succeeding Plan Period. The Investment Election made in accordance with
this Article VII shall be irrevocable. Such Investment Election shall
continue from Plan Period to Plan Period unless the Director changes
the Investment Election regarding future Deferred Compensation by
submitting a written request to the Secretary of the Company on a form
prescribed by the Compensation Committee. Any such change shall become
effective as of the first day of the Plan Period next following the
Plan Period in which such request is given.
7.5 At the end of each Plan Period, a report shall be issued to each
Director who has a Deferred Compensation Account which sets forth the
amount and Market Value of any shares of Common Stock (and fractions
thereof) reflected in such Account.
Article VIII--Distribution of Accounts
8.1 When a Director terminates his membership on the Board of Directors,
said Director shall be entitled to receive the entire amount and the
Market Value of any shares of Common Stock (and fractions thereof)
reflected in his Deferred Compensation Account payable in cash in
accordance with his Deferral Election. No portion of a Director's
Deferred Compensation Account shall be distributed in Common Stock. In
the event a Director shall have elected to receive the balance of his
Deferred Compensation Account in a lump sum, distribution shall be made
on the first day of the month selected by the Director in accordance
with the terms of the Plan, or as soon as reasonably possible
thereafter. In the event the Director shall have elected to receive
annual installments, the first payment shall be on the first day of the
month selected by a Director, or as soon as reasonably possible
thereafter, and shall be an amount equal to the balance in the
Director's Account on such date divided by the number of annual
installment payments. Each subsequent annual payment shall be an amount
equal to the balance in the Director's Account on the payment date
divided by the number of remaining annual payments and shall be paid on
the anniversary of the preceding payment date. The Market Value of any
shares of Common Stock credited to a Director's Deferred Compensation
Account shall be determined as of the twenty-fifth (25th) day of the
month immediately preceding the date of any lump sum or installment
distribution.
8.2 Upon the death of a Director, or a former Director, prior to the
payment of all amounts and the Market Value of any shares of Common
Stock (and fractions thereof) credited to said Director's Account, the
unpaid balance shall be paid at the sole discretion of the Compensation
Committee (a) in a lump sum to the designated beneficiary of such
Director or former Director within thirty (30) days of the date of
death (or as soon as reasonably possible thereafter) or (b) in
accordance with the Deferral Election made by such Director or former
Director. In the event a beneficiary designation has not been made, or
the designated beneficiary is deceased or cannot be located, payment
shall be made to the estate of the Director or former Director. The
Market Value of any shares of Common Stock credited to a Director's
Deferred Compensation Account shall be determined as of the twenty
fifth (25th) day of the month immediately preceding the date of any
lump sum or installment distribution.
8.3 The beneficiary designation referred to above may be changed by a
Director or former Director at any time, and without the consent of the
prior beneficiary, on a form to be provided by the Secretary of the
Company.
Article IX--Miscellaneous
9.1 No Director or beneficiary shall have any right to sell, assign,
transfer, encumber or otherwise convey the right to receive payment of
any benefit payable here under, which payment and the right thereto are
expressly declared to be nonassignable and nontransferable. Any attempt
to do so shall be null and void and of no effect.
9.2 The Company shall not reserve or otherwise set aside funds for the
payment of its obligations here under, which obligations will be paid
from the general assets of the Company. Notwithstanding that a Director
shall be entitled to receive the entire amount in his Deferred
Compensation Account as provided in Section 8.1, any amounts credited
to a Director's Account to be paid to such Director shall at all times
be subject to the claims of the Company's creditors.
9.3 The Board of Directors may terminate the Plan at any time or may, from
time to time, amend the Plan; provided, however, that no such amendment
or termination shall impair any rights to payments which had been
deferred under the Plan prior to the termination or amendment.
9.4 This Plan shall be construed in accordance with and governed by the
laws of the State of Georgia.
Exhibit 10(d)41
DEFERRED COMPENSATION PLAN
FOR
DIRECTORS OF GULF POWER COMPANY
Amended and Restated Effective January 1, 1987
Article I
Definitions
1.1 "Account" shall mean the Deferred Compensation Account established
for each Director electing to participate in the Plan pursuant to
Article VI.
1.2 "Board of Directors" or "Board" shall mean the Board of Directors of
Gulf Power Company.
1.3 "Common Stock" shall mean the common stock of The Southern Company.
1.4 "Company" shall mean Gulf Power Company.
1.5 "Compensation" shall mean the compensation payable to the Directors
of the Company, including retainer fees and meeting fees, as
determined from time to time by the Board of Directors.
1.6 "Deferral Election" shall mean the written election by a Director to
defer payment of all or a portion of his Compensation under the Plan
pursuant to Article VI.
1.7 "Director" shall mean a member of the Board of Directors and shall
include an Advisory Director.
1.8 "Investment Election" shall mean the written election by a Director
to have his Deferred Compensation invested pursuant to Section 7.2 or
Section 7.3.
1.9 "Market Value" shall mean the average of the high and low prices of
the Common Stock, as Published in the Wall Street Journal in its
report of New York Stock Exchange composite transactions, on the date
such Market Value is to be determined, as specified herein (or the
average of the high and low sale prices on the trading day
immediately preceding such date if the Common Stock is not traded on
the New York Stock Exchange on such date).
1.10 "Plan" shall mean the Deferred Compensation Plan for Directors of Gulf
Power Company.
1.11 "Plan Period" shall mean the period designated in
Article V.
II-5
<PAGE>
Article II
Purpose
2.1 The Plan provides a method of deferring payment to a Director of his
Compensation until a date following the termination of his membership
on the Board of Directors.
Article III
Eligibility
3.1 An individual who serves as a Director and is not otherwise actively
employed by the Company or any of its subsidiaries or affiliates
shall be eligible to participate in the Plan.
Article IV
Administration
4.1 The Plan shall be administered by the Compensation Committee of the
Board of Directors, as appointed from time to time. The Compensation
Committee shall have the power to interpret the Plan and, subject to
its provisions, to make all determinations necessary or desirable for
the Plan's administration.
Article V
Plan Periods
5.1 The first Plan Period shall commence June 1, 1981. Said first Plan
Period shall be a seven-month period and all subsequent Plan Periods
shall be on a calendar year basis, except that the initial Plan
Period applicable to any person elected to fill a vacancy on the
Board of Directors who was not a Director on the preceding December
31 shall begin on the first day of such Director's membership on the
Board of Directors.
Article VI
Participation
6.1 Prior to the beginning of any Plan Period, a Director may elect to
participate in the Plan by directing that payment of all or any part
of the Compensation which would otherwise be paid to the Director in
the next succeeding Plan period be deferred until the Director
terminates his membership on the Board of Directors and elects to
commence distribution of his Deferred Compensation Account pursuant
to the terms of the Plan.
6.2 The Deferral Election shall be in writing on a form prescribed by the
Compensation Committee and shall state (a) that the Director wishes
to make an election to defer payment of his Compensation, (b) the
percentage/dollar amount of Compensation to be deferred, (c) the
method of
II-6
<PAGE>
payment, which shall be the payment of a lump sum or a series of annual
payments not to exceed ten (10), and (d) the time for commencement of
distribution of his Account balance, which shall be not later than the
first day of the month coinciding with or next following the second
anniversary of the termination of his membership on the Board of
Directors. Each Director making a Deferral Election in accordance with
the terms of the Plan, and his successors, heirs and assigns shall be
bound as to any action taken pursuant to the terms thereof and to the
terms of the Plan.
6.3 The Deferral Election shall be made by written notice delivered to
the Corporate Secretary of the Company prior to the first day of the
next succeeding Plan Period and shall be effective on the first day
of such succeeding Plan Period. The Deferral Election made in
accordance with this Article shall be irrevocable during that Plan
Period. Such Deferral Election shall continue from Plan Period to
Plan Period unless the Director terminates participation or changes
the Deferral Election regarding future payments by submitting a
written request to the Corporate Secretary of the Company on a form
prescribed by the Compensation Committee. Any such termination or
change shall become effective as of the first day of the Plan Period
next following the Plan Period in which such request is given. A
termination of participation in the Plan or change in Deferral
Election regarding future payments shall not affect amounts
previously deferred. The initial Deferral Election made after the
effective date of this Amendment and Restatement with respect to (a)
the method of payment, whether it be lump sum or installments,
including the number of installments selected, and (b) the time for
commencement of distribution of a Participants Account may not be
revoked and shall govern the distribution of a Participant's Account,
except as provided in Section 6.5.
6.4 A Director who has filed a termination of Deferral Election may
thereafter file a new Deferral Election to participate for Plan
Periods subsequent to the Plan Period of the filing of such Deferral
Election. The new Deferral Election shall not affect amounts
previously deferred.
6.5 With the approval of the Compensation Committee, a Director may amend
a prior Deferral Election on a form prescribed by the Compensation
Committee not prior to the 390th day nor later than the 360th day
prior to his termination on the Board of Directors in order to change
(a) the form, and/or (b) the time for commencement of the
distribution of his Deferred Compensation Account in accordance with
the terms of the Plan. Any such amendment to a prior Deferral
Election, as described in this Section 6.5, shall be contingent upon
the Director's completion of his term of membership on the Board of
Directors, except in the event of the disability or death of such
Director.
II-7
<PAGE>
Article VII
Deferred Compensation Accounts
7.1 An Account shall be established on the Company books for
each Director electing to defer all or a portion of his
compensation, which shall be credited with (a) any Compensation
deferred in accordance with Article VI and (b) pursuant to each
Director's Investment Election, the amounts computed in
accordance with Section 7.2 and/or the number of shares
computed in accordance with Section 7.3.
7.2 The Deferred Compensation Account of each Director electing to invest
his Deferred Compensation for a Plan Period pursuant to this Section
7.2 shall be credited with an amount computed by the Company by
treating the amount deferred as a sum certain to which the Company
will add in lieu of interest an amount equal to the prime rate of
interest set by the First National Bank of Atlanta. Interest shall be
computed as if credited from the date such Compensation would
otherwise have been paid and shall be compounded quarterly at the end
of each calendar quarter. The prime rate in effect on the first day
of each calendar quarter shall be deemed the prime rate in effect for
each calendar quarter. Interest will be treated as if accrued and
will be compounded on any balance until such amount is fully
distributed.
7.3 The Deferred Compensation Account of each Director electing to invest
his Deferred Compensation for a Plan Period pursuant to this Section
7.3 shall be credited with the number of shares (including fractional
shares) of Common Stock which could have been Purchased on the date
such Deferred Compensation otherwise would have been paid based upon
the Common Stock's Market Value. As of each date of payment of
dividends on the Common Stock, there shall be credited with respect
to shares of Common Stock in the Director's Deferred Compensation
Account such additional shares (including fractional shares) of
Common Stock as follows:
(a) In the case of cash dividends, such additional shares as
could be purchased at the Market Value as of the dividend
payment date with the dividends which would have been
payable if the credited shares had been outstanding;
(b) In the case of dividends payable in property other than
cash or Common Stock, such additional shares as could be
purchased at the Market Value as of the payment date with
the fair market value of the property which would have been
payable if the credited shares had been outstanding; or
(c) In the case of dividends payable in Common Stock, such
additional shares as would have been payable on the
credited shares if they had been outstanding.
II-8
<PAGE>
7.4 The Investment Election by a Director with respect to his Deferred
Compensation Account shall be made in writing on a form prescribed by
the Compensation Committee and delivered to the Corporate Secretary
of the Company prior to the first day of the next succeeding Plan
Period and shall be effective on the first day of such succeeding
Plan Period. The Investment Election made in accordance with this
Article VII shall be irrevocable during that Plan Period. Such
Investment Election shall continue from Plan Period to Plan Period
unless the Director changes the Investment Election regarding future
deferred Compensation by submitting a written request to the
Corporate Secretary of the Company on a form prescribed by the
Compensation Committee. Any such change shall become effective as of
the first day of the Plan Period next following the Plan Period in
which such request is given.
