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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-8349
FLORIDA PROGRESS CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2147112
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Progress Plaza
St. Petersburg, Florida 33701
Telephone Number (813) 824-6400
(Address of principal executive offices; telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
Common Stock without par value New York Stock Exchange
and Preferred Stock Purchase Rights Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 22, 1994 was $2,704,621,736.
The number of shares of common stock without par value outstanding as of
February 22, 1994 was 89,408,983.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement, dated March 7, 1994,
relating to the 1994 Annual Meeting of Shareholders are incorporated in
Part III hereof.
GLOSSARY
When used herein, the following terms will have the meanings indicated:
TERM MEANING
1935 Act. . . . . . . . . . . . .Public Utility Holding Company Act of 1935
Btu . . . . . . . . . . . . . . .British thermal unit
CAAA. . . . . . . . . . . . . . .Clean Air Act Amendments of 1990
CERCLA or Superfund . . . . . . .Comprehensive Environmental Response
Compensation and Liability Act
Company . . . . . . . . . . . . .Florida Progress Corporation
DOE . . . . . . . . . . . . . . .United States Department of Energy
DSM . . . . . . . . . . . . . . .demand-side management
Electric Fuels. . . . . . . . . .Electric Fuels Corporation
EMF . . . . . . . . . . . . . . .electromagnetic fields, or electric and
magnetic fields
EPA . . . . . . . . . . . . . . .United States Environmental Protection Agency
EWGs. . . . . . . . . . . . . . .exempt wholesale generators
FDEP. . . . . . . . . . . . . . .Florida Department of Environmental Protection
(formerly the Florida Department of
Environmental Regulation)
FERC. . . . . . . . . . . . . . .Federal Energy Regulatory Commission
Financial Statements. . . . . . .The Company's Consolidated Financial
Statements for the year ended
December 31, 1993 contained under
Item 8 herein
Florida Power . . . . . . . . . .Florida Power Corporation
FP&L. . . . . . . . . . . . . . .Florida Power & Light Company
FPSC. . . . . . . . . . . . . . .Florida Public Service Commission
Georgia Power . . . . . . . . . .Georgia Power Company
INPO. . . . . . . . . . . . . . .Institute of Nuclear Power Operations
KV. . . . . . . . . . . . . . . .kilovolts
KVA . . . . . . . . . . . . . . .kilovolt amperes
KWH . . . . . . . . . . . . . . .kilowatt hours
MMcf/d . . . . . . . . . . . . . million cubic feet per day
MW. . . . . . . . . . . . . . . .megawatts
Mid-Continent . . . . . . . . . .Mid-Continent Life Insurance Company
NEIL. . . . . . . . . . . . . . .Nuclear Electric Insurance, Ltd.
NRC . . . . . . . . . . . . . . .United States Nuclear Regulatory Commission
PCBs. . . . . . . . . . . . . . .polychlorinated biphenyls
PCH . . . . . . . . . . . . . . .Progress Capital Holdings, Inc.
PRP . . . . . . . . . . . . . . .potentially responsible party
Progress Credit . . . . . . . . .Progress Credit Corporation
Proxy Statement . . . . . . . . .The definitive proxy statement dated
March 7, 1994, relating to the
Company's 1994 Annual Meeting
of Shareholders
SEC . . . . . . . . . . . . . . .Securities and Exchange Commission
Talquin . . . . . . . . . . . . .Talquin Corporation
TDC . . . . . . . . . . . . . . .Talquin Development Company
Union Carbide . . . . . . . . . .Union Carbide Corporation
PART I
ITEM 1. BUSINESS
THE COMPANY
Florida Progress Corporation (the "Company"), a diversified electric utility
holding company, has its principal executive offices at One Progress Plaza, St.
Petersburg, Florida 33701, telephone number (813) 824-6400. The Company was
incorporated in Florida on January 21, 1982. In March 1982, the Company became
the parent company of Florida Power Corporation ("Florida Power") and its
former subsidiaries, including Electric Fuels Corporation, a coal mining and
transportation services company ("Electric Fuels"). The corporate
restructuring was done to accommodate diversification into certain non-utility
businesses. In August 1988, Progress Capital Holdings, Inc. ("PCH") was formed
to become the downstream holding company for the Company's diversified
subsidiaries and to consolidate the financing of non-utility operations.
The Company defines its principal business segments as utility and diversified
operations. The utility segment is composed of Florida Power, the Company's
largest subsidiary, and encompasses all regulated public utility operations.
See Item 1 "Business-Utility Operations-Florida Power". The diversified
operations segment includes Electric Fuels, Progress Credit Corporation
("Progress Credit"), which is comprised of a commercial lending and leasing
business and a real estate company, and Mid-Continent Life Insurance Company
("Mid-Continent"), a life insurance company that was acquired in 1986. See
Item 1 "Business-Diversified Operations". For further information concerning
the operating profit and assets attributable to each of the Company's business
segments, see Note 6 to the Company's consolidated financial statements for the
year ended December 31, 1993 contained herein under Item 8 ("Financial
Statements").
The Company is a public utility holding company under the Public Utility
Holding Company Act of 1935 ("1935 Act"). The Company is exempt from
registration with the Securities and Exchange Commission ("SEC") under the 1935
Act and attendant regulation because its utility operations are primarily
intrastate. The SEC has the power, however, to revoke the Company's exemption
upon a finding that the exemption is "detrimental to the public interest or the
interest of investors or consumers."
The Company has diversified, through subsidiaries, into non-utility businesses,
which would be prohibited if the Company were not exempt from regulation under
the 1935 Act. In February 1989, the SEC published for comment a proposed rule
under the 1935 Act that would specify certain circumstances, or safe harbors,
in which non-utility diversification by an exempt public utility holding
company would not be deemed "detrimental to the public interest or the interest
of investors or consumers". Although there are numerous questions concerning
the interpretation and application of the proposed rule, it is doubtful whether
the Company would meet the proposed safe harbors. Failure to satisfy the safe
harbors, however, would not necessarily preclude the SEC from continuing the
Company's exemption. The comment period for the proposed rule expired in
August 1989, and the SEC has yet to take further action on its proposal.
UTILITY OPERATIONS - FLORIDA POWER
The Company's utility segment is composed of the Company's largest subsidiary,
Florida Power, and encompasses all regulated public utility operations. First
incorporated in Florida in 1899, Florida Power has a system generating
capability of 7,563 megawatts ("MW"). In 1993, Florida Power accounted for 80%
of the Company's consolidated revenues, 92% of its earnings from continuing
operations and 75% of its assets.
Florida Power provided electric service during 1993 to an average of 1,214,653
customers in a service area covering about 20,000 square miles in central and
northern Florida and along the west coast of the state. The service area
includes St. Petersburg and Clearwater as well as the areas surrounding Walt
Disney World, Orlando, Ocala and Tallahassee. Of Florida Power's 1993 electric
revenues billed, approximately 56% were derived from residential sales, 24%
from commercial sales, 9% from industrial sales, 5% from other retail sales
and 6% from wholesale sales. The more important industries in the territory
include phosphate mining and processing, electronics manufacturing and design,
and citrus and other food processing. Other important commercial activities are
tourism, health care, construction and agriculture.
Florida Power's revenues and unit sales, measured in kilowatt hours ("KWH"),
vary with the weather. This weather sensitivity results primarily from
customers using electricity to heat or cool their residences or places of
business. Revenues and KWH sales tend to be higher in summer and winter. See
the financial information under the heading "Quarterly Financial Data" which
follows the notes to the Company's Financial Statements.
FUEL AND PURCHASED POWER
GENERAL: Florida Power's consumption of various types of fuels depends on
several factors. The most important factors are the demand for electricity by
Florida Power's customers, the availability of various generating units, the
availability and cost of fuel, and the requirements of federal and state
regulatory agencies. In 1993, Florida Power's energy mix was 45% coal, 21%
oil, 18% nuclear and 16% purchased power, as compared to 47% coal, 24% oil, 16%
nuclear and 13% purchased power for 1992.
Florida Power is permitted to pass the cost of recoverable fuel and purchased
power to its customers through fuel adjustment clauses. (See Note 1 to the
Financial Statements.)
Because of uncertainties in the relevant domestic and international markets,
future prices for and the availability of the various fuels discussed in this
report cannot be determined. However, Florida Power believes that its fuel
supply contracts, as described below, will be adequate to meet its fuel supply
needs.
Florida Power's average fuel costs per million British thermal units ("Btu")
for each of the five years ended December 31, 1993, were as follows:
1993 1992 1991 1990 1989
Coal $1.96 $1.97 $2.01 $2.05 $2.06
Oil 2.49 2.53 2.56 3.10 2.65
Nuclear .54 .57 .65 .67 .67
Gas 4.27* 2.54* 1.90 2.15 2.29
Average 1.79 1.86 1.89 2.11 2.10
*Gas accounted for .2% of Florida Power's fuel mix in 1993 and 1992.
OIL AND GAS: Oil is purchased under contracts with several suppliers. The
cost of Florida Power's oil is tied by contract to certain posted or published
market prices. These prices are largely influenced by the world market for
fuel. At present, management believes that Florida Power has contracts for an
adequate supply of oil for the reasonably foreseeable future. Florida Power's
natural gas is purchased under firm and interruptible transportation contracts.
Existing contracts for oil are sufficient to cover the requirements when
natural gas is not available through the interruptible contracts. In addition,
Florida Power has signed contracts to transport natural gas through the
proposed SunShine Pipeline. (See Item 2 "Properties-Utility Operations-Planned
Generation".)
NUCLEAR: In order to fuel a nuclear generating station, four distinct stages
are involved; each is contracted separately. Stage I and Stage II involve the
mining and milling of the natural uranium ore to produce a concentrate, and the
conversion of uranium concentrate into uranium hexafluoride. Stage III and
Stage IV entail the enrichment of the uranium hexafluoride and the fabrication
of the enriched uranium hexafluoride into usable fuel assemblies.
Florida Power has contracts for the supply of uranium concentrates (Stage I)
through 1995, conversion of uranium concentrates (Stage II) through 1997,
enrichment services (Stage III) through 2014 and for fuel assembly fabrication
(Stage IV) through 2004. Under anticipated operating conditions, Florida Power
has all stages of the nuclear fuel supply cycle under contract for unit
operations through the refueling planned in 1996.
It will be necessary for Florida Power to enter into future contracts to cover
the differences between the total unit lifetime requirements of Crystal River
Unit No. 3 and the requirements covered by the present contracts. Although no
assurances can be given as to the future availability or costs of such
contracts, Florida Power expects future contract commitments will be made at
the appropriate time.
Spent nuclear fuel is stored at Florida Power's Crystal River Unit No. 3
pending disposal under a contract with the United States Department of Energy
("DOE"). (See Note 9 to the Financial Statements.) At the present time,
Florida Power has facilities on site for the storage of fuel burned through the
year 2009.
COAL: Florida Power anticipates a requirement of approximately 5,700,000 tons
of coal in 1994. Current environmental regulations limit sulfur content, at
12,000 Btu per pound, to 1.2% for Crystal River Unit Nos. 1 and 2, and 0.7% for
Unit Nos. 4 and 5. Most of the coal is expected to be supplied from the
Appalachian coal fields of the United States. Approximately two-thirds of the
coal is expected to be delivered by rail and the remainder by barge. The coal
is being supplied by Electric Fuels.
Electric Fuels has long-term contracts with various sources for 78% of the coal
requirements of Florida Power's coal units. Electric Fuels acquires the
remainder in the spot market and under short-term contracts. The long-term
contracts have price escalation provisions.
PURCHASED POWER: Florida Power buys and sells economy power through a
purchased power brokering system in which other Florida utilities participate.
In addition, Florida Power has long-term contracts to purchase annually 50 MW
of power from Tampa Electric Company and 400 MW from The Southern Company.
These contracts obligate Florida Power to pay certain minimum annual amounts
representing capacity payments. Florida Power also has various contracts with
non-utility electric power generators to purchase 1,117 MW of power annually by
1996. As of December 31, 1993, 473 MW of that generation was available. (See
Note 11 to the Financial Statements.)
REGULATION AND FRANCHISES
Florida Power is subject to the jurisdiction of the Florida Public Service
Commission ("FPSC") with respect to retail rates, customer service, planning,
need for and construction of facilities, accounting, issuance of securities
and other matters. In addition, Florida Power is subject to regulation by the
Federal Energy Regulatory Commission ("FERC") with respect to accounting,
transmission and sales of wholesale power in interstate commerce and certain
other matters.
Florida Power's nuclear generating unit is subject to regulation under the
jurisdiction of the United States Nuclear Regulatory Commission ("NRC"). The
NRC's jurisdiction encompasses broad supervisory and regulatory powers over
the construction and operation of nuclear reactors, including matters of health
and safety, antitrust considerations and environmental impacts. Florida Power
has a 90.4% ownership interest in the nuclear unit it operates. (See Note 9 to
the Financial Statements.)
A recent staff report to the NRC has identified 15 nuclear plants as not
meeting the NRC's threshold measure of the strength of a reactor pressure
vessel in light of the age of the vessel. The NRC staff report is based on a
generic analytical methodology that does not account for plant-specific
factors. Although Florida Power's nuclear unit, Crystal River #3, is one of
the 15 plants identified in the report, this issue is one that Florida Power
had anticipated several years ago. Florida Power previously submitted a plant-
specific analysis showing that its reactor vessel has not been compromised by
plant operation and meets NRC safety criteria. Although Florida Power's
submission to the NRC has yet to be approved by the NRC, Florida Power expects
to be able to continue to operate the plant without any acceleration of its
expected retirement date. The NRC has not said when it will take action on
Florida Power's submission.
By virtue of state and municipal legislation, Florida Power holds franchises
with varying expiration dates to provide electric service in all municipalities
in which it distributes electric energy. The general effect of these
franchises is to grant Florida Power the right to enter upon and use streets,
alleys and other public places for erecting and maintaining poles, wires and
other apparatus for the sale and distribution of electric energy. All of the
existing franchises were for a 30-year period when granted, the maximum
allowed by Florida law. There are a total of 109 franchises, of which 3
expire between April 1, 1994 and December 31, 1999, 57 expire between January
1, 2000 and December 31, 2004, 2 expire between January 1, 2005 and December
31, 2009, 19 expire between January 1, 2010 and December 31, 2014, 13 expire
between January 1, 2015 and December 31, 2019, and 15 expire between January 1,
2020 and December 31, 2024. For further information concerning these franchise
agreements, see Item 1 "Business-Utility Operations-Competition-
Municipalities".
ENVIRONMENTAL MATTERS
Florida Power is subject to federal, state and local regulations dealing with
air and water quality and other environmental matters.
AIR: All of Florida Power's air pollution sources meet the air emission
standards currently set by the Florida Department of Environmental Protection
("FDEP") (formerly the Florida Department of Environmental Regulation) and/or
the United States Environmental Protection Agency ("EPA").
The 1990 Amendments to the Clean Air Act ("CAAA"), under Title IV, Acid Rain
Control, require reduction in sulfur dioxide and nitrogen oxide emissions by
the year 2000 and set a permanent cap on those emissions. The reductions are
to be implemented in two phases. Phase I limitations apply in 1995 and Phase
II limitations are effective by 2000. Florida Power is not materially affected
by Phase I. To meet Phase II limitations, Florida Power is implementing a
strategy based primarily on burning cleaner fuels. Florida Power does not
expect that it will be required to undertake any significant modifications to
its existing units in order to meet Phase II requirements. Continuous emission
monitors will be installed on most of the Company's units by the end of 1994 at
an expected total cost of approximately $12 million. These monitors are
required on all affected units under Title IV.
Under Title III of the CAAA, the EPA will be studying the emission of
hazardous air pollutants and, where appropriate, promulgating emission
limitations for specific source categories. Depending on the results of
these studies and the EPA's determination of the need for additional
limitations, Florida Power could incur additional capital and operating
expenses.
WATER: Construction was completed in 1993 on an $89 million capital project
to install a major water cooling system at Florida Power's Crystal River
Energy Complex. The 1993 expenditures for the project totaled $5.0 million.
This system was constructed in order to meet thermal discharge limitations set
by the EPA and the FDEP. In 1993, approximately $3.9 million was spent to
remove and dispose of sludge and to upgrade a wastewater disposal pond at the
Bartow Power Plant.
WASTE MATERIALS: Florida Power is nearing completion of its program to reduce
electrical equipment utilizing polychlorinated biphenyls ("PCBs"). All
regulatory compliance dates have been met. Florida Power has contracted with
a vendor to remove the remaining PCB contaminated transformers from electric
generating plants by the end of 1994. During 1993, three plants changed their
PCB transformers to non-PCB transformers.
STORAGE TANK PROGRAM: The regulation of underground and above-ground storage
tanks continues to expand, and can be expected to affect virtually every
Florida Power tank in 1994, including vehicular fuel tanks, bulk fuel storage
tanks, mineral acid tanks, hazardous material tanks and compression vessels.
The FDEP's storage tank regulations require the replacement or upgrading of
tanks that are not protected from corrosion, and the installation of
containment for spills and leaks. These requirements must be met by 1999.
Florida Power expects the annual expenditures through 1999 related to
compliance with these regulations to be $1 million and $3 million for operating
expense and construction, respectively.
Under the FDEP program, revenues from taxes on imported oil are expected to
be used to reimburse Florida Power for the majority of expenditures necessary
to clean up storage tank contamination discovered and reported to date.
Florida Power does not expect the existing contamination cleanup expenditures
to be material. With the continued expansion of regulation and the resulting
increased monitoring of tank systems and oil filled electrical equipment,
further contamination may be discovered that would result in additional
expenditures for retrofitting and equipment upgrades, but these expenditures
are not expected to be material.
OIL SPILL CONTINGENCY PLANS: Florida Power has filed oil spill contingency
plans pursuant to the Oil Pollution Act of 1990. Florida Power spent
approximately $.5 million in 1993 to implement the plans.
ELECTROMAGNETIC FIELDS: The potential adverse effects of electromagnetic
fields, or electric and magnetic fields ("EMF") upon human health continues to
be an important issue in the siting, construction and operation of electric
transmission and distribution systems. Pursuant to its exclusive jurisdiction
to regulate EMF associated with electric transmission and distribution lines
and substation facilities in Florida, the FDEP has adopted rules which
establish certain EMF limits for new transmission lines and substations. The
rule, as revised in October 1992, also requires an annual review of the state
of the scientific research into the potential adverse effects of EMF upon human
health. The staff of the FDEP provided its progress report to the
Environmental Regulation Commission on December 1, 1993 and, based on its
review of the scientific research, recommended that "no revision of the current
EMF standards be made at this time." The Environmental Regulation Commission
made no revision to EMF standards. Florida Power believes that compliance with
these EMF rules, which at present essentially maintain the status quo with
respect to regulated EMF exposure levels, will not have a material adverse
effect on the cost of constructing or maintaining new transmission lines or
substations.
There has been substantial discussion in professional publications regarding
the potential for extensive litigation alleging adverse health effects of EMF
from transmission and distribution lines, but to date no case arising out of
such a claim has resulted in a verdict against an electric utility.
Florida Power's management monitors and reports to Florida Power's Board of
Directors at least annually on developments in research concerning the
potential health effects of EMF, EMF mitigation technologies and procedures,
and significant actions by principal federal and Florida agencies related to
EMF.
OTHER ENVIRONMENTAL MATTERS: For further information concerning certain
environmental matters relating to the Company's utility operations, see
paragraphs 6 and 7 under Item 3 "Legal Proceedings" and "Contaminated Site
Cleanup" in Note 11 to the Financial Statements.
RATE MATTERS
The underlying concept of utility ratemaking is to set rates at a level that
allows the utility to collect revenues equal to its cost of providing service
plus a reasonable rate of return on its equity. To accomplish this, the FPSC
and FERC use various ratemaking mechanisms.
The FPSC oversees the intrastate operations of the state's investor-owned
utilities. The FPSC authorizes retail "base rates" that are designed to give a
utility company the opportunity to earn a specific rate of return on its "rate
base", or average investment in utility plant. These rates are intended to
cover all reasonable and prudent expenses of utility operations and to provide
investors with a fair rate of return. The retail base rates, resulting from
the 1992 retail rate decision, provide Florida Power the opportunity to earn a
regulatory return on equity of 12%, with an allowed range between 11% and 13%.
The FPSC must review base rates every four years.
The FPSC allows utility companies to recover fuel, purchased power and
conservation costs through an adjustment charge on monthly electric bills.
This charge is adjusted every six or 12 months and remains level throughout
the period. The adjustment charge includes projected costs for a six- or
12-month period plus an adjustment to compensate for differences between
estimated and actual costs for the prior period, including interest. (See Note
1 to the Financial Statements.)
During Florida Power's most recent retail rate case, Florida Power agreed to
file a demand-side management ("DSM") incentive proposal and a revenue
decoupling proposal. Florida Power filed both proposals in April 1993. DSM is
a term used to describe efforts by electric utilities to meet energy sales
growth and demand through energy conservation and efficiency as opposed to
additional generation construction and purchased power. The DSM proposal
provides an initial five year trial period that would allow the FPSC a basis to
determine if the DSM incentive should be continued, modified or terminated.
The Legal Environmental Assistance Foundation, Inc., an intervenor to this
proceeding, has submitted a DSM incentive proposal for Florida Power that is
also being considered by the FPSC. Florida Power believes that an incentive on
selected DSM program costs would encourage Florida Power to develop and utilize
additional DSM programs since both rate payers and shareholders would benefit.
Florida Power's revenue decoupling proposal would apply a decoupling mechanism
to residential revenues for a period of three years beginning in November 1994.
Revenue decoupling is a relatively new ratemaking concept intended to break the
direct link between growth in energy sales and revenues. Florida Power does
not expect that decoupling, as proposed by Florida Power, would have a material
impact on its earnings. The FPSC staff has combined the DSM incentive and
revenue decoupling proposals into one recommendation that contains both pro and
con arguments on each proposal. The FPSC is expected to make a decision
regarding the proposals by the end of 1994.
Luis J. Lauredo was reappointed to a four-year term on the FPSC; his prior term
expired in January 1994. Diane K. Kiesling was appointed to fill a second FPSC
vacancy in December 1993 for a term that will expire in January 1998.
FERC regulates wholesale and interstate transmission rates, acquisition and
disposition of certain property, licensing of hydroelectric projects, and
other matters. FERC is responsible for accounting and reporting functions
under the Federal Power Act to ensure that reliable and consistent financial
information is available for regulatory and public purposes.
Florida Power is interconnected with 22 municipal electric systems. Florida
Power's wholesale customers include Seminole Electric Cooperative, Inc., the
Florida Municipal Power Agency and 11 municipalities. During 1993, about 6% of
Florida Power's electric revenues were from its wholesale business.
For further information with respect to rate matters, see paragraphs 1,2 and
3 under Item 3 "Legal Proceedings" and Note 8 to the Financial Statements.
