SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-3274
FLORIDA POWER CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-0247770
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3201 34th Street South
St. Petersburg, Florida 33711
Telephone Number (813) 866-5151
(Address of principal executive offices; telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, par value $100 per share
Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 23, 1994 was $-0-. As of March 23, 1994,
there were issued and outstanding 100 shares of the registrant's
common stock, without par value, all of which were held, beneficially
and of record, by Florida Progress Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
None
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GLOSSARY
When used herein, the following terms will have the meanings indicated:
TERM MEANING
Btu. . . . . . . . . . . . . . British thermal unit
CAAA . . . . . . . . . . . . . Clean Air Act Amendments of 1990
CERCLA or Superfund. . . . . . Comprehensive Environmental Response
Compensation and Liability Act
Company. . . . . . . . . . . . Florida Power Corporation
DOE. . . . . . . . . . . . . . United States Department of Energy
DSM. . . . . . . . . . . . . . demand-side management
Electric Fuels . . . . . . . . Electric Fuels Corporation
EMF . . . . . . . . . . . . . electromagnetic fields, or electric and magnetic
fields
EPA. . . . . . . . . . . . . . United States Environmental Protection Agency
FDEP . . . . . . . . . . . . . Florida Department of Environmental Protection
(formerly the Florida Department of
Environmental Regulation)
FERC . . . . . . . . . . . . . Federal Energy Regulatory Commission
Financial Statements . . . . . The Company's Financial Statements for the
year ended December 31, 1993 contained
under Item 8 herein
Florida Progress . . . . . . . Florida Progress Corporation
FP&L . . . . . . . . . . . . . Florida Power & Light Company
FPSC . . . . . . . . . . . . . Florida Public Service Commission
Georgia Power. . . . . . . . . Georgia Power Company
INPO . . . . . . . . . . . . . Institute of Nuclear Power Operations
KV . . . . . . . . . . . . . . kilovolts
KVA. . . . . . . . . . . . . . kilovolt amperes
KWH. . . . . . . . . . . . . . kilowatt hours
LTIP . . . . . . . . . . . . . Long-Term Incentive Plan
MMcf/d . . . . . . . . . . . . million cubic feet per day
MW . . . . . . . . . . . . . . megawatts
NEIL . . . . . . . . . . . . . Nuclear Electric Insurance, Ltd.
NRC. . . . . . . . . . . . . . United States Nuclear Regulatory Commission
PCBs . . . . . . . . . . . . . polychlorinated biphenyls
PRP. . . . . . . . . . . . . . potentially responsible party
SDG&E. . . . . . . . . . . . . San Diego Gas & Electric Company
SEC. . . . . . . . . . . . . . Securities and Exchange Commission
SERP . . . . . . . . . . . . . Supplemental Executive Retirement Plan
Talquin. . . . . . . . . . . . Talquin Corporation
Union Carbide. . . . . . . . . Union Carbide Corporation
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Florida Power Corporation (the "Company") was incorporated in Florida in 1899
and is an operating public utility engaged in the generation, purchase,
transmission, distribution and sale of electricity within Florida. The Company
became a wholly owned subsidiary of Florida Progress Corporation ("Florida
Progress") in March 1982, as a result of a corporate restructuring. All of the
Company's common stock is owned by Florida Progress. The Company's preferred
stock is owned by non-affiliates.
The Company provided electric service during 1993 to an average of 1,214,653
customers in a service area covering about 20,000 square miles in central and
northern Florida and along the west coast of the state. The service area
includes St. Petersburg and Clearwater as well as the areas surrounding Walt
Disney World, Orlando, Ocala and Tallahassee. Of the Company's 1993 electric
revenues billed, approximately 56% were derived from residential sales, 24%
from commercial sales, 9% from industrial sales, 5% from other retail sales
and 6% from wholesale sales. The more important industries in the territory
include phosphate mining and processing, electronics manufacturing and design,
and citrus and other food processing. Other important commercial activities
are tourism, health care, construction and agriculture.
The Company's revenues and unit sales, measured in kilowatt hours ("KWH"), vary
with the weather. This weather sensitivity results primarily from customers
using electricity to heat or cool their residences or places of business.
Revenues and KWH sales tend to be higher in summer and winter. See the
financial information under the heading "Quarterly Financial Data" which
follows the notes to the Company's financial statements for the year ended
December 31, 1993 contained herein under Item 8 ("Financial Statements").
FUEL AND PURCHASED POWER
GENERAL: The Company's consumption of various types of fuels depends on
several factors. The most important factors are the demand for electricity by
the Company's customers, the availability of various generating units, the
availability and cost of fuel, and the requirements of federal and state
regulatory agencies. In 1993, the Company's energy mix was 45% coal, 21% oil,
18% nuclear and 16% purchased power, as compared to 47% coal, 24% oil, 16%
nuclear and 13% purchased power for 1992.
The Company is permitted to pass the cost of recoverable fuel and purchased
power to its customers through fuel adjustment clauses. (See Note 1 to the
Financial Statements.)
Because of uncertainties in the relevant domestic and international markets,
future prices for and the availability of the various fuels discussed in this
report cannot be determined. However, the Company believes that its fuel
supply contracts, as described below, will be adequate to meet its fuel supply
needs.
The Company's average fuel costs per million British thermal units ("Btu") for
each of the five years ended December 31, 1993, were as follows:
1993 1992 1991 1990 1989
Coal $1.96 $1.97 $2.01 $2.05 $2.06
Oil 2.49 2.53 2.56 3.10 2.65
Nuclear .54 .57 .65 .67 .67
Gas 4.27* 2.54* 1.90 2.15 2.29
Average 1.79 1.86 1.89 2.11 2.10
*Gas accounted for .2% of the Company's fuel mix in 1993 and 1992.
OIL AND GAS: Oil is purchased under contracts with several suppliers. The
cost of the Company's oil is tied by contract to certain posted or published
market prices. These prices are largely influenced by the world market for
fuel. At present, management believes that the Company has contracts for an
adequate supply of oil for the reasonably foreseeable future. The Company's
natural gas is purchased under firm and interruptible transportation contracts.
Existing contracts for oil are sufficient to cover the requirements when
natural gas is not available through the interruptible contracts. In addition,
the Company has signed contracts to transport natural gas through the proposed
SunShine Pipeline. (See Item 2 "Properties-Planned Generation".)
NUCLEAR: In order to fuel a nuclear generating station, four distinct stages
are involved; each is contracted separately. Stage I and Stage II involve the
mining and milling of the natural uranium ore to produce a concentrate, and
the conversion of uranium concentrate into uranium hexafluoride. Stage III and
Stage IV entail the enrichment of the uranium hexafluoride and the fabrication
of the enriched uranium hexafluoride into usable fuel assemblies.
The Company has contracts for the supply of uranium concentrates (Stage I)
through 1995, conversion of uranium concentrates (Stage II) through 1997,
enrichment services (Stage III) through 2014 and for fuel assembly fabrication
(Stage IV) through 2004. Under anticipated operating conditions, the Company
has all stages of the nuclear fuel supply cycle under contract for unit
operations through the refueling planned in 1996.
It will be necessary for the Company to enter into future contracts to cover
the differences between the total unit lifetime requirements of Crystal River
Unit No. 3 and the requirements covered by the present contracts. Although no
assurances can be given as to the future availability or costs of such
contracts, the Company expects future contract commitments will be made at the
appropriate time.
Spent nuclear fuel is stored at the Company's Crystal River Unit No. 3 pending
disposal under a contract with the United States Department of Energy ("DOE").
(See Note 7 to the Financial Statements.) At the present time, the Company has
facilities on site for the storage of fuel burned through the year 2009.
COAL: The Company anticipates a requirement of approximately 5,700,000 tons of
coal in 1994. Current environmental regulations limit sulfur content, at
12,000 Btu per pound, to 1.2% for Crystal River Unit Nos. 1 and 2, and 0.7% for
Unit Nos. 4 and 5. Most of the coal is expected to be supplied from the
Appalachian coal fields of the United States. Approximately two-thirds of the
coal is expected to be delivered by rail and the remainder by barge. The coal
is being supplied by Electric Fuels Corporation ("Electric Fuels"), a
subsidiary of Florida Progress.
Electric Fuels has long-term contracts with various sources for 78% of the coal
requirements of the Company's coal units. Electric Fuels acquires the
remainder in the spot market and under short-term contracts. The long-term
contracts have price escalation provisions.
PURCHASED POWER: The Company buys and sells economy power through a purchased
power brokering system in which other Florida utilities participate. In
addition the Company has long-term contracts to purchase annually of 50 MW of
power from Tampa Electric Company and 400 MW from The Southern Company. These
contracts obligate the Company to pay certain minimum annual amounts
representing capacity payments. The Company also has various contracts with
non-utility electric power generators to purchase 1,117 MW of power annually by
1996. As of December 31, 1993, 473 MW of that generation was available. (See
Note 10 to the Financial Statements.)
REGULATION AND FRANCHISES
The Company is subject to the jurisdiction of the Florida Public Service
Commission ("FPSC") with respect to retail rates, customer service, planning,
need for and construction of facilities, accounting, issuance of securities and
other matters. In addition, the Company is subject to regulation by the
Federal Energy Regulatory Commission ("FERC") with respect to accounting,
transmission and sales of wholesale power in interstate commerce and certain
other matters.
The Company's nuclear generating unit is subject to regulation under the
jurisdiction of the United States Nuclear Regulatory Commission ("NRC"). The
NRC's jurisdiction encompasses broad supervisory and regulatory powers over the
construction and operation of nuclear reactors, including matters of health and
safety, antitrust considerations and environmental impacts. The Company has a
90.4% ownership interest in the nuclear unit it operates. (See Note 7 to the
Financial Statements.)
A recent staff report to the NRC has identified 15 nuclear plants as not
meeting the NRC's threshold measure of the strength of a reactor pressure
vessel in light of the age of the vessel. The NRC staff report is based on a
generic analytical methodology that does not account for plant-specific
factors. Although the Company's nuclear unit, Crystal River #3, is one of the
15 plants identified in the report, this issue is one that the Company had
anticipated several years ago. The Company previously submitted a plant-
specific analysis showing that its reactor vessel has not been compromised by
plant operation and meets NRC safety criteria. Although the Company's
submission to the NRC has yet to be approved by the NRC, the Company expects
to be able to continue to operate the plant without any acceleration of its
expected retirement date. The NRC has not said when it will take action on the
Company's submission.
By virtue of state and municipal legislation, the Company holds franchises with
varying expiration dates to provide electric service in all municipalities in
which it distributes electric energy. The general effect of these franchises
is to grant the Company the right to enter upon and use streets, alleys and
other public places for erecting and maintaining poles, wires and other
apparatus for the sale and distribution of electric energy. All of the
existing franchises were for a 30-year period when granted, the maximum allowed
by Florida law. There are a total of 109 franchises, of which 3 expire between
April 1, 1994 and December 31, 1999, 57 expire between January 1, 2000 and
December 31, 2004, 2 expire between January 1, 2005 and December 31, 2009, 19
expire between January 1, 2010 and December 31, 2014, 13 expire between January
1, 2015 and December 31, 2019, and 15 expire between January 1, 2020 and
December 31, 2024. For further information concerning these franchise
agreements, see Item 1 "Business-Competition-Municipalities".
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local regulations dealing with
air and water quality and other environmental matters.
AIR: All of the Company's air pollution sources meet the air emission
standards currently set by the Florida Department of Environmental Protection
("FDEP") (formerly the Florida Department of Environmental Regulation) and/or
the United States Environmental Protection Agency ("EPA").
The 1990 Amendments to the Clean Air Act ("CAAA"), under Title IV, Acid Rain
Control, require reduction in sulfur dioxide and nitrogen oxide emissions by
the year 2000 and set a permanent cap on those emissions. The reductions are
to be implemented in two phases. Phase I limitations apply in 1995 and Phase
II limitations are effective by 2000. The Company is not materially affected
by Phase I. To meet Phase II limitations, the Company is implementing a
strategy based primarily on burning cleaner fuels. The Company does not expect
that it will be required to undertake any significant modifications to its
existing units in order to meet Phase II requirements. Continuous emission
monitors will be installed on most of the Company's units by the end of 1994 at
an expected total cost of approximately $12 million. These monitors are
required on all affected units under Title IV.
Under Title III of the CAAA, the EPA will be studying the emission of
hazardous air pollutants and, where appropriate, promulgating emission
limitations for specific source categories. Depending on the results of
these studies and the EPA's determination of the need for additional
limitations, the Company could incur additional capital and operating
expenses.
WATER: Construction was completed in 1993 on an $89 million capital project to
install a major water cooling system at the Company's Crystal River Energy
Complex. The 1993 expenditures for the project totaled $5.0 million. This
system was constructed in order to meet thermal discharge limitations set by
the EPA and the FDEP. In 1993, approximately $3.9 million was spent to remove
and dispose of sludge and to upgrade a wastewater disposal pond at the Bartow
Power Plant.
WASTE MATERIALS: The Company is nearing completion of its program to reduce
electrical equipment utilizing polychlorinated biphenyls ("PCBs"). All
regulatory compliance dates have been met. The Company has contracted with a
vendor to remove the remaining PCB contaminated transformers from electric
generating plants by the end of 1994. During 1993, three plants changed
their PCB transformers to non-PCB transformers.
STORAGE TANK PROGRAM: The regulation of underground and above-ground storage
tanks continues to expand, and can be expected to affect virtually every
Company tank in 1994, including vehicular fuel tanks, bulk fuel storage tanks,
mineral acid tanks, hazardous material tanks and compression vessels. The
FDEP's storage tank regulations require the replacement or upgrading of tanks
that are not protected from corrosion, and the installation of containment for
spills and leaks. These requirements must be met by 1999. The Company expects
the annual expenditures through 1999 related to compliance with these
regulations to be $1 million and $3 million for operating expense and
construction, respectively.
Under the FDEP program, revenues from taxes on imported oil are expected to be
used to reimburse the Company for the majority of expenditures necessary to
clean up storage tank contamination discovered and reported to date. The
Company does not expect the existing contamination cleanup expenditures to be
material. With the continued expansion of regulation and the resulting
increased monitoring of tank systems and oil filled electrical equipment,
further contamination may be discovered that would result in additional
expenditures for retrofitting and equipment upgrades, but these expenditures
are not expected to be material.
OIL SPILL CONTINGENCY PLANS: The Company has filed oil spill contingency
plans pursuant to the Oil Pollution Act of 1990. The Company spent
approximately $.5 million in 1993 to implement the plans.
ELECTROMAGNETIC FIELDS: The potential adverse effects of electromagnetic
fields, or electric and magnetic fields ("EMF") upon human health continues to
be an important issue in the siting, construction and operation of electric
transmission and distribution systems. Pursuant to its exclusive jurisdiction
to regulate EMF associated with electric transmission and distribution lines
and substation facilities in Florida, the FDEP has adopted rules which
establish certain EMF limits for new transmission lines and substations. The
rule, as revised in October 1992, also requires an annual review of the state
of the scientific research into the potential adverse effects of EMF upon human
health. The staff of the FDEP provided its progress report to the
Environmental Regulation Commission on December 1, 1993 and, based on its
review of the scientific research, recommended that "no revision of the current
EMF standards be made at this time." The Environmental Regulation Commission
made no revision to EMF standards. The Company believes that compliance with
these EMF rules, which at present essentially maintain the status quo with
respect to regulated EMF exposure levels, will not have a material adverse
effect on the cost of constructing or maintaining new transmission lines or
substations.
There has been substantial discussion in professional publications regarding
the potential for extensive litigation alleging adverse health effects of EMF
from transmission and distribution lines, but to date no case arising out of
such a claim has resulted in a verdict against an electric utility.
The Company's management monitors and reports to the Company's Board of
Directors at least annually on developments in research concerning the
potential health effects of EMF, EMF mitigation technologies and procedures,
and significant actions by principal federal and Florida agencies related to
EMF.
OTHER ENVIRONMENTAL MATTERS: For further information concerning certain
environmental matters relating to the Company's utility operations, see
paragraphs 6 and 7 under Item 3 "Legal Proceedings" and "Contaminated Site
Cleanup" in Note 10 to the Financial Statements.
RATE MATTERS
The underlying concept of utility ratemaking is to set rates at a level that
allows the utility to collect revenues equal to its cost of providing service
plus a reasonable rate of return on its equity. To accomplish this, the FPSC
and FERC use various ratemaking mechanisms.
The FPSC oversees the intrastate operations of the state's investor-owned
utilities. The FPSC authorizes retail "base rates" that are designed to give a
utility company the opportunity to earn a specific rate of return on its "rate
base", or average investment in utility plant. These rates are intended
to cover all reasonable and prudent expenses of utility operations and to
provide investors with a fair rate of return. The retail base rates, resulting
from the 1992 retail rate decision, provide the Company the opportunity to earn
a regulatory return on equity of 12%, with an allowed range between 11% and
13%. The FPSC must review base rates every four years.
The FPSC allows utility companies to recover fuel, purchased power and
conservation costs through an adjustment charge on monthly electric bills.
This charge is adjusted every six or 12 months and remains level throughout
the period. The adjustment charge includes projected costs for a six- or
12-month period plus an adjustment to compensate for differences between
estimated and actual costs for the prior period, including interest. (See Note
1 to the Financial Statements.)
During the Company's most recent retail rate case, the Company agreed to file a
demand-side management ("DSM") incentive proposal and a revenue decoupling
proposal. The Company filed both proposals in April 1993. DSM is a term used
to describe efforts by electric utilities to meet energy sales growth and
demand through energy conservation and efficiency as opposed to additional
generation construction and purchased power. The DSM proposal provides an
initial five year trial period that would allow the FPSC a basis to determine
if the DSM incentive should be continued, modified or terminated. The Legal
Environmental Assistance Foundation, Inc., an intervenor to this proceeding,
has submitted a DSM incentive proposal for the Company that is also being
considered by the FPSC. The Company believes that an incentive on selected DSM
program costs would encourage the Company to develop and utilize additional DSM
programs since both rate payers and shareholders would benefit.
The Company's revenue decoupling proposal would apply a decoupling mechanism
to residential revenues for a period of three years beginning in November 1994.
Revenue decoupling is a relatively new ratemaking concept intended to break the
direct link between growth in energy sales and revenues. The Company does not
expect that decoupling, as proposed by the Company, would have a material
impact on its earnings. The FPSC staff has combined the DSM incentive and
revenue decoupling proposals into one recommendation that contains both pro and
con arguments on each proposal. The FPSC is expected to make a decision
regarding the proposals by the end of 1994.
Luis J. Lauredo was reappointed to a four-year term on the FPSC; his prior term
expired in January 1994. Diane K. Kiesling was appointed to fill a second FPSC
vacancy in December 1993 for a term that will expire in January 1998.
FERC regulates wholesale and interstate transmission rates, acquisition and
disposition of certain property, licensing of hydroelectric projects, and
other matters. FERC is responsible for accounting and reporting functions
under the Federal Power Act to ensure that reliable and consistent financial
information is available for regulatory and public purposes.
The Company is interconnected with 22 municipal electric systems. The
Company's wholesale customers include Seminole Electric Cooperative, Inc., the
Florida Municipal Power Agency and 11 municipalities. During 1993, about 6% of
the Company's electric revenues were from its wholesale business.
