THE CONSOLIDATED 10-Q FOR AMERICAN ELECTRIC POWER CO., INC. AND
SUBSIDIARIES IS REQUESTED TO BE INCLUDED AS PART OF THE FILING.
<PAGE>
<TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period from to
<CAPTION>
Commission Registrant; State of Incorporation; I. R. S. Employer
File Number Address; and Telephone Number Identification No.
<S> <C> <C>
1-3525 AMERICAN ELECTRIC POWER COMPANY, INC. 13-4922640
(A New York Corporation)
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
0-18135 AEP GENERATING COMPANY (An Ohio Corporation) 31-1033833
1 Riverside Plaza, Columbus, Ohio 43215
Telephone (614) 223-1000
1-3457 APPALACHIAN POWER COMPANY (A Virginia Corporation) 54-0124790
40 Franklin Road, Roanoke, Virginia 24011
Telephone (540) 985-2300
1-2680 COLUMBUS SOUTHERN POWER COMPANY (An Ohio Corporation) 31-4154203
215 North Front Street, Columbus, Ohio 43215
Telephone (614) 464-7700
1-3570 INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation) 35-0410455
One Summit Square
P.O. Box 60, Fort Wayne, Indiana 46801
Telephone (219) 425-2111
1-6858 KENTUCKY POWER COMPANY (A Kentucky Corporation) 61-0247775
1701 Central Avenue, Ashland, Kentucky 41101
Telephone (800) 572-1141
1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000
301 Cleveland Avenue S.W., Canton, Ohio 44702
Telephone (330) 456-8173
AEP Generating Company, Columbus Southern Power Company and Kentucky Power Company meet
the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are
therefore filing this Form 10-Q with the reduced disclosure format specified in General
Instruction H(2) to Form 10-Q.
Indicate by check mark whether the registrants (1) have filed all reports required to
be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrants were required to
file such reports), and (2) have been subject to such filing requirements for the past
90 days.
Yes X No
The number of shares outstanding of American Electric Power Company, Inc. Common Stock,
par value $6.50, at July 31, 1997 was 189,188,675.
/TABLE
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AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended June 30, 1997
<CAPTION>
INDEX
Page
Part I. FINANCIAL INFORMATION
<S> <C>
American Electric Power Company, Inc. and Subsidiary Companies:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . A-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . A-2 - A-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . A-4
Notes to Consolidated Financial Statements . . . . . . . . . A-5 - A-7
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . A-8 - A-11
AEP Generating Company:
Statements of Income and Statements of Retained Earnings . . B-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . B-2 - B-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . B-4
Notes to Financial Statements. . . . . . . . . . . . . . . . B-5
Management's Narrative Analysis of Results of Operations . . B-6 - B-7
Appalachian Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . C-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . C-2 - C-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . C-4
Notes to Consolidated Financial Statements . . . . . . . . . C-5 - C-7
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . C-8 - C-11
Columbus Southern Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . D-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . D-2 - D-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . D-4
Notes to Consolidated Financial Statements . . . . . . . . . D-5 - D-6
Management's Narrative Analysis of Results of Operations . . D-7 - D-9
Indiana Michigan Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . . E-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . E-2 - E-3
Consolidated Statements of Cash Flows. . . . . . . . . . . . E-4
Notes to Consolidated Financial Statements . . . . . . . . . E-5 - E-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . . E-7 - E-9
Kentucky Power Company:
Statements of Income and Statements of Retained Earnings . . F-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-2 - F-3
Statements of Cash Flows . . . . . . . . . . . . . . . . . . F-4
Notes to Financial Statements. . . . . . . . . . . . . . . . F-5 - F-6
Management's Narrative Analysis of Results of Operations . . F-7 - F-8
<PAGE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
FORM 10-Q
For The Quarter Ended June 30, 1997
INDEX
Page
Ohio Power Company and Subsidiaries:
Consolidated Statements of Income and
Consolidated Statements of Retained Earnings . . . . . . G-1
Consolidated Balance Sheets. . . . . . . . . . . . . . . . G-2 - G-3
Consolidated Statements of Cash Flows. . . . . . . . . . . G-4
Notes to Consolidated Financial Statements . . . . . . . . G-5 - G-6
Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . . G-7 - G-10
Part II. OTHER INFORMATION
Item 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1 - II-3
Item 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-3 - II-5
Item 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . II-5
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-6
This combined Form 10-Q is separately filed by American Electric Power Company,
Inc., AEP Generating Company, Appalachian Power Company, Columbus Southern Power
Company, Indiana Michigan Power Company, Kentucky Power Company and Ohio Power Company.
Information contained herein relating to any individual registrant is filed by such
registrant on its own behalf. Each registrant makes no representation as to
information relating to the other registrants.
</TABLE>
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<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . .$1,382,158 $1,400,941 $2,874,227 $2,918,722
OPERATING EXPENSES:
Fuel and Purchased Power . . . . . . . . 391,878 404,914 826,575 845,891
Other Operation. . . . . . . . . . . . . 300,305 300,723 602,585 604,431
Maintenance. . . . . . . . . . . . . . . 124,728 139,043 224,113 244,466
Depreciation and Amortization. . . . . . 151,549 149,414 303,501 298,528
Taxes Other Than Federal Income Taxes. . 122,166 120,990 248,780 248,616
Federal Income Taxes . . . . . . . . . . 70,277 65,232 175,440 164,043
TOTAL OPERATING EXPENSES . . . . 1,160,903 1,180,316 2,380,994 2,405,975
OPERATING INCOME . . . . . . . . . . . . . 221,255 220,625 493,233 512,747
NONOPERATING INCOME (LOSS) . . . . . . . . 5,686 1,030 10,195 (97)
INCOME BEFORE INTEREST CHARGES AND
PREFERRED DIVIDENDS . . . . . . . . . . . 226,941 221,655 503,428 512,650
INTEREST CHARGES . . . . . . . . . . . . . 103,651 98,363 197,473 198,388
PREFERRED STOCK DIVIDEND REQUIREMENTS
OF SUBSIDIARIES . . . . . . . . . . . . . 2,151 10,626 12,255 21,584
NET INCOME . . . . . . . . . . . . . . . .$ 121,139 $ 112,666 $ 293,700 $ 292,678
AVERAGE NUMBER OF SHARES OUTSTANDING . . . 188,822 187,104 188,585 186,913
EARNINGS PER SHARE . . . . . . . . . . . . $0.64 $0.60 $1.56 $1.57
CASH DIVIDENDS PAID PER SHARE. . . . . . . $0.60 $0.60 $1.20 $1.20
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . $1,607,776 $1,477,852 $1,547,746 $1,409,645
NET INCOME . . . . . . . . . . . . . . . . 121,139 112,666 293,700 292,678
DEDUCTIONS:
Cash Dividends Declared. . . . . . . . . 113,227 112,205 226,170 224,188
Other. . . . . . . . . . . . . . . . . . 649 120 237 (58)
BALANCE AT END OF PERIOD . . . . . . . . . $1,615,039 $1,478,193 $1,615,039 $1,478,193
See Notes to Consolidated Financial Statements.
/TABLE
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<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . . . $ 9,393,950 $ 9,341,849
Transmission . . . . . . . . . . . . . . . . . . . . . . 3,399,090 3,380,258
Distribution . . . . . . . . . . . . . . . . . . . . . . 4,498,915 4,402,449
General (including mining assets and nuclear fuel) . . . 1,516,360 1,491,781
Construction Work in Progress. . . . . . . . . . . . . . 406,401 353,832
Total Electric Utility Plant . . . . . . . . . . 19,214,716 18,970,169
Accumulated Depreciation and Amortization. . . . . . . . 7,745,799 7,549,798
NET ELECTRIC UTILITY PLANT . . . . . . . . . . . 11,468,917 11,420,371
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . . . 1,321,882 892,674
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . . . 94,179 57,539
Accounts Receivable. . . . . . . . . . . . . . . . . . . 565,939 535,024
Allowance for Uncollectible Accounts . . . . . . . . . . (7,227) (3,692)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 255,363 235,257
Materials and Supplies . . . . . . . . . . . . . . . . . 243,827 251,896
Accrued Utility Revenues . . . . . . . . . . . . . . . . 167,473 174,966
Prepayments. . . . . . . . . . . . . . . . . . . . . . . 132,196 103,891
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . 1,451,750 1,354,881
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . . . 1,850,321 1,889,482
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . . . 233,948 325,580
TOTAL. . . . . . . . . . . . . . . . . . . . . $16,326,818 $15,882,988
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock-Par Value $6.50:
1997 1996
Shares Authorized . . . .300,000,000 300,000,000
Shares Issued . . . . . .198,188,667 197,234,992
(8,999,992 shares were held in treasury) . . . . . . . $ 1,288,226 $ 1,282,027
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . 1,745,759 1,715,554
Retained Earnings. . . . . . . . . . . . . . . . . . . . 1,615,039 1,547,746
Total Common Shareholders' Equity. . . . . . . . 4,649,024 4,545,327
Cumulative Preferred Stocks of Subsidiaries:
Not Subject to Mandatory Redemption. . . . . . . . . . 46,869 90,323
Subject to Mandatory Redemption. . . . . . . . . . . . 127,605 509,900
Long-term Debt . . . . . . . . . . . . . . . . . . . . . 5,077,757 4,796,768
TOTAL CAPITALIZATION . . . . . . . . . . . . . . 9,901,255 9,942,318
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . . . 1,106,210 1,002,208
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . . . 265,870 86,942
Short-term Debt. . . . . . . . . . . . . . . . . . . . . 639,400 319,695
Accounts Payable . . . . . . . . . . . . . . . . . . . . 176,050 206,227
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 372,827 414,173
Interest Accrued . . . . . . . . . . . . . . . . . . . . 75,171 75,124
Obligations Under Capital Leases . . . . . . . . . . . . 94,417 89,553
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 294,536 304,323
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . 1,918,271 1,496,037
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . 2,601,701 2,643,143
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . . . 389,818 401,491
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . . . 235,959 240,598
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . . . 173,604 157,193
COMMITMENTS AND CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . . . $16,326,818 $15,882,988
See Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 293,700 $ 292,678
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . . . . 303,318 294,865
Deferred Federal Income Taxes. . . . . . . . . . . . . . . . . (17,262) (9,048)
Deferred Investment Tax Credits. . . . . . . . . . . . . . . . (11,673) (11,760)
Amortization of Deferred Property Taxes. . . . . . . . . . . . 76,422 74,709
Amortization of Operating Expenses and
Carrying Charges (net). . . . . . . . . . . . . . . . . . . 14,317 18,183
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . . . . (27,380) (52,667)
Fuel, Materials and Supplies . . . . . . . . . . . . . . . . . (12,037) 622
Accrued Utility Revenues . . . . . . . . . . . . . . . . . . . 7,493 36,269
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . (28,305) (44,902)
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . (30,177) (42,423)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . . . . (41,346) (49,668)
Revenue Refunds Accrued. . . . . . . . . . . . . . . . . . . . (1,606) 26,812
Other (net). . . . . . . . . . . . . . . . . . . . . . . . . . . 40,956 20,615
Net Cash Flows From Operating Activities . . . . . . . . . 566,420 554,285
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . . . . (331,278) (215,227)
Investment in Yorkshire Electricity Group plc. . . . . . . . . . (357,205) -
Proceeds from Sale of Property and Other . . . . . . . . . . . . 4,785 6,670
Net Cash Flows Used For Investing Activities . . . . . . . (683,698) (208,557)
FINANCING ACTIVITIES:
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . 39,023 33,121
Issuance of Long-term Debt . . . . . . . . . . . . . . . . . . . 651,318 309,404
Change in Short-term Debt (net). . . . . . . . . . . . . . . . . 319,705 161,346
Retirement of Cumulative Preferred Stock . . . . . . . . . . . . (433,234) (38,057)
Retirement of Long-term Debt . . . . . . . . . . . . . . . . . . (196,724) (556,895)
Dividends Paid on Common Stock . . . . . . . . . . . . . . . . . (226,170) (224,188)
Net Cash Flows From (Used For) Financing Activities. . . . 153,918 (315,269)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . . . . 36,640 30,459
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . 57,539 79,955
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . $ 94,179 $ 110,414
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $190,815,000 and $191,603,000 and
for income taxes was $146,130,000 and $138,641,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $105,663,000 and $83,502,000 in 1997 and
1996, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-ments should
be read in conjunction with the 1996 Annual Report
as incorporated in and filed with the Form 10-K. Certain prior-period
amounts have been reclassified to conform with current-period presentation.
2. FINANCING AND RELATED ACTIVITIES
During the first six months of 1997, subsidiaries issued
$655 million principal amount of long-term obligations: three
series of first mortgage bonds totaling $144 million at 6.35%,
6.4% and 6.71% all due in 2000; $180 million of junior
subordinated deferrable interest debentures at 7.92% and 8% due
in 2027; $50 million of financing obligations under a sale-leaseback
agreement and other loan agreements of $275 million
at 6.06% for an investment in the United Kingdom due in 1999
and $6 million at 12.42% for an investment in China due in
2000.
The proceeds were used during 1997 to redeem 4,257,490
shares of cumulative preferred stock as detailed in the table
below and to retire $196 million principal amount of long-term
debt: $156 million of first mortgage bonds with interest rates
ranging from 8.75% to 9.35% due in 2021 and 2022; $20 million
of variable rate installment purchase contracts due in 2025;
and $20 million of term loans with an interest rate of 7.19%
at maturity.
Number Total
of Shares Reacquisition
Series Retired Price Range Price
(in thousands)
4.08%-4.56% 434,540 $ 61.00-$ 69.94 $ 29,361
5.90%-5.92% 1,515,900 101.83- 103.20 156,074
6.02%-6-7/8% 1,307,050 103.71- 107.26 137,071
7.80%-7-7/8% 1,000,000 105.20- 105.50 105,232
$427,738
3. YORKSHIRE ACQUISITION
In April 1997 the Company and Public Service Company of
Colorado through an equally owned joint venture acquired all
of the outstanding shares of Yorkshire Electricity Group plc,
an electric distribution company in the United Kingdom. Total
consideration paid by the joint venture was approximately $2.4
billion which was financed by a combination of equity and non-recourse debt.