COMPETITION
GENERAL. The electric utility industry in general is expected to become
increasingly competitive due to a variety of regulatory, economic and
technological developments. The passage of the Energy Policy Act of 1992 (the
"Energy Policy Act") and changes at the FERC are encouraging the development of
competition in the generation segment of the electric utility industry and the
unbundling of wholesale electric utility services. Although the major
implications of these changes are not likely to be felt for several years, the
electric utility industry must accept the inevitability of greater competition
and regulatory changes in the future.
The Company believes that Florida Power is in a good competitive position.
Florida Power's electric rates compare favorably with other utilities in
Florida. Florida Power produces cost-efficient power and its generating units
consistently rank among the nation's best in terms of overall efficiency. And
Florida Power's management is committed to streamlining and enhancing
operations to keep Florida Power competitive.
GENERATION. The most immediate competitive challenge for the electric utility
industry is building and operating new power plants, since generating plants
constitute a significant portion of rate base. This is particularly true
in Florida, where the FPSC already has adopted a rule that may require
competitive bidding for new generation in some cases. (See Item 2 "Properties
- - Utility Operations - Planned Generation.") Utilities must be able to
construct and operate new units at prices competitive with non-utility
generators. Florida Power has already received regulatory approval to
construct its next two baseload units, scheduled for completion in 1998 and
1999. (See Item 2 "Properties - Utility Operations - Planned Generation").
Florida Power plans to compete aggressively in the generation market in
Florida.
Under current law, industrial and large commercial customers have the ability
to own and operate facilities to generate their own electricity. Customers
also have the option of using fuels such as natural gas, oil or wood as a
substitute for electric energy. To date, Florida Power has not experienced any
material loss of load, revenues or net income as a result of self-generation or
fuel switching. Moreover, Florida Power's industrial business represents only
about 12 percent of megawatt-hour sales, which is lower than the industry
average of 35 percent.
MUNICIPALITIES. Electric utilities are granted the right to serve customers in
municipal jurisdictions. Increasing competition may affect new franchise
agreements between utilities and municipalities. Typically, a municipality
signs a 30-year, non-exclusive agreement that allows a utility to provide
electric service to residents within a certain jurisdiction. In return, the
utility adds a franchise fee to each resident's monthly electric bill. These
franchise fees are collected by the utility and remitted to the municipality.
Florida Power currently has 109 franchises. Only three franchises, which
account for less than 5% of total electric revenues, expire during the
1990s. One of the three franchises expires in 1996 and accounts for the
majority of these revenues. Florida Power expects to renew all of its existing
franchise agreements.
In addition to three investor-owned electric systems that are contiguous to
Florida Power's system at various locations, there are several municipalities
and rural electric cooperatives rendering electric service within the general
area served by Florida Power. Florida Power has territorial agreements with
these electricity suppliers. The FPSC retains the jurisdiction to actively
regulate these territorial agreements. The Florida legislature also is
considering a bill that, in general, would certify the retail electric service
areas served by Florida's electric utilities.
WHOLESALE. Florida Power's wholesale customers include Seminole Electric
Cooperative, Inc., the Florida Municipal Power Agency and 11 municipalities.
During 1993, only about six percent of Florida Power's electric revenues were
derived from its wholesale business.
TRANSMISSION. Electric utilities are facing a new regulatory environment that
is expected to change the way access to transmission lines is granted and
priced. The Energy Policy Act grants third parties, including independent
energy producers, access to use a utility's transmission system to deliver
power for resale. In Florida, this practice is occurring already.
What concerns Florida Power most about "open access" - or the right of outside
firms to use Florida Power's utility lines - is that a fair pricing structure
be established for the use of its transmission line system. Florida Power
wants to protect its investment and its tradition of quality service to its
customers.
Florida Power believes that the pricing debate will be resolved as the industry
moves toward the formation of regional transmission groups. Electric utilities
are expected to participate in these groups by coordinating regional networks
to better serve customers in a changing energy market. Each transmission group
would set pricing policies, subject to ultimate approval by the FERC, and work
closely with state regulators in the siting of new transmission lines.
Florida Power believes that it is doubtful, however, that much additional power
will be transmitted, or "wheeled", into peninsular Florida or into Florida
Power's service territory in the near future. This is because nearly all
transmission interface capacity into Florida is presently being used by Florida
utilities to import electricity from other utilities to the north. It could be
years before more interface capacity into the state is added. Public
opposition and environmental restrictions have contributed to construction
delays for utilities like Florida Power that are trying to build new
transmission lines in Florida.
BUSINESS POSITION. A number of rating agencies and other analysts have
reviewed the business position of electric utilities in recent months, and
although citing increased competition in the industry as a whole, have found
that Florida Power's business position is good. One major rating agency, for
example, stiffened its debt-ratings formula for the electric utility industry,
saying that more stringent financial risk standards are appropriate to take
into account mounting business risk. The rating agency indicated that the
industry's credit profile is threatened chiefly by intensifying competitive
pressures, but also by sluggish demand expectations, slow earnings growth
prospects, high common dividend payouts, environmental cost pressures, and
nuclear operating and decommissioning costs. After reviewing these and other
concerns, the rating agency categorized each utility's business position as
being either "above average," "average" or "below average" relative to other
companies in the industry. Florida Power was given a rating of
"above-average." Positive factors that influenced the rating agency's
favorable evaluation include Florida Power's location in a growing service
territory, its manageable construction program and the reasonable regulatory
climate in Florida as compared with other states. Factors of concern to the
rating agency were Florida Power's high level of purchased power commitments
and its high dividend payout ratio. (See Note 11 to the Financial Statements
and Item 5.)
EMPLOYEES
Florida Power employed 6,295 employees at December 31, 1993, of which 5,807
were full-time employees. The International Brotherhood of Electrical Workers
represents 2,371 full-time employees. The current union contract was ratified
in January 1992 and expires in December 1994.
DIVERSIFIED OPERATIONS
The Company's diversified operations are owned directly or indirectly through
PCH, a Florida corporation and wholly owned subsidiary of the Company that was
incorporated in 1988. PCH holds the capital stock of, and provides funding
for, the Company's non-utility subsidiaries, which include the following:
ELECTRIC FUELS - Formed in 1976, Electric Fuels is a coal mining and
transportation services company serving utility and industrial
companies, including Florida Power. Its major businesses include coal
mining, procurement and transportation; bulk commodities transportation;
and railcar and marine repair services. In 1993, Electric Fuels
completed a major expansion in the railcar repair segment of its
business. The acquisition of the assets of an Alabama-based company
boosted the unit's market share in the nation's rail services business.
MID-CONTINENT - Acquired in 1986, Mid-Continent is a life insurance
company headquartered in Oklahoma City which has been in business since
1909. Its principal product is a low-premium death benefit policy.
PROGRESS CREDIT - Formed in 1983, Progress Credit is a financial
services company with lending and leasing activities primarily involving
commercial aircraft, real estate, locomotives and medical equipment.
Progress Credit is not entering into new transactions, unless they
facilitate the Company's business withdrawal strategies, and plans to
sell, over time, most of its assets. In February 1993, Progress Credit
purchased at approximately book value its minority partner's 20%
interest in Progress Leasing Corporation, a subsidiary formerly owned
80% by Progress Credit. Most of the purchase price is payable in the
year 2000 and is subject to adjustments based on the portfolio's
performance. Also in 1993, the Company merged its primary real estate
unit, Talquin Corporation, into Progress Credit to streamline
administration and reduce overhead. The Company is continuing
to sell its real estate properties as market conditions allow.
As of December 31, 1993, PCH and its subsidiaries employed approximately
1,500 persons.
The Company's non-utility subsidiaries compete in their respective marketplaces
in terms of price, service reliability and other factors. Electric Fuels'
primary competitors are other coal suppliers, companies offering coal
transportation services and railcar and marine repair services. The business
of Electric Fuels and its subsidiaries, taken as a whole, is not subject to
significant seasonal fluctuation. Mid-Continent actively competes with other
insurance companies in all jurisdictions in which it is licensed. Many of
these competitors have more diversified lines of insurance coverage and
substantially greater financial resources.
ENVIRONMENTAL MATTERS
Electric Fuels is subject to federal, state and local regulations which govern
air and water quality, waste disposal and other environmental matters. The
coal mining business is affected primarily by the Clean Water Act and the
Clean Air Act. The transportation and the railcar and marine repair businesses
are primarily affected by the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-To-Know Act and the Clean Water Act.
The Environmental Affairs Department of Electric Fuels reviews existing and
emerging environmental regulations, disseminates applicable environmental
information throughout the organization and conducts site specific
environmental compliance audits. Transactional environmental assessments are
performed on new acquisitions to determine the potential environmental
liabilities associated with the facilities being considered. Compliance with
environmental laws and regulations has not had a material effect on Electric
Fuels' capital expenditures, earnings or competitive position, and Electric
Fuels does not anticipate making any material capital expenditures for
environmental facilities through the end of 1995.
For further information concerning certain environmental matters relating to
the Company's diversified operations, see paragraph 8 under Item 3 "Legal
Proceedings."
EXECUTIVE OFFICERS OF THE REGISTRANT
Jack B. Critchfield, Chairman of the Board and Chief
Executive Officer, Age 60
Since December 1, 1991, Dr. Critchfield's principal
occupation has been as shown above. From January 1991 to
December 1991, Dr. Critchfield was Chairman, President
and Chief Executive Officer, from February 1990 to
January 1991 he was President and Chief Executive
Officer, and from February 1988 to February 1990, he was
President and Chief Operating Officer of the Company. From
January 1987 to February 1988, Dr. Critchfield was Group Vice
President, Energy and Technology Group of the Company and
President and Chief Executive Officer of Electric Fuels.
From November 1983 to January 1987, he served as Vice
President of the Eastern and Ridge Divisions of
Florida Power.
Richard Korpan, President and Chief Operating Officer,
Age 52
Since December 1, 1991, Mr. Korpan's principal
occupation has been as shown above. From August
1989 to December 1991, he was Executive Vice
President and Chief Financial Officer of the
Company. He joined the Company in June 1989
to assume the position of Executive Vice President
and Chief Financial Officer. From 1986 to June
1989, Mr. Korpan was President and Chief Executive
Officer of Pacific Diversified Capital Company, a
subsidiary that comprises the non-utility operations
of San Diego Gas & Electric Company.
Jeffrey R. Heinicka, Senior Vice President and Chief Financial
Officer, Age 40
From December 1990 until appointment to his current
position in March 1994, Mr. Heinicka served as Vice
President and Treasurer of the Company. In March 1994,
Mr. Heinicka was also appointed as Senior Vice President
and Chief Financial Officer of Florida Power, where he
had served as Vice President and Treasurer since April
1993. From March 1988 until December 1990, he was Vice
President, Treasurer and Controller of Electric Fuels.
Allen J. Keesler, Jr., Group Vice President, Utility
Group and President and Chief Executive Officer, Florida
Power, Age 55
Since February 1988, Mr. Keesler's principal
occupation has been as shown above. From January
1983 to February 1988, he served as President and
Chief Executive Officer of Talquin Corporation, a
former subsidiary. Mr. Keesler served as Group
Vice President, Development Group, from January
1986 to February 1988.
Richard D. Keller, President and Chief Executive Officer,
Electric Fuels Corporation, Age 40
Since May, 1990, Mr. Keller's principal occupation
has been as shown above. He has served as President
and Chief Executive Officer of Electric Fuels since
February, 1988. From 1985 until February, 1988, Mr.
Keller was Vice President and Chief Financial
Officer of Electric Fuels.
Joseph H. Richardson, Senior Vice President, Corporate
Development, Age 44
In August 1991, Mr. Richardson was appointed to his
position as Senior Vice President of the Company. In
October 1993, he was also appointed to the position of
Senior Vice President, Legal and Administrative
Services, and General Counsel of Florida Power Corporation,
a position he holds concurrently with his positions at the
Company. He was President and Chief Executive Officer of
Talquin Corporation from May 1990 until September 1993.
From May 1990, to August 1991, Mr. Richardson was Group Vice
President, Development Group. From July 1986 to May 1990, he
served as Vice President of Talquin.
There are no family relationships between any director and/or any executive
officer of the Company. The executive officers serve at the pleasure of the
Board of Directors.
Item 2. PROPERTIES
The Company believes that its physical properties and those of its subsidiaries
are adequate to carry on its and their businesses as currently conducted. The
Company and its subsidiaries maintain property insurance against loss or damage
by fire or other perils to the extent that such property is usually insured.
(See Note 11 to the Financial Statements.) Substantially all of Florida
Power's utility plant is pledged as collateral for Florida Power's First
Mortgage Bonds. Certain railcars and tug/barge units owned or operated by
Electric Fuels are subject to the lien of mortgages in favor of certain
lenders, as are certain real estate properties held by Progress Credit.
Equipment owned by Progress Credit and leased under finance leases is subject
to liens in favor of the secured lenders.
UTILITY OPERATIONS
GENERATION: In November 1993, Florida Power added 396 MW of peaking capability
to its Intercession City site. As a result of modifications to existing
generating units, there was a total capability increase of 561 MW from last
year's winter generating capability. As of December 31, 1993, the total net
winter generating capability was 7,563 MW. This capability is generated by
eighteen steam units at six plant locations with a capability of 4,929 MW and
43 combustion turbine peaking units with a capability of 2,634 MW. Florida
Power's ability to use this generating capability may be adversely impacted by
various governmental regulations affecting nuclear operations and other aspects
of Florida Power's business. (See "Regulation and Franchises" and
"Environmental Matters" under Item 1 "Business-Utility Operations.") Operation
of these units may also be substantially curtailed by unanticipated equipment
failures or interruption of fuel supplies. The net maximum hourly demand
served during 1993 was 6,729 MW on August 5, 1993. Florida Power met that
demand through system generating capability and economy power purchases from
neighboring utilities. Florida Power's existing generating plants (all located
in Florida) and their capabilities are as follows:
Winter Net
Maximum
Dependable
Primary Location Steam Peaking Capability
Plants Fuel (County) MW MW MW
- ---------------- ------- ------------- ------- ------- ----------
Crystal River: Citrus
Unit #1 Coal 373 - 373
Unit #2 Coal 469 - 469
Unit #3 Uranium 755* - 755
Unit #4 Coal 717 - 717
Unit #5 Coal 717 - 717
----- -----
3,031 3,031
Anclote: Pasco
Unit #1 Oil 517 - 517
Unit #2 Oil 517 - 517
Bartow Oil Pinellas 449 217 666
Turner Oil Volusia 145 200 345
Intercession City Oil Osceola - 750 750
DeBary Oil Volusia - 786 786
Higgins Oil Pinellas 123 148 271
Bayboro Oil Pinellas - 232 232
Avon Park Oil Highlands - 64 64
Port St. Joe Oil Gulf - 18 18
Rio Pinar Oil Orange - 18 18
Suwannee River Oil Suwannee 147 201 348
----- ----- -----
4,929 2,634 7,563
===== ===== =====
* Represents 90.4% of total plant capability because 9.6% of capability
was owned by other parties at December 31, 1993.
In January 1994, a 40 MW cogeneration unit located at the University of Florida
in Gainesville was put into service. This unit provides steam to the University
campus and hospital while generating electricity for Florida Power's system.
Also in January 1994, Florida Power put two of its oldest power plants, the
Higgins and Turner steam units, on extended cold shutdown status. This will
increase the overall efficiency of Florida Power's operation.
PLANNED GENERATION: Florida Power and Georgia Power Company ("Georgia Power")
plan to become co-owners of a 165 MW advanced combustion turbine to be located
at Florida Power's Intercession City Peaker site. Upon expected completion in
1996, Florida Power would operate and maintain the unit for both owners.
During the months of June through September, Georgia Power would have the
exclusive right to the output of this unit. Florida Power would have that
right for the balance of the year. This transaction would be subject to
approval by the SEC and the Georgia Public Service Commission.
In a separate agreement, Florida Power has agreed to sell between 150 and 500
MW of summer peaking capacity annually to Georgia Power during the years of
1995 through 1999. Since Florida Power is a winter-peaking utility and Georgia
Power is a summer-peaking utility, this transaction presents unique advantages
to both parties. The agreement was accepted for filing by the FERC on March
11, 1994 and is pending approval by the Georgia Public Service Commission.
Florida Power's generation strategy includes continuing efforts to sign similar
energy agreements with other utilities. The revenues from these energy sales
will help Florida Power offset some of its annual production costs and better
utilize its facilities year-round.
In 1992, the FPSC granted Florida Power a certificate of need to build two
gas-fired combined cycle generating units and related facilities. Each unit
has a winter rating of 235 MW. They are to be built on a new power plant site
in Polk County, Florida, approximately 50 miles east of Tampa. This new site
is to be reclaimed from about 8,000 acres of mined-out phosphate land. The
first unit is planned to come on line in 1998, with the second unit to follow
in 1999. Commencement of construction of these units is contingent on
obtaining all regulatory approvals.
Florida Power plans to use natural gas to fuel the first phase of the new
energy complex in Polk County. Two Florida Power subsidiaries currently have
30% equity interests in the interstate and intrastate partnerships,
respectively, of a gas pipeline project called the SunShine Pipeline. These
investments totaled $4.9 million at December 31, 1993. Florida Power has an
option to reduce or eliminate its ownership positions at the end of 1994.
The SunShine Pipeline, estimated to cost approximately $600 million, would
originate near Pascagoula, Mississippi and would consist of two components:
the Sunshine Interstate Pipeline Project and the Sunshine Pipeline Project. The
two components of the pipeline together will consist of approximately 600
miles of pipe with a 30-inch diameter main line. The design capacity
through-put is anticipated to be approximately 460 million cubic feet per day
("MMcf/d") for the interstate component and approximately 380 MMcf/d for the
intrastate component. Each of the components would be owned by a separate
general partnership and, in connection therewith, Florida Power has formed two
subsidiary companies: Power Interstate Energy Services Corporation, which is a
partner in the interstate partnership, and Power Energy Services Corporation,
which is a partner in the intrastate partnership. ANR Pipeline Company, a
subsidiary of The Coastal Corporation, owns 40% of each partnership and
TransCanada PipeLines Limited owns 30% of each partnership through subsidiary
companies.
The interstate component of the SunShine Pipeline from Pascagoula to Okaloosa
County, Florida would be regulated by the FERC. The intrastate component of
the project from Okaloosa County to Polk County, Florida would be regulated by
the FPSC. In June 1993, the FPSC approved a determination of need for the
intrastate portion of the pipeline. Construction on the pipeline is contingent
upon obtaining all regulatory approvals, financing and commitments from
customers. (See Note 11 to the Financial Statements.)
Florida Power has signed a separate 25-year contract for the transportation of
natural gas through the SunShine Pipeline to Florida Power's Anclote plant near
Tarpon Springs and the Polk County site. Florida Power has contracted to
purchase 120 MMcf/d of capacity through the pipeline beginning in early 1996,
and to increase that volume to 210 MMcf/d by 1999 upon completion of Florida
Power's planned generation complex in Polk County.
Florida Power's expansion plan for generation is summarized in the table below:
Winter Net
Maximum
Combustion Planned Dependable
Location Steam Turbine In Service Capability
Plants (County) MW MW Date MW
- ------------ -------- ----- -------- ---------- ---------
Intercession City(2) Osceola - 165 1/96 165
Combined Cycle 1 Polk 235 - 11/98 235
Combined Cycle 2 Polk 235 - 11/99 235
-----
635
Existing system generation (1) 7,335
-----
Total planned system generation by the year 2000 is 7,970
=====
(1) Subsequent to closing the Higgins and Turner steam units, and adding a
40 MW cogeneration unit.
(2) Florida Power plans to co-own this unit with Georgia Power.
In late December 1993, the FPSC adopted a rule regarding the construction of
new power plants in Florida. In general, the rule requires each investor-owned
electric utility to engage in a competitive bidding process for the
construction of new generation unless the utility demonstrates on a case by
case basis that such a process is not in the best interests of the utility's
ratepayers. More specifically, the rule provides that prior to filing a
petition for determination of need for an electrical power plant, each
investor-owned electric utility shall evaluate supply-side alternatives to its
next planned generating unit by issuing a request for proposals. The utility
is required to evaluate proposals (which may include non-utility generators,
utility generators, turnkey offerings, and other generating supply
alternatives) from which a manageable group of potentially viable and
cost-effective finalists would be selected. The rule also provides, however,
that the FPSC may waive the rule or any part thereof upon a showing that the
waiver (a) would likely result in a lower cost supply of electricity to the
utility's ratepayers, (b) would increase the reliable supply of electricity to
the utility's ratepayers, or (c) is otherwise in the public interest. Although
the adoption of this rule could eventually affect Florida Power's ability to
construct its own power plants, the rule is not expected to affect the
construction of two gas-fired combined cycle generating units at Florida
Power's site in Polk County, Florida, because as noted above, the FPSC already
has granted Florida Power a certificate of need for these units.
NUCLEAR PLANT AND NUCLEAR INSURANCE: Information regarding nuclear plant and
nuclear insurance is contained in Note 9 to the Financial Statements.
TRANSMISSION AND DISTRIBUTION: As of December 31, 1993, Florida Power
distributed electricity through 329 substations with an installed transformer
capacity of 38,711,485 kilovolt amperes ("KVA"). Of this capacity, 26,963,425
KVA is located in transmission substations and 11,748,060 KVA in distribution
substations. Florida Power has 4,454 circuit miles of transmission lines of
which 2,560 circuit miles are operated at 500, 230, or 115 kilovolts ("KV")
and the balance at 69 KV. Florida Power has 22,390 circuit miles of
distribution lines which operate at various voltages ranging from 2.4 to 25 KV.
Florida Power is preparing to construct a 500 KV transmission line that will
run through northwest Hillsborough County and connect the Lake Tarpon
substation in Pinellas County to the Kathleen substation in Polk County (the
"LTK Line"). Florida Power received a certification of need for the LTK Line
from the FPSC in 1984, a letter from the FDEP in February 1994 indicating that
a water quality certification had been issued, and a dredge and fill permit
from the U.S. Army Corps of Engineers in March 1994. Through the end of 1993,
several lawsuits challenging various aspects of the LTK Line were dismissed
with prejudice or were unsuccessful on the merits. In the first quarter 1994,
Hillsborough County filed a lawsuit against the FDEP, and other parties
initiated two administrative proceedings, that challenge procedures followed in
issuing permits or authorizations relating to the LTK Line. Completion of
the LTK Line is subject to the successful defense of these and any other legal
actions that may seek to halt or delay construction of the LTK Line, and to the
completion of condemnation proceedings to acquire various parcels needed for
the project.
Florida Power has deferred indefinitely its plans to construct a 250 mile, 500
KV transmission line that would have interconnected bulk power electric systems
in Florida and Georgia. Factors contributing to this decision were a slowing
in Florida Power's customer growth rate and uncertainties related to
transmission access and pricing.