For further information with respect to rate matters, see paragraphs 1,2 and 3
under Item 3 "Legal Proceedings" and Note 8 to the Financial Statements.
COMPETITION
GENERAL. The electric utility industry in general is expected to become
increasingly competitive due to a variety of regulatory, economic and
technological developments. The passage of the Energy Policy Act of 1992 (the
"Energy Policy Act") and changes at the FERC are encouraging the development of
competition in the generation segment of the electric utility industry and the
unbundling of wholesale electric utility services. Although the major
implications of these changes are not likely to be felt for several years, the
electric utility industry must accept the inevitability of greater competition
and regulatory changes in the future.
The Company believes that it is in a good competitive position. The Company's
electric rates compare favorably with other utilities in Florida. The Company
produces cost-efficient power and its generating units consistently rank among
the nation's best in terms of overall efficiency. And the Company's management
is committed to streamlining and enhancing operations to keep the Company
competitive.
GENERATION. The most immediate competitive challenge for the electric utility
industry is building and operating new power plants, since generating plants
constitute a significant portion of rate base. This is particularly true
in Florida, where the FPSC already has adopted a rule that may require
competitive bidding for new generation in some cases. (See Item 2
"Properties-Planned Generation.") Utilities must be able to construct and
operate new units at prices competitive with non-utility generators. The
Company has already received regulatory approval to construct its next two
baseload units, scheduled for completion in 1998 and 1999. (See Item 2
"Properties-Planned Generation".) The Company plans to compete aggressively in
the generation market in Florida.
Under current law, industrial and large commercial customers have the ability
to own and operate facilities to generate their own electricity. Customers
also have the option of using fuels such as natural gas, oil or wood as a
substitute for electric energy. To date, the Company has not experienced any
material loss of load, revenues or net income as a result of self-generation or
fuel switching. Moreover, the Company's industrial business represents only
about 12 percent of megawatt-hour sales, which is lower than the industry
average of 35 percent.
MUNICIPALITIES. Electric utilities are granted the right to serve customers in
municipal jurisdictions. Increasing competition may affect new franchise
agreements between utilities and municipalities. Typically, a municipality
signs a 30-year, non-exclusive agreement that allows a utility to provide
electric service to residents within a certain jurisdiction. In return, the
utility adds a franchise fee to each resident's monthly electric bill. These
franchise fees are collected by the utility and remitted to the municipality.
The Company currently has 109 franchises. Only three franchises, which account
for less than 5% of total electric revenues, expire during the 1990s. One of
the three franchises expires in 1996 and accounts for the majority of these
revenues. The Company expects to renew all of its existing franchise
agreements.
In addition to three investor-owned electric systems that are contiguous to the
Company's system at various locations, there are several municipalities and
rural electric cooperatives rendering electric service within the general area
served by the Company. The Company has territorial agreements with these
electricity suppliers. The FPSC retains the jurisdiction to actively regulate
these territorial agreements. The Florida legislature also is considering a
bill that, in general, would certify the retail electric service areas served
by Florida's electric utilities.
WHOLESALE. The Company's wholesale customers include Seminole Electric
Cooperative, Inc., the Florida Municipal Power Agency and 11 municipalities.
During 1993, only about six percent of the Company's electric revenues were
derived from its wholesale business.
TRANSMISSION. Electric utilities are facing a new regulatory environment that
is expected to change the way access to transmission lines is granted and
priced. The Energy Policy Act grants third parties, including independent
energy producers, access to use a utility's transmission system to deliver
power for resale. In Florida, this practice is occurring already.
What concerns the Company most about "open access" - or the right of outside
firms to use the Company's utility lines - is that a fair pricing structure be
established for the use of its transmission line system. The Company wants to
protect its investment and its tradition of quality service to its customers.
The Company believes that the pricing debate will be resolved as the industry
moves toward the formation of regional transmission groups. Electric utilities
are expected to participate in these groups by coordinating regional networks
to better serve customers in a changing energy market. Each transmission group
would set pricing policies, subject to ultimate approval by the FERC, and work
closely with state regulators in the siting of new transmission lines.
The Company believes that is doubtful, however, that much additional power will
be transmitted, or "wheeled", into peninsular Florida or into the Company's
service territory in the near future. This is because nearly all transmission
interface capacity into Florida is presently being used by Florida utilities to
import electricity from other utilities to the north. It could be years before
more interface capacity into the state is added. Public opposition and
environmental restrictions have contributed to construction delays for
utilities like the Company that are trying to build new transmission lines in
Florida.
BUSINESS POSITION. A number of rating agencies and other analysts have
reviewed the business position of electric utilities in recent months, and
although citing increased competition in the industry as a whole, have found
that the Company's business position is good. One major rating agency, for
example, stiffened its debt-ratings formula for the electric utility industry,
saying that more stringent financial risk standards are appropriate to take
into account mounting business risk. The rating agency indicated that the
industry's credit profile is threatened chiefly by intensifying competitive
pressures, but also by sluggish demand expectations, slow earnings growth
prospects, high common dividend payouts, environmental cost pressures, and
nuclear operating and decommissioning costs. After reviewing these and other
concerns, the rating agency categorized each utility's business position as
being either "above average," "average" or "below average" relative to other
companies in the industry. The Company was given a rating of "above-average."
Positive factors that influenced the rating agency's favorable evaluation
include the Company's location in a growing service territory, its manageable
construction program and the reasonable regulatory climate in Florida as
compared with other states. Factors of concern to the rating agency were
the Company's high level of purchased power commitments and its high
dividend payout ratio. (See Note 11 to the Financial Statements and Item 5.)
EMPLOYEES
The Company employed 6,295 employees at December 31, 1993, of which 5,807 were
full-time employees. The International Brotherhood of Electrical Workers
represents 2,371 full-time employees. The current union contract was ratified
in January 1992 and expires in December 1994.
ITEM 2. PROPERTIES
The Company believes that its physical properties are adequate to carry on its
business as currently conducted. The Company maintains property insurance
against loss or damage by fire or other perils to the extent that such property
is usually insured. (See Note 10 to the Financial Statements.) Substantially
all of the utility plant is pledged as collateral for the Company's first
mortgage bonds.
GENERATION: In November 1993, the Company added 396 MW of peaking capability
to its Intercession City site. As a result of modifications to existing
generating units, there was a total capability increase of 561 MW from last
year's winter generating capability. As of December 31, 1993, the Company's
total net winter generating capability was 7,563 MW. This capability is
generated by eighteen steam units at six plant locations with a capability of
4,929 MW and 43 combustion turbine peaking units with a capability of 2,634 MW.
The Company's ability to use this generating capability may be adversely
impacted by various governmental regulations affecting nuclear operations and
other aspects of the Company's business. (See "Regulation and Franchises" and
"Environmental Matters" under Item 1 "Business.") Operation of these units may
also be substantially curtailed by unanticipated equipment failures or
interruption of fuel supplies. The net maximum hourly demand served during
1993 was 6,729 MW on August 5, 1993. The Company met that demand through
system generating capability and economy power purchases from neighboring
utilities. The Company's existing generating plants (all located in Florida)
and their capabilities are as follows:
Winter Net
Maximum
Dependable
Primary Location Steam Peaking Capability
Plants Fuel (County) MW MW MW
- ------ ------- -------- ----- ------- ----------
Crystal River: Citrus
Unit #1 Coal 373 - 373
Unit #2 Coal 469 - 469
Unit #3 Uranium 755* - 755
Unit #4 Coal 717 - 717
Unit #5 Coal 717 - 717
----- -----
3,031 3,031
Anclote: Pasco
Unit #1 Oil 517 - 517
Unit #2 Oil 517 - 517
Bartow Oil Pinellas 449 217 666
Turner Oil Volusia 145 200 345
Intercession
City Oil Osceola - 750 750
DeBary Oil Volusia - 786 786
Higgins Oil Pinellas 123 148 271
Bayboro Oil Pinellas - 232 232
Avon Park Oil Highlands - 64 64
Port St. Joe Oil Gulf - 18 18
Rio Pinar Oil Orange - 18 18
Suwannee River Oil Suwannee 147 201 348
----- ----- -----
4,929 2,634 7,563
===== ===== =====
* Represents 90.4% of total plant capability because 9.6% of
capability was owned by other parties at December 31, 1993.
In January 1994, a 40 MW cogeneration unit located at the University of Florida
in Gainesville was put into service. This unit provides steam to the University
campus and hospital while generating electricity for the Company's system.
Also in January 1994, the Company put two of its oldest power plants, the
Higgins and Turner steam units, on extended cold shutdown status. This will
increase the overall efficiency of the Company's operation.
PLANNED GENERATION: The Company and Georgia Power Company ("Georgia Power")
plan to become co-owners of a 165 MW advanced combustion turbine to be located
at the Company's Intercession City Peaker site. Upon expected completion in
1996, the Company would operate and maintain the unit for both owners. During
the months of June through September, Georgia Power would have the exclusive
right to the output of this unit. The Company would have that right for the
balance of the year. This transaction would be subject to approval by the
Securities and Exchange Commission ("SEC") and the Georgia Public Service
Commission.
In a separate agreement, the Company has agreed to sell between 150 and 500 MW
of summer peaking capacity annually to Georgia Power during the years of 1995
through 1999. Since the Company is a winter-peaking utility and Georgia Power
is a summer-peaking utility, this transaction presents unique advantages to
both parties. The agreement was accepted for filing by the FERC on March 11,
1994 and is pending approval by the Georgia Public Service Commission. The
Company's generation strategy includes continuing efforts to sign similar
energy agreements with other utilities. The revenues from these energy sales
will help the Company offset some of its annual production costs and better
utilize its facilities year-round.
In 1992, the FPSC granted the Company a certificate of need to build two
gas-fired combined cycle generating units and related facilities. Each unit
has a winter rating of 235 MW. They are to be built on a new power plant site
in Polk County, Florida, approximately 50 miles east of Tampa. This new site
is to be reclaimed from about 8,000 acres of mined-out phosphate land. The
first unit is planned to come on line in 1998, with the second unit to follow
in 1999. Commencement of construction of these units is contingent on
obtaining all regulatory approvals.
The Company plans to use natural gas to fuel the first phase of the new energy
complex in Polk County. Two Company subsidiaries currently have 30% equity
interests in the interstate and intrastate partnerships, respectively, of a gas
pipeline project called the SunShine Pipeline. These investments totaled $4.9
million at December 31, 1993. The Company has an option to reduce or eliminate
its ownership positions at the end of 1994.
The SunShine Pipeline, estimated to cost approximately $600 million, would
originate near Pascagoula, Mississippi and would consist of two components: the
Sunshine Interstate Pipeline Project and the Sunshine Pipeline Project. The two
components of the pipeline together will consist of approximately 600
miles of pipe with a 30-inch diameter main line. The design capacity
through-put is anticipated to be approximately 460 million cubic feet per day
("MMcf/d") for the interstate component and approximately 380 MMcf/d for the
intrastate component. Each of the components would be owned by a separate
general partnership and, in connection therewith, the Company has formed two
subsidiary companies: Power Interstate Energy Services Corporation, which is a
partner in the interstate partnership, and Power Energy Services Corporation,
which is a partner in the intrastate partnership. ANR Pipeline Company, a
subsidiary of The Coastal Corporation, owns 40% of each partnership and
TransCanada PipeLines Limited owns 30% of each partnership through subsidiary
companies.
The interstate component of the SunShine Pipeline from Pascagoula to Okaloosa
County, Florida would be regulated by the FERC. The intrastate component of
the project from Okaloosa County to Polk County, Florida would be regulated by
the FPSC. In June 1993, the FPSC approved a determination of need for the
intrastate portion of the pipeline. Construction on the pipeline is contingent
upon obtaining all regulatory approvals, financing and commitments from
customers. (See Note 10 to the Financial Statements.)
The Company has signed a separate 25-year contract for the transportation of
natural gas through the SunShine Pipeline to the Company's Anclote plant near
Tarpon Springs and the Polk County site. The Company has contracted to
purchase 120 MMcf/d of capacity through the pipeline beginning in early 1996,
and to increase that volume to 210 MMcf/d by 1999 upon completion of the
Company's planned generation complex in Polk County.
The Company's expansion plan for generation is summarized in the table below:
<TABLE>
<CAPTION>
Winter Net
Maximum
Combustion Planned Dependable
Location Steam Turbine In Service Capability
Plants (County) MW MW Date MW
- ------------ -------- ----- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Intercession City (2) Osceola - 165 1/96 165
Combined Cycle 1 Polk 235 - 11/98 235
Combined Cycle 2 Polk 235 - 11/99 235
-----
635
Existing system generation (1) 7,335
-----
Total planned system generation by the year 2000 is 7,970
=====
(1) Subsequent to closing the Higgins and Turner steam units,
and adding a 40 MW cogeneration unit.
(2) The Company plans to co-own this unit with Georgia Power.
</TABLE>
In late December 1993, the FPSC adopted a rule regarding the construction of
new power plants in Florida. In general, the rule requires each investor-owned
electric utility to engage in a competitive bidding process for the
construction of a new generation unless the utility demonstrates on a case by
case basis that such a process is not in the best interests of the utility's
ratepayers. More specifically, the rule provides that prior to filing a
petition for determination of need for an electrical power plant, each
investor-owned electric utility shall evaluate supply-side alternatives to its
next planned generating unit by issuing a request for proposals. The utility
is required to evaluate proposals (which may include non-utility generators,
utility generators, turnkey offerings, and other generating supply
alternatives) from which a manageable group of potentially viable and
cost-effective finalists would be selected. The rule also provides, however,
that the FPSC may waive the rule or any part thereof upon a showing that the
waiver (a) would likely result in a lower cost supply of electricity to the
utility's ratepayers, (b) would increase the reliable supply of electricity to
the utility's ratepayers, or (c) is otherwise in the public interest. Although
the adoption of this rule could eventually affect the Company's ability to
construct its own power plants, the rule is not expected to affect the
construction of two gas-fired combined cycle generating units at the Company's
site in Polk County, Florida, because as noted above, the FPSC already has
granted the Company a certificate of need for these units.
NUCLEAR PLANT AND NUCLEAR INSURANCE: Information regarding nuclear plant and
nuclear insurance is contained in Note 7 to the Financial Statements.
TRANSMISSION AND DISTRIBUTION: As of December 31, 1993, the Company
distributed electricity through 329 substations with an installed transformer
capacity of 38,711,485 kilovolt amperes ("KVA"). Of this capacity, 26,963,425
KVA is located in transmission substations and 11,748,060 KVA in distribution
substations. The Company has 4,454 circuit miles of transmission lines of
which 2,560 circuit miles are operated at 500, 230 or 115 kilovolts ("KV") and
the balance at 69 KV. The Company has 22,390 circuit miles of distribution
lines which operate at various voltages ranging from 2.4 to 25 KV.
The Company is preparing to construct a 500 KV transmission line that will
run through northwest Hillsborough County and connect the Lake Tarpon
substation in Pinellas County to the Kathleen substation in Polk County (the
"LTK Line"). The Company received a certification of need for the LTK Line
from the FPSC in 1984, a letter from the FDEP in February 1994 indicating that
a water quality certification had been issued, and a dredge and fill permit
from the U.S. Army Corps of Engineers in March 1994. Through the end of 1993,
several lawsuits challenging various aspects of the LTK Line were dismissed
with prejudice or were unsuccessful on the merits. In the first quarter 1994,
Hillsborough County filed a lawsuit against the FDEP, and other parties
initiated two administrative proceedings, that challenge procedures followed in
issuing permits or authorizations relating to the LTK Line. Completion of
the LTK Line is subject to the successful defense of these and any other legal
actions that may seek to halt or delay construction of the LTK Line, and to the
completion of condemnation proceedings to acquire various parcels needed for
the project.
The Company has deferred indefinitely its plans to construct a 250 mile, 500 KV
transmission line that would have interconnected bulk power electric systems in
Florida and Georgia. Factors contributing to this decision were a slowing in
the Company's customer growth rate and uncertainties related to transmission
access and pricing.
ITEM 3. LEGAL PROCEEDINGS
1. FERC Docket No. ER93-299.
On December 17, 1993, the Company executed settlement agreements related
to the coal cost issues in its 1993 wholesale rate case. The parties had
previously resolved all cost of service issues and agreed to settlement
rates that produced increased annual revenues of $5.9 million, or $2.7
million less than the Company's initially filed rates. The coal issue
settlement involves a net cost to the Company of $1.2 million, and
includes the customers' agreement to use certain FPSC market pricing
mechanisms for FERC fuel adjustment clause purposes. In addition, the
settlement resolves all claims regarding the propriety of past
coal-related fuel adjustment costs through December 31, 1993. The
proposed, unopposed settlement is pending before the FERC, with approval
expected in the first quarter of 1994.
2. FERC Docket No. ER94-961-000.
On January 24, 1994, the Company reached a settlement in principle with
the majority of its wholesale customers in its proposed 1994 rate case.
The settlement provides for an annual revenue increase of approximately
$10 million compared to 1993 settlement rates pending FERC approval. The
agreement was reached utilizing a "pre-filing settlement procedure" under
which the Company's rate case filing package was provided to the wholesale
customers in advance of filing with FERC, without delaying the eventual
effective date of the new rates. The settlement agreement was filed with
FERC on February 8, 1994, with settlement rates becoming effective for
the customers that are parties to the agreement on March 2, 1994. A
decision from the FERC regarding this settlement, and new rates for the
minority of customers not party to the agreement, is expected in April
1994.
3. Florida Gas Transmission Company v. Florida Public Service Commission,
Florida Supreme Court Case No. 82,171.
On July 7, 1993, the FPSC issued a certificate of need to the Sunshine
Pipeline Partners, a Florida general partnership, for an intrastate
natural gas pipeline from northwest Florida to central Florida. Through a
wholly owned subsidiary, Power Energy Services Corporation, the Company
holds a 30% equity interest in this general partnership. On August 2,
1993, Florida Gas Transmission Company filed a notice of appeal of the
FPSC's action to the Florida Supreme Court on the basis that (i) the law
under which the certificate was granted is unconstitutionally vague in its
delegation of authority to the FPSC and (ii) the FPSC's final order
failed to address matters that the FPSC is statutorily required to
address. Briefs have been filed and oral arguments were heard in the case
on February 1, 1994. A decision is expected in the first half of 1994.
4. Union Carbide Corporation v. Florida Power & Light Company ("FP&L") and
Florida Power Corporation, U.S. District Court for the Middle District of
Florida, Tampa Division, Civil Action No. 88-1672-CIV-T-13C.
In this suit filed on October 14, 1988, seeking both injunctive relief and
damages, Union Carbide Corporation ("Union Carbide") claims that the
Company violated provisions of the Sherman and Clayton Antitrust Acts
primarily by refusing to provide retail electric service to Union
Carbide's plant at Mims, Florida. The Company's records indicate that a
territorial agreement has been in effect between it and FP&L for
approximately thirty (30) years, pursuant to which it was understood and
agreed that the Company would not provide retail electric service in the
area in question and that FP&L would provide such service. The Company's
records further indicate that its territorial agreement with FP&L was
approved by the FPSC pursuant to a clearly articulated policy of the
state encouraging such territorial agreements between electric utilities.