The Company uses the equity method of
accounting for its investment in Yorkshire Electricity. The
investment in the joint venture is included in other property
and investments ($361 million) and the earnings ($4.1
million)from the Yorkshire investment are included in
nonoperating income.
<PAGE>
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
Taxes
As discussed in Note 3, the Company and Public Service
Company of Colorado acquired a United Kingdom distribution
company, Yorkshire Electricity Group plc. On July 2, 1997 the
United Kingdom's governing Labour Party proposed a budget that
includes a windfall profits tax on certain privatized entities.
The tax was enacted on July 31, 1997. The windfall profits tax
liability for Yorkshire Electricity Group plc is estimated to
be 135 million pounds sterling ($222 million) and is payable
in two equal installments with the first due in December 1997
and the second installment a year later. AEP's share of the
tax is estimated to be $111 million. The effect on after tax
net earnings of the windfall profits tax is currently being
assessed and will be recorded in the third quarter.
As discussed in Note 9, "Federal Income Taxes" of the Notes
to Consolidated Financial Statements in the 1996 Annual Report,
the Internal Revenue Service (IRS) agents auditing the
consolidated federal income tax returns for the years 1991
through 1993 requested a ruling from their National Office as
to whether certain interest deductions relating to corporate
owned life insurance (COLI) should be disallowed. The COLI
program was established in 1990 as part of the Company's
strategy to fund and reduce the cost of medical benefits for
retired employees. The Company filed a brief with the IRS
National Office defending the subject deductions. Although no
disallowance has been proposed, a disallowance of COLI interest
deductions through June 30, 1997 would reduce earnings by
approximately $267 million inclusive of interest. Management
believes it will ultimately prevail on this issue and will
vigorously contest any disallowance that may be proposed.
Steam Generator Replacement
The Company has announced plans to replace the four steam
generators in the Donald C. Cook Nuclear Plant's Unit 1 in
Bridgman, Michigan. The replacement will take place during the
regularly scheduled refueling outage in the spring of the year
2000. The unit is expected to be out of service for about 100
days. The cost of similar steam generator replacement projects
in the industry have ranged from $150 million to $180 million.
Certain construction commitments to produce the steam generator
components with long lead time production requirements have
been made. The plant's Unit 2 steam generators were replaced
in 1988.
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. These standards are expected to result in
redesignation of a number of areas of the country currently in
attainment to nonattainment which could ultimately dictate more
stringent emission restrictions for AEP System generating
units.
<PAGE>
<PAGE>
The new rules provide that the states must first determine
the attainment status of their areas. The states then have
three years to submit a compliance plan and up to ten years
after designation to come into compliance with the new
standards. The compliance deadline could be as late as 2010
for the ozone standard and 2012-2015 for the fine particulate
standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company must bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it would have a material adverse effect on
results of operations or possibly financial condition unless
such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in the 1996 Annual Report.
<PAGE>
<PAGE>
AMERICAN ELECTRIC POWER COMPANY, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
RESULTS OF OPERATIONS
Net income increased 8% or $8.5 million in the second quarter
primarily due to reduced operating expenses, increased nonoperating
income and the favorable effects of a preferred stock redemption
program. For the year-to-date period net income was relatively
unchanged as the negative effects of milder weather on revenues
were largely offset by the effects of decreased operating expenses,
increased nonoperating income and the favorable impact of the
preferred stock redemptions.
Operating revenues decreased in both periods as a result of
decreased energy sales to retail customers partly offset by the
effect of increased wholesale energy transactions. Retail energy
sales decreased 1% in the second quarter and 2% in the year-to-date
period reflecting decreased energy sales to residential and
commercial customers due to milder weather in 1997.
Energy sales to wholesale customers were up 13% in the second
quarter and 11% in the year-to-date period primarily due to
increased coal conversion service sales which are for the
conversion of customers' coal to electricity. The substantial
increase in coal conversion service sales reflects the cost
effectiveness of this service to customers. An increase in
transmission and other related services to wholesale customers also
contributed to an increase in wholesale revenues.
Income statement items which changed significantly were:
Increase (Decrease)
Second Quarter Year-To-Date
(in millions) % (in millions) %
Fuel and Purchased
Power Expense . . . . . . . . $(13.0) (3) $(19.3) (2)
Maintenance Expense. . . . . . (14.3) (10) (20.4) (8)
Federal Income Taxes . . . . . 5.0 8 11.4 7
Nonoperating Income. . . . . . 4.7 N.M. 10.3 N.M.
Preferred Stock Dividend
Requirements of Subsidiaries. (8.5) (80) (9.3) (43)
N.M. = Not Meaningful<PAGE>
<PAGE>
The decrease in operating expenses were mainly due to
reductions in fuel, purchased power and maintenance expenses. The
decrease in fuel and purchased power expense was mainly due to
reduced generation reflecting the weather related decrease in sales
to retail customers. Maintenance expense declined due primarily to
a decline in storm damage reflecting the milder weather.
The increase in federal income tax expense attributable to
operations was due to changes in certain book/tax timing
differences accounted for on a flow-through basis for rate-making
and financial reporting purposes, including the effect of recent
federal legislation limiting corporate owned life insurance tax
deductions.
Nonoperating income increased in both periods due to the
Company's 50% share of earnings from the recently acquired
Yorkshire Electricity Group plc of approximately $4.1 million.
Also contributing to the year-to-date increase were the effect of
losses recorded in the first quarter of 1996 from certain demand
side management program costs and clean-up of underground fuel
storage tanks at a subsidiary's facilities.
Preferred stock dividend requirements of the subsidiaries
decreased in both comparative periods reflecting the redemption of
over 4 million shares of cumulative preferred stock completed
during the first half of 1997 as part of a redemption program.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first six months were $438 million.
During the first six months of 1997 subsidiaries issued $655
million principal amount of long-term obligations at interest rates
ranging from 6.06% to 12.42%; retired $196 million principal amount
of long-term debt with interest rates ranging from 3.45% to 9.35%;
redeemed 4,257,490 shares of cumulative preferred stock with rates
ranging from 4.08% to 7-7/8% at a total cost of $433 million and
increased short-term debt by $320 million.
YORKSHIRE ACQUISITION
Yorkshire Electricity Group plc, an electric distribution
company in the United Kingdom, was acquired by the Company and
Public Service Company of Colorado through an equally owned joint
venture in April 1997. Total consideration paid by the joint
venture was approximately $2.4 billion which was financed by a
combination of equity and non-recourse debt. The Company uses the
equity method of accounting for its investment in Yorkshire
Electricity. The investment in the joint venture is included in
other property and investments and the earnings from the Yorkshire
investment are included in nonoperating income.
<PAGE>
TAXES
On July 2, 1997 the United Kingdom's governing Labour Party
proposed a budget that includes a windfall profits tax on certain
privatized entities. The tax was enacted on July 31, 1997. The
windfall profits tax liability for Yorkshire Electricity Group plc
is estimated to be 135 million pounds sterling ($222 million) and
is payable in two equal installments with the first due in December
1997 and the second installment a year later. AEP's share of the
tax is estimated to be $111 million. The effect on after tax net
earnings of the windfall profits tax is currently being assessed
and will be recorded in the third quarter.
STEAM GENERATOR REPLACEMENT
The Company has announced plans to replace the four steam
generators in its Donald C. Cook Nuclear Plant's Unit 1. The
replacement will take place during a regularly scheduled refueling
outage in the spring of the year 2000. The unit is expected to be
out of service for about 100 days. The cost of similar steam
generator replacement projects in the industry have ranged from
$150 million to $180 million. Certain construction commitments to
produce the steam generator components with long lead time
production requirements have been made. The plant's Unit 2 steam
generators were replaced in 1988.
REVISED AIR QUALITY STANDARDS
On July 18, 1997, the United States Environmental Protection
Agency published revised a National Ambient Air Quality Standard
(NAAQS) for ozone and a new NAAQS for fine particulate matter (less
than 2.5 microns in size) in the Federal Register. These standards
are expected to result in redesignation of a number of areas of the
country currently in attainment to nonattainment which could
ultimately dictate more stringent emission restrictions for AEP
System generating units.
The new rules provide that the states must first determine the
attainment status of their areas. The states then have three years
to submit a compliance plan and up to ten years after designation
to come into compliance with the new standards. The compliance
deadline could be as late as 2010 for the ozone standard and 2012-2015 for
the fine particulate standard.
<PAGE>
<PAGE>
Management is reviewing the impact of the new rules, however,
we are unable to estimate compliance costs without knowledge of
reductions that the states will find necessary to meet the new
standards. If such reductions are significant and the Company must
bear a significant portion of the cost of compliance in the region
or county that is in violation of the revised standards, it would
have a material adverse effect on results of operations or possibly
financial condition unless such costs are recovered.
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $53,433 $55,313 $112,529 $112,797
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 18,739 21,736 46,089 45,268
Rent - Rockport Plant Unit 2 . . . . . 17,070 17,071 34,141 34,148
Other Operation. . . . . . . . . . . . 2,714 2,962 5,844 6,111
Maintenance. . . . . . . . . . . . . . 5,357 3,883 7,743 7,376
Depreciation . . . . . . . . . . . . . 5,412 5,413 10,807 10,826
Taxes Other Than Federal Income Taxes. 850 907 1,729 1,882
Federal Income Taxes . . . . . . . . . 850 886 1,607 1,937
TOTAL OPERATING EXPENSES . . . 50,992 52,858 107,960 107,548
OPERATING INCOME . . . . . . . . . . . . 2,441 2,455 4,569 5,249
NONOPERATING INCOME. . . . . . . . . . . 950 834 1,800 1,624
INCOME BEFORE INTEREST CHARGES . . . . . 3,391 3,289 6,369 6,873
INTEREST CHARGES . . . . . . . . . . . . 1,070 1,058 2,011 2,144
NET INCOME . . . . . . . . . . . . . . . $ 2,321 $ 2,231 $ 4,358 $ 4,729
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $2,637 $1,953 $1,886 $1,955
NET INCOME . . . . . . . . . . . . . . . 2,321 2,231 4,358 4,729
CASH DIVIDENDS DECLARED. . . . . . . . . 1,286 2,000 2,572 4,500
BALANCE AT END OF PERIOD . . . . . . . . $3,672 $2,184 $3,672 $2,184
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production. . . . . . . . . . . . . . . . . . . . . . . . $626,769 $627,926
General . . . . . . . . . . . . . . . . . . . . . . . . . 3,082 2,931
Construction Work in Progress . . . . . . . . . . . . . . 2,346 1,400
Total Electric Utility Plant. . . . . . . . . . . 632,197 632,257
Accumulated Depreciation. . . . . . . . . . . . . . . . . 247,114 238,532
NET ELECTRIC UTILITY PLANT. . . . . . . . . . . . 385,083 393,725
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . 25 139
Accounts Receivable . . . . . . . . . . . . . . . . . . . 19,079 18,879
Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,200 17,792
Materials and Supplies. . . . . . . . . . . . . . . . . . 4,178 4,266
Prepayments . . . . . . . . . . . . . . . . . . . . . . . 607 804
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . 41,089 41,880
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . . . 5,748 5,857
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . . . . . 2,986 1,449
TOTAL . . . . . . . . . . . . . . . . . . . . . $434,906 $442,911
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - Par Value $1,000:
Authorized and Outstanding - 1,000 Shares . . . . . . . $ 1,000 $ 1,000
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . 42,235 44,235
Retained Earnings . . . . . . . . . . . . . . . . . . . . 3,672 1,886
Total Common Shareholder's Equity . . . . . . . . 46,907 47,121
Long-term Debt. . . . . . . . . . . . . . . . . . . . . . 69,562 89,554
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . 116,469 136,675
OTHER NONCURRENT LIABILITIES. . . . . . . . . . . . . . . . 1,463 1,613
CURRENT LIABILITIES:
Short-term Debt - Notes Payable . . . . . . . . . . . . . 18,800 9,575
Accounts Payable. . . . . . . . . . . . . . . . . . . . . 15,132 7,510
Taxes Accrued . . . . . . . . . . . . . . . . . . . . . . 4,108 2,903
Rent Accrued - Rockport Plant Unit 2. . . . . . . . . . . 4,963 4,963
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 299 3,932
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . 43,302 28,883
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2 . . . . . . . . . . . . . . . . . . 141,687 144,472
REGULATORY LIABILITIES:
Deferred Investment Tax Credits . . . . . . . . . . . . . 71,776 73,460
Amounts Due to Customers for Income Taxes . . . . . . . . 33,221 33,893
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 88 66
TOTAL REGULATORY LIABILITIES. . . . . . . . . . . 105,085 107,419
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . 26,900 23,849
TOTAL . . . . . . . . . . . . . . . . . . . . . $434,906 $442,911
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
AEP GENERATING COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 4,358 $ 4,729
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 10,807 10,826
Deferred Federal Income Taxes. . . . . . . . . . . . . . 2,379 2,434
Deferred Investment Tax Credits. . . . . . . . . . . . . (1,684) (1,687)
Amortization of Deferred Gain on Sale
and Leaseback - Rockport Plant Unit 2. . . . . . . . . (2,785) (2,786)
Deferred Property Taxes. . . . . . . . . . . . . . . . . (1,460) (1,562)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . . . . . (200) (609)
Fuel, Materials and Supplies . . . . . . . . . . . . . . 680 (1,831)
Accounts Payable . . . . . . . . . . . . . . . . . . . . 7,622 (584)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 1,205 3,387
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (3,914) (1,616)
Net Cash Flows From Operating Activities . . . . . . 17,008 10,701
INVESTING ACTIVITIES - Construction Expenditures . . . . . . (1,765) (1,251)
FINANCING ACTIVITIES:
Return of Capital to Parent Company. . . . . . . . . . . . (2,000) (500)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (20,010) -
Change in Short-term Debt (net). . . . . . . . . . . . . . 9,225 (4,400)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (2,572) (4,500)
Net Cash Flows Used For Financing Activities . . . . (15,357) (9,400)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . (114) 50
Cash and Cash Equivalents at Beginning of Period . . . . . . 139 22
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 25 $ 72
Supplemental Disclosure:
Cash paid (received) for interest net of capitalized amounts was $1,819,000 and
$2,035,000 and for income taxes was $(562,000) and $(764,000) in 1997 and 1996,
respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
AEP GENERATING COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
GENERAL
The accompanying unaudited financial statements should be
read in conjunction with the 1996 Annual Report as incorporated
in and filed with the Form 10-K.
