===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000
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
==================================== ==========================================
<PAGE>
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No____
<TABLE>
<CAPTION>
Description of Shares Outstanding
Registrant Common Stock at July 31, 2000
<S> <C> <C>
The Southern Company Par Value $5 Per Share 648,627,046
Alabama Power Company Par Value $40 Per Share 5,608,955
Georgia Power Company No Par Value 7,761,500
Gulf Power Company No Par Value 992,717
Mississippi Power Company Without Par Value 1,121,000
Savannah Electric and Power Company Par Value $5 Per Share 10,844,635
</TABLE>
This combined Form 10-Q is separately filed by The Southern Company,
Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company and Savannah Electric and Power Company. Information contained
herein relating to any individual company is filed by such company on its own
behalf. Each company makes no representation as to information relating to the
other companies.
2
<PAGE>
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2000
<TABLE>
<CAPTION>
Page
Number
<S> <C>
DEFINITIONS........................................................................................................ 4
PART I - FINANCIAL INFORMATION
<S>
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition
The Southern Company and Subsidiary Companies
Condensed Consolidated Statements of Income........................................................ 7
Condensed Consolidated Statements of Cash Flows.................................................... 8
Condensed Consolidated Balance Sheets.............................................................. 9
Condensed Consolidated Statements of Comprehensive Income and
Accumulated Other Comprehensive Income.......................................................... 11
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 12
Alabama Power Company
Condensed Statements of Income..................................................................... 19
Condensed Statements of Cash Flows................................................................. 20
Condensed Balance Sheets........................................................................... 21
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 23
Exhibit 1 - Report of Independent Public Accountants............................................... 27
Georgia Power Company
Condensed Statements of Income..................................................................... 29
Condensed Statements of Cash Flows................................................................. 30
Condensed Balance Sheets........................................................................... 31
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 33
Exhibit 1 - Report of Independent Public Accountants............................................... 37
Gulf Power Company
Condensed Statements of Income..................................................................... 39
Condensed Statements of Cash Flows................................................................. 40
Condensed Balance Sheets........................................................................... 41
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 43
Mississippi Power Company
Condensed Statements of Income..................................................................... 48
Condensed Statements of Cash Flows................................................................. 49
Condensed Balance Sheets........................................................................... 50
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 52
Savannah Electric and Power Company
Condensed Statements of Income..................................................................... 57
Condensed Statements of Cash Flows................................................................. 58
Condensed Balance Sheets........................................................................... 59
Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 61
Notes to the Condensed Financial Statements........................................................... 64
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................ 65
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................................................................... 71
Item 2. Changes in Securities..................................................................................... Inapplicable
Item 3. Defaults Upon Senior Securities........................................................................... Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders....................................................... 71
Item 5. Other Information......................................................................................... Inapplicable
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 73
Signatures ............................................................................................... 75
3
<PAGE>
DEFINITIONS
TERM MEANING
ALABAMA..................................... Alabama Power Company
BEWAG....................................... Berliner Kraft und Licht AG
Clean Air Act............................... Clean Air Act Amendments of 1990
ECO Plan.................................... Environmental Compliance Overview Plan
Energy Act.................................. Energy Policy Act of 1992
EPA....................................... . U. S. Environmental Protection Agency
FASB........................................ Financial Accounting Standards Board
FERC........................................ Federal Energy Regulatory Commission
Form 10-K................................... Combined Annual Report on Form 10-K of SOUTHERN, ALABAMA,
GEORGIA, GULF, MISSISSIPPI and SAVANNAH for the year ended
December 31, 1999
GEORGIA..................................... Georgia Power Company
GULF........................................ Gulf Power Company
integrated Southeast utilities.............. ALABAMA, GEORGIA, GULF, MISSISSIPPI, and SAVANNAH
MISSISSIPPI................................. Mississippi Power Company
Mobile Energy............................... Mobile Energy Services Company, L.L.C. and Mobile Energy
Services Holdings, Inc.
PEP......................................... Performance Evaluation Plan
PSC......................................... Public Service Commission
RTO......................................... Regional Transmission Organization
SAVANNAH.................................... Savannah Electric and Power Company
SCS......................................... Southern Company Services, Inc.
SEC......................................... Securities and Exchange Commission
SOUTHERN.................................... The Southern Company
Southern Energy............................. Southern Energy, Inc. including SOUTHERN subsidiaries managed or
controlled by Southern Energy
SOUTHERN system............................. SOUTHERN, integrated Southeast utilities, Southern Energy, and
other subsidiaries
TVA......................................... Tennessee Valley Authority
WPD......................................... Western Power Distribution (United Kingdom) (formerly South
Western Electricity plc)
</TABLE>
4
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q includes forward-looking statements
in addition to historical information. The registrants caution that there are
various important factors that could cause actual results to differ materially
from those indicated in the forward-looking statements; accordingly, there can
be no assurance that such indicated results will be realized. These factors
include legislative and regulatory initiatives regarding deregulation and
restructuring of the electric utility industry; the extent and timing of the
entry of additional competition in the markets of SOUTHERN's subsidiaries;
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
the non-traditional business and the success of efforts to invest in and develop
new opportunities; and other factors discussed elsewhere herein and in other
reports (including Form 10-K) filed from time to time by the registrants with
the SEC.
5
<PAGE>
THE SOUTHERN COMPANY
AND SUBSIDIARY COMPANIES
6
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---------------------------------- ------------------------------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $2,188,285 $1,988,445 $3,970,993 $3,663,228
Sales for resale 229,188 194,643 407,117 360,854
Southern Energy revenues 672,907 503,309 1,193,891 1,024,863
Other revenues 105,269 104,683 196,235 183,700
----------------- ---------------- ------------------ ----------------
Total operating revenues 3,195,649 2,791,080 5,768,236 5,232,645
----------------- ---------------- ------------------ ----------------
Operating Expenses:
Operation --
Fuel 863,249 656,890 1,511,998 1,169,356
Purchased power 180,438 244,152 284,859 518,578
Other 607,661 518,564 1,050,057 1,005,633
Maintenance 252,622 233,945 493,800 455,231
Depreciation and amortization 394,147 325,163 771,439 640,244
Taxes other than income taxes 157,887 145,060 317,662 291,322
----------------- ---------------- ------------------ ----------------
Total operating expenses 2,456,004 2,123,774 4,429,815 4,080,364
----------------- ---------------- ------------------ ----------------
Operating Income 739,645 667,306 1,338,421 1,152,281
Other Income:
Interest income 34,800 40,142 62,125 69,628
Equity in earnings of unconsolidated subsidiaries 29,658 48,242 50,815 142,923
Other, net 49,097 10,954 66,356 37,666
----------------- ---------------- ------------------ ----------------
Earnings Before Interest and Income Taxes 853,200 766,644 1,517,717 1,402,498
----------------- ---------------- ------------------ ----------------
Interest Charges and Other:
Interest on long-term debt 208,568 164,355 408,917 330,708
Interest on notes payable 78,213 44,058 145,317 71,515
Amortization of debt discount, 10,546 9,991 19,123 19,011
premium and expense, net
Other interest charges, net 3,388 16,056 6,092 29,253
Minority interests in subsidiaries 12,909 14,841 42,977 36,184
Distributions on capital and preferred 44,265 46,181 88,331 89,948
securities of subsidiaries
Preferred dividends of subsidiaries 4,763 4,588 9,458 10,221
----------------- ---------------- ------------------ ----------------
Total interest charges and other, net 362,652 300,070 720,215 586,840
----------------- ---------------- ------------------ ----------------
Earnings Before Income Taxes 490,548 466,574 797,502 815,658
Income taxes 148,644 152,589 210,154 277,357
----------------- ---------------- ------------------ ----------------
Consolidated Net Income $341,904 $313,985 $587,348 $538,301
================= ================ ================== ================
Common Stock Data:
Average number of shares of 648,696 693,465 650,915 695,996
common stock outstanding (in thousands)
Basic and diluted earnings $0.52 $0.45 $0.90 $0.77
per share of common stock
Cash dividends paid $0.335 $0.335 $0.67 $0.67
per share of common stock
The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
----------------- -----------------
(in thousands)
Operating Activities:
<S> <C> <C>
Consolidated net income $587,348 $538,301
Adjustments to reconcile consolidated net income
to net cash provided from operating activities --
Depreciation and amortization 787,877 701,860
Deferred income taxes and investment tax credits 42,057 79,902
Equity in earnings of unconsolidated subsidiaries (50,815) (142,910)
Other, net 122,705 53,023
Changes in certain current assets and liabilities
excluding effects from acquisitions --
Receivables, net (294,685) (67,533)
Fossil fuel stock 12,679 (94,238)
Materials and supplies (9,233) (4,456)
Accounts payable 31,849 (287,931)
Other (85,170) 51,952
----------------- -----------------
Net cash provided from operating activities 1,144,612 827,970
----------------- -----------------
Investing Activities:
Gross property additions (1,185,144) (1,060,446)
Southern Energy business acquisitions, net of cash acquired (60,578) (1,476,990)
Other (115,535) (86,289)
----------------- -----------------
Net cash used for investing activities (1,361,257) (2,623,725)
----------------- -----------------
Financing Activities:
Increase (decrease) in notes payable, net 847,786 2,117,626
Proceeds --
Other long-term debt 881,605 924,915
Capital and preferred securities - 250,000
Common stock 299 23,748
Retirements/repurchases --
First mortgage bonds (200,000) (524,800)
Other long-term debt (137,310) (398,066)
Preferred stock (383) (85,732)
Common stock repurchased (414,475) (250,921)
Payment of common stock dividends (437,846) (467,324)
Other (1,524) (216,274)
----------------- -----------------
Net cash provided from financing activities 538,152 1,373,172
----------------- -----------------
Net Increase (Decrease) in Cash and Cash Equivalents 321,507 (422,583)
Cash and Cash Equivalents at Beginning of Year 466,416 871,353
----------------- -----------------
Cash and Cash Equivalents at End of Year $787,923 $448,770
================= =================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $666,730 $489,072
Income taxes (net of refunds) $133,647 $139,130
Southern Energy business acquisitions --
Fair value of assets acquired $661,061 $1,509,815
Less cash paid for common stock 139,394 1,476,990
----------------- -----------------
Liabilities assumed $521,667 $ 32,825
================= =================
The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
------------------- -------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 787,923 $ 466,416
Special deposits 32,146 72,490
Receivables, less accumulated provisions for uncollectible accounts
of $59,884 at June 30, 2000 and $65,420 at December 31, 1999 1,801,778 1,645,325
Unrecovered retail fuel clause revenue 305,809 243,791
Fossil fuel stock, at average cost 297,956 310,635
Materials and supplies, at average cost 594,313 585,080
Other 315,196 198,823
------------------- -------------------
Total current assets 4,135,121 3,522,560
------------------- -------------------
Property, Plant, and Equipment:
In service 37,931,125 36,763,700
Less accumulated provision for depreciation 14,587,394 14,075,044
------------------- -------------------
23,343,731 22,688,656
Nuclear fuel, at amortized cost 204,011 226,124
Construction work in progress 1,343,171 1,629,701
------------------- -------------------
Total property, plant, and equipment 24,890,913 24,544,481
------------------- -------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries 1,433,990 1,376,357
Property rights, net of accumulated amortization
of $273,903 at June 30, 2000 and $226,866 at December 31, 1999 2,098,641 2,202,206
Goodwill, net of accumulated amortization
of $189,700 at June 30, 2000 and $163,560 at December 31, 1999 2,013,715 2,105,859
Other intangibles, net of accumulated amortization
of $23,490 at June 30, 2000 and $13,308 at December 31, 1999 498,049 446,927
Nuclear decommissioning trusts 706,105 658,567
Leveraged leases 565,980 556,419
Other 647,916 578,231
------------------- -------------------
Total other property and investments 7,964,396 7,924,566
------------------- -------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 953,733 987,144
Prepaid pension costs 654,103 590,274
Debt expense, being amortized 142,102 145,092
Premium on reacquired debt, being amortized 290,534 217,125
Other 490,588 457,770
------------------- -------------------
Total deferred charges and other assets 2,531,060 2,397,405
------------------- -------------------
Total Assets $39,521,490 $38,389,012
=================== ===================
The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholders' Equity (Unaudited) 1999
------------------- -------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Securities due within one year $ 387,814 $ 576,299
Notes payable 4,729,395 3,915,258
Accounts payable 886,439 895,456
Customer deposits 139,234 132,555
Taxes accrued --
Income taxes 325,917 155,326
Other 261,030 263,899
Interest accrued 262,145 281,272
Vacation pay accrued 121,060 120,360
Other 563,826 793,334
------------------- -------------------
Total current liabilities 7,676,860 7,133,759
------------------- -------------------
Long-term debt 12,412,755 11,746,596
------------------- -------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,500,791 4,504,896
Deferred credits related to income taxes 602,825 639,921
Accumulated deferred investment tax credits 678,517 693,422
Employee benefits provisions 538,147 513,395
Prepaid capacity revenues 69,312 79,703
Other 682,295 453,034
------------------- -------------------
Total deferred credits and other liabilities 7,071,887 6,884,371
------------------- -------------------
Minority interests in subsidiaries 749,084 724,610
------------------- -------------------
Company or subsidiary obligated mandatorily redeemable
capital and preferred securities 2,321,945 2,326,835
------------------- -------------------
Cumulative preferred stock of subsidiaries 368,126 368,509
------------------- -------------------
Common Stockholders' Equity:
Common stock, par value $5 per share --
Authorized -- 1 billion shares
Issued -- June 30, 2000: 700,622,308 shares;
-- December 31, 1999: 700,620,486 shares 3,503,112 3,503,102
Paid-in capital 2,480,390 2,480,198
Treasury, at cost -- June 30, 2000: 52,001,091 shares;
-- December 31, 1999: 34,824,901 shares (1,333,450) (918,972)
Retained earnings 4,381,761 4,232,399
Accumulated other comprehensive income (110,980) (92,395)
------------------- -------------------
Total common stockholders' equity 8,920,833 9,204,332
------------------- -------------------
Total Liabilities and Stockholders' Equity $39,521,490 $38,389,012
=================== ===================
The accompanying notes as they relate to SOUTHERN are an integral part of these statements.
</TABLE>
10
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For the Six Months
Ended June 30,
----------------------------------
2000 1999
----------------------------------
(in thousands)
Consolidated net income $587,348 $538,301
Other comprehensive income:
Foreign currency translation adjustments (28,592) (177,991)
Related income tax benefits 10,007 62,297
---------------- ----------------
CONSOLIDATED COMPREHENSIVE INCOME $568,763 $422,607
================ ================
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
At June 30,
2000 At December 31,
(Unaudited) 1999
------------------ ------------------
(in thousands)
Balance at beginning of period ($92,395) $15,400
Change in current period (18,585) (107,795)
------------------ ------------------
BALANCE AT END OF PERIOD ($110,980) ($92,395)
================== ==================
The accompanying notes as they relate to SOUTHERN are an integral part of
these statements.
