ML20046B504
| ML20046B504 | |
| Person / Time | |
|---|---|
| Site: | Cooper  |
| Issue date: | 07/27/1993 |
| From: | Horn G NEBRASKA PUBLIC POWER DISTRICT |
| To: | Dinitz I NRC |
| References | |
| NSD930896, NUDOCS 9308040300 | |
| Download: ML20046B504 (120) | |
Text
,
.s GENERAL OFFICE
~ "
P.O. BOX 499. COLUMBUS. NEBRASKA 68602-0499 gs Nebraska Public Power District "i"R"'#62!s?"'
NSD930896 July 27, 1993 U.S. Nuclear Regulatory Commission Attn: Mr. Ira Dinit Mail Stop 12-E-4 Washington, DC 20555
Subject:
Licensee Guarantees of Payment of Deferred Premiums Cooper Nuclear Station NRC Docket No.20-298. DPR-46 Gentlemen:
In accordance with the requirements of 10 CFR Part 140.21, relative to deferred insurance premiums, the Nebraska Public Power District submits the following information which, we believe, demonstrates our ability to obtain funds in the amount of $10 million for payment of such premiums within the specified three month period.
The Nebraska Public Power District has renewed a Credit Agreement, which is included as an enclosure, with the American National Bank and Trust Company of Chicago which indicates that said bank will lend the District funds, not to exceed $5 million as specifically required to pay public liability claims arising from nuclear incidents.
This Credit Agreement is valid through July 31, 1994, at which time the District will submit the appropriate documentation to verify the guarantee requirements for the following year.
Midwest Power Systems, under the terms of a power purchase contract, has acknowledged its responsibility to assume 50 percent of the retrospective premium requirements in an amount not to exceed $5 million in one year.
Midwest Power Systems has chosen to utilize the type of guarantee defined in 10 CFR 140.21(e).
Therefore, as enclosures to this letter, we are submitting the following documents in support of 50 percent of the required $10 million premium.
1.
Midwest Power Systers Inc.
1992 Annual Report to the Securities and Exchange Commission - Form 10-K 2.
Five Year Financial Forecast dated November, 1992 for Midwest Resources, the holding company of Midwest Power Systems.
We believe that the enclosed information is sufficient to demonstrate our ability to generate the necessary funds required by the deferred premium; however, should you require additional information, please do not hesitate to contset me.
Sin > rely,
!!W e4 G. 4 Horn M0037 Nuc car Power Croup Manager 9308040300 30727 PDR ADOCK 05000298 m$
i 5
PDR fL
- I erful Pride in Nebraska
j I
_~
July 27, 1993 Page 2 of 2
/ dis
-Enclosure i
cc:
U.S. Nuclear. Regulatory Commission i
Attn: Document Control Desk l
Washington, DC 20555 U.S. Nuclear Regulatory Commission w/o encl.
Regional. Office - Region IV
+
Ar}ington, TX NRC Senior Resident Inspector l
Cooper Nuclear Station w/o encl.
-]
i 1
e
'i 1
1 1
.I I
l
j r
1 l
CREDIT AGREEMENT l
CREDIT AGREEMENT, dated as of August 1, 1993, between NEBRASKA PUBLIC POWER DISTRICT (herein called the." District") and i
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO (herein called the " Bank").
The District desires to provide for future borrowings, and the Bank is willing to commit to lend to the Dastrict, upon the terms and conditions herein set forth, the aggregate sum of up to
$5,000,000, in such installments and at such times cus hereinaf ter provided, to be evidenced by notes of the District therefor.
l In consideration of the foregoing and.the covenants and i
conditions herein contained, the parties thereto agree as fol-l lows:
1.
Definitions.
The following terms shall, for all purposes of this credit Agreement, have the following meanings:
"Act" shall mean the Public Power and Irrigation l
District Law, constituting Article 6 of Chapter 70 of the Revised i
Statutes of Nebraska, as amended and supplemented.
f
" Electric Resolution" shall mean the resolution enti-l tied " Electric System Revenue Bond Resolution" adopted by the i
Board of Directors of the District on August 22, 1968, as sup-i plemented or amended in accordance with the terms thereof.
" Electric System Bonds" shall mean Electric System
]
Revenue Bonds of the District authorized to be issued under the Electric Resolution.
]
" Electric System General Reserve Fund" shall mean the Electric System General Reserve Fund established in Section 502 of the Electric Resolution, b
" Loans" shall mean the loans provided for in this Credit Agreement.
" Note or Notes" shall mean any note or notes, as the l
case may be, issued pursuant to this Credit Agreement by the i
District to evidence any Loan.
" Note Resolution" shall mean the resolution of the District entitled " Resolution Authorizing $5,000,000 Bank Credit of 1993," adopted July 8, 1993 authorizing the issuance of the Notes and authorizing the execution and delivery of this credit Agreement, a true and correct copy of which resolution is annexed hereto as Annex A..
S.
2.
Commitment to Lend.
The Bank hereby agrees, upon the terms and conditions herein set forth, to make one or more Loans to the District, in accordance with the provisions of this Credit Agreement, on or before July 31, 1994 in an aggregate principal up to, but not exceeding $5,000,000, each Loan to be in the principal amount of not less than $250,000.
3.
Borrowinos.
The District shall give the Bank at least two (2)' days prior notice of tha date and amount of each borrowing hereunder.
Each borrowing pursuant thereto shall take-place at the principal office of the Bank at LaSalle and Washington Streets, Chicago, Illinois.
Not later than 11:00 a.m.
on the date of each borrowing, the Bank shall, subject to the terms of this credit Agreement, make available to the District, Federal Reserve or other immediately available funds in the prin-cipal amount being borrowed, upon delivery to the Bank of a Note in such principal amount.
4.
The Nctes.
Each Note shall be designated as
" Electric System Note, Series NRC of 1993," shall be payable to the order of American National Bank and Trust Company of Chicago, shall be dated the date of its delivery, shall be payable one year from its date of issue (subject to optional prepayment as provided in Section 8 hereof), and shall bear interest (payable on the first day of each January, April, July and October) on the unpaid principal amount thereof from its date fluctuating at the rate per annum equal to 87% of the rate of interest announced or.
published publicly from time to time by the Bank as its base rate or equivalent rate of interest.
Such interest rate shall be com-puted on the basis of a 365/366-day year.
The Notes shall be executed on behalf of the District by the manual signature of its Chairman, Vice Chairman, President, Treasurer or Assistant Treasurer and its corporate seal shall be affixed, imprinted, engraved or otherwise repro-duced thereon and attested by the manual signature of its Secretary or any Assistant Secretary and shall be otherwise in substantially the form annexed hereto as Annex B.
5.
Commitment Fee.
The District shall pay to the Bank as a commitment fee contemporaneously with the execution of this credit Agreement the sum of $5,000 6
Tax Indemnification.
(i)
The parties intend that the Bank shall receive in respect of the Notes amounts equal to the principal thereof and interest thereon as provided hereunder, when due, without deductions, penalties, charges, or withholdings as a result of the imposition of any federal income or similar federal tax imposed on the Bank as a holder of any of the notes (collec-tively " Taxes"). t
.4
4*
Any such Taxes shall be paid by the District.
The District will pay the Bank the aucunts necessary such that the net amount of
-i the principal and interest received and retained by the Bank is not less than the amount payable under this Agreement had such Taxes not been-imposed.
If, notwithstunding the previous two sentences, the Bank pays any such Taxes, the Bank will furnish to the District official tax receipts or evidence of payment of all such Taxes and the District will promptly reimburse the Bank therefor.
(ii)
If the Internal Revenue Code of 1986, as amended, (the " Code"), or any other federal income tax law, rule, regula-tion, or governmental interpretation thereof hereafter enacted, adopted or issued, other than any such change mentioned in (iii) below, when affecting the Bank as a holder of the Nctes or com-4 pliance by the Bank as a holder of the Notes with suti, (a) subjects the Bank to any tax, duty, charge, or withholding due on the principal or or interest on the Notes or changes the basis of taxation of payments to the Bank in respect of the principal of or interest on the Notes, in-cluding, without limitation, the effect of any limitation on I
the deductibility of interest on the funds obtained to purchase or carry the Notes; or
.( b) imposes any other condition or circumstance the result of which is to increase the cost to the Bank of pur-chasing, funding or carrying the Notes, or reduces any amount receivable by the Bank in connection with the prin-cipal of or interest on the Notes or requires the Bank to make any payment calculated by reference to the amount of the Notes or interest received by it in an amount deemed material by the Bank; then, within thirty days of demand by the Bank, the District shall pay the Bank an amount which will be equal, on an after-tax basis to the Bank (taking into account any taxes payable by the Bank on such amount), to (a) that portion of such increased cost incurred or (b) the amount or reduction in an amount received which the Bank determines is attributable to purchasing, funding or carrying the Notes to the extent of the principal amount thereof outstanding from time to time.
The effect of any such increased cost which is imposed on the Bank generally may be allocated to the Notes on any reasonable basis'in the discretion of the Bank.
(iii)
If at any time or times while the Bank is the Holder of the Notes there is a change in the maximum marginal tax rate (the " Tax Rate") at which the Bank could be taxed for fed-eral income tax purposes, the interest rate on the Notes shall be
- r
~-
i 4
decreased (in the case of a decrease in the Tax Rate) to an in-l terest rate equal to the product of (i) the interest rate on the Notes in effect immediately prior to a change in the Tax Rate times (2) a fraction (expressed in decimals) the numerator of which is the number one (1) minus the applicable Tax Rate after such change and the denominator of which is the number one (1) i minus the Tax Rate which had been in effect prior to such change
[
in the Tax Rate.
(iv)
Notwithstanding any of the other provisions of this Agreement, if the District has paid the additional amount specified in (ii) and (iii) above, the District shall not be obligated to pay or reimburse the Bank for any tax on the income of the Bank to the extent that such income tax is attributable to I
the inclusion in the gross income of the Bank for federal tax purposes of interest on the Notes as if such interest had been timely reported and timely paid.
7.
Conditions Precedent to Loans.
The Bank shall not be obligated to make any loan unless at the date specified for the making thereof the District delivers to the Bank:
1 (a)
The opinion of the General Counsel to the District, dated as of such date, to the effect that:
I (i)
There is no litigation pending in any court, either State or Federal, questioning the creation, or-ganization or existence of the District or the validity of this Credit Agreement or the Note being issued to evidence such Loan; and (ii)
The District has the power to borrow the amount being loraed; to execute and deliver this Credit Agreement; to evidence the Loans by its Notes to be made and delivered in accordance herewith, and to per-4 form and observe all of the terms and conditions of I
this credit Agreement on its part to be performed and observed; and (b)
A certificate of the Chairman, President, Treasurer or. Assistant Treasurer of the District, dated as of such date, to the effect that the representations and warranties of the District contained in Section 14 of this Credit Agreement are true and correct as of such date; and (c)
A certificate of the Chairman or President or Treasurer or Assistant Treasurer of the District, dated as of such date, setting forth the aggregate amount of bonds and notes of the District that will be outstanding immedi-ately after the issuance of the note then being issued and stating that no default has occurred in the payment of prin-cipal of or interest on any indebtedness for borrowed noney.
i c
i of the District which remains uncured; and (d)
The opinion of Mudge Rose Guthrie Alexander &
Ferdon, Bond Counsel to the District, dated as of such date, substantially in the form annexed thereto as Annex C; (e)
A certificate as to Arbitrage, dated as of such date, in accordance with the provisions of the Code; and i
(f) Such additional certificates, instruments and other documents as the Bank or its counsel may deem necessary to effect good delivery of the Note being delivered on such i
date or evidence the due performance by the District of the conditions precedent hereunder.
[
8.
Optional Precavnent.
The District may prepay any Note as a whole or in part, at any time or from time to time, without penalty or premium, by paying to the Bank all or part of l
the principal amount of the Note to be prepaid, together with the unpaid interest accrued on the amount of principal so prepaid to the date of such prepayment.
Each prepayment of a Note shall be made on such date and in such principal amount as shall be spec-ified by the District in a written notice delivered to the Bank not less than 10 days prior thereto.
Notice having been given as aforesaid, the principal amount of the Note stated in such notice or the whole thereof, as the case may be, shall become due and payable on the prepayment date stated in such notice, together with interest accrued and unpaid to the prepayment date on the principal amount then being paid; and the amount of principal and i
interest then due and payable shall be paid (1) in case the entire unpaid balance of the principal of any Note is to be paid, upon presentation and surrender of such Note to the District or its representative at the principal office of the Bank, and (ii) in case only part of the unpaid balance of principal of any Note is to be paid, upon presentation of such Note at the principal office of the Bank for notation thereon by the Bank of the amount of principal and interest on such Note then paid.
If on the prepayment date moneys for the payment of the principal amount to be prepaid on such Note together with interest to the prepayment date on such principal amount, shall have been paid to the Bank as above provided and if notice of prepayment shall have been given to the Bank as above provided, then from and after the prepayment date interest on such principal amount of such Note shall cease to accrue.
If said moneys shall not have been so paid on the prepayment date, such principal amount of such Note shall continue to bear interest until payment thereof at the rate provided for in Section 4 of this Credit Agreement.
9.
Application of Note Proceeds.
The proceeds of the Notes shall be used to pay amounts required to be paid by the District as a result of one or more nuclear incidents, as pro-vided in the Price-Anderson Act, as amended (Pub.
L.94-197, as
amended and as compiled in 42 U.S.C.'Section 2210 and pertinent subsections of 42 U.S.C.
Section 2014, as amended) and certain regulations of the Nuclear Regulatory Commission (10 C.F.R. Part 140, as amended in particular by 42 Fed. Reg. 46-54 (January 3, 1977)) or any act or regulation supplemental thereto or amenda-tory thereof.
10.
Payment.
The obligation to pay the principal of and interest on the Notes and the other. amounts payable hereunder is a special obligation of the District. payable solely from such amounts in the Electric System General Reserve Fund as may be available therefor under the District's bond resolutions then outstanding; provided, however, that such obligation to pay the principal of and interest on the Notes and the other amounts payable hereunder from amounts in the Electric System General Reserve Fund shall be subject and subordinated in all respects to the pledge of the Revenues (as defined in the Electric Resolution), moneys, securities and funds created by the Electric Resolution and, provided, further, that the obligation to pay the principal of and interest on the Notes and the other amounts payable hereunder from amounts in the Electric System General Reserve Fund shall be subject and subordinated to any payments which shall at any time be required to be made from Electric System General Reserve Fund pursuant to Section 713 of the District's Power Supply System Revenue Bond Resolution, adopted by the Board of Directors of the District on September 29, 1972, as supplemented and amended in accordance with the terms thereof.
The District shall duly and punctually pay or cause to be paid from the Electric System General Reserve Fund, in Federal Reserve or other immediately available funds, the principal of the Notes, the interest thereon and the other amounts payable hereunder at the dates and place and in the manner provided herein and in the Notes according to the true intent and meaning thereof.
If the principal of the Notes becomes due and payable on a Saturday or Sunday or a day which is a Bank holiday, such payment shall be made on the next succeeding Bank business day and the extension of time for payment shall be included in computing interest in i
connection with such payment.
I 11.
All of the Bank's rights and remedies under this Credit Agreement are cumulative and non-exclusive.
The acceptance by the Bank of any partial payment made hereunder after the time when any of District's Loans become due and payable will not establish a custom, or waive any rights of the Bank to enforce prompt payment thereof.
The Bank's failure to require strict performance by the District of any provision of this credit Agreement shall not waive, affect or diminish any right of the Bank thereafter to demand strict compliance and performance therewith.
Any waiver of an event of default hereunder shall not suspend, waive or affect any other event of default hereunder. =<
12.
Rate Covenant.
The District covenants and agrees with the Bank that so long as any credit shall be available here-under or any Note or interest thereon is unpaid it shall comply for the benefit of the Bank with requirements of Section 712 of the Electric Resolution.
13.
Necative Covenants of the District.
The District, if and so long as credit shall be available hereunder or any Note or interest thereon is unpaid, will not alter, amend or repeal the Note Resolution, or take any action impairing the authority thereby or hereby given with respect to the issuance and payment of the Notes.
14.
Tax Covenant.
In order to maintain the exclusion from gross income for purposes of federal income taxation of interest on the Notes, the District shall comply with the pro-visions of the Code applicable to the Notes, including without i
limitation the provisions of the Code which prescribe yield and other limits within which the proceeds of the Notes and other amounts are to be invested and require that certain investment earnings on the foregoing be rebated on a periodic basis to the Treasury Department of the United States of America.
The District shall not take any action or fail to take any action, which would cause the Notes to be " Arbitrage Bonds" within the meaning of Section 148(a) of the Code.
15.
Representations and Warranties.
The District rep-resents and warrants that:
i (a)
The District has the power to borrow the amount provided for in this Credit Agreement; to execute and de-liver this Credit Agreement; to evidence the Loans by its Notes to be made and delivered in accordance with the pro-visions hereof and to perform and observe all of the terms and conditions of this credit Agreement on its part to be performed and observed; (b)
The making and performance by the District of this Credit Agreement will not violate any provision of the Act, or any bond or note resolution of the District, or any regulation, order or decree of any court, and will not i
result in a breach of any of the terms of the petition for creation, as amended, of the District or any agreement or instrument to which the District is a party or by which the District is bound; and (c)
The District, by adoption of the Note Resolution i
has duly authorized the borrowing of the amount provided for in this Credit Agreement, the execution and delivery of this Credit Agreement, and the making and delivery of the Notes to the Bank as herein provided; and to that end the District warrants that it will take all action and will do all things which it is authorized by law to take and to do in order to fulfill all covenants on its part to be performed and to provide for and to assure payment of the Loans as herein provided.
16.
Acceleration of Due Date Uoon Default.
If one or more of the following events of default shall occur and be continuing:
(a)
Default shall occur and be continuing in the pay-ment when due of any principal or interest on any Note; (b)
Any representation or warranty made herein or pur-suant hereto shall prove to be untrue in any material respect; (c)
Default shall occur in the performance of any of the other covenants or agreements of the District contained herein, and the act or omission creating such default shall continue for a period of 30 days after written notice there-of shall have been given to the District; or (d)
Default shall be made in the payment of the prin-cipal of or interest on any Electric System Bonds when due, and as a result of such default, the maturity of such Bonds is accelerated;-
then, and in any such event, the Bank shall have the right to declare the principal of and all interest then accrued on all l
Notes to be due and payable immediately, and upon such declara-tion the Notes and the interest accrued thereon shall become due and payable, anything in this Credit Agreement or in the Notes contained to the contrary notwithstanding.
]
J 17.
Defeasance.
If the District shall pay or cause to I
be paid, or there shall otherwise be paid, to the Bank the prin-cipal of and interest on the Notes at the times and in the manner stipulated herein, then the covenants, agreements and other obligations of the District hereunder shall thereupon cease,.
terminate and become void and be discharged and satisfied.
If moneys sufficient to pay the principal amount of the Notes and interest thereon until maturity or a date fixed for repayment shall have been paid to the Bank for application to such purpose, the Notes and the interest thereon shall be deemed to have been paid within the meaning and with the effect expressed in this Section.
Amounts so set aside and held may be invested in obli-gations of, or guaranteed by, the United States of America, provided, however, that said obligations shall mature not later than the maturity date of the Notes.
All earnings from such investments shall be paid over.to the District, as received, free and clear of any trust, lien or pledge.
18.
Notices.
All notices under this Credit Agreement shall be in writing and written notices shall be deemed to have been duly given if' delivered or mailed by registered mail, in the case of the District, at Box 499, Columbus, Nebraska 68601, Attention:
President, and in the case of the Bank, at its prin-cipal office at LaSalle and Washington Streets, Chicago, Illinois 60690, Attention:
Steven H. Abbey.
19.
Counterparts.
This Credit Agreement may be exe-cuted in any number of counterparts, and all such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the District and the Bank have caused this Credit Agreement to be duly signed on their respec-tive behalf by their officers thereunto duly authorized, all as of the date and year first above written.
l NEBRASKA PUBLIC POWER DISTRICT
[ SEAL]
By M
M Treasurer Attest:
N Assistant Secretary AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
[ SEAL)
By
~~~
Vice President i
M Attest:/
[
/
(
/
\\
lifL\\
Pru ~ /
I r
(l::: : :: :_::::_:: ::
l
0FilCIAL EEAL" 5
J SHARI A. SMITH l
d Notary Putlic. 5 :te ot thois l
4 Gl> ::::::::::::::::_ ::::)h My Commission Exp;res 12/18/93 ANNEX A Resolution Authorizina $5,000,000 Bank Credit of 1993 Be it Resolved, by the Board of Directors of Nebraska Public Power District, as follows:
Section 1.
Pursuant to the Public Power and Irrigation District Law, Article 6 of Chapter 70 of the Revised Statutes of Nebraska, as amended and supplemented (herein called the "Act"),
Nebraska Public Power District (herein called the " District")
shall be authorized to enter into a credit agreement (herein called the " Credit Agreement") for one or more loans in an aggre-gate principal amount up to, but not exceeding, $5,000,000 from American National Bank and Trust Company of Chicago (herein called the " Bank") in substantially the form subnitted at this meeting, to which shall be annexed, as Annex A, a copy of this resolution adopted by the District.
Each loan shall be made in the principal amount of not less than $250.000 m any date on or before July 31, 1994; provided that the District shall give the Bank two (2) days prior notice of the date and n:9ount of each borrowing and shall be evidenced by an Electric System Note, Series NRC of 1993 (herein called a " Note"; all Notes made under the Credit Agreement are herein collectively called the " Notes")
of the District in the aggregate principal amount of each loan, which Note shall be issued and delivered by the District to tne Bank in the principal amount and on the date of the loan evi-denced thereby.
Each Note shall be payable to the order of the Bank from the sources set out in Section 10 of the Credit Agreement, shall be dated the date of its delivery, shall be payable one year from its date of issue (subject to optional pre-i payment as a whole or in part, at any time or from time to time, l
without penalty or premium, as provided in the Credit Agreement)
I and shall bear interest (payable on the first day of each January, April, July and October and upon maturity) on the unpaid principal amount thereof from its date fluctuating at the rate per annum equal to 87% of the rate of interest announced or published publicly from time to time by the Bank as its base rate l
or equivalent rate of interest.
Interest is to be computed on H
the basis of a 365/366-day year.
Each Note shall be in substantially the form set forth in Annex B to the Credit Agreement.
I Section 2.
The proceeds of the Notes shall be applied
{
by the District to the purpose and in the manner provided in Section 9 of the Credit Agreement.
Section 3.
The President, any Vice President, the Treasurer, and the Assistant Treasurer of the District are each hereby authorized to execute the Credit Agreement and the Secretary, or any Assistant Secretary, are each hereby authorized to affix the seal of the District on the Credit Agreement.
A-1
i l
Section 4.
The Chairman, Vice Chairman, President, Treasurer or Assistant Treasurer of the District are each hereby authorized to execute the Notes by manual signature and the Secretary or any Assistant Secretdry are each hereby authorized to cause the seal of the District to-be affixed, imprinted, en-graved or otherwise reproduced on the Notes and to attest the same.
Any of the foregoing office)s are hereby authorized to deliver the executed Notes in accordance with the provisions of_
i the Credit Agreement.
Section 5.
The Chairman, Vice Chairman, President, Treasurer or Assistant Treasurer of the District and the Secretary or any Assistant Secretary are, and each of them hereby is authorized to do and perform all things and to execute all papers in the name of the District or otherwise, as they deem-advisable, and to make all payments, necessary or convenient in their respective opinions, to the end that the District may carry out the objects of this resolution and its obligations under the terms of the Credit Agreement and of the Notes.
t l'
8 s
A-2
L ANNEX B (FORM OF NOTE)
NEBRASKA PUBLIC POWER DISTRICT i
ELECTRIC SYSTEM NOTE, SERIES NRC OF 199_
No.
l FOR VALUE RECEIVED, the undersigned, NEBRASKA PUBLIC l
POWER DISTRICT (the " District"), a public corporation and polit-ical subdivision organized and existing under and by virtue of the laws of the State of Nebraska, hereby promises to pay to the order of American National Bank and Trust Company of Chicago (the
" Bank") on 19 upon presentation and sur-render of this Note at the principal office of the Bank, the principal sum of Dollars ($
),
in lawful money of the United States of America, and to pay l
interest (payable on 19 and quarterly there-l after on the first day of each January, April, July and October and upon maturity) on said principal sum at said office in like i
money from the-date hereof fluctuating at the rate per annum i
equal to 87% of the rate of interest announced or published J
publicly from time to time by the Bank as its base rate or_
4 equivalent rate of interest.
Such interest shall be computed on I
the basis of a 365/366-day year.
i This Note is a special obligation of the District and is one l
of a duly authorized issue of notes of the District (the " Notes")
{
l issued and to be issued under and pursuant to the Public Power l
and Irrigation District Law of Nebraska, as amended and supple-l mented (herein called the "Act"), and under and pursuant to a resolution of the District, adopted July 8, 1993, entitled Resolution Authorizing $5,000,000 Bank Credit of 1993 (the " Note Resolution), and under and pursuant to a Credit Agreement (the
" Credit Agreement"), dated as of August 1, 1993 by and between the District and the Bank.
The obligation to pay the principal of and interest on this l
Note is a special obligation of the District payable solely from such amounts in the Electric System General Reserve Fund (as de-fined in the Credit Agreement) as may be available therefor under the District's Bond resolutions then outstanding; provided, how-ever, that such obligation to pay the principal of and interest on this Note from the Electric System General Reserve Fund is subject and subordinated in all respects to the pledge of the revenues, moneys, securities and funds created by the Electric Resolution (as defined in the Credit Agreement); and, provided, further, that the obligation to pay the principal of and interest on this Note from the Electric System General Reserve Fund is subject and subordinated to any payments which shall at any time be required to be made from the Electric System General Reserve Fund pursuant to Section 713 of the District's Power Supply B-1 L
System Revenue Bond Resolution, adopted by the Board of Directors of the District on September 29, 1972, as supplemented and amended in accordance with the terms thereof.
This Note is subject to the terms and conditions contained in the Note Resolution and the Credit Agreement, copies of which l
are on file at the principal office of the District, and refer-ence is made thereto for a complete statement of such terms and conditions.
The District shall have the right to prepay this Note as a whole or in part, at any time or from time to time, without pen-alty or premium, in accordance with the terms of the Credit Agreement.
The prepayment date and the principal amount of the Note to be prepaid shall be specified by the District in a written notice to the Bank not less than 10 days prior to any prepayment.