FINANCING ACTIVITIES
In June 1997, the Company redeemed $10 million each of the
1995 Series A and 1995 Series B Pollution Control Revenue Bonds
due 2025.
<PAGE>
<PAGE>
AEP GENERATING COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
Operating revenues are derived from the sale of Rockport Plant
energy and capacity to two affiliated companies and one
unaffiliated utility pursuant to Federal Energy Regulatory
Commission (FERC) approved long-term unit power agreements. The
unit power agreements provide for recovery of costs including a
FERC approved rate of return on common equity and a return on other
capital net of temporary cash investments.
Net income increased $0.1 million or 4% in the second quarter
primarily due to income earned on temporary cash investments. The
decrease in net income of $0.4 million or 8% for the year-to-date
period is a result of a decrease in the return on common equity due
to a return of capital to the parent company, and a decrease in the
return on other capital, partially offset by income earned on
temporary cash investments and lower financing costs.
Income statement items which changed significantly were:
Increase (Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Operating Revenues . . . . . $(1.9) (3) $(0.3) N.M.
Fuel Expense . . . . . . . . (3.0) (14) 0.8 2
Other Operation Expense. . . (0.2) (8) (0.3) (4)
Maintenance Expense. . . . . 1.5 38 0.4 5
Taxes Other Than Federal
Income Taxes . . . . . . . (0.1) (6) (0.2) (8)
Federal Income Taxes . . . . N.M. N.M. (0.3) (17)
Nonoperating Income. . . . . 0.1 14 0.2 11
Interest Charges . . . . . . N.M. N.M. (0.1) (6)
N.M. = Not Meaningful
The decrease in operating revenues for the second quarter is
primarily attributable to a decrease in recoverable fuel expense.
The decrease for the year-to-date period reflects the decreased
returns previously mentioned, partially offset by an increase in
recoverable operating expenses.
Fuel expense decreased in the second quarter due to reduced
generation as Rockport Plant Unit 1 was out-of-service for general
boiler inspection and repair. Although generation decreased, fuel
expense increased in the year-to-date period due to an increase in
the average cost of coal consumed.
Other operation expense decreased for both comparative periods
as a result of lower general and administrative expenses.
The general boiler inspection and repair on Rockport Plant Unit
1 accounted for the increased maintenance expense.
<PAGE>
Taxes other than federal income taxes decreased due to a
reduction in Indiana property tax expense resulting from decreases
in assessed values for personal property and a reduction in the
Indiana supplemental net income tax accrual resulting from lower
pre-tax book income. Federal income taxes attributable to
operations also decreased due to lower pre-tax book income.
The increases in nonoperating income reflect the effect of
higher average balances of temporary cash investments during the
current period.
Year-to-date interest charges declined due to lower average
short-term debt balances.
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $373,084 $379,887 $789,534 $820,859
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 89,355 91,907 184,259 181,503
Purchased Power. . . . . . . . . . . . 75,468 76,510 161,008 167,637
Other Operation. . . . . . . . . . . . 61,427 61,066 125,267 123,809
Maintenance. . . . . . . . . . . . . . 29,080 36,225 51,890 59,376
Depreciation and Amortization. . . . . 34,274 33,168 68,249 66,041
Taxes Other Than Federal Income Taxes. 29,763 29,014 60,036 60,316
Federal Income Taxes . . . . . . . . . 8,320 8,778 29,094 35,321
TOTAL OPERATING EXPENSES . . . 327,687 336,668 679,803 694,003
OPERATING INCOME . . . . . . . . . . . . 45,397 43,219 109,731 126,856
NONOPERATING INCOME (LOSS) . . . . . . . 79 (21) 323 576
INCOME BEFORE INTEREST CHARGES . . . . . 45,476 43,198 110,054 127,432
INTEREST CHARGES . . . . . . . . . . . . 30,098 27,092 58,192 55,702
NET INCOME . . . . . . . . . . . . . . . 15,378 16,106 51,862 71,730
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 680 4,100 5,645 8,201
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 14,698 $ 12,006 $ 46,217 $ 63,529
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $211,382 $223,469 $208,472 $199,021
NET INCOME . . . . . . . . . . . . . . . 15,378 16,106 51,862 71,730
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 28,609 27,075 57,218 54,150
Cumulative Preferred Stock . . . . . 573 3,917 2,077 7,834
Capital Stock Expense. . . . . . . . . 107 184 3,568 368
BALANCE AT END OF PERIOD . . . . . . . . $197,471 $208,399 $197,471 $208,399
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,912,168 $1,883,271
Transmission . . . . . . . . . . . . . . . . . . . . 1,067,101 1,054,207
Distribution . . . . . . . . . . . . . . . . . . . . 1,538,707 1,495,445
General. . . . . . . . . . . . . . . . . . . . . . . 198,763 188,740
Construction Work in Progress. . . . . . . . . . . . 78,987 95,469
Total Electric Utility Plant . . . . . . . . 4,795,726 4,717,132
Accumulated Depreciation and Amortization. . . . . . 1,825,806 1,782,017
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,969,920 2,935,115
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 29,151 29,621
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 8,846 7,260
Accounts Receivable. . . . . . . . . . . . . . . . . 157,611 160,021
Allowance for Uncollectible Accounts . . . . . . . . (2,257) (687)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 60,031 52,605
Materials and Supplies . . . . . . . . . . . . . . . 52,940 56,605
Accrued Utility Revenues . . . . . . . . . . . . . . 32,041 51,843
Prepayments. . . . . . . . . . . . . . . . . . . . . 14,657 10,797
TOTAL CURRENT ASSETS . . . . . . . . . . . . 323,869 338,444
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 443,131 451,272
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 41,792 46,285
TOTAL. . . . . . . . . . . . . . . . . . . $3,807,863 $3,800,737
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 30,000,000 Shares
Outstanding - 13,499,500 Shares. . . . . . . . . . $ 260,458 $ 260,458
Paid-in Capital. . . . . . . . . . . . . . . . . . . 592,815 575,380
Retained Earnings. . . . . . . . . . . . . . . . . . 197,471 208,472
Total Common Shareholder's Equity. . . . . . 1,050,744 1,044,310
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 19,795 29,815
Subject to Mandatory Redemption. . . . . . . . . . 22,310 190,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,494,041 1,365,834
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,586,890 2,629,959
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 127,408 109,203
CURRENT LIABILITIES:
Short-term Debt. . . . . . . . . . . . . . . . . . . 103,250 60,700
Accounts Payable . . . . . . . . . . . . . . . . . . 90,277 85,892
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 53,255 40,935
Customer Deposits. . . . . . . . . . . . . . . . . . 13,832 13,750
Interest Accrued . . . . . . . . . . . . . . . . . . 20,530 20,938
Other. . . . . . . . . . . . . . . . . . . . . . . . 56,278 80,360
TOTAL CURRENT LIABILITIES. . . . . . . . . . 337,422 302,575
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 659,893 669,964
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 70,296 72,677
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 25,954 16,359
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . $3,807,863 $3,800,737
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,862 $ 71,730
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . . 68,902 66,694
Deferred Federal Income Taxes. . . . . . . . . . . . . . . (6,524) 2,030
Deferred Investment Tax Credits. . . . . . . . . . . . . . (2,381) (2,409)
Deferred Power Supply Costs (net). . . . . . . . . . . . . 9,093 5,006
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . . 3,980 (37,278)
Fuel, Materials and Supplies . . . . . . . . . . . . . . . (3,761) 16,312
Accrued Utility Revenues . . . . . . . . . . . . . . . . . 19,802 14,095
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . (3,860) (10,792)
Accounts Payable . . . . . . . . . . . . . . . . . . . . . 4,385 819
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . . 12,320 (774)
Revenue Refunds Accrued. . . . . . . . . . . . . . . . . . (1,606) 26,812
Other (net). . . . . . . . . . . . . . . . . . . . . . . . . (4,731) (15,370)
Net Cash Flows From Operating Activities . . . . . . . 147,481 136,875
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . . (91,759) (74,210)
Proceeds from Sale of Property . . . . . . . . . . . . . . . 2,241 1,079
Net Cash Flows Used For Investing Activities . . . . . (89,518) (73,131)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company. . . . . . . . . . 20,000 25,000
Issuance of Long-term Debt . . . . . . . . . . . . . . . . . 183,257 200,825
Change in Short-term Debt (net). . . . . . . . . . . . . . . 42,550 (31,775)
Retirement of Cumulative Preferred Stock . . . . . . . . . . (183,842) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . . (56,378) (189,164)
Dividends Paid on Common Stock . . . . . . . . . . . . . . . (57,218) (54,150)
Dividends Paid on Cumulative Preferred Stock . . . . . . . . (4,746) (7,834)
Net Cash Flows Used For Financing Activities . . . . . (56,377) (57,098)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . . 1,586 6,646
Cash and Cash Equivalents at Beginning of Period . . . . . . . 7,260 8,664
Cash and Cash Equivalents at End of Period . . . . . . . . . . $ 8,846 $ 15,310
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $56,791,000 and $51,719,000 and
for income taxes was $24,890,000 and $29,226,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $11,797,000 and $5,584,000 in 1997
and 1996, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial
statements should be read in conjunction with the 1996 Annual
Report as incorporated in and filed with the Form 10-K. Certain
prior-period amounts have been reclassified to conform with
current-period presentation.
2. RATE MATTERS
On June 13, 1997, the Company filed an application with the
Virginia State Corporation Commission (Virginia SCC) for
approval of an alternative regulatory plan (Plan) and for an
increase of $30.5 million in base rates on an annual basis to
be effective July 13, 1997. The Company's Plan would institute
a moratorium period during which no changes would be made prior
to January 1, 2001, from the total rate levels (including the
Company's current 1.482 cents/kwh fuel factor) proposed by the
Company. The Company's filing includes a proposal to shift
revenue among the Company's customer classes with the effect
that customer rates could change significantly from year to
year. In addition, it includes a sharing of earnings above
certain levels between the Company and its customers, and
acceleration of the recovery of certain regulatory assets.
On July 10, 1997, the Virginia SCC issued an order
suspending implementation of new rates until November 11, 1997.
A public hearing has been scheduled for May 19, 1998 to
consider the Company's proposal.
3. FINANCING ACTIVITIES
During the first six months of 1996, the Company issued two
series of first mortgage bonds of $48 million each with rates
of 6.35% and 6.71% due in 2000 and $90 million of 8% Series
Junior Subordinated Deferrable Interest Debentures due in 2027.
In March 1997, the Company redeemed $56 million of first
mortgage bonds with interest rates of 8.75% and 9.35%.
As part of a tender offer, the following number of shares
of Cumulative Preferred Stock were reacquired and retired at
the prices listed plus an amount equal to accrued dividends:
Number Price Total
of Shares Paid Per Reacquisition
Series Retired Share Price
(in thousands)
4-1/2% 99,563 $ 69.02 $ 6,872
5.90% 422,900 103.17 43,631
5.92% 538,500 103.20 55,573
6.85% 215,500 107.26 23,114
7.80% 22,500 105.50 2,374
In April 1997, the Company redeemed the remaining 477,500
shares of 7.80% Series Cumulative Preferred Stock, par value
$100, at $105.20 per share.
In June 1997, the Company received a $20 million cash
capital contribution from its parent which was credited to
paid-in capital.
<PAGE>
4. CONTINGENCIES
Taxes
As discussed in Note 9, "Federal Income Taxes" of the Notes
to Consolidated Financial Statements in the 1996 Annual Report,
the Internal Revenue Service (IRS) agents auditing the AEP
System's consolidated federal income tax returns for the years
1991 through 1993 requested a ruling from their National Office
as to whether certain interest deductions relating to corporate
owned life insurance (COLI) should be disallowed. The COLI
program was established in 1990 as part of the Company's
strategy to fund and reduce the cost of medical benefits for
retired employees. AEP filed a brief with the IRS National
Office defending the subject deductions. Although no
disallowance has been proposed, a disallowance of the COLI
interest deductions through June 30, 1997 would reduce earnings
by approximately $67 million inclusive of interest. Management
believes it will ultimately prevail on this issue and will
vigorously contest any disallowance that may be proposed.
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. These standards are expected to result in
redesignation of a number of areas of the country currently in
attainment to nonattainment which could ultimately dictate more
stringent emission restrictions for AEP System generating
units.
The new rules provide that the states must first determine
the attainment status of their areas. The states then have
three years to submit a compliance plan and up to ten years
after designation to come into compliance with the new
standards. The compliance deadline could be as late as 2010
for the ozone standard and 2012-2015 for the fine particulate
standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company must bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it could have a material adverse effect on
results of operations or possibly financial condition unless
such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in its 1996 Annual Report.
<PAGE>
<PAGE>
APPALACHIAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
RESULTS OF OPERATIONS
Net income declined 5% in the second quarter primarily due to
a reduction in operating revenues and increased interest charges
reflecting an increase in long-term debt outstanding. For the
year-to-date period net income decreased 28% predominantly due to
a decline in retail revenues reflecting milder winter weather in
1997.
Income statement lines which changed significantly were:
Increase (Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Operating Revenues . . . . . $(6.8) (2) $(31.3) (4)
Fuel Expense . . . . . . . . (2.6) (3) 2.8 2
Purchased Power Expense. . . (1.0) (1) (6.6) (4)
Maintenance Expense. . . . . (7.1) (20) (7.5) (13)
Federal Income Taxes . . . . (0.5) (5) (6.2) (18)
Interest Charges . . . . . . 3.0 11 2.5 4
The reduction in operating revenues was due to declines in both
retail and wholesale revenues. Retail revenues declined due to
decreased energy demand from weather-sensitive residential and
commercial customers of 1% and 4%, respectively, in the second
quarter and 9% and 5%, respectively, in the year-to-date period.