DIVERSIFIED OPERATIONS
ELECTRIC FUELS
Electric Fuels operates approximately 975 railcars, 11 locomotives, 400 river
barges and 15 river towboats which are either owned or leased, and are used for
the transportation and shipping of coal and other bulk products. Through a
joint venture, it has five oceangoing tug/barge units. An Electric Fuels
subsidiary, through another joint venture, owns and operates a large bulk
product terminal, located on the Mississippi River south of New Orleans, for
handling coal and other products. Electric Fuels provides drydocking and
repair services to towboats, offshore supply vessels and barges through an
operation it owns near New Orleans.
Electric Fuels controls, either directly or through subsidiaries, coal reserves
located in eastern Kentucky and southwestern Virginia. Electric Fuels owns, in
fee, properties that contain estimated proven and probable coal reserves of
approximately 180 million tons and controls, through mineral leases, additional
estimated proven and probable coal reserves of approximately 85 million tons.
Electric Fuels also owns a 50% undivided interest in coal reserves located in
West Virginia that currently are being leased to a third party under an
agreement that expires in March 1998. The reserves controlled by Electric
Fuels include substantial quantities of high quality, low sulfur coal that is
appropriate for use at Florida Power's existing generating units. The total
production of coal mined from these reserves during 1993 was approximately 3.9
million tons.
In connection with its coal operations, an Electric Fuels subsidiary, through a
joint venture, has an ownership interest in the operation of an underground
mining complex in southeastern Kentucky and southwestern Virginia. Other
Electric Fuels subsidiaries own and operate surface and underground mines, coal
processing and loadout facilities, a river terminal facility in eastern
Kentucky and three bulk commodity terminals: one on the Ohio River in
Cincinnati, Ohio, and two on the Kanawha River near Charleston, West Virginia.
Electric Fuels and its subsidiaries employ both company and contract miners in
their mining activities.
An Electric Fuels subsidiary owns railroad car and parts repair facilities in
eleven states. In addition, another subsidiary of Electric Fuels owns and
operates a manufacturing facility at the Florida Power Energy Complex in
Crystal River, Florida. The manufacturing process utilizes the fly ash
generated by the burning of coal as the major raw material in the production of
lightweight aggregate used in building blocks.
PROGRESS CREDIT
Progress Credit, through its leasing operations, owns 21 aircraft, 3 spare
aircraft engines, 55 locomotives and other property. The aircraft and engines
are mainly leased to seven U.S. commercial airlines. Information concerning
Progress Credit's net investment in these assets is included in Note 5 to the
Financial Statements. Through its real estate development subsidiary, Talquin
Development Company ("TDC"), Progress Credit owns real estate throughout
Florida. Significant holdings include 775 acres near Tallahassee, 2,000 acres
near Polk City, and a 400-acre office park and a marina with 235 wet slips and
400 high and dry slips and 20 acres of adjacent property in St. Petersburg. In
addition, TDC owns substantially all of two blocks in the central business
district of St. Petersburg, which contain over 400,000 square feet of office
and retail space. The Company and various subsidiaries occupy approximately
77,000 square feet of this office space. Through partnerships, TDC has
interests in two office buildings and in a 334 unit apartment complex.
MID-CONTINENT
Mid-Continent owns an office building in Oklahoma City, Oklahoma.
ITEM 3. LEGAL PROCEEDINGS
1. FERC Docket No. ER93-299.
On December 17, 1993, Florida Power executed settlement agreements related
to the coal cost issues in its 1993 wholesale rate case. The parties had
previously resolved all cost of service issues and agreed to settlement
rates that produced increased annual revenues of $5.9 million, or $2.7
million less than Florida Power's initially filed rates. The coal issue
settlement involves a net cost to Florida Power of $1.2 million, and
includes the customers' agreement to use certain FPSC market pricing
mechanisms for FERC fuel adjustment clause purposes. In addition, the
settlement resolves all claims regarding the propriety of past
coal-related fuel adjustment costs through December 31, 1993. The
proposed, unopposed settlement is pending before the FERC, with approval
expected in the first quarter of 1994.
2. FERC Docket No. ER94-961-000.
On January 24, 1994, Florida Power reached a settlement in principle with
the majority of its wholesale customers in its proposed 1994 rate case.
The settlement provides for an annual revenue increase of approximately
$10 million compared to 1993 settlement rates pending FERC approval. The
agreement was reached utilizing a "pre-filing settlement procedure" under
which Florida Power's rate case filing package was provided to the
wholesale customers in advance of filing with FERC, without delaying the
eventual effective date of the new rates. The settlement agreement was
filed with FERC on February 8, 1994, with settlement rates becoming
effective for the customers that are parties to the agreement on March 2,
1994. A decision from the FERC regarding this settlement, and new rates
for the minority of customers not party to the agreement, is expected in
April 1994.
3. Florida Gas Transmission Company v. Florida Public Service Commission,
Florida Supreme Court Case No. 82,171.
On July 7, 1993, the FPSC issued a certificate of need to the Sunshine
Pipeline Partners, a Florida general partnership, for an intrastate
natural gas pipeline from northwest Florida to central Florida. Through a
wholly owned subsidiary, Power Energy Services Corporation, Florida Power
holds a 30% equity interest in this general partnership. On August 2,
1993, Florida Gas Transmission Company filed a notice of appeal of the
FPSC's action to the Florida Supreme Court on the basis that (i) the law
under which the certificate was granted is unconstitutionally vague in its
delegation of authority to the FPSC and (ii) the FPSC's final order failed
to address matters that the FPSC is statutorily required to address.
Briefs have been filed and oral arguments were heard in the case on
February 1, 1994. A decision is expected in the first half of 1994.
4. Union Carbide Corporation v. Florida Power & Light Company ("FP&L") and
Florida Power Corporation, U.S. District Court for the Middle District of
Florida, Tampa Division, Civil Action No. 88-1672-CIV-T-13C.
In this suit filed on October 14, 1988, seeking both injunctive relief and
damages, Union Carbide Corporation ("Union Carbide") claims that Florida
Power violated provisions of the Sherman and Clayton Antitrust Acts
primarily by refusing to provide retail electric service to Union
Carbide's plant at Mims, Florida. Florida Power's records indicate that a
territorial agreement has been in effect between it and FP&L for
approximately thirty (30) years, pursuant to which it was understood and
agreed that Florida Power would not provide retail electric service in the
area in question and that FP&L would provide such service. Florida
Power's records further indicate that its territorial agreement with FP&L
was approved by the FPSC pursuant to a clearly articulated policy of the
state encouraging such territorial agreements between electric utilities.
Accordingly, Florida Power and FP&L jointly filed a Motion for Summary
Judgment on November 22, 1988, contending that there is no dispute as to
any material issue of fact in the case, and that the case should therefore
be decided in their favor, as a matter of law, based upon the
qualification of the approved territorial agreement for the state action
exemption to the antitrust laws. Union Carbide filed a Motion for Partial
Summary Judgment as to the issue of liability on May 2, 1989. On July 11,
1989, the General Counsel to the FPSC was allowed to appear and file a
Memorandum of Law as Amicus Curiae in support of the positions of Florida
Power and FP&L in their Joint Motion for Summary Judgment.
On December 8, 1993, the Court denied the Motion for Summary Judgment
filed by Florida Power and FP&L and the Motion for Partial Summary
Judgment filed by Union Carbide. The Court found that even though
Florida has a clearly articulated State policy of allocating service
territories of utilities and the FPSC has provided adequate supervision
of the retail service territories of Florida Power and FP&L, the
documentation of the territorial agreement and the FPSC's approval of
that agreement, "...gives rise to conflicting interpretations of the
intent of [Florida Power and FP&L and the FPSC] regarding the provision of
service in Broward County." The Court construed the intent of the FPSC
in approving the territorial agreement to be to "...allocate to each
utility that territory on its respective side of the boundary line in
which competition is reasonably expected." Union Carbide, FP&L, and
Florida Power all filed Motions for Reconsideration of the Court's Order
of December 8, 1993.
On January 26, 1994, the Court denied all the Motions for Reconsideration
and found that a material issue of fact exists as to "...whether Mims was
located in an area to the east of the [territorial] boundary line [between
Florida Power and FP&L] in which competition [between Florida Power and
FP&L] was reasonably foreseeable in the future." This issue had never
been raised by any of the parties to the litigation, and was mentioned for
the first time in the Court's Order of December 8, 1993. Florida Power
believes that the issue of expected competition in the Mims area at the
time the territorial agreement was approved is not material to a proper
disposition of the case, and that a summary judgment should be entered in
favor of Florida Power and FP&L on the basis of the Court's findings in
their favor on all the critical issues of law in its Order of December 8,
1993.
Incident to a status conference in the case on February 1, 1994, Union
Carbide requested certification of the case for purposes of taking an
appeal. Accordingly, the Court elected to delay permitting any additional
discovery or setting the case for trial on the limited issue of material
fact it found to exist pending disposition of appeals from the Court's
rulings on the motions for summary judgment. Florida Power and FP&L filed
notices of appeal to the U.S. Court of Appeals for the 11th Circuit on
February 8, 1994 and the plaintiff filed a notice of cross appeal on
February 22, 1994. Also at the status conference on February 1, 1994,
Praxair, Inc. to which Union Carbide had previously spun off its plant at
Mims, Florida, was substituted for Union Carbide as the plaintiff in their
cause, subject to certain reservations. Accordingly, future reports on
this case will be under the name of Praxair, Inc. v. FP&L and Florida
Power.
5. Kim S. McDowell and Talesa C. Lloyd v. Florida Power Corporation, United
States District Court for the Middle District of Florida, Tampa Division,
Case No. 91-1858-CIV-T-23B.
On November 3, 1992, counsel for the plaintiffs in this matter filed a
motion for leave to file a first amended complaint. The initial pro se
action, filed on November 29, 1991, by these two former employees of
Florida Power, raised allegations of sexual discrimination and harassment
and sought relief under Title VII of the Civil Rights Act of 1964. The
motion asks the court to allow the plaintiffs to amend the initial
complaint to add another named plaintiff and to allow the named plaintiffs
to represent a class of female employees. The first amended complaint
also seeks injunctive relief and compensatory and punitive damages on
behalf of the class of all former, present, and future female employees of
Florida Power who have been, are being or will be discriminated against or
harassed because of their sex.
Florida Power believes that its exposure in this matter will not be
material even if it is unsuccessful in defending against the individual
claims of the named representatives. However, it cannot yet be
determined whether this case will be certified as a class action or how
large the class could become. Certain procedural matters have delayed
the handling of this case, and at present seven motions are pending and
no trial date has been set.
6. Florida Public Utilities Company v. Florida Power Corporation, Florida
Power & Light Company, Atlanta Gas Light Company, and City of Sanford,
Florida, United States District Court for the Middle District of Florida,
Orlando Division, Civil Action No. 92-115-CIV-ORL-19.
On February 7, 1992, Florida Power was served with a copy of a complaint
alleging damages caused by violations of the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA" or "Superfund") and
Sections 376.302 and 376.313(3) Florida Statutes, by former owners of a
coal gasification plant previously operated at Sanford, Florida. The
plaintiff, Florida Public Utilities Company, currently owns the land which
includes the former plant site. The complaint states that the FDEP has
completed its initial investigation and has determined that hazardous
substances have been discharged and/or released at the site of the former
gasification plant.
The plaintiff alleges that Florida Power owned and operated the plant
from 1944 until 1946 and that Florida Power is a successor in interest
through the merger of Florida Power with a previous owner of the plant,
Sanford Gas Company.
On February 3, 1994, the parties to this action submitted a completed
contamination assessment report to the FDEP. As of this date, Florida
Power has not received any further communication from the FDEP. Florida
Power anticipates an extended period of negotiation with the FDEP. The
lawsuit continues to be stayed pending the results of the FDEP's review.
At the present time, Florida Power does not believe that its share of the
costs of cleaning up this site will be material, or that it will have to
bear a significantly disproportionate share of those costs. This matter
is being reported because liability for the cleanup of certain sites is
technically joint and several, and because the extent to which other
parties will ultimately share in the cleanup costs at this site is not yet
determinable. (See Note 11 to the Financial Statements for further
information regarding the potential costs.)
7. Peak Oil Company, Missouri Electric Works, 62nd Street, AKO Bayside,
Bluff Electric and Sydney Mine Superfund Sites.
Florida Power has been notified by the EPA that it is or could be a
"potentially responsible party" ("PRP") with respect to each of the above
Superfund sites. Based upon the information presently available, Florida
Power has no reason to believe that its total liability for the cleanup
of these sites will be material or that it will be required to pay a
significantly disproportionate share of those costs. However, these
matters are being reported because liability for cleanup of certain sites
is technically joint and several, and because the extent to which Florida
Power may ultimately have to participate in those cleanup costs is not
presently determinable. (See Note 11 to the Financial Statements for
further information regarding the potential costs.)
8. Peak Oil Company and Zellwood Groundwater Superfund Sites.
The Company has been notified by the EPA that one or more former
non-utility operations whose assets have been divested are or could be
PRPs with respect to the Zellwood Groundwater or Peak Oil Company
Superfund cleanup sites. Based upon the information presently
available, the Company has no reason to believe that its total liability
for the cleanup of these sites will be material or that it will be
required to pay a significantly disproportionate share of those costs.
However, these matters are being reported because liability for cleanup
of certain sites is technically joint and several, and because the extent
to which the Company may ultimately have to participate in those cleanup
costs is not presently determinable. (See Note 11 to the Financial
Statements for further information regarding the potential costs.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange. The high and low price per share of the Company's
common stock for each quarterly period and the dividends per common share paid
on shares of the Company's common stock during the last two fiscal years
appears on the "Quarterly Financial Data" table at the end of the Notes to the
Financial Statements, herein.
In November 1993, the Company's Board announced an increase of 2.1% in the
annual dividend rate from $1.94 to $1.98 per share. The Company's current
dividend payout ratio is 87 percent. The Company's earnings projections
indicate that it can lower the dividend payout. Over time, it is the Company's
goal to lower the payout ratio to 75 percent. At the same time, the Company
believes that it can maintain a dividend growth rate that is comparable with
that of other high-quality electric utility stocks.
The Company's Restated Articles of Incorporation, as amended, do not limit the
dividends that may be paid on its common stock. However, the primary source
for payment of the Company's dividends consists of dividends paid to it by
Florida Power. Florida Power's Amended Articles of Incorporation, as amended,
and its Indenture dated as of January 1, 1944, as supplemented, under which it
issues first mortgage bonds, contain provisions restricting dividends in
certain circumstances. At December 31, 1993, Florida Power's ability to pay
dividends was not, nor is it expected to be, limited by these restrictions.
The Company and PCH have entered into an Amended and Restated Support Agreement
dated as of February 1, 1991, pursuant to which the Company has agreed to cause
PCH to have at the last day of each month a net worth (defined generally as the
sum of capital stock and retained earnings minus the sum of treasury stock and
intangible assets) equal to $150 million, plus 50% of PCH's consolidated net
income since January 1, 1990 (and not minus any consolidated net loss), plus
the net proceeds to PCH of any capital stock or equity contribution issued to
or made by the Company or any subsidiary of the Company since January 1, 1990,
other than an equity contribution consisting of capital stock or assets of a
subsidiary of the Company. As of December 31, 1993, PCH's net worth was $98.1
million higher than the amount required under this agreement.
The approximate number of equity security holders of the Company is as follows:
Number of Record Holders
Title of Class as of February 22, 1994
- ------------------------------ -------------------------
Common Stock without par value 44,340
ITEM 6. SELECTED FINANCIAL DATA
Annual Growth Rates
(in percent)
1988-1993 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
FLORIDA PROGRESS CORPORATION
Summary of operations (in millions):
Utility revenues 5.9 $1,957.6 $1,774.1 $1,718.8 $1,709.1 $1,627.0 $1,468.5
Diversified revenues (continuing) 12.7 491.4 321.2 355.9 301.7 274.3 270.1
Income from continuing operations 1.9 195.8 175.7 174.5 179.8 186.1 178.6
Income (loss) from discontinued
operations and change in accounting - .8 - (2.4) (15.0) 1.0 1.2
Net income 1.8 196.6 175.7 172.1 164.8 187.1 179.8
- ------------------------------------------------------------------------------------------------------------------
Balance sheet data (in millions):
Total assets 5.7 $5,638.8 $5,333.0 $5,024.9 $5,045.9 $4,610.4 $4,272.3
Capitalization:
Short-term capital (11.3) $ 201.6 $ 201.9 $ 68.2 $ 681.0 $ 498.6 $ 366.5
Long-term debt 12.2 1,866.6 1,656.4 1,659.1 1,326.2 1,125.8 1,048.8
Preferred stock (8.7) 148.5 216.0 231.0 233.5 233.5 233.5
Common stock equity 6.7 1,820.5 1,737.6 1,587.7 1,424.3 1,372.3 1,316.9
- ------------------------------------------------------------------------------------------------------------------
Total capitalization 6.4 $4,037.2 $3,811.9 $3,546.0 $3,665.0 $3,230.2 $2,965.7
- ------------------------------------------------------------------------------------------------------------------
Common stock data:
Average shares outstanding (in millions) 2.9 88.3 85.4 80.8 77.0 76.6 76.6
Earnings per share:
Utility (1.4) $2.06 $1.99 $2.03 $2.15 $2.19 $2.21
Diversified (continuing) 4.2 .16 .07 .13 .18 .24 .13
Discontinued operations and
change in accounting - .01 - (.03) (.19) .01 .01
Consolidated (1.0) 2.23 2.06 2.13 2.14 2.44 2.35
Dividends per common share 3.2 1.95 1.905 1.843 1.777 1.72 1.667
Dividend payout - 87.6% 93.0% 87.0% 82.9% 70.4% 71.0%
Dividend yield - 5.9% 5.9% 6.0% 7.2% 6.6% 7.3%
Book value per share of common stock 3.5 $20.40 $19.85 $19.14 $18.37 $17.92 $17.20
Return on common equity - 11.1% 10.6% 11.4% 11.8% 13.9% 13.9%
- ------------------------------------------------------------------------------------------------------------------
Common stock price per share:
High - 36 3/8 33 1/4 31 1/2 27 26 3/4 25 1/8
Low - 31 1/4 27 7/8 24 3/8 22 1/4 22 1/8 21 1/4
Close 7.7 33 5/8 32 5/8 31 1/4 25 1/2 26 5/8 23 1/4
Price earnings ratio (year-end) 15.1 15.8 14.7 11.9 10.9 9.9
- ------------------------------------------------------------------------------------------------------------------
Other year-end data:
Number of employees (.4) 7,825 7,301 7,350 7,879 7,490 7,974
Number of common shareholders (.2) 44,371 44,870 42,176 41,970 43,005 44,929
- ------------------------------------------------------------------------------------------------------------------
FLORIDA POWER CORPORATION
Electric sales billed (millions of KWH):
Residential 3.9 13,372.6 12,825.8 12,623.9 12,415.5 11,786.9 11,065.6
Commercial 4.0 7,884.8 7,544.1 7,489.2 7,328.7 6,989.8 6,479.4
Industrial (1.7) 3,380.8 3,254.5 3,303.0 3,455.7 3,766.1 3,680.6
Total retail sales 3.2 26,528.3 25,414.0 25,179.1 24,878.3 24,123.3 22,691.7
Total electric sales 1.9 28,647.8 27,375.5 27,350.2 27,143.7 26,510.5 26,130.9
- ------------------------------------------------------------------------------------------------------------------
Residential service (average annual):
KWH sales per customer 1.1 12,420 12,214 12,257 12,319 12,059 11,754
Revenue per customer 3.8 $983 $884 $899 $896 $845 $814
- ------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges (SEC method) .2 3.83 3.84 3.87 3.89 3.79 3.79
Embedded cost of long-term debt (3.2) 6.8% 7.5% 7.7% 7.9% 8.1% 8.0%
Embedded cost of preferred stock (1.1) 6.8% 7.3% 7.3% 7.2% 7.2% 7.2%
- ------------------------------------------------------------------------------------------------------------------
Operating data:
Net system capability (MW) 4.4 7,563 7,002 6,623 6,571 6,309 6,086
Net system peak (MW) 1.7 6,729 6,982 6,056 5,026 6,817 6,188
Construction additions (in millions) 17.1 $442.0 $491.6 $355.3 $269.5 $254.8 $201.1
Percentage of construction expenditures
generated internally (6.9) 70% 32% 90% 52% 73% 100%
Average number of customers 2.7 1,214,653 1,182,170 1,159,237 1,135,499 1,101,817 1,060,971
Number of full-time employees 1.0 5,807 5,806 5,677 5,570 5,553 5,512
- ------------------------------------------------------------------------------------------------------------------
In the preceding table, certain reclassifications have been made to amounts in
prior years to conform to the current year's presentation and all share and per
share amounts have been adjusted to reflect the 3-for-2 common stock split to
shareholders of record on June 30, 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Although the electric utility industry is becoming increasingly competitive,
Management believes that Florida Power is in a good competitive position. See
Item 1 "Business-Utility Operations-Competition."
Florida Power is streamlining operations and cutting costs to improve its
competitiveness. These actions also are expected to allow Florida Power to
offset other rising costs such as income taxes, environmental expenses and
insurance costs. Florida Power expects to earn its authorized return on
equity, while maintaining competitive prices. Through anticipated sales growth
and cost control, Florida Power believes it can wait to file a major retail
rate case until its next baseload unit is near completion in 1998.
OPERATING RESULTS
The Company's 1993 consolidated earnings were $196.6 million, or $2.23 per
share, compared with $175.7 million, or $2.06 per share, for 1992 and $172.1
million, or $2.13 per share, for 1991. A summary of earnings per share by
company is as follows:
EARNINGS PER SHARE
1993 1992 1991
- ----------------------------------------------------------------
Florida Power Corporation $2.06 $1.99 $2.03
- ----------------------------------------------------------------
Electric Fuels Corporation .17 .14 .10
Mid-Continent Life Insurance Co. .10 .09 .09
Progress Credit Corporation:
Lending and leasing .02 .05 .10
Real estate (.08) (.19) (.08)
Corporate and other (.05) (.02) (.08)
- ----------------------------------------------------------------
Diversified .16 .07 .13
- ----------------------------------------------------------------
Continuing operations 2.22 2.06 2.16
Discontinued operations - - (.03)
Change in accounting .01 - -
- ----------------------------------------------------------------
Consolidated $2.23 $2.06 $2.13
- ----------------------------------------------------------------
UTILITY
In 1993, Florida Power earned $181.5 million, or $2.06 per share, compared
with $170.2 million, or $1.99 per share, in 1992 and $164.1 million, or $2.03
per share, in 1991.