11
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
SOUTHERN's traditional business is primarily represented
by its five integrated Southeast utilities, which provide electric service in
four states. Another significant portion of SOUTHERN's business is represented
by Southern Energy, which develops and manages domestic and international
electricity and other energy-related businesses for SOUTHERN. Businesses
acquired by Southern Energy have been included in the consolidated statements of
income since the date of acquisition. Certain changes in operating revenues and
expenses from the prior period result from such acquisitions. Reference is made
to Note (N) in the "Notes to the Condensed Financial Statements" herein for
information relating to the planned initial public offering and subsequent
spin-off of Southern Energy.
Earnings
SOUTHERN's consolidated net income for the second quarter and
year-to-date 2000 was $342 million ($0.52 per share) and $587 million ($0.90 per
share), respectively, compared to $314 million ($0.45 per share) and $538
million ($0.77 per share) for the corresponding periods of 1999. For the
integrated Southeast utilities, earnings were up by $18 million or 6.8% and $26
million or 5.7% for the second quarter and year-to-date 2000, respectively, due
primarily to higher operating revenues. Earnings for Southern Energy were up by
$16 million or 21.1% and $29 million or 17.8% for the second quarter and
year-to-date 2000, respectively, when compared to the same periods of the
previous year. The increase in Southern Energy's earnings is mainly due to the
growing profitability from its Asian business units, primarily due to the Sual
generating units being placed in service during the latter part of 1999.
<TABLE>
<CAPTION>
Significant income statement items appropriate for discussion include the following:
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Operating revenues............................... $404,569 14.5 $535,591 10.2
Fuel expense..................................... 206,359 31.4 342,642 29.3
Purchased power expense.......................... (63,714) (26.1) (233,719) (45.1)
Other operation expense.......................... 89,097 17.2 44,424 4.4
Maintenance expense.............................. 18,677 8.0 38,569 8.5
Depreciation and amortization expense............ 68,984 21.2 131,195 20.5
Equity in earnings of unconsolidated
subsidiaries.................................. (18,584) (38.5) (92,108) (64.4)
Other, net....................................... 38,143 348.2 28,690 76.2
Interest on long-term debt....................... 44,213 26.9 78,209 23.6
Interest on notes payable........................ 34,155 77.5 73,802 103.2
Other interest charges, net...................... (12,668) (78.9) (23,161) (79.2)
Income taxes..................................... (3,945) (2.6) (67,203) (24.2)
</TABLE>
12
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operating revenues. Operating revenues for the integrated Southeast
utilities increased $229 million or 10.2% during the second quarter of 2000 and
$352 million or 8.5% year-to-date 2000 due primarily to increased customer base,
warmer weather and growth in the wholesale energy supply business in the
Southeast. Southern Energy's operating revenues increased $170 million or 33.7%
and $169 million or 16.5% for the second quarter and year-to-date 2000
reflecting increased energy sales as a result of additional generating units
placed into service.
Fuel expense. These increases for the current quarter and year-to-date 2000
can be attributed primarily to Southern Energy. Fuel expense for Southern Energy
increased $152 million or 225.7% for the second quarter and $235 million or
216.1% year-to-date 2000. The increases are primarily attributed to the
increased generation at plants in New York and California, which were acquired
during 1999. Fuel expense for the integrated Southeast utilities was up due
primarily to increased generation in order to meet energy demands.
Purchased power expense. The decreases in purchased power expense for the
second quarter and year-to-date 2000 when compared to the same periods in 1999
are primarily attributed to Southern Energy and were partially offset by
increases in purchased power expense for the integrated Southeast utilities.
Southern Energy's purchased power expense decreased $135 million or 84.9% and
$333 million or 86.0%, respectively, for the second quarter and year-to-date
2000 as a result of the sale in 1999 of the former South Western Electricity
plc's supply business to London Electricity plc. For the integrated Southeast
utilities, purchased power expense increased $71 million or 83.8% for the second
quarter of 2000 and $99 million or 75.3% year-to-date 2000 due to higher demand
for energy.
Other operation expense. During the second quarter and year-to-date 2000,
the increases in other operation expense are mainly attributed to Southern
Energy. Southern Energy's other operation expense was up by $62 million or 77.6%
for the current quarter and $36 million or 22.3% year-to-date 2000 as compared
to the corresponding periods in 1999. The increases were primarily due to the
acquisitions of generating assets in New York and California and the new Sual
plant in the Philippines being placed into service in 1999. For the integrated
Southeast utilities, other operation expense increased for the current quarter
and year-to-date 2000 due primarily to increased costs related to employee
severance costs and customer service expense.
Maintenance expense. For the integrated Southeast utilities, maintenance
expense was up $7 million or 3.4% and $19 million or 4.8%, respectively, for the
second quarter and year-to-date 2000 when compared to the same periods in 1999.
These increases are attributed to a major, planned outage on a fossil power
generation facility and maintenance on overhead lines. Southern Energy's
maintenance expenses increased during second quarter and year-to-date 2000 by
$12 million or 46.1% and $19 million or 37.9%, respectively, when compared to
the same periods in 1999 due primarily to the acquisitions in 1999 of generating
assets in New York and California.
Depreciation and amortization expense. For the integrated Southeast
utilities, this item increased $41 million or 15.5% in the second quarter of
2000 and $70 million or 13.5% year-to-date 2000 primarily as a result of
accelerated amortization and depreciation by GEORGIA in accordance with the
three-year rate order approved by the Georgia PSC. See Note (H) in the "Notes to
the Condensed Financial Statements" herein for further details regarding the
retail rate order. Southern Energy's depreciation and amortization expense was
higher for the current quarter by $26 million or 45.3% and $58 million or 51.8%
year-to-date 2000 due to the increase in generating assets in Asia and North
America.
13
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Equity in earnings of unconsolidated subsidiaries. The decreases in this
item for the second quarter and year-to-date 2000 when compared to the same
periods in 1999 are attributed to a number of factors at Southern Energy. The
decrease in the second quarter 2000 primarily relates to reduced earnings from
the energy trading and marketing joint venture and continued price competition
in Germany. The majority of the year-to-date 2000 decrease results from a $54
million settlement recognized during the first quarter of 1999 representing
claims against a contractor for the Shajiao C construction project in China. The
settlement was partially offset by related expenses included in other income
accounts and income taxes.
Other, net. For the current quarter and year-to-date 2000, Southern
Energy's other, net increased $31 million or 179.4% and $14 million or 24.7%,
respectively, when compared to the corresponding periods in 1999. These
increases are primarily the result of the settlement of a commercial dispute
with an outside advisor and additional lease income. For the integrated
Southeast utilities, the increases in other, net for the current quarter and
year-to-date 2000 are attributed primarily to ALABAMA's increase in the equity
portion of Allowance for Funds Used During Construction as a result of an
increase in the capitalization base.
Interest on long-term debt. For the second quarter and year-to-date 2000,
the increases in interest on long-term debt are primarily attributed to Southern
Energy and represent increased amounts outstanding for long-term debt.
Interest on notes payable. During the second quarter and year-to-date 2000,
when compared to the corresponding periods of 1999, the increases in interest on
notes payable are attributed to SOUTHERN's increased use of commercial paper and
to Southern Energy's acquisition financing.
Other interest charges, net. These decreases for the current quarter and
year-to-date 2000 are primarily attributed to an increase in ALABAMA's Allowance
for Funds Used During Construction resulting in a larger credit to interest
expense than was recorded in the corresponding periods for 1999. Also, there was
a decrease in interest charges related to the nuclear decommissioning trust,
which was offset by a concurrent reduction of interest income in accordance with
FERC requirements.
Income taxes. The year-to-date 2000 decrease is primarily due to a tax
provision of $28 million in 1999 related to the Shajiao C settlement discussed
previously. In addition, in February 2000 an agreement with the United Kingdom
Inland Revenue related to prior year tax computations at WPD resulted in a $20
million reduction.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment. For additional information relating to Southern Energy
and other businesses, see Item 1 - BUSINESS - "Southern Energy" and "Other
Business" in the Form 10-K. Also, reference is made to Note (N) in the "Notes to
the Condensed Financial Statements" herein for information relating to the
planned initial public offering and subsequent spin-off of Southern Energy.
14
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SOUTHERN is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SOUTHERN in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SOUTHERN in the Form 10-K.
On December 20, 1999, the FERC issued its final rule on RTOs. Reference is
made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings
Potential" of SOUTHERN in the Form 10-K for information on this matter.
Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Protection Agency Litigation" and Note 3 to the financial
statements of SOUTHERN in the Form 10-K for information on EPA litigation.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SOUTHERN has not yet quantified the
impact of adopting these statements on its financial statements; however, the
adoption could increase volatility in earnings and other comprehensive income.
In June 2000, SOUTHERN, through its subsidiary Southern Energy, announced
an agreement with Potomac Electric Power Company ("PEPCO") to purchase PEPCO's
generating business in Maryland and Virginia, assume PEPCO's entitlements under
various power purchase agreements, operate two power stations in Washington,
D.C. retained by PEPCO, and supply PEPCO with power required to meet its retail
obligations for up to four years pursuant to transition power agreements. The
purchase price of this transaction is $2.65 billion plus amounts to be
determined for working capital and reimbursement of capital expenditures, and
approximately $260 million in the event certain power purchase agreements are
not transferred to Southern Energy. This transaction is expected to close in
November 2000.
On Friday, August 11, 2000, WPD Limited ("WPDL"), an indirect
49% owned subsidiary of Southern Energy, submitted an offer of
365 pence per share for the entire ordinary share capital of Hyder plc which
owns and runs the electricity network in South Wales and the water
distribution and waste water treatment business for all of Wales. This
represents a total purchase price of (pound)559 million ($838 million).
Friday was the last day for submission of revised offers, no
other revised offers were submitted, and WPDL was informed by the Takeover
Panel in the United Kingdom that it was the higher bidder. WPDL's increased
bid has not yet been formally announced pending the outcome of an appeal by
the other party competing to acquire Hyder against a ruling of the Panel
Executive allowing the WPDL bid to proceed. If WPDL's bid is successful, it
is intended that WPD will become involved in the management of the electricity
network in South Wales.
Reference is made to Notes (B) through (D), (F) through (I), (L) and (N)
through (R) in the "Notes to the Condensed Financial Statements" herein for
discussion of various contingencies and other matters which may affect future
earnings potential. Reference is also made to Part II - Item 1 - "Legal
Proceedings" herein.
15
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION
Overview
Major changes in SOUTHERN's financial condition during the first six months of
2000 included $1.2 billion used for gross property additions to utility plant.
The funds for these additions and other capital requirements were from
operations, short-term borrowings and other long-term debt. See SOUTHERN's
Condensed Consolidated Statements of Cash Flows for further details. Reference
is made to the SOUTHERN's Condensed Consolidated Statements of Comprehensive
Income herein for information relating to other comprehensive income.
Financing Activities
During the first six months of 2000, maturities of the integrated Southeast
utilities' first mortgage bonds totaled $200 million. In February 2000, GEORGIA
issued $300 million of floating rate senior notes due February 22, 2002. The
proceeds of the sale were used to repay a portion of GEORGIA's outstanding
short-term indebtedness. In March 2000, MISSISSIPPI issued $100 million of
floating rate senior notes due March 28, 2002. The proceeds were used to prepay
bank loans of $45 million maturing in November 2001 and $5 million maturing in
October 2002. The balance was used to repay a portion of MISSISSIPPI's
outstanding short-term indebtedness. In May 2000, ALABAMA issued $250 million of
7.85% senior notes due May 15, 2003. The proceeds of the sale were used to repay
a portion of ALABAMA's outstanding short-term indebtedness.
Reference is made to "Future Earnings Potential" herein for the discussion
of the agreement between SOUTHERN, through its subsidiary Southern Energy, and
PEPCO. To fund the purchase price of this transaction, Southern Energy plans to
enter into lease financing arrangements for a significant portion of the PEPCO
assets which are expected to provide $1.5 billion; to issue $1.02 billion of
debt at Southern Energy North America Generating, Inc., a Southern Energy
subsidiary, of which approximately $938 million will be drawn at closing; and to
provide the balance from committed credit lines.
Reference is made to Note (M) in the "Notes to the Condensed Financial
Statements" herein for discussion of a program to repurchase SOUTHERN's common
stock.
The market price of SOUTHERN's common stock at June 30, 2000 was $23.3125
per share and the book value was $13.75 per share, representing a market-to-book
ratio of 170%, compared to $23.50, $13.82 and 170%, respectively, at the end of
1999. The dividend for the second quarter of 2000 was $0.335 per share.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Capital
Requirements for Construction", "Other Capital Requirements" and "Environmental
Matters" of SOUTHERN in the Form 10-K for a description of the SOUTHERN system's
capital requirements for its construction program, sinking fund requirements and
maturing debt, and environmental compliance efforts. Approximately $388 million
will be required by June 30, 2001 for redemptions and maturities of long-term
debt. Also, the integrated Southeast utilities plan to continue, to the extent
possible, a program to retire higher-cost debt and preferred stock and replace
these securities with lower-cost capital.
16
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Sources of Capital
In addition to the financing activities previously described, SOUTHERN may
require additional equity capital during the remainder of the year. The amounts
and timing of additional equity capital to be raised in 2000, as well as in
subsequent years, will be contingent on SOUTHERN's investment opportunities. The
integrated Southeast utilities plan to obtain the funds required for
construction and other purposes from sources similar to those used in the past.
The amount, type and timing of any financings--if needed--will depend upon
maintenance of adequate earnings, regulatory approval, prevailing market
conditions and other factors. See Item 1 - BUSINESS - "Financing Programs" in
the Form 10-K for additional information.
To meet short-term cash needs and contingencies, the SOUTHERN system had at
June 30, 2000, approximately $788 million of cash and cash equivalents and
approximately $6.2 billion of unused credit arrangements with banks. These
unused credit arrangements also provide liquidity support to variable rate
pollution control bonds and commercial paper programs. At June 30, 2000, the
SOUTHERN system companies had outstanding approximately $2.4 billion of
short-term notes payable and $2.3 billion of commercial paper. Management
believes that the need for working capital can be adequately met by utilizing
lines of credit without maintaining large cash balances.
See Note (D) in the "Notes to the Condensed Financial Statements" herein
for discussion of financial derivative contracts entered into by SOUTHERN.