Revenues from wholesale customers decreased 4% in the quarter and
5% in the year-to-date period while wholesale sales increased 7% in
the quarter and 4% in the year-to-date period. The decreases in
wholesale revenues resulted from a decrease in the average price
per kilowatthour sold. The increases in wholesale sales resulted
from substantial increases in coal conversion services partially
offset by decreases of 8% in the second quarter and 11% in the
year-to-date period of traditional sales for resale to unaffiliated
utilities. Coal conversion service sales are for the conversion of
customers' coal to electricity and are priced to exclude customer-provided
fuel. Traditional sales for resale are for the sale of
electricity generated from the Company's coal and are priced to
include the cost of coal. The substantial increase in coal
conversion service sales reflects the cost effectiveness of this
service to customers. The reduction in traditional sales for
resale resulted from the milder winter weather in 1997 and the
increasingly competitive nature of the wholesale power markets.
<PAGE>
The decrease in fuel expense in the quarter was due to a
decrease in generation. In the year-to-date period fuel expense
increased due to the operation of the West Virginia power supply
cost recovery mechanism as overcollections of fuel cost were
deferred in accordance with a rate order, partly offset by
decreased coal-fired generation.
Purchased power expense declined in the year-to-date period as
lower demand led to reduced purchases of energy from the AEP System
Power Pool (Power Pool), partly offset by an increase in Power Pool
capacity charges. An increase in the Company's prior twelve-month
peak demand relative to the total peak demand of all Power Pool
members caused the increase in Power Pool capacity charges.
Maintenance expense decreased as a result of the effects of the
recognition of incremental storm damage expense in accordance with
directions of the Virginia State Corporation Commission in the
second quarter of 1996 and reduced levels of repairs to
distribution facilities in 1997.
The decrease in federal income tax expense attributable to
operations was primarily due to a decrease in pre-tax operating
income.
Interest charges increased primarily as a result of an increase
in the balance of long-term debt outstanding issued to finance the
reacquisition of preferred stock. A January 1997 tender offer that
retired $130 million stated value preferred stock on February 28,
1997 and the subsequent reacquisition of $48 million stated value
preferred stock on April 11, 1997 were responsible for a decrease
in preferred stock dividend requirements.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the first six months of 1997 were $104 million.
The Company issued two series of first mortgage bonds of $48
million each with rates of 6.35% and 6.71% due in 2000. The
Company also issued $90 million of 8% series Junior Subordinated
Deferrable Interest Debentures due in 2027. In March 1997, the
Company redeemed $56 million of first mortgage bonds with interest
rates of 8.75% and 9.35%. Short-term debt increased by $43 million
from year-end balances. In June 1997, the Company received a $20
million cash capital contribution from its parent which was
credited to paid-in capital.
As part of the January 1997 tender offer for all of the
Company's outstanding preferred stock that was announced in
conjunction with a special meeting of shareholders, 1,298,963
shares of $100 stated value preferred stocks were reacquired. The
total cost of the stock reacquisition was $134 million. At the
<PAGE>
special meeting of shareholders held on February 28, 1997, the
Company's articles of incorporation were amended to remove certain
capitalization ratio requirements which restricted the Company's
ability to issue debt. As a result unsecured borrowings are now
limited only by the Public Utility Holding Company Act of 1935 and
the Virginia State Corporation Commission with the current
limitation set at $250 million for unsecured short-term borrowings.
In April 1997, all remaining shares of the 7.80% Series of
Preferred Stock were reacquired for $50 million.
REVISED AIR QUALITY STANDARDS
On July 18, 1997, the United States Environmental Protection
Agency published a revised National Ambient Air Quality Standard
(NAAQS) for ozone and a new NAAQS for fine particulate matter (less
than 2.5 microns in size) in the Federal Register. These standards
are expected to result in redesignation of a number of areas of the
country currently in attainment to nonattainment which could
ultimately dictate more stringent emission restrictions for AEP
System generating units.
The new rules provide that the states must first determine the
attainment status of their areas. The states then have three years
to submit a compliance plan and up to ten years after designation
to come into compliance with the new standards. The compliance
deadline could be as late as 2010 for the ozone standard and 2012-2015 for
the fine particulate standard.
Management is reviewing the impact of the new rules, however,
we are unable to estimate compliance costs without knowledge of the
cost of reductions that the states will find necessary to meet the
new standards. If such reductions are significant and the Company
must bear a significant portion of the cost of compliance in the
region or county that is in violation of the revised standards, it
could have a material adverse effect on results of operations or
possibly financial condition unless such costs are recovered.
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $263,263 $269,023 $528,270 $540,063
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 37,129 45,169 81,929 92,675
Purchased Power. . . . . . . . . . . . 45,319 39,971 83,834 83,440
Other Operation. . . . . . . . . . . . 43,621 46,844 85,751 91,008
Maintenance. . . . . . . . . . . . . . 19,743 17,409 33,067 31,332
Depreciation . . . . . . . . . . . . . 22,572 21,966 45,019 43,757
Amortization of Zimmer
Plant Phase-in Costs . . . . . . . . 7,334 7,965 15,741 16,413
Taxes Other Than Federal Income Taxes. 29,654 28,088 59,623 56,195
Federal Income Taxes . . . . . . . . . 14,923 14,438 32,908 29,644
TOTAL OPERATING EXPENSES . . . 220,295 221,850 437,872 444,464
OPERATING INCOME . . . . . . . . . . . . 42,968 47,173 90,398 95,599
NONOPERATING INCOME (LOSS) . . . . . . . 324 385 1,360 (2,520)
INCOME BEFORE INTEREST CHARGES . . . . . 43,292 47,558 91,758 93,079
INTEREST CHARGES . . . . . . . . . . . . 19,862 20,062 39,004 40,457
NET INCOME . . . . . . . . . . . . . . . 23,430 27,496 52,754 52,622
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 533 1,374 1,377 3,044
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 22,897 $ 26,122 $ 51,377 $ 49,578
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $108,727 $78,984 $ 99,582 $74,320
NET INCOME . . . . . . . . . . . . . . . 23,430 27,496 52,754 52,622
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 19,671 18,969 39,342 37,938
Cumulative Preferred Stock . . . . . 438 1,422 875 2,844
Capital Stock Expense. . . . . . . . . 95 70 166 141
BALANCE AT END OF PERIOD . . . . . . . . $111,953 $86,019 $111,953 $86,019
The common stock of the Company is wholly owned by American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $1,509,654 $1,503,371
Transmission . . . . . . . . . . . . . . . . . . . . 325,986 326,247
Distribution . . . . . . . . . . . . . . . . . . . . 912,908 885,267
General. . . . . . . . . . . . . . . . . . . . . . . 134,210 130,946
Construction Work in Progress. . . . . . . . . . . . 69,557 54,062
Total Electric Utility Plant . . . . . . . . 2,952,315 2,899,893
Accumulated Depreciation . . . . . . . . . . . . . . 1,050,976 1,016,909
NET ELECTRIC UTILITY PLANT . . . . . . . . . 1,901,339 1,882,984
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 23,624 24,069
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 12,844 9,134
Accounts Receivable (net). . . . . . . . . . . . . . 100,461 63,003
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 23,397 18,278
Materials and Supplies . . . . . . . . . . . . . . . 22,492 23,999
Accrued Utility Revenues . . . . . . . . . . . . . . 53,629 31,826
Prepayments. . . . . . . . . . . . . . . . . . . . . 41,465 32,330
TOTAL CURRENT ASSETS . . . . . . . . . . . . 254,288 178,570
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 360,449 385,689
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 38,880 70,274
TOTAL. . . . . . . . . . . . . . . . . . . $2,578,580 $2,541,586
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 24,000,000 Shares
Outstanding - 16,410,426 Shares. . . . . . . . . . $ 41,026 $ 41,026
Paid-in Capital. . . . . . . . . . . . . . . . . . . 571,922 574,709
Retained Earnings. . . . . . . . . . . . . . . . . . 111,953 99,582
Total Common Shareholder's Equity. . . . . . 724,901 715,317
Cumulative Preferred Stock - Subject to
Mandatory Redemption . . . . . . . . . . . . . . . 25,000 25,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 839,875 882,641
TOTAL CAPITALIZATION . . . . . . . . . . . . 1,589,776 1,622,958
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 41,175 40,068
CURRENT LIABILITIES:
Preferred Stock Due Within One Year. . . . . . . . . - 50,000
Long-term Debt Due Within One Year . . . . . . . . . 96,390 14,640
Short-term Debt. . . . . . . . . . . . . . . . . . . 136,100 51,800
Accounts Payable . . . . . . . . . . . . . . . . . . 65,454 54,828
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 91,476 129,429
Interest Accrued . . . . . . . . . . . . . . . . . . 13,623 13,605
Other. . . . . . . . . . . . . . . . . . . . . . . . 32,732 32,314
TOTAL CURRENT LIABILITIES. . . . . . . . . . 435,775 346,616
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 433,693 441,477
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 55,298 57,101
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 22,863 33,366
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . $2,578,580 $2,541,586
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 52,754 $ 52,622
Adjustments for Noncash Items:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 45,137 43,571
Deferred Federal Income Taxes. . . . . . . . . . . . . . (1,385) (3,789)
Deferred Investment Tax Credits. . . . . . . . . . . . . (1,803) (1,824)
Deferred Collection of Fuel Costs (net). . . . . . . . . (7,315) 2,121
Amortization of Deferred Property Taxes. . . . . . . . . 32,400 30,446
Amortization of Zimmer Plant Operating Expenses and
Carrying Charges . . . . . . . . . . . . . . . . . . . 15,775 15,211
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . (37,458) 1,186
Fuel, Materials and Supplies . . . . . . . . . . . . . . (3,612) 2,475
Accrued Utility Revenues . . . . . . . . . . . . . . . . (21,803) (699)
Prepayments. . . . . . . . . . . . . . . . . . . . . . . (9,135) (10,840)
Accounts Payable . . . . . . . . . . . . . . . . . . . . 10,626 (8,809)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . (37,953) (29,193)
Other (net). . . . . . . . . . . . . . . . . . . . . . . . (4,084) (4,853)
Net Cash Flows From Operating Activities . . . . . . 32,144 87,625
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (58,623) (38,642)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,470 2,301
Net Cash Flows Used For Investing Activities . . . . (57,153) (36,341)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 38,574 -
Change in Short-term Debt (net). . . . . . . . . . . . . . 84,300 64,225
Retirement of Cumulative Preferred Stock . . . . . . . . . (52,953) (7,500)
Retirement of Long-term Debt . . . . . . . . . . . . . . . - (68,255)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (39,342) (37,938)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (1,860) (3,022)
Net Cash Flows From (Used For) Financing Activities. 28,719 (52,490)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . 3,710 (1,206)
Cash and Cash Equivalents at Beginning of Period . . . . . . 9,134 10,577
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 12,844 $ 9,371
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $36,976,000 and $39,244,000
and for income taxes was $26,762,000 and $18,674,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $4,570,000 and $6,941,000 in 1997
and 1996, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial
statements should be read in conjunction with the 1996 Annual
Report as incorporated in and filed with the Form 10-K.
2. FINANCING ACTIVITIES
In January 1997 the Company terminated an agreement under
which $50 million of undivided interests in designated pools
of accounts receivable and accrued utility revenues were sold
with limited recourse.
In March 1997 the Company redeemed the entire 500,000
shares outstanding of its 7-7/8% Series of Cumulative Preferred
Stock, par value $100, at the regular redemption price of
$105.25 per share and issued $40 million of 7.92% Junior
Subordinated Deferrable Interest Debentures due in 2027.
3. ZIMMER PHASE-IN PLAN
In June 1997 the Company completed recovery of the Zimmer
Plant phase-in plan deferrals and ceased charging a 3.39%
temporary surcharge. The temporary surcharge was placed into
effect on February 1, 1994 to allow the Company to recover a
rate phase-in deferral of $93.9 million. The amount of net
phase-in deferrals that were collected through the surcharge
was $18.5 million in 1994, $28.5 million in 1995, $31.5 million
in 1996 and $15.4 million through June 26, 1997 when the total
amount was collected. The completion of the recovery of
amounts deferred under the phase-in plan and the cessation of
the surcharge will not affect net income since the deferred
costs were amortized commensurate with their recovery. For
other information regarding the Zimmer rate case refer to the
1996 Annual Report - Notes to Consolidated Financial Statements
- Note 2.
4. CONTINGENCIES
Taxes
As discussed in Note 8, "Federal Income Taxes" of the Notes
to Consolidated Financial Statements in the 1996 Annual Report,
the Internal Revenue Service (IRS) agents auditing the AEP
System's consolidated federal income tax returns for the years
1991 through 1993 requested a ruling from their National Office
as to whether certain interest deductions relating to corporate
owned life insurance (COLI) should be disallowed. The COLI
program was established in 1990 as part of the Company's
strategy to fund and reduce the cost of medical benefits for
retired employees. AEP filed a brief with the IRS National
Office defending the subject deductions. Although no
disallowance has been proposed, a disallowance of COLI interest
deductions through June 30, 1997 would reduce earnings by
approximately $36 million inclusive of interest. Management
believes it will ultimately prevail on this issue and will
vigorously contest any disallowance that may be proposed.
<PAGE>
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. The revised standards are expected to result
in redesignation of a number of areas of the country currently
in attainment to nonattainment which could ultimately dictate
more stringent emission restrictions for AEP System generating
units.
The new rules provide that the states must first determine
the attainment status of their areas. The states then have
three years to submit a compliance plan and up to ten years
after designation to come into compliance with the new
standards. The compliance deadline could be as late as 2010
for the ozone standard and 2012-2015 for the fine particulate
standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company must bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it could have a material adverse effect on
results of operations or possibly financial condition unless
such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in its 1996 Annual Report.
<PAGE>
<PAGE>
COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
Net income decreased $4.1 million or 15% in the second quarter
of 1997 due to decreased sales to residential customers, increased
maintenance expense and increased taxes other than federal income
taxes. Year-to-date net income increased slightly as the second
quarter decline largely offset a first quarter increase that
resulted from an increase in nonoperating income and decreased
interest charges.
Operating revenues decreased 2% in both the second quarter and
year-to-date periods due predominantly to lower retail fuel clause
revenues which decreased due to the amortization of previously
overcollected fuel costs and gains from the sale of emission
allowances. The Public Utilities Commission of Ohio fuel clause
adjustment mechanism requires the recordation of a regulatory
liability when fuel is overrecovered. Therefore, the decrease in
fuel clause revenues did not affect net income since it was offset
by the amortization of a regulatory liability recorded in a prior
period. Retail revenues decreased 3% in both periods due to
weather-related residential sales decreases which were partly
offset by increases in industrial sales.
