ML20033G265

Kansas Gas & Electric Co 1989 Annual Rept

ML20033G265
Person / Time
Site:	Wolf Creek
Issue date:	12/31/1989
From:	Doyle A KANSAS CITY POWER & LIGHT CO.
To:
Shared Package
ML20033G259	List: ML20033G258 ML20033G262 ML20033G265 ML20033H292
References
NUDOCS 9004060407
Download: ML20033G265 (24)

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{{#Wiki_filter:, -. i ,Karfsas Gas cnd Electric Company i i = 1989 Annua i = Report i EARS i t ) Letter to Our Shareholders l We achieved much in 1989, but missed our conJitioning. With summer cooling nonnally I earnings goal and ended the year with two twing our biggest single source of revenue, l unfavorable decisions from the Kansas the effect was great. Corporation Commission. In late December, over $trong dissents from l Accomplishments Are Significant the KCC chairman, the KCC decided it I We increased our annual common stock would require us to make two refunds totaling } dividend 7.5% to $1.72 per > hare, approximately $16 million and reduce retail Standard & Poor,> raised our debt rating rates by $8.7 million. KCC orders wah those j i toI O - i d in mid Febmm*. We j believe the orden are unlawful and l e Wolf Creek produced more electnca.y than l any other generating unit m the nation. unreammble and we are challenging them. Requests for reconsideration have been filed e A favorable settlement oflitigation with a with the KCC. If necessary, we will ask the major coal supplier cleared the way for couns to review these matters. resolution of potential environmental problems with La Cygne 1. Future Strategy is Clear Our level of customer acceptance has Our strategic plan for 1990 and beyond is grown above the national average to 46,L, designed to continue to improve service, favorability. increase earnings and generally strengthen j our KO&E team. e Wholesale revenues were 56% over 19S8 and at a record high. Although our customer approval rating 1 compares favorably with the national l Earnings Dropt Refund Order $ industry average, our customers have l Disappointing identified specific areas in which they expect I Nonetheless, we did not meet our earning 6 more service. We are focusing attention on goal. Earnings per share were $1.36. They these areas.We believe excellent service is were $2.10 in 1988. The drop was due necessary to improved profitability, primarily to milJ summer weather and lueeting our earnings goals so we continue unfavorable regulatory decisions. to move toward restoring our former $2.36 The coolest summer in 20 years sharply annual dividend remains of paramount reduced the use of electricity for air Contim4ed new page 9004060407 900330 PDR ADOCK 050004A2 1 PDC i

q r Arco Economy 16 Strong i $i' s

1. ate in 1989, a major national news j

I i ,\\ maga:ine characteri:ed Wichita as one of 10 l u Ih' - ^ I regional

• boom towns." With backlogged orders well into the 90's, Wichita's major 4-d' ',

~ aircraft manufacturers face their brightest future in more than a decade. There were 11 l i new industries hicating in our service area i 4 O last year. The largest is Superior Industries ) / new aluminum automobile wheel / manufacturing facility in Pittsburg. Employment will top 750 by early 1991. l j This new facility again demonstrates that i southeast and south central Kansas is ( I l attractive to majot manuf7cturers who distribute to national as well as regional { markets. Unlike some regions, we have sufficient electric generating capacity to i h K Gdnsm maintain a prosperous and growing economy. j 80th Anniversary Focuses on Service importance. Our 1990 plan is intended to finally, this is our 80th anniversary.1. ate in ensure 1989 does not become a permanent g 939 we had a special occasion to hiok over setback. While another milJ summer wouhl our first 80 years when we were honored by be detrimental, we me working to furthe' The Newcomen Society of the United States i limit expense growth, increase sales by 3% at its 1989 Kansas Meeting. This society - and obtain reasonable rates, named for Thomas Newcomen whose There is a basis for optimism. Out 1989 engines paved the way for the Industrial i growth in residential customers wai the Revolution - is dedicated to preserving the largest in four years. We continue to increase history of those who contribute to the i l our share of the space heating market, in progress of mankind. When we kok in the i 1989 over 50% of new homes in our service communities we serve, we see that electric area were equipped with heat pumps, double energy has continually improved the quality I the percentage of 1987. We will continue to of life. I aggressively sell power in the wholesale We also have seen that our company has i I market. Sales to other utilities represented a constantly been tested by the need for new bright spot in 1989, contributing $3 million methods and technology, the challenges of i to our bottom line. We do not expect to competition and offering quality service. We match that in 1990. are using our 80th anniversary as an } A major goal for 1989 had been to opportunity to better understand what we successfully conclude all rate matters relatcJ must do in our next 80 years, just as we have to Wolf Creek Generating Station which in years past. l went into service in 1985. That included Thank you for your support and please le making permanent the last phase of the Wolf us know if you have questions or comments. Creek rate increase approved by the KCC in 1987. As I've noted, we didn't make that Sincerely, i goal. Ibing so will continue to be a high A i priority in 1990. Unfortunately, this will g hz - - - l divert resources which we haJ hoped to t I devote to improving customer service anJ to Wilson K. CaJman l holding the line on rates while Chainnan of the Ikard and Pren, dent improving earnings. I i ( j