7.5 At the end of each Plan Period, a report shall be issued to each
Director who has a Deferred Compensation Account which sets forth the
amount and Market Value of any shares of Common Stock (and fractions
thereof) reflected in such Account.
Article VIII
Distribution of Accounts
8.1 When a Director terminates his membership on the Board of Directors,
said Director shall be entitled to receive the entire amount and the
Market Value of any shares of Common Stock (and fractions thereof)
reflected in his Deferred Compensation Account payable in cash in
accordance with his Deferral Election. No portion of a Director's
Deferred Compensation Account shall be distributed in Common Stock.
In the event a Director shall have elected to receive the balance of
his Deferred Compensation Account in a lump sum, distribution shall
be made on the first day of the month selected by the Director in
accordance with the terms of the Plan, or as soon as reasonably
possible thereafter. In the event the Director shall have elected to
receive annual installments, the first payment shall be on the first
day of the month selected by a Director, or as soon as reasonably
possible thereafter, and shall be paid an amount equal to the balance
in the Director's Account on such date divided by the number of
annual installment payments. Each subsequent annual payment shall be
an amount equal to the balance in the Director's Account on the
payment date divided by the number of remaining annual payments and
shall be paid on the anniversary of the preceding payment date.
Notwithstanding a Director's election to receive his Deferred
Compensation Account balance in annual installments, the Compensation
Committee, in its sole discretion upon request of the Director or his
legal representative, may accelerate the payment of any such
installments for cause. The Market Value of any shares of Common
Stock credited to a Director's Deferred Compensation Account shall be
determined as of the twenty-fifth (25th) day of the month immediately
preceding the date of any lump sum or installment distribution.
II-9
8.2 Upon the death of a Director, or a former Director prior to the
payment of all amounts and the Market Value of any shares of Common
Stock (and fractions thereof) credited to said Director's Account,
the unpaid balance shall be paid in the sole discretion of the
Compensation Committee (a) in a lump sum to the designated
beneficiary of such Director or former Director within thirty (30)
days of the date of death (or as soon as reasonably possible
thereafter) or (b) in accordance with the Deferral Election made by
such Director or former Director. In the event a beneficiary
designation has not been made, or the designated beneficiary is
deceased or cannot be located, payment shall be made to the estate of
the Director or former Director. The Market Value of any shares of
Common Stock credited to a Director's Deferred Compensation Account
shall be determined as of the twenty-fifth (25th) day of the month
immediately preceding the date of any lump sum or installment
distribution.
8.3 The beneficiary designation referred to above may be changed by a
Director or former Director at any time, and without the consent of
the prior beneficiary, on a form to be provided by the Corporate
Secretary of the Company.
Article IX
Miscellaneous
9.1 No Director or beneficiary shall have any right to sell, assign,
transfer, encumber or otherwise convey the right to receive payment
of any benefit payable hereunder, which payment and the right thereto
are expressly declared to be nonassignable and non-transferable. Any
attempt to do so shall be null and void and of no effect.
9.2 The Company shall not reserve or otherwise set aside funds for the
payment of its obligations hereunder, which obligations will be paid
from the general assets of the Company. Notwithstanding that Director
shall be entitled to receive the entire amount in his Deferred
Compensation Account as provided in Section 8.1, any amounts credited
to a Director's Account to be paid to such Director shall at all
times be subject to the claims of the Company's creditors.
9.3 The Board of Directors may terminate the Plan at any time or may,
from time to time, amend the Plan; provided, however, that no such
amendment or termination shall impair any rights to payments which
had been deferred under the Plan prior to the termination or
amendment.
9.4 This Plan shall be construed in accordance with and governed by the
laws of the State of Florida.
II-10
<PAGE>
FIRST AMENDMENT
TO THE DEFERRED COMPENSATION PLAN
FOR DIRECTORS OF GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the "Company")
heretofore adopted the amendment and restatement of the Deferred Compensation
Plan for Directors of Gulf Power Company (the "Plan") effective as of January
16, 1987; and
WHEREAS, the Board of Directors of the Company desires to amend the
Plan to comply with changes in the Securities and Exchange Act of 1934; and
WHEREAS, under Section 9.3 of the Plan, the Board of Directors has the
authority to amend the Plan at any time.
NOW THEREFORE, effective as of the date of execution, the Board of
Directors hereby amends the Plan as follows:
1.
Section 6.5 of the Plan shall be amended by deleting said Section in
its entirety and substituting therefore the following language:
6.5 Except as provided below, with the approval of the Compensation
Committee, a Director may amend a prior Deferral Election on a form prescribed
by the Compensation Committee not prior to the 390th day nor later than the
360th day prior to his termination of membership on the Board of Directors in
order to change (a) the form, and/or (b) the time for commencement of the
distribution of his Deferred Compensation Account in accordance with the terms
of the Plan; provided, however, that any Director who is required to file
reports pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as
amended, with respect to equity securities of The Southern Company shall not be
permitted to amend his Deferral Election during any time period for which such
Director is required to file any such reports with respect to the portion of his
Deferred Compensation Account invested in accordance with the provisions of
Section 7.3 of the Plan. Any such amendment to a prior Deferral Election, as
described in this Section 6.5, shall be contingent upon the Director's
completion of his term of membership on the Board of Directors, except in the
event of the disability or death of such Director.
2.
Except as amended herein by this First Amendment, the Plan shall remain
in full force and effect as adopted and amended by the Company prior to the
adoption of this First Amendment.
<PAGE>
IN WITNESS WHEREOF, this First Amendment has been executed pursuant to
resolutions of the Board of Directors of Gulf Power Company this 1st day of
February, 1993, to be effective as of the date of execution.
GULF POWER COMPANY
By: /s/ D. L. McCrary
-------------------
Its: President
------------------
Attest:
By: /s/ W. E. Tate
------------------------
Its: Secretary & Treasurer
-----------------------
(CORPORATE SEAL)
-2-
<PAGE>
SECOND AMENDMENT TO THE
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the
"Company') heretofore adopted the Amendment and Restatement of the Deferred
Compensation Plan for Directors of Gulf Power Company (the "Plan') effective as
of January 16, 1987; and
WHEREAS, the Board of Directors of the Company desires to
amend the Plan to address the payment of compensation in the form of stock to
Participants in the Plan; and
WHEREAS, under Section 9.3 of the Plan, the Board of Directors
has the authority to amend the Plan at any time.
NOW, THEREFORE, effective as of the date of execution set
forth below, the Board of Directors hereby amends the Plan as follows:
1.
Section 1.5 of the Plan shall be amended by deleting said
Section in its entirety and substituting therefore the following language:
1.5 "Compensation" shall mean the compensation payable to
the Directors of the Company, including retainer fees
and meeting fees, but excluding any amount paid in
the form of stock, as determined from time to time by
the Board of Directors.
2.
Section 6.3 of the Plan shall be amended by adding to the end of such
Section the following language:
Notwithstanding the foregoing, if the Compensation paid to a
Director is increased during a Plan Period, such Director
shall receive a Deferral Election Form proscribed by the
Compensation Committee and shall be entitled to make a new
deferral election regarding increased future Compensation
effective as of the date the increase in Compensation occurs.
3.
Except as amended herein by this Second Amendment, the Plan
shall remain in full force and effect as adopted and amended by the Company
prior to adoption of this Second Amendment.
<PAGE>
IN WITNESS WHEREOF, this Second Amendment has been executed
pursuant to resolutions of the Board of Directors of Gulf Power Company this
27th day of July, 1994, to be effective as of the date of execution.
GULF POWER COMPANY
By: /s/ Travis J. Bowden
Its: President
--------------------------------
ATTEST:
By: /s/ W. E. Tate
---------------------------------
Its: Secretary/Treasurer
[CORPORATE SEAL]
2
<PAGE>
THIRD AMENDMENT TO THE
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF GULF POWER COMPANY
WHEREAS, the Board of Directors of Gulf Power Company (the "Company")
heretofore adopted the amendment and restatement of the Deferred Compensation
Plan for the Directors of Gulf Power Company (the "Plan") effective as of
January 1, 1987; and
WHEREAS, under Section 9.3 of the Plan, the Board of Directors has the
authority to amend the Plan from time to time; and
WHEREAS, the Board of Directors of the Company desires to amend the
Plan to add an additional deferral feature;
NOW, THEREFORE, effective as of April 25, 1997, the Board of Directors
hereby amends the Plan as follows:
1. A new Section 1.15 is hereby added to the Plan and shall read as
follows:
1.15 "Accrued Pension" means the U.S. dollar amount of the
actuarially-determined present value of the accrued and unpaid past
service pension benefits under The Southern Company OutsideDirectors'
Pension Plan (the "Directors Pension Plan ") of a Director acting as
such at and as of December 31, 1996, as calculated as of the
termination date of the Directors Pension Plan (the "Termination
Date"), taking into account the Directors age and years and months of
past service and such other assumptions as shall be reasonable and
uniformly applied to all Directors.
2. A new Section 6.25 is hereby added to the Plan and shall read as
follows:
6.25 Deferred Pension Election
(a) Any Director, who has an Accrued Pension as of the Termination
Date, may make a single one- time election, on or before April
25, 1997 in writing and on a form to be furnished by the
Committee, to convert his or her Accrued Pension into a
deferred pension account under the Plan (a "Deferred Pension
Account").
<PAGE>
Upon making a deferred pension election (a "Deferred
Pension Election '), a new Deferred Pension Account
will be established in the Director's name and will
be credited with the amount of his or her Accrued
Pension so converted.
(b) Once made, a Deferred Pension Election cannot be changed or
revoked.
(c) A Deferred Pension Election shall defer the starting date for
the payment of the designated amount of the Director's Accrued
Pension, and any investment return credited thereon, until the
termination of the Director's membership on the Board.
(d) In the event of any such Deferred Pension Election, the form
of payment of any distribution (i.e., in a lump sum or in up
to ten approximately equal annual installments) and the
starting date of such distribution, (which may not be later
than the date which is twenty- four (24) months following the
date of termination of membership on the Board) shall be
elected at the same time. Except as herein provided, such
form-of-payment election shall not be changed or revoked.
IN WITNESS WHEREOF, this Third Amendment has been executed
pursuant to resolutions of the Board of Directors of Gulf Power Company this
25th day of April, 1997, to be effective as of the date of execution.
GULF POWER COMPANY
By: /s/ Travis J. Bowden
Its: President
---------------------
Attest:
By: /s/ W. E. Tate
----------------------
Its: Secretary/Treasurer
(Corporate Seal)
-2-
April 25, 1997
Exhibit 10(e)37
DEFERRED COMPENSATION PLAN FOR
DIRECTORS OF MISSISSIPPI POWER COMPANY
Amended and Restated Effective January 1, 2000
<PAGE>
SECTION 1
Definitions
1.1 "Beneficial Ownership" means beneficial ownership within the meaning of
Rule 13d-3 promulgated under the Exchange Act.
"Board" or "Board of Directors" means the Board of Directors of the Company.
1.3 "Business Combination" means a reorganization, merger or consolidation
or sale of Southern, or a sale of all or substantially all of
Southern's assets.
1.4 "Cash Compensation" means the annual retainer fees and meeting fees
payable to a Director in cash.
1.5 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
1.6 "Committee" means the Compensation Committee of the Board, or such
other committee as may be designated by the Board to be responsible for
administering the Plan.
1.7 "Common Stock" means the common stock of Southern, including any shares
into which it may be split, subdivided, or combined.
1.8 "Company" means Mississippi Power Company or any successor thereto.
1.9 "Company Change in Control" means the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 50% or more of the combined voting power of the
then outstanding Voting Securities of the Company; provided, however,
that for purposes of this Section 1.9, any acquisition by an Employee,
or Group composed entirely of Employees, any qualified pension plan,
any publicly held mutual fund or any employee benefit plan (or related
trust) sponsored or maintained by Southern or any corporation
Controlled by Southern shall not constitute a Change in Control;
(b) Consummation of a reorganization, merger or consolidation
of the Company (a "Company Business Combination"), in each case,
unless, following such Company Business Combination, Southern Controls
the corporation surviving or resulting from such Company Business
Combination; or
(c) Consummation of the sale or other disposition of all or
substantially all of the assets of the Company to an entity which
Southern does not Control.
