<PAGE>
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 15, 1995
------------------
MISSISSIPPI POWER COMPANY
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mississippi 0-6849 64-0205820
- -------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2992 West Beach, Gulfport, Mississippi 39501
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 864-1211
----------------
N/A
- -------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
2
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
99 - Audited Financial Statements of
Mississippi Power Company as of
December 31, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MISSISSIPPI POWER COMPANY
/s/ Wayne Boston
By Wayne Boston
Assistant Secretary
Date: March 1, 1995
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 15, 1995 on the financial statements of Mississippi
Power Company, included in this Form 8-K, into Mississippi Power Company's
previously filed Registration Statement File Nos. 33-49320 and 33-49649.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 1, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from
the financial statements filed as Exhibit 99 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000066904
<NAME> MISSISSIPPI POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 952,772
<OTHER-PROPERTY-AND-INVEST> 3,353
<TOTAL-CURRENT-ASSETS> 100,200
<TOTAL-DEFERRED-CHARGES> 67,386
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,123,711
<COMMON> 37,691
<CAPITAL-SURPLUS-PAID-IN> 179,734
<RETAINED-EARNINGS> 144,328
<TOTAL-COMMON-STOCKHOLDERS-EQ> 361,753
0
74,414
<LONG-TERM-DEBT-NET> 252,032
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 95,689
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (41,199)
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 381,022
<TOT-CAPITALIZATION-AND-LIAB> 1,123,711
<GROSS-OPERATING-REVENUE> 499,162
<INCOME-TAX-EXPENSE> 31,386
<OTHER-OPERATING-EXPENSES> 394,701
<TOTAL-OPERATING-EXPENSES> 426,087
<OPERATING-INCOME-LOSS> 73,075
<OTHER-INCOME-NET> 2,992
<INCOME-BEFORE-INTEREST-EXPEN> 76,067
<TOTAL-INTEREST-EXPENSE> 22,011
<NET-INCOME> 54,056
4,899
<EARNINGS-AVAILABLE-FOR-COMM> 49,157
<COMMON-STOCK-DIVIDENDS> 34,100
<TOTAL-INTEREST-ON-BONDS> 22,606
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<EPS-PRIMARY> 0
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</TABLE>
<PAGE>
1
MANAGEMENT'S REPORT
Mississippi Power Company 1994 Annual Report
The management of Mississippi Power Company has prepared--and is responsible
for--the financial statements and related information included in this report.
These statements were prepared in accordance with generally accepted accounting
principles appropriate in the circumstances and necessarily include amounts that
are based on best estimates and judgments of management. Financial information
throughout this annual report is consistent with the financial statements.
The Company maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that books and records
reflect only authorized transactions of the Company. Limitations exist in any
system of internal controls, however, based upon a recognition that the cost of
the system should not exceed its benefits. The Company believes its system of
internal accounting control maintains an appropriate cost/benefit relationship.
The Company's system of internal accounting controls is evaluated on an
ongoing basis by the internal audit staff. The Company's independent public
accountants also consider certain elements of the internal control system in
order to determine their auditing procedures for the purpose of expressing an
opinion on the financial statements.
The audit committee of the board of directors, composed of four directors
who are not employees, provides a broad overview of management's financial
reporting and control functions. Periodically, this committee meets with
management, the internal auditors, and the independent public accountants to
ensure that these groups are fulfilling their obligations and to discuss
auditing, internal controls, and financial reporting matters. The internal
auditors and independent public accountants have access to the members of the
audit committee at any time.
Management believes that its policies and procedures provide reasonable
assurance that the Company's operations are conducted according to a high
standard of business ethics.
In management's opinion, the financial statements present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Mississippi Power Company in conformity with generally accepted accounting
principles.
/s/ David M. Ratcliffe
David M. Ratcliffe
President and Chief Executive Officer
/s/ Michael W. Southern
Michael W. Southern
Vice President, Secretary, Treasurer and
Chief Financial Officer
<PAGE>
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Mississippi Power Company:
We have audited the accompanying balance sheets and statements of capitalization
of Mississippi Power Company (a Mississippi corporation and a wholly owned
subsidiary of The Southern Company) as of December 31, 1994 and 1993, and the
related statements of income, retained earnings, paid-in capital, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 (pages 10-25) referred to above
present fairly, in all material respects, the financial position of Mississippi
Power Company as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the periods stated, in conformity with
generally accepted accounting principles.
As explained in Notes 2 and 8 to the financial statements, effective January
1, 1993, Mississippi Power changed its methods of accounting for postretirement
benefits other than pensions and for income taxes.
/S/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 15, 1995
<PAGE>
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Mississippi Power Company 1994 Annual Report
RESULTS OF OPERATIONS
Earnings
Mississippi Power Company's net income after dividends on preferred stock for
1994 totaled $49.2 million, an increase of $6.7 million over the prior year.
This improvement is attributable primarily to increased energy sales and rate
increases. A retail rate increase under the Company's Performance Evaluation
Plan (PEP) of $6.4 million annually became effective in July 1993. Under the
Environmental Compliance Overview Plan (ECO Plan), retail rates increased by
$7.6 million annually effective April 1994. Also, effective in April 1994 was a
$3.6 million wholesale rate increase.
A comparison of 1993 to 1992 reflects an increase in 1993 earnings of $5.6
million. As was the case in 1994, earnings in 1993 increased because of higher
energy sales and retail rate increases.
Revenues
The following table summarizes the factors impacting operating revenues for the
past three years:
================================================================
Increase (Decrease)
from Prior Year
-----------------------------------
1994 1993 1992
-----------------------------------
(in thousands)
Retail --
Change in
base rates $ 9,314* $ 5,079* $ 6,605
Sales growth 9,560 5,606 7,181
Weather 1,752 4,735 (3,915)
Fuel cost
recovery
and other 6,594 15,028 (2,743)
- ----------------------------------------------------------------
Total retail 27,220 30,448 7,128
- ----------------------------------------------------------------
Sales for resale --
Non-affiliates 4,611 3,298 1,387
Affiliates (5,981) 5,464 (7,989)
- ----------------------------------------------------------------
Total sales for
resale (1,370) 8,762 (6,602)
Other operating
revenues (1,571) 1,226 1,535
- ----------------------------------------------------------------
Total operating
revenues $ 24,279 $ 40,436 $ 2,061
================================================================
Percent change 5.1% 9.3% 0.5%
- ----------------------------------------------------------------
*Includes the effect of the retail rate increases approved under the ECO Plan.
Retail revenues of $395 million in 1994 increased 7.4 percent over the prior
year, compared with increases of 9.0 percent and 2.2 percent in 1993 and 1992,
respectively. The increase in retail revenues for 1994 was a result of growth in
energy sales and customers and retail rate increases. Changes in base rates
reflect rate changes made under PEP and the ECO Plan as approved by the
Mississippi Public Service Commission (MPSC).
Under the fuel cost recovery provision, recorded fuel revenues are equal to
recorded fuel expenses, including the fuel component and the operation and
maintenance component of purchased energy. Therefore, changes in recoverable
fuel expenses are offset with corresponding changes in fuel revenues and have no
effect on net income.
<PAGE>
4
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
Included in sales for resale to non-affiliates are revenues from rural
electric cooperative associations and municipalities located in southeastern
Mississippi. Energy sales to these customers increased 7.8 percent in 1994 and
9.0 percent in 1993 with the related revenues rising 14.0 percent and 14.1
percent, respectively. The customer demand experienced by these utilities is
determined by factors very similar to Mississippi Power's.
Sales for resale to non-affiliated non-territorial utilities are primarily
under long-term contracts consisting of capacity and energy components. Capacity
revenues reflect the recovery of fixed costs and a return on investment under
the contracts. Energy is generally sold at variable cost. Under these long-term
contracts, the capacity and energy components were:
=============================================================
1994 1993 1992
----------------------------------------
(in thousands)
Capacity $ 1,965 $ 4,191 $ 3,573
Energy 8,473 12,120 19,538
- -------------------------------------------------------------
Total $10,438 $16,311 $23,111
=============================================================
Capacity revenues for Mississippi Power varied due to changes in the
contracts and in the allocation of transmission capacity revenues throughout the
Southern electric system. Most of the Company's capacity revenues are derived
from transmission charges.
Sales to affiliated companies within the Southern electric system will vary
from year to year depending on demand and the availability and cost of
generating resources at each company. These sales have no material impact on
earnings.
Below is a breakdown of kilowatt-hour sales for 1994 and the percent change
for the last three years:
==================================================================
Amount Percent Change
(millions of -------- -----------------------------
kilowatt-hours 1994 1994 1993 1992
-------- -----------------------------
Residential 1,922 (0.4)% 6.9 % (1.5)%
Commercial 2,101 8.6 6.8 2.4
Industrial 3,847 6.2 2.5 7.3
Other 38 (0.5) 0.3 (57.2)
-----
Total retail 7,908 5.1 4.7 2.9
Sales for
resale --
Non-affiliates 2,556 0.4 (5.3) (0.7)
Affiliates 174 (59.2) 52.2 (54.6)
------
Total 10,638 1.3% 3.3% (1.5)%
==================================================================
Total retail energy sales in 1994 increased, compared to the previous year,
due primarily to the improvement in the economy. The most notable factor that
increased commercial energy sales was the recent establishment of casinos within
the Company's service area. It is expected that the establishment of new casinos
should slow appreciably. However, growth in ancillary services (lodging, food,
transportation, etc.) should continue. Also, energy demand is expected to grow
as a result of a larger and more fully employed population. The improvement in
the economy also carried over to the industrial sector. Retail energy sales in
1993 increased due to an improving economy and weather influences. Industrial
sales increased in 1992 as a result of new contracts with two large industrial
customers.
In addition to the previously discussed long-term contracts, energy sales to
non-affiliates include economy sales and amounts sold under short-term
contracts. Sales for resale to non-affiliates are influenced by those utilities'
own customer demand, plant availability, and the cost of their predominant fuels
- -- oil and natural gas.
Expenses
Total operating expenses for 1994 were higher than the previous year because of
higher taxes and an increase in maintenance expenses and depreciation and
amortization. Additionally, included in other operation expenses are increased
costs associated with work force reduction programs. (See Note 2 to the
financial statements for information on these programs.) Expenses in 1993 were
higher than 1992 primarily because of higher production expenses stemming from
<PAGE>
5
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
increased demand, an increase in the federal income tax rate, and higher
employee related costs.
