ML20101C915
| ML20101C915 | |
| Person / Time | |
|---|---|
| Site: | Monticello, Prairie Island  |
| Issue date: | 12/31/1995 |
| From: | Howard J NORTHERN STATES POWER CO. |
| To: | |
| References | |
| NUDOCS 9603190267 | |
| Download: ML20101C915 (60) | |
Text
.
u
%..,,q 5,. s.p. ;. :.
__. : y>G.. ;; ".,{ > :.
.:./>
y... n...,;
..: 1
- '. ' :.v:t '.,
- .) _ w :;...... J;.* " *,> f.;&.:
- .' 1. ::
L G ;; -:..: " l
+ q 7: %,, :. y ;;. - L.y';_ >y '., L / 9. %.z y.X.::: ?l '.(:..;;,_.. ~
- y l...,
.. ~ -.-
_ 7,q ;[/;:: m: %r
, ' ; r.L. ;;: :' :
- - ',3.c.
- -
, n ml:". :.. n:::
- ,,c..... v ?g: :b3, ':[ '_...,l-q?::y.
..... :r
,4;;
- 9
- .5. '. +l.
.L.r ' : : : :. v%..ws.
. ;;..,.y,.....::
3 u-
. s.y g :s. ;:. :.... ~v
- g..... :q:.;
- b. ;; : ::: ;. ~;: : -..... %.
- ..:..:;.. :. m n :.
- .;...a.-
- _ 3:,....::..
..v
.:. 5, :L...
... w..;t,.;. - y.
-u
....2
..g
.."- n. :ft
.. c 3 ~:..? (l.,.C ' '."q.,....*: %.....,.J
, t.
-f...,.
.. c. :. e
.*N.
....l:;:^ 4 ;
l, L _^:a :
. "- l. 7., :
..._s,,
~....~.,T...S
. c.:, : :..
- *; ;;'.Q
- Y: b \\,..l. F* ;' ',,W i.a'
- - eb.
p.
-. y. ~; :
...7..._,.3.,
- m..
,-l.::M....%. h..C; 3.. :: :, ;f. Y.T '- Q::_'L.[ -Q. W,. ;.,, \\,.:1.'i i ; % '?,l.y Y ; 9...+. '.Y,.l; ~.. :;. ;,
- 3. 5.e ;. 2 : <..
y.x.
.. :;. -". ' .;- :. %, ?: J 'h ::
AR.,
.'l '. i.. '
% ; a.-'..a.,
..,y : q. :, 4:h i. ?..,
' f.:..(..
c
._.~.....t..:
. ~q:
_ R a, J. ? _ Y'.:. :9.. /..h.R. L 6-
-;. *~ '
..... ':v.
- .,,G y
.. :., ' h.; r?.. b. n, ;,.-
- ,. } j ',[ :.
. q }',. :[@.
. '....:.f ' ' A,:f '.9. ' :
e l (.t ! [' :
' ',- [.[,;. :' ' '...' i', s, _ ' 5..V. _~., T :^ l ' _. :,...
...).,(.-.
s
- - ;._ ' ' g. -> :...;.
_ 3. ;.0
.s t
a i*
'. ;)
l;;. 'l. '. s, -
,-3 *., -; <. 2 ::.'., 4'..:.l: z..
', G.;;
b. - 1..:. ^_..; ;. 7'f..
. _1._ ;:l
, l
..'...!. y:.. ;,
_2
' -; L.
.?
[,'1,.... :-q, 3,.[ L _~.,.;: j ] : :. '
7., Y.u.*.{.... l. ;. [
.,. ^
_ll.-
[ 3.; -',i. '., 4.');; 'I'
_l_
. ;y ^ *_ L '... - -
_.. (:
' 'r: ;' -.. l ^ '..} l ' G ' ' s y.. ~b.
t':y:-
':. 'e,O, e,; ?. s.' ?, ' ' ' ;., j': ?. '
, j {$ _.
.a b a, -:,
3 ;- x, (
~;.... -
. ;o Lc..~ '.:. ::;; ;..: - : a~~.
', ;; ; ;.' 5. _,.
'.) *,1-(. l '
b
. U-
... 1, ::.
,. :.. '. ) ::.', y
..d *. -
_.ye.x ;t ;,. _' '_ _
o,
... i, i,:.,,
- '.1_
- 3 A : '_, 'y'~.-
~. >..,..
- z.:; _ '. ( ; ': ; ',..... _ }. ;;[; _.-. ' +; 3.
.7-
.- - L 9;a * > n :.
,;- ',.., _... {, \\ ;,, ' _:.
,n.' '.
p,
. *< ',.p 'v.
.'l_".
..'..:,o:/
..'J.N q I
^ ' &" P* ' L. [.:
- ).'. } k l i ;
- 2. l.
- \\ -)..
- ;. :. -
- n. ;. -.: *. _,
~. O G-f,.. l, '. ;; 'f ',.,.> ;
L
' '.,m'..
.. Y. ':
..[_',,:.4 y ;:: ', _ ' _ '.. l;..,;.,,',+;.,..
. f i :_
'. 4 : )._ * ).'.'. '. ~ :' ' l.
, ^
- .l
._,(
- _;...*.b.
' ~ L' l.
..)~;.**
. L
'[' [.i.} :.. %;,'f. '..)*
^
);. :-
-. [ [. ' ; f.q.. [.. L j 4...'.;, (. h ',..
. _.;.., ;. d :. ?l..Q.. ',,
- _.q* : '
-;;'Tl~ - -l ":..,.
,, ', ;.. I". :.
l:,.
4 ;. s.
l g... ;
,c
,1
....y,.
7,,,
... _ f.,'. '... '.[ '. :,;...; '. '..
g < 7.,
..p
e
.-r
,'..7
.....,:,s..
. i:v.
i ', -r-
,' M,'
p,,.,., c, ' ~:\\., %
j...' y l [, ;,.... _...,,..,,,;-. -
a.
- ~
-:...3
__3
- [ _ ;.,
t
.y...
.. '.,. Q '.j _,,.,,. -
....f..*_ _., ; ' [y,_,, '. _,;::
.+
- n v g, s '.. ' n ?.k V
[
.,.)'.
,p..h
_,v.
, ~,.
'.rr-'.....'\\*:...-
,:r.l L
?"',;.,','.
g',., l l-l I ', :.. :.. _ ', : ;.,;; *.,.,
- l s _; _ l '._;!
~
' ' "[ :', f'"
..<v
,9
,.. ^
f.i.; _l $ ;
- }";}.... ' ;
- ,,l
" ',.... ". _._ [,
,, q ; :' <;,.
' (.y ',,_.3 7 ; z g....,. v. _ j:$,. ; ;*,} _y
,..~
) w..,... - '
. i'._...-
3
.....t
? ] :*,> &
_.,p
~
- .( g.
.f.~.'.).',.'*;
I.i : ' -
. ?.
O,'
v ;_.,. _ : -y '-
- . '.; 9.'l' '..'; ',. - l. :l..
h ' '.. ' =..\\.' '::l y.,
^
.,... \\,.: ' ;;, ;;g ' _
,n.
- . 'l MQQ 4 l.,l. ::g,
i
- _, f.:.. ?*: ;. a. :.
. l,:.. '
n
_ ~.,,( _.; J; ' ~..\\,
'a.
.::[;=~'..."l,'..,'..,,* i.. ::. ' '\\.'. ; :'.'._ f. - :... ': ' ^ :
. '.fg ::)^.[.'.._ :.f * *,,:,;'. '.
t-
.'ek
.. :~
s.
n l ; :.
$1,
'",,.;?.'; ': ';' *,, _.:.
s-n,
...;.',(.
49 L:
?%
.,'.q...--......:..:-
j..
- -'w....,, _ - g.y.
~
t..
' ; L.
$ l' blNh - -._'.. -
~.a
- = g. '.<-
7, L. Q
.,j., I.. '.'... ' ~.".-:',:...
...'f,,.:,,&yw; y.
- x-
,: X:
.c,.
t.
L'...:.,'.
-y:'.
[jg&
.. m
^f..,
l
.. ';Q l. *: N,0; *l:.:
(l' '_. '. _ - (. j
- .ll.'.l
. ; ' A '... ^ Y'.' ;. -l '. :.v ;.. fl'ff '
Ib,te
^- :.lf'-.
?
... '. - l;...l.v \\."..
,;_'.L'._
f.7:7 (
&W,.. g " o....... '..,
_..?'-
P.
.. :;:,g.
- r
' I..
~- '
.f..h
? -.
...y,.'
'; I'.. *:. L.
.c
". :},. ' l... ~...,..' ;^ *.~ - ' : c. 1.'
'.'. ll. ;[. ' ) '. :',;; f..l. $ i.l.'.
llj ht. i
'a
-: ' 7l O d;i Y L 5. O ~ ;'.'f.l l$ t[' ! '..' l;' ' 'I
-:.,.j.
b$ y.,.
W i; '.'.~ l,'l.f..:l :.b.
!'..R.W.
. l ;. ^ T } '.: ~, h. l...:
'. 'l:...
hq..
. ~
.4_.
O..-....y:[:ll{, f f ~ ':ll..'. y; _.,,;[.[
y -
.. ;. m. 3
,.t>
s..
.. ^ '.
. f l ' !.n..
... ~
\\ _ _.l ~. (...
I.'(: :
y.i.,
.;..,. p, w,U. 4. W' j' y. --.
-.s v,4l%.' , Q.g. '.. ?
. m c.. w. ;. )..'[j ' l -
j L
i -
{:;
']
l
..,.j ij
. ;. ;,; ' 7-... y. -.i -
~-
- fp ;
3
.. ~. (., ;,.:A *p. : c..n.::
n..,....,
- -. wen NRi '
^
f
,,,) '
_s
_ f',* *? ^ ? :. ', ', '. ' ;_._ ;, y.. l '. '
f-
- .t
. r
..,. f '.' '._ :
^
' '. ' D.. f. ; y.'s
.WI ', {. ' _ $ ' W *... _:...,
- h. - [.. '.: '.'f. _
,., 7
,;.g i mppy,..
,.j,
-s
,.,7g, -
l i ;
1 i-
.e
). ;.,,;.h-
}
l d.PR '._:.
',, ; q ' ' : ;...
' ': a 's
" :.. '.. *ab c,,,p f
b..
_ ;,[ f,_ ". l ?ll*.'. y 3},
BE,.
,,...fl[f j
- _,3.
l+*
l,i
{..' ;.p*. Q.. ;.,.. m., l;.- { '..;,....
9 ;; -
f.
.' ; &,\\1
- l.., ;. [.,; ;. h -l[l " '
fI h. ;,
l.....
.N s.
...?
.g
, [.
!. ~.l - ? k 'l,.' ;.
....' O. k.
. ' ' ;':' j ;
. _ se; ' ).
- c;...
-y...- - ' ' ; '*.
' ' [. :'. '.;_ _.ff,
- .g.,'3
.f y
yg,
tn..1
- Y. h '.' 3 a
b,-
- q,..,.,.
4_,3 I.l $g & '.l f
y '; :;.
Y,,y.h. N h 3
- f
' v
- :. _$ $ t
?_'...fjf. ! ; )...
^l 1
.j..;
.,q %
- '....,cs.
L,.';.,4 ;
's'
,. :l U p
4
[
-'i
?
F e
p
.e
. I I
l
@h N
f~ llf ipl' "O
... '3 ;
' f.. : ', :[. [* '.'.. '
Y
."s s,.
I.
_.;jll.f L'
' '.' l
. ?;:
{,
-l
[
.....i:
6,'. t - ;;.
.s.-,
<!t
_3 i '
.y.
Y,::.;.....
C. R : '.
Q v '$..
.C.
> ' ~4
}. _ Q,.
J
' -_y'"t-
,2
- ... '.. ;, x
\\_:...,'l,'.'
WWA
-'y..l..
v;.;:
g
,,. /.; *_
'I
' y -l
's
..s e
n
- i..
_ g 4..
(
.c
'l ~ :} d.f, l. '.~ ' b; " ' l a... ; ;. ;.
,.8
.f'
....s.
.;... N y '-I 4 40
. Y.;
..s
- . - q a..
.g.
' ', ; f.) ( '..,.
L.
k.J.
[
.?(( h ' ' '..:'
.'V:f. : lhj '. kg / V '. ' '
g h i, ' [.
M
- k. *
' t.'_
-'* N
_.s; '. Y., l YY N s
l','
' ' f.
.Y _..
':? ;j'l:.j.'(',,..~...f
Y'Y_ !.k.
.ht
.h {
[l. '.,' i
' ': '.' ;. ?
.[,-
-,'.~. !'; _K)* h, j if...l f.' :. :W ' W ;. !)[:f f ~'l.[.f '.f i ;l l
.p..; % } y.y_ % <.,'$$'L &..r Ef, ?'
- [' I; f:
.?.*
[ _ ;* l
....,.. _.?." f. -l _; _,.;I'f. f, : _ V [.Q ; f _.' 4,
,1
.~ y
.:::.. Y si&...
I W Q f;.l&.,,',"; _ Y.
., T.
u < ;.
..0
-...-. c
.: q
.f
.' '+,.
.f..
')*'
}.
- 1 Y.
~
^
5
,i..,.' '. :
. ~... ' ' ^
I. ?
c.
~
.r-n.:
r
..s.
~._ _ llh.,
,s
?
.... ': '$ "... _l. j..;(;hl, k.n.<x ;;{... -
V.*
$f..';^ ;. g [Q_l^ :; y Q'. ".l.,. ' ' ' ^*,..
).. k. '.
c.
- ..--w n-
. < ~ Q. 'Y
^'
4[. ' ; 'Q. y : f..... '.5 5._~,-Q'f $.W..] 'l l' f' ' ' ' '.. &.&0:
C '.l.
l.['.
...s
(. ';
k
.,n_ '.)'
~.
. ?,. *
- Y.,
day..-'
Yp.. '.,l:.
p..,.;
^,. *.. ' ' '
'. r;
':. : ( : '. '.
C
. s
~'
0;;::, q :. :.
'4 l.
l
' Y
. ip. - 'j A
.-[':..'.,..
,:. ::. s,.
(p.' -
..d'>q', GNW ; :,'.'.- h, :;,.f. h.s; C.l.
',.E.-l'.
.-,'We>.'-.
- LR '. L ;t. -;
,_'l,
- :Q _*: '; '
I'. y.l
- f.Y. N
-;l-
, r.
~V ' '. f *., c _. gJM.'..L. ':f:. A9%,,,. ;; '.
-Q. '. ;,.
.~
- ,sg
. ? w;;p.; $:'w.
_,:- ^.
.',...'M.
- I,'
. j (,,,'*,i..l* &q...hj ' &...lf. :: ' ' %:
,- - '.-x -
l l
^'. '
'i. ; :::. ::.
s.
m f.
.-l..-
.... o.I.$ ' '.. L'.*
.,.. '. - b. ; g.._ *.;,.." 5 s.'
Y
..~;q}..'.'.T.',','.
& i..
- . l.
'l ',l f'
% 'I
.a.4 s [ i.. ; '. ', *._...... f Cf' '
s.
^ f:.,
3
'v
. ay.,.
- - ~ ' '
,.;.. 1..
.'}i'...,.g...'...
...u' l
t...... ;. J., : : G: '.;
.,l:
- .... ' ' ; ;
- ..r..- '.
- r - l * '
[.
~.. '..*...l_,~.,'
,,'.f.,.,).
.?,
' '...' :, 'v -_..e's....,. :,e l <
...rT....,v*:,.,-.'.:'..'.
.A
...... ~. '
...g:a:
~'.; '.:,. ';.;
- ' y;'
. q.) ;..
.i.... '
? l..) :.. I If.
'l
..*l. .. M 'l :
. T., t, ::- '
v -,
' ^
_. ;, q ;
r,
-_,n.'.>;,.'
'.;Y
'l}.
- .[?,
l G.l
[
@M_.
N
...M W h.
.*-e,
.i
,,_..i,',,l'.,.....,. 'f....:f ' -
.. +
- - ', '*...l'.',',. _,,
. ' l.i ' ', ', ; ' ;
t-
...,4*
..~..
,.l,'
,*1 '-.,4.
. 'i. _,&,... g?;i;l.l.*..,..
~.
+,;.;c' l m'
.L
- ' ' b ' ' *W Y '
, _ _..,i I,
- l.,
- i'.
^'.'s._.
,'a.
y ;
.x m[.n:m ; g' ty.
(}W;f.g,
- n W. M.y; y h :;a;8 8;v'.; y
- 5. ' ::;W = f:
- 7. ~.
... :. :p :,. T :..,..
.: w
+
- L 3. - [.O. *f.l.f
- [.J}.[f.].f.;:]-[,(.[f'7'I,'M:.f[ M.,;.ij @ y. %..)Q f(.g' M a.
- ,['.
.,f^
^ *.,
y :,. 6.... ' i, ' _
.'j. i.. f.f _, J. ). Y,..y _ I ' Y ': *.. - : -
- ,'.l
_l'._
- l ' l L
.' ['ll.; ;. : '...
s 3.,-
l
~, _.
,s
...._l~.
- . _ (
- ;. _,
?"'
+* '. ** l :l F ':
?.' :'. ',. I, ' ;. ):
~-
es..ir 7,
- [
._7
- v..
.n.
.;. x b.:,,. 4. x.; ;
..,,c
,~
.3
~-[;
f.[;; [
,[I_ f; ;,.
" y. j:. i(.:. [ [ n }. {. f.... '. ; _;.
4 AMg.g
- ..
- .l
(
K ' (,; gg:...
., 7, '..,
/f.(.4.7 j g
.Q.N....,? - (( [ :l v..
..fJ 1 _
L.,.
~
...l.. : 'l. :. l:. l.l
',h
.[::.
.l ' ;
Rg ' ' J,. ;.l
~.. ' l. ' ; [ j C.
^
- 7 a i
.s
- ;,.
- .. 7 q ;.
. f....;
...; f..
+
c.
r
. ;g-m g,s 4
,.i
..g,..y,,
- ..>1-
,.l,
..,.. - --... ;,..,4
~
' ~, ].j i': '. ~.
'g
_%. _,.;;..f.
.8 _ g {g, v'./
.y _ ll,,[i<
J.,
.t.q _
"...~_[
[_.'-
_ i_
- 6. 4dg[,
'n
} -.. '.;.: --,.. w.
.... ! Y, :l '.
[ ~ U
. ' J',.
Y'
} **Y
%n :;eg '.
' b ' O
C L-U O fc : 1 F-
- b '
i
.N.
].j [ -
E
~
it
4%Q U ' " W.1 'aeh. ?".D ?. E i f..f ; E ' h. S, f '
- &f _,.
'gj..,.
Qnt, -
- . [
.[_
[._
- (;_[.,
.y ymmy n,
. J ~;. ~ { \\ L f ;.3;. y _ ;.
-)
{.'... '. g..[ gg *vy;.$
J o+
o,. M... i %o g # g! m o. +M..w x.xgNORTHERff
- ra ama p
Atde "lillilm
- m y o w a:
im o
- 4
, # ;. : o -s a
r.v.u: g ; ;
- ~ _. }
- ._.
y
_9 g
g
- . & )_L l.
- ..y.;, ; _ }.
- f *
- q,
[7 y.
i k[
(
- (
[.. )..
46.,
wpl,
g
. y,g t a
w #..s j
\\ ~.
\\.. : ).
a 't y4
~~
- ,. ' ch ).,
'. y En h '
A -
r... '.
=:,
a.
i{
5i-
'E h
.. c x
.m
. x S M4 0;,.
O' 868444 4
- 3... ;,JH 6.,. _. _ ;
< 2. l..' ; Q.
'9%. : 6 gg. Q ;'L
-. }.
sepamrW. geht'. '
. I....
Jt
_. <.{
' ~.] ](.; 4 jg
, isp), yr.g g
{
4 ha b
[
h-4.k sma.or iQd '*w*usnahm' w*L -k is,i k
s..,> ; lla$ % gg ~.9.y.:
- & l l
~ -
g d a 8-of Q jf.W / df f~&.x.k.y ggga y
l g-7 pnamc.+L.w w n;
- - n,.a-r~
8
. ngg u.a x 94
. =-
sg i
j i.
th?
s M'
.. m'.
.4+;,q, '.
.. g i c '4 a i s
.f,
....n:*:
- b %. :.
,h. - 5.
n'
, R4epaq u. - -
-i na u
0 9. W,',m. %...
. E j: g, g
g.
.y -g.
g ;:'s '.# c. %,.'<t-
-5
.r
- x. Q ; ' o e* n.
v. ~..
w.m... a: :
- ,3 gg.
- g. '^
s.
a
.c.
n
,w-w ;, _
[%'
i '.. -
i
~. i. '. - ~ ' '
t
/ ',.p,
a enes :
888.]. h a ?..:1
, V
~~'3.-
- g. -^
_ _ ~ _ _
[_
y;..' -.... Q. (
hhp. _[ ] _{ q2 h.. -k...
.?
j, - '
m g <w m q j,9{'a $(. ] $dEdi.
74 jhtjAWNU Ap
%-Q wwgg g,
. ~m 7 h.)j.
.- f W f J.Me qmgede j L F.
) jfM.@t $).
Y Y$h
a 4
FINANCIAL
SUMMARY
Return on Conunon Equity Earnings Per Share Conunon Stock Price Range 21 Years of Dividend Growth Percent Dollars Per Share Dollars Per Shore Dollars Per Share 14
~ '
5 50 55 -
12 -
II 125 5.00 50 r
12
~
3.00 4.50 45 11 2.75 10 40 4.00 g
9 150 35 2.25
~
8 100 30 2 00
~
7 1.75 l
2.50 25 6
1.50 5
2.00 20 1.25 4
1.2 15 1.00 1.00 10 2
.50
.2 5
1
.25 0
0 0
0 9.!
E E
E 5
E E !
I E!!!{
5 g Total E Total Yaar-End g Continuing Operations g Continuing Operations Excluding Accounting Excluding Accounting Change and Discontinued Change and Discontinued i
Telephone Operations Telephone Operations
-m.
1 Financial Highlights QNTENT.(
1995 1994 % Change i.etter to Shareholders 2
Eamings per share
$3.S1
$3.46 13.0 %
Dividends declared Oprations Review 6
per shar6
$2.685
$2.625 2.3%
Directors and Officers 16 Utility operating i
revenues (millions)
$2,568.6
$2.486.5 3.3%
Management's Discussion and Analysis 18 Netincomo(millions)
$275.8
$243.5 13.3 %
Consolidated Financial Statements 28 Retum on common equity 13.4 %
12.4 %
Notes to Financial Statements 34 Assets (millions)
$6,228.6 S5,949.7 4.6%
Customers (thousands) 1,821.4 1,786.4 2.0%
Reports of Management and Peak electric Independent Accountants 50 demand (megawatts) 7,519 7,101 5.9%
Financnl Statistics 51 Retail electnc energy sales (millions of kilowatthours) 34,500 33,096 4.2%
Operating Statistics 52 j
Benefit employees 6,829 7,032 (2.9%;
Shareholder Information 55 l
l 4-4 Notincome Market Price and Book Value Dividend Payout Ratio Average Cost of Dollars in Millions at Year-End Percent of Earnings Long-Term Debt Dollars Per Share Percent 350
~
~
50 120 ~
~
~
~
to -
~
~
~
l 110
~
g
- 2E 100 6
g g
0 20 70
'g M pga {
10 '
2 2
60 0
0 2
0 5
E Tot 8' E MarketPrice 1992 Payout Excluding Accounting Change g continuingoperations g BookValue Excluding Accounting Change and Discontinued Telephone operations 4
COMPANY DESCRIPTION i
Northern States Power Company (NSP), headquar-Viking Gas Transmission Company, a wholly owned tered in Minneapolis, Minnesota,is a major U.S. utility subsidiary, owns and operates a 500-mile interstate with growing domestic and overseas non-regulated natural gas pipeline providing gas transportation ser-energy ventures. NSP and its wholly owned sub-vices to customers in the Upper Midwest from con-sidiary, Northern States Power Company-Wisconsin, nections with four major pipelines in the United operate generation, transmission and distribution States and Canada, f acilities providing electricity to about 1.4 million customers in Minnesota, Wisconsin, North Dakota, Cenergy, Inc., another wholly owned subsidiary, South Dakota and Michigan. The two companies became Cenerprise, Inc. on January 1,1996. The also distribute natural gas to more than 400,000 cus-company markets natural gas, electricity and energy-tomers in Minnesota, Wisconsin, North Dakota and related services throughout the United States.
Michigan, and provide a variety of energy-related services throughout their service areas.
NRG Energy,Inc., a wholly owned subsidiary, oper-ates and has interests in independent, non-regulated power and energy businesses in the United States and other countries, with major projects in Germany 19e011 o/5 and Australia.
L.
1 i
LETTER TO SHAREHOLDERS
~
"ineteen ninety-five was another good 1
I year for your company. Our financial performance was strong, our subsidiaries continued to seek opportunities to grow and we took significant action to help ensure success in the years ahead.
- //
p s.
The single most important event in 1995 3
was our agreement to merge with Wiscon-1 A
sin Energy Corporation to form Primergy
.g; Corporation. We announced the plan on l
hlay 1, and shareholders of both companies gave their overwhelming approval in Sep-j tember. Now we are pursuing approvals from the Federal Energy Regulatory Com-mission, the Securities and Exchange Com-
't mission, the Department of Justice, the James J. Howard Federal Trade Commission, the Nuclear Chairman of the Board. President and Chief Executive Officer Regulatory Commission and public service because our industry is at the crossroads of commissions in hiinnesota, Wisconsin, change. Through industry restructuring at North Dakota and hiichigan. We remain the state and federal levels, competition will optimistic that the merger will be com-continue to increase and more open electric pleted by January 1,1997.
markets will enable commercial, industrial and even residential customers to choose Wisconsin Energy is an electric and natural their energy suppliers. We want them to gas utility headquartered in Milwaukee that choose Primergy. We believe the merger serves much of eastern Wisconsin and por-will help us succeed in the new marketplace tions of the Upper Peninsula of hiichigan.
and help your company continue to grow Like NSP, Wisconsin Energy has low and prosper. By ensuring continued com-prices, is financially sound, has commend.
petitive prices, high-quality services and able operating records and is committed to commitment to customer satisfaction, environmental protection, safety and com-Primergy will help communities attract munity involvement. NSP and Wisconsin new business, add jobs and strengthen the Energy fit well together.
economy in our combined service area.
We are enthusiastic about the merger NSP and Wisconsin Energy k>ok forward to 2
l l
1 l
l l
1 I
competition, and we intend to be ready for it ongoing operations, excluding non-recurring in all respects. We have the vision, the tech-transactions, were $3.69 per share, compared nologies and the expertise. We have employ-with $3.45 in 1994, a 7 percent increase. Net ces who can execute our plans in the income for the year ended December 31, L
empowered work environment we are cre-1995, was $275.8 million, compared with ating for them.
. $243.5 million in 1994.
NSP and Wisconsin Energy are analyzing Higher electric and natural gas sales and carefully the best business and operating
. reduced operating and maintenance costs practices of both companies and other indus-contributed to strong earnings in 1995.
try leaders to help shape Primergy for a Total retail electric sales increased 4.2 per-4 dynamic future. The strong leadership and cent,in part due to a 1.3 percent mcrease m entrepreneurial spirit of our employees will customer accounts. Warmer-than normal guide our new company. Primergy, to be summer weather also contributed to higher j
neadquartered in Minneapolis, will be posi-demand for electricity. Total gas sales tioned to build long-term value for our increased 9.8 percent, and customer accounts sharehohlers, while enhancing customer increased 4.1 percent. Higher costs for depre-sersice and system reliability.
ciation, taxes and interest expenses partially offset the increases.
We will keep you informed as the merger continues to progress.
We are well-positioned to reach our objec-tive of long-term earnings growth of 5 I also am pleased to report that for the third percent per year, on average, from ongo-consecutive year, your company's earnings ing operations.
per share increased. Earnings per share in 1995.were $3.91, compared with $3.46 in In 1995, our non-regulated businesses, 1994, a 13 percent increase. Earnings from including: NRG Energy, Inc.: Cenergy, Inc.,
Primergy Service Territory 1996; and Eloigne Company continued to g
seek opportunities to grow. NSP's non-regu-
"n'
,'S lated businesses contributed 50 cents per My~~
share in 1995, compared with 49 cents per g
4 share in 1994.
m For the 21st consecutive year, your dividend
^
increased to an annual rate of $2.70 per N AresNSPwillserve g
Wac sm En gy a
d n W4 h 199L NSP's conunon stock closed the year at W3, up The new Primergy Corporation's electric and natural gas service area includes portions of Minnesota, from the 1994 close of $44.
Wisconsin, Michigan's Upper Peninsula, North Dakota and South Dakota.
[
3
6 t
i In addition to strong financial performance, Our plan to temporarily store used fuel on l
business expansion and preparation for the or adjacent to Mescalero Apache land in future through our proposed merger, your New Mexico also moved forward in 1995.
company also made progress in other areas.
NSP and the Mescalero Apache tribe are leading a group of more than 20 utilities
.In 1995, NSP began storing used nuclear participating in the project.
. fuel in reinforced steel containers at an out-door facility adjacent to our Prairie Island In early 1996, the Mescalero project con-nuclear power plant in Red sortium plans to select a site e'
Wing, Minnesota. By the-for the facility and deter-end of the year, three 122-mine the storage technol-4
)
ton hiaded casks were moved ogy to be used. By the end
,~
to the storage area.
of the year, the group plans
~
to submit a project license in 1994, the Minnesota Leg-application to the Nuclear islacure authorized NSP
%~
Regulatory Commission.Our to phase in the use of 17 objective is to have the te'mp-containers for temporary fuel orary storage facility operat-storageifour company meets in 1995, NSP began to store used ing by 2002.
j several requirements. They.
nuclear fuelin reinforced steel con-include finding an alterna-tainers adjacent to the company's The federal government is Prairie Island plant. NSP continues tive storage site in Goodhue to work at the state and federal gov-responsible for establishing a County, away from Prairie ernment levels to resolve the issue permanent nuclear waste Island, and the development n a permanent basis. Storage at repository. As chairman of the plant site is temporary.
or purchase of 425 mega-the Nuclear Energy Insti-watts of wind-generated and tute, I have encouraged 125 megawatts of biomass-generated nuclear utility companies and other groups electricity by 2002. We continue to make to work with government officials at the progress in all three areas.
state and federal levels to resolve the nuclear storage issue. A successful resolu-Members of the-Prairie Island Indian tion is vital to our company, our industry Community requested that we provide and our country. Nuclear energy provides funding and land in exchange for their about 30 percent of the electricity our cus-support of new legislation ending the tomers use. They require a variety of reli-requirement for an alternative storage site.
able energy sources, including nuclear One legislative committee approved the power, to enhance economic and environ-proposal. However, it has not mental progress. As shareholders and citi-new advanced in a second committee. We will zens, you can be proud that your company continue to work with members of the has taken a leadership position on these Indian community and the Legislature to important issues.
resolve issues of mutual interest.
r 4-
i Economic development is a priority for I believe being a good corporate citizen NSP's service area. In 1995, your company makes g<xxl business sense. Not only does the participated in 29 economic development effort help people in need,it also will help us j
projects in Minnesota that helped create or retain and attract customers in the much I
retain 3,900 jobs and are expected to gener-more competitive environment we face.
are an estimated $6.2 million in annual rev-enues for NSP. The projects include a new Our overall progress in 1995 was gratify-manufacturing facility Seagate Technology, ing. As we move ahead with the merger, Inc. is building in Bloomington, Minnesota.
we will continue to focus on improving j
financial results, promoting 4
in Eau Claire, Wisconsin,
{
profitable growth in our
~
Hutchinson Technology Inc.
l 4
core electric and natural built a manufacturing plant
' [
gas businesses and sub-l in Gateway West Industrial y
sidiaries, and operating our p
Park, a partnership between power plants and other i
NSP and the city of Eau J
facilities safely, efficiently Claire. A second plant is and with respect for the scheduled to be built in 1996 environment. We will con-and operating in 1997. Total Hutchinson Technology Inc. makes tinue to serve our customers j
cmployment for the two suspension assemblies for computer well, and we will help our plants is estimated at 2,300, disk drives and currently supplies employees adapt to changes a
about 70 percent of sne market.
l In South Dakota, NSP's i our industry. Our success commitment to economic today is a key to providing development in 1995 contributed more than energy for a bright tomorrow.