1.10 "Compensation Payment Date" means the date on which compensation,
including cash retainer, meeting fees, and the Stock Retainer, is
payable to a Director or compensation would otherwise be payable to a
Director if an election to defer such compensation had not been made.
1.11 "Consummation" means the completion of the final act necessary to
complete a transaction as a matter of law, including, but not limited
to, any required approvals by the corporation's shareholders and board
of directors, the transfer of legal and beneficial title to securities
or assets and the final approval of the transaction by any applicable
domestic or foreign governments or agencies.
1.12 "Control" means, in the case of a corporation, Beneficial Ownership of
more than 50% of the combined voting power of the corporation's Voting
Securities, or in the case of any other entity, Beneficial Ownership
of more than 50% of such entity's voting equity interests.
1.13 "Deferred Cash Trust" means the Deferred Cash Compensation Trust for
Directors of The Southern Company and its Subsidiaries.
1.14 "Deferred Compensation Account" means the Prime Rate Investment
Account, the Phantom Stock Investment Account, and/or the Deferred
Stock Account.
1.15 "Deferred Pension Election" means the election by a Director under
Section 5.3 in connection with the deferral of receipt of the
Director's Pension Benefit until termination from the Board.
1.16 "Deferred Stock Account" means the bookkeeping account established
under Section 6.3 on behalf of a Director and includes shares of Common
Stock credited thereto to reflect the reinvestment of dividends
pursuant to Section 6.3(a)(iii).
1.17 "Deferred Stock Trust" means the Deferred Stock Trust for Directors of
The Southern Company and its Subsidiaries.
1.18 "Director" means a member of the Board.
1.19 "Distribution Election" means the designation by a Director of the
manner of distribution of the amounts and quantities held in the
Director's Deferred Compensation Accounts upon the director's
termination from the Board pursuant to Section 5.4.
1.20 "Effective Date" means January 1, 2000.
1.21 "Employee" means an employee of Southern or any of its subsidiaries
that are "employing companies" as defined in the Southern Company
Deferred Compensation Plan as amended and restated January 1, 2000, and
as may be amended from time to time.
1.22 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.23 "Group" has the meaning set forth in Section 14(d) of the Exchange Act.
1.24 "Incumbent Board" means those individuals who constitute the Southern
board of directors as of October 19, 1998, plus any individual who
shall become a director subsequent to such date whose election or
nomination for election by Southern's shareholders was approved by a
vote of at least 75% of the directors then comprising the Incumbent
Board. Notwithstanding the foregoing, no individual who shall become a
director of the Southern board of directors subsequent to October 19,
1998, whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule
14a-11 of the regulations promulgated under the Exchange Act) with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Southern board of directors shall be a member of
the Incumbent Board.
1.25 "Market Value" means the average of the high and low prices of the
Common Stock, as published in the Wall Street Journal in its report of
New York Stock Exchange composite transactions, on the date such Market
Value is to be determined, as specified herein (or the average of the
high and low sale prices on the trading day immediately preceding such
date if the Common Stock is not traded on the New York Stock Exchange
on such date).
1.26 "Participant" means a Director or former Director who has an unpaid
Deferred Compensation Account balance under the Plan.
1.27 "Participating Companies" means those companies whose boards of
directors have authorized the establishment of trust(s) for the funding
of their respective directors' Deferred Compensation Accounts under
their respective Deferred Compensation Plans for Directors, including
the Company.
1.28 "Pension Benefit" means the U.S. dollar amount of the
actuarially-determined present value of benefits based on a Director's
expected service at the required retirement date under The Southern
Company Outside Directors Pension Plan, as calculated as of the
Termination Date, plus accrued earnings on such amount calculated as if
invested at the Prime Interest Rate from the Termination Date, until
such amount is invested in Deferred Compensation Accounts pursuant to
the provisions of Section 5.3.
1.29 "Pension Benefit Investment Date" means the date to be determined by
the Committee, as of which the Director's Pension Benefit will be
credited to a Deferred Compensation Account in accordance with the
director's Deferred Pension Election under Section 5.3.
1.30 "Phantom Stock Investment Account" means the bookkeeping account
established pursuant to Section 6.2 in which a Director may elect to
defer Cash Compensation or make investments, and includes amounts
credited thereto to reflect the reinvestment of dividends.
1.31 "Plan" means the Deferred Compensation Plan for Directors of
Mississippi Power Company as from time to time in effect.
"Plan Period" means the period designated in Section 4.
1.33 "Person" means any individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act.
1.34 "Preliminary Change in Control" means the occurrence of any of the
following as determined by the Southern Committee: (a) Southern or the
Company has entered into a written agreement, such as, but not limited
to, a letter of intent, which, if Consummated, would result in a
Southern Change in Control or a Company Change in Control, as the case
may be; (b) Southern, the Company or any Person publicly announces an
intention to take or to consider taking actions which, if Consummated,
would result in a Southern Change in Control or a Company Change in
Control under circumstances where the Consummation of the announced
action or intended action is legally and financially possible;
(c) Any Person becomes the Beneficial Owner of fifteen percent (15%) or
more of the Common Stock; or (d) The Southern board of directors or the
board of directors of the Company has declared that a
Preliminary Change in Control has occurred.
1.35 "Prime Interest Rate" means the prime rate of interest as published in
the Wall Street Journal.
"Prime Rate Investment Account" means the bookkeeping account established
pursuant to Section 6.1 in which a Director may elect to defer Cash
Compensation or make investments, the investment return on which is
computed at the Prime Interest Rate.
1.37 "Southern" means The Southern Company.
1.38 "Southern Change in Control" means any of the following:
(a) The Consummation of an acquisition by any Person of Beneficial
Ownership of 20% or more of Southern's Voting Securities; provided,
however, that for purposes of this subsection (a), the following
acquisitions of Southern's Voting Securities shall not constitute a
Change in Control:
(i) any acquisition directly from Southern,
(ii) any acquisition by Southern,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Southern or any corporation
controlled by Southern, (iv) any acquisition by a qualified
pension plan or publicly held mutual fund, (v) any acquisition
by an Employee or Group composed exclusively of Employees, or
(vi) any Business Combination which would not otherwise
constitute a Change in Control because of the application of
clauses (i), (ii) and (iii) of Section 1.37(c);
(b) A change in the composition of Southern's board of directors
whereby individuals who constitute the Incumbent Board cease for any
reason to constitute at least a majority of Southern's board of
directors; or (c) Consummation of a Business Combination, unless,
following such Business Combination, all of the following three
conditions are met:
(i) all or substantially all of the individuals and entities
who held Beneficial Ownership, respectively, of Southern's
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, 65% or
more of the combined voting power of the Voting Securities of
the corporation surviving or resulting from such Business
Combination, (including, without limitation, a corporation
which as a result of such transaction holds Beneficial
Ownership of all or substantially all of Southern's Voting
Securities or all or substantially all of Southern's assets)
(such surviving or resulting corporation to be referred to as
"Surviving Company"), in substantially the same proportions as
their ownership, immediately prior to such Business
Combination, of Southern's Voting Securities; (ii) no Person
(excluding any corporation resulting from such Business
Combination, any qualified pension plan, publicly held mutual
fund, Group composed exclusively of employees or employee
benefit plan (or related trust) of Southern, its subsidiaries,
or Surviving Company) holds Beneficial Ownership, directly or
indirectly, of 20% or more of the combined voting power of the
then outstanding Voting Securities of Surviving Company except
to the extent that such ownership existed prior to the
Business Combination; and (iii) at least a majority of the
members of the board of directors of Surviving Company were
members of the Incumbent Board at the earlier of the date of
execution of the initial agreement, or of the action of the
Southern board of directors, providing for such Business
Combination.
1.39 "Southern Committee" means Chairman of the Southern board of directors,
Chief Financial Officer of Southern, General Counsel of Southern, and
the Chairman of the "Administrative Committee", as defined in Section
3.1 of the Southern Company Deferred Compensation Plan, as restated and
amended effective January 1, 2000.
"Stock Retainer" means the annual Board retainer fee that is paid to the
Director in the form of Common Stock.
1.40 "Termination Date" means January 1, 1997, the date as of which The
Southern Company Outside Directors Pension Plan was effectively
terminated.
1.41 "Trust Administrator" means the individual or committee that is
established to in the Deferred Stock Trust and the Deferred Cash Trust,
to administer such trusts on behalf of the Participating Companies.
1.42 "Voting Securities" shall mean the outstanding voting securities of a
corporation entitling the holder thereof to vote generally in the
election of such corporation's directors.
Where the context requires, words in the masculine gender shall include the
feminine gender, words in the singular shall include the plural, and words in
the plural shall include the singular.
SECTION 2
Purpose
The Plan provides a method of deferring payment to a Director of his
compensation until a date following the termination of his membership on the
Board.
SECTION 3
Eligibility
An individual who serves as a Director and is not otherwise actively employed by
the Company or any of its subsidiaries or affiliates is eligible to participate
in the Plan.
SECTION 4
Plan Periods
Except as pertains to a Director's initial Plan Period, all Plan Periods shall
be on a calendar year basis The initial Plan Period applicable to any person
elected to the Board who was not a Director on the preceding December 31, shall
begin on the first day of such Director's membership on the Board. The initial
Plan Period under this amended and restated plan shall begin January 1, 2000.
Except as otherwise provided herein, the terms of the Plan in effect prior to
the effective date of this Plan shall continue to be applicable to deferrals
made pursuant to the Plan prior to January 1, 2000.
SECTION 5
Elections
5.1 Cash Compensation
(a) Prior to the beginning of a Plan Period, a Director may direct
that payment of all or any portion of Cash Compensation that
otherwise would be paid to the Director for the Plan Period,
be deferred in amounts as designated by the Director, and
credited to (i) a Prime Rate Investment Account, (ii) a
Phantom Stock Investment Account, or (iii) a Deferred Stock
Account. Upon the Director's termination from the Board of
Directors, such deferred compensation and accumulated
investment return held in the Director's Deferred Compensation
Accounts shall be distributed to the Director in accordance
with the Director's Distribution Election and the provisions
of Section 7.
(b) An election to defer Cash Compensation is irrevocable. Such an
election shall continue from Plan Period to Plan Period unless
the Director changes his election to defer cash compensation
paid in a future Plan Period prior to the beginning of such
future Plan Period.
(c) Cash Compensation deferred under this Section 5.1 shall be
invested in Deferred Compensation Accounts as directed by the
Director on the Compensation Payment Date.
5.2 Stock Retainer
(a) Prior to the beginning of a Plan Period, a Director may direct
that payment of all of the Stock Retainer that otherwise would
be paid to the Director for the Plan Period, be deferred in
amounts as designated by the Directors, and credited to his
Deferred Stock Account, such deferred compensation and
accumulated investment return held in the Director's Deferred
Stock Account shall be distributed to the Director in
accordance with the Director's Distribution Election and the
provisions of Section 7.
(b) An election to defer the Stock Retainer is irrevocable. Such
an election shall continue from Plan Period to Plan Period
unless the Director changes his election to defer Stock
Retainer paid in a future Plan Period prior to the beginning
of such future Plan Period.
(c) Stock Retainer deferred under this Section 5.2 shall be
invested in Deferred Stock Account as directed by the Director
on the Compensation Payment Date.
5.3 Deferred Pension Election
Any Director, who had a Pension Benefit as of the Termination Date,
made a single one-time election, , to credit all of his Pension Benefit
into a Deferred Compensation Account. The Pension Benefit was credited
on the Pension Benefit Investment Date, at the election of the
Director, to (i) a Prime Rate Investment Account or (ii) a Phantom
Stock Investment Account. Upon the Director's termination from the
Board, such Pension Benefit and accumulated investment return held in
the Director's Deferred Compensation Accounts shall be distributed to
the Director in accordance with the Director's Distribution Election
and the provisions of Section 7.