Fuel costs constitute the single largest expense for Mississippi Power.
These costs decreased in 1994 due to a 5.5 percent decrease in generation, which
reflects lower demand on the rest of the Southern electric system and, hence,
the availability of lower cost generation from affiliates. Fuel expenses in
1993, compared to 1992, were higher because of increased generation reflecting
higher demand.
Purchased power consists primarily of energy purchases from the affiliates
of the Southern electric system. Purchased power transactions (both sales and
purchases) among Mississippi Power and its affiliates will vary from period to
period depending on demand and the availability and variable production cost at
each generating unit in the Southern electric system.
The increase in depreciation and amortization is primarily the result of the
commercial operation of a 75 megawatt combustion turbine unit in May 1994.
Taxes other than income taxes increased in 1994 because of higher ad valorem
taxes, which are property based, and municipal franchise taxes, which are
revenue based.
The change in income taxes for 1994 reflected the change in operating
income. Income tax expense in 1993 increased because of the enactment of a
higher corporate income tax rate retroactive to January 1, 1993, coupled with
higher earnings.
Effects of Inflation
Mississippi Power is subject to rate regulation and income tax laws that are
based on the recovery of historical costs. Therefore, inflation creates an
economic loss because the Company is recovering its costs of investments in
dollars that have less purchasing power. While the inflation rate has been
relatively low in recent years, it continues to have an adverse effect on the
Company because of the large investment in long-lived utility plant.
Conventional accounting for historical costs does not recognize this economic
loss nor the partially offsetting gain that arises through financing facilities
with fixed-money obligations, such as long-term debt and preferred stock. Any
recognition of inflation by regulatory authorities is reflected in the rate of
return allowed.
Future Earnings Potential
The results of operations for the past three years are not necessarily
indicative of future earnings potential. The level of future earnings depends on
numerous factors ranging from regulatory matters to growth in energy sales to a
less regulated, more competitive environment. Expenses are subject to constant
review and cost control programs. Among the efforts to control costs are
utilizing employees more effectively through a functionalization program for the
Southern electric system, redesigning compensation and benefit packages, and
re-engineering work processes. Mississippi Power is also maximizing the utility
of invested capital and minimizing the need for capital by refinancing,
decreasing the average fuel stockpile, raising generating plant availability and
efficiency, and managing the construction budget. Operating revenues will be
affected by any changes in rates under the PEP, the Company's performance based
ratemaking plan. PEP has proven to be a stabilizing force on electric rates,
with only moderate changes in rates taking place.
The ECO Plan, approved by the MPSC in 1992, provides for recovery of costs
associated with environmental projects approved by the MPSC, most of which are
required to comply with Clean Air Act Amendments of 1990 (Clean Air Act)
regulations. The ECO Plan is operated independently of PEP. The Clean Air Act
and other important environmental items are discussed later under "Environmental
Matters."
The Federal Energy Regulatory Commission (FERC) regulates wholesale rate
schedules and power sales contracts that Mississippi Power has with its sales
for resale customers. The FERC is currently reviewing the rate of return on
common equity included in these schedules and contracts and may require such
returns to be lowered, possibly retroactively.
Further discussion of PEP, the ECO Plan, and proceedings before the FERC is
made in Note 3 to the financial statements herein.
<PAGE>
6
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
Future earnings in the near term will depend upon growth in energy sales,
which are subject to a number of factors. Traditionally, these factors have
included changes in contracts with neighboring utilities, energy conservation
practiced by customers, the elasticity of demand, weather, competition, and the
rate of economic growth in Mississippi Power's service area. However, the Energy
Policy Act of 1992 (Energy Act) is beginning to have a dramatic effect on the
future of the electric utility industry. The Energy Act promotes energy
efficiency, alternative fuel use, and increased competition for electric
utilities. The Southern Company is positioning the business to meet the
challenge of this major change in the traditional practice of selling
electricity. The Energy Act allows Independent Power Producers (IPPs) to access
a utility's transmission network in order to sell electricity to other
utilities. This may enhance the incentive of IPPs to build cogeneration plants
for a utility's large industrial and commercial customers and sell excess
generation to other utilities. Although the Energy Act does not require
transmission access to retail customers, retail wheeling initiatives are rapidly
evolving and becoming very prominent issues in several states. In order to
address these initiatives, numerous questions must be resolved with the most
complex ones relating to transmission pricing and recovery of stranded
investments. As the initiatives become a reality, the structure of the utility
industry could radically change. Therefore, unless Mississippi Power remains a
low-cost producer and provides quality service, the Company's retail energy
sales growth could be limited, and this could significantly erode earnings.
Conversely, being the low-cost producer could provide significant opportunities
to increase market share and profitability.
Mississippi Power is subject to the provisions of Financial Accounting
Standards Board Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. In the event that a portion of the Company's operations is no longer
subject to these provisions, the Company would be required to write off related
regulatory assets and liabilities. See Note 1 to the financial statements under
"Regulatory Assets and Liabilities," for additional information.
FINANCIAL CONDITION
Overview
The principal changes in Mississippi Power's financial condition during 1994
were gross property additions to utility plant of $104 million, including the
commercial operation of a 75 megawatt capacity combustion turbine unit. Funding
for gross property additions and other capital requirements came primarily from
capital contributions from The Southern Company, the sale of first mortgage
bonds, the issuance of long-term notes payable, earnings and other operating
cash flows. The Statements of Cash Flows provide additional details.
Financing Activity
Mississippi Power continued to lower its financing costs in 1994 by issuing new
debt securities and retiring high-cost issues. The Company sold $35 million of
first mortgage bonds and issued $85 million in term notes. Retirements,
including maturities during 1994, totaled some $42 million of such securities.
(See the Statements of Cash Flows for further details.) Composite financing
rates for the years 1992 through 1994 as of year-end were as follows:
===========================================================
1994 1993 1992
---------------------------
Composite interest rate on
long-term debt 6.44% 6.57% 6.91%
Composite preferred stock
dividend rate 6.58% 6.58% 7.29%
============================================================
Capital Structure
At year-end 1994, the Company's ratio of common equity to total capitalization
was 48.7 percent, compared to 49.8 percent in 1993 and 47.3 percent in 1992. The
lower equity ratio in 1994 can be attributed primarily to additional long-term
debt.
Capital Requirements for Construction
The Company's projected construction expenditures for the next three years total
$223 million ($78 million in 1995, $73 million in 1996, and $72 million in
1997). The major emphasis within the construction program will be on upgrading
existing facilities. Also included in the estimates for property additions for
<PAGE>
7
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
the three-year period is $2.9 million committed to meeting the requirements of
Clean Air Act regulations. Revisions may be necessary because of factors such as
revised load projections, the availability and cost of capital, and changes in
environmental regulations.
Other Capital Requirements
In addition to the funds required for the Company's construction program,
approximately $96 million will be required by the end of 1997 for present
sinking fund requirements and maturities of long-term debt. Mississippi Power
plans to continue, when economically feasible, to retire higher cost debt and
preferred stock and replace these obligations with lower-cost capital.
Environmental Matters
In November 1990, the Clean Air Act was signed into law. Title IV of the Clean
Air Act -- the acid rain compliance provision of the law -- will have a
significant impact on Mississippi Power and the other operating companies of The
Southern Company. Specific reductions in sulfur dioxide and nitrogen oxide
emissions from fossil-fired generating plants will be required in two phases.
Phase I compliance began in 1995 and affects eight generating plants -- some 10
thousand megawatts of capacity or 35 percent of total capacity -- in the
Southern electric system. Phase II compliance is required in 2000, and all
fossil-fired generating plants in the Southern electric system will be affected.
In 1995, the Environmental Protection Agency (EPA) began issuing annual
sulfur dioxide emission allowances through the allowance trading program. An
emission allowance is the authority to emit one ton of sulfur dioxide during a
calendar year. The method for issuing allowances is based on the fossil fuel
consumed from 1985 through 1987 for each affected generating unit. Emission
allowances are transferable and can be bought, sold, or banked and used in the
future.
The sulfur dioxide emission allowance program is expected to minimize the
cost of compliance. The Southern Company's sulfur dioxide compliance strategy is
designed to take advantage of allowances as a compliance option.
The Southern Company expects to achieve Phase I sulfur dioxide compliance at
the eight affected plants by switching to low-sulfur coal, which has required
some equipment upgrades. This compliance strategy is expected to result in
unused emission allowances being banked for later use. Additional construction
expenditures were required to install equipment for the control of nitrogen
oxide emissions at these eight plants. Also, continuous emissions monitoring
equipment will be installed on all fossil-fired units. Under this Phase I
compliance approach, additional construction expenditures are estimated to total
approximately $300 million through 1995 for The Southern Company, of which
Mississippi Power's portion is approximately $65 million.
For Phase II sulfur dioxide compliance, The Southern Company could use
emission allowances banked during Phase I, increase fuel switching, install flue
gas desulfurization equipment at selected plants, and/or purchase more
allowances depending on the price and availability of allowances. Also, in Phase
II, equipment to control nitrogen oxide emissions will be installed on
additional system fossil-fired plants as required to meet anticipated Phase II
limits. Therefore, during the period 1996 to 2000, current compliance strategy
for The Southern Company could require total construction expenditures of
approximately $150 million, of which Mississippi Power's portion is
approximately $5 million. However, the full impact of Phase II compliance cannot
now be determined with certainty, pending the continuing development of a market
for emission allowances, the completion of EPA regulations, and the possibility
of new emission reduction technologies.
An average increase of up to 2 percent in revenue requirements from
customers could be necessary to fully recover the Company's cost of compliance
for both Phase I and II of Title IV of the Clean Air Act. Compliance costs
include construction expenditures, increased costs for switching to low-sulfur
coal, and costs related to emission allowances.
Mississippi Power's ECO Plan is designed to allow recovery of costs of
compliance with the Clean Air Act, as well as other environmental statutes and
regulations. The MPSC reviews environmental projects and the Company's
environmental policy through the ECO Plan. Under the ECO Plan, any increase in
<PAGE>
8
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
the annual revenue requirement is limited to 2 percent of retail revenues.
However, the plan also provides for carryover of any amount over the 2 percent
limit into the next year's revenue requirement. Mississippi Power's management
believes that the ECO Plan provides for recovery of the Clean Air Act costs.