17
<PAGE>
ALABAMA POWER COMPANY
18
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---------------- ---------------- ---------------- ----------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $747,570 $690,043 $1,353,696 $1,257,943
Sales for resale --
Non-affiliates 113,685 93,008 209,816 178,573
Affiliates 18,423 22,183 47,092 69,284
Other revenues 20,780 17,382 36,031 31,140
---------------- ---------------- ---------------- ----------------
Total operating revenues 900,458 822,616 1,646,635 1,536,940
---------------- ---------------- ---------------- ----------------
Operating Expenses:
Operation --
Fuel 218,321 211,820 413,395 399,834
Purchased power --
Non-affiliates 37,001 17,995 55,873 25,575
Affiliates 53,922 36,091 80,787 63,518
Other 135,363 134,602 247,609 252,498
Maintenance 83,762 75,039 160,596 145,813
Depreciation and amortization 91,226 87,634 181,698 174,816
Taxes other than income taxes 52,088 50,601 106,240 103,662
---------------- ---------------- ---------------- ----------------
Total operating expenses 671,683 613,782 1,246,198 1,165,716
---------------- ---------------- ---------------- ----------------
Operating Income 228,775 208,834 400,437 371,224
Other Income (Expense):
Interest income 8,551 14,322 14,477 23,768
Equity in earnings of unconsolidated subsidiaries 638 709 1,497 1,477
Other, net (107) (2,796) (1,189) (8,299)
---------------- ---------------- ---------------- ----------------
Earnings Before Interest and Income Taxes 237,857 221,069 415,222 388,170
---------------- ---------------- ---------------- ----------------
Interest Charges and Other:
Interest on long-term debt 54,462 45,966 106,514 91,026
Interest on notes payable 4,234 2,885 7,176 5,560
Amortization of debt discount, premium and expense, net 2,886 2,772 5,725 5,490
Other interest charges, net 2,415 10,787 3,490 16,878
Distributions on preferred securities of subsidiary 6,371 6,202 12,707 12,033
---------------- ---------------- ---------------- ----------------
Total interest charges and other, net 70,368 68,612 135,612 130,987
---------------- ---------------- ---------------- ----------------
Earnings Before Income Taxes 167,489 152,457 279,610 257,183
Income taxes 60,278 55,568 100,919 93,344
---------------- ---------------- ---------------- ----------------
Net Income 107,211 96,889 178,691 163,839
Dividends on Preferred Stock 4,036 3,852 8,004 7,727
---------------- ---------------- ---------------- ----------------
Net Income After Dividends on Preferred Stock $103,175 $93,037 $170,687 $156,112
================ ================ ================ ================
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
----------------- -----------------
(in thousands)
Operating Activities:
<S> <C> <C>
Net income $178,691 $163,839
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 202,909 204,381
Deferred income taxes and investment tax credits, net 14,557 15,517
Other, net (37,992) 38,566
Changes in certain current assets and liabilities --
Receivables, net (66,654) (20,610)
Fossil fuel stock (10,377) (32,054)
Materials and supplies (5,790) (5,805)
Accounts payable (6,326) (71,378)
Energy cost recovery, retail (7,502) 4,653
Other 24,476 (8,442)
----------------- -----------------
Net cash provided from operating activities 285,992 288,667
----------------- -----------------
Investing Activities:
Gross property additions (391,398) (321,236)
Other (26,371) (46,039)
----------------- -----------------
Net cash used for investing activities (417,769) (367,275)
----------------- -----------------
Financing Activities:
Increase in notes payable, net 123,418 276,751
Proceeds --
Other long-term debt 250,000 301,650
Preferred securities - 50,000
Capital contributions from parent company 84,000 -
Redemptions --
First mortgage bonds (100,000) (300,000)
Other long-term debt (3,078) (1,640)
Preferred stock - (50,000)
Special deposits - (101,650)
Payment of preferred stock dividends (7,984) (7,997)
Payment of common stock dividends (208,800) (196,400)
Other (894) (10,653)
----------------- -----------------
Net cash provided from (used for) financing activities 136,662 (39,939)
----------------- -----------------
Net Change in Cash and Cash Equivalents 4,885 (118,547)
Cash and Cash Equivalents at Beginning of Period 19,475 134,248
----------------- -----------------
Cash and Cash Equivalents at End of Period $ 24,360 $ 15,701
================= =================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $114,885 $114,401
Income taxes (net of refunds) $42,604 $41,660
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
------------------ --------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 24,360 $ 19,475
Receivables --
Customer accounts receivable 315,798 265,900
Unrecovered retail fuel clause revenue 176,129 168,627
Other accounts and notes receivable 43,796 42,137
Affiliated companies 60,355 40,083
Accumulated provision for uncollectible accounts (5,269) (4,117)
Refundable income taxes 13,974 17,997
Fossil fuel stock, at average cost 94,959 84,582
Materials and supplies, at average cost 173,427 167,637
Other 73,931 46,011
------------------ --------------------
Total current assets 971,460 848,332
------------------ --------------------
Property, Plant, and Equipment:
In service 12,247,350 11,783,078
Less accumulated provision for depreciation 5,040,364 4,901,384
------------------ --------------------
7,206,986 6,881,694
Nuclear fuel, at amortized cost 89,228 106,836
Construction work in progress 589,435 715,153
------------------ --------------------
Total property, plant, and equipment 7,885,649 7,703,683
------------------ --------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries 36,702 34,891
Nuclear decommissioning trusts 295,205 286,653
Other 11,952 12,156
------------------ --------------------
Total other property and investments 343,859 333,700
------------------ --------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 327,282 330,405
Prepaid pension costs 239,491 213,971
Debt expense, being amortized 9,235 9,563
Premium on reacquired debt, being amortized 79,898 83,895
Department of Energy assessments 27,685 27,685
Other 104,628 97,470
------------------ --------------------
Total deferred charges and other assets 788,219 762,989
------------------ --------------------
Total Assets $9,989,187 $9,648,704
================== ====================
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
ALABAMA POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholders' Equity (Unaudited) 1999
------------------ --------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Securities due within one year $ 854 $ 100,943
Notes payable 220,242 96,824
Accounts payable --
Affiliated 97,448 91,315
Other 121,528 140,842
Customer deposits 34,349 31,704
Taxes accrued --
Income taxes 153,241 100,569
Other 52,644 18,295
Interest accrued 34,857 26,365
Vacation pay accrued 30,112 30,112
Other 51,603 84,267
------------------ --------------------
Total current liabilities 796,878 721,236
------------------ --------------------
Long-term debt 3,437,906 3,190,378
------------------ --------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,247,445 1,240,344
Deferred credits related to income taxes 256,496 265,102
Accumulated deferred investment tax credits 254,824 260,367
Employee benefits provisions 84,131 82,298
Prepaid capacity revenues 69,312 79,703
Other 143,074 155,901
------------------ --------------------
Total deferred credits and other liabilities 2,055,282 2,083,715
------------------ --------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes 347,000 347,000
------------------ --------------------
Cumulative preferred stock 317,512 317,512
------------------ --------------------
Common Stockholder's Equity:
Common stock, par value $40 per share --
Authorized - 6,000,000 shares
Outstanding - 5,608,955 shares
Par value 224,358 224,358
Paid-in capital 1,622,992 1,538,992
Premium on preferred stock 99 99
Retained earnings 1,187,160 1,225,414
------------------ --------------------
Total common stockholder's equity 3,034,609 2,988,863
------------------ --------------------
Total Liabilities and Stockholder's Equity $9,989,187 $9,648,704
================== ====================
The accompanying notes as they relate to ALABAMA are an integral part of these condensed statements.
</TABLE>
22
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
Earnings
ALABAMA's net income after dividends on preferred stock for the second quarter
and year-to-date 2000 was $103.2 million and $170.7 million, respectively,
compared to $93.0 million and $156.1 million for the corresponding periods of
1999. Earnings for the current quarter and year-to-date 2000 increased $10.1
million or 10.9% and $14.6 million or 9.3%, respectively, due primarily to
increases in operating revenues, which were partially offset by higher operating
expenses.
Significant income statement items appropriate for discussion include the
following:
<TABLE>
<CAPTION>
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Retail sales..................................... $57,527 8.3 $95,753 7.6
Sales for resale - non-affiliates................ 20,677 22.2 31,243 17.5
Sales for resale - affiliates.................... (3,760) (16.9) (22,192) (32.0)
Purchased power - non-affiliates................. 19,006 105.6 30,298 118.5
Purchased power - affiliates..................... 17,831 49.4 17,269 27.2
Maintenance expense.............................. 8,723 11.6 14,783 10.1
Interest income.................................. (5,771) (40.3) (9,291) (39.1)
Other, net....................................... 2,689 96.2 7,110 85.7
Interest on long-term debt....................... 8,496 18.5 15,488 17.0
Other interest charges, net...................... (8,372) (77.6) (13,388) (79.3)
</TABLE>
Retail sales. Retail sales revenues were higher for the second quarter and
year-to-date 2000 when compared to the same periods in 1999 due mainly to
increases in retail energy sales of 5.1% and 4.2% for the respective periods.
Retail energy sales increased due primarily to warmer weather and strong
commercial growth.
Sales for resale-non-affiliates. These revenues increased in the second
quarter and year-to-date 2000 due primarily to increased unit power sales and
increased sales for resale within ALABAMA's service area. Revenues from unit
power sales for the current quarter and year-to-date 2000 increased as a result
of higher energy sales and an adjustment recorded in the second quarter of 1999
lowering the return under formula rate contracts. Territorial sales for resale
increased for the current quarter and year-to-date 2000 as a result of warmer
weather. Energy is usually sold at variable cost and has no significant impact
on earnings.
Sales for resale - affiliates and Purchased power - affiliates. Revenues
from sales for resale to affiliated companies within the SOUTHERN system, as
well as purchases of energy, will vary from period to period depending on demand
and the availability and cost of generating resources at each company. These
transactions did not have a significant impact on earnings.
23
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Purchased power - non-affiliates. Increased amounts of purchased power were
needed to meet territorial demand for the second quarter and year-to-date 2000
to offset decreased nuclear and hydro power generation related to a refueling
and steam generator replacement outage and lower stream flows, respectively.
Maintenance expense. These expenditures increased for the current quarter
and year-to-date 2000 primarily due to higher costs related to a major, planned
outage on a fossil power generation facility and increased maintenance of
overhead lines.
Interest income. This item was lower for the current quarter and
year-to-date 2000 when compared to the same periods in 1999 due primarily to a
decrease in recognized gains on investments held by the nuclear decommissioning
trust. Interest income related to the nuclear decommissioning trust was offset
by a concurrent reduction of other interest charges in accordance with FERC
requirements.
Other, net. The increase for the second quarter and year-to-date 2000 was
primarily due to an increase in the equity portion of Allowance for Funds Used
During Construction as a result of an increase in the capitalization base.
Interest on long-term debt. Interest on long-term debt increased in the
second quarter and year-to-date 2000 primarily due to the issuance of $450
million of senior notes in the last half of 1999 and $250 million in the current
quarter.
Other interest charges, net. The decreases in other interest charges for
the second quarter and year-to-date 2000 when compared to the same periods in
1999 are primarily attributed to an increase in Allowance for Funds Used During
Construction resulting in a larger credit to interest expense than was recorded
in the corresponding periods for 1999. Also, there was a decrease in interest
charges related to the nuclear decommissioning trust, which was offset by a
concurrent reduction of interest income in accordance with FERC requirements.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, ALABAMA is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of ALABAMA in the Form 10-K.
On December 20, 1999, the FERC issued its final rule on Regional
Transmission Organizations (RTOs). Reference is made to Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of ALABAMA in the Form
10-K for information on this matter.
24
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" and Note 3 to the financial statements of ALABAMA in the
Form 10-K for information on EPA litigation.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts - and for hedging activities. ALABAMA has not yet quantified the
impact of adopting these statements on its financial statements; however, the
adoption could increase volatility in earnings.
Reference is made to Notes (B), (C), (F), (G) and (O) in the "Notes to the
Condensed Financial Statements" herein for discussion of various contingencies
and other matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in ALABAMA's financial condition during the first six months of
2000 included the addition of approximately $391.4 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operating activities and capital contributions from SOUTHERN. See ALABAMA's
Condensed Statements of Cash Flows for further details.
Financing Activities
During the first six months of 2000, maturities of first mortgage bonds by
ALABAMA totaled $100 million. In May 2000, ALABAMA issued $250 million of 7.85%
senior notes due May 15, 2003. The proceeds of the sale were used to repay a
portion of ALABAMA's outstanding short-term indebtedness. ALABAMA will continue
to retire higher-cost debt and preferred stock and replace these securities with
lower-cost capital as market conditions permit.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of ALABAMA
under "Capital Requirements," "Other Capital Requirements" and "Environmental
Matters" in the Form 10-K for a description of ALABAMA's capital requirements
for its construction program, maturing debt and environmental compliance
efforts.
Sources of Capital
In addition to the financing activities previously described herein, ALABAMA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.
25
<PAGE>
ALABAMA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
To meet short-term cash needs and contingencies, ALABAMA had at June 30,
2000, approximately $24.4 million of cash and cash equivalents, had unused
committed lines of credit of approximately $902 million (including $418 million
of such lines under which borrowings may be made only to fund purchase
obligations relating to variable rate pollution control bonds) and an extendible
commercial note program. ALABAMA has regulatory authority for up to $750 million
of short-term borrowings. At June 30, 2000, ALABAMA had outstanding $196 million
of commercial paper and $24 million of notes payable to banks.