Operating revenues were $1.958 billion in 1993, compared with $1.774 billion in
1992 and $1.719 billion in 1991. The increased operating revenues and higher
earnings in 1993 were mainly due to the phased-in increases in retail base
rates, reflecting the outcome of Florida Power's 1992 retail rate case.
In September 1992, the FPSC granted Florida Power an annual revenue increase of
$85.8 million. The FPSC approved permanent increases in retail base rates of
approximately $58 million in November 1992, $9.7 million in April 1993 and
$18.1 million in November 1993. (See Note 10 to the Financial Statements.)
The new retail rates are based on a 12% regulatory return on equity. Florida
Power's allowed retail regulatory return on equity range is 11% to 13%.
Florida Power's retail regulatory return on equity was 12.1% for the year ended
December 31, 1993.
New revenues were granted in the approved rate increase to allow for the
recovery of new investment to support customer growth, increased operations
and maintenance costs, and higher depreciation expenses. The rate increase
also allows Florida Power to recover costs for employee benefits in accordance
with the new accounting standard for other postretirement benefits that became
effective January 1, 1993.
The new base rates increased operating revenues by $43.4 million and increased
earnings by $10.4 million for 1993, after recording new expenses authorized in
the rate case.
The FPSC has conducted proceedings to review the authorized return on common
equity for other Florida utilities to reflect a lower cost of capital. While
some of these proceedings have resulted in a reduction of the authorized return
on common equity, the FPSC has not ordered any refunds or lowered customer
rates.
Florida Power filed a 1994 wholesale base rate proceeding on February 8, 1994
before the FERC after reaching a settlement in principle with its wholesale
customers. Florida Power is requesting an increase in annual revenues
of approximately $10 million to recover costs for new generating facilities and
higher purchased power costs. The settlement is expected to be approved by the
FERC in the second quarter 1994.
In December 1993, Florida Power executed a settlement agreement with its
wholesale customers for $5.7 million in higher annual revenues in its 1993
rate proceeding. The settlement is expected to be approved by the FERC in the
first quarter of 1994.
Florida Power reached a settlement with its wholesale customers in its 1992
rate proceeding, which had no significant impact on annual revenues but
resulted in a retroactive depreciation adjustment that increased Florida
Power's 1992 fourth quarter earnings by $5.6 million. (See Note 1 to the
Financial Statements.)
Florida Power's customer growth rate for 1993 was 2.7%, compared with 2% in
1992. An increase of more than 32,000 customers during 1993 was the principal
reason for a 5.3% increase in retail KWH sales for the year.
The main reason for the increase in the customer growth rate during 1993 was
Florida Power's acquisition of the Sebring Utilities Commission electrical
distribution system. The purchase occurred in April 1993, adding about 12,500
customers to Florida Power's system. Florida Power paid $54 million for the
system, which included $23.6 million for the book value of the assets and
going-concern value of the system. The $30.4 million difference was used to
retire Sebring's prior debt and will be repaid to Florida Power through a
transition rate from Sebring customers over a period of 15 years. Florida
Power plans to include the net book value of the assets in its next retail rate
case in 1998.
In addition to customer growth, the higher energy sales in 1993 were the result
of increased average customer usage. During 1993, average residential and
commercial customer usage was up by 1.7% and 1.8%, respectively, compared with
1992. The primary reason for the higher average usage was the
warmer-than-normal summer weather in Florida Power's service territory in 1993.
Fuel and purchased power costs increased by $49.9 million in 1993, compared
with 1992. The increase was primarily due to higher system requirements and
increased purchased power costs. Florida Power has several long-term purchased
power commitments with qualifying facilities that will increase its level of
purchased power over the next several years. Since Florida Power recovers
substantially all fuel and purchased power costs through fuel and capacity
adjustment clauses, and defers any adjustments to the following period, these
fluctuations have little impact on net income. (See Note 11 to the Financial
Statements with respect to present and possible future impact of these
commitments.)
Other utility operations and maintenance expenses increased by $64.2 million in
1993. Recoverable energy conservation programs accounted for $32.3 million of
the increase. Florida Power recovers substantially all of its energy
conservation program costs through a clause similar to the fuel adjustment
clause. Also contributing to the increase were postretirement benefits and the
costs associated with an early retirement option announced in late 1993. These
increases in other utility operations and maintenance expenses were partially
offset by reduced maintenance costs at the Crystal River Nuclear Plant that
resulted from the timing of outages.
Florida Power's earnings were lowered by $3.4 million, or $.04 a share, for the
early retirement costs recognized in 1993 and Florida Power estimates that 1994
earnings will be lower by approximately $8 million. Payroll cost reductions
and other lower personnel-related expenses are expected to pay back the
expenses being recognized for the early retirement option in less than three
years.
During 1993, the nuclear unit's capacity factor was 84.5%, which is above the
industry average. This capacity factor was achieved despite the plant
completing a mid-cycle maintenance outage. Florida Power's share of the
expenses for the 53-day outage totaled $9.7 million. (See Note 9 to the
Financial Statements.)
Electric utilities have only recently begun the process of decommissioning
large nuclear units. Therefore, estimates of decommissioning costs have been
based on limited experience. As the industry gains additional experience,
estimates of decommissioning costs may increase. (See Note 9 to the Financial
Statements.)
In November 1992, the U.S. Nuclear Regulatory Commission issued its most recent
Systematic Assessment of Licensee Performance report for the nuclear unit. The
report gave favorable ratings to the plant in all seven functional areas. The
plant received the highest performance rating in three of seven areas and the
next to the highest or industry average rating in the remaining four areas.
The next performance report for the unit is expected in April 1994.
The 1992 retail rate decision included revenues to recover additional
depreciation expense, beginning in November 1992, previously ordered by the
FPSC. The decision included a provision for fossil plant dismantlement costs.
These dismantlement costs totaled $23.9 million in 1993, $18.2 million in 1992
and $16.6 million in 1991. (See Note 1 to the Financial Statements.)
Stock dilution accounted for all of the decline in Florida Power's earnings per
share in 1992 and also impacted the 1993 earnings per share amount.
The financial return on Florida Power's common equity was 12.1% in 1993, 12.3%
in 1992 and 12.9% in 1991. Although the 1993 Florida Power return was
bolstered by the increase in retail electric rates and the higher energy sales,
these increases were offset by higher income taxes, and increased costs for
insurance and the early retirement option.
Several Company subsidiaries, including Florida Power, have been notified by
the EPA that each is or may be a potentially responsible party for the cleanup
costs of several contaminated sites. In addition, Florida Power is a defendant
in an action seeking contribution for cleanup costs from the prior owners of a
former coal gasification plant site. (See Note 11 to the Financial
Statements.)
DIVERSIFIED OPERATIONS
In 1993, earnings from continuing diversified operations were $14.3 million,
or $.16 per share, compared with $5.5 million, or $.07 per share, in 1992 and
$10.4 million, or $.13 per share, in 1991. Improved operating results at the
diversified companies in 1993 were partially offset by the negative impact of
the new federal tax law. The tax law reduced earnings of the Company's
diversified operations by $3.6 million, or $.04 per share, in 1993.
Diversified results were lower in 1992 as the real estate unit provided for
expected losses on the sale of real estate.
The Company continues to expand the energy-related businesses of Electric
Fuels, the Company's coal mining and transportation unit. In June 1993, a
subsidiary of Electric Fuels acquired the assets of Steel Processing Services,
Inc., an Alabama-based rail car repair and parts reconditioning company. The
acquisition increased 1993 revenues for Electric Fuels by approximately $80
million. The combined rail services operations will allow Electric Fuels to
better serve the needs of its rail industry customers and accelerate expansion
into new markets.
Earnings for Electric Fuels were $14.9 million, or $.17 per share, in 1993,
compared with $12.1 million, or $.14 per share, in 1992 and $8 million, or $.10
per share, in 1991. In addition to earnings from the former Steel Processing
operations in 1993, improved results from Electric Fuels' marine operations and
higher coal production resulting from newly acquired coal reserves contributed
to the earnings increases in 1992 and 1993.
The Company also is maintaining a proven growth strategy for its life insurance
business, Mid-Continent Life Insurance Company. With plans to open two new
offices annually in the next several years, Mid-Continent expects to expand
market share through the development of a regional office network.
Mid-Continent's earnings for 1993 increased to $8.5 million, or $.10 per share,
from $8 million, or $.09 per share, in 1992 and $7.5 million, or $.09 per
share, in 1991. The annual earnings increases are mainly due to the growth in
premiums, net of related expenses, which is attributable to the expansion of
the regional office network; more independent agents marketing Mid-Continent's
products; and an increasing market share. Since the Company acquired
Mid-Continent in 1986, the insurance company's earnings have increased an
average of 19% annually.
The Company is continuing to withdraw from the lending and leasing business and
is selling its real estate properties as market conditions allow. In 1993, the
Company merged its primary real estate unit, Talquin, into Progress Credit, the
Company's lending and leasing unit, to streamline administration and reduce
overhead.
Since announcing its decision to implement an orderly liquidation of the
investment portfolio and the commercial lending and leasing business in
September 1991, the Company has reduced Progress Credit's financial assets by
35%, or $314 million. The financial portfolio, which totaled $573.5 million at
the end of 1993, primarily contains commercial aircraft loans and leases and
first mortgage real estate loans. The lending and leasing unit has experienced
delinquencies in ongoing lease and loan payments as well as loan principal
maturities. Progress Credit has negotiated the restructuring of certain
transactions and instituted legal remedies and other remedial actions, where
appropriate. (See Note 5 to the Financial Statements.)
As of the end of 1993, the Company had reserves of $24.5 million for the
lending and leasing portfolio. Assuming no further deterioration in the
airline and real estate industries, these reserves are expected to be adequate
to implement the Company's orderly liquidation strategy.
Leases and loans generally are placed in non-accrual status when management
believes the collectibility of interest or principal is unlikely. There were
no assets on non-accrual status as of December 31, 1993. Since then, one loan
collateralized by real estate assets in Van Nuys, California has been placed on
non-accrual status. The related lease payments have been reduced since
buildings on the property were damaged in the recent Los Angeles earthquake.
Despite this event, management continues to believe the reserves for the
lending and leasing portfolio to be adequate.
Earnings in 1993 for the Company's commercial lending and leasing unit were
$2.2 million, or $.02 per share, compared with $4 million, or $.05 per share,
in 1992 and $8.4 million, or $.10 per share, in 1991.
The lower income in 1993 is primarily due to the effect of the new tax law,
which reduced the lending and leasing operations' net earnings by $2.5 million,
or $.03 per share. This reduction included a deferred tax adjustment related
to the leveraged equipment leasing business.
In 1993, the Company's real estate unit realized losses from continuing
operations of $7.4 million, or $.08 per share, compared with losses of $16.7
million, or $.19 per share, in 1992 and $6.6 million, or $.08 per share, in
1991.
During 1993, the real estate operations had lower operating and interest costs,
compared with 1992, due to the sale of some properties in the real estate
portfolio and lower interest rates. In April 1993, two life-care facilities
were sold to the projects' managing general partner for $82.8 million, which
resulted in a deferred gain of $4.2 million. Progress Credit financed the sale
of the life-care facilities through 7-year mortgage loans. In September and
October 1993, the real estate unit sold all of its apartment complexes, in
which it has a general partnership interest, for a total of $83.9 million, and
recognized an after-tax loss of about $.5 million.
In 1992, the real estate unit provided for expected losses on real estate
sales, which reduced earnings by $7.4 million, or $.09 per share. This was the
major reason for the higher losses in 1992 at the real estate unit.
The timing of earnings from an installment sale of the real estate unit's
citrus operations impacted the 1991 results. In 1991, the unit recognized the
last installment gain of $3.1 million, or $.04 per share, from this sale.
The sale of the real estate portfolio and the finance unit's holdings is
expected to result in lower revenues and interest expense for the Company.
The impact on net income depends on the timing of these sales and the
relationship between the returns on the assets sold, carrying costs incurred
and the interest rates on the associated debt repaid.
Since most of the Company's remaining real estate properties are located in
growth areas, management believes the market for its projects should begin to
recover as the economy improves. The current weak real estate market will
require the Company to hold these properties, and absorb the related carrying
costs, until economic conditions improve and the properties can be sold.
The Company's investments in its real estate portfolio totaled approximately
$140 million at December 31, 1993. The majority of this capital was invested
in Barnett Tower, the Company's headquarters building, and the Carillon office
park.
The increases in the 1993 diversified revenues and operating expenses are
mainly due to the expansion of the rail services business at Electric Fuels.
These increases were partially offset by reduced operations as a result of the
sale of real estate assets during 1993 and the continuing withdrawal from the
lending and leasing business.
The return on equity for continuing diversified operations was 5.2% in 1993, 2%
in 1992 and 4.8% in 1991. In each year, the diversified returns were depressed
mainly due to holding real estate properties without any significant sales
activity.
Excluding the results from the lending and leasing and real estate units, which
are being divested, the diversified returns were 10.1% in 1993, 11% in 1992 and
9.9% in 1991. The percentage of equity invested in diversified operations was
16% at the end of 1993 and is likely to remain below 20%.
INTEREST EXPENSE AND INFLATION
Interest expense was impacted by lower interest rates in both 1992 and 1993,
compared with 1991. Interest expense increased in 1993, compared with 1992,
despite lower rates, due to higher average debt levels in 1993.
Allowance for funds used during construction decreased $3.1 million in 1993,
compared with an increase of $9.3 million in 1992. During 1992 and 1993,
several major construction projects were completed at Florida Power,
contributing to the 1993 decrease.
Even though the inflation rate has been relatively low in recent years,
inflation continues to affect the Company by reducing the purchasing power of
the dollar and increasing the cost of replacing assets used in the business.
This has a negative effect on Florida Power since regulators do not generally
consider this economic loss when utility rates are set. However, such losses
are partly offset by the economic gains that result from the repayment of
long-term debt with inflated dollars.
INCOME TAXES
In August, the Omnibus Budget Reconciliation Act of 1993 was signed into law.
The major provision of the new tax law affecting the Company is the increase
in the maximum corporate income tax rate from 34% to 35%. This 1% increase in
the tax rate, and the related impact on accounting for long-term leveraged
leases, lowered the Company's 1993 net earnings by $6.4 million, or $.07 per
share. (See Note 7 to the Financial Statements.)
ACCOUNTING STANDARDS
The Company adopted Financial Accounting Standard No. 109, "Accounting for
Income Taxes," in 1993. The adoption of the standard did not have a
significant impact on earnings in 1993. (See Note 1 to the Financial
Statements.)
The Company also adopted Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," in 1993. This
standard mandates that an employer's obligation for postretirement benefits
must be fully accrued by the date employees attain full eligibility to receive
these benefits. The Company accrued approximately $19 million in additional
annual costs under the new standard in 1993, but a substantial portion was
recovered through increased customer base rates at Florida Power. (See Note 8
to the Financial Statements.)
The Company will be required to adopt two new financial accounting standards in
1994 - Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and Financial Accounting Standard
No. 112, "Employers' Accounting for Postemployment Benefits." The Company
plans to adopt the provisions of Financial Accounting Standard No. 114,
"Accounting by Creditors for the Impairment of a Loan," effective in 1995. The
adoption of these standards is not expected to have a material impact on
earnings. (See Note 1 and Note 5 to the Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations has been the primary source of capital for the Company
over the last five years.
In May 1991, the Company sold 4.4 million common shares through its first
underwritten public stock offering since 1983. The net proceeds totaled $113.2
million. In a May 1992 public offering, the Company sold an additional 2.6
million common shares. The net proceeds of this offering were $76.5 million.
During the last three years, the Company also raised $143.6 million of equity
capital through its Progress Plus Stock Plan and a predecessor plan. In 1993,
about 1.7 million additional shares were issued through the plan, providing
$57.7 million. In late 1993, the Company filed a shelf registration for 4.5
million common shares. The Company expects to issue a portion of these shares
in a 1994 public offering.
The Company is issuing new equity to strengthen its common equity capital
percentage and raise equity for funding Florida Power's construction program.
Other sources of capital have included proceeds from the sale of the building
products operations and real estate properties and the orderly liquidation of
the lending and leasing portfolio.
The Company's common equity, as a percent of total capital, was 45.1% as of
December 31, 1993, and 45.6% in 1992. Short-term capital, as a percent of
total capital, was 5% in 1993 and 5.3% in 1992.
The Company has strengthened its capital structure through the sale of common
stock, Florida Power first mortgage bonds, real estate properties, and lending
and leasing assets, when compared with 1990. At December 31, 1990, common
equity was 38.8% of total capital and short-term debt was 18.6% of total
capital. The Company's primary short- and long-term capital requirements
result from utility construction and property additions, dividend payments to
common shareholders, debt repayments and diversified property additions. Other
capital requirements include business acquisitions and joint venture
investments.
UTILITY
Florida Power's construction expenditures for 1993 totaled $426.4 million,
consisting primarily of distribution and production expenditures. The
five-year construction program includes planned expenditures of $344 million,
$378 million, $325 million, $371 million and $354 million for 1994 through
1998.
In December 1991, the FPSC approved the utility's request to construct two
gas-fired, combined-cycle generating units in Polk County, Florida.
Construction expenditures of $287 million are planned for this new energy
complex in the 1994-1998 forecast with most of the expenditures in the later
years.
Florida Power plans to use natural gas for the first phase of the new energy
complex in Polk County. Florida Power's subsidiaries currently have 30% equity
interests in the interstate and intrastate partnerships of a gas pipeline
project. These investments totaled $4.9 million at December 31, 1993. Florida
Power has an option to reduce or eliminate its ownership positions at the end
of 1994. (See Note 11 to the Financial Statements.)
In a separate agreement, Florida Power has signed a 25-year contract for the
transportation of natural gas to Florida Power's Anclote plant near Tarpon
Springs and the Polk County site through this planned pipeline.
The Clean Air Act of 1990 requires electric utility companies to reduce sulfur
dioxide emissions in two phases. Florida Power will not be affected
significantly by Phase I, which begins in 1995, and expects to meet Phase II
requirements in the year 2000 with minimal capital expenditures.
In addition to funding its construction commitments with cash from operations,
Florida Power accesses the capital markets through the issuance of commercial
paper, medium-term notes and first mortgage bonds and receives equity from the
Company's common stock sales. Florida Power's goal is to maintain a capital
structure consistent with its double A minus credit rating.
In 1992, Florida Power established a $200-million public medium-term note
program, providing for the issuance of either fixed or floating interest rate
notes, with maturities that may range from nine months to 30 years. The
program has approximately $170 million available for future issuance.
During 1993, Florida Power repaid $355.5 million of first mortgage bonds and
$45.4 million of medium-term notes. (See Note 2 to the Financial Statements.)
Florida Power's embedded cost of long-term debt declined to 6.8% at December
31, 1993, compared with 7.5% at year-end 1992.
During 1992, Florida Power purchased and redeemed 50,000 shares of its
Cumulative Preferred Stock, pursuant to sinking fund provisions. In 1993,
Florida Power redeemed an additional 800,000 shares of its Cumulative Preferred
Stock. (See Note 3 to the Financial Statements.)
The Company contributed $60 million in 1993, $121.6 million in 1992 and $100
million in 1991 to Florida Power from the proceeds of the Company's public
stock offerings in May 1992 and May 1991 and the Progress Plus Stock Plan.
These equity funds were used to reduce outstanding commercial paper and to
further strengthen Florida Power's financial position.
Florida Power has a $400-million commercial paper program that is rated A-1+ by
Standard & Poor's and P-1 by Moody's. Florida Power's interim financing needs
are funded primarily through its commercial paper program. Florida Power has
established 364-day and five-year revolving bank credit facilities, both for
$200 million, which are used to back up commercial paper. (See Note 2 to the
Financial Statements.)
DIVERSIFIED OPERATIONS
Progress Capital Holdings, Inc. is a downstream holding company of the Company
used to finance the activities of the diversified operations, as well as
consolidate the collective financial strength of these operations. PCH has the
benefit of a support agreement with the Company, which helps to lower the cost
of capital to those individual businesses.
PCH funds diversified operations primarily through the issuance of commercial
paper and medium-term notes. PCH's commercial paper program is rated A-1 by
Standard & Poor's and P-1 by Moody's and its medium-term note program is rated
A and A2, respectively.
PCH has established a private $400 million medium-term note program providing
for the issuance of notes with maturities ranging from nine months to 30 years.
In February 1994, PCH issued $100 million of fixed-rate, medium-term notes, of
which $50 million are due in 1999 and $25 million are due in each of 2001 and
2004, with stated interest rates of 5.75%, 6.13%, and 6.48%, respectively. The
net proceeds were used for the repayment of commercial paper and for general
corporate purposes. Up to $126 million of remaining notes may be issued under
this program at either fixed or floating rates.
PCH also has established two revolving bank credit facilities: a 364-day,
$100-million facility and a five-year, $300-million facility. These facilities
are used to back up PCH's commercial paper program. By changing the term of
the commercial paper backup facility to be primarily long-term and reducing the
amount of short-term debt, PCH has strengthened its short-term liquidity. At
December 31, 1993, PCH's short-term debt (including current maturities), as a
component of total capital, was 4%, compared with 9.2% in 1992.
In 1993, total diversified capital expenditures were $21.7 million, primarily
for the non-regulated operations at Electric Fuels. Sales of leases, loans and
securities generated net proceeds of $21.5 million, $70.1 million and $127.9
million in 1993, 1992 and 1991, respectively, primarily due to the planned
liquidation of the finance unit's assets.
In 1994, diversified capital expenditures are expected to be $25 million, with
most of these planned expenditures designated for the non-regulated coal and
barge operations at Electric Fuels. These expenditures are expected to be
financed through cash generated internally and medium-term notes.
The Company has off-balance sheet risk related to debt of unconsolidated
partnerships. (See Note 11 to the Financial Statements.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants
Statements of Income for the years ended
December 31, 1993, 1992 and 1991
Balance Sheets, December 31, 1993 and 1992
Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991
Notes to Financial Statements
Quarterly Financial Data (Unaudited)
AUDITORS' REPORT
To the Board of Directors and Shareholders of Florida Progress Corporation:
We have audited the consolidated balance sheets of Florida Progress Corporation
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, cash flows and shareholders' equity for each of the
years in the three-year period ended December 31, 1993. In connection with our
audits of the financial statements, we also have audited the consolidated
financial statement schedules listed in Item 14 herein. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Progress Corporation
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed in Notes 1 and 8 to the consolidated financial statements, in
1993, Florida Progress Corporation and subsidiaries changed their methods of
accounting for income taxes and postretirement benefits other than pensions.