Accordingly, the Company and FP&L jointly filed a Motion for Summary
Judgment on November 22, 1988, contending that there is no dispute as to
any material issue of fact in the case, and that the case should
therefore be decided in their favor, as a matter of law, based upon the
qualification of the approved territorial agreement for the state action
exemption to the antitrust laws. Union Carbide filed a Motion for
Partial Summary Judgment as to the issue of liability on May 2, 1989. On
July 11, 1989, the General Counsel to the FPSC was allowed to appear and
file a Memorandum of Law as Amicus Curiae in support of the positions of
the Company and FP&L in their Joint Motion for Summary Judgment.
On December 8, 1993, the Court denied the Motion for Summary Judgment
filed by the Company and FP&L and the Motion for Partial Summary Judgment
filed by Union Carbide. The Court found that even though Florida has a
clearly articulated State policy of allocating service territories of
utilities and the FPSC has provided adequate supervision of the retail
service territories of the Company and FP&L, the documentation of the
territorial agreement and the FPSC's approval of that agreement,
"...gives rise to conflicting interpretations of the intent of [the
Company and FP&L and the FPSC] regarding the provision of service in
Broward County." The Court construed the intent of the FPSC in approving
the territorial agreement to be to "...allocate to each utility that
territory on its respective side of the boundary line in which
competition is reasonably expected." Union Carbide, FP&L, and the
Company all filed Motions for Reconsideration of the Court's Order of
December 8, 1993.
On January 26, 1994, the Court denied all the Motions for Reconsideration
and found that a material issue of fact exists as to "...whether Mims was
located in an area to the east of the [territorial] boundary line [between
the Company and FP&L] in which competition [between the Company and FP&L]
was reasonably foreseeable in the future." This issue had never been
raised by any of the parties to the litigation, and was mentioned for the
first time in the Court's Order of December 8, 1993. The Company believes
that the issue of expected competition in the Mims area at the time the
territorial agreement was approved is not material to a proper disposition
of the case, and that a summary judgment should be entered in favor of the
Company and FP&L on the basis of the Court's findings in their favor on
all the critical issues of law in its Order of December 8, 1993.
Incident to a status conference in the case on February 1, 1994, Union
Carbide requested certification of the case for purposes of taking an
appeal. Accordingly, the Court elected to delay permitting any additional
discovery or setting the case for trial on the limited issue of material
fact it found to exist pending disposition of appeals from the Court's
rulings on the motions for summary judgment. The Company and FP&L filed
notices of appeal to the U.S. Court of Appeals for the 11th Circuit on
February 8, 1994 and the plaintiff filed a notice of cross appeal on
February 22, 1994. Also at the status conference on February 1, 1994,
Praxair, Inc. to which Union Carbide had previously spun off its plant at
Mims, Florida, was substituted for Union Carbide as the plaintiff in their
cause, subject to certain reservations. Accordingly, future reports on
this case will be under the name of Praxair, Inc. v. FP&L and the Company.
5. Kim S. McDowell and Talesa C. Lloyd v. Florida Power Corporation, United
States District Court for the Middle District of Florida, Tampa Division,
Case No. 91-1858-CIV-T-23B.
On November 3, 1992, counsel for the plaintiffs in this matter filed a
motion for leave to file a first amended complaint. The initial pro se
action, filed on November 29, 1991, by these two former employees of the
Company, raised allegations of sexual discrimination and harassment and
sought relief under Title VII of the Civil Rights Act of 1964. The motion
asks the court to allow the plaintiffs to amend the initial complaint to
add another named plaintiff and to allow the named plaintiffs to represent
a class of female employees. The first amended complaint also seeks
injunctive relief and compensatory and punitive damages on behalf of the
class of all former, present, and future female employees of the Company
who have been, are being or will be discriminated against or harassed
because of their sex.
The Company believes that its exposure in this matter will not be
material even if it is unsuccessful in defending against the individual
claims of the named representatives. However, it cannot yet be
determined whether this case will be certified as a class action or how
large the class could become. Certain procedural matters have delayed
the handling of this case, and at present seven motions are pending and
no trial date has been set.
6. Florida Public Utilities Company v. Florida Power Corporation, Florida
Power & Light Company, Atlanta Gas Light Company, and City of Sanford,
Florida, United States District Court for the Middle District of Florida,
Orlando Division, Civil Action No. 92-115-CIV-ORL-19.
On February 7, 1992, the Company was served with a copy of a complaint
alleging damages caused by violations of the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA" or "Superfund") and
Sections 376.302 and 376.313(3) Florida Statutes, by former owners of a
coal gasification plant previously operated at Sanford, Florida. The
plaintiff, Florida Public Utilities Company, currently owns the land which
includes the former plant site. The complaint states that the FDEP has
completed its initial investigation and has determined that hazardous
substances have been discharged and/or released at the site of the former
gasification plant.
The plaintiff alleges that the Company owned and operated the plant from
1944 until 1946 and that the Company is a successor in interest through
the merger of the Company with a previous owner of the plant, Sanford Gas
Company.
On February 3, 1994, the parties to this action submitted a completed
contamination assessment report to the FDEP. As of this date, the Company
has not received any further communication from the FDEP. The Company
anticipates an extended period of negotiation with the FDEP. The lawsuit
continues to be stayed pending the results of the FDEP's review.
At the present time, the Company does not believe that its share of the
costs of cleaning up this site will be material, or that it will have to
bear a significantly disproportionate share of those costs. This matter
is being reported because liability for the cleanup of certain sites is
technically joint and several, and because the extent to which other
parties will ultimately share in the cleanup costs at this site is not yet
determinable. (See Note 10 to the Financial Statements for further
information regarding the potential costs.)
7. Peak Oil Company, Missouri Electric Works, 62nd Street, AKO Bayside, Bluff
Electric and Sydney Mine Superfund Sites.
The Company has been notified by the EPA that it is or could be a
"potentially responsible party" ("PRP") with respect to each of the above
Superfund sites. Based upon the information presently available, the
Company has no reason to believe that its total liability for the cleanup
of these sites will be material or that it will be required to pay a
significantly disproportionate share of those costs. However, these
matters are being reported because liability for cleanup of certain sites
is technically joint and several, and because the extent to which the
Company may ultimately have to participate in those cleanup costs is not
presently determinable. (See Note 10 to the Financial Statements for
further information regarding the potential costs.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
All of the Company's common stock is owned by Florida Progress, its corporate
parent, and hence there is no market for the stock. For the past three years,
the Company has paid quarterly dividends to Florida Progress totaling the
amounts shown in the Statements of Shareholders' Equity of the Financial
Statements.
The Company's Amended Articles of Incorporation, as amended, and its Indenture
dated as of January 1, 1944, as supplemented, under which it issues first
mortgage bonds, contain provisions restricting dividends in certain
circumstances. At December 31, 1993, the Company's ability to pay dividends
was not, nor is it expected to be, limited by these restrictions.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In millions)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric sales billed (millions of KWH)
Residential 13,372.6 12,825.8 12,623.9 12,415.5 11,786.9
Commercial 7,884.8 7,544.1 7,489.2 7,328.7 6,989.8
Industrial 3,380.8 3,254.5 3,303.0 3,455.7 3,766.1
Other 1,890.1 1,789.6 1,763.0 1,678.4 1,580.5
----------------------------------------------------
Total retail sales 26,528.3 25,414.0 25,179.1 24,878.3 24,123.3
Sales for resale 2,119.5 1,961.5 2,171.1 2,265.4 2,387.2
----------------------------------------------------
Total electric sales 28,647.8 27,375.5 27,350.2 27,143.7 26,510.5
----------------------------------------------------
Residential service (average annual):
KWH sales per customer 12,420 12,214 12,257 12,319 12,059
Revenue per customer $983 $884 $899 $896 $845
Revenue per KWH $0.0792 $0.0724 $0.0733 $0.0727 $0.0701
FINANCIAL DATA:
Operating Revenues $1,957.6 $1,774.1 $1,718.8 $1,709.1 $1,627.0
Net Income after Dividends
on Preferred Stock $181.5 $170.2 $164.1 $165.5 $167.2
Total Assets $4,259.5 $3,980.6 $3,643.2 $3,528.1 $3,422.6
Long-Term Debt and Preferred Stock
subject to Mandatory Redemption $1,433.6 $1,318.3 $1,213.1 $1,119.8 $1,095.2
Total capitalization including
short-term debt (in millions) $3,240.4 $3,029.2 $2,692.2 $2,633.4 $2,473.9
Capitalization ratios:
Short-term capital 5.3% 4.4% 1.4% 7.4% 4.7%
Long-term debt 43.1 40.8 41.4 38.7 40.2
Preferred stock 4.6 7.1 8.6 8.9 9.4
Common stock equity 47.0 47.7 48.6 45.0 45.7
----------------------------------------------------
Ratio of earnings to
fixed charges (SEC method) 3.83 3.84 3.87 3.89 3.79
Embedded cost of long-term debt 6.8% 7.5% 7.7% 7.9% 8.1%
Embedded cost of preferred stock 6.8% 7.3% 7.3% 7.2% 7.2%
----------------------------------------------------
OPERATING DATA:
Net winter generating capacity (MW) 7,563 7,002 6,623 6,571 6,309
Net system winter peak load (MW) 6,653 6,982 6,056 5,026 6,817
Net system summer peak load (MW) 6,729 6,357 5,925 5,946 5,832
BTU per KWH of net output 10,027 9,981 10,007 10,005 10,076
Construction additions (in millions) $442.0 $491.6 $355.3 $269.5 $254.8
Percentage of construction expenditures
generated internally 70% 32% 90% 52% 73%
Fuel cost per million BTU $1.79 $1.86 $1.89 $2.11 $2.10
Average number of customers 1,214,653 1,182,170 1,159,237 1,135,499 1,101,817
Number of regular employees 5,807 5,806 5,677 5,570 5,553
----------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Although the electric utility industry is becoming increasingly competitive,
the Company believes that it is in a good competitive position. See Item 1
"Business-Competition."
The Company is streamlining operations and cutting costs to improve its
competitiveness. These actions also are expected to allow the Company to
offset other rising costs such as income taxes, environmental expenses and
insurance costs. The Company expects to earn its authorized return on equity,
while maintaining competitive prices. Through anticipated sales growth and
cost control, the Company believes it can wait to file a major retail rate case
until its next baseload unit is near completion in 1998.
OPERATING RESULTS
In 1993, the Company earned $181.5 million, compared with $170.2 million in
1992 and $164.1 million in 1991.
Operating revenues were $1.958 billion in 1993, compared with $1.774 billion in
1992 and $1.719 billion in 1991. The increased operating revenues and higher
earnings in 1993 were mainly due to the phased-in increases in retail base
rates, reflecting the outcome of the Company's 1992 retail rate case.
In September 1992, the FPSC granted the Company an annual revenue increase of
$85.8 million. The FPSC approved permanent increases in retail base rates of
approximately $58 million in November 1992, $9.7 million in April 1993 and
$18.1 million in November 1993. (See Note 8 to the Financial Statements.)
The retail rates are based on a 12% regulatory return on equity. The Company's
allowed retail regulatory return on equity range is 11% to 13%. The Company's
retail regulatory return on equity was 12.1% for the year ended December 31,
1993.
New revenues were granted in the approved rate increase to allow for the
recovery of new investment to support customer growth, increased operations
and maintenance costs, and higher depreciation expenses. The rate increase
also allows the Company to recover costs for employee benefits in accordance
with the new accounting standard for other postretirement benefits that became
effective January 1, 1993.
The new base rates increased operating revenues by $43.4 million and increased
earnings by $10.4 million for 1993, after recording new expenses authorized in
the rate case.
The FPSC has conducted proceedings to review the authorized return on common
equity for other Florida utilities to reflect a lower cost of capital. While
some of these proceedings have resulted in a reduction of the authorized return
on common equity, the FPSC has not ordered any refunds or lowered customer
rates.
The Company filed a 1994 wholesale base rate proceeding on February 8, 1994
before the FERC after reaching a settlement in principle with its wholesale
customers. The Company is requesting an increase in annual revenues of
approximately $10 million to recover costs for new generating facilities and
higher purchased power costs. The settlement is expected to be approved by the
FERC in the second quarter 1994.
In December 1993, the Company executed a settlement agreement with its
wholesale customers for $5.7 million in higher annual revenues in its 1993
rate proceeding. The settlement is expected to be approved by the FERC in the
first quarter of 1994.
The Company reached a settlement with its wholesale customers in its 1992 rate
proceeding, which had no significant impact on annual revenues but resulted in
a retroactive depreciation adjustment that increased the Company's 1992
fourth quarter earnings by $5.6 million. (See Note 1 to the Financial
Statements.)
The Company's customer growth rate for 1993 was 2.7%, compared with 2% in 1992.
An increase of more than 32,000 customers during 1993 was the principal reason
for a 5.3% increase in retail KWH sales for the year.
The main reason for the increase in the customer growth rate during 1993 was
the Company's acquisition of the Sebring Utilities Commission electrical
distribution system. The purchase occurred in April 1993, adding about 12,500
customers to the Company's system. The Company paid $54 million for the
system, which included $23.6 million for the book value of the assets and
going-concern value of the system. The $30.4 million difference was used to
retire Sebring's prior debt and will be repaid to the Company through a
transition rate from Sebring customers over a period of 15 years. The Company
plans to include the net book value of the assets in its next retail rate case
in 1998.
In addition to customer growth, the higher energy sales in 1993 were the result
of increased average customer usage. During 1993, average residential and
commercial customer usage was up by 1.7% and 1.8%, respectively, compared with
1992. The primary reason for the higher average usage was the
warmer-than-normal summer weather in the Company's service territory in 1993.
Fuel and purchased power costs increased by $49.9 million in 1993, compared
with 1992. The increase was primarily due to higher system requirements and
increased purchased power costs. The Company has several long-term purchased
power commitments with qualifying facilities that will increase its level of
purchased power over the next several years. Since the Company recovers
substantially all fuel and purchased power costs through fuel and capacity
adjustment clauses, and defers any adjustments to the following period, these
fluctuations have little impact on net income. (See Note 10 to the Financial
Statements with respect to present and possible future impact of these
commitments.)
Other utility operations and maintenance expenses increased by $64.2 million in
1993. Recoverable energy conservation programs accounted for $32.3 million of
the increase. The Company recovers substantially all of its energy
conservation program costs through a clause similar to the fuel adjustment
clause. Also contributing to the increase were postretirement benefits and the
costs associated with an early retirement option announced in late 1993. These
increases in other utility operations and maintenance expenses were partially
offset by reduced maintenance costs at the Crystal River Nuclear Plant that
resulted from the timing of outages.
The Company's earnings were lowered by $3.4 million, for the early retirement
costs recognized in 1993 and the Company estimates that 1994 earnings will be
lower by approximately $8 million. Payroll cost reductions and other lower
personnel-related expenses are expected to pay back the expenses being
recognized for the early retirement option in less than three years.
During 1993, the nuclear unit's capacity factor was 84.5%, which is above the
industry average. This capacity factor was achieved despite the plant
completing a mid-cycle maintenance outage. The Company's share of the expenses
for the 53-day outage totaled $9.7 million. (See Note 7 to the Financial
Statements.)
Electric utilities have only recently begun the process of decommissioning
large nuclear units. Therefore, estimates of decommissioning costs have been
based on limited experience. As the industry gains additional experience,
estimates of decommissioning costs may increase. (See Note 7 to the Financial
Statements.)
In November 1992, the U.S. Nuclear Regulatory Commission issued its most recent
Systematic Assessment of Licensee Performance report for the nuclear unit. The
report gave favorable ratings to the plant in all seven functional areas. The
plant received the highest performance rating in three of seven areas and the
next to the highest or industry average rating in the remaining four areas.
The next performance report for the unit is expected in April 1994.
The 1992 retail rate decision included revenues to recover additional
depreciation expense, beginning in November 1992, previously ordered by the
FPSC. The decision included a provision for fossil plant dismantlement costs.
These dismantlement costs totaled $23.9 million in 1993, $18.2 million in 1992
and $16.6 million in 1991. (See Note 1 to the Financial Statements.)
The financial return on the Company's common equity was 12.1% in 1993, 12.3% in
1992 and 12.9% in 1991. Although the Company's 1993 return was bolstered by
the increase in retail electric rates and the higher energy sales, these
increases were offset by higher income taxes, and increased costs for insurance
and the early retirement option.
The Company has been notified by the EPA that it is or may be a potentially
responsible party for the cleanup costs of several contaminated sites. In
addition, the Company is a defendant in an action seeking contribution for
cleanup costs from the prior owners of a former coal gasification plant site.
(See Note 10 to the Financial Statements.)
INTEREST EXPENSE AND INFLATION
Interest expense was impacted by lower interest rates in both 1992 and 1993,
compared with 1991. Interest expense increased in 1993, compared with 1992,
despite lower rates, due to higher average debt levels in 1993.
Allowance for funds used during construction decreased $3.1 million in 1993,
compared with an increase of $9.3 million in 1992. During 1992 and 1993,
several major construction projects were completed at the Company, contributing
to the 1993 decrease.
Even though the inflation rate has been relatively low in recent years,
inflation continues to affect the Company by reducing the purchasing
power of the dollar and increasing the cost of replacing assets used in the
business. This has a negative effect on the Company since regulators do not
generally consider this economic loss when utility rates are set. However,
such losses are partly offset by the economic gains that result from the
repayment of long-term debt with inflated dollars.
INCOME TAXES
In August, the Omnibus Budget Reconciliation Act of 1993 was signed into law.
The major provision of the new tax law affecting the Company is the increase
in the maximum corporate income tax rate from 34% to 35%. This 1% increase in
the tax rate lowered the Company's 1993 net earnings by $2.8 million (See Note
5 to the Financial Statements.)
ACCOUNTING STANDARDS
The Company adopted Financial Accounting Standard No. 109, "Accounting for
Income Taxes," in 1993. The adoption of the standard did not have an
impact on earnings in 1993. (See Note 1 to the Financial Statements.)
The Company also adopted Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," in 1993. This
standard mandates that an employer's obligation for postretirement benefits
must be fully accrued by the date employees attain full eligibility to receive
these benefits. The Company accrued approximately $18 million in additional
annual costs under the new standard in 1993, which was recovered through
increased customer base rates. (See Note 6 to the Financial Statements.)
The Company will be required to adopt two new financial accounting standards in
1994 - Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and Financial Accounting Standard
No. 112, "Employers' Accounting for Postemployment Benefits." The adoption of
these standards is not expected to have a material impact on earnings. (See
Note 1 to the Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations has been the primary source of capital for the Company
over the last five years.
The Company's construction expenditures for 1993 totaled $426.4 million,
consisting primarily of distribution and production expenditures. The
five-year construction program includes planned expenditures of $344 million,
$378 million, $325 million, $371 million and $354 million for 1994 through
1998.
In December 1991, the FPSC approved the utility's request to construct two
gas-fired, combined-cycle generating units in Polk County, Florida.
Construction expenditures of $287 million are planned for this new energy
complex in the 1994-1998 forecast with most of the expenditures in the later
years.