Revenues from wholesale customers increased 5% on a 21%
increase in sales during the second quarter and increased less than
1% on a 15% sales increase during the year-to-date period. The
modest increase in revenues compared to the increases in sales
resulted from a decrease in the average price per kilowatthour
sold. The increases in wholesale sales resulted from increased
coal conversion services which are for the conversion of customers'
coal to electricity and are priced to exclude the customer-provided
fuel. The substantial increase in conversion service sales
reflects the cost effectiveness of this service to customers.
<PAGE>
<PAGE>
Income statement lines which changed significantly were as
follows:
Increase (Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Fuel Expense. . . . . . . . $(8.0) (18) $(10.7) (12)
Purchased Power Expense . . 5.3 13 0.4 N.M.
Other Operation Expense . . (3.2) (7) (5.3) (6)
Maintenance Expense . . . . 2.3 13 1.7 6
Taxes Other Than Federal
Income Taxes . . . . . . . 1.6 6 3.4 6
Federal Income Taxes. . . . 0.5 3 3.3 11
Nonoperating Income . . . . - - 3.9 N.M.
N.M. = Not Meaningful
The decline in fuel expense was due to decreased generation and
the operation of the fuel clause adjustment mechanism which
credited fuel expenses in the current period with the amortization
of deferred fuel costs recorded as a regulatory liability in the
prior period.
Purchased power expense increased in the second quarter of 1997
due to increased energy charges from the AEP System Power Pool as
Conesville Plant Units 5 and 6 were out of service for a major part
of the second quarter for maintenance.
The decline in other operation expense was mainly due to the
amortization of deferred gains on the sale of emission allowances,
commensurate with recognition as a reduction to customers bills,
and a decline in employee pensions and benefits expense.
Maintenance expense increased during the second quarter of 1997
due to scheduled maintenance of boiler plant at Conesville Units 5
and 6.
The increase in taxes other than federal income taxes was
primarily due to increased property taxes, as a result of increases
in assessed property values and tax rates, and higher gross
receipts taxes, as a result of the effect of a tax credit recorded
in 1996 and increased revenues during the assessment period.
Federal income taxes attributable to operations increased
primarily due to changes in certain book/tax differences accounted
for on a flow-through basis for rate-making and financial reporting
purposes.
Nonoperating income in the year-to-date period increased due
to the effect of losses recorded in the first quarter of 1996 from
certain deferred demand side management program costs and the
clean-up of underground fuel storage tanks at one of the Company's
facilities.
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $320,508 $323,494 $661,821 $653,377
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . 53,526 56,532 113,776 116,555
Purchased Power. . . . . . . . . . . . 34,177 34,653 70,173 69,316
Other Operation. . . . . . . . . . . . 81,300 78,686 159,911 157,496
Maintenance. . . . . . . . . . . . . . 30,459 30,107 55,695 56,549
Depreciation and Amortization. . . . . 35,106 35,086 70,124 69,978
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . 3,911 3,911 7,822 7,822
Taxes Other Than Federal Income Taxes. 15,591 18,440 33,876 38,361
Federal Income Taxes . . . . . . . . . 16,298 15,649 40,410 33,852
TOTAL OPERATING EXPENSES . . . 270,368 273,064 551,787 549,929
OPERATING INCOME . . . . . . . . . . . . 50,140 50,430 110,034 103,448
NONOPERATING INCOME (LOSS) . . . . . . . 497 272 965 (365)
INCOME BEFORE INTEREST CHARGES . . . . . 50,637 50,702 110,999 103,083
INTEREST CHARGES . . . . . . . . . . . . 16,729 17,195 32,832 33,809
NET INCOME . . . . . . . . . . . . . . . 33,908 33,507 78,167 69,274
PREFERRED STOCK DIVIDEND REQUIREMENTS. . 1,217 2,910 3,325 5,858
EARNINGS APPLICABLE TO COMMON STOCK. . . $ 32,691 $ 30,597 $ 74,842 $ 63,416
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . $282,157 $239,799 $269,071 $235,107
NET INCOME . . . . . . . . . . . . . . . 33,908 33,507 78,167 69,274
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . 29,065 28,127 58,130 56,254
Cumulative Preferred Stock . . . . . 1,184 2,359 2,387 5,249
Capital Stock Expense. . . . . . . . . 33 551 938 609
BALANCE AT END OF PERIOD . . . . . . . . $285,783 $242,269 $285,783 $242,269
The common stock of the Company is wholly owned
by American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $2,531,212 $2,525,969
Transmission . . . . . . . . . . . . . . . . . . . . 880,822 881,407
Distribution . . . . . . . . . . . . . . . . . . . . 711,603 696,069
General (including nuclear fuel) . . . . . . . . . . 208,126 189,619
Construction Work in Progress. . . . . . . . . . . . 96,942 84,605
Total Electric Utility Plant . . . . . . . . 4,428,705 4,377,669
Accumulated Depreciation and Amortization. . . . . . 1,917,166 1,861,893
NET ELECTRIC UTILITY PLANT . . . . . . . . . 2,511,539 2,515,776
NUCLEAR DECOMMISSIONING AND SPENT NUCLEAR
FUEL DISPOSAL TRUST FUNDS. . . . . . . . . . . . . . 522,856 490,778
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 158,869 154,265
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 8,782 8,233
Accounts Receivable. . . . . . . . . . . . . . . . . 124,234 125,822
Allowance for Uncollectible Accounts . . . . . . . . (1,412) (156)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 26,416 23,977
Materials and Supplies . . . . . . . . . . . . . . . 75,556 77,074
Accrued Utility Revenues . . . . . . . . . . . . . . 35,735 38,295
Prepayments. . . . . . . . . . . . . . . . . . . . . 11,196 10,271
TOTAL CURRENT ASSETS . . . . . . . . . . . . 280,507 283,516
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 417,054 421,692
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 32,186 31,457
TOTAL. . . . . . . . . . . . . . . . . . . $3,923,011 $3,897,484
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 2,500,000 Shares
Outstanding - 1,400,000 Shares . . . . . . . . . . $ 56,584 $ 56,584
Paid-in Capital. . . . . . . . . . . . . . . . . . . 732,406 731,272
Retained Earnings. . . . . . . . . . . . . . . . . . 285,783 269,071
Total Common Shareholder's Equity. . . . . . 1,074,773 1,056,927
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . 9,499 21,977
Subject to Mandatory Redemption. . . . . . . . . . 68,445 135,000
Long-term Debt . . . . . . . . . . . . . . . . . . . 1,009,723 1,042,104
TOTAL CAPITALIZATION . . . . . . . . . . . . 2,162,440 2,256,008
OTHER NONCURRENT LIABILITIES:
Nuclear Decommissioning. . . . . . . . . . . . . . . 341,165 313,845
Other. . . . . . . . . . . . . . . . . . . . . . . . 200,163 174,903
TOTAL OTHER NONCURRENT LIABILITIES . . . . . 541,328 488,748
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . 35,000 -
Short-term Debt. . . . . . . . . . . . . . . . . . . 103,925 43,500
Accounts Payable . . . . . . . . . . . . . . . . . . 41,956 61,892
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 69,137 65,400
Interest Accrued . . . . . . . . . . . . . . . . . . 15,714 15,281
Obligations Under Capital Leases . . . . . . . . . . 35,935 29,740
Other. . . . . . . . . . . . . . . . . . . . . . . . 62,147 66,436
TOTAL CURRENT LIABILITIES. . . . . . . . . . 363,814 282,249
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 582,706 594,879
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 142,536 146,473
DEFERRED GAIN ON SALE AND LEASEBACK -
ROCKPORT PLANT UNIT 2. . . . . . . . . . . . . . . . 94,272 96,125
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 35,915 33,002
COMMITMENTS AND CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . $3,923,011 $3,897,484
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 78,167 $ 69,274
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 73,856 73,820
Amortization of Rockport Plant Unit 1
Phase-in Plan Deferrals. . . . . . . . . . . . . . . . 7,822 7,822
Deferral of Incremental Nuclear
Refueling Outage Expenses (net). . . . . . . . . . . . (9,281) (4,850)
Deferred Federal Income Taxes. . . . . . . . . . . . . . (5,770) (7,712)
Deferred Investment Tax Credits. . . . . . . . . . . . . (3,937) (3,963)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . 2,844 (9,172)
Fuel, Materials and Supplies . . . . . . . . . . . . . . (921) (2,596)
Accrued Utility Revenues . . . . . . . . . . . . . . . . 2,560 11,403
Accounts Payable . . . . . . . . . . . . . . . . . . . . (19,936) (9,679)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 3,737 2,486
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 12,224 5,306
Net Cash Flows From Operating Activities . . . . . . 141,365 132,139
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (59,723) (37,128)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,284 853
Net Cash Flows Used For Investing Activities . . . . (58,439) (36,275)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . 47,728 38,579
Change in Short-term Debt (net). . . . . . . . . . . . . . 60,425 (3,250)
Retirement of Cumulative Preferred Stock . . . . . . . . . (78,838) (30,555)
Retirement of Long-term Debt . . . . . . . . . . . . . . . (50,000) (46,091)
Dividends Paid on Common Stock . . . . . . . . . . . . . . (58,130) (56,254)
Dividends Paid on Cumulative Preferred Stock . . . . . . . (3,562) (5,780)
Net Cash Flows Used For Financing Activities . . . . (82,377) (103,351)
Net Increase (Decrease) in Cash and Cash Equivalents. . . . 549 (7,487)
Cash and Cash Equivalents at Beginning of Period . . . . . . 8,233 13,723
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 8,782 $ 6,236
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $31,019,000 and $32,516,000
and for income taxes was $39,784,000 and $44,183,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $50,684,000 and $42,290,000 in 1997
and 1996, respectively.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-ments should
be read in conjunction with the 1996 Annual Report as incorporated in
and filed with the Form 10-K.
2. FINANCING ACTIVITIES
In February 1997, the Company issued $48 million of 6.40%
First Mortgage Bonds due 2000. In May 1997, the Company
redeemed $50 million of 8.75% First Mortgage Bonds due 2022.
In March 1997, the Company, as part of a tender offer,
reacquired and retired the following number of shares of
Cumulative Preferred Stock at the prices listed plus an amount
equal to accrued dividends:
Number Price Total
of Shares Paid Per Reacquisition
Series Retired Share Price
(in thousands)
4.12% 20,669 $ 64.17 $ 1,326
4-1/8% 59,325 62.31 3,697
4.56% 28,525 69.94 1,995
5.90% 233,000 101.83 23,726
6-1/4% 97,500 103.79 10,120
6.30% 217,550 103.71 22,562
6-7/8% 117,500 106.45 12,508
3. COMMITMENTS AND CONTINGENCIES
Steam Generator Replacement
The Company has announced plans to replace the four steam
generators in its Donald C. Cook Nuclear Plant's Unit 1. The
replacement will take place during a regularly scheduled
refueling outage in the spring of the year 2000. The unit is
expected to be out of service for about 100 days. The cost of
similar steam generator replacement projects in the industry
have ranged from $150 million to $180 million. Certain
construction commitments to produce the steam generator
components with long lead time production requirements have
been made. The plant's Unit 2 steam generators were replaced
in 1988.
Taxes
As discussed in Note 7, "Federal Income Taxes" of the Notes
to Consolidated Financial Statements in the 1996 Annual Report,
the Internal Revenue Service (IRS) agents auditing the AEP
System's consolidated federal income tax returns for the years
1991 through 1993 requested a ruling from their National Office
as to whether certain interest deductions relating to corporate
owned life insurance (COLI) claimed on Federal income tax
returns should be disallowed. The COLI program was established
in 1990 as part of the Company's strategy to fund and reduce
the cost of medical benefits for retired employees. AEP filed
a brief with the IRS National Office defending the subject
deductions. Although no disallowance has been proposed, a
<PAGE>
disallowance of the COLI interest deductions through June 30,
1997 would reduce earnings by approximately $55 million
inclusive of interest. Management believes it will ultimately
prevail on this issue and will vigorously contest any
disallowance that may be proposed.
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. These standards are expected to result in
redesignation of a number of areas of the country currently in
attainment to nonattainment which could ultimately dictate more
stringent emission restrictions for AEP System generating
units.
The new rules provide that the states must first determine
the attainment status of their areas. The states then have
three years to submit a compliance plan and up to ten years
after designation to come into compliance with the new
standards. The compliance deadline could be as late as 2010
for the ozone standard and 2012-2015 for the fine particulate
standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company is to bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it would have a material adverse effect on
results of operations or possibly financial condition unless
such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in its 1996 Annual Report.
<PAGE>
<PAGE>
INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
RESULTS OF OPERATIONS
Net income although relatively unchanged for the second
quarter, increased 13% or $8.9 million for the year-to-date period
reflecting an increase in first quarter revenues. Revenues
increased 1% or $8.4 million in the year-to-date period due
primarily to a 2% increase in retail sales, partly offset by a 2%
decline in wholesale sales. The increase in retail sales was
largely attributable to increased industrial customer usage.
Retail revenues also increased due to an increase in fuel clause
recoveries. Under a fuel clause recovery mechanism unrecovered
fuel costs are deferred for future recovery.
The decline in wholesale sales reflects a decrease in energy
deliveries to the AEP System Power Pool (Power Pool) due to planned
generating unit outages that reduced the availability of
generation. Partly offsetting the decline in wholesale sales were
additional Power Pool sales to nonaffiliated companies for coal
conversion and transmission services. Coal conversion service
sales are for the conversion of customers' coal to electricity.
The increase in coal conversion service sales reflects the cost
effectiveness of this service to customers.
Income statement line items which changed significantly were:
Increase (Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Fuel Expense. . . . . . . $(3.0) (5) $(2.8) (2)
Other Operation Expense . 2.6 3 2.4 2
Taxes Other Than
Federal Income Taxes . . (2.8) (15) (4.5) (12)
Federal Income Taxes. . . 0.6 4 6.6 19
Nonoperating Income . . . 0.2 83 1.3 N.M.