Financial Highlights, Five Year Comparison (Do! Lata rn Timuuni rnc;v ;ict sAau,Lual 19N9 1955 19N7 1966 1965 l Operat mg Ilevenue> 5 51),53) ! 526.220 $ S l 4, H 2 5 4V5.614 5 412,115 Net income 5 47,493 5 77,169 i 72.422 i 14.856 i V7.7 32 l I.arnings Applicable to Common SicsL 5 46,672 1 76,462 i 60 %46 i 8>.669 i 51,177 Average Shares of Common Sto6L Outstanding (Thouwnd.) 14.280 16.49s 40.623 40,763 4V,115 Common SetsL Per Sharc Data j 1.arning, 5 1.16 5 2 10 i I 72 1 0 14 5 2 13 I Cash t h idend. 1.61 i 1 51 i l iv i 1 225 1 2 065 Indis ated Year Lt.J 1)n idenJ llati 5 1,72 i 1 60 1 14* I \\6 i l 15 hiarlet Wlut br 1.nJ 5 21.175 1 20 75 i IV 26 22 576 i 14 125 IL 4 Wlut (hia hi Net Tangibit Awet>) b rLnd 5 19,50 19 7$ 5 19 21 i 15 57 5 20 12 Availzble Capacit3 (hiegawan ) 2,180 2,176 2, WV 2,4 H 2,097 Statem Peak Ile6ponsibilit) (hiegawans) 1,56N 1,677 1,6 0 1.627 1,612 Itchen e Capacit) (hiegaw att,) 812 6VV 746 505 455 Aserege Une Per flesidential Customer ( Kilowar t hour,) 9,248 V,726 V. l l 4 v.202 V,4 % Ascrage Price Per Itenidential Kilou althout M,92 ( V.O l f 9 02( 5 Vlf 7 IIf Number of Customer br.1nd 254,810 251,549 249,970 247,720 246,017 1.ong Term Debt 5 726,517 i 772,54V $1,016.006 5 1,063,464 $ 1,047,420 itedemption llequired Preferred SimL 5 5 5 i 's,000 $ 76,000 Total iles tric Plant (Net) 51,874,914 11,897.529 $ 1.92 6.06 12,025,592 $ 2,217.475 Total A66ct> $2,181,569 i2,449,472 $ 2.571,V7 2 12252,S60 $2,444,7sv Company Profile A4 g M.. h 3 g-Kane, oas anJ ucens cempain prociae, .m r i _,_,_, h 2 s m,_.a t useome,, th,ouchoot s.ioe sqea,e macs. ,!,s 3 neath thr entire southeast quarter sit Karisas '4 i l c o s a.i.,.ia m,i m n,_,,a , m 766oinmumtits. The s omparn also sen e,12 other elecins utihne at wholesale !L Int t rt tif) net il< ink afe nlaintaineJ with 10 i>ther I unhnes The c ompain n a member of the ~

y southwee roue,Po.ii e.

4, a,meu,ca enhm. cost,, sub,em,e,he iunsdit non of the cansas ( :orpiranon l kh ( :omnuuion, the i eJeral I nerev flegulaton

• l'.

('.otunuuton anJ iither state anJ federal N4 L f' 4 h ( avenues with lunsJit tion m rnatters suc h as ihose relannt n,ihe ennronment, satetv. - at t tiunt ting afid iuuarit e iit set urities ^ ^% klufing } 98V, 3b% ist tipt f at tfig rei enues [- _,, _ t -.n m. _, 2 m,,.., n t t ilnfl)ef t tal ( usttill) elk, 29% tititti indtist rial p , ger - t ue c,.ma m,,_. uemae _n -,, and iither sourt es Industnal revenues mo ludeJ lb% frtiTn file alrk f ait inanuf actuTLng. Ii% frsitu hujicrain jngjuuracs neu plms in bHbbutg gedl t'an[dn the petroleum retimrig and 15% from t henut al 750 f t ;no.lu cs alunununi aumniobdc schah fa, the inanotas runne, pnnt ipalh one i unorner ormmal campment marLct \\

Management's Discussion and Analysis of Results of Operations and Financial Condhion I 6 1 i Results of Operations carning, per, hare of common tock wne l $1.36 in 1989, a decrease from $2.10 in 1988. l Mild Weather and Refund, ) 1mer Earning. The 1988 carnmg> r share were 50.38 above 1 carnings pn 6 sate o $1 m hange in l arning, applicabic to common Stock were avnage arcs outstanyng reau ndmm the I $47 million in 1989, down 39 percent ompan(> purchase of us cmmnon Stock ha. J from 1988. Mild weather, refund, ordered inneases in earn ng, pn $ hare of j pm e by the Kansas Corporation Commi>> ion (KCC), approximately $0.08 in 1989 and $0.21 in 1988. i chmination of ihaw in revenue accruals and amorti:ation of phase in revenuer. led to reduced Dividends paid pu share of common stock carnings. IncreaseJ salci to wholesale customers, were $1.63 in 1989, an incicase of $0.12 from l a retail rate increase effective January 1989 and 1988. In Novembn 1989, the BoarJ of Directors t seduced operation and maintenance expense, declared a quarterly dividend of $0.43 per share, I kept the Jecrease from being much larger, an increase of $0.03 or 7.5 percent ovn the l Earnmg> in 1988 were $76 million, an increase dividend paid in each of the previous four of 9 percent over 1987, ai restated to reflect the quarters. Dividends paid per common Share in j adoption of Statement of Financial Accounting 1988 were $1.51, an increase of $0.12 over 1987. l Standardo No. 92 RcgidarcJ Enterpri.scs, in November 1988, the quarterly dividend was [ Accountingfor Phac-In Pl,ms (SFAS 92). increased to 50.40, a $0.03 or 8.1 percent I q Improved revenun, income from short term increase over the dividend paid in each ef the i invntments and rcJuced intere>t expense, all of previous four quarters. l 1 j u bic h more than offset increased operating Rate increase and Wholc$ ale Salc5 expensc>, led to the 1988 increase. Prov!Je Revenue increase j In 1989, the Company's return on average Operating revenues were $$34 million in j common equity was 6.9 percent compared to., 1989, $$26 million in 1988 and $$14 million in 10.6 percent for 1988 and 9.2 percent for 198r. 1987. Operating revenues for 1989 were affected by a $15 million increase in wholesale revenues, a $29 million rate increase effective January 1989, lower retail saln which reduced revenues I T,arnings per Share Dividends per Shne by an citimated $ 16 million primarily as a result of cool Summer weather, two KCC orJered i - $2.50 - 52,50 refunds totaling $15 million and a $$ million f j reduction in fuel expense which flows through revenun. The reduction of the rate increase and i - 2.00 2.00 the KCC refunds are discussed further under 4 Rate Developments. The Changes in Ope.ating 1 50 Revenun graph proviJn the major components 1 50 that account for operating revenue changes for { the past five years. l _ g,p) g I ~ .50 ,50 i ~ 0 O l F5 M 67 M 89 65 M 87 M 89 l l 4

l I Retail Kilowanhout Sales Dec!!nc While Changes in Oswrating Wholesale Salen Highest in Ten Years m;y'Awg g,'l l Retail kilowatthout hales in 1989 decreased.4 percent from the 1988 hates which were 3 ._ g o, m - stro t p rcent over 1987. The mildest summer weather i experienced in the last 20 years was the major 11 _ :o3 factor contributing to the 1989 $ ales Jecrease. 7. L_ s,w e p' "? l ", p I k l Industrial $ ales, the least weather sensitive of the d retril Sales category, increased only I percent in i 1989 as compared to a 3 p rcent increase in 6,000 1988. Smaller industrial Sales growth in 1989 was ? 20 primat ly from lower Sales to a (cw large industrial customers which experienccJ