$2.2 million in revenue for NSP and an esti-I mated 2,900 jobs in Sioux Falls alone. In On behalf of our Board of Directors, officer North Dakota, NSP helped attract First team and all of our employees, I thank you i
Bank, Cargill and Marvin Undows facili-sincerely for your confidence and support.
l ties, and assisted the state campaign sup-We will continue to strive to earn it each and l
porting retention of two U.S. Air Force every day in the years ahead.
bases in Minot and Grand Forks.
Sincerely, 1
We also are proud of our efforts to assist i
people in our communities. Our corporate j
contributions program, which primarily j
focuses on supporting disadvantaged peo-i ple, provided $4.5 million in direct grants James J. Howard throughout our service area. Other efforts, Chairman of the Board, including nearly 15,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of volunteer President and l
service and a successful United Way cam-Chief Executive Officer paign, also are significant.
February 19,1996 5
t
s..
e,.-
4
.,r.
...,.,.'l,':.t.
- i. L.,[ *,_. :,, y. -,
..c
.v.
t.
,;....:,y,.,.,".
.{s.
.,-'.\\ y.l *.
S.
.. [.l :* ', ',":.
-l'.::,y.,.) ;[ ',',,,: ;., 'll l,.
. { Q l',:;,,'...S*,
- h.j '. ' R : y.y, y ;,; y,..,:.
.,;y
- ...., -. -. '.....:,y.,c
.fs,;,
.,,_r l M.G.L Q, ;.
7 E., d g,l.",:....-
.y...,,.' d.s..,
9.
..n,.
-f
....i..,..
.. '. :' - G ; '
}
.j, - $ * ;;.., ' f :.
- K..:":;,, ;' ' ;
l_
'_'V
. C. l
',J.!l$ :
g.g g '.,.5'}'-;;-s.i.3:.y. :. ;:.. y:.,( ;ra f.,(,;f ;,l' ' *8_;[_
^ ~,:f. s '-
ev" p-EJ'
. n Q *,. j. :y -'. > :'- R
' y,) ;%i ;,, _,, _.
f.
- n 5
_ _ _, _. _. g' ?..Q a
.ro, ;..;
.,q:.,,.c. - } u ;;..., _,, 4;_ _
_t..,
g '..
._.;..:.(,,
j,h%. ' y
__:'..'.: Q.
.g!p } _ ~ ; :
' ' '. ~, ; f. : ;' '.
N ' '., *,. y v
'.'.)_,7','..
s:
...'.?..P,'
_,.t,,.
A
.........l9...
g,3.,. r..:..; ::, ;,. -.*
- ~ '.
.,.u
. :.'.. _ '., : w
.f..
- e.
1 c.
- ?
..n
.v ;w:.
- -q
~..:
a
': -[ #
,].
M[.' 5,.
.::1 j,.
f,
,' L f; '
C'"..
'l,, - ;
/,j,,",..
', }.
,q :
- w....
...y_
'.,.:,,n,'
'......,.l
.;,L U
,4 g. '. : -
f, 'k :.
.l'
.f,.>,...:
.z..
.. - w a: :
',., ^. '
i.,',.,,;;.:,..-,.,....'.,.. o.
.? :. ' -
~ ;., :ft.....p..>.
.'._y
-(.:
n
".e n.
u.v.
s wa
.s, -..,
.s.
'.s.l ', ' ; -l ' :. ',
+-,y'.,'>
,_l
.v Q.,*;A
- 1. ] ', 9 ::i:
', - {. " ;: i..,,:..; q '.,:..
.4.,
"L a.:. '. -..:
'E
~.
l 4, ;., :4.e.. '.,..; ':y,.,
..r L..'.. p
.l;.".'.".,,.,
,. _.* ?.'.
- A s. - ':..,. -::' '~ ; y.i. N N ' ' e '.
. s
.cw,. A v m
.j,l,;'
.' y.
- ',p W '
, ; (. [ '
g,
'7 'j 4.;,,
/ g
!, -4, ', ;-
,,.l."
,]
.y..j
,,t.
$:e,,, f.y._
.# h.. *,
I:..
f.'.._
.'I,l..I
'_ lk A
_. l,' :;*;'
?., * {.j., ; h,'. '. * :'
~. '..
', ' :,..,;: ' f,. n. n f...
_ e, [ '. ' '.
f'] T* ' '.:,;
' * : ' : ' ;.. ~. -
. y
,2
':.:l_
.,. : ;.. '.; ; :', ' ;;k
- .L
.w ; '. :.s..
' } l..l,'S.
l ;l ' -. ;_ ). _ _f k '
. :_ ;;,". ;. '.l 'f. *:_
l'[.'.*; l, j
- ,'4 'l' ;_ ' :._ ',
.,:l
,c_..
- c.-
.a 4
..? N. ' ' U, : l ;.'_
" i
- ., 3.%.'.;:.;
..,' Q . ? !. !'
..' ?,%
] i. tl i ':l i * ' '.'.
-< ;, ' ** f.)
'- ^ * ' 'I
- I.
.,. ~,, _,. -
.Y. : '*
',_. / : ':,,', -
n; _ ',., f T.,_
/. *, ' ',[..'_., ( ', (,,,
"t
., ' ~ _.
,.} y'[,. l., ']-
,,I
[. :I, ',y
'.',,.,".,a,.. *g.. _';, { -
(
f ** ],, : f f. -(
f 1
..'e
>e';.
} f ;, ',',,. ',..[
.,,.,.,;.,'6-s,
}
.,'A.
- .y u'
p-,
' l_ V [ '*.
r,-
,',l
-'fa-
'Y
(' '.; ".. h',
' : j '
... ' l[g.; '_
y
'. :. A
..:,,.. I ':.:
- .,_n
-w.
m
- z.,
- -
i'*,....+-s:'...'.,...g..
.g..
3,,., -ll. \\ :.)
.g.,.,
,,..,.,c- < [,,. -
,. p,..
bl~
..,p,
- i',f_,,_.., ;_..,
6
(
g....,g,,.,,.,,.,.6...p,,; f,.,,,, : ;.,,..... "
v.
..r I
5 c..
?.
'.,.,W-
\\' :,.,(
- e,.
,..i.,
.p ;
.,{.;
e...f..~
J p 4
- g
' <* M,i,,' ' ' ::y 'i.
4,.
..o'-
~
.. p.
.. -. c
.,.g'..r..
.a rj.'.
r l,,, '.,
.'.l'.. - - -..
' * ' l-s:
- e..,.
., p
..l ::.
_',,l ;,-
'. f ' ' ' i;.. y '..i '.l ;. l'?l,. ?...i,', ;, ;f.'.;.,, 'll:: 1.;., ~,
'..;",-'.,..",i f,. < f.k !.
f., ~. i f _ N.,*' l :.....'%
M. '...
I: l :i.' _
q a
.;,.,.',i,,}.,..g0,,,'..',.,:-',..,
'f _. ': ' 'j. l l' ; :;....',
r:*~ ;, c*,
,n S..;..'
._[_._
-c,:.i...:.,-
.:'. e
'.,-(,
. +; '. - '~ =
.' ^ .. '. " '.:.',' * *,...'8.
i...
&.. '. s,.
- c,
- fr.
j..,. l.{f -... : :'. h '.., ;,,
' ". ' *. ;.* ', f:,,.; L..
v.
_ 7,. '. ~,,
~,..;_,'.,, +,' [.
,.. _. ' ^ ^*
- L.. ;;.,.(_. ' f. ' '
..,y.
_\\_,
.. ' -.. Y l
.l'..f h f ;. - '.;
ll l.
' j' A
' _';. ~','; :~
,;.. ',,.,t
,p
,..r.t
?,
s m.-
[.:.,I.?,,."?,1 y,,'.'.s.
' i'$.9 f. ;..,f. f..' ; B :l,;
.. _,... ' hw&g..; f {. *.; N' l'_,,:, Lt.:
- .,.b,[ _
^'
.....v...
4 2
.. +.., ' '
. Q
(,,,7 9... g:.,, g i,,,
e, j..;..
..$ ' *_ li.;
.d, ;;,,.. ;,
p,,.;.,.,.., ',.., - _
._,.a,_.,..,r,;, :,-. _ y
- i,-
.f : 7_3',! s.,. l: \\,... ; [ [, :
>,.,, =.
'_....y_
- , (.
\\; -
,s...
,s
,' g a,,
j if
.'s b*
...... -, i:., ;., -........:..;..... -
y.
p;.. :........,..
...u.>
...v,.
,: : :).,. -
',1 9 h.hf
,f l,
'?:
p.
f, '
y.._..;,
i 4,.
,fJ d
y-j..,,..e.
- ..e*
- a
~.
.. hff...,... - "
J,
.- [
'=.,p,
.,..,,,g
.'...,,'c
,8.,
..i.,.g.,.,.,.,t,*...
......,.v'.
g
,.,.,..,. spf t.3 )
9
. '-...y........, -.
.i.g 3
i
../t.-
,c e.
,i,
,.., n e
- g f.
f.
[."'"
~
'.i-
.l
- .Y-
?'.
I :
t
' ; * : ' }
l".,V. ' ',.,:., q y,<.
a,....:..
r
,. K,-
_.o - :
. ~. ;, :, p-
- , :~ -
f,
..? :."..
$,.. ~' '
...o-n
..,.7,...
... '.^ %-
s
'1
'. V.1;p.., a. *^ '
, j",:. ;; ;..
' ~
. y' [ -
\\-
.. y "Y ' W,,g:h. L;..- ::..,'.. : :q. :
.c. ;' A
.'....._.'.....'j.'-. s.
_ :. : 3'b n C:. '
- ,,c...
- l
.y'
.>z
.,'..:..;.:'.- h c..' ; '
'"? _ _:... :.6... '.
- l. '..
'. :% * > ' ~
If
' "%. ;. %,B. y*: ':,7;t 6%.:,: s ': -
3 -
3.
? '. ' f, ~ -. l.::._.,'..".:', - -
': '. :Y
.:..a.7 L'.'
'.. '.: :.,.....: '. '...s
.b ', - -
\\ ',"t;._,..,*'r.' ; ' n*
b :. '.., : '
"L:: rlf.h. ;~, * '. ' ; i';. {. s 'l. ;. ' '.;...
\\
e3 c..
3
,.' ' ; ? Wn.f " 4
.n w.,.
L ;;'
<.y.,'.... ' '....., '
e 1,
1,., : ; ltt;yl. -
.f
,q;qu p a. p}p
- i.'.~' -;
,4. _
a; ;. y
,4-
- ..q e.,3 9.q.:r.+y' _. ;....,.._ y';,; -
<*-($.
g) z 7;'
,,;,s.; s...,.':
, - ' u:.
1, ',i+t ) A
. '. - - G*
- Tb; y 7
_ _,r
-L $.l i. Aj
' : J.. t.r.. :. ',,..
n.... " N ::..L, 1 Ah J %. t. R.. ',. ?e3:d,..;m4. $gh.f @*%e'%a
- 'L.
. H: 3 Of " 9 ':,D N' '9 : t ' ' ;f C..
{ l.. V.M.. d.
.O
^
- i:.:
..lc 4.,(p
.-..c e v..
- i. d..** ' ' ' '. l:..... h ': ' -
%-~W M. r&$:
' ~.k
( j. ' 2.
R' 4
A f V. i i.* ;. M,. f
.,K4 M%, ym% v.
.,r d-
+
g
'4.,s..V ~.. '..l,4
,...,... R,. ff
- ; * :,,..:. l. y..: t.;::,...
- h
... g r:.L. g,
'. j ' *;..::. l 5~. ':.. ';.
5' '. '.. i..,, l... p,. ' ?.. ;. r. x,.....
. c. w...
o
.a+
,$.d Q "A Yl:w.Xl['41 M:b c
.a"
,.... ?: m :. ;.a,.:.'; :.MQ 'c;.lv :. : -9
.. -. f/[:
h.,.,', ' '. ' ".;). l~.l., '.
'. hh ' A... O',d,4... ' [\\
',f.
,-:' i.' gi". c'.h Y' I').: '. ' M V.
- , ' ' "r ;.
e b
, l.:n
- 7
" '. s.y ; '. % '. :,, :..
'. ' l". il.?,.. '. f. T.
]. Q. '. :, - a: :,
i i
i ENERGY FOR A BRIGHT TOMORROW To ensure a bright tomorrow for our years of planning and development, we will shareholders, customers and employ-install a new customer service system (CSS) l ces, NSP is meeting the challenges of a that employs the latest information technol-rapidly changing marketplace with aggres-ogy. CSS enables us to deal proactively and sive strategies for the future. Our proposal much more effectively with customer needs, to merge with Wisconsin Energy Cor-particularly the billing requirements oflarge poration to form Primergy customers. With the system's Corporation was the most case of use, we expect signif-signincant of several far-icant productivity gains as reaching decisions that will
/....
enhance our ability to grow f.
I.
we provide customers with faster and more meaningful j
and thrive in a competitive f
information.
environment. In addition, 4{
we are actively pursuing j{
Improved customer service opportunities for prontable and productivity also were growth through our non-id ass i. :
important factors in upgrad-regulated subsidiaries, and NSP's Chisago substation is one of ing and redesigning NSP's i
are investing in new tech-several in the United States and control center, which began nologies to improve produc-Canada newly equipped with tech.
operating in April 1995. The nologically advanced electrical tivity and customer service, devices as part of a project upgrad.
center, featuring advanced ing NSP's 500-kilovolt transtnission information technology, con-Equally important is our line to canada.
solidates the management of reliance on the fundamental generation, transmission and good practices that continue to contribute to distribution operations in one location, our success: environmental protection, safety, cost control, workforce effectiveness, and Advances in transmission line technology community involvement, contributed to the success of a thr e-year pro-l ject to upgrade NSP's 500-kilovolt transmis-i NSP recognizes that customers are driving sion line to Canada. The project increased the competitive changes occurring in the the capacity of the line by about 45 percent, electric industry. We support competition in eliminating the need to construct hundreds both the wholesale and retail electric markets of miles of new transmission lines while because it allows customers to choose their enabling NSP to fulfill its electricity ex-l energy supplier, lowers prices and increases change agreements with the Manitoba operating efficiency.
Hydro-Electric Board.
4 Our customers are key to our decision-mak-Technology allows us to achieve marked ing, in March 1996, after more than two improvements in customer service, but 1
~ h?$N$a,!
Jj!r;;55@
+
.g.; 4...,
E sad
- ='y g.
e
'j
,.*[,
r
.L
.{'
'l
+
t
?.,;, l Y
i
, s&a l-4 _<
ib
. ?&h';.
?h;
....) p n
- b 4
- w
.m
?
v th.*
I;
,j,,,
f E
.{" 7%
~
^
_3,;5
. 7,-
_s; I
'[d 4,.
s
. zo j.w.
.J 9h
%T
'V p
~
m 5'
/
.,( @ ),. -
6
(
/
\\
4 there is no substitute for developing a per-Workforce-effectiveness improvements ben-sonal relationship with customers. When efit customers and contribute to NSP's Seagate Technology, Inc., the world's largest bottom line. In 1995, NSP initiated a sig-volume manufacturer of magnetic record-nincant work process redesign for NSP ing heads, was evaluating locations for a Electric's distribution area that resulted in third wafer fabrication facility, NSP formed productivity improvements of 12 percent a consultative account team representing compared with 1994. At NSP's warehousing several areas of the company to help attract operations in Maple Grove, Minnesota, Seagate's new facility.
workforce-effectiveness im-provements have reduced g
Seagate decided to locate the
~
warehousing costs by 52 w
plant in Illoomington, Min-percent since 1993, whil -
nesota, part of NSP's service increasing the amount of territory and adjacent to material handled per hour an existing Seagate facility, rg by 47 percent.
5 Ilecause electric reliability is
- i]'u n
essential to Seagate's opera-Those improvements demon-tions, NSP accelerated its strate employees' commit-scheduled upgrade of the Honeywell,lec., one of NSP's largest ment to cost control and Nine Mile Creek substation, electric customers, has received more customer service, but few than $1 million in rebates for energy-events showcased NSP em-efficiency improvements and the NSP also works closely with instaliation of a cool storage system.
ployee dedication and deter-builders and developers, NSP key account executive Albert Joe mination as dramatically as another group ofimportant (right) worked with Honeywell's Ben the 1995 heat storms. Two Cyr (left) on lighting improvements.
customers, in 1995, NSP record-setting heat waves marked the Grst anniversary sent electric demand soaring
[
ofits customer service guarantee program, to new highs of 7,439 megawatts on June 20 l
which guarantees builders and developers and 7,519 megawatts on July 13.
an installation date for electric and natural i
gas service, and ensures that NSP crews will High demand for sustained periods puts restore sites to their original condition fol-NSP's generation and distribution systems lowing an installation.
to the test and places enormous burdens on our workforce. Once again, however, NSP The program exceeded original expectations employees were equal to the challenge. Our and is receiving positive customer feedback.
line crews, power plant workers, control In addition, the guarantees have reduced center operators, engineers and customer NSP's own design and construction costs by representatives worked around the clock to improving workload management.
ensure an adequate electric supply and restore power when outages occurred.
I 9
.y.
,y------_-------
b**
,><...5
...p',' ) '. _.....,.
... ~... '... >.
- f' 4 -'..:.- ' " -
' ' _ ; :.: ;?g-
- ' +-.;*'
.'.'9
- . _...'.,,.( f, ;..[Y,;. ll '..
0
%N E*
' ' ^
.~Y.s,'.'.,:,,....
I, f, " g, : &Q l. L l.;.',:
y:N:';f.... '4-
. :.,e
,. g,q.4
.h.
b' 3
,,..:.;.._.. ;. ; Y.f.'* f ;-.,.
L
- 73
.,. u s -...;..-......
c..,
.g,-
,. :,,,;,, y. r;,,.
,.,. ;. 4,._;[ *
..1,...'_
y.;
,[
,h. k., \\l:~ '. l.g ' lr j; l' ?;' ;:. / ;y y y.
) ' j. y '.:
+,).-
- x !
. f.. :' ':[ -
.:t
.: 'i : y _ - Q. a.
b h,
' ;I
,l i
s
_s-....., ;,;. _ ;. u
-..,..;~:.,,.
r..
'.:$ * ' ' { ',
ll.(f...);
f)g.,_,
":::: ')
,_. [.
Yl (;.; _ f
- l2}
- j... ifl,.Q[.',[.,; ' _. ' Q.k._ ;' f:.
,.^
f
.....(,
,V_
!.% ?
' ;..l
,\\ '.
.._? S b,) -
- .T V ' ' - ' ' - '.
- D '
- y.. '
~
L.;). -. p y _ ';, ; :.,_,
(,
, p.l h' '
.. ;[,1
. );. ..b: ' A ' : ! ' '
[
Q_. rg,
... ' ' ;- ).: <. :_
.,.'..,.f.;_,..., '_g. t
_ 3.,
. (. -;,;,,.
- .~'
u,..
yz
....;,_y
- y.
..,u..s
- c...
,b,. )._
- p_,.~,..
- ~....'?
s+
1,.,lp :(y:$. :il o.g...: _ < -:
W.
~,'.:':1,
~.
.7
';_].._
,-[
~ ^ -
- G '.,. ; '
CL'
,i
~?.
f.
.,,l.
.,, ;.ll
,. ; r..,
- [
[
~
\\
. * ? {l ? ks? ' n... l-?,', W.'W f
.?
,.,. ?.:
L
...l,
yp i:... }, )
. & ::. ' ' : l'.l': Y V. l '. ' ' ' _ Q '.'.}. !:. i.f ' (
. f.t. ' ;. f. R..
', y..~ - [..;
.?.': ' '.. ~. ^ '..L; l :L +: :.: '.' \\ 1. '. u L.
Q l'-
L.,f. ' J '.' ' [.
~c.,l+
)
i.
. ws
_e
.. -.. ; *.-L..',\\ f.. _..
- _ ;_,[ 9 '...,,l ).".y.L l. ;'l. l g? [ [...., > f '., ',._.:
~..
, e l'
. e....
.. ~
+
).;
- g..
, ;. ', a
-.;- s.,.;..,. :.;..l;.;; ;.
... ;, y.,
Q...
- i. e j g, b_..
{,....
7 -
,,g
&q,,
q.. g, l;;
~.,. -
-l....;.
c:
. );; Y
..t.'
../.>
7
. :.]
.l
^
g
,y.'
. : l 7,. _ _ '.,. ;, ' ;
1' f _ '.., e p., _._'. ; :, \\ f.; ', ' J ', f,,._., ',[.;. ',.. -
v,;..
j
.p..
. 7
- q... t :
-b.. Y,., l
".{.'
- t. :.-
..;i
.r
,.',,,: ' l:.. s ]
Y,(
h 8
',,L.
, A
(;,.. "... ;f, y:. -.
. ;, J.,., 9.
. ', ', '.;..'.'-,(;. ',,. "' t i
. f ' f ', ;...(. ' A ' '. ' ('... '. } '4 g.,
4'
'7 i,,. ;.4 - ..',,'Me>j
. : '. J.,
.,'*:,~,.' '
7.,
y
'f at',
- j: ; p.
'. w,
^
.' e; *-; i& _.
-l
' * ~ '
.l
- $ '.l '._.
_, '_';^ -
f,
..; f.l :, V[
. :'.; ' - ~.[.,(
.'. l ;.l. _..
WW l. W,. :
-: L
- T
<.,....:7,,'.'...-
T<.-
J l s:
Al,, ;....,..g,
(
.f,
'4,-
(,
/.3
.r.
r
,.,p,
. :. :l
_4
.,.,.i..,.,,;.._*"_..;.,-
, f. m,,,
,.'.,......,',p,,
r
.,a..-
v 1...-
,2,'.'g..
.. _. [ ;,
P,,',...
't I
[
^
l-
.l
_ l.:
g
'},
.. c p.
.i -,.
},.
,. ' f i.,, - ' -.. '. ' '
t...
[..
1
. l.'
N, f4,,
i tg.,,
l.
r y
.f n
4f
..}L; y':lll. !., _ ' ' :.l'.,.'f.
' ;;..~,'%.^::4l.Q.',q;/_};',
]:.[:l /. },
_ j._. ~ _ '.', '.. ' J,c '., } ' \\.. *.. [ ; f f ' *.;;
s >
ll_.
y y, f,.., '_.,._a s-p..
' f, ~ p
_?.
+
.y.
G, _" %.
,;,'l~.
.).: :..
- i..
' _.. [., }l.'.., h<,p.: nf *,, j,. <. / : ; *. y:
'm.
. '...y. ;. J '
. [ _;.,
. k ',)
s".
.!.; l ;-
- f. '
. p,,. ' :.'.,
,/,., ,.. 4. :..t.
.s-
,..n'.
.....,'.'e.
..i.r.-
. 5.,,.,y. ;.. -
.e
-e
-g
-. 3
. ' L % _ '" ' J i A;, -
' ' ' f A 'll *,,t,:.< ' k,h g ' ' h -
,'i.,
T
.j,
.'_',l
'~- : : :'.'
,l.~.'
'. * '. ' ;.(
.g
- '.',[.h *,, E ' v,5
,, ' [ [', Y. }, ('h..
. -f' :
Q. '.' ["; ? * * *. ' , '.. - [} #'- 'g
. P \\,. "
k
' )._ s 4,
i '.
l'..., ' ',. ',,,'
,:,.j f '. -...
.f;
'.','s-
.- ' a
_ ^'
',p l
- u. n*:[
,_ _. ',.;:,, G' s'.
s'
's s
s
~' ". '. -
. ' (".}./ ' y l s
\\ '.s,. '. -
- 4. p 1.,.
t v.
j.%..y.;-
,;.' *f ;. ','. s..
..3:..>
a n.q:,.. - '
. '.. '. :. p m.,f ;.,,
i
' j."
v...
..r,
.L
'.I-.
E
... [ *,
, * ;;v
..,J,-
.i(
,Y,'..:,.,..
- (\\,,[
'r,.'. ' ', '(,,., k. j '. l[ t ! + ' '
"_1.,
,h k
..;s-l :..
r.(_.,
q9 ; ;.9 W.
A, ((,
' ', h, _., - l {. :'
't.
I,] ?;.
y,.
,2- } '...
- 3..n '.
[. '%,. ' *. ' ; _ : [;_l.,.'.
y.
1
,; y
.o.
j'
, p.
.l e ;;, ik,..., - l (*'
- .l '
....,... *. j ' l lf ' -
': f '.. ",.{. *
- j - l.,'
' l; l :.,,..
i..
l.
/
r
f
. I
.,' $ l.' '
4
.!: - ' ! l ',
.C i&'
,...; ', y ' L.. l.) 'l' k _ I
, l(,N y.,. ' ',';..'
}l.l.?l,
'
- r
~
.. ' k y ',}, '.:,
' /'.
<- [ p. r' ^ '.k..
- ,4.[
. h l f. l ' I'.. U 'U.j
. E: hl[ '
I
['
e' L.
? lp A ' b /
hj
. d/
'f',,
.u_ l,,,
.h
, Of
?
1,.: :' ' :.
' v,, yo, [ * *. ';If 3
,.,,,, '.:, - l b_. ;2 \\'*
[ y ,. L ; g',
!.-[ ^ .
' b '. ;. ?
' ', ', [
) ;
,m> y!&, '.3. "
' r ' y ;. v_
- '~ W *
..,,y,.'....,:
- , s \\ ;...
A:
g'.n u., y ;,.;".,,
~ ^~^i..:
.^},0 $, N Y.
a T M-l.,Q L,z;,, i.l M
. - s 4. ':,.h
- ,] T QC:.
.K;:',:,,,
,.V
~ '..';., '
_' '.V %.? Q(% ' l%;.b r.'
i,,
2-l.) p-
.n 5
- l.,.
l ',
- p.'?,, f. l '
W *, ' ' ' '.-).T.fp,3'...
<.. ;. (,,3,
'.l _ $., y., *'*L.'.-.
'.L '.k,.., ?.:;.
e 'i...,
,' ' :y'*
-J., :,.;, '. f.'. :
- 7.. -. ~.'.. b.. I.l.'.,' ',] :d(.- Q . '. :[ ' *<- lg' a.
l 5
'e'.
'. ',al f
..f, t :l..
e,.
f.,.
+
j.,,
,e.. < g,.
g,,.
,; f g.,
4: :... j.
.y.[... _
j e
. i
',,fl
_,'L *,
,a s:: ' ?,k,}{.l '. ' :q. < ;;'.....
~ l A.,
1.y
}, ;,.,;. [.,> ?, e -
' U, ',.. { y. f:) ',P
'^
- ,_
- ):/ V E
u
' ; h, ',1
.. yf y.. ;.M; e y!. ), S
'[1' M. '.. ',';; ; g',6; ;_., ';... - [. :. '.
1 f.-
_, ? &.
- - v..r.,
. "(.
m"..
3
'.;y. e :: % ',';'.....,...,,
.'..i'.f
- .',4 e..%..m :4.. ',':
,., - _..... '. ',,..;', {..,'.h
.y ;,8 r
.:...,~.a.
W,.
a..' v.
.y, }
y.c.
p
'. g.. ~,. ' 4.." *,,.
s'. ' '.
..4y,
,, , Q. g
..y.4.-[
- :. '*,' ;. j h' * ; c
. ;, w..:, ;,.,,,
[_',.
'. I ', ; ', ;
a.
l-7...__
_' - [
',l
,.t 4
.s
- p,g
- 3-
,,,,ot Q,,,,.Q. ', -
.;.., \\.',
y.,
.1:_
,._ y.., ;. y [ f < {!. 9,%
.~,l,
. ' /*
'_, l' :
f, ':
- . ^ -
g..
i.,.-
'l
- ['.
' '. - l./ h '.f
' O ',, 3 tI
- ^ -.f
) 'i I ( a N, - '
't i
s r.
u)
- _Sa, l
),...'
_f'
. :,1, ' ' '.,
{,
' jr
..,q.,
..; y ";
- e..
l-
+,
..-a e
f.
a - '_
l.
,.\\.,
[.')
. :9 t...,..
.,.s.
.r g,.,.,: 4
' [ '_ '
r.
- n f.
'... y ty : -
~ _..
- x., y.. -.'.
s r.
- ,.~ -
i r
,1
- k...
5,'..'
.. - '. ',. J /. _..... ',.,,
',',, _ \\ 'l s i f. '. ' (...
i.':..'.-
-l :
, i.. i. ',... / '..:f' *..:..
-,n-. '....,. ".
- ^
V.
s s
... ' '... '. : ? _..: : '. '
g..
',',.,,f,
.,. _,,.-',p,,',, ;,;
,,.,...?:
J
{.
' '. ',. ' '... *- = '. o
- :,.,, :t
- . [.
,l - '.,,,' i,. -~ ^, -. ', y
..T*.
+
J
(
t '
3'
.,.s.
Q)
[.
(,
g.e,
'f
.;(_
g;
_33.<.
_.., p-
-,3 ;. ; r
.....,,..,'.,..:, e - [ h. i.. f',-
.3
- .. ' q:
T... ;..,
a.
s. a c
c.,, -. ~ '...,..
,.',.j..,','.
.-l L
.] :'_."..,J.."...,, '; ';
x
.. :......a
The heat also tested the effectiveness of NSP's strong. Prairie Island, which holds a No. I energy management programs, including the rating from INPO as well, was identi6ed as a Saver's Switch *, Peak-Control and Energy-top performer by the Nuclear Energy Insti-Control programs. Saver's Switch
- reduces tute. Both plants received high marks from peak load by cycling participants' central air the Nuclear Regulatory Commission in its conditioners on and off for 15-minute inter-most recent assessments.
vals. Peak-Control and Energy-Control pm-grams require participants to reduce their NSP's coal-fired and hydroelectric plants electric use '.< hen NSP is finished 1995 with outstand-nearing its highest, or peak, ing operating records. Our level of electric dcmand in 1
Sherburne County coal-fired exchange for substantially N
plant once again achieved reduced energy bills. Uamg an availability rating higher the pmgrams, NSP elimi-than 90 percent, compared nated 550 megawatts from its with the industry average peak load during those criti-of 82 percent. Our Allen S.
cal hot days.