N.M. = Not meaningful
Fuel expense decreased in both periods due to the reduction in
generation caused by the planned generating unit outages. Also
contributing to the decrease in the quarter was the use of an
increased proportion of lower cost nuclear generation to coal-fired
generation reflecting the effects of plant maintenance outages in
the second quarter. Nuclear generation was available for a greater
portion of the second quarter in 1997 than in 1996 since a
refueling and maintenance outage at the Donald C. Cook Nuclear
<PAGE>
Plant (Cook Nuclear Plant) Unit 1 was completed earlier in the
second quarter of 1997 than a similar refueling and maintenance
outage for Cook Nuclear Plant Unit 2 performed in 1996. Also
Rockport Unit 1 and Tanners Creek Unit 4 experienced general boiler
and inspection maintenance in the second quarter of 1997 reducing
the availability of coal-fired generation when compared with the
same period in 1996.
Other operation expense increased in both periods due to
increased administrative and general expenses.
The decrease in taxes other than federal income taxes in both
periods was the result of lower Indiana and Michigan real and
personal property tax accruals recorded this year as compared with
1996 due to declines in assessed property values.
Federal income taxes attributable to operations increased in
both periods as a result of an increase in pre-tax operating income
and changes in certain book/tax timing differences accounted for on
a flow-through basis for rate-making and financial reporting
purposes.
The increase in nonoperating income for the year-to-date period
was due to the effect of a loss on the sale of a western coal
property in the first quarter of 1996.
FINANCIAL CONDITION
Total plant and property additions including capital leases for
the year-to-date period were $111 million. During the first six
months of 1997 short-term debt outstanding increased by $60
million.
In February 1997, the Company issued $48 million of 6.40% First
Mortage Bonds, due 2000. In May 1997, the Company redeemed $50
million of 8.75% First Mortgage Bonds due 2022.
As part of a January 1997 tender offer for all of the Company's
outstanding preferred stock that was announced in conjunction with
a special meeting of shareholders, 774,069 shares of $100 par value
preferred stocks were reacquired. The total cost of the stock
reacquisition was $78 million. At the special meeting of
shareholders held on February 28, 1997, the Company's articles of
incorporation were amended to remove certain capitalization ratio
requirements which restricted the Company's ability to issue
unsecured debt. As a result, unsecured borrowings are now limited
only by the Public Utility Holding Company Act of 1935 with the
current limitation set at $175 million for unsecured short-term
borrowings.
<PAGE>
<PAGE>
STEAM GENERATOR REPLACEMENT
The Company has announced plans to replace the four steam
generators in its Cook Nuclear Plant's Unit 1. The replacement
will take place during a regularly scheduled refueling outage in
the spring of the year 2000. The unit is expected to be out of
service for about 100 days. The costs of similar steam generator
replacement projects in the industry have ranged from $150 million
to $180 million. Certain construction commitments to produce the
steam generator components with long lead time production
requirements have been made. The plant's Unit 2 steam generators
were replaced in 1988.
REVISED AIR QUALITY STANDARDS
On July 18, 1997, the United States Environmental Protection
Agency published a revised National Ambient Air Quality Standard
(NAAQS) for ozone and a new NAAQS for fine particulate matter (less
than 2.5 microns in size) in the Federal Register. These standards
are expected to result in redesignation of a number of areas of the
country currently in attainment to nonattainment which could
ultimately dictate more stringent emission restrictions for AEP
System generating units.
The new rules provide that the states must first determine the
attainment status of their areas. The states then have three years
to submit a compliance plan and up to ten years after designation
to come into compliance with the new standards. The compliance
deadline could be as late as 2010 for the ozone standard and 2012-2015 for
the fine particulate standard.
Management is reviewing the impact of the new rules, however,
we are unable to estimate compliance costs without knowledge of
reductions that the states will find necessary to meet the new
standards. If such reductions are significant and the Company must
bear a significant portion of the cost of compliance in the region
or county that is in violation of the revised standards, it could
have a material adverse effect on results of operations or possibly
financial condition unless such costs are recovered.
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . $78,101 $78,730 $166,681 $167,319
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . 19,463 20,110 38,627 41,790
Purchased Power. . . . . . . . . . . . . 21,913 22,102 45,143 44,621
Other Operation. . . . . . . . . . . . . 11,880 11,974 23,889 24,330
Maintenance. . . . . . . . . . . . . . . 5,571 7,634 10,678 15,354
Depreciation and Amortization. . . . . . 6,519 6,267 13,059 12,521
Taxes Other Than Federal Income Taxes. . 2,045 1,744 4,839 4,118
Federal Income Taxes . . . . . . . . . . 1,281 598 5,777 3,126
TOTAL OPERATING EXPENSES. . . . . 68,672 70,429 142,012 145,860
OPERATING INCOME . . . . . . . . . . . . . 9,429 8,301 24,669 21,459
NONOPERATING LOSS. . . . . . . . . . . . . (148) (95) (289) (429)
INCOME BEFORE INTEREST CHARGES . . . . . . 9,281 8,206 24,380 21,030
INTEREST CHARGES . . . . . . . . . . . . . 6,140 5,837 12,108 11,905
NET INCOME . . . . . . . . . . . . . . . . $ 3,141 $ 2,369 $ 12,272 $ 9,125
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . $86,531 $92,071 $ 84,090 $91,381
NET INCOME . . . . . . . . . . . . . . . . 3,141 2,369 12,272 9,125
CASH DIVIDENDS DECLARED. . . . . . . . . . 6,690 6,066 13,380 12,132
BALANCE AT END OF PERIOD . . . . . . . . . $82,982 $88,374 $ 82,982 $88,374
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . $241,828 $244,805
Transmission . . . . . . . . . . . . . . . . . . . . 264,425 264,563
Distribution . . . . . . . . . . . . . . . . . . . . 330,282 329,184
General. . . . . . . . . . . . . . . . . . . . . . . 67,055 64,650
Construction Work in Progress. . . . . . . . . . . . 67,766 48,400
Total Electric Utility Plant . . . . . . . . 971,356 951,602
Accumulated Depreciation and Amortization. . . . . . 290,263 286,640
NET ELECTRIC UTILITY PLANT . . . . . . . . . 681,093 664,962
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . 6,376 6,452
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . 1,278 1,106
Accounts Receivable. . . . . . . . . . . . . . . . . 27,541 28,589
Allowance for Uncollectible Accounts . . . . . . . . (437) (272)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . 11,519 9,244
Materials and Supplies . . . . . . . . . . . . . . . 12,877 13,175
Accrued Utility Revenues . . . . . . . . . . . . . . 6,234 8,175
Prepayments. . . . . . . . . . . . . . . . . . . . . 2,215 2,011
TOTAL CURRENT ASSETS . . . . . . . . . . . . 61,227 62,028
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . 88,789 88,776
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . 8,758 11,361
TOTAL. . . . . . . . . . . . . . . . . . . $846,243 $833,579
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - $50 Par Value:
Authorized - 2,000,000 Shares
Outstanding - 1,009,000 Shares . . . . . . . . . . $ 50,450 $ 50,450
Paid-in Capital. . . . . . . . . . . . . . . . . . . 118,750 108,750
Retained Earnings. . . . . . . . . . . . . . . . . . 82,982 84,090
Total Common Shareholder's Equity. . . . . . 252,182 243,290
First Mortgage Bonds . . . . . . . . . . . . . . . . 179,358 179,305
Notes Payable. . . . . . . . . . . . . . . . . . . . 75,000 75,000
Subordinated Debentures. . . . . . . . . . . . . . . 38,913 38,893
TOTAL CAPITALIZATION . . . . . . . . . . . . 545,453 536,488
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . 21,990 19,467
CURRENT LIABILITIES:
Short-term Debt. . . . . . . . . . . . . . . . . . . 58,700 51,675
Accounts Payable . . . . . . . . . . . . . . . . . . 22,167 31,057
Customer Deposits. . . . . . . . . . . . . . . . . . 3,387 3,409
Taxes Accrued. . . . . . . . . . . . . . . . . . . . 6,803 5,064
Interest Accrued . . . . . . . . . . . . . . . . . . 5,113 5,217
Other. . . . . . . . . . . . . . . . . . . . . . . . 11,427 9,199
TOTAL CURRENT LIABILITIES. . . . . . . . . . 107,597 105,621
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 154,087 153,538
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . 16,391 17,007
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . 725 1,458
CONTINGENCIES (Note 4)
TOTAL. . . . . . . . . . . . . . . . . . . $846,243 $833,579
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
KENTUCKY POWER COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 12,272 $ 9,125
Adjustments for Noncash Items:
Depreciation and Amortization. . . . . . . . . . . . . . 13,065 12,557
Deferred Federal Income Taxes. . . . . . . . . . . . . . 347 415
Deferred Investment Tax Credits. . . . . . . . . . . . . (616) (622)
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . 1,213 60
Fuel, Materials and Supplies . . . . . . . . . . . . . . (1,977) (5,129)
Accrued Utility Revenues . . . . . . . . . . . . . . . . 1,941 7,247
Accounts Payable . . . . . . . . . . . . . . . . . . . . (8,890) (5,091)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . 1,739 (1,797)
Other (net). . . . . . . . . . . . . . . . . . . . . . . . 4,644 (123)
Net Cash Flows From Operating Activities . . . . . . 23,738 16,642
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . (27,211) (18,181)
Proceeds from Sales of Property. . . . . . . . . . . . . . - 250
Net Cash Flows Used For Investing Activities . . . . (27,211) (17,931)
FINANCING ACTIVITIES:
Capital Contributions from Parent Company. . . . . . . . . 10,000 10,000
Issuance of Long-term Debt . . . . . . . . . . . . . . . . - 50,000
Change in Short-term Debt (net). . . . . . . . . . . . . . 7,025 29,975
Retirement of Long-term Debt . . . . . . . . . . . . . . . - (74,738)
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . (13,380) (12,132)
Net Cash Flows From Financing Activities . . . . . . 3,645 3,105
Net Increase in Cash and Cash Equivalents. . . . . . . . . . 172 1,816
Cash and Cash Equivalents at Beginning of Period . . . . . . 1,106 1,031
Cash and Cash Equivalents at End of Period . . . . . . . . . $ 1,278 $ 2,847
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $12,046,000 and $12,114,000
and for income taxes was $4,395,000 and $4,505,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $3,571,000 and $2,831,000 in 1997
and 1996, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
KENTUCKY POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited financial statements should be
read in conjunction with the 1996 Annual Report as incorporated
in and filed with the Form 10-K.
2. FINANCING ACTIVITIES
The Company received from its parent a cash capital
contribution of $10 million in June 1997 which was credited to
paid-in capital.
3. RATE MATTERS
In a May 27, 1997 order the Kentucky Public Service
Commission (KPSC) approved the Company's request for a monthly
surcharge to recover environmental compliance costs. The
surcharge was applied to bills rendered on and after July 7,
1997. However, as part of the May 27, 1997 order the KPSC
directed the Company to refund to ratepayers $2.3 million ($1.5
million after tax) of emission allowance sale proceeds
(received in 1996), as a reduction of the first twelve months
of environmental surcharge revenues. Management believes the
KPSC's May 27, 1997 order unlawfully requires the Company to
refund the allowance sale proceeds and intends to pursue a
favorable resolution of this matter through the appeals
process. The Company believes, based on the advice of counsel,
that it is probable it will prevail on the appeal. It is
expected that this matter will be resolved in the fourth
quarter of 1997. No provision for loss has been recorded.
4. CONTINGENCIES
Taxes
As discussed in Note 7, "Federal Income Taxes" of the Notes
to Financial Statements in the 1996 Annual Report, the Internal
Revenue Service (IRS) agents auditing the AEP System's
consolidated federal income tax returns for the years 1991
through 1993 requested a ruling from their National Office as
to whether certain interest deductions relating to corporate
owned life insurance (COLI) claimed by the Company for 1992 and
1993 should be disallowed. The COLI program was established
in 1992 as part of the Company's strategy to fund and reduce
the cost of medical benefits for retired employees. AEP filed
a brief with the IRS National Office defending the subject
deductions. Although no disallowance has been proposed, a
disallowance of COLI interest deductions through June 30, 1997
would reduce earnings by approximately $6 million inclusive of
interest. Management believes it will ultimately prevail on
this issue and will vigorously contest any disallowance that
may be proposed.
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. These standards are expected to result in
<PAGE>
redesignation of a number of areas of the country currently in
attainment to nonattainment which could ultimately dictate more
stringent emission restrictions for AEP System generating
units.
The new rules provide that the states must first determine
the attainment status of their areas. The states then have
three years to submit a compliance plan and up to ten years
after designation to come into compliance with the new
standards. The compliance deadline could be as late as 2010
for the ozone standard and 2012-2015 for the fine particulate
standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company must bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it could have a material adverse effect on
results of operations or possibly financial condition unless
such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in its 1996 Annual Report.
<PAGE>
<PAGE>
KENTUCKY POWER COMPANY
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
Although revenues decreased $0.6 million in both the second
quarter and year-to-date periods, net income increased 33% or $0.8
million for the quarter and 34% or $3.1 million for the year-to-date period.
The increase in net income for both periods was
mainly attributable to decreased maintenance expense.
Operating revenues decreased in the second quarter due to
decreased wholesale energy sales to the AEP System Power Pool
(Power Pool) partly offset by increased retail energy sales.
Milder weather in 1997 compared with unseasonably warm temperatures
in 1996 accounted for the decrease in sales to the Power Pool.
Energy sales to retail customers increased mainly due to increased
industrial customer usage.
Year-to-date operating revenues decreased as a result of
decreased energy sales to retail customers offset in part by an
increase in wholesale revenues. Residential and commercial energy
sales declined, due to decreased customer usage as a result of
warmer winter weather, more than offsetting an increase in sales to
industrial customers. Wholesale revenues rose mainly due to an
increase in coal conversion services and transmission services.
Coal conversion services are for the conversion of customers' coal
to electricity. The substantial increase in coal conversion
service sales reflects the cost effectiveness of this service to
customers.
Other income statement items which changed significantly were:
Increase(Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Fuel Expense . . . . . . . . $(0.6) (3) $(3.2) (8)
Maintenance Expense. . . . . (2.1) (27) (4.7) (30)
Taxes Other Than Federal
Income Taxes. . . . . . . . 0.3 17 0.7 18
Federal Income Taxes . . . . 0.7 114 2.7 85
Fuel expense decreased as a result of a decline in fuel
consumed, due to increased plant efficiency and decreased
generation. The significant decrease in maintenance expense
reflects the effects of scheduled steam plant maintenance work in
1996 at the Company's Big Sandy Plant Unit 2 and reduced overhead
distribution line maintenance expenditures in 1997.