If on the prepayment date moneys for the payment of the principal amount of this Note to be prepaid, together with interest to the prepayment date on such principal amount, shall have been paid to the Bank as above provided, then from and after the prepayment date interest on such principal amount of this Note shall cease to accrue.
If said moneys shall not have been so paid on the prepayment date, such principal amount of this Note shall continue to bear interest as provided above until payment thereof.
This Note _is not an obligation of the State of Nebraska and the Act provides that the State of Nebraska shall never pledge its credit or funds, or any part thereof, for the payment or settlement of any indebtedness whatsoever of the District.
IN WITNESS WHEREOF, Nebraska Public Power District has
~
caused this Note to be signed in its name and-on its-behalf by its President or Treasurer or Assistant Treasurer, and its offi-cial seal to be hereunto affixed and attested by its Secretary or any Assistant Secretary, as of day of 19__.
NEBRASKA PUBLIC POWER DISTRICT By Treasurer
[ SEAL]
Attest:
Assistant Secretary B-2
l 1
ANNEX C 19__
l Nebraska Public Power District I
Columbus, Nebraska American National Bank and 1
Trust company of Chicago Chicago, Illinois Gentlemen:
We have examined the record of proceedings relating to the issuance of the $
Electric System Note, Series NRC of 1993, No.
dated 19__
(the " Note"),
of Nebraska Public Power District (the " District"), a body cor-porate and politic, constituting a public corporation and. polit-ical subdivision of the State of Nebraska.
The Note is issued under and pursuant to Chapter 70, Article 6,
of the Revised Statutes of the State of Nebraska, as amended (the "Act"), and under and pursuant to a Credit Agreement (the
" Credit Agreement"), between the District and American National Bank.and Trust Company of Chicago (the " Bank"), dated as of i
August 1, 1993, authorized by a resolution (the " Note Resolution") of the District adopted on July 8,'1993 and entitled
" Resolution Authorizing $5,000,000 Bank Credit of 1993."
l The Note is payable to the order of the Bank, matures on l
19__
(subject to prepayment in accordance with the l]
terms of the Credit Agreement), and bears interest (payable on 19__ and quarterly thereafter on the first day of January, April, July and October and upon maturity) from its date fluctuating at the rate per annum equal to 87% of the rate of interest announced or published publicly from time to time by the Bank as its base rate or equivalent rate of interest.
Such interest rate shall be computed on the basis of a 365/366-day year.
The obligation to pay the principal of and interest on the Note is a special obligation of the District payable solely from such amounts in the Electric System General Reserve Fund (as de-fined in the Credit Agreement) as may be available therefor under the District's bond resolutions then outstanding; provided, how-ever, that such obligation to pay the principal of and interest on the Note from the Electric System Reserve Fund is subject and subordinated in all respects to the pledge of the revenues, moneys, securities and funds created by the Electric Resolution (as defined in the Credit Agreement; and provided, further, that the obligation to pay the principal of and interest on the Note from the Electric System General Reserve Fund is subject and subordinated to any payments which shall at any time be required C-1
to be made from the Electric System General Reserve Fund pursuant I
to Section 713 of the District's Power Supply System Revenue Bond Resolution, adopted by the Board of Directors of the District on September 9, 1972, as supplemented and amended in accordance with the terms thereof.
l We are of the opinion that:
1.
The District is duly created and validity existing under the provisions of the Act, with power to adopt the Note i
Resolution, to enter into the Credit Agreement, to issue the Note thereunder and to make and perform the covenants contained in the y
credit Agreement.
-r 2.
The Note Resolution has been duly adopted by the District, is in full force and effect and is valid and binding on the District and enforceable in accordance with its terms, and i
the Credit Agreement has been duly authorized and executed by the District, is in full force and effect, is valid and binding upon the District and enforceable in accordance with its terms.
3.
The Note has been duly authorized and issued by the District in accordance with law and in accordance with the Note Resolution and the Credit Agreement, and is a valid binding and direct obligation of the District enforceable in accordance with its terms and entitled to the benefit of the Act and of the l
Credit Agreement.
4.
The Internal Revenue Code of 1986 as amended (the i
" Code") sets forth certain requirements which must be met sub-sequent to the issuance and delivery of the Note for interest thereon to be and remain excluded from gross income for purposes i
of federal income taxation.
Noncompliance with such requirements may cause interest on the Note to be included in gross income retroactive to the date of issue of the Note.
The District has covenanted to comply with such requirements.
In our opinion, under existing law, and assuming compliance with the aforementioned covenant, interest on the Note is ex-cluded from gross income for federal and State of Nebraska income tax purposes.
The Note is not a "specified private activity bond" within the meaning of Section 57(a) (5) of the Code and, therefore, the interest of the Note will not be treated as a preference item for purposes of computing the federal alternative minimum tax imposed by Section 55 of the Code.
However, we note a portion of the interest on the Note owned by corporations may be subject to the federal alternative minimum tax, which is based in part on adjusted current earnings.
l l
l C-2 J
l..
Except as stated in the preceding two paragraphs, we express no opinion as to any federal or state tax consequences of the ownership of, receipt of interest on, or disposition of the Note.
The opinions contained in paragraphs 2 and 3 above are qualified to the extent that the enforceability of the Note Resolution, the Credit Agreement and the Note, respectively, may be limited by any applicable bankruptcy, moratorium or similar laws relating to the enforcement of creditors' rights.
We have examined the Note, as executed, and, in our opinion, the form of said Note and its execution are regular and proper.
Very truly yours, C-3
i
- i d
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
[ Fee Required]
For the fiscal year ended December 31.1992 OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
[No Fee Required]
For the transition period from to Commission file number 0-20452 MIDWEST POWER SYSTEMS INC.
(Exact name of registrant as specified in its charter)
IOWA 42-1375614 (State or other jurisdiction of (1.R.S. Employer incorporation or orgamnrion)
Identification No.)
666 Grand Ave.. P.O. Box 657. Des Moines. Iowa 50303 (Address of principal executive offices)
(Zip Code)
Registrant's tel: phone number, including area code 515-281 2900 Securities registered pmsuant to Section 12(b) of the Act NONE Securities registered pursuant to Section 12(g) of the Act
$3.30 Otmniative Preferred Stock, Withotit Par Value
$3.75 Cumulative Preferred Stock, Without Par Value
$3.90 Cumulative Prefened Stock, Without Par Value
$4.20 Cumulative Prefened Stock, Without Par Value
$4.35 Cumulative Preferred Stock, Without Par Value
$4.40 Cumulative Preferred Stock, Without Par Value
$4.80 Ormniative Preferred Stock, Without Par Value
$7.64 Cumulative Preferred Stock, Without Par Value
$8.08 Ormn1ntive Preferred Stock, Without Par Value
$8.32 Cumulative Preferred Stock, Without Par Value 58.52 Cumulative Prefelred Stock. Without Par Value (Tule of Class)
Indicate by check mark whether the registrant (1) has filed all repons required to be filed by Section 13 or 15(d) of the Seemities Exchange Act of 1934 during the preceding 12 months (or for such shoner period that the registrant was required to file such repons), and (2) has been subject to such filing regmrements for the past 90 days.
Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contamed herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X].
J The aggregate market value of voting stock held by non-affiliates of the registrant was zem as of hhrch 22,1993, when 1,000 shares of common stock, without par value, were outstandmg.
i MIDWEST POWER SYSTEMS INC.
1992 Form 10-K Annual Repon TABLE OF CONTENTS i
Pane 1
Pani j
i Item 1 Business General Development of Business............................
3 i
Financial Information About Industry Segments..................
3 Narrative Description of Bnevne"............................
3 General............................................
3 Capital &pendi ures and Financmg...................
3 t
Electric Operarians - Generation...........................
5 Electric Opews - Fuel Supply..........................
6 Natura1 Gas Operations...
7 Regulati on..........................................
8 Envuonmental Marters..................................
8
)
Employees..........................................
9 Item 2 Properties........................................
10 Item 3 legal Picrxt nes........................................
10 Item 4 Suhmi" ion of Maners to a Vote of Security Holders................
10 Pan II i
s Item 5 Market for the Registrant's Common Equity and RelatM Stockholder Matters................................
11 Ite m 6 Selected Financial Data.....................................
11 Item 7 Management's Discussion and Analysis of Pnancial Conduion and Results of Operations..........................
11 Item 8 Fmanczal Statements r.ad Supp1=entary Data.....................
11 Item 9 r*hanges in and Disagreements with Accountants on Accounting and Financial Disclosure.......................
11 f
Pan III Item 10 Directors and Executive Officers of the Registrant..................
12 Item 11 Execunve Ngamion....................................
14 Item 12 Secunty Ownership of Certam Beneficial Owners and Managem ent........................................
20 Item 13 Cenam Peintinnthine and Reinfari Transactions...................
21 Pan IV Item 14 Exhibits. Financial Statement Schedules, and Repons on Fonn 8-K....................................
22 Signanuts 72 Exhibits Indr 73 i
2-i c
4 PARTI ITEM 1. BUSINESS
)
(a) General Development of Business Midwest Power Systems Inc. (MPS or Company), an Iowa corporadon,is the wholly-owned utility subsidiary of Midwest Resources Inc. (Midwest Resources or MWR). On July 22,1992, Iowa Power Inc. (IPR) and Iowa Public Service Company (IPS) merged with and into Midwest Power Systems Inc. (MPS).
IPS and IPR were previously the utility subsidiaries of Midwest Energy Company (MWE) and Iowa Resources Inc. (IOR), respectively. On November 7,1990, IOR and MWE merged with and into Midwest Resources, a newly created holding company.
(b) Financial Information About Industry Segments See Part IV, Item 14 " Exhibits, Fm~ ancial Statement Schedules and Repons on Form 8-K, Note (13) of Notes to Consolidated Financial Statements for finsncial information about industry segments.
(c) Narrative Description of Business GENERAL The Company operates an electric division and a natural gas division. 'Ibe electric division, Midwest Power, has been and is engaged in the generation, purchase, tranemasion, distribution and sale of electric energy, servmg 417,000 customers in 327 communities in westem and central Iowa and six communities in southeastem South Dakota. The natural gas division, Midwest Gas, distributes natural gas at retail to 370,000 customers in 204 communities in Iowa,43 communities in Minnesota, 8 communities in South Dakota and 2 communities in Nebraska. In December 1992, Midwest Gas signed a definitive agreement with Minnegasco, a division of Arkla, Inc., whereby Midwest Gas would acquire Minnegasco's South Dakota distribution properties and Minnegasco would acquire Midwest Gas
- Mmnesota distribution properties. Refer to Pan IV Item 14, Note (3) of Notes to Consolidated Financial Statements for funher information. CBEC Railway Inc., an Iowa corporation formed in 1990, is a wholly-owned subsidiary of the Company that was organized to own and operate rail facilities for tbc tmnsportation of coal. CBEC Railway Inc. has not commenced operations.
The Company is a regulated public utility holding franchises to operate in various municipalities and having territorial protection in other areas granted by state regulatory commiwions.
CAPITAL EXPENDITURES AND FINANCING The Company made gmss utility property additions, including capital expenditures for Cooper Nuclear Station (Cooper) capital improvements, of $595 million during the period January 1,1988, to December 31,1992, of which $66 million was for Cooper capital impmvements, $405 million was for electric plant, $112 million was for gas plant and $12 million was for common plant. Utility propeny retirements during the same period amounted to $106 million, of which $80 million was applicable to electric plant, $23 million to gas plant and $3 million to common plant.
T5 Company's sources of capital are provided from funds generated intemally, contributions from hMR and various =temal sources such as commercial paper, bank lines of credit, and other debt and equity securities. _
Cunently, MPS has an IPS indenture, an IPR indenture and, effective January 1,1993, an MPS indenture.
The MPS indennne is less restrictive than the two previous indentures. In January 1993, MPS began rennancing some of its long-term debt, including that issued under the IPS and IPR indentures, with debt issued under the MPS indenmre. No funher bond issuances will be made under the IPS and IPR indennnes. At January 1,1993, approximately $873 million of general mongage bonds could have been issued in compliance udth the MPS indenture. Refer to Part IV, Item 14, Note (15) of Notes to Consolidated Financial Statements for discussion about l
refinancing activites.
MPS currently has authority fmm the Federal Energy Regulatory Commission (FERC) to issue (i) on or before December 31,1993, shon-term debt in the form of commercial paper, bank notes, and notes to MWR or affiliated companies amounting to $259 million and (ii) up to $175 million of long-term debt in the form of general mongage bonds and pollution contml revenue bonds.
l l
i 1
4
~
ELECTRIC OPERATIONS - GENERATION Midwest Power's owned electric generating facilities are all located in Iowa. 7he net accredited generating capacity, along with the participation purchases and sales, net and firm purchases and sales, net, are shown for summer 1992 accreditation.
Accredited Generating Plant Fuel Capability (kW)
Steam Electric Generating Plants:
George Neal Station Unit No.1 Coal 135,000 Unit No. 2 Coal 300,000 Unit No. 3 Coal 221,500 (1)
Unit No. 4 Coal 247,500 (2)
Ottumwa Unit Coal 237,200 (3) lAuisa Unit Coal 292,500 (4)
Council Bluffs Energy Center Unit No.1 Coal 46,000.
Unit No. 2 Coal 88,000 Unit No. 3 Coal 315.200 (5) 1.882.900 Combustion Turbines:
Parr - 2 units Gas / Oil 27,100 Electrifarm - 3 units Gas /011 186,100 River Hills Energy Center - 8 units Gas /Dil 127,200 Sycamore Energy Center - 2 units Gas /Dil 148,000 Pleasam Hill-2 units Oil 70.000 558.400 Nuclear Capacity Purchase:
Cooper Nuclear Station Nuclear 389.000 (6)
Net Accredited Generating Capacity 2,830,300 Add: Participation Purchases and Sales, Net (77,000)
Firm Purchases and Sales, Net 29.000 Adjusted Net Accredited Generating Capability 2,782.300 Temporarily Deactivated Units:
Des Moines Energy Center Coal 188,000 (7)
(1) Capacity represents Midwest Power's 43 percent share.
(2) CapAity represents Midwest Power's 40.6 percent share.
3 (3) Capacity represents Midwest Power's 33.5 percent share.
(4) Capacity represents Midwest Power's 45 percent share.
(5) Capacity represents Midwest Power's 46.7 percent share.
(6) Cooper Nuclear Station is owned by Nebraska Public Ibwer District and the amount slown is i
Midwest Power's entitlement (50 percent) of Cooper's accredited capacity under a power purchase agreement extending to the year 20CM. (Refer to Notes (1)(f) and (2)(b) of Notes to Consolidated Financial Statements included in Part IV.)
(7) Two units deactivated in the third quaner of 1985 with projected reactivation in the late 1990's.
1 1 i
9
~
The annual hourly peak demand occurs during the summer period, principally as a result of air conditioning use. Midwest Power's highest hourly peak demand in 1992 was 1,959 megawatts (MW) in August, a reduction of 303 MW from Midwest Power's record of 2,262 MW set in 1988 and 232 MW below the 1991 peak demand of 2,191 MW.
i Midwest Power is interconnected with certain Iowa and neighboring utilities and is one of 44 utilities involved in an electric power pooling agreement known as the Mid-Continent Area Power Pool (MAPP). The purpose of MAPP is to coorthnate the plannmg, construction and operation of generation and transmission facilities, including the purchase and sale of power and energy among members. In addition, Midwest Power and three other lowa investor-owned utilities are parmers in ENEREX, a general pannership. ENEREX coordinates the purchase and sale of electric energy among the panners and handles the daily unit commitment function.
The transmission lines of Midwest Power, operating from 34,500 to 345,000 uolts, totaled 3,590 circuit miles at December 31,1992, and were used to supply electricity to 417,000 customers.
In October 1992 the National Energy Policy Act (NEPA) was signed into law. NEPA, which allows all electric generators to transpan wholesale power acmss utilities
- trnnemission facilities, will impact Midwest Power to some degree. The Company is cunently evaluating the law and its impact on Midwest Power.
Generation by coal, nuclear, oil and natural gas as a percent of Midwest Power's total net generation of electricity during each of the last three calendar years and the average cost to the Company of those fucis are as follows:
All Fuels Year
% of Generation Average Cost Ended Coal Nuclear Gas / Oil (Mills per kWh) 1990 77 22 1
9.7 1991 79 20 1
10.0 i
1992 75 24 1
9.1 ELECTRIC OPERATIONS - FUEL SUPPLY Midwest Power has contracts and commitments pmviding for the furmthmg of coal in quantities which are adequate, in the opinion of management, absent circumstances not now foreseen. Costs of coal are subject to price adjustments under the extsung contracts. Some contracts contain market price reopener clauses which have i
resulted in reduced coal prices. All of the Company's wholesale sales (which are pan of sales for resale) and retail sales of electricity are subject to energy adjustment clauses.
Midwest Power's five major coal supply contracts under which deliveries are currently being received are as follows:
Year In Which Contracted Annual Contract Expires Tonnare (1) 1994 292.000-439,000 (2) 1998 730,000-893,000 1999 760,000-939,000 (3) 2001 360,000-660,000 (3) 2003 621,000-887,000 (4)
(1)
Company's share only where contract pertams to jointly-owned unit.
(2)
Option to extend for 2 years.
(3)
Tonnage varies per specified annual contract amounts.
(4)
Tormage varies per specified annual contract amourns and includes only a partial annual regmrement in the year 2003.
Natural gas and oil are used for peak demand electric generation and for standby purposes. These sources am in adequate supply and available to meet the Company's needs.
Approximately 30 percent of the fuel in the core at Cooper Nuclear Station must be replaced every 18 months.
For additional information conceming electric operations, see "Unaudited Utility Statistics", in Pan IV, Item 14, of this filing.
NATURAL GAS OPERATIONS The Midwest Gas division mamtams contracts for delivery capacity fmm four pipelines: Nonhern Natural Gas Company (NNG), Natural Gas Pipeline Co. of America (Natural), Viking Gas Transmission Company (Viking) and ANR Pipeline Company (ANR). Midwest Gas purchases gas from three of the four pipehnes and various non-traditional suppliers. The gas is then distributed by Midwest Gas to its customers through 11,764 miles of distribution mains and senices.
Contracts with NNG provide delivery of 194,400 MhiBru per day of 12-month firm transport service,156,100 MMBtu per day of seasonal service and 80,000 MMBtu per day of storage service withdrawal during peak periods.
Contracts on a firm delivery basis with Natural are 10,400 AniBtu per day of contract demand,50,100 MMBru per day of firm transpon service and 18,700 MMBtu per day of storage service withdrawal during peak periods.
The firm contract with Viking is for 2,000 MMBru per day of firm transport service. Contracts with ANR provide for delivery of 6,600 MMBtu per day of firm transpon service.
In addition, Midwest Gas also contracts for storage gas supplies. This storage gas is available during the heating season and delivered on either a firm or interruptible tmnsportation contract. The following table shows the quantities of storage gas supplies available from each pipehne.
Pipeline Total Storage Maximum Daily System MBiBtu)
Withdrawal miMBru)
NNG 6,200,000 80,000 Natural 2,148,500 36,700 ANR 310,400 4,700 Purchases from suppliers other than gas transmission pipelines are the result of changes occurrmg in the natural gas supply area. These changes have helped to control natural gas cost to utility customers and created opportunities for prmiding additional services through transponation arrangements. Midwest Gas continually monitors the gas supply market to take advantage of opportunities as they arise, in order to meet peak day gas demand during winter months, two liquefied natural gas plants enable the liquefaction and storage of gas during off-peak months for use during the heating season and provide additional maximum daily delivery capacity of 69,600 MMBru. In addition,11 propane-air gas peak shaving plants, of which 4 am located in Iowa,6 in Minnesota and 1 in South Dakota, have 99,540 MMBtu maximum daily delivery capacity.
FERC has issued Orders 636,636A and 636B related to the regulation ofinterstate pipeline companies. These Orders will directly impact the operation, revenues and costs of local distribution companies, including Midwest Gas. Refer to "Pmspective Information" in " Management's Discussion and Analysis of Fmancial Condition and Results of Operations" included in Pan IV, item 14 for funher discussion of the impact of these Orders.
Natural gas distribution facilities located in the midwest experience significant eamnni demands. Sales during the spring and summer months are traditionally lower than the fall and winter heating season.
A purchased gas adjustment clause, which exists in all jurisdictions, permits rates to be adjusted at any time gas suppliers change their pricing. _ _ _ _ _ _ - _ _ _ _.
t For additional information conceming the natural gas operations, see "Unaudited Utility Statistics", in Part IV, Item 14.
REGULATION The Company is subject to regulation by the Iowa Utilities Board (IUB) and the South Dakota Public Utilities Commission (SDPUC) as to electric and gas retail rates and service and by FERC as to eleenic sales for resale rates. The Company is also subject to regulation by the Minnesota Public Utilities Commission (MPUC) for its gas retail rates and service. In addition, Iowa law requires that a certificate of convenience and necessity be obtained from the IUB prior to construction of a proposed electric generation station with a total capacity of 25 or more megawans. Need for the station must be estabbshed and approval of the proposed site obtained before a certificate can be issued.
Iowa law authorizes the IUB to suspend new rates for up to ten months beyond the date of initial flIing.
During the interim period of rate proceedings, statutory authority in Iowa all>ws for interim rate increases, subject to refund, starting no later than 90 days fmm the initial filing date.
7 Minnesota law authorizes the MPUC to suspend new rates for up to ten months beyond the date of the initial filing. Dunng the interim period of the rate proceedings, MPUC regulations permit the collection ofinterim rates, subject to refund, starting no sooner than 60 days from the initial filing date.
South Dakota law authorizes the SCPUC to suspend new rates for up to six months during the pendency of rate pmceedings; however, the mtes are permined to be implemented after six months subject to mfund pmding a final order in the proceedmg.
The Company is a utility within the meaning of the Federal Power Act and a natural gas company within the meaning of the Natural Gas Act. Therefore, it is subject to regulation by FERC, as to numerous activities, including the issuance of securities, accounting policies and practices and the establishment and regulation of elecuic interconnections and transmission services. For the year ended December 31,1992, approximately 13.8 percent of the total electric revenues were sales for resale and subject to FERC regulation. Natural gas revenues are not subject to FERC trgulation.
~
The Company's electric and gas operations are conducted under franchises (expiring in various years from 1993 to 2018), permits and licenses obtained fmm state and local authorities. The Company has no franche expiring prior to 2000 for its largest communities served.
MWR is exempt from the Public Utility Holding Company Act of 1935. MWR's exemption is based upon its filing with the Securities and Exchange Commission (SEC) in November 1090, an Initial Statement by Holding Company Pursuant to Regulation 250.2 of the Public Utility Holding Company Act of 1935. h0VR mainrams its
+
exemption by filing a Form U-3A-2 with the SEC each year.
For information relating to the Company's Rate Matters, reference is made to Pan IV, Item 14, Note (10) of Notes to Consolidated Fmancial Statements.
ENVIRONMENTAL AMTTERS i
The Company is subject to numerous legislative and regulatory environmental protection requirements involving air and water pollution, waste management, hazardous chemical use, noise abatement, land use and aesthetics.
Essentially all utility generating units are subject to the provisions of the Clean Air Act Amendments of 1990 which address continuous emission monitoring, permit requirements and fees, and emission of toxic substances.
_g.
9 The Company i:stimates total capital costs of approximately $3 million by the year 1995 and increased operations and Inamtenance expense of approximately $2 million annually thereafter for compliance with these provisions.
By the year 2000, some Company coal-fired generadng units will be required to mstall controls to reduce emissions of nitrogen oxides. The Company estimates the costs of these controls could range from $20 to 25 million.
The United States Environmental Protection Agency and the Iowa Depanment of Natural Resources have determined that contammated wastes remaining at cenain decommissioned manufactured gas plant (MGP) facilities l
may pose a trutat to the public health or the environment if such contammants are in sufficient quantities and at such concentrations as to warrant remedial acdon. The Company could be involved in up to 22 such sites. The Company's present estimate of pmbable remediation costs at these sites is $14 million. The Company's current gas rates in Iowa provide recovery for MGP costs of $3.1 million on an annual basis.
As a user of polychlorinated biphenyls (PCBs), the Company is subject to govemmental regulations pennining to the use, handhng and proper disposal of PCBs. The Company is aware of four PCB sites in which it may be involved. The Company anticipates recovery of any material expenditures from other responsible parties and through rates.
For funher information relating to the Company's Environmental Maners, reference is made to Part IV, item l
14, Note (2)(c) of Notes to Consolidated Financial Statements.
EMPLOYEES On Febmary 23,1993, the Company had 2,851 full-time employees and 71 part-time and temporary employees for a total of 2,922 employees. Of that total,1,516 are union employees.
l I
l 9
l
I ITEM 2. PROPERTIES Reference is made to item 1 (c) " Electric Operations - Generation", "Elecaic Operations - Fuel Supply" and
" Natural Gas Operations" of this filing conceming the propenies of the Company.
It is the opinion of management that the pnncipal depreciable properties oumed by the Company are in good operating condition and well maintning The Mongage and Deed of Tmst of IPS as amended and supplemented and the Indenture of M.ortgage and Deed of Trust of IPR as amended and supplemented constitute first mortgage liens on substanually all of the propenies owned by the Company, subject only to excepted encumbrances. The MPS General Mortgage Indenutre and Deed of Trust dated January 1,1993, constitutes a juniorlien on all of the Company's electric properties located in Iowa that are covered under the previously existing indennues. It will become a first lien when all bonds issued under the IPS and IPR indentures are retired and is a first lien on all new, available properties.
ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries have no materiallegal proceedings except for the following:
ENVIRONMENTAL MA'1TERS Reference is made to item 1(c), " Environmental Mauers," and to Pan IV, Item 14, Note (2)(c) of Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS No maners were submined to a vote of the Company's security holders during the founh quaner of 1992.
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EOUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION AND DIVIDENTS The Company's outstandmg common stock is held entirely by its parent company. MWR, and is not publicly traded. The annual total of quanerly common stock cash dividends declared by the Company to MWR in 1992 and 1991 were $73,944,000 and $78,200,000, respectively.
ITEM 6. SELECTED FINANCIAL DATA Refemnce is made to Part IV of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FfNANCIAL CONDITION AND i
RESULTS OF OPERATIONS I
Reference is made to Part IV of this port.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA For the infonnation required by item 8 for the Company, inMnding the (i) Consolidated Statements ofIncome, (ii) Consolidated Statements of Cash Flows, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Capitahzation. (v) Conmlidcad Statements of Retained Eammgs, (vi) Notes to Consolidated Financial Statements and (vii) Report ofIndependent Public Accountants, reference is made to Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
l.