/s/KPMG PEAT MARWICK
- ----------------------
KPMG PEAT MARWICK
St. Petersburg, Florida
January 24, 1994
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Income
- -----------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992, and 1991 (In millions)
1993 1992 1991
REVENUES:
Electric Utility $1,957.6 $1,774.1 $1,718.8
Diversified 491.4 321.2 355.9
- -----------------------------------------------------------------------------
2,449.0 2,095.3 2,074.7
- -----------------------------------------------------------------------------
EXPENSES:
Fuel used in generation 460.8 471.9 498.5
Purchased power 209.5 140.4 104.3
Deferred fuel (11.8) (3.7) 3.8
Other operations 378.0 310.9 282.0
- -----------------------------------------------------------------------------
Operations 1,036.5 919.5 888.6
Maintenance 136.8 139.7 134.8
Depreciation 240.2 209.5 206.3
Taxes other than income taxes 152.6 138.3 129.3
- -----------------------------------------------------------------------------
1,566.1 1,407.0 1,359.0
- -----------------------------------------------------------------------------
Diversified:
Cost of sales 390.1 238.4 238.4
Other 50.2 45.1 61.9
- -----------------------------------------------------------------------------
440.3 283.5 300.3
- -----------------------------------------------------------------------------
INCOME FROM OPERATIONS 442.6 404.8 415.4
- -----------------------------------------------------------------------------
INTEREST EXPENSE & OTHER
Interest expense 141.1 134.2 146.1
Allowance for funds used
during construction (15.6) (18.7) (9.4)
Preferred dividend requirements
of Florida Power 13.4 16.7 16.8
Other expense (income), net (2.5) 8.4 (4.5)
- -----------------------------------------------------------------------------
136.4 140.6 149.0
- -----------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 306.2 264.2 266.4
Income taxes 110.4 88.5 91.9
- -----------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 195.8 175.7 174.5
DISCONTINUED OPERATIONS,
net of income taxes:
Provision for loss on disposal - - (2.4)
CUMULATIVE EFFECT OF INCOME TAX
ACCOUNTING CHANGE 0.8 - -
- -----------------------------------------------------------------------------
NET INCOME $196.6 $175.7 $172.1
=============================================================================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 88.3 85.4 80.8
- -----------------------------------------------------------------------------
EARNINGS PER AVERAGE COMMON SHARE:
Continuing operations $2.22 $2.06 $2.16
Discontinued operations - - (0.03)
Cumulative effect of accounting change 0.01 - -
- -----------------------------------------------------------------------------
$2.23 $2.06 $2.13
=============================================================================
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
- ----------------------------------------------------------------------------
DECEMBER 31, 1993 AND 1992 (In millions)
1993 1992
ASSETS
PROPERTY PLANT & EQUIPMENT:
Electric utility plant in service
and held for future use $5,320.3 $4,853.9
Less: Accumulated depreciation 1,846.2 1,660.8
Accumulated decommissioning for
nuclear plant 118.3 102.0
Accumulated dismantlement for
fossil plants 68.5 47.1
- ----------------------------------------------------------------------------
3,287.3 3,044.0
Construction work in progress 285.7 333.8
Nuclear fuel, net of amortization of
$299.9 in 1993 and $273.6 in 1992 68.4 64.2
- ----------------------------------------------------------------------------
Net electric utility plant 3,641.4 3,442.0
Other property, net of depreciation of
$141.0 in 1993 and $119.9 in 1992 391.6 393.6
- ----------------------------------------------------------------------------
4,033.0 3,835.6
- ----------------------------------------------------------------------------
CURRENT ASSETS:
Cash and equivalents 9.1 8.1
Accounts receivable, net 242.7 202.1
Current portion of leases and loans receivable 31.3 25.4
Inventories, primarily at average cost:
Fuel 79.5 107.1
Utility materials and supplies 112.2 103.4
Diversified materials and products 35.8 11.2
Underrecovery of fuel cost 7.1 4.4
Other 41.8 34.6
- ----------------------------------------------------------------------------
559.5 496.3
- ----------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Leases and loans receivable, net 485.4 529.6
Marketable securities 129.3 119.5
Joint ventures, and partnerships 88.4 91.4
Nuclear plant decommissioning fund 107.7 89.8
Deferred insurance policy acquisition costs 81.5 68.6
Other 154.0 102.2
- ----------------------------------------------------------------------------
1,046.3 1,001.1
- ----------------------------------------------------------------------------
$5,638.8 $5,333.0
============================================================================
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
Consolidated Balance Sheets
- ----------------------------------------------------------------------------
DECEMBER 31, 1993 AND 1992 (In millions)
1993 1992
CAPITAL AND LIABILITIES
COMMON STOCK EQUITY:
Common stock without par value, 250,000,000
shares authorized, 89,259,572 shares
outstanding in 1993 and 87,529,856 in 1992 $1,008.3 $949.2
Retained earnings 812.2 788.4
- ----------------------------------------------------------------------------
1,820.5 1,737.6
CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:
Without sinking funds 113.5 133.5
With sinking funds 35.0 82.5
LONG-TERM DEBT 1,866.6 1,656.4
- ----------------------------------------------------------------------------
TOTAL CAPITAL 3,835.6 3,610.0
- ----------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable 149.4 108.9
Customers' deposits 71.5 69.0
Income taxes payable 42.3 39.6
Accrued interest 45.2 42.2
Other 77.4 60.4
- ----------------------------------------------------------------------------
385.8 320.1
Notes payable 125.0 2.9
Current portion of long-term debt
and preferred stock 76.6 199.0
- ----------------------------------------------------------------------------
587.4 522.0
- ----------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 756.3 816.7
Unamortized investment tax credits 119.6 129.0
Insurance policy benefits reserves 186.5 140.3
Other 153.4 115.0
- ----------------------------------------------------------------------------
1,215.8 1,201.0
- ----------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 11)
- ----------------------------------------------------------------------------
$5,638.8 $5,333.0
============================================================================
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Cash Flows
- -----------------------------------------------------------------------------
For the Years ended December 31, 1993, 1992, and 1991 (In millions)
1993 1992 1991
OPERATING ACTIVITIES;
Income from continuing operations $195.8 $175.7 $174.5
Adjustments for noncash items:
Depreciation and amortization 299.9 268.7 266.3
Deferred income taxes and investment
tax credits, net (49.1) (17.4) (22.6)
Changes in working capital, net of effects from
acquisition or sale of businesses:
Accounts receivable (26.1) (18.6) (4.7)
Inventories 12.2 (36.8) 21.5
Overrecovery (underrecovery) of fuel costs (2.7) (43.8) 46.4
Accounts payable 17.7 14.2 17.8
Other 23.4 23.1 13.7
Other operating activities 31.8 8.6 15.6
- -----------------------------------------------------------------------------
Cash provided by continuing operations 502.9 373.7 528.5
- -----------------------------------------------------------------------------
Loss from discontinued operations - - (2.4)
Adjustments for noncash items - - 8.7
- -----------------------------------------------------------------------------
Cash provided by discontinued operations - - 6.3
- -----------------------------------------------------------------------------
502.9 373.7 534.8
- -----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Property additions (including allowance for
borrowed funds used during construction) (462.4) (519.6) (397.6)
Proceeds from sale of properties and businesses 35.8 31.5 52.3
Purchase of leases, loans and securities (128.6) (65.7) (121.1)
Proceeds from sale or collection of leases,
loans and securities 150.1 135.8 249.0
Acquisition of businesses (80.5) (23.0) (5.7)
Investments in joint ventures and partnerships (24.1) (5.3) (11.2)
Distributions from joint ventures and partnerships 26.0 5.0 15.0
Other investing activities (13.5) (15.1) (10.6)
- -----------------------------------------------------------------------------
(497.2) (456.4) (229.9)
- -----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Issuance of long-term debt 385.7 450.3 384.1
Repayment of long-term debt (473.2) (315.3) (266.2)
Increase (decrease) in commercial paper with
long-term support 154.0 (34.1) 175.1
Redemption of preferred stock (80.5) (5.0) -
Sale of common stock 59.1 137.6 141.1
Dividends paid on common stock (172.3) (163.4) (149.8)
Increase (decrease) in short-term debt 124.2 0.2 (578.1)
Other financing activities (1.7) (2.7) (1.1)
- -----------------------------------------------------------------------------
(4.7) 67.6 (294.9)
- -----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 1.0 (15.1) 10.0
Beginning cash and equivalents 8.1 23.2 13.2
- -----------------------------------------------------------------------------
ENDING CASH AND EQUIVALENTS $9.1 $8.1 $23.2
=============================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $138.1 $129.9 $147.5
Income taxes (net of refunds) $155.1 $91.5 $101.5
=============================================================================
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
Consolidated Statements of Shareholders' Equity
- -----------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992 AND 1991 (In millions, except
share amounts)
Cumulative
Preferred Stock
-----------------
Without With
Common Retained Sinking Sinking
Stock Earnings Funds Funds
Balance, December 31, 1990 $670.5 $753.8 $133.5 $100.0
Net income after dividends
on preferred stock 172.1
Common stock issued - 5,381,529 shares 141.1
Cash dividends on common stock
($1.843 per share) (149.8)
Preferred stock reclassified
to current - 25,000 shares (2.5)
- -----------------------------------------------------------------------------
Balance, December 31, 1991 811.6 776.1 133.5 97.5
Net income after dividends
on preferred stock 175.7
Common stock issued - 4,596,938 shares 137.6
Cash dividends on common stock
($1.905 per share) (163.4)
Preferred stock redeemed or reclassified
to current - 150,000 shares (15.0)
- -----------------------------------------------------------------------------
Balance, December 31, 1992 949.2 788.4 133.5 82.5
Net income after dividends
on preferred stock 196.6
Common stock issued - 1,729,716 shares 59.1
Cash dividends on common stock
($1.95 per share) (172.3)
Preferred stock redeemed - 675,000 shares (0.5) (20.0) (47.5)
- -----------------------------------------------------------------------------
Balance, December 31, 1993 $1,008.3 $812.2 $113.5 $35.0
=============================================================================
The accompanying notes are an integral part of these financial statements.
FLORIDA PROGRESS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The Company is an exempt holding company under the Public Utility
Holding Company Act of 1935. Its largest subsidiary, representing 75% of
total assets, is Florida Power, a public utility engaged in the generation,
purchase, transmission, distribution and sale of electric energy primarily
within Florida.
The consolidated financial statements combine the financial results of the
Company and its majority-owned operations. All significant intercompany
balances and intercompany transactions have been eliminated. Investments in
20% to 50% owned joint ventures are accounted for using the equity method.
UTILITY PLANT - Utility plant is stated at the original cost of construction,
which includes payroll and related costs such as taxes, pensions and other
fringe benefits, general and administrative costs and an allowance for funds
used during construction. Substantially all of the utility plant is pledged as
collateral for Florida Power's first mortgage bonds.
UTILITY REVENUES, FUEL AND PURCHASED POWER EXPENSES - Florida Power accrues
the non-fuel portion of base revenues for services rendered but unbilled.
Revenues include amounts resulting from fuel, purchased power and conservation
adjustment clauses, which are designed to permit full recovery of these costs.
The adjustment factors are based on projected costs for a six- or 12-month
period. Revenues and expenses are adjusted for differences between recoverable
fuel, purchased power and conservation costs and amounts included in current
rates. The cumulative fuel cost difference is shown on the balance sheet as
overrecovery or underrecovery of fuel costs. Any overrecovery or underrecovery
of costs, plus an interest factor, is refunded or billed to customers during
the subsequent period.
The cost of fossil fuel for electric generation is charged to expense as
consumed. The cost of nuclear fuel is amortized to fuel expense based on the
quantity of heat produced for the generation of electric energy in relation
to the quantity of heat expected to be produced over the life of the nuclear
fuel core.
EARNED INCOME ON FINANCE LEASES - The Company uses the finance method for
recognizing earned income from finance leases, which are primarily leveraged
leases having terms of five to 28 years. Accordingly, earned income, including
any residual values expected to be recognized, and the related deferred
investment tax credits are amortized as revenues over the term of the
transaction to provide an approximate level return on the positive net
investment. Residual values are determined principally on the basis of
independent appraisals of the anticipated values of the leased assets
remaining at the expiration of the lease.
INCOME TAXES - Financial Accounting Standard No. 109, "Accounting for Income
Taxes," was adopted by the Company in the first quarter of 1993. The objective
of this standard is to recognize the amount of current and deferred taxes
payable and refundable for all events that have been recognized in the
financial statements or tax returns based on enacted tax laws at the date of
the financial statements.
The Company elected to report the cumulative effect of the change in method of
accounting for income taxes in 1993. The impact of the change is an increase
in 1993 net income of $.8 million, attributable to the Company's nonregulated
activities.
Under the new standard, deferred income taxes are provided on all significant
temporary differences between the financial statements and the tax bases of
assets and liabilities using presently enacted tax rates. In adopting the
standard, the Company recorded a net decrease in deferred tax balances of $57.7
million. Substantially all of this net decrease is attributable to Florida
Power and resulted from the reversal of deferred income taxes accrued in prior
years at rates in excess of the presently enacted tax rate and the recognition
of a temporary difference related to deferred investment tax credits. The
decrease to deferred income taxes was partially offset by an increase for
temporary differences for which no deferred taxes had been recorded because of
prior regulatory practices. Because of regulatory precedent and Florida
Power's intent to recover and settle these amounts in future rates, a
corresponding regulatory asset and regulatory liability were recorded and there
was no effect on net income.
Deferred investment tax credits subject to regulatory accounting practices are
amortized to income over the lives of the related properties. Additionally,
deferred investment tax credits associated with finance lease transactions are
amortized to revenues as described earlier.
DEPRECIATION AND MAINTENANCE - The Company provides for depreciation of the
cost of properties over their estimated useful lives primarily on a
straight-line basis. Florida Power's annual provision for depreciation,
including a provision for nuclear plant decommissioning costs and fossil
plant dismantlement costs, expressed as a percentage of the average balances
of depreciable utility plant, was 4.8% for 1993, 4.6% for 1992 and 4.8% for
1991.
Florida Power was authorized by the FPSC to apply new depreciation rates, which
resulted in a $37.2-million increase in depreciation expense for 1991. This
increase included $16.6 million for fossil plant dismantlement costs. The
effect of these new rates on wholesale customers was reversed in connection
with the settlement of Florida Power's 1992 wholesale rate request, resulting
in a one-time adjustment of previously recorded depreciation. The reversal
increased net income in the fourth quarter of 1992 by $5.6 million, of which
$3.1 million was applicable to periods prior to 1992. The 1992 retail rate
case included higher fossil plant dismantlement costs, totaling about $24
million annually, beginning in November 1992.
In 1993, Florida Power filed a new depreciation study with the FPSC. The
filing includes the results of a site-specific dismantlement study of Florida
Power's fossil generating facilities. If the FPSC approves Florida Power's
recommended change in rates, annual depreciation expense will decrease by $9.7
million on a retail jurisdictional basis, beginning in January 1995.
Florida Power charges maintenance expense with the cost of repairs and minor
renewals of property. The plant accounts are charged with the cost of renewals
and replacements of property units. Accumulated depreciation is charged with
the cost, less the net salvage, of property units retired.
ALLOWANCE FOR FUNDS - The allowance for funds used during construction
represents the estimated cost of capital funds (equity and debt) applicable
to utility plant under construction. Recognition of this item as a cost of
utility plant under construction is appropriate because it constitutes an
actual cost of construction and, under established regulatory rate practices,
Florida Power is permitted to earn a return on these costs and recover them
in the rates charged for utility services while the plant is in service.
In 1993, the FPSC reduced Florida Power's allowance for funds rate to 7.8%,
effective July 1, 1993. The revision was prompted by the utility's newly
authorized cost of capital. The average rate used in computing the allowance
for funds was 7.9% for 1993 and 8% for 1992 and 1991.
INSURANCE PREMIUMS, POLICY ACQUISITION COSTS AND BENEFIT RESERVES - Life
insurance premiums are recognized as revenue over the premium-paying periods
of the policies. The Company defers recoverable costs in its insurance
operations that directly relate to the production of new business. These
costs are amortized over the expected premium-paying period. Reserves are
established out of each premium payment to provide for the present value of
future insurance policy benefits, using reasonable assumptions for future
investment yield, mortality, withdrawals and the risk of adverse deviation.
PROFIT FROM REAL ESTATE SALES - Profit from the sale of real estate is
recognized only upon the closing of a sale, the transfer of ownership rights
to the purchaser and receipt of an adequate cash down payment.
MARKETABLE SECURITIES AND FINANCIAL INSTRUMENTS - The Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Fixed-income securities are carried at amortized
cost and other equity securities are stated at the lower aggregate of cost or
market value.
The Company will be required to adopt Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," in 1994.
The standard requires the Company to address the accounting and reporting for
investments in debt and equity securities. The standard requires investments
to be classified in three categories depending on the Company's intended use.
The adoption of this standard is required to be reflected prospectively, and is
not expected to have a material impact on 1994 earnings.
(2) DEBT
The Company's long-term debt at December 31, 1993 and 1992, is scheduled to
mature as follows:
Interest
(In millions) Rate 1993 1992
- -----------------------------------------------------------------------------
Florida Power Corporation:
First mortgage bonds:
Maturing through 1998:
1993(early redemption) 8.48%(b) $ - $ 75.0
1995 4.74%(a) 34.4 34.4
1997 6.13% 16.7 16.7
1998 (early redemption) 7.00% - 20.5
Maturing 1999 through 2003 6.50%(a) 355.0 355.0
Maturing 2006 and 2008 6.88% 80.0 80.0
Maturing 2021 through 2023 7.98%(a) 400.0 300.0
Discount, net of premium, being
amortized over term of bonds (7.3) (2.2)
- -----------------------------------------------------------------------------
878.8 879.4
Pollution control financing obligations:
Maturing 2014 through 2027 6.59%(a) 240.9 240.9
Notes maturing:
1993-1994 8.41%(a) 45.9 90.0
1995-2008 7.79%(a) 78.9 49.5
Commercial paper, supported by revolver
maturing December 31, 1998 3.29%(a) 200.0 96.0
Progress Capital Holdings:
Commercial paper, supported by revolver
maturing November 30, 1998 3.33%(a) 245.0 195.0
Notes maturing:
1993-1994 9.18%(a) 20.3 60.3
1995-2001 8.56%(a) 182.0 182.0
Other debt, maturing through 2006 8.62%(a) 51.4 49.8
- -----------------------------------------------------------------------------
1,943.2 1,842.9
Less: Current portion of long-term debt 76.6 186.5
- -----------------------------------------------------------------------------
$1,866.6 $1,656.4
- -----------------------------------------------------------------------------
(a) Weighted average interest rate at December 31, 1993.
(b) Weighted average interest rate at the redemption date.
The Company's consolidated subsidiaries have lines of credit totaling $800
million, which are used to support commercial paper. The lines of credit were
not drawn on as of December 31, 1993. Interest rate options under line of
credit arrangements vary from sub-prime or money market rates to the prime
rate. Banks providing lines of credit are compensated through fees.
Commitment fees on lines of credit vary between .1 and .225 of 1%.
The lines of credit consist of four revolving bank credit facilities, two each
for Florida Power and PCH. The Florida Power facilities, $200 million each,
are for terms of 364 days and five years. The PCH facilities consist of $100
million with a 364-day term and $300 million with a five-year term. In 1993,
both 364-day facilities were renewed to November 1994. In addition, both
five-year facilities were extended to 1998. Based on the duration of the
underlying backup credit facilities, $445 million of the outstanding commercial
paper at December 31, 1993, and all outstanding commercial paper at December
31, 1992, are classified as long-term debt.
In 1993, Florida Power refunded $355.5 million of its first mortgage bonds,
with a weighted average interest rate of 8.13%, which were comprised of seven
series originally due to mature from 1998 through 2006. Florida Power refunded
substantially all of these first mortgage bonds using the proceeds from the
issuance of four series of first mortgage bonds, with a weighted average
interest rate of 6.35%, which are due to mature from 1999 through 2008.
In connection with the purchase of the Sebring Utilities Commission electric
distribution system in April 1993, Florida Power issued $30.7 million of
15-year, 6.67% amortizing medium-term notes. The net proceeds were used to
repay commercial paper that was issued initially to retire the Sebring
Utilities Commission debt.
In December 1993, Florida Power issued $100 million of First Mortgage Bonds, 7%
Series due 2023. The proceeds were used for the repayment of commercial paper
and for general corporate purposes.
The combined aggregate maturities of long-term debt for 1994 through 1998 are
$76.6 million, $46.8 million, $175.5 million, $110.3 million and $403.6
million, respectively. In addition, about 17% of Florida Power's outstanding
first mortgage bonds have an annual 1% sinking fund requirement. These
requirements, which total $1.8 million annually for 1994 and 1995, $1.3 million
annually for 1996 and 1997 and $1 million for 1998, are expected to be
satisfied with property additions.
The Company has a support agreement with PCH that requires the parent company
to maintain a minimum net worth at PCH. At December 31, 1993, PCH's net worth
was $98.1 million higher than the amount required under this agreement.
(3) PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS
A summary of outstanding Cumulative Preferred Stock of Florida Power follows:
Current Outstanding
Dividend Redemption Shares December 31,
Rate Price Authorized Outstanding 1993 1992
- ------------------------------------------------------------------------------------
(In millions)
Without sinking funds, not subject to mandatory redemption:
4.00% $104.25 40,000 39,980 $ 4.0 $ 4.0
4.40% $102.00 75,000 75,000 7.5 7.5
4.58% $101.00 100,000 99,990 10.0 10.0
4.60% $103.25 40,000 39,997 4.0 4.0
4.75% $102.00 80,000 80,000 8.0 8.0
7.40% $102.48 300,000 300,000 30.0 30.0
7.76% $102.98(a) 500,000 500,000 50.0 50.0
8.80% $101.00 200,000 - - 20.0
- ------------------------------------------------------------------------------------
$ 113.5 $133.5
- ------------------------------------------------------------------------------------
With sinking funds, subject to mandatory redemption:
7.08% $104.72(b) 500,000 350,000 $ 35.0 $ 45.0
7.84% $101.96 500,000 - - 50.0
- -------------------------------------------------------------------------------
35.0 95.0
Less: Current portion - 12.5
- -------------------------------------------------------------------------------
$ 35.0 $ 82.5
- -------------------------------------------------------------------------------
(a) $102.21 after February 15, 1994
(b) $102.36 after November 15, 1996; $100.00 after November 15, 2001
The Company has 10 million shares of authorized, but unissued, Preferred Stock
without par value issuable in series. The first series, designated Junior
Participating Preferred Stock, was created in 1991 but remains unissued. The
Junior Participating Preferred Stock is entitled to quarterly dividends equal
to the greater of $10 per share or 100 times the per share common stock
dividend and is entitled to 100 votes per share held. Florida Power also has 4
million shares of authorized Cumulative Preferred Stock, $100 par value, of
which 1.5 million shares are outstanding. In addition, Florida Power has 1
million shares of authorized, but unissued, Preference Stock, $100 par value,
and 5 million shares of authorized, but unissued, Cumulative Preferred Stock,
without par value.