5.4 Distribution Election
(a) Prior to the establishment of a Deferred Compensation Account
for a Director under this amended and restated plan, the
Director may elect that upon termination from the Board of
Directors the values and quantities held in the Directors
Deferred Compensation Accounts be distributed to the Director,
pursuant to the provisions of Section 7, in a single
distribution or in a series of annual installments not to
exceed ten (10). The time for the commencement of distribution
shall not be later than the first day of the month coinciding
with or next following the second anniversary of termination
of Board membership.
(b) A Distribution Election is irrevocable except that a Director
may amend the Distribution Election then in effect not prior
to the 390th day or later than the 360th day prior to his
termination of Board membership.
5.5 Beneficiary Designation
A Director or former Director may designate a beneficiary to receive
distributions from the Plan in accordance with the provisions of
Section 7 upon the death of the director. The beneficiary designation
may be changed by a Director or former Director at any time, and
without the consent of the prior beneficiary.
5.6 Form of Election
All elections pursuant to the provisions of this Section 5 of the Plan
shall be made in writing to the Secretary of the Company on a form or
forms available upon request of the Secretary.
SECTION 6
Accounts
6.1 Prime Rate Investment Account
A Prime Rate Investment Account shall be established for each Director
electing deferral or investment of Cash Compensation at the Prime
Interest Rate. The amount directed by the Director to such account
shall be credited to it as of the Pension Benefit Investment Date or
Compensation Payment Date, as applicable, and credited thereafter with
interest computed using the Prime Interest Rate. Interest shall be
computed from the date such compensation is credited to the account and
compounded quarterly at the end of each calendar quarter. The Prime
Interest Rate in effect on the first day of a calendar quarter shall be
deemed the Prime Interest Rate in effect for that entire quarter.
Interest shall accrue and compound on any balance until the amount
credited to the account is fully distributed.
6.2 Phantom Stock Investment Account
The Phantom Stock Investment Account established for each Director
electing deferral of Cash Compensation for investment at the Common
Stock investment rate shall be credited with the number of shares
(including fractional shares rounded to the nearest ten-thousandth) of
Common Stock which could have been purchased on the Pension Benefit
Investment Date or the Compensation Payment Date, as applicable, as
determined by dividing the applicable compensation by the Market Value
on such date. On the date of the payment of dividends on the Common
Stock, the Director's Phantom Stock Investment Account shall be
credited with additional shares (including fractional shares rounded to
the nearest ten-thousandth) of Common Stock, as follows:
(a) In the case of cash dividends, such additional shares as would
have been purchased as of the Common Stock dividend record
date as if the credited shares had been outstanding on such
date and dividends reinvested thereon under the Southern
Investment Plan;
(b) In the case of dividends payable in property other than cash
or Common Stock, such additional shares as could be purchased
at the Market Value as of the date of payment with the fair
market value of the property which would have been payable if
the credited shares had been outstanding; and
(c) In the case of dividends payable in Common Stock, such
additional shares as would have been payable on the credited
shares as if they had been outstanding.
6.3 Deferred Stock Account
(a) A Director's Deferred Stock Account will be credited:
(i) with the number of shares of Common Stock (rounded to
the nearest ten thousandth of a share) determined by
dividing the amount of Cash Compensation subject to
deferral or investment in the Deferred Stock Account
by the average price paid by the Trustee of the
Deferred Stock Trust for shares of Common Stock with
respect to the Pension Benefit Investment Date or the
Compensation Payment Date, as applicable, as reported
by the Trustee, or, if the Trustee shall not at such
time purchase any shares of Common Stock, by the
Market Value on such date;
(ii) as of the date on which Stock Retainer is paid, the
shares of Common Stock payable to the Director as his
Stock Retainer; and
(iii) as of each date on which dividends are paid on the
Common Stock, with the number of shares of Common
Stock (rounded to the nearest ten thousandth of a
share) determined by multiplying the number of shares
of Common Stock credited in the Director's Deferred
Stock Account on the dividend record date, by the
dividend rate per share of Common Stock, and dividing
the product by the price per share of Common Stock
attributable to the reinvestment of dividends on the
shares of Common Stock held in the Deferred Stock
Trust on the applicable dividend payment date or, if
the Trustee of the Deferred Stock Trust has not
reinvested in shares of Common Stock on the
applicable dividend reinvestment date, the product
shall be divided by the Market Value on the dividend
payment date.
(b) If Southern enters into transactions involving stock splits,
stock dividends, reverse splits or any other recapitalization
transactions, the number of shares of Common Stock credited to
a Director's Deferred Stock Account will be adjusted (rounded
to the nearest ten thousandth of a share) so that the
Director's Deferred Stock Account reflects the same equity
percentage interest in Southern after the recapitalization as
was the case before such transaction.
(c) If at least a majority of Southern's stock is sold or
exchanged by its shareholders pursuant to an integrated plan
for cash or property (including stock of another corporation)
or if substantially all of the assets of Southern are disposed
of and, as a consequence thereof, cash or property is
distributed to Southern's shareholders, each Director's
Deferred Stock Account will, to the extent not already so
credited under this Section 6.3, be (i) credited with the
amount of cash or property receivable by a Southern
shareholder directly holding the same number of shares of
Common Stock as is credited to such Director's Deferred Stock
Account and (ii) debited by that number of shares of Common
Stock surrendered by such equivalent Southern shareholder.
(d) Each Director who has a Deferred Stock Account also shall be
entitled to provide directions to the Trust Administrator to
cause such committee to similarly direct the Trustee of the
Deferred Stock Trust to vote, on any matter presented for a
vote to the shareholders of Southern, that number of shares of
Common Stock held by the Deferred Stock Trust equivalent to
the number of shares of Common Stock credited to the
Director's Deferred Stock Account. Such committee shall
arrange for distribution to all Directors in a timely manner
of all communications directed generally to the Southern
shareholders as to which their votes are solicited.
SECTION 7
Distributions
7.1 Upon termination of a Director's membership on the Board, the amount
credited to a Director's Deferred Compensation Accounts will be paid to
the Director or his beneficiary, as applicable. The amount credited to
a Director's Prime Rate Investment Account and Phantom Stock Investment
Account shall be paid in cash and the amount credited to his Deferred
Stock Account shall, except as otherwise provided in Section 6.3(c),
Section 9.5, or to the extent the Company is otherwise, in the
reasonable judgment of the Committee, precluded from doing so, be paid
in shares of Common Stock (with any fractional share interest therein
paid in cash to the extent of the then Market Value thereof). Such
payments shall be from the general assets of the Company (including the
Deferred Cash Trust and the Deferred Stock Trust) in accordance with
this Section 7.
7.2 Unless other arrangements are specified by the Committee on a uniform
and nondiscriminatory basis, deferred amounts shall be paid in the form
of (i) a lump sum payment, or (ii) in approximately equal annual
installments, as elected by the Director pursuant to the provision of
Section 5.4; provided, however, that payments shall be made only in a
single lump sum if payment commences due to termination for cause. Such
payments shall be made (or shall commence) as soon as practicable
following the termination of Board membership or, if so elected in the
Distribution Election, up to twenty-four (24) months following such
termination.
In the event a Director elected to receive the balance of his Deferred
Compensation Accounts in a lump sum, distribution shall be made on the
first day of the month selected by the Director on his Distribution
Election, or as soon as reasonably possible thereafter. If the Director
elected to receive annual installments, the first payment shall be made
on the first day of the month selected by a Director, or as soon as
reasonably possible thereafter, and shall be equal to the balance in
the Director's Deferred Compensation Accounts on such date divided by
the number of annual installment payments. Each subsequent annual
payment shall be an amount equal to the balance in the Director's
Deferred Compensation Accounts on the date of payment divided by the
number of remaining annual payments and shall be paid on the
anniversary of the preceding date of payment. The Market Value of any
shares of Common Stock credited to a Director's Phantom Stock
Investment Account shall be determined as of the twenty-fifth (25th)
day of the month immediately preceding the date of any lump sum or
installment distribution.
Upon the death of a Director, or a former Director prior to the payment
of all amounts credited to the Director's Deferred Compensation
Accounts, the unpaid balance shall be paid in the sole discretion of
the Committee (i) in a lump sum to the designated beneficiary of such
Director or former Director within thirty (30) days of the date of
death (or as soon as reasonably possible thereafter) or (ii) in
accordance with the Distribution Election made by such Director or
former Director. In the event a beneficiary designation has not been
made, or the designated beneficiary is deceased or cannot be located,
payment shall be made to the estate of the Director or former Director.
The Market Value of any shares of Common Stock credited to a Director's
Phantom Stock Investment Account shall be determined as of the
twenty-fifth (25th) day of the month immediately preceding the date of
any lump sum or installment distribution.
SECTION 8
Change in Control and Other Special Provisions
8.1 Notwithstanding any other terms of the Plan to the contrary, following
a Southern Change in Control or a Company Change in Control, the
provisions of this Section 8 shall apply to the payment of benefits
under the Plan with respect to any Director who is a Participant on
such date.
8.2 The Deferred Cash Trust and the Deferred Stock Trust (collectively
"Trusts") have been established to hold assets of the Participating
Companies under certain circumstances as a reserve for the discharge of
the Company's obligations under the Plan. In the event of a Preliminary
Change in Control of Southern or the Company, the Company shall be
obligated to immediately contribute such amounts to the Trusts as may
be necessary to fully fund all benefits payable under the Plan in
accordance with the procedures set forth in Section 8.3 hereof. In
addition, in order to provide the added protections for certain
individuals in accordance with Paragraph 7(c) of the Trust, the Company
may fund the Trusts prior to a Preliminary Change in Control of
Southern or the Company in accordance with the terms of the Trusts. All
assets held in the Trusts remain subject only to the claims of the
Participating Companies' general creditors whose claims against the
Participating Companies are not satisfied because of the Participating
Companies' bankruptcy or insolvency (as those terms are defined in the
Trust). No Participant has any preferred claim on, or beneficial
ownership interest in, any assets of the Trusts before the assets are
paid to the Participant and all rights created under the Trusts, as
under the Plan, are unsecured contractual claims of the Participant
against the Company.
8.3 As soon as practicable following either a Preliminary Change in Control
of Southern or of the Company, the Company shall contribute an amount
based upon the funding strategy adopted by the Trust Administrator
necessary to fulfill the Company's obligations pursuant to this Section
8. In the event of a dispute over such actuary's determination, the
Company and any complaining Participant(s) shall refer such dispute to
an independent, third party actuarial consultant, chosen by the Company
and such Participant. If the Company and the Participant cannot agree
on an independent, third party actuarial consultant, the actuarial
consultant shall be chosen by lot from an equal number of actuaries
submitted by the Company and the applicable Trustee. Any such referral
shall only occur once in total and the determination by the third-party
actuarial consultant shall be final and binding upon both parties. The
Company shall be responsible for all of the fees and expenses of the
independent actuarial consultant.
8.4 In the event of a Southern Change in Control or a Company Change in
Control, notwithstanding anything to the contrary in the Plan, upon
termination as a Director, that amount in the Deferred Compensation
Plan Account(s) of a Participant who was a Director determined as of
such Change in Control shall be paid out in a lump sum if such
Participant makes an election pursuant to procedures established by the
Trust Administrator, in its sole and absolute discretion. If no such
election is made, the Director shall receive payment of his Accounts
solely in accordance with Section 7.
SECTION 9
General Provisions
9.1 In the event that the Company shall decide to establish an advance
accrual reserve on its books against the future expense of payments
from any Deferred Compensation Accounts, such reserve shall not under
any circumstances be deemed to be an asset of this Plan but, at all
times, shall remain a part of the general assets of the Company,
subject to claims of the Company's creditors.
9.2 A person entitled to any amount under this Plan shall be a general
unsecured creditor of the Company with respect to such amount.
Furthermore, a person entitled to a payment or distribution with
respect to a Deferred Compensation Account shall have a claim upon the
Company only to the extent of the balance in his Deferred Compensation
Accounts.