26
<PAGE>
Exhibit 1
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO ALABAMA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of ALABAMA POWER
COMPANY as of June 30, 2000, and the related condensed statements of income for
the three-month and six-month periods ended June 30, 2000 and 1999 and cash
flows for the six-month periods ended June 30, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of ALABAMA POWER COMPANY as of
December 31, 1999 (not presented herein) and, in our report dated February 16,
2000, we expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1999 is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
/s/ Arthur Andersen LLP
Birmingham, Alabama
August 8, 2000
27
<PAGE>
GEORGIA POWER COMPANY
28
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---------------- ---------------- ----------------- ----------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $1,095,283 $ 990,335 $2,004,311 $1,852,112
Sales for resale --
Non-affiliates 62,110 53,861 105,799 95,616
Affiliates 31,220 14,482 43,153 22,388
Other revenues 32,064 32,870 59,053 52,362
---------------- ---------------- ----------------- ----------------
Total operating revenues 1,220,677 1,091,548 2,212,316 2,022,478
---------------- ---------------- ----------------- ----------------
Operating Expenses:
Operation --
Fuel 269,396 237,574 480,303 415,786
Purchased power --
Non-affiliates 85,430 47,752 128,540 79,910
Affiliates 41,728 43,850 89,468 98,771
Other 201,529 184,321 360,512 352,603
Maintenance 88,408 90,937 186,541 182,473
Depreciation and amortization 173,803 139,289 331,570 271,724
Taxes other than income taxes 49,896 49,151 101,509 98,153
---------------- ---------------- ----------------- ----------------
Total operating expenses 910,190 792,874 1,678,443 1,499,420
---------------- ---------------- ----------------- ----------------
Operating Income 310,487 298,674 533,873 523,058
Other Income (Expense):
Interest income 778 2,115 1,186 2,365
Equity in earnings of unconsolidated subsidiaries 676 731 1,529 1,464
Other, net 1,955 (3,389) (4,270) (10,026)
---------------- ---------------- ----------------- ----------------
Earnings Before Interest and Income Taxes 313,896 298,131 532,318 516,861
---------------- ---------------- ----------------- ----------------
Interest Charges and Other:
Interest on long-term debt 43,402 42,872 82,274 83,983
Interest on notes payable 7,920 5,618 16,075 9,834
Amortization of debt discount, premium and expense, net 4,506 3,900 7,216 7,600
Other interest charges, net (2,694) (402) (5,454) 727
Distributions on preferred securities of subsidiary 14,776 17,026 29,552 31,997
---------------- ---------------- ----------------- ----------------
Total interest charges and other, net 67,910 69,014 129,663 134,141
---------------- ---------------- ----------------- ----------------
Earnings Before Income Taxes 245,986 229,117 402,655 382,720
Income taxes 97,284 90,368 160,084 151,189
---------------- ---------------- ----------------- ----------------
Net Income 148,702 138,749 242,571 231,531
Dividends on Preferred Stock 169 178 339 1,379
---------------- ---------------- ----------------- ----------------
Net Income After Dividends on Preferred Stock $ 148,533 $ 138,571 $ 242,232 $ 230,152
================ ================ ================= ================
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
--------------- ----------------
(in thousands)
Operating Activities:
<S> <C> <C>
Net income $242,571 $231,531
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 304,526 280,856
Deferred income taxes and investment tax credits, net (15,964) 6,396
Other, net 169,471 33,791
Changes in certain current assets and liabilities --
Receivables, net (10,306) 9,255
Fossil fuel stock 3,870 (34,316)
Materials and supplies (3,836) (3,354)
Accounts payable (21,728) (66,228)
Energy cost recovery, retail (62,437) (4,262)
Other 27,948 40,918
--------------- ----------------
Net cash provided from operating activities 634,115 494,587
--------------- ----------------
Investing Activities:
Gross property additions (456,786) (353,516)
Other (66,152) (44,126)
--------------- ----------------
Net cash used for investing activities (522,938) (397,642)
--------------- ----------------
Financing Activities:
Increase (decrease) in notes payable, net (238,082) 147,701
Proceeds --
Other long-term debt 300,000 338,000
Preferred securities - 200,000
Capital contributions from parent company 269,000 -
Retirements --
First mortgage bonds (100,000) (209,000)
Other long-term debt - (50,000)
Preferred stock (383) (35,732)
Payment of preferred stock dividends (318) (378)
Payment of common stock dividends (275,100) (266,800)
Other (85,183) (212,429)
--------------- ----------------
Net cash used for financing activities (130,066) (88,638)
--------------- ----------------
Net Change in Cash and Cash Equivalents (18,889) 8,307
Cash and Cash Equivalents at Beginning of Period 34,660 16,272
--------------- ----------------
Cash and Cash Equivalents at End of Period $ 15,771 $ 24,579
=============== ================
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $133,263 $126,412
Income taxes (net of refunds) $54,164 $88,524
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
------------------ -------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 15,771 $ 34,660
Receivables --
Customer accounts receivable 506,203 438,161
Other accounts and notes receivable 107,083 102,544
Affiliated companies 12,199 16,006
Accumulated provision for uncollectible accounts (5,100) (7,000)
Fossil fuel stock, at average cost 122,428 126,298
Materials and supplies, at average cost 257,730 253,894
Other 93,528 63,990
------------------ -------------------
Total current assets 1,109,842 1,028,553
------------------ -------------------
Property, Plant, and Equipment:
In service 16,171,016 15,798,624
Less accumulated provision for depreciation 6,775,426 6,538,574
------------------ -------------------
9,395,590 9,260,050
Nuclear fuel, at amortized cost 114,783 119,288
Construction work in progress 451,669 425,975
------------------ -------------------
Total property, plant, and equipment 9,962,042 9,805,313
------------------ -------------------
Other Property and Investments:
Equity investments in unconsolidated subsidiaries 27,893 25,024
Nuclear decommissioning trusts 410,900 371,914
Other 32,191 33,766
------------------ -------------------
Total other property and investments 470,984 430,704
------------------ -------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 577,945 590,893
Prepaid pension costs 173,171 145,801
Debt expense, being amortized 54,743 55,824
Premium on reacquired debt, being amortized 178,476 99,331
Other 123,759 120,441
------------------ -------------------
Total deferred charges and other assets 1,108,094 1,012,290
------------------ -------------------
Total Assets $12,650,962 $12,276,860
================== ===================
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
GEORGIA POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholder's Equity (Unaudited) 1999
------------------ -------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Securities due within one year $ 51,240 $155,772
Notes payable and commercial paper 398,159 636,241
Accounts payable --
Affiliated 90,510 76,591
Other 288,634 346,785
Customer deposits 77,238 74,695
Taxes accrued --
Income taxes 129,798 7,914
Other 95,660 127,414
Interest accrued 47,848 58,665
Vacation pay accrued 37,927 38,143
Other 99,566 153,767
------------------ -------------------
Total current liabilities 1,316,580 1,675,987
------------------ -------------------
Long-term debt 2,992,806 2,688,358
------------------ -------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 2,213,027 2,202,565
Deferred credits related to income taxes 257,777 267,083
Accumulated deferred investment tax credits 359,714 367,114
Employee benefits provisions 187,719 181,529
Other 345,178 151,812
------------------ -------------------
Total deferred credits and other liabilities 3,363,415 3,170,103
------------------ -------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes 789,250 789,250
------------------ -------------------
Preferred stock 14,569 14,952
------------------ -------------------
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 2,084,983 1,815,983
Premium on preferred stock 40 40
Retained earnings 1,745,069 1,777,937
------------------ -------------------
Total common stockholder's equity 4,174,342 3,938,210
------------------ -------------------
Total Liabilities and Stockholder's Equity $12,650,962 $12,276,860
================== ===================
The accompanying notes as they relate to GEORGIA are an integral part of these condensed statements.
</TABLE>
32
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
Earnings
GEORGIA's net income after dividends on preferred stock for the second quarter
and year-to-date 2000 was $148.5 million and $242.2 million, respectively,
compared to $138.6 million and $230.2 million for the corresponding periods in
1999. The second quarter 2000 increase of $10.0 million or 7.2% and the
year-to-date increase of $12.1 million or 5.2% are primarily attributed to
higher operating revenues which were partially offset by higher operating
expenses, including additional accelerated amortization and depreciation
required under GEORGIA's three-year rate order.
<TABLE>
<CAPTION>
Significant income statement items appropriate for discussion include the
following:
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Retail sales..................................... $104,948 10.6 $152,199 8.2
Sales for resale - non-affiliates............... 8,249 15.3 10,183 10.6
Sales for resale - affiliates.................... 16,738 115.6 20,765 92.8
Other operating revenues......................... (806) (2.5) 6,691 12.8
Fuel expense..................................... 31,822 13.4 64,517 15.5
Purchased power - non-affiliates................. 37,678 78.9 48,630 60.9
Other operation expense.......................... 17,208 9.3 7,909 2.2
Depreciation and amortization.................... 34,514 24.8 59,846 22.0
</TABLE>
Retail sales. Retail sales revenues were higher for the second quarter and
year-to-date 2000 when compared to the same periods in 1999 due mainly to
increases in retail energy sales of 7.5% and 6.1% for the respective periods.
Retail energy sales to residential, commercial and industrial customers were up
by 11.3%, 9.5% and 3.4% for the second quarter of 2000 and 8.0%, 8.5% and 3.0%
year-to-date 2000, respectively. Retail energy sales increased due primarily to
growth in the number of customers and warmer weather than in the corresponding
periods of 1999.
Sales for resale - non-affiliates. The increases in these sales to
non-affiliates in the second quarter and year-to-date 2000 are attributed to
higher demand for energy by non-affiliates. These transactions did not have a
significant impact on earnings.
Sales for resale - affiliates. Revenues from sales for resale to affiliated
companies within the SOUTHERN system will vary from period to period depending
on demand and the availability and cost of generating resources at each company.
These transactions did not have a significant impact on earnings.
Other operating revenues. The year-to-date 2000 increase is primarily
attributed to the recognition of the open-access transmission tariff settlement
in 1999.
33
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Fuel expense. This expense is higher for the second quarter and
year-to-date 2000, when compared to the same periods of the prior year, due
primarily to increased generation from fossil-fueled plants to meet higher
energy demands and higher natural gas and oil prices. These expenses do not have
a significant impact on earnings since energy expenses are generally offset by
energy revenues.
Purchased power from non-affiliates. Increased demand for energy as well as
the drought in GEORGIA's service area, and increased prices for natural gas and
oil, resulted in the increases in purchased power for the current quarter and
year-to-date 2000 when compared to the same periods of 1999. These expenses do
not have a significant impact on earnings since energy expenses are generally
offset by energy revenues.
Other operation expense. These expenses were higher in the second quarter
and year-to-date 2000 as compared to the corresponding periods in the prior year
due primarily to increased costs related to employee severance costs and
customer service expense.
Depreciation and amortization expense. For the second quarter and
year-to-date 2000, the increases in this expense are attributable to accelerated
amortization and depreciation required by the three-year rate order which became
effective January 1, 1999 and increased in-service property, plant and
equipment. See Note (H) in the "Notes to the Condensed Financial Statements"
herein for further details regarding the retail rate order.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors including weather, regulatory matters and energy sales.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, GEORGIA is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of GEORGIA in the Form
10-K.
Effective January 1, 1999, GEORGIA began operating under a new three-year
retail rate order. Under the order, GEORGIA's earnings are evaluated against a
retail return on common equity range of 10% to 12.5%. In compliance with the
order, retail rates were decreased by $24 million on an annual basis effective
January 1, 2000. Reference is made to Note (H) in the "Notes to the Condensed
Financial Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GEORGIA in the Form 10-K for additional
information.
Compliance costs related to the Clean Air Act and other environmental
issues could affect earnings. For additional information, see Item 7 -
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental Issues" of GEORGIA in the
Form 10-K.
34
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts - and for hedging activities. GEORGIA has not yet quantified the
impact of adopting these statements on its financial statements; however, the
adoption could increase volatility in earnings.
Reference is made to Notes (B), (C), (H), (I) and (O) in the "Notes to the
Condensed Financial Statements" herein for discussion of various contingencies
and other matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
The major change in GEORGIA's financial condition during the first six months of
2000 was the addition of approximately $456.8 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations and capital contributions from SOUTHERN. See GEORGIA's Condensed
Statements of Cash Flows for further details.
Financing Activities
During the first six months of 2000, maturities of first mortgage bonds by
GEORGIA totaled $100 million. In February 2000, GEORGIA issued $300 million of
floating rate senior notes due February 22, 2002. The proceeds of the sale were
used to repay a portion of GEORGIA's outstanding short-term indebtedness.
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GEORGIA
under "Liquidity and Capital Requirements" and "Environmental Issues" in the
Form 10-K for a description of GEORGIA's capital requirements for its
construction program and environmental compliance efforts.
Sources of Capital
In addition to the financing activities previously described herein, GEORGIA
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.
35
<PAGE>
GEORGIA POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
To meet short-term cash needs and contingencies, GEORGIA had at June 30,
2000, approximately $15.8 million of cash and cash equivalents and approximately
$1.8 billion of unused credit arrangements with banks. The credit arrangements
provide liquidity support to GEORGIA's obligations with respect to variable rate
pollution control bonds and its commercial paper program. At June 30, 2000,
GEORGIA had outstanding $398.2 million of commercial paper. Management believes
that the need for working capital can be adequately met by utilizing lines of
credit without maintaining large cash balances.