The Company plans to use natural gas for the first phase of the new energy
complex in Polk County. The Company's subsidiaries currently have 30% equity
interests in the interstate and intrastate partnerships of a gas pipeline
project. These investments totaled $4.9 million at December 31, 1993. The
Company has an option to reduce or eliminate its ownership positions at the
end of 1994. (See Note 10 to the Financial Statements.)
In a separate agreement, the Company has signed a 25-year contract for the
transportation of natural gas to the Company's Anclote plant near Tarpon
Springs and the Polk County site through this planned pipeline.
The Clean Air Act of 1990 requires electric utility companies to reduce sulfur
dioxide emissions in two phases. The Company will not be affected
significantly by Phase I, which begins in 1995, and expects to meet Phase II
requirements in the year 2000 with minimal capital expenditures.
In addition to funding its construction commitments with cash from operations,
the Company accesses the capital markets through the issuance of commercial
paper, medium-term notes and first mortgage bonds and receives equity from
Florida Progress' common stock sales. The Company's goal is to maintain a
capital structure consistent with its double A minus credit rating.
In 1992, the Company established a $200-million public medium-term note
program, providing for the issuance of either fixed or floating interest rate
notes, with maturities that may range from nine months to 30 years. The
program has approximately $170 million available for future issuance.
During 1993, the Company repaid $355.5 million of first mortgage bonds and
$45.4 million of medium-term notes. (See Note 2 to the Financial Statements.)
The Company's embedded cost of long-term debt declined to 6.8% at December 31,
1993, compared with 7.5% at year-end 1992.
During 1992, the Company purchased and redeemed 50,000 shares of its Cumulative
Preferred Stock, pursuant to sinking fund provisions. In 1993, the Company
redeemed an additional 800,000 shares of its Cumulative Preferred Stock. (See
Note 3 to the Financial Statements.)
Florida Progress contributed $60 million in 1993, $121.6 million in 1992 and
$100 million in 1991 to the Company from the proceeds of Florida Progress'
public stock offerings in May 1992 and May 1991 and the Progress Plus Stock
Plan. These equity funds were used to reduce outstanding commercial paper and
to further strengthen the Company's financial position.
The Company has a $400-million commercial paper program that is rated A-1+ by
Standard & Poor's and P-1 by Moody's. The Company's interim financing needs
are funded primarily through its commercial paper program. The Company has
established 364-day and five-year revolving bank credit facilities, both for
$200 million, which are used to back up commercial paper. (See Note 2 to the
Financial Statements.)
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants
Statements of Income for the years ended
December 31, 1993, 1992 and 1991
Balance Sheets, December 31, 1993 and 1992
Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991
Notes to Financial Statements
Quarterly Financial Data (Unaudited)
<PAGE>
AUDITORS' REPORT
To the Board of Directors and Shareholders of Florida Power Corporation:
We have audited the balance sheets of Florida Power Corporation as of December
31, 1993 and 1992, and the related statements of income, shareholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1993. In connection with our audits of the financial statements, we also
have audited the financial statement schedules as listed in Item 14 herein.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Power Corporation as
of December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1993,
in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedules when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Notes 1 and 6 to the financial statements, in 1993, Florida
Power Corporation changed its methods of accounting for income taxes and
postretirement benefits other than pensions.
/s/KPMG PEAT MARWICK
- ---------------------
KPMG PEAT MARWICK
St. Petersburg, Florida
January 24, 1994
<PAGE>
FLORIDA POWER CORPORATION
Statements of Income
- ---------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991 (In millions)
1993 1992 1991
OPERATING REVENUES $1,957.6 $1,774.1 $1,718.8
- ---------------------------------------------------------------------------
OPERATING EXPENSES:
Operation
Fuel used in generation 460.8 471.9 498.5
Purchased power 209.5 140.4 104.3
Deferred fuel (11.8) (3.7) 3.8
Other 378.0 310.9 282.0
- ---------------------------------------------------------------------------
1,036.5 919.5 888.6
Maintenance 136.8 139.7 134.8
Depreciation 240.2 209.5 206.3
Taxes, Other Than Income 152.6 138.3 129.3
Income taxes 104.5 97.7 92.8
- ---------------------------------------------------------------------------
1,670.6 1,504.7 1,451.8
- ---------------------------------------------------------------------------
OPERATING INCOME 287.0 269.4 267.0
- ---------------------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction 8.9 10.4 4.0
Miscellaneous other income, net (1.9) (1.0) (0.3)
- ---------------------------------------------------------------------------
7.0 9.4 3.7
- ---------------------------------------------------------------------------
INTEREST CHARGES:
Interest On Long-Term Debt 91.7 84.2 79.1
Other Interest Expense 14.1 16.0 16.1
- ---------------------------------------------------------------------------
105.8 100.2 95.2
Allowance for borrowed funds used
during construction (6.7) (8.3) (5.4)
- ---------------------------------------------------------------------------
99.1 91.9 89.8
- ---------------------------------------------------------------------------
NET INCOME 194.9 186.9 180.9
DIVIDENDS ON PREFERRED STOCK 13.4 16.7 16.8
- ---------------------------------------------------------------------------
NET INCOME AFTER DIVIDENDS
ON PREFERRED STOCK $181.5 $170.2 $164.1
===========================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
- --------------------------------------------------------------------------
December 31, 1993 and 1992 (In millions)
1993 1992
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Electric utility plant in service
and held for future use $5,320.3 $4,853.9
Less: Accumulated depreciation 1,846.2 1,660.8
Accumulated decommissioning for
nuclear plant 118.3 102.0
Accumulated dismantlement for
fossil plants 68.5 47.1
- --------------------------------------------------------------------------
3,287.3 3,044.0
Construction work in progress 285.7 333.8
Nuclear fuel, net of amortization
of $299.9 in 1993 and $273.6 in 1992 68.4 64.2
- --------------------------------------------------------------------------
3,641.4 3,442.0
Other property, net 27.7 28.4
- --------------------------------------------------------------------------
3,669.1 3,470.4
- --------------------------------------------------------------------------
CURRENT ASSETS:
Accounts receivable, less reserve
of $2.4 in 1993 and $2.6 in 1992 168.2 147.8
Inventories at average cost
Fuel 58.9 77.8
Materials and supplies 112.2 103.4
Underrecovery of fuel costs 7.1 4.4
Deferred income taxes 29.2 13.7
Other 5.8 10.4
- --------------------------------------------------------------------------
381.4 357.5
- --------------------------------------------------------------------------
OTHER ASSETS:
Nuclear plant decommissioning fund 107.7 89.8
Unamortized debt expense, being amortized
over term of debt 31.6 21.1
Other 69.7 41.8
- --------------------------------------------------------------------------
209.0 152.7
- --------------------------------------------------------------------------
$4,259.5 $3,980.6
==========================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Balance Sheets
- --------------------------------------------------------------------------
December 31, 1993 and 1992 (In millions)
1993 1992
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock without par value - 60,000,000
shares authorized, 100 shares outstanding $812.9 $752.9
Retained earnings 709.5 692.0
- --------------------------------------------------------------------------
1,522.4 1,444.9
Cumulative preferred stock:
Without sinking funds 113.5 133.5
With sinking funds 35.0 82.5
Long-term debt 1,398.6 1,235.8
- --------------------------------------------------------------------------
3,069.5 2,896.7
- --------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable 106.2 71.0
Accounts payable to associated companies 17.1 25.0
Customer deposits 71.5 69.0
Income taxes payable 24.6 15.5
Accrued other taxes 8.4 8.2
Accrued interest 33.2 30.2
Other 34.2 28.4
- --------------------------------------------------------------------------
295.2 247.3
Notes payable 125.0 -
Current portion of long-term debt 45.9 120.0
Preferred stock sinking fund obligations - 12.5
- --------------------------------------------------------------------------
466.1 379.8
- --------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 472.7 503.3
Unamortized investment tax credits 117.8 126.3
Other 133.4 74.5
- --------------------------------------------------------------------------
723.9 704.1
- --------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
- --------------------------------------------------------------------------
$4,259.5 $3,980.6
==========================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Statements of Cash Flow
- -----------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991 (In millions)
1993 1992 1991
OPERATING ACTIVITIES:
Net income after dividends on preferred stock $181.5 $170.2 $164.1
Adjustments for noncash items:
Depreciation & amortization 276.5 243.4 241.9
Deferred income taxes and investment
tax credits, net (25.0) 8.6 (35.2)
Allowance for equity funds used
during construction (8.9) (10.4) (4.0)
Changes in working capital:
Accounts receivable (18.4) (12.5) 2.9
Inventories 10.1 (21.7) 25.2
Overrecovery (underrecovery) of fuel cost (2.7) (43.8) 46.4
Accounts payable 35.2 9.6 18.6
Accounts payable to associated companies (7.9) 4.4 (6.4)
Other 25.1 (5.3) 11.2
Other operating activities 14.2 (4.0) 7.7
- -----------------------------------------------------------------------------
479.7 338.5 472.4
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Construction expenditures (426.4) (472.9) (345.9)
Allowance for borrowed funds used
during construction (6.7) (8.3) (5.4)
Additions to nonutility property (7.6) (12.3) (8.4)
Acquisition of electric distribution system (53.9) - -
Proceeds from sale of property 6.0 3.8 4.5
Other investing activities (18.4) (14.9) (11.4)
- -----------------------------------------------------------------------------
(507.0) (504.6) (366.6)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Issuance of long-term debt 385.0 430.1 208.5
Repayment of long-term debt (402.7) (243.2) (173.3)
Increase in commercial paper
with long-term support 104.0 18.0 78.0
Redemption of preferred stock (80.5) (5.0) -
Dividends paid on common stock (163.5) (155.4) (142.1)
Equity contributions from parent 60.0 121.6 100.0
Increase (decrease) in short-term debt 125.0 - (178.5)
- -----------------------------------------------------------------------------
27.3 166.1 (107.4)
- -----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS - - (1.6)
Beginning cash and equivalents - - 1.6
- -----------------------------------------------------------------------------
ENDING CASH AND EQUIVALENTS $ - $ - $ -
=============================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $93.8 $89.7 $86.7
Income taxes (net of refunds) $120.3 $92.7 $120.8
=============================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
Statements of Shareholders' Equity
- ---------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992 AND 1991 (In millions, except
share amounts)
Cumulative
Preferred Stock
-----------------
Without With
Common Retained Sinking Sinking
Stock Earnings Funds Funds
- ---------------------------------------------------------------------------
Balance, December 31, 1990 $531.3 $655.2 $133.5 $100.0
Net income after dividends
on preferred stock 164.1
Capital contribution by parent company 100.0
Cash dividends on common stock (142.1)
Preferred stock reclassified
to current - 25,000 shares (2.5)
- ---------------------------------------------------------------------------
Balance, December 31, 1991 631.3 677.2 133.5 97.5
Net income after dividends
on preferred stock 170.2
Capital contribution by parent company 121.6
Cash dividends on common stock (155.4)
Preferred stock redeemed or reclassified
to current - 150,000 shares (15.0)
- ---------------------------------------------------------------------------
Balance, December 31, 1992 752.9 692.0 133.5 82.5
Net income after dividends
on preferred stock 181.5
Capital contribution by parent company 60.0
Cash dividends on common stock (163.5)
Preferred stock redeemed -
675,000 shares (0.5) (20.0) (47.5)
- ---------------------------------------------------------------------------
Balance, December 31, 1993 $812.9 $709.5 $113.5 $35.0
===========================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
FLORIDA POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The Company is a public utility engaged in the generation, purchase,
transmission, distribution and sale of electric energy primarily within
Florida. It is subject to regulation by the FPSC and the FERC. The Company's
records comply with the accounting and reporting requirements of these
regulatory authorities and generally accepted accounting principles.
UTILITY PLANT - Utility plant is stated at the original cost of construction,
which includes payroll and related costs such as taxes, pensions and other
fringe benefits, general and administrative costs and an allowance for funds
used during construction. Substantially all of the utility plant is pledged as
collateral for the Company's first mortgage bonds.
UTILITY REVENUES, FUEL AND PURCHASED POWER EXPENSES - The Company accrues the
non-fuel portion of base revenues for services rendered but unbilled.
Revenues include amounts resulting from fuel, purchased power and conservation
adjustment clauses, which are designed to permit full recovery of these costs.
The adjustment factors are based on projected costs for a six- or 12-month
period. Revenues and expenses are adjusted for differences between recoverable
fuel, purchased power and conservation costs and amounts included in current
rates. The cumulative fuel cost difference is shown on the balance sheet as
overrecovery or underrecovery of fuel costs. Any overrecovery or underrecovery
of costs, plus an interest factor, is refunded or billed to customers during
the subsequent period.
The cost of fossil fuel for electric generation is charged to expense as
consumed. The cost of nuclear fuel is amortized to fuel expense based on the
quantity of heat produced for the generation of electric energy in relation
to the quantity of heat expected to be produced over the life of the nuclear
fuel core.
INCOME TAXES - Financial Accounting Standard No. 109, "Accounting for Income
Taxes," was adopted by the Company in the first quarter of 1993. The objective
of this standard is to recognize the amount of current and deferred taxes
payable and refundable for all events that have been recognized in the
financial statements or tax returns based on enacted tax laws at the date of
the financial statements.
The Company elected to report the cumulative effect of the change in method of
accounting for income taxes in 1993. Under the new standard, deferred income
taxes are provided on all significant temporary differences between the
financial statements and the tax bases of assets and liabilities using
presently enacted tax rates. In adopting the standard, the Company recorded a
net decrease in deferred tax balances of $57 million which resulted from the
reversal of deferred income taxes accrued in prior years at rates in excess of
the presently enacted tax rate and the recognition of a temporary difference
related to deferred investment tax credits. The decrease to deferred income
taxes was partially offset by an increase for temporary differences for which
no deferred taxes had been recorded because of prior regulatory practices.
Because of regulatory precedent and the Company's intent to recover and settle
these amounts in future rates, a corresponding regulatory asset and regulatory
liability were recorded and there was no effect on net income.
Deferred investment tax credits subject to regulatory accounting practices are
amortized to income over the lives of the related properties.
DEPRECIATION AND MAINTENANCE - The Company provides for depreciation of the
cost of properties over their estimated useful lives primarily on a
straight-line basis. The Company's annual provision for depreciation,
including a provision for nuclear plant decommissioning costs and fossil
plant dismantlement costs, expressed as a percentage of the average balances
of depreciable utility plant, was 4.8% for 1993, 4.6% for 1992 and 4.8% for
1991.
The Company was authorized by the FPSC to apply new depreciation rates, which
resulted in a $37.2-million increase in depreciation expense for 1991. This
increase included $16.6 million for fossil plant dismantlement costs. The
effect of these new rates on wholesale customers was reversed in connection
with the settlement of the Company's 1992 wholesale rate request, resulting in
a one-time adjustment of previously recorded depreciation. The reversal
increased net income in the fourth quarter of 1992 by $5.6 million, of which
$3.1 million was applicable to periods prior to 1992. The 1992 retail rate
case included higher fossil plant dismantlement costs, totaling about $24
million annually, beginning in November 1992.
In 1993, the Company filed a new depreciation study with the FPSC. The filing
includes the results of a site-specific dismantlement study of the Company's
fossil generating facilities. If the FPSC approves the Company's recommended
change in rates, annual depreciation expense will decrease by $9.7 million on a
retail jurisdictional basis, beginning in January 1995.
The Company charges maintenance expense with the cost of repairs and minor
renewals of property. The plant accounts are charged with the cost of renewals
and replacements of property units. Accumulated depreciation is charged with
the cost, less the net salvage, of property units retired.
ALLOWANCE FOR FUNDS - The allowance for funds used during construction
represents the estimated cost of capital funds (equity and debt) applicable
to utility plant under construction. Recognition of this item as a cost of
utility plant under construction is appropriate because it constitutes an
actual cost of construction and, under established regulatory rate practices,
the Company is permitted to earn a return on these costs and recover them
in the rates charged for utility services while the plant is in service.
In 1993, the FPSC reduced the Company's allowance for funds rate to 7.8%,
effective July 1, 1993. The revision was prompted by the Company's newly
authorized cost of capital. The average rate used in computing the allowance
for funds was 7.9% for 1993 and 8% for 1992 and 1991.
MARKETABLE SECURITIES AND FINANCIAL INSTRUMENTS - The Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Fixed-income securities are carried at amortized
cost and other equity securities are stated at the lower aggregate of cost or
market value.
The Company will be required to adopt Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
The standard requires the Company to address the accounting and reporting for
investments in debt and equity securities. The standard requires investments
to be classified in three categories depending on the Company's intended use.
The adoption of this standard is required to be reflected prospectively, and is
not expected to have a material impact on 1994 earnings.
(2) DEBT
The Company's long-term debt at December 31, 1993 and 1992, is scheduled to
mature as follows:
Interest
(In millions) Rate 1993 1992
- ------------------------------------------------------------------------------
First mortgage bonds:
Maturing through 1998:
1993(early redemption) 8.48%(b) $ - $ 75.0
1995 4.74%(a) 34.4 34.4
1997 6.13% 16.7 16.7
1998 (early redemption) 7.00% - 20.5
Maturing 1999 through 2003 6.50%(a) 355.0 355.0
Maturing 2006 and 2008 6.88% 80.0 80.0
Maturing 2021 through 2023 7.98%(a) 400.0 300.0
Discount, net of premium, being amortized
over term of bonds (7.3) (2.2)
- ------------------------------------------------------------------------------
878.8 879.4
Pollution control financing obligations:
Maturing 2014 through 2027 6.59%(a) 240.9 240.9
Notes maturing:
1993-1994 8.41%(a) 45.9 90.0
1995-2008 7.79%(a) 78.9 49.5
Commercial paper, supported by
revolver maturing December 31, 1998 3.29%(a) 200.0 96.0
- ------------------------------------------------------------------------------
1,444.5 1,355.8
Less: Current portion of long-term debt 45.9 120.0
- ------------------------------------------------------------------------------
$1,398.6 $1,235.8
- ------------------------------------------------------------------------------
(a) Weighted average interest rate at December 31, 1993.
(b) Weighted average interest rate at the redemption date.
The Company has revolving lines of credit totaling $400 million, which are used
to support commercial paper. The lines of credit were not drawn on as of
December 31, 1993. Interest rate options under line of credit arrangements
vary from sub-prime or money market rates to the prime rate. Banks providing
lines of credit are compensated through fees. Commitment fees on lines of
credit vary between .1 and .175 of 1%.
The revolving lines of credit facilities, $200 million each, are for terms of
364 days and five years. In 1993, the 364-day facility was renewed to November
1994 and the five-year facility was extended to December 1998. Based on the
duration of the underlying backup credit facilities, $200 million of the
outstanding commercial paper at December 31, 1993, and all outstanding
commercial paper at December 31, 1992, are classified as long-term debt.
In 1993, the Company refunded $355.5 million of its first mortgage bonds, with
a weighted average interest rate of 8.13%, which were comprised of seven series
originally due to mature from 1998 through 2006. The Company refunded
substantially all of these first mortgage bonds using the proceeds from the
issuance of four series of first mortgage bonds, with a weighted average
interest rate of 6.35%, which are due to mature from 1999 through 2008.