Title III of the Clean Air Act requires a multi-year EPA study of power
plant emissions of hazardous air pollutants. The EPA is scheduled to submit a
report to Congress on the results of this study by November 1995. The report
will include a decision on whether additional regulatory control of these
substances is warranted. Compliance with any new control standard could result
in significant additional costs. The impact of new standards -- if any -- will
depend on the development and implementation of applicable regulations.
The EPA continues to evaluate the need for a new short-term ambient air
quality standard for sulfur dioxide. Preliminary results from an EPA study on
the impact of a new standard indicate that a number of plants could be required
to install sulfur dioxide controls. These controls would be in addition to the
controls already required to meet the acid rain provisions of the Clean Air Act.
The EPA issued proposed rules in November 1994 and is required to take final
action on this issue in 1996. The impact of any new standard will depend on the
level chosen for the standard and cannot be determined at this time.
In addition, the EPA is evaluating the need to revise the ambient air
quality standards for particulate matter, nitrogen oxides, and ozone. The impact
of any new standard will depend on the level chosen for the standard and cannot
be determined at this time.
In 1995, the EPA may issue revised rules on air quality control regulations
related to stack height requirements of the Clean Air Act. The full impact of
the final rules cannot be determined at this time, pending their development and
implementation.
In 1993, the EPA issued a ruling confirming the non-hazardous status of coal
ash. However, the EPA has until 1998 to classify co-managed utility wastes --
coal ash and other utility wastes -- as either non-hazardous or hazardous. If
the EPA classifies the co-managed wastes as hazardous, then substantial
additional costs for the management of such wastes may be required. The full
impact of any change in the regulatory status will depend on the subsequent
development of co-managed waste requirements.
The Company must comply with other environmental laws and regulations that
cover the handling and disposal of hazardous waste. Under these various laws and
regulations, the Company could incur costs to clean up properties currently or
previously owned. Upon identifying potential sites, the Company conducts
studies, when possible, to determine the extent of any required cleanup costs.
Should remediation be determined to be probable, reasonable estimates of costs
to clean up such sites are developed and recognized in the financial statements.
A currently owned site where manufactured gas plant operations were located
prior to the Company's ownership is under investigation for potential
remediation, but no prediction can presently be made regarding the extent, if
any, of contamination or possible cleanup. Results of this investigation are
expected to be available in early 1995. If this site were required to be
remediated, industry studies show the Company could incur cleanup costs ranging
from $1.5 million to $10 million before giving consideration to possible
recovery of clean-up costs from other parties. Accordingly, no accrual has been
made for remediation in the accompanying financial statements.
Several major pieces of environmental legislation are in the process of
being reauthorized or amended by Congress. These include: the Clean Water Act;
the Resource Conservation and Recovery Act; the Comprehensive Environmental
Response, Compensation, and Liability Act; and the Endangered Species Act.
Changes to these laws could affect many areas of the Company's operations. The
full impact of these requirements cannot be determined at this time, pending the
development and implementation of applicable regulations.
Compliance with possible new legislation related to global climate change,
electromagnetic fields, and other environmental and health concerns could
significantly affect the Company. The impact of new legislation -- if any --
will depend on the subsequent development and implementation of applicable
regulations. In addition, the potential for lawsuits alleging damages caused by
electromagnetic fields exists.
<PAGE>
9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Mississippi Power Company 1994 Annual Report
Sources of Capital
At December 31, 1994, the Company had $70 million of committed credit in
revolving credit agreements and also had $27 million of committed short-term
credit lines. The Company had no short-term notes payable outstanding at year
end 1994.
It is anticipated that the funds required for construction and other
purposes, including compliance with environmental regulations, will be derived
from operations, the sale of additional first mortgage bonds, pollution control
obligations, and preferred stock, and the receipt of additional capital
contributions from The Southern Company. Mississippi Power is required to meet
certain coverage requirements specified in its mortgage indenture and corporate
charter to issue new first mortgage bonds and preferred stock. The Company's
coverage ratios are sufficiently high enough to permit, at present interest rate
levels, any foreseeable security sales. The amount of securities which the
Company will be permitted to issue in the future will depend upon market
conditions and other factors prevailing at that time.
<PAGE>
10
STATEMENTS OF INCOME
For the Years Ended December 31, 1994, 1993, and 1992
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
==========================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Operating Revenues (Notes 1 and 3):
Revenues $ 489,624 $ 459,364 $ 424,392
Revenues from affiliates 9,538 15,519 10,055
- ------------------------------------------------------------------------------------------
Total operating revenues 499,162 474,883 434,447
- ------------------------------------------------------------------------------------------
Operating Expenses:
Operation --
Fuel 102,216 113,986 96,743
Purchased power from non-affiliates 2,711 2,198 1,337
Purchased power from affiliates 68,543 58,019 60,689
Other 97,988 100,381 90,392
Maintenance 45,785 44,001 43,165
Depreciation and amortization 35,716 33,099 32,789
Taxes other than income taxes 41,742 37,145 34,664
Federal and state income taxes (Note 8) 31,386 22,668 16,378
- ------------------------------------------------------------------------------------------
Total operating expenses 426,087 411,497 376,157
- ------------------------------------------------------------------------------------------
Operating Income 73,075 63,386 58,290
Other Income (Expense):
Allowance for equity funds used during construction 1,099 1,010 642
Interest income 87 517 766
Other, net 2,033 3,971 5,501
Income taxes applicable to other income (227) (1,158) (1,427)
- ------------------------------------------------------------------------------------------
Income Before Interest Charges 76,067 67,726 63,772
- ------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 19,725 17,688 22,357
Allowance for debt funds used during construction (1,039) (788) (563)
Interest on notes payable 1,442 1,000 362
Amortization of debt discount, premium, and expense 1,479 1,262 630
Other interest charges 404 728 339
- ------------------------------------------------------------------------------------------
Net interest charges 22,011 19,890 23,125
- ------------------------------------------------------------------------------------------
Net Income 54,056 47,836 40,647
Dividends on Preferred Stock 4,899 5,400 3,857
- ------------------------------------------------------------------------------------------
Net Income After Dividends on Preferred Stock $ 49,157 $ 42,436 $ 36,790
==========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
11
STATEMENTS OF CASH FLOWS
For the Years ended December 31, 1994, 1993, and 1992
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
=========================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating Activities:
Net income $ 54,056 $ 47,836 $ 40,647
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 47,827 45,660 41,472
Deferred income taxes 1,563 5,039 (5,473)
Allowance for equity funds used during construction (1,099) (1,010) (642)
Other, net 5,230 3,005 7,904
Changes in certain current assets and liabilities --
Receivables, net 3,066 (4,347) 1,002
Inventories (9,856) 11,119 975
Payables (8,754) 4,133 460
Other 3,334 (8,033) 6,095
- ------------------------------------------------------------------------------------------
Net cash provided from operating activities 95,367 103,402 92,440
- ------------------------------------------------------------------------------------------
Investing Activities:
Gross property additions (104,014) (139,976) (68,189)
Other (14,087) 7,562 4,235
- ------------------------------------------------------------------------------------------
Net cash used for investing activities (118,101) (132,414) (63,954)
- ------------------------------------------------------------------------------------------
Financing Activities:
Proceeds:
Capital contributions 25,000 30,036 26
Preferred stock - 23,404 35,000
First mortgage bonds 35,000 70,000 40,000
Pollution control bonds - 38,875 23,300
Other long-term debt 85,310 - -
Retirements:
Preferred stock - (23,404) -
First mortgage bonds (32,628) (51,300) (104,703)
Pollution control bonds (10) (25,885) (23,650)
Other long-term debt (9,299) (8,170) (6,212)
Notes payable, net (40,000) 9,000 26,500
Payment of preferred stock dividends (4,899) (5,400) (3,857)
Payment of common stock dividends (34,100) (29,000) (28,000)
Miscellaneous (1,201) (5,683) (7,821)
- ------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 23,173 22,473 (49,417)
- ------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents 439 (6,539) (20,931)
Cash and Cash Equivalents at Beginning of Year 878 7,417 28,348
- -----------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 1,317 $ 878 $ 7,417
==========================================================================================
Supplemental Cash Flow Information:
Cash paid during the year for --
Interest (net of amount capitalized) $19,196 $15,697 $22,941
Income taxes 31,115 29,009 19,514
- ------------------------------------------------------------------------------------------
( ) Denotes use of cash. ***
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
12
BALANCE SHEETS
At December 31, 1994 and 1993
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
============================================================================================
ASSETS 1994 1993
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Utility Plant:
Plant in service, at original cost (Notes 1 and 6) $ 1,385,032 $ 1,238,847
Less accumulated provision for depreciation 477,098 462,725
- --------------------------------------------------------------------------------------------
907,934 776,122
Construction work in progress 44,838 108,063
- --------------------------------------------------------------------------------------------
Total 952,772 884,185
- --------------------------------------------------------------------------------------------
Other Property and Investments 3,353 11,289
- --------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,317 878
Receivables-
Customer accounts receivable 27,865 31,376
Other accounts and notes receivable 6,599 5,581
Affiliated companies 6,058 6,698
Accumulated provision for uncollectible accounts (670) (737)
Fossil fuel stock, at average cost 16,885 11,185
Materials and supplies, at average cost 25,301 21,145
Current portion of deferred fuel charges (Note 5) 1,068 440
Current portion of accumulated deferred income taxes (Note 8) 5,410 4,316
Prepaid federal income taxes 5,019 3,648
Prepayments 760 1,007
Vacation pay deferred (Note 1) 4,588 4,797
- --------------------------------------------------------------------------------------------
Total 100,200 90,334
- --------------------------------------------------------------------------------------------
Deferred Charges:
Debt expense and loss, being amortized 10,929 11,666
Deferred fuel charges (Note 5) 9,000 17,520
Deferred charges related to income taxes (Note 8) 25,036 25,267
Deferred early retirement program costs (Note 2) 11,286 -
Miscellaneous 11,135 10,073
- --------------------------------------------------------------------------------------------
Total 67,386 64,526
- --------------------------------------------------------------------------------------------
Total Assets $ 1,123,711 $ 1,050,334
============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
13
BALANCE SHEETS
At December 31, 1994 and 1993
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
============================================================================================
CAPITALIZATION AND LIABILITIES 1994 1993
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Capitalization (See accompanying statements):
Common stock equity $ 361,753 $ 321,768
Preferred stock 74,414 74,414
Long-term debt 306,522 250,391
- --------------------------------------------------------------------------------------------