4. M

~"- equipment problems and extended downtime for 0 maintenance. Sales to these customers are expecteJ to retum to normal in 1990. The Sales 2,p f g_,,, graph presents the components of kilowatthour Sales for the past five years. p [ ,g Wholesale Sales for 1989 increased by 76.8 85 86 87 m W 85 u 87 u u [ percent over 1988 which had a decrease of 6.9 g g g g, g,,g j percent from 1987. The increase in wholesale salci rewhed primarily from >hort term W indu*W D Waale E S" M ""ad' '"d '"h agreements with neighboring utilities and the mia.ie sna (wee availability of Wolf Creek Generating Station (Wolf Creek) throughout all of 1989. These transactions provided approximately $24 million of additional revenue, and contributed maintenance outage is ncheduled to begin in approximately $3 million to net income. March 1990. The 1988 increase in other i Oper: ting Expen$c Increases by $9 Million operation and maintenance was the result of the l Despite O&M Decrease 1.a Cygne 2 lease expense and Significant power plant maintenance. t The combineJ expenses of fuel and purchased power decreased by $5 million or 5 percent from Amorti:ation of phase in revenues began 1988 even though net generation it. creased by January 1989, as required by a July 1988 KCC W h a m W db 14 percent over 1988. The greater availability of i i Wolf Creek, which has a much lower fuel cost, expense ova 1988. Accrued phase in revenues contributed significantly to this decrease. Wolf will be amorti:ed equally through June 1998, a Creck's increased availability was a result of no puiod of 91/2 years. refueling and maintenance outage during 1989. Elimination of Pha5c.in Revenue Accruals and f Other operation and maintenance expense Lower investment income Reduces Other i decreased by $7 million or 4 percent (mm 1958, income by $37 Million j which had increaseJ by $35 million or 24 in July 1988, the KCC orJered the Company I percent over 1987. The 1989 decrease is to discontinue accruing phase in revenues 1 primarily the result of no refueling and effective December 31,1988, to bring the f maintenance outage at Wolf Creek. With the Company's phase in plan into compliance with d completion of the refueling outage in January SFAS 92. Ceasing accrual of phase in revenues I l 1989 the plant began operating on an IS-month reduced other income and deductions by the i j fuel cycle. This means refueling and major pretax amount of $45 million in 1989. l i maintenance outages are spaced approximately l 18 months apart rather than approximately 12 j months. The 1988 outage cost approximately $8 j l l million. The next Wolf Creek refueling and l 5

L e i Income from short. term investments in January 1990, the Company increased its Jecrea,ed $1I million as funds were used to ownership in CIC to 80 percent and will provide purchase the Cornpany's cornmon stock and additional funding of approximately $3 million i retire high coupon Jebt. Investment income in for development and marketing of PowerStat. 1988 had increased by $12 million over 1987 levels. Future investment income will be reduccJ Interca: Charges Continue to Decline to the extent the 1989 year end balance of $46 Interest c harges decreased by $9 million in million for simrt term investments is used to 1989 and $3 million in 1988. The 1989 decrease i continue the Company's stock purchase program results primarily frorn retiring the $100 mi!! ion i and retirement of high coupon debt. 13.5% Series First Mortgage Ibnds in March. j in 1988 and 1989, the Company made an Capital Requirements and Resources investment in and advances to ClC Systems, Inc., of Nashville, Tennessee, totaling Internally Generated Funds Expected to Satisfy approximately $ 3 million. ClO is developing Capital Requirements l 3 ^ PowerStat, a prepay rnetering system. The system ith no new generating facilities l enables customers to pay for electricity in currently planned, the Company's i 1 advance by purchasing a magnetic card to construction program is focuseil on i activate a switch in the metering system. providing service to new customers and f Throughout 1988 and 1989 CIC has continucJ improving present electric facilities. The l developing, mahfying and testing the avstem. construction program through 1994, including l Marketing the PowerStat began in 1989. The the purchase of nuclear fuel, is estimated 1 o be Company recorded a charge of approximately $3 $366 million. !\\bt maturities and sinking fund i million (included in Misce!!aneous Nei) in requirements through 1994 are estimated to be [ 1989 representing the net lowes incurrcJ by $58 million. The Company anticipates that [ CIC. internally generated funds will meet substantially r all of the $424 million capital requirements for construction and debt maturities. However, in l 1991, construction expenditures of $15 million l and a debt maturity of $57 million are expecteJ l projecicJ Construction to be provided from existing bank facilities. The Expenditures Projected Construction ExpenJitures graph provides the estimated construction expenditures j .__.$gog for the next five years. Congress is considering legislation which i ing would amend the Clean Air Act to require a two phase reduction in SO and NOx emissions. l _ 7$ It is not possible to predict the final form of the Il-50 t legislation, but the Com,any's current assessment is that capita and operating costs of complying with such legislation would not have a material effect on the financial condition ol the Company. - 25 in October 1989, Standard and Poor's j Corporation (S&P) raised its rating on the l l Company's senior secured debt to BBB+ from l BBB. Ratings on senior unsecured debt and I p l 90 91 92 93 94 preferred stock were raised to BBB from BBB.. l l S&P reported the upgrade reflected continued l - c.ai conuruuan tenhum improvement in the Company's financial M AlC performance and an excellent operating tecord at } the Company's 47 percent owned Wolf Creek Generating Station. S&P noted that F F 6 t

trengthening of the Gimpany's (mancial bankruptcy. The ultimate effeus of this event on condaion has been ihniugh rate relief, cost the realirable value d this commercial paper aintainment, reduced capital SpenJing and cannot presently be determined. reavinable sain growth. In 19M, the Company purchased cornitate. During 1989, the Company retired $100 owned hfe insurance policin on its key million of 13.5% Snin First hiongage Ibnds, management. The annual cash outflow for the $18.1 emilion of 16% Serin Fnst hiortgage premiums on ihne policin from 1989 through ibnds and purchased 683,500 Sharn of iti 1992 is approximately $27 million, in 1993, the common Stock. The Company helJ 6,920,299 Company will be able to bonow against the sharn of its common Stoc L m ocasury stock at accumulated cash valun of the policin. Afin December 31,1989. The Company has 1993, the borrowings are expected to produce cuthorization from the Ibard of Directors to annual cash mnows, net of expensn, through the purchase up to an additional 3,079,800 sharn, remaining hfe of the policin. Ibnowings against chich the Company plans to complete in 1990. the pohcin are paid back from the death The Company has authority from the Federal P"'c ceds. Energy Regulatory Comminion (FERC) to Rate Developmenth make shon term borrowings up to $225 milhon. Retail Rate Refund OrdercJ and N"'" N' "'" The Company has the following bank facihtin: n February 13,1990, the KCC ordered the Company to reduce its retail rain by

