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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 March 31, 2000
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 May 15, 2000, 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 March 31, 2000
Index
Page
No.
PART I--FINANCIAL INFORMATION:
Statement of Income - Three months ended
March 31, 2000 and 1999 3
Balance Sheet - March 31, 2000
and December 31, 1999
4
Statement of Cash Flows - Three months ended
March 31, 2000 and 1999 5
Notes to Financial Statements
6
Management's Discussion and Analysis of Financial
Condition and Results of Operations
7-8
PART II--OTHER INFORMATION 9
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ALLEGHENY GENERATING COMPANY
Statement of Income
(Thousands of Dollars)
Three Months Ended
March 31
2000 1999
ELECTRIC OPERATING REVENUES $ 17,155 $ 17,857
OPERATING EXPENSES:
Operation and maintenance expense 1,366 1,611
Depreciation 4,244 4,245
Taxes other than income taxes 1,133 1,132
Federal income taxes 1,829 2,414
Total Operating Expenses 8,572 9,402
Operating Income 8,583 8,455
OTHER INCOME, NET - 1
Income Before Interest Charges 8,583 8,456
INTEREST CHARGES:
Interest on long-term debt 2,427 2,497
Other interest 878 906
Total Interest Charges 3,305 3,403
NET INCOME $ 5,278 $ 5,053
See accompanying notes to financial statements.
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ALLEGHENY GENERATING COMPANY
Balance Sheet
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS: 2000 1999
Property, Plant, and Equipment:
<S> <C> <C> <C> <C>
Utility plant $ 828,303 $ 828,221
Construction work in progress 619 673
828,922 828,894
Accumulated depreciation (231,421) (227,177)
597,501 601,717
Current Assets:
Cash 11 16
Accounts receivable from parents 2,430 2
Materials and supplies - at average cost 2,145 2,118
Prepaid taxes - 4,318
Income tax refund receivable 600 600
Other 153 207
5,339 7,261
Deferred Charges:
Regulatory assets 6,452 4,568
Unamortized loss on reacquired debt 7,018 7,168
Other 165 169
13,635 11,905
Total Assets $ 616,475 $ 620,883
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 151,768 154,490
151,769 154,491
Long-term debt 148,960 148,931
300,729 303,422
Current Liabilities:
Notes payable to affiliate 52,200 52,150
Accounts payable - 376
Accounts payable to parents 4,360 4,360
Accounts payable to affiliates 3,882 3,863
Taxes accrued 1,819 1,030
Interest accrued 812 3,229
Other 570 455
63,643 65,463
Deferred Credits:
Unamortized investment credit 44,868 45,199
Deferred income taxes 182,898 182,461
Regulatory liabilities 24,337 24,338
252,103 251,998
Total Capitalization and Liabilities $ 616,475 $ 620,883
</TABLE>
See accompanying notes to financial statements.
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ALLEGHENY GENERATING COMPANY
Statement of Cash Flows
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
2000 1999*
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net income $ 5,278 $ 5,053
Depreciation 4,244 4,245
Deferred investment credit and income taxes, net (1,778) 1,370
Changes in certain current assets and
liabilities:
Accounts receivable (2,428) -
Materials and supplies (27) 5
Prepaid taxes 4,318 1,097
Accounts payable (357) 177
Taxes accrued 789 1,075
Interest accrued (2,417) (2,422)
Other, net 352 392
7,974 10,992
CASH FLOWS FROM INVESTING:
Construction expenditures (29) (39)
CASH FLOWS FROM FINANCING:
Notes payable to affiliate 50 (2,950)
Cash dividends paid on common stock (8,000) (8,000)
(7,950) (10,950)
NET CHANGE IN CASH (5) 3
Cash at January 1 16 30
Cash at March 31 $ 11 $ 33
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $5,539 $5,572
Income taxes (3) 49
</TABLE>
*Certain amounts have been revised for comparative purposes.
See accompanying notes to financial statements.
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ALLEGHENY GENERATING COMPANY
Notes to Financial Statements
1. Allegheny Generating Company (the Company) was incorporated in
Virginia in 1981. Its common stock is owned by Monongahela
Power Company - 27%, The Potomac Edison Company - 28%, and
Allegheny Energy Supply Company, LLC - 45% (the Parents). The
Parents are wholly-owned subsidiaries of Allegheny Energy,
Inc. (Allegheny Energy) and are part of the Allegheny Energy
integrated electric utility system. The Company's Notes to
Financial Statements in its Annual Report on Form 10-K for the
year ended December 31, 1999, should be read with the
accompanying financial statements and the following notes.
With the exception of the December 31, 1999 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 March 31, 2000, and the
results of operations and cash flows for the three months
ended March 31, 2000 and 1999. Certain amounts in the three
months ended March 31, 1999 statement of cash flows have been
revised for comparative purposes.
2. For purposes of the 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. The Company systematically reduces capitalization each year
as its asset depreciates, resulting in the payment of
dividends in excess of current earnings. The Securities and
Exchange Commission (SEC) has approved the Company's request
to pay common dividends out of capital. Common dividends
were paid from retained earnings, reducing the account
balance to zero, and from other paid-in capital as follows:
Three Months Ended
March 31
2000 1999
(Thousands of Dollars)
Retained earnings $5,278 $5,053
Other paid-in capital 2,722 2,947
Total $8,000 $8,000
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.