36
<PAGE>
Exhibit 1
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO GEORGIA POWER COMPANY:
We have reviewed the accompanying condensed balance sheet of GEORGIA POWER
COMPANY (a Georgia corporation) as of June 30, 2000, and the related condensed
statements of income for the three-month and six-month periods ended June 30,
2000 and 1999 and cash flows for the six-month periods ended June 30, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet of GEORGIA POWER COMPANY as of
December 31, 1999 (not presented herein), and, in our report dated February 16,
2000, we expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying condensed balance sheet as of December
31, 1999, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
/s/ Arthur Andersen LLP
Atlanta, Georgia
August 8, 2000
37
<PAGE>
GULF POWER COMPANY
38
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------- ------------------------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $142,360 $128,214 $259,167 $235,495
Sales for resale --
Non-affiliates 16,609 14,932 27,587 26,126
Affiliates 20,566 13,610 29,233 20,681
Other revenues 2,585 10,059 4,631 19,019
-------------- ---------------- --------------- --------------
Total operating revenues 182,120 166,815 320,618 301,321
-------------- ---------------- --------------- --------------
Operating Expenses:
Operation --
Fuel 57,020 53,208 98,663 91,961
Purchased power --
Non-affiliates 15,781 9,138 22,395 13,294
Affiliates 3,578 3,100 6,736 6,675
Other 29,979 27,780 57,167 54,922
Maintenance 15,346 15,903 29,522 32,496
Depreciation and amortization 16,443 16,034 32,810 32,112
Taxes other than income taxes 13,468 12,399 26,813 24,943
-------------- ---------------- --------------- --------------
Total operating expenses 151,615 137,562 274,106 256,403
-------------- ---------------- --------------- --------------
Operating Income 30,505 29,253 46,512 44,918
Other Income (Expense):
Interest income 289 260 727 501
Other, net (934) (91) (1,438) (903)
-------------- ---------------- --------------- --------------
Earnings Before Interest and Income Taxes 29,860 29,422 45,801 44,516
-------------- ---------------- --------------- --------------
Interest Charges and Other:
Interest on long-term debt 5,726 5,032 11,346 9,982
Interest on notes payable 1,010 871 1,783 1,356
Amortization of debt discount, premium and expense, net 532 491 1,035 989
Other interest charges, net 228 333 400 611
Distributions on preferred securities of subsidiary 1,550 1,550 3,100 3,100
-------------- ---------------- --------------- --------------
Total interest charges and other, net 9,046 8,277 17,664 16,038
-------------- ---------------- --------------- --------------
Earnings Before Income Taxes 20,814 21,145 28,137 28,478
Income taxes 7,833 7,865 10,449 10,345
-------------- ---------------- --------------- --------------
Net Income 12,981 13,280 17,688 18,133
Dividends on Preferred Stock 54 54 108 108
-------------- ---------------- --------------- --------------
Net Income After Dividends on Preferred Stock $12,927 $13,226 $17,580 $18,025
============== ================ =============== ==============
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
--------------- ---------------
(in thousands)
Operating Activities:
<S> <C> <C>
Net income $17,688 $18,133
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 34,793 34,100
Deferred income taxes and investment tax credits, net (8,245) (1,952)
Other, net 5,202 5,824
Changes in certain current assets and liabilities --
Receivables, net (11,728) (12,514)
Fossil fuel stock (1,914) (22,869)
Materials and supplies 1,335 (831)
Accounts payable 5,789 (4,082)
Other 27,476 6,709
--------------- ---------------
Net cash provided from operating activities 70,396 22,518
--------------- ---------------
Investing Activities:
Gross property additions (48,452) (33,242)
Other (9,289) (10,221)
--------------- ---------------
Net cash used for investing activities (57,741) (43,463)
--------------- ---------------
Financing Activities:
Increase (decrease) in notes payable, net 3,000 53,500
Retirements --
Other long-term debt (924) -
Payment of preferred stock dividends (108) (117)
Payment of common stock dividends (29,500) (30,100)
Other (22) (4)
--------------- ---------------
Net cash provided from (used for) financing activities (27,554) 23,279
--------------- ---------------
Net Change in Cash and Cash Equivalents (14,899) 2,334
Cash and Cash Equivalents at Beginning of Period 15,753 969
--------------- ---------------
Cash and Cash Equivalents at End of Period $854 $3,303
=============== ===============
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $16,335 $13,089
Income taxes (net of refunds) 5,207 2,412
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
--------------- --------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 854 $ 15,753
Receivables --
Customer accounts receivable 68,095 55,108
Other accounts and notes receivable 5,874 4,325
Affiliated companies 5,203 7,104
Accumulated provision for uncollectible accounts (1,933) (1,026)
Fossil fuel stock, at average cost 31,783 29,869
Materials and supplies, at average cost 28,753 30,088
Regulatory clauses under recovery 3,952 11,611
Other 6,943 5,354
--------------- --------------------
Total current assets 149,524 158,186
--------------- --------------------
Property, Plant, and Equipment:
In service 1,872,767 1,853,664
Less accumulated provision for depreciation 851,079 821,970
--------------- --------------------
1,021,688 1,031,694
Construction work in progress 59,404 34,164
--------------- --------------------
Total property, plant, and equipment 1,081,092 1,065,858
--------------- --------------------
Other Property and Investments 4,475 1,481
--------------- --------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 16,597 25,264
Prepaid pension costs 20,369 17,734
Debt expense, being amortized 2,470 2,526
Premium on reacquired debt, being amortized 16,602 17,360
Other 18,681 20,086
--------------- --------------------
Total deferred charges and other assets 74,719 82,970
--------------- --------------------
Total Assets $1,309,810 $1,308,495
=============== ====================
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
GULF POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholder's Equity (Unaudited) 1999
--------------- --------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Notes payable $ 58,000 $ 55,000
Accounts payable --
Affiliated 13,869 14,878
Other 24,569 22,581
Customer deposits 13,219 12,778
Taxes accrued --
Income taxes 18,312 4,889
Other 12,669 7,707
Interest accrued 8,786 9,255
Vacation pay accrued 4,199 4,199
Other 7,157 4,961
--------------- --------------------
Total current liabilities 160,780 136,248
--------------- --------------------
Long-term debt 366,724 367,449
--------------- --------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 156,530 162,776
Deferred credits related to income taxes 39,947 49,693
Accumulated deferred investment tax credits 26,752 27,712
Employee benefits provisions 33,735 31,735
Other 25,713 21,333
--------------- --------------------
Total deferred credits and other liabilities 282,677 293,249
--------------- --------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes 85,000 85,000
--------------- --------------------
Preferred stock 4,236 4,236
--------------- --------------------
Common Stockholder's Equity
Common stock, without par value--
Authorized - 992,717 shares
Outstanding - 992,717 shares 38,060 38,060
Paid-in capital 221,254 221,254
Premium on preferred stock 12 12
Retained earnings 151,067 162,987
--------------- --------------------
Total common stockholder's equity 410,393 422,313
--------------- --------------------
Total Liabilities and Stockholder's Equity $1,309,810 $1,308,495
=============== ====================
The accompanying notes as they relate to GULF are an integral part of these condensed statements.
</TABLE>
42
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
Earnings
GULF's net income after dividends on preferred stock for the second quarter and
year-to-date 2000 was $12.9 million and $17.6 million, respectively, compared to
$13.2 million and $18.0 million for the same periods in 1999. Although operating
revenues increased, earnings decreased slightly due primarily to changes in
interest on long-term debt and notes payable.
<TABLE>
<CAPTION>
Significant income statement items appropriate for discussion include the
following:
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Retail sales..................................... $14,146 11.0 $23,672 10.1
Sales for resale - non-affiliates................ 1,677 11.2 1,461 5.6
Sales for resale - affiliates.................... 6,956 51.1 8,552 41.4
Other operating revenues......................... (7,474) (74.3) (14,388) (75.7)
Fuel expense..................................... 3,812 7.2 6,702 7.3
Purchased power - non-affiliates................. 6,643 72.7 9,101 68.5
Other operation expense.......................... 2,199 7.9 2,245 4.1
Maintenance expense.............................. (557) (3.5) (2,974) (9.2)
Taxes other than income taxes.................... 1,069 8.6 1,870 7.5
Other, net....................................... (843) N/M (535) (59.2)
Interest on long-term debt....................... 694 13.8 1,364 13.7
N/M - Not meaningful
</TABLE>
Retail sales. Excluding the recovery of fuel expense and certain other
expenses that do not affect net income, retail sales revenues increased slightly
during the second quarter and year-to-date 2000 when compared to the
corresponding periods of the prior year. Retail energy sales increased 4.9% and
5.1% during the second quarter and year-to-date 2000, respectively, when
compared to the same periods in 1999. These increases were due primarily to
growth in the number of retail customers served by GULF. The year-to-date 2000
increase in energy sales was offset, for the most part, by retail base rate
reductions and the recording of estimated revenues to be shared under GULF's
Sharing Plan, which was approved by the Florida PSC in October 1999. For
additional information regarding the reduction to retail base rates and the
Sharing Plan, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of GULF in the Form 10-K.
Sales for resale - non-affiliates. Increased revenues from unit power
energy sales were the primary reason for the second quarter and year-to-date
2000 increases when compared to the same periods in 1999. Energy is usually sold
at variable cost and has no significant impact on net income.
43
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Sales for resale - affiliates. Revenues from sales for resale to affiliated
companies within the SOUTHERN system will vary from period to period depending
on demand and the availability and cost of generating resources at each company.
These transactions do not have a significant impact on earnings.
Other operating revenues. These revenues were down in the second quarter
and year-to-date 2000 due primarily to a decrease in fuel, conservation and
capacity clause revenues. The decreases in these revenues were a result of
adjustments to reflect differences between recoverable costs and the amounts
actually reflected in current rates. The recovery provisions generally equal the
related expenses and have no material effect on net income.
Fuel expense. For the second quarter and year-to-date 2000, fuel expense
increased due mainly to increased generation in order to meet the demand for
energy and a higher average cost of fuel consumed.
Purchased power from non-affiliates. The increases during the second
quarter and year-to-date 2000 when compared to the same periods in the prior
year are primarily attributed to an increase in energy purchases due to
increased power marketing activities, the majority of which were resold to
non-affiliated third parties. These transactions had no significant effect on
net income.
Other operation expense. These expenses were higher for the second quarter
and year-to-date 2000 due primarily to increased expenses associated with higher
variable payroll costs, as well as a higher provision for uncollectible accounts
when compared to the same periods in 1999.
Maintenance expense. For the second quarter and year-to-date 2000, these
expenses decreased when compared to the corresponding periods of 1999 due
primarily to scheduled outages during the first half of 1999.
Taxes other than income taxes. The increases in these taxes for the current
quarter and year-to-date 2000 are primarily due to higher franchise fees and
gross receipt taxes related to increases in GULF's billed revenues. These
collections are also included in other operating revenues and have no impact on
earnings.
Other, net. The second quarter 2000 decrease, when compared to the same
period in 1999, is attributed, for the most part, to expenses related to the
discontinuance of GULF's appliance sales division. The year-to-date 2000
decrease is primarily attributed to the discontinuance of GULF's appliance sales
division, as well as an increase in expenditures related to environmental
advocacy when compared to the same period in 1999.
Interest on long-term debt. Interest on long-term debt increased during the
second quarter and year-to-date 2000 due mainly to the issuance of senior notes
during the latter half of 1999.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.
With the enactment of the Energy Act and new legislation being discussed
at federal and state levels to expand customer choice, GULF is positioning the
business to meet the challenge of increasing competition. For
44
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of GULF and Item 1 - BUSINESS - "Competition" in the
Form 10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs are not fully recovered through GULF's Environmental Cost Recovery Clause.
For additional information about the Clean Air Act and other environmental
issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Environmental
Matters" of GULF in the Form 10-K.
On November 4, 1999, the Florida PSC approved GULF's plan to reduce its
authorized rate of return, reduce retail base rates and share revenues with its
customers. For additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Future Earnings Potential" of GULF in the Form 10-K.
On December 20, 1999, the FERC issued its final rule on RTOs. Reference is
made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings
Potential" of GULF in the Form 10-K for information on this matter.
Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Protection Agency Litigation" and Note 3 to the financial
statements of GULF in the Form 10-K for information on EPA litigation.
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts - and for hedging activities. GULF has not yet quantified the impact
of adopting these statements on its financial statements; however, the adoption
could increase volatility in earnings.
Reference is made to Notes (B) and (O) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in GULF's financial condition during the first six months of 2000
included the addition of approximately $48.5 million to utility plant. The funds
for these additions and other capital requirements were derived primarily from
operations. See GULF's Condensed Statements of Cash Flows for further details.
Financing Activities
GULF plans to continue, to the extent possible, a program to retire higher-cost
debt and preferred stock and replace these securities with lower-cost capital.
45
<PAGE>
GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of GULF under
"Capital Requirements for Construction," "Environmental Matters" and "Other
Capital Requirements" in the Form 10-K for a description of GULF's capital
requirements for its construction program, environmental compliance efforts and
maturing debt.
Sources of Capital
In addition to the financing activities previously described herein, GULF plans
to obtain the funds required for construction and other purposes from sources
similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, GULF had at June 30, 2000,
approximately $854 thousand of cash and cash equivalents and $46.5 million of
unused committed lines of credit with banks in addition to $61.9 million
liquidity support for GULF's obligations with respect to variable rate pollution
control bonds. At June 30, 2000, GULF had $58 million outstanding of notes
payable to banks. Management believes that the need for working capital can be
adequately met by utilizing lines of credit without maintaining large cash
balances.
46
<PAGE>
MISSISSIPPI POWER COMPANY
47
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------- ---------------- ---------------- --------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $132,749 $120,047 $233,711 $212,065
Sales for resale --
Non-affiliates 35,787 32,078 62,349 59,307
Affiliates 4,303 3,257 8,884 4,292
Other revenues 3,189 3,208 5,789 5,361
-------------- ---------------- ---------------- --------------
Total operating revenues 176,028 158,590 310,733 281,025
-------------- ---------------- ---------------- --------------
Operating Expenses:
Operation --
Fuel 52,513 46,706 89,573 78,228
Purchased power --
Non-affiliates 13,152 7,162 17,160 9,507
Affiliates 11,433 7,497 23,055 16,399
Other 27,954 27,683 54,685 54,730
Maintenance 17,247 14,265 30,184 25,866
Depreciation and amortization 13,508 11,780 25,221 23,569
Taxes other than income taxes 12,091 12,208 24,132 23,315
-------------- ---------------- ---------------- --------------
Total operating expenses 147,898 127,301 264,010 231,614
-------------- ---------------- ---------------- --------------
Operating Income 28,130 31,289 46,723 49,411
Other Income:
Interest income 41 69 140 150
Other, net 437 587 791 1,221
-------------- ---------------- ---------------- --------------
Earnings Before Interest and Income Taxes 28,608 31,945 47,654 50,782
-------------- ---------------- ---------------- --------------
Interest Charges and Other:
Interest on long-term debt 6,404 5,034 11,828 10,044
Interest on notes payable 624 874 1,669 1,286
Amortization of debt discount, premium and expense, net 366 361 723 717
Other interest charges, net 95 96 223 178
Distributions on preferred securities of subsidiary 699 699 1,398 1,398
-------------- ---------------- ---------------- --------------
Total interest charges and other, net 8,188 7,064 15,841 13,623
--------------- ---------------- ---------------- --------------
Earnings Before Income Taxes 20,420 24,881 31,813 37,159
Income taxes 7,684 9,424 11,852 14,006
--------------- ---------------- ---------------- --------------
Net Income 12,736 15,457 19,961 23,153
Dividends on Preferred Stock 504 504 1,007 1,007
-------------- ---------------- ---------------- --------------
Net Income After Dividends on Preferred Stock $12,232 $ 14,953 $18,954 $ 22,146
============== ================ ================ ==============
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
-------------- ---------------
(in thousands)
Operating Activities:
<S> <C> <C>
Net income $19,961 $23,153
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 27,444 25,637
Deferred income taxes and investment tax credits, net (2,669) 1,747
Other, net 6,407 (1,226)
Changes in certain current assets and liabilities --
Receivables, net 245 (15,694)
Fossil fuel stock 6,623 (12,453)
Materials and supplies (391) (1,152)
Accounts payable (8,686) (7,287)
Other (4,035) (3,490)
-------------- ---------------
Net cash provided from operating activities 44,899 9,235
-------------- ---------------
Investing Activities:
Gross property additions (44,921) (26,700)
Other (9,297) (6,879)
-------------- ---------------
Net cash used for investing activities (54,218) (33,579)
-------------- ---------------
Financing Activities:
Increase (decrease) in notes payable, net (10,500) 56,000
Proceeds --
Other long-term debt 100,000 -
Capital contributions from parent company 10,000 -
Retirements --
Other long-term debt (50,681) (57)
Payment of preferred stock dividends (1,007) (1,007)
Payment of common stock dividends (27,400) (27,600)
Other (253) (243)
-------------- ---------------
Net cash provided from financing activities 20,159 27,093
-------------- ---------------
Net Change in Cash and Cash Equivalents 10,840 2,749
Cash and Cash Equivalents at Beginning of Period 173 1,327
-------------- ---------------
Cash and Cash Equivalents at End of Period $11,013 $4,076
============== ===============
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $13,776 $12,722
Income taxes (net of refunds) $104 $97
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
-------------------- -------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 11,013 $ 173
Receivables --
Customer accounts receivable 77,358 61,274
Other accounts and notes receivable 17,723 23,490
Affiliated companies 5,241 16,097
Accumulated provision for uncollectible accounts (530) (697)
Fossil fuel stock, at average cost 19,174 25,797
Materials and supplies, at average cost 21,029 20,638
Other 12,074 10,013
-------------------- -------------------
Total current assets 163,082 156,785
-------------------- -------------------
Property, Plant, and Equipment:
In service 1,653,678 1,601,399
Less accumulated provision for depreciation 648,467 626,841
-------------------- -------------------
1,005,211 974,558
Construction work in progress 59,043 68,721
-------------------- -------------------
Total property, plant, and equipment 1,064,254 1,043,279
-------------------- -------------------
Other Property and Investments 2,280 1,389
-------------------- -------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 14,333 21,557
Prepaid pension costs 4,368 2,488
Debt expense, being amortized 4,645 4,355
Premium on reacquired debt, being amortized 7,578 8,154
Other 10,753 13,129
-------------------- -------------------
Total deferred charges and other assets 41,677 49,683
-------------------- -------------------
Total Assets $1,271,293 $1,251,136
==================== ===================
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
MISSISSIPPI POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholders' Equity (Unaudited) 1999
-------------------- -------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Securities due within one year $ 30,020 $ 30,020
Notes payable 47,000 57,500
Accounts payable --
Affiliated 13,334 17,002
Other 33,878 43,105
Customer deposits 4,522 3,749
Taxes accrued --
Income taxes 19,674 6,865
Other 20,462 35,534
Interest accrued 5,815 6,733
Vacation pay accrued 5,218 5,218
Other 8,549 7,497
-------------------- -------------------
Total current liabilities 188,472 213,223
-------------------- -------------------
Long-term debt 371,178 321,802
-------------------- -------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 136,979 139,564
Deferred credits related to income taxes 26,823 34,765
Accumulated deferred investment tax credits 24,088 24,695
Employee benefits provisions 34,773 34,268
Workforce reduction plan 10,494 11,272
Other 18,155 12,770
-------------------- -------------------
Total deferred credits and other liabilities 251,312 257,334
-------------------- -------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trust holding company junior
subordinated notes 35,000 35,000
-------------------- -------------------
Preferred stock 31,809 31,809
-------------------- -------------------
Common Stockholder's Equity
Common stock, par value $40 per share --
Authorized - 6,000,000 shares
Outstanding - 5,608,955 shares
Par value 37,691 37,691
Paid-in capital 191,502 181,502
Premium on preferred stock 326 326
Retained earnings 164,003 172,449
-------------------- -------------------
Total common stockholder's equity 393,522 391,968
-------------------- -------------------
Total Liabilities and Stockholder's Equity $1,271,293 $1,251,136
==================== ===================
The accompanying notes as they relate to MISSISSIPPI are an integral part of these condensed statements.