• At December 31,1989, the Company haJ shori ictm bank linn of crcJit totaling $75

$8.7 rni@(in and refund the same amount plusm.inen us as cusuunn$. In acairdance wth million of which none was outstanding at the orJer, a reduction in revenun of $8.2 million Y' * * "3 ' and accrued intnot of $0.4 million was recorded

• At December 31,1989, the Company had in 1989. The KCC had previously authori:cJ the

$160 million outstanding in unsecurcJ bank Company to increase its rato by $29 million, of bonowings. which $14.4 million was interim and subject to

• The Q,mpany ha a long term revolving refund, pending an audit of the Company's 1988 credit loan agreement totaling $150 million of financial rnults. The Company appealed to the which none was out>tandmg at year end. The

"'uns the mJn snaking the rain intnim and loan agreement was renegotiated in October subject uuefund. 1989 anJ cunently extends thniugh October The KCC $taff's audit roults found that the 1992. Company had a revenue deficiency of $18.4 Since August 1989, the Company has entereJ million, after the $29 million increase effective into internt rate swap agreements to reduce the January 198% Tiw Staff recommendeJ the $14.4 imp;ct of chango in internt rain on its noating million interim increase be made permanent, rtte debt. The swar agreements limit the internt The majority decision of the KCC r;te on approximately $120 million of its incornitated approximately $27 million of vari:ble rate debt. See Note 6 of the Notn to adjustments, most of which were prope,eJ by the Fin:ncial Statements for adJitional information. Citi:en's Util;ty Ratepayen, Ibatd (CURB). The Company routinely purchasn Short term CURB is an independent State agency which invntment grade commercial paper for special reproents the iritneus of rnidential and small cmnmucial cuumans before the KCC. The depcit internt accounts msociateJ with tax, exempt pollution control bonds (See Note 6 of adjusunents wne imputapons of revenue Notn to the Financial Statements). On February unociated with intenupable sain agreenwnts, 1,1990, the Company purchaseJ $6.6 million of Sale of gn fired capacity to a neighboring utility Drexel Burnham Lambert Group Inc. and reduction ofihe space heating rate. The commercial paper. On February 13,1990, Drexel KCC alsoejected the $taff's recommended Burnham Lamben Group Inc. filed for retum on equay of 12.53 percent and adopted a 12.03 percent return on equity. 7

a .e-e, X f y 9 y P" 4 4 ne Qvnpany beheves iti rates reflect its u.i Ownpany will(de with the KOC a acquent kr F d wrvice and willgpc c any refund or ' reconsideratkm, if necemary, the Omgeny will

wducike in 6:s raies. %e Company will file ask the courts to review this notter and wek with the KOC a request kg ecconsideration. lf.

. asynoval ro delay making the refund unt61 the, neicesary, the Qvnpny will ask the court 6 to - i.witet has been fully reviewal. . review the matter, and seek approval to contime. Cesapessy bguests han's d ' Lj to collect wvenues ai cunent rato until the - CemlSeselnsww metter he been fully reviewed. in 1 ( mber 1987.Kansa City Power &L Re6 sad Ordee,d fee Alleged Esceu Light Qwnpny (KCPL),ihe gerator d La 4 Fuel Cheeps se cuatesmees Cypw 1, a aal fired generating unit ownal On February 14,1990, the KCC ordered the Jointly with KG&E, requested suspenske d Qwnpany to icfund, in three annual lump sum. shipnwnta d high sulfm nel from Pittsburg and q payments, $6.9 million plus accrued interest d Midway C(wl Mining Qwnpany %Wn min w i approximately $1.3 million to its retall in comply with variom etate and federal ait customen. Revenue and interest expense f(v ""I"I" "'""d*'d AI'" """""C'"I"I ', negWatime wkh P&M to wduce << chnunaw,- 1989 teflect these adjustments. The refund the ammnt of awl undo cmtran, the m'nen - results from a KCC staff invntigathe d the fuel 4 charyn which were meed through the fuel filed suit against P&M to dewnniew the rights adjustment clause wille Wolf Creek wm out of and obhgatime d the pnin under the wrvice for its 1987 refueling and maintenance

agutnwnt, outape, and a subsequent unpt,mned 26 day On ikccmber 7,1989, the Ownpany and outage in January and February of 1988.

KCPL entered into a wtelement agreement with j The ntimated exceu energy costs are bawd P&M cmduding legal pnedings begun in 1988. The witlenwnt remits in the terminatkm on the premise that if Wolf Orek had operatal d 'h' h*#"* C'*I "',C h"*',C0""'C' *I'h P during the unscheduled outage days, the energy P&M as of1%cember 31 19(19 in conskleration. amis to the Company's retail customers would have been lower due to the relatively low c *t of d a single payment d $45 million, of which nuclear fuel in comprison to the Company's $22.5 millim was the Company's share, altunative fuel souten. The refund calculation is The Company believes the wetlement'with : bawd on a hypothetical attemative fuel mix P&M will yield net benefits to the Qvnpany and - rather than the Altemative Fuel Ratku required its customen by enabling the procurement and by the Company's fuel adjustment clause. If the buming d leu expensive and cleaner coal at La Altemative Fuel Ratkw were used, the refund Cygne 1. The mmt significant cat savine and amount would be approximately $1 million. benefits inchde reducing fuel cmts at La Cygne 1 The Compny believes that the KCC ha and compliance with cunent sulfur dioxide and, acted unreasonably by focming on an isolated paniculate eminion limitations without 78 day perkd of time when Wolf Creek's additkmal emtly telluthm control equipment.- puductivity wm unusually low, and ignored the The Company has filed an application with overall exceptkmal operating performance of the KCC for authority to defer and recover its Wolf Creek $1nce commercial operation in share d the wetlement through the fuel Septen.ber of 1985. For the perkd January 1986 adjustment clauw. Heariny nwy be held to - through August 1988, the performance of Wolf . determine the amount and method drenwery. Creek aved customen $26 million in fuel cats The Company believes it is reas6nable to expect above KCC expectations, net t.o he alleged the KCC to apr' rove much recovery. A similar ' cacca cmts incuned during the outage in application will be filed with the FERC.' ' / question. Thme uvine have been pued on io the customen through the fuel adjustment clause. The Company believn the fuel costs as billed were proper and will oppme the refund. The j, l q