PART III ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRAhT
' Information concerning the directors and executive officers of the Company is as follows:
(a) Identification Served Present in Present Served as
,Name Ace Position Position Since Director Since Russell E. Chnsnansen 57 Chairman, President and 1991 1992 Chief Executive Officer Richard C. Engle 58 Executive Vice President 1992 1992 (Midwest Power-Generation and Transmission) and Director Lynn K. Vorbrich 54 Executive Vice President 1992 1992 (Midwest Power-Distribution) and Director Philip G. Lmdner 49 Group Vice President-1992 1992 Administrative Services and Director Beverly A. Wharton 39 Group Vice President 1992 1992 (Midwest Gas) and Duector John A. Rasmussen, Jr.
47 Vice President and General Counsel 1991 James R. Bull 51 Vice President 1992 James J. Howard 50 Vice President 1992 Lester A. Juan 54 Vice President 1992 Paul J. Leighton 39 Secretary and Assistant Treasurer 1991 J. Sue Rozema 40 Treasurer and Assistant Secretary 1991 Larry M. Smith 37 Controller 1992 Each director and executive officer serves an annual tenn of office. Officers are elected annually by the Board of Directors. There are no family relationships between the foregoing executive officers and ducctors of the Company, nor any arrangements or understandings between any director or officer and any other person pursuant to which the director / officer was elected.
(b) Business Experience During the Last Five Years Rusall E. Christiansen Chairman and Chief Executive Officer of MWR since 1992 and President since 1990. Vice Chamnan and Chief Operating Officer of MWR from' 1990 to
)
1992. Chamnan and Chief Executive Officer of MWE fmm 1986 to 1990 and j
President fmm 1985 to 1990. Chamnan, Prendent and Chief Executive Officer of MPS since 1992. N-n and Chief Executive Officer of IPS fmm 1986 to 1992, and Chauman and Chief Executive Officer of IPR fmm 1990 to 1992. '
Richard C. Engle Executive Vice President of MPS since 1992. President and Chief Og-mg Officer of IPS fmm 1990 to 1992 and Senior Vice President and Chief Operating Officer fram 1987 to 1990.
j Lynn K. Vorbrich Executive Vice President of MPS since 1992. President and Chief Operating Officer of IPR fmm 1989 to 1992 and Execu*ive Vice President of IPR fmm 1986 to 1989.
i Philip G. Lindner Gmup Vice President of MPS since 1992. Senior Vice President ofIPR fmm 1990 to 1992. Vice President of IPR in 1989. Prior to joining IOR and IPR in 1989, Mr. Lmdner served as Vice President and Chief Financial Officer for MacNeal Hospital from 1987 to 1989.
Beverly A. Whanon Gmup Vice President of MPS since 1992. Senior Vice President ofIPS from 1988 to 1992. Vice President fmm 1985 to 1988 and Secretary fmm 1984 to 1988.
1 I
Each of the officers not also serving as a duector has been employed by the Company or one of its predecessors. IPS or IPR for mare than five years in various capacities.
5 I
I I
l l
1 d i
ITEM 11. EXECUTIVE COMPENSATION The following table sets fonb all cornpensation paid by the Company and MWR for services in all capacities to the Company for the fiscal years ended December 31,1992,1991 and 1990, to those persons who were, at December 31,1992, (i) the chief executive officer and (ii) the other four most highly compensated executive officerr of the Company (" named executive officers"). Portions of the compensation shown in the following table are ecovend from affiliate companies for services rendered to them by the named executive officers or by the shanng of costs throagh the MWR corporate allocation.
Summary Compensation Table Annual Compensation Name and Principal Other Annual All Other Position Year SalanT$)
Bonus ($X1)
CompensationfS)
Compensation (s)
Russell E. Chnsuansen (2) 1992 380,000 0
0 38,570 Chamnan, Pmsident and 1991 360,000 60,000 0
29,980 Chief Executive Officer 1990 303,798 525,750 0
13,658 Richard C. Engle (3) 1992 224,000 0
4.583 24,201 Executive Vice President 1991 212,000 31,800 0
18,583 1990 182,000 186,250 0
12,659 Lynn K. Vorbrich (4) 1992 232,061 0
4,510 16,947 Executive Vice Pmsident 1991 211,492 31,800 0
14,978 1990 200,769 219,650 0
14,764 i
Philip G. Lindner (5) 1992 155,446 0
3,413 9,923 Gmup Vice President 1991 142,662 19,200 0
11,744 1990 135,519 134,295 0
9,000 Beverly A. Whanon (6) 1992 136,000 0
2,132 9,835 Gmup Vice President 1991 122,000 16,400 0
11,186 1990 115,000 0
0 12,659 (1) Amounts shown are those camed for the respective fiscal year. Awards of 25,000,10,000,10,000 and 6,000 performance shares (each share the equivalent of one share of MWR Common Stock (Common Stock) having a value of $18.625) made on January 30, 1991, to Messrs. Chnsuansen, Engle, Vorbrich and 12ndner, respectively, pursuant to MWR's noncash bonus award plan are includul in the amounts shown for 1990..
(2) All Other Compensation consists of $15,000, $15,000 and $10,999 paid in 1992,1991 and 1990, respectively, as director fees, $20,661 and $12,155 paid in 1992 and 1991, respectively, for supplemental 1ife msurance which is deemed to be additional income to Mr. Christiansen and contributions by the Company of $2,909,
$2.825 and $2,659 in 1992,1991 and 1990, respedvely, to a defined contdbution plan.
l (3) All Other Compensation consists of 18,000, $8,000 and $10,000 paid in 1992,1991 and 1990, respectively, 1
as ducctors fees, $13,289 and $7,758 paid in 1992 and 1991, respectively, for supplemental life insurance which is deemed to be additional income to Mr. Engle and contributions by the Company of $2,912, $2,825 and $2,659 in 1992,1991 and 1990, respectively, to a defined contribution plan.
(4) All Other Compensation consists of $8,0L O, $8,000 and $13,764 paid in 1992,1991 and 1990, respectively, as director fees, $7,401 and $5,978 paid in 1992 and 1991, r-Wycly, for supplemental 11fe insurance which is deemed to be additional income to Mr. Vorbrich and contributions by the Company of $1,546, $1,000 and
$1,000 in 1992,1991 and 1990, respect'vity, to a defined contribution plan.
(5) All Other Compensation ccasists of $4,473, $8,000 and $8,000 paid in 1992,1991 and 1990, respectively, as director fees, $3,374 and $2,744 paid in 1992 and 1991, respectively, for supplementallife insurarre which is deemed to be additional income to Mr. Lmdner and contributions by the Company of $2,076, $1,000 and
$1,000 in 1992,1991 and 1990, respectively, to a defined contribution plan. Pursuant to a letter agreement dated as of March 27,1989, if a merger or acquisition results in a change of control of the Company, Mr.
Lindner may, at his option, within a 12-month period after such merger or acquisition, r: sign from his position with the Company. If Mr. Lindner resigns during such period, or if following such change in control and prior to January 1,1994, he is temdrmrad for any reason other than for cause, Mr. Lindner would be entitled to l
twelve months' severance pay at his base salary.
(6) All Other Compensation consists of 55,806, $8,000 and $10,000 paid in 1992,1991 and 1990, respectively, as director fees, $1,309 and $765 paid in 1992 and 1991, respectively for srpplemental life insurance which is deemed to be additional income to Ms. Whanon and contributions by the Company of $2,720, $2,421 and
$2,659 in 1992,1991 and 1990, respectively, to a defined contribution plan.
MANAGEMENT DEVELOPMENT COMMTITEE REPORT ON EXECUTIVE COMPENSATION The Management Development Comminee of the MWR Board of Duectors (Board of Duectors) has furnished the following report on executive compensation. This committee, along with the MWR Board of Directors as a whole, determines compensation for officers of the parent company and affiliates. The term " Company" refers to MWR in this report.
The Management Development Committee (Comminee) of the Board of Duectors is comprised of six members of the Board of Directors, none of whom is a current or fonner officer or employee of the Company or any of its subsidiaries. The Comminee has the following responsibilities:
o
- 1. Review the performance of senior management, including the Chief Executive Officer.
- 2. Review compensation, benefits, pension plans and other forms of indirect compensation for officers and senior managerial employees.
- 3. Consider the needs for succession plannmg and adequacy of plans to assure continuity of the Company's i
management.
- 4. Review, approve and recommend to the Board of Directors and admmister various incentive compensation i
plans, including annual and long-term plarts.
t The Company has a compensation policy which is designed to compensate management with salary, incentives and benefits at levels which are generally competitive with comparative utility companies and general industry.
Incentive plans and perfortaance review processes are intended to encourage and reward outstandmg performance.
The compensation policy and the goals set forincentive plans are designed to benefit shareholders and customers as well as to attract and retain highly qualified and capable executives. In addition, the policy for establishing incentive compensation plans is intended to place a portion of total compensation at nsk.
The Committee anrrually reviews executive compensation in December of each year for the purpose of determining base salaries for the next year. As part of its review, the Comminee evaluates overall corporate performance, including cammgs, comparative utility and general industry compensation levels and salary recommendations made by the Chief Executive Officer of the Company. The Comminee then recommends base salaries to the Board of Directors. In January of each year, the Committee sets targets and goa's for the annual and long-term mcentive compensation plans for that year. In the second and third quaners of each year, the Committee evaluates the attainment of targets and goals under these plans for the precedmg year and determines the level of incentive awards, if any. Exceptional individual performance may be rewarded under the noncash bonus award plan.
Base Salaries. 'Ihe base salary for Mr. Christiansen and each of the other senior officers is determmed by reference to the base salary paid to their respective peers at other comparable utility companies, industry and national surveys and performance judgments as to the past and expected future contributions of the individual executives. As a general guideline, base salaries for the senior officers are within the range of the utility industry average for comparative companies as,ietermmed through compensation surveys. The Committee reviewed with Mr. Christiansen the performance et each of the senior officers during 1991 and the base salary adjustments recommended by Mr. Chrisuansen In evaluating the performance of Mr. Christiansen and the senior officers, the Comminee considered their indindual comributions to combining the various functions performed separately by Iowa Resources Inc. and MMwest Energy Company prior to the merger, including their respective utility operations, which have resdted in increased operating and management efficiencies. It is estimated that the net present value of cost savings from the merger will total appmximately $89 million during the period 1992 through 2001, a si,mifkmt amount of which has already been reali7ed These efficiencies and associated costs savings have benefined both the shareholders and the customers of the Company and have been recognized by the Iowa Utilities Board which has granted the Company management efficiency awards in recent rate decisions. These are added to the allowed rate of retum on shareholder equity. The Comminee has also considered management's commitment to the long-term growth of the Company by focusing on the strategic opportunities of the utility and nonutility businesses and developing plans to implement these strategies.
Base salary adjustments for the senior officers consistent with those generally made for all Company employees were recommended by the Committee to the Board of Directors. The Committee indepmamdy reviewed the performance of Mr. Chnstiansen during 1991 and recommended to the Board of Directors that he receive a 1992 base salary adjustment consistent with the senior officers and the other employees of the Company in recognition of his contribution in leading the Company through the post-merger transition pe:iod and structuring the Company to be positioned to take advantage of futme strategic oppominities. The Board of Directors corcurred with the recommendations of the Committee.
AnmaalIncentive Compensation. Annual mcentive compensation awards were made in recognition of the senior officer's individual performance and the performance of the business unit under the officer's responsibility in 1991. In the case of Mr. Chrktimm awards were based on the performance of the entire Company. For 1991, specific targets and goals were not in place due to the brief history of the Company, however, discretionary incentive awards of 2.7 percent up to a maximum of 16.7 percent of a participant's annual base salary were granted. Mr. Christiansen received the maximum award. One half of the award was paid in cash and the remainder in performance shares. Each performance share has a value equal to one share of the Company's :
i l
Common Stock. Such awards were made at the discretion of the Board of Directors as recommended by the Committee and were in recognition of the participant's achievements in effectively combining the operations of the Company after the merg:r, and in the case of Mr. Christiansen, in effectively leading the Company through the post-merger transition and stmemring the Company to be positioned to take advantage of future strategic
)
oppommities.
He Company adopted an Annual Incentive Compensation Plan for key employees, including Mr. Christiansen and the senior officers, effective in 1992. Individual awards under this plan are based on the achievement of specific individual, business unit and corporate performance goals. For Mr. Christiansen,75 percent of his award is based on overall corporate goals and 25 percent on individual goals. For the senior officers with operations responsibility,40 percent of their awanis are based on achieving business unit goals,40 percent on overall corporate goals and 20 percent on individual goals. For the senior officers with staff responsibilities,60 percent of their awards are based on overall corporate goals and 40 percent on individual goals. Corporate performance goals consist of a shareholder measure of targeted eamings growth with a minimum carnmgs level to be achieved before any awanis may be made, and a customer measure of electric and gas rate performance as compared to other specific utility companies. Business unit goals consist of unit operations and maintenance cost measures and utility customer service measures, including service reliability and responsiveness to customer needs. Individual goals are developed by the senior officer and reviewed by the Chief Executive Officer. The achievement of each goal is indexed on a sliding scale basis. As the goal is achieved and then exceeded, the index scales up. Target awards of 14 pement to 35 percent of annual base salary will be made upon achievement of 100 percent of the established goals. Maximum awards of 21 percent to 52.5 percent will be awarded if the established goals are exceeded as determmed by the mdex De Chief Executive Officer would be eligible for awards at the 35 i
percent /52.5 percent levels. One half of the award is paid in cash and the remainder in performance shares. The specific goals are not included herein because they are believed to represent confidential business information.
Since this plan was not adopted until 1992, no awards were made for years prior to 1992. No awards were made for 1992 performance since the corporate performance goals were not achieved.
Long Term Incendre Compemation. A Long Term Incentive Compensation Plan was also adopted by the l
Company for senior officers, effective in 1992. Individual awards under this plan are based on the achievement of certain corporate performance goals during each three year performance cycle, with the first cycle consisting of the years 1990 through 1992 and the last cycle years 1994 through 1996. The two goals which must be met each year under the plan are annual growth in corporate cammgs per share and the retum on shareholder equity.
J The target for each goal for the current year of the cycle is determined in January by the Comminee. The camings per share goal is weighted at 75 percent with the retum on equity goal weighted at 25 percent. Target awards are fmm 7.5 percent to 25 percent with a maximum award based on exceeding the goals of 12.5 percent to 37.5 percent of annual base salary he Chief Executive Officer would be eligible for awards at the 25 percent /37.5 percent levels. Cash awards are paid at the end of a performance cycle. The specific goals are not included herein because they are believed to represent confidential business information. Since this plan's first cycle was not l
completed until December 31,1992, no awards were made for years prior to 1992. No awards were made for the cycle ending December 31,1992, since the corporate performance goals for the cycle were not achieved.
Noncash Bonus Awurds. The Company has adopted a noncash bonus award plan for certam officers of the Company. Individual awards are made in performance shares and paid in cash at the earlier of retirement, deatl.,
disabihty or involuntary termination without cause. Awanis are made at the discretion of the Boani of Directors upon recommendation by the Committee in recognition of exceptional performance. No awards were made under this plan for plan years 1991 or 1992.
4 4
, 1
RETIREMENT PLANS The Iowa Power Inc. Salaried Employees' Retirement income Plan (IPR Retirement Plan) pmvides for payment of fixed pension benefits to persons who retire after a specified age and number of years of service, based on average annual salary during the five highest paid consecutive years out of the last ten years prior to retirement.
j Messrs. Vorbrich and Lindner are panicipants in the IPR Retiret ent Plan and are credited with 20 and 3 years of service, respectively.
MWR mamtams an unfunded Supplemental Retirement Plan (IPR Supplemental Plan) to pmvide additional retirement benefits to certain officers, as determined by the Boarti of Directors. Messrs. Vorbrich and Lmdner are panicipants in the IPR Supplemental Plan. Part A of the IPR Supplemental Plan provides retirement benefits up to 65 percent of a participant's highest annual salary during the five years prior to retirement reduced by the participant's IPR Retirement Plan benefit. The percentage applied is based on years of credited service. A panicipant who takes early retirement is entitled to reduced benefits under the plan. A survivor benefit is payable to a surviving spouse. Part B of the plan pmvides that an additional 150 percent of annual salary is to be paid out to participants at the rate of 10 percent per year over 15 years, except in the event of a panicipant's death, in which event the unpaid balance would be paid to the participant's beneficiary or estate.
Benefits from the IPR Supplemental Plan will be paid out of general corporate funds. MWR mamtams life msurance on participants in amounts actuarially determined to be sufficient to fur.<1 all of the future liabilities under the IPR Supplemental Plan. MWR, thmugh a trust,is both owner and beneficiary of all such life insurance. The IPR Supplemental Plan has been designed so that if the assumptions made as to mortality experience, policy dividend, tax credits and other factors are reahzed, MWR will recover fully its premium and benefit payments over the life of the IPR Supplemental Plan. Deferred compensation is considered pan of the salary covered by the IPR Supplemental Plan.
The table below shows the estimated aggregate annual benefit payable (for the first 15 years of retirement) under the IPR Supplemental Plan and the IPR Retirement Plan. The amounts exclude Social Security and are based on a straight life annuity and retirement at age 65. Amounts shown are calculated on the basis of credited service. Federal law limits the amount of benefits payable to an individual tiuough the IPR Retirement Plan and benefits exceeding such limitations are payable under the IPR Supplemental Plan.
Estirnated Annual Benefit Highest Annual Salary Years of Service 4
in Five Years Prior 25 or to Retirement 10 15 20 More S150,000
$ 90,000
$ 97,500
$105,000
$112.500 200,000 120,000 130,000 140,000 150,000 250,000 150,000 162.500 175,000 187,500 300,000 180,000 195,000 210,000 225,000 1
350,000 210,000 227,500 245,000 262,500 400,000 240,000 260,000 280,000 300,000 450,000 270,000 292,500 315,000 337,500 500,000 300,000 325,000 350,000 375,000 The Iowa Public Service Company Retirement Plan for Salaried Employees (IPS Retirement Plan) was amended effective January 1,1992, to pmvide for the determmation of retirement benefits in the same manner l
as the IPR Retirement Plan for service credited after such date. Benefits for service prior to such date are 1
4 w
i determined as previously provided by the IPS Retirement Plan using the final average pay method, based on the employee's highest five years' eamings. Messrs. Chnstiansen and Engle and Ms. %71arton are panicipants in the IPS Retirement Plan and are credited with 33,28, and 16 years of service, respectively.
Messrs. Christiansen and Engle and Ms. Whanon are panicipants in the Iowa Public Service Company Supplemental Retirement Plan (IPS Supplemental Plan), a nonqualified plan for certain executives, as determined by the MWR Board of Directors. The IPS Supplemental Plan provides a panicipant, upon normal retirement, a monthly retirement benefit until the panicipant's death equal to 70 percent of the panicipant's monthly base salary at the time of retirement. This benefit will be reduced by the amount of the panicipant's regular retirement and Social Security monthly benefits and any benefit from a retirement plan of a prior employer. A participant who takes early retirement is entitled to reduced benefits under the plan. A survivor benefit is payable to the surviving spouse for the remainder of the surviving spouse's life. Benefits to participants will be paid out of general corporate funds, however, the Company has acquired life insurance on the panicipants in an amount sufficient to 4
cover its premium costs and benefit payments under the plan. Deferred compensation is considered pan of the y'
salary covered by the IPS Supplemental Plan.
The table below shows the estimated aggregate benefits payable under the IPS Supplemental Plan and the IPS Retirement Plan. The amounts exclude Social Security and are based on normal retirement at age 65. Federal law limits the amount of benefits payable to an individual through the IPS Retirement Plan and benefits exceeding such limitation are payable under the IPS Supplemental Plan.
l l
Estimated Annual Benefit Years of Service Salary 25 or to Retirement 10 15 20 More 5100,000
$ 70,000
$ 70,000
$ 70,000
$ 70,000 150,000 105,000 105,000 105,000 105,000 200,000 140,000 140,000 140,000 140,000 250,000 175,000 175,000 175,000 175,000 300,000 210,000 210,000 210,000 210,000 350,000 245,000 245,000 245,000 245,000 400,000 280,000 280,000 280,000 280,000 450,000 315,000 315,500 315,500 315,500 500,000 350,000 350,000 350,000 350,000
)
4 i
DIRECTORS' COMPENSATION i
Directors each receive an annual fee of $8,000. No meeting fees are paid. In addition Mr. Chnsuansen receives an annual amount of $7,000 from MWR as director fees for service on the MWR Board of Directors.
i Directors have the opportunity to make an election prior to the commencement of any year to defer a portion or all of their compensation received for senice as a director pursuant to the Midwest Resources Inc. Board of I
Directors Deferred Compensation Plan. Amounts previously defened under predecessor companies' deferred compensation plans will be disuibuted in accordance with each such plan's respective provisions upon a director's termination of service as a director.
L ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT MWR owns 100 percent of the 1,000 shares of MPS' common stock, without par value, which were outstanding on February 25,1993.
The following table sets fonh infonnation conceming each class of MWR's and MPS' equiry securities which were owned of record or beneficially held on February 25,1993, by each of MPS' directors and nominees for election as directors, the chief executive officer and the four other most highly compensated executive officers and, as a gmup, by such persons and other executive officers. The number of shares owned by any director or nominee, or by all directors and executive officers of MPS as a group, did not exceed one percent of MWR shares outstanding on February 25,1993.
Name of Director Amount and Nature of Title of Class or identity of Group Beneficial Ownetship (1)
Midwest Resources common Russell E. Christiansen 10,614(2) stock, without par value Midwest Resources common Richard C. Engle 7,749(3) stock, without par value Midwest Resources common Philip G. Lindner 259(4) stock, without par value Midwest Resources common Lynn K. Vortrich 2,875(5) stock, without par value Midwest Resources common Beverly A. Whanon 2,773(6) stock, without par value Midwest Resources common 12 directors and officers, 52,080(7) stock, without par value as a group 1
(1) Beneficial ownership of each of the shares of Common Stock listed in the foregoing table is comprised of sole voting power and sole investment power, unless otherwise noted.
(2) includes 5,991 shares held in a defined contribution plan as of December 31,1992, and 4,515 shares a
beneficially owned by Mr. Christiansen and his spouse.
(3) Includes 6,099 shares held in a defined contribution plan as of December 31, 1992, 1,098 shares beneficially owned by Mr. Engle's spouse and 552 shares beneficially owmed by Mr. Engle and his spouse, l
(4) Includes 121 shares held in a defined contribution plan as of December 31,1992, and 138 shares owned beneficially by Mr. Lindner and his spouse.
(5) includes 800 shares held in a defined contribution plan as of December 31,1992, and 228 shares beneficially owned by Mr. Vorbrich and his spouse.
_j
9 (6) Includes 995 shams held in a defined contribution plan as of December 31,1992, and 1,441 shares beneficially owned by Ms. Wharton and her spouse and 337 shares beneficially owmed in a custodial account for a minor child.
I (7) Includes shares held in defined contribution plans as of December 31,1992, and shares beneficially owned jointly with and individually by family members.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS i
Reference is made to Note (16) of Notes to Consolidated Fmancial Statements for a summary of afminted transactions.
r t
P i.
a 1
PART IV
~
ITEM 14. EXHIBITS. FTNANCIAL STATEMENT SCFIEDULES. AND REPORTS ON FORM 8.K (a)1. Financial Statements (induded herein)
Pace No.
Selected Onnelianted Financial Data................................
24 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................
25 Consolidated Statements ofIncome For the Year Ended December 31, 1992, 1991 and 1990................................
35 Consolidated Statements of Cash Flows For the Year Ended December 31, 1992, 1991 and 1990................................
36 Consolidated Bninnce Sheets - December 31,1992 and 1991...
37 Consolidated Statements of Capita 117ntion - December 31,1992 and 1991.......
39 Consolidated Statements of Retamed Eammgs for the Year Ended D-her 31,1992,1991 and 1990.................................
41 Notes to Conelidead Financial Statements............................
42 Management's Responsibility For Fmancial Statements....................
56 Repon of Independent Public Accountants.............................
57 Unandited Utility Statistics....................
58 f
(a)2. Financial Statement Schedules (included herein)
The following schedules should be read in conjunction with the aforementioned financial statements.
For the years ended December 31,1992,1991 and 1990 -
Pace No.
Amounts Receivable from Related Parties, Underwriters, Promotors and Employees Other Than Related Panies (Schedule II)..........
60 1
Consolidated Pmpeny, Plant and Equipment (Schedule V) 63 Consolidated Accumulated Depreciation, Depletion and Amomzation of Propeny, Plant and Equipment (Schedule VI).........................
66 Consolidated Valuation and Qualifying Accounts (Schedule VIII) 69 i
ranmlidated Shon-Term Bormwmgs (Schedule IX)......................
70 Conelid=taA Supplementary Income Statement Information (Schedule X).......
71
[
Other schedules are omitted because of the absence of conditions under which they are n:qmred or because the required information is given in the financial statements or notes thereto.
22-
i
\\
l (a)3. Exhibits See Exhibits index on page 73.
(b)
Reports on Form 8-K On November 20,1992, the Company filed a repon on Form 8-K dated November 16,1992, regarding the announcement that Midwest Gas, the natural gas division of the Company, signed a letter of intent with Minnegasco, a division of Arkla, Inc., to exchange portions of their natural gas service tenitories.
On December 15, 1992, the Company filed a repon on Form 8-K dated December 14, 1992, including fm' ancial statements, notes to financial statements and repon of independent public accountants. The financial statements included were as follows:
As of December 31,1991 ar J 1990 -
Consolidated Balance Sheets Consolidated Statements of Capitalization For the year December 31,1991,1990, and 1989 -
Consolidated Statements ofIncome Consolidated Statements of Cash Flows Consolidated Statements of Retamed Eammgs On December 31,1992, the Company filed a report on Form 8-K dated December 23,1992, regarding the announcement that Midwest Gas signed a definitive agreement with Mmnegasco to exchange ponions of their natural gas service territories.
t r
k a
. a
j MIDWEST POWER SYSTEMS INC.