</TABLE>
51
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
Earnings
MISSISSIPPI's net income after dividends on preferred stock for the second
quarter and year-to-date 2000 was $12.2 million and $18.9 million, respectively,
compared to $14.9 million and $22.1 million for the corresponding periods of
1999. Earnings decreased during the second quarter and year-to-date 2000 by $2.7
million or 18.2% and $3.2 million or 14.4%, respectively, due to increased
operating expenses.
<TABLE>
<CAPTION>
Significant income statement items appropriate for discussion include the
following:
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Retail sales..................................... $12,702 10.6 $21,646 10.2
Sales for resale - non-affiliates................ 3,709 11.6 3,042 5.1
Sales for resale - affiliates.................... 1,046 32.1 4,592 107.0
Fuel expense..................................... 5,807 12.4 11,345 14.5
Purchased power - non-affiliates................. 5,990 83.6 7,653 80.5
Purchased power - affiliates..................... 3,936 52.5 6,656 40.6
Maintenance expense.............................. 2,982 20.9 4,318 16.7
Depreciation and amortization expense............ 1,728 14.7 1,652 7.0
Interest on long-term debt....................... 1,370 27.2 1,784 17.8
</TABLE>
Retail sales. Retail sales revenues were up in the second quarter and
year-to-date 2000 when compared to the same periods of 1999 due to increased
energy sales to the retail sector of 5.7% and 7.6 %, respectively. Retail energy
sales to residential, commercial and industrial customers increased by 5.5%,
3.7% and 7.1% for the second quarter 2000 and 5.2%, 6.3% and 9.6% for
year-to-date 2000, respectively, due primarily to growth in the number of
customers, warmer weather and new industrial load.
Sales for resale - non-affiliates. The increases in these sales for the
current quarter and year-to-date 2000 are primarily due to the continuing
economic growth in the areas served by rural cooperatives in Mississippi.
Sales for resale - affiliates and Purchased power - affiliates. Revenues
from sales for resale to affiliated companies, as well as purchases of energy,
within the SOUTHERN system will vary from period to period depending on demand
and the availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings.
Fuel expense. Fuel expense increased during the second quarter and
year-to-date 2000 due mainly to higher unit cost of fuel and, during the second
quarter, increased generation to meet energy demands.
Purchased power - non-affiliates. For the second quarter and year-to-date
2000, purchased power from non-affiliates increased as a result of increased
demand for energy.
52
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Maintenance expense. These costs increased in the second quarter and
year-to-date 2000 due to scheduled maintenance performed on steam power
generation facilities.
Depreciation and amortization. The increases in this expense for the
current quarter and year-to-date 2000 when compared to the same periods in 1999
are primarily attributed to additional distribution facilities and a new higher
depreciation rate approved by the Mississippi PSC.
Interest on long-term debt. These interest payments were higher in the
second quarter and year-to-date 2000 due mainly to higher interest rates being
charged on a variable rate long-term debt outstanding.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment. Operating revenues will be affected by any changes in
rates under the PEP and ECO plans. The PEP has proven to be a stabilizing force
on electric rates, with only moderate changes in rates taking place. For
additional information, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Future Earnings Potential" of MISSISSIPPI in the Form 10-K. See Note (J) in the
"Notes to the Condensed Financial Statements" herein for information regarding
an agreement between MISSISSIPPI and certain of its wholesale customers to
reduce rates.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, MISSISSIPPI is positioning
the business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of MISSISSIPPI in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be recovered. MISSISSIPPI's 2000 ECO Plan filing was approved, as
filed, by the Mississippi PSC on March 22, 2000 and resulted in a slight
decrease in customer prices. For additional information about the Clean Air Act
and other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND
ANALYSIS - "Environmental Matters" of MISSISSIPPI in the Form 10-K.
On December 20, 1999, the FERC issued its final rule on RTOs. Reference is
made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings
Potential" of MISSISSIPPI in the Form 10-K for information on this matter.
Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" and Note 3 to the financial statements of MISSISSIPPI in
the Form 10-K for information on EPA litigation.
53
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
In May 2000, the Mississippi PSC ordered that its docket reviewing
restructuring of the electric industry in the State of Mississippi be suspended.
The Mississippi PSC found that retail competition may not be in the public
interest at this time and ordered that no further formal hearings would be held
on this subject. It found that the current regulatory structure had produced
reliable low cost power and "should not be changed without clear and convincing
demonstration that change would be in the public interest." The Mississippi PSC
will continue to monitor retail and wholesale restructuring activities
throughout the United States and reserved "its right to order further formal
hearings on the matter should new evidence demonstrate that retail competition
would be in the public interest and all customers could receive a reduction in
the total cost of their electric service."
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts - and for hedging activities. MISSISSIPPI has not yet quantified the
impact of adopting these statements on its financial statements; however, the
adoption could increase volatility in earnings.
Reference is made to Notes (B), (J) and (O) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in MISSISSIPPI's financial condition during the first six months
of 2000 included the addition of approximately $44.9 million to utility plant.
The funds for these additions and other capital requirements were derived
primarily from operations and capital contributions from SOUTHERN. See
MISSISSIPPI's Condensed Statements of Cash Flows for further details.
Financing Activities
In March 2000, MISSISSIPPI issued $100 million of floating rate senior notes due
March 28, 2002. The proceeds were used to prepay bank loans of $45 million
maturing in November 2001 and $5 million maturing in October 2002. The balance
was used to repay a portion of MISSISSIPPI's outstanding short-term
indebtedness. MISSISSIPPI plans to continue, to the extent possible, a program
to retire higher-cost debt and replace these securities with lower-cost capital.
54
<PAGE>
MISSISSIPPI POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Capital Requirements
Reference is made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS of
MISSISSIPPI under "Capital Requirements for Construction," "Environmental
Matters" and "Other Capital Requirements" and Note 3 to the financial statements
in the Form 10-K for a description of MISSISSIPPI's capital requirements for its
construction program, environmental compliance efforts, sinking fund
requirements and maturities of long-term debt.
Sources of Capital
In addition to the financing activities previously described herein, MISSISSIPPI
plans to obtain the funds required for construction and other purposes from
sources similar to those used in the past. The amount, type and timing of any
financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, MISSISSIPPI had at June
30, 2000, approximately $11 million of cash and cash equivalents and
approximately $99.3 million of unused committed credit arrangements with banks.
At June 30, 2000, MISSISSIPPI had short-term notes payable outstanding of $47
million. Management believes that the need for working capital can be adequately
met by utilizing lines of credit without maintaining large cash balances.
55
<PAGE>
SAVANNAH ELECTRIC
AND
POWER COMPANY
56
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---------------- ---------------- --------------- --------------
(in thousands) (in thousands)
Operating Revenues:
<S> <C> <C> <C> <C>
Retail sales $70,323 $59,806 $120,108 $105,613
Sales for resale --
Non-affiliates 997 764 1,566 1,232
Affiliates 1,033 578 2,754 944
Other revenues 427 544 742 1,001
---------------- ---------------- --------------- --------------
Total operating revenues 72,780 61,692 125,170 108,790
---------------- ---------------- --------------- --------------
Operating Expenses:
Operation --
Fuel 16,763 10,951 26,510 17,544
Purchased power --
Non-affiliates 5,405 2,361 7,593 3,453
Affiliates 8,570 10,276 16,620 19,453
Other 12,845 11,961 24,648 23,240
Maintenance 5,478 4,759 10,144 9,198
Depreciation and amortization 6,309 5,966 12,618 11,943
Taxes other than income taxes 3,310 2,923 6,354 5,827
---------------- ---------------- --------------- --------------
Total operating expenses 58,680 49,197 104,487 90,658
---------------- ---------------- --------------- --------------
Operating Income 14,100 12,495 20,683 18,132
Other Income (Expense):
Interest income 38 27 79 63
Other, net (18) (496) (404) (919)
---------------- ---------------- --------------- --------------
Earnings Before Interest and Income Taxes 14,120 12,026 20,358 17,276
---------------- ---------------- --------------- --------------
Interest Charges and Other:
Interest on long-term debt 2,340 2,463 4,612 4,938
Interest on notes payable 581 177 1,034 198
Amortization of debt discount, premium and expense, net 241 235 481 468
Other interest charges, net 17 (7) 73 58
Distributions on preferred securities of subsidiary 685 685 1,370 1,370
---------------- ---------------- --------------- --------------
Total interest charges and other, net 3,864 3,553 7,570 7,032
---------------- ---------------- --------------- --------------
Earnings Before Income Taxes 10,256 8,473 12,788 10,244
Income taxes 3,969 3,205 4,858 3,767
---------------- ---------------- --------------- --------------
Net Income $ 6,287 $ 5,268 $ 7,930 $ 6,477
================ ================ =============== ==============
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months
Ended June 30,
2000 1999
--------------- ---------------
(in thousands)
Operating Activities:
<S> <C> <C>
Net income $7,930 $6,477
Adjustments to reconcile net income
to net cash provided from operating activities --
Depreciation and amortization 13,495 12,757
Deferred income taxes and investment tax credits, net (1,563) (775)
Other, net 3,326 546
Changes in certain current assets and liabilities --
Receivables, net (13,588) (12,533)
Fossil fuel stock 94 (1,918)
Materials and supplies (706) (255)
Accounts payable 8,627 4,177
Other 2,468 670
--------------- ---------------
Net cash provided from operating activities 20,083 9,146
--------------- ---------------
Investing Activities:
Gross property additions (13,325) (17,019)
Other, net (3,279) (1,926)
--------------- ---------------
Net cash used for investing activities (16,604) (18,945)
--------------- ---------------
Financing Activities:
Increase (decrease) in notes payable, net 7,400 35,400
Retirements --
First mortgage bonds - (15,800)
Other long-term debt (304) (254)
Payment of common stock dividends (12,300) (12,400)
Other - 319
--------------- ---------------
Net cash provided from (used for) financing activities (5,204) 7,265
--------------- ---------------
Net Change in Cash and Cash Equivalents (1,725) (2,534)
Cash and Cash Equivalents at Beginning of Period 6,553 5,962
--------------- ---------------
Cash and Cash Equivalents at End of Period $4,828 $3,428
=============== ===============
Supplemental Cash Flow Information:
Cash paid during the period for --
Interest (net of amount capitalized) $5,774 $6,670
Income taxes (net of refunds) 2,867 224
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Assets (Unaudited) 1999
----------------- -------------------
(in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 4,828 $ 6,553
Receivables --
Customer accounts receivable 30,229 20,752
Unrecovered retail fuel clause revenue 21,661 21,089
Other accounts and notes receivable 3,809 3,505
Affiliated companies 4,489 1,195
Accumulated provision for uncollectible accounts (296) (237)
Fossil fuel stock, at average cost 7,015 7,109
Materials and supplies, at average cost 9,108 8,402
Other 737 2,869
----------------- -------------------
Total current assets 81,580 71,237
----------------- -------------------
Property, Plant, and Equipment:
In service 813,040 804,096
Less accumulated provision for depreciation 371,392 360,639
----------------- -------------------
441,648 443,457
Construction work in progress 10,746 6,561
----------------- -------------------
Total property, plant, and equipment 452,394 450,018
----------------- -------------------
Other Property and Investments 2,003 1,506
----------------- -------------------
Deferred Charges and Other Assets:
Deferred charges related to income taxes 14,614 16,063
Cash surrender value of life insurance for deferred compensation plans 16,305 16,305
Debt expense, being amortized 3,080 3,155
Premium on reacquired debt, being amortized 7,980 8,385
Other 2,132 3,549
----------------- -------------------
Total deferred charges and other assets 44,111 47,457
----------------- -------------------
Total Assets $580,088 $570,218
================= ===================
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
SAVANNAH ELECTRIC AND POWER COMPANY
CONDENSED BALANCE SHEETS
At June 30,
2000 At December 31,
Liabilities and Stockholders' Equity (Unaudited) 1999
----------------- -------------------
(in thousands)
Current Liabilities:
<S> <C> <C>
Securities due within one year $ 30,669 $ 704
Notes payable 41,700 34,300
Accounts payable --
Affiliated 7,249 4,632
Other 15,495 11,118
Customer deposits 5,588 5,426
Taxes accrued --
Income taxes 2,223 3,046
Other 2,232 3,013
Interest accrued 4,582 3,237
Vacation pay accrued 2,185 2,142
Other 4,189 5,742
----------------- -------------------
Total current liabilities 116,112 73,360
----------------- -------------------
Long-term debt 116,878 147,147
----------------- -------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 80,827 80,318
Deferred credits related to income taxes 18,108 19,687
Accumulated deferred investment tax credits 10,948 11,280
Deferred compensation plans 11,194 10,624
Employee benefits provisions 8,502 7,805
Other 7,042 5,150
----------------- -------------------
Total deferred credits and other liabilities 136,621 134,864
----------------- -------------------
Company obligated mandatorily redeemable preferred
securities of subsidiary trusts holding company junior
subordinated notes 40,000 40,000
----------------- -------------------
Common Stockholder's Equity
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 9,788 9,787
Retained earnings 106,466 110,837
----------------- -------------------
Total common stockholder's equity 170,477 174,847
----------------- -------------------
Total Liabilities and Stockholder's Equity $580,088 $570,218
================= ===================
The accompanying notes as they relate to SAVANNAH are an integral part of these condensed statements.