Total 742,689 646,573
- --------------------------------------------------------------------------------------------
Current Liabilities:
Long-term debt due within one year (Note 10) 41,199 19,345
Notes payable (Note 5) - 40,000
Accounts payable-
Affiliated companies 3,337 10,197
Other 31,144 50,731
Customer deposits 2,712 2,786
Taxes accrued-
Federal and state income (Note 8) 433 186
Other 31,224 26,952
Interest accrued 4,427 4,237
Miscellaneous 14,613 14,120
- --------------------------------------------------------------------------------------------
Total 129,089 168,554
- --------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (Note 8) 129,505 124,334
Accumulated deferred investment tax credits 31,228 32,710
Deferred credits related to income taxes (Note 8) 45,832 48,228
Accumulated provision for property damage (Note 1) 10,905 10,538
Miscellaneous 34,463 19,397
- --------------------------------------------------------------------------------------------
Total 251,933 235,207
- --------------------------------------------------------------------------------------------
Commitments and Contingent Matters (Notes 2, 3, 4, and 5)
Total Capitalization and Liabilities $ 1,123,711 $ 1,050,334
============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
14
STATEMENTS OF CAPITALIZATION
At December 31, 1994 and 1993
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
=========================================================================================================
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------
(in thousands) (percent of total)
<S> <C> <C> <C> <C>
Common Stock Equity:
Common stock, without par value --
Authorized -- 1,130,000 shares
Outstanding -- 1,121,000 shares in
1994 and 1993 $ 37,691 $ 37,691
Paid-in capital 179,362 154,362
Premium on preferred stock 372 372
Retained earnings (Note 11) 144,328 129,343
- ---------------------------------------------------------------------------------------------------------
Total common stock equity 361,753 321,768 48.7 % 49.8 %
- ---------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock:
$100 par value --
Authorized -- 1,244,139 shares
Outstanding -- 744,139 shares in 1994
and 1993
4.40% 4,000 4,000
4.60% 2,010 2,010
4.72% 5,000 5,000
6.32% 15,000 15,000
6.65% 8,404 8,404
7.00% 5,000 5,000
7.25% 35,000 35,000
- --------------------------------------------------------------------------------------------------------
Total (annual dividend requirement -- $4,899,000) 74,414 74,414 10.0 11.5
- --------------------------------------------------------------------------------------------------------
Long-Term Debt:
First mortgage bonds --
Maturity Interest Rates
-------- --------------
June 1, 1994 4 5/8% - 10,000
July 1, 1995 4 3/4% - 11,000
August 1, 1996 6% - 10,000
March 1, 1998 5 3/8% 35,000 35,000
2000 to 2003 6 5/8% to 7 5/8% 40,000 40,000
March 1, 2004 6.60% 35,000 -
May 1, 2021 9 1/4% 47,072 48,700
June 1, 2023 7.45% 35,000 35,000
- --------------------------------------------------------------------------------------------------------
Total first mortgage bonds 192,072 189,700
Pollution control obligations (Note 9) 63,155 63,165
Other long-term debt (Note 9) 95,689 19,678
Unamortized debt premium (discount), net (3,195) (2,807)
- --------------------------------------------------------------------------------------------------------
Total long-term debt (annual interest
requirement--$22,606,000) 347,721 269,736
Less amount due within one year (Note 10) 41,199 19,345
- --------------------------------------------------------------------------------------------------------
Long-term debt excluding amount due within one year 306,522 250,391 41.3 38.7
- --------------------------------------------------------------------------------------------------------
Total Capitalization $ 742,689 $ 646,573 100.0% 100.0%
========================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
15
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31, 1994, 1993, and 1992
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
===========================================================================================
1994 1993 1992
------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at Beginning of Period $ 129,343 $ 118,429 $ 111,670
Net income after dividends on preferred stock 49,157 42,436 36,790
Cash dividends on common stock (34,100) (29,000) (28,000)
Preferred stock transactions and other, net (72) (2,522) (2,031)
- -------------------------------------------------------------------------------------------
Balance at End of Period (Note 11) $ 144,328 $ 129,343 $ 118,429
===========================================================================================
STATEMENTS OF PAID-IN CAPITAL
For the Years Ended December 31, 1994, 1993, and 1992
===========================================================================================
1994 1993 1992
- -------------------------------------------------------------------------------------------
(in thousands)
Balance at Beginning of Period $ 154,362 $ 124,326 $ 124,300
Contributions to capital by parent company 25,000 30,036 26
- -------------------------------------------------------------------------------------------
Balance at End of Period $ 179,362 $ 154,362 $ 124,326
===========================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
16
NOTES TO FINANCIAL STATEMENTS
Mississippi Power Company 1994 Annual Report
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
Mississippi Power Company is a wholly owned subsidiary of The Southern Company,
which is the parent company of five operating companies, Southern Company
Services (SCS), Southern Communications Services (Southern Communications),
Southern Electric International (Southern Electric), Southern Nuclear Operating
Company (Southern Nuclear), and The Southern Development and Investment Group
(SDIG). The operating companies (Alabama Power Company, Georgia Power Company,
Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power
Company) provide electric service in four southeastern states. Contracts among
the companies--dealing with jointly owned generating facilities, interconnecting
transmission lines, and the exchange of electric power--are regulated by the
Federal Energy Regulatory Commission (FERC) or the Securities and Exchange
Commission. SCS provides, at cost, specialized services to The Southern Company
and to the subsidiary companies. Southern Communications, beginning in mid-1995,
will provide digital wireless communications services--over the 800-megahertz
frequency band--to The Southern Company's subsidiaries and also will market
these services to the public within the Southeast. Southern Electric designs,
builds, owns, and operates power production facilities and provides a broad
range of technical services to industrial companies and utilities in the United
States and a number of international markets. Southern Nuclear provides services
to The Southern Company's nuclear power plants. SDIG develops new business
opportunities related to energy products and services.
The Southern Company is registered as a holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). Both The Southern Company and its
subsidiaries are subject to the regulatory provisions of the PUHCA. Mississippi
Power is also subject to regulation by the FERC and the Mississippi Public
Service Commission (MPSC). The Company follows generally accepted accounting
principles and complies with the accounting policies and practices prescribed by
the respective commissions.
Certain prior years' data presented in the financial statements have been
reclassified to conform with current year presentation.
Regulatory Assets and Liabilities
Mississippi Power is subject to the provisions of Financial Accounting Standards
Board (FASB) Statement No. 71, Accounting for the Effects of Certain Types of
Regulation. Regulatory assets represent probable future revenues to the Company
associated with certain costs that are expected to be recovered from customers
through the ratemaking process. Regulatory liabilities represent probable future
reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. Regulatory assets and (liabilities)
reflected in the Balance Sheets as of December 31 relate to: (in thousands)
===============================================================
1994 1993
------------------------
Deferred income taxes $25,036 $25,267
Vacation pay 4,588 4,797
Work force reduction costs 11,286 -
Deferred fuel charges 10,068 17,960
Premium on reacquired debt 9,571 10,563
Property damage reserve (10,905) (10,538)
Deferred income tax credits (45,832) (48,228)
Other, net (3,383) (3,653)
- ---------------------------------------------------------------
Total $ 429 $(3,832)
===============================================================
In the event that a portion of the Company's operations is no longer subject
to the provisions of Statement No. 71, the Company would be required to write
off the related regulatory assets and liabilities. In addition, the Company
would be required to determine any impairment to other assets, including plant,
and write down the assets to their fair value.
Revenues
Mississippi Power accrues revenues for service rendered but unbilled at the end
of each fiscal period. The Company's retail and wholesale rates include
provisions to adjust billings for fluctuations in fuel and the energy component
of purchased power. Retail rates also include provisions to adjust billings for
fluctuations in costs for ad valorem taxes and certain qualifying environmental
<PAGE>
17
NOTES (continued)
Mississippi Power Company 1994 Annual Report
costs. Revenues are adjusted for differences between actual allowable amounts
and the amounts included in rates.
The Company has a diversified base of customers. No single customer or
industry comprised 10 percent or more of revenues. In 1994, uncollectible
accounts continued to average less than 1 percent of revenues.
Depreciation
Depreciation of the original cost of depreciable utility plant in service is
provided by using composite straight-line rates which approximated 3.2 percent
in 1994, 3.1 percent in 1993, and 3.3 percent in 1992. When property subject to
depreciation is retired or otherwise disposed of in the normal course of
business, its cost -- together with the cost of removal, less salvage -- is
charged to the accumulated provision for depreciation. Minor items of property
included in the original cost of the plant are retired when the related property
unit is retired.
Income Taxes
Mississippi Power provides deferred income taxes for all significant income tax
temporary differences. Investment tax credits utilized are deferred and
amortized to income over the average lives of the related property.
Effective January 1, 1993, Mississippi Power adopted FASB Statement No.
109, Accounting for Income Taxes. Statement No. 109 required, among other
things, conversion to the liability method of accounting for accumulated
deferred income taxes. See Note 8 to the financial statements for additional
information about Statement No. 109.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the estimated debt and equity costs of capital funds that are
necessary to finance the construction of new facilities. While cash is not
realized currently from such allowance, it increases the revenue requirement
over the service life of the plant through a higher rate base and higher
depreciation expense. The composite rates used to capitalize the cost of funds
devoted to construction were 6.9 percent in 1994, 6.8 percent in 1993, and 8.2
percent in 1992. AFUDC (net of income taxes), as a percent of net income after
dividends on preferred stock, was 3.5 percent in 1994 and 1993 and 2.7 percent
in 1992.
Utility Plant
Utility plant is stated at original cost. This cost includes: materials; labor;
minor items of property; appropriate administrative and general costs;
payroll-related costs such as taxes, pensions, and other benefits; and the
estimated cost of funds used during construction. The cost of maintenance,
repairs, and replacement of minor items of property is charged to maintenance
expense except for the maintenance of coal cars and a portion of the railway
track maintenance, which are charged to fuel stock. The cost of replacements of
property (exclusive of minor items of property) is charged to utility plant.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, temporary cash investments are
considered cash equivalents. Temporary cash investments are securities with
original maturities of 90 days or less.
Financial Instruments
In accordance with FASB Statement No. 107, Disclosure About Fair Value of
Financial Instruments, all financial instruments of the Company for which the
carrying amount does not approximate fair value, must be disclosed. At December
31, 1994, the fair value of long-term debt was $331 million and the carrying
amount was $348 million. At December 31, 1993, the fair value of long-term debt
was $278 million and the carrying amount was $270 million. The fair value for
long-term debt was based on either closing market price or closing price of
comparable instruments.