SELECTED CONSOLIDATED FINANCIAL DATA (1) and (2) 1992 1991 1990 1989 1988 I
For the year ended December 31 (000)
Opentung revenues S 923,180 S 929,813 5 876,943 S 899,119 5 873,983 Operating income 112.971 137,646 135,814 141,174 131,116 Eammgs on common stock (3) 46.944 72,082 75.072 82,474 72,155-As of December 31 Total assets (000) 2,168,981 2,165,497 2,130,738 2,090,050- 2,080,611 1
Capitalasmn ($ Milhnnc-%)
Common stock equity 5647 45 % 5675-45 % 5624-45 % 5618-45 % -5607-44 %
Cumniative redeemable preferred stock (4) 0-0%
30-2 %
30-2 %
30-2 %
30-2 %
1 Curnatarive non-redeemable preferred stock 54-4 %
54-4 %
54-4 %
54-4 %
54-4 %
Long-term debt (excluding current matunues) 727-51 %
741-49 %
666-49 %
676-49 %
678-50 %
li Liability under power purchase contract (000)
$146,150
$150,838 5159,293 5167,282 3174.832
.j 1
(1) In July 19921owa Public Service Company and lowa Power Inc. merged into and with Midwest Power Systems inc. The data included in this statement is presented as if the companies were merged as of the earliest period shown and reflects the lustancal recorded amounts of the prahecnr companies. Refer to Note (1)(a) of Notes to Consolidated Finarrial Senrements.
(2) 'Ihc Company sold certam assets during 1989. The income from that sale is reflected in earninge.
I (3) Eammgs per average common share and dividends on common stock per share are not applicable to MPS as a wholly-owned subsidiary.
I (4) On March 1,1992, the Company redeemed all 300,000 shares of the Cumulative RaAaamahia Preferred Stock.
.i Refer to Note (4) of Notes to Consolidated Fmancial Statements.
i 3
I
~!
i 24 1
?
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CORPORATE STRUCTURE in July 1992, Iowa Power Inc. (IPR) and Iowa Public Service Company (IPS), merged into Midwest Power Systems Inc. (Company or MPS), a wholly-owned subsidiary of Midwest Resources Inc.
(MWR), a public utility holding company. MPS mamtams two operating divisions: Midwest Power and Midwest Gas.
The Company's resuhs of operations are significantly influenced by weather conditions, general economic conditions in the Company's utility service territory and rate regulation. The Company is allowed cunent recovery from retail and wholesale customers for fuel and power purchased costs, including the fuel ponion of nuclear power pumhased, through an energy adjustment clause and for gas purchased costs through a purchased gas adjustment clause. Thus, as fuel costs related to retail and wholesale customers fluctuate, revenues will fluctuate accordingly, with no impact on eamings.
RESULTS OF OPERATIONS Since the merger of MWR's predecessor companies, Iowa Resources Inc. (IOR) and Midwest Energy Company (MWE), in 1990, the Company has been reorganizing, downsizing and adjusting in an effon to take advantage of efficiencies gained through the merger. In all three rate cases completed in 1992, the Company was granted management efficiency awards increasing revenues an estimated $3.2 million annually, due in pan to the recognition of merger savings. In 1992, the Company reahzed approximately $14 million of savings from the utility and holding company mergers compared to approximately $2 million in 1991. Many of these savings have already been reflected in revenues from customers in the fonn oflower rates or reduced rate inc cases through rate filings completed during 1992.
'Ibe Company anticipates these and funher savings in the futme.
OVERWEW Eammgs on Common Stock (Eammgs on Common or Eamings) for 1992 decreased substantially compared to 1991. Eamings on Common for 1992 was $46.9 million compared to $72.1 million for 1991 i
and $75.1 million for 1990.
i Analysis of Earnings on Common 1992 1991 1990 (In Millions)
Midwest Power..
$39.9
$65.2
$69.4 Midwest Gas.
7.0 69 5.7 Total.............
$46.9
$72.1
$75.1 The most influential factor in the comparison of Eamings for 1992 and 1991 was the impact of significantly milder temperatures on the Company's electric and gas sales. The decrease in use per customer resulted in an $18.4 million reduction of Eamings compared to 1991. Increases in revenues due to customer growth, rate increases and sales for resale helped to offset a portion of that decrease. Higher nuclear power pmehased costs due to increases in operations and maintenance expenses, including decommissioning funding, at the Cooper Nuclear Station (Cooper) (a nuclear facility from which the Company purchases 50 percent of the energy output) reduced Eammgs by approximately $6.8 million.
Recognition of a loss on the sale of propeny also reduced Eamings by $1.5 million.
25
The following discussion provides funher detail of the variance in Eamings as well as changes in censin line items on the Consolidated Statements of Income.
ELECTRIC OPERATIONS l
Electric Revenue Increase (Decrease) from Prior Year 1992 1991 (In Millions)
Sales volume......
$(27.2)
$ 26.5 Rates.................................
5.1 0.4 Cost of energy....
(2.7)
(4.5)
Sales for resale and other...................
10.9 3.8 l
na 9.)
s 26.2 l
Total m
1992 Compared To 1991 Eammgs for electric operations decreased $25.3 million to $39.9 million for 1992. The Company's Electric Operating Revenues decreased $13.9 million, or 2.2 percent, as the net result of a S27.1 million reduction in revenues fmm tetail customers and a $13.2 million increase in revenues fmm sales for resale.
The margin on sales for resale is considerably lower than the margin on retail sales.
Sales to retail customers were down 3.3 percent in 1992 due mostly to a 9.1 percent decrease in sales to residential customers, the Company's highes. margin and most weather sensitive customers.
Significantly cooler temperatures during the cooling season were the major cause of the decrease in residential sales. Temperatures, measured in cooling degree days, were 54.5 percent cooler than those in the 1991 cooling season and 38.7 percent cooler than normal. As a result of the milder temperatures and some conservation due to demand side management (DSM) programs, use per customer in 1992 dropped 9.9 p:rcent for residential customers compared to 1991. Although a modest growth of approximately one percent in the average number of residential customers impmved sales slightly, the overall decrease in residential sales due to the lower use per customer resulted in a reduction to revenues of $25.4 million.
Sales to small general service customers decreased 1.9 percent while sales to large general service customers increased 1.9 percent.
A 14.9 percent increase in sales for resale offset the decrease in retail sales, resulting in a 2.7 l
percent increase in total sales of electricity for the year. The increase in sales for resale was due to increased opportunities for sales for resale, increased availability of Company. generated energy due to lower retail sales and the impact of a bulk-power sales agreement effective in June 1991.
Revenues increased 55.1 million due to an increase in the overall rate per kWh. Two electric rate cases that concluded during 1992 contributed to the increase.
Fuel for Generation decreased 6.4 percent due to a 5.8 percent decrease in the average fuel cost per kWh generated. Lower retail sales reduced the need for the Company's higher cost plants during 1992 which helped to decrease the overall cost of fuel Power Purchased increased $11.0 million, or 43.1 percent, due mostly to a $9.0 million impact from the 1991 use of and the 1992 replacement of a nuclear energy power reserve that is used when Cooper is down for maintenance and refueling. Nuclear Power Purchased increased $13.8 million, or 19.0 percent, due to an $11.4 million increase in operations and _ _ _ _ _ _ _ _ _ _ _ _
i 1
mamtenance expenses,incinding decommiesioning fimdmg, and a $2.4 million increase in fuel costs. The increase in fuel costs is due to Cooper being down for maintenanca and refueling in 1991 but not in 1992.
Other Operatmg Expenses increased $1.2 million, or 1.2 percent, compared to the 1991 amount.
Increases in certain employee benefit expenses, including health costs, increased DSM costs not deferred, a $1.1 million adjustment for DSM costs previously deferred and general increases in various other admmistrative and operatmg expenses all contributed to the increase. Panially offsetting these increases was a decrease in costs related to the 1991 early retirement and severance plan and a reduction of expenses due to merger savings. Mamtenance expenses increased $2.4 million due to an increase in tree tnmmmg expenses and other overhead distribution and trancmiteion costs. The Company plans to continue an aggressive tree tnmmmg policy with the intention to reduce future storm damage to the distribution system and expects future tree inmmmg costs to remain at a level comparable to 1992.
Depreciation and Amomzation increased 4.3 percent due to an increase in depreciable plant. General Taxes increased due to an increase in propeny assessment values and the average mill levy. Other, Net decreased due to the recognition of $2.5 million for a loss on the sale of propeny.
1991 Compared To 1990 The Company's electric operations continued to experience growth in both customers and use per customer in 1991, especially for residential and small general service customers. Electric revenues increased 4.3 percent over 1990.
A 46.9 percent decrease in allowance for funds used during construction (AFUDC), an increase in mamtenance expense and costs recorded for a reorganization and staffing plan (incinding an enhmeeA voluntary early reurement and a severance plan) announced in 1991 were major reasons for Eammgs decreasmg $4.2 million to $65.2 million.
Electric sales to retail customers increased 3.9 percent to 9.2 billion kWh for 1991. Residential and smr.ll general service customer sales volumes both increased over 7.0 percent due to customer gmwth and 6.6 percent and 6.2 percent irusses, respectively, in use per customer. The primary cause of the mcrease in use per customer was colder temperamres during the heating season and warmer temperatures during the cooling season compared to 1990. Sales to large general service customers decreased 1.9 percent. Overall, the impact of these items was an increase in revenues of $26.5 million.
The Company's sales for resale were 4.4 percent higher than 1990, resulting in a $3.7 million increase in revenues. This was due to a new bulk-power sales contract effective in June 1991, panially offset by lower sales in the first half of the year from the conservation of some coal inventories.
Fuel for Generation and Power Purchased together increased 6.6 percent over 1990 due to increased gereration, especially at a higher cost coal generanng plant. Increased bulk-power sales, coupled with a mnmrenance overhaul at a low-cost generatmg plant, necessitated use of the higher cost plant.
Expenses related to the eady retirement and severance plans and increases in health, pension and insurance benefits and information systems expense accounted for $5.3 million of a $7.9 million, or 8.1 percent, increase in Other Operating Expenses. Also contributing to the increase were building operations, marketing and DSM expenses. These increases were partially offset by decreased costs of the merger of MWE and LOR into MWR. Maintenance expenses were 16.3 percent greater than 1990 due primarily to unplanned mamtenance at generating stations and the rimmg of regulady scheduled generator and boiler plant overhauls. General Taxes mcreased 7.2 percent due mostly to increases in propeny assessment values and the average milllevy. c a
3 AFUDC, which is included in Other, Net, decreased $2.6 million compared to 1990. Construction of two combustion turbines, placed in service in mid-1990, and a new energy center, placed in service in mid.1991, resuhed in a significant decrease in the construction balance on which AFUDC is computed.
In addition, the use of low-cost, shon-term fmancing caused equity AFUDC to drop substantially.
GAS OPERATIONS Gas Revenue increase (Decrease) from Prior Year 1992 1991 (In Millions)
Sales volume.....
$(12.2)
$ 18.8 Rates...........
8.3 5.6 Cost per unit of gas....
12.4 1.8 Other.............
n.0) 0.5 Total..
$ 7.5
$ 26.7 1992 Compared To 1991 Eamings for the gas operations increased 50.1 million to $7.0 million for 1992 compared to 1991.
Gas Operating Revenues increased $7.5 million, or 2.6 percent. An increase in the cost per unit of gas purchased for resale resulted in additional revenues of $12.4 million thmugh the purchased gas adjustment clause. An increase in overall rates due in part to interim and fmal rate increases in two gas rate cases yielded an $8.3 million increase in revenues. A 5.4 percent reduction in retail sales volumes partially offset the increases due to rates and cost per unit of gas. In the first quaner of 1992, temperatures were 13.1 percent warmer than the first quarter of 1991. The resulung decrease in the use per customer reduced revenues $12.5 million in the first quarter. Use per customer remained below 1991 thmughout the year resulting in an annual decrease in revenues of $17.6 million. A growth in customers helped to offset the impact of a lower use per customer by adding $5.4 million to revenues.
Gas Purchased for Resale increased $3.8 million, or 1.9 percent, due to an inen:ase in the cost per unit of gas pamally offset by a decrease in purchases due to lower retail sales volumes. Other Operaung Expenses increased $4.0 million, or 8.6 percent, resulting fmm a $3.9 million increase in costs related to manufactured gas plant (MGP) site remediation due primarily to the 1992 write-off of costs previously deferred. Also contributing to the increase were increases in health insurance, pension and customer accounts expenses and a $0.7 million adjustment for DSM costs previously deferred. Partially offsetting these mcreases were decreases in expenses related to =**@g, gas distribution, early retirement and building rental and a reduction of expenses due to merger savings. Maintenance expenses decreased 5.2 percent due to the timing of gas distribution maintenance and an increase in new construction.
Depreciation and Amortization increased due to an increase in depreciable plant in service. The increase in General Taxes is due to an increase in the propeny assessment values and the average mill levy. Other, Net reflects a $1.4 million recovery of MGP site remediation costs ihmugh a settlement with a third party during 1992.
1991 Compared To 1990 An increase in natural gas sales volumes during 1991 was the primary cause of an improved Eammgs for the gas operations. Compared to 1990, Earmngs for the gas operations increased $1.2 million to $6.9 million.
Temperatures in the Company's utility service area were colder, measured in heating degree days, in the first and founh quaners of 1991 by 12.3 percent and 3.7 percent, respectively, compared to 1990.
As a result, use per customer rose approximately 9.0 percent in those quaners, primarily by the residential and small general service customers, whose usage tends to be more greatly influenced by changes in temperature. Though reduced slightly by warmer temperatw kring the rest of the year, the increased use per customer, and a 2.4 percent growth in the average number of customers, contributed $18.8 million to the $26.7 million increase in revenues.
Higher rates yielded a $5.6 million increase in revenues for 1991. In addition, an increase in the cost per unit of gas purchased for resale in all quaners except the first quaner resulted in a $1.8 million increase in revenues for the year.
Gas Purchased for Resale, which is the major component of operating expenses for the gas operations, was up $15.8 million due mostly to the greater sales volumes. Costs related to manufactured gas cleanup, as well as increases in health and pension benefit expenses, were the major causes of an 11.8 percent, or $4.9 million, increase in Other Operating Expenses. Also contributing to the increase were gas distribution and customer accounts expenses and costs of the early retirement and severance plans.
These increases were partially offset by a decrease in costs of the 1990 merger of IOR and MWE and in outside services expenses. Maintenance expenses rose 15.2 percent, or 50.9 million, due to increased maintenance of gas distribution and compressor equipment.
LIQUIDITY AND CAPITAL RESOURCES Capital resources of the Company are derived primarily from funds genented from cunent operations, shon-term bormwings,long-term bormwings and equity financing. These capital resources pmvide funds required for current operations, debt interest and retirement, dividends, construction expenditures and other capital requirements.
The Company's material sources ofliquidity at December 31,1992, included cunent assets of
$241 million and bant lines of credit of $120 million.
In December 1991, the Company issued $125 million of long-term debt, and MWR made a contribution of capital, to replace shon-term borrowings and refinance higher cost debt. The resulting decrease in Notes Payable and increase in Long-Tenn Debt were the main causes of the decrease in Other Interest Charges and the increase in Interest on Long-Term Debt. On March 1,1992, the Company redeemed all 300,000 outstandmg shares of the $7.35 Series of preferred stock, reducing annual preferred dividends by $2.2 million. As a resuh of these financing activities and the impact of Eammgs and common stock dividends, the Company's capitalization ratios changed modestly, with an increase in Long-Tenn Debt and a decrease in Preferred Stock.
'Ihe Company is in the process of refinancing its long-term debt with the intention, to the extent practicable, to restmeture the timing cf its long-term debt maturities and to achieve a lower overall composite interest rate. In the fourth quaner of 1992, the Company received the necessary approvals to issue up to $750 million oflong-term debt. In Februsy 1993, the Company issued approximately $575 million of general mongage bonds to refinance existing debt. As of the end of January, $568 million of the existing long-term debt had been called, tendered, or repurchased. The Company anticipates that tins refinancing will reduce the cost of debt by approximately $3 million in 1993.
1 t
The Company currently has outstandmg bonds issued under three indentures: the IPS indenture.
the IPR indenture and the MPS indenture. The IPS and IPR indentures provide as security for the outstanding bonds issued under them, a first lien on cenain electric and gas properties. The MPS indenture, dated January 1,1993, provides as security for the outstanding bonds issued under it, a junior lien on all of the Company's electric propenies located in the State of Iowa that are covered under the previously existing indentures. This will become a first lien when all bonds issued under the IPS and IPR indentures are retired. The MPS indenture will provide a first lien on any new available propenies. The provisions of the MPS indenture result in an increase in the amount of bonds that can be issued on the basis of bonded propeny. Under the MPS indenture, as of December 31,1992, total Iowa-only electric propeny of approximately $2.1 billion would have been available for bonding and would entitle the Company to issue up to approximately $1.6 billion principal amount of bonds and/or notes after bonds issued under the IPR and IPS indentures are retired. As of December 31,1992, the Company had $741 million of long-term debt outstandmg, including cunent maturities.
The Company's access to external capital and its cost of capital are influenced by the credit ratings ofits securities. The ratings for mongage bonds and preferred stocks listed below apply to the outstandmg securities assumed or exchanged by MPS. With MPS assuming the first mongage bonds of, and exchanging pmferred stock for that outstandmg for, IPS and IPR, the credit ratings now reflect the combined credit factors of the two companies. The ratings for outstanding bonds issued under the three indentures described above are as stated in the table below.
]
Moody's Fitch Investors Standan!
Investors Service
& Poor's Service Mongage Bonds A2 A+
A Preferred Stocks a3 A
A Commercial Paper P-1 Al F-1 The above ratings reflect only the views of such rating agencies and each rating should be evaluated independendy of any other rating. Generally, rating agencies base their ratings on information fumished to them by the issuing company and on investigation, studies and assumptions by the rating agencies. There is no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if in the judgment of the rating agency circumstances so warrant. Such ratings are not a recommendation to hny sell or hold securities.
The following is a summary of the meanings of the ratings shown above and the relative rank of l
the Company's rating within each agency's classification system.
Moody's top four long-term debt ratings (Aaa, Aa, A and Baa) are generally considered
" investment grade." Obligations which are rated "A" possess many favorable investment attributes and are considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. A numerical modifier ranks the security within the category with a "1" indicating the high end, a "2" indicating the midrange and a "3" indicating the low end of the category. Standard & Poor's top four long-term debt ratings (AAA, AA, A and BBB) are considered " investment grade", Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in economic conditions than debt in higher rated categories. Fitch Investors Service considers the top four long-term debt ratings (AAA, AA, A and BBB) as " investment grade".
Fitch's "A" rated bonds are considered to be a good quality. the issuer's ability to pay interest and repay - -
principal is considered to be strong but may be more vulnerable to adverse changes in economic conditions than bonds with higher ratings. A plus (+) or minus (-) sign may be used after Standard &
Poor's and Fitch ratings to designate the relative position of a credit within the rating category.
Ratmgs of preferred issues am an indication of the company's ability to pay the preferred dividend and any sinking fund obligations on a timely basis. Moody's top four preferred stock ratings (aaa, aa, a and ban) are generally considered " investment grade". Moody's "a" rating is considered to be an upper medium grade preferred stock. Earmngs and asset protection are expected to be maintained at adequate levels in the foreseeable future. Standard & Poor's top four preferred stock ratings (AAA, AA, A and BBB) are considered " investment grade". Standard & Poor's "A" rating indicates adequate camings and asset protection. Fitch's top fourpreferred stock ratings (AAA, AA A and BBL) are generally considered
" investment grade". Fitch's "A" rating is considered good quality. Asset protection and coverage of preferred dividends are considered adequate and are expected to be maintained.
Moody's top three commercial paper ratings (P-1, P-2 and P-3) are generally considered "invesunent grade". Issuers rated "P-1" have a superior ability for repayment of senior short-term debt obligataons and repayment ability is often evidenced by a conservative structure, broad margms in enminge coverage of fixed financial charges and well established access to a range of financial markets and assured sources of altemate liquidity. Standard & Poor's commercial paper ratings are a current assessment of the hLehhood of timely payment of debt having an original maturity less than 365 days. The top three Standard & Poor's commercial paper remgt (Al, A2 and A3) are considered " investment grade". Issues rated "Al" indicate that the degree of safety regarding timely payment is either overwhelming or very strong. Rose issues determmed to possess overwheimmg safety are denoted with a plus (+) sign designation. Fitch's commercial paper ratings are assigned at the request of the issuer to debt obligations with an original maturity not in excess of 270 days. An "F-1" ccmmercial paper rating is regarded as having the strongest degree of assurance for timely payment.
Consolidated cash capital expenditures, including Cooper capital improvements, were $120 million for 1992. Of the total, $97 million were for electric operations and 523 million were for gas operations.
PROSPECTIVE INFORMATION The addition of new customers and improvement in other economic factors indicate general economic conditions contmue to improve in the Company's service territory.
In recent rate cases, the Company's rates were adjusted by action of the Iowa Utilities Board (IUB), but the Company was not granted the rate levels requested nor the recovery of cenain costs related to MGP site remediation. However, the rate environment as a whole has been generally positive, and the Company has received favorable treatment on several items of importance to the Company, including recovery of certain envimnmental cleanup costs and recognition of merger efficiencies. In a recent rule makmg, the IUB ordered that it will permit recognition and recovery of postretirement medical costs on an accrual basis.
Nuclear operation and main
- nance expense, including decommissioning fundmg, are expected to contmue to increase substantially over the next few years. The Company will continue seeking recovery of these costs through the ratemaking process.
i ne Company's manmment annually reviews long-range capital expenditure needs. Based upon such a review, the Company has planned cash capital expenditures of $164 million for 1993. The Company expects that 5135 million of the 1993 plan will be expended for electric operations and $29 million for gas operations. Estimated cash capital expenditures for the years 1994 through 1997 are $719 million, excluding the capital expenditures for the repowering project discussed below. The Company believes its capital resources and liquidity are sufficient to meet its projected regmrements.
The Company has entered into an agreement with the Department of Energy (DOE) for a repowering project of the Company's Des Moines Energy Center to demonstrate a developing coal-buming technology believed to be substantially cleaner and more efficient than technologies now in use. The project,if successful, is expected to decrease the Company's long-term energy costs and reduce the need for energy purchases and more costly generating capacity. The DOE and the Company will provide approximately 593 million and 5103 million, respectively, to the pmject. If the project pmceeds as expected, the Company could spend 510 million during the design phase and $71 million during the construction phase. The project is expected to be completed in 1996. The DOE and the Company each have cenain termmation rights under the agreement.
The Company's current forecast of capacity requuements indicates that it will have capacity deficiencies for the remainder of the 1990's. These deficiencies are expected to be met by the repowering pmject, additional non-base load facilities, purchases or a combination thereof. The degme to which non-base load facilities and purchases will be needed is dependent upon the success of the repowering pmject.
The need for significant base load additions is not anticipated prior to the year 2000, even if the repowering pmject is termmated.
The Company's current fuel mix for installed capacity is 66 percent coal,20 percent oil and gas and 14 percent nuclear. No significant changes in the fuel mix am planned thmugh the year 2000, although completion of the repowering project or the addition of non-base load facilities would change the mix somewhat before then.
The United States Environmental Pmtection Agency (EPA) and the Iowa Depamnent of Natural Resources have determined that contmined wastes remaining at cenain decommissioned MGP sites require remedial action. 'Ihe Company has identified several MGP sites and is assessing its panicipation in the resolution of such sites. One site is on the National Priority List (hPL) and another has been nominated for the NPL (see Note (2)(c)).
As a user of polychlorinated biphenyls (PCBs), the Company is subject to governmental regulations penammg to the use, handhng and proper disposal of PCBs. The Company is involved as one of several parties in a cleanup at one site and has been notified by the EPA that it is deemed by the EPA as one of several potentially responsible parties at two other sites (see Note (2)(c)).
The Company's coal-fired generating units are minimally affected by the Phase I provisions of the Clean Air Act Amendments of 1990. By the year 2000, some coal-fired generating units will be required to install contmls to reduce emissions of nitrogen oxides. The cost of these controls is not expected to have a material adverse impact upon the financial position or results of operations of the Company (see Note (2)(c)).
Legislation enacted in Iowa in 1990 requuts electric and gas utilities to spend 2 percent and 1.5 percent, respectively, of their annual Iowa junsdictional revenues on DSM activities (effons to impmve customer energy efficiency). The legislation pennits periodic recovery of these deferred costs, with a carrying charge, so long as the utility's DSM programs are cost effective or, if not cost effective, so long as the utility was prudent and reasonable in the planning and implementation of the pmgrams Under the legislation, the utilities are also eligible for a monetary reward or subject to a monetary penalty depending upon the cost effectiveness of the overall DSM effort. The Company will be making a filing in mid-1993 1
for the recovery of some of the costs incurred during the period July 1990 to December 1992 and anticipates that recovery of such costs, as appmved, would begin in early 1994. As of December 31, 1992, the Company had $16.2 million of deferred DSM costs, including carrying costs, on its Consolidated Balance Sheet. The Company will make periodic filings for other DSM costs incurred and for future activities.
The Company mamtams contracts for delivery capacity from each of the four pipeline suppliers serving its natural gas distribution system. The Company purchases gas from three of the four pipelines and from third party sources and delivers these supplies through its distribution system. Contracts with pipelines and suppliers are maintamed at levels which are intended to be competitively priced while assuring an adequate and reliable supply of natural gas. The majority of the long-term contracts with natural gas pipelines have recently been renegotiated for 3-to 5-year terms. The Company anticipates securing adequate supplies of natural gas for the 1993/1994 heating season. The Company estimates that its peak day requirements will be met with the following: 1) gas purchased from pipelines; 2) stored gas purchased during the summertime; 3) contracted third-party dimet purchases; and 4) peak shaving facilities which are maintamed to assure a reliable supply of gas during peak periods. In addition, the Company will displace a portion of these supplies with spot gas purchases if spot gas is available and cost effective to the customer. He above supply arrangements are expected to be viable options for meeting gas requirements for future extended penods.
The Federal Energy Regulatory Commission (FERC) issued Orders 636,636A and 636B which are expected to significantly change the operations and regulatory requirements for interstate pipeline companies begmmng November 1,1993. These changes will directly impact local distribution companics (LDCs), including Midwest Gas, by requinng LDCs to assume responsibility for the procurement, transponation and storage of natural gas. The Company actively participated in the rulemaking process and is actively involved in the pipeline companies' restructunng proceedings. While the actual impacts will depend to a great degree on the outcome of the pipelines
- compliance filings and the experience from operating under new rules, the Company currently estimates that a one-time charge for pipeline transition costs resulting from the Orders will be equivalent to an inemase of up to appmximately 12 percent in the retail price of gas. This one-time charge is expected to be paid to the pipelines over a 3-to 4-year period.
r These Orders also mandate a change in the pipeline rate design. The Company currently estimates that the mandated change willincrease fixed charges paid to pipelines by Midwest Gas and would amount to an increase in retail rates of up to 8 percent per year. The increase in costs due to pipeline rate design may be phased in over a 4-year period. The Company anticipates that under curent regulatory conditions t
it will recover costs related to these Orders thmugh the purchased gas adjustment clause. These Orders also include revisions that will allow LDCs to reduce the cost of gas. However, the opportunities to lower costs are not expected to offset the increases.