4 King plant remains among the 50 lowest-cost coal-fired NSP's electric generating Record-setting heat waves in 1995 plants in the country.
plants performed admirably tested NSP employees and systerns.
during the heat as well. The B th were equalto the challenge.
The company's 19 Wisconsin company operated many of hydroelectric plants gener-its peaking units, those ated 968,065 megawart hours, plants used during times of high energy a 16 percent increase over 1994. At the demand. The Angus Anson peaking plant, Chippewa Falls hydroelectric plant, crews which went into service in September 1994 completed an $8.8 million renovation, and uses two natural-gas-fired turbines, increasing the plant's turbine efficiency proved especially reliable and cost-effective.
from 76 percent to 92 percent, gaining addi-tional capacity and allowing it to operate another 40 ears.The Chippewa Falls reno-Safe, efficient, reliable operations also charac-3 terize the company's nuclear generating units, vation is consistent with the company's which include the Prairie Island and Monti-strategy to keep its existing assets viable and cello plants. In 1995, the Monticello plant maximize the use of a site for the long term.
received a top rating from the Institute of Nuclear Power Operations (INPO),indicat-Another important NSP focus is to secure ing the plant's overall operations were excel-avenues for profitable growth, which is lent. Monticello also achieved an availability the goal of our non-regulated operations.
record when it completed 375 days of contin-Once again, those businesses completed an uous operation at year-end and was still going excellent year.
H
+-
gx::y :,3 ;:..;;;;
...: y ;,,
.3. p.
. y..;:.;.;; r
_,m_; y._.-...,,, 9
' pf w;., q ;.g y : :,-
. :y..
_.;.,jg' W :_j_;N p 7:y., ;_.
- q. p.;;.
c y.-Q-
[ y :.,.. :.
a
' * :?
..7; L W-
~ ;.
( :
- 1.,:,(:
N.
~ ~
d..
- ' n:
^
A.., :.w,v.
w.
_? -. ff 3
. _. :...;; ~.. '
4,..
+f:A'Y O_:... :
_9-
. g: : ! :[h$,.g f:.;M '.' ' '.' b.':
,,,l
.,.e
)
..c 2'mQ[,. _,.
.j4 r..
.q
.?
f N
. gbL
{
m
~ ms
~
j L
1; N$
J
. n. ~
,. s(. s n c.wl m.,!+[
m.c r
.x' '
,/,
V'
.l y,,
.M C;;;s
}.gL
[
? );.,'
%L.d
&f
. h f. ' ' ^.
l_
['
l;
.g
. +... -
fl i
~.,,. *. '
i h
j
.?
h R
w 3.w. v a:
.w
_,Ih.
i 3 ; ; _~ ;,
..v-y i
j.,i h. I..
M ;I
.ll.
(
'...I t-r
'j',' ' '
j.
'E.
.~O.v4
- g
.f
,b
?.
.. +.
.i -
' 'l
..a.
- - c.
..[.
1 -
e
. Y,,
.1-1-[ '
jl.[ !
/'-
< - 7l.
-. tE
?
.in 4beenslend, AmeaRa.MW ;
y4
^ L 1, i M mr T
^
. ' y :4,..
'.,q=-
' ' Australian holdings reRect thei.
.g.-"
~ :
.j..
^
': [
y::
\\
m',_ p ),.x-
[ e. _. ^.
~
m.
'.:.I?
N
~ ' '
,- t...:
.~
~'.,
a.' -
.}.
..yl..l: ; ;.. r- },l.- ? N ; _
.{
' "[ } s Y:':).<" (,.'
. :...:'~
/ ' 7 '., ' ~.
c.
y.
. l.
1..;;..,.h_.
- " G N ' :.$.:&.:
l.
?.'
., l l l.'.!
..h[)h/ [
I I
- h,.
((.[k. k f;.k
O Our wholly owned subsidiary NRG district heating systems in Pittsburgh and Energy Inc. (NRG) and a partner own a San Francisco.
400-megawatt share of the 960-megawatt Schkopau coal-fired generating plant, located The NEO Corporation (NEO), an NRG near Leipzig, Germany. The first Schkopaa subsidiary, is successfully operating 11 small 1
unit began its startup process in November hydroelectric facilities across the United I
1995 and was declared commercially opera-States and two generating plants that use tional in January 1996. Schkopau burns renewable landGil gas as fuel. NEO has brown coal, which comes exclusive rights to develop at from the nearby hilHRAG least 12 additional landfill industrial cor.iplex, also gas projects.
owned by NRG and part-ners. The second Schkopau Cenergy, Inc., which became unit is expected to begin Cenerprise,Inc. on January 1, commercial operation in 1996, is another non-regu-June 1996.
, {
lated NSP subsidiary show-
~9 ing great potential.Cenerprise in Queensland, Australia, a
markets energy management NRG operates the 1,680~
With the growing popularity of girls.
services, natural gas and elec-megawatt, coal-fired Glad-hockey, NSP Gas has discovered a tricity nationwide. In deliv-stone Power Station. NRG pr misino market for desiccant ering energy management dehu nidification systems for new made signi6 cant improve-and existing ice arenas. Fueled by services, the company devel-ments to environmental pro-natural gas, the system dehumidifies ops a five-to 10-year energy tection systems at the plant, ice arenes m te efficiently than partnership with customers conventional methods, which ran smoothly in its that typically includes analyz-second year of NRG opera-ing energy use, developing tion, in December 1995, NRG signed an and implementing ef6ciency improve-j agreement to operate and partially own the ments, helping to arrange financing for Collinsville Power Station, a 180-megawatt, capital improvements and guaranteeing coal-Gred plant also h>cated in Queensland.
projected savings.
NRG's domestic operations include the hiin-NSP Gas added more new customers in 1995 neapolis Energy Center, which won several than ever before, signing up 16,708 by year-contracts in 1995, including cooling the new end. hiany of them were in the Brainerd Federal Reserve Bank under construction in Lakes area, where in 1994 NSP Gas initiated hiinneapolis, and heating Fairview Riverside its largest gas expansion ever. The utility also Hospital and Augsburg College. NRG also is aggressively pursuing a strategy to sign up acquired a 50 percent interest in Thermal customers on existing NSP gas lines.
Ventures Incorporated, which operates the 1
4 13
l
._.c
. ; ^ '. ' *..
f.:...
1
'I
' '..-~.: '
- _. ! ;', ;,plb _ ' *,_.;.,, ;.. [
,/.
- E
'.,.''*~~'.;+e_
_- -.}'..._,:
'i 9
.y
..., - 'g
- [: Y. -
Q L.
.;.l 4:
^.
f z y,'.gn.,gu..mw.%y
^
g
........n. (
/
p
,#,a ~w.,...m%m.; :a m.
i yyg
..; < g,
s w r, '
=
';Q h;... a$:
. : y,.y.3 3.QQp -
w,,,,ngl;,;;q., gg.:p{ y
.h;yf g., yn Q
m?y;/3g nes.
1 W a6m 6 w m pen s isd& M rn W g
. S.. i. m p ~
6
,...* /17 p
.f.
0%
.. ;eNOM['.E[-
[;
[
~
i P
. e.
. n..,
+c
, ~,
... ~
.: x 7
-z /w. ;. : vJacNSS tl{S C0mpanfsiegel,s.teiri... ; u.:
.":D e
- ny.? A 4
'ry. M ':
4 y:.: '.
^
..e a
.n
. ~ ; q ( 7,0.
.,Q c..
/--p g..
3 3
y;y
... +
c
.. 7; ;. :._.:;
- , (.~.,..
. m.>~..
m... #..' - J'.
~
- t u
. ;;.~..
.. - _. ;..p q._ ;.f;....
.';. l l. ;
<.n'.'
G:
' iy - '.; ~.: ' '
' ~~. ' %.! l '
- } l' v.} ;;. '
- W j _ ' y...
- V.
i
. g.
.7.; [
.g;:
n g
g
.v.
'e gi
.a g;
s_
, f
% % A; 4.wE,-
M,tM,
n&
y n-m... ~
n
$m
'E
- y i{,
' f l_.
A n
Amvg[g
,c p.a 7 7 '
}
,.,, x.
.a..
+i*h' t' I'Y
'~
[.','~
v
[
I -j.'.'
M' /
d g
.9 h
3 ; n% 1.] g w-" '
A., A L'lf.. -&,n m ; I.;v
, l s.
L 's ".? L
" ' >D :
- >Q::;
-,,';.,N,;-. : ; *
- ...
- ..2.'n c.
.a w
~y f : -.. v....
-7
..c.
I I
'g
k'
....'z.,
,7
'qq'f;jw
, y[.
.~f, h sQ "3. L', f g
g ; i. 4 y,-.-
.J
..: 3
.,;y
+ y a
.a ; -
.c iL [
'_[ ; _ j
..l j.
7;.
i; 3-
. Mk (s:.s 4-
.m
";- x t.
.... : '.I
.., h;.
- .;f,lf.v&a
- . ~ <m 11., m
'(
.g. -
ft.-;
- l r
.,.. j
.;. n.
u.
3., k:.
. ; J. :'
. ;.. a. g.
3,7y;y g ;g,g;;s 4:q
- c g
. ) ;..g 3 ;;; ;
j g
r w &.. n _,G _ ~x;.
~
QQ t _..sQ(f f
[:.
[z).. ). [
.' v.,.
a'
..j jyg Q sf;. f ::l ).:l : J i.J' l f l.l l l l l 3 & & % R,x&,..
w.Rf v.
,.v
. ; o
];
n e.
.. gs; }
'L :
+.-...s!
M-
?
f mum;xnzadw n,
+
- I, 4C-
.,J.,;-,'
.e J'.
jg'..
3, l
e
- g4 m.'.
._ y,gm. p..
.i
- .. z ;.
t
- c.
2
.y
..2 g..
.. +sn..
'n -
<c'.
?..
't.-
g 4-
..,, p _. A.. +..te; s f
hj.
b 0,,
- _~L
..['
^ '
' 3 " '. ' ' -
~
Like NSP's electric business, NSP Gas is rely-To improve customer service and increase ing on new technology to improve prmluctiv-productivity, we will invest in new technol-ity and customer service. NSP technicians ogy when it makes sense. We aiso will rely on who hicate underground electric and natural workforce-effectiveness measures 'o accom-gas lines at customers' request are using a plish tho,e gads, new computerized field operation system that incorporates radio communications tech.
Our regulated and non-regulated operations nology to transmit data to and from the field.
will remain poised to take advantage of The system has increased opportunities for profitable productivity 5 percent and growth. We recognize that 3 73 reduced dispatch and admin.
m our success depends on antic-istrative duties by 50 percent.
ipating potential markets and moving quickly to cap-a At NSP's wholly owned sub-l ture them.
sidiary, Viking Gas Trans-j, mission Co. (Viking), plans Finally, we will not abandon are under way to expand the fundamentals that made Viking's existing service to NSP a strong company in the the Minnesota communities NSP employee Barb Thomas (left) past and will contribute to its of Perham and Randall and became a good friend nf Beverly competitiveness in the future industrial customer Ameri-(center) and Tammie Thornton after as we merge with Wisconsin participating in the Homeless To can Crystal Sugar,and begin Home project, which links homeless Energy to become Primergy.
serving ProGold, LLC, a families to housing in the Minneapo-Those fundamentals include new industrial customer in lis St. Paul area. During 1995, NSP the recognition that our employees moved 12 families into a North Dakota. The com" place they could call home.
employees are instrumental pany will install 13.5 miles of to our success, and must be new pipeline as part of the skilled and empowered; the expansion, which is scheduled for 1996.
belief that contributing to our communi-ties remains important in a competitive As NSP moves rapidly into a marketplace market; and our ongoing commitment to filled with greater uncertainties, our energy environmental protection, will remain focused on customers and work-ing with them to identify and meet or exceed With those strategies in place and our will-their needs. We will look in particular for ingness to pursue them aggressively, we have opportunities that contribute to customers' ti.e energy for a bright tomorrow.
competitiveness and our own profitability.
15
a 1
~. _
.g j
1...
L.
l j
i
'L
[_..
[ 'y C
a p
7 y-Ff y
y.
y
- y.. y
]
jf
.e.
.m b
e, a
m 1
}
BOARD OF DIRECTORS Back row,left to right:
G.M. Pieschel, Dr. Margaret R. Preska, H. Lyman Bretting, Dale L Haakenstad and Douglas W. Leatherdale j
Front row.left to right Richard M. Kovacevich, John E. Pearson, W. John Driscoll, James J. Howard, Allen F. Jacobson, A. Patricia Sampson and David A. Christensen a
l 1
4 DIRECTORS OF TH E. MINNESOTA COMPANY l
H. Lyman (Tad) Bretting (59) 3,4 James J. Howard (60)*
John E. Pearson (69) 2,3 Pres &lentand CEO Chainnan ofthe11ami Retired Chainnan C.G llretting ManufacturingGanjuny, hic.
Firsidentand CEO The NWNL Oimpanies,Inc.and Manufacturer of napkin and paper towel Northern States Power Com[uny Northwestern National Life Insurance Co.
folding machines (elected January 1987)
(elected December 1983)
(elected March 1990)
Allen F.Jacobson (69)2,4 G.M. Pieschel(68) 1,3 David A.Christensen(61)2,4 Retired Chairman and CEO Chainnan ofthelimrd PresidentandCEO Minnesota Mining Fanners and Merchants State llank Raven Industries. Inc.
and Manufacturing Company (elected February 1978)
Manufacturers of reinforced plastics, sewn (elected January 1983)
Dr. Margaret R. Preska (58) 2,4 I" P "
Richard M. Kovacevich (52) 3,4 DistinguishedSereicr Professor It 11 i rly Chairman. Firsident and CEO Minnesota State Universities j
W. John Driscoll(67) I,2 Norwest Corporation (elected January 1980)
Retired Chainnan ofthe Board Hokling compiny fbr banking institutions 4
A. Patn.. Sampson (47) 1,3 cia and President (elected April 1990)
Rock Island Company Douglas W. Leatherdale (59) 1,2 r in ersand Associates
(
i r r 174) hainnan fthe Bwid, Presidentand CEO A man gement and diversity The St. Paul Compames,1ne.
consulting company i
Dale L Haakenstad (68)I,4 Property and liabihty insurance (elected January 1985)
Retired Firsidentand CEO organiiation Western States Life Insurance Company (elected April 1991) 4 (elected February 1978)
Board Committees e
- 1. Audit
- 2. Corporate Management 1
- 3. Finance j
- 4. Power Supply
' James J. Iloward is an ex officio member of all committees.
16
PRINCIPAL OFFICERS OF THE MINNESOTA COMPANY Douglas D. Antony (53)
Gary R. Johnson (49)
Roger D.Sandoen (50)
President-NSP Generation Vice Praident, Geneml Counsel l' ice President, Controller and CIO
- U""
"##'I L Atland D. Brusven (63) -
Loren L Taylor (49)
Vice Pmident Finance Cynthia L Lesker (47)
President.NSP Elatric
~ Jackie A. Currier (44)
Edward L Watzt (56)
Via Praident and Tirasurer Edward J.McIntyre (45)
Vice President-Nuclear Genemtion Via Prnident and CFO James J. Howard (60)
Keith H.Wietecki(46)
Chainnan ofthe floard, President and CEO Thomas A. Micheletti(49) pre,; dent-NSP Gas
~
Via President-Publicand GoerrnmentAffairs
. DIRECTORS OF THE WISCONSIN COMPANY H. Lyamn (Ted) Bretting (59)*
Wayne E. Harrison (68)
Larry G. Schnack (58)* '
President and CEO Dairy Fanner Chanallor
- C. G. llretting Manufacturing O snguny. Inc.
. elected August 1990)
University of Wiscrinsin-Eau Claire
(
Manufacturer of napkin and
('''
I Ray A. Larson (66)*
,3 jo)5" '" '""
President -
Loren L Taylor (49)'
' (;[[
c Wissota San'd and Gravel Company President-NSP Elatric Philip M. Gelett (45)*
(elected November 1979)
NSP-Minnesota I "I##"#.
- I John A.Noor(49)
Northetn Engravs.ng Cutparation Chairman, President and CEO rates P wer Company
'Autlit 0ammittee memlers
',> r n
r I a t< r 11 plia e
and electrome controls indusines (elected December 1992)
(elected May 1990)
PRINCIPAL OFFICERS.0F THE WISCONSIN COMPANY'
)
Michael N.Gregerson (48)
David E.Ripka (47)
Neal A.Siikaria (49)
Vice President-Cwtomer Services Contmiler Treasurer John P. Moore, Jr. (49) '
Anthony G.Schuster (51)
Patrick D.Watkins (55).
' Saretary and Genemi Counsel '
Vice President-Pouer Deliary and Generation Via President-C<nporate Services
' John A.Noor(49)
)
Chairman, President and CEO DIRECTORS OE N RG ENERGY, INC.
Douglas D. Antony (53)
Gary R. Johnson (49)
David H. Peterson (54) j President-NSP Genemtion '
Vice President, General Counsel Chairman PresidentandCEO (clared February 1995) _
and Corpomte Seartary '
NRG Energy, Inc.
Northern States Pouer Company (elenedJuly 1939) i Jackie A. Currier (44)
(elected February 1993) 1
. Vice Presidentand Toraswer Northern States Pourr Company Edward J.McIntyre (45)
(claredJanuary 1993) 17ce President and CFO Northern States Pouer Company (clated May 1992)
PRINCIPAL OFFICERS'OF N RG ENERGY, INC.
David H. Peterson (54).
Carl A.Carroca (59)
Robert McClenschen (44)
Chairman ofthe floard, President and CEO Via President Via President-
- "'"I*#"#
Jame: J. Bender (39)
Assistant GenemlCounsel Julie A.Jorgensen (33)
Louise T. Routhe (39) l and Corpomte Saretary Vice Presidentand GeneralCounsel Vice Firsident-Human Resouras 0
Leonard A. Bluhm (50)
' Valorie A. Knudsen (39)
' 17ce President and CFO Contm/ler Ronald J.Will(55)
Via President-Opemtions and Engineering Craig A.MataczynskH35)
Lee R.Carlson (56)
Treasureo.
Via President-U.S. Ilusiness Detvlopment
_17 j
~
Northern States Power Company, a Mmnesota corporation (the To IIcrois) dividerds an a reg Isr b: sis aid meillai; a lxg-term Company), hae two significant subsidiaries, Northern States Power average payout ratio iJi the range of 65 ti 75 percent.The objective Company, a Wisconsin corporation (the Wisconsin Company), and payout ratio is based on long-term earnings expectations. In June NRG Energy, Inc., a Delaware corporation (NRG). The Company also 1995, NSP's annualized common dividend rate was increased by 6 has several other subsidiaries, including Viking Gas Transmission cents per share, or 2.3 percent, from $2.64 to $2.70. The dividend pay-Company (Viking) and Cenergy, Inc. (Cenergy), which changed its out ratio was 69 percent in 1995, within tiie objective range.
name to Cenerprise,Inc., effective Jan.1,1996. The Company and its subsidiaries collectively are referred to herein as NSP.
To maintain continued financial strength with a double A bond rating.
The Company's first mortgage bonds continued to be rated AA by S&P, FINANCIAL RESULTS AND OngcTivES AA by Duff & Phelps,Inc. and AA by Fitch Investors Service,Inc. Since
'Y
' "'" 9*9 1995 FINANCIAL RESULTS its interpretations of a Minnesota law enacted in 1994 regarding the NSP's 1995 earnings per share were $3.91, an increase of 45 cents, or g
g pj g g
13.0 percent, over the $3 46 earned in 1994. The effects of sales First mortgage bonds issued by the Wisconsin Company carry compa-growth m the core electnc and gas utikty businesses, f avorable rable ratings. NSP's pretax interest coverage ratio, based on income weather, and reduced operating and maintenance costs more than w thout Allowance for Funds Used During Construction (AFC), was 3.8 in offset higher costs for depreciation, tax and interest expenses. This gg provided a regulated utikty earnings increase of 44 cents, or 14 8 per-year end 1995, including both regulated and non-regulated operations, cent, from 1994. In 1995, non-regulated businesses contributed earn-contributes to NSP's financial flexibility and strength.
ings of 50 cents, up I cent, or 2.0 percent, from 1994 earnings.
Investor returns also were enhanced in 1995 by an increase in the Twih h%mWSP e5 h M We common dividend rate, as discussed below.
by the year 2001 GRG expects to meet this goal through growing "9
NSP remained financially strong in 1995, as evidenced by continued nesses. Businesses owned or managed by NRG provided 12.4 per.
high operating cash flows and interest coverage. NSP maintained
- '" "0" "
its first mortgage bond ratings with all rating agencies during 1995.
NSP bonds are rated double A by all rating agencies except To maintain long-term everage annual earnings growth of 5 percent Moody's investors Services (Moody's). Moody's downgraded NSP's from ongoing operations, as described below. Excluding the non-first mortgage bond ratings in May 1994 to Al based on its interpre-recurring items discussed later under Factors Affecting Results of tation of provisions of a Minnesota law enacted in 1994 regarding Operations, NSP achieved earnings per share growth of 7.0 percent the used fuel storage project for the Praine Island nuclear generat-in 1995 over 1994 and an average annual growth of 10.5 percent ing plant. (See discussion of this legislation in Notes 14 and 15 to the since 1993.
Financial Statements.) In 1995, Moody's placed the Company's rat-ings on credit review for possible upgrade based on anticipated 1994 1993 cost savings from the proposed merger with Wisconsin Energy Cor.
Total earnings per share g
4
$3.46
$3 02 poration, which is discussed later.
Less earnings from f,d non-recurring items f Gal 0.01 Earnings from ongoing operations :M
$3.45
$3.02 ota et n o investors is measured by dividends plus stock price appreciation. NSP's common dividend rate increased by more than 2 Total earnings per share increased 13.0 percent in 1995 over 1994.
percent and its stock price increased by 11.6 percent in 1995. For the most recent 15,10- and five-year periods, the total return on NSP BUSINESS STRATEGIES common stock averaged 18.1 percent,12.7 percent and 13.8 percent NSP's management is proactive in shaping the new business environ-per year, respectively. For the sarne periods, the total return for the ment in which it will be operating. In April 1995, the Company and Standard & Poor's (S&P) composite stock index for 500 industrial Wisconsin Energy Corporation (WEC) entered into a definitive agree-companies averaged 14.8 percent,14.8 percent and 16.5 percent per ment that provides for a strategic business combination in a " merger-year, respectively.
" transaction to operate as Primergy Corporation (Primergy),
U "" '"
"9 ""
FINANCIAL OBJECTIVES c
an anagen nuum a sach n n cru d NSP's financial objectives are:
mg a combined enterprise well-positioned for an increasingly com-To provide investor returns in the top one-fourth of the utility industry
- * "fi d U "
e o
as measured by a three-year average return on equity. NSP's everage com anies' respective customers and to enhance value for the return on common equity for the three years endmg m 1995 was 12.5 shareholders of both companies. In addition to this merger strategy, percent. Based on a three year average, this return was below the management's business strategies include:
top one-fourth of the mdustry, which was approximately 13.0 percent, but above the median three-year industry average of approximately Focusing on the core energy business. The electric utihty industry is becoming more complex as customers, as well as utilities and federal and state regulators, promote competition. To remain successfulin
)
18 l
this more complex environment, NSP will maintain its focus on its mal summer weather m 1995 Mor'tributed to sales growth compared core entrgy-rslated activities.
with 1994, which had a cool:r-tt'an-normal summer.
Providing reliable, low-cost, environmentally responsible energy.
On a weather-adjusted basis, sales to retail customers increased an Whether energy is produced or purchased through NSP's regulated estimated 2.4 percent in 1995 and 3.4 percent in 1994. Retail sales utihty or its non-regulated businesses, three general concepts pro-growth for 1996 is estimated to be 0.8 percent over 1995, or 1.9 per-vide a focus for its energy businesses: reliable energy, low-cost cent on a weather-adjusted basis, energy and environmentally responsible energy.
Sales to other utilities increased 1.0 percent in 1995 after decreas-R:sponding to customer needs. Customers will have an increasing ing 21.6 percent in 1994. The 1994 decrease from 1993 largely was number of options for meeting their energy needs, and there will be due to unusually high demand in 1993 from utilities in Md-r.ricken competition among energy companies for the privilege of serving Midwestern states.
those customers. NSP will work with its customers to develop inno-vative products and services that benefit both customers and NSP.
The table below summarizes the principal reasons for the elet6c revenue changes during the past two years:
Increasing non regulated investments and earnings. Non regulated businesses will be an important part of NSP's future. Deregulation in (Mdlions of dollarsi mhm 1994 vs.1993 the utihty industry is expected to provide new investment opportuni-Retail sales growth g..g p@
{$5
$56 ties in non-regulated businesses. Participation in these opportunities (excluding weather impacts) ia expected to improve NSP's total profitabihty.
Estimated impact of weather on R+
retail sales volume W'&S*
8 k ' [1 RESULTS OF OPERATIONS AND l.lQUIDITY Sales to other utilities (20)
AND CAPITAL RESOURCES Wholesale sales Q (MI 7
Conservation cost recovery E19 3 2
s e p
g p
hyg g
The following discussion and analysis by management focuses on Other rate changes II
$h those f actors that had a material effect on NSP's financial condition 15 and results of operations during 1995 and 1994. It should be read in Energy management discounts and eNheri iMI 1
conjunction with the accompanying Financial Statements and Notes Total revenue increase p
- UN 4
$92 thereto. Trends and contingencies of a material nature are discussed to the extent known and considered relevant. Material changes in NSP's electric rates are adjusted for changes in fuel and purchased balance sheet items aru discussed below and in the accompanying Notes to Financial Statements. The discussion and analysis and the l
through fuel adjustment clauses in all jurisdictions, except as noted related financial statements do not reflect the impact of the Com-gg g
g;
, g, psny's proposed merger with WEC except for pro forma information adjustments is approximately 60 days, an estimate of the adjustments included in Note 18 to the Financial Statements.
is recorded in unbilled revenue in the month in which costs are incurred. In Wisconsin, the biennial retail rate review process con-RESULTS OF OPERATIONS siders changes in electric fuel and purchased energy costs in lieu of 1995 Compared with 1994 and 1993 a fuel adjustment clause.
NSP's 1995 earnings per share were $3.91, up 45 cents from the $3.46 earned in 1994 and up 89 cents from the $3.02 earned in 1993. Regu-In 1995, a new rate adjustment clause was approved. It accelerated j
lated utikty businesses generated earnings per share of $3.41 in 1995, recovery of deferred electric conservation and energy management
$2.97 in 1994 and $2.93 in 1993 Non-regulated businesses generated program costs in the Company's Minnesota jurisdiction.This adjust-j earnings per share of 50 cents in 1995,49 cents in 1994 and 9 cents in ment clause helps reduce the need for filing a general rate increase 1993. The results of the regulated utility businesses and the non-reg-request for recovery of increases in conservation expenditures. The ulated businesses are discbssed in more detaillater. In addition to the Company is required to request a new cost recovery level annually. In revenue and expense changes, earnings per share have been January 1996, a number of changes to the Company's regulatory affected by an increasing average number of common and equivalent deferral and amortization practices for Minnesota conservation pro-shares outstanding Common and equivalent shares increased in 1995 gram expenditures were approved.These changes allow the Com-j and 1994 due mainly to stock issuances for the Company's dividend pany to expense rather than amortize new conservation expenditures l
reinvestment and stock ownership plans beginning in 1996 and to increase its recovery of electric margins lost I
due to conservation activity. In addition, the Company received appr val f r 1996 and 1997 conservation expenditures at levels lower Utility Operating Results than 1995. On April 1,1996, the Company expects to file for annual 1
Electric Revenues Sales to retail customers, which account for more changes to the Minnesota conservation rate adjustment clause with than 90 percent of NSP's electric revenue, increased 4.2 percent in an effective period of July 1,1996,through June 30,1997. Revenues in 1995 and 3.9 percent in 1994. Retail revenues were f avorably affected 1996 are expected to increase by an estimated $17 million, compared by sales growth, weather and increased cost recovery for conserva-w th 1995, due to the effects of the rate recovery changes for conser-tion expenditures. During 1995, NSP added 18,297 retail electric cus-vation programs in 1995 and 1996. These revenue increases will be tomers, a 1.3 percent increase. Total sales of electricity increased 2.9 largely offset by a corresponding increase in conservation expenses.
percent in 1995 and decreased 0.2 percent in 1994. Warmer than-nor-19 l
El;ctric Pnductin Espels:s Fuel expense for electric generation The table below summarizes the pnncipai reasons for the gas revenue j
increased $4.5 million, or 1.4 percent, in 1995 compared with an changes during the past two years.
j increase of $5 6 mihion, or 1.8 percent,in 1994. The 1995 increase was primarily attributable to an increase in output from NSP's generating (Millions of dollars) 1994 vs 1993 plants, resultmg from increased sales and fewer scheduled plant Sales growth
)
maintenance outages. Although output from NSP's generating plants (excluding weather impacts)
SO l
declined slightly in 1994 because of rnore scheduled fossil plant main-Estimated impact of weather tenance outages, fuel expenses were higher in 1994 because of the on firm sales volume (8) higher cost of nuclear fuel per megawatt-hour due to increased pay-Sales to off-system customers 14 ments to the U.S. Department of Energy (DOE) for decommissioning Purchased gas adjustment and decontamination of the DOE's uranium enrichment facilities and clause recovery (24)
)
nuclear fuel disposal costs. In addition, the costs of fossil fuel were Rate changes and other 4
higher in 1994 because of fewer coal purchases at the lowest con-Viking Gas (acquired in June 1993) ? @ $
5 tractual prices due to lower fossil plant output.
Total revenue increase idecrea sgBM T s
$(9)
Purchased power costs decreased $5.2 million, or 2.1 percent, in 1995 NSP's retail gas rates are adjusted for changes in purchased gas costs after increasing $41.1 million, or 19.7 percent, in 1994. The decrease in from amounts currently included in approved base rates through pur-1995 was primarily due to lower average market prices and less energy chased gas adjustment clauses in all jurisdictions. Effective November purchased.The level of purchases declined due to fewer scheduled 1995, a new rate adjustment clause was approved that accelerated plant maintenance outages in 1995. The increase in 1994 primarily was recovery of deferred gas conservation and energy management pro-due to additional demand expenses of $21 million for the full-year impact gram costs in the Company's Minnesota jurisdiction, similar to the retail of capacity charges from the power purchase agreements with the electric rate clause discussed previously. The Company estimates it Manitoba Hydro-Electric Board (MH), which went into effect in May will receive an additional $2.7 million in revenues from this new rate 1993, as discussed in Note 15 to the Financial Statements. In addition to mechanism in 1996 compared with 1995. This increased recovery will demand expenses, purchased power costs increased from 1993 due to result in a corresponding increase in conservation expenses.
)
higher everage market prices and increased purchases because of I
more plant maintenance outages in 1994.