Materials and Supplies
Generally, materials and supplies include the cost of transmission, distribution
and generating plant materials. Materials are charged to inventory when
purchased and then expensed or capitalized to plant, as appropriate, when used
or installed.
<PAGE>
18
NOTES (continued)
Mississippi Power Company 1994 Annual Report
Vacation Pay
Mississippi Power's employees earn their vacation in one year and take it in the
subsequent year. However, for ratemaking purposes, vacation pay is recognized as
an allowable expense only when paid. Consistent with this ratemaking treatment,
the Company accrues a current liability for earned vacation pay and records a
current asset representing the future recoverability of this cost. Such amounts
were $4.6 million and $4.8 million at December 31, 1994 and 1993, respectively.
In 1995, an estimated 78 percent of the 1994 deferred vacation cost will be
expensed, and the balance will be charged to construction and other accounts.
Provision for Property Damage
Mississippi Power is self-insured for the cost of storm, fire and other
uninsured casualty damage to its property, including transmission and
distribution facilities. As permitted by regulatory authorities, the Company
provided for such costs by charges to income of $1.1 million in 1994 and $1.5
million in 1993 and 1992. The cost of repairing damage resulting from such
events that individually exceed $50 thousand is charged to the accumulated
provision to the extent it is available. As of December 31, 1994, the
accumulated provision amounted to $10.9 million, the maximum allowed for 1994.
Effective January 1995, regulatory treatment by the MPSC allows a maximum
accumulated provision of $18 million.
2. RETIREMENT BENEFITS:
Pension Plan
Mississippi Power has a defined benefit, trusteed, non-contributory pension plan
that covers substantially all regular employees. Benefits are based on the
greater of amounts resulting from two different formulas: years of service and
final average pay or years of service and a flat-dollar benefit. The Company
uses the "entry age normal method with a frozen initial liability" actuarial
method for funding purposes, subject to limitations under federal income tax
regulations. Amounts funded to the pension trust are primarily invested in
equity and fixed-income securities. FASB Statement No. 87, Employers' Accounting
for Pensions, requires use of the "projected unit credit" actuarial method for
financial reporting purposes.
Postretirement Benefits
Mississippi Power also provides certain medical care and life insurance benefits
for retired employees. Substantially all employees may become eligible for these
benefits when they retire. Qualified trusts are funded to the extent required by
the Company's regulatory commissions. Amounts funded are primarily invested in
debt and equity securities.
Effective January 1, 1993, Mississippi Power adopted FASB Statement No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions, on a
prospective basis. Statement No. 106 requires that medical care and life
insurance benefits for retired employees be accounted for on an accrual basis
using a specified actuarial method, "benefit/years-of-service." The cost of
postretirement benefits is reflected in rates on a current basis.
Prior to 1993, Mississippi Power recognized these benefit costs on an
accrual basis using the "aggregate cost" actuarial method, which spreads the
expected cost of such benefits over the remaining periods of employees' service
as a level percentage of payroll costs. The total cost of such benefits
recognized by the Company was $3.6 million in 1992.
Funded Status and Cost of Benefits
Shown in the following tables are actuarial results and assumptions for
pension and postretirement medical and life insurance benefits as computed under
the requirements of FASB Statement Nos. 87 and 106, respectively. The funded
status of the plans at December 31 was as follows:
<PAGE>
19
NOTES (continued)
Mississippi Power Company 1994 Annual Report
===============================================================
Pension
-------------------
1994 1993
-------------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $80,603 $73,735
Non-vested benefits 2,966 3,245
--------------------------------------------------------------
Accumulated benefit obligation 83,569 76,980
Additional amounts related to
projected salary increases 27,292 24,434
- ---------------------------------------------------------------
Projected benefit obligation 110,861 101,414
Less:
Fair value of plan assets 145,598 154,224
Unrecognized net gain (37,485) (49,239)
Unrecognized prior service cost 3,109 3,590
Unrecognized transition asset (6,635) (7,188)
- ---------------------------------------------------------------
Prepaid asset (accrued liability)
recognized in the
Balance Sheets $(6,274) $ (27)
===============================================================
Postretirement Medical
------------------------
1994 1993
------------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees and dependents $18,106 $10,408
Employees eligible to retire 774 3,752
Other employees 19,124 19,389
- ---------------------------------------------------------------
Accumulated benefit obligation 38,004 33,549
Less:
Fair value of plan assets 6,460 6,271
Unrecognized net loss (gain) 2,301 3,500
Unrecognized transition
obligation 15,319 16,540
- ---------------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $13,924 $ 7,238
===============================================================
Postretirement Life
----------------------
1994 1993
----------------------
(in thousands)
Actuarial present value of
benefit obligation:
Retirees $4,727 $3,315
Other employees 3,727 4,596
- -----------------------------------------------------------
Accumulated benefit obligation 8,454 7,911
Less:
Fair value of plan assets 148 84
Unrecognized net loss (gain) (550) (632)
Unrecognized transition
obligation 3,349 3,606
- -----------------------------------------------------------
Accrued liability recognized in
the Balance Sheets $5,507 $4,853
===========================================================
The weighted average rates assumed in the above actuarial calculations were:
==========================================================
1994 1993 1992
----------------------------
Discount 8.0% 7.5% 8.0%
Annual salary increase 5.5 5.0 6.0
Long-term return on
plan assets 8.5 8.5 8.5
- ----------------------------------------------------------
An additional assumption used in measuring the accumulated postretirement
medical benefit obligation was a weighted average medical care cost trend rate
of 10.5 percent for 1994 decreasing gradually to 6.0 percent through the year
2000 and remaining at that level thereafter. An annual increase in the assumed
medical care cost trend rate of 1 percent would increase the accumulated medical
benefit obligation as of December 31, 1994, by $6.7 million and the aggregate of
the service and interest cost components of the net retiree medical cost by $1.1
million.
<PAGE>
20
NOTES (continued)
Mississippi Power Company 1994 Annual Report
Components of the plans' net cost are shown below:
================================================================
Pension
------------------------------
1994 1993 1992
------------------------------
(in thousands)
Benefits earned during
the year $ 3,780 $ 3,792 $ 3,595
Interest cost on
projected benefit
obligation 7,503 7,296 6,886
Actual (return) loss on
plan assets 3,244 (20,017) (5,812)
Net amortization and
deferral (16,048) 8,741 (4,265)
- -----------------------------------------------------------------
Net pension cost (income) $(1,521) $ (188) $ 404
=================================================================
Of the above net pension amounts recorded, $(1.1) million in 1994, $(170)
thousand in 1993, and $269 thousand in 1992, and were recorded in operating
expenses, and the remainder was recorded in construction and other accounts.
Postretirement Medical
----------------------------
1994 1993
----------------------------
(in thousands)
Benefits earned during the year $1,486 $1,149
Interest cost on accumulated
benefit obligation 2,666 2,187
Amortization of transition
obligation over 20 years 864 871
Actual (return) loss on
plan assets 127 (808)
Net amortization and deferral (562) 343
- -----------------------------------------------------------------
Net postretirement cost $4,581 $3,742
=================================================================
Postretirement Life
---------------------
1994 1993
---------------------
(in thousands)
Benefits earned during the year $ 274 $ 299
Interest cost on accumulated
benefit obligation 585 624
Amortization of transition
obligation over 20 years 179 180
Actual (return) loss on
plan assets 5 (6)
Net amortization and deferral (13) -
- ---------------------------------------------------------------
Net postretirement cost $1,030 $1,097
===============================================================
Of the above net postretirement medical and life insurance costs recorded,
$4.4 million in 1994 and $3.9 million in 1993 was charged to operating expense
and the remainder was charged to construction and other accounts.
Work Force Reduction Programs
During 1994, Mississippi Power and SCS instituted work force reduction
programs. The costs of the SCS work force reduction program were apportioned
among the various entities that form the Southern electric system, with the
Company's portion amounting to $1.4 million. The Company instituted an early
retirement incentive program in April 1994 and deferred the related costs of
approximately $12.9 million. The Company received authority from the MPSC to
defer these costs, as well as its portion of the costs of the SCS program, and
to amortize over a period not to exceed 60 months, beginning no later than
January 1995. During 1994, the Company expensed $3.0 million of the cost of
these programs.
3. LITIGATION AND REGULATORY MATTERS:
Retail Rate Adjustment Plans
Mississippi Power's retail base rates are set under a Performance Evaluation
Plan (PEP). The current version, PEP-2 was approved by the MPSC in January 1994.
PEP-2 was designed with the MPSC objectives that the plan would reduce the
impact of rate changes on the customer and provide incentives for Mississippi
Power to keep customer prices low. PEP-2 includes a mechanism for sharing rate
adjustments based on the Company's ability to maintain low rates for customers
and on the Company's performance as measured by three indicators that emphasize
price and service to the customer. PEP-2 provides for semiannual evaluations of
Mississippi's performance-based return on investment. Any change in rates is
limited to 2 percent of retail revenues per evaluation period. PEP-2 will remain
in effect until the MPSC modifies or terminates the plan. During 1994, there was
no increase under PEP-2.
Environmental Compliance Overview Plan
The MPSC approved Mississippi Power's ECO Plan in 1992. The plan establishes
procedures to facilitate the MPSC's overview of the Company's environmental
strategy and provides for recovery of costs associated with environmental
projects approved by the MPSC. Under the ECO Plan any increase in the annual
revenue requirement is limited to 2 percent of retail revenues. However, the
plan also provides for carryover of any amount over the 2 percent limit into the
next year's revenue requirement. The ECO Plan has resulted in annual retail rate
increases, the latest being a $7.6 million increase effective April 1994. On
<PAGE>
21
NOTES (continued)
Mississippi Power Company 1994 Annual Report
January 31, 1995, the Company filed the ECO Plan with the MPSC requesting an
annual retail rate increase of $3.7 million, which included $1.6 million of 1994
carryover.
Mississippi Power conducts studies, when possible, to determine the extent
of any required clean-up costs. Should remediation be determined to be probable,
reasonable estimates of costs to clean up such sites are developed and
recognized in the financial statements. See "Environmental Matters" in the
Management's Discussion and Analysis for information on a manufactured gas plant
site.