In late October, the President of the United States signed into law the National Energy Policy Act (NEPA). His comprehensive legislation permits an exemption from the Public Utility Holding Company Act for exempt wholesale generators and allows all electric generators to transpon wholesale power across utilities
- transmission facilities. NEPA requires the FERC to promulgate rules within one year of NEPA's enactment. This law promotes competition in the wholesale electric power market. It will impact the electric industry to some degree; however, the nature of its impact on the Company cannot be ascertamed at this time.
In December 1992 the Company, through Midwest Gas, signed a definitive agreement with Minnegasco to exchange some gas service areas and distribution propenies. Midwest Gas would also receive $38 million. Midwest Gas would receive Minnegasco's South Dakota service territory with 46,000 customers and Minnegasco would receive the Midwest Gas Minnesota service territory with 79,000 customers. Based on 1992 revenues, the Company's revenues would decrease approximately $23 million annually, as well as decreases in purchased gas costs and other expenses, as a result of the reduction in customers. The agreement is subject to certain regulatory approvals.
In December 1990, the Financial Accounting Standards Board issued a new standard (FAS 106),
on accounting for postretirement benefits other than pensions. This new standard requires that the expected cost of these benefits be charged to expense during the years that the employees render service.
- ntis is a significant change fmm the Company's cunent method of recogruzing these costs on a c1mme or premiums paid basis. The Company is required to adopt the new accounting standard no later than 1993.
The Company has prospectively adopted the standard in January 1993 and estimates an increase in costs of approximately $10 million annually. The Company has previously been allowed rate recovery on these benefits on a claims or premiums paid basis but anticipates requesting recovery of costs on a FAS 106 accrual basis. The IUB which regulates a majority of the Company's utility operations, has ruled that it will pennit recovery of these higher amounts in future rates if the Company extemally funds these '
costs. The Company expects that the IUB will permit it to defer these increased costs until its next rate cases, not to exceed three years.
I L
l l
l - -
t MIDWEST POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31 1992 1991 1990 (in Thousands)
OPERATING REVENTES Electric..................
5623.360 5637,222 5610.967 G as................
299,820 292.291 265,617 Other....
300 359 Total.....................................
923.180 929.813 876 943 OPERATING EXPENSES Fuel for generation.............................
101 468 108.400 99,996 Power p=hased.......
36,434 25,466 25,575 Nucler.r power p' shad 86,455 72,659 73,300 Gas ; urchased for resale.........................
200,780 196.979 181,219 Other operating expenses........................
156,901 151,678 138,865 Maint nance.................................
54,233 52,140 44,875 Depreciation and amorrrnnm................
86.190 82,475 78,434 General taxes................................
63.652 62,199 58,462 Current income taxes...........................
19.894 35,873 36,561 Deferred income taxes........
8D19 8,142 7,754 investment tax credit (3.817)
(3.844)
(3912)
Total...................
810.209 792.167 741.129 OPERATING 1NCOME.......................
112 971 137.M6 135.814 OTIIER INCOME Allowance for equity funds.........
1,213-124 1,756 Interest and dividend income..
772 877 750 Non-operatmg income taxes......................
35 (176) 1,020 Other, net...................................
(1,729)
(405)
(292)
Total.............
291 420 3.234 INCOME BEFORE FIXED CIIARGES............
113.262 138.066 139.048 FIXED CIIARGES Interest on long. term debt......
61,440 55.520 55,542 Other imerest charges...........................
2,230 8.002 6,987 Allowance for borrowed funds....................
(1.058)
(2.899)
(3914)
Total.....................................
62.612 60.623 58.615 NET INCOME...............................
50,650 77,443 80,433 Preferred stock dividends.....
3.706 5361 5.361 EARNINGS ON COMMON STOCK..............
S 46944 S 72.082 5 75.072 The accompanying notes are an imegral part of these statements.
i l
l i
35-
MIDWEST POWER SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
~
Year Ended December 31 1992 1991 1990 (In Thnneande)
NET CASH FLOWS FROM OPERATING ACTITTFIES Net incom e................................................... S 50,650 5 77,443 5 80,433
)
Adjustments to reconcile net income to net cash provided:
Depreciadon and amortrnrion....................................
86,190 82,475 78,434 Amornnnnn of advances for nuclear fuel and capual improvements 11,971 9,599 10,118 Net increase in deferred income taxes and investment tax credit, net..............
2.939 2,955 3.098 Allowance for equity funds......................................
(1,213)
(124)
(1,756)
Non. cash change in deferred assets.................................
13.066 3,297 3,704 (1,657)
(1,658)
Amomzanon of unbilled revenues..............
Cash flows impacted by changes in' Receivables...............................................
(9,831)
(4,863) 5357 Receivables from afM*M compames...........................
18,465 12,126 (949)
Inventories................................................
(6,248)
(160)
(10342)
I%payasts and other current assets..............................
(832)
(1,932) 756 Accounts payable............................................
(8,129) 3,956 (2,282)
&mmes payable to orma compames...........................
2,451 1,642 (11)
Interest accrued............................
(40)
(611)
(144)
Taxes accrued............................................
(3,625) 8,846 (3,474)
Other current liabilities......................................
8.363 (3,412)
(3,135)
Other.....
4.500 (9.025)
(5338)
Net cash provided......................
168.767 180.555 152.811 r
NET CASH FLOWS FROM INVESTLNG AC'ITVITIES l
Utility plant capital expmdimres.................................... (103,791) (101,212) (109,166)
Cooper Nuclear Station capital improvement advances....................
(10.855)
(14,297)
(16,022)
Other capital cWam s.........................................
(197) 292 (399)
Deferred demand side management expendmnes............
g,934) p.476)
(2,241)
Allowance for equity funds 1,213 124 1,756 Proceeds from sale of assets..............
4,000 Net cash imm investments........................................
2.09_8_
12 (296)
Net cash used............................................... (119.466) (118.557) (126368)
NET CASH FLOWS FROM FINANCING ACTITTTIES Long-term debt proceeds...............
125,000 Dividends paid on common stock.........
g3.944) 0 8,200)
(69.336)
Dividends paid on preferred stock.........
(3,706)
(5,361)
(5,361)
Retirement of long. term debt.......................................
(1,940)
(57,202)
(1,843)
Reacqmsition of preferred stock.....................................
(31,583)
(4)
(3)
Contribution from parent 56,795 Net increase (decrease) in notes payable...............................
58.100 (101.900) 53.775 Net cash used..............................................
(53.073)
(60.872)
(22.768) l 4
NET INCREASE (DECREASE)IN CASH AND CASH EQ UIVALENTS........................................
(3,772) 1,126 3,675 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..........
7.989 6.863 3.188 CASH AND CASH EQUIVALENTS AT END OF YEAR................
S 4217 5 7.989 5 6.863 The accompanying notes are an integral part of these statements. I l
4 MIDWEST POWER SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS ASSETS As M December 31 1992 1991 (In P + =.r * )
UTILITY PLAhT Elecnic.............................................
32.183,094
$2,133.636 Gas................................................
347 472 314,103 Plant acquisition adjusunent...............................
19.456 19A56 Gross plant. including consauction woi in progress of S33,416 and $29,663, respectively 2,550,022 2,467,195 Less accumulated de s4Lon and amommunn.................
978.442_
913A79 r
Utility plant, net 1.571.580 1.553.716 OTHER PROFERTY AND INVESTMENTS Property, net of accumulated depreciation and amomnnnn 2,170 2,561 Investments...........................................
31.614 33.717 Total..............................................
33.784 36.278 POWER PURCHASE CONTRACT Productive capacity.....................................
146,150 150,838 Advances for capital improvements, net of accumulated amornnnnn of $72.239 and $60,268. respectively..............
96996 98.111 Total..............................................
2.4) 4.,p.
248 949 1
CURRENT ASSETS Cash and cash equrvalents.................................
4,217 7,989 Receivables, less reserves of S1,151 and $1,069, respectively........
133,414 123,583 Receivables from affilimM compames........................
37,654 56,119 Electne production fuel, at average cost.......................
25,149 26,247 Natural gas and propane in storage, at average cost...............
18.367 10,994 Matenals and etWim at average cost........................
13,663 13,690 Pzepayments and other...................................
8.256 7.424 Total..............................................
240.720 246.046 DEFERRED CHARGES AND OTHER ASSETS...............
79.751 80.508 TOTAL ASSETS......................................
$2,168981
$2,165,497 The accompanying notes are an integral part of these statements. 4 1
MIDWEST POWER SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS CAPITA 1.17.4 TION AND LIABILITIES As of December 31 1992 1991 (In "Ihousands)
CAPITA 1.f7ATION Common stock equity....................................
S 646,630
$ 675,163 Cumulative non. redeemable preferred stock...............
54,413 54,462 Cumulative redeemable preferred stock........................
30.000 1.ong-term debt (excluding current maturities)...................
726.611 740.561 Total.............................................
1.427.654 1.500.186 POWER PURCHASE CONTRACT........................
138.085 141.890 CURRENT LIABILITIES Notes payable.........................................
58,100 l
Current pomon of long-tenn debt 14.219 1,997 Current pornon of power purchase contract.....
8,065 8,948 Accounts payable..................
69,171 77,300 Accounts payable to affhM co npanies......................
5,125 2,674
- ytaest accrued........................................
16,475 16.515 Taxes accmed.........................................
65,667 69,292 Other..............................
19.388 11.025 Total.............
256.210 187.751 RESERVES AND DEFERRED CREDITS Deferred income taxes...................................
241,130 233,150 Investment tax credit 70,283 74,101 Other...............................................
35.619 28.419 Total..............................................
347.032 335.670 TOTAL CAPITAI17ATION AND LIABILITIES..............
$2,160.,981 S2.165.497 The accompanying notes are an integral part of trese statements.
P !
e
MIDWEST POWER SYSTEMS INC.
1OF2 CONSOLIDATED STATEMENTS OF CAPITAT17ATION As of December 31 1992 1991 (In *Ihousands)
COMMON STOCK EQUITY Common stock, no par; 100.000,000 shares authorized:
1,000 shares outstandmg............................
S 462,274 S 462,948 Retamed earnmgs...................................
184356 212.215 Total 646,630 453 %
675.163 45.0%
i t
PREFERRED STOCK; without par value; 10,000,000 shares authorized:
Cumulative non-redemnhle -
$3.30 Series,49,M3 and 49.846 shares, respectively........
4,964 4,985 l
$3.75 Series,38,320 and 38,455 shares, respectively........
3,832 3,845 l
$3.90 Series,32,636 and 32,770 shares, respectively........
3.263 3.277 l
$4.20 Series, 47,369 shares..........................
4.737 4.737 5435 Series, 49,950 shares..........................
4,995 4,995 S4.40 Series, 50,000 shares..........................
5,000 5,000
$4.80 Series 49,898 and 49,908 shares, respectively........
4,990 4,991
$7.64 Series, 66,135 shares..........................
6,614 6,614 58.08 Series,48,786 shares..................
4,879 4,879 5832 Series, 71,525 shares..........................
7,045 7,045 58.52 Series, 40,944 shares..........................
4.094 4.094 i
l Total........................................
54.413 3.8%
54A62 3.61 6
Cumulative redeemable -
57.35 Series, none and 300,000 shares, respectively.........
30.000 2.0%
LONG-TERM DEBT First mortgage bonds:
4 3/8% Series, due 1993............................
12,000 8 1/4% Series, due 1996............................
80,000 80,000 8 1/4% Series, due 1996............................
50,000 50,000 8 3/8% Series, due 1997............................
50,000 50,000 6 5/8% Series, due 1998............................
11125 13.174 9% Series, due 2000.........
25.000 25,000 9% Series, due 2000...............................
12.900 12,964-7 5/8% Series, due 2001............................
13.350 13,425 8% Series, due 2001...............................
15,000 15,000 7 3/8% Series, due 2002............................
17,000 17,000 8.15 % Series, due 2003............................
75,000 "
75,000
)
8 2/10% Series, due 2003..........................
50,000 **
50,000 j
8 3/4% Series, due 2006............................
29,203 29,203 9% Series, due 2006...............................
25,000 25,000 8% Series, due 2007............
25,000 25,000 8 1/4% Se t, d m 2007............................
29,400 29,400 8 3/4 % Series, due 20v..........................
25,000 25,000 10 1/2% Series, due 2018..........................
70,000 70,000 7hc accompanying notes are an integral part of these statements.
j l
-39
MIDWEST POWER SYSTEMS INC.
2 OF 2 CONSOLIDATED STATEMENTS OF CAPITALIZATION As or December 31 1992 1991 (In Thousands)
LONG-TERM DEBT (CONTINUED)
)
Pollution connot revenue bonds:
5 4/10% average rate, due annually through 2003...........
S 8,060 8,404 5 4/10% to 5 3/4% Series, due pmodically througn 2003......
6.800 7,210 61/2% Series, due 2003 (secured by first mortgage bonds).....
9,900 9.900 61/4% Series, due 1997 through 2006 (secured by first mortgage bonds).....................
18,000 18,000 5 9/10% Series, due 1997 through 2007 (secured by first mortgage bonds).....................
18.000 18,000 9 3/4% Series, due 1999 (secured by first mortgage bonds).....
6,400 6,400 61/2% Series, due 2013 (secured by first mortgage bonds).....
11,000 11,000 Louisa County, Iowa, floating 30. day municipal bond rate, due 2015......................
23.900 23,900 Notes:
6 4/10% Series, due 2003 through 2007..................
2,000 2,000 7% to 15% Series, due annually through 1996..............
79 148 8 3/4% Series, due 2002............................
240 240 9 1/2% Series, due annually through 2009.................
944 969 9 7/8% Series, due monthly through 2011.................
13,480 13,715 Obligation under capital lease.........................
4,720 5,662 Unamoruzed bond diemunt..............
(1.890)
(2.153)
Total.........................................
726.611 50.9 %
740561 49.4 %
TOTAL 51,427.654 100.0 %
$1.500,186 100.0 %
In*= series of First Mortgage Bonds and Note called in their entirety during January 1993.
" Indicates series of First Mortgage Bonds parnally tendered or repurchased in January 1993. 'Ihe Comp;my received $60.5 nuihnn of the 10.5% series due July 2018 in tender; and wuased $44.4 millinn and S27.1 muhnn of the 8.15% series and 8.20% series, respectively, due in December 2003.
See Note (15) Events Occurrmg Subsequent to the Date of the Balance Sheet.
The following General Mortgage Bonds will be inned by Midwest Power Systems Inc. in February 1993 as part of its refinancmg plan:
(In 'Ihousands) 6 1/4% Senes, due 1998.............................
S 75,000 6 3/4% Series, due 2000............................
75.000 7% Series, due 2005 100.000 71/8% Series, due 2003.....
100,000 7 3/8% Series, due 2008.............................
75,000 8% Series, due 2022......
50,000 8 1/8% Series, due 2023.............................
100.000 Total.........................................
S 575,000 The accompanying notes are an integral part of these statements.
i i
i
~
MLOWEST POWER SYSTEMS INC.
CON 5OLIDATED STATEMENTS OF RETAINED EAILNINGS Year Ended December 31 1992 1991 1990 (In Then~4)
BALANCE, AT BEGINNING OF YEAR...........
$212.215
$218.333
$212.597 b
Earmngs on ecxnmon stock.......................
46.944 72,082 75,072 Less:
t Din..ndt on common stock....................
73.944 78,200 69.336 Loss on reacquisition of preferred s:ock.............
859 BALANCE, AT END OF YEAR.............
$1f',4356
$212215
$218333 7he accompanying notes are an integral pan of these statements.
1 F.
i r
NOTES TO CONSOllDATED FINANCIAL STATEMENTS (1)
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Corporate Organization and Summary of Significant Accounting Policies:
Midwest Power Systems Inc. (Company or MPS) is a wholly-owned public utility subsidiary of Midwest Resources Inc. (MWR). On July 22,1992, Iowa Power Inc. (IPR) and Iowa Public Service Company (IPS),
wholly-owned subsidianes of MWR, merged with and into MPS. The financial sintments are presented as if the companies were merged as of the earliest period shown. The Company accounted for the merger under a method which combines the assets, liabilities and ownership interests at their existing recorded amounts. The total outstanding shares of common stock of IPS and IPR have each been convened into 50 shares of MPS no par value common stock. Each issued and outstandmg share of IPR and IPS Prefened Stock was converted into one fully p id and no par value share of MPS Preferred Stock. MPS assumed the long-term debt of both IPR and IPS.
1 The Company mamtmns two operating divisions: Midwest Power and Midwest Gas. Midwest Power provides electric service to 417,000 customers in 327 lowa communities and six communities in southeastem South Dakota.
Midwest Gas provides namral gas service to 370,000 customers in 204 Iowa,43 Mirmesota. 8 South Dakota and 2 Nebraska communities. The Company grants unsecured credit to customers, whmmially all of whom are local businesses and residents.
l The consolidated fmancial statemems include the accounts of all subsidiaries after elimination of significant intercompany accounts and transactions.
Prior year amounts have been rechuified on a basis consistent with the 1992 presentation.
(b) Rate Regulation anc' "evenue Recognition:
The Company's operations are subject to rate regulation by the Iowa Utilities Board (IUB), the Minnesota Public Utilities Commission (MPUC), the South Dakota Public Utilities Commission and the Federal Energy Regulatory Commission (FERC). The fmancial statements of the Company are based on generally accepted accounting principles, which give recognition to the mtemaking and accounting practices of these agencies.
Revenues are recorded based on service rendered to the end of the month. Accrued unbilled revenues are
$45,948,000 and $35,824,000 at December 31,1992 and 1991, respectively, and are included in Receivables on the Consolidated Balance Sheets.
The majority of the Company's electric and gas revenues are subject to adjustment clauses. These clauses allow the Company to adjust the amounts charged for electric and gas service as the costs of gas purchases, fuel for generation or purchased power change. The costs recovered in revenues through use of the adjustment clauses are charged to expense in the same period.
(c) Depreciation and Amortization:
The Company's pmvisions for depreciation are based on straight-line composite rates. The average depreciation rates for electric and gas plant were 3.6 percent and 3.9 percent, respectively, for each of the years ended December 31,1992,1991 and 1990.,
a
Utility plant is stated at original cost which includes overheads, admuustrative costs and an allowance for funds used during construction.
The cost of repairs and minor replacements is charged to maintennnre expense. Property additions and major property replacements are charged to plant accounts. The cost of depreciable units of utility plant retired or disposed ofin the normal course of busmess is eliminated imm the utility plant accounts and such cost, plus net removal cost, is charged to accumulated depreciation.
(d) Income Taxes:
The Company pmvides defened income taxes for all differences in the timing ofincome and expense except where such deferred income taxes are not allowed by regulatory agencies as an expense for rate purposes. Income tax expense related to these transactions is included in the period in which the taxes become payable. The-estimated cumulative net amount of deferred taxes which has not been pmvided for as of December 31,1992, is
$109 million, primarily related to depreciable assets. Invesunent tax credits have been deferred and are being amomzed over the life of the rela:ed pwgiy.
In February 1992, the Financial Accounting Standards Board (FASB) issued an accounting standart1, FAS 109, which requues an asset and liability approach for financial accountmg and reporting for income taxes rather than the defened method. "Ibe Company adopted FAS 109 effective Jammry 1,1993, on a restatement basis. The adoption of FAS 109 will result in a mirumal adjustment to Retamed Eammgs. Because of rate regulation additional regulatory assets and liabilities of approrimnrely $200 million will be recorded.
(e) Consolidated Statements of Cash Flows:
The Company considers all cash and highly liquid debt instmments purchased with a remnimng mamrity of three months or less to be cash and cash equivalents for purposes of the Consolidated Statements of Cash Flows.
Cash paid for interest and income taxes for the years ended D+camh r 31 was as foHows (in thonavie):
1992 1991 1990 Interest paid, net of j
amounts capitahzed...........
$60l711
$ 59,259
$ 57,111 Income taxes paid.............
$29.105
$ 31,858
$ 43,160 (f) Accounting for Long-term Power Purchase Contract:
Under a long-term power purchase comract with Nebraska Public Power District (NPPD), expiring in 2004, the Company purchases one-half of the output of the 778-megawatt Cooper Nuctcar Station (Cooper). The Consolidated Balance Sheets include a liability for the Company's fixed obligation to pay 50 percent of NPPD's Nuclear Facility Revenue Bonds. A like amount represennng the Company's right to purchase power is shown as an asset.
9 The debt amomzation component of the Company's payments to NPPD was $5,854,000,58,455,000 and
$7,990,000 and the net interest compnent was $7,391,000, $6,600,000 and $6,811,000 each for the years 1992, 1991 and 1990, respectively. Current maturities of the power purchase contract obligation are $8,065,000,
$10,723,000, $11,183,000, $11,688,000 and $12,233,000 for 1993,1994,1995,1996 and 1997, respectively.
Capital improvement costs for new property, including carrying costs, are being deferred, amomzed and recovered in rates over the term of the NPPD contract. Capital improvement costs for pmperty rep 1wments, including carrying costs, are being deferred, amomzed and recovered in rates over a five. year penod.
All costs the Company incurs in relation to its long-term power purchase contract with NPPD are included in Nuclear Power Purchased on the Consolidated Statements of Income.
(2) COMMITMENTS AND CONTINGENCIES:
(a) Capital Expenditures:
The Company's capital expenditures, including Cooper capital improvements, deferred demand side management expenditures and allowances for funds are estimated to be $170.455,000 for 1993.
(b) Long-Term Power Purchase Contract:
Payments to NPPD cover one-half of the fixed and operating costs of Cooper (creluding depreciation but including debt service) and the Company's share of nuclear fuel cost (irrludmg nuclear fuel disposal) based on energy delivered. The debt service portion on a monthly basis is approximately $1.3 million for 1993 and is not conungent upon the plant being in service.
NPPD has filed a decomnussionmg plan with the Nuclear Regulatory Commusion (NRC) and esmNicMd an external trust for nuclear decommissionmg fimde The Company's share of the 1992 NRC minimum decommissioning fundmg requrrement is $59.8 million. However, NPPD believes that the fundmg amount required by regulation understates the expected cost to decommission Cooper. Based on a site-specific study, the Company's share of expected Cooper decommissioning costs is $158.3 million, in 1988 dollars. 'Ihis site-specific estimate is being used as the basis for decommiteioning funding. During 1992, the Cnmmny contnbuted $5.0 million toward fundmg Cooper decommissioning. As of December 31,1992, the Company's share of funds set aside by NPPD for d"=tmi"ioning was $17.4 million. In addition, payments also include amounts to mamtam various funds and reserves which are anticipated also to be available for plant de. honing costs.
NPPD has primary and excess property insurance for Cooper in the amount of $1.3 billion, and the Company purchases $662.5 million of excess pmpeny coverage duectly from a mutual insurance company. 'Ibe combmation of insurance programs provides the Company coverage for its 50 percent share of losses up to $2.625 billion.
Cunently, this is the maxunum avniinhle coverage. Under NRC rules, the required excess pmpeny insurance must be used to pay the costs of any obligation to decontaminate the facility and remove debris before any other claims for propeny damage. In the evern of an accident at any of the mutual company members insured nuclear plants, i
the Company would be subject to a retrospective premium. The maximum additional retmspective prunium the Cnmpany would be subject to is $6.1 million and would be assessed only in the event of two accidents at mutual company members insured nuclear plants in the same year. The Company also purchases msurance coverage from the mutual insurance company for increased costs of generation and purchased power in the event of an accidental outage at Cooper. 1
\\
i
NPPD purchases nuclear liability msurance in the amount of $200 million. In accordance with the Price-Anderson Amendment Act of 1988, excess liability coverage is provided by a mandatory industry-wide program under which the owners of nuclear generating facilities could be assessed for liability incurred due to a serious nuclear incident at any commercial nuclear reactor in the United States. The Company's 50 percent share of the maximum amount of such an assessment would be $31.5 million per incident, payable in annual inctanments of not more than $5 million. However, an additional assessment of not more than 5 percent of the amount may be payable if the public liability cinims and legal costs ansmg from a nuclear incident at an indemnified facility exceed the Price-Anderson financial pmtection.
An industry-wide policy with an aggregate limit of $200 million for the nuclear indusuy as a whole is in effect to cover ton rintmc of workers as a result of radiation exposure on or afterJanuary 1,1988. The Company's share of a maximum retrospective premium adjustment would be approximately $1.5 million.
(c) Environmental Matters:
The United States Environmental Pmtection Agency (EPA) and the Iowa Depamnent of Natural Resources (IDNR) have derarminM hat coritaminatM wastes remaining at censin decommissioned manufactured gas plant t
(MGP) facilities may pose a threat to the public health or the environment if such contammanic are in sufficient quantities and at such concentranons as to warrant remedial action. The Cnmpany could be involved, as a potentially responsible party (PRP), in up to 22 such sites.
'Ibe Company and other PRPs have entered into a Consent Decree with the EPA at one site which is on the National Priority List (NPL). The Company and IDNR have entered into Consent Orders to investigate and conduct remedial action at two sites. A limited investigation has been completed at one additional site which has been nominnrM for the NPL. 'Ibe Company proposes to conduct limited site investigations at most of the remaining sites. The outcome of the Commny and environmental agency investigations will be an imponant factor with respect to any remedial action.
The Company's present esumate of probable remediation costs is $14 million. This esumate could change materially based on facts and circumstances derived from future site investigations. This estimate has been i
recorded as a liability and a regulatory asset for future recovery through the regulatory process. Effective in l
September 1992, the Company's gas rates in Iowa provide recovery for MGP cost., of $3.1 million on an annumi l
basis.
The Company is pursumg recovery of the response costs imm other potentially responsible parties and its insurance carriers.
As a user of polychlorinated biphenyls (PCBs), the Company is subject to govemmental regulations pertaming to the use, handhng and proper disposal of PCBs. The Company is involved as one of several parties in a cleanup at one site and has been notified by the EPA that it is being considered one of several potennally iwible panies at two other sites. In addttion, actifications were made by the Company to the EPA National Farpanca Center and IDNR conceming a release of PCBs in connection with the retuement of propeny. Site n=ne== ment and removal are near completion with guidance fmm EPA Region VII. The Campany estimates total costs of removal at this site of approximately 54 million, which have been charged to accumiitatM depreciation. 'Ibe Company is pursuing recovery of all costs it has incurred in cleaning and remediating propeny fmm responsible panies.