In March 1993, Florida Power redeemed its $20-million 8.80% series perpetual
preferred stock, as well as the 1993 mandatory and optional sinking fund
amounts on its 7.08% and 7.84% series preferred stock, totaling $5 million and
$20 million, respectively.
In December 1993, Florida Power redeemed the 1994 mandatory and optional
sinking fund amounts on the 7.08% and 7.84% series preferred stock, totaling
$5 million and $20 million, respectively. In addition, Florida Power redeemed
all the remaining shares of its 7.84% series preferred stock, totaling $10
million, at a redemption price of $101.96.
Preferred stock redemption requirements for 1995 through 1998, after giving
effect to the above retirements, are $2.5 million annually.
In November 1991, the Company adopted a Shareholder Rights Plan. The
Shareholder Rights Agreement provides that attached to each share of common
stock is one right which, when exercisable, entitles the holder of the right
to purchase one one-hundredth of a share of Junior Participating Preferred
Stock at a purchase price of $130, subject to adjustment. The number of
rights attached to each share of common stock is also subject to adjustment,
and after giving effect to the 3-for-2 common stock split to shareholders of
record on June 30, 1992, each share of common stock now has attached to it
approximately two-thirds of one right. Upon certain occurrences, the rights
may be exercised to purchase shares of the Company's, or a surviving entity's,
common stock. Alternatively, the Board may approve a stock issuance to each
holder of rights, with no cash payment by shareholders. The rights have no
voting or dividend rights and expire December 2001, unless redeemed earlier by
the Company.
(4) FINANCIAL INSTRUMENTS
The fair value amounts of the Company's financial instruments have been
determined using available market information and valuation methodologies
deemed appropriate in the opinion of management. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions may have a
material effect on the estimated fair value amounts. The following methods
and assumptions were used by the Company in estimating its fair value
disclosures for financial instruments.
LOANS RECEIVABLE - The fair values for commercial finance loans have been
estimated using discounted cash flow analyses, management's estimate of the
interest rate that would apply in today's market on an individual loan basis,
as well as repayment assumptions that may differ from the current loan document
in certain cases. Estimating fair values for loans associated with the airline
industry is difficult due to a limited number of similar transactions in a
troubled industry. Management has therefore estimated a range of fair values
for these loans.
The fair values for real estate loans and insurance policy loans are estimated
using discounted cash flow analyses and using interest rates currently being
offered for similar loans. Loans with similar characteristics are aggregated
for purposes of the calculation.
Other loans, primarily notes from the sales of companies, are valued at the
carrying amounts for variable rate loans and using discounted cash flow
analyses at current market rates for fixed-rate instruments.
MARKETABLE SECURITIES - Fair values for marketable debt and equity securities
are based on quoted market prices.
NUCLEAR PLANT DECOMMISSIONING FUND - The assets in this fund consist of cash
and equivalents, which are valued at their carrying amount, and equity
securities and governmental notes and bonds, which are valued at quoted
market prices.
PREFERRED STOCK OF FLORIDA POWER WITH SINKING FUNDS - The fair values of
Florida Power's preferred stock subject to mandatory redemption are estimated
using discounted cash flow analyses, based on current market rates.
DEBT - The carrying amounts of debt with short-term maturities (primarily
commercial paper) approximate their fair value. The fair values for debt with
fixed interest rates are estimated using discounted cash flow analyses, based
on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
The fair value analysis ignores redemption prices and issuance costs (including
underwriting commissions) that would be required to refund existing fixed
interest rate debt. In addition, the analysis assumes that all of the debt is
currently callable at fair value.
The Company had the following financial instruments for which the estimated
fair values differ from the carrying values at December 31, 1993 and 1992:
1993 1992
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
- -------------------------------------------------------------------------------------
ASSETS:
Loans receivable:
Commercial finance business:
Real estate $148.2 $147.2 $139.6 $132.0
Airline 62.7 27 to 48 67.9 37 to 54
Life insurance business:
Loans secured by
real estate 9.1 10.5 11.2 11.7
Policy loans 10.0 8.9 9.9 8.1
- --------------------------------------------------------------------------------------
230.0 193.6 228.6 188.8
to 214.6 to 205.8
Allowance for loan losses (23.8) - (19.2) -
- ---------------------------------------------------------------------------------------
$193.6 $188.8
Total loans receivable $206.2 to 214.6 $209.4 to 205.8
Marketable securities $129.3 $133.9 $119.5 $122.6
Nuclear plant decommissioning fund 107.7 112.9 92.7 96.4
- ---------------------------------------------------------------------------------------
Capital and Liabilities:
Preferred stock with sinking funds $ 35.0 $ 37.1 $ 95.0 $ 99.7
Long-term debt:
Florida Power Corporation 1,444.5 1,525.4 1,355.8 1,376.1
Progress Capital Holdings 498.7 517.2 487.1 503.4
- ---------------------------------------------------------------------------------------
In accordance with its liquidation plan, Progress Credit sold $118.4 million of
marketable securities during 1991 for a pretax gain of $14.5 million.
(5) LEASES AND LOANS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
At December 31, 1993 and 1992, investments in leases and loans receivable
were as follows:
(In millions) 1993 1992
- -----------------------------------------------------------------------
Finance leases:
Rentals receivable $244.3 $283.3
Unguaranteed residual values 171.3 183.3
Unearned income (82.1) (91.5)
Deferred investment tax credits (22.0) (25.4)
- -----------------------------------------------------------------------
Total finance leases 311.5 349.7
- -----------------------------------------------------------------------
Loans receivable:
Commercial finance business 210.9 207.5
Life insurance business 19.1 21.1
- -----------------------------------------------------------------------
Total loans receivable 230.0 228.6
- -----------------------------------------------------------------------
Allowance for losses (24.8) (23.3)
- -----------------------------------------------------------------------
516.7 555.0
Less: Current portion 31.3 25.4
- -----------------------------------------------------------------------
$485.4 $529.6
- -----------------------------------------------------------------------
Rentals receivable from finance leases represent unpaid rentals less principal
and interest on non-recourse third party debt. Progress Credit's share of
rentals receivable is subordinate to the share of the debt holders who also
have a security interest in the leased property.
Finance leases primarily consist of leveraged investments in aircraft as
described below. The majority of the aircraft leases have terms of 15 to 20
years, with a maximum of 28 years. Net contractual maturities of rentals
receivable under these contracts are $13.8 million, $14.4 million, $13.5
million, $11.6 million and $11.3 million for 1994 through 1998, respectively,
and $179.7 million in total thereafter. Deferred taxes applicable to
leveraged leases were $242.1 million and $264.2 million at December 31, 1993
and 1992, respectively.
Net income recognized from leveraged leases (after payments to non-recourse
lenders, but before other borrowing costs) was as follows:
(In millions) 1993 1992 1991
- -----------------------------------------------------------------------------
Lease income (loss) $2.7 $(3.6) $ (.7)
Income tax effect (1.3) (3.5) .8
Effect of change in tax rate on
deferred assets/liabilities (2.9) - -
Amortization of investment tax
credits 1.4 5.9 2.0
Gain on sale of equipment
(net of tax) 3.8 - -
- -----------------------------------------------------------------------------
$3.7 $(1.2) $ 2.1
- -----------------------------------------------------------------------------
At December 31, 1993 and 1992, Progress Credit's portfolio included investments
in the airline and commercial real estate industries as follows:
(In millions) 1993 1992
- ---------------------------------------------------------------------
Airline industry:
Finance leases $263.9 $269.3
Loans receivable 62.7 67.9
Joint ventures 41.1 43.2
Equipment operating leases 8.4 9.5
- ---------------------------------------------------------------------
$376.1 $389.9
- ---------------------------------------------------------------------
Commercial real estate industry:
Finance leases $ 15.9 $ 15.9
Loans receivable 148.2 139.6
- ---------------------------------------------------------------------
$164.1 $155.5
- ---------------------------------------------------------------------
Progress Credit's commercial finance loans to entities associated with the
airline industry are secured by security interests in aircraft, aircraft
engines or spare parts.
These loans are further collateralized, where applicable, by an assignment to
Progress Credit of the borrowers' lease agreements with third party users of
the secured equipment and, in some cases, third party guaranties.
Progress Credit's loans receivable from borrowers engaged in commercial real
estate activities are secured by first mortgage liens on the related commercial
real estate, assignment of leases and selected third party guaranties.
No new transactions are being initiated unless they facilitate the Company's
orderly withdrawal strategy.
Due to conditions in the airline industry and a weak real estate market,
Progress Credit has experienced delinquencies in ongoing lease and loan
payments as well as loan principal maturities. Progress Credit has negotiated
the restructuring of certain transactions. Although most of the outstanding
real estate and aircraft loans mature during the next five years, Progress
Credit expects many of the borrowers will not be able to retire the loans at
maturity. Progress Credit will pursue its options for any non-performing
assets, including restructuring, remedial actions and remarketing.
Progress Credit's portfolio at December 31, 1993, included $81.9 million of
aircraft leases, which were restructured in 1991 through 1993. Progress
Credit's portfolio also includes $51.6 million of restructured aircraft loans
to Pegasus Capital Corporation, a company in which Progress Credit has a 21%
minority interest. In 1992, Progress Credit received $10 million in partial
principal payments on a $35-million restructured real estate loan and
anticipates full repayment upon the expected sale of the collateral property.
All restructured assets were performing in accordance with their new terms
at year-end and the restructurings did not materially reduce Progress Credit's
future annual revenue.
During 1993, 1992 and 1991, Progress Credit provided $5.9 million, $6.4 million
and $17.9 million, respectively, for possible loan and lease losses and had
write-offs totaling $4.2 million, $3.7 million and $7.5 million, respectively.
The Company believes Progress Credit's existing reserve of $24.5 million is
adequate to cover its planned orderly liquidation, assuming no further
deterioration in the airline and real estate industries.
Leases and loans generally are placed on non-accrual status when management
believes the collectibility of interest or principal is unlikely. At December
31, 1992, there was a $15.1-million loan on non-accrual status. There were no
assets on non-accrual status as of December 31, 1993.
The Company plans to adopt the provisions of Financial Accounting Standard No.
114, "Accounting by Creditors For Impairment of a Loan," effective in 1995.
The standard requires that impaired loans be measured based on the loans'
present value of expected future cash flows, or the loans' observable market
price or the fair value of the collateral. The standard will be adopted
prospectively. The Company does not expect the adoption of this standard to
have a material impact on earnings.
(6) BUSINESS SEGMENTS
The Company defines its principal business segments as utility and diversified
operations. The utility is engaged in the generation, purchase, transmission,
distribution and sale of electric energy. Electric Fuels operations include
coal mining, procurement and transportation services to Florida Power and other
external customers. Other continuing diversified operations include activities
in leveraged leasing, commercial finance, life insurance, real estate and
technology development.
In June 1993, Electric Fuels acquired the assets of a rail services company
that contributed approximately $80 million to 1993 revenues.
The Company's business segment information for continuing operations for 1993,
1992 and 1991 is summarized below. No single customer accounted for more than
10% of unaffiliated revenues. Intra-segment sales have been eliminated and the
Company's equity in the earnings of partnerships and joint ventures has been
included in revenues.
(In millions) 1993 1992 1991
- -------------------------------------------------------------------------
Revenues:
Utility $1,957.6 $1,774.1 $1,718.8
Diversified:
Electric Fuels Corporation:
Coal sales to electric utility 244.9 264.6 262.2
Sales to external customers 335.8 200.7 197.1
Other diversified 157.7 122.8 161.1
- -------------------------------------------------------------------------
2,696.0 2,362.2 2,339.2
- -------------------------------------------------------------------------
Eliminations (247.0) (266.9) (264.5)
- -------------------------------------------------------------------------
Revenues from external customers $2,449.0 $2,095.3 $2,074.7
- -------------------------------------------------------------------------
Income from operations:
Utility $ 391.5 $ 367.1 $ 359.8
Diversified:
Electric Fuels Corporation 30.3 21.1 17.4
Other diversified 20.8 16.6 38.2
- -------------------------------------------------------------------------
442.6 404.8 415.4
Interest and other expense 136.4 140.6 149.0
- -------------------------------------------------------------------------
Income from continuing operations
before income taxes $ 306.2 $ 264.2 $ 266.4
- -------------------------------------------------------------------------
Identifiable assets:
Utility $4,254.2 $3,980.3 $3,642.9
Diversified:
Electric Fuels Corporation 397.2 328.7 280.4
Other diversified 987.4 1,024.0 1,101.6
- -------------------------------------------------------------------------
$5,638.8 $5,333.0 $5,024.9
- -------------------------------------------------------------------------
Depreciation and amortization:
Utility $ 276.5 $ 243.4 $ 241.9
Diversified:
Electric Fuels Corporation 16.4 18.9 17.8
Other diversified 7.0 6.4 6.6
- -------------------------------------------------------------------------
$ 299.9 $ 268.7 $ 266.3
- -------------------------------------------------------------------------
Capital additions:
Utility $ 440.7 $ 493.5 $ 359.7
Diversified:
Electric Fuels Corporation 19.5 23.1 28.9
Other diversified 2.2 3.0 9.0
- -------------------------------------------------------------------------
$ 462.4 $ 519.6 $ 397.6
- -------------------------------------------------------------------------
(7) INCOME TAXES
(In millions) 1993 1992 1991
- -------------------------------------------------------------------------
Components of income tax expense:
Payable currently:
Federal $140.7 $ 98.1 $ 99.5
State 18.8 7.8 14.3
- -------------------------------------------------------------------------
159.5 105.9 113.8
- -------------------------------------------------------------------------
Deferred, net:
Federal (39.2) (9.3) (12.9)
State (5.1) 1.0 .4
Effect of change in tax rate on
deferred assets/liabilities 4.7 - -
- -------------------------------------------------------------------------
(39.6) (8.3) (12.5)
- -------------------------------------------------------------------------
Amortization of investment
tax credits, net (9.5) (9.1) (9.8)
- -------------------------------------------------------------------------
110.4 88.5 91.5
- -------------------------------------------------------------------------
Tax benefits related to
discontinued operations - - .4
- -------------------------------------------------------------------------
$110.4 $ 88.5 $ 91.9
- -------------------------------------------------------------------------
The principal components of deferred income tax expense for 1992 and 1991 were
the difference between the financial and tax accounting for leases, the
underrecovery or overrecovery of fuel costs and the difference between
accelerated and straight-line depreciation.
The primary differences between the statutory rates and the effective
income tax rates are detailed below:
1993 1992 1991
- --------------------------------------------------------------------------
Federal statutory income tax rate 35.0% 34.0% 34.0%
State income tax, net of federal
income tax benefits 2.8 3.0 3.5
Amortization of investment tax credits (3.0) (3.2) (3.5)
Effect of change in tax rate on deferred
assets/liabilities 1.5 - -
Other (1.8) (2.3) (1.1)
- --------------------------------------------------------------------------
Effective income tax rates 34.5% 31.5% 32.9%
- --------------------------------------------------------------------------
The Omnibus Budget Reconciliation Act of 1993 included various rule changes and
increased the maximum corporate income tax rate from 34% to 35%. The impact of
the new tax law increased the Company's 1993 income tax expense by $7.9
million. This included $3.2 million attributable to the new tax rate on
current income and $4.7 million resulting from an adjustment of non-regulated
deferred tax balances. The tax rate change increased Florida Power's deferred
tax balances by $18.3 million with a corresponding net increase to the
regulatory asset.
The following summarizes the components of deferred tax liabilities and assets
at December 31, 1993:
(In millions) 1993
- -------------------------------------------------------------------------
Deferred tax liabilities:
Difference in tax basis of property, plant and equipment $532.4
Difference in accounting for leveraged leases 242.8
Other 90.1
- -------------------------------------------------------------------------
Total deferred tax liabilities $865.3
- -------------------------------------------------------------------------
Deferred tax assets:
Accrued book expenses $ 89.1
Unbilled revenues 17.3
Other 31.8
- -------------------------------------------------------------------------
Total deferred tax assets $138.2
- -------------------------------------------------------------------------
At December 31, 1993, the Company had net non-current deferred tax liabilities
of $756.3 million and net current deferred tax assets of $29.2 million. The
Company expects the results of future operations will generate sufficient
taxable income to allow the utilization of deferred tax assets.
(8) RETIREMENT BENEFIT PLANS
PENSION BENEFITS - The Company and certain of its subsidiaries have a
non-contributory defined benefit pension plan covering substantially all
employees. The benefits are based on length of service, compensation during
the highest consecutive 48 of the last 120 months of employment and social
security benefits. Prior to January 1, 1992, the compensation portion of the
benefit formula was based on the highest consecutive 60 of the last 120 months
of employment. The participating companies make annual contributions to the
plan based on an actuarial determination and in consideration of tax
regulations and funding requirements under federal law.
Based on actuarial calculations and the funded status of the pension plan, the
Company was not required to contribute to the plan for 1993, 1992 or 1991.
Shown below are the components of the net pension cost calculations for those
years:
(In millions) 1993 1992 1991
- --------------------------------------------------------------------
Service cost $16.3 $18.1 $ 13.9
Interest cost 27.5 25.4 22.4
Actual earnings on plan assets (60.7) (37.3) (91.4)
Net amortization and deferral 17.9 (3.1) 58.0
- --------------------------------------------------------------------
Net pension cost 1.0 3.1 2.9
Regulatory adjustment - (.9) (2.7)
- --------------------------------------------------------------------
Net pension cost recognized $ 1.0 $ 2.2 $ .2
- --------------------------------------------------------------------
The following summarizes the funded status of the pension plan at December
31, 1993 and 1992:
(In millions) 1993 1992
- --------------------------------------------------------------------
Accumulated benefit obligation:
Vested $276.0 $229.2
Non-vested 37.9 33.9
- --------------------------------------------------------------------
313.9 263.1
Effect of projected compensation increases 91.8 96.3
- --------------------------------------------------------------------
Projected benefit obligation 405.7 359.4
Plan assets at market value, primarily listed
stocks and bonds 505.0 460.0
- --------------------------------------------------------------------
Plan assets in excess of projected benefit
obligation $ 99.3 $100.6
- --------------------------------------------------------------------
Consisting of the following components:
Unrecognized transition asset $ 45.3 $ 50.3
Unrecognized prior service cost (10.3) (11.2)
Effect of changes in assumptions and
difference between actual and
estimated experience 64.3 61.5
- --------------------------------------------------------------------
$ 99.3 $100.6
- --------------------------------------------------------------------
The following weighted average actuarial assumptions at January 1 were used in
the calculation of pension costs for the following years:
1993 1992 1991
- -----------------------------------------------------------------------------
Discount rate 7.75% 7.25% 8.50%
Expected long-term rate of return 9.00% 9.00% 9.00%
Rate of compensation increase 5.50% 6.00% 6.00%
- -----------------------------------------------------------------------------
The Company used a discount rate of 7.25% and a rate of compensation increase
of 5% to calculate the pension plan's 1993 year-end funded status. The change
in the discount rate from 7.75% at December 31, 1992 to 7.25% at December 31,
1993, increased the projected benefit obligation by $25.8 million and is
expected to increase annual pension costs by $.8 million, beginning in 1994.
OTHER POSTRETIREMENT BENEFITS - The Company and some of its subsidiaries
provide certain health care and life insurance benefits for retired employees.
Employees become eligible for these benefits when they reach normal retirement
age while working for the Company. Prior to 1993, the Company's policy had
been to accrue benefits currently payable along with amortization of past
service costs of current retirees. The Company had accrued $23.9 million at
December 31, 1992, using this method. The Company implemented Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," effective January 1, 1993. This standard requires that
an employer's obligation for postretirement benefits be fully accrued by the
date employees attain full eligibility to receive such benefits. The Company's
costs for 1993 increased from $5 million to $23.9 million under the new
standard. A substantial portion of the additional cost was recovered from
Florida Power customers through new retail base rates as discussed in Note 10.
The net postretirement benefit cost of the plan for 1993 was:
(In millions) 1993
- -----------------------------------------------------------------------
Service cost $ 5.6
Interest cost 11.8
Amortization of unrecognized transition obligation 6.5
- -----------------------------------------------------------------------
$23.9
- -----------------------------------------------------------------------
The following summarizes the plan's status, reconciled with amounts recognized
in the Company's balance sheet at December 31:
(In millions) 1993 1992
- ----------------------------------------------------------------------
Accumulated postretirement benefit
obligation:
Retirees $ 94.3 $ 73.8
Fully eligible active plan
participants 2.0 3.6
Other active plan participants 76.2 74.7
- ----------------------------------------------------------------------
172.5 152.1
- ----------------------------------------------------------------------
Unrecognized transition obligation (120.7) (128.2)
Unrealized net losses (4.4) -
- ----------------------------------------------------------------------
Accrued postretirement benefit
cost $ 47.4 $ 23.9
- ----------------------------------------------------------------------
The following weighted average actuarial assumptions were used in the
calculation of the year-end status of other postretirement benefits:
1993 1992
- ----------------------------------------------------------------------
Discount rate 7.5% 8.0%
Rate of compensation increase 5.0% 5.5%
Health care cost trend rates:
Pre-Medicare 13.00-5.25% 14.50-6.00%
Post-Medicare 9.75-5.00% 10.50-5.00%
- ----------------------------------------------------------------------
The transition obligation is being accrued through 2012. A one-percentage
point increase in the assumed health care cost trend rate for each future year
would have increased 1993 cost by 18.6% ($3.2 million) and the accumulated
postretirement benefit obligation as of December 31, 1993 by 15.1% ($25.3
million). The change in the discount rate from 8% at December 31, 1992
to 7.5% at December 31, 1993, increased the projected benefit obligation by
$11.4 million and is expected to increase annual postretirement benefit costs
by $.8 million, beginning in 1994.
Due to different retail and wholesale regulatory requirements, Florida Power
plans to make quarterly contributions to an irrevocable external trust fund
recently established for wholesale ratemaking, while continuing to accrue
postretirement benefit costs to an unfunded reserve for retail ratemaking.
EARLY RETIREMENT OPTION - In late 1993, the Company offered an early retirement
option to certain employees age 55 or older with at least 20 years of service
with the Company. The effective retirement date for those employees accepting
the option is February 1, 1994. The Company recognized expenses related to
this offer of about $6 million in 1993, which are not included in the
postretirement benefit cost table. The Company estimates the related expenses
in 1994 will be about $13 million.
NEW ACCOUNTING STANDARD - The Company will be required to adopt Financial
Accounting Standard No. 112, "Employers' Accounting for Postemployment
Benefits," in 1994. The adoption of this standard is not expected to have a
material impact on earnings in 1994.