4. Regulatory liabilities, net of regulatory assets, in
thousands of dollars of $17,885 at March 31, 2000 and $19,770 at
December 31, 1999 relate to income taxes.
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ALLEGHENY GENERATING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
COMPARISON OF FIRST QUARTER OF 2000 WITH FIRST QUARTER OF 1999
The Notes to Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations in the Annual Report on Form 10-K for Allegheny
Generating Company (the Company) for the year ended December 31,
1999, should be read with the following Management's Discussion
and Analysis information.
Factors That May Affect Future Results
This management's discussion and analysis of financial
condition and results of operations contains forecast information
items that are "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. All such
forward-looking information is necessarily only estimated. There
can be no assurance that actual results will not materially
differ from expectations. Actual results have varied materially
and unpredictably from past expectations.
Factors that could cause actual results to differ materially
include, among other matters, electric utility restructuring,
including ongoing state and federal activities; developments in
the legislative, regulatory, and competitive environments in
which the Company operates, including regulatory proceedings
affecting rates charged by the Company; environmental,
legislative, and regulatory changes; future economic conditions;
and other circumstances that could affect anticipated revenues
and costs such as unscheduled maintenance or repair requirements
and compliance with laws and regulations.
Review of Operations
As described under Liquidity and Capital Requirements,
revenues are determined under a cost of service formula rate
schedule. Revenues are expected to decrease each year due to a
normal continuing reduction in the Company's net investment in
the Bath County station and its connecting transmission
facilities upon which the return on investment is determined.
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The net investment (primarily net plant less deferred income
taxes) decreases to the extent that provisions for depreciation
and deferred income taxes exceed net plant additions. Revenues
for the first quarter of 2000 decreased primarily due to a
reduction in net investment and lower operating expenses.
The decrease in operating expenses in the first quarter of
2000 resulted from decreased operation and maintenance expense
and a decrease in federal income tax primarily due to a decrease
in operating income before taxes and the Company's share of tax
savings in consolidation.
Liquidity and Capital Requirements
The Company's discussion on Liquidity and Capital
Requirements and Review of Operations in its Annual Report on
Form 10-K for the year ended December 31, 1999 should be read
with the following information.
Pursuant to an agreement, the Parents buy all of the
Company's capacity in the station priced under a "cost-of-service
formula" wholesale rate schedule approved by the Federal Energy
Regulatory Commission (FERC). Under this arrangement, the
Company recovers in revenues all of its operation and maintenance
expenses, depreciation, taxes, and a return on its investment.
On December 29, 1998, the FERC issued an Order accepting a
proposed amendment to the Parent's Power Supply Agreement for the
Company effective January 1, 1999. This amendment sets the
generation demand for each Parent proportional to its ownership
in the Company. Previously, demand for each Parent fluctuated
due to customer usage.
The Company's rates are set by a formula filed with and
previously accepted by the FERC. The only component which
changes is the return on equity (ROE). Pursuant to a settlement
agreement filed with and approved by the FERC, the Company's ROE
is set at 11% and will continue at that rate unless any affected
party seeks a change.
As previously reported, the Company has received authority
from the Securities and Exchange Commission (SEC) to pay common
dividends from time to time through December 31, 2001, out of
capital 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 out of other paid-in capital and the
reduction of retained earnings to zero. The Company's goal is to
retire debt and pay dividends in amounts necessary to maintain a
common equity position of about 45%, including short-term debt.
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.
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ALLEGHENY GENERATING COMPANY
Part II - Other Information to Form 10-Q
for Quarter Ended March 31, 2000
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
1. (a) Date and Kind of Meeting:
The annual meeting of shareholders was held at
Hagerstown, Maryland, on February 29, 2000. No proxies
were solicited.
(b) Election of Directors:
The holders of all 1,000 shares of common stock voted
to elect the following Directors of the Company to hold
office until the next annual meeting of shareholders
and until their successors are duly chosen and
qualified:
Thomas K. Henderson Richard J. Gagliardi
Michael P. Morrell Alan J. Noia
Peter J. Skrgic
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 March 31, 2000.
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/ T. J. KLOC
T. J. Kloc, Vice President
and Controller
(Chief Accounting Officer)
May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Allegheny Generating Company
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 2,430
<ALLOWANCES> 0
<INVENTORY> 2,145
<CURRENT-ASSETS> 5,339
<PP&E> 828,922
<DEPRECIATION> 231,421
<TOTAL-ASSETS> 616,475
<CURRENT-LIABILITIES> 63,643
<BONDS> 148,960
0
0
<COMMON> 1
<OTHER-SE> 151,768
<TOTAL-LIABILITY-AND-EQUITY> 616,475
<SALES> 17,155
<TOTAL-REVENUES> 17,155
<CGS> 1,366
<TOTAL-COSTS> 6,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,305
<INCOME-PRETAX> 7,107
<INCOME-TAX> 1,829
<INCOME-CONTINUING> 5,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,278
<EPS-BASIC> 0.00<F1>
<EPS-DILUTED> 0.00<F1>
<FN>
<F1>*All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