Cost of Gas Purchased and Transported The cost of gas purchased and transported decreased $7.1 million, or 2.7 percent,in 1995 primarily Gas Revenues The majority of NSP's retail gas sales are categorized due to a 12.6 percent decline in the per unit cost of purchased gas, i
as firm (primarily space heating customers) and interruptible (com-partially offset by higher sendout volumes due to increased sales and mercial/ industrial customers with an alternate energy supply). Firm off-system deliveries.The lower cost of purchased gas reflects con-sales in 1995 increased 6 8 percent compared with 1994 sales, while tinuing favorable market pricing, while the higher gas sendout reflects firm sales in 1994 decreased 5.4 percent compared with 1993 sales.
sales growth in 1995 and higher gas sales to off system customers.
The 1995 increase primarily is due to increased sales of natural gas The cost of gas associated with off-system sales was $14.3 million in resulting from 16,680 additional new firm gas customers, a 4.1 percent 1995 and $12.7 million in 1994. The cost of gas purchased and trans-increase, and slightly more favorable weather in 1995. The 1994 ported decreased $18.6 million, or 6.6 percent,in 1994. The decrease i
decrease was due largely to warm weather in the last quarter of 1994.
reflects lower gas prices and cost recovery adjustments, partially off-set by higher sendout volumes primarily for gas sales to off-system l
On a weather adjusted basis, firm sales are estimated to have customers. The average cost per unit of NSP-owned gas sold in 1994 increased 4.6 percent in 1995 and decreased 0.7 percent in 1994. Firm was 8.4 percent lower than it was in 1903, mainly due to lower market gas sales in 1996 are estimated to increase by 2.6 percent relative to prices for gas.
1995, a 3.6 percent increase on a weather adjusted basis.
j Other Operation, Maintenance and Administrative and General Interruptible sales of gas increased 15.7 percent in 1995 and 4.4 per.
These expenses, in total, decreased by $9.1 million, or 1.4 percent, in cent in 1994. The 1995 increase is the result of f avorable gas market 1995 compared with an increase of $26.0 million, or 4.0 percent,in prices that caused large interruptible customers with alternate fuel 1994. The 1995 decrease is largely due to fewer employees, fewer sources to use more natural gas. Other gas deliveries increased 46.1 scheduled plant maintenance outages, lower property insurance pre.
percent in 1995 and 65.7 percent in 1994 primarily due to additional miums and a one-time charge in 1994 for postemployment benefits.
gas sales to off-system customers. Viking wholesale transmission Partially offsetting these decreases were higher employee benefit deliveries increased 1.1 percent in 1995. These wholesale deliveries costs, and higher electric line maintenance costs, mostly for tree trim-increased 74.3 percent in 1994 due to a full year of Viking activity.
ming and heat related repairs. The 1994 increase resulted primarily from higher postretirement health care costs, including amounts deferred from 1993, and higher postemployment costs as discussed in Note 2 to the Financial Statements. (See Note 12 to the Financial Statements for a summary of administrative and general expenses)
Conservation and Energy Management Expenses in 1995 vi aigher 1
than in 1994 primarily due to higher amortization levels
.eferred conservation program costs, consistent with cost recovery under new 20
I electric and gas rate adjustment clauses in the Company's Minnesota Pref:rr:d Divide:ds Dividends on the Company's preferred stock jurisdiction effective May 1,1995, and Nov.1,1995, respectively. The decreased in 1994 primarily due to redemption of the $7.84 Series d:ferred costs being amortirrd are highst due to incrsased customer Cumulative Preferrsd Stock in October 1993.
. pirticipation in NSP's conservation and energy management programs.
NON-REGULATED BUSINESS RESULTS Depreciation and Amortization The increases in 1995 and 1994 reflect higher levels of depreciabla plant.
"Y'U" P
" "" * **"Y such as mdependent power production, gas marketing, industrial heating and cooling, and energy related refuse-derived fuel (RDF)
Property and General Taxes Property and general taxes increased in u
n.
also has innstnents in aMam Wng pojecu 1995 and 1994 primarily due to property additions and higher property and severalincome producing properties. The following discusses NSP's diversified business results in the aggregate.
Utility income Taxes The variations in income taxes primarily are
. attributable to fluctuations in taxable income. (See Note 9 to the businesses that are consolidated are reported in Other income Financial Statements for a detailed reconciliation of the statutory tax (Deductions)-Net on the Consolidated Statements of income. (Note 12 rate to NSP's effective tax rate.)
to the Financial Statements lists the individual components of this line item.) Non-regulated operating revenues increased $71.3 million, or 29 NON OPERATING ITEMS RELATED TO UTILITY BUSINESSES percent, in 1995, and $151.3 million, or 167 percent, in 1994. The 1995 Allowance for Funds Used During Construction (AFC) The differ-increase was largely due to increased gas marketing sales by ences in AFC for the reported periods are attributable to varying lev-Cenergy. The 1994 increase was mainly due to the impact of Cenergy
'els of construction work in progress and changing AFC rates gas marketing and NRG industrial heating and cooling businesses associated with various levels of short term borrowings to fund acquired in IS93. Non-regulated operating expenses increased in 1995 construction. In addition, returns allowed on deferred costs for con-primarily due to higher gas costs associated with Cenergy gas sales servation and energy management programs increased AFC-equity and higher project development eroenses by NRG on pending pro-by $2.6 million and $2.0 million in 1995 and 1994, respectively, and jects. Non-regulated operating expenses increased in 1994 consistent i
increased AFC-debt by the amounts of $1.5 mill;on and $0.9 million in with revenue increases resulting from 1993 acquisitions. In addition, 1995 and 1994, respectively.
such expenses increased in 1994 due to fewer project development costs being capitalized on pending projects in 1994 compared with Other income (Expense) Note 12 to the Financial Statements lists the 1993, and project write downs. Non regulated operating expenses components of Other income (DeductionsFNet reported on the Con-include charges of $5.0 million in 1995 and $5.0 million in 1994 for pre-solidated Statements of income. 0ther than the operating revenues viously capitalized development and investment costs to reflect a and expenses of non regulated businesses, as discussed in the next decrease in tne expected future cash flows of certain energy projects.
section, non-operating income (net of expense items and associated income taxes)ielated to utility businesses increased $5.6 million in Equity in Operating Earnings NSP has a less-than-majanty equity inter-1995 and decreased $2.4 million in 1994. The 1995 increase primarily is est in many non-regulated projects, as discussed in Note 3 to the due to higher expense levels in 1994 for environmental and regulatory Financial Statements. Consequently, a large portion of NSP's non regu-contingencies, and public and governmental affairs costs related to lated earnings is reported as Equity in Earnings of Unconsolidated Affil-the Prairie Island fuel storage issue. These were partly offset by lates on the Consolidated Statements of income. The 1995 decrease in lower interest income associated with the Company's settlement of equity in project operating earnings is due to lower earnings from an
. federal income tax disputes in 1995. The 1994 decrease primarily is NRG cogeneration project contract that was terminated in 1995 and due to higher expenses for environmental and regulatory contingen-other domestic projects, somewhat offset by higher earnings from NRG cies, and higher pubhc and governmental affairs expenses associ-international energy projects (one of which did not provide earnings ated with the Prairie Island fuel storage issue, partially offset by prior to the second quarter of 1994). The 1994 increase in equity in pro-interest income associated with the Company's settlement of federal ject operating earnings primarily is due to new international energy income tax disputes.
projects in which NRG entered during 1994 (as discussed in Note 3 to the Financial Statements), and rnore profitable operations of other I;terest Charges (Before AFC) Interest costs recognized for NSP's energy projects in which NRG had been an investor for several years.
utilrty businesses, including amounts capitalized to reflectthe financ-
)
ing costs of construction activities, were $123.4 million in 1995, $107.1 Equity in Gains From Contract Terminations in June 1995, after l
million in 1994 and $110.4 raillion in 1993. The 1995 increase is largely receiving final regulatory approvals, a power sales contract between due to long term debt issues in 1995 and 1994 (net of retirements) and a California energy project. in which NRG is a 45 percent investor, and higher short-term interest rates, which affect commercial paper bor-an unaffiliated utility company was terminated. A pretax gain of rowings and variable rate long-term debt. The 1994 decrease reflects approximately $30 million was recognized by NRG for its share of the the impact of refinancing several higher-rate long-term debt issues in termination settlement. In 1994, a Michigan cogeneration project,in i
1 1993 and 1994. These interest savings were partially offset by interest which NRG was a 50 percent investor, received a payment from an on higher short-term debt balances and Viking debt (issued late in unaffdiated utility company as compensation for the termination of an 1993). The average short-term debt balance was $208.7 million in energy purchase agreement. A pretax gain of 59.7 million was recog-1995, $204.5 million in 1994 and $77.0 million in 1993.
nized by NRG for its share of the contract termination settlement, net i
of project investment costs.
21
)
Other IIcome (Expe:se) Other than the operating revenues and the Company and the utility subsidiary of WEC. The business combi-expenses of non-r:gulated businesses, as discussed above, non-oper-nation is intended to be tax frea for income tax purposes, and ating income (n2t of expense itims) related to non-regulated busi-accounted for as a " pooling of interests." On Sept. 13,1995, more nesses increased $4.7 milhon in 1995 and increased $0.8 million in 1994.
than 95 percent of the respective shareholders of the Company and The 1995 increase primarily is due to a gam on the sale of Cenergy oil WEC voting approved the merger plan at their respective shareholder and gas properties, higher income from cash investments, and an meetings. Under the proposed business combination, shareholders of adjustment to the 1994 contract termination gain recorded by NRG.
the Company would receive 1.626 shares of Primergy common stock for each share of the Company's common stock owned at the time of interest Expense Interest charges on the Consolidated Statements of the merger.
Income include interest and amortization expenses related to non-regulated businesses. The expenses were $9.9 million in 1995, $8.0 After the merger is completed, a transition to a new organization million in 1994 and $3.1 million in 1993. The increase in 1995 mainly is would begin. Anticipated cost savings of the new organization (com-due to the issuance of long-term debt on new affordable housing pro-pared with the continued independent operation of NSP and WEC) jects by Eloigne Company, a wholly owned subsidiary of the Company.
are estimated to be $2 billion over a 10-year period, net of transaction The increase in 1994 relates primarily to non-utility long-term debt costs (about $30 million) and costs to achieve the merger savings issued to finance the 1993 acquisitions of NRG's industrial heating (about $122 million). Itis anticipated that the proposed merger will and cooling business (Minneapolis Energy Center), a gas marketing allow the companies to implement a modest reduction in electric business now operated by Cenergy, and 1994 investments in afford-retail rates and a four-year rate freeze for electric retail customers. In able housing projects by Eloigne Company. In addition, during 1994 addition, the companies agreed to provide a four-year freeze in and late 1993, United Power & Land and First Midwest Auto Park, wholesale rates. After the merger,the regulated businesses of NSP wholly owned subsidiaries of the Company, issued long-term debt and WEC would continue to operate as utility subsidiaries of secured by non-regulated properties and lowered NSP's equity Primergy, which would be registered under the Public Utility Holding investment in these subsidiaries.
Company Act of 1935 (PUNCA), as amended, and some of the Com-pany's subsidiaries would be transferred to direct Primergy owner-Income Taxes The Consolidated Statements of income include ship. Except for certain gas distribution properties transferred to the income tax expense related to non-regulated businesses of $6.1 mil-Company,the Wisconsin Company will become part of the regulated lion in 1995, $2.6 million in 1994 and $3.5 million in 1993. The increase business of WEC, Although NSP and WEC are working to avoid in 1995 mainly is due to a gain from an NRG energy contract termina-divestitures, the PUHCA may require the merged entity to divest cer-tion, as discussed previously, somewhat offset by higher income tax tain of its gas utility and/or non regulated operations. Also, regulatory credits from Eloigne Company's affordable housing projects. The authorities may require the restructuring of transmission system decrease in 1994 mainly is due to higher income tax credits from operations or administration. NSP currently cannot determine if such affordable housing projects and energy tax credits related to an NRG divestitures or restructuring would be required. In addition Wiscon-project, somewhat offset by higher taxes due to higher operating sin state lawlimits the total assets of non-utility affiliates of Primergy.
j earnings, as discussed above. The effective tax rate in 1995 and 1994 This could affect the growth of non-regulated operations, j
is substantially less than the U.S. federal tax rate mainly due to the tax treatment of income from unconsolidated international affiliates, and The agreement to merge is subject to a number of conditions, including energy and affordable housing tax credits, as shown in Note 9 to the approval by applicade regulatory authorities. During 1995, NSP and Financial Statements.
WEC received a ruling from the internal Revenue Service indicating that the proposed successive merger transactions would not prevent FACTORS AFFECTING RESULTS OF OPERATIONS treatment of the business combination as a tax free reorganization under applicable tax law if each transaction independently qualified.
NSP's results of operations during 1995,1994 and 1993 were primarily During 1995, NSP and WEC submitted filings to the Federal Energy Reg-dependent upon the operations of the Company's and Wisconsin ulatory Commission (FERC), applicable state regulatory commissions Company's utility businesses consisting of the generation,transmis-g g gg gg sion, distribution and sale of electricity and the distribution, trans-merger to form Primergy. The FERC has put the merger application on portation and sale of natural gas. NSP's utility revenues depend on an accelerated schedule, ordering the administrative law judge's initial customer usage, which varies with weather conditions, general busi-decision by Aug. 30,1996, and briefs on exception by Sept. 30,1996, ness conditions, the state of the economy and the cost of energy ser-which makes possible a FERC ruling on the merger application by the vices. Various regulatory agencies approve the prices for electric and end of 1996. Although the goal of NSP and WEC is to receive approvals gas service within their respective jurisdictions. In addition, NSP's from all regulatory authorities by the end of 1996, some regulatory non-regulated businesses are contributing significantly to NSP's authonties have not established a timetable for their decisions.There-earnings.The histoncal and future trends of NSP's ooeratmg results fore,the timing of the approvals necessary to complete the merger is have been and are expected to be affected by the following factors:
not known at this time.The state filings included a request for deferred
- "" "9 "" " ' " ' '
Proposed Merger On April 28,1995, the Company and WEC entered into with the proposed merger. At Dec. 31,1995, $13 9 million of costs asso-an Agreement and Plan of Merger that provides for a business comb.i-ciated with the proposed merger had been deferred as a component of nation of NSP and WEC in a " merger-of equals" transaction. As a intangible and Other Assets. In February 1996,the appropriate commit-result of the mergers contemplated by the merger agreement. Primergy tees of the Minnesota Legislature passed legislation that would affect will become the holding company for the regulated operations of both 22
merger approval for electric utilities This bill, if passid into law, would In March 1995, the FERC issued a Notice of Proposed Rulemaking on provide for certain bindmg commrtments regarding minimum levels of Open Access Non-discriminatory Transmission Services and a Sup-staffing and investment for electric ssrvice.
piemental Notice of Proposed Rulemaking on Stranded Investment (together called the Mega NOPR). The Mega NOPR is intended to in addition to the regulatory and other governmental approvals of the create a vigorous wholesale electric market by requiring transmis-proposed merger, certain NSP financial and other agreements may sion providers to offer open access to their transmission systems.
be construed to require that,in the case of a change in ownership The FERC is proposing to require utilities to unbundle power sales (such as the proposed mergerl the other party to the agreement must from transmission. This "unbundled service" requirement would consent to the change or waive the requirement. Agreements with apply only to new requirements contracts and new coordination trade such provisions at Dec. 31,1995, include $101.7 million of long term contracts. The Mega NOPR would apply to all utilities under the debt, operating lease agreements with annual oayments of $1.3 rnil-FERC's jurisdiction and would require each utility to file individualtar-lion in 1996 and a $10 million credit hne agreement, under which there iffs. The FERC also seeks to require non-jurisdictional transmission-were no borrowmgs at Dec. 31,1995. Although neither consents nor providing entities (such as municipals and cooperatives) to offer open waivers from the other parties have yet been obtained, NSP will seek access by includmg a reciprocity clause in their individual tariffs so to obtain them prior to the completion of the merger. (See further dis-that those who take service from a FERC jurisdictional utility must cussion of the proposed business combination in Note 18 to the also offer open access. Concurrently with the Mega-NOPR, the FERC Financial Statementsj issued a proposal for a Real Time Information Network intended to facilitate open access by requiring all public utilities to create an R:gulation NSP's utility rates are approved by the FERC, the Min-electronic bulletin board of information regarding their transmission nesota Public Utilities Commission (MPUC), the North Dakota Public system services, availability and rates. Also in the Mega-NOPR, the Service Commission, the Public Service Commission of Wisconsin FERC proposed to consider cases involving stranded costs resulting (FSCW), the Michigan Public Service Commission and the South from open access (a) when a state regulatory commission does not Dakota Pubhc Utikties Commission. Rates are designed to recover have authority under state law to address such costs at the time retail plant investment and operating costs and an allowed return on wheelmg (which is the transmission to retail customers of power gen-investment, using an annual period upon which rate case filings are erated by a third party,in competition with supplies from the hnst util-based. NSP requests changes in rates for utility services as needed ity) takes place, and (b) after a state commission has addressed such through filings with the governing commissions. The rates charged to costs. In response to the FERC's proposals, NSP filed comments with retail customers in Wisconsin are reviewed and adjusted biennially.
the FERC that supported the Mega-NOPR's open access initiative and Because comprehensive rate changes are not requested annually in asserted NSP's intent that open access transmission tariffs filed in Minnesota, NSP's primary jurisdiction, changes in operating costs 1994 comply with the spirit of the Mega-NOPR. NSP expects the can affect NSP's earnings, shareholders' equity and other financial impact of any rulemaking such as the Mega-NOPR to be consistent results. Except for Wisconsin electric operations, NSP's rate sched-with its efforts to be a competitively priced supplier of electricity and ules provide for cost-of energy and resource adjustments to billings an active participant in the competitive market for electricity.
and revenues for changes in the cost of fuel for electric generation, purchased energy, purchased gas, and conservation and energy With the development of electric industry competition,the Company j
rnanagement program costs. For Wisconsin electric operations, the has experienced an increase in requests for the use of its transmis.
biennial retail rate review process considers changes in electric fuel sion system. A large portion of these requests is due to the increase and purchased energy costs in lieu of a cost of energy adjustment in FERC-approved power marketers. In 1995, the Company filed 23 clause. In addition to changes in operating costs, other f actors affect-transmission service agreements for FERC approval, including 10 with ing rate fihngs are sales growth, conservation and demand-side man-power marketers. While the annual transmission revenue in 1995 from j
agement efforts and the cost of capital.
this activity was immaterial,it is expected that 1996 revenues will increase due to the growth of power marketing activity in this region.
Competition The Energy Policy Act of 1992 (the Act) was a catalyst for comprehensive and significant changes in the operation of electric In response to the developing electric industry competition, Cenergy utilities, including increased competition. The Act's reform of the applied for and was granted permission by the FERC to market elec-PUHCA promotes creation of wholesale non-utikty power generators tricity (except electricity generated by NSP)in the United States, and authorizes the FERC to require utilities to provide wholesale trans-effective Dec.1,1994. Cenergy was one of the first affiliates of an mission services to third parties. The legislation allows utihties and electric utihty to obtain this approval from the FERC.
non-regulated companies to build, own and operate power plants nationally and internationally without being subject to restrictions that Some states are considering proposals to increase competition in the previously applied to utilities under the PUHCA. Management believes supply of electricity. In response to a proposalin 1994 by its regulator this legislation will promote the continued trend of increased competi-in Wisconsin. NSP outlined the transitional steps necessary to create tion in the electric energy markets. NSP management plans to con-an open and fair competitive electric market. NSP's position is that all tinue its efforts to be a competitively priced supplier of electricity and customers should be able to choose their electric supplier by 2001, an active participant in the competitive market for electricity. The pro-and that generation also should be deregulated by 2001. NSP pro-posed merger with WEC is a key strategic initiative designed to facili-poses that utikties retain operational control of their transmission and tote NSP's effective competition in the future energy marketplace.
distribution systems, and that utilities should be permitted to recover the cost of investments made under tradttional regulation. Regulators 23
in Mnnesota and Rfisconsin are currently considering what actions vide their power supply.While the fullimpact of these chances is they should take regarding electric industry competition. In Wiscon-unknown at this time, the following changes have been identified, sin, regulators developed a plan for a phased approach.They voted to
)
adopt a testructuring plon, which includes a 32 step phase in of retail in 1992, nine of the Company's municipal wholesale electric customers wheeling by the year 2001. A key component of the plan is to provide notified the Compariy of their intent to terminate their power supply
)
the protections necessary to ensure that consumers are not harmed agreements with the Company, effective July 1995 or July 1996 The i
in an increasingly competitive environment. One component of the loss of seven of these customers in July 1995 resulted in a revenue plan is to have an independent system operator control transmission decrease of approximately $12 milhon from 1994 levels. The other two access. In Minnesota, regulators have developed draft principles to customers, who are expected to terminate their power agreements in provide a framework for electric industry restructuring They have not July 1996, provided revenues of $3.6 million in 1995. These nine cus-established definitive timelines for industry restructuring or changes.
tomers are expected to become wheeling customers providing esti-One of the principles supports an open transmission system and mated annual revenues of nearly $3 million. NSP's remaining 19 establishing a robust wholesale competitive market. NSP believes the municipal wholesale electric customers are under contracts with transition to a more competitive electric industry is inevitable and terms expiring in the years 1999 through 2008.
beneficial for all consumers. NSP supports an orderly and efficient transition to an open, fair and competitive energy market for all cus-During 1993, the Company signed an electric power agreement to tomers and suppliers. The timing of regulatory actions and their provide Michigan's Upper Peninsula Power Company (UPPCO) with impact on NSP cannot be predicted and may be significant.
up to 150 megawatts of baseload service, peaking service options and load regulation service options for 20 years from January 1998 During 1992 and 1993, the FERC issued a series of orders (together through December 2017. Load regulation service is designed to called Order 636) addressing interstate natural gas pipehne servico change the level of power delivery during each hour to match restructuring.This restructuring "unbundled" each of the services UPPCO's load requirements. UPPC0 has nominated 50 megawatts of 1
(sales, transportation, storage and ancillary services) traditionally baseload and five megawatts of winter season peaking power pur-provided by gas pipeline companies. Interstate pipelines have been chases from NSP beginning Jan.1,1998. The annual revenue for 1998 allowed to recover from their customers 100 percent of prudently is projected to be approximately $11 million to $14 million. The inter-incurred transition costs attributable to Order 636 restructuring, change agreement between UPPCO and NSP for this sale was Under service agreements that went into effect Nov.1,1993, NSP accepted by the FERC.The Michigan Public Utilities Commission also estimates that it will be responsible for less than $11 million of tran-must approve the transaction.
]
sition costs over a five-year period beginning on that date. To date, NSP's regulatory commissions have approved recovery of these llate Changes As discussed previously under Utility Operating restructuring charges in retail gas rates through the purchased gas Results, filings for rate changes in 1995 had an immaterialimpact on -
adjustment. NSP does not believe Order 636 has materially affected financial results. No significant general rate filings in any of NSP's its cost of gas supply. NSP's acquisitions of Viking and Cenergy in utility jurisdictions are expected for 1996. However, the Company has 1993 have enhanced its ability to participate in the more competitive proposed rate changes in connection with requested approvals of its j
gas transportation business. In implementing Order 636, Viking proposed business combination with WEC, as discussed previously.
)
incurred no transition costs.
Used Nuclear Fuel Storage and Disposalin 1994, NSP received leg-Customer Cogeneration Koch Refining Co. (Koch), the Company's islative authorization from the State of Minnesota for dry cask fuel stor-largest eustomer, which provides approximately S30 million in annual age facilities at the Company's Prairie Island nuclear generating i
revenues to NSP, proposes to build a cogeneration plant to burn petro-facility. As a condition of this authorization,the Minnesota Legislature leum coke, a refinery byproduct, to produce between 180 and 250 established several resource commitments for the Company, including megawatts of electricity.This would be enough supply for Koch's own wind and biomass generation sources, as well as other requirements.
use plus an additional 80 to 150 megawatts to be sold on the wholesale in addition, the Company and other utikties filed a lawsuit against the a
market. Koch is requesting a legislative exemption from Minnesota 00E in 1994 to compel the DOE to fulfillits statutory and contractual property tax for its plant. While NSP supports the reduction of taxes on obligations to store and dispose of used nuclear fuel as required by the generating facilities,it believes any reduction should be applied to all Nuclear Waste Policy Act of 1982. Also, the Company is leading a con-generating facilities so that there are no unfair tax advantages avail-sortium to establish a private facility for interim storage of used nuclear able to some generators. This project has severalimplications for NSP:
fuel, the outcome of which is uncertain at this time. (See Notes 14 and
- 1) Koch could become a competitor as it seeks markets for its excess 15 to the Financial Statements for more information.)
capacity; 2) Koch's capacity would also represent a potential power source for NSP; and 3) Koch's plan represents a potentialloss of a Environmental Matters NSP incurs several types of environmental large retail customer.The project's anticipated three-year lead time will costs, including nuclear plant decommissioning, storage and ultimate allow NSP to respond appropriately.
disposal of used nuclear fuel, disposal of hazardous materials and wastes, remediation of contaminated sites and monitoring of dis.
Wholesale Customers NSP had wholesale revenues from sales of charges into the environment. Because of the continuing trend toward electricity of approximately $44 million in 1995 and approximately $57 greater environmental awareness and increasingly stringent regula-million in 1994. The trend of increased competition, as previously dis-tion, NSP has been experiencing a trend toward increasing environ-cussed, has resulted in significant changes in the negotiation of con-mental costs. This trend has caused, and may continue to cause, tracts with wholesale customers, in the ptst several years, these slightly higher operating expenses and capital expenditures for envi-customers have begun to evaluate a variety oi snergy sources to pro-ronmental compliance in addition to nuclear decommissioning and 24
~
used nuclear fuel disposal expenses (as discussed in Note 14 to the businesses in 1995 and 1994 may not necessarily be indicative of Financial Statements), coats charged to NSP's operating expenses for future operating results, environmental momtoring and disposal of hazardous materials and wastes in 1995 were approximataly $26 million and are expected to Accounting Changes The Financial Accounting Standards Board increase to an average annual amount of approximately $30 million for (FASB) has issued two new accounting standards that become effec-the five year period 1996 2000. However, the precise timing and tive in 1996. Statement of Financial Accounting Standards (SFAS) No.
amount of environmental costs,includmg those for site remediation 121, Accountmg for the impairment of Long-Lived Assets, establishes i
and disposal of hazardous materials, are currently unknown. In each standards for measuring and recognizing asset impairments. SFAS No.
of the years 1995,1994 and 1993, the Company spent about $15 million 123, Accounting for Stock-Based Compensation, provides an optional ior capital expenditures on enviror mentalimprovements at its utility accounting method for compensation from stock option and other stock f acilities. In 1996, the Company expects to incur approximately $20 mil-award programs that NSP does not intend to use. NSP does not expect lion in capital expenditures for compliance with environmental regula-the adoption of these new accounting standards to have a material tions and approximately $180 million for the five-year period 1996-2000, impact on its results of operations or financial condition. However, the These capital expenditure amounts include the costs of constructing principles of SFAS No.121 will be followed to measure the effects of any used nuclear fuel storage casks. (See Notas 14 and 15 to the Financial stranded investments that could arise from the Act.the FERC's Mega-Statements for further discussion of these and other environmental NOPR proposal or other competitive business developments.
contingencies that could affect NSP.)
The FASB also has proposed new accounting standards expected to go Weather NSP's earnings can be significantly affected by unusual into effect in 1997, The standards would rsquire ths full accrual of weather, in 1995, unusual weather, mainly a hot sumrner, increased nuclear plant decommissioning and certain atler site exit obligations.
earnings over a normal year by an estimated 21 cents per share. Mild Material adjustments to NSP's balance shee' could occur under the weather, mainly cool summers, reduced earnings from a normal year FASB's proposal. However, the effects of regulaion are expected to min-by an estimated 13 cents per share in 1994 and 18 cents per share in imize or elimmate any impact on operating expenses and earnings from 1993.The effect of weatheris considered part of NSP's ongoing busi-this future accounting change. (For further discussion of the expected ness operations.
impact of this change, see Note 14 to the Financial Statements.)
Acquisitions In 1994, NRG acquired ownership interests in three signif-Use of Derivatives Through its non-regulated subsidiaries, NSP uses icant international energy projects (listed in Note 3 to the Financial derivative financial instruments to hedge the risks of fluctuations in for-Statements). NSP also made three other strategically important busi-eign currencies and natural gas prices. Also, to hedge the interest rate ness acquisitions in 1993, including an interstate natural gas pipeline risk associated with fixed rate debt in a declining interest rate environ-(Viking), an energy services marketing business (Cenergy) and a steam ment, NSP uses interest rate swap agreements to convert fixed rate debt heating and chilled water cooling system business (Minneapolis to variable rate debt. (See Notes 1 and li to the Financial Statements for Energy Center, now an NRG subsidiary). NSP continues to evaluate further discussion of NSP's financialinstruments and derivatives.)
j opportunities to enhance its competitive position and shareholder i
returns through strategic business acquisitions.
Non-recurring items NSP's earnings for 1995 include two significant unusual or infrequently occurring items. As discussed in the Non-reg-Impact of Non-regulated Investments NSP's net income includes ulated Business Results section, NRG recognized a pretax gain of after-tax earnings of S33.6 million, or 50 cents per share, from all of its approximately $30 million (26 cents per share) from a power sales non-regulated businesses in 1995 and S32.9 million, or 49 cents per contract termination settlement. Partially offsetting this gain was an share,in 1994. As discussed previously, NRG acquired equity interests asset impairment write-down of $5 million before taxes (4 cents per in three significant energy projects in 1994. NSP expects to continue share) for a non-regulated domestic energy project.
investing significant amounts in non-regulated projects, including domestic and international power production projects through NRG, NSP's 1994 earnings also included several significant unusual or as described under Future Financing Requirements. Depending on the infrequently occurring items. Although their net effect was an earn-success and timing of involvement in these projects, NSP's goal is for ings increase of only I cent per share, individually significant non-WRG earnings to increase in the future to contribute at least 20 per-recurring items included a gain on termination of a non-regulated cent of NSP's earnings by the year 2000.The non-regulatad projects in cogeneration contract, interest income from the settlement of a fed-which NRG has invested carry a higher level of risk than NSP's tradi-eralincome tax dispute, a charge for pre 1994 postemployment costs tional utility businesses. Current and future investments in non-regu-associated with adopting SFAS No.112, and asset impairment write-lated projects are subject to uncertainties prior to fma; legal closing, downs for certain non-regulated energy projects.
and contmuing operations are subject to foreign government actions, foreign economic and currency risks, partnership actions, competi-Inflation Historically, certain operating costs, mainly labor and prop-tion, operating risks, dependence on certain suppliers and customers, erty taxes, have been affected by inflation. Also, inflation has tended domestic and foreign environmental and energy regulations, or all of to increase the replacement cost of operating f acilities, which has these items. Most of NRG's current project investments consist of increased depreciation expense when replacement facilities are con-minority interests, and a substantial portion of future investments may structed. However, several significant expense items, including fus!
taka the form of minority interests, which limits NRG's ability to control costs, income taxes and interest expense have been less sensitive to the development or operation of the projects. In addition, significant inflation. Overall, inflation at the levels currently being experienced is j
expenses may be incurred for potential projects pursued by NRG that not expected to materially affect NSP's prices to customers or returns may never materialize.The operating results of NSP's non-regulated to shareholders.