(9) NUCLEAR OPERATIONS
JOINTLY OWNED PLANT - The following information relates to Florida Power's
90.4% proportionate share of the Crystal River Nuclear Plant at December 31,
1993:
(In millions) 1993
- -------------------------------------------------------------
Utility plant in service $622.7
Construction work in progress 22.8
Unamortized nuclear fuel 68.4
Accumulated depreciation 266.3
Accumulated decommissioning 118.3
- -------------------------------------------------------------
Net capital additions for Florida Power were $20.1 million in 1993, and
depreciation expense, exclusive of nuclear decommissioning, was $26.2 million.
Each co-owner provides for its own financing. Florida Power's share of the
asset balances shown previously and operating costs are included in the
appropriate consolidated financial statements. Amounts exclude any allocation
of costs related to common facilities.
DECOMMISSIONING COSTS - Florida Power's nuclear plant depreciation expenses
include a provision for future decommissioning costs that are recoverable
through rates charged to customers. Florida Power is placing amounts collected
in an externally managed trust fund. The recovery from customers, plus income
earned on the trust fund, is intended to be sufficient to cover Florida Power's
share of the future dismantlement, removal and land restoration costs. Florida
Power has a license to operate the nuclear unit through December 3, 2016, and
contemplates decommissioning beginning at that time.
In the current site-specific study approved by regulatory authorities, total
future decommissioning costs are estimated to be approximately $1.2 billion,
which corresponds to $221 million in 1993 dollars. Decommissioning expense, as
authorized by the FPSC and the FERC, was $11.9 million for 1993 and 1992 and
$11.8 million for 1991.
Florida Power prepared a 1991 site-specific study at the request of the FPSC
that estimated decommissioning costs. Those costs, expressed in 1993 dollars,
are $307.6 million. The FPSC postponed consideration of that study until 1994.
Florida Power is required to file a new site-specific study with the FPSC in
1994, which will incorporate current cost factors, technology and radiological
criteria. The results of that study cannot be reasonably estimated at this
time. However, based on prior regulatory treatment, Florida Power expects to
recover any increase in nuclear decommissioning costs through future rates.
The NRC issued updated waste burial cost factors in 1993, which are used in the
generic NRC formula for estimating decommissioning costs. Florida Power's 1991
site-specific study contains estimates for decommissioning costs that exceed
current NRC minimum requirements.
The National Energy Policy Act of 1992 established a fund to pay for the
decontamination and decommissioning of nuclear enrichment facilities operated
by the DOE. The fund is expected to consist of payments from affected domestic
utilities and the federal government. Florida Power's current annual special
assessment, before adjustment for inflation, is $1.4 million. Florida Power
recorded a total estimated liability of $19.5 million at December 31, 1993,
with a corresponding regulatory asset. This special assessment is being
recovered from utility customers through the fuel adjustment clause.
The Financial Accounting Standards Board has issued Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts." Based in part on the
issuance of this interpretation, the SEC staff announced it intends to require
that estimated nuclear decommissioning costs be shown as a liability in the
financial statements, beginning in 1994. Florida Power currently has recorded
the accumulated provisions for nuclear decommissioning costs as a contra asset
on the balance sheet. If the SEC staff maintains its position, a liability and
a corresponding asset of $307.6 million each would be recorded in 1994 based on
available cost estimates.
FUEL DISPOSAL COSTS - Florida Power has entered into a contract with the DOE
for the transportation and disposal of spent nuclear fuel. Disposal costs for
nuclear fuel consumed are being collected from customers through the fuel
adjustment clause at a rate of $.001 per net nuclear kilowatt-hour sold and
are paid to the DOE quarterly. Florida Power currently is storing spent
nuclear fuel on site and has sufficient storage capacity in place or under
construction for fuel burned through the year 2009.
PLANT MAINTENANCE AND REFUELING OUTAGES - Florida Power accrues a reserve for
maintenance and refueling expenses anticipated to be incurred during scheduled
nuclear plant outages. A planned 53-day mid-cycle maintenance outage in 1993,
cost Florida Power $9.7 million. A 77-day refueling outage in 1992, resulted
in a cost of $30.2 million to Florida Power.
The next planned refueling outage, scheduled for approximately nine weeks
beginning in April 1994, presently is estimated to cost $21.4 million.
INSURANCE - The Price-Anderson Act currently limits the liability of an owner
of a nuclear power plant for a single nuclear incident to $9.4 billion.
Florida Power has purchased the maximum available commercial nuclear liability
insurance of $200 million with the balance provided by indemnity agreements
prescribed by the NRC. In the event of a nuclear incident at any U.S. nuclear
power plant, Florida Power could be assessed up to $79.3 million per incident,
with a maximum assessment of $10 million per year. Florida Power has never
been assessed for a nuclear incident under these indemnity agreements. In
addition to this liability insurance, Florida Power carries extra expense
insurance with Nuclear Electric Insurance, Ltd. ("NEIL") to cover the cost of
replacement power during any prolonged outage of the nuclear unit. Under this
policy, Florida Power is subject to a retroactive premium assessment of up to
$2.7 million in any year in which policy losses exceed accumulated premiums and
investment income.
(10) RATES AND REGULATION
RETAIL RATES - In January 1992, Florida Power filed a retail base rate increase
request of $145.9 million using a regulatory return on equity of 13.6%. The
request was based upon a dual-year test period that included 1992 and 1993.
In September 1992, the FPSC granted Florida Power an annual revenue increase of
$85.8 million.
The new rates provide Florida Power the opportunity to earn a regulatory return
on equity of 12%, with a new allowed range between 11% and 13%. The FPSC
granted increases in retail base rates of approximately $58 million in November
1992, $9.7 million in April 1993 and $18.1 million in November 1993. The FPSC
also upheld a previously awarded interim increase of $31.2 million.
The interim rates and new base rates increased 1992 earnings by $15.4 million.
The new base rates increased 1993 earnings by $10.4 million, after recording
new expenses authorized in the rate case.
WHOLESALE RATES - In December 1993, Florida Power executed a settlement
agreement with its wholesale customers in its 1993 base rate proceeding. The
agreement provides for an annual revenue increase of $5.7 million, effective
February 1993. The settlement is expected to be approved by the FERC in the
first quarter of 1994.
In December 1992, Florida Power reached a settlement agreement with its
wholesale customers, which resulted in no significant change in revenues.
The 1992 settlement was approved by the FERC and provided for a retroactive
change in Florida Power's depreciation rates to December 1990. (See Note 1.)
Florida Power expects to file a 1994 wholesale base rate proceeding in the
first quarter of 1994. Florida Power will be requesting an increase in
revenues of approximately $10 million to recover costs for new generating
facilities and higher purchased power costs. If approved by the FERC, the
rate increase will go into effect in March 1994.
(11) COMMITMENTS AND CONTINGENCIES
UTILITY CONSTRUCTION PROGRAM - Substantial commitments have been made in
connection with Florida Power's construction program, which are presently
estimated to result in construction expenditures in 1994 of $344 million for
electric plant and nuclear fuel.
SUNSHINE PIPELINE PROJECT - Florida Power currently has a 30% equity ownership
interest in both an intrastate and an interstate gas pipeline partnership, with
an option to reduce or eliminate its interest in December 1994. The cost of
the pipeline project is estimated to be approximately $600 million. In 1994,
Florida Power expects to invest $6 million in these partnerships.
FUEL AND PURCHASED POWER COMMITMENTS - Florida Power has entered into various
long-term commitments to provide the fossil and nuclear fuel requirements of
its generating plants and to reserve pipeline capacity for natural gas. In
most cases, such contracts contain provisions for price escalation, minimum
purchase levels and other financial commitments. Estimated annual payments,
based on current market prices, for Florida Power's firm commitments for fuel
purchases, excluding coal and purchased power, are $3.7 million, $12.9 million,
$35.2 million, $36.6 million and $36.1 million for 1994 through 1998,
respectively, and $1,150.3 million in total thereafter. Additional commitments
will be required in the future to supply Florida Power's fuel needs.
Florida Power has entered into long-term contracts with The Southern Company
for up to 400 megawatts of purchased power annually through 2010, representing
4.7% of Florida Power's total current system capacity. Florida Power has an
option to lower these purchases to 200 megawatts annually, beginning in 2000
with a three-year notice. The power will be supplied by coal-fired generating
units that have a combined capacity of approximately 3,500 megawatts. The
entire commitment is guaranteed by The Southern Company's total system, which
is approximately 30,000 megawatts. The long-term contracts obligate Florida
Power to pay certain minimum annual amounts representing capacity payments.
The estimated annual capacity payments under the contracts will be $49 million
in 1994 and then approximately $60 million annually until the contract expires
in 2010. The capacity cost of power purchased under these contracts was $38
million in 1993 and $22 million in 1992 and 1991.
As of December 31, 1993, Florida Power had entered into long-term contracts
with non-utility generators for 1,117 megawatts of capacity. These contracts
have terms ranging from nine to 35 years. In most cases, these contracts
account for 100% of the generating capacity of each of the facilities. Of the
1,117 megawatts under contract, 473 megawatts are currently available and the
remaining future capacity is a part of Florida Power's plans for meeting future
electricity demand growth. All commitments have been approved by the FPSC.
The following table shows the annual capacity payments, and the present value
(at 10%) of these payments at December 31, 1993, which Florida Power expects to
incur if all units are brought into service as contracted and meet contracted
performance requirements:
Capacity Present
(In millions) Payments Value
- ------------------------------------------------------------------
1994 $ 84 $ 77
1995 181 150
1996 218 163
1997 235 160
1998 247 154
1999-2025 10,497 2,022
- -----------------------------------------------------------------
Total $ 11,462 $ 2,726
- -----------------------------------------------------------------
The capacity cost of power purchased from non-utility generators was $33
million in 1993, $10 million in 1992 and $2 million in 1991.
Florida Power does not plan to increase the level of purchased power it
currently has under contract. Florida Power believes that its current
contracts allow for system reliability and help reduce construction
expenditures. These contracts could weaken Florida Power's overall credit
ratings.
The FPSC allows these capacity payments to be recovered through a capacity
cost recovery clause, which is similar to, and works in conjunction with the
fuel adjustment clause.
COAL-RELATED CONTRACTS - In connection with the supply of coal to Florida Power
and other customers, Electric Fuels has entered into several contracts with
outside parties for the purchase of coal and also several operating leases
related to coal procurement, processing and transportation. Minimum coal
purchases are approximately 4 million tons per year. The annual obligations
under these contracts and leases are $192.4 million, $122.9 million, $76.9
million, $76.3 million and $75.1 million for the years 1994 through 1998,
respectively, and $264.2 million in total thereafter. The total cost incurred
under these commitments was $213.2 million in 1993, $249.3 million in 1992 and
$250.2 million in 1991.
OFF-BALANCE SHEET RISK - Several of the Company's subsidiaries are general
partners in unconsolidated partnerships and joint ventures. The Company or
subsidiaries have agreed to support certain loan agreements of the partnerships
and joint ventures. The totals of the debt support agreements were $33.9
million and $68.7 million at December 31, 1993 and 1992, respectively, of which
$26.4 million and $45.8 million were guaranties, $7.5 million and $11.7 million
were stand-by letters of credit, respectively, and $11.2 million in 1992 were
cash deficiency agreements. If the other partners fail to perform their
obligations and if the partnership assets, consisting primarily of land and
buildings, were worthless, those subsidiaries could be liable for an additional
$52.8 million as of December 31, 1993, which represents partnership liabilities
exceeding amounts as mentioned earlier. The Company considers these credit
risks to be minimal, based upon the asset values supporting the partnership
liabilities.
INSURANCE COVERAGE - Florida Power is subject to retroactive premium
assessments in connection with its nuclear liability insurance. In addition,
Florida Power currently carries approximately $2.1 billion in nuclear property
insurance provided through several different policies. One of these policies,
which also is underwritten by NEIL, provides $1.4 billion of excess coverage.
Under this policy, Florida Power is subject to a retroactive premium assessment
of up to $6.5 million for the first loss in any policy year in which losses
exceed funds available to NEIL. In the event of multiple losses in any policy
year, Florida Power's aggregate retroactive premium could total up to $13.9
million.
Effective November 1993, the FPSC authorized Florida Power to self-insure its
transmission and distribution lines against loss due to storm damage and other
natural disasters. Florida Power is accruing $3 million annually to the storm
damage reserve and may defer any losses in excess of the reserve.
CONTAMINATED SITE CLEANUP - Florida Power and other subsidiaries of the Company
have received notices from the EPA that each is or could be a "potentially
responsible party" under the CERCLA and the Superfund Amendment and
Reauthorization Act and may be liable, together with others, for the costs of
cleaning up several contaminated sites identified by the EPA. In addition,
Florida Power has been named as a defendant in one suit brought against four
prior owners of a coal gasification plant site, seeking contributions pursuant
to CERCLA and Florida law toward the cost of cleaning up that site and nearby
property that may have become contaminated. The best estimates currently
available to the Company indicate that its proportionate share of liability for
cleaning up the sites range from $.7 million to $1.5 million, and it has
reserved $1 million against these potential costs. Liability for such cleanup
costs is technically joint and several. However, the Company presently has no
reason to believe that it will ultimately have to pay a significantly
disproportionate share of the cleanup costs of any of the sites. Although it
does not currently contemplate a need to do so, Florida Power believes that it
would have a sound basis for seeking recovery through the ratemaking process in
the event it ultimately has to pay a significantly disproportionate share of
the costs of cleaning up any contaminated site. It is recognized, however,
that no such recovery would be assured.
UNION CARBIDE LAWSUIT - Florida Power and FP&L are co-defendants in an
antitrust action brought by Union Carbide, a customer of FP&L, seeking
injunctive relief and damages.
The suit challenges a long-standing territorial agreement between the two
unaffiliated, neighboring utilities, notwithstanding the defendants' contention
that the agreement was clearly authorized by state law and approved by the
FPSC. Florida Power believes that the state action exemption from the
antitrust laws is applicable to the agreement and its consequent refusal to
provide electricity to Union Carbide. Management believes it has a strong
defense and intends to vigorously defend against this action.
QUARTERLY FINANCIAL DATA (Unaudited)
Three Months Ended
(In millions, except per share amounts) March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------------------------------
1993
Revenues $493.3 $553.3 $768.9 $633.5
Income from operations 84.8 99.5 172.2 86.1
Net income 34.4 43.0 82.0 37.2
Earnings per average common share .39 .49 .93 .42
Dividends per common share .485 .485 .485 .495
Common stock price per share:
High 35 3/4 36 36 3/8 35 3/4
Low 31 1/4 32 3/8 34 1/4 32 1/4
- --------------------------------------------------------------------------------------------------------
1992
Revenues $463.5 $511.7 $626.6 $493.5
Income from operations 79.5 84.8 148.9 91.6
Net income 30.1 34.9 74.6 36.1
Earnings per average common share .36 .41 .86 .41
Dividends per common share .473 .473 .473 .485
Common stock price per share:
High 31 3/4 30 7/8 33 1/4 33 1/8
Low 27 7/8 28 1/4 30 1/4 31 1/4
- ---------------------------------------------------------------------------------------------------------
The business of the Company's largest subsidiary, Florida Power, is seasonal
in nature and it is management's opinion that comparisons of earnings for the
quarters do not give a true indication of overall trends and changes in the
Company's operations. As explained in Note 1 to the Financial Statements,
Florida Power recorded an adjustment to depreciation expense in the fourth
quarter of 1992, which increased earnings by $5.6 million. Due to the timing of
common stock issues, the sum of the 1992 quarterly earnings per share do not
equal the corresponding annual figure.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Directors of the registrant is included under the
headings "Information as to Nominees" and "Information as to Continuing
Directors" in the Company's Proxy Statement and is incorporated herein by
reference. Information concerning the executive officers of the registrant is
set forth in Part I, Item 1 hereof under the heading "Executive Officers of
the Registrant". Information concerning compliance by the Directors, executive
officers and other persons with the reporting requirements of Section 16(a) of
the Exchange Act is set forth under the heading "Compliance with Section 16(a)
of the Exchange Act" in the Company's Proxy Statement and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is under the heading "Compensation of
Directors", "Compensation Committee Interlocks and Insider Participation",
"Executive Compensation" and "Pension Plan Table" in the Company's Proxy
Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is included under the headings "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of Management"
in the Company's Proxy Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included under the heading "Certain
Business Relationships" in the Company's Proxy Statement and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements, notes to Financial Statements and
report thereon of KPMG Peat Marwick are found in Item 8
"Financial Statements and Supplementary Data", herein.
2. The following Financial Statement Schedules and
reports are included herein:
V- Property, Plant and Equipment for the
years ended December 31, 1993, 1992 and
1991
VI- Accumulated Depreciation of Property,
Plant and Equipment for the years ended
December 31, 1993, 1992 and 1991
VIII-Valuation and Qualifying Accounts
for the years ended December 31,
1993, 1992 and 1991
IX- Short-Term Borrowings for the years
ended December 31, 1993, 1992 and 1991
X- Supplementary Income Statement
Information for the years ended December
31, 1993, 1992 and 1991
All other schedules are not submitted because they
are not applicable or not required or because the
required information is included in the financial
statements or notes thereto.
Financial statements of the Company's subsidiaries
have been omitted as the subsidiaries do not meet
the tests of a significant subsidiary, or in the
case of Florida Power Corporation, are presented
in a separate report on Form 10-K.
3. Exhibits filed herewith:
10.(a) Florida Progress Supplemental Executive
Retirement Plan. *
21 Subsidiaries of Florida Progress Corporation.
23 Consent of Independent Certified Public
Accountants to the incorporation by reference
of their report on the financial statements
into the following registration statements of
the Company: Form S-3 (No. 33-51573) (relating
to the registration of 4.5 million shares of
common stock and filed with the SEC on December 17,
1993); Form S-8 (No. 33-54912)(relating to the Savings
Plan for Employees of Florida Progress and filed with
the SEC on November 23, 1992); Form S-3 (No. 33-45044)
(relating to the Progress Plus Plan and filed with the
SEC on January 13, 1992); Form S-8 (No. 33-47623)
(relating to the Company's Long-Term Incentive Plan
and filed with the SEC on May 1, 1992); Form S-8 (No.
33-39153) (also relating to the Long-Term Incentive
Plan and filed with the SEC on February 26, 1991); and
Form S-3 (No. 2-93111)(relating to the acquisition of
Better Business Forms and filed with the SEC on
September 5, 1984).
4. Exhibits incorporated herein by reference:
3.(a) Bylaws of Florida Progress Corporation, as
amended to date. (Filed as Exhibit 3(a) to
the Company's Form 10-K for the year ended
December 31, 1992, as filed with the SEC on
March 31, 1993).
3.(b) Restated Articles of Incorporation, as
amended, of Florida Progress Corporation.
(Filed as Exhibit 3(a) to the Company's Form
10-K for the year ended December 31, 1991, as
filed with the SEC on March 30, 1992.)
4.(a) Rights Agreement, dated as of November 21,
1991, between the Company and Manufacturers
Hanover Trust Company, including as Exhibit A
the form of Rights Certificate. (Filed as
Exhibit 4(a) to the Company's Form 8-K dated
November 21, 1991, as filed with the SEC on
November 27, 1991).
4.(b) Amended Articles of Incorporation, as
amended, of Florida Power Corporation.
(Filed as Exhibit 3(a) to the Florida Power
Form 10-K for the year ended December 31,
1991, as filed with the SEC (File No. 1-3274)
on March 30, 1992).
4.(c) Indenture, dated as of January 1, 1944 (the
"Indenture"), between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees. (Filed as Exhibit B-18 to Florida
Power's Registration Statement on Form A-2
(No. 2-5293) filed with the SEC on January
24, 1944).
4.(d) Seventh Supplemental Indenture, dated as of
July 1, 1956, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(b) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(e) Eighth Supplemental Indenture, dated as of
July 1, 1958, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(c) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(f) Sixteenth Supplemental Indenture, dated as of
February 1, 1970, between Florida Power and
Morgan Guaranty Trust Company of New York and
The Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(d) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(g) Twenty-Ninth Supplemental Indenture, dated as
of September 1, 1982, between Florida Power
and Morgan Guaranty Trust Company of New York
and Florida National Bank, as Trustees, with
reference to the modification and amendment
of the Indenture. (Filed as Exhibit 4(c) to
Florida Power's Registration Statement on
Form S-3 (No. 2-79832) filed with the SEC on
September 17, 1982).
10.(b) Management Incentive Compensation Plan
of Florida Progress Corporation, as
amended. (Filed as Exhibit 10(a) to the Company's
Form 10-K for the year ended December 31, 1992,
as filed with the SEC on March 31, 1993.) *
10.(c) Amended and Restated Support Agreement,
dated as of February 1, 1991, between
Florida Progress Corporation and
Progress Capital Holdings, Inc. (Filed
as Exhibit 10(d) to the Company's Form
10-K for the year ended December 31,
1990, as filed with the SEC on March 28,
1991).
10.(d) Florida Progress Corporation Long-Term
Incentive Plan, approved by the Company's
Shareholders on April 19, 1990. (Filed as
Exhibit 10(d) to the Company's Form 10-Q for
the quarter ended March 31, 1990, as filed
with the SEC on May 14, 1990). *
10.(e) Amended and Restated General Partnership
Agreement of the SunShine Pipeline Partners
dated May 5, 1993. (Filed as Exhibit 10(a)
to Florida Power's Form 10-Q for the quarter
ended June 30, 1993, as filed with the SEC
(File No. 1-3274) on August 3, 1993).
10.(f) Amended and Restated General Partnership
Agreement of the SunShine Interstate
Pipeline Partners dated May 5, 1993. (Filed
as Exhibit 10(b) to Florida Power's Form 10-Q
for the quarter ended June 30, 1993, as filed
with the SEC (File No. 1-3274) on August 3, 1993).
10.(g) Precedent Agreement dated April 8, 1993
between Florida Power and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to Florida Power by the
intrastate component of the SunShine Pipeline.
(Filed as Exhibit 10(c) to Florida Power's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC (File No. 1-3274) on August 3,
1993).
10.(h) Precedent Agreement dated April 8, 1993
between Florida Power and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to Florida Power by the
interstate component of the Sunshine Pipeline.
(Filed as Exhibit 10(d) to Florida Power's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC (File No. 1-3274) on August 3,
1993).
10.(i) Letter Agreement dated June 30, 1993
relating to the SunShine Pipeline.
(Filed as Exhibit 10(e) to Florida Power's
Form 10-Q for the quarter ended June 30,
1993, as filed with the SEC (File No. 1-3274)
on August 3, 1993). (Confidential treatment
has been granted with respect to a portion
of this document - omitted portion filed
separately with the SEC).
* Exhibit constitutes an executive compensation plan or arrangement.
In reliance upon Item 601(b)(4)(iii) of Regulation S-K, certain instruments
defining the rights of holders of long-term debt of the Company and its
consolidated subsidiaries are not being filed herewith, because the total
amount authorized thereunder does not exceed 10% of the total assets of the
Company. The Company hereby agrees to furnish a copy of any such instruments
to the Commission upon request.