The Company's coal-fired generatmg units are minimally affected by the Phase I provisions of the Clean Air Act Amendments of 1990 (CAA). These generatmg units currently meet the new CAA sulfur dioxide emission rate standards by buming low-sulfur Wyoming coal. Additional emission rate reductions will not be required to achieve compliance. The Company estimates that sufficient emission allowances have been allocated on a system-wide basis for its units to operate at the capacity factors needed to meet system energy regmrements. By the year 2000, some Company coal-fired generating units will be regmred to install contmls to reduce emissions of nitrogen oxides. The Company estimates the costs of these controls could range from $20 to 25 million. Essentially all utility generating units are subject to CAA provisions which address continuous emission monitoring, permit regturements and fees, and emission of toxic substances. The Company estimates capital costs of approximately
$3 million and increased annual operations and mamtenner expense of approximately $2 million for compliance with these provisions.
It is management's opinion that the ultimate resolution of the environmental matters will not have a material advers: impact upon the financial position or results of operations of the Company.
i (d) Coal and Natural Gas Contract Commitments:
The Company has entered into coal supply contracts which expire between 19M and 2003, for its fossil-fueled f
generating stations. At December 31,1992,the contracts cover appmximately 5178 million of coal over the life of the contracts, which includes $21 million expected to be incurred in 1993. The Company expects to supplement these coal contracts with spot market purchases to fulfill its future fossil fuel needs The Company has entered into contracts with various natural gas pipehnes which expire between 1993 and 1998, inclusive. At December 31,1992, the minimum cnmminnent under these contracts is appmximately $231 million of natural gas over the life of the contracts, which includes $58 million expected to be incurred in 1993.
(3) GAS SERVICE AREA EXCHANGE:
On December 23,1992, Midwest Gas signed a definitive service area exchange agreement with Minnegasco, a division of Arila. Inc. The agreement calls for Minnegasco to acquue Midwest Gas' Minnesota natural gas distribution properties with a book value of $51 million. Midwest Gas would receive Minnegasco's South Dakota disuibution properties with a fair value of $30 millinn and a payment of $38 million. 'Ibe Midwest Gas Minnesota pmpenies serve over 79,000 customers and provided revenues of $56 million in 1992. 'Ihe Minnegasco South Dakota properties serve over 46,000 customers and provided revenues of $33 million in 1992. The agreement is subject to approval by utility regulatory authorities in South Dakota, Mmnesota, and Iowa.
(4) PREFERRED STOCK:
All series of Prefened Stock (no par value) are redeemable at the option of the Company at prices varying from $100.58 to $105.00 plus dividends accrued and unpaid at the date of redemption. Each series is entitled to
$100 per share plus accrued dividends upon involuntary liquidation, have no preemptive rights and are entitled to cumulative dividends at the respective rates per amntm. Ibe Preferred Stock has no voting rights except as permined by the anicles of incorporation or required by law. - _ _ _ _ _ _ _ _.
On March 1,1992, the Company redeemed all 300,000 outstandnig shares of the $7.35 Series of Preferred Stock for the price of $105.201 per share and paid the regular quanerly dividend of $1.8375 per share on March 1,1992. A $1.6 million loss on reacqmsition of preferred stock was charged to Retained Earmngs and Paid-in Capital. In addition, the Company redeemed 482,44 and 29 shares during 1992,1991 and 1990, respectively.
Annual dividend requirements for preferred stock outstandmg at December 31,1992, total $3.154,000.
(5) JOINTLY-OWNED UTILITY PLANT:
Underjoint plant ownership agreements with other utilities, the Company had undivided interests at December 31,1992, in jointly. owned generating plants as shown in the table below.
The dollar amounts below represent the Company's share in each jointly-owned unit. Each pardcipant has provided financing for its share of each unit. Operating Expenses on the Consolidated Srnrments of Income include the Company's share of the expenses of these units.
Neal Neal Council Ottumwa Louisa Unit Unit Bluffs Unit Unit No.3 No.4 Unit No.3 No.1 No.1 (Dollars in millions except capital cost per kW)
Utility plant in service
$ 68.1
$155.7
$166.5
$129.6
$270.2 Year placed in service 1975 1979 1978 1981 1983 Accumulated depreciation.
$ 33.7 5 63.6 5 71.7
$ 46.4 5 80.7 Unit capacity.MW....
515 610 675 708 650 Percent ownership.......
43.0%
40.6%
46.7 %
33.5 %
45.0%
Capital cost per kW
$ 308
$ 629
$ 528
$ 546
$ 924 (6) ALLOWANCE FOR FUNDS:
Im1mied in Allowance for Equity Funds and Allowance for Bormwed Funds are allowances for funds used during construction and accrued on advances for capitalimprovements arx! cther capital expenditures for the years ended December 31 es follows (in thousands):
l 1992 1991 1990 Allowance for equity futuis:
Used dming construction S 835
$ 37
$ 1.169 Accrued on advances for capital improvements........
409 65 587 Accmed on o:her capital expenditures..............
(31) 22 Allowance for bormwed funds:
Used during consuuction 614 1,638 2,626 Accrued on advances for capital improvements.......
409 994 1,288 Accrued on other capital expenditures..............
35 267
(7) RETIREMENT PLANS:
The Company has non-contributory defined benefit pension plans covering substantiaHy all employees. The benefit fannulas are based on employees' years of service and individual camings.
The Company generally uses the aggregate acmarial cost method to detemune annual fundmg requirements.
Under this method, there is no unfunded prior service cost. The excess of the present value of projected benefits over plan assets is funded as a level pen:entage of covered paymil. The utility has been allowed to recover fundmg contributions in rates. The plan assets are stated at fair market value and are comprised of insurance contracts, federal govemment debt and corporate equity securities.
The following disclosures are the totals for MPS and nonutility afmies, of which MPS represents approximately 99 percent of the paymil costs covered under these plans. No detailed segregation of the data is available by subsidiary. MPS data is shown in summary only.
Net periodic pension cost includes the following componmte for the years ended December 31 (in thousands):
1992 1991 1990 Service cost-benefit earned during the period S 6,776 5 6,445 5 5.741 Interest cost on projected benefit obligation.
13,701 11,137 10.618 Increase (decrease) in pension costs from actual retum on assets..........................
(8,912)
(32.283) 3.561 Net amomzation and deferral.................
(7.388) 17,732 (18,404)
Regulatory recognition of incurred cost 911 099 1.626 MPS and affiliates net periodic pension cost......
S 5.088
$ 4.030
$ 3.142 MPS net periodic pension cost.......
$ 4.930
$ 3.262
$ 1.926 Assumptions used were:
Discount rate.............
8.0%
8.5%
8-9%
Rate of increase in compensation levels.
5.5%
5.5%
5-6%
Expected long-term rate of retum on assets........
9.0%
9.0%
8-9%
ne following table presems the plans' fundmg status and amounts recognized in the Company's Consolidated Balance Sheets as of December 31 (in thn=n*):
1 l
1992 1991 Actuarial present value of benefit obligations:
Vested benefit obligation........................
S(121,547)
$ (97,719)
Non-vested benefit obligation.....................
(7.156)
(13.422)
Accumulated benefit obligation....................
(128,703)
(111,141)
Provtsion for future pay increases..................
(50.728)
(39.711)
Pmjected benefit obligation......................
(179,431)
(150,852)
Plan assets at fair value.........................
176.323 177.166 Pmjected benefit obligation (greater than) less than plan assets..........................
(3,108) 26,314 Unrecogmzed prior service cost...................
12,998 10,705 Unrecognized net (gain) loss.....................
2,825 (27,991)
Unrecogmzed net transition asset..................
(17,865)
(19,321)
Other......................................
(3.473) 1.072 Pension liability recogniW from total MPS and affihnte plans........................
$ (8,623)
S (9.221)
Pension contribution in excess of cost included in Deferred Charges and Other Assets in the MPS Consolidated Balance Sheets................
S 8,353 5 8.406 In addition to providing pension benefits, the Company pmvides certain health care and life insurance benefits for retired employees. Under the current plan, substantially all of the Company's employees may become eligible for these benefits if they reach renrement age while working for the Company. However, the Company retains the right to change these benefits anytime at its dtscretion. The cost of retiree health care and life insurance benefits is recogntzed as an expense as Harms or premiums are paid. nese costs amounted to $3.836,000 for 1992, $3.246,000 for 1991 and $3,325,000 for 1990.
In December 1990, the FASB issued a standard, FAS 106, on accounting for postretirement benefits other than pensions. This standard requires that the expected cost of these benefits be charged to ernanM during the years that the employees render service. This is a significant change fmm the Camnsny's current method of recogmzmg these costs on the animt or premiums paid basis.
De Company adopted the standard on January 1,1993, and began amortizing the discounted present value of the accumn!nted benefit obligation to expense over a 20-year period. The total MPS and affiliate ectimateA accumniated postretirement benefit obligation and the estimated net periodic costs as defined under FAS 106 are -
approximately $96 million and $15 million, respectively.
De Company had previously been allowed rate recovery on these postrenrement benefits on a darme or premiums paid basts. nc IUB issued an orderin January 1993, allowing recovery of arternany funded FAS 106 costs. The IUB anticipates that it will allow utilities to defer the difference between the FAS 106 accrual and the pay-as-you-go method for up to three years. De Company intends to fund its FAS 106 obligation..
(8) COMMON STOCK:
Common stock outstandmg changed during the years ended December 31 as shown in the table below (in j
thousands):
1992 1991 1990 Amount Shares
- Amount Shares *. Amount Shares
- Balance, beguming of year......... $462.948 1,000
$405,639 1,000
$405,637 1,000 changes due to:
Contnbution fmm parent 57,308 Gain (loss) on reacg.lisition of preferred stock.........
(674) 1 2
Balance, end of year............ 54 62.274 1,000
$462.948 1.000
$405,639 1.000
- Shares are based upon the conversion of the total ote"2nding shares of common stock of IPR and IPS into 50 shares each of MPS plus 900 shares of MPS common stock out"anding at the time of the merger.
(9) INCOME TAX EXPENSE:
Income tax expense was as follows for the years ended December 31 (in thnneandt):
Income Taxes 1992 1991 1990 Current Federal...............................
$16,129
$28,792
$27,143 State....
4.993 8.600 9.142 21.122 37.392 Jg Deferred Federal..........
7,112 7,339 7,300 State.....
(356)
(540)
(290) 6.756 6.799 7.010 Investment tax credit amoruzation.
(3.817)
(3.844)
(3.912)
Total................................
$24.061,
$40.347
$39.383.
i e
i
'Ihe sources of timing differences resulting in defened income taxes and the tax effect of each for the years ended December 31 are as follows (in thonunds):
Deferred federal and state income 1992 1991 1990 taxes, net, related to:
Accelerated depreciation..............
$ 5,529
$ 6.278
$ 6,688 Unbilled revenues 847 847 l
RefinnnHng..
1,036 Other. net...............................
191 (326)
(525)
Total.................................
$ 6.756
$ 6,799
$ 7.010 The following table is a reconciliation between the effective income tax rate, before prefened stock dividends of subsidiary, irdim"I by the 'nnsolimed Srnrmntts of Income and the srarntnry federal income tax rate for r
the years ended December 31:
1992 1991 1990 Effective federal and state income tax rate........
32 %
34 %
33 %
State income tax, net of federal income tax benefit........................
(4)
(4)
(5)
Amoruzation of investment tax credit............
5 3
3 Difference between book and tax depreciation for which deferred taxes have not been provided...
2 Other..................................
1 1
1 Statutory federal income tax rate...............
34 %
34 %
34 %
(10) RATE MA'ITERS:
The Company settled three rate cases in the State ofIowa during 1992 as shown in the following table (dollars in millions):
Electric Electric Gas (IPR)
(IPS)
(IPS)
Date Filed.........................
3/1792 8/2S1 7/1591 R~macaA Revenue Increase (Decrease)....
$ 36.1
$ (16.4)
$ 14.5 Revenue Increase (Decrease)-
Fmal Order......................
$ 19.3
$ (4.6)
$ 53 Retum on Equity....................
12.20 %
12.30 %
12.75 %
Final Rates implemented...............
Oct-92 Sep-92 Sep-92 The Company plans to file a request with the IUB in 1993 to combine the electric tariffs of the former IPS and IPR service territories into common MPS rates.
(11) INVESTMENTS:
Investments include the following amounts as of December 31 (in thousands):
1992 1991 Preferred stocks................................
30.092 32,280 Equity method investments........................
81 81 Other.......
1.441 1.356 Total......................................
$ 31,614
$ 33.717 (12) SHORT-TERM BORROWING:
Interim fmancmg of working capital needs and the construction pmgram may be obtamed imm the sale of commercial paper or short-term bormwing from banks The Company's short-term notes payable consisted of commercial paper bormwings of $58,100.000 and none at December 31,1992, and 1991, rc.sgiively. The Company had bank lines of credit of $119,670,000 at December 31,1992. These lines are used to support commercial paper and bank bormwings. The average interest rate on the mmmercial paper and bank bormwings was 3.75 percent for 1992 and 6.15 percent for 1991.
i i
(13) SEGMENTS OF BUSINESS:
For the year ended December 31 1992 1991
~1990 Operating Revenues:
(In Thousands)
Bectric
$ 623,360
$ 637,222
$ 610,967 Gas........................
299,820 292.291 265.617 Other.
300 359
$ 923.180
$ 929.813
$ 876.943 Operating Expenses:
Becaic....
$ 526,070
$ 515,967
$ 489,235 Gas..............
284,139 276.036 251,602 Other.
164 292
$ 810.209
$ 792.167
$ 741.129 Operating Income:
Bectric.....................
$ 97,290
$ 121,255
$ 121,732 Gas........................
15,681 16,255 14,015 Other...
136 67
$ 112,971
$ 137.646
$ 135.814 Depreciation and Amortization Expense:
Electric.
74,305
$ 71.238 67,888 Gas....
11,885 11,237 10,542 Other.
4 86,190
$ 82.475 78.434 Capital Expenditures:
Bectric.....................
99,308
$ 101,999
$ 100,392 Gas........................
23,272 20,986 27,037 Other.....
197 (292) 399
$ 122.777
$ 122.693
$ 127.828 Identifiable Assets as of December 31:
Ecctric.....................
$1,589,990
$1,598,212
$1,595.159 Gas........................
281.671 254.877 246.408 1,871,661 1,853,089 1,841.567 Corporate Assets.....
297.320 312.408 289.171
$2.168.981
$2,165.497
$2.130.738 Idemifiable assets are all assets that are used directly in the Company's operations of each segment. Corporate assets are prmeipally invesunents, cash, temporary cash investments, receivables, prepayments, deferred charges and other non-utility assets.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of Cash and Cash Equivalents, Receivables, Notes Payable, Accounts Payable and Other j
Current Liabilities appmximates the fair value because of the short maturity of these financialinstruments.
A reasonable esumare of fair value ofinvestments could not be made without incurnng excessive costs. The carrying amount of financial instruments included in Investments on the Consolidated Balance Sheets, was $31.5 i i
j
million which consists of Preferred Stock and Other as listed in Note (11) Investments. The fmancial instmments included in Investments consists primanly of the non-current portion of an investment representing all the issued preferred stock of an untaded company which is carried at $30.1 million. The terms of this preferred stock provide that no dividends will be paid and requue $2.2 million to be redeemed annually each February 1 through 2002, 53.9 million in 2003 and $3.8 million in 2004.
The fair values of Long-term Debt and Preferred Stock are estimated based on the quoted market prices of those or similar issues, where available. For those issues where no quoted market prices are available, the fair value is estimated based on current rates available to the Company for debt or preferred stock with similar remaining maturities. He carrying amount of finnneial mstntments included in Long-term Debt, plus current maturities, was $737 million and the fair value was $767 million. The carrying amount for the Company's outstandmg prefened stock was $54 million and the fair value was $39 million.
(15) EVENTS OCCURRING SUBSEQUENT TO THE DATE OF THE BALANCE SHEET:
1 In February 1993, the Company will complete the refinnneing of a significant portion of its first mortgage bonds. The Company will issue $575 million of new securities in a seven-pan offering with interest rates varying from 61/4% to 81/8% and various mantrity dates fmm 1998 through 2023. The Company called, repurchased or made tender offers for $568 million ofits previous debt issues. The Company's maturities oflong-term debt after the refin ing for 1993,1994,1995,1996 and 1997 are $1,985,000, $2,024,000, $1.438,000, $975,000 and
$5.568,000, respectively. Substannally all utility plant is pledged.
(16) AFFILIATED COMPANY TRANSACTIONS:
The companies identified as affiliates, other than the parent company, are wholly-owned subsidiaries of MWR.
The basis for these charges is provided for in service agreements between MPS and the parent company or its affiliates. In the opinion of management, the expenses between entities are fair and reasonable.
MPS leased unit trams fmm an affiliate for the transponation of coal to MPS generating stations. Unit train costs, including maintenance, were $2.933,000,53,825,000 and $3,710,000 for 1992,1991, and 1990, respectively.
MPS's parent company incurs cenain adminierative and general expenses which are of general berrfit to all i
of its subsidiaries, including treasury, legal, shareholder relations and accouming functions. MPS's share of such expenses was $4,930,000,54,382,000, and $10,659.000 for 1992,1991 and 1990, res9ectively. Included in tha 1990 amount are $4,476,000 of costs related to the merger ofIowa Resources Inc. and Midwest Energy Company into MWR.
MPS is reimbursed for charges incurred on behalf ofits parent company and other affiliated companies. De amount of such expenses were $6,810,000, $5329,000 and $6,960,000 for 1992,1991 and 1990, respectively.
l The majority of these reimbursed expenses were for employee wages and benefits, msurance, building Irntal, computer costs, adminierative services and travel expense.
MPS leases office facilities and other propenies from affiliates and total lease payments were $577,000,
$2,324,000 and $2,264,000 for 1992,1991 and 1990, respectively. On December 31, 1991, MPS assumed ownership of the Sioux City office building which had previously been leased fmm an affiliate. As a result of the transfer, MPS assumed notes payable in the amount of 513.928,000.. _ _ _ _ - _ - _ _ _ _ _ _ _ _ _ _ _
MPS leased other transportation equipment from an affiliate. MPS lease costs were $281,000, $671,000 and
$767,000 for 1992,1991 and 1990, respectively.
MPS received interest income on cash invested with affiliates and interest expense was allocated to MPS from I
the parent. MPS recorded net affiliate company interest expense of $130,000 and $175,000 for 1992 and 1991, respectivdy, and net affiliate company interest income of $140,000 for 1990.
MPS accepted assignment of accounts receivable owned by MWR to its diversified businesses subsidiary of
$22,609,000 and $45,000,000 in 1992 and 1991, respectively. MPS collected $18,586,000 and $12,067,000 of the receivables during 1992 and 1991, respectively.
(17) UNAUDITED QUARTERLY OPERATING RESULTS:
Earnmgs on Operating Operating Common i
Revenues Income Stock (In '1housands) 1992 i
1st Quaner.............
$ 251,163
$ 32,650
$ 16,365 2nd Quaner.........
196,657 18,429 3,584 3rd Quarter..
211,946 30,736 12,330 4th Quarter.............
263,414 31,156 14,665 1991 Ist Quarter.............
$ 255,823
$ 37,331
$ 21,027 2nd Quarter....
203,812 28,632 12,470 3rd Quaner.............
222.933 39,557 23,367 4th Quarter............
247,245 32,126 15,218 i
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The Company's management is responsible for the presentation of the accompanying financial statements, which have been prepared in conformity with generally accepted accounting principles and include amounts based on informed esumates and judgments of management.
Management mnintainc internal accounting controls which it believes are adequate to pmvide reasonable assurance that assets are safeguarded, transactions are executed in accordance with management authorization and financial records are reliable for preparing the financial statements. Intemal accounting contmls are supported by written policies and procedures, a staff of intemal auditors who conduct comprehensive intemal audits and the selection and trammg of qualified personnel.
The Midwest Resources Inc. Board of Directors, through its Audit Committee comprised entirely of outside directors, meets periodically with management, intemal auditors and the Company's independent public accountants to discuss auditing, intemal contml and financial reponing maners. To ensure their independence, both the intemal auditors and independent public accountants have full and free access to the Audit Committee.
The independent public accountants, Anhur Andersen & Co., are engaged to audit the Company's financial statements in accordance with generally accepted auditing standards.-
Russell E. Christiansen Chairman and Chief Executive Officer l
l l 1 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Midwest Power Systems Inc.:
We have audited the accompanying consohdated balance sheets and consolidated statements of capitahzation of Midwest Power Systems Inc. (an Iowa corporation and wholly-owned subsidiary of Midwest Resources Inc.) and subsidiades as of December 31,1992 and 1991, and the related consolidated statements of income, r-h camings and cash flows for each of the three years in the period ended December 31,1992. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these fmancial statements and schedules based on our audits.
We conducted our audits in accordance with generally eccepted auditing standards. Those standards regmre that we plan and perform the audit to obtain reasonable assurance about whether the financial sentements are free of material mi"taten ent: An audit inclnda namining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements. An audit also includes assessing the accounting principles used and significant esumates made by management, as well as evaluating the overall fmarxnal statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the fmancial position of Midwest Power Systems Inc. and subsidiaries as of December 31,1992 and 1991, and the results of their operations and their cash flows for each of the three years in the period ended December 31,1992, in conformity with generally accepted accounting pnnciples.
Our audits were made for the purpose of forming an opinion on the basic fmancial statements taken as a whole. The schedules hsted in the index of financial statement schedules (Item 14 (a) 2) are presented for purposes of complying with the Securities and Exchange Commission's rules and are not pan of the basic fuumcial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
Chicago, Illinois January 29,1993 57-
UNAUDITED MIDWEST POWER STATISTICS For the year ended December 31 1992 1991 1990 1989 1988 Revenues (000)
Residential................. 5 244,295 5 267,178 5 253,937 5 240,513 5 244,640 Small general semce..........
150,319 152,870 145,547 150,256 151,730 Large general service..........
111,674 111,694 111,822 120,456 121,174 Other.....................
30.839 32.434 30341 32,661 19.240 Subtotal..................
537,127 564,176 541,647 543,886 536,784 Sales for resale............,,
86.2 73.046 69320 68309 44.890 Total.................... S 623360 5 637.222 S 610,967 5 612,195 5 581.674 Sales (000 kWh)
Residential.................
2,956,489 3,252,828 3,025,089 3,013,384 3,075,586 Small general semce..........
2.617,781 2,667,210 2.489,279 2,354,375 2,262,567 Large general service..........
2,937,041 2,881,832 2,938,581 2,819,734 2,801,277 Other.....................
347371 354.719 356.787 370361 354.085 Subtotal..................
8,858,682 9,156,589 8,809,736 8,557.854 8,493,515 Sales for resale..............
5.085 308 4.424.222 4.239.471 4.027.660 2383964 Total...................
13,444.190 13 380,811 13,049,207 12,585,514 10,877,479 Energy (000 kWh)
Generated.................
9,753,806 9,814,754 9,306,590 8,444,290 6.895,226 Purchased............
4 973.069 4 349.152 5303326 4.843.178 4.718 921 14,726.875 14363906 14.809,916 13.287.468 11,614,147 Customers (year.end)
Residential.................
360,048 356.076 353,490 350,464 347,207 Small general semce...........
51,407 50,923 50,593 49,858 49,289 Large general service..........
759 769 751-759 842 Other.........
4.494 4389 4.252 4.067 3971 Subtotal..................
416,708 412,157 409,086 405,148 401,309 Sales for resale..............
79 85 R4 88 84 Total....................
416,787 412.242 409,170 405.236 401393 Average Annual Use Per Residential Customer Revenue...................
568235 5753.09 5721S5 568935 S707.24 KWh.....................
8.258 9,169 8,600 8.637 8,891 Average number of residennal customers.................
358,018 354,774 351,739 348,896 345,910 Revenues as a Percent of Total Residential.................
39.2 %
41S %
41.6%
393 %
42.1 %
Small general semce..........
24.1 24.0 23.8 24.5 26.1 Large general service..........
17.9 17.5 183 19.7 20.8 Other.....................
5.0 5.1 5.0 53 33 S ubtotal..................
86.2 88.5 88.7 88.8 923 Sales for resale..............
13.8 11.5 11 3 11.2 7.7 Total....................
100.0 %
100.0 %
100.0 %
100 0 %
100.0 %
Sales as a Percent of Total Residen:ial.................
21.2 %
24.0 %
23.2 %
23S%
283 %
Small general semce..........
18.8 19.6 19.1 18.7 20.8 Large general service..........
21.0 21.2 22.5 22.4 25.7 Other.....................
25 2.6 2.7 3.0 33 i
Subtotal.................
63.5 67.4 57.5 68.0 78.1 Sales for resale..............
363 32.6 32.5 32.0 21 9 Total.,..................
100.0 %
100_.0 %
100.0 %
100.0 %
100.0 %
58-l
UNAUDITED MIDWEST GAS STATISTICS For the year ended December 31 1992 1991 1990 1989 1988-Revenues (000)
Residential........................... S 183.262 S 176.649 5 158.653 S 169,392 S 166.111 Small general service....................
81,689 78,233 70,749 78,493 77,391 Large general service...........
29,170 30,680 30,139 32,702 40,664.
Other...............................
5.699 6329 6.076 5.975 7.843 Total.......
S 299,820
$ 29229:
S 265.617 S 286.562 S 292.009 Sales (000 MMBru)
Residential..........................
33,161 34,750 31,413 34,621 33,481 Small general semce...............
18,829 19.300 18,042 20,179 18,846 Large general semce...............
8,303 9,187 9,493 11,594 14,343 l
Other...............................
463 1.014 400 478 1.632 Subtotal...........
60.756 64.251 59,438 66,872 68,302 Gas h ospu icd........................
12.421 10993 9.688 12.844 16.807 Total..............................
73.177 75244 69.126 79316
- 85. 09 Supply (000 MMBtu)
Gas from peabng facilities LP gas..........................
15 4
28 24 5
LNG gas.........................
277 421 473 1.978 364 Natural gas purchased..................
69,062 75,887 65,291 67,750 68.122 i
Methane gas purchased.................
38 39 63 52 29
+
Total gas receipts...................
69.392 76.351 65,855 69,804 68.520 Less Company use, deliveries to LNG and storage.................