9.3 All commissions, fees, and expenses that may be incurred in operating
the Plan will be paid by the Company.
9.4 The Company will pay its prorated share of all commissions, fees, and
expenses that may be incurred in operating any trust(s) established
under the Plan (including the Deferred Stock Trust and the Deferred
Cash Trust).
9.5 Notwithstanding any other provision of this Plan: (i) elections under
this Plan may only be made by Directors while they are directors of the
Company; (with the exception of the designation of beneficiaries) and
(ii) distributions otherwise payable to a Director in the form of
Common Stock shall be delayed and/or instead paid in cash in an amount
equal to the fair market value thereof if such payment in Common Stock
would violate any federal or State securities laws (including Section
16(b) of the Securities Exchange Act of 1934, as amended) and/or rules
and regulations promulgated thereunder.
9.6 Directors, their legal representatives and their beneficiaries shall
have no right to anticipate, alienate, sell, assign, transfer, pledge
or encumber their interests in the Plan, nor shall such interests be
subject to attachment, garnishment, levy or execution by or on behalf
of creditors of the Directors or of their beneficiaries.
SECTION 10
Administration
Subject to the express provisions of the Plan, the Committee shall have the
exclusive right to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations necessary or
advisable for the administration of the Plan. The decisions, actions and records
of the Committee shall be conclusive and binding upon the Company and all
persons having or claiming to have any right or interest in or under the Plan.
The Committee may delegate to such officers, employees, or departments of the
Company or Southern, such authority, duties, and responsibilities of the
Committee as it, in its sole discretion, considers necessary or appropriate for
the proper and efficient operation of the Plan, including, without limitation,
(i) interpretation of the Plan, (ii) approval and payment of claims, and (iii)
establishment of procedures for administration of the Plan.
SECTION 11
Amendment, Termination and Effective Date
11.1 Amendment of the Plan
Except for the provisions of Section 8, which may not be amended
following a Southern Change in Control or Company Change in Control,
and subject to the provisions of Section 11.3, the Plan may be wholly
or partially amended or otherwise modified at any time by written
action of the Board of Directors.
11.2 Termination of the Plan
Subject to the provisions of Section 11.3 herein, the Plan may be
terminated at any time by written action of the Board of Directors.
11.3 No Impairment of Benefits
Notwithstanding the provisions of Sections 11.1 and 11.2, herein no
amendment to or termination of the Plan shall impair any rights to
benefits that have accrued hereunder.
11.4 Governing Law
This Plan shall be construed in accordance with and governed by the
laws of the State of Mississippi.
IN WITNESS WHEREOF, the Plan, as amended and restated effective January
1, 2000, has been executed pursuant to resolutions of the Board of Directors of
Mississippi Power Company, this 23rd day of February, 2000.
MISSISSIPPI POWER COMPANY
By: ________________________________
Attest:
By: ___________________________
Exhibit 21(a)
Subsidiaries of The Southern Company
The voting stock of each company shown indented is owned by the company
immediately above which is not indented to the same degree. Subsidiaries not
indented are directly owned by The Southern Company.
<TABLE>
<CAPTION>
Name of Company Jurisdiction of Organization
<S> <C> <C> <C> <C> <C> <C>
Alabama Power Company...............................................................................................Alabama
Alabama Energy Providers, Inc..................................................................................Alabama
Alabama Power Capital Trust I.................................................................................Delaware
Alabama Power Capital Trust II................................................................................Delaware
Alabama Power Capital Trust III...............................................................................Delaware
Alabama Power Capital Trust IV................................................................................Delaware
Alabama Power Capital Trust V.................................................................................Delaware
Alabama Property Company.......................................................................................Alabama
Southern Electric Generating Company...........................................................................Alabama
(50% - Alabama Power Company; 50% - Georgia Power Company)
Georgia Power Company...............................................................................................Georgia
Georgia Power Capital Trust I.................................................................................Delaware
Georgia Power Capital Trust II................................................................................Delaware
Georgia Power Capital Trust III...............................................................................Delaware
Georgia Power Capital Trust IV................................................................................Delaware
Georgia Power Capital Trust V.................................................................................Delaware
Georgia Power Capital Trust VI................................................................................Delaware
Georgia Power L.P. Holdings Corp...............................................................................Georgia
Georgia Power Capital, L.P..................................................................................Delaware
Piedmont-Forrest Corporation...................................................................................Georgia
Southern Electric Generating Company...........................................................................Alabama
(50% - Alabama Power Company; 50% - Georgia Power Company)
Gulf Power Company....................................................................................................Maine
Gulf Power Capital Trust I....................................................................................Delaware
Gulf Power Capital Trust II...................................................................................Delaware
Gulf Power Capital Trust III..................................................................................Delaware
Mississippi Power Company.......................................................................................Mississippi
Mississippi Power Capital Trust I.............................................................................Delaware
Mississippi Power Capital Trust II............................................................................Delaware
Mississippi Power Capital Trust III...........................................................................Delaware
Mississippi Power Services, Inc............................................................................Mississippi
Savannah Electric and Power Company.................................................................................Georgia
Savannah Electric Capital Trust I.............................................................................Delaware
Southern Communications Services, Inc..............................................................................Delaware
Southern Company Energy Solutions, Inc..............................................................................Georgia
Southern Company Services, Inc......................................................................................Alabama
Southern Electric Railroad Company.................................................................................Delaware
<PAGE>
- 2 -
Mobile Energy Services Holdings, Inc................................................................................Alabama
Mobile Energy Services Company, L.L.C........................................................................Alabama
(99% - Mobile Energy Services Holdings, Inc.; 1% -
Southern Energy Resources, Inc.)
Southern Energy, Inc.........Delaware
Southern Energy Resources, Inc................................................................................Delaware
SEI Operadora de Argentina, S.A............................................................................Argentina
(99.99% - Southern Energy Resources, Inc.; .01% - Holdings)
Southern Electric International Asia, Inc...................................................................Delaware
Southern Electric International, GmbH........................................................................Austria
Asociados de Electricidad, S.A...............................................................................Argentina
Southern Electric International, Inc..........................................................................Delaware
Southern Electric, Inc....Delaware
Southern Energy North America, Inc............................................................................Delaware
SEI Michigan Holdings, Inc..................................................................................Delaware
SEI Michigan, LLC Delaware
Southern Energy North America Generating, Inc...............................................................Delaware
SEI State Line, Inc. ....................................................................................Delaware
State Line Holding Corporation..........................................................................Delaware
State Line Energy, L.L.C..............................................................................Indiana
(60% - SEI State Line, Inc.; 40% - State Line Holding Corporation)
Southern Energy New York, G.P., Inc.......................................................................Delaware
Southern Energy Hudson Valley Investments, Ltd............................................................Delaware
Southern Energy Bowline, L.L.C..........................................................................Delaware
(99% - Southern Energy Hudson Valley Investments, Inc.;
1% - Southern Energy New York, G.P., Inc.)
Southern Energy Lovett, L.L.C...........................................................................Delaware
(99% - Southern Energy Hudson Valley Investments, Inc.;
1% - Southern Energy New York, G.P., Inc.)
Southern Energy NY-Gen, L.L.C...........................................................................Delaware
(99% - Southern Energy Hudson Valley Investments, Inc.;
1% - Southern Energy New York, G.P., Inc.)
Southern Energy Bay Area Investments, Inc.................................................................Delaware
Southern Energy Golden State Holding Inc..................................................................Delaware
Southern Energy California, L.L.C.......................................................................Delaware
(50% - Southern Energy Bay Area Investments; 50% -
Southern Energy Golden State Holdings, Inc.)
Southern Energy Delta, L.L.C.........................................................................Delaware
Southern Energy Potrero, L.L.C.......................................................................Delaware
Southern Energy New England Investments, Inc..............................................................Delaware
Southern Energy New England (G.P.), Inc...................................................................Delaware
Southern Energy Canal, L.L.C............................................................................Delaware
(99% - Southern Energy New England Investments, Inc.; 1% -
Southern Energy New England (G.P.), Inc.)
Southern Energy Kendall, L.L.C..........................................................................Delaware
(99% - Southern Energy New England Investments, Inc.; 1% -
Southern Energy New England (G.P.), Inc.)
<PAGE>
- 3 -
Southern Energy Canal III, L.L.C........................................................................Delaware
(99% - Southern Energy New England Investments, Inc.; 1% -
Southern Energy New England (G.P.), Inc.)
SEI Wisconsin Holdings, Inc...............................................................................Delaware
SEI Wisconsin, L.L.C....................................................................................Delaware
Southern Energy Texas (G.P.), Inc.........................................................................Delaware
Southern Energy Southwest Investments, Inc................................................................Delaware
Southern Energy Central Texas, L.P......................................................................Delaware
(99% - Southern Energy Southwest Investments, Inc.; 1% Southern
Energy Texas (G.P.), Inc.)
SEI Texas, L.P......Delaware
(99% - Southern Energy Southwest Investments, Inc.;
1% Southern Energy Texas (G.P.), Inc.)
Mobile Development Company..................................................................................Delaware
Southern Energy Ventures, Inc...............................................................................Delaware
Southern Energy Trading and Marketing, Inc................................................................Delaware
SC Energy Ventures, Inc..................................................................................Georgia
Southern Company Energy Marketing L.P................................................................Delaware
(59.4% - SC Energy Ventures, Inc.; 39.6% - Domestic Corporation;
1% - Southern Company Energy Marketing G.P., L.L.C.)
Southern Company Retail Energy Marketing L.P.......................................................Delaware
(99% - Southern Company Energy Marketing L.P.; 1% -
Southern Company Energy Marketing G.P., L.L.C.)
Southern Producer Services, LLP......................................................................Delaware
(99% - SC Energy Ventures, Inc.; 1% - SC Ashwood Holdings, Inc.)
Southern Energy Retail Trading and Marketing, Inc.......................................................Delaware
SC Ashwood Holdings, Inc...................................................................................Georgia
Southern Company Energy Marketing G.P., L.L.C...........................................................Delaware
(60% - SC Ashwood Holdings, Inc.; 40% - Domestic Corporation)
SEI Birchwood, Inc....Delaware
Birchwood Power Partners, LP..............................................................................Delaware
(50% - SEI Birchwood, Inc.; 50% - Domestic Corporation)
Greenhost, Inc........Delaware
(50% - SEI Birchwood, Inc.; 50% - Domestic Corporation)
SEI Hawaiian Cogenerators, Inc..............................................................................Delaware
Southern Energy-Cajun, Inc..................................................................................Delaware
SEI New England Holding Corp................................................................................Delaware
SEI New England, Inc. Delaware
Southern Energy New England, L.L.C........................................................................Delaware
(50% - SEI New England Holding Corp; 50% - SEI New England Inc.)
Southern Energy Wichita Falls Management G.P., Inc..........................................................Delaware
Southern Energy Wichita Falls Investment, Inc...............................................................Delaware
Southern Energy Wichita Falls, L.P........................................................................Delaware
(99% - Southern Energy Wichita Falls Investment, Inc.; 1% -
Southern Energy Wichita Falls Management G.P., Inc.)
Southern Energy International, Inc............................................................................Delaware
<PAGE>
- 4 -
Southern Energy do Brazil Ltda................................................................................Brazil
(99.99% - Southern Energy International, Inc.; .1% -
Southern Energy Resources, Inc.)