(b) Reports on Form 8-K:
During the fourth quarter of the year ended
December 31, 1993, the Company filed the
following reports on Form 8-K:
Form 8-K dated October 21, 1993, reporting
under Item 5 "Other Events" a press release
and related Investor Information Report, each
dated October 21, 1993, reporting third
quarter 1993 earnings.
Form 8-K dated December 1, 1993, reporting
under Item 5 "Other Events" a press release
dated December 1, 1993 relating to a decision
by the Company to offer a voluntary early
retirement option to about 200 employees,
most of whom worked at Florida Power.
In addition, the Company filed the following report on Form 8-K
subsequent to the fourth quarter of 1993:
Form 8-K dated January 17, 1994, reporting under
Item 5 "Other Events" various press releases and
related Investor Information reports, which disclose
certain workforce reductions and the Company's 1993
earnings.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FLORIDA PROGRESS CORPORATION
March 24, 1994 By: /s/ Jack B. Critchfield
----------------------------
Jack B. Critchfield,
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Jack B. Critchfield Chairman of the Board, March 24, 1994
- ------------------------- Chief Executive Officer
Jack B. Critchfield and Director
Principal Executive Officer
/s/ Jeffrey R. Heinicka Senior Vice President and March 24, 1994
- ------------------------- Chief Financial Officer
Jeffrey R. Heinicka
Principal Financial Officer
/s/ John Scardino, Jr. Vice President and March 24, 1994
- ------------------------- Controller
John Scardino, Jr.
Principal Accounting Officer
/s/ Michael P. Graney Director March 24, 1994
- -------------------------
Michael P. Graney
/s/ Allen J. Keesler, Jr. Director March 24, 1994
- -------------------------
Allen J. Keesler, Jr.
(Continued)
Signature Title Date
--------- ----- ----
/s/ Richard Korpan Director March 24, 1994
- -------------------------
Richard Korpan
/s/ Clarence V. McKee Director March 24, 1994
- -------------------------
Clarence V. McKee
/s/ Vincent J. Naimoli Director March 24, 1994
- -------------------------
Vincent J. Naimoli
/s/ Richard A. Nunis Director March 24, 1994
- -------------------------
Richard A. Nunis
/s/ Charles B. Reed Director March 24, 1994
- -------------------------
Charles B. Reed
/s/ Joan D. Ruffier Director March 24, 1994
- -------------------------
Joan D. Ruffier
/s/ Robert T. Stuart, Jr. Director March 24, 1994
- -------------------------
Robert T. Stuart, Jr.
/s/Paul R. Verkuil Director March 24, 1994
- -------------------------
Paul R. Verkuil
/s/ Jean Giles Wittner Director March 24, 1994
- -------------------------
Jean Giles Wittner
Schedule V
1 of 3
FLORIDA PROGRESS CORPORATION
Electric Plant
For the Year Ended December 31, 1993
(In millions)
Other
Balance at Additions Retirements Changes Balance at
Beginning at cost or Sales Add(Deduct) End of
Classification of Period (See Note 3) (See Note 1)(See Note 2) of Period
- ---------------------------------------------------------------------------------------------------
Production:
Steam $1,501.7 $38.8 $13.0 ($1.6) $1,525.9
Nuclear 586.0 32.7 0.2 0.0 618.5
Other 189.2 101.8 5.8 0.0 285.2
Transmission 614.9 61.0 4.2 1.5 673.2
Distribution 1,497.4 132.8 (3.3) 1.3 1,634.8
Transportation and general 246.3 37.5 3.6 0.0 280.2
Intangible 7.4 2.1 0.0 0.0 9.5
-------- -------- -------- ------- --------
Total Electric Plant in Service 4,642.9 406.7 23.5 1.2 5,027.3
Electric plant purchased or sold 0.3 8.1 0.0 4.2 12.6
Electric Plant Held for Future Use 14.4 0.3 0.0 0.0 14.7
Completed construction not classified 196.3 50.6 0.0 18.8 265.7
-------- -------- -------- -------- --------
Total electric plant in service,
held for future use and not classified 4,853.9 465.7 23.5 24.2 5,320.3
Construction work in progress 333.8 (48.1) 0.0 0.0 285.7
Nuclear fuel 337.8 30.5 0.0 0.0 368.3
-------- -------- -------- -------- --------
Total electric utility plant 5,525.5 448.1 23.5 24.2 5,974.3
------- ------- ------- -------- --------
Other property 513.5 29.3 29.0 18.8 532.6
------- ------- ------- -------- -------
Total property plant and equipment $6,039.0 $477.4 $52.5 $43.0 $6,506.9
======== ======== ======= ======== ========
Note: (1) Retirements charged to accumulated depreciation $22.7
Retirements charged to income and other accounts 29.8
-------
$52.5
=======
(2) Other changes: Property increase resulting from business acquisitions. $ 47.2
Other (4.2)
-------
$ 43.0
=======
(3) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation.
/TABLE
Schedule V
2 of 3
FLORIDA PROGRESS CORPORATION
Electric Plant
For the Year Ended December 31, 1992
(In millions)
Other
Balance at Retirements Changes Balance at
Beginning Additions or Sales Add(Deduct) End of
Classification of Period at cost (See Note 1)(See Note 2) of Period
- --------------------------------------------------------------------------------------------------
Production:
Steam $1,483.3 $27.8 $9.4 $0.0 $1,501.7
Nuclear 567.0 27.5 12.0 3.5 586.0
Other 181.7 9.0 1.6 0.1 189.2
Transmission 601.6 17.0 2.3 (1.4) 614.9
Distribution 1,405.2 124.9 34.0 1.3 1,497.4
Transportation and general 224.6 24.6 2.1 (0.8) 246.3
Intangible 1.6 5.8 0.0 0.0 7.4
-------- -------- -------- -------- --------
Total Electric Plant in Service 4,465.0 236.6 61.4 2.7 4,642.9
Electric Plant purchased or sold 0.0 2.3 0.0 (2.0) 0.3
Electric Plant Held for Future Use 12.7 1.9 0.0 (0.2) 14.4
Completed construction not classified 66.8 132.9 3.4 0.0 196.3
-------- -------- -------- -------- --------
Total electric plant in service,
held for future use and not classified 4,544.5 373.7 64.8 0.5 4,853.9
Construction work in progress 241.5 92.3 0.0 0.0 333.8
Nuclear fuel 312.2 25.6 0.0 0.0 337.8
-------- -------- -------- -------- --------
TOTAL ELECTRIC UTILITY PLANT $5,098.2 $491.6 $64.8 $0.5 $5,525.5
------- ------- ------- -------- --------
Other property 446.9 38.3 12.0 40.3 513.5
------- ------- ------- -------- --------
Total property plant and equipment $5,545.1 $529.9 $76.8 $40.8 $6,039.0
======== ======== ======== ======== ========
Note: (1) Retirements charged to accumulated depreciation $61.3
Retirements charged to income and other accounts 15.5
-------
$76.8
=======
(2) Other changes: Property increase resulting from business acquisitions. $39.6
Reduction of certain property to fair value. (11.6)
Reclassify remaining assets from discontinued operations. 10.7
Reclassify former non-operating assets from "Other" assets. 1.5
Other 0.6
-------
$40.8
=======
(3) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation.
Schedule V
3 of 3
FLORIDA PROGRESS CORPORATION
Electric Plant
For the Year Ended December 31, 1991
(In millions)
Other
Balance at Retirements Changes Balance at
Beginning Additions or Sales Add(Deduct) End of
Classification of Period at cost (See Note 1)(See Note 2) of Period
- --------------------------------------------------------------------------------------------------
Production:
Steam $1,463.3 $34.4 $14.4 $0.0 $1,483.3
Nuclear 542.0 25.8 0.8 0.0 567.0
Other 176.5 2.8 0.7 3.1 181.7
Transmission 596.1 17.6 10.2 (1.9) 601.6
Distribution 1,315.6 114.1 25.2 0.7 1,405.2
Transportation and general 198.1 29.7 3.2 0.0 224.6
Intangible 1.0 0.6 0.0 0.0 1.6
------- ------- ------- ------- -------
Total Electric Plant in Service 4,292.6 225.0 54.5 1.9 4,465.0
Electric plant purchased or sold (0.1) 0.1 0.0 0.0 0.0
Electric plant held for future use 16.4 0.1 1.9 (1.9) 12.7
Completed construction not classified 46.3 20.5 0.0 0.0 66.8
------- ------- ------- ------- -------
Total electric plant in service,
held for future use and not classified 4,355.2 245.7 56.4 (0.0) 4,544.5
Construction work in progress 141.2 100.3 0.0 0.0 241.5
Nuclear fuel 302.9 9.3 0.0 0.0 312.2
------- ------- ------- ------- -------
Total electric utility plant 4,799.3 355.3 56.4 0.0 5,098.2
------- ------- ------- ------- -------
Other property 423.8 46.3 16.2 (7.0) 446.9
------- ------- ------- ------- -------
Total property plant and equipment $5,223.1 $401.6 $72.6 ($7.0) $5,545.1
======== ======== ======== ======= =======
Note: (1) Retirements charged to accumulated depreciation $56.4
Retirements charged to income and other accounts. 16.2
-------
$72.6
=======
(2) Other changes: Property increase resulting from business acquisitions. $2.8
Property contributed to unconsolidated partnership. (7.7)
Reduction of certain property to fair value. (2.1)
-------
($7.0)
=======
(3) See Note 1 to the Financial Statements for a description
of the method used to compute the provision for depreciation.
Schedule VI
FLORIDA PROGRESS CORPORATION
Accumulated Depreciation of Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(In millions)
----------Additions----------
Balance at Charged to Salvage Retirements Other Balance at
Beginning Charged to Clearing Less Cost (See Note 1, Changes End of
Description of Period Expense Accounts of Removal Schedule V) Add/(Deduct) Period
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993
Accumulated depreciation - electric plant $1,660.8 $202.9 $5.3 ($6.3) $22.7 $6.2 (A) $1,846.2
Accumulated decommissioning - nuclear plant 102.0 11.9 0.0 0.0 0.0 4.4 (B) 118.3
Accumulated dismantlement - fossil plants 47.1 23.9 0.0 (2.5) 0.0 0.0 68.5
--------- -------- ------ ------- -------- -------- --------
Total accumulated depreciation-electric plant $1,809.9 $238.7 $5.3 ($8.8) $22.7 $10.6 $2,033.0
======== ======== ====== ======== ======== ======== ========
Accumulated amortization of nuclear fuel $273.6 $26.3 $-- $ -- $ -- $ -- $299.9
======== ======== ====== ======== ======== ======== ========
Accumulated depreciation of other property $119.9 $29.7 $-- $ -- $9.3 $0.7 $141.0
======== ======== ====== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1992
Accumulated depreciation - electric plant $1,543.6 $179.1 $5.2 ($5.5) $61.3 ($0.3) 1,660.8
Accumulated decommissioning - nuclear plant 85.2 11.9 0.0 0.0 0.0 4.9 (B) 102.0
Accumulated dismantlement - fossil plants 28.9 18.2 0.0 0.0 0.0 0.0 47.1
--------- --------- ----- -------- -------- -------- --------
Total accumulated depreciation-electric plant $1,657.7 $209.2 $5.2 ($5.5) $61.3 $4.6 $1,809.9
======== ======== ===== ======== ======== ======== ========
Accumulated amortization of nuclear fuel $247.2 $25.4 $-- $ -- $ -- $1.0 $273.6
======== ======== ===== ======== ======== ======== ========
Accumulated depreciation of other property $98.6 $27.4 $-- $ -- $8.9 $2.8 $119.9
======== ======== ===== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1991
Accumulated depreciation - electric plant $1,421.9 $177.6 $4.5 ($3.6) $56.4 ($0.4) 1,543.6
Accumulated decommissioning - nuclear plant 69.7 11.8 0.0 0.0 0.0 3.7 (B) 85.2
Accumulated dismantlement - fossil plants 12.3 16.6 0.0 0.0 0.0 0.0 28.9
--------- --------- ----- -------- -------- -------- --------
Total accumulated depreciation-electric plant $1,503.9 $206.0 $4.5 ($3.6) $56.4 $3.3 $1,657.7
======== ======== ===== ======== ======== ======== ========
Accumulated amortization of nuclear fuel $218.7 $28.5 $-- $ -- $ -- $ -- $247.2
======== ======== ====== ======== ======== ======== ========
Accumulated depreciation of other property $80.1 $24.0 $-- $ -- $7.4 $1.9 $98.6
======== ======== ====== ======== ======== ======== ========
(A) Increase primarily due to business acquisitions.
(B) Primarily earnings on Nuclear Decommissioning Fund.
Schedule VIII
FLORIDA PROGRESS CORPORATION
Valuation and Qualifying Accounts
For the Years Ended December 31, 1993, 1992, and 1991
(In millions)
Balance at Additions Balance at
Beginning Charged to Other End of
Description of Period Expense Deductions Add (Ded) Period
- --------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
Nuclear Refueling Outage Reserve $8.7 $15.1 $12.3 $-- $11.5
======= ======= ======= ======= =======
Insurance policy benefit reserves $140.3 $26.8 $ -- 19.4(A) $186.5
======= ======= ======= ======= =======
Reserve for loan & lease losses $23.3 $5.9 $4.4 $-- $24.8
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1992
Nuclear Refueling Outage Reserve $13.8 $25.2 $30.3 $ -- $8.7
======= ======= ======= ======= =======
Insurance policy benefit reserves $115.9 $24.4 $ -- $ -- $140.3
======= ======= ======= ======= =======
Reserve for loan & lease losses $20.5 $6.5 $3.7 $ -- $23.3
======= ======= ======= ======= =======
FOR THE YEAR ENDED DECEMBER 31, 1991
Nuclear Refueling Outage Reserve $5.8 $17.2 $9.2 $ -- $13.8
======= ======= ======= ======= =======
Insurance policy benefit reserves $98.8 $17.1 $ -- $ -- $115.9
======= ======= ======= ======= =======
Reserve for loan & lease losses $10.1 $17.9 $7.5 $ -- $20.5
======= ======= ======= ======= =======
(A) Increase due to adoption of Financial Accounting Standard No. 113.
Schedule IX
FLORIDA PROGRESS CORPORATION
Short-Term Borrowings
For the Years Ended December 31, 1993, 1992 and 1991
(In millions except for percentages)
Weighted Month-End Average Weighted Average
Balance at Average Maximum Amount Amount Outstanding Interest Rate
Category of Aggregate End of Interest Outstanding During the During the
Short-Term Borrowings Period Rate (a) During the Period Period Period (b)
- ---------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
Payable to Holders of
Commercial Paper (c)(d) $570.0 3.30% $570.0 $477.5 3.22%
FOR THE YEAR ENDED DECEMBER 31, 1992
Payable to Holders of
Commercial Paper (c)(d) $291.0 3.59% $438.5 $366.0 4.13%
FOR THE YEAR ENDED DECEMBER 31, 1991
Payable to Banks $ - - % $272.4 $204.6 7.14%
Payable to Holders of
Commercial Paper (c)(d) $325.1 4.96% $551.5 $420.4 6.36%
(a) Based on end of period balance.
(b) The average interest rate was determined by dividing
interest expense for the year on short-term borrowings by average short-term borrowings
during the year.
(c) Two Company subsidiaries are authorized to issue a total of $800 million in commercial paper
(C/P) with various maturities up to but not exceeding 270 days. All C/P borrowings are
backed up by an equivalent amount of unused bank lines of credit.
(d) As of December 31, 1993, 1992 and 1991, $445 million, $291 million and $247.1 million,
respectively, of the C/P borrowings were classified as long-term in the Financial Statements
because of the maturity of the underlying backup bank lines of credit. See Note 2 to the
Financial Statements. For purposes of this schedule, all C/P borrowings are included in the
amounts shown.
/TABLE
FLORIDA PROGRESS CORPORATION Schedule X
Supplementary Income Statement Information
- ----------------------------------------------------------------------------
For the Years Ended December 31, 1993, 1992, and 1991
(In millions)
The amounts of maintenance, other than those set forth in the statements
of income are not significant. Rents, royalties, advertising costs and
research and development costs are not significant.
Depreciation and Taxes other than income taxes are set forth below:
1993 1992 1991
Depreciation:
Total charged to income $268.4 $236.6 $230.0
Less amounts charged to diversified
operations and other expense accounts 28.2 27.1 23.7
- ----------------------------------------------------------------------------
Charged directly to utility operating expenses $240.2 $209.5 $206.3
============================================================================
Taxes other than income taxes:
Property taxes $58.3 $52.8 $49.2
State gross receipts tax 45.4 40.3 36.3
Franchise fees 38.8 34.5 35.2
Payroll and other taxes 37.6 33.7 27.4
- ----------------------------------------------------------------------------
Total 180.1 161.3 148.1
Less amounts charged to diversified operations,
balance sheet and other expense accounts 27.5 23.0 18.8
- ----------------------------------------------------------------------------
Charged directly to utility operating expenses $152.6 $138.3 $129.3
============================================================================
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
------- -------
Exhibits filed herewith:
10.(a) Florida Progress Supplemental Executive
Retirement Plan.
21 Subsidiaries of Florida Progress Corporation.
23 Consent of Independent Certified Public
Accountants to the incorporation by reference
of their report on the financial statements
into the following registration statements of
the Company: Form S-3 (No. 33-51573) (relating
to the registration of 4.5 million shares of
common stock and filed with the SEC on December 17,
1993); Form S-8 (No. 33-54912)(relating to the Savings
Plan for Employees of Florida Progress and filed with
the SEC on November 23, 1992); Form S-3 (No. 33-45044)
(relating to the Progress Plus Plan and filed with the
SEC on January 13, 1992); Form S-8 (No. 33-47623)
(relating to the Company's Long-Term Incentive Plan
and filed with the SEC on May 1, 1992); Form S-8 (No.
33-39153) (also relating to the Long-Term Incentive
Plan and filed with the SEC on February 26, 1991); and
Form S-3 (No. 2-93111)(relating to the acquisition of
Better Business Forms and filed with the SEC on
September 5, 1984).
Exhibits incorporated herein by reference:
3.(a) Bylaws of Florida Progress Corporation, as
amended to date. (Filed as Exhibit 3(a) to
the Company's Form 10-K for the year ended
December 31, 1992, as filed with the SEC on
March 31, 1993).
3.(b) Restated Articles of Incorporation, as
amended, of Florida Progress Corporation.
(Filed as Exhibit 3(a) to the Company's Form
10-K for the year ended December 31, 1991, as
filed with the SEC on March 30, 1992.)
4.(a) Rights Agreement, dated as of November 21,
1991, between the Company and Manufacturers
Hanover Trust Company, including as Exhibit A
the form of Rights Certificate. (Filed as
Exhibit 4(a) to the Company's Form 8-K dated
November 21, 1991, as filed with the SEC on
November 27, 1991).
4.(b) Amended Articles of Incorporation, as
amended, of Florida Power Corporation.
(Filed as Exhibit 3(a) to the Florida Power
Form 10-K for the year ended December 31,
1991, as filed with the SEC (File No. 1-3274)
on March 30, 1992).
4.(c) Indenture, dated as of January 1, 1944 (the
"Indenture"), between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees. (Filed as Exhibit B-18 to Florida
Power's Registration Statement on Form A-2
(No. 2-5293) filed with the SEC on January
24, 1944).
4.(d) Seventh Supplemental Indenture, dated as of
July 1, 1956, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(b) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(e) Eighth Supplemental Indenture, dated as of
July 1, 1958, between Florida Power and
Guaranty Trust Company of New York and The
Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(c) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(f) Sixteenth Supplemental Indenture, dated as of
February 1, 1970, between Florida Power and
Morgan Guaranty Trust Company of New York and
The Florida National Bank of Jacksonville, as
Trustees, with reference to the modification
and amendment of the Indenture. (Filed as
Exhibit 4(d) to Florida Power's Registration
Statement on Form S-3 (No. 33-16788) filed
with the SEC on September 27, 1991).
4.(g) Twenty-Ninth Supplemental Indenture, dated as
of September 1, 1982, between Florida Power
and Morgan Guaranty Trust Company of New York
and Florida National Bank, as Trustees, with
reference to the modification and amendment
of the Indenture. (Filed as Exhibit 4(c) to
Florida Power's Registration Statement on
Form S-3 (No. 2-79832) filed with the SEC on
September 17, 1982).
10.(b) Management Incentive Compensation Plan
of Florida Progress Corporation, as
amended. (Filed as Exhibit 10(a) to the Company's
Form 10-K for the year ended December 31, 1992,
as filed with the SEC on March 31, 1993.)
10.(c) Amended and Restated Support Agreement,
dated as of February 1, 1991, between
Florida Progress Corporation and
Progress Capital Holdings, Inc. (Filed
as Exhibit 10(d) to the Company's Form
10-K for the year ended December 31,
1990, as filed with the SEC on March 28,
1991).
10.(d) Florida Progress Corporation Long-Term
Incentive Plan, approved by the Company's
Shareholders on April 19, 1990. (Filed as
Exhibit 10(d) to the Company's Form 10-Q for
the quarter ended March 31, 1990, as filed
with the SEC on May 14, 1990).
10.(e) Amended and Restated General Partnership
Agreement of the SunShine Pipeline Partners
dated May 5, 1993. (Filed as Exhibit 10(a)
to Florida Power's Form 10-Q for the quarter
ended June 30, 1993, as filed with the SEC
(File No. 1-3274) on August 3, 1993).
10.(f) Amended and Restated General Partnership
Agreement of the SunShine Interstate
Pipeline Partners dated May 5, 1993. (Filed
as Exhibit 10(b) to Florida Power's Form 10-Q
for the quarter ended June 30, 1993, as filed
with the SEC (File No. 1-3274) on August 3, 1993).
10.(g) Precedent Agreement dated April 8, 1993
between Florida Power and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to Florida Power by the
intrastate component of the SunShine Pipeline.
(Filed as Exhibit 10(c) to Florida Power's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC (File No. 1-3274) on August 3,
1993).
10.(h) Precedent Agreement dated April 8, 1993
between Florida Power and the SunShine Pipeline
Partners covering terms and conditions of service
to be provided to Florida Power by the
interstate component of the Sunshine Pipeline.
(Filed as Exhibit 10(d) to Florida Power's
Form 10-Q for the quarter ended June 30, 1993,
as filed with the SEC (File No. 1-3274) on August 3,
1993).
10.(i) Letter Agreement dated June 30, 1993
relating to the SunShine Pipeline.
(Filed as Exhibit 10(e) to Florida Power's
Form 10-Q for the quarter ended June 30,
1993, as filed with the SEC (File No. 1-3274)
on August 3, 1993). (Confidential treatment
has been granted with respect to a portion
of this document - omitted portion filed
separately with the SEC).