25
llQUIDlW AND CAPITAL RESOURCES NSP's equity investments m non-regulated projects during 1995 were financed through internally generated funds. Project financing 1995 Financing Requirements NSP's need for capital funds Q orf,nar.
requirements,in excess of equity contributions frora investors, were I
ily related to the construction of plant and equipment to meet the satisfied with project debt. Project debt associated with many of f
needs of electric and gas utility customers and to fund equi:y commit-NSP's non-regulated investments is not reflected in NSP's balance
)
ments or other investments in non regulated businesses. Total NSP sheet because the equity method of accounting is used for such utility cap tal expenditures (including AFC) were $386 million in 1995.
investments. (See Note 3 to the Financial Statements.)
Of that amount, $318 million related to replacements and improve-ments of NSP's electric system and nuclear fuel, and $37 milhon in January 1996, NRG issued $125 million of 7.625 percent unse-involved construction of natural gas distribution facilities. NSP com-cured Senior Notes maturing in 2006 to support equity requirements panies invested $71 million in non regulated projects and property in for projects currently under way and in development. The Senior 1995. NRG primarily invested in existing projects. In 1995, CenergY Notes were assigned ratings of BBB-by S&P's Rating Group and became a majority investor (80 percent)in Energy Masters Corpora-Baa3 by Moody's.
tion, a firm specializing in energy efficiency improvement services for commercial, industrial and institutional customers. The investment is Future Financing Requirements Utility financing requirements for 1996-accounted for on a consolidated basis. Eloigne Company invested in 2000 may be affected in varying degrees by numerous factors, including affordable housing projects, including wholly owned and limited part' load growth, changes in capital expenditure levels, rate changes norship ventures-allowed by regulatory agencies, new legislation, market entry of com-peting electric power generators, changes in environmental regulations 1995 Financing Activity During 1995, NSP's primary sources of capital and other regulatory requirements. NSP currently estimates that its util-included internally generated funds,long term debt, short-term debt ity capital expenditures will be $410 million in 1996 and $1.9 billion for the and common stock issuances, as discussed below. The allocation of five year period 1996-2000. Of the 1996 amount, approximately $345 mil-financing requirements between these capital options is based on the lion is scheduled for utility electric f acilities and approximately $45 mil-relative cost of each option, regulatory restrictions and the con, lion for natural gas facilities, including Viking. In addition to utility capital straints of NSP's long range capital structure objectives. During 1995, expenditures, expected financing requirements for the 1996-2000 period 4
1 NSP continued to meet its long range regulated capital structure inclu.'e proximately $480 million to retire long-term debt and meet first i
objective of 45-50 percent common equity and 42 50 percent debt.
mortgage bo.,d sinking fund requirements.
Funds generated internally from operating cash flows in 1995 Through its subsidiaries, NSP expects to invest significant amounts in remained sufficient to meet working capital needs, debt service, divi.
non regulated projects in the future. Financing requirements for non-dend payout requirements and non-regulated investment commit-regulated project investments may vary depending on the success, tim-ments, as well as fund a significant portion of construction ing and level of involvement in projects currently under consideration.
expenditures. The pretax interest coverage ratio, excluding AFC,was NSP's potential capital requirements for non-regulated projects and 3.8 in 1995 and 3.9 in 1994. These ratios met NSP's objective range of property are estimated to be approximately $140 million in 1996 and 3.5-5 0 for interest coverage. Internally generated funds could have approximately $550 million for the five-year period 1996 2000. These provided financing for 85 percent of NSP's total capital expenditures amounts include commitments for NRG investments, as discussed in for 1995 and 72 percent of the $1.9 billion in capital expenditures Note 15 to the Financial Statements, and Eloigne Company investments incurred for the five-year period 1991 1995.
of up to $13 million annually in 1996 2000 for affordable housing pro-jects. Eloigne Company expects to finance approximately 65 percent of NSP had approximately $216 miHion in short-term borrowings out, these investments in affordable housing projects with equity and standing as of Dec. 31,1995. Throughout 1995, short-term borrowings approximately 35 percent with long term debt. In addition to invest-were used to finance a portion of utility capital expenditures and pro-ments in non regulated projects, NSP continues to evaluate opportuni-vide for other NSP cash needs.
ties to enhance shareholder returns and achieve long-term financial objectives through acquisitions of existing businesses. Long term in 1995, the Company issued $250 million of first mortgage bonds to financing may be required for such investments.
refinance higher cost debtissues and reduce short-term debtlevels.
Eloigne Company also issued approximately $12.5 million of long-term The Company also will have future financing requirements for the debt to finance aff ordable housing project investments.
portion of nuclear plant decommissioning costs not funded extemally.
Based on the most recent decommissioning study, these amounts are During 1995, the Company issued new shares of common stock under anticipated te be approximately $363 million, and are expected to be various stock plans, including 536,360 new shares under the paid during the years 2010 to 2022.
Employee Stock Ownership Plan (ESOP),527,671 new shares under the Dividend Reinvestment and Stock Purchase Plan (DRSPP), and Future Sources of Financing NSP expects to obtain external capital for 63,780 new shares under the Executive Long Term incentive Award future financing requirements by periodically issuing long-term debt, Stock Plan. In addition, the Company issued common stock in con.
short term debt, common stock and preferred stock as needed to nection with a non regulated business acquisition. At Dec.31,1995, maintain desired capitalization ratios. Over the long-term, NSP's equity the total number of common shares outstanding was 68,175,934.
investments in non-regulated projects are expected to be financed through internally generated funds or the Company's issuance of com-mon stock. Financing requirements for the non-regulated projects,in 26
excess of rqurty contributions from investors, tre expected to be ful-level of commercial paper borrowings. Commercial banks presently fill d throuch project or subsiditry debt. Decommissioning expenses provide credit lines of approximately $265 million to the Comp ny and not fund:d by an external trust are expscted to be financed through a an additional $17 million to subsidi: ries of the Company. These credit combination of internally generated funds, long-term debt and com-lines make short-term financing available in the form of bank loans.
mon stock. The extent of external financing to be required for nuclear decommissioning costs, as discussed above, is unknown at this time.
The Company's Articles of incorporation authorize the maximum amount of preferred stock that may be issued. Under these provisions, the Com-NSP's ability to finance its utihty construction program at a reasonable pany could have issued all $460 million of its remaining authorized, but cost and to provide for other capital needs depends on its ability to unissued, pref erred stock at Dec. 31,1995, and remained in compliance meet investors' return expectations. Financing flexibility is enhanced by with allinterest and dividend coverage requirements.
providmg working capital needs and a high percentage of total capital requirements from internal sources, and having the ability to issue long-The level of common stock authorized under the Company's Articles term securities and obtain short term credit. NSP expects to maintain of incorporation is 160 million shares. In January 1996, the Company adequate access to securities markets in 1996. Access to securities filed a registration statement with the SEC to provide for the sale of up markets at a reasonable cost is determined in large part by credit qual-to 1.6 million additional shares of new common stock under the Com-ity. The Company's first mortgage bonds are rated AA-by Standard &
pany's Dividend Reinvestment and Stock Purchase Plan (DRSPP) and Poor's Corporation, Al by Moody's Investors Service,Inc. (Moody's),
Executive Long-Term Incentive Award Stock Plan. The Company may AA by Duff & Phelps,Inc., and AA by Fitch Investors Service,Inc. Rat-issue new shares or purchase shares on the open market for its ings for the Wisconsin Company's first mortgage bonds are generally stock based plans. (See Note 5 to the Financial Statements for dis-comparable. These ratings reflect the views of such organizations, and cussion of stock awards outstanding.) The Company plans to issue an explanation of the significance of these ratings may be obtained new shares for its DRSPP, ESOP and Executive Long Term incentive from each agency. In May 1994. Moody's downgraded the Company's Award Stock plans in 1996. While no general public stock offerings first mortgage bond ratings to A1 based on its interpretation of provi-are curren1y anticipated in 1996, such offerings may be necessary to sions of a Minnesota law enacted in 1994 for used nuclear fuel storage fund significant equity investments in non-regulated projects should at the Prairie Island generating plant. (The other three rating agencies they occur.
re!.ffirmed their ratings of the Company's bonds after considering the potentialimpact of the legislation on NSP.) As discussed in Notes 14 Internally generated funds from utility operations are expected to and 15 to the Financial Statements, the legislation requires the Com-equal approximately 90 percent of anticipated utility capital expendi-pany to increase its use of renewable energy sources such as wind and tures for 1996 and approximately 100 percent of the $1.9 billion in biomass power. Moody's has indicated that it believes these sources of anticipated utility capital expenditures for the five-year period 1996-power are considerably more costly than the powu currently gener-2000. Internally generated funds from all operations are expected to ated and that NSP's electric production costs wiliincrease materially equal approximately 75 percent and 90 percent, respectively, of the over current levels. NSP acknowledges that electric production cops anticipated total capital expenditures for 1996 and the five year may increase as a result of the Prairie Island legislation. In 1995, period 1996-2000. Because NSP intends to reinvest foreign cash flows a
Moody's placed the Company's ratings on credit review for possible in non-U.S. operations, the equity income from international invest-upgrade based on anticipated cost savings from the proposed merger ments currently does not provide operating cash available for U.S.
with WEC, which was discussed previously.
cash requirements such as payment of dividends, domestic capital expenditures and domestic debt service. Through NRG, NSP intends The Company's and the Wisconsin Company's first mortgage indentures to pursue a diverse portfolio of foreign energy projects with varying 4
limit the amount of first mangage bonds that may be issued. The MPUC levels of cash flows, income and foreign taxation to allow maximum and the PSCW have jurisdiction over securities issuance. At Dec.31, flexibility of foreign cash flows, 1995, with an assumed interest rate of 7.0 percent, the Company could a
have issued about $2.5 billion of additional first mortgage bonds under The merger agreement, as previously discussed, provides for restric-its indenture, and the Wisconsin Company could have issued about $356 tions on certain transactions by both the Company and WEC, including milhon of additional first mortgage bonds under its indenture.
the issuance of debt and equity securities.While the Company cur-rently does not plan to enter into transactions that would not comply The Company filed a shelf registration for first mortgage bonds with with these restrictions, circumstances may arise to make such trans-the Securities and Exchange Commission (SEC)in October 1995.
actions necessary. Under such circumstances, the Company and WEC Depending on capital market conditions, the Company expects to would need to mutually agree to amend the merger agreement.
issue the $300 million of registered, but unissued, bonds over the next several years to raise additional capital or redeem outstanding secu-rities. In addition, depending on market conditions, the Wisconsin Company may issue up to $65 million in first mortgage bonds to redeem outstanding securities or raise additional capital.
The Company's Board of Directors has approved short term bnrrow-ing levels up to 10 percent of capitalization. The Company has received regulatory approval for up to $445 million in short-term bor.
rowing levels and plans to keep its credit lines at or above its average 21
Year Ended Dec. 31 Ithouscnds of dollars, except per snare data) 1994 1993 Utility Operating Reve3es Electric
$2 066 644
$1974 916 Gas 419 903 429 076 Total 2 486 547 2 403 992 Utility Operating Expenses Electric production expenses - fuel and purchased power 570 880 524 126 Cost of gas purchased and transported 263 905 282 036 Other operation 316 479 310 585 Maintenance 170 145 161 413 Administrative and general 187 996 176 617 Conservation and energy management 31 231 29 358 Depreciation and amortization g
273 801 264 517 Property and general taxes lg 234 564 223 108 income taxes A
129 228 128 346 s
Total gjg,,gy 2 178 229 2 100 106 Utility Operating income
$ l@
308 318 303 886 Vgfp W
Other income (Expense) pp J, Equity in earnings of unconsolidated affiliates:
Earnings from operations 32 024 3 030 Gain from contract termination l
9 685 Allowance for funds used during construction - equity 4 548 7 328 Dther income (deductions)- net (3 686) 7 982 income taxes on non-regulated operations and non-operating items (199)
(2 394)
Total 42 372 15 946 income Before Interest Charges i
350 690 319 832 Interest Charges Interest on utility long-term debt 89 553 101 677 Other utility interest and amortization 7
17 555 8 739 Non-regulated interest and amortizatioe i
7 975 3 146 Allowance for funds used during construction - debt (7 868)
(5 470)
Total 107 215 108 092 Net income 243 475 211 740 Preferred Stock Dividends 12 364 14 580 Earnings Available for Com. Stock i
$231111
$197160 Average Number of Common and Equivalent Shares Outstanding (000's) 66 845 65 211
$3.46
$3.02 Earnings Per Average Common Share i
Common Dividends Declared per Share
$2.625
$2.565 See Notes to Financial Statements on pages 34 to 49 28
Year Ended Dec. 31
' (lhousands oldoIIxts) 1994 1993 Cash Flows from Operating Activities:
nit income
$243 475
$211740 Adjustments to reconcile netincome to cash from operating activities:
Depreciation and amortization 304 583 286 855 Nuclear fuel amortization 45 553 43 120 Deferred income taxes (6 101) 12 256 Deferred investment tax credits recognized (9 501)
(9 223)
Allowance for funds used during construction - equity (4 548)
(7 328)
Undistributed equity in earnings of unconsolidated affiliate operations (23 588)
(1 142)
Undistributed equity in gain from non-regulated contract termination settlements Cash provided by (used for) changes in certain working capitalitems (8 627) 33 259 Conservation program expenditures - net of amortization (29 963)
(21 185)
Cash provided by (used for) changes in other assets and liabihties (1 042) 12 340 Net Cash Provided by Operating Activities 510 241 560 692 Cash Flows from investing Activities:
Capital expenditures:
Utility businesses (387 026)
(356 836)
Non-regulated businesses (22 260)
(4 859)
Increase (decrease)in construction payables 11 668 2 598 Allowance for funds used during construction - equity 4 548 7 328 Sale (purchase) of short-term investments - net (866) 62 Investment in external decommissioning fund (42 677)
(32 578)
Business acquisitions (159 385)
Equity investments in non regulated projects and other (132 511)
(25 957)
Net Cash Used for investing Activities (569 124)
(569 627)
Cash Flows from Financing Activities:
Change in short-term debt - net issuances (repayments) 132 239 (40 361)
Proceeds from issuance of long-term debt 367 184 613 120 Loan to ESOP i
Repayment of long term debt, including reacquisition premiums (272 097)
(489 106)
Proceeds from issuance of common stock 1 368 183 654 i
Redemption of preferred stock, including premium (36 092)
Dividends paid (186 568)
(180 220)
Not Cash Provided by (Used for) Financing Activities 42 126 50 995 Not increase (Decrease)in Cash and Cash Equivalents (16 757) 42 060 Cash and Cash Equivalents at Beginning of Period 57 812 15 752 Cash and Cash Equivalents at End of Period
$41055
$57 812 Cash Provided by (Used for) Changes in Certain Working Capitalltems:
Customer accounts receivable and unbilled utility revenues
$14 708
$(43 219) j Materials and supplies inventories (13 462) 13 911 1
Payables and accrued liabilities (excluding construction payables) 32 550 54 247 Customer rate refunds (10 410) 12 235 Other (32 013)
(3 915) l Net S(8 627)
$33 259 Supplemental Disclosures of Cash Flow information:
Cash paid during the year for:
I interest (net of amount capitalized)
$1(,6 867
$107 037 income taxes (net of refunds received)
$170 474
$120 491 1
See Notes to FinancialStatements on pages 34 to 49 i
l 29
Dec. 31 1994 Utility Plant Electric -including construction work in progress: 1995, $137,662; 1994, $117,235
$6372 317 Gas 677 233 Other 262 506 Total 7 312 056 Accumulated provision for depreciation (3116 Bill Nuclear fuel-including amounts in process: 1995, $34,235; 1994, $12,505 797 097 Accumulated provision for amortization (718 690)
Not utihty plant 4 273 652
)
Current Assets
)
Cash and cash equivaients 41 055 Short-term investments in f
892 Customer accounts receivable - net of accumulated provision for uncollecrible aecounts: 1995, $4,338; 1994, $3,912 229 272 Unbilled utihty revenues 98 651 Other receivables
[
80 444 Materials and supplies - at everage cost Fuel 56 960 Other 101 878
=
g Prepayments and other 56 075 Total current assets a
665 227 Other Assets Regulatory assets j
357 576 Non-regulated property-net of accumulated depreciation: 1995, $83,724; 1994, $73,296 172 961 Equity investments in non-regulated projects and other investments 197 490 External decommissioning fund investments 145 467 Long-term receivables 68 735 Intangible and other assets 68 624 Total other assets 1 010 853 Total
$5 949 732 Liabilities and Equity seu Capitalization (See pages 32-33)
Q}%j)
Common stockholders
- equity
, gh
$1896 967 f
Preferred stockholders
- equity 240 469 Long-term debt F
A 1 463 354 Total capitahzation t
3 600 790 Current Liabilities Long term debt due within one year P
16 106 a
Other long-term debt potentially due within one year i
i 141 600 Short-term debt - pnmarily commercial paper
[
j 238 439 Accounts payable f
y 234 905 Taxes accrued I
fi 178 119 Interest accrued
[
f 28 164 Dividends payable on common and preferred stocks 1;
47 283 Accrued paytoil, vacation and other 1,
9, 79 029 Total current liabikties (V[__ _ J 963 645 Other Liabilities Deferred income taxes N
845 031 Deferred investment tax credits 173 838 Regulatory liabilities 200 517 Pension and other benefit obligations 4
92 514 Other long-term obligations and deferred income
~
l 73 397 m
Total other liabihties
$5,
/
1 385 297 Commitments and Contingent Liabilities (See Notes 14 and 15)
{c9 WIQ y
Total (iya,d1
$5 949 732 See Notes to financial Statements on pages 34 to 49 30
Cumulative Currency Number of Retained Shares Held Translation (Dollar amounts in thousands)
Shares issued Par Value Premium Earnings by ESOP Adjustments Balance at Dec.31,1992 62 590 360
$156 496
$370819
$1099 896
$ (5113)
Net income 211 740 Dividends declared:
Cumulative preferred stock at required rates (14 580)
Common stock (168 615) issuances of common stock 4 281 217 10 703 176 296 Preferred stock redemption and stock issuance costs (3 345)
(1 069)
Loan to ESOP to purchase shares (15 000)
Repaymentof ESOPloan 9 226 Balance at Dec.31,1993 66 879 577
$167199
$543 770
$1127 372
$(10 887)
Net income 243 475 Dividends declared:
Cumulative preferred stock at required rates (12 364)
Common stock (175 292)
Issuances of common stock 42 567 106 1 342 Stockissuance costs (80)
Tax benefit from stock options exercised 843 Repayment of ESOPloan 7 897 Currency translation adjustments S3 586 Balance at Dec. 31,1994 66 922 144
$167 305
$545 875
$1183191
$ (2 990)
$3 506 Net income 275 795 Dividends declared:
Cumulative preferred stock at required rates (12 450)
Common stock (180 510)
Issuances of common stock 1 253 790 3 135 53 051 Stock issuance costs (1)
Tax benefit from stock options exercised 169 Loan to ESOP to purchase shares (15 000)
Repayment of ESOP loan 7 333 Currency translation adjustments (1 098) uu:rn mo ierramum,
i393 38; s33 3.' i ges t.
S3334
( g330
, gg s See Notes to Financial Statements on pages 34 to 49 31
Dec. 31 (lhousands of dollars)
Gm t994 Common Stockholders' Equity Common stock - autherted 160,000,000 shares of $2.50 per value; l
issued shares: 1995,68,175,934,1994,66,922,144
$ 167 305 Premium on common stock 545 875 Retained earnings 1 183 191 Leveraged common stock held by Employee Stock Ownership Plan (ESOP)
- shares at cost: 1995,229,154; 1994,59,445 (2 990) i Currency translation adjustments - net 64 3 586 l
Total common stockholders' equity tygj
$1896 967 Cumulative Preferred Stock - authorized 7,000,000 shares of $100 par value; f.N,pd M{kfy outstanding shares: 1995 and 1994. 2,400,000 Minnesota Company
$3.60 series,275,000 shares IWW)
$27 500 4.08 series,150,000 shares dWW 15 000 4.10 series,175,000 shares YhNl 17 500 4.11 series. 200,000 shares jM) 20 000 4.16 series,100,000 shares
{%
10 000 4.56 series,150,000 shares y@l 15 000 6.80 series,200,000 shares
({S%
20 000 7.00 series,200,000 shares
. jWj 20 000 30 000 W:lM}i Variable Rate series A,300,000 shares QM 65 000 Variable Rate series B,650,000 shares
. Mq 240 000 Total Premium on preferred stock
$?M 469 Total preferred stockholders' equity 1,3J
$ 240469 Long-Term Debt jg' $j First Mortgage Bonds Minnesota Company t*/ r 3]
hN %
Series due:
March 1,1996,6.2%
0 j
$ 8 800*
Oct.1,1997,5X%
I' j
100 000 Feb.1.1999,5X%
Q j
200 000
- h~@$j jj 100 000 Dec.1,2000,5X%
150 000 Oct.1,2001,7X%
March 1,2002,7X%
hWWi 50 000 Feb.1,2003,7X%
([Mj 50 000 Aprill,2003,6X%
%SW) 80 000 Dec.1,2005,6X%
3 kWWd 75 000 Dec.1,1994-2006,6.60%
[35M 22 300**
March 1,2011, Variable Rate i /9W 13 700*
$ [YD 98 000 July 1,2019,9X%
/'
70 000 June l,2020,9X%
July 1,2025,7X%
NNW5 Total WM,.
$1012 800 Less redeemable bonds classified as current (see Note 7) yMS (13 700)
Less current maturities 14 5 (1 200)
Net sWWMy 5 997 900
- Pollution controlfinancing
- Resource recovery financing See Notes to Financial Statements on pages 34 to 49 32
Dec.31 (Thousands of dollars) 1994 Long-Term Debt-continued First Mortgage Bonds Wisconsin Company (less reacquired bonds:1995 $3,365;1994, $490)
Series due:
Oct.1,2003,5%%
$ 40 000 April 1,2021,9X%
1 48 010 March 1,2023,7X%
iM h 110 000 Total
" q ig; y
198 010 Less current maturities (2 910)
Net JSIM j $ 195100 Guaranty Agreements - Minnesota Company Series due:
q
<4 j
ti Feb.1,1994 2003,5/ '-
- $%Uk $ 5 900*
May 1,1994-2003,5.bu%
' '!NW 24 750' Feb.1,2003,7.40%
JW Total 3 500*
. gWWj 34 150 Less current maturities
< Mj (700)
Net lS casssi $ 33 450 Miscellaneous Long-Term Debt N $j Ls 4
City of Becker Pollution Control Revenue Bonds - Series due Dec.1,2005,7.25%
.$]It% $ 9 000*
April 1,2007,6.80%
j[$P%j iW 60 000*
March 1,2019, Variable Rate 27 900*
Sept.1,2019, Variable Rate QW 100 000*
Anoka County Resource Recovery Bond - Series due
>t G
Dec.1,1994-2008,7.06%
j$ @
25 150 "
City of La Crosse, Resource liecovery Bond - Series due I '" / d Nov.1,2011,7X%
pM 18 600 "
Viking Gas Transmission Company Senior Notes - Series due
"( j. ;
Oct. 31,2008,6.4%
MMR 29 511 NRG Energy Center, Inc. (Minneapolis Energy Center)
[]N Senior Secured Notes - Series due June 15,2013,7.31%
b ?$$
81 498 United Power & Land Notes due
, ~ \\ ;fiQ March 31,2000,7.62%
, 3.Mj pjSW 9 375 Various Affordable Housing Project Notes due 1994 2024,1.0 %-9.9 %
d5Wj 7 710 Employee Stock Ownership Plan Bank Loan due 1994-2002, Variable Rate
(( [358))
2 698 Other E I4b 3 10 736 Total gMWj 382 178 Less variable rate Becker bonds classified as current (See Note 7) yWW]
(127 900)
Less current maturities T-494 M (11 296)
Net L5 WW4 $ 242 982 Unamortized discount on long-term debt - net
~ WW t (6 078)
Totallong-term debt f WWW n 1 463 354 Total capitalization iWW15 3 $3 600 790
- Pollution controlfinancing
" Resource recovery financing See Notes to Financial Statements on pages 34 to 49 I
l l
+~a, o
i t
o i m iv ' o neso a m. u asu ees
- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Alliwxce for Fuids Us:d DIrirg CustructiIn (AFC) AFC, a non-cash item,is computed by applying a composite pretax rate, repre-System of Accounts Northern States Power Comnany, a Minnesota senting the cost of capital used to finance utility construction corporation (the Company), is predominantly a regulated public utikty activities, to qua ified Construction Work in Progress (CWIP). The AFC serving customers m Minnesota, North Dakota and South Dakota.
rate was 6.0 percent in 1995,5.0 percent in 1994 and 7.4 percent in J
Northern States Power Company, a Wisconsin corporation (the Wis-1993. The amount of AFC capitalized as a construction cost in CWIP is consin Company), a wholly owned subsidiary of the Company,is a regulated public utility serving customers in Wisconsin and Michigan.
credited to other income (for equity capital) and interest charges (for debt capital). AFC amounts capitalized in CWIP are included in rate Another wholly owned subsidiary, Viking Gas Transmission Company base for establishing utility service rates. In addition to construction-(Viking),is a regulated natural gas transmission company that oper-ates a 500 mile interstate natural gas pipeline. Consequently, the e@n mm Company, the Wisconsin Company and Viking maintain accounting records in accordance with either the uniform system of accounts Depreciation For financial reporting purposes, depreciation is com-presenbed by the Federal Energy Regulatory Commission (FERC) or uted by applying the straight-line method over the estimated useful those prescribed by state regulatory commissions, whose systems lives of various property classes. The Company files with the Min-are the same in all material respects.
nesota Public Utilities Commission (MPUC) an annual review of remain-
"U
'" 0 "'
" E
Principles of Consolidation The consolidated financial statements studies, as approved by the MPUC, recommended a decrease of include all materict companies in which NSP holds a controlling approximately $0.2 million and an increase of approximately S0.5 million fMancialinterest, including: the Wisconsin Company; NRG Energy, for the 1995 and 1994 annual depreciation accruals, respectively.
kc. (NRG); Viking; Cenergy, Inc. (Cenergy), which changed its name to Cenerprise,Inc. effective Jan.1,1996; and Eloigne Company. As Every five years, the Company also must file an average service life discussed in Note 3, NSP has investments in partnerships, joint ven-g tures and projects for which the equity method of accounting is recent filings approved by the MPUC were in 1994 for general plant applied. Earnings from equity in international investments are and in 1993 for all other f acilities. Depreciation provisions, as a cer-recorded net of foreign income taxes. All significant intercompany centage of the average balance of depreciable utility propertyin ser-transactions and balances have been eliminated in consolidation v ce, were 3.64 percent in 1995,3.55 percent in 1994 and 3 47 percent except for intercompany and intersegment profits for sales among the g
electric and gas utility businesses of the Company, the Wisconsin Company and Viking, which are allowed in utility rates. The Company Decommissioning As discussed in Note 14, NSP currently is record-and its subsidiaries collectively are referred to herein as NSP.
ing the future costs of decommissioning the Company's nuclear gen-erating plants through annual depreciation accruals. The provision Revenues Revenues are recognized based on products and services provided to customers each month. Because utikty customer meters for the estimated decommissioning costs has been calculated using an annuity approach designed to provide for full expense accrual are read and billed on a cycle basis, unbilled revenues (and related (w th full rate recovery) of the future decommissioning costs,includ-energy costs) are estimated and recorded for services provided from the monthly meter-reading dates to month-end.
ng reclamation and removal, over the estimated operating lives of the Company's nuclear plants. The Financial Accounting Standards Board (FASB) has proposed new accounting standards expected to go into The Company's rate schedules, applicable to substantially all of r.ts util-effect in 1997. The standards would require the full accrual of nuclear ity customers, include cost-of-energy adjustment clauses, under which ant decommissioning and certain other site exit obligations beginning rates are adjusted to reflect changes in average costs of fuels, pur-in 1997. lSee Note 14 for more discussion of this proposed standJrd.)
chased energy and gas purchased for resale. The Company's rate schedules in Minnesota also include a rate adjustment clause, which is Nuclear Fuel Expense The original cost of nuclear fuelis amortized to to be adjusted annually, to reflect changes in recovery of electric and fuel expense based on energy expended. Nuclear fuel expense also gas deferred conservation program costs. As ordered by its primary includes assessments from the U.S. Department of Energy (DOE) for regulator, Wisconsin Company retail rate schedules include a cost-of-costs of future fuel disposal and DOE f acihty decommissioning, as energy adjustment clause for purchased gas but not for electric fuel discussed in Note 14.
and purchased energy.The biennial retail rate review process for Wis-consin electric operations considers changes in electric fuel and pur-g chased energy costs in lieu of a cost-of-energy adjustment.
nized when it is probable that a liability has been incurred and the am un a
can teamaW e@aM &n a singk Utility Plant and Retirements Utihty plant is stated at original cost.
estimate of the liability cannot be determined,the low end of the esti-The cost of additions to utility plant includes contracted work, direct mated range is recorded. Costs are charged to expense or deferred labor and materials, allocable overhead costs and allowance for as a regulatory asset based on expected recovery in future rates,if funds used during construction.The cost of units of property retired' they relate to the remediation of conditWe caused by past opera-plus net removal cost,is chargod to the accumulated provision for tions, or if they are not expected to mitigate or prevent contamination depreciat;on and amortization. Maintenance and replacement of from future operations. Where environmental expendituras relate to items determined to be less than units of property are charged to
,g g
g operating expenses.
g periods. Estimated remediation costs are recorded at undiscounted 34
amounts, independent of any insurance or rate recovery, based on derivative arrangement is the use of natural gas futures contracts by prior experience, assessments and current technology. Accrued Cenergy to manage the risk of gas price fluctuations. The cost or obligations are regularly adjusted as environmental assessments and benef t of natural gas futures contracts is recorded when related estimates are revised, and remediation efforts proceed. For sites sales commitments are fulfilled as a component of Cenergy's non-where NSP has been designated as one of several potentially respon-regulated operating expenses. NSP does not speculate in natural gas sible parties, the amount accrued represents NSP's estimated share futures. A third derivative instrument used by NSP is interest rate of the cost. NSP intends to treat any future costs incurred related to swaps that convert fixed rate debt to variable rate debt. The cost or decommissioning and restoration of its non-nuclear power plants and benefit of the interest rate swap agreements is recorded as a compo-substation sites, where operation may extend indefinitely, as a capi-nent of interest expense. None of these three derivative financial talized removal cost of retirement in utility plant. Depreciation instruments is reflected on NSP's balance sheet.
expense levels currently recovered in rates include a provision for an estimate of removal costs (based on historical experience).