Southern Energy - Asia, Inc.................................................................................Delaware
Southern Energy Asia Ventures, Inc........................................................................Delaware
Consolidated Electric Power Asia Limited...................................................................Bermuda
(90.0% - Southern Energy - Asia, Inc.; 10%
Southern Energy Asia Ventures, Inc.) (NOTE 1)
CEPA Pagbilao Limited..................................................................................Hong Kong
Southern Energy Holdings Philippines, Inc.........................................................Philippines
(71.94% - CEPA Pagbilao Limited; 18.08% - CEPA Mobile
Power Systems (BVI) Corporation; 9.98% - Navotas II
Holdings (BVI) Corp.; 0.000022% - CEPA Navotas I Limited)
Southern Energy Quezon, Inc.....................................................................Philippines
(87.22% - Southern Energy Holdings Philippines, Inc;
12.78% Third parties)
Southern Energy Mobile, Inc.....................................................................Philippines
CEPA Services Corp............................................................................Philippines
Southern Energy Navotas II Power, Inc...........................................................Philippines
Southern Energy China, Ltd................................................................British Virgin Islands
CEPA Navotas I Limited.................................................................................Hong Kong
Southern Energy Project Holdings Philippines, Inc.................................................Philippines
Southern Energy Navotas, Inc......................................................................Philippines
(60.1%- CEPA Navotas I Limited; 29.9% Southern Energy
Holdings Philippines, Inc.; 10% -Third party)
Navotas II Holdings (BVI) Corp............................................................British Virgin Islands
CEPA Mobile Power Systems (BVI) Corporation...............................................British Virgin Islands
CEPA Guangxi Energy Limited............................................................................Hong Kong
CEPA Eastern Power Plant Limited..........................................................British Virgin Islands
CEPA Construction (Hong Kong) Limited..................................................................Hong Kong
Sual Construction Corporation.....................................................................Philippines
Southern Energy Resources and Development Corporation.............................................Philippines
(40% - CEPA Construction (Hong Kong) Limited; 60% -
Edgardo Bautista)
CEPA International Finance Corporation....................................................British Virgin Islands
Stenus Limited Jersey
Southern Energy (Shajiao C) Limited.................................................................Hong Kong
(79.99% - CEPA International Finance Corporation; 0.01% - Stenus
Limited; 20% - Third parties)
Guangdong Guanghope Power Co., Ltd................................................Peoples Republic of China
(40% - Southern Energy (Shajiao C) Limited;
60% - Third party)
CEPA Pangasinan Electric Limited..........................................................British Virgin Islands
Southern Energy Pangasinan, Inc...................................................................Philippines
(91.91% - CEPA Pangasinan Electric Limited; 8.09% - Third parties)
Southern Energy Sual Holdings, Inc................................................................Philippines
CEPA Pakistan (BVI) Limited...............................................................British Virgin Islands
CEPA Energy Pakistan Limited.........................................................................Pakistan
<PAGE>
- 5 -
CEPA Nominee (BVI) Limited................................................................British Virgin Islands
Tranquil Star Corporation.................................................................British Virgin Islands
CEPA Thailand (BVI) Limited............................................................British Virgin Islands
CEPA India (BVI) Limited..................................................................British Virgin Islands
CEPA Investment (Mauritius) Limited.................................................................Mauritius
CEPA Operations, (Hong Kong) Limited...................................................................Hong Kong
CEPA Operations (Philippines) Corp................................................................Philippines
CEPA Project Management and Engineering (BVI) Limited.....................................British Virgin Islands
CEPA Fuels Limited British Virgin Islands
Marsford Investments Pte Ltd........................................................................Singapore
Allied Queensland Coalfields Pty Ltd.)..............................................................Australia
(95.17% - CEPA Fuels Limited; 4.83% - Marsford Investments Pte Ltd.)
Aberdare Collieries Pty Ltd.......................................................................Australia
New Whitwood Collieries Pty Ltd.................................................................Australia
Riverview Coal Terminal Pty Ltd.................................................................Australia
AQC (Kogan Creek) Pty Ltd.......................................................................Australia
AQC (Wilkie Creek) Pty Ltd......................................................................Australia
Baralaba Coal Pty Ltd.............................................................................Australia
Lemon Grove Investments Pty Ltd...................................................................Australia
Tiaro Coal Pty Ltd................................................................................Australia
CEPA Australia (BVI) Limited...........................................................................Australia
CEPA Holding Australia Pty Ltd......................................................................Australia
CEPA (Kogan Creek) Holding Pty Ltd................................................................Australia
CEPA (Kogan Creek) Leasing I Pty Ltd............................................................Australia
CEPA (Kogan Creek) Leasing II Pty Ltd...........................................................Australia
CEPA (Kogan Creek) Leasing III Pty Ltd..........................................................Australia
CEPA (Kogan Creek) Leasing IV Pty Ltd...........................................................Australia
Kogan Creek Power Project Joint Venture.......................................................Australia
(12% - CEPA (Kogan Creek) Leasing I Pty Ltd.; 12% -
CEPA (Kogan Creek) Leasing II Pty Ltd.; 25% - CEPA
(Kogan Creek) Leasing III Pty Ltd.; 51% - CEPA (Kogan
Creek) Leasing IV Pty Ltd.)
Southern Electric International - Netherlands, BV........................................................Netherlands
Southern Electric International Finance, Inc................................................................Delaware
Southern Energy Europe, Inc.................................................................................Delaware
Southern Energy UK Generation Limited..............................................................England & Wales
Southern Energy Development - Europe Limited.......................................................England & Wales
Southern Energy Development Hungaria, L.L.C................................................................Hungary
The Southern Company - Europe, plc.................................................................England & Wales
(99% - Southern Energy Europe, Inc., 1% - Southern Energy Inc.)
Southern Energy Netherlands, Ltd..........................................................................Delaware
Southern Energy Europe Investments, Ltd.................................................................Delaware
Southern Energy Netherlands, B.V. ................................................................Netherlands
(50% - Southern Energy Netherlands, Ltd.; 50% - Southern
Energy Europe Investments Ltd.)
Southern Energy - Europe B.V.........................................................................Netherlands
Southern Energy Netherlands Management Company, Inc.....................................................Delaware
Southern Electric International - Europe, Inc.............................................................Delaware
<PAGE>
- 6 -
SEI Beteilligungs, GmbH..................................................................................Germany
P.T. Tarahan Power Company..........................................................................Indonesia
(55% - SEI Beteilligungs, GmbH; 2.5% - Domestic Corporation;
42.5% - Foreign Company)
Southern Energy Europe Investments, Ltd.................................................................Delaware
SEI Europe UK Limited.........................................................................England & Wales
(50% - Southern Energy Europe Investments, Ltd.; 50%-
Southern Electric International - Europe, Inc.)
SWEB Holdings UK............................................................................England & Wales
(49% - SEI Europe UK Limited; 51% - Domestic Corporation)
SWEB Holdings Limited.....................................................................England & Wales
Southern Investment UK plc..............................................................England & Wales
SWEB Energy Purchasing Business Limited...............................................England & Wales
South Western Electricity plc (NOTE 1)................................................England & Wales
SWEB Investments Limited...........................................................England & Wales
South Western Helicopters Limited..................................................England & Wales
AZTEC Insurance Limited...................................................................Guernsey
SWEB Insurance Limited....................................................................Guernsey
SWEB Investments 1996 Limited......................................................England & Wales
Croeso Systems Development Limited...............................................England & Wales
(50% - SWEB Investments 1996 Limited)
ebusiness South West Limited.....................................................England & Wales
(45% - SWEB Investments 1996 Limited)
SWEB Property Investments Limited..................................................England & Wales
SWEB Property Developments Limited.................................................England & Wales
Temple Back Developments Limited.................................................England & Wales
(49.0% - SWEB Property Developments Limited)
Weston-Super-Mare Developments Limited.........................................England & Wales
South Western Power Limited........................................................England & Wales
South Western Power Investments Limited..........................................England & Wales
Teeside Power Limited..........................................................England & Wales
(7.7% - South Western Power Investments Limited)
Wind Electric Limited..........................................................England & Wales
(11.7% - South Western Power Investments Limited)
WindResources Limited..........................................................England & Wales
(45% - South Western Power Investments Limited)
Carland Cross Limited........................................................England & Wales
Coal Clough Limited..........................................................England & Wales
Winterton Power Limited........................................................England & Wales
(25% - South Western Power Investments Limited)
Green Electron Limited...........................................................England & Wales
(90% - South Western Power Limited;
10% - Foreign Corporation)
SWEB Data Collection Services Limited..............................................England & Wales
Non-Fossil Purchasing Agency Limited...............................................England & Wales
ElectraLink Limited................................................................England & Wales
(6.19% - South Western Electricity plc)
South Western Energy Limited.......................................................England & Wales
<PAGE>
- 7 -
South Western Natural Gas Limited..................................................England & Wales
SWEB Finance Limited...............................................................England & Wales
SWEB Gas Limited...................................................................England & Wales
REC Collect Limited................................................................England & Wales
(25% - South Western Electricity plc)
South Western Electricity Share Scheme Trustees Limited............................England & Wales
Electricity Pensions Trustee Limited...............................................England & Wales
(5% - South Western Electricity plc)
St. Clements Services Limited......................................................England & Wales
(9.1% - South Western Electricity plc)
Electricity Pensions Limited.......................................................England & Wales
(Limited by Guarantee - South Western Electricity plc)
ESN Holdings Limited...............................................................England & Wales
(4.5% - South Western Electricity plc)
Electricity Association Limited....................................................England & Wales
(5.9% - South Western Electricity plc)
Northmere Limited..................................................................England & Wales
(Limited by Guarantee - South Western Electricity plc)
SWEB Limited.......................................................................England & Wales
SWEB Retail Limited................................................................England & Wales
SWEB Natural Gas Limited...........................................................England & Wales
SWEB Pension Trustee Limited.......................................................England & Wales
SWEB Telecom Limited...............................................................England & Wales
UK Data Collection Service Limited.................................................England & Wales
(8.33% - South Western Electricity plc)
Western Natural Gas Limited........................................................England & Wales
SEI Brazil Holdings, Inc....................................................................................Delaware
SEI South America, Inc. Delaware
Southern Energy Caribe, Ltd.................................................................................Delaware
Southern Energy - Newco2, Inc...............................................................................Delaware
SEI Chile, SA.........Chile
(99.99% - Southern Energy - Newco2, Inc., .001% - Southern Energy, Inc.)
Energia del Pacifico Limitada..........................................................................Argentina
(99.9% - SEI Chile, SA, .1% - Southern Energy International, Inc.)
Gasoducto Nor Andino Argentina, S.A.....................................................................Chile
(33.33% - Energia del Limitada,; 66.67% - Tractebel)
Gasoducto Nor Andino S.A.............................................................................Chile
(33.33% - Energia del Limitada; 66.67% - Tractebel)
Empressa Electrica del Norte Grande, SA....................................................................Chile
(82.34034% - SEI Chile, SA; 8.81% - Foreign Government;
8.850% - Natural Persons)
Sitranor S.A.....Chile
(60% - Empressa Electrica del Norte Grande, SA; 20% - CODELCO;
20% ELECTROANDINA)
Southern Electric Bahamas Holdings, Limited................................................................Bahamas
Southern Electric Bahamas, Ltd ..........................................................................Bahamas
ICD Utilities Limited.................................................................................Bahamas
(25% - Southern Electric Bahamas, Ltd; 75% - Foreign Company)
<PAGE>
- 8 -
Freeport Power Company Limited........................................................................Bahamas
(50% - Southern Electric Bahamas, Ltd; 50% - ICD Utilities Limited)
Cayman Energy Traders Cayman Islands
(27.59% - Southern Energy International, Inc.; 72.41% -
Domestic Corporation)
Southern Electric do Brasil Participacoes, Limitada.........................................................Brazil
(90.6% - Cayman Energy Traders; 9.4% - Foreign Pension Fund)
Companhia Energetica de Minas Gerais (CEMIG)..............................................................Brazil
(14.41% - Southern Electric do Brasil Participacoes, Limitada; 24.3% - Foreign
Government; 20.99% - General Public; 40.30% - Foreign Companies)
Southern Energy E Associados Particpacoes, S.A................................................................Brazil
SEI Germany - BEWAG, Inc....................................................................................Delaware
SEI Worldwide Holdings, Inc.................................................................................Delaware
SEI Worldwide Holdings (Germany) GmbH......................................................................Germany
(50% - SEI Germany - BEWAG, Inc.; 50% - SEI Worldwide Holdings, Inc.)
