<PAGE>
Page 1 of 8
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996
Commission File Number 0-14688
ALLEGHENY GENERATING COMPANY
(Exact name of registrant as specified in its charter)
Virginia 13-3079675
(State of Incorporation) (I.R.S. Employer Identification No.)
10435 Downsville Pike, Hagerstown, Maryland 21740-1766
Telephone Number - 301-790-3400
The registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days.
At November 13, 1996, 1,000 shares of the Common Stock ($1.00 par
value) of the registrant were outstanding.
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ALLEGHENY GENERATING COMPANY
Form 10-Q for Quarter Ended September 30, 1996
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Statement of income - Three and nine months ended
September 30, 1996 and 1995 3
Balance sheet - September 30, 1996
and December 31, 1995 4
Statement of cash flows - Nine months ended
September 30, 1996 and 1995 5
Notes to financial statements 6
Management's discussion and analysis of financial
condition and results of operations 7
PART II--OTHER INFORMATION 8
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ALLEGHENY GENERATING COMPANY
Statement of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
ELECTRIC OPERATING REVENUES $ 20,825 $ 21,573 $ 62,757 $ 65,730
OPERATING EXPENSES:
Operation and maintenance expense 1,299 1,324 3,633 4,691
Depreciation 4,290 4,274 12,870 12,722
Taxes other than income taxes 1,174 1,221 3,582 3,768
Federal income taxes 3,296 3,410 10,002 10,135
Total Operating Expenses 10,059 10,229 30,087 31,316
Operating Income 10,766 11,344 32,670 34,414
OTHER INCOME AND DEDUCTIONS 1 5 4 14
Income Before Interest Charges 10,767 11,349 32,674 34,428
INTEREST CHARGES:
Interest on long-term debt 3,847 4,149 11,764 12,546
Other interest 234 236 726 1,256
Total Interest Charges 4,081 4,385 12,490 13,802
NET INCOME $ 6,686 $ 6,964 $ 20,184 $ 20,626
</TABLE>
See accompanying notes to financial statements.
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- 4 -
ALLEGHENY GENERATING COMPANY
Balance Sheet
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
ASSETS: (Thousands of Dollars)
<S> <C> <C>
Property, Plant, and Equipment:
At original cost, including $488,000
and $412,000 under construction $ 837,030 $ 836,894
Accumulated depreciation (171,895) (159,037)
665,135 677,857
Current Assets:
Cash 145 31
Accounts receivable from parents - 5,274
Materials and supplies - at average cost 2,181 2,049
Other 355 232
2,681 7,586
Deferred Charges:
Regulatory assets 14,617 14,617
Unamortized loss on reacquired debt 9,335 9,900
Other 276 327
24,228 24,844
Total Assets $ 692,044 $ 710,287
CAPITALIZATION AND LIABILITIES:
Capitalization:
Common stock - $1.00 par value per share,
authorized 5,000 shares, outstanding
1,000 shares $ 1 $ 1
Other paid-in capital 209,999 209,999
Retained earnings 99 4,153
210,099 214,153
Long-term debt:
Debentures, net 148,619 148,548
Commercial paper 3,449 30,561
Medium-term notes 70,000 70,600
Notes payable to affiliates 11,850 -
444,017 463,862
Current Liabilities:
Long-term debt due within one year 4,600 6,375
Accounts payable 102 16
Interest accrued 1,444 5,151
Taxes accrued 1,039 113
Other 1 237
7,186 11,892
Deferred Credits:
Unamortized investment credit 49,996 50,987
Deferred income taxes 162,259 156,091
Regulatory liabilities 27,455 27,455
Other 1,131 -
240,841 234,533
Total Capitalization and Liabilities $ 692,044 $ 710,287
</TABLE>
See accompanying notes to financial statements
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ALLEGHENY GENERATING COMPANY
Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1996 1995
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $20,184 $20,626
Depreciation 12,870 12,722
Deferred investment credit and income taxes, net 5,176 5,206
Changes in certain current assets and
liabilities:
Accounts receivable 5,274 (1,447)
Materials and supplies (132) 208
Accounts payable 86 7
Taxes accrued 926 849
Interest accrued (3,707) (3,651)
Other, net 1,461 2,416
42,138 36,936
CASH FLOWS FROM INVESTING:
Construction expenditures (150) (2,194)
CASH FLOWS FROM FINANCING:
Retirement of long-term debt (17,636) (7,933)
Cash dividends on common stock (24,238) (26,850)
(41,874) (34,783)
NET CHANGE IN CASH 114 (41)
Cash at January 1 31 45
Cash at September 30 $ 145 $ 4
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $15,496 $16,754
Income taxes 4,608 3,473
</TABLE>
See accompanying notes to consolidated financial statements.