f g f Management Statement of Responsibility. for Financial Statements The management of Kansas Oas and Electric Qimpany is too niible for the (mancial statements, rmio thereto, and otlwr information in thi6 report. The accompanying financial statements have bstn pregered by management in accordance with generally mcpted mounting principin. The mountmg spicm is in - accordan(c with the Uniform Sptem of Acc ounts procribed by the Federal Energy Regulatory Comminico and the State Corporation Qimmiaton of the State of Kansas. > The integrity of the accounting records to uphelJ by a comprehensive system of intemal accounting controls, ' monitored on a regular basis by the tuternal audit Staff of the Company. This sysicm is complemented by a sei si accounting gilicio and procedures which provide the necosary guidance needed to institute effective internal ' control. 5 The Ibard of Ducciors meintains its ovenight inponsibility through an AuJit Commitice consisting of three outside ducctors. The Gimmittee meets with managerwnt, the internal auditors, and the independent nu,htors in connection wah its review of matters relating to the Company's financial reporting; the Company's internal audit program: the Company's system of internal accounting controls; and servico of the independent., auditors.The Gimmittec meets with the auditors without management present in order to sourc 6ndependent. i treatment of matters brought to its attention.The Committee also recommends to the Directors the selection of independent auditors. F i J:mes T. Clark Vice Prnident Accounting Wichita, Kansas February 28.19@ -i i I r [ t i l i h I t 'I l ( l 'l t 9 i ^

Statements of Income for the Years buted Decemhc.r 31 - 1989 19hk 1967 fTlamsandd. Operating Revenpen (Note 2) [5]3:533 $52(3220. $514,3 h' On rating Emp n=cs l'uct and pm hused piwet 99,096 104,462 103,944 Other o;eration 129,472 128,464 99,699 i 41,767 50,011 'Tii,952 '43 Maintenance ~270.335 ~ih2837 l f9$ Total on ration and maintenance Ikprecintion 72,093 70,981 72,419.; Atnortiration. phanc in en enues (Note 2) 17.545 income tasc5 (Note 9) 13.527 10,436 24,763 - ' Othet taxc3 ., J2ditt J1413. J0 Mi l 7 Mil, Total operatins exp n6cs ,30],9)! 196.968 3 Operating locome _127,595 ,,129.,15} 1 3.8179.1 Other income and DcJuctions '47,838 - 45,011 Phase in revenues (Note 2) Investment income 9,139 19,668 7,281 Corporate-owned hfe insurance ne (752) (2,271) (5,417) Mixellancou>. net (5.907) 1,591 1,641 income tnses. net (Note 9) _l,2fil _{22,62$) _(21196)' Total other income and Jeductions 3,741 ,,_(Lilj _30.L41 Income Before Interest Charpen _Lil,))(i _120,4D _M9fM Intercat Chargen long-term debt 65,772 80,543 89,243 Other interest _I tt,07) ,,_J2f97- _7d11 Totalintercit charge net 6),tt43 JJ,l40 _9h1L4 Net income 47.493 77,183 72,322 Preferred Stock Dividends 81) 82] 2dM Earnings Applicable to Common Stock 5 46,672 5 76,362 $ 69,846 Average Shares of Common Stock Out$tanding 34,280 36,398 40,523 Earnings Per Sha,e of Common Stock 1,36 $_2JO $_1J2 ~ Sec notes tofmancial starcmenn. I f l l 10' n 1

a i o 4 o 4BaWica Sheets L Desemkr 31 1989 ~ 1988 (Thmoamhl A6hets Electric Ph.nt at Original Coat (Note 6) Plant in servke $ 2.382.118 $2,M0,577 Leu accunmlated deprec iation 543Alf 47Mit Nei plant in acrme 1,839.500 1,$71,631 Castruuion work in progreu 13,181 10,401 14 Electric plant hcid for future use net 6,522 6.627 Nmleur fuel net 157]J __ _ _ 9.110 - Total electric plant nei LF.IL9 Li ' lM7R2 Other Property and investmenin Special degu,iti(Notes 6 und 10) 14,391 16,347 - Other 90) 2J96 ~ Total other property anJ investments _.I5,294 _ _18.J4) 3' . Current Assets Cmh and cah equivalente 7,202-3,977 Short term investment > 45,973 154,382 ' Accounts receivable and unbilled revenues 45,328 38,M6 Fouil fuel at average cost 21.152 ~ 21,573 Material, anJ oupplien. at average ont 28,241 28,642 Prepayment 6 and other current msets 9,02 $ t)); Total current msets _l56,931 J h 26.;- Deferred Debits and Other Annet. Ikfened regulatory revenue (Notes 2,9 and 10) 125,520 78,701, Phase in revenuc> (Note 2) 149,128 166,673 Ca.porate owned life insurance net 37,697 295 Ikcununtaioning trust 3.710 2,694 Unamorit:cJ debt expense 6,764 7,404 Other _ U42l ,_R721 Total deferrcJ debits ._) Rep J{My Total $ 2,381,569 $ 2,439,372 Capitalization and Liabilities Capit.ltration (See Statements of Capitali:ation) $ l'.409,589 $ 1,482,. 5,h6 Current Liabilitics Short term borrowing (Note 3) 159,900 90,2(0 Securitics due within one year (Note 6) 215 102,480 Accounts payable 74,068 ; 67,498-Retail refunds (Note 2) 16,757 - + interest oc crucJ 17,762 21,781 Taxc> accrued 12,353 15,026 Cu:tomer,' depositt bl6T ___300.6}p-3J(i) Total current liabilities 2.tti,3.2.3 Def:rrcJ Credits and Other Llobilities Ikfened income taxes (Note 9) 287,454 '251,816 : Ikferred investment inx uedtis (Note 9) 74,063 75,808 Ikferred g in from sale leaseback (Note 7) 300,542 310,169 . Accennulated provision for decomminioning 3,710 2,694 Other

2) M 9 l}A19 -

Totti deferrcJ ucJits and other liabilitica _byJ,7 jib ._.(i}i916 Commitments and Contingencies (Notes 2 and 10) Tot:.1 $ 2,381,569 $_2,439,372 - L See notes so fnumcial statements. I1