Southern Energy Holding Beteiligungsgesellschaft GmbH....................................................Germany
BEWAG, AG.............................................................................................Germany
(26% - Southern Energy Holding Beteiligungsgesellschaft GmbH,
74% Other Foreign Persons )
Southern Energy Development-Europa GmbH..................................................................Germany
SEI y Asociados de Argentina, S.A......................................................................Argentina
(45.79% - SEI Worldwide Holdings GmbH; 7.14%- Asociados de
Electricidad, S.A.; 40.52% - Holdings: 5.55% - Foreign Corporation;
1% - Domestic Company)
Hidroelectrica Alicura, S.A.........................................................................Argentina
(59% - SEI y Asociados de Argentina, S.A.; 41% - Foreign Government)
Southern Electric International Trinidad, Inc...............................................................Delaware
The Power Generation Company of Trinidad & Tobago Limited.......................................Trinidad & Tobago
(39% - Southern Electric International Trinidad, Inc.; 51% -
Foreign Government; 10% - Domestic Corporation)
SE China Investments....Delaware
Southern Energy Mauritius Limited........................................................................Mauritius
SEMAR Limited.....Mauritius
Southern Energy Newco Limited............................................................................Mauritius
SE Finance Capital Corporation................................................................................Delaware
Southern Energy Finance Company, Inc........................................................................Delaware
EPZ Lease, Inc........Delaware
EPZ Lease, LLC....Delaware
(99% EPZ Lease, Inc.; 1% Southern Energy Finance Company, Inc.)
EPZ Lease Holding A, LLC.............................................................................Delaware
(99% EPZ Lease, LLC; 1% EPZ Lease, Inc.)
EPZ Lease Trust A..................................................................................Delaware
EPZ Lease Holding B, LLC.............................................................................Delaware
(99% EPZ Lease, LLC; 1% EPZ Lease, Inc.)
EPZ Lease Trust B..................................................................................Delaware
EPZ Lease Holding C, LLC.............................................................................Delaware
(99% EPZ Lease, LLC; 1% EPZ Lease, Inc.)
EPZ Lease Trust C..................................................................................Delaware
<PAGE>
- 9 -
Southern Energy Clairton, Inc.............................................................................Delaware
Southern Energy Clairton, L.L.C.........................................................................Delaware
(85% - Southern Energy Clairton, Inc.; 15% Southern Energy
Clairton2, Inc.)
Clairton 1314 B Partnership, L.P.....................................................................Delaware
(27% - Southern Energy Clairton, L.L.C.; 73% -
Domestic Corporations)
Southern Energy Clairton2, Inc............................................................................Delaware
Southern Energy Carbontronics, Inc........................................................................Delaware
Southern Energy Carbontronics, L.L.C....................................................................Delaware
(99% - Southern Energy Carbontronics,Inc.; 1% -
Southern Energy Finance Company)
Carbontronics Synfuels Investors, L.P................................................................Delaware
(24.75% - Southern Energy Clairton, L.L.C.; 75.25% -
Domestic Corporations)
Dutch Gas Lease, Inc. Delaware
Dutch Gas Lease, L.L.C..................................................................................Delaware
Dutch Gas Lease Holding A, L.L.C.....................................................................Delaware
Dutch Gas Lease Trust A............................................................................Delaware
Dutch Gas Lease Holding B, L.L.C.....................................................................Delaware
(99% - Dutch Gas Lease, L.L.C; 1% - Dutch Gas Lease, Inc.)
Dutch Gas Lease Trust B............................................................................Delaware
Dutch Gas Lease Holding C, L.L.C.....................................................................Delaware
(99% - Dutch Gas Lease, L.L.C; 1% - Dutch Gas Lease, Inc.)
Dutch Gas Lease Trust C ...........................................................................Delaware
SEI Gamog Lease, Inc. Delaware
SEI Gamog Lease Holding A, L.L.C..........................................................................Delaware
SEI Gamog Lease Trust A.................................................................................Delaware
SEI Gamog Lease Holding B, LLC............................................................................Delaware
SEI Gamog Lease Trust B.................................................................................Delaware
SEI Gamog Lease Holding C, LLC............................................................................Delaware
SEI Gamog Lease Trust C.................................................................................Delaware
Nuon Lease, Inc.............................................................................................Delaware
Nuon Lease Holding D, L.L.C...............................................................................Delaware
Nuon Lease Trust D Delaware
Nuon Lease Holding E, L.L.C...............................................................................Delaware
Nuon Lease Trust E Delaware
Nuon Lease Holding F, L.L.C...............................................................................Delaware
Nuon Lease Trust F Delaware
Southern Company Capital Funding, Inc.........................................................................Delaware
Southern Company Capital Trust I............................................................................Delaware
Southern Company Capital Trust II...........................................................................Delaware
Southern Company Capital Trust III..........................................................................Delaware
Southern Company Capital Trust IV...........................................................................Delaware
Southern Company Capital Trust V............................................................................Delaware
Southern Company Capital Trust VI...........................................................................Delaware
<PAGE>
- 10 -
Southern Company Capital Trust VII..........................................................................Delaware
Southern Company Capital Trust VIII.........................................................................Delaware
Southern Company Capital Trust IX...........................................................................Delaware
Energia de Neuvo Leon, SA De CV......................................................................................Mexico
(33 1/3% - The Southern Company; 33 1/3% Foreign Corporations;
33 1/3% - Foreign Government)
PowerCall, Inc. Delaware
Southern Telecom, Inc..............................................................................................Delaware
Southern Information 1, Inc...................................................................................Delaware
Southern Information 2, Inc...................................................................................Delaware
Southern Telecom 1, Inc.......................................................................................Delaware
Southern Telecom 2, Inc.......................................................................................Delaware
Southern Nuclear Operating Company Inc.............................................................................Delaware
Footnotes:
NOTE 1 - Certain of CEPA's holdings in the Philippines were reorganized through
a series of agreements that were dated and executed on or before December 31,
1997. However, these agreements are awaiting the approval of certain
governmental authorities in the Philippines and are not yet effective.
</TABLE>
Exhibit 21(b)
Subsidiaries of Alabama Power Company
Name of Company Jurisdiction of Organization
Alabama Energy Providers, Inc...................................Alabama
Alabama Power Capital Trust I..................................Delaware
Alabama Power Capital Trust II.................................Delaware
Alabama Power Capital Trust III................................Delaware
Alabama Power Capital Trust IV.................................Delaware
Alabama Power Capital Trust V..................................Delaware
Alabama Property Company........................................Alabama
Southern Electric Generating Company............................Alabama
(50% - Alabama Power Company; 50% - Georgia Power Company)
Exhibit 21(c)
Subsidiaries of Georgia Power Company
The voting stock of each company shown indented is owned by the company
immediately above which is not indented to the same degree. Subsidiaries not
indented are directly owned by Georgia Power Company.
Name of Company Jurisdiction of Organization
Georgia Power Capital Trust I...............................Delaware
Georgia Power Capital Trust II..............................Delaware
Georgia Power Capital Trust III.............................Delaware
Georgia Power Capital Trust IV..............................Delaware
Georgia Power Capital Trust V...............................Delaware
Georgia Power Capital Trust VI..............................Delaware
Georgia Power L.P. Holdings Corp.............................Georgia
Georgia Power Capital, L.P.............................Delaware
Piedmont-Forrest Corporation.................................Georgia
Southern Electric Generating Company.........................Alabama
(50% - Alabama Power Company; 50% - Georgia Power Company)
Exhibit 21(d)
Subsidiaries of Gulf Power Company
Name of Company Jurisdiction of Organization
Gulf Power Capital Trust I......................................Delaware
Gulf Power Capital Trust II.....................................Delaware
Gulf Power Capital Trust III....................................Delaware
Exhibit 21(e)
Subsidiaries of Mississippi Power Company
Name of Company Jurisdiction of Organization
Mississippi Power Capital Trust I.......................Delaware
Mississippi Power Capital Trust II......................Delaware
Mississippi Power Capital Trust III.....................Delaware
Mississippi Power Services, Inc......................Mississippi
Exhibit 21(f)
Subsidiaries of Savannah Electric and Power Company
Name of Company Jurisdiction of Organization
Savannah Electric Capital Trust I.............................Delaware
Exhibit 24(a)
February 21, 2000
A. W. Dahlberg, W. L. Westbrook, Tommy Chisholm, and Wayne Boston
Dear Sirs:
The Southern Company proposes to file or join in the filing of reports
under the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission with respect to the following: (1) the filing of this
Company's Annual Report on Form 10-K for the year ended December 31, 1999 and
(2) the filing of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
during 2000.
The Southern Company and the undersigned directors and officers of said
Company, individually as a director and/or as an officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K, said Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any necessary or appropriate amendment or
amendments to any such reports, to be accompanied in each case by any necessary
or appropriate exhibits or schedules thereto.
Yours very truly,
THE SOUTHERN COMPANY
By /s/ A. W. Dahlberg
A. W. Dahlberg
Chairman, President and
Chief Executive Officer
<PAGE>
- 2 -
/s/Dorrit J. Bern /s/Donald M. James
Dorrit J. Bern Donald M. James
/s/Thomas F. Chapman /s/David J. Lesar
Thomas F. Chapman David J. Lesar
/s/A. D. Correll /s/Zack T. Pate
A. D. Correll Zack T. Pate
/s/A. W. Dahlberg /s/Gerald J. St. Pe'
A. W. Dahlberg Gerald J. St. Pe'
/s/H. Allen Franklin /s/Stephen A. Wakefield
H. Allen Franklin Stephen A. Wakefield
/s/W. L. Westbrook
________________________________ W. L. Westbrook
Bruce S. Gordon
/s/L. G. Hardman III /s/Tommy Chisholm
L. G. Hardman III Tommy Chisholm
/s/Elmer B. Harris /s/W. Dean Hudson
Elmer B. Harris W. Dean Hudson
<PAGE>
Extract from minutes of meeting of the board of directors of The Southern
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing the Company's Annual Report
on Form 10-K for the year ended December 31, 1999, 2000 Form 10-Q's and Form
8-K's, and of remedying any deficiencies with respect thereto by appropriate
amendment or amendments, this Company, the members of its board of directors,
and its officers, are authorized to give their several powers of attorney to A.
W. Dahlberg, W. L. Westbrook, Tommy Chisholm, and Wayne Boston.
- - - - - - - - - -
The undersigned officer of The Southern Company does hereby certify
that the foregoing is a true and correct copy of a resolution duly and regularly
adopted at a meeting of the board of directors of The Southern Company, duly
held on February 21, 2000, at which a quorum was in attendance and voting
throughout, and that said resolution has not since been rescinded but is still
in full force and effect.
Dated March 24, 2000 THE SOUTHERN COMPANY
By /s/ Tommy Chisholm
Tommy Chisholm
Secretary
Exhibit 24(b)
January 21, 2000
W. L. Westbrook Wayne Boston
270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE
Atlanta, Georgia 30303 Atlanta, Georgia 30308-3374
Dear Sirs:
Alabama Power Company proposes to file with the Securities and Exchange
Commission, under the Securities Exchange Act of 1934, (1) its Annual Report on
Form 10-K for the year ended December 31, 1999, and (2) its quarterly reports on
Form 10-Q during 2000.
Alabama Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint W. L. Westbrook and Wayne Boston our true
and lawful Attorneys for each of us and in each of our names, places and steads
to sign and cause to be filed with the Securities and Exchange Commission in
connection with the foregoing said Annual Report on Form 10-K, quarterly reports
on Form 10-Q, and any appropriate amendment or amendments thereto and any
necessary exhibits.