<PAGE>
<PAGE>
Taxes other than federal income taxes increased primarily due
to increased state income taxes as a result of an increase in pre-tax
operating income.
The increase in federal income tax expense attributable to
operations in both periods was primarily due to increases in pre-tax
operating income, changes in certain book/tax differences
accounted for on a flow-through basis for rate-making and financial
reporting purposes and in the year-to-date period the completion of
the amortization of deferred federal income taxes in excess of the
statutory tax rate as ordered by the Kentucky Public Service
Commission.
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . $447,147 $449,383 $931,447 $954,124
OPERATING EXPENSES:
Fuel . . . . . . . . . . . . . . . . . . . 144,236 144,426 306,238 322,752
Purchased Power. . . . . . . . . . . . . . 16,009 16,175 32,468 31,240
Other Operation. . . . . . . . . . . . . . 79,196 78,985 161,559 161,876
Maintenance. . . . . . . . . . . . . . . . 33,372 42,083 62,849 71,150
Depreciation and Amortization. . . . . . . 35,088 34,369 70,028 68,643
Taxes Other Than Federal Income Taxes. . . 41,950 40,532 83,863 82,735
Federal Income Taxes . . . . . . . . . . . 28,204 25,530 64,819 60,601
TOTAL OPERATING EXPENSES . . . . . 378,055 382,100 781,824 798,997
OPERATING INCOME . . . . . . . . . . . . . . 69,092 67,283 149,623 155,127
NONOPERATING INCOME. . . . . . . . . . . . . 2,560 128 7,530 2,262
INCOME BEFORE INTEREST CHARGES . . . . . . . 71,652 67,411 157,153 157,389
INTEREST CHARGES . . . . . . . . . . . . . . 21,333 23,462 41,243 46,904
NET INCOME . . . . . . . . . . . . . . . . . 50,319 43,949 115,910 110,485
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . 370 2,240 1,908 4,480
EARNINGS APPLICABLE TO COMMON STOCK. . . . . $ 49,949 $ 41,709 $114,002 $106,005
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands)
BALANCE AT BEGINNING OF PERIOD . . . . . . . $609,934 $546,611 $584,015 $518,029
NET INCOME . . . . . . . . . . . . . . . . . 50,319 43,949 115,910 110,485
DEDUCTIONS:
Cash Dividends Declared:
Common Stock . . . . . . . . . . . . . . 86,647 35,714 124,209 71,428
Cumulative Preferred Stock . . . . . . . 370 2,194 2,459 4,388
Capital Stock Expense. . . . . . . . . . . - 47 21 93
BALANCE AT END OF PERIOD . . . . . . . . . . $573,236 $552,605 $573,236 $552,605
The common stock of the Company is wholly owned by
American Electric Power Company, Inc.
See Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
ASSETS
<S> <C> <C>
ELECTRIC UTILITY PLANT:
Production . . . . . . . . . . . . . . . . . . . . . . . . $2,572,319 $2,556,507
Transmission . . . . . . . . . . . . . . . . . . . . . . . 827,109 820,636
Distribution . . . . . . . . . . . . . . . . . . . . . . . 880,366 872,936
General (including mining assets). . . . . . . . . . . . . 680,922 680,443
Construction Work in Progress. . . . . . . . . . . . . . . 86,244 66,099
Total Electric Utility Plant . . . . . . . . . . . 5,046,960 4,996,621
Accumulated Depreciation and Amortization. . . . . . . . . 2,278,774 2,216,534
NET ELECTRIC UTILITY PLANT . . . . . . . . . . . . 2,768,186 2,780,087
OTHER PROPERTY AND INVESTMENTS . . . . . . . . . . . . . . . 106,900 106,485
CURRENT ASSETS:
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . 48,127 24,003
Accounts Receivable. . . . . . . . . . . . . . . . . . . . 221,694 232,734
Allowance for Uncollectible Accounts . . . . . . . . . . . (1,969) (1,433)
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,801 113,361
Materials and Supplies . . . . . . . . . . . . . . . . . . 75,090 75,908
Accrued Utility Revenues . . . . . . . . . . . . . . . . . 34,572 38,852
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . 56,511 44,203
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . 550,826 527,628
REGULATORY ASSETS. . . . . . . . . . . . . . . . . . . . . . 540,369 540,123
DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . . . . 82,934 137,843
TOTAL. . . . . . . . . . . . . . . . . . . . . . $4,049,215 $4,092,166
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
1997 1996
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
CAPITALIZATION:
Common Stock - No Par Value:
Authorized - 40,000,000 Shares
Outstanding - 27,952,473 Shares. . . . . . . . . . . . . $ 321,201 $ 321,201
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . 462,285 460,662
Retained Earnings. . . . . . . . . . . . . . . . . . . . . 573,236 584,015
Total Common Shareholder's Equity. . . . . . . . . 1,356,722 1,365,878
Cumulative Preferred Stock:
Not Subject to Mandatory Redemption. . . . . . . . . . . 17,575 38,532
Subject to Mandatory Redemption. . . . . . . . . . . . . 11,850 109,900
Long-term Debt . . . . . . . . . . . . . . . . . . . . . . 969,590 1,002,436
TOTAL CAPITALIZATION . . . . . . . . . . . . . . . 2,355,737 2,516,746
OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . . . . 264,612 245,032
CURRENT LIABILITIES:
Long-term Debt Due Within One Year . . . . . . . . . . . . 129,472 67,293
Short-term Debt. . . . . . . . . . . . . . . . . . . . . . 112,225 41,302
Accounts Payable . . . . . . . . . . . . . . . . . . . . . 84,261 89,399
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . . 143,199 162,798
Interest Accrued . . . . . . . . . . . . . . . . . . . . . 17,021 18,094
Obligations Under Capital Leases . . . . . . . . . . . . . 26,788 24,153
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 88,525 84,385
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . 601,491 487,424
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . 729,157 738,626
DEFERRED INVESTMENT TAX CREDITS. . . . . . . . . . . . . . . 44,619 46,308
DEFERRED CREDITS . . . . . . . . . . . . . . . . . . . . . . 53,599 58,030
CONTINGENCIES (Note 3)
TOTAL. . . . . . . . . . . . . . . . . . . . . . $4,049,215 $4,092,166
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
OHIO POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 115,910 $ 110,485
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . . . . . . . 86,888 82,863
Deferred Federal Income Taxes. . . . . . . . . . . . . . . . (1,530) 1,180
Deferred Fuel Costs (net). . . . . . . . . . . . . . . . . . (13,695) (2,368)
Amortization of Deferred Property Taxes. . . . . . . . . . . 38,193 39,099
Changes in Certain Current Assets and Liabilities:
Accounts Receivable (net). . . . . . . . . . . . . . . . . . 11,576 1,009
Fuel, Materials and Supplies . . . . . . . . . . . . . . . . (2,622) (8,691)
Accrued Utility Revenues . . . . . . . . . . . . . . . . . . 4,280 3,152
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . (12,308) (16,469)
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . (5,138) (25,365)
Taxes Accrued. . . . . . . . . . . . . . . . . . . . . . . . (19,599) (23,203)
Other (net). . . . . . . . . . . . . . . . . . . . . . . . . . 25,521 33,939
Net Cash Flows From Operating Activities . . . . . . . . 227,476 195,631
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . . . . . . . (63,411) (44,831)
Proceeds from Sale of Property and Other . . . . . . . . . . . 4,784 5,529
Net Cash Flows Used For Investing Activities . . . . . . (58,627) (39,302)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . . . . . . . . . . . . . 98,958 -
Change in Short-term Debt (net). . . . . . . . . . . . . . . . 70,923 108,521
Retirement of Cumulative Preferred Stock . . . . . . . . . . . (117,601) -
Retirement of Long-term Debt . . . . . . . . . . . . . . . . . (70,337) (158,649)
Dividends Paid on Common Stock . . . . . . . . . . . . . . . . (124,209) (71,428)
Dividends Paid on Cumulative Preferred Stock . . . . . . . . . (2,459) (4,388)
Net Cash Flows Used For Financing Activities . . . . . . (144,725) (125,944)
Net Increase in Cash and Cash Equivalents. . . . . . . . . . . . 24,124 30,385
Cash and Cash Equivalents at Beginning of Period . . . . . . . . 24,003 44,000
Cash and Cash Equivalents at End of Period . . . . . . . . . . . $ 48,127 $ 74,385
Supplemental Disclosure:
Cash paid for interest net of capitalized amounts was $40,976,000 and $46,627,000 and
for income taxes was $48,063,000 and $39,244,000 in 1997 and 1996, respectively.
Noncash acquisitions under capital leases were $20,299,000 and $14,108,000 in 1997 and
1996, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
OHIO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. GENERAL
The accompanying unaudited consolidated financial state-
ments should be read in conjunction with the 1996 Annual Report as
incorporated in and filed with the Form 10-K.
2. FINANCING ACTIVITY
During the first half of 1997 the Company issued $50
million of 7.92% Junior Subordinated Deferrable Interest
Debentures due 2027 and a coal mining subsidiary received
$50 million under a sale-leaseback agreement accounted for
as a financing. Under this accounting the assets sold
remain on the books and the seller recognizes a financing
liability as part of long-term debt. The Company and a
subsidiary retired $70 million of long-term debt; $20
million at maturity and $50 million of 8.75% First Mortage
Bonds due in 2022 under maintenance provisions at 100%. In
March 1997 the Company, as part of a tender offer,
reacquired and retired the following number of shares of
Cumulative Preferred Stock at the prices listed plus an
amount equal to accrued dividends:
Number Price Total
of Shares Paid Per Reacquisition
Series Retired Share Price
(in thousands)
4.08% 27,182 $ 64.56 $ 1,755
4.20% 28,875 66.46 1,919
4.40% 55,889 69.62 3,891
4-1/2% 97,616 69.02 6,737
5.90% 321,500 103.09 33,143
6.02% 364,000 103.71 37,750
6.35% 295,000 105.14 31,016
3. CONTINGENCIES
Taxes
As discussed in Note 8, "Federal Income Taxes" of the
Notes to Consolidated Financial Statements in the 1996
Annual Report, the Internal Revenue Service (IRS) agents
auditing the AEP System's consolidated federal income tax
returns for the years 1991 through 1993 requested a ruling
from their National Office as to whether certain interest
deductions relating to corporate owned life insurance (COLI)
should be disallowed. The COLI program was established in
1990 as part of the Company's strategy to fund and reduce
the cost of medical benefits for retired employees. AEP
filed a brief with the IRS National Office defending the
subject deduction. Although no disallowance has been
proposed, a disallowance of COLI interest deductions through
June 30, 1997 would reduce earnings by approximately $99
million inclusive of interest. Management believes it will
ultimately prevail on this issue and will vigorously contest
any disallowance that may be proposed.
<PAGE>
<PAGE>
Revised Air Quality Standards
On July 18, 1997, the United States Environmental
Protection Agency published a revised National Ambient Air
Quality Standard (NAAQS) for ozone and a new NAAQS for fine
particulate matter (less than 2.5 microns in size) in the
Federal Register. These standards are expected to result in
redesignation of a number of areas of the country currently
in attainment to nonattainment which could ultimately
dictate more stringent emission restrictions for AEP System
generating units.
The new rules provide that the states must first
determine the attainment status of their areas. The states
then have three years to submit a compliance plan and up to
ten years after designation to come into compliance with the
new standards. The compliance deadline could be as late as
2010 for the ozone standard and 2012-2015 for the fine
particulate standard.
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary
to meet the new standards. If such reductions are
significant and the Company must bear a significant portion
of the cost of compliance in the region or county that is in
violation of the revised standards, it could have a material
adverse effect on results of operations or possibly
financial condition unless such costs are recovered.
Other
The Company continues to be involved in certain other
matters discussed in the 1996 Annual Report.
<PAGE>
<PAGE>
OHIO POWER COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
SECOND QUARTER 1997 vs. SECOND QUARTER 1996
AND
YEAR-TO-DATE 1997 vs. YEAR-TO-DATE 1996
RESULTS OF OPERATIONS
Net income increased $6.4 million or 14% in the second
quarter and $5.4 million or 5% in the year-to-date period due to
reduced maintenance and financing costs and increased
nonoperating income.
Operating revenues decreased in both periods as a result of
a 3% reduction in retail energy sales and a reduction in the
contract price for the sale of electricity to a major industrial
customer. The effects of milder weather and a labor strike at
another major industrial customer reduced retail sales.
Energy sales to wholesale customers were up 31% in the
second quarter of 1997 and 14% in the year-to-date period
primarily due to an increase in energy supplied to the AEP System
Power Pool (Power Pool) and coal conversion services to power
marketers. Coal conversion services are for the conversion of
customers' coal to electricity. The substantial increase in coal
conversion service sales reflects the cost effectiveness of this
service to customers. The energy supplied to the Power Pool rose
due to the unavailability of an affiliate's nuclear unit.
Although energy sales increased in both periods, wholesale
revenues increased only 9% in the quarter and were flat in the
year-to-date period reflecting a decrease in the average price
per kilowatthour sold. The average price decreased since Power
Pool sales are at cost and conversion services are priced to
exclude customer-provided fuel.
<PAGE>
<PAGE>
Other income statement items which changed significantly
were:
Increase (Decrease)
Second Quarter Year-to-Date
(in millions) % (in millions) %
Fuel Expense . . . . . . . $(0.2) - $(16.5) (5)
Maintenance Expense. . . . (8.7) (21) (8.3) (12)
Federal Income Taxes . . . 2.7 10 4.2 7
Nonoperating Income. . . . 2.4 N.M. 5.3 233
Interest Charges . . . . . (2.1) (9) (5.7) (12)
N.M. = Not Meaningful
The decrease in fuel expense in the year-to-date period was
mainly due to a decline in generation resulting from the reduced
demand for energy in the first quarter of 1997 reflecting the
milder weather and the unavailability of certain of the Company's
generating units.
Maintenance expense decreased in both periods due to a
decrease in production plant maintenance work during the second
quarter. Both units of the Gavin Plant were out of service for
inspection and repairs in the second quarter of 1996 whereas in
the second quarter of 1997 these units did not have major outages
for maintenance.