FERC Reviews Equity Returns
In May 1991, the FERC ordered that hearings be conducted concerning the
reasonableness of the Southern electric system's wholesale rate schedules and
contracts that have a return on equity of 13.75 percent or greater. The
contracts that could be affected by the hearings include substantially all of
the transmission, unit power, long-term power and other similar contracts,
including the Company's Transmission Facilities Agreement (TFA) discussed in
Note 5 under "Lease Agreements." Any changes in the rate of return on common
equity that may require refunds as a result of this proceeding would be
substantially for the period beginning in July 1991 and ending in October 1992.
In August 1992, a FERC administrative law judge issued an opinion that
changes in rate schedules and contracts were not necessary and that the FERC
staff failed to show how any changes were in the public interest. The FERC staff
has filed exceptions to the administrative law judge's opinion, and the matter
remains pending before the FERC.
In August 1994, the FERC instituted another proceeding based on
substantially the same issues as in the 1991 proceeding. The second period under
review for possible refunds began in October 1994 and is scheduled to continue
until January 1996.
If the rates of return on common equity recommended by the FERC staff were
applied to all of the schedules and contracts involved in both proceedings and
refunds were ordered, the amount of refunds could range up to approximately $0.6
million at December 31, 1994. Although the final outcome of this matter cannot
now be determined, in management's opinion, the final outcome will not result in
changes that would have a material adverse effect on the Company's financial
statements.
4. CONSTRUCTION PROGRAM:
Mississippi Power is engaged in continuous construction programs, the costs of
which are currently estimated to total some $78 million in 1995, $73 million in
1996, and $72 million in 1997. These estimates include AFUDC of $1.7 million in
1995, $2.2 million in 1996, and $1.5 million in 1997.
The construction program is subject to periodic review and revision, and
actual construction costs may vary from the above estimates because of numerous
factors. These factors include changes in business conditions; revised load
growth estimates; changes in environmental regulations; increasing costs of
labor, equipment and materials; and cost of capital. The Company does not have
any new generating plants under construction. However, significant construction
will continue related to transmission and distribution facilities and the
upgrading and extension of the useful lives of generating plants.
See "Environmental Matters" in Management's Discussion and Analysis for
information on the impact of the Clean Air Act Amendments of 1990 and other
environmental matters.
5. FINANCING AND COMMITMENTS:
Financing
Mississippi Power's construction program is expected to be financed from
internal and other sources, such as the issuance of additional long-term debt
and preferred stock and the receipt of capital contributions from The Southern
Company.
The amounts of first mortgage bonds and preferred stock which can be issued
in the future will be contingent upon market conditions, adequate earnings
levels, regulatory authorizations and other factors. See "Sources of Capital" in
Management's Discussion and Analysis for information regarding the Company's
coverage requirements.
At December 31, 1994, Mississippi Power had unused committed credit
agreements with banks for $27 million. Additionally, Mississippi Power had $70
million of unused committed credit agreements in the form of revolving credit
<PAGE>
22
NOTES (continued)
Mississippi Power Company 1994 Annual Report
agreements expiring at various dates during 1995 and in 1997. The agreements
expiring December 31, 1997, for $40 million allow short-term borrowings to be
converted into term loans, payable in 12 equal quarterly installments, with the
first installment due at the end of the first calendar quarter after the
applicable termination date or at an earlier date at the Company's option. In
connection with these credit arrangements, the Company agrees to pay commitment
fees based on the unused portions of the commitments or to maintain compensating
balances with the banks. The Company had no short-term borrowings outstanding at
year-end 1994.
Assets Subject to Lien
Mississippi Power's mortgage indenture dated as of September 1, 1941, as amended
and supplemented, which secures the first mortgage bonds issued by the Company,
constitutes a direct first lien on substantially all the Company's fixed
property and franchises.
Lease Agreements
In 1984, Mississippi Power and Gulf States Utilities Company (Gulf States)
entered into a forty-year transmission facilities agreement whereby Gulf States
began paying a use fee to the Company covering all expenses relative to
ownership and operation and maintenance of a 500 kV line, including amortization
of its original $57 million cost. For the three years ended 1994 use fees
collected under this agreement, net of related expenses, amounted to $3.9
million each year, and are included with other income, net, in the Statements of
Income. For other information see Note 3 under "FERC Reviews Equity Returns."
In 1989, Mississippi Power entered into a twenty-two
year lease agreement for the use of 495 aluminum railcars. In 1994, a second
lease agreement for the use of 250 additional aluminum railcars was also entered
into for twenty-two years. Both of these leases, totaling 745 railcars, were for
the transport of coal at Plant Daniel. Gulf Power, as joint owner of Plant
Daniel, is responsible for one half of the lease cost. The Company's share (50%)
of the leases is charged to fuel inventory and allocated to fuel expense as the
fuel is consumed. The lease cost charged to inventory was $1.2 million in each
of the past three years. For the year 1995, the Company's annual lease payment
will be $2.6 million, of which $1.2 million was charged to inventory in 1994.
Lease payments will be approximately $1.7 million per year for the years 1996
through 1999. Lease payments after 1999 total approximately $26.1 million. The
Company has the option to purchase the 745 railcars at the greater of the
termination value or the fair market value, or to renew the leases at the end of
the lease term.
Fuel Commitments
To supply a portion of the fuel requirements of its generating plants,
Mississippi Power has entered into various long-term commitments for the
procurement of fuel. In most cases, these contracts contain provisions for price
escalations, minimum production levels, and other financial commitments. Total
estimated obligations were approximately $393 million at December 31, 1994.
Additional commitments for fuel will be required in the future to supply the
Company's fuel needs.
In order to take advantage of lower cost coal supplies, agreements were
reached in 1986 to terminate two contracts for the supply of coal to Plant
Daniel, which is jointly owned by Mississippi Power and Gulf Power, an operating
affiliate. The Company's portion of this payment was about $60 million. In
accordance with the ratemaking treatment, the cost to terminate the contracts is
being amortized through 1995 to match costs with savings achieved. The remaining
unamortized amount of Mississippi Power's share of principal payments to the
suppliers totaled $10.1 million at December 31, 1994.
6. JOINT OWNERSHIP AGREEMENTS:
Mississippi Power and Alabama Power own as tenants in common Greene County
Electric Generating Plant (coal) located in Alabama; and Mississippi Power and
Gulf Power own as tenants in common Daniel Electric Generating Plant (coal)
located in Mississippi. At December 31, 1994, Mississippi Power's percentage
ownership and investment in these jointly owned facilities were as follows:
==========================================================================
Company's
Generating Total Percent Gross Accumulated
Plant Capacity Ownership Investment Depreciation
- ---------- --------- --------- ----------- -------------
(Megawatts) (in thousands)
Greene
County 500 40% $ 57,567 $29,742
Daniel 1,000 50% 219,870 90,908
- --------------------------------------------------------------------------
<PAGE>
23
NOTES (continued)
Mississippi Power Company 1994 Annual Report
Mississippi Power's share of plant operating expenses is included in the
corresponding operating expenses in the Statements of Income.
7. LONG-TERM POWER SALES AGREEMENTS:
General
Mississippi Power and the other operating affiliates of The Southern Company
have entered into long-term contractual agreements for the sale of capacity and
energy to certain non-affiliated utilities located outside of the system's
service area. The agreements for non-firm capacity expired in 1994. Some of
these agreements (unit power sales) are firm commitments and pertain to capacity
related to specific generating units. Mississippi Power's participation in firm
production capacity unit power sales ended in 1989. However, the Company
continues to participate in transmission and energy sales under the unit power
sales agreements. Because the energy is generally sold at variable costs under
these agreements, only revenues from capacity sales affect profitability.
Off-system capacity revenues for the Company have been as follows:
============================================================
Other
Year Unit Power Long-Term Total
- ------------------------------------------------------------
(in thousands)
1994 $ 660 $1,305 $1,965
1993 1,571 2,620 4,191
1992 2,168 1,405 3,573
- ------------------------------------------------------------
In 1994, long-term non-firm power of 200 megawatts was sold by the Southern
electric system to Florida Power Corporation until the contract expired at
year-end.
8. INCOME TAXES:
Effective January 1, 1993, Mississippi Power adopted FASB Statement No. 109,
Accounting for Income Taxes. The adoption resulted in the recording of
additional deferred income taxes and related regulatory assets and liabilities.
At December 31, 1994, the tax-related regulatory assets to be recovered from
customers were $25 million. These assets are attributable to tax benefits flowed
through to customers in prior years and to taxes applicable to capitalized
AFUDC. At December 31, 1994, the tax-related regulatory liabilities to be
refunded to customers were $46 million. These liabilities are attributable to
deferred taxes previously recognized at rates higher than current enacted tax
law and unamortized investment tax credits.
Details of the federal and state income tax provisions are shown below:
==================================================================
1994 1993 1992
------------------------------
(in thousands)
Total provision for
income taxes
Federal --
Currently payable $26,072 $15,842 $20,286
Deferred --current year 6,313 5,158 (1,578)
--reversal of
prior years (5,161) (820) (3,931)
- ------------------------------------------------------------------
27,224 20,180 14,777
- ------------------------------------------------------------------
State --
Currently payable 3,978 2,945 2,992
Deferred --current 1,669 1,339 218
--reversal of
prior years (1,258) (638) (182)
- ------------------------------------------------------------------
4,389 3,646 3,028
- ------------------------------------------------------------------
Total 31,613 23,826 17,805
Less income taxes charged
to other income 227 1,158 1,427
- ------------------------------------------------------------------
Federal and state
income taxes charged
to operations $31,386 $22,668 $16,378
==================================================================
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
<PAGE>
24
NOTES (continued)
Mississippi Power Company 1994 Annual Report
bases, which give rise to deferred tax assets and liabilities are as follows:
===============================================================
1994 1993
-------------------------
(in thousands)
Deferred tax liabilities:
Accelerated depreciation $138,281 $130,299
Basis differences 11,645 11,332
Coal contract buyouts 3,851 6,870
Other 17,908 18,719
- ---------------------------------------------------------------
Total 171,685 167,220
- ---------------------------------------------------------------
Deferred tax assets:
Other property
basis differences 27,375 28,779
Pension and
other benefits 5,386 4,625
Property insurance 4,171 4,031
Unbilled fuel 3,649 4,205
Other 7,009 5,562
- --------------------------------------------------------------
Total 47,590 47,202
- --------------------------------------------------------------
Net deferred tax
liabilities 124,095 120,018
Portion included in
current assets, net 5,410 4,316
- --------------------------------------------------------------
Accumulated deferred
income taxes in the
Balance Sheets $129,505 $124,334
==============================================================
In 1989, under order of the MPSC, Mississippi Power began amortizing
deferred income taxes not covered by the Internal Revenue Service normalization
requirements, that had been recorded at rates higher than those specified by the
current statutory income tax rules. This amortization occurred over a 60-month
period, the effect of which was a reduction of income tax expense of
approximately $2.7 million per year. This tax rate differential has been fully
amortized.