In connection with the purchase of the Sebring Utilities Commission electric
distribution system in April 1993, the Company issued $30.7 million of 15-year,
6.67% amortizing medium-term notes. The net proceeds were used to repay
commercial paper that was issued initially to retire the Sebring Utilities
Commission debt.
In December 1993, the Company issued $100 million of First Mortgage Bonds, 7%
Series due 2023. The proceeds were used for the repayment of commercial paper
and for general corporate purposes.
The combined aggregate maturities of long-term debt for 1994 through 1998 are
$45.9 million, $35.4 million, $30.6 million, $38.0 million and $201.5 million,
respectively. In addition, about 17% of the Company's outstanding first
mortgage bonds have an annual 1% sinking fund requirement. These requirements,
which total $1.8 million annually for 1994 and 1995, $1.3 million annually for
1996 and 1997 and $1 million for 1998, are expected to be satisfied with
property additions.
<PAGE>
(3) PREFERRED AND PREFERENCE STOCK
A summary of outstanding Cumulative Preferred Stock of the Company follows:
<TABLE>
<CAPTION>
Current Outstanding
Dividend Redemption Shares December 31
Rate Price Authorized Outstanding 1993 1992
- --------------------------------------------------------------------------------
(In millions)
Without sinking funds, not subject to mandatory redemption:
<S> <C> <C> <C> <C> <C>
4.00% $104.25 40,000 39,980 $ 4.0 $ 4.0
4.40% $102.00 75,000 75,000 7.5 7.5
4.58% $101.00 100,000 99,990 10.0 10.0
4.60% $103.25 40,000 39,997 4.0 4.0
4.75% $102.00 80,000 80,000 8.0 8.0
7.40% $102.48 300,000 300,000 30.0 30.0
7.76% $102.98(a) 500,000 500,000 50.0 50.0
8.80% $101.00 200,000 - - 20.0
- --------------------------------------------------------------------------------
$ 113.5 $ 133.5
- --------------------------------------------------------------------------------
With sinking funds, subject to mandatory redemption:
7.08% $104.72(b) 500,000 350,000 $ 35.0 $ 45.0
7.84% $101.96 500,000 - - 50.0
- --------------------------------------------------------------------------------
35.0 95.0
Less: Current portion - 12.5
- --------------------------------------------------------------------------------
$ 35.0 $ 82.5
- --------------------------------------------------------------------------------
(a) $102.21 after February 15, 1994
(b) $102.36 after November 15, 1996; $100.00 after November 15, 2001
</TABLE>
The Company has 4 million shares of authorized Cumulative Preferred Stock, $100
par value, of which 1.5 million shares are outstanding. In addition, the
Company has 1 million shares of authorized, but unissued, Preference Stock,
$100 par value, and 5 million shares of authorized, but unissued, Cumulative
Preferred Stock, without par value.
In March 1993, the Company redeemed its $20-million 8.80% series perpetual
preferred stock, as well as the 1993 mandatory and optional sinking fund
amounts on its 7.08% and 7.84% series preferred stock, totaling $5 million and
$20 million, respectively.
In December 1993, the Company redeemed the 1994 mandatory and optional sinking
fund amounts on the 7.08% and 7.84% series preferred stock, totaling $5 million
and $20 million, respectively. In addition, the Company redeemed all the
remaining shares of its 7.84% series preferred stock, totaling $10 million, at
a redemption price of $101.96.
Preferred stock redemption requirements for 1995 through 1998, after giving
effect to the above retirements, are $2.5 million annually.
(4) FINANCIAL INSTRUMENTS
The fair value amounts of the Company's financial instruments have been
determined using available market information and valuation methodologies
deemed appropriate in the opinion of management. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions may have a
material effect on the estimated fair value amounts. The following methods
and assumptions were used by the Company in estimating its fair value
disclosures for financial instruments.
NUCLEAR PLANT DECOMMISSIONING FUND - The assets in this fund consist of cash
and equivalents, which are valued at their carrying amount, and equity
securities and governmental notes and bonds, which are valued at quoted market
prices.
PREFERRED STOCK OF THE COMPANY WITH SINKING FUNDS - The fair values of the
Company's preferred stock subject to mandatory redemption are estimated using
discounted cash flow analyses, based on current market rates.
DEBT - The carrying amounts of debt with short-term maturities (primarily
commercial paper) approximate their fair value. The fair values for debt with
fixed interest rates are estimated using discounted cash flow analyses, based
on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
The fair value analysis ignores redemption prices and issuance costs (including
underwriting commissions) that would be required to refund existing fixed
interest rate debt. In addition, the analysis assumes that all of the debt is
currently callable at fair value.
The Company had the following financial instruments for which the estimated
fair values differ from the carrying values at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Nuclear plant decommissioning fund 107.7 112.9 92.7 96.4
- ---------------------------------------------------------------------------------------
CAPITAL AND LIABILITIES:
Preferred stock with sinking funds $ 35.0 $ 37.1 $ 95.0 $ 99.7
Long-term debt: 1,444.5 1,525.4 1,355.8 1,376.1
- ---------------------------------------------------------------------------------------
</TABLE>
(5) INCOME TAXES
(In millions) 1993 1992 1991
- -------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $110.2 $ 75.4 $108.8
State 19.1 13.6 19.1
- -------------------------------------------------------------------------
129.3 89.0 127.9
- -------------------------------------------------------------------------
Deferred, net:
Federal (13.9) 14.3 (21.7)
State (2.6) 2.2 (4.3)
- -------------------------------------------------------------------------
(16.5) 16.5 (26.0)
- -------------------------------------------------------------------------
Amortization of investment
tax credits, net (8.5) (8.0) (9.2)
- -------------------------------------------------------------------------
$104.3 $ 97.5 $ 92.7
- -------------------------------------------------------------------------
The principal components of deferred income tax expense for 1992 and 1991 were
the underrecovery or overrecovery of fuel costs and the difference between
accelerated and straight-line depreciation.
The primary differences between the statutory rates and the effective income
tax rates are detailed below:
1993 1992 1991
- --------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 34.0% 34.0%
State income tax, net of federal
income tax benefits 3.6 3.6 3.7
Amortization of investment tax credits (2.8) (2.8) (3.4)
Other ( .7) (0.5) (0.4)
- --------------------------------------------------------------------------
Effective income tax rates 35.1% 34.3% 33.9%
- --------------------------------------------------------------------------
The Omnibus Budget Reconciliation Act of 1993 included various rule changes and
increased the maximum corporate income tax rate from 34% to 35%. The impact of
the new tax law increased the Company's 1993 income tax expense by $2.8
million. The tax rate change increased the Company's deferred tax balances by
$18.3 million with a corresponding net increase to the regulatory asset.
The following summarizes the components of deferred tax liabilities and assets
at December 31, 1993:
(In millions) 1993
- -------------------------------------------------------------------------
Deferred tax liabilities:
Difference in tax basis of property, plant and equipment $500.4
Deferred book expenses 13.8
Under/(over) recovery of fuel 2.8
- -------------------------------------------------------------------------
Total deferred tax liabilities $517.0
- -------------------------------------------------------------------------
Deferred tax assets:
Accrued book expenses $ 40.5
Unbilled revenues 17.3
Regulatory liability for deferred income taxes 11.9
Other 3.8
- -------------------------------------------------------------------------
Total deferred tax assets $ 73.5
- -------------------------------------------------------------------------
At December 31, 1993, the Company had net non-current deferred tax liabilities
of $472.7 million and net current deferred tax assets of $29.2 million. The
Company expects the results of future operations will generate sufficient
taxable income to allow the utilization of deferred tax assets.
(6) RETIREMENT BENEFIT PLANS
PENSION BENEFITS -- The Company's parent, Florida Progress, has a
non-contributory defined benefit pension plan covering substantially all
employees. The benefits are based on length of service, compensation during
the highest consecutive 48 of the last 120 months of employment and social
security benefits. Prior to January 1, 1992, the compensation portion of the
benefit formula was based on the highest consecutive 60 of the last 120 months
of employment. The participating companies make annual contributions to the
plan based on an actuarial determination and in consideration of tax
regulations and funding requirements under federal law.
Based on actuarial calculations and the funded status of the pension plan,
the Company was not required to contribute to the plan for 1993, 1992 or 1991.
Shown below are the components of the net pension cost calculations for those
years:
(In millions) 1993 1992 1991
- --------------------------------------------------------------------
Service cost $16.3 $18.1 $ 13.9
Interest cost 27.5 25.4 22.4
Actual earnings on plan assets (60.7) (37.3) (91.4)
Net amortization and deferral 17.9 (3.1) 58.0
- --------------------------------------------------------------------
Net pension costs 1.0 3.1 2.9
====================================================================
The Company's costs were as follows:
Share of Plans net pension costs .9 3.0 2.7
Regulatory adjustment - (.9) (2.7)
- --------------------------------------------------------------------
Net pension cost recognized $ .9 $ 2.1 $ -
- --------------------------------------------------------------------
The following summarizes the funded status of the pension plan at
December 31, 1993 and 1992:
(In millions) 1993 1992
- --------------------------------------------------------------------
Accumulated benefit obligation:
Vested $276.0 $229.2
Non-vested 37.9 33.9
- --------------------------------------------------------------------
313.9 263.1
Effect of projected compensation increases 91.8 96.3
- --------------------------------------------------------------------
Projected benefit obligation 405.7 359.4
Plan assets at market value, primarily listed
stocks and bonds 505.0 460.0
- --------------------------------------------------------------------
Plan assets in excess of projected benefit
obligation $ 99.3 $100.6
- --------------------------------------------------------------------
Consisting of the following components:
Unrecognized transition asset $ 45.3 $ 50.3
Unrecognized prior service cost (10.3) (11.2)
Effect of changes in assumptions and
difference between actual and
estimated experience 64.3 61.5
- --------------------------------------------------------------------
$ 99.3 $100.6
- --------------------------------------------------------------------
The following weighted average actuarial assumptions at January 1 were
used in the calculation of pension costs for the following years:
1993 1992 1991
- ------------------------------------------------------------------------------
Discount rate 7.75% 7.25% 8.50%
Expected long-term rate of return 9.00% 9.00% 9.00%
Rate of compensation increase 5.50% 6.00% 6.00%
- ------------------------------------------------------------------------------
The Company used a discount rate of 7.25% and a rate of compensation increase
of 5% to calculate the pension plan's 1993 year-end funded status. The change
in the discount rate from 7.75% at December 31, 1992 to 7.25% at December 31,
1993, increased the projected benefit obligation by $25.8 million and is
expected to increase annual pension costs by $.8 million, beginning in 1994.
OTHER POSTRETIREMENT BENEFITS - The Company's parent, Florida Progress,
provides certain health care and life insurance benefits for retired employees.
Employees become eligible for these benefits when they reach normal retirement
age while working for the Company. Prior to 1993, the Company's policy had
been to accrue benefits currently payable along with amortization of past
service costs of current retirees. The Company had accrued $23.9 million at
December 31, 1992, using this method. The Company implemented Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," effective January 1, 1993. This standard requires that
an employer's obligation for postretirement benefits be fully accrued by the
date employees attain full eligibility to receive such benefits. The Company's
costs for 1993 increased from $5 million to $22.7 million under the new
standard and was recovered from customers through retail base rates as
discussed in Note 8.
The net postretirement benefit cost of the plan for 1993 was:
(In millions) 1993
- -----------------------------------------------------------------------
Service cost $ 5.6
Interest cost 11.8
Amortization of unrecognized transition obligation 6.5
- -----------------------------------------------------------------------
$23.9
- -----------------------------------------------------------------------
The Company's share of the plan's postretirement benefit costs were $22.7
million in 1993.
The following summarizes the plan's status, reconciled with amounts recognized
in Florida Progress' balance sheet at December 31:
(In millions) 1993 1992
- ----------------------------------------------------------------------
Accumulated postretirement benefit
obligation:
Retirees $ 94.3 $ 73.8
Fully eligible active plan
participants 2.0 3.6
Other active plan participants 76.2 74.7
- ----------------------------------------------------------------------
172.5 152.1
- ----------------------------------------------------------------------
Unrecognized transition obligation (120.7) (128.2)
Unrecognized net losses (4.4) -
- ----------------------------------------------------------------------
Accrued postretirement benefit
cost $ 47.4 $ 23.9
- ----------------------------------------------------------------------
The following weighted average actuarial assumptions were used in the
calculation of the year-end status of other postretirement benefits:
1993 1992
- ----------------------------------------------------------------------
Discount rate 7.5% 8.0%
Rate of compensation increase 5.0% 5.5%
Health care cost trend rates:
Pre-Medicare 13.00-5.25% 14.50-6.00%
Post-Medicare 9.75-5.00% 10.50-5.00%
- ----------------------------------------------------------------------
The unrecognized transition obligation is being accrued through 2012. A
one-percentage point increase in the assumed health care cost trend rate for
each future year would have increased 1993 current service and interest cost by
18.6% and the accumulated postretirement benefit obligation as of December 31,
1993 by 15.1%. The change in the discount rate from 8% at December 31, 1992
to 7.5% at December 31, 1993, increased the projected benefit obligation of the
plan by $11.4 million and is expected to increase annual postretirement benefit
costs of the plan by $.8 million, beginning in 1994.
Due to different retail and wholesale regulatory requirements, the Company
plans to make quarterly contributions to an irrevocable external trust fund
recently established for wholesale ratemaking, while continuing to accrue
postretirement benefit costs to an unfunded reserve for retail ratemaking.
EARLY RETIREMENT OPTION - In late 1993, Florida Progress offered an early
retirement option to certain employees age 55 or older with at least 20 years
of service with the Company. The effective retirement date for those employees
accepting the option is February 1, 1994. The Company recognized expenses
related to this offer of about $6 million in 1993, which are not included in
the postretirement benefit cost table. The Company estimates the related
expenses in 1994 will be about $13 million.
NEW ACCOUNTING STANDARD - The Company will be required to adopt Financial
Accounting Standard No. 112, "Employers' Accounting for Postemployment
Benefits," in 1994. The adoption of this standard is not expected to have a
material impact on earnings in 1994.
(7) NUCLEAR OPERATIONS
JOINTLY OWNED PLANT - The following information relates to the Company's
90.4% proportionate share of the Crystal River Nuclear Plant at December 31,
1993:
(In millions) 1993
- -------------------------------------------------------------
Utility plant in service $622.7
Construction work in progress 22.8
Unamortized nuclear fuel 68.4
Accumulated depreciation 266.3
Accumulated decommissioning 118.3
- -------------------------------------------------------------
Net capital additions for the Company were $20.1 million in 1993, and
depreciation expense, exclusive of nuclear decommissioning, was $26.2 million.
Each co-owner provides for its own financing. The Company's share of the asset
balances shown previously and operating costs are included in the appropriate
consolidated financial statements. Amounts exclude any allocation of costs
related to common facilities.
DECOMMISSIONING COSTS - The Company's nuclear plant depreciation expenses
include a provision for future decommissioning costs that are recoverable
through rates charged to customers. The Company is placing amounts collected
in an externally managed trust fund. The recovery from customers, plus income
earned on the trust fund, is intended to be sufficient to cover the Company's
share of the future dismantlement, removal and land restoration costs. The
Company has a license to operate the nuclear unit through December 3, 2016,
and contemplates decommissioning beginning at that time.
In the current site-specific study approved by regulatory authorities, total
future decommissioning costs are estimated to be approximately $1.2 billion,
which corresponds to $221 million in 1993 dollars. Decommissioning expense, as
authorized by the FPSC and the FERC, was $11.9 million for 1993 and 1992 and
$11.8 million for 1991.
The Company prepared a 1991 site-specific study at the request of the FPSC that
estimated decommissioning costs. Those costs, expressed in 1993 dollars, are
$307.6 million. The FPSC postponed consideration of that study until 1994.
The Company is required to file a new site-specific study with the FPSC in
1994, which will incorporate current cost factors, technology and radiological
criteria. The results of that study cannot be reasonably estimated at this
time. However, based on prior regulatory treatment, the Company expects to
recover any increase in nuclear decommissioning costs through future rates.
The NRC issued updated waste burial cost factors in 1993, which are used in
the generic NRC formula for estimating decommissioning costs. The Company's
1991 site-specific study contains estimates for decommissioning costs that
exceed current NRC minimum requirements.
The National Energy Policy Act of 1992 established a fund to pay for the
decontamination and decommissioning of nuclear enrichment facilities operated
by the DOE. The fund is expected to consist of payments from affected domestic
utilities and the federal government. The Company's current annual special
assessment, before adjustment for inflation, is $1.4 million. The Company
recorded a total estimated liability of $19.5 million at December 31, 1993,
with a corresponding regulatory asset. This special assessment is being
recovered from utility customers through the fuel adjustment clause.
The Financial Accounting Standards Board has issued Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts." Based in part on the
issuance of this interpretation, the SEC staff announced it intends to require
that estimated nuclear decommissioning costs be shown as a liability in the
financial statements, beginning in 1994. The Company currently has recorded
the accumulated provisions for nuclear decommissioning costs as a contra asset
on the balance sheet. If the SEC staff maintains its position, a liability and
a corresponding asset of $307.6 million each would be recorded in 1994 based on
available cost estimates.
FUEL DISPOSAL COSTS - The Company has entered into a contract with the DOE
for the transportation and disposal of spent nuclear fuel. Disposal costs for
nuclear fuel consumed are being collected from customers through the fuel
adjustment clause at a rate of $.001 per net nuclear kilowatt-hour sold and
are paid to the DOE quarterly. The Company currently is storing spent nuclear
fuel on site and has sufficient storage capacity in place or under construction
for fuel burned through the year 2009.
PLANT MAINTENANCE AND REFUELING OUTAGES - The Company accrues a reserve for
maintenance and refueling expenses anticipated to be incurred during scheduled
nuclear plant outages. A planned 53-day mid-cycle maintenance outage in 1993,
cost the Company $9.7 million. A 77-day refueling outage in 1992, resulted
in a cost of $30.2 million to the Company.
The next planned refueling outage, scheduled for approximately nine weeks
beginning in April 1994, presently is estimated to cost $21.4 million.
INSURANCE - The Price-Anderson Act currently limits the liability of an owner
of a nuclear power plant for a single nuclear incident to $9.4 billion. The
Company has purchased the maximum available commercial nuclear liability
insurance of $200 million with the balance provided by indemnity agreements
prescribed by the NRC. In the event of a nuclear incident at any U.S. nuclear
power plant, the Company could be assessed up to $79.3 million per incident,
with a maximum assessment of $10 million per year. The Company has never been
assessed for a nuclear incident under these indemnity agreements. In addition
to this liability insurance, the Company carries extra expense insurance with
Nuclear Electric Insurance, Ltd. ("NEIL") to cover the cost of replacement
power during any prolonged outage of the nuclear unit. Under this policy, the
Company is subject to a retroactive premium assessment of up to $2.7 million in
any year in which policy losses exceed accumulated premiums and investment
income.
(8) RATES AND REGULATION
RETAIL RATES - In January 1992, the Company filed a retail base rate increase
request of $145.9 million using a regulatory return on equity of 13.6%. The
request was based upon a dual-year test period that included 1992 and 1993. In
September 1992, the FPSC granted the Company an annual revenue increase of
$85.8 million.