Statements of Cash Flows for the brs Erded December.41 1999 1988 1987. Incrcair (Decreaw) in Ca4 ami coa Equanienn (Thomtmds) Ca6h Floma fran Operating Activitics Net 6ncome $ 47.493 $ 77,183 5 72,322 AJ;ustments to scomc tle net income to net cash prov6Jed th rn tarion and amor:::ation 79,294 80.967 84,319 t DefenrJ income taxes 9,916 26,118 (55,576) IMoncJ mvestment tax credits net (1.745) (476) 51,596 Phair in arvenues and amorti:ation 17.545 (45,011) (47.838) Corporate owncJ hfr itaurance (k l.12) (5.326) (2,596) Coal contract oritirment (22.500) Amortt:ation of rain from sale leaselw k (9.627) (9,638) (2,410) Other. not 10.481 ' 2,138 (2,229) Changes in current assets and liabilities: Auounts rectivable and unbilled revenues (6,972) (2,973) 6.124 Other current as* cts (871) 589 3,324 Auounta payable and triail refunds 23.127 15.016 12,769 AarueJ liabilitle. (6.692) (20,179) 26.992 Other cunent liabibiles (heti) 311 211 Net cash provided by operating activities J10Alf 1IK721 J.iltl9 Canh Flows from F6nancing Activitics Pnwcc,h from: lisuance of common stock 154 3.016 $33' Il5AV ' 150AV Ittvolving credit agreement Special Jcposits 1.956 - 22,499 (22,988) 144 923 Other long-term debt ibnowings again6: cash surrender value of hfe insurance policies 2.130 26,342 45,944 Short icnn tenowings: Proeveds maturities over three months 75,000 Maturities three months or less. net (5.300) 43,200 39,500 11edemptions of: First mortgage lunds (118.100) (26,W) (38,300) llevolving cresht agreement (30,000) (235AV) (170AV) (20AV) - Otbre long term debt (180) (23AV) Preferred stock Purchases of treasury stock (17.912) (77,629) (39,2 9 ) Divdends paid E6,720) Aff1R) E M l6) Net cash used in financmg activities (148,972) (184,747) (135,181) Cash flows from Inventing Activitics i AJJitions to electric plant (56.765) ($2.854) (53,920) Corporate owncJ life truurance pohcies (28,349) (26,380) ,(50,155) 392,100 Proceeds from sale leaseback Purchase of shon tenn investments (7.332) (16.592) (373,723) Drawdown of short term investments 115,643 160AV 76AV Other investments _(1440) _IlJH) Net cash provided by (used in) investing activities _2LMtl . _t2,)31 EM) Net increase (Decrease) in Cash and Cash Equivalents 3,225 (3,685) 2,148-Cash and Cash Equivalents at Beginning of Year _)M7 '._746L ._Mll l. Cash and Canh Equivalents at End of Year {,_7@2 $ 3,977 $ 7,662_ Sec norcs so fmancial stancmenn. 12 i l

s !.Stareinena of Capitalization Duember 31 1989 198N (7kmdd Cannum Simk huity (See Statements d Common Simk feity) Cornmon ata L, without par value, authort cJ 50,W,000 > hares - 6 636.815 45,2 % S 636.661 42.9 % Retained carnings 162,071 11.5 171,298 11.6 Other paid in capital _26$ 1 ?M a Subtotal 799,151 $6,7 808,224 54.5 Treasury stal, at cut (134,800) (9.6) ~1116,868) ~p.9) Tcal Common Sim L r,ity ~is4i3tl 17,~1 14LM6 46T6 Cumulative Pederred Siwk (Nwe 4) Redemption not required: 4 %%,5100 par value; authori:cd and outstanding $2,0116haren 8,201 8,201 Serial, $100 par value; authori:cd 255,W Sharca: 432% series, outs.:andmg 60,0& hares 6,000 6.W 4.28% erien.outstandmg 45,000 $ hares 4J00 3W Tc:al Cumulative Picfened Stock IttRI 1.3 - __thJd 1.3 kmg Term Debt (Note 6) Fir:t Mongage Ikmdu Serie6 Due 1989 1988 $ 18,100 16 % 13%% 100,W 4%% 1991 $ 7,000 7,M 14.05 % 1991 30,000 30,000 14%% 1991 20,000 20,W 5%% 1996 16,000 16,0D0 8%% 2000 35,000 35,000 8%% 2001 35,000 35,000 7%% 2002 25,000 25,W 6.8% 2004 14,500 14,500 9%% 2005 40,000 40,000 8%% 2006 25,000 25,000 8%% 2007 25,000 25,W 6% 2007 10,000 10,000 5%% 2007 21,940 21,940 8%% 2008 30,000 30,000 9%% 2016 _ 50,000 50,000 Total Firat Mongage ikinJ6 384,440 502,540 Other Long Term Debt: Pollution Control Revenue ikindi: 5%% Series 2003 14,820 15,000 Adjustable rate series 2013 63,000 63,W Adjustable rate series 2013 87,000 87,000 Adjustable rate series 2014 98,000 98.000 Adjustable rate series 2015 79,500 79,500 Revolving crnlit agreement 1992 30,000 Unamonimipremium anJ ducount-rwt (8) (11) t Tot:1 Other Long Tenn Ikbt 342.312 372,489 Securities due within one year (215) A02,480) Total Long Tenn Ikht ~7fhi517 51.6 j )f4b 52.1 Total Capitallration .$Jd09,51i9 100.0 % $1d8QS6 LOAQ% t $t'e r\\0tel 80 fir \\WleNd Stiltemer\\tS. F M 13 t

t -1 l Staiements.of Common Stock Equity L An dic 1'can Dated Dctenh r 31,1989,19Mi and 1987 C1'mmtwt.hmk Trt#ptrhsk Orker Shore Pand4n ' bialewd ..l>6mL Anmust Capi.ipt, _[+rnings Shotes. Anw=nt Total - (Thomands cucp: Slars) l blance Janu:.ry 1.1987 40,799,699 $633,112 $265 $136,352 5 769,729 Net income 72,322 72,322 Cmh dnitenk Common ataL $1.39 pre sharc (56,060)' (56.060): hrft rrcJ Simk (2,476) . (2,476)" Purtha c of trea.ury simL (2,055,300) S (39,259) _. (39,2 59)' ' 513 Employee atmL plani 23,548 511 Im on ernequired picierscJ 6tm L - (4) -(4) i bl nce Dnember 31.1987 40,823,247 633,645 265 150,134i (2,055.300). 0 9,259),744,785 Net income 77,183 77,163 Cash dividendo ' Common simk $1,51 vr i. hare (55,198) ' (55,198)" i I Pacierred aimL (821) 3