Use of Estimates in recording transactions and balances resulting from business operations, NSP uses estimates based on the best income Taxes NSP records income taxes in accordance with State-information available. Estimates are used for such items as plant ment of Financial Accounting Standards (SFAS) No.109-Accounting depreciable lives, tax provisions, uncollectible accounts, environ-for income Taxes. Under the liability method required by SFAS No.
mentalloss contingencies, unbilled revenues and actuarially deter-109, income taxes are deferred for alltemporary differences between mined benefit costs. As better information becomes available (or pretax financial and taxable income and between the book and tax actual amounts are determinable), the recorded estimates are bases of assets and habilities. Deferred taxes are recorded using the revised. Consequently, operating results can be affected by revisions tax rates scheduled by law to be in effect when the temporary differ-to prior accounting estimates. Recent changes in interest rates have ences reverse. Due to the effects of regulation, current income tax resulted in changes to actuarial assumptions used in the benefit cost expense is provided for the reversal of some temporary differences calculations for postretirement benefits. Also,the depreciable lives of previously accounted for by the flow-through method. Also, regula-certain plant assets are reviewed and,if appropriate, revised each tion has created certam regulatory assets and liabihties related to year, as discussed previously. (See Notes 8,14 and 15 for more infor-income taxes, as summarized in Note 10. NSP's policy for income mation on the effects of these changes in estimates.)
taxes related to international operations is discussed in Note 9.
Cash Equivalents NSP considers investments in certain debt instru-Investment tax credits are deferred and amortized over the estimated ments (primarily commercial paper) with an original matunty to NSP of lives of the related property.
three months or less at the time of purchase to be cash equivalents.
Foreign Currency Translation The local currencies are generally the Regulatory Deferrals As regulated utilities, the Company, the Wiscon-functional currency of NSP's foreign operations. Foreign currency sin Company and Viking account for certain income and expense denominated assets and liabilities are translated at end-of period items under the provisions of SFAS No. 71 - Accounting for the rates of exchange. The resulting currency translation adjustments are Effects of Regulation. In doing so, certain costs that would otherwise accumulated and reported as a separate component of stockholders' be charged to expense are deferred as regulatory assets based on equity. Income, expense and cash flows are translated at weighted-expected recovery from customers in future rates. Likewise, certain average rates of exchange for the period.
credits that otherwise would be reflected as income are deferred as regulatory liabilities based on expected flowback to customers in Exchange gains and losses that result from foreign currency transac-future rates. Management's expected recovery of deferred costs and tions (e g. converting cash distributions made in one currency to expected flowback of deferred credits are generally based on spe-another) are included in the results of operations as a component of cific ratemaking decisions or precedent for each item. Regulatory equrty in earnings of unconsolidated affiliates. Through Dec. 31,1995, assets and liabilities are amortized consistent with ratemaking treat-NSP had not experienced any material translation gains or losses ment established by regulators. Note 10 describes the nature and from foreign currency transactions that have occurred since the amounts of these regulatory deferrals.
respective foreign investment dates.
Other Assets The purchase of various non-regulated entities from Derivative Financial Instruments NSP's policy is to hedge foreign 1993-1995 at a price exceeding the underlying fair value of net assets currency denominated investments as they are made to preserve acquired resulted in recorded goodwill of $20.3 million ($19.0 million their U.S. dollar value, where appropriate hedging instruments are net of accumulated amortization) at Dec. 31,1995. This goodwill and available. NRG has entered into currency hedging transactions other intangible ass 6ts acquired are being amortized using the through the use of forward foreign currency exchange agreements.
straight-line method over periods of 15 to 30 years. NSP periodically Gains and losses on these agreements offset the effect of foreign evaluates the recovery of goodwill based on an analysis of estimated currency exchange rate fluctuations on the valuation of the invest-undiscounted future cash flows.
ments underlying the hedges. Hedging gains and losses, net of income tax effects, are reported with other currency translation intangible and other assets also include deferred financing costs adjustments as a separate component of stockholders' equity. NRG is (net of amortization) of approximately $11.8 million at Dec. 31,1995.
riot hedging currency translation adjustments related to future oper.
These costs are being amortized over the remaining maturity period ating results. NSP does not speculate in foreign currencies. A second of the related debt.
35
Reclassifications Certain reclassifications have been made to the investments in the MIBRAG and Gladstone projects in 1994 resulted in 1994 and 1993 financial statements to conform with the 1995 presen-an increase in the equity in earnings from unconsolidated affiliates of tation. These reclassifications had no effect on net income or earn-approximately S26 million in 1994.
ings per share.
Summarized Financialinformation of Unconsolidated Affiliates
- 2. ACCOUNTING CHANGES Summarized financialinformation for these projects, including inter-n an pa
, as as Mom (as d ann Postemployment Benefits Effective Jan.1,1994, NSP adopted the the years ended Dec. 31,1995 and 1994L provisions of SFAS No.112 - Employers' Accounting for Postemploy-ment Benefits. This standard required the accrual of certain postem-p;
- g p ployment costs, such as injury compensation and severance,that are (Millions of dollars) ma 1994 payable in the future. The Company's pre 1994 liability of approxi-g mately $9 4 million (8 cents per share) was expensed in 1994.
Other Assets SWI 1 593.8 Total Assets I WMi
$2108.7 Postretirement Benefits As discussed in Note 8, NSP changed its Current Liabilities
<5 m
$ 159.6 cecounting for postretirement medical and death benefits in 1993.
Other Liabilities L 2W 1 480.0 Due to rate recovery of the expense increases, the change had an EquW Ed W 469.1 immaterial effect on net income. Of the 1993 cost increases due t adoption of SFAS No.106, about $12 million was deferred to be amor-Total Liabilities and Equity ySB N i
$2108.7 tired over rate recovery periods in 1994-1996. In 1994, administrative gp.s Equity Investment a
in Unconsolidated Affiliates 8
$179.1 and general expenses increased by approximately $16 million due to the full recognition of accrued SFAS No.106 costs, including amounts deferred from 1993 Results of Operations (Mdlions o/ dollars) na 1954
- 3. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD Operating Revenues qsusy
$778I Operating income RMK3{
$128/
Through its non-regulated subsidiaries NSP has investments in vari-Net income MER$
$117.(
ous international and domestic energy projects and domestic afford-able housing and real estate projects. The equity method of
- 4. CUMULATIVE PREFERRED STOCK accounting is applied to such investments in affiliates, which include Jomt ventures and partnerships, because the ownership structure The Company has two series of adjustable rate preferred stock. The prevents NSP from exercising a controlling influence over operating dividend rates are calculated quarterly and are based on prevailing and financial policies of the projects. Under this method, equity in the rates of certain taxable government debt securities indices At Dec.
31,1995, the annualized dividend rates were $5.50 for both series A pretax income or losses of domestic partnerships and in the net and series B.
income or losses of international projects is reflected as Equity m Earnings of Unconsolidated Affiliates. A summary of NSP's significant equity method investments is as follows:
At Dec. 31,1995, the various preferred stock series were callable at rices per share ranging from $102.00 to $103.75, plus accrued divi-dends. In 1993, the Company redeemed all 350,000 shares of its $7.84 Geograph.ic Economic Placed in series Cumulative Preferred Stock at $103.12 per share.
Name Area interest Service Various Independent
- 5. COMMON STOCK AND INCENTIVE STOCK PLANS Power Production July 1991-Facilities U.S.A.
45W50%
December 1994 The Company's Articles of incorporation and First Mortgage inden-Affordable Housing-April 1993-ture provide for certain restrictions on the payment of cash dividends Limited Partnerships U.S.A.
20 % 99 % December 1995 on common stock. At Dec. 31,1995, the Company could have paid, Rosebud SynCoal without restrictions, additional cash lividends of more than $1 billion Partnership U.S.A.
50 %
August 1993 on common stock.
MIBRAG Mining and Power Generation Europe 33.3 %
January 1994 NSP has an Executive Long Term Incentive Award Stock P.an that Gladstone Power permits granting non-qualified stock options. The options :urrently Station Australia 37.5 %
March 1994 granted may be exercised one year from the date of gran: and are Scudder Latm exercisable thereafter for up to nine years. The plan also ahaws cer-American Trust for tain employees to receive restricted stock and other perfoi nance Independent Power Latin awards. Performance awards are valued in dollars, but paid in i hares Energy Projects America 25 %
June 1993 based on the market price at the time of payment. Transactions under Schkopau Power Under the various incentive stock programs, which may result in the Station Europe 20.6 %
Construction issuance of new shares, were as follows:
36
Stoch Awards The Company's First Mortgage Bonds Series due March 1,2011, and (Thousands o/ shares.
1994 1993 the City of Becker Pollution Control Revenue Bonds Series due March Outstanding Jan.1 b37.1 528.7 1,2019, and Sept.1,2019, have variable interest rates, which currently Options granted 304 0 196.9 change at various periods up to 270 days, based on prevailing rates Other stock awards 5.... $1
.2 95 for certain commercial paper secunties or similar issues. The interest Options and awards e (42.6)
(114.3) rates applicable to these issues averaged 5.2 percent,3.7 percent Options and awards fdMk@k..
(16.1)
(22.2) and 3.8 percent, respectively, at Dec. 31,1995. The 2011 series bonds Other FM L2)
(1.5) are redeemable upon seven days notice at the option of the bond-Outstanding at Dec. 3W<Wi 782.4 537.1 holder. The Company also is potentially liable for repayment of the Option pnce ranges:
g-2019 Series Becker Bonds when the bonds are tendered, which
'?q Unexercised occurs each time the variable interest rates change. The principal at Dec. 31 M $33.25-$43.50 $33.25-$43.50 amount of allthree series of these variable rate bonds outstanding Exercised during
.Q represents potential short-term obligations and, therefore, is reported the year SM} $3325-$43.50 $33.25-$40 94 under current habikties on the balance sheet.
Using the treasury stock method of accounting for outstanding stock Maturities and sinking-fund requirements on long-term debt are: 1996, options,the weighted average number of shares of common stock
$25,760,000; 1997, $111,553,000; 1998, $14,457,000; 1999, $210,909.000; outstanding for the calculation of primary earnings per share includes and 2000, $115,982,000.
any dilutive effects of stock options and other stock awards as com-mon stock equivalents The differences between shares used for pri-
- 8. BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS mary and fully diluted earnings per share were not material.
P WW MW WQm iWWWhe@h a
ma@3 pcent am mgesend W locallahnsns
- 6. SHORT-TERM BORROWINGS under a collective-bargaining agreement, which expires Dec. 31,1996 NSP has approximately $282 million of commercial bank credit lines under commitment fee arrangements. These credit knes make short-Pension Benefits NSP has a non-contributory, defined benefit pen-term financing available in the form of bank loans and support for com-sion plan that covers substantially all employees. Benefits are based mercial papcr sales. There were no borrowings against these credit on a combination of years of service,the employee's highest average knos at Dec. 31,1995, and approximately $3.6 million of such borrow-pay for 48 consecutive months and Social Security benefits.
ings, with interest payable at 9.75 percent, at Dec. 31,1994. However,
$9.6 rnilkon in letters of credit were outstanding, which reduced the it is the Company's pokcy to fully fund the actuarially determined pen-available credit lines at Dec. 31,1995.
sion costs recognized for ratemaking purposes, subject to the limita-tions under applicable employee benefit and tax laws. Plan assets At Dec. 31,1995 and 1994, the Company had $215.6 million and $234.8 principally consist of common stock of pubhc companies. corporate million, respectively, in short-term commercial paper borrowings out-bonds and U.S. government securities. The funded status of NSP's standing. The weighted average interest rates on all short-term bor-pension plan as of Dec. 31 is as follows:
rowings as of Dec. 31,1995, and Dec. 31,1994, were 5 7 percent and 6.1 percent, tespectively.
(Thousands of dollars) m 1994 Actuanal present value of benefit obhgaten;..
y I$'MWf $ 571254 7, LONG-TERM DEBT Vested Non-vested hW1Fd 120 420 The annual sinking-fund requirements of the Company's and the Wiscensin Company's First Mortgage Indentures are the amounts Accumulated benefit obhgation i $ $51W d $ 691674 Projected benetit obhgation W W I"
$ 836 957 necessary to redeem 1 percent of the highest principal amount of PI e
1 165 584 each series of first mortgage bonds at any time outstanding, exclud-Plan assets m excess of i
n ing those series issued for pollution control and resource recovery financings, and excluding certain other series totaling $990 million.
projected benefit obligation
$181$9 (328 627)
The Company may, and has, applied property additions in lieu of cash Unrecognized prior service cost I WW (21 538)
Unrecognized net actuarial gain
- WMj 370 289 payments on all series, as permitted by its First Mortgage indenture.
Unrecognized net transitional asset HWl 691 The Wisconsin Company also may apply property additions in heu of Net pension habikty recorded i 8 c 15W i $ 20 815 cash on all series as permitted by its First Mortgage Indenture.
Except for minor exclusions, all real and personal property of the Company and the Wisconsin Companyis subject to the liens of the for regulatory purposes, the Company's pension expense is deter.
first mortgage indentures. Other debt secunties are secured by a hen mined and recorded under the aggregate cost method. As required SMS 87 - We' Accounting for Pensions, the difference on the related real or personal property, as indicated on the Consoh.
dated Statements of Capitalization.
between the pension costs recorded for ratemaking purposes and the amounts determined under SFAS No. 87 is recorded as a regula-tory habikty on the balance sheet. Net annual penodic pension cost includes the following components:
37
m
.- i
.ea
. u n i i n.s
- i b
(Thousands of dollars) u 1994 1993 IMillions of dollars)
"T"E 1994 Service cost-benehts earned
,, q APB0:
3 during the period 139) $27536 $25 015 Retirees b(9954
$132.2 Interest cost on projected
{.]
Fully eligible plan participants
$4A 21.5 benefit obligation plE j 65 107 71 075 Other active plan participants IMOSh 79.4 Actual return on assets WW (12 668) (152 019)
Total APB0 x W.8 g 233.1 Net amortization and deferral MSl (82114) 66 299 Plan assets at fair value NHA {
8.0 Net penodic pension cost
. ij APB0 m excess of plan assets
- 354j 225.1 determined under SFAS No. 87
? $314! (2 139) 10 370 Unrecognized net actuarial gain (loss)
- QSAl 2.3 Additional costs recognized
,(( ff Unrecognized transition obligation
[(1EBd (194.0) due tc actions of regulators a 18841 3 922 5 117 Not benefit obhgation recorded F $ M.8 i
$ 33 4 Net penodic pension cost h
Q recognized for ratemaking
[ $ 2318A $ 1783 $15 487 The assumed health care cost trend rates used in measuring the APB0 at Dec. 31,1995 and 1994, respectively, were 10.4 and 11.0 percent for The weighted average discount rate used in determining the actuarial those under age 65, and 7.3 and 7.5 percent for those over age 65. The present value of the projected obligation was 7 percent in 1995 and 8 assumed cost trend rates are expected to decrease each year until they percent in 1994. The rate of increase in future compensation levels used reach 5.5 percent for both age groups in the year 2004, after which they in determining the actuarial present value of the projected obligation are assumed to remrin constant. A 1 percent increase in the assumed was 5 percent in 1995 and 1994. The assumed long-term rate of return on health care cost trend rate for each year would increase the APB0 by assets used for cost determinations under SFAS No. 87 was 9 percent approximately 15 percent as of Dec. 31,1995. Service and interest cost for 1995 and 8 percent for 1994 and 1993. Assumption changes components of the net periodic postretirement cost would increase by decreased 1995 pension costs (determined under SFAS No. 87) by approximately 17 percent with a similar 1 percent increase in the approximately $21.5 million. Assumption changes are expected to assumed health care cost trend rate. The assumed discount rate used increase 1996 pension costs (determined under SFAS No 87) by approx-in determining the APB0 was 7 percent for Dec. 31,1995,8 percent for imately $13.6 milhon. Because the Company's pension expense is deter.
Dec. 31,1994, and 7 percent for Dec. 31,1993, compounded annually.
mined under the aggregate-cost method (not SFAS No. 87) for regulatory The assumed long term rate of return on assets used for cost determi-and financial reporting purposes, the effects of regulation prevent the nations under SFAS No.106 was 8 percent for 1995 and 1994. Assump-majority of these assumption changes from affecting earnings.
tion changes decreased 1994 costs by approximately $2.1 million and decreased 1995 costs by approximately $2.0 million. The effect of the Postretirement Health Care NSP has a contributory health and welfare changes in 1996 is expected to be a cost increase of approximately benefit plan that provides health care and death benefits to substantially
$2.1 million.
all employees after their retirement. The plan is intended to provide for sharing the costs of retiree health care between NSP and retirees. For The net annual periodic postretirement benefit cost recorded consists employees retiring after Jan.1,1994, a six-year cost-sharing strategy of the following components:
was implemented with retirees paying 15 percent of the total co:,t of health care in 1994, increasing to a total of 40 percent in 1999.
(Milhons of dollars) u 1994 1993 Service cost-benefits
_,3 Effective Jan.1,1993, NSP adopted the provisions of SFAS No.106 -
earned during the year d 8 52
$ 5.0
$ 4.4 Interest cost (on service cost and APBO) 7192]1 Employers' Accounting for Postretirement Benefits Other Than Pen-16.1 17.5 sions. SFAS No.106 requires the actuarially determined obligation for Actual return on assets
.l1AN
(.2)
(.1)
[b - 10A j postretirement health care and death benefits to be fully accrued by Amortization of transition obligation 10.8 10.8 the date employees attain full eligibihty for such benefits, which is Net amortization and deferral E. f 9,4i
(.3)
.1 generally when they reach retirement age. This is a sigmficant Net penodic postretirement I
M change from NSP's pre 1993 policy of recognizing benefit costs on a health care cost under SFAS No.106h ;34A ]
31.4 32.7 cash basir after retirement. In conjunction with the adoption of SFAS Costs recognized (deferred) due to
'3 No.106, NSP elected to amortire on a straight-hne basis over 20 actions of regulators L 4A l 4.1 (12.1) years the umecognized accumulated postretirement benefit obliga-Net periodic postretirement health p
,7 tion (APBO) of $215.6 milhon for current and future retirees. This care cost recognized for ratemaking 6 ; $3BA J $35.5
$20.6 obligation considered 1994 plan design changes, including Medicare integration, increased retiree cost sharing and managed indemnity Regulators for NSP's retail and wholesale customers in Minnesota, measures not in effect in 1993.
Wisconsin and North Dakota have allowed full recoury of increased benefit costs under SFAS No.106, effeciive in 1993. Increased 1993 Before 1993, NSP funded payments for retiree benefits internally.
accrual costs for Minnesota retail customers are being amortized While NSP generally prefers to continue using internal funding of over the years 1994 through 1996, consistent with approved rate benefits paid and accrued, significant levels of external funding, recovery External funding was required by Minnesota and Wisconsin including the use of tax advantaged trusts,have been required by retail regulators to the extent it is tax advantaged, funding began for NSP's regulators, as discussed below. Plan assets held in such trusts Wisconsin in 1993 and must begin by the next general rate filing for as of Dec. 31,1995, consisted of investments in equity mutual funds Minnesota. For wholesale ratemaking, the FERC has required external and cash equivalents.The funded status of NSP's health care plan as funding for all benefits paid and accrued under SFAS No.106.
of Dec.31is as follows:
38
ESOP NSP has a leveraged Employee Stock Ownership Plan (ESOP) and 5.4 million shares of the Company's common stock as of Dec. 31, that rovers substantially all employees Employer contributions to this 1995 and 1994, respectively. An average of 221,066 and 111,845 non-contributory, defined contribution plan are generally made to the uncommitted leveraged ESOP shares were excluded from earnings-extent NSP realizes a tax savings on its income statement from divi-per-share calculations in 1995 and 1994, respectively. The fair value of dends paid on certain shares held by the ESOP. Contributions to the NSP's leveraged ESOP shares approximated cost at Dec. 31,1995.
ESOP in 1995,1994 and 1993, which represent compensation expense, were $5,059,000, $5,695,000 and $6,281,000, respectively. ESOP contn-401(k) NSP has a contributory, defined contribution Retirement Sav-butions have no material effect on NSP earnings because the contri-ings Plan, which complies with section 401(k) of the Internal Revenue butions (net of tax) are essentially offset by the tax savings provided Code and covers substantially all employees. Since 1994, NSP has by the dividends paid on ESOP shares. Leveraged shares held by the been matching specified amounts of employee contributions to this ESOP are allocated to participants when dividends on stock held by plan. NSP's matching contributions were $3.7 million in 1995 and $2.6 the plan are used to repay ESOP loans. NSP's ESOP held 5.7 million million in 1994.
- 9. INCOME TAXES Totalincome tax expense from operations differs from the amount computed by applying the statutory federalincome tax rate to income before income tax expense. The reasons for the difference are as follows:
GM 1994 1993 federal statutory late Q.EA%q 35.0 %
35.0 %
Increases (decreases)in tax from:
State income taxes, net of federalincome tax benefit 5.1 %)
5.9 %
6.1 %
Tax credits recognized
, (k3Al%f (3.5)%
(2.8)%
Equity income from unconsolidated international affiliates h< : C(2.El%3 (2.5)%
0.0 %
T 1A %(
0.5 %
1.3 %
Regulatory differences - utility plant items Other - net b S.4' % $
(0 7)%
(1.4)%
i-2 Effective income tax rate k 354 %l 34.7 %
38.2 %
L{
d (Thousands of dollars)
M Income taxes are comprised of the following expense (benefit) items:
{
g included in utility operating expenses:
[,y _.J Current federaltax expense
[$1379f1 j
$108 652
$92 099 Current state tax expense
@ 35Wj 34 823 25 787 Deterred federal tax expense l: (12 989)!
(3 450) 15 010 Deferred state tax expense
- (2M (1 606) 4 431 Deferred investment tax credits E 18Mll (9 191)
(8 981)
Total L.14715 2 129 228 128 346 included in other income (expense):
(
1 Current federal tax expense
'let !
3 959 7 853 h 1839]
923 2 289 Current state tax expense 1
Current foreign tax expense i [238j 219 Current federal tax credits f illagtd (3 548)
(321)
Deferred federaltax expense h2045 f (835)
(6 736)
Deferred state tax expense W[ : ? M ?! (319d (310)
(242)
(209)
(449)
Deferred investment tax credits Total
- - 5W h 199 2 394 Totalincome tax expense s $152 M e
$129 427
$130 740 income before income taxes includes net foreign equity income of $32.3 and $25 9 million in 1995 and 1994, respectively. NSP's management intends to reinvest the earnings of foreign operations indefinitely. Accordingly, U S. income taxes and foreign withholding taxes have not been provided on the earnings of foreign subsidiary companies. The cumulative amount of undistnbuted earnings of foreign subsidiaries upon which no U S. income taxes or foreign withholding taxes have been provided is approximately $61.6 million at Dec. 31,1995. The additional U.S. income tax and foreign withholding tax on the unremitted foreign earnings,if repatriated, would be offset in whole or in part by foreign tax credits. Thus, it is impracticable to estimate the amount of tax that might be payable.
39
,i <
.. o a an w m ianes The components of NSP's net deferred tax liabihty (current and non-11.FINANCIAllNSTRUMENTS current portions) at Dec. 31 were:
Fair Values The estimated Dec. 31 fair values of NSP's recorded
- " * * ' " * ' ~ " * " ' ' ' ' ' * * ' * " * * *
(Thousands of dollars)
Ym 1994 tax b es oe S 843 872
^ * " "
Regulatory assets D9I 120 329 Tax benefit transfer leases MWBI 76 775 ash cashqsakng g
r i
i Other F WM 7 854 Total deferred tax habikties hWWMth $1048830 Y
( k ' ',.D N "9 **
Deferred tax assets:
'4 n;q decommissioning Regulatory liabilities
$[55) S 1
,]
80 383 O WM1h I" # ""
1 65 812 h
Deferred investment tax credits Long-term debt.
P
+w Deferred compensation, vacation N
,c
- %q cu en 621060 m M ot cu ren ly deduc b WW 50 572 Other
- MW1 18 110 Total deferred tax assets l$ 570l $ 214 877 cas, cash eqAakng and sWe investments, de ca@g Net deferred tax habihty
($ WW3 $ 833 953 am unt approximates fair value because of the short maturity of those instruments. The fair values of the Company's long-term invest-
- 10. REGULATORY ASSETS AND LIABillTIES ments in an external nuclear decommissioning fund are estimated based on quoted market prices for those or similar investments. The The following summarizes the individual components of unamortized fair value of NSP's long-term debt is estimated based on the quoted regulatory assets and liabihties shown on the Consolidated Balance market prices for the same or similar issues, or the current rates Sheets at Dec. 31:
offered to NSP for debt of the same remaining rnaturities.
Amortization Derivatives NRG has entered into six forward foreigi currency (Thousands o/ dollars)
Period u
1994 exchange contracts witn counterparties to hedge expsure to cur-AFC recorded in plant
.q rency fluctuations to the extent permissible by hedge accounting I
on a net-of-tax basis
- Plant Lives
$5GWs $155102 requirements Nrsuant to these contracts, transactions have been Conservation and energy
- g.., j(
executed thh e designed to protect the economic value in U.S. dol-management programs
- Up to 10 years 1995 76 902 lars of NRG's equityinvestments and retained earnings, denominated Losses on d
in Australian dollars and German deutsche marks (DM). NRG's for-reacquired debt Term of New Debt 7 WW1 52514 ward foreign currency exchange contracts, in the notional amount of Environmental costs Up to 15 years G MB 47 779
$119 million, hedge approximately $123 million of foreign cerrer'cy Deferred postretirement 3[
denominated assets, and in the notional amount of $47 million, hedge benefit costs 3-15 Years QBW 9 930 approximately $64 million of foreign currency denominated retained Unrecovered purchased
- y. ;
earnings at Dec. 31,1995. Because the effects of both currency trans-gas costs 1-2 years
[$W 7 601 lation adjustments to foreign investments and currency hedge instru-State commission
. s,1 ment gains and losses are recorded on a net basis in stockholders' accounting adjustments
- Plant Lives pf73H 5 544 equity (not earnings), the impact of significant changes in currency Other Various ifAW,! 2 204 exchange rates on these items would have an immaterial effect on Total regulatory assets f W62181 $357 576 NSP's financial condition and results of operations. The contracts Excess deferred income taxes y
,1 g required cash collateral balances of $5.9 million at Dec. 31,1995, collected from customers i$ SW) $ 75277 which are reflected as other current assets on NSP's balance sheet.
Investment tax credit deferrals 1198EMh 110831 The contracts terminate in 1998 through 2005 and require foreign cur-Unrealized gains from g.
rency interest payments by either party during each year of the con-decommissioning investments F33N3 1 412 tract. If the contracts had L gen terminated at Dec. 31,1995, $5 2 b@MMj Pensior, costs 11 054 million would have been paye.% by NRG for currency exchange rate Fuel costs and other 7Wf 1 943 changes to date. Managerr.ent behaves NRG's exposure to credit risk Totai regulatory habikties
!$3M SFj $200517 due to non performance by the counterparties to its forward
- Earns a return on investmentin the ratemaking process.
exchange contracts is not significant, based on the investment grade rating of the counterparties.
c:: sa u >sa wes Cenergy has entered into natural gas futures contracts in the notional
- 12. DETAIL OF CERTAIN INCOME AND EXPENSE IUMS amount of $11.3 million at Dec. 31,1995. The original contract terms range from one month to three years. The contracts are intended to Administrative and general (A&G) expense for utility operations consists mitigate risk from fluctuations in the price of natural gas that will be required to satisfy sales commitments for future dehveries to cus-
/ Thousands of dollars) 1994 1993 tomers in excess of Cenergy's natural gas reserves. Cenergy's futures contracts hedge $11.5 million in anticipated natural gas sales in 1996-A&G salanes and wages S 49 726 $ 51601 p
1997. Margin balances of $2.3 million at Dec. 31,1995, were mam-tained on deposit with brokers and recorded as cash and cash OE M 995 equivalents on NSP's balance sheet. The counterparties to the
.f oM Other benefits -
38 792 51 860 futures contracts are the Now York Mercantile Exchange and major y
g gas pipeline operators. Management believes that the nsk of non-performance by these counterparties is not significant. If the con-29 751 30 504 insurance and claims jWW 16 771 16 165 tracts had been terminated at Dec. 31,1995, $0.6 million would have Other NN 11 055 11 492 been payable to Cenergy for natural gas price fluctuations to date.
Total S tWj $187 996 $176617 NSP has three interest rate swap agreements with notional amounts totalling $320 million. These swaps were entered into in conjunction Other income (deductions)- net consist of the following:
with first mortgage bonds. As summarized below, these agreements Thousands of dollars) wm 1994 1993 effectively convert the interest costs of these debt issues from fixed to variable rates based on six-month London Interbank Offered Rates d
WG
$9W (LIBOR), with the rates changing semiannually.
Operating expenses WWPJ 241480*
81 480 National Amount Term of Net Effective etax peratingincome"
@Aq W
9W Internt andnvntment inconm M 8%
H22
/ millions Swap Interest Cost at Series ofdollars)
Agreement Dec. 31,1995 m Senes se Environmental and regula ryc n ngencin M
Other-net (excluding income taxes) L j n% (M Oct.1,1997
$100 Matunty 5.94 %
5 267)
(739) ah nedncome WnM
$ DN $ M $ N2 e 1 1999
$200 Maturity 5.36 %
Marc 12023
$20 March 1,1998 8.03 %
in 1995and$50million in 1994.
Market risks associated with these agreements result from short-
- E term interest rate fluctuations. Credit risk related to non-performance
- E#""
- E" #
of the counterparties is not deemed significant, but would result in
- 13. JOINT PLANT OWNERSHIP NSP terminating the swap transaction and recognizing a gain or loss, depending on the fair market value of the swap. The interest rate The Company is a participant in a jointly owned 855-megawatt coal-fired swaps serve to hedge the interest rate risk associated with fixed rate electric generating unA Sherburne County generating station unit No. 3 debt in a declining interest rate environment. This hedge is produced (Sherco 3), which began ccmmercial operation Nov.1,1987. Undivided by the tendency for changes in the fair market value of the swap to be interests in Sherco 3 have been financed and are owned by the Com-offset by changes in the present value of the liability attributable to pany (59 percent) and Southern Minnesota Municipal Power Agency the fixed rate debt issued in conjunction with the interest rate swaps.
(41 percent). The Company is the operating agent under the joint owner-If the interest rate swaps had been discontinued on Dec. 31,1995, the ship agreement. The Company's share of related expenses for Sherco 3 present value benefit to NSP would have been $2.8 million, which is since commercial operations began are included in Utility Operating partially offset by an increase in the present value of the related debt Expenses. The Company's share of the gross cost recorded in Utility of $0 9 million above carrying value.