</TABLE>
60
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SECOND QUARTER 2000 vs. SECOND QUARTER 1999
AND
YEAR-TO-DATE 2000 vs. YEAR-TO-DATE 1999
RESULTS OF OPERATIONS
Earnings
SAVANNAH's net income after dividends on preferred stock for the second quarter
and year-to-date 2000 was $6.3 million and $7.9 million, respectively, as
compared to $5.3 million and $6.5 million for the corresponding periods of 1999.
Earnings for the current quarter and year-to-date 2000 were higher due primarily
to increased operating revenues, partially offset by increased operating
expenses.
<TABLE>
<CAPTION>
Significant income statement items appropriate for discussion include the
following:
Increase (Decrease)
---------------------------------------------------------------
Second Quarter Year-To-Date
------------------------------- -------------------------------
(in thousands) % (in thousands) %
<S> <C> <C> <C> <C>
Retail sales..................................... $10,517 17.6 $14,495 13.7
Sales for resale - affiliates.................... 455 78.7 1,810 191.7
Fuel expense..................................... 5,812 53.1 8,966 51.1
Purchased power - non-affiliates................. 3,044 128.9 4,140 119.9
Purchased power - affiliates..................... (1,706) (16.6) (2,833) (14.6)
Other operation expense.......................... 884 7.4 1,408 6.1
Maintenance expense.............................. 719 15.1 946 10.3
Interest on notes payable........................ 404 228.2 836 N/M
N/M - Not meaningful
</TABLE>
Retail sales. Retail sales revenues for the second quarter and year-to-date
2000 were higher than the same periods in 1999 due primarily to increased retail
energy sales. Total retail energy sales were up 8.3% for the second quarter and
8.2% year-to-date 2000 due primarily to growth in the number of customers
serviced by SAVANNAH and warmer temperatures during the second quarter of 2000.
Energy sales to residential, commercial and industrial customers for the second
quarter and year-to-date 2000 increased by 9.5%, 9.6% and 3.4% and 9.0%, 9.8%
and 4.5%, respectively.
Sales for resale - affiliates and Purchased power - affiliates. Revenues
from sales for resale to affiliated companies, as well as purchases of energy,
within the SOUTHERN system will vary from period to period depending on demand
and the availability and cost of generating resources at each company. These
transactions do not have a significant impact on earnings.
Fuel expense. This expense increased in the second quarter and year-to-date
2000 reflecting higher fuel prices. The year-to-date 2000 increase was also
affected by increased generation in order to meet energy demands.
61
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Purchased power - non-affiliates. For the second quarter and year-to-date
2000, purchased power increased reflecting higher demand for energy and
increased costs for purchased power. These transactions do not have a
significant impact on earnings.
Other operation expense. The increases in this item for the second quarter
and year-to-date 2000, when compared to the same periods in 1999, result from
higher employee benefits expenses.
Maintenance expense. During the second quarter and year-to-date 2000,
maintenance expense increased due mainly to an unscheduled maintenance outage at
one of SAVANNAH's older plants and a major boiler outage at one of the coal
plants.
Interest on notes payable. The increases in this item for the second
quarter and year-to-date 2000, when compared to the same periods in 1999, result
from the increased outstanding amount of short-term debt and higher interest
rates in 2000.
Future Earnings Potential
The results of operations discussed above are not necessarily indicative of
future earnings potential. The level of future earnings depends on numerous
factors ranging from weather to energy sales growth to a less regulated, more
competitive environment.
In 1998, the Georgia PSC approved a four-year accounting order for
SAVANNAH. Reference is made to Note (K) in the "Notes to the Condensed Financial
Statements" herein and Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of SAVANNAH in the Form 10-K for additional information.
With the enactment of the Energy Act and new legislation being discussed at
federal and state levels to expand customer choice, SAVANNAH is positioning the
business to meet the challenge of increasing competition. For additional
information, see Item 1 - BUSINESS - "Competition" and Item 7 - MANAGEMENT'S
DISCUSSION AND ANALYSIS - "Future Earnings Potential" of SAVANNAH in the Form
10-K.
Compliance costs related to the Clean Air Act could affect earnings if such
costs cannot be offset. For additional information about the Clean Air Act and
other environmental issues, see Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" of SAVANNAH in the Form 10-K.
On December 20, 1999, the FERC issued its final rule on RTOs. Reference is
made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future Earnings
Potential" of SAVANNAH in the Form 10-K for information on this matter.
Reference is also made to Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS -
"Environmental Matters" and Note 3 to the financial statements of SAVANNAH in
the Form 10-K for information on EPA litigation.
62
<PAGE>
SAVANNAH ELECTRIC AND POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which must be adopted by January 2001. In June 2000, the
FASB issued Statement No. 138, an amendment of FASB Statement No. 133,
Accounting for Certain Derivative Instruments and Certain Hedging Activities.
These statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SAVANNAH has not yet quantified the
impact of adopting these statements on its financial statements; however, the
adoption could increase volatility in earnings.
Reference is made to Notes (B), (K) and (O) in the "Notes to the Condensed
Financial Statements" herein for discussion of various contingencies and other
matters which may affect future earnings potential.
FINANCIAL CONDITION
Overview
Major changes in SAVANNAH's financial condition during the first six months of
2000 included the addition of approximately $13.3 million to utility plant. The
funds for these additions and other capital requirements were derived primarily
from operations and credit arrangements with banks. See SAVANNAH's Condensed
Statements of Cash Flows for further details.
Financing Activities
SAVANNAH plans to continue, to the extent possible, a program to retire
higher-cost debt and replace these obligations with lower-cost capital.
Sources of Capital
SAVANNAH plans to obtain the funds required for construction and other purposes
from sources similar to those used in the past. The amount, type and timing of
any financings--if needed--will depend upon maintenance of adequate earnings,
regulatory approval, prevailing market conditions and other factors. See Item 1
- BUSINESS - "Financing Programs" in the Form 10-K for additional information.
To meet short-term cash needs and contingencies, SAVANNAH had at June 30,
2000, approximately $4.8 million of cash and cash equivalents and approximately
$49.5 million of unused committed credit arrangements with banks. At June 30,
2000, SAVANNAH had $41.7 million outstanding of notes payable to banks. Since
SAVANNAH has no major generating plants under construction, management believes
that the need for working capital can be adequately met by utilizing lines of
credit.
63
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
INDEX TO APPLICABLE NOTES TO
FINANCIAL STATEMENTS BY REGISTRANT
Registrant Applicable Notes
SOUTHERN A, B, C, D, E, F, G, H, I, L, M, N, O, P, Q, R
ALABAMA A, B, C, F, G, O
GEORGIA A, B, C, H, I, O
GULF A, B, O
MISSISSIPPI A, B, J, O
SAVANNAH A, B, K, O
64
<PAGE>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
ALABAMA POWER COMPANY
GEORGIA POWER COMPANY
GULF POWER COMPANY
MISSISSIPPI POWER COMPANY
SAVANNAH ELECTRIC AND POWER COMPANY
NOTES TO THE CONDENSED FINANCIAL STATEMENTS:
(A) The condensed financial statements of the registrants included herein
have been prepared by each registrant, without audit, pursuant to the
rules and regulations of the SEC. In the opinion of each
registrant's management, the information regarding such registrant
furnished herein reflects all adjustments necessary to present fairly the
results of operations for the periods ended June 30, 2000 and 1999.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations, although each registrant
believes that the disclosures regarding such registrant are adequate to
make the information presented not misleading. It is suggested
that these condensed financial statements of each registrant be read in
conjunction with the financial statements of such registrant and the
notes thereto included in the Form 10-K. Certain prior period
amounts have been reclassified to conform with current period
presentation. Due to seasonal variations in the demand for energy,
operating results for the periods presented do not necessarily indicate
operating results for the entire year.
The condensed financial statements of ALABAMA and GEORGIA included herein
have been reviewed by ALABAMA's and GEORGIA's independent public
accountants as set forth in their reports included herein as Exhibit 1 to
ALABAMA's and GEORGIA's condensed financial statements.
(B) 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 unrecoverable regulatory assets and liabilities, and determine
if any other assets have been impaired. For additional information, see
Note 1 to the financial statements of each registrant in Item 8 of the
Form 10-K.
(C) The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry--including
SOUTHERN's--regarding the recognition, measurement and classification
of decommissioning costs for nuclear generating facilities in the
financial statements. In response to these questions, the FASB has
decided to review the accounting for obligations related to the
retirement of long-lived assets, including nuclear decommissioning.
Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of SOUTHERN, ALABAMA and GEORGIA in Item 7 and
Note 1 to the financial statements of SOUTHERN, ALABAMA and GEORGIA
under "Depreciation and Nuclear Decommissioning" in Item 8 of the Form
10-K.
(D) SOUTHERN engages in price risk management activities. Reference is made to
MANAGEMENT'S DISCUSSION AND ANALYSIS - "Derivative Financial Instruments"
and Note 1 to the financial statements of SOUTHERN in Item 8 of the Form
10-K for a discussion of these activities. Activities for non-trading
purposes consist of transactions to mitigate SOUTHERN's risk related to
interest rate and foreign currency exchange rate fluctuations. At June 30,
2000, the status of outstanding non-trading related derivative contracts
was as follows:
65
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
<TABLE>
<CAPTION>
Year of
Maturity or Notional Unrecognized
Type Termination Amount Gain (Loss)
---- ------------ ------ -----------
(in thousands)
<S> <C> <C> <C>
Interest rate swaps 2000-2012 $832,486 $1,884
2001-2012 (pound)600,000 $(46,230)
2002-2007 DM691,000 $1,048
Interest rate option 2000 $133,200 $36
Cross currency swaps 2001-2007 (pound)394,300 $27,080
Cross currency swaption 2003 DM435,000 $27,850
(pound) - Denotes British pounds sterling.
DM - Denotes Deutschemark.
</TABLE>
In January 1998, Southern Energy and Vastar Resources, Inc. combined their
energy trading and marketing activities to form a joint venture. Southern
Energy's 60% investment in the joint venture is accounted for under the
equity method of accounting. SOUTHERN, Southern Energy and Vastar have
made guarantees to certain counterparties regarding performance of
contractual commitments by the joint venture. At June 30, 2000,
outstanding guarantees related to the estimated fair value of net
contractual commitments were approximately $278 million. SOUTHERN and
Southern Energy have also made financial guarantees related to the
joint venture as follows:
<TABLE>
<CAPTION>
At June 30, 2000
(in millions)
----------------------------------------------------------------------------------------
<S> <C>
Minimum payments to Vastar $ 85
Trade credit support (Notional amount) 825
Vastar gas purchase contract 128
----------------------------------------------------------------------------------------
Reference is made to MANAGEMENT'S DISCUSSION AND ANALYSIS - "Future
Earnings Potential" of SOUTHERN in Item 7 and Notes 1 and 5 to the
financial statements of SOUTHERN under the captions "Financial Instruments
for Trading Activities" and "Energy Trading and Marketing Commitments",
respectively, in Item 8 of the Form 10-K.
At June 30, 2000, Southern Energy also had a contingent commitment to buy the remaining
40% interest in the joint venture from Vastar for $210 million. On August 10, 2000
Southern Energy entered into a non-binding letter of intent to complete this
acquisition for $250 million.
</TABLE>
66
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(E) SOUTHERN's principal business segment -- or its traditional business -- is
the five integrated Southeast utilities that provide electric service in
four states. The other reportable business segment is non-traditional
energy services provided by Southern Energy, which develops and manages
electricity and other energy-related projects both in the United States
and abroad. Intersegment revenues are not material. Financial data for
business segments for the periods covered in the Form 10-Q are as follows:
<TABLE>
<CAPTION>
Integrated All
Southeast Southern Other Reconciling
Utilities Energy (Note) Eliminations Consolidated
------------ ---------- --------- ------------- ---------------
(in millions)
Three Months Ended June 30, 2000:
<S> <C> <C> <C> <C> <C>
Operating revenues $ 2,472 $ 673 $ 62 $ (12) $ 3,195
Segment net income (loss) 282 93 (34) 1 342
Six Months Ended June 30, 2000:
Operating revenues 4,477 1,194 119 (22) 5,768
Segment net income (loss) 458 194 (64) (1) 587
Total assets at June 30, 2000 26,015 14,308 520 (1,322) 39,521
----------------------------------------- ------------ ---------- --------- ------------- ---------------
Three Months Ended June 30, 1999:
Operating revenues $ 2,243 $ 503 $ 55 $ (10) $ 2,791
Segment net income (loss) 264 77 (11) (16) 314
Six Months Ended June 30, 1999:
Operating revenues 4,125 1,025 97 (14) 5,233
Segment net income (loss) 432 165 (44) (15) 538
Total assets at December 31, 1999 25,251 13,872 455 (1,189) 38,389
------------------------------------------ ----------- ---------- --------- ------------- ----------------
</TABLE>
(Note) The all other category includes parent SOUTHERN, which does not
allocate operating expenses to business segments. Also, this category
includes segments below the quantitative threshold for separate
disclosure. These segments include a wireless communication company and a
developmental company for energy products and services. Amounts for
Southern Energy exclude interest expense to parent SOUTHERN.