(821).l Puitbaw of treasury stak (1,981,499) - (77,629)' -(77,629) -

3,016 Employee atmL plans _ 157,118 Q16 N!ance Dwember 31.1988 40,980,585 636,661 265 171,295 (6,036,799) (116,888) 691.336 Net income 47,493 . 47,493 1 H Cash dividende Gimmon $tt.tk $1,63 per share (55,899). ' (55,899) ' PrefericJ simL (821) -(821) Purchaw of trecury simL ' (k83,500) (17,912).;(17,912) .I y Employec aim L plar,> 7.490 ,154 154 blance December 31,1989 40,988,075 }6]6,815 p265 5162A71 (6,920,299)$(13,4M) }664,M1 i See notes tofmancalstatements. e h l, 't 4

t SStat'ements of Income Taxes. ' An AcYen EndedDccernN 31 1999 19ks '1987 I (Thousarch). Income Tem na beordwl in die Statements <4 income Opereting egees: Currently payabic + Twlesal $ 4,773 $ 4,883 $ 34,530 ..Siate 49 (701) 16,039 Deferred. Federal 6,739 2,76) (65,729) 4 L. '. State. 3,340 3,611 (11,763) i Inmtment tax c mhi. Ikferral 1,365 2,541. . 54,542 + Atnantration . 1247 ) ?) JLO9) _1LD(s) Total JM27 1MM ._2MO 4 Oihn income and deductiam Cunently payable Federal (678).

2,739 (655).,

.Stnic (49)' 701 ' 127 1%ferrcJ. Federal (147) 15,963 18,781 Staic (16) '3,783 3,135 inmtment tax credit amorti:ation D71) ,_1} 5t!) -{90)' Total lh2il) . 2A828 . 21,298 H2,266 $E2f3' L._4606) Lialincome taxes Sources of Iklermi income Tous 's-Accelerated deptulation ' $31,875 $30,803 5 33,228 Disallowance of riant onts (Note 2) 1,236 .1,236 .-1,236 the in revenues (Note 2) (7,905) - 18,771. 21,916 Unbilled revenues (I,975) (1,975) ' (2,550) Anelerated amoni:ation (11,736) (11,799)- (13.015)- Net operating tax loa (1,243) (2,069) 47,291 . IkfencJ gain on sale leaseback 4,248 4,248.

(140,926)-

Alternative tuinimum tax credits (5,460). Coal contu.ct settlement (Notts 2 and 10) (8,622) . (10,163). Retail refunds (Note 2) 6,444 N Other. net J,014 '.JL9Js), 122 %) fliS1h) Total L9alfi 12MLB J r Efhtive Faleral Income Tax Itate Statutory federal income tax rate 34%. 34 % .40% AdJ (Deduct) income tax effects of: i Accelerated amorti:ation of deferred income tax credits (Note 2). (17) (9)- (11) ikpreciation 10 5 8 Ikncfit from state income taxes '(3)

(3).

(5) H Amortitution of investment tax nedit. (5) (3) (1) 'L Corporate owncJ life inwrance (3) Other items. net (no one item makes up more than 2%) (1): (1)~ 2-Effective federal income tax rate 15% 23 % 33 % ' See notes wfinancial smtemenn. . m m 4

"4"*

• a' "* """ * '""^"*"' ""d '"b' ' '#

Notes to Financial Statements nwca"nt as an auci ai annel cat and o amortircJ to exp rac bawd upm the quantity of heat poJuud for the generatum of

1. Summary of Signifkant Aucunting Polici" dntriory. The anumulatcJ nmortantum of nuclear fuel in Sr tem of Accounts. The Gunnmy si oubjni to the the scactor m IV< cmbr 31,1989 and 1968 wm 519,9 an:t $9.6 jurinduiion of the State Corpranon Comminion of the Staic mdlion, topttMir. The GimpanC6 rate n heduln inc lade a of K.nsa$ (KOC) anJ the Fe teral I nergt Regulatory furt adjmtment clauw whic h permiti cunent semvenn cd fort Commioion (11RC) and mamiaira its account 6 in au ordan(t usu.

cith the umform nitem of acwant> procribed by thne Depentathe. For (mancial rennting purpwn, the argulatory cornmiulon6 As a regulaicJ utihty, the acmunung Gunpny 993 the Straight ime meth(d to Jcpn inte the prmopin apphed by the Company affer in cenain rops ts n,q,md con of ponny mcr su niimacd ecmaimng wrrke from show apphed by non regulaicJ bunnen. hfr. The pnivisin for denn lation 61aint as a penent cd 1:lectric l'lant The cost of plant insluJes contracted wcak, origmal uia of deprn inble pmperty was 7.9% for 1989,1988 dmst labor and mate iah, allocabic crencning, supervnion, anj 1987, gencial and admmist,ative amis, and allowanc c for fund > uwd income Ton. nc Gimpany adopied Staicment of dunne ainstrwtion ( AICh AIC intefincJ in the app!k aHe Fmancid Asomntmg Siandarda No,96, Accounpr$ for inamic - regulatory erstem of acomnis as the net not during the Iwriod Tam (STA$ 96) in 19b7. Th66 6taicment acquien the. ni constrm tion of honowcJ fands uwd for construoion Compny to nmNnh A fened us habihhn or auen, m puronn, inc luJme nmicar luc 1, and a irmonabic rate on othe' appopiate, f.n all tempnary ddinenco, and to aJ)uu fund 6 when m uwd. AIC in 1989,1988 and 1987 w" deferrsd tax balanc n to ref!cci chanen in ux emin expnu d to immaterial and, thewfore, not separatcJ on the inc ome be in effect during the perkd* m whk h the icmenary rittements. afferencn revn>c. The Significant temenary afferenen that Maintenancc and repairs of popeny, and replacements und give rise io the net accumulaicJ defened inmme tax liabihtin renewoli of itrme determtnni to be Ica than unit $ of popeny, include unclcrated tax & iconiton, AFC, unamortized t arc (harpd to operating experan. The cnt of units of invntinent tax creats, defernd gain inun hale leawlwk, and popeny scplac cJ or senewn!, plus removal nata, leu salvare, phaw in sevenun. tu harged to auumulatal deputtation, and the coat of relaint in accordanc e with various rate orders ntnved from the teplaccluenth and tenewalb in ad1d to cINtric plant. KQ de Gunpany b not yet NIIccHd thfough rates IIW Itettennent are chared io clntric plant, amounu nncuary to pay a significant pwilon of the net Other Property and invntments. At ikccmber 31,1989 defened inmme tax liabihtin As the Gunpany helievn it in i the Company auounini for in myntment in CIC Systems, pobable that the net future inacain in inuune taxn payable Inc. (CIC) using the niuity method of nuounting. In Jam.arY will be remvend from coHomers through future rates, it has 1990, the Company incrcawd its ownership in CIC from 50% rennJnl no defened regulatory revenue unwis for the portiom to 80% of the net income tax liabihtin not yet collecini through Short. Term Intntmenn. Short term invntmenu rain. Thnc aarts are al a a tempnary afference for whkh regnent the unexpended pocenh from the sale leanchack defened inmme tax liabilitin have been novidal at exh dnc nbed in Note 7. Thne invntments consist primarily of balance $heet date. cernficato of dermi anJ variable rate municipal debt intnement Tax credits. The Tax Reform Act of 1986 in:truments havmg an average matunty of approximately 30 repealed invntment tax creat$. In accordance with KCC Jays and vanable rate prefened Stock. Qwt of thne

n. quin ments, invntment tax credits relating to utthey propeny mvntments approximain market.