Plant at Dec. 31,1995 and 1994, was $585,625,000 and $585,783,000, respectively. The corresponding accumulated provisions for deprecia-Letters of Credit NSP uses letters of credit to provide financial guaran-tion were $150,022,000 and $132,092,000.
tees for certain operating obligations, including NSP workers' com-pensation benefits and ash disposal site costs, and Cenergy natural
- 14. NUCLEAR OBLIGATIONS gas purchases. At Dec.31,1995, letters of credit of $46.7 million were outstanding. Generally, the letters of credit have terms of one year and Fuel Disposal NSP is responsible for the temporary storage of used are automatically renewed, unless prior written notice of cancellation nuclear fuel from the Company's nuclear generating plants. Under a -
is provided to NSP and the beneficiary by the issuing bank. The con-contract wd me Company, h M is MgaW M anm b tract amounts of these letters of credit approximate their fair value responsibility for permanent storage or disposal of NSP's used and are subject to fees compet:tively determined in the marketplace.
nuckar M Re %mpany has W Mng ns po@n d de Es permanent disposal program since 1981. Funding took place through an internal sinking fund until 1983, when the DOE began assessing fuel disposal fees under the Nuclear Waste Policy Act of 1982 based 41
1
- a.
m
. i m y moeso a m, o >su #es on o charge of 0.1 cent per kilowatt 4our sold to customers from working with the Mescalero Apache Tribe to establish a priecte facil-nuclear generation.The cumulative smount of such assessments ity for interim storage of used nuclear fuel on the Tribe's reservation from the DOE to NSP through Dec. 31,1995, is $230.8 million. Currently, in New Mexico. A core group of more than 20 United States nuclear it is not determinable if the arrount an i method of the DOE's assess-utilities has agreed to support the construction and operation of the ments to all utihties will be sutFeien' to fully fund the DOE's perma-Mescalero interim storage site. Work on the project is under way in nent storage or disposal facility.
several areas, including environmental assessment, facility design and drafting the detailed contracts that will govern the construction The DOE has stated in statute and by contract that a permanent stor-and operation of the site. An architect engineering firm and an envi-age or disposal facility would be ready to accept used nuclear fuel by ronmental contractor have been retained to perform the environmen-1998. Accordingly, NSP has been providing, with regulatory and leg-tal and licensing activities. The consortium is currently scheduled to islative approval,its own temporary on site storage f acihties at its submit a license application for the facility to the Nuclear Regulatory Monticello and Prairie Island nuclear plants, with a capacity suffi-Commission (NRC)in December 1996. The spent fuel storage facility is cient for used fuel from the plants until at least that date. Recent indi-expected to be operational and able to accept the first shipment of cations from the DOE are that a permanent federal facility will not be used nuclear fuel by mid 2002. However, due to pending regulatory ready to accept used fuel from utilities until approximately 2010. In and govarnmental approval uncertainty,it is possible that this interim 1994, the Company and 13 other major utilities filed a lawsuit against storage may be delayed or not available.
the DOE in an attempt to clarify the DOE's obligation to accept spent nuclear fuel beginning in 1998. The primary purpose of the lawsuit is Fuel egense includes DOE fuel disposal assessments of $12.3 million, to insure the Company and its customers receive timely storage of
$10.6 r,iillion and $8.7 million for 1995,1994 and 1993, respectively. Dis-used nuclear fuel. The lawsuit was argued before the United States posal expenses reflect reductions of $0.7 million in 1994 and $2.6 mil-Circuit Court of Appeals for the District of Columbia on Jan.17,1996, lion in 1993 due to a change in the DOE's basis of charging customers, and a decision is expected in three to six months from the time of retroactive to 1983. Nuclear fuel expenses in 1995,1994 and 1993 also argument. In 1995, the DOE published its " Final Interpretations of include about $5 million, $5 million and $1 million, respectively, for Nuclear Waste Acceptance issues"in the Federal Register. In this payments to the DOE for the decommissioning and decontamination notice, the DOE concluded that it has neither an unconditional obliga-of the DOE's uranium enrichment facilities. The DOE's initial assess-tion to accept spent nuclear fuel by 1998 nor any authority to provide ment of $46 million to the Company was recorded in 1993. This interim storage. Because of the DOE's inadequate progress to provide assessment will be payable in annualinstallments from 1993-2008 and a permanent repository and its disavowal of its obligation, the Min-each installment is being amortized to expense on a monthly basis in nesota Department of Public Service is investigating whether contin-the 12 months following each pa; 7 The most recent installment ued payments to fund the DOE's permanent disposal program is paid in 1995 was $3.7 million; fue &llments a ' uubject to infla-prudent use of ratepayer money.The outcome of this investigation is tion adjustments under DOE rules. The Company is obtaining rate unknown at this time. In the meantime, NSP is investigating all of its recovery of these DOE assessments through the cost-of-energy alternatives for used fuel storage until a DOE f acility is available.
adjustment clause as the assessments are amortized. Accordingly, When on-site temporary storage at NSP's nuclear plants reaches the unamortized assessment of $44 million at Dec. 31,1995, has been approved capacity,the CAmpany could seek interim storage at a con-deferred as a regulatory asset and is reported under the caption Envi-tracted private facility. The Company received Minnesota legislative ronmental Costs in Note 10.
approvalin 1994 for additional on-site storage facihties at its Prairie Island plant, provided the Company satisfies certain requirements.
Plant Decommissioning Decommissioning of all Company nuclear Seventeen dry cask containers, each of which can store approxi-f acilities is planned for the years 2010-2022, using the prompt disman-mately one-half year's used fuel, can become available as follows:
tlement method. The Company is currently following industry practice five immediately in 1994; four more in 1996 if an application for an by ratably accruing the costs for decommissioning over the approved alternative storage site is filed, an effort to locate such a site is made cost recovery period and including the accruals in Utility Plant -
and 100 megawatts of wind generation is available or contracted for Accumulated Depreciation, as discussed in Note 1. Consequently, the construction; and the final eight in 1999, unless the specified alterna-total decommissioning cost obligation and corresponding asset cur-tive site is not operational or under construction, certain resource rently are not recorded in NSP's financial statements. The FASB has commitments are not met, or the Minnesota Legislature revokes its proposed new accounting standards which,if approved as expected approval. (See additional discussion of legislative commitments in in 1996, would require the full accrual of nuclear plant decommission-Note 15 ) NSP has loaded used fuel into three of the dry cask contain-ing and certain other site exit obligations beginning in 1997. If NSP ers as of Dec. 31,1995. With the dry cask storage f acilities approved were to adopt the proposed accounting, beginning in 1997 an esti-in 1994 for the Prairie Island nuclear generating plant, the Company mated total discounted decommissioning obligation of $610 million believes it has adequate storage capacity to continue operation of its would be recorded as a liability, with the corresponding costs capital-nuclear plants until at least 2002 and 2003 for Prairie Island Units 1 ized as a plant asset and depreciated over the operating life of the and 2, respectively. The Monticello nuclear plant has storage capac-plant. The obligation calculation methodology proposed by the FASB ity to continue operations until 2010. Storage availabikty to permit is slightly different from the ratemaking methodology that derives the operation beyond these dates is not assured at this time.
decommissioning accruals currently being recovered in rates (as dis-cussed below). The Company has not yet determined the potential Two alternatives to on site storage of used fuel are currently under impact of the FASB's proposed changes in the accounting for site exit consideration. As discussed in Note 15, the Company is investigating obligations other than nuclear decommissioning (such as costs of alternative sites in Goodhue County, Minnesota, for interim used removal). However, the ultimate decommissioning and site exit costs nuclear fuel storage. Also, the Company is leading a consortium to be accrued are the same under both methods and, accordingly,the 42
effects of regulation are expected to minimize or eliminate any impact At Dec. 31,1995, the Company has recorded and recovered in rates on operating expenses and results of operations from this future cumulative decommissioning accruals of $381 million; $177 million has accounting change.
been deposited into external trust funds for such accruals. The Com-pany believes future decommissioning cost accruals will continue to Consistent with cost recovery in utility customer rates, the Company be recovered in customer rates. Decommissioning and interest records annual decommissioning accruals based on periodic site-accruals are included with the accumulated provision for deprecia-specific cost studies and a presumed level of dedicated funding. Cost tion on the balance sheet. Interest costs and trust earnings associ-studies quantify decommissioning costs in current dollars. Since the sted with externally funded obligations are reported in Other income costs are expected to be paid in 2010-2022, funding presumes that and Expense on the income statement.
current costs wili escalate in the future at a rate of 4.5 percent per year. The total estimated decommissioning costs that will ultimately A revision to NSP's 1993 nuclear decommissioning study and nuclear be paid, net of income earned by external trust funds, is currently plant depreciation capital recovery request was filed with the MPUC being accrued using an annuity approach over the approved plant and approved in 1994. Although management expects to operate the recovery period. This annuity approach uses the assumed rate of Prairie Island units through the end of their licensed lives, the return on funding, which is currently 6 percent (net of tax) for external approved capital recovery would allow for the plant to be fully depre-funding and approximately 8 percent (net of tax) for internal funding.
ciated, including the accrual and recovery of decommissioning costs in 2008, about six years earlier than the end of its licensed life. The The total obligation for decommissioning currently is expected to be approved recovery period for Prairie Island has been reduced funded approximately 82 per cent by external funds and 18 percent by because of the uncertainty regarding used fuel storage.The updated internal funds, as approved by the MPUC. Rate recovery of internal nuclear decommiss;oning study resulted in a decrease in annual cost funding began in 1971 through depreciation rates for removal accruals for decommissioning due to a reduction in decommissioning expense, and was changed to a sinking fund recovery in 1981. Contri-cost estimates as well as the shortened recovery period. The com-butions to the external fund started in 1990 and are expected to con-bined impact of the request as approved, including the shorter depre-tinue until plant decommissioning begins. Costs not funded by ciation period and lower decommissioning costs, was a net decrease external trust contributions and related earnings will be funded of about $800,000 in annual depreciation and decommissioning through internally generated funds and issuance of Company debt or expenses, beginning in 1994.
stock. The assets held in trusts as of Dec. 31,1995, primarily consisted of investments in tax-exempt municipal bonds, common stock of pub-
- 15. COMMITMENTS AND CONTINGENT LIABILITIES lic companies and U.S. government securities.
g gg The following table summarizes the funded status of the decommis-ture established several energy resource and other commitments for sioning obligation at Dec. 31,1995, under the method currently in use.
ain me Wame MaM temporary nuclear fuel stor-age facility approval, as discussed in Note 14. The additional resource co m t ents, which can be built, purchased or(in the case (Millions of dollars)
M mass genua &n) connd, can be swnmaM as Won Decommissioning cost estimate L.
q from most recent study (1993 dollars)
$ MA Effect of escalating costs to payment g
we me egawatts DeaJne date (at 4.5% per year) ktWA "d
"'O Estimated future decommissioning costs (undiscounted) { $18RS!
8 mass W
M ona0 W8 N Estimated decommissioning cost obligation b
j b($ MRSMM Bsmass 75 m ona0 W2 escalated to current dollars External trust fund assets at fair value
"#0 Decommissioning obligation in j
excess of assets currently held in external trust I M41 (1)in addition to 25 megawatts of wind generation Decommissioning expenses recognized include the following compo-
- Y#" O nents:
(3) Power purchase contract awarded to Zond Systems, Inc.
(Millions of dollars)
M 1994 1993 Annual decommissioning cost accrual -
y reported as depreciation expenseb The Company has taken steps to comply with the requirements of Externally funded srb
$33.2
$28.4 Internally funded 7
these resource commitments. Twenty five megawatts of third party (including interest costs)
, Elb 1.1 14.5 wind generation has been fully operational since May 1,1994. With Interest cost on externally funded respect to the additional 100 megawatts of wind energy to be under e nuac en decommissioning obligation
[8Aj 3.5 3.7
, e mpany has Wained a de de@
na n n e nnesma n nrnental haMoad MB), and Earnings from external trust funds -
84 (3.5)
(3.7)
Current year decommissioning
- j selected Zond Systems, Inc. to supply the wind energy. The Company accruals - net
$$N,4)
$34.3
$42.9 mus n w secme wind dgMs W sMom an unsuccessM Mer, which ha s indicated it will not voluntarily transfer the wind rights. The 43
Company has commenced htigation to expedite resolution of the wind interest in O'Brien; (ii) a $7.5 million investment by PRG for all of rights dispute. Siting and design activities are proceeding while wind O'Brien's interest in certain biogas projects; and (iii) a $45 million q
rights acquisition efforts continue. An independent evaluator also unsecured loan from NRG to O'Brien. NRG currently is negotiating reviewed proposals from bidders regarding 50 megawatts of f arm-with an unaffiliated lender to refinance O'Brien's Newark Boxboard grown closed-loop biomass generation and made a recommendation project in the amount of $56 million, of which approximately $26 mil-to the Company in January 1996, with a final decision to be made in lion would be applied for distribution to O'Brien's creditors in reduc-early 1996. On Jan. 22,1996, the Company notified the MPUC that due tion of NRG's approximately $107 million obligation. If this financing is to the price of the various bids and otter factors, the Company not obtained concurrently with the closing of the O'Brien transaction, intended to reject each of the bids. Since lagislation may be proposed NRG would be obligated to make a $26 million loan to O'Brien after its to change various elements of the biomass mandate,the Company reorganization.
proposed to delay its report detailing the Company's decision and its proposal to meet the statutory mandate antil later in 1996.
Lesses Rentals under operating leases were approximately $26.9 mil-lion, $24.0 million and $27.5 million for 1995,1994 and 1993, respec-Other commitments established by the Legislature include applying tively. Future commitments under these leases generally decline from for, locating and licensing an alternativs used fuel storage site, a low-currentlevels.
income discount for electric customert, additional required conser-vation improvement expenditures and various study and reporting Fuel Contracts NSP has contracts providing for the purchase and requirements to a legislative electric energy task force formed in delivery of a significant portion of its current coal, nuclear fuel and 1994. In January 1995, the MPUC approved the Company's low-natural gas requirements. These contracts, which expire in various income discount programs in accordan:e with the statute. In July years between 1996 and 2013, require minimum contractual purchases 1995, the Company filed documents wit 5 the MEQB outlining two and deliveries of fuel, and additional payments for the rights to pur-atternative Goodhue County sites to be considered for the develop-chase coalin the future, in total NSP is committed to the minimum ment of an interim used nuclear fuel storaga facility, as the Minnesota purchase of approximately $529 million of coal, $26 million of nuclear Legislature required. The MEQB has begun a 12 to 18-month public fuel and $512 million of natural gas and related transportation, or to process to examine these sites and any others that may be proposed.
make payments in lieu thereof, under these contracts. In addition, NSP The Company has implemented programs to begin meeting the other is required to pay additional amounts depending on actual quantities legislative commitments. The Company's et pital commitments dis-shipped under these agreements. As a result of FERC Order 636, NSP closed below include the known effects of the 1994 Prairie Island leg-has been very active in developing a mix of gas supply, transportation islation. The impact of the legislation on power purchase and storage contracts designed to meet its needs for retail gas sales.
commitments and other operating expenses is not yet determinable.
The contracts are with several suppliers and for various periods of time. Because NSP has other sources of fuel available and suppliers Capital Commitments NSP estimates utility aapital expenditures, are expected to continue to provide reliable fuel supplies, risk of loss including acquisitions of nuclear fuel, will be $410 million in 1996 and from non-performance under these contracts is not considered signif-
$1.9 billion for 1996 2000. There also are contractual commitments for icant. In addition, NSP's risk of loss (in the form of increased costs) the disposal of used nuclear fuel. (See Note 14.)
from market price changes in fuelis mitigated through the cost of-energy adjustment provision of the ratemaking process, which pro-NRG is contractually committed to additional equity investments in an vides for recovery of nearly all fuel costs.
existing German energy project. Such commitmeits are for approxi-mately DM 33 million in 1996. The 1996 commitment would be approx-Power Agreements The Company has executed several agreements imately $23 million, based on exchange rates in effect at Dec. 31, with the Manitoba Hydro-Electric Board (MH) for hydroelectricity. A 1995. In addition, NRG is contractually committed to additional equity summary of the agreements is as follows:
investments of $17 million in the Scudder Latin American Trust for independent Power Energy Projects, as of Dec. 31,1995.
Years Megawatts Participation Power Purchase 1996-2005 500 NRG is in the final stages of purchasing a 42 percent interest in Seasonal Participation Power Purchase 1996 250 0'Brien Environmental Energy, Inc. (O'Brien) from bankruptcy. In con-Seasonal Peaking Power Purchase 1996 200 nection with its bid for O'Brien, on Jan. 3,1996, NRG obtained a $100 Seasonal Diversity Exchanges:
million letter of credit from a bank, which is secured by a pledge of Summer exchanges from MH 1996 2014 150 various NRG assets. NRG delivered the letter of credit to O'Brien on 1997 2016 200 Jan.18,1996, to secure its obligation to complete its proposed invest-Winter exchanges to MH 1996 2014 150 ment in O'Brien. In January 1996, the United States Bankruptcy Court 1996-2015 200 for the District of New Jersey confirmed the Chapter 11 Plan of Reor-2015-2017 400 ganization for O'Brien proposed by NRG and other interested parties.
2018 200 0'Brien has interests in eight domestic operating power generation facilities with aggregate capacity of approximately 230 megawatts, The cost of the 500-megawatt participation power purchase commit-and in one ISO-megawatt f acility in the contract stage of develop-ment is based on 80 percent of the costs of owning and operating the ment. As a result of the purchase, approximately $107 million would Company's Sherco 3 generating plant (adjusted to 1993 dollars). The be made available to O'Brien's credttors by NRG. At least $81 milhon total estimated future annual capacity costs for all MH agreements is of the total made available to the creditors would be provided by NRG projected to be approximately $65 million. However, the Company and as follows:(i) a $2B million equit/ nvestment by NRG for its 42 percent MH have consented to arbitration to finalize interpretations of specific i
44
contractual factors relating to the 500-megawatt participation agree-maximum assessments of approximately $4.9 million (five times the ment. These commitments to MH, which represent about 22 percent amount of its annual premium) and $36.8 million (generally 7.5 times of MH's output capabilityin 1996, account for approximately 13 per-the amount of its annual premium)if losses exceed accumulated cent of NSP's 1996 electric system capability. The risk of loss from reserve funds under the business interruption and property damage non-performance by MH is not considered significant, and the risk of coverages, respectively.
loss from market price changes is mitigated through cost-of-energy rate adjustments.
Environmental Contingencies Other long-term liabilities include an accrual of $42 million, and other current liabilites include an The Company has an agreement with Minnketa Power Cooperative accrual of $6 million at Dec. 31,1995, for estimated costs associ-(MPC)for the purchase of summer season c pacity and energy. From ated with environmental remediation. Approximately $37 million of 1996 through 2001, the Company will buy 150 megawatts of summer the long-term liabihty and $4 million of the current liabihty relate to a season caNcity for $12.4 million annually. From 2002 through 2015, 00E assessment for decommissioning of a federal uranium enrich-the Company will purchase 100 megawatts of capacity for $100 mil-ment facility, as discussed in Note 14. Other estimates have been lion annually. Under the agreement, energy will be priced against the recorded for expected environmental costs associated with manu-cost of fuel consumed per megawatt-hour at the Coyote Generating factured gas plant sites formerly used by the Company and other Station in North Dakota. The Company also has three seasonal (sum-waste disposal sites, as discussed below.
mer) purchase power r mements with MPC, Minnesota Power and Mid American Energy Coyany for the purchase of 388 megawatts in These environmentalliabilities do not include accruals recorded (and 1996, including reserves. The annual cost cf this capacity will be collected from customers in rates) for future nuclear fuel disposal approximately $4 million.
costs or decommissioning costs related to the Company's nuclear generating plants. (See Note 14 for further discussion.)
The Company has agreements with several non-regulated power producers to purchase electric capacity and associated energy. The The Environmental Protection Agency (EPA) or state environmental 1996 cost of these commitments for non-regulated installed capacity agencies have designated the Company as a "potentially responsible is approximately $20 million for 115 megawatts. This annual cost will party" (PRP) for 12 waste disposal sites to which the Company increase to approximately $37 million-$44 million for 1997 2018 and allegedly sent hazardous materials. Under applicable law, the Com-then decrease to approximately $25 million-$29 million for 2019-2027 pany, along with each PRP, could be held jointly and severally liable due to the expiration of existing agreements and an additional agree-for the total remediation costs of all 12 sites, which are currently esti-mont for the purchase of 245 to 262 megawatts.
mated between $123 million and $126 million. If additional remediation is necessary or unexpected costs are incurred, the amount could be Nuclear insurance The Company's public liability for claims resulting in excess of $126 million. The Company is not aware of the other par-from any nuclear incident is limited to $8.9 billion under the 1988 ties' inability to pay, nor does it know if responsibihty for any of the Price Anderson amendment to the Atomic Energy Act of 1954.The sites is disputed by any party The Company's share of the costs asso-Company has secured $200 million of coverage for its public liability ciated with these 12 sites is approximately $2.5 million. Of this exposure with a pool of insurance companies. The remaining $8.7 bil-amount, about $1.5 million already has been paid in connection with lion of exposure is funded by the Secondary Financial Protection Pro-eight of the 12 sites for which the Company has settled with the EPA gram, available from assessments by the federal government in case and other PRPs. For the remaining four sites, neither the amount of of a nuclear accident.The Company is subject to assessments of up remediation costs nor the final method of their allocation among all to $79.3 million for each of its three licensed reactors to be applied for designated PRPs has been determined. However, the Company has public liability arising from a nuclear incident at any licensed nuclear recorded an estimate of approximately $1 million for future costs for facility in the United States. The rnaximum funding requirement is $10 all four sites, with the estimated payment dates not determinable at million per reactor during any one year.
this time. While it is not feasible to determine the outcome of these matters, amounts accrued represent the best current estimate of the The Company purchases insurance for property damage and site Company's future liability for the remediation costs of these sites. It is decontamination cleanup costs with coverage limits of $2.0 billion for the Company's practice to vigorously pursce and,if necessary, litigate each of the Company's two nuclear plant sites. The coverage consists with insurers to recover incurred remediation costs whenever possi-of $500 million from Nuclear Mutual Limited (NML) and $1.5 billion ble. Through htigation, the Company has recovered from other PRPs a from Nuclear Electric insurance Limited {NEIL).
portion of the remediation costs paid to date. Management believes costs incurred in connection with the sites, which are not recovered NEll also provides business interruption insurance coverage,includ-from insurance carriers or other parties, should be allowed recovery ing the cost of replacement power obtained during certain prolonged in future ratemaking. Until the Company is identified as a PRP,it is not accidental outages of nuclear generating units. Premiums billed to possible for the Company to predict the timing or amount of any costs NSP from NML and NEll are expensed over the policy term. All com-associated with cleanup sites other than those discussed above.
panies insured with NML and NEll are subject to retrospective pre-mium adjustments if losses exceed accumulated reserve funds.
The Wisconsin Company potentially may be involved in the cleanup Capital has been accumulated in the reserve funds of NML and NEll and remediation at three sites. One site is a solid and hatardous waste to the extent that the Company would have no exposure for retro-landfill site in Eau Claire, Wis The Wisconsin Company contends that spective premium assessments in case of a single incident under the it did not dispose of hazardous wastes in the subject landfill during the business interruption and the property damage insurance coverages.
time period in question. Because neither the amount of cleanup costs However, in each calendar year, the Company could be subject to not the finalmethod of their allocation among all designated PRPs has 45
been determined,it is not feasible to predict the outcome of this mat-this complex legislation have been finalized. No additional capital ter at this time. The second site, in Ashland, Wis., contains cre-expenditures are anticipated to comply with the sulfur dioxide emis-osote/ coal tar contamination. A portion of the Ashland site was sion limits of the Clean Air Act. NSP has expended significant contaminated by a gas manuf acturing plant formerly operated by the amounts over the years to reduce sulfur dioxide emissions at its Wisconsin Company. Cleanup at this portion of the site has begun and plants. Based on revisions to the sulfur dioxide portion of the pro-will be completed in 1996. The Wisconsin Company has paid approxi-gram, NSP's emission allowance allocations for the years 1995-1999 mately $400,000 and has accrued its estimated liability of $900,000 for were dramatically reduced. The Company's capital expenditures the remainder of the cleanup. The Wisconsin Company is discussing include some costs for ensuring compliance with the Clean Air Act's its potentialinvolvement in a second portion of the Ashland site with other emission requirements; other expenditures may be necessary the Wisconsin Department of Natural Resources. Investigations are upon EPA's finalization of remaining rules. Because NSP is only under way to determine the Wisconsin Company's responsibility as beginning to implement some provisions of the Clean Air Act,its over-well as that of predecessor companies contributing to the contamina-all financial impact is unknown at this time. Capital expenditures for tion existing at the second portion of the AsStand site. The investiga-opacity compliance, which began in 1995 at certain facilities, are tion also should determine the extent and source of the considered in the capital expenditure commitments disclosed previ-contamination and potential methods for remediation. An estimate of ously. NSP plans to seek recovery of these expenditures in future cleanup and remediation costs at the Eau Claire site and the second rate proceedings.
portion of the Ashland site and the extent of the Wisconsin Com-pany's responsibility,if any, for sharing such costs are not known at Several of NSP's operating f acilities have asbestos containing mater-this time. The third site is a landfill site in Hudson, Wis., which is one ial, which represents a potential health hazard to people who come in of the 12 waste disposal sites discussed previously.
contact with it. Governmental regulations specify the required timing and nature of disposal of asbestos-containing materials. Under such The Company also is continuing to investigate 15 properties, either requirements, asbestos not readily accessible to the environment presently or previously owned by the Company, which were at one need not be removed until the facilities containing the material are time sites of gas manufacturing, gas storage plants or gas pipelines.
demolished. NSP estimates its future asbestos removal costs will The purpose of this investigation is to determine if waste materials approximate $43 million. Most of these costs ill not need to be are present,if such materials constitute an environmental or health incurred until current operating facilities are demolished, and will be risk,if the Company has any responsibility for remedial action and if included in the costs of removal for the facilities.
recovery under the Company's insurance policies can contribute to any remediation costs. Of the 15 gas sites under investigation, the Environmentalliabilities are subject to considerable uncertainties Company already has remediated one site and is actively taking that affect NSP's ability to estimate its share of the ultimate costs of remedial action at four of the sites. In addition, the Company has been remediation and pollution control efforts. Such uncertainties involve notified that two other sites eventually will require remediation, and a the nature and extent of site contamination, the extent of required study will be initiated in 1996 to determine the cost and method of cleanup efforts, varying costs of alternative cleanup methods and cleanup. Cleanup is expected to begin in 1997. The Company has paid pollution control technologies, changes in environmental remediation
$6.7 million to date on these seven active sites. The one remediated and pollution control requirements, the potential effect of technologi-site continues to be monitored. The Company has recorded an esti-calimprovements, the number and financial strength of other poten-mated liability for future costs at the other six active sites of approxi-tially responsible parties at multi party sites and the identification of mately $6.1 million, with payment expected over the next 10 years.
new environmental cleanup sites. NSP has recorded and/or dis-This estimate is based on prior experience and includes investigation, closed its best estimate of expected future environmental costs and remediation and htigation costs. As for the eight inactive sites, no lia-obligations, as discussed previously.
bility has been recorded for remediation or investigation because the present land use at each of these sites does not warrant a response Legal Claims in the normal course of business, NSP is a party to rou-action.While it is not feasible to determine the precise outcome of all tine claims and litigation arising from prior and current operatiora. NSP of these matters,the accruals recorded represent the current best is actively defending these matters and has recorded an estimate of estimate of the costs of any required cleanup or remedial actions at the probable cost of settlement or other disposition. In July 1993, a nat-these former gas operating sites. Management also believes that ural gas explosion occurred on the Company's distribution system in St.
incurred costs, which are not recovered from insurance carriers or Paul, Minn. Total damages are estimated to exceed $1 million. The other parties, should be allowed recovery in future ratemaking. Dur-Company has a self insured retention deductible of $1 million, with ing 1994, the Company's gas utility received approval for deferred general hability coverage of $150 million, which includes coverage for accounting for certain gas remediation costs incurred at four active allinjuries and damages. Seventeen lawsuits have been filed, including sites, with fmal rate treatment of such costs to be determined in one suit with multiple plaintiffs. In April 1995, the National Transporta-future general gas rate cases.
tion Safety Board found little,if any, fault with the Company's actions or conduct. A trial to decide civilliability and the parties responsible for The Clean Air Act, including the Amendments of 1990 (the Clean Air the explosion has been scheduled for February 1997, with the damages Act), cal!s for reductions in emissions of sulfur dioxide and nitrogen portion of the trial scheduled for six months thereafter. The ultimate oxides from electric generating plants. These reductions, which will costs to the Company are unknown at this time, be phased in, began in 1995. The majority of the rules implementing 46
- 16. SEGMENT INFORMATION Year Ended Dec.31 (Thousands of dollars) 1994 1993 Utility operating income before income taxes Electric
$ 399185
$ 393 758 Gas 38 361 38 474 Total operating income before income taxes
$ 437 546
$ 432232 Utikty depreciation and amortization Electric
$ 252322
$ 245 200 Gas 21 479 19 317 Total depreciation and amortization
$ 273801
$ 264 517 Utihty capital expenditures
?
Electric utility
$ 303 896
$ 284 239 Gas utility 60 183 36 312 Common utihty 22 947 36 285 Total utikty capital expenditures (E
i
$ 387 026
$ 356 836 identifiable assets
- -J Electric utility
$4 634 511
$4 543 286 Gas utshty 556 975 521 595 Totalidentifiable assets Other corporate assets'
$5191486
$5 064 881 758 246 522 837 Total assets iW E9
$5 949 732
$5 587 718
- Includes equityinvestments of $185 million in 1995 and $134 million in 1994 in non regulated energyprojects outside of the United States.
- 17. SUMMARlZED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended Utikty operating revenues
-- W w M,
. _ iM,
M Utility operating income
).'
ifMy ",
eof
@$6/$95 E, k.EWI Netincome b((r *
(WW) j[, W I%j M $ d ij W W jj%) "jp{
, s W$ i ;,' gj i
7 Earnings available for common stock
Q Earnings per average common share hi ' l j$$((p-
.l If y$8 i ? O@kl Dividends declared per common share Q4W[
C-
.($Wjst 3d,
UjWld,hf_
- TW$7 + g'7%j g
Stock prices - high
^
5 sa pf{y
- M 4i MW1 7W3%,
%gW
.. low Quarter Ended (Thousands of dollars /
March 31,1994 June 30,1994 Sept. 30,1994 Dec. 31,1994 Utikty operating revenues
$683 462
$581963
$612 328
$608 794 Utility operating income 85 795 65 526 88 932 68 065*
Netincome 65 794 52 808 76 065 48 808*
Earnings available for common stock 62 737 49 751 72 968 45 655' Earnings per average common share
$ 94
$.74
$1.09 S.68' Dividends declared per common share
$.645
$.660
$.660
$.660 Stock prices - high
$43 %
$43 %
$43 %
$47
-low
$40 %
$38 %
$40%
$41 %
'An expense of $8]million ($5.1 million net of tax), or 8 cents per share, was recognized to write off the unamortized deferred costs associated with adopting SFAS No. I12. (See Note 2) Such costs had initially been deferred based on a preliminary decision to request amortization through rates over future periods.