(F) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the Form 10-K for information relating to retail rate
adjustment procedures.
(G) Reference is made to Note 3 to the financial statements of SOUTHERN and
ALABAMA in Item 8 of the Form 10-K for information relating to a judgment
against ALABAMA arising from discharges into Lake Martin. On August 4,
2000, the Supreme Court of Alabama reversed the judgment against ALABAMA
and the other defendants, and rendered a judgment in favor of all
defendants.
67
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
(H) Reference is made to Note 3 to the financial statements of
SOUTHERN and GEORGIA in Item 8 of the Form 10-K for information
concerning a three-year rate order approved by the Georgia PSC
effective January 1, 1999. The order decreased annual retail
rates by $262 million effective January 1, 1999 and by an
additional $24 million effective January 1, 2000. The order
further provides for $85 million each year, plus up to $50
million annually of any earnings above a 12.5% retail return on
common equity during the second and third years, to be applied to
accelerated amortization or depreciation of assets. In May 2000,
the Georgia PSC ordered that these funds be maintained in a
regulatory liability account instead of being applied to premium
on reacquired debt as proposed by GEORGIA. Two-thirds of any
additional earnings above the 12.5% return will be applied to
rate reductions and the remaining one-third retained by GEORGIA.
Pursuant to this provision, GEORGIA recognized accelerated
amortization of $51 million in the second quarter and $88 million
year-to-date 2000 and $21 million in the second quarter and $43
million year-to-date 1999.
(I) Reference is made to Note 3 to the financial statements of SOUTHERN and
GEORGIA in Item 8 of the Form 10-K for information regarding GEORGIA's
designation as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and other
environmental contingencies.
(J) In April 2000, MISSISSIPPI reached an agreement with certain of
its wholesale customers to reduce its rates effective January 1,
2000. The agreement results in an annual rate reduction of
approximately $3 million and a temporary annualized rate
reduction of approximately $3 million for a period of 18 months
ending June 30, 2001. In anticipation of FERC approval,
MISSISSIPPI has accumulated a liability for approximately $3
million in revenues subject to refund for the six months ended
June 30, 2000. In addition, MISSISSIPPI and its customers agreed
that neither party would seek a unilateral change to the new
rates prior to January 1, 2002, except for changes due to the
operation of the fuel cost adjustment clause under the tariff. In
July 2000, the FERC accepted MISSISSIPPI's settlement with its
customers as filed.
(K) In 1998, the Georgia PSC approved a new accounting order for SAVANNAH.
Under this order, SAVANNAH will reduce electric rates to its small
business customers, expense additional storm damage accruals and accrue
additional depreciation on generating assets. For additional information
concerning the four-year accounting order approved by the Georgia PSC in
June 1998, reference is made to Note 3 to the financial statements of
SAVANNAH in Item 8 of the Form 10-K.
(L) Reference is made to Note 3 to the financial statements of
SOUTHERN in Item 8 and to Legal Proceedings in Item 3 of the Form
10-K for information relating to (i) petitions for Chapter 11
bankruptcy relief which were filed in the U. S. Bankruptcy Court
for the Southern District of Alabama and (ii) proposed settlement
discussions among the affected parties. At June 30, 2000, Mobile
Energy had total assets of $392 million and senior debt
outstanding of $190 million of first mortgage bonds and $72
million related to tax-exempt bonds. In connection with the bond
financings, SOUTHERN provided certain limited guarantees, in lieu
of funding debt service and maintenance reserve accounts with
cash. As of June 30, 2000, under an agreement with the
bondholders, SOUTHERN had paid $38.3 million pursuant to the
guarantees. SOUTHERN continues to have guarantees outstanding of
certain potential environmental and other obligations of Mobile
Energy that represent a maximum contingent liability of $21
million at June 30, 2000. The final outcome of this matter cannot
now be determined. On August 4, 2000, Mobile Energy and its
immediate parent, Mobile Energy Services Holdings, Inc., filed a
joint proposed plan of
68
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
reorganization with the bankruptcy court. If approved as proposed, that
plan would result in a termination of SOUTHERN's direct and indirect
ownership interests in both entities. That proposed plan of
reorganization, however, would not affect SOUTHERN's ongoing guarantee
obligations related to Mobile Energy that are described above.
(M) In April 1999, SOUTHERN's board approved the repurchase of up to 50
million shares of SOUTHERN's common stock over the next two years through
open market or privately negotiated transactions. The repurchase program
was completed during the first quarter 2000.
(N) On April 17, 2000, SOUTHERN announced that its board of directors approved
an initial public offering of up to 19.9 percent of its Southern Energy
subsidiary. SOUTHERN also announced that it is planning to spin-off to
holders of SOUTHERN common stock the remaining ownership of Southern
Energy within 12 months of the initial public offering. The spin-off will
be subject to a number of market and other conditions. Reference is made
to SOUTHERN's Current Report on Form 8-K dated April 17, 2000 for
additional information.
On April 21, 2000, Southern Energy filed a registration statement with the
SEC for the initial public offering of Southern Energy shares. Southern
Energy filed an amendment to such registration statement on July 18, 2000.
The offering is expected to take place as soon as practicable after the
effective date of the registration statement.
(O) Reference is made to Note 3 to the financial statements of SOUTHERN,
ALABAMA , GEORGIA, GULF, MISSISSIPPI and SAVANNAH in Item 8 of the Form
10-K for information on EPA litigation. On August 1, 2000, the U.S.
District Court granted ALABAMA's motion to dismiss for lack of
jurisdiction in Georgia, and granted SCS's motion to dismiss on the
grounds that it neither owned nor operated the generating units involved
in the proceedings.
(P) Southern Energy has two significant power sales agreements with the
Philippine National Power Corporation ("NPC") that are supported by a
sovereign guarantee by the Philippines' government. For the year ended
December 31, 1999, and the six months ended June 30, 2000, approximately
8% and 17.5%, respectively, of SOUTHERN's net income was derived from
these agreements. If these agreements were terminated, it could have a
material adverse effect on the future operating results and liquidity of
SOUTHERN and Southern Energy.
(Q) In March 2000, an administrative law judge ("ALJ") held hearings
in connection with a FERC proceeding to determine the percentage
of a settled $158.8 million revenue requirement for the period
from June 1, 1999 through December 31, 2001 to be paid to
Southern Energy California, L.L.C. and its subsidiaries
(collectively, "SE California") under reliability must-run
agreements between SE California and the California Independent
System Operator ("CAISO"). SE California had proposed to allocate
approximately 75% of the responsibility for payment of the
revenue requirement to the CAISO, while CAISO and other aligned
parties argued that CAISO should pay no more than approximately
7%. On June 7, 2000, the ALJ presiding over this FERC proceeding
issued an initial decision allocating 3% of the responsibility
for payment to the CAISO and the remaining 97% to SE California.
On July 7, 2000, SE California filed an appeal of the ALJ's
initial decision with the FERC. The outcome of this appeal is
uncertain. A final FERC order in this proceeding may be appealed
to the U.S. Court of Appeals. If SE California is ultimately
unsuccessful in its appeal of the ALJ's decision, SE California
will be required to refund certain amounts of the revenue
requirement billed to the CAISO for the period from June 1, 1999
69
<PAGE>
NOTES TO THE CONDENSED FINANCIAL STATEMENTS: (Continued)
until the final disposition of the appeal. The amount of this refund as of
June 30, 2000 would have been approximately $94 million and would have
reduced net income by approximately $33 million. These amounts do not
include interest that would be payable in the event of a refund. If SE
California is unsuccessful in its appeal, it plans to pursue other options
available under the reliability must-run agreements to mitigate the impact
of the ALJ's decision upon its future operations.
(R) On February 21, 2000, Southern Energy executed a stock purchase agreement
with The AES Corporation to sell its interest in Alicura for a total
consideration of $205 million including the assumption of debt. The
closing was expected to occur on June 28, 2000; however, it has not yet
occurred. There can be no assurance that this transaction will be
consummated.
70
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
(1) Cooper et al.vs. GEORGIA, SOUTHERN and SCS
(Superior Court of Fulton County, Georgia)
On July 28, 2000, a lawsuit alleging race discrimination was
filed by three GEORGIA employees against GEORGIA, SOUTHERN and
SCS. The lawsuit also raised claims on behalf of a purported
class. The plaintiffs seek compensatory and punitive damages
in an unspecified amount, as well as injunctive relief. The
final outcome of this case cannot now be determined.
(2) Reference is made to the Notes to the Condensed Financial
Statements herein for information regarding certain legal and
administrative proceedings in which SOUTHERN and its reporting
subsidiaries are involved.
Item 4. Submission of Matters to a Vote of Security Holders.
SOUTHERN
SOUTHERN held its annual meeting of stockholders on May 24,
2000. Each nominee for director of SOUTHERN received the
requisite plurality of votes. The vote tabulation was as
follows:
Nominees Shares For Shares Withhold Vote
Dorrit J. Bern 464,687,888 9,174,789
Thomas J. Chapman 464,486,349 9,376,328
A. D. Correll 465,357,341 8,505,337
A. W. Dahlberg 464,916,299 8,946,378
H. Allen Franklin 465,275,068 8,587,609
Bruce S. Gordon 465,206,728 8,655,950
L. G. Hardman III 465,344,771 8,517,907
Elmer B. Harris 465,005,528 8,857,149
Donald M. James 465,155,555 8,707,123
David J. Lesar 465,898,084 8,964,594
Zack T. Pate 465,351,532 8,511,146
Gerald J. St. Pe 465,348,609 8,514,069
71
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.(Continued)
ALABAMA
ALABAMA held its annual common stockholders meeting on April
28, 2000, and the following persons were elected to serve as
directors of ALABAMA:
Whit Armstrong Thomas C. Meredith
David J. Cooper Mayer Mitchell
H. Allen Franklin William V. Muse
Elmer B. Harris John T. Porter
R. Kent Henslee Robert D. Powers
Carl E. Jones, Jr. Andreas Renschler
Patricia M. King C. Dowd Ritter
James K. Lowder James H. Sanford
Wallace D. Malone, Jr. John Cox Webb, IV
All of the 5,608,955 outstanding shares of ALABAMA's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
GEORGIA
By written consent, in lieu of the annual meeting of
stockholders of GEORGIA, effective May 17, 2000, the following
persons were elected to serve as directors of GEORGIA:
Daniel P. Amos Zell Miller *
Juanita P. Baranco G. Joseph Prendergast
William A. Fickling, Jr. David M. Ratcliffe
H. Allen Franklin Herman J. Russell
L. G. Hardman III William Jerry Vereen
James R. Lientz, Jr. Carl Ware
* Zell Miller resigned effective July 25, 2000.
All of the 7,761,500 outstanding shares of GEORGIA's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
GULF
By written consent, in lieu of the annual meeting of
stockholders of GULF, effective June 27, 2000, the following
persons were elected to serve as directors of GULF:
Travis J. Bowden W. Deck Hull, Jr.
Fred C. Donovan Joseph K. Tannehill
H. Allen Franklin Barbara H. Thames
All of the 992,717 outstanding shares of GULF's common stock
are owned by SOUTHERN and were voted for the election of such
directors.
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.(Continued)
MISSISSIPPI
MISSISSIPPI held its annual stockholders meeting on April 4,
2000, and the following persons were elected to serve as
directors of MISSISSIPPI:
Edwin E. Downer Malcolm Portera
Dwight H. Evans George A. Schloegel
Robert S. Gaddis Philip J. Terrell
Linda T. Howard N. Eugene Warr
Aubrey K. Lucas
All of the 1,121,000 outstanding shares of MISSISSIPPI's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
SAVANNAH
SAVANNAH held its annual stockholders meeting on May 17, 2000,
and the following persons were elected to serve as directors of
SAVANNAH:
Gus H. Bell, III G. Edison Holland, Jr.
Archie H. Davis Robert B. Miller, III
Walter D. Gnann Arnold M. Tenenbaum
All of the 10,844,635 outstanding shares of SAVANNAH's common
stock are owned by SOUTHERN and were voted for the election of
such directors.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
--------
Exhibits 3 - (d)2 By-laws of GULF as amended
effective July 28, 2000, and
as presently in effect.
(f)2 By-laws of SAVANNAH as amended
effective May 27, 2000, and as
presently in effect.
Exhibits 15 - Letter re: unaudited interim financial
information
(a) ALABAMA
(b) GEORGIA
Exhibit 24 - (a) Powers of Attorney and
resolutions. (Designated in
the Form 10-K for the year
ended December 31, 1999, File
Nos. 1-3526, 1-3164, 1-6468,
0-2429, 0-6849 and 1-5072 as
Exhibits 24(a),24(b), 24(c),
24(d), 24(e) and 24(f),
respectively, and incorporated
herein by reference.)
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K. (Continued)
Exhibits 27 - Financial Data Schedule
(a) SOUTHERN
(b) ALABAMA
(c) GEORGIA
(d) GULF
(e) MISSISSIPPI
(f) SAVANNAH
(b) Reports on Form 8-K.
-------------------
ALABAMA filed a Current Report on Form 8-K dated May 11,
2000:
Items reported: Items 5 and 7
Financial statements filed: None
SOUTHERN filed Current Reports on Form 8-K dated April
17, 2000 and June 8, 2000:
Items reported: Items 5 and 7
Financial statements filed: None
SOUTHERN filed a Current Report on Form 8-K dated
June 7, 2000:
Items reported: Item 5
Financial statements filed: None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
THE SOUTHERN COMPANY
By A. W. Dahlberg
Chairman and Chief Executive Officer
(Principal Executive Officer)
By W. L. Westbrook
Financial Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
-------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
ALABAMA POWER COMPANY
By Elmer B. Harris
President and Chief Executive Officer
(Principal Executive Officer)
By William B. Hutchins, III
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
75
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
GEORGIA POWER COMPANY
By David M. Ratcliffe
President and Chief Executive Officer
(Principal Executive Officer)
By Thomas A. Fanning
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
GULF POWER COMPANY
By Travis J. Bowden
President and Chief Executive Officer
(Principal Executive Officer)
By Ronnie Labrato
Comptroller and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
76
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
MISSISSIPPI POWER COMPANY
By Dwight H. Evans
President and Chief Executive Officer
(Principal Executive Officer)
By Michael W. Southern
Vice President, Secretary, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
-------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature of the undersigned company
shall be deemed to relate only to matters having reference to such company and
any subsidiaries thereof.
SAVANNAH ELECTRIC AND POWER COMPANY
By G. Edison Holland, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
By Kirby R. Willis
Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)
By /s/ Wayne Boston
(Wayne Boston, Attorney-in-fact)
Date: August 11, 2000
77