The new rates provide the Company the opportunity to earn a regulatory return
on equity of 12%, with a new allowed range between 11% and 13%. The FPSC
granted increases in retail base rates of approximately $58 million in November
1992, $9.7 million in April 1993 and $18.1 million in November 1993. The FPSC
also upheld a previously awarded interim increase of $31.2 million.
The interim rates and new base rates increased 1992 earnings by $15.4 million.
The new base rates increased 1993 earnings by $10.4 million, after recording
new expenses authorized in the rate case.
WHOLESALE RATES - In December 1993, the Company executed a settlement agreement
with its wholesale customers in its 1993 base rate proceeding. The agreement
provides for an annual revenue increase of $5.7 million, effective February
1993. The settlement is expected to be approved by the FERC in the first
quarter of 1994.
In December 1992, the Company reached a settlement agreement with its wholesale
customers, which resulted in no significant change in revenues. The 1992
settlement was approved by the FERC and provided for a retroactive change in
the Company's depreciation rates to December 1990. (See Note 1.)
The Company expects to file a 1994 wholesale base rate proceeding in the first
quarter of 1994. The Company will be requesting an increase in revenues of
approximately $10 million to recover costs for new generating facilities and
higher purchased power costs. If approved by the FERC, the rate increase will
go into effect in March 1994.
(9) TRANSACTIONS WITH RELATED PARTIES
The Company has entered into two coal supply contracts with Electric Fuels to
meet substantially all of its coal requirements through 2004. The cost of
coal purchased for 1993, 1992, and 1991 was $244.6 million, $261.1 million,
and $264.1 million, respectively. The amount payable to Electric Fuels for
coal purchases at December 31, 1993 and 1992, was $16.6 million and $23.1
million, respectively.
(10) COMMITMENTS AND CONTINGENCIES
CONSTRUCTION PROGRAM - Substantial commitments have been made in connection
with the Company's construction program, which are presently estimated to
result in construction expenditures in 1994 of $344 million for electric plant
and nuclear fuel.
SUNSHINE PIPELINE PROJECT - The Company currently has a 30% equity ownership
interest in both an intrastate and an interstate gas pipeline partnership,
with an option to reduce or eliminate its interest in December 1994. The cost
of the pipeline project is estimated to be approximately $600 million. In
1994, the Company expects to invest $6 million in these partnerships.
FUEL AND PURCHASED POWER COMMITMENTS - The Company has entered into various
long-term commitments to provide the fossil and nuclear fuel requirements of
its generating plants and to reserve pipeline capacity for natural gas. In
most cases, such contracts contain provisions for price escalation, minimum
purchase levels and other financial commitments. Estimated annual payments,
based on current market prices, for the Company's firm commitments for fuel
purchases, excluding coal and purchased power, are $3.7 million, $12.9
million, $35.2 million, $36.6 million and $36.1 million for 1994 through 1998,
respectively, and $1,150.3 million in total thereafter. Additional commitments
will be required in the future to supply the Company's fuel needs.
The Company has entered into long-term contracts with The Southern Company for
up to 400 megawatts of purchased power annually through 2010, representing 4.7%
of the Company's total current system capacity. The Company has an option to
lower these purchases to 200 megawatts annually, beginning in 2000 with a
three-year notice. The power will be supplied by coal-fired generating units
that have a combined capacity of approximately 3,500 megawatts. The entire
commitment is guaranteed by The Southern Company's total system, which is
approximately 30,000 megawatts. The long-term contracts obligate the Company
to pay certain minimum annual amounts representing capacity payments. The
estimated annual capacity payments under the contracts will be $49 million in
1994 and then approximately $60 million annually until the contract expires in
2010. The capacity cost of power purchased under these contracts was $38
million in 1993 and $22 million in 1992 and 1991.
As of December 31, 1993, the Company had entered into long-term contracts with
non-utility generators for 1,117 megawatts of capacity. These contracts have
terms ranging from nine to 35 years. In most cases, these contracts account
for 100% of the generating capacity of each of the facilities. Of the 1,117
megawatts under contract, 473 megawatts are currently available and the
remaining future capacity is a part of the Company's plans for meeting future
electricity demand growth. All commitments have been approved by the FPSC.
The following table shows the annual capacity payments, and the present value
(at 10%) of these payments at December 31, 1993, which the Company expects to
incur if all units are brought into service as contracted and meet contracted
performance requirements:
Capacity Present
(In millions) Payments Value
- ------------------------------------------------------------------
1994 $ 84 $ 77
1995 181 150
1996 218 163
1997 235 160
1998 247 154
1999-2025 10,497 2,022
- -----------------------------------------------------------------
Total $11,462 $2,726
- -----------------------------------------------------------------
The capacity cost of power purchased from non-utility generators was $33
million in 1993, $10 million in 1992 and $2 million in 1991.
The Company does not plan to increase the level of purchased power it currently
has under contract. The Company believes that its current contracts allow for
system reliability and help reduce construction expenditures. These contracts
could weaken the Company's overall credit ratings.
The FPSC allows these capacity payments to be recovered through a capacity cost
recovery clause, which is similar to, and works in conjunction with the fuel
adjustment clause.
INSURANCE COVERAGE - The Company is subject to retroactive premium assessments
in connection with its nuclear liability insurance. In addition, the Company
currently carries approximately $2.1 billion in nuclear property insurance
provided through several different policies. One of these policies, which also
is underwritten by NEIL, provides $1.4 billion of excess coverage. Under this
policy, the Company is subject to a retroactive premium assessment of up to
$6.5 million for the first loss in any policy year in which losses exceed funds
available to NEIL. In the event of multiple losses in any policy year, the
Company's aggregate retroactive premium could total up to $13.9 million.
Effective November 1993, the FPSC authorized the Company to self-insure the
Company's transmission and distribution lines against loss due to storm damage
and other natural disasters. The Company is accruing $3 million annually to
the storm damage reserve and may defer any losses in excess of the reserve.
CONTAMINATED SITE CLEANUP - The Company has received notices from the EPA that
it is or could be a "potentially responsible party" under the CERCLA and the
Superfund Amendment and Reauthorization Act and may be liable, together with
others, for the costs of cleaning up several contaminated sites identified by
the EPA. In addition, the Company has been named as a defendant in one suit
brought against four prior owners of a coal gasification plant site, seeking
contributions pursuant to CERCLA and Florida law toward the cost of cleaning up
that site and nearby property that may have become contaminated. The best
estimates currently available to the Company indicate that its proportionate
share of liability for cleaning up the sites range from $.7 million to $1.5
million, and it has reserved $1 million against these potential costs.
Liability for such cleanup costs is technically joint and several. However,
the Company presently has no reason to believe that it will ultimately have to
pay a significantly disproportionate share of the cleanup costs of any of the
sites. Although it does not currently contemplate a need to do so, the Company
believes that it would have a sound basis for seeking recovery through the
ratemaking process in the event it ultimately has to pay a significantly
disproportionate share of the costs of cleaning up any contaminated site. It
is recognized, however, that no such recovery would be assured.
UNION CARBIDE LAWSUIT - The Company and FP&L are co-defendants in an antitrust
action brought by Union Carbide, a customer of FP&L, seeking injunctive relief
and damages. The suit challenges a long-standing territorial agreement between
the two unaffiliated, neighboring utilities, notwithstanding the defendants'
contention that the agreement was clearly authorized by state law and approved
by the FPSC. The Company believes that the state action exemption from the
antitrust laws is applicable to the agreement and its consequent refusal to
provide electricity to Union Carbide. Management believes it has a strong
defense and intends to vigorously defend against this action.
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION
Quarterly Financial Data (Unaudited)
- ---------------------------------------------------------------------------------------------
(In millions) Three Months Ended
- ---------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1993
Operating revenues $407.0 $461.9 $609.0 $479.7
Net income 35.4 42.3 84.7 32.5
Earnings on common stock 31.5 39.1 81.5 29.4
1992
Operating revenues $383.1 $433.4 $549.9 $407.7
Net income 32.8 37.0 77.2 39.9
Earnings on common stock 28.6 32.8 73.0 35.8
</TABLE>
The business of the Company is seasonal in nature and it is management's
opinion that comparisons of earnings for the quarters do not give a true
indication of overall trends and changes in the Company's operations. As
explained in Note 1 to the Financial Statements, the Company recorded an
adjustment to depreciation expense in the fourth quarter of 1992, which
increased earnings by $5.6 million.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) DIRECTORS OF THE COMPANY
R. Mark Bostick, Age 39, Director since 1992
Member - Executive Committee
Since January, 1989, Mr. Bostick's principal occupation has
been President of COMCAR Industries, Inc., a privately held,
diversified transportation company. For more than five years
before 1989, Mr. Bostick was Executive Vice President of COMCAR.
Mr. Bostick was a director of Mid-State Federal Savings Bank,
Ocala, Florida, until December 9, 1993.
Stanley A. Brandimore, Age 66, Director since 1982
Member: Compliance Committee
Mr. Brandimore retired as an employee of Florida Progress on
July 1, 1990. For more than five years prior to his retirement,
Mr. Brandimore was Executive Vice President and General Counsel
of Florida Progress.
Jack B. Critchfield, Age 60, Director 1975 - 1978 and since 1988
Chairman - Executive Committee
Since December 1, 1991, Dr. Critchfield's principal occupation
has been Chairman of the Board and Chief Executive Officer of
Florida Progress. From January 1991 to December 1991, Dr.
Critchfield was Chairman, President and Chief Executive Officer;
and, from February 1990 to January 1991, he was President
and Chief Executive Officer, and from February 1988 to February
1990, he was President and Chief Operating Officer of Florida
Progress. From January 1987 to February 1988, Dr. Critchfield
was a Group Vice President of Florida Progress and President and
Chief Executive Officer of Electric Fuels. From November 1983
to January 1987, he served as Vice President of the Eastern and
Ridge Divisions of the Company.
Dr. Critchfield is a director of Barnett Banks, Inc.,
Jacksonville, Florida.
Allen J. Keesler, Age 55, Director since 1988
Member - Executive Committee
President and Chief Executive Officer of the Company and Group
Vice President of Florida Progress. See the following executive
officer listing for additional background information.
Mr. Keesler is a director of SouthTrust Corporation, Birmingham,
Alabama.
Richard Korpan, Age 52, Director since 1989
Member - Executive Committee
Mr. Korpan joined Florida Progress in June 1989 to become
Executive Vice President and Chief Financial Officer and was
elected President and Chief Operating Officer effective December
1, 1991. Prior to joining Florida Progress, he was President
and Chief Executive Officer of Pacific Diversified Capital
Company, a subsidiary that comprises the non-utility operations
of San Diego Gas & Electric Company ("SDG&E"). From 1979 to
1986, he held several positions with SDG&E including Senior Vice
President and Chief Financial Officer, Group Vice President-
Finance, and Treasurer. After practicing law in Colorado, he
served in various financial positions at Public Service
Company of Colorado before joining SDG&E.
Mr. Korpan is a director of SunBank of Tampa Bay.
Clarence V. McKee, Esquire, Age 51, Director since 1988
Mr. McKee's principal occupation is Chairman and Chief Executive
Officer of McKee Communications, Inc., radio and television
property investments, Tampa, Florida. From 1987 to 1992, he
served as Chairman and Chief Executive Officer of WTVT Holdings,
Inc. He served as Counsel to Pepper & Corazinni, a Washington,
D.C. communications law firm, from 1980 until 1987 when he
became a co-owner of WTVT Holdings, Inc., licensee of WTVT-TV,
Tampa, Florida. He also served two years as a television
commentator for the Fox Broadcasting Network.
Mr. McKee is a director of Barnett Bank of Tampa and Barnett
Banks, Inc., Jacksonville.
Joan D. Ruffier, Age 54, Director since 1991
Member - Executive Committee
Ms. Ruffier's principal occupation is a general partner of
Sunshine Cafes, Orlando, Florida, a food and beverage
concession business at major Florida airports. From 1978 to
1982 she served as a management consultant to the National
Association of Bank Women. From 1982 to 1986, she practiced
public accounting with the firm of Colley, Trumbower & Howell.
In 1986, she assumed her present position.
Ms. Ruffier is a member of the Administrative Board of Sun Bank,
N.A. in Orlando, and the board of the Jacksonville Branch of the
Federal Reserve Bank of Atlanta. She also serves on the boards
of directors of SunHealth Corporation and Sun Health
Enterprises, Inc. of Charlotte, North Carolina.
Lee H. Scott, Age 67, Director since 1983
On February 28, 1990, Mr. Scott retired as an employee of
Florida Progress. From February 1988 through February
1990, Mr. Scott's principal occupation was Chairman of the
Board of the Company and Vice Chairman of the Board
of Florida Progress. From April 1986 to February 1988, Mr.
Scott was President and Chief Executive Officer of
the Company. For more than three years prior to April 1986,
Mr. Scott was President and Chief Operating Officer of the
Company. From January 1985 to February 1988, Mr. Scott was also
a Group Vice President of Florida Progress.
Jean Giles Wittner, Age 59, Director since 1977
Member - Compliance Committee
Ms. Wittner is President of Wittner & Company, a St. Petersburg,
Florida firm involved in real estate management and insurance
brokerage and consulting. She previously served as President
and Chief Executive Officer of a savings association from 1975
until it was sold on December 31, 1986. She then became
President of Wittner Securities, Inc. In November 1989, she
became President of Wittner & Company.
All of the directors except Mr. Bostick, Mr. Brandimore and Mr. Scott
are directors of Florida Progress.
Each director holds office until the next Annual Meeting of Shareholders
and until the election and qualification of a successor.
b) EXECUTIVE OFFICERS OF THE COMPANY
Allen J. Keesler, Jr., President and Chief Executive Officer, Age 55
Since February 1988, Mr. Keesler's principal occupation has been
President and Chief Executive Officer of the Company and Group Vice
President of Florida Progress. For more than three years prior to
February 1988, Mr. Keesler was President and Chief Executive Officer
of Talquin Corporation ("Talquin"), a former subsidiary of Florida
Progress. Mr. Keesler has been a Group Vice President of Florida
Progress since January 1986.
Maurice H. Phillips, Executive Vice President, Age 55
Since September 1989, Mr. Phillips' principal occupation has been as
shown above. For more than three years prior to September 1989, Mr.
Phillips was Senior Vice President, Operations of the Company.
Dr. Percy M. Beard, Jr., Senior Vice President, Nuclear Operations,
Age 57
Since November 1989, Dr. Beard's principal occupation has been as
shown above. From December 1981 to November 1989, Dr. Beard held
various positions with the Institute of Nuclear Power Operations
("INPO") including, Vice President, Government Relations. INPO,
formed in 1979, is a nonprofit organization whose members consist
primarily of utilities with nuclear plants either in operation or
under construction.
John A. Hancock, Senior Vice President, Power Supply, Age 53
Mr. Hancock became Senior Vice President, Energy Supply, effective
January 1993. From September 1989, to January 1993, Mr. Hancock was
Senior Vice President, Power Operations, of the Company. For more
than four years prior to September 1989, Mr. Hancock was Vice
President, Fossil Operations, of the Company.
Philip C. Henry, Senior Vice President, Energy Delivery, Age 61
Mr. Henry was elected Senior Vice President, Energy Delivery, of the
Company effective January 1993. From March 1983 to January 1993,
Mr. Henry served as Vice President, Design and Construction, of the
Company.
Jeffrey R. Heinicka, Senior Vice President and Chief Financial Officer,
effective March 1994, Age 40
From April 1993 until appointment to his current position in March
1994, Mr. Heinicka served as Vice President and Treasurer of the
Company. In March 1994, Mr. Heinicka was also appointed as Senior
Vice President and Chief Financial Officer of Florida Progress where
he had served as Vice President and Treasurer since December 1990.
From March 1988 until December 1990, he was Vice President, Treasurer
and Controller of Electric Fuels.
David L. Miller, Senior Vice President, Corporate Services, Age 49
Since January 1993, Mr. Miller's principal occupation has been as
shown above. From October 1990 to January 1993, Mr. Miller was
Senior Vice President, Administrative Services, of the Company.
Prior to that time he served the Company as Vice President, Suncoast
Division, from April 1988 to October 1990, South Suncoast Division
Manager from October 1987 to April 1988, and as Director of
Conservation and Marketing during 1986.
Joseph H. Richardson, Senior Vice President, Legal and Administrative
Services, and General Counsel, effective October 21, 1993, Age 44
From August 1991 to present, Mr. Richardson served (and will continue
to serve concurrently) as Senior Vice President, Corporate
Development, of Florida Progress. From May 1990 until September
1993, he was President and Chief Executive Officer of Talquin. From
May 1990, to August 1991, Mr. Richardson was Group Vice President,
Development Group. From July 1986 to May 1990, he served as Vice
President of Talquin.
There are no family relationships between any director and/or executive
officer of the Company.
Each executive officer is elected annually. See Item 11 "Executive
Compensation" with respect to Dr. Beard's employment agreement.
c) Compliance with Section 16(a) of the Exchange Act
Based upon a review of Forms 3 furnished to the Company pursuant to
Rule 16-a-3(e) of the Exchange Act during 1993 and written
representations received by the Company, all required reports were
filed.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
With the exception of Messrs. Bostick, Brandimore and Scott, the compensation
for all outside directors of the Company (excluding employees of Florida
Progress) is a daily meeting fee of $1,500 for Company Board and committee
meetings attended on any one day. Messrs. Bostick, Brandimore and Scott
receive these daily meeting fees and $7,500 per year as a retainer fee. Outside
directors who serve on the Board of Directors of the Company's parent are paid
an annual retainer in the amount of $22,500, plus a fee of $1,500 for
attendance at each meeting of the parent's Board of Directors and a per day
meeting fee of $1,500 for subsidiary and committee meetings attended on any one
day. All or a portion of these fees may be deferred at the discretion of a
director.
COMPENSATION OF EXECUTIVES
The following table contains information with respect to compensation awarded,
earned or paid during the years 1991-1993 to (i) the Chief Executive Officer,
(ii) the other four most highly compensated executive officers of the Company,
and (iii) two additional individuals for whom disclosure would have been
provided but for the fact that the individuals were not serving as executive
officers at the end of 1993 (collectively (ii) and (iii) referred to as the
"Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long-Term Compensation
Name and Principal
LTIP All other
Position Year Salary Bonus Payouts Compensation(2)
- ------------------ ----- ------ ----- ------- ---------------
<S> <C> <C> <C> <C> <C>
ALLEN J. KEESLER, JR. 1993 $379,548 $208,000 $217,250(3) $ 9,888
President and Chief
Executive Officer 1992 374,163 36,000 9,603
1991 337,412 82,000
MAURICE H. PHILLIPS 1993 $241,418 $104,000 $121,031(3) $ 9,869
Executive Vice President
1992 237,365 23,000 9,514
1991 214,717 52,140
DAVID R. KUZMA 1993 $218,481 $103,750 N/A $ 9,591
Senior Vice President
and Chief Financial 1992 212,693 45,000 9,225
Officer
1991 163,201
JOSEPH H. RICHARDSON 1993 $198,071 100,000 $ 78,875(3) $ 119
Senior Vice President
and General Counsel 1992 192,554 38,000 1,908
1991 171,713
PERCY M. BEARD 1993 $188,728 $100,000 N/A $ 7,925
Senior Vice President
1992 182,706 18,000 7,400
1991 163,588 39,152
JOSEPH F. CRONIN (4) 1993 $224,993 $ 79,000 $ 92,938(3) $ 9,458
Senior Vice President
1992 265,769 28,000 10,288
1991 217,624
RICHARD W. NEISER (4) 1993 $200,436 $ 70,000 N/A $ 8,434
Senior Vice President
1992 206,068 20,000 8,353
1991 190,182 40,409
</TABLE>
(1) All other annual compensation paid to the Chief Executive Officer
and the Named Executive Officers during 1993, other than salary
and annual incentive compensation, does not exceed the minimum
amounts required to be reported pursuant to Securities and Exchange
Commission rules.