47
l
- 18. MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION SUMMARIZED PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
As previously reported in the Company's Current Report on Form 8-K, The following summary of unaudited pro forma financialinformation dated April 28,1995, and filed on May 3,1995, and Quarterly Reports reflects the adjustment of the historical consolidated balance sheets on Form 10-Q,the Company and Wisconsin Energy Corporation (WEC) and statements of income of NSP and WEC to give effect to the have entered into an Agreement and Plan of Merger (Merger Agree-Transaction to form Primergy and a new subsidiary structure. The ment), which provides for a strategic business combination involving unaudited pro forma balance sheet information gives effect to the the Company and WEC in a
- merger-of-equals" transaction (the Transaction as if it had occurred on Dec. 31,1995. The unaudited pro Transaction). See further discussion of the transaction in the Man-forma income statement information gives effect to the Transaction agement's Discussion and Analysis, Factors Affecting Results of as if it had occurred on Jan.1,1995. This pro forma information was Operations - Proposed Merger section.
prepared from the historical consolidated financial statements of NSP and WEC on the basis of accounting for the Transaction as a pooling Primergy Corporation (Primergy), which will be registered under the of interests and should be read in conjunction with such historical Public Utility Holding Company Act of 1935, as amended, will be the consolidated fmancial statements and related notes thereto of NSP parent company of both the Company (which, for regulatory reasons, and WEC. The following information is not necessarily indicative of willreincorporate in Wisconsin) and WEC's current principal utility the financial position or operating results that would have occurred subsidiary, Wisconsin Electric Power Company, which will be had the Transaction been consummated on the dates for which the renamed " Wisconsin Energy Company." It is anticipated that, follow.
Transaction is being given effect, nor is it necessarily indicative of ing the Transaction, except for certain gas distribution properties future Primergy operating results or financial position.
transferred to the Company, the Wisconsin Company will be merged into Wisconsin Energy Company and that some of the Company's Primorgy information The following summarized Primergy pro forma other subsidiaries wiil become direct Primergy subsidiaries.
financialinformation reflects the combination of the historical finan-cial statements of NSP and WEC after giving effect to the Transaction As noted above, pursuant to the Transaction, NSP will reincorporate in to form Primergy. A $141 million pro forma adjustment has been made Wisconsin. This reincorporation will be accomplished by the merger of to conform the presentations of noncurrent deferred income taxes in the Company into a new company, Northern Power Wisconsin Corpo-the summarized pro forma combined balance sheet information as a ration (New NSP), with New NSP being the surviving corporation and net liability. The pro forma combined earnings per common share succeeding to the business of the Company as an operating public util-reflect pro forma adjustments to average common shares outstand-ity. Following such merger, a new WEC subsidiary, WEC Sub Corpora-ing in accordance with the stock conversion provisions of the Merger tion (WEC Sub), will be merged with and into New NSP, with New NSP Agreement.
being the surviving corporation and becoming a subsidiary of Primergy.
Both New NSP and WEC Sub were created to effect the Transaction ~
j and will not have any significant operations, assets or liabilities prior to such mergers. After the Transaction is completed, current common stockholders of the Company will own shares of Primergy common stock, and current bon'iholders and preferred stockholders of the Com-pany will become investors in New NSP.
40 l
Pro Forma Prim 2rgy Pro Forma Finsacial Information NSP WEC Combined (Milhons of dollars, exceptper share amounts)
As of Dec.31,1995:
Utility Plant-Net
$4 310
$2 911
$ 7 221 Current Assets 705 531 1 236 Other Assets 1 214 1 119 2 192 Total Assets
$6 229
$4 561
$10649 Common Stockholders' Equity
$2028
$1871
$ 3899 Preferred Stockholders
- Equity 240 30 270 Long-Term Debt 1 542 1 368 2 910 Total Caprtalaation 3 810 3 269 7 079 Current liabilities 992 436 1 428 Other Liabilities 1 427 856 2 142 Total Equity and Liabilities
$6 229
$4 561
$10 649 For the Year Ended Dec.31,1995:
Utility Operating Revenues
$2 569
$1770
$4 339 Utility Operating income
$346
$329
$675 Net income, after Preferred Dividend Requirements
$263
$234
$497 Earnings per Common Share:
As reported
$3.91
$2.13 Using NSP Equivalent Shares'
$3.69 Using Primergy Shares
$2.27
- Represents the pro forma equivalent of one share of NSP Common Stock calculated by multiplying the pro forma information by the conversion ratio of 1.626 shares of Primergy Common Stock for each share of NSP Common Stock.
New NSP Information The following summarized New NSP pro forma financialinformation reflects the adjustment of the historical financial state-ments of NSP to give effect to the Transaction, including the merger of the Wisconsin Company into Wisconsin Energy Company and the transfer of ownership of all of the other current NSP subsidiaries to Primergy. The transfer of certain Wisconsin Company gas distribution properties to New NSP, which is anticipated as part of the merger, has not been reflected in the pro forma amounts due to immateriality.
Merger Divestitures, Pro Forma New NSP Pro Forma FinancialInformation NSP Net Now NSP (Milhons of dollars)
As of Dec. 31,1995:
Utility Plant-Net
$4 310
$ (692)
$3 618 Current Assets 705 (170) 535 Other Assets 1 214 (531) 683 Total Assets
$6 229
$(1393)
$4 836 Common Stockholders' Equity
$2 028
$ (706)
$1322 Preferred Stockholders' Equity 240 240 Long-Term Debt 1 542 (356) 1 186 Total Capitalization 3 810 (1 062) 2 748 Current Liabilities 992 (139) 853 Other Liabilities 1 427 (192) 1 235 Total Equity and Liabilities
$6 229
$(1393)
$4 836 For the Year Ended Dec.31,1995:
Utility 0perating Revenues
$2 569
$(213)
$2 356 Utility Operating income
$346
$(62)
$284 Net Income, after Preferred Dividend Requirements
$263
$(73)
$190 49
REPORT OF MANAGEMENT REPORT OFINDEPENDENT ACCOUNTANTS Management is responsible for the preparation and integnty of NSP's To the Shareholders if N rtherz States Pawir CompaIy:In our opin-financial statements. The financisi statements have been prepared in ion, the accompanying consolidated balance sheet and statement of accordance with generally accepted accounting principles and nec-capitalization and the related consolidated statements of income, of essarily include some amounts that are based on management's esti-common stockholders
- equity and of cash flows present f airly,in all mates and judgment.
material respects, the financial position of Northern States Power Company, a Minnesota corporation, and its subsidiaries at Dec. 31, To fulfillits responsibility, management maintains a strong internal 1995, and the results of their operations and their cash flows for the control structure, supported by formal policies and procedures that year in conformity with generally accepted accounting principles.
are communicatt,d throughout NSP. Management also maintains a These financial statements are the responsibility of the Company's staff of internal auditors who evaluate the adequacy of and investi-management; our responsibility is to express an opinion on these gate the adherence to these controls, policies and procedures.
financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing Our independent public accountants have audited the financial state-standards which require that we plan and perform the audit to obtain ments and have rendered an opinion as to the statements' fairness of reasonable assurance about whether the financial statements are presentation, in all materiallespects, in conformity with generally free of material misstatement. An audit includes examining, on a test accepted accounting principles. During the audit, they obtained an basis, evidence supporting the amounts and disclosures in the finan-understanding of NSP's internal control structure, and performed cial statements, assessing the accounting principles used and signif-tests and other procedures to the extent required by generally icant estimates made by management, and evaluating the overall accepted auditing standards.
financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The consolidated The Board of Directors pursues its oversight role with respect to NSF.
financial statements of the Company and its subsidiaries for the years financial statements through the Audit Committee, which is comprised ended Dec. 31,1994 and 1993 were audited by other independent solely of non-management directors. The Committee meets periodically accountants whose report dated Feb. 8,1995 expressed an unquali-with the independent public accountants, internal auditors and man-fied opinion on those statements and included an explanatory para-agement to assure that all are properly discharging their responsibili-graph related to a change in method of accounting for postretirement ties. The Committee approves the scope of the annual audit and health care costs in 1993.
reviews the recommendations the independent public accountants have for improving the internal control structure. The Board of Direc-tors, on the recommendation of the Audit Committee, engages the inde-pendent public accountants, subject to shareholder approval.
M g
Both the independent public accountants and the internal auditors PRICE WATERHOUSE LLP have unrestricted access to the Audit Committee.
Minneapolis, Minnesota February 5,1996 j
James J. Howard Chairman of the Board, President and Chief Executive Officer Edward J. McIntyre Vice President and Chief Financial Officer NORTHERN STATES POWER COMPANY Minneapolis, Minnesota February 5,1996 50
Selected Financial Data IMdhons of dollars, except per share data) num 1994 1993 1992 1991 1985 Utiltty operating revenues
$3 486.5
$2 404.0
$2159.5
$2 201.1
$1778.3 Utility operating expenses
$2178.2
$2100.1
$1903.5
$1895.6
$1531.6 Income from continuing operations L
before accounting change (4)
$243.5
$211.7
$160.9
$207.0
$195.8 Netincome g
$243.5
$211.7
$206.4
$224.1
$197.7 Earnings available for common stock 7
$231.1
$197.2
$190.3
$206.1
$184.7 Average number of common and
).$ N equivalent shares outstanding (000's) i; 66 845 65 211 52 641 62 566 62 274
[fM lfd Earnings per average common share:
Continuing operations before accounting change (4)
$3.46
$3.02
$2.31
$3.02
$2.94 Total h%
$3.46
$3.02
$3.04
$3.29
$2.97 Dividends declared per share QM1
$2.625
$2.565
$2.495
$2.395
$1.725 Total assets SMU
$5 949.7
$5 587.7
$5142.5
$4 918.8
$4 047.6 Long term debt DM-
$1463.4
$1291.9
$1299.9
$1233.9
$1252.5 h[i.3 Ratio of earnings (from continuing operations before 5
accounting changes, including AFC)to fixed charges g
4.0 4.0 3.2 3.9 4.7 Financial Statistics GLE 1994 1993 1992 1991 1985 Return on average common equrty:
g,q Continuing operations before accounting change (4)
[' 905j 12.4 %
11.4 %
9.1%
12.2 %
15.4 %
)
Total earnings available for common stock 11RSC 12.4 %
11.4 %
11.9 %
13.3 %
15.6 %
Dividends as percent of earnings (2)
[ENEj 75.8 %
85.5 %
107.8 %
72.7 %
58.2 %
Dividends as percent of book value D $$1b; 9.7%
10.0 %
10.0 %
9.9%
9.6%
Five-year growth rate in earnings per share (1):
'fj Continuing operations before accounting change (4)
'J 75) 1.0%
(2.9%)
(4.1%)
(0.6%)
13.4 %
Total earnings available for common stock j$2%}
2.6%
0.1%
0.2%
0.5%
13.4 %
Capital expenditures,
.;M excluding business acquiritions (millions)
}W
$409.3
$361.7
$427.8
$349.9
$513.7 Percent of capital expenditures that could
[
be financed by internally generated j,
j funds (excluding AFC and after dividends)
/S$q 5
69.3%
98.5 %
49.4 %
57.7%
60.5 %
Cash dividend coverage (2)
C&Sj 3.0 3.1 2.8 3.4 4.4 y(4851 AFC as percent of earnings per share (2)
ESE]
5.4%
6.5%
10.5 %
5.6%
22.6 %
Effective tax rate 34.7 %
38.2 %
34.9 %
35.9%
44.5 %
Capitalization (3)
Common equity (44(
47.5 %
43.4%
47.5 %
49.6 %
44.5 %
Preferred equity
.. ;E.7E]
6.0%
6.5%
8.0%
9.4%
7.9%
Debt
$ SSE) 46.5 %
44.1 %
44.5 %
41.0 %
47.6 %
Total F1R 100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
k'SEs Average cost of long term debt h88%
7.34 %
6.96 %
7.87 %
8.15%
8.08 %
Average utility plant investment per dollar of revenue
~~ f SR.
$3.19
$315
$3.32
$3.11
$2.71 Accumulated depreciation as a percent of
, jj depreciable plant g42%
43.3 %
42.1 %
40.4 %
39.6 %
33.9 %
Depreciation expense as a percent of
- .J average depreciable utility plant 6189El 3.55 %
3.47 %
3.36 %
3.35%
3.63 %
Benefit employees (at Dec.31) 18mi 7 032 7 362 7 522 7 414 7 414 AFC-Allowance for Funds Used During Construction (I) least squares method (2) Excludes the cumulative effect of unbilled revenue accounting change in 1992 earnings (3) includes short term notes payable, currentportion oflong term debt andpreferred stocks with mandatory redemption (4) income and earnings from continuing operations exclude discontinued telephone operations (in 1991 andprior years) and an accounting change (in 1992). They include non-recurring items in 1994 and 1995, as discussed on page 25.
51 s
1994 1993 1992 1991 1985
~
Rsgulated Elsctric Opsrations gg Revenues (thousands)
, 7;;
Residential
$[#.
$ 66 962
$ 68 222
$ 63 376
$ 67 878
$ 58 309 With space heating Without space heating U_ M 616 821 583 371 534 676 568 672 425 652 Small commercial and industrial h
351 287 327 888 312 581 315 946 236 915 Medium commercial and industrial
!WR Large commercial and industrial
[4G N 824 195 780 444 718 712 713 177 515 794 Streetlighting and other 3 3Sk 28 936 29 214 29 764 30 720 30 734 Total retail p1GN5ij 1 888 201 1 789 139 1 659 109 1 696 393 1 267 404 Sales for resale
( f $3BNIj 146 239 159 498 137 962 145 008 94 605 Miscellaneous D 'NWI 32 204 26 279 26 245 21 837 14 103 Total
($ 318730i
$ 2 066 644
$1974 916
$1823 316
$ 1863 238
$ 1376112 Sales (millions of kilowatt-hourst pr p
Residential y.
d With space heating If 11111]
1 076 1 094 1 041 1 141 1 066 Without space heating
{fi885{
8 227 7 998 7 640 8 226 6 900 Small commercial and industrial ilMBj 5 585 5 307 5 224 5 330 4 326 Medium commercial and industrial 3 7 M1 o
410941]J Large commercial and industrial 17 874 17 117 16 365 16 286 12 569 Streetlighting and other Bi 334 344 372 386 500 Total retail
< 34Wj 33 096 31 860 30 642 31 369 25 361 Sales for resale b.85]
6 733 8 044 6 530 6 083 4 211 Total p ? 41Wj 39 829 39 904 37 172 37 452 29 572 Customer accounts Ist Dec. 31) q" Residential l
With space heating NN4 76 050 75 644 74 939 74 646 66 668 Without spaee heating
[1,19 W l 1 146 578 1 131 928 1 119 354 1 104 772 1 010 194 Small commercial and industrial h144 FM ;
142 858 141 446 140 768 139 266 125 992 Medium commercial and industrial I f7Wl Large commercial and industrial kWj 8 172 8 114 7 904 7 758 6 049 Streetlighting and other b [4El 4 836 4 813 4 627 7 662 5 245 Total retail
) 1W7Mj 1 378 494 1 361 945 1 347 592 1 334 104 1 214 148 N87; 70 71 74 72 81 Sales for resale p
Total F1WWi 1 378 564 1 362 016 1 347 666 1 334 176 1 214 229 Residential with space heating
.. JJ Annual kwh per customer i14 SFI) 14 22A 14 531 13 950 15 272 16 522 Annuai revenue per customer M!
$88519
$906.18
$849.08
$908.47
$903.72 Average revenue per kwh (SNef 6.22e 6.24e 6.09c 5 95e 5.47e Residential without space heating
,_]
Annual kwh per customer l- [J 7N4 7 230 7 106 6 879 7 505 6 887 Annual revenue per customer W B.M'
$542.04
$518.34
$481.45
$518.83
$424.86 Average revenue per kwh h 17.Esj 7.50e 7.29e 7.00c 6.91c 6.17e Kilowatt-hour output (millions)
- q Thermal iBWj 32 710 33 130 30 467 31 335 24 095 Hydro
?1OS 922 1 001 1 024 1 153 1200 e e Purchased and interchange f ESINl 9 054 8 541 8 187 7 019 6 317 Total h E4408j 42 686 42 672 39 678 39 507 31 612 Capability at time of maximum demand (megawatts)l 1715))
Company owned 6 859 6 816 6 798 6 823 6 057 Purchased and sales - net (with reserve) 51M8l 1 860 1 787 1 614 1 368 810 Total k: L 9010i 8 719 8 603 8 412 8 191 6 867 Maximum demand (megawatts)
- 7999 e 7 101 6 990 6 128 7 080 5 205 p[ sJuly13!
Date of maximum demand
(
June 14 Aug. 25 June 12 July 16 July 9
- Beginning in 1995, the commercial and industrial customer class has been segmented into small(less than 100 kw in demandper year),
medium (100 kw up to 1,000 kw) andlarge iI,000 kw or more). The medium group, which is an estimate, was reported as large prior to 1995.
52
m i
1994 1993 1992 1991 1985 Regulated Gas Operations gg Revenues tthousands)
Residential t
With space heating g
$204 668
$220 828
$178164
$179161
$195248 Without space heating
>Mc 2 838 2 715 2 523 2 614 3 838 Commercial and industrial
$N' EN Firm L [W.
120 912 131 431 105 829 105 703 118 760 interruptible
[<<j % :
49 384 52 216 41 612 40 768 81 501 Interstate transmission (Viking)*
SQ) 14 075 9 019 Miseeilaneous" b fSPM 28 026 12 867 8 078 9 674 2 853 Total b6)
$419903
$429 076
$336 206
$337 920
$402 200 Sales (thousands of mcf) y
'. y%_, a Residential With space heating
- (W W 38 427 40 946 35 136 37 493 32 850 Without space heating b, N. St,y) 323 331 323 359 464 Commercial and industrial yJ Sj Firm
[353 27 342 28 622 24 273 25 429 22 042 interruptible r3g 8 19 373 18 559 15 823 15 813 19 986 i
Miscellaneous k
EWS 212 186 108 325 114 Total retail ir--
SWj 85 677 88 644 75 663 79 419 75 456 Other gas delivered (thousands of mcf)
V,,
p Interstate transmission (Viking)*
$WWl 131 074 75 188 Agency, transportation and off-system sales fI ? SWl 13 466 8 128 7 332 7 549 106 Total b ;19101j 144 540 83 316 7 332 7 549 106 Customer accounts (at Dec. J1) p 4
Asidential 6-Ml With space heating E WMf 351 773 337 868 326 439 314 843 255 154 Without space heating T.WWj 18 961 19 408 19 841 20 294 24 420 Commercial and industrial WSMi 37 140 36 185 35 458 34 663 28 414 Total b iWWj 407 874 393 461 381 738 369 800 307 988 Rasidential with space heating g
g 4
Annual mcf per customer (197l 112 124 110 122 131 Annual revenue per customer i M.Sl
$595.30
$667.28
$557.83
$581.61
$779.75 Average revenue per mcf SSl
$5.33
$5.39
$5.07
$4.78
$5.94 s
Gas purchased for resale to utility customers yg$NN79]4; Total cost (thousands)"*
$245 939
$275 313
$216 743
$209 326
$300 375 Cost recognized per mcf sold"*
'fi 3,41
$2.85
$3.11
$2.86
$2.64
$3.98 Maximum sendout (mef)
- ; WWj 686 130 642 684 611 380 612 522 610 914 Dete of maximum sendout
@MM Jan.17 Dec.27 Dec. 23 Feb.14 Jan.19
- bcludes intercompany sales revenues of $24 million (20,441 thousands of mcf)in 1995 and$22 million (!6,845 thousands of mcf)in 1994
- Includes NSP revenues for agency and transportation services and off-system sales
- hcludes cost and volumes for other gas delivered 53
(Thousands of dollars, except p:r share data) wm 1994 1993 1
Operating Results 0 pirating Revenu,s Operating Expenses l1)
$241827
$90 531 (241 480) i81 480)
Equity in earnings of unconsolidated affiliates:
{
t Earnings from operations (2)
J 31 595 2 695 Gains from contract terminations D
1 9 685 Other income (deductions)- net f
j 1843 1 040 Interest expense
-4(
[
(2 591)
(3 548)
(7 975)
(3 146)
Income taxes (2)
Net income LW4
$32 904
$6 092 yQ_12 q Contribution of Non-regulated Businesses to NSP Earnings per Share
,f NRG Energy,Inc.
AN3
$0.44
$0.04 Eloigno Company 7AEd 0.02 0.00 Cenergy, Inc. (Cenerprise, Inc., effective Jan.1,1996)
, i4S 0.00 0.00 Other (3)
WJ GM !
0.03 0.05 Total so351
$0.49
$0.09 (Thousands of dollars) wm 1994 Equity investment by Non-regulated Businesses in Unconsolidated Projects at Dec. 31 q
(including undistributed earnings and capitalized development costs)
. (.. ig Australian projects
- $ WWj
$75108 German piojects
[fWWj 55 337 Other international projects bMWj 4 013 Affordable housing projects (U.S.)
1SW11 7 148 Other U S. projects
. ' WW i 36 152 Total Equity investment in Unconsolidated Non-regulated Projects
WIq
$177 758 Additional Equity invested in Consolidated Non-regulated Businesses I19555) 104 011 Total Net Assets of Non-regulated Businesses 953
$281769 SIGNIFICANT UNCONSOLIDATED NON REGULATED PROJECTS AT DEC.31,1995 Total NRG Mw-Generation Projects Operating Location Mw Ownership Equity Operator Gladstone Power Station Australia 1680 37.5 %
630 NRG MIBRAG mbh Germany 200 33.3 %
67 JointVenture MIBRAG(NRG/ Power-Gen ple/Morrison Knudsen Corp.)
San Joaquin Valley Energy Partners California, USA 55 45.0 %
25 Joint Venture-NRCNolkar Coombs Jackson Valley Energy Partners Cakfornia, USA 16 50.0 %
8 Joint Venture-NRCNotkar Coombs Scudder Latin American Power Projects Latin America 254 7.7% 10.3 %
23 Stewart & Stevenson/Wartsila Sunnyside Cogeneration Associates Utah, USA 58 50.0 %
29 Joint Venture-NRG/ Babcock & Wilcox Energy Center Kladno Czech Republic 28 18.3 %
5 Energy Center Kladno Total NRG Mw-Generation Projects Under Construction Location Mw Ownership Equity Operator Schkopau Power Station Germany 960 20.6 %
200 Veba Kraftwerke Ruhr A.G.
Total NRG Mw-Generation Projects Under Development (4)
Location Mw Ownership Equity Operator O'Brien Environmental Energy,Inc.
New Jersey, USA 203 42 %
85 Stewart & Stevenson Capitol District Energy Center Cogeneration Associates Connecticut, USA 56 50 %
28 Coastal Collinsville Austraba 189 50 %
95 NRG lI) Includes project write-downs of $5.0 million in 1995 and $5.0 million in 1994.
(2) Equity in operating eamings is presented net of foreign income taxes of $6.3 milhon in 1995 and $78 million in 1994.
(3) Includes NSP-owned refuse-derived fuel operations managed by NRG.
(
(4) Projects under development may or may not be completed.
l 54 lL
a r
I,,
$2.625 1994 1993 1992 1991 1985*
Common stock shareholders at year end 85 263 86 404 74 525 72 704 82 234 Book value at year end
$28.35
$27.32
$25.91
$25.21
$19 72 Market prices High
$47
$47%
$45 %
$44
$27 %
Low
$38X
$40X
$38 X
$30
$20 %
Year-end closing
$44
$43 X
$43X
$43
$26 X Dividends declared per share
$2.565
$2.495
$2.395
$1.725 Earnings per share
$3.46
$3.02
$3.04
$3.29
$2.97
- Adjusted for June 1986 two4or one stock spht HEADQUARTERS:
STOCK EXCHANGE LISTINGS AND TICKER SYMBOL:
414 Nicollet Mall, Minneapolis, MN 55401 Common stock is traded on New York, Chicago, and Pacific Exchanges.
NySE lists some preferred stock. Ticker symbol: NSP. Newspaper stock STOCKINFORMATION:
tables list NSP as NoStPw, NoStPwr or NSPw. NSP's home page on the Contact the Shareholders Department at NSP's headquarters. Call toll-Internet is located at http//www.nspco.com free (800) 527-4677, Monday through Friday,8 a.m. to 5 p.m. CST. From the Mmneapolis St. Paul area, call (612) 330-5560.
ANNUAL MEETING:
Wed., April 24,1996, 'O a.m. at the Minneapolis Convention Center, INVESTOR RELATIONS INFORMATION:
Minneapolis, MN.
Contact Richard J. Kolkmann, Investor Relations, at NSP's headquarters.
Call (612) 330-6622.
FORM 10-K (THE ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION):
DIRECT DIVIDEND DEPOSIT:
Contact the Financial Accounting, Budgets and Reports Department at NSP offers direct deposit of dividends to shareholders' checking or NSP headquarters. A statistical supplement to the annual report is also savings accounts. To sign up for this free service, contact the Share-available. Call (612) 330-7772.
holders Department for information and authorization forms.
STREET-NAME SHAREHOLDERS AND BENEFICIAL OWNERS:
SCHEDULE OF ANTICIPATED DIVIDEND RECORD DATES AND PAYMENT If you would like to receive NSP's quarterly report. contact the Financial DATES FOR 1996:
Accounting, Budgets and Reports Department at NSP headquarters. Call (612) 330-7772.
Preferred Stock Common Stock Record Dates Payment Dates Record Dates Payment Dates DUPLICATE MAILINGS:
Dec. 29,1995 Jan.15,1996 Jan. 2,19%
Jan. 20,1996 If there are two or more shareholders at yow V Jress, you may have March 29,1996 April 15,1996 April 10,1996 April 20,1996 received duplicate shareholder mailings. To elimin> te duplicate mailings, June 28,1996 July 15,1996 July 11,1996 July 20,1996 write or call the Shareholders Department at NR headquarters. Call Sept. 30,1996 Oct.15,1996 Oct.1,1996 Oct. 20,1996 toll-free (800) 527-4677, Monday through Friday,8 a.m. to 5 p.m. CST.
Dec. 31,1996 Jan.15,1997 From the Minneapolis-St. Paul area, call 330-5560.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN:
The Company's Dividend Reinvestment and Stock Purchase Plan offered by Prospectus is a convenient way to purchase shares of the Company's common stock without payment of any brokerage commission or service charge. Those eligible to participate in the plan are:
- Shareholders of NSP
= Shareholders who hold stock in " street name" through investment firms, provided the firm has established procedures permitting participation
- Employees of NSP and its subsidiaries
- Non shareholders of legal age who live in Minnesota, North Dakota, South Dakota, Wisconsin and Michigan (Non-shareholders mustmake aninitialinvestmentof atleast$100)
Once enrolled in the plan, participants may-
- Automatically reinvest all or a portion of their quarterly dividends
- Make additional cash investments. The minimum single payment is
$25 and the maximum quarterly payment is $10,000.
l Contact the Shareholders Department for a Prospectus and authoriza-I tion form.
55
NORTHERN STATES POWER COMPANY NORTHERN STATES POWER COMPANY (MINNESOTA)
Transfer Agent, Common and Preferred Stocks Trustee-Bonds Northern States Power Company Firstar Trust Company 777 E. Wisconsin Ave.
Registrar Common and Preferrod Stocks Milwaukee, WI 53202 Norwest Bank Minnesota, N.A.
Sixth St and Marquette Ave.
Coupon-Paying Agents-Bonds Minneapolis, MN 55479-0059 Firstar Trust Company Milwaukee Dividend Distribution Northern States Power Company First Bank, N.A.
201 West Wisconsin Ave.
Forwarding Agent Milwaukee, WI 53259 Norwest Bank international 3 New York Plaza,15th Floor New York, NY 10004 Trustee-Bonds -
Harris Trust and Savings Bank III West Monroe St Chicago,IL 60690 First Trust Company, Inc.
332 Minnesota St St Paul,MN 55101 Norwest Bank Minnesota, N.A.
Minneapolis Coupon-Paying Agents-Bonds Harris Trust and Savings Bank Chicago Chemical Bank of New York 277 Park Ave.
NewYork,NY 10172 First Trust Company,Inc.
St Paul 56 5
- ABOUT THE COVERS in addition to being home to NSP's corporate headquar-ters, the city of Minneapolis (front cover) provides a promising market for the company's local Government Energy Conservation Program. As part of that effort, NSP offers iocal governments partial funding for engineering audits and design services, and provides no interest financing to promote comprehensive energy retrofits.
Projects under way in Minneapolis include energy audit-ing and lighting retrofitting in as many as 65 city buildings.
NSP also is working with the Minne,,olis Water Works Department to test a new, energy efficient method of treating water, and plans to finance $2 million to $3 million of improvements in 1996.
In St. Paul (back cover),where the program began in 1993, NSP has financed $1.4 million of energy improvements, saving the city almost $200,000 in annual energy costs.
The city installed new equipment in 48 city buildings, and has audited and retrofitted mote than 120 other electric services, such as pump stations.
The program continues to find new conservation opportu-nities.The St. Paul Public Works /Iraffic Department has installed $100,000 in new light-emitting diode (LED) traffic signallighting, improving energy savings by up to 90 per-cent. The St. Paul Public Water Department will use the program to fund an estimated $300,000 of their new dewa-tering process.
The Local Government Energy Conservation Program is part of NSP's ongoing effort to help customers conserve energy and manage its use. NSP's overall goal is to reduce system-wide peak electric demand by 1,700 megawatts by the year 2000. That not only enables cus-tomers te save energy and money, but allows NSP to post-pone building large power plants. In 1995, the company and its customers achieved their greatest savings to date, reducing demand by 202 megawatts for a cumulative reduction of 1,224 megawatts.
O Printed on paper containing 10 percent recycled fibers and a minimum of 10 percent post consumer waste.
Please recycle.
1 9
A g
e O
A3 y
+
e e%..,.
,g
,, i.; ':2
,,'~
- y:'4j 5
' '[,,
.'e;[,
o...v-..:....-
m weems,y e
- gelnwnnt,
...~..: *..
- ,,,-[.
j, 8+
x a
..,,.',.,:..a,.'..
e r _,.
p m
WP,
4 t
s O
y N
s q+,
e a i
.. lllf.?.
sy
}e g_
.}'
s r +
f-'
,e..,.y r
g f
..m, n.hs,y.,.
J t 0
- g. w
~).
.,t..
7
\\
- '; t3.f{,
. ^ a s
~/
3 i
- ik ; W
( 2 21
'e l '. A ',y.
I5 @ ';j
" f i
4.-g i
' + -
4 4
n -- -
i,.
e n
e,"
J o
a g
e a
8 8
9 p
- g
,q 5
+
a
- 8
, k e
e 4
4 9
y a
4,
+
5 0
g e
g.
d p
n 5
4
[
a E
I.
s 4
mi g
9 e
t.,
m O'
O
'5 P
g 9
a >
5 -
g 9,
4 f.
A i
e
=
.(
r 4
t o
t lA
'-)~
e g
a p
g A
I s
e 6
V -
e a
5 g
4 e
a 4
g,
d I
$a' '
d f
9 A
f,
- ==
< ha
k d'
,O
- ,.' l b
e 6
=
m o
4 a-4 f
a s
e d $
"O p.
9
.f M
4 f
8 g
y 4
I t
d' e
a y
54 j
9 o
_e e
g we a
4 e
h P
J 6
^
s
.,O 4
y e
E 8
4 4
~g
- r. p ,-
,J I '
4 s
e g
h' 4
e p
.A
}
e
'e q
.e
, T
, +
9 L
- l a
-r a
4 e
e P
e e
I' e.:
Nf5 o 4
i i
4.
T
' f.', #
y 35 I
-[{ 'I
%g y,.y,
. t i; 4
- MmL n
?...'r (qn a
y_
t
'\\
i.
n,
^
O e
, y
'g c
,. q p
~,
3
, g..
.j j ; 3r 4
' f '
(- }
[;
a y,
s
^
,