Deferred investment tax credits are amortized over the life of the related
property with such amortization normally applied as a credit to reduce
depreciation in the Statements of Income. Credits amortized in this manner
amounted to $1.5 million in both 1994 and 1993 and $1.4 million in 1992. At
December 31, 1994, all investment tax credits available to reduce federal income
taxes payable had been utilized.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
=============================================================
1994 1993 1992
----------------------------
Total effective tax rate 37% 33% 30%
State income tax, net of
federal income tax benefit (3)% (3) (3)
Tax rate differential 1 4 6
Other - 1 1
- -------------------------------------------------------------
Statutory federal tax rate 35% 35% 34%
=============================================================
Mississippi Power and its affiliates file a consolidated federal income tax
return. Under a joint consolidated income tax agreement, each company's current
and deferred tax expense is computed on a stand-alone basis, and consolidated
tax savings are allocated to each company based on its ratio of taxable income
to total consolidated taxable income.
9. OTHER LONG-TERM DEBT:
Details of other long-term debt are as follows:
==============================================================
December 31,
1994 1993
-------------------
(in thousands)
Obligations incurred in
connection with the sale by
public authorities of
tax-exempt pollution control
revenue bonds:
5.80% due 2007 $ 980 $ 990
Variable rate due 2020 6,550 6,550
Variable rate due 2022 16,750 16,750
6.20% due 2023 13,000 13,000
5.65% due 2023 25,875 25,875
- --------------------------------------------------------------
63,155 63,165
- --------------------------------------------------------------
Notes payable:
8.25% due 1994-1995 - 17,520
7.50% due 1994-1995 1,689 2,158
5.39% to 5.72% due 1995 9,000 -
4.15% to 5.89% due 1995-1996 50,000 -
6.0375% due 1996 35,000 -
- --------------------------------------------------------------
95,689 19,678
- --------------------------------------------------------------
Total $158,844 $82,843
==============================================================
Pollution control obligations represent installment or lease purchases of
pollution control facilities financed by application of funds derived from sales
by public authorities of tax-exempt revenue bonds. Mississippi Power has
authenticated and delivered to the Trustee a like principal amount of first
<PAGE>
25
NOTES (continued)
Mississippi Power Company 1994 Annual Report
mortgage bonds as security for obligations under collateralized installment
agreements. The principal and interest on the first mortgage bonds will be
payable only in the event of default under these agreements. The 5.8% Series of
pollution control obligations has a cash sinking fund requirement of $10
thousand annually through 1997 and $20 thousand annually in 1998 and 1999.
10. LONG-TERM DEBT DUE WITHIN ONE YEAR:
A summary of the improvement fund requirements and scheduled maturities and
redemptions of long-term debt due within one year is as follows:
===============================================================
1994 1993
-------------------
(in thousands)
Bond improvement
fund requirements $ 1,931 $ 1,902
Less:
Portion to be satisfied by
certifying property additions 1,431 1,402
- ---------------------------------------------------------------
Cash improvement fund
requirements 500 500
First mortgage bond maturities
and redemptions - 10,000
Pollution control bond cash
sinking fund requirements (Note 9) 10 10
Current portion of notes
payable (Note 9) 40,689 8,835
- ---------------------------------------------------------------
Total $41,199 $19,345
===============================================================
The first mortgage bond improvement fund requirement is one percent of each
outstanding series authenticated under the indenture of Mississippi Power prior
to January 1 of each year, other than first mortgage bonds issued as collateral
security for certain pollution control obligations. The requirement must be
satisfied by June 1 of each year by depositing cash or reacquiring bonds, or by
pledging additional property equal to 166-2/3 percent of such requirement.
11. COMMON STOCK DIVIDEND RESTRICTIONS:
Mississippi Power's first mortgage bond indenture and the corporate charter
contain various common stock dividend restrictions. At December 31, 1994, $94
million of retained earnings was restricted against the payment of cash
dividends on common stock under the most restrictive terms of the mortgage
indenture or corporate charter.
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for 1994 and 1993 are as follows:
===================================================================
Net Income
After Dividends
Quarter Operating Operating On
Ended Revenues Income Preferred Stock
- ------- ------------------------------------------------
March 1994 $114,134 $12,910 $ 8,266
June 1994 131,792 19,891 13,744
September 1994 142,340 26,212 21,357
December 1994 110,896 14,062 5,790
March 1993 $101,552 $ 9,529 $ 4,424
June 1993 117,764 18,147 11,852
September 1993 148,102 22,377 16,560
December 1993 107,465 13,333 9,600
Mississippi Power's business is influenced by seasonal weather conditions
and the timing of rate changes.
<PAGE>
26
SELECTED FINANCIAL AND OPERATING DATA
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $499,162 $474,883 $434,447
Net Income after Dividends
on Preferred Stock (in thousands) $49,157 $42,436 $36,790
Cash Dividends on Common Stock (in thousands) $34,100 $29,000 $28,000
Return on Average Common Equity (percent) 14.38 14.09 13.27
Total Assets (in thousands) $1,123,711 $1,050,334 $791,283
Gross Property Additions (in thousands) $104,014 $139,976 $68,189
- ------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $361,753 $321,768 $280,640
Preferred stock 74,414 74,414 74,414
Preferred stock subject to mandatory redemption - - -
Long-term debt 306,522 250,391 238,650
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $742,689 $646,573 $593,704
================================================================================================
Capitalization Ratios (percent):
Common stock equity 48.7 49.8 47.3
Preferred stock 10.0 11.5 12.5
Long-term debt 41.3 38.7 40.2
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
================================================================================================
First Mortgage Bonds (in thousands):
Issued 35,000 70,000 40,000
Retired 32,628 51,300 104,703
Preferred Stock (in thousands):
Issued - 23,404 35,000
Retired - 23,404 -
- ------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's Aa3 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps A+ A+ A+
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps A A A
- ------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 152,891 151,692 150,248
Commercial 29,276 28,648 28,056
Industrial 650 570 573
Other 189 190 189
- ------------------------------------------------------------------------------------------------
Total 183,006 181,100 179,066
================================================================================================
Employees (year-end) 1,535 1,586 1,619
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
27A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1991 1990 1989
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $432,386 $446,871 $442,650
Net Income after Dividends
on Preferred Stock (in thousands) $22,627 $34,176 $38,576
Cash Dividends on Common Stock (in thousands) $28,500 $27,500 $27,000
Return on Average Common Equity (percent) 8.17 12.36 14.43
Total Assets (in thousands) $790,641 $800,026 $786,570
Gross Property Additions (in thousands) $53,675 $49,009 $43,916
- ------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $273,855 $279,833 $273,157
Preferred stock 39,414 39,414 39,414
Preferred stock subject to mandatory redemption - 3,750 4,500
Long-term debt 304,150 270,724 277,693
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $617,419 $593,721 $594,764
================================================================================================
Capitalization Ratios (percent):
Common stock equity 44.4 47.1 45.9
Preferred stock 6.4 7.3 7.4
Long-term debt 49.2 45.6 46.7
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
================================================================================================
First Mortgage Bonds (in thousands):
Issued 50,000 - -
Retired - 4,000 3,823
Preferred Stock (in thousands):
Issued - - -
Retired 4,118 750 750
- ------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps A+ A+ A+
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps A A A
- ------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 148,978 147,738 147,308
Commercial 27,441 27,134 26,867
Industrial 562 574 525
Other 400 411 404
- ------------------------------------------------------------------------------------------------
Total 177,381 175,857 175,104
================================================================================================
Employees (year-end) 1,630 1,842 1,750
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
27B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1988 1987 1986
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands) $437,939 $455,843 $476,265
Net Income after Dividends
on Preferred Stock (in thousands) $36,081 $35,200 $33,814
Cash Dividends on Common Stock (in thousands) $27,600 $24,700 $23,700
Return on Average Common Equity (percent) 14.03 14.68 15.28
Total Assets (in thousands) $779,319 $764,068 $767,110
Gross Property Additions (in thousands) $54,550 $53,288 $62,488
- ------------------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $261,473 $252,992 $226,601
Preferred stock 39,414 39,414 39,414
Preferred stock subject to mandatory redemption 5,250 6,750 8,250
Long-term debt 287,525 294,811 299,684
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $593,662 $593,967 $573,949
================================================================================================
Capitalization Ratios (percent):
Common stock equity 44.1 42.6 39.5
Preferred stock 7.5 7.8 8.3
Long-term debt 48.4 49.6 52.2
- ------------------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0 100.0
================================================================================================
First Mortgage Bonds (in thousands):
Issued - - 35,000
Retired - 29,701 29,250
Preferred Stock (in thousands):
Issued - - -
Retired 1,500 1,500 1,500
- ------------------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1 A1
Standard and Poor's A+ A+ A+
Duff & Phelps 5 5 5
- ------------------------------------------------------------------------------------------------
Preferred Stock -
Moody's a1 a1 a1
Standard and Poor's A A A
Duff & Phelps 6 6 6
- ------------------------------------------------------------------------------------------------
Customers (year-end):
Residential 146,750 146,273 145,809
Commercial 26,751 26,342 26,217
Industrial 478 438 393
Other 399 389 363
- ------------------------------------------------------------------------------------------------
Total 174,378 173,442 172,782
================================================================================================
Employees (year-end) 1,831 1,898 1,882
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
27C
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
====================================================================================
1985 1984
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands) $475,610 $442,507
Net Income after Dividends
on Preferred Stock (in thousands) $33,330 $31,380
Cash Dividends on Common Stock (in thousands) $22,600 $21,000
Return on Average Common Equity (percent) 15.83 15.74
Total Assets (in thousands) $679,577 $660,530
Gross Property Additions (in thousands) $57,791 $37,290