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ALLEGHENY GENERATING COMPANY
Notes to Financial Statements
1. The Company's Notes to Financial Statements in the Allegheny
Power System companies' combined Annual Report on Form 10-K for
the year ended December 31, 1995, should be read with the
accompanying financial statements and the following notes.
With the exception of the December 31, 1995 balance sheet in
the aforementioned annual report on Form 10-K, the accompanying
financial statements appearing on pages 3 through 5 and these
notes to financial statements are unaudited. In the opinion of
the Company, such financial statements together with these
notes contain all adjustments (which consist only of normal
recurring adjustments) necessary to present fairly the
Company's financial position as of September 30, 1996, the
results of operations for the three and nine months ended
September 30, 1996 and 1995, and cash flows for the nine months
ended September 30, 1996 and 1995.
2. The Statement of Income reflects the results of past operations
and is not intended as any representation as to future results.
For purposes of the Balance Sheet and Statement of Cash Flows,
temporary cash investments with original maturities of three
months or less, generally in the form of repurchase agreements,
are considered to be the equivalent of cash.
3. Common stock dividends per share declared and paid during the
periods for which income statements are included are as
follows:
<TABLE>
<CAPTION>
1996 1995
Number Amount Number Amount
of Shares Per Share of Shares Per Share
<S> <C> <C> <C> <C>
First Quarter 1,000 $9,225 1,000 $8,950
Second Quarter 1,000 $8,410 1,000 $8,950
Third Quarter 1,000 $6,603 1,000 $8,950
</TABLE>
Earnings per share are not reported inasmuch as the common
stock of the Company is 100% owned by its parents, Monongahela
Power Company (27%), The Potomac Edison Company (28%), and West
Penn Power Company (45%).
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ALLEGHENY GENERATING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996
WITH THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1995
The changes in revenues and net income are primarily
due to a continuing reduction in the Company's net plant (the major
component of rate base). As a result of the April 4, 1996 settlement
agreement which is described below, the Company's Return on Equity (ROE)
decreased from 11.2% to 11%, with resultant decreases in revenues and net
income.
The decrease in other interest for the nine months
ended September 1996 was due to the prior year reflecting interest paid on
the revenue refund pursuant to the March 23, 1995 settlement agreement
described below.
LIQUIDITY AND CAPITAL RESOURCES
The Company's discussion on Liquidity and Capital
Resources and Results of Operations in the Allegheny Power System
companies' combined Annual Report on Form 10-K for the year ended December
31, 1995, should be read with the following information.
On December 21, 1995, the Company submitted a
negotiated settlement to the Federal Energy Regulatory Commission (FERC)
to address the Company's return on equity (ROE) effective after 1995.
Interested parties representing less than 2% of the Company's eventual
revenues filed exceptions. On February 20, 1996, the FERC instituted an
investigation of the proposed rate. Subsequently, the parties who filed
exceptions removed their exceptions and accepted the settlement agreement
provided for a 1996 return on equity of 11% and an ROE adjustment
mechanism for future years.
In July 1996, the Company filed a request with the
Securities and Exchange Commission for authority to pay common dividends
from time to time through December 31, 2001, out of capital or unearned
surplus, to the extent permitted under applicable corporation law and any
applicable financing agreements which restrict distributions to
shareholders. Due to the nature of being a single asset company with
declining capital needs, the Company systematically reduces capitalization
each year as its asset depreciates. This has resulted in the payment of
dividends in excess of current earnings and the reduction of retained
earnings. The Company's practice is to retire debt and pay dividends in
amounts necessary to maintain a 45% common equity position. The payment
of dividends out of capital surplus will not be detrimental to the
financial integrity or working capital of either the Company or its
parents, nor will it adversely affect the protections due debt security
holders.
On September 19, 1996, the Securities and Exchange
Commission approved the Company's request to pay common dividends out of
capital or unearned surplus.
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ALLEGHENY GENERATING COMPANY
Part II - Other Information to Form 10-Q
for Quarter Ended September 30, 1996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) No reports on Form 8-K were filed on behalf of the
Company for the quarter ended September 30, 1996.
Signature
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALLEGHENY GENERATING COMPANY
/s/ THOMAS J. KLOC
Thomas J. Kloc
Controller
(Chief Accounting Officer)
November 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 145
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 2,181
<CURRENT-ASSETS> 2,681
<PP&E> 837,030
<DEPRECIATION> 171,895
<TOTAL-ASSETS> 692,044
<CURRENT-LIABILITIES> 7,186
<BONDS> 233,918
0
0
<COMMON> 1
<OTHER-SE> 210,098
<TOTAL-LIABILITY-AND-EQUITY> 692,044
<SALES> 62,757
<TOTAL-REVENUES> 62,757
<CGS> 3,633
<TOTAL-COSTS> 20,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,490
<INCOME-PRETAX> 30,186
<INCOME-TAX> 10,002
<INCOME-CONTINUING> 20,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,184
<EPS-PRIMARY> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