(2) Company contributions to its Savings Plan on behalf of the Chief
Executive Officer and the Named Executive Officers.
(3) Represents the dollar value as of February 3, 1994, the date of grant,
of shares of Common Stock earned under the 1991-1993 performance cycle
of the Florida Progress Corporation Long-Term Incentive Plan ("LTIP"),
two-thirds of which are restricted. The total number of shares earned
are as follows: Allen J. Keesler, Jr., 6,952 shares; Maurice H. Phillips
3,873 shares; Joseph F. Cronin 2,974 shares; and Joseph H. Richardson
2,524 shares. The vesting schedule for the restricted stock is 50% on
January 1, 1995 and 50% on January 1, 1996. Dividends are payable on
the restricted Common Stock to the extent and on the same date as
dividends are paid on all other shares of Florida Progress Corporation
Common Stock.
In the event of a change in control of Florida Progress Corporation,
all restrictions on all shares of restricted stock shall lapse upon
such change in control.
(4) Messrs. Cronin and Neiser retired from the Company effective
December 31, 1993. Each was relieved of his executive officer
responsibilities effective October 1, 1993.
The following table contains information with respect to Performance
Shares awarded in 1993 to the Chief Executive Officer and each of the Named
Executive Officers of the Company for the 1993-1995 performance cycle of the
LTIP:
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN(1)
AWARDS IN 1993
Number of Performance Estimated Payout at End of Period(3)
Performance Period ---------------------------------------
Name Shares(2) Covered Threshold Target Maximum
- ---------------------- --------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Allen J. Keesler, Jr. 4,300 1993-1995 2,150 shares 4,300 shares 6,450 shares
Maurice H. Phillips 2,394 1993-1995 1,197 shares 2,394 shares 3,591 shares
David R. Kuzma 2,166 1993-1995 1,083 shares 2,166 shares 3,249 shares
Joseph H. Richardson 1,965 1993-1995 983 shares 1,965 shares 2,948 shares
Percy M. Beard 1,876 1993-1995 938 shares 1,876 shares 2,814 shares
</TABLE>
(1) The LTIP is a Common Stock based incentive plan for long-term growth and
performance of Florida Progress. It was approved by the Florida Progress
shareholders in 1990.
(2) Performance shares awarded under the Florida Progress LTIP which, upon
achievement of performance criteria established by the Compensation
Committee of the Board of Directors of Florida Progress, would result in
the payout of shares of Florida Progress Common Stock, two-thirds of which
would be restricted for periods of time. Payouts of shares of Florida
Progress Common Stock are made for achieving returns on equity equal to or
exceeding the thresholds established by the Compensation Committee. In
the event of a change in control of Florida Progress, 150% of all
performance shares awarded under the LTIP and then outstanding would
automatically be considered earned and would be paid in shares of
unrestricted Florida Progress Common Stock together with shares of
unrestricted Florida Progress Common Stock payable for dividend
equivalents accrued to the change in control on performance shares awarded
for performance cycles starting after December 31, 1992. Also, all
restrictions on shares of restricted Florida Progress Common Stock
previously granted and then held would terminate. As of December 31,
1993, no restricted Florida Progress Common Stock was held by the Chief
Executive Officer or the Named Executive Officers.
(3) Awards are earned upon achievement of Florida Progress and/or subsidiary
return on equity goals for the three-year performance cycle.
PENSION PLAN TABLE
The table below illustrates the estimated annual benefits (based on a straight
life annuity at age 65) payable under the Florida Progress Retirement Plan and
its Nondiscrimination Plan for specified compensation and service levels. The
current compensation, i.e., base pay, and the years of credited service that
would be used in calculating benefits under the Retirement and
Nondiscrimination Plans for the executives named in the summary compensation
table are as follows: Mr. Keesler, $383,004 - 31 years of service; Mr.
Phillips, $243,628 - 33 years of service; Mr. Kuzma, $220,500 - 3 years of
service; Mr. Richardson $200,000 - 17 years of service; Dr. Beard, $191,000 - 4
years of service; Mr. Cronin $225,000 - 29 years of service; and Mr. Neiser
$200,436 - 27 years of service. The table below shows estimated Retirement and
Nondiscrimination Plans benefits using a direct 40% Social Security offset
formula.
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefits Payable Under
the Retirement Plan and Nondiscrimination Plan
-----------------------------------------------------------------------------------
Average Annual
Compensation Service Years
- -------------- -----------------------------------------------------------------------------------
5 10 15 20 25 30 35 or more
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 17,216 $ 34,432 $ 51,649 $ 68,865 $ 86,081 $103,297 $120,514
300,000 26,216 52,432 78,649 104,865 131,081 157,297 183,514
400,000 35,216 70,432 105,649 140,865 176,081 211,297 246,514
500,000 44,216 88,432 132,649 176,865 221,081 265,297 309,514
600,000 53,216 106,432 159,649 212,865 266,081 319,297 372,514
700,000 62,216 124,432 186,649 248,865 311,081 373,297 435,514
800,000 71,216 142,432 213,649 284,865 356,081 427,297 498,514
</TABLE>
The estimated total annual regular benefit that a participant in the Florida
Progress Supplemental Executive Retirement Plan ("SERP") would be entitled to
receive (including those amounts payable under the Retirement and
Nondiscrimination Plans and primary Social Security) is equal to the benefit
shown in the table above as payable under the Retirement and Nondiscrimination
Plans, but calculated as if the SERP participant had 35 years of service. The
current compensation that would be used in calculating the benefits for each
executive listed in the summary compensation table who is a SERP participant is
substantially that reported as salary and bonus in the summary compensation
table. The amounts payable under the SERP are reduced by amounts payable under
the Retirement and Nondiscrimination Plans and primary Social Security.
Benefits may also be paid under the SERP upon early retirement (age 55 with
five years of service, but only with the consent of the Florida Progress
Compensation Committee for executives with less than 15 years of service),
disability, certain terminations of employment within three years after a
change in control is deemed to have occurred, and termination after becoming
100% vested (vesting occurs in specified situations after a person otherwise
qualifies for early retirement or when the combination of age plus years of
service equals 65). These pre-normal retirement benefits are based generally
on the accrued benefit earned by a participant as of the date of termination of
employment, except that the change-in-control benefit is 100% of the
participant's projected normal retirement benefit plus up to two years annual
salary and bonus and the disability benefit is based on 70% of the
participant's then current earnings.
Mr. Keesler is eligible for the foregoing SERP benefits.
Messrs. Cronin and Neiser took early retirement pursuant to the "special early
retirement" provisions of the SERP, which are distinguished and apart from
those mentioned above. Under their arrangements, Mr. Cronin will receive
annual retirement benefits of $152,586 until age 62, and $142,435 thereafter,
Mr. Neiser $137,283 until age 62, and $127,239 thereafter, with a 50% annual
survivor benefit payable to their respective spouses upon their deaths. At
least 50% of those benefits are payable pursuant to the SERP with the balance
payable under the Retirement and Nondiscrimination Plans. The Company will
also pay for life 100% of their Company medical insurance premiums and 75% of
their spouse's. Mr. Cronin will also be eligible to receive two-thirds of his
1992-1994 LTIP performance cycle award, if it is earned.
Dr. Percy M. Beard is employed as the Company's Senior Vice President, Nuclear
Operations, pursuant to an employment agreement with the Company. Under that
agreement, the Company shall employ Dr. Beard at a base salary of not less
than $150,000 per year through November 1994, subject to his death or
resignation. The agreement is automatically extended for additional one-year
terms unless either party chooses not to extend it. The agreement accords him
credit for prior employment for purposes of certain Company benefits. If Dr.
Beard remains employed beyond November 1994, but his employment terminates
before he shall be entitled to receive compensation under the Retirement Plan,
the Company is obligated to pay him the equivalent of early retirement benefits
due employees with less than 25 years of service until the date he is entitled
to receive retirement benefits under the Retirement Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
None of the Company's officers or directors owns any shares of the Company's
common or preferred stock.
The following table sets forth information concerning shares of Florida
Progress Common Stock that are held by persons known to the Company to be the
beneficial owners of more than 5% of said stock as of December 31, 1993.
Number of Shares Percent
Name and Address Beneficially Owned(1) of Class
- ---------------- --------------------- ---------
Savings Plan for Employees
of Florida Progress Corporation Trust
One Progress Plaza
St. Petersburg, Florida 33701 5,079,619(2) 5.69%
Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404 4,638,742 5.20%
- -----------------------------------------------------------------------------
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security and/or investment
power with respect to a security. Unless otherwise noted, the number of
shares held are beneficially owned as of December 31, 1993.
(2) The Investment Committee of the Savings Plan for Employees of Florida
Progress Corporation shares investment power with participating employees
in respect of all such shares. Shares are voted in accordance with
instructions of the participating employees to whose accounts such shares
are allocated. No votes are cast in respect of shares for which
instructions are not received or for shares which are not allocated to a
participant's account.
The table below sets forth as of December 31, 1993, the number of shares of
common stock of Florida Progress Corporation owned by the Company's directors,
Chief Executive Officer and Named Executive Officers individually and the
directors and executive officers of the Company as a group.
Number of Shares Percent of
Name Beneficially Owned (1) Class (2)
---- ---------------------- ----------
Stanley A. Brandimore 450
R. M. Bostick 200
Jack B. Critchfield 9,297
Allen J. Keesler, Jr. 20,526
Richard Korpan 2,138
Clarence V. McKee 1,700
Joan D. Ruffier 2,205
Lee H. Scott 19,804
Jean Giles Wittner 7,398
Percy M. Beard, Jr. 476
David R. Kuzma 2,334
Maurice H. Phillips 7,573
Joseph H. Richardson 3,566
Joseph F. Cronin 7,532
Richard W. Neiser 7,624
All 18 directors and executive
officers as a group, including
those named above 114,737 .13%
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security and/or investment
power with respect to a security.
(2) Unless otherwise noted, less than 1% per individual.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements, notes to Financial Statements, and
report thereon of KPMG Peat Marwick are found in Item 8
"Financial Statements and Supplementary Data" herein.
2. The following Financial Statement Schedules and reports are
included herein:
V- Electric Plant for the years ended December 31, 1993,
1992 and 1991
VI- Accumulated Depreciation of Electric Plant and
Amortization of Nuclear Fuel for the years ended
December 31, 1993, 1992 and 1991
VIII- Valuation and Qualifying Accounts for the years ended
December 31, 1993, 1992 and 1991
IX- Short-Term Borrowings for the years ended December 31,
1993, 1992 and 1991
X- Supplementary Income Statement Information for the
years ended December 31, 1993, 1992 and 1991
The Report of Independent Certified Public Accountants on
Financial Statements and Schedules. See index at the beginning
of Item 8 "Financial Statements and Supplementary Data".
All other schedules are not submitted because they are not
applicable or not required or because the required information
is included in the financial statements or notes thereto.
3. Exhibits filed herewith:
12 Statement of Computation of Ratios.
23 Consent of Independent Certified Public
Accountants to the incorporation by reference
of their report on the financial
statements into the Company's registration
statements on Form S-3 (No. 33-62210)
(relating to the Company's first mortgage
bond shelf) and Form S-3 (No. 33-50908)
(relating to the Company's medium-term
note shelf).
4. Exhibits incorporated herein by reference:
3.(a) Amended Articles of Incorporation, as
amended, of the Company. (Filed as
Exhibit 3(a) to the Company's Form 10-K
for the year ended December 31, 1991, as
filed with the SEC on March 30, 1992.
3.(b) Bylaws as amended. (Filed as Exhibit
(3)(b) to the Company's Form 10-K for the
year ended December 31, 1987).
4.(a) Indenture, dated as of January 1, 1944
(the "Indenture"), between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, securing the First Mortgage
Bonds, 3 3/8% Series Due 1974. (Filed as
Exhibit B-18 to the Company's Registration
Statement on Form A-2 (No. 2-5293) filed
with the SEC on January 24, 1944).
4.(b) Seventh Supplemental Indenture, dated as
of July 1, 1956, between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the
modification and amendment of the
Indenture and the issuance of the
Company's First Mortgage Bonds, 3 7/8%
Series Due 1986. (Filed as Exhibit 4(b) to
the Company's Registration Statement on
Form S-3 (No. 33-16788) filed with the SEC
on September 27, 1991).
4.(c) Eighth Supplemental Indenture, dated as of
July 1, 1958, between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the
modification and amendment of the
Indenture and the issuance of the
Company's First Mortgage Bonds, 4 1/8%
Series Due 1988. (Filed as Exhibit 4(c)
to the Company's Registration Statement on
Form S-3 (No. 33-16788) filed with the SEC
on September 27, 1991.)
4.(d) Sixteenth Supplemental Indenture, dated as
of February 1, 1970, between the Company
and Morgan Guaranty Trust Company of New
York and The Florida National Bank of
Jacksonville, as Trustees, with reference
to the modification and amendment of the
Indenture. (Filed as Exhibit 4(d) to the
Company's Registration Statement on Form
S-3 (No. 33-16788) filed with the SEC on
September 27, 1991.)
4.(e) Twenty-Ninth Supplemental Indenture dated
as of September 1, 1982, between the
Company and Morgan Guaranty Trust Company
of New York and The Florida National Bank
of Jacksonville, as Trustees, with
reference to the modification and
amendment of the Indenture. (Filed as
Exhibit 4(c) to the Company's Registration
Statement on Form S-3 (No. 2-79832) filed
with the SEC on September 17, 1982.)
10.(a) Florida Progress Supplemental Executive
Retirement Plan. (Filed as Exhibit 10(a)
to the Florida Progress Form 10-K for
the year ended December 31, 1993, as
filed with the SEC (File No. 1-8349) on
March 30, 1994). *
10.(b) Management Incentive Compensation Plan of
Florida Progress Corporation, as amended.
(Filed as Exhibit 10(a) to the Florida
Progress Form 10-K for the year ended
December 31, 1992, as filed with the SEC
(File No. 1-8349) on March 31, 1993.) *
10.(c) Florida Progress Corporation Long-Term
Incentive Plan, approved by the Florida
Progress Shareholders on April 19, 1990.
(Filed as Exhibit 10(d) to the Florida
Progress Form 10-Q for the quarter ended
March 31, 1990, as filed with the SEC
(File No. 1-8349) on May 14, 1990). *
10.(d) Amended and Restated General Partnership
Agreement of the SunShine Pipeline Partners
dated May 5, 1993. (Filed as Exhibit 10(a)
to the Company's Form 10-Q for the quarter
ended June 30, 1993, as filed with the SEC
on August 3, 1993).
10.(e) Amended and Restated General Partnership
Agreement of the SunShine Interstate
Pipeline Partners dated May 5, 1993. (Filed
as Exhibit 10(b) to the Company's Form 10-Q
for the quarter ended June 30, 1993, as filed
with the SEC on August 3, 1993).
10.(f) Precedent Agreement dated April 8, 1993
between the Company and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to the Company by the
intrastate component of the SunShine Pipeline.
(Filed as Exhibit 10(c) to the Company's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC on August 3, 1993).
10.(g) Precedent Agreement dated April 8, 1993
between the Company and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to the Company by the
interstate component of the SunShine Pipeline.
(Filed as Exhibit 10(d) to the Company's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC on August 3, 1993).
10.(h) Letter Agreement dated June 30, 1993
relating to the SunShine Pipeline.
(Filed as Exhibit 10(e) to the Company's
Form 10-Q for the quarter ended June 30,
1993, as filed with the SEC on August
3, 1993). (Confidential treatment
has been granted with respect to a portion
of this document - omitted portion filed
separately with the SEC).
* Exhibit constitutes an executive compensation plan or arrangement.
In reliance upon Item 601(b)(4)(iii) of Regulation S-K, certain instruments
defining the rights of holders of long-term debt of the Company are not being
filed herewith, because the total amount authorized thereunder does not exceed
10% of the total assets of the Company. The Company hereby agrees to furnish a
copy of any such instruments to the Commission upon request.
(b) Reports on Form 8-K:
During the fourth quarter of the year ended December 31, 1993,
the Company filed the following reports on Form 8-K:
Form 8-K dated October 21, 1993, reporting
under Item 5 "Other Events" a press release
and related Investor Information Report, each
dated October 21, 1993, reporting third
quarter 1993 earnings.
Form 8-K dated December 1, 1993, reporting
under Item 5 "Other Events" a press release
dated December 1, 1993 relating to a decision
by the Company's parent, Florida Progress,
to offer a voluntary early retirement option to
about 200 employees, most of whom worked at
the Company.
Form 8-K dated December 7, 1993, reporting
under Item 5 "Other Events" the sale of
$100 million first mortgage bonds and
filing under Item 7 "Financial Statements
and Exhibits" certain related documents.
In addition, the Company filed the following report on Form 8-K
subsequent to the fourth quarter of 1993:
Form 8-K dated January 17, 1994, reporting under
Item 5 "Other Events" various press releases and
related Investor Information reports, which disclose
certain workforce reductions at the Company and
Florida Progress' 1993 earnings.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FLORIDA POWER CORPORATION
March 24, 1994 By: /s/ Allen J. Keesler, Jr.