Yours very truly,
ALABAMA POWER COMPANY
By /s/Elmer B. Harris
Elmer B. Harris
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/ Whit Armstrong /s/ Mayer Mitchell
Whit Armstrong Mayer Mitchell
/s/ David J. Cooper /s/ William V. Muse
David J. Cooper William V. Muse
/s/ H. Allen Franklin /s/ John T. Porter
H. Allen Franklin John T. Porter
/s/ Elmer B. Harris /s/ Robert D. Powers
Elmer B. Harris Robert D. Powers
/s/ R. Kent Henslee ______________________________
R. Kent Henslee Andreas Renschler
/s/ Carl E. Jones, Jr. /s/ C. Dowd Ritter
Carl E. Jones, Jr. C. Dowd Ritter
/s/ Patricia M. King /s/ James H. Sanford
Patricia M. King James H. Sanford
/s/ James K. Lowder /s/ John Cox Webb, IV
James K. Lowder John Cox Webb, IV
/s/ Wallace D. Malone, Jr. /s/ William B. Hutchins, III
Wallace D. Malone, Jr. William B. Hutchins, III
/s/ Thomas C. Meredith /s/ Art P. Beattie
Thomas C. Meredith Art P. Beattie
<PAGE>
Extract from minutes of meeting of the board of directors of Alabama Power
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing and filing with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, Alabama Power Company's annual report on Form 10-K for the year
ended December 31, 1999, and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, and also filing
quarterly reports on Form 10-Q, Alabama Power Company, the members of
its Board of Directors, and its officers are authorized to give their
several powers of attorney to W. L. Westbrook and Wayne Boston, in
substantially the form of power of attorney presented to this meeting.
- - - - - - - - - -
The undersigned officer of Alabama Power Company does hereby certify
that the foregoing is a true and correct copy of resolution duly and regularly
adopted at a meeting of the board of directors of Alabama Power Company, duly
held on January 21, 2000, at which a quorum was in attendance and voting
throughout, and that said resolution has not since been rescinded but is still
in full force and effect.
Dated March 24, 2000 ALABAMA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(c)
February 16, 2000
W. L. Westbrook and Wayne Boston
Dear Sirs:
Georgia Power Company proposes to file or join in the filing of reports
under the Securities Exchange Act of 1934 with the Securities and Exchange
Commission with respect to the following: (1) the filing of its Annual Report on
Form 10-K for the year ended December 31, 1999, and (2) the filing of its
quarterly reports on Form 10-Q during 2000.
Georgia Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint each of you our true and lawful Attorney for
each of us and in each of our names, places and steads to sign and cause to be
filed with the Securities and Exchange Commission in connection with the
foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and
any appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
GEORGIA POWER COMPANY
By /s/ David M. Ratcliffe
David M. Ratcliffe
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/ Daniel P. Amos /s/ Herman J. Russell
Daniel P. Amos Herman J. Russell
/s/ Juanita P. Baranco /s/ David M. Ratcliffe
Juanita P. Baranco David M. Ratcliffe
/s/ William A. Fickling, Jr. /s/ William Jerry Vereen
William A. Fickling, Jr. William Jerry Vereen
/s/ H. Allen Franklin /s/ Carl Ware
H. Allen Franklin Carl Ware
/s/ L. G. Hardman III /s/ Thomas A. Fanning
L. G. Hardman III Thomas A. Fanning
/s/ James R. Lientz, Jr. /s/ Judy M. Anderson
James R. Lientz, Jr. Judy M. Anderson
/s/ Zell Miller /s/ Cliff S. Thrasher
Zell Miller Cliff S. Thrasher
/s/ G. Joseph Prendergast
G. Joseph Prendergast
<PAGE>
Extract from minutes of meeting of the board of directors of Georgia Power
Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing reports under the
Securities Exchange Act of 1934 to be filed with the Securities and
Exchange Commission with respect to (a) the filing of the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, and
(b) quarterly filings on Form 10-Q during 2000; and of remedying any
deficiencies with respect thereto by appropriate amendment or
amendments, this Company and the members of its Board of Directors
authorize their several powers of attorney to W. L. Westbrook and Wayne
Boston.
- - - - - - - - - -
The undersigned officer of Georgia Power Company does hereby certify
that the foregoing is a true and correct copy of resolution duly and regularly
adopted at a meeting of the board of directors of Georgia Power Company, duly
held on February 16, 2000, at which a quorum was in attendance and voting
throughout, and that said resolution has not since been rescinded but is still
in full force and effect.
Dated March 24, 2000 GEORGIA POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(d)
February 25, 2000
Mr. W. L. Westbrook Mr. Wayne Boston
The Southern Company Southern Company Services, Inc.
270 Peachtree Street, N.W. 241 Ralph McGill Blvd. NE
Atlanta GA 30303 Atlanta GA 30308-3374
Dear Sirs:
Re: Forms 10-K and 10-Q
Gulf Power Company proposes to file or join in the filing of reports
under the Securities Exchange Act of 1934 with the Securities and Exchange
Commission with respect to the following: (1) its Annual Report on Form 10-K for
the year ended December 31, 1999, and (2) its 2000 quarterly reports on Form
10-Q.
Gulf Power Company and the undersigned Directors and Officers of said
Company, individually as a Director and/or as an Officer of the Company, hereby
make, constitute and appoint each of you our true and lawful Attorney for each
of us and in each of our names, places and steads to sign and cause to be filed
with the Securities and Exchange Commission in connection with the foregoing
said Annual Report on Form 10-K, quarterly reports on Form 10-Q and any
appropriate amendment or amendments thereto and any necessary exhibits.
Sincerely,
By /s/Travis J. Bowden
Travis J. Bowden
President and Chief Executive Officer
<PAGE>
- 2 -
/s/ Travis J. Bowden /s/ Barbara H. Thames
Travis J. Bowden Barbara H. Thames
/s/ Fred C. Donovan /s/ Arlan E. Scarbrough
Fred C. Donovan Arlan E. Scarbrough
/s/ H. Allen Franklin /s/ Ronnie R. Labrato
H. Allen Franklin Ronnie R. Labrato
/s/ W. D. Hull, Jr. /s/ Warren E. Tate
W. D. Hull, Jr. Warren E. Tate
/s/ Joseph K. Tannehill
Joseph K. Tannehill
<PAGE>
Extract from minutes of meeting of the board of directors of Gulf Power Company.
- - - - - - - - - -
RESOLVED, That for the purpose of signing the reports under
the Securities Exchange Act of 1934 to be filed with the Securities and
Exchange Commission with respect to the filing of this Company's Annual
Report on Form 10-K for the year ended December 31, 1999, and its 2000
quarterly reports on Form 10-Q, and of remedying any deficiencies with
respect thereto by appropriate amendment or amendments, this Company,
the members of its Board of Directors, and its Officers, are authorized
to give their several powers of attorney to W. L. Westbrook and Wayne
Boston.
- - - - - - - - - -
The undersigned officer of Gulf Power Company does hereby certify that
the foregoing is a true and correct copy of resolution duly and regularly
adopted at a meeting of the board of directors of Gulf Power Company, duly held
on February 25, 2000, at which a quorum was in attendance and voting throughout,
and that said resolution has not since been rescinded but is still in full force
and effect.
Dated March 24, 2000 GULF POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(e)
February 23, 2000
W. L. Westbrook and Wayne Boston
Dear Sirs:
Mississippi Power Company proposes to file or join in the filing of
reports under the Securities Exchange Act of 1934 with the Securities and
Exchange Commission with respect to the following: (1) the filing of its Annual
Report on Form 10-K for the year ended December 31, 1999, and (2) the filing of
its quarterly reports on Form 10-Q during 2000.
Mississippi Power Company and the undersigned directors and officers of
said Company, individually as a director and/or as an officer of the Company,
hereby make, constitute and appoint each of you our true and lawful Attorney for
each of us and in each of our names, places and steads to sign and cause to be
filed with the Securities and Exchange Commission in connection with the
foregoing said Annual Report on Form 10-K, quarterly reports on Form 10-Q and
any appropriate amendment or amendments thereto and any necessary exhibits.
Yours very truly,
MISSISSIPPI POWER COMPANY
By /s/Dwight H. Evans
Dwight H. Evans
President and Chief Executive Officer
<PAGE>
- 2 -
/s/ Edwin E. Downer /s/ George A. Schloegel
Edwin E. Downer George A. Schloegel
/s/ Dwight H. Evans /s/ Philip J. Terrell
Dwight H. Evans Philip J. Terrell
/s/ Robert S. Gaddis /s/ Gene Warr
Robert S. Gaddis Gene Warr
/s/ Linda T. Howard /s/ Michael W. Southern
Linda T. Howard Michael W. Southern
/s/ Aubrey K. Lucas /s/ Frances V. Turnage
Aubrey K. Lucas Frances V. Turnage
/s/ Malcolm Portera
Malcolm Portera
<PAGE>
Extract from minutes of meeting of the board of directors of Mississippi Power
Company.
- - - - - - - - - -
RESOLVED: That this Company, the members of this Company's
Board of Directors and its officers are authorized to give their
several powers of attorney to W. L. Westbrook and Wayne Boston for the
purpose of signing the reports under the Securities Exchange Act of
1934 to be filed with the Securities and Exchange Commission with
respect to the filing of the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, and the filing of this Company's
quarterly reports to the Securities and Exchange Commission on Form
10-Q for the year 2000.
- - - - - - - - - -
The undersigned officer of Mississippi Power Company does hereby
certify that the foregoing is a true and correct copy of resolution duly and
regularly adopted at a meeting of the board of directors of Mississippi Power
Company, duly held on February 23, 2000, at which a quorum was in attendance and
voting throughout, and that said resolution has not since been rescinded but is
still in full force and effect.
Dated March 27, 2000 MISSISSIPPI POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit 24(f)
February 24, 2000
W. L. Westbrook and Wayne Boston
Dear Sirs:
Savannah Electric and Power Company proposes to file with the
Securities and Exchange Commission, under the Securities Exchange Act of 1934,
(1) its Annual Report on Form 10-K for the year ended December 31, 1999, and (2)
its quarterly reports on Form 10-Q during 2000.
Savannah Electric and Power Company and the undersigned directors and
officers of said Company, individually as a director and/or as an officer of the
Company, hereby make, constitute and appoint W. L. Westbrook and Wayne Boston
our true and lawful Attorneys for each of us and in each of our names, places
and steads to sign and cause to be filed with the Securities and Exchange
Commission in connection with the foregoing said Annual Report on Form 10-K,
quarterly reports on Form 10-Q, and any appropriate amendment or amendments
thereto and any necessary exhibits.
Yours very truly,
SAVANNAH ELECTRIC AND POWER COMPANY
By /s/ G. Edison Holland, Jr.
G. Edison Holland, Jr.
President and Chief Executive
Officer
<PAGE>
- 2 -
/s/ Gus H. Bell, III /s/ Robert B. Miller, III
Gus H. Bell, III Robert B. Miller, III
/s/ Archie H. Davis /s/ Arnold M. Tenenbaum
Archie H. Davis Arnold M. Tenenbaum
/s/ Walter D. Gnann /s/ K. R. Willis
Walter D. Gnann K. R. Willis
/s/ G. Edison Holland, Jr. /s/ Nancy E. Frankenhauser
G. Edison Holland, Jr. Nancy E. Frankenhauser
<PAGE>
Extract from minutes of meeting of the board of directors of Savannah Electric
and Power Company.
- - - - - - - - - -
RESOLVED: That for the purpose of signing reports required to
be filed by the Company under the Securities Exchange Act of 1934 to be
filed with the Securities and Exchange Commission including (a) the
filing of this Company's Annual Report on Form 10-K for the year ended
December 31, 1999, and (b) quarterly reports on Form 10-Q during
calendar year 2000; and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, this Company and the
members of its Board of Directors, and its officers, be and they are
hereby authorized to give their several powers of attorney to W. L.
Westbrook and Wayne Boston for the purposes set out above.
- - - - - - - - - -
The undersigned officer of Savannah Electric and Power Company does
hereby certify that the foregoing is a true and correct copy of resolution duly
and regularly adopted at a meeting of the board of directors of Savannah
Electric and Power Company, duly held on February 24, 2000, at which a quorum
was in attendance and voting throughout, and that said resolution has not since
been rescinded but is still in full force and effect.
Dated March 24, 2000 SAVANNAH ELECTRIC AND POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