The increase in both periods in federal income tax expense
attributable to operations was due to an increase in pre-tax
operating income and in the comparative year-to-date period due
to changes in certain book/tax differences accounted for on a
flow-through basis for rate-making and financial reporting
purposes.
Nonoperating income increased in both periods reflecting the
positive effect of a loss recorded in June 1996 on emission
allowances. Also contributing to the year-to-date increase was
recognition in March 1997 of a gain on the sale of emission
allowances.
A refinancing program reduced outstanding debt and lowered
average interest rates resulting in decreased interest charges.
A January 1997 tender offer that retired $119 million par value
preferred stock on February 28, 1997 was responsible for a
decrease in preferred stock dividend requirements.
<PAGE>
<PAGE>
FINANCIAL CONDITION
Total plant and property additions including capital leases
for the first six months of 1997 were $84 million.
During the first six months of 1997, the Company and a
subsidiary retired $70 million principal amount of long-term debt
with interest rates ranging from 7.19% to 8.75%, issued $100
million of long-term obligations at rates of 6.98% and 7.92% and
increased short-term debt by $71 million.
As part of the January 1997 tender offer for all of the
Company's outstanding preferred stock that was announced in
conjunction with a special meeting of shareholders, 1,190,062
shares of $100 par value preferred stocks were reacquired. The
total cost of the stock reacquisition was $118 million. At the
special meeting of shareholders held on February 28, 1997 the
Company's articles of incorporation were amended to remove
certain capitalization ratio requirements which restricted the
Company's ability to issue unsecured debt. As a result unsecured
borrowings are now limited only by the Public Utility Holding
Company Act of 1935 with the current limitation set at $250
million for unsecured short-term borrowings.
REVISED AIR QUALITY STANDARDS
On July 18, 1997, the United States Environmental Protection
Agency published a revised National Ambient Air Quality Standard
(NAAQS) for ozone and a new NAAQS for fine particulate matter
(less than 2.5 microns in size) in the Federal Register. These
standards are expected to result in redesignation of a number of
areas of the country currently in attainment to nonattainment
which could ultimately dictate more stringent emission
restrictions for AEP System generating units.
The new rules provide that the states must first determine
the attainment status of their areas. The states then have three
years to submit a compliance plan and up to ten years after
designation to come into compliance with the new standards. The
compliance deadline could be as late as 2010 for the ozone
standard and 2012-2015 for the fine particulate standard.
<PAGE>
<PAGE>
Management is reviewing the impact of the new rules,
however, we are unable to estimate compliance costs without
knowledge of reductions that the states will find necessary to
meet the new standards. If such reductions are significant and
the Company must bear a significant portion of the cost of
compliance in the region or county that is in violation of the
revised standards, it could have a material adverse effect on
results of operations or possibly financial condition unless such
costs are recovered.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
American Electric Power Company, Inc. ("AEP")
The annual meeting of shareholders was held in Kingsport,
Tennessee on April 23, 1997. The holders of shares entitled to
vote at the meeting or their proxies cast votes at the meeting
with respect to the following four matters, as indicated below:
1. Election of 12 directors to hold office until the next
annual meeting and until their successors are duly
elected. Each nominee for director was elected by a
vote of the shareholders as follows:
Number of Shares Number of
Nominee Voted For Votes Withheld
Peter J. DeMaria 154,830,048 2,091,583
John P. DesBarres 154,644,655 2,276,976
E. Linn Draper, Jr. 154,676,011 2,245,620
Robert M. Duncan 154,633,578 2,288,053
Robert W. Fri 154,753,183 2,168,448
Lester A. Hudson, Jr. 154,779,240 2,142,391
Leonard J. Kujawa 154,705,529 2,216,102
Gerald P. Maloney 154,823,818 2,097,813
Angus E. Peyton 154,620,060 2,301,571
Donald G. Smith 154,803,572 2,118,059
Linda Gillespie Stuntz 154,717,848 2,203,783
Morris Tanenbaum 154,687,800 2,233,831
2. Approve the appointment by the Board of Directors of
Deloitte & Touche LLP as independent auditors of AEP for
the year 1997. The proposal was approved by a vote of
the shareholders as follows:
Votes FOR 155,049,794
Votes AGAINST 775,823
Votes ABSTAINED 1,096,014
Broker NON-VOTES* 0
II-1
<PAGE>
3. Approve the Deferred Compensation and Stock Plan for
Non-Employee Directors. The proposal was approved by a
vote of the shareholders as follows:
Votes FOR 142,784,266
Votes AGAINST 9,625,655
Votes ABSTAINED 4,511,710
Broker NON-VOTES* 0
4. Approve amendments to the Restated Certificate of
Incorporation and By-Laws to reduce the minimum required
number of directors from 12 to nine. The proposal was
approved by a vote of the shareholders as follows:
Votes FOR 131,652,720
Votes AGAINST 2,984,508
Votes ABSTAINED 2,104,958
Broker NON-VOTES* 20,179,445
*A non-vote occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not
vote on another proposal because the nominee does not
have discretionary voting power and has not received
instructions from the beneficial owner.
II-2
<PAGE>
Appalachian Power Company ("APCo")
The annual meeting of stockholders was held on April 22,
1997 at 1 Riverside Plaza, Columbus, Ohio. At the meeting,
13,499,500 votes were cast FOR each of the following seven
persons for election as directors and there were no votes with-
held and such persons were elected directors to hold office for
one year or until their successors are elected and qualify:
Peter J. DeMaria Gerald P. Maloney
E. Linn Draper, Jr. James J. Markowsky
Henry W. Fayne Joseph H. Vipperman
William J. Lhota
No other business was transacted at the meeting.
Indiana Michigan Power Company ("I&M")
The annual meeting of stockholders was held on April 22,
1997 at 1 Riverside Plaza, Columbus, Ohio. At the meeting,
1,400,000 votes were cast FOR each of the following thirteen
persons for election as directors and there were no votes with-
held and such persons were elected directors to hold office for
one year or until their successors are elected and qualify:
Karl G. Boyd Gerald P. Maloney
C. R. Boyle, III James J. Markowsky
G. A. Clark David B. Synowiec
Peter J. DeMaria Joseph H. Vipperman
William N. D'Onofrio William E. Walters
E. Linn Draper, Jr. Earl H. Wittkamper
William J. Lhota
No other business was transacted at the meeting.
Ohio Power Company ("OPCo")
The annual meeting of shareholders was held on May 6, 1997
at 1 Riverside Plaza, Columbus, Ohio. At the meeting, 27,952,473
votes were cast FOR each of the following seven persons for elec-
tion as directors and there were no votes withheld and such per-
sons were elected directors to hold office for one year or until
their successors are elected and qualify:
Peter J. DeMaria Gerald P. Maloney
E. Linn Draper, Jr. James J. Markowsky
Henry W. Fayne Joseph H. Vipperman
William J. Lhota
No other business was transacted at the meeting.
Item 5. Other Information.
AEP and I&M
Reference is made to page 9 of the Annual Report on Form 10-K for
the year ended December 31, 1996 ("1996 10-K") for a dis-
cussion of competition and retail wheeling in Michigan. On June
5, 1997, the Michigan Public Service Commission ("MPSC") entered
an order requiring electric utilities to phase in retail open
access for customers, with full customer choice by 2002. Under
the order, customer choice is phased in from 1997 through 2001,
II-3
<PAGE>
at the rate of 2.5% of each utility's customer load per year,
with all customers becoming eligible to choose their electric
supplier effective January 1, 2002. The order essentially
adopted the December 1996 MPSC staff report that recommended full
recovery of stranded costs of utilities, including nuclear gen-
erating investment, through the use of a transition charge
applicable to customers exercising choice. The order found
securitization of stranded costs to be feasible, but also found
that legislation is required before securitization can be used.
As required by the order, on July 31, 1997, I&M filed its imple-
mentation proposal and tariff provisions. A number of petitions
for rehearing and clarification of the June 5 order have been
filed, including one by I&M on July 3, 1997, and other unaffili-
ated parties have commenced judicial appeals.
AEP, AEP Generating Company ("AEGCo"), APCo, Columbus Southern
Power Company ("CSPCo"), I&M, Kentucky Power Company ("KEPCo")
and OPCo
Reference is made to page 22 of the 1996 10-K for a discus-
sion of the assessment of long range transport of ozone precur-
sors and other air quality issues.
On June 19, 1997, the Ozone Transport Assessment Group
("OTAG") adopted recommendations to the United States Environ-
mental Protection Agency ("Federal EPA") regarding source
controls for nitrogen oxides ("NOx") and volatile organic com-
pounds. Recommended utility source controls for NOx range from
current Clean Air Act requirements to reductions of up to 85%
from 1990 emission levels. Federal EPA is expected to issue
proposed State Implementation Plan deficiency notices ("SIP
calls") to states within the OTAG region in September 1997. The
SIP calls will prescribe state-by-state NOx emission reduction
requirements. Opportunity will be provided to comment on the
appropriateness of Federal EPA's action.
II-4
<PAGE>
<PAGE>
On July 9, 1997, Federal EPA published in the Federal
Register notice of proposed New Source Performance Standard
changes for NOx emissions from utility boilers. The more
stringent proposed revision, if finalized, will apply to utility
boilers constructed, modified or reconstructed after the date of
the proposal.
On July 31, 1997, Federal EPA published in the Federal
Register proposed Regional Haze rules governing prevention and
remediation of visibility impairment in mandatory Class I federal
areas (national parks and wilderness areas). These proposed
regulations are expected to target emissions from coal-fired
power plants in conjunction with control requirements associated
with the revised ozone and fine particulate National Ambient Air
Quality Standards.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
APCo, CSPCo, I&M, KEPCo and OPCo
Exhibit 12 - Statement re: Computation of Ratios.
AEP, AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K:
Company
Reporting Date of Report Items Reported
AEP April 1, 1997 Item 5. Other Events
AEP April 1, 1997 Item 7. Financial
Statements and Exhibits
AEGCo, APCo, CSPCo, I&M, KEPCo and OPCo
No reports on Form 8-K were filed during the quarter
ended June 30, 1997.
II-5
<PAGE>
In the opinion of the companies, the financial statements contained
herein reflect all adjustments (consisting of only normal recurring accruals)
which are necessary to a fair presentation of the results of operations for
the interim periods.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signatures for each undersigned
company shall be deemed to relate only to matters having reference to such
company and any subsidiaries thereof.
AMERICAN ELECTRIC POWER COMPANY, INC.
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Controller
and Secretary
AEP GENERATING COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
APPALACHIAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
COLUMBUS SOUTHERN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
INDIANA MICHIGAN POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
KENTUCKY POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
OHIO POWER COMPANY
G.P. Maloney P.J. DeMaria
G.P. Maloney, Vice President P.J. DeMaria, Vice President
and Controller
Date: August 12, 1997
II-6
<TABLE>
EXHIBIT 12
APPALACHIAN POWER COMPANY
Computation of Consolidated Ratio of Earnings to Fixed Charges
(in thousands except ratio data)
<CAPTION>
Twelve
Months
Year Ended December 31, Ended
1992 1993 1994 1995 1996 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on First Mortgage Bonds. . . . . . . . $ 84,177 $ 80,472 $ 75,815 $ 80,777 $ 82,082 $ 80,574
Interest on Other Long-term Debt. . . . . . . . 17,986 16,846 16,415 16,404 18,025 23,280
Interest on Short-term Debt . . . . . . . . . . 1,792 1,615 3,366 5,119 3,639 3,195
Miscellaneous Interest Charges. . . . . . . . . 2,617 2,954 3,913 5,323 7,327 6,394
Estimated Interest Element in Lease Rentals . . 6,700 7,900 7,700 7,000 6,600 6,600
Total Fixed Charges. . . . . . . . . . . . $113,272 $109,787 $107,209 $114,623 $117,673 $120,043
Earnings:
Net Income. . . . . . . . . . . . . . . . . . . $131,419 $125,132 $102,345 $115,900 $133,689 $113,821
Plus Federal Income Taxes . . . . . . . . . . . 46,017 51,681 39,599 53,355 65,801 59,082
Plus State Income Taxes . . . . . . . . . . . . 2,649 8,887 5,910 7,273 10,180 11,178
Plus Fixed Charges (as above) . . . . . . . . . 113,272 109,787 107,209 114,623 117,673 120,043
Total Earnings . . . . . . . . . . . . . . $293,357 $295,487 $255,063 $291,151 $327,343 $304,124
Ratio of Earnings to Fixed Charges. . . . . . . . 2.58 2.69 2.37 2.54 2.78 2.53
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000006879
<NAME> APPALACHIAN POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,969,920
<OTHER-PROPERTY-AND-INVEST> 29,151
<TOTAL-CURRENT-ASSETS> 323,869
<TOTAL-DEFERRED-CHARGES> 41,792
<OTHER-ASSETS> 443,131
<TOTAL-ASSETS> 3,807,863
<COMMON> 260,458
<CAPITAL-SURPLUS-PAID-IN> 592,815
<RETAINED-EARNINGS> 197,471
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,050,744
22,310
19,795
<LONG-TERM-DEBT-NET> 1,494,041
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 103,250
<LONG-TERM-DEBT-CURRENT-PORT> 8
0
<CAPITAL-LEASE-OBLIGATIONS> 48,551
<LEASES-CURRENT> 10,819
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,058,345
<TOT-CAPITALIZATION-AND-LIAB> 3,807,863
<GROSS-OPERATING-REVENUE> 789,534
<INCOME-TAX-EXPENSE> 34,031
<OTHER-OPERATING-EXPENSES> 645,772
<TOTAL-OPERATING-EXPENSES> 679,803
<OPERATING-INCOME-LOSS> 109,731
<OTHER-INCOME-NET> 323
<INCOME-BEFORE-INTEREST-EXPEN> 110,054
<TOTAL-INTEREST-EXPENSE> 58,192
<NET-INCOME> 51,862
5,645
<EARNINGS-AVAILABLE-FOR-COMM> 46,217
<COMMON-STOCK-DIVIDENDS> 57,218
<TOTAL-INTEREST-ON-BONDS> 40,354
<CASH-FLOW-OPERATIONS> 147,481
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> All common stock owned by parent company; no EPS required.
</FN>
</TABLE>