- ------------------------------------------------------------------------------------
Capitalization (in thousands):
Common stock equity $216,087 $205,018
Preferred stock 39,414 39,414
Preferred stock subject to mandatory redemption 9,750 10,500
Long-term debt 261,594 267,051
- ------------------------------------------------------------------------------------
Total (excluding amounts due within one year) $526,845 $521,983
====================================================================================
Capitalization Ratios (percent):
Common stock equity 41.0 39.3
Preferred stock 9.3 9.5
Long-term debt 49.7 51.2
- ------------------------------------------------------------------------------------
Total (excluding amounts due within one year) 100.0 100.0
====================================================================================
First Mortgage Bonds (in thousands):
Issued - -
Retired 250 250
Preferred Stock (in thousands):
Issued - -
Retired 1,111 639
- ------------------------------------------------------------------------------------
Security Ratings:
First Mortgage Bonds -
Moody's A1 A1
Standard and Poor's A A
Duff & Phelps 5 5
Preferred Stock -
Moody's a1 a1
Standard and Poor's A A
Duff & Phelps 6 6
- ------------------------------------------------------------------------------------
Customers (year-end):
Residential 145,071 142,846
Commercial 25,629 25,404
Industrial 371 348
Other 356 356
- ------------------------------------------------------------------------------------
Total 171,427 168,954
====================================================================================
Employees (year-end) 1,801 1,669
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
28
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $124,257 $118,793 $109,781
Commercial 124,716 115,152 107,131
Industrial 142,268 130,198 117,010
Other 3,882 3,760 3,533
- ------------------------------------------------------------------------------------------------
Total retail 395,123 367,903 337,455
Sales for resale - non-affiliates 88,122 83,511 80,213
Sales for resale - affiliates 9,538 15,519 10,055
- ------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 492,783 466,933 427,723
Other revenues 6,379 7,950 6,724
- ------------------------------------------------------------------------------------------------
Total $499,162 $474,883 $434,447
================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,922,217 1,929,835 1,804,858
Commercial 2,100,625 1,933,685 1,811,042
Industrial 3,847,011 3,623,543 3,536,634
Other 38,147 38,357 38,261
- ------------------------------------------------------------------------------------------------
Total retail 7,908,000 7,525,420 7,190,795
Sales for resale - non-affiliates 2,555,914 2,544,982 2,687,917
Sales for resale - affiliates 174,342 426,919 280,443
- ------------------------------------------------------------------------------------------------
Total 10,638,256 10,497,321 10,159,155
================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.46 6.16 6.08
Commercial 5.94 5.96 5.92
Industrial 3.70 3.59 3.31
Total retail 5.00 4.89 4.69
Total sales 4.63 4.45 4.21
Residential Average Annual Kilowatt-Hour Use Per Customer 12,611 12,780 12,066
Residential Average Annual Revenue Per Customer $815.21 $786.71 $733.90
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,086 2,011 2,011
Maximum Peak-Hour Demand (megawatts):
Winter 1,636 1,401 1,386
Summer 1,874 1,872 1,755
Annual Load Factor (percent) 63.4 60.0 60.8
Plant Availability - Fossil-Steam (percent) 85.4 88.0 92.0
- ------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 56.0 63.5 60.4
Oil and gas 10.2 7.6 5.8
Purchased power -
From non-affiliates 1.2 1.3 1.2
From affiliates 32.6 27.6 32.6
- ------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,295 10,075 9,888
Cost of fuel per million BTU (cents) 165.96 170.13 162.27
Average cost of fuel per net kilowatt-hour generated (cents) 1.71 1.71 1.60
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
29A
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1991 1990 1989
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $103,820 $102,243 $100,068
Commercial 103,666 103,352 103,403
Industrial 116,972 123,754 128,983
Other 5,869 6,078 5,992
- ------------------------------------------------------------------------------------------------
Total retail 330,327 335,427 338,446
Sales for resale - non-affiliates 78,826 86,194 82,111
Sales for resale - affiliates 18,044 20,157 16,938
- ------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 427,197 441,778 437,495
Other revenues 5,189 5,093 5,155
- ------------------------------------------------------------------------------------------------
Total $432,386 $446,871 $442,650
================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,832,266 1,804,838 1,741,855
Commercial 1,768,441 1,718,074 1,686,302
Industrial 3,297,247 3,311,460 3,204,208
Other 89,375 85,938 87,611
- ------------------------------------------------------------------------------------------------
Total retail 6,987,329 6,920,310 6,719,976
Sales for resale - non-affiliates 2,706,320 2,883,581 2,798,086
Sales for resale - affiliates 617,696 714,365 527,970
- ------------------------------------------------------------------------------------------------
Total 10,311,345 10,518,256 10,046,032
================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.67 5.66 5.74
Commercial 5.86 6.02 6.13
Industrial 3.55 3.74 4.03
Total retail 4.73 4.85 5.04
Total sales 4.14 4.20 4.35
Residential Average Annual Kilowatt-Hour Use Per Customer 12,338 12,228 11,842
Residential Average Annual Revenue Per Customer $699.11 $692.70 $680.32
Plant Nameplate Capacity Ratings (year-end) (megawatts) 2,011 1,998 1,998
Maximum Peak-Hour Demand (megawatts):
Winter 1,267 1,201 1,556
Summer 1,682 1,724 1,682
Annual Load Factor (percent) 61.5 59.0 58.8
Plant Availability - Fossil-Steam (percent) 89.8 93.3 94.0
- ------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 64.1 62.6 63.4
Oil and gas 8.1 14.0 13.5
Purchased power -
From non-affiliates 0.7 0.8 0.5
From affiliates 27.1 22.6 22.6
- ------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,142 10,319 10,159
Cost of fuel per million BTU (cents) 177.52 183.27 178.38
Average cost of fuel per net kilowatt-hour generated (cents) 1.80 1.89 1.81
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
29B
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
================================================================================================
1988 1987 1986
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues (in thousands):
Residential $96,711 $98,338 $101,984
Commercial 98,772 98,669 100,521
Industrial 123,038 129,004 134,501
Other 5,874 5,723 5,882
- ------------------------------------------------------------------------------------------------
Total retail 324,395 331,734 342,888
Sales for resale - non-affiliates 75,525 88,060 107,270
Sales for resale - affiliates 33,747 31,278 21,669
- ------------------------------------------------------------------------------------------------
Total revenues from sales of electricity 433,667 451,072 471,827
Other revenues 4,272 4,771 4,438
- ------------------------------------------------------------------------------------------------
Total $437,939 $455,843 $476,265
================================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,686,722 1,658,327 1,674,407
Commercial 1,607,988 1,555,044 1,544,899
Industrial 2,879,457 2,862,632 2,877,026
Other 86,049 81,153 81,352
- ------------------------------------------------------------------------------------------------
Total retail 6,260,216 6,157,156 6,177,684
Sales for resale - non-affiliates 2,280,341 2,615,058 2,382,443
Sales for resale - affiliates 1,100,808 955,303 704,461
- ------------------------------------------------------------------------------------------------
Total 9,641,365 9,727,517 9,264,588
================================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 5.73 5.93 6.09
Commercial 6.14 6.35 6.51
Industrial 4.27 4.51 4.68
Total retail 5.18 5.39 5.55
Total sales 4.50 4.64 5.09
Residential Average Annual Kilowatt-Hour Use Per Customer 11,499 11,356 11,498
Residential Average Annual Revenue Per Customer $659.30 $673.41 $700.32
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,966 1,966 1,966
Maximum Peak-Hour Demand (megawatts):
Winter 1,284 1,224 1,208
Summer 1,621 1,548 1,612
Annual Load Factor (percent) 57.6 59.0 56.8
Plant Availability - Fossil-Steam (percent) 93.0 93.5 93.2
- ------------------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 86.3 79.4 74.1
Oil and gas 4.8 5.3 5.1
Purchased power -
From non-affiliates 0.4 0.3 2.0
From affiliates 8.5 15.0 18.8
- ------------------------------------------------------------------------------------------------
Total 100.0 100.0 100.0
================================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,220 10,525 10,569
Cost of fuel per million BTU (cents) 185.13 194.46 224.63
Average cost of fuel per net kilowatt-hour generated (cents) 1.89 2.05 2.37
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
29C
SELECTED FINANCIAL AND OPERATING DATA (continued)
Mississippi Power Company 1994 Annual Report
<TABLE>
<CAPTION>
====================================================================================
1985 1984
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues (in thousands):
Residential $96,878 $92,955
Commercial 96,883 91,500
Industrial 129,495 128,951
Other 5,884 5,704
- ------------------------------------------------------------------------------------
Total retail 329,140 319,110
Sales for resale - non-affiliates 115,757 106,691
Sales for resale - affiliates 27,277 13,226
- ------------------------------------------------------------------------------------
Total revenues from sales of electricity 472,174 439,027
Other revenues 3,436 3,480
- ------------------------------------------------------------------------------------
Total $475,610 $442,507
====================================================================================
Kilowatt-Hour Sales (in thousands):
Residential 1,603,539 1,535,329
Commercial 1,500,972 1,415,153
Industrial 2,786,883 2,768,877
Other 83,142 78,198
- ------------------------------------------------------------------------------------
Total retail 5,974,536 5,797,557
Sales for resale - non-affiliates 2,819,439 2,656,738
Sales for resale - affiliates 733,142 285,562
- ------------------------------------------------------------------------------------
Total 9,527,117 8,739,857
====================================================================================
Average Revenue Per Kilowatt-Hour (cents):
Residential 6.04 6.05
Commercial 6.45 6.47
Industrial 4.65 4.66
Total retail 5.51 5.50
Total sales 4.96 5.02
Residential Average Annual Kilowatt-Hour Use Per Customer 11,135 10,814
Residential Average Annual Revenue Per Customer $672.71 $654.74
Plant Nameplate Capacity Ratings (year-end) (megawatts) 1,966 1,966
Maximum Peak-Hour Demand (megawatts):
Winter 1,310 1,210
Summer 1,444 1,421
Annual Load Factor (percent) 61.0 59.8
Plant Availability - Fossil-Steam (percent) 92.4 93.1
- ------------------------------------------------------------------------------------
Source of Energy Supply (percent):
Coal 74.1 67.5
Oil and gas 2.8 2.5
Purchased power -
From non-affiliates 0.4 0.2
From affiliates 22.7 29.8
- ------------------------------------------------------------------------------------
Total 100.0 100.0
====================================================================================
Total Fuel Economy Data:
BTU per net kilowatt-hour generated 10,396 10,385
Cost of fuel per million BTU (cents) 235.24 236.45
Average cost of fuel per net kilowatt-hour generated (cents) 2.45 2.46
- ------------------------------------------------------------------------------------
</TABLE>