7.597 443 5.447 2.119 1901 Supply available for resale...............
61.795 75,908
_ 60,408 67.685 66.619 Customers (year-end)
Restental 334.789 327,313 321.119 312,446 309.989 Commercial 34,706 34,261 33.998 33,104 33,866 Industnal............................
906 940 944 1.044 1.074 Total..............................
370,401 362.514 356.061 346.594 344 929 Average Annual Use Per Residential Customer Revenue.............................
S 555.29 5 546.16 5 502.57
$546.53 5544.63 MMBru 100 107 100 112 110 Average number of residential customers....
330,027 323,437 315,682 309,941 304.999 Degree Days Actual..............................
6,434 6.724 6.439 7,420 7,050 Nonnal.............................
7,101 7,268 7.268 7,251 7,251 Percent colder (warmer) than normal.........
(9.4)
(7.5)
(11A) 23 (2.8)
Revenues as a Percent of Total Racidanthi 61.1 %
60.4 %
59.7 %
59.1 %
56.9 %
Small general semce....................
273 26.8 26.6 -
27A 26.5 Large general semce....................
93 10.5 11.4 11.4 13.9 Other...............................
19 23 23 2.1 2.7 Total..............................
100 0 %
100.0 %
100.0 %
100.0 %
100.0 %
Sales as a Percent of Total (Excluding Gas Transported)
Rendential 54.6 %
54.1 %
529 %
51.8%
49.0%
Small general semce....................
31.0 30.0 303 30.2 27.6 Large general service....................
13 3 14 3 16.0 173 21.0 Other...............................
0.7 1.6 08 03 2.4 Total..............................
100.0 %
100.0 %
100$%
100.0 %
100.0 %
Cost per MMBru.....
S 330 5
3.07 5
3.05 5
297 S
2.90 i
............... )
SCHEDULE II MIDWEST POWER SYSTEMS INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS. PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31,1992 (In Den==h)
Column A Column B Column C Column D Coltimn E Balance at Deductions Balance at i
Begmning Amounts Amounts End of Year of Year Additions Collected Written Off Curnmt Not Current Accounts Receivable Midwest Resources Inc.
$33,662
$26,238 (1) $22.502(2) 5
$37,398 5
Midwest Capital Group,Inc.
22,155 (21,595)(1) 502 58 Other Related Parties 302 2.167 2.271 198 Total
$56.119
$ 6,810
$25.275 5
$37.654 S
(1) Includes the transfer of $22.609 receivable from Midwest Capital Group, Inc. to Midwest Resources Inc.
(2) Includes $18,586 collected on the reeivable transferred from Midwest Capital Group, Inc.
I
. SCHEDULE II i
- J
\\
)
- MIDWEST POWER SYSTEMS INC.
AMOUNTS RECEIVABI.E FROM RELATED PARTIES, i
UNDERWRITERS PROMOTERS AND EMPIDYEES OTHER 'HIAN RELNIED PAR'UES FOR THE YEAR ENDED DECEMBER 31,1991 (In Thousands)
)
Column A Column B Column C Column D
- Column E Balance at Deductions Balance at -
Begmnmg Amounts Amounts End of Year of Year Additions Collected Wrinen Off Current Not Current Accounts Receivable i
Midwest Resources Inc.
S 192
$48,148 (1) 514,678 (2) 533,662 5
Midwest Capital Gmup,Inc.
67,731 (44,197)(1) 1,379 (3) 22.155 i
Other RehreA Parties 322 J178 1.598
}Q?
Total
$68345 5 5.529
$17.655 5
$56.119 5
i (1) Includes the transfer of $45,000 receivable fmm Midwest Capital Group,Inc. to Midwest Resources Inc.
(2) Includes $12,067 collected on the receivable transfened fmm Midwest Capital Group,Inc.
(3) Includes a non-cash seulement of $128 for the IPS corporate headquaners taalding.
i
-l t
1 i 1
T SCHEDULED MIDWEST POWER SYS'IEMS INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELA 7ED PARTIES FOR THE YEAR ENDED DECEhGER 31,1990 (In "Ibonawk)
Column A Column B Column C Column D Cohunn E Balance at Deductions Balance at Begmnmg Amounts Amounts End of Year of Year Additions Collected Written Off Current Not Current Accounts Receivable Midwest Resources Inc.
S 240 S 1,711 51,759 5
192 S
Midwest Capital Group, Inc.
67A04 1.256 929 67,731 Other Related Parties (350)
E E
J Total
$67.294 5 6.960
$6.009 5
568245 S
l i
SCHEDULE V hEDWEST POWER SYSTEMS INC.
CONSOLIDATED PROPERTY. PIANT AND EQUIPMENT
~
FOR THE YEAR ENDED DECEMBER 31.1992 (In Thousands) r Column A Cohann B Cohmm C Column D Column E Colu:cn F Retirements Balance at or Sale at Other Balance Begmamg Addmons Original Charges at Close Classification of Year at Cost Cost (Crndits) of Yeme (Note 2)
(Note 3)
ELECTRIC PLANT Electric plant in semce Intangibles.............
S 6.434 5 457 5
1 S 5.914 5 12.804 Prnr+rweinn Steam 909.470 3.153 696 450 912.377 Other.
84,751 78 10 84.683 Traraminion.....................
271.666 5.257 3.226 1
273.698 Di ce h6..................
581.036 38.018 4.516 (3) 614.535 Genmal plant...................
95.918 6.619 3.773 25.289 124.053 Completed, not umnzed..............
78.216 27.674 1390 (587) 103.913 Total electric plant in service 2.027.491 81.178 13,680 31.074 2.126,063 Electric plant in semce under capital lease...
10.449 41 136 10.544 Exp. m.m1 plam...................
33 20 53 Plant held for fumre tne.
23.234 4.404 (679) 18.151 Construction work in progress............
26,400 498 1.295 28.283 Total electnc plant...............
2.087.697 81.676 18.125 31.846 2.183.094 GAS PLANT.
Gas plant in savice Int =, rih 1es..
1.584 19 3.004 4.607 Prvhrevm........................
6.630 1
5 6.636 0:her storage......................
16.946 4
17 16.967 Disaibution......................
236.391 17.266 1.378 310 252.589 General plant.............
23.263 1.466 86 26.481 51.124 ranm1-d. not imir>7ed...............
4.526 195 219 9.502 Total gas plant in semce..........
294.340 18.951 1.683 29.817 341.425 Gas plant in service smder capital lease 905 5
910 Plant =, Lition adjustment.............
19.456 19.456 Plant held for future use................
4 4,
Construction work in progress..
2.242 2.891 5.133 Total gas plant.................
316.947 21.842 1,683 29.R22 366.928 COhWlON PLANT:
Onmman plant in semce..
61.619 (2.840)
(1.326)
(60.105)
Construction work in progress............
932 400 (1.3321 1
Total ramman plant..
62.551 (2.440)
(1326)
(61.437)
{
l Total utility pla=1................
52.467,195
$ 101.078 5 18.482 5 231
$2.550,022 (7THER PHYSICAL PROPERTY.........
5 2.565 5
1R6 5 416 5 (161) 2,174 N(7FES:
(1)
See Notes (Ic). (5) and (15) of Notes to e-M~d Fmancial Statemenn (2)
The reserve for utility plant deprectanon has been charged with the amount indicated on Schedule VI for the year ended December 31.1992.
(3)
Utili:y Plant previoinly classafied as ecm nnn Plant was transferred to Electne Plant and Gas Plant during 1992.
) i
I SCHEDULE V MIDWEST POWER SYSTEMS INC.
CONSollDATED PROPERTY. PLAhT AND EQUIPMEhT FOR THE YEAR ENDED DECEMBER 31.1991 (In "Ihousands)
Column A Cohzmn B Cohunn C Cohunn D Column E Column F Retirements Bal== at or Sale at Other Bal
- Begirming AMoum Original Charges at Close Classi5 cation of Year at Cost Cost (Credits) of Year (Note 2)
ELECTRIC PLAhT:
Electne plant in semce intangibl=s.
5 1.320 s 1.287 5
6 s 3.833 s
6,434 Proderima Steam 896.179 16.169 2.880 2
909.470 Other.
49.931 34.842 22 84.751 Transrmssion 263.033 10.012 1.336 (43) 271.666 Distritxition.
549.890 35.729 4.562 (21) 581.036 General plant......................
97.797 9.554 7.637 (3.7%)
95.918 Completed, not immrM.............
44.646 (18.048)
(1.618) 78.216 Total electric plant in service 1.952.796 89.545 14.825 (25) 2.027,491 Electric plant in service imder capi:a1 lease...
6.984 3.465 10.449 Experuncatal plant.
33 33 Plant held for fu:nre use..
23.358 124 23.234 Construction work in progress.....
37.840 (11350) 26.490 Total electric plant.
2.021.011 78,195 14.949 3.440 2.087.697 GAS PLANT:
Gas plant in service Imangibles.......
1.326 259 2
1 1.584 Pv.h..+.
6.170 447 4
17 6.630 0:her storage 15.806 1.224 77 (7) 16.946 Distribution..
209,791 27.402 1.088 286 236.391 General plant......................
19.811 4.040 648 60 23.263 Completed, not immvM...............
19.846 (10304) 16 9.526 Total gas plant in semce 271750 23.068 1.835 357 294.340 Gas plant in service under capnal lease 901 4
905 Plant acquisition adjustment 19.456 19.456 Plant held for future use..............
4 4
Cm= Man work in progress.........,..
6.503 (4.261) 2.242 Total gas plam..............
799.614 18.807 1.835 361 316.947 COMMON PLANT Carmtrm plant in service........
44.283 4.763 1840 15.413 (3) 61.619 Common plant in semce smder capital lease..
15.400 (15.400X3)
Construction work in progress.
2.783 (1.851) 932 Total common plant.........
62.466 2.912 2.840 13 62.551 Total utility plant................
123 83.091 5 99.914 5 19.624 5 3.814
$2,467,195 CYTHER PHYSICAL PROPERTY.........
S 6.589 5
(219) 5 4323 518 5
2.565 NOTES:
(1)
See Notes (Ic). (5) and (15) of Notes to C-M 'ad Fm= al Starrmest (2)
The rese ve for utiliry plant de;recia: ion has been charged with the amount mdEmerd on Schedule VI for the year ended n~.,-M 31,1991. The difference represents the sale of isnd and other property not fully 4mJ.idl.
(3)
MPS assurned ownerstap of property which was previously recorded as Property Under Capual I rar, 5
SCHEDULE V 1
MIITNEST POWER SYSTEMS INC.
CONSOLIDATED PROPERTY, PLME AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31.1990 (In Tho==nde)
Cohunn A Column B Column C Cohmm D Cohmm E Colunm F Retirements Ba1=ce at or Sale at Other Balmnne Begim:mg Addmnne Ongmal Charges at Close Classificancm of Year at Cost Cost (Credits) of Year (Note 2)
ELECTRIC PLAln:
Electric plant in service Intangibles........................
5 1.306 5
50 5
36 5
1.320 Pra+vrnn Steam 889.469 6.990 280 896.179 Other.......................
49.663 302 34 49.931 Transm.ssion......................
257.535 6.766 1.270 2
263.033 Dism k h 521.160 33.041 4.310 (1) 549.890 General plant................
92.765 7.308 2.273 (3) 97.797 i
CamniataA. not tmmzed..............
45,080 50,052 4 86 94.646 Total electne plant in semce.
1.856.978 104.509 8.689 (2) 1.952.796 Electric plant in semce uncia capaal lease...
7.5(B (519) 6.984 Ex-m usut.1 plant.......
33 33 -
Plant held for fu:ure use................
26.211 77 (2.930) 23.358 Construction work in progress............
62.293 0 4.453) 37.840 Total cloenic plant...............
1.952.985 80.166 8.689 G 451) 2 021.011 GAS PLANT:
Gas plant in service Irmribles........
1.297 29 1.326 Prad m inn...................
6.221 3
36 (18) 6.170 Other storage......................
15.769 21 16 15.806 Dwhh 195.049 15.316 908 334 209.791 General plant......................
16.504 4,351 1.125 81 19.811 Completed, not immzed...............
17.790 1.618
($04)
(66) 19.846 Total gas plant in semce..........
252.630 21.338 1.565 347 272.750 Gas plant in semce under capital lease.
897 4
901 Plant w-.. --. adjustment.............
19.456 19,456 Plant held for futme use................
10 (6) 4 Construction wczk in progress.
1.751 4.754 0) 6.503 Total gas plant..................
274.744 26.092 1.565 343 299.614 COMMON PLANT:
Common fant in service...............
42.603 1.671 (37)
(28) 44.283 Common plant in service under capital lease..
15.400 15.400 Construction work in grogress............
2.085 698 2.783 r
Total rnmmnn plant..............
60.0R8 2369 G7)
(28) 62.466 Total utility plant................
$2.287,817 5 108.627 5 10.217 5 (3.136)
$2383,091 OTHER PHYSICAL PROPERTY.........
9.599 5
397 5
39
$ G368) 6.589 N(7FES:
(1)
See Notes (Ic). (5) and (15) of Notes tu c onmia.a Fmancial Statements.
(2)
The reserve for utility plant deprec2 anon has been charged with the amourn irar= rad on Schedule VI for the year ended December 31.1990. The difference represents the sale of land and other property not fully %bsd.
SCHEDULE VI MIDWEST POWER SYSTEMS INC.
CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31,1992 (In Thanemde)
Column A Column B Column C Column D Column E Column F Retirements Balance at Additions Charred to Cost of Adjusunents Balance at Begmmng Other At Original Removal or and Close Description of Year Income Accounts Cost Salvare. Net Transfers of Year (Notes 1&2) (Note 3) (Note 4)
UTILITY PLAhT:
Electnc plant.
5809,938 5 70,832 5 3,253
$ 18,125 S 2.492 5 9,788 $873,194 Gas plant 84,098 10,457 1,466 1,683 369 6,739 100,708 4,540 Plant acquisition adjusunent 3,892 648 Common plant....
15551 2599 100 (1.326)
(148)
(19.724)
Total utility plant accumulated depreciation and amornnnnn. $913.479 S 84536
$ 4,819 518,482 S 2.713 S (3,197) $978,442 OTHER PHYSICAL PROPERTY 4
5
- S S
S S
- S 4
NOTES:
(1)
See Footnote 1(c) of Notes to Consolidated Fmancial Statements for the basis of the gudsians for deprectation.
(2)
Depreciation and amornunnn as shown on the Consolidated Statements ofincome and the Consolidated Statements of Cash Flows includes $1,654 of amortization of deferred charges.
(3)
Represents provisions for depreciation of work equipment and other miwD=mus equipment of the Company which are charFed to clearing accounts and apportioned therefrom, together with other expenses, to various accounts.
(4)
See Note (2) to Schedule V for the year ended December 31,1992.
SCHEDULE VI MIDWEST POWER SYSTEMS INC.
CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31,1991 (In Thnneande) i 1'
Column A Column B Column C Column D Column E Column F Retirements Balance at Additions Charged to Cost of Adjustments Balance at Begmmng Other At Ongmal Removal or and Close Desenttion of Year Inmme. Accounts Cost Salvare. Net Transfers of Year (Notes 1&2) (Note 3) (Note 4) l UTILITY PLANT.
Electnc plant............... S750.557
$68,195
$2370
$14.918 SI,070
$4,204
$809,938 Gas plant 74,899 9,989 1,354 1,835 318 9
84,098 Plant acquisition adjusenent 3,243 649 3,892 Common plant..............
15.R89 2.023 376 2#0 (90) 13 ES, Total utility plant accumulated
&pMon and amornnnnn. $844.588
$80,856 $ 4.700
$19,593
$1,298
$ 4.226 jf OTHER PHYSICAL PROPERTY $
100 1 (
$ 410
$ (91)
$ 222 gj-1 NOTES:
(1)
See Footnote 1(c) of Notes to Cnnenlidamd Financial Statements for the basis of the provmrm for depreciation.
i l
(2)
Depreciation and amornnnnn as shown on the Consolidated Statements ofIncome and tie ConsohdatM i
Statements of Cash Flows includes $1.618 of amornnnnn of deferred charges.
(3)
Represents puvaams for depreciation of work equipment and other mier *Itaneous equipment of the Company which are charged to clearing accounts and apportioned therefrom, together with other expenses, to vanous accounts.
(4)
See Note (2) to Schedule V for the year ended Decemixr 31,1991.
SCHEDULE VI MIDWEST POWER SYSTEMS INC.
CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31,1990 (In Thonematic)
J Column A Column B Column C -
Column D Column E Column F Retirements
-t Balance at Additions Charned to Cost of Adjustments Balance at l
Begmamg Other At Ongmal Removal or and-Close -
Desermtion of Year Income Accourits Cost Salvane. Net Transfers of Year (Notes 1&2) (Note 3)
(Note 4)
~
l UTILITY PLANT.
Electnc plant................5693236 564 S22 $2,809 S 8,689 5 449
$(1,272) 5750,557
-j 65B89 9,360 1.248 1.565 139 6
74.899 l
Gas plant 3,243 i
Plant acquisition adjustment 2.595 648 Common plant............... 13563
),f42,
,,,,J,pj_
(3"A E
7 15_889 1
5 Total utility plant accurnularA deprematirut and amornnrmn..S775.383 S76.812 $4.412 510.217 3 543 g
g
{
I OTHER PHYSICAL PROPERTY. S 4 5 S
39 5 (13) 26l 5 100' NOTES (1)
See Footnote 1(c) of Notes to 0-Mai Financial Statements for the basis of the provimons for depreciation.
f (2)
Dorm-zies and amornnnnn as shown on the Consolidated S tatements ofIncome and the ('nnenhriarari Statements of Cash Flows includes $1,618 of amornnrum of deferral charges.
.t (3)
Rop-puvMass for 4 > : sinn of work equipment and other nuscellaneous equipment of the l
Company which are charged to cleanng accounts and apportioned therefrom, together with other l
expenses, to vanous accounts.
(4)
See Note (2) to Schednte V for the year ended December 31,1990.
I i
I t
2,
1 i
SCHEDULE VIII i
MIDWEST POWER SYSTEMS INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBEP. 31,1992 (In h-at) i Column A Column B Column C Column D Cnhunn E DeAnetiennt
'l Addidons for Purposes Balance at Charged for Which Balance at Beginning Charged to Other Reserves End Description of Year to Income Accounte Were Created of Year ~
i Reserves Deducted Frem Assas
-t i
To Which They Apply:
t Reserve for unmlWhle accounts-Year ended 1992................
51.060
$1,651 S
$1.569 g
j Year ended 1991
$1,1e
$1,737
$1.813 g
ea. ended 1990................
51347 S1,804 5
$2.006 g
l t
t
?.. _.
SCHEDULE IX MIDWEST POWER SYSTEMS INC.
CONSOLIDA*IED SHORT-TERM BORROWINGS FOR THE THREE YEARS ENDED DECEMBER 31,1992 (In "Ih=c=M;)
Column A Column B Column C Column D Column E Column F Maximum Average Weighted Category of Weighted Amount Amount Average Aggregate Balance at Average Outstanding Outstandmg Interest Rate Short-term End Interest Dunng the During the Durmg the -
Borrowmes of Year Rate Year Year Year (Note 1)
(Note 2)
(Note 3)
Year Ended:
1992 Commercial paper S 58.100 3.781 S68300 S 27,149 3.75 %
1991 Commercial paper
$134.600
$104327 6 15 %
1990 Commercial paper 101 900 8.09 %
$101.900
$ 67,056 8.24 %
NOTES: (1) Weighted average interest rate on halanm at the end of the year.
(2) The computation of the average amount outonMmg during the yearis bd on the sum of the da3y amounts outstandmg divided by the number of days in the year.
(3) The computadon of the weighted average interest rate is based on the sum of the annual interest on each transactum divided by the sum of the daily net amounts of commercial paper and notes outstandmg..
(4) See Footnote (12) of Notes to Consolidated Financial Statements.
1..
SCHEDULE X MIDWEST POWER SYSTEMS INC.
CONSOLIDATED SUPPLEMENTARY INCOhm STATEMENT INFORMATION FOR THE THREE YEARS ENDED DECEhBER 31,1992 (In ~Ihonwvic)
Column A Column B t
i Charged to Cost And Expenses Year Ended December 31 1992 1991 1900 Taxes, other than payroll and income taxes - Property
$55,333 552.625 548.741 i
NOTE:
Mainrnum and repairs is not set fonh inasmuch as the information is included in the consolidated finarx2al mennents.
Depreciation and amortization of intangible assets, royalties and adverusmg are not set fcrth inasmuch as such items do not exceed one percent of total revenues as shown in the related 3
Consolidated Sta:ement of Income.
See Foomote (13) of Notes to CmmHat~i Financial Statements for nMirional supplementary mcome statement informanon by business segment.
i I
e l
e i
SIGNATURES
]
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this repon to be signed on its behalf by the undersigned, thereunto duly authonzed.
MIDWEST POWER SYSTEMS INC.
Date: March 26,1993 By R. E. Christiansen (R. E. Chrisuansen)
Chauman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this repon has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
Sicnature Title Date R. E. Christiansen Chairman and Chief Executive Officer March 26,1993 (R. E. Chrisnansen)
P. G. Lindner Group Vice President-Admuustrative March 26,1993 (P. G. Lindner)
Services and Director (Chief Fmancial and Accounting Officer)
R. C. Encle Director March 26,1993 (R. C. Engle) 1 l
I L. K. Vorbrich Director Mart:h 26,1993 (L. K. Vorbrich)
B. A. Wharton Director Mart:h 26,1993 (B. A. Wharen).________ ____________ -
EXIIIBITS INDEX Sequential Exhibits Filed Herewith Pace Nos.
4(b)-1 General Mortgage Indenture and Deed of Trust dated as of January 1,1993, between MPS and Morgan Guaranty Trust Company of New York, Trustee.
80 4(b)-2 First Supp1*mentn1 Indenntre dated as of January 1,1993, between MPS and Morgan Guaranty Trust Company of New York Trustee 208 4(b)-3 Second Supplemental Indentme dated as of January 15,1993, between MPS and Morgan Guaranty Trust Company of New York. Trustee.
228 12 Computation of ratios of eammgs to fixed charges and computation of ratios of earnmgs to fixed charges plus prefened dividend regarements.
244 72.1 Subsidiaries of MPS.
246 24 Consent ofIndependent Public Accountants.
247 Exhibits incorporated by Reference 3.1 Articles of Incorporation of MPS, as amended (Fded as Annex B to MPS' Registration Statement, Registration No. 33-42866.)
3.2 Bylaws of MPS (Filed as Exhibit 3(b) to MPS' Registration Statemern, Registration No. 33-42866.)
3.3 Restated Articles of Incorporation of IPS, as amended (physically filed in IPS Form 10-K filed in 1989).
3.4 Bylaws of IPS, as amended (physically filed in IPS' 1989 Form 10-K).
3.5 Restated Anicles of Incorporation of Iowa Power Inc. (Fded as Exhibit 3.1 to IPR's Annual Repon on Form 10-K for the year ended December 31,1989. Commission Fde No.1-3567.
3.6 Amended and Restated Bylaws of IPR. (Filed as Exhibit 3.2 to IPR's Annual Report on Form 10-K for the year ended December 31,1983, Commission File No.1-3567.)
4.1 Indenntre of Mongage dated as of August 1,1943, between IPR and Harris Trust and Savings Bank and Harold Eckhan, Trustees. (Filed as Exhibit 8(aXI) to IPR's Registration Statement, Registration No. 2-5138.)
4.2 Instrument relative to appointment of W. H. Milsted as Individual Trustee under Indenture of Mongage. (Filed as Exhibit 4-B-5 to IPR's Registration Statemern, Registration No. 2-%19.)
l e
4.3 Ninth Supplemental Indenture dated as of January 1,1968, between IPR and Hanis Tmst and Savings Bank and R. H. Long, Trustees. (Fded as Exhibit 2-B-12 to IPR's Registration Statement: Registration No. 2-27681.)
4.4 Tenth Supplemental Indenture dated as of January 1,1970, between IPR and Harris Trust and Savings Bank and R. H. Long, Trustees. (Fded as Exhibit 2-B-13 to IPR's Registration Statement, Registration No. 2-35624.)
4.5 Eleventh Supplemental Indenture dated as of December 1,1971, between IPR and Harris Trust and Savings Bank and R. H. Long, Trustees. (Fded as Exhibit 2-B-14 to IPR's Registration Statement, Registration No. 2-42191.)
4.6 Thirteenth Supplemental Indentme dated as of March 1,1976, between IPR and Harris Tmst and Savings Bank and R. H. Long, Trustees (Filed as Exhibit 2-B-15 to IPR's Registration Statement, Registration No. 2-58163.)
4.7 Founeenth Supplemental Indenture dated as of March 1,1977, between IPR and Harris Trust and Savings Bank and R. H. Ieng, Trustees. (Fded as Exhibit 2-B-16 to IPR's Registration Statement, Registration No. 2-59339.)
4.8 Loan Agreement No. I between the City of Council Bluffs. Iowa, and IPR pmviding for the borrowing by IPR of the pmceeds of Pollution Control Revenue Bonds issued by the City.
(Fded as Exhibit 2-B-17 to IPR's Registration Statement, Reg 2stration No. 2-59339.)
4.9 Loan Agreement No. 2 between the City of Council Bluffs, Iowa and IPR pmviding for the borrowing by IPR of the pmceeds of Pollution Control Revemie Bonds issued by the City and the issuance by IPR of its Note due 2007. (Filed as Exhibit 2-B-18 to IFR's Registration Statement, Registration No. 2-59339.)
4.10 Instrument relative to the resignation of R. IL Ieng as individual trustee and appointment and acceptance of R. S. Stam as individual tmstee under the Indenture of Mongage and Deed of Trust between IPR and Harris Trust and Savings Bank, dated as of August 1,1943, as amended and supplemented. (Fded as Exhibit 2-B-19 to IPR's Registration Statement, Registration No.
2-59339.)
4.11 Fifteenth Supplemental Indent ce dated as of September 15,1977, between IPR and Harris Tmst and Savings Bank and R. S. Stam, Trustees. (Fded as Exhibit 2-B-20 to IPR's Registration Statement, Registration No. 2-59752.)
4.12 Sixteenth Supplemental 1ndentme dated as of December 1,1978, between IPR and Harris Tmst and Savings Bank and R. S. Stam, Tmstees. (Fded as exhibit 2-B-21 to IPR's Registration Statement. Registration No. 2-63259.)