-------------------------
Allen J. Keesler, Jr., President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ Jack B. Critchfield Chairman of the March 24, 1994
------------------------- Board and Director
Jack B. Critchfield
/s/ Allen J. Keesler, Jr. President, Chief March 24, 1994
------------------------- Executive Officer
Allen J. Keesler, Jr. and Director
Principal Executive Officer
/s/ Jeffrey R. Heinicka Senior Vice President March 24, 1994
- ------------------------- and
Jeffrey R. Heinicka Chief Financial Officer
Principal Financial Officer
/s/ John Scardino, Jr. Vice President March 24, 1994
- ------------------------- and Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ R. Mark Bostick Director March 24, 1994
- -------------------------
R. Mark Bostick
/s/ S. A. Brandimore Director March 24, 1994
- -------------------------
S. A. Brandimore
/s/ Richard Korpan Director March 24, 1994
- -------------------------
Richard Korpan
/s/ Clarence V. McKee Director March 24, 1994
- -------------------------
Clarence V. McKee
/s/ Joan D. Ruffier Director March 24, 1994
- -------------------------
Joan D. Ruffier
/s/ Lee H. Scott Director March 24, 1994
- -------------------------
Lee H. Scott
/s/ Jean Giles Wittner Director March 24, 1994
- -------------------------
Jean Giles Wittner
<PAGE>
<TABLE>
<CAPTION>
Schedule V
1 of 3
FLORIDA POWER CORPORATION
Electric Plant
For the Year Ended December 31, 1993
(In millions)
Other
Balance at Additions Retirements Changes Balance at
Beginning at cost or Sales Add(Deduct) End of
Classification of Period (See Note 3)(See Note 1) (See Note 2) of Period
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production:
Steam $1,501.7 $38.8 $13.0 ($1.6) $1,525.9
Nuclear 586.0 32.7 0.2 0.0 618.5
Other 189.2 101.8 5.8 0.0 285.2
Transmission 614.9 61.0 4.2 1.5 673.2
Distribution 1,497.4 132.8 (3.3) 1.3 1,634.8
Transportation and general 246.3 37.5 3.6 0.0 280.2
Intangible 7.4 2.1 0.0 0.0 9.5
-------- -------- -------- -------- --------
Total Electric Plant in Service 4,642.9 406.7 23.5 1.2 5,027.3
Electric plant purchased or sold 0.3 8.1 0.0 4.2 12.6
Electric Plant Held for Future Use 14.4 0.3 0.0 0.0 14.7
Completed construction not classified 196.3 50.6 0.0 18.8 265.7
-------- -------- -------- -------- --------
Total electric plant in service,
held for future use and not classified 4,853.9 465.7 23.5 24.2 5,320.3
Construction work in progress 333.8 (48.1) 0.0 0.0 285.7
Nuclear fuel 337.8 30.5 0.0 0.0 368.3
-------- -------- -------- -------- --------
TOTAL ELECTRIC UTILITY PLANT $5,525.5 $448.1 $23.5 $24.2 $5,974.3
======== ======== ======== ======== ========
</TABLE>
Note: (1) Retirements charged to accumulated depreciation $22.7
Retirements charged to income and other accounts 0.8
-------
$23.5
=======
<TABLE>
<CAPTION>
<S> <C>
Note: (2) Other changes: Increase resulting from business acquisition $27.4
Other (3.2)
-----
$24.2
=====
</TABLE>
Note: (3) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation
<PAGE>
<TABLE>
<CAPTION>
Schedule V
2 of 3
FLORIDA POWER CORPORATION
Electric Plant
For the Year Ended December 31, 1992
(In millions)
Balance at Additions Retirements Other Balance at
Beginning at cost or Sales Changes End of
Classification of Period (See Note 2)(See Note 1) Add(Deduct) of Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production:
Steam $1,483.3 $27.8 $9.4 $0.0 $1,501.7
Nuclear 567.0 27.5 12.0 3.5 586.0
Other 181.7 9.0 1.6 0.1 189.2
Transmission 601.6 17.0 2.3 (1.4) 614.9
Distribution 1,405.2 124.9 34.0 1.3 1,497.4
Transportation and general 224.6 24.6 2.1 (0.8) 246.3
Intangible 1.6 5.8 0.0 0.0 7.4
-------- -------- -------- -------- --------
Total Electric Plant in Service 4,465.0 236.6 61.4 2.7 4,642.9
Electric Plant purchased or sold 0.0 2.3 0.0 (2.0) 0.3
Electric Plant Held for Future Use 12.7 1.9 0.0 (0.2) 14.4
Completed construction not classified 66.8 132.9 3.4 0.0 196.3
-------- -------- -------- -------- --------
Total electric plant in service,
held for future use and not classified 4,544.5 373.7 64.8 0.5 4,853.9
Construction work in progress 241.5 92.3 0.0 0.0 333.8
Nuclear fuel 312.2 25.6 0.0 0.0 337.8
-------- -------- -------- -------- --------
TOTAL ELECTRIC UTILITY PLANT $5,098.2 $491.6 $64.8 $0.5 $5,525.5
======== ======== ======== ======== ========
</TABLE>
Note: (1) Retirements charged to accumulated depreciation $61.3
Retirements charged to income and other accounts 3.5
-------
$64.8
=======
Note: (2) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation
<PAGE>
<TABLE>
<CAPTION>
Schedule V
3 of 3
FLORIDA POWER CORPORATION
Electric Plant
For the Year Ended December 31, 1991
(In millions)
Balance at Additions Retirements Other Balance at
Beginning at cost or Sales Changes End of
Classification of Period (See Note 2)(See Note 1) Add(Deduct) of Period
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production:
Steam $1,463.3 $34.4 $14.4 $0.0 $1,483.3
Nuclear 542.0 25.8 0.8 0.0 567.0
Other 176.5 2.8 0.7 3.1 181.7
Transmission 596.1 17.6 10.2 (1.9) 601.6
Distribution 1,315.6 114.1 25.2 0.7 1,405.2
Transportation and general 198.1 29.7 3.2 0.0 224.6
Intangible 1.0 0.6 0.0 0.0 1.6
------- ------- ------- ------- -------
Total Electric Plant in Service 4,292.6 225.0 54.5 1.9 4,465.0
Electric plant purchased or sold (0.1) 0.1 0.0 0.0 0.0
Electric Plant Held for Future Use 16.4 0.1 1.9 (1.9) 12.7
Completed construction not classified 46.3 20.5 0.0 0.0 66.8
------- ------- ------- ------- -------
Total electric plant in service,
held for future use and not classified 4,355.2 245.7 56.4 (0.0) 4,544.5
Construction work in progress 141.2 100.3 0.0 0.0 241.5
Nuclear fuel 302.9 9.3 0.0 0.0 312.2
------- ------- ------- ------- -------
TOTAL ELECTRIC UTILITY PLANT $4,799.3 $355.3 $56.4 $0.0 $5,098.2
======= ======= ======= ======= =======
</TABLE>
Note: (1) Retirements charged to accumulated depreciation $56.4
=======
Note: (2) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation
<PAGE>
<TABLE>
<CAPTION>
Schedule VI
FLORIDA POWER CORPORATION
Accumulated Depreciation of Electric Plant & Amortization of Nuclear Fuel
For the Years Ended December 31, 1993, 1992 and 1991
(In millions)
---------- Additions----------
Balance at Charged to Salvage Retirements Other Balance at
Beginning Charged to Clearing Less Cost (See Note 1, Changes End of
Description of Period Expense Accounts of Removal Schedule V) Add/(Deduct) Period
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Accumulated depreciation - electric plant $1,660.8 $202.9 $5.3 ($6.3) $22.7 $6.2 (A) $1,846.2
Accumulated decommissioning - nuclear plant 102.0 11.9 0.0 0.0 0.0 4.4 (B) 118.3
Accumulated dismantlement - fossil plants 47.1 23.9 0.0 (2.5) 0.0 0.0 68.5
-------- -------- -------- -------- -------- -------- --------
Total accumulated depreciation-electric plant $1,809.9 $238.7 $5.3 ($8.8) $22.7 $10.6 $2,033.0
======== ======== ======== ======== ======== ======== ========
Accumulated amortization
of Nuclear Fuel $273.6 $26.3 $0.0 $0.0 $0.0 $0.0 $299.9
======== ======== ======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1992
Accumulated depreciation - electric plant $1,543.6 $179.1 $5.2 ($5.5) $61.3 ($0.3) 1,660.8
Accumulated decommissioning - nuclear plant 85.2 11.9 0.0 0.0 0.0 4.9 (B) 102.0
Accumulated dismantlement - fossil plants 28.9 18.2 0.0 0.0 0.0 0.0 47.1
-------- --------- -------- -------- -------- -------- --------
Total accumulated depreciation-electric plant $1,657.7 $209.2 $5.2 ($5.5) $61.3 $4.6 $1,809.9
======== ======== ======== ======== ======== ======== ========
Accumulated amortization
of Nuclear Fuel $247.2 $25.4 $0.0 $0.0 $0.0 $1.0 $273.6
======== ======== ======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1991
Accumulated depreciation - electric plant $1,421.9 $177.6 $4.5 ($3.6) $56.4 ($0.4) 1,543.6
Accumulated decommissioning - nuclear plant 69.7 11.8 0.0 0.0 0.0 3.7 (B) 85.2
Accumulated dismantlement - fossil plants 12.3 16.6 0.0 0.0 0.0 0.0 28.9
-------- -------- -------- -------- -------- -------- --------
Total accumulated depreciation-electric plant $1,503.9 $206.0 $4.5 ($3.6) $56.4 $3.3 $1,657.7
======== ======== ======== ======== ======== ======== ========
Accumulated amortization
of Nuclear Fuel $218.7 $28.5 $0.0 $0.0 $0.0 $0.0 $247.2
======== ======== ======== ======== ======== ======== ========
</TABLE>
(A) Increase due primarily to business acquisitions.
(B) Primarily earnings on Nuclear Decommissioning Fund.
<PAGE>
<TABLE>
<CAPTION>
Schedule VIII
FLORIDA POWER CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1993, 1992, and 1991
(In millions)
Balance at Additions Balance at
Beginning Charged to Deductions End of
Description of Period Expense (See Note) Period
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993
1993 Nuclear Midcycle Outage (#9) Reserve $4.2 $4.6 $9.5 ($0.7)
1994 Nuclear Refueling Outage (#9) Reserve 4.5 10.5 2.8 12.2
------- ------- ------- -------
$8.7 $15.1 $12.3 $11.5
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1992
1991 Nuclear Midcycle Outage (#8) Reserve ($2.4) $2.6 $0.2 $0.0
1992 Nuclear Refueling Outage (#8) Reserve 16.2 13.7 29.9 0.0
1993 Nuclear Midcycle Outage (#9) Reserve 0.0 4.4 0.2 4.2
1994 Nuclear Refueling Outage (#9) Reserve 0.0 4.5 0.0 4.5
------- ------- ------- -------
$13.8 $25.2 $30.3 $8.7
======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1991
1991 Nuclear Midcycle Outage (#8) Reserve $1.7 $4.8 $8.9 ($2.4)
1992 Nuclear Refueling Outage (#8) Reserve 4.1 12.4 0.3 16.2
------- ------- ------- -------
$5.8 $17.2 $9.2 $13.8
======= ======= ======= =======
</TABLE>
Note: Deductions are payments of actual expenditures related to the outage.
<PAGE>
<TABLE>
<CAPTION>
FLORIDA POWER CORPORATION Schedule IX
Short-Term Borrowings
For the Years Ended December 31, 1993, 1992 and 1991
(In millions except for percentages)
Month-End
Weighted Maximum Amount Avg. Amount Weighted Avg.
Balance at Average Outstanding Outstanding Interest Rate
Category of Aggregate End of Interest During the During the During the
Short-Term Borrowings Period Rate (a) Period Period Period (b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993
Payable to Holders of
Commercial Paper (c) (d) $325.0 3.29% $325.0 $226.6 3.19%
FOR THE YEAR ENDED DECEMBER 31, 1992
Payable to Holders of
Commercial Paper (c) (d) $96.0 3.54% $243.0 $163.6 3.95%
FOR THE YEAR ENDED DECEMBER 31, 1991
Payable to Banks $ - - % $58.0 $43.1 7.60%
Payable to Holders of
Commercial Paper (c) (d) $78.0 5.01% $139.0 $76.0 6.76%
</TABLE>
(a) Based on end of period balance.
(b) The average interest rate was determined by dividing interest expense on
short-term borrowings for the year by average short-term borrowings during
the year.
(c) The Company is authorized to issue $400 million in commercial paper (C/P)
with various maturities up to but not exceeding 270 days. All C/P
borrowings are backed up by an equivalent amount of unused bank lines of
credit.
(d) As of December 31, 1993, 1992 and 1991, $200 million, $96 million and $-0-,
respectively, of the C/P borrowings were classified as long-term
in the Financial Statements because of the maturity of the underlying
backup bank lines of credit. See Note 2 to the Financial Statements.
For purposes of this schedule, all C/P borrowings are included in the
amounts shown.
<PAGE>
FLORIDA POWER CORPORATION Schedule X
Supplementary Income Statement Information
- ----------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992, and 1991
(In millions)
The amounts of depreciation and maintenance, other than those set forth in
the statements of income are not significant. Rents, royalties,
advertising costs and research and development costs are not significant.
Taxes other than income taxes are set forth below:
1993 1992 1991
Property taxes $54.6 $49.7 $46.2
State gross receipts tax 42.6 37.5 32.2
Franchise fees 38.3 34.0 34.8
Payroll and other taxes 25.6 24.9 22.4
- ----------------------------------------------------------------------------
Total 161.1 146.1 135.6
Less amounts not charged to operating expenses 8.5 7.8 6.3
- ----------------------------------------------------------------------------
Charged directly to operating expenses $152.6 $138.3 $129.3
============================================================================
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
------- -------
Exhibits filed herewith:
12 Statement of Computation of Ratios.
23 Consent of Independent Certified Public
Accountants to the incorporation by reference
of their report on the financial
statements into the Company's registration
statements on Form S-3 (No. 33-62210)
(relating to the Company's first mortgage
bond shelf) and Form S-3 (No. 33-50908)
(relating to the Company's medium-term
note shelf).
Exhibits incorporated herein by reference:
3.(a) Amended Articles of Incorporation, as
amended, of the Company. (Filed as
Exhibit 3(a) to the Company's Form 10-K
for the year ended December 31, 1991, as
filed with the SEC on March 30, 1992.
3.(b) Bylaws as amended. (Filed as Exhibit (3)(b)
to the Company's Form 10-K for the year
ended December 31, 1987).
4.(a) Indenture, dated as of January 1, 1944
(the "Indenture"), between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, securing the First Mortgage
Bonds, 3 3/8% Series Due 1974. (Filed as
Exhibit B-18 to the Company's Registration
Statement on Form A-2 (No. 2-5293) filed
with the SEC on January 24, 1944).
4.(b) Seventh Supplemental Indenture, dated as
of July 1, 1956, between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the
modification and amendment of the
Indenture and the issuance of the
Company's First Mortgage Bonds, 3 7/8%
Series Due 1986. (Filed as Exhibit 4(b) to
the Company's Registration Statement on
Form S-3 (No. 33-16788) filed with the SEC
on September 27, 1991).
4.(c) Eighth Supplemental Indenture, dated as of
July 1, 1958, between the Company and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the
modification and amendment of the
Indenture and the issuance of the
Company's First Mortgage Bonds, 4 1/8%
Series Due 1988. (Filed as Exhibit 4(c)
to the Company's Registration Statement on
Form S-3 (No. 33-16788) filed with the SEC
on September 27, 1991.)
4.(d) Sixteenth Supplemental Indenture, dated as
of February 1, 1970, between the Company
and Morgan Guaranty Trust Company of New
York and The Florida National Bank of
Jacksonville, as Trustees, with reference
to the modification and amendment of the
Indenture. (Filed as Exhibit 4(d) to the
Company's Registration Statement on Form
S-3 (No. 33-16788) filed with the SEC on
September 27, 1991.)
4.(e) Twenty-Ninth Supplemental Indenture dated
as of September 1, 1982, between the
Company and Morgan Guaranty Trust Company
of New York and The Florida National Bank
of Jacksonville, as Trustees, with
reference to the modification and
amendment of the Indenture. (Filed as
Exhibit 4(c) to the Company's Registration
Statement on Form S-3 (No. 2-79832) filed
with the SEC on September 17, 1982.)
10.(a) Florida Progress Supplemental Executive
Retirement Plan. (Filed as Exhibit 10(a)
to the Florida Progress Form 10-K for
the year ended December 31, 1993, as
filed with the SEC (File No. 1-8349) on
March 30, 1994).
10.(b) Management Incentive Compensation Plan of
Florida Progress Corporation, as amended.
(Filed as Exhibit 10(a) to the Florida
Progress Form 10-K for the year ended
December 31, 1992, as filed with the SEC
(File No. 1-8349) on March 31, 1993.)
10.(c) Florida Progress Corporation Long-Term
Incentive Plan, approved by the Florida
Progress Shareholders on April 19, 1990.
(Filed as Exhibit 10(d) to the Florida
Progress Form 10-Q for the quarter ended
March 31, 1990, as filed with the SEC
(File No. 1-8349) on May 14, 1990).
10.(d) Amended and Restated General Partnership
Agreement of the SunShine Pipeline Partners
dated May 5, 1993. (Filed as Exhibit 10(a)
to the Company's Form 10-Q for the quarter
ended June 30, 1993, as filed with the SEC
on August 3, 1993).
10.(e) Amended and Restated General Partnership
Agreement of the SunShine Interstate
Pipeline Partners dated May 5, 1993. (Filed
as Exhibit 10(b) to the Company's Form 10-Q
for the quarter ended June 30, 1993, as filed
with the SEC on August 3, 1993).
10.(f) Precedent Agreement dated April 8, 1993
between the Company and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to the Company by the
intrastate component of the SunShine Pipeline.
(Filed as Exhibit 10(c) to the Company's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC on August 3, 1993).
10.(g) Precedent Agreement dated April 8, 1993
between the Company and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to the Company by the
interstate component of the SunShine Pipeline.
(Filed as Exhibit 10(d) to the Company's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC on August 3, 1993).
10.(h) Letter Agreement dated June 30, 1993
relating to the SunShine Pipeline.
(Filed as Exhibit 10(e) to the Company's
Form 10-Q for the quarter ended June 30,
1993, as filed with the SEC on August
3, 1993). (Confidential treatment
has been granted with respect to a portion
of this document - omitted portion filed
separately with the SEC).
Exhibit 12
FLORIDA POWER CORPORATION
Statement of Computation of Ratios
(Dollars In Millions)
Ratio of Earnings to Fixed Charges:
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Net Income $194.9 $186.9 $180.9 $182.3 $184.0
Add:
Operating Income Taxes 104.5 97.7 92.8 102.0 86.5
Other Income Taxes (0.1) (0.2) (0.1) 1.0 (0.7)
------ ------ ------ ------ ------
Income Before Taxes 299.3 284.4 273.6 285.3 269.8
Total Interest Charges 105.8 100.2 95.2 98.8 96.6
------ ------ ------ ------ ------
Total Earnings (A) $405.1 $384.6 $368.8 $384.1 $366.4
------ ------ ------ ------ ------
Fixed Charges (B) $105.8 $100.2 $95.2 $98.8 $96.6
------ ------ ------ ------ ------
Ratio of Earnings to
Fixed Charges (A/B) 3.83 3.84 3.87 3.89 3.79
====== ====== ====== ====== ======
Exhibit 23
The Board of Directors and Shareholders
Florida Power Corporation:
We consent to incorporation by reference in the registration statements No.
33-62210 on Form S-3 and No. 33-50908 on Form S-3 of Florida Power Corporation
of our report dated January 24, 1994, relating to the balance sheets of Florida
Power Corporation as of December 31, 1993 and 1992, and the related statements
of income, shareholders' equity and cash flows and related schedules for each
of the years in the three-year period ended December 31, 1993, which report
appears in the December 31, 1993 annual report on Form 10-K of Florida Power
Corporation.
Our report refers to a change in the methods of accounting for income taxes and
postretirement benefits other than pensions.
/s/KPMG PEAT MARWICK
- ----------------------
KPMG PEAT MARWICK
St. Petersburg, Florida
March 24, 1994