4.13 Loan Agreement dated as of December 1,1985, between Louisa County, Iowa, and IPR providing for the borrowing by IPR of the proceeds of pollution control revenue bonds issued by the County. (Filed as Exhibit 4.31 to IPR's Annual Repon on Form 10-K for the year ended December 31,1985, Commission Fde No.1-3567.)
^
i I
4.14 Twenty-First Supplemental Indenture dated as of July 1,1986, between IPR and Harris Trust and Savings Bank and R. S. Stam, Trustees. (Fded as Exhibit 4.26 to IPR's Annual Repon on 3
Form 10-K for the year ended December 31,1987, Commasion Fde No.1-3567.)
4.15 Twenty-Second Supplemental Indenture dated as of December 1,1986, between IPR and Hams Trust and Savings Bank and R. S. Stam, Trustees. (Fded as Exhibit 4.27 to IPR's Annual Repon on Form 10-K for the year ended December 31,1987, Commission Fde No.1-3567.)
4.16 Twenry-Third Supplemental Indenture dated July 15,1988, between IPR and Harris Trust and Savings Bank and R. S. Stam, Trustees (Filed as Exhibit 4.28 to IPR's Annual Report on Form 10-K for the year ended December 31,1988, Commission Fde No.1-3567.)
l 4.17 Insuument relative to the resignation of R. S. Stam as individual trustee and appointmen and acceptance of J. Bartolini as individual trustee under the Indenture of Mortgage and Deed of Trust between IPR and Harns Trust and Savings Bank, dated as of August 1,1943, as amended and supplemented. (Filed as Exhibit 4.29 to IPR's Annual Repon on Form 10-K for the year ended December 31,1989 Commission Fde No.1-3567.)
l l
4.18 Twenty-Founh Supplemental Indenture dated December 1,1991. between IPR, Ha: Tis Truet and j
Savings Bank and J. Bartolini Trustees (Fded as exhibit 4.18 to IPR's Annual Report on Form 1
10-K for the year ended December 31,1991, Commission File No.1-3567) l 4
Mongage and Deed of Trust dated as of June 1,1946 (physically filed in IPS' Registration Statement No. 2-6418 under the Securities Act of 1933 as Exhibit B-2).
4(a)-1 Fust Supplemental Indenture dated as of September 1,1947 (physically filed in IPS' Registration 1
Statement No. 2-7165 under the Securities Act of 1933 as Exhibit 7-B).
4(a)-2 Second Supplemental Indenture dated as of November 1,1948 (physically filed in IPS' Registration Statement No. 2-7677 under the Securities Act of 1933 as Exhibit 7-D).
4(a)-3 Tlurd Supplemental Indenture dated as of May 1,1949 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, Fde Number 1-5131, under the Securities Exchange Act of 1934 as Exhibit 4(a)-3).
l 4(a)-4 Fourth Supplemental Indenture dated as of December 27,1949 (physically filed in IPS' 10.K for fiscal year ended December 31,1984. File Number 1-5131, under the Securities Exchange Act of 1934 as Exhibit 4(a)-4).
4(a)-5 Fifth Supplemental Indenture dated as of July 1,1951 (physically filed in Registration Statement No. 2-9(M2 under the Securities Act of 1933 as Exhibit 7-F).
4(a)-6 Sixth Supplemental Indenture dated as of June 1,1953 (physically filed in Registration Statement No. 2-10250 under the Securities Act of 1933 as Exhibit 4-H).
4(a)-7 Seventh Supplemental Indenture dated as of May 1,1954 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Exchange Act of 1934 as Exhibit 4(a)-7). 1
?
4(a)-8 Eighth Supplemental Indennue dated as of March 1,1958 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Exchange act of 1934 as Exhibit 4(a)-8).
4(a)-9 Ninth Supplemental Indenture dated as of September 1,1%3 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Exchange Act of 19M as Exhibit 4(a)-9).
i 4
4(a)-10 Tenth Supplemental indenture dated as of April 1,1970 (physically filed in IPS' 10-K for fiscal year ended December 31,1984. File Number 1-5131, under the Securities Exchange Act of 1934 as Exhibit 4(a)-10).
4(a)-11 Eleventh Supplemental Indenttue dated as of September 1,1971 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Exchange.
Act of 1934 as Exhibit 4(a)-11).
4(a)-12 Twelfth Supplemental Indenture dated as of June 1,1972 (physically filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Exchange Act of 1934 as Exhibit 4(a)-12).
4(a)-13 Thineenth Supplemental Indennue dated as of May 1,1975 (physically filed Registration Statement No. 2-53149 under the Securities Act of 1933 as Exhibit 2-0).
4(a)-14 Founcenth Supplemental Indenture dated as of December 1,1975 (physically filed in Registration Statement No. 2-55816 under the Securities Act of 1933 as Exhibit 2-P).
4(a)-15 Fifteenth Supplemental Indenture dated as of May 1,1976 (physically filed in Registration Statement No. 2-59515 under Securities Act of 1933 as Exhibit 2-Q).
4(a)-16 Sixteenth Supplemental 1ndentme dated as of November 1,1976 (physically filed in Registration Statement No. 2-59515 under the Securities Act of 1933 as Exhibit 2-R).
4(a)-17 Sevenraenth Supplemental Indenture dated as of August 1,19"n (physically filed in Registranon Statement 2-62147 under the Securities Act of 1933 as Exhibit 2-S).
4(a)-18 Eighteenth Supplementai Indenture dated as of August 1,1978 (physically filed in Registration Statement No. 2-62147 under the Securities Act of 1933 as Exhibit 2-T).
i 4(a)-19 Nineteenth Supplemental Indenture dated as of September 1,1979 (physically filed in Registration Statement No. 2-65046 under the Securities Act of 1933 as Exhibit 2-U).
4(a)-20 Twentieth Supplemental Indenture dated as of December 1,1980 (physically filed in Registranon Statement No. 2-71233 under the Securities Act of 1933 as Exhibit 2-V).
1 I
4(a)-21 Twenty-First Supplemental Indenture dated as of July 29,1981 (physically filed in IPS' 10-K for fiscal year ended December 31,1986).
76-4
4(a)-22 Twenty-Second Supplemental indenture dated as of October 1,1981 (physically filed in IPS' 10-K for fiscal year ended December 31,1986).
4(a)-23 Twenty-Third Supplemental Indenture dated as of December 1,1983 (physicany filed in IPS' 10-K for fiscal year ended December 31,1984, File Number 1-5131, under the Securities Act of 1934 as Exhibit 4(a)-23).
i 4(a)-24 Twenty-Fourth Supplemental Indenture ofIPS dated as of April 1,1986 (physically filed in IPS*
10-K for fiscal year ended December 31,1986).
4(a)-25 Twenty-Fifth Supplemental Indenture of IPS dated as of January 31,1987 (physically filed in IPS' 10-K for fiscal year ended December 31,1986).
t 4(a)-26 Twenty-Sixth Supplemental Indenture ofIPS dated as of December 1,1991 (physically filed in IPS' 10-K for fiscal year ended December 31,1991).
10.1 Power Sales Contract between IPR and Nebraska Public Power District, dated September 22, 1967. (Filed as Exhibit 4-C-2 to IPR's Registration Statement, Registration No. 2-27681.)
10.2 Amendments No. I and 2 to Power Sales Contract between IPR and Nebraska Public Power District. (Filed as Exhibit 4-C-2-a to IPR's Registration Srntement Registration No. 2-35624.)
10.3 Amendment No. 3 dated August 31, 1970, to the Power Sales Contract between IPR and Nebraska Public Power District. dated September 22,1%7. (Filed as Exhibit 5-C-2-b to IPR's Registration Statement, Registrnion No. 2-42191.)
10.4 Amendment No. 4 dated March 28, 1974, to the Power Sales Contract between IPR and Nebraska Public Power District, dated September 22,1967. (Filed as Exhibit 5-C-2-c to IPR's Registration Statement, Registration No. 2-42191.)
10.5 Coal Supply Agreement between the Amax Coal Company Division of American Metal Climax, Inc., and IPR dated August 31,1973, and Amendment to Agreement between the same panies dated December 19,1973. (Filed as Exhibit 5-J-2 to IPR's Registranon Statement, Registration No. 2-51540.)
10.6 12tter Agreement dated July 30,1974, between Amax Coal Company and IPR amendmg Coal Supply Agreement. (Filed as Exhibit 5-J-2-a to IPR's Registration Statement, Registration No.
2-52835.)
10.7 Amendment No. 3 dated January 1,1979, to the Coal Supply Ag tement between Amax Coal Company and IPR, dated August 31,1973. (Filed as Exhibit 10.7 to IPR's Annual Report on Form 10-K for the year ended DecemW 31,1987, rnmmksion File No.1-3567.)
10.8 Amendment No. 4 and supplemental leuer dated July 1,1982, to the Coal Supply Agreement between Amax Coal Company and IPR, dated August 31,1973. (Filed as Exhibit 10.8 to IPR's Annual Report on Form 10-K for the year ended December 31,1987, Commission File No. I-3567.)
77
10.9 Amendment No. 5 (lener agreement) dated July 23, 1987, to the Coal Supply Agreement between Amax Coal Company and IPR, dated August 31,1973. (Fded as Exhibit 10.17 to IPR's Annual Repon on Form 10-K for the year ended December 31,1988, Commission Fde No.1-3567.)
10.10 Amendment No. 6 dated December 14,1988, to the Coal Supply Agreement between Amax Coal Company and IPR, dated August 31,1973. (Edited to exclude confidential information.)
An unedited version of this document has been filed with the SEC under separate cover, pursuant to an OBJECTION TO DISCLOSURE OF INFORMATION AND APPLICATION FOR CONFIDENTIAL TREATMENT. (Fded as Exhibit 10.18 to IPR's Annual Repon on Form 10-K for the year ended December 31,1988, Commission Fde No.1-3567.)
10.11 Revised and amended Supp: mental Retirement income Plan for IOR and Subsidiaries dated October 24,1984. (Fded as Exlubit 10.24 to IOR's Annual Report on Form 10-K for the year ended December 31,1984, Committion File No.1-7830.)
10.12 Revised and amended Executive Compensation Plan for IOR and Subsidiaries, dated July 24, 1985. (Filed as Exhibit 10.21 to IOR's Annual Repon on Form 10-K for the year ended December 31,1985, Comuussion Fde No.1-7830.)
10.13 Revised and amended Executive Defened Compensation Plan for IOR and Subsidiaries, dated 7 dy 24,1985. (Fded as Exhibit 10.22 to IOR's Annual Repon on Form 10-K for the year ended December 31,1985, Commission File No.1-7830.)
10.14 Revised and amended Deferred Compensation Plan for Board of Directors of IOR and Subsidiaries, dated July 24,1985. (Fded as Exhibit 10.23 to IOR's Annual Repon on Fonn 10-K for the year ended December 31,1985, Commission File No.1-7830.)
10.15 Revised and amended Executive Compensation Plan for IOR and Subsidiaries, dated December 18,1987. (Filed as Exhibit 10.14 to IPR's Annual Report on Form 10-K for the year ended Wnher 31,1987, Commissirn Fde No.1-3567.)
i 10.16 Revised and amended Executive Deferred Compensation Plan for IOR and Subsidiaries, dated Dermher 18,1987. (Fded as Exhibit 10.15 to IPR's Annual Report on Form 10-K for the year ended December 31,1987, Commission Fde No.1-3567.)
10.17 Revised and amended Defern:d Compensation Plan for Board of Directors of IOR and Subsidiaries, dated December 18,1987. (Fded as Exhibit 10.16 to IPR's Annual Repon on Form 10-K for the year ended December 31,1987, Commission Fde No.1-3567.)
10.18 Amended and Restated Agreement and Plan of Merger among Midwest Power Systems Inc.,
Iowa Public Service Company and Iowa Power Inc. (Fded as Annex A to Midwest Power Systems Inc.'s Registration Statement, Registration No. 33-42866) 10.19 Company's lease covering new office building dated April 25,1979, amendment thereto dated May 15,1979 and other agreements relating thereto (physically filed in Registration Statement No. 2-65046 under the Securities Act of 1933 as Exhibit 5).
1 ;
i i
~
I
)
e 10.20 Agreement and plan of merger among C&P Holdings Company Midwest Energy Company and Iowa Resources Inc. (physically filed in IPS' 1989 Form 10-K).
Note:
Pursuant to (b)(4)(iii)(A) of item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-K every inscument with respect to long-term debt if the total amount i
of securities authorized thereunder does not exceed 10 percent of total assets of the Company but hereby agrees to furmsh to the Commission on request any such insuuments.
I i
79-
)
E YEAR FINANCIAL FORECASE 1998-1997
E YEAR FINANCIAL FORECASE 1998-1997 l
no
O IlfX billle l'IT >lllU a
1 e
i Midwest Hesources Inc. is the largest utility holding company in the state ofIowa, serving one-third of the state's electric and natural gas customers in urban. small town and rural areas. The Company has additional holdings in diversified industries. Midwest Resources has nearly $2..i bilhon in assets and $1 billion in annual revenues.
j The Company's utility subsidiary-Midwest Power Systems-has two divisions:
I Midwest Power and Midwest Gas. Midwest Power provides electric service to 416,000 customers in central, western and north central lowa and southeastern South Dakota.
Nidwest Gas provides natural gas service to 365,000 customen; in Iowa, Minnesota!
1 I
Nebraska and South Dakota.
Midwest Resources is headquartered in Des Moines. the capital city ofIowa, a growing center of finance. insurance and publishing. Other population centers served by the j
utilities are Sioux City, Waterloo and Council Bluffs, Iowa, and the suburban area north j
of Minneapolis-St. Paul, Minnesota!In Iowa, Midwest Power and Midwest Gas serve some of the nation's largest service and rnanufacturing companies.
j The diversified investments of Midwest Resources are operated through Midwest l
Capital Group, Inc. These investments include real catate development, constmction of generation facilities and electric lines. railcar leasmg and management, coal l
j transportation. telecom-l l
l munications and oil and gas c,,.%
invesunents.
j Midwest Resources was i
I I
I fonned November 7.1990. by
.nsamen.
w anos,
j the merger of Iowa Resources
)
Inc. of Des Moines and Midwest Energy Company of Sioux City. Midwest Power Systems was formedJuly 22,1992, by the merger of Iowa Power Inc. of Des Moines and Iowa Public Service Company of Sioux j
City, the previous utility subsidiaries of Midwest Resources.
Midwest Resources and its subsidiaries have 3,100 employees. The Company has 55,000 shareholders living in all 50 states and 22 other countries. Midwest Resources and its predecessors have paid dividends continuously since 1909.
- see AMumptions and Comments regarding letter of intent with Arkla. Inc i
i MIDWEST
)
RESOURCES.
N
( }lWtillfig l't >lmis! /()() b l U')~
i 1
i MIDWESTPOWERSYSTEMSINC.
l 1
1 Forecast Projected 1992 1993 1994 1995 1996 1997 Midwest Power (Note 1)
Retad sales tMulions of kWh)(Note 2) 8 818 9.547 9.755 9,950 10.126 10.293 Annual retad sales gro vth rate
( 3.7m 8.3%
2.2%
2.(y%
1.8%
1.7%
Electnc generating capabihtv (MW) 2.830 2.830 2.830 2.830 2.830 2.830 Capacity purchases 360 350 342 297 172 172 Capaaty sales
-408 433 459 429 305 306 Peak demand 1.959 2,315 2.337 2.361 2.387 2.414 Perrent reserve nurgin (Note 3) 42.0%
18.7 %
16.1 %
14.3%
13.0%
11.7 %
l Fuel Sources for Energy Coal 75%
r%
W%
74 %
76 77 %
)
Nuclear t Note 41 25%
22%
22%
25%
22 %
22%
Od/ Gas U%
1%
1%
1%
1%
1%
Total 100%
1(k m 100%
100%
100%
1(X M Midwest Gas (Note 1)
Retad sales (mmcf)(Note 2) 56.765 63,139 63,728 64.189 64.641 65.101 l
Annual retad sales grmvth rate
( 11.7)%
11.2 %
0.9%
0.7%
0.7%
0.7%
Transponation sales (mmcf) 12.329 12.529 12.461 12.451 12.591 12.733 i
i Note (1) Midwest Power Systems Inc. has two divisions:
(3) Midwest Power is a member of the Mid-Continent Midwest Power (eleanc) and Midwest Gas (natural Area Power Pool, which mquires that member i
l gas). This forecast ckes not reDect potential changes companie3 maintain a 15% reserve margin. Midwest l
in the sernce temtory of Midwest Gas. See Power expects to nuintain compliance with this Assumptions and Comments.
requirement.
(2) Irgislation enaaed in Iowa in 1990 requires electnc (4) The Company has a long-term power purchase and gas utihues to spend 2.0 percent and 1.5 contraa with the Nebraska Public Power 1.)istrict for perrent. respecively, of their annual revenues on one-half the capaaty of the Cooper Nuclear Station _
demand side management progrants. The impact of 1he station went into service in 1974 and has t
these programs has not been redected in the gas generated significant amounts of energy for the j
- s. des fowcast.
Company since that time. The forecast refktts no scheduled refueling outages in 1992 and 1995.
,a i
1 1
i J
i g
[-
I: nut t u uti I < >n n tsi l'J') l-- l'l'> ~
l l
MIDWESTPOWERSYSTEMSINC.
1 (Dollars in Millions)
Forecast Projected Total 1992 1993 1994 1995 1996 1997 1993-1997 i
Capital Requirements Capital expenditures (Note 1) 5 138 5 166 5 159 5 162 5 166 5 165 5 818 Matunues and sinking funds 31 14 2
1 131 55 203 Total capital requirements 5 169 5 1R0 5 161 S 163 5 297 5 220 5 1.021 internalSources of Capital Deprecatnn and amomzation 5 105
$ 108 5 113 5 116 5 123 5 127 5 587 Demand side mgmt. amomzstion 0
0 13 13 16 16 58 Other (26) 10 6
10 9
8 43 Subtotal 5 79 5 118 5 132 5 139
$ 148 5 151 5 6R8 l
Percent of total capital requirements 47 %
65%
82%
85%
50%
69 %
67 %
i ExternalSources of Capital long-term debt financing
$ 0 5 0 5 75 50 5 135 5 60 5 270 Common equity financtng
,0 0
33 0
0 0
33 Shon-term finanang 90 62 (79) 24 14 9
30 Subtotal 5 90 5 62 5 29 5 24 5 149 5 69 5 333 Percent of total capital requirements 53%
35 %
18%
15%
50%
31 %
33 %
Total sources of capital 5 169 5 180 5 161 5 103 5 297 5 220 5 1.021 Capitallration Ratios (Year-end) long-term debt 51 %
51%
51 %
51 %
51 %
50 %
Preferred stock 4%
4%
9%
3%
3%
3%
Common equity 45%
45%
45%
46%
46%
47 %
Pre-TaxInterest Coverage 2.2 2.8 2.8 2.9 2.9 2.8 1
Nots (1) Capital expenditures for the clean ccul proiect are not included in the forecast for 1994-1997.
See Assumptions and Comments.
a f MIDWEST A. RESOURCES.
--A
--yv-
I illtfilcitil 1 (>ln ilM 14) ll* JU ~
i t
l M0WESTRESOURCESINC. CONSOUDATED (Dollars in Millions) i Forecast Projected Total 1992 1993 1994 1995 1996 1997 1993-1997 Capital Requirements Midwest Power Systems Inc.
5 138 5 166 5 159 5 162 5 166 5 165 5 818 l
Midwest Capital Group, Inc.
8 12 5
6 4
4 31 Matunues and sinking funds 40 21 8
7 170 61 267 Total capital requirements 5 186 5 199 5 172 5 17; 5 MO 5 230 5 1.116 4
InternalSources of Capital Deprectauon and amomzation 5 113 5 118 5 120 5 121 5 128 5 132 5 619 Demand side mgmt. amomzauon 0
0 13 13 16 16 58 Other (30 9
22 24 28 88 Subtotal 5 79 5 127 5 13's 5 156 5 168 5 176 5 765 Percent of total capital requirements 42%
64 %
8(yvo 89 %
49%
77 %
69 %
ExternalSources of Capital Inng-term debt financing 5 0
$ 5 5 77 5 2
$ 135 5 60 5 279 Common equny financing 19 0
47 0
0 0
47 Short term financing 88 67 (90) 17 37
.6) 25 Subtotal 5 107 5 72 5 34 5 19 5 172 5 4 5 351 Percent of total capital requirements 58 %
36 %
20 %
11 %
51 %
31 %
Total sources of capital 5 186 5 199 5 172 5 175 5 340 5 2V) 5 1.116
^
l I
Capitalization Ratios (Year-end)
I long-term debt 53 %
52%
51%
50%
M.F!t 48%
Preferred stock 3%
3%
3%
3%
3%
3%
Common equity 44 %
45%
46%
47%
48%
49%
j
.i i
i s
9 I
t i
. \\%Illlll) flu,ilS (lild ( AlllllllCll[S 1
6
= Projected 1992 is based on actual results through September 1992 plus estimates for the last three months of the year.
l
- Tbtal electric sales will increase 2.2% annually 109.$-1997: retail electric sales will increase 1.9% annually 1993-1997.
i
- Electrie peak kud growth of 1.1"6 is forecasted for 1993-1997
. Tbtal gas sales will increase 0. % annually 1993-1997: retail gas sales will increase ONS annually 1093-1997.
- Rate increases for the period 1993-1997 are anticipated to be less than the rate of inflation.
~1ile inflation rate for operations and maintenance, excluding fuel. is projected to average 3.5"6 per annum.
. Capital expenditures for the clean coal project are not included in the forecast for 1994-1997. Midwest Power Systems has entered into an agreement with the Department of Energy (DOE) for a repowering proten of the Company's Des Moines Energy Center to demonstrate a developing coal-burning technology believed to be substannally cleaner and more etficient than technologies now in use. The project. if successit/L is expected to reduce the Company's long-term energy costs and the need for additional comtnistion turbines and energy purchases. The DOE and the Company will provide approximately 593 million and $103 million. respectively, to the project. If the proiect proceeds as expected. the Company 1
could spend $10 million during the design phase and $71 million during the construction phase, and the i
project would be schedukxl to be completed in 1996. The DOE and the Company each have certain tennination rights under the agreement.
. Capital expenditures for Midwest Power Systems, excluding the clean coal project, are forecasted to range j
from 581S milhon to $883 million for the penod from 1993 to 1997. Expenditures alxwe the i
5818 rnillkan level in the accompanying forecast will be dependent upon the level of earnings achieved during the forecast period.
- The Company will beem accruing for the costs of FAS 106 t post-retirement medical benefits) beginning lanuary 1.1993. The proieaed 1993 I'AS 100 cost of 511.6 million includes amonnzanon of the transition obligatkin of 593., nullion over a 20-year penod. The 1993 pay-as-you-go costs are projected to be 54.1 i
milhon. The Comp.my and other lowa utilities are seeking to recover these increased costs in rates. The i
f orecast includes such rtxuvery beginning with the next electric and gas rate cases.
i a A potertial clunge in the service terntory (>f Midwest Gas is not reflected in this forecast. On November 14.
1992. Mdwest Gas and Minnegasco. a division of Arkla. Inc.. signed a letter of intent to exchange portions of their natural gas servim terntones. Acmrding to the letter. Minnegasco would receive the Company ~s Minnesota territorv nonh of Minneapolis-SL Paul. and Midwest Gas would receiw the territory that meludes Vermilhon and Sioux Falls. Sotub Dakota, plus a payment of 538 million. The Minnesota terntorv has more than 7MX10 custonrrs and the douth Dakota terntory has more than +4.000 mstomers.
4 i
l b
I l
l y% MIDWEST ARESOURCES 1
l'iiltiiit kll lll;Gltl1,y!Ils 1
Twelve Months Ended 9/30/92 12/31/91 12/3't/90 Midwest Resources Inc. Consolidated i-RevenuesU U n 5
1.004.231 1.023.817 5
924.051 Net inmme M4))
5
-i3,900 S
68,444 5
62.299 hetum on average common equiry 6.6%
11.0 %
10.0 %
Eamings per average share 5
0.82 S
1.36 5
1.25 Ikok value per common share-end or penod 5
12.34 5
12.76 5
12.49 Common stock dividend rate-end of penod 5 1.16 5
1.%
1.56 stock pace range (nine months for 1992) j lx3w S
15.88 5
17,38 5
18.00 Ihgh 5
20.63 5
20.75 5
19.25 l
Average shares outstanding HvXn 53.371 50,393 50,019
~
Total ;ssets uno) 5 2.364.099 5
2a03.083 5
2.3+0.636 Capital expenditures (OWD 5
135.389 139,014 5
155.459 Midwest Power SystemsInc.
Revenues HXX11 5
907,010 929,813 5
876.943
)
Electric 5tatistics Retail elecinc sales - millions of kWh 8.792 9.157 8.810 Total elecinc sales - nullions of kWh 13.915 13.581 11049 Average annual residential use - kWh 8.189 9.169 8.600 Average annual residential revenue per kWh 8.30 C 8.21 c 8 39 c Ekctnc peak kaad - megawatts 1,959 2.191 2.238 l
Coohng degree days (nomul - S'6) 535 1.165 963 Gas Statistics Retad gas sales immcf) 61.151 6i.251 59.438 Transponanon gas sales (mmcf) 11.989 10.993 9,688 Average annual residential use (mcf) 103 107 100 Average annual residential revenue 5
541 5
546 5
503
]
1kaung degree days (nomul 7.268) 6.516 6.724 6,439 l
l l
1 l
Pnor year amounts have been reclassifed on a basis consistent with the 1992 presentation.
(
l I
p I
{
a 1
i
[
.s.5' t;%.,...
1 p*e 29
{f',. < F
'i g
3 1
SYg
.w a
. *'9'
.}E -
)
r;~'
' Y
~
1 a:s',
mus.: L-
-y J
Y i.{ J.,
4T
~
Mb [
hd..
"< e e-~ :
sw ~ p.,
A: ',..
a.(-
- ,- [ %EA -
y a. g :. '
.c r a..
.a,
_A4 Semce temtories of Midwest Power and Midwest Gas I
i COMPANYCONTACTS 4
i
- 1. Sue Rozema Maureen E. Moore 4
' Treasurer Financial Analyst
)
Midwest Resources lnc.
Midwest Resotirces Inc.
(515) 281-2250 (515) 242-4380 Midwest Resources Inc.
666 Grand Avenue P.O. Box 9244 Des Moines. Iowa j
50306-9244 1
i J
l f M DWEST YRESOURCES.
\\.
Kt C,..ome - x.,1<i.si e,ne,
- - - -