placed into ncrvice are defened when utilind and are leme Coh Surrender Yalue of Life Insurance Policin.The amonized to income over the remaining livn of the related followmg amount related to cornitate owned life imurance popeny. contracts are recorJed on the Mancc shecto Suu.irents of Cah Flows. Rn purpan of the Statemenu of cash flows, the Company considers highly liquiJ Jebt _1989 1MK imtruments, except thcae claulfini a6 Short tenn invntments, (Millunu) pun hawd with a maturity of three months or los to be cash equivalents. Onh Surrender value of contracts $115.3 5 75.8 The amounts of internt (net of amounts capitdtted) and - Ikarowings agaimt wntruta J77.6) GM) income taxn paid for each of the three yeon in the perhdi Nei U7,7 LM cnded December 31, are m followo internt expeme includni in the corpente owned life .j M1,

_1MR, 1ML insurance. net on the income statements wm 56.9, $5,9 and (Thouwndd

$4.5 million for 1989,1988 and 1987, enpectively. Revenun. Operating revenun include amounts actually Internt ElsL92 IELME INE billed for $crvien rendered and on accrual of ntimatcJ income taxn D M L5,9 N 5 33 @ unbilled revenun. Unbilled revenun enuit from servkes deliveral since the perkd mvered by the lutot billings to Reclusificatkm. Certain amounu in pior yean have been natomen. reclautficJ to conform with claulficatiom uwd in the current Fuct Coats. The cost of nuclear fuel in procca of year prnentation. l 16-i j

. & Regulatory Matters fuel msts nmed ihrough the fuel adjustment clause as a resuh in July 1988, the Kansas Corporatuin Conumssion (KCC) of W"If C'erk hr hR off h"C 78 ddY$ more thao scheduleJ inued an order nuhfyi.w ihe rate stabihzanon plan (plan) between September 27 1987 and February 16,1988.1989 appnwed in hiarch 1987. Mahf a anons to the phm included: revenues reflect the refunJ ni anordan(c with the order and All phaw in revenues and carrying charges were deternuncJ an addnional $1.1 milhon of mierent exlwnse. Management on a net of tax bam and the carrymg c harges on temporary behnes the f(ici costs aquHW wcre pnipe! and w@ oppne the exceu capacity disallowance were calculated on a net plant 'Cf""I D' ("""P""Y *'N NC *"h OC " "'4 ""*' N" baus. reconsideranon It netessary, the Lompany wdl ask the courts to review this nmiter and seek approval to delas making the All tempon.r) excess capaoti dnallowances were uuluded r fund umd the meer he been fully reviewed. m tate baw eticctive January 1,1989 .The Company has filed an upphcation with the KCC f.or Accrual of phase m revenues was discontmued effecove aAirny to defer the Company's share of a mal wntract Dec ember 31,1988. walement wub PittsNrg and Midway Coal Mining Company Effective Januan 1,1989, the accumulated phase-in anmunting to $22.5 milhon and recover its share of the revenues asset of $21.6 nulhon, net of related mcome taxch-settlement through the fuel adjustment clause. The settlement received iute base treatment. Effec ove the same date, the resuhs m the termmation of a long :enn coal contract. Cony any began amoni:mg the phase m revenue anet on " llearmgs may be held to detennme the amount and methat of stnught hne basis over 91/2 years. recovery and management twlieves it is reasonable to expect

• The $15.6 nulhon rate mcrease scheduled for Januari 1, the KCC wdl approve such remvery.

iW2 was clmur.aicJ. 3. Short. Term llorrowings

• The Company wdl no. i.e ennited to any funher rate At December 31,1989, the Company had bank credit increases untilJanuary 1,1992 barring extraonhnars arrangements available of $75 milhon. Meximum shon term circumstances.

turmwmgs outstandmg durmg 1989 and 1988 were $178 Three cotaponents of the March 1987 order not mahhed million on June 2,1989, and $137 milhon on July 6,1988. were (1) the Company's commument to mclude m n> revenue The weighted average interest rates, includmg fees, were 9.6% requirements an expc ;teJ $800 million stream of net income for 1989 anJ 81% for 1988. generated twer the next 40 years through corporate-owned hfe 4, Cumulative Preferred Stock miunmce contracts; (2) the deprecianon rate for Wolf Creek The call pnces at December 31,1989 on the 41/2% 4.28% at 2.6% a decrease from 1.4% as a resuh of a change m its depreciable hfe from 30 to 40 years; anJ (1) the $29 million anJ 4.32% series preferred stocks were $110, $101 and $101.64, respectively. The embedded costs of preferred stock at rate mcrease effecove January 1,1989; however, $14.4 mdhon December 31,1989,1988 and 1987 were 4.44% of the increase was subsequently made imerim and subject to 5. Common Stock refund contingent on an aubt by the KCC of the Company's 1988 cost of service. During 1989, the Company adopted a long term incentive The KCC's mmhfications to the plan broenht a m plan (plan) providing for the issuance of up to 1,500,000 shares comphance with the requirements of Statement of Financial of muunon uock during a period of ten years begmumg Accounting Standards No. 92, Regukued Emerprnes - January 1,1989. The plan permits grants of various awards to Acconnang for lhe in Plam (SFAS 92), but also resulted m qualified employees. During 1989, grants for 10,424 and 29,751 changes to the amounts of phase m resenues and related shares of perfonnance shares and opnons, respectively, were deferred mmme tues previously recor&J m 1987 m made to qualified employees under this plan. The perfonnance connection with the plan. As permatcJ by SFAS 92,in 1988, shares are inuable unhe employees five years (nun the gmnt the Company restated as 1987 fmancial statements for these period while the options are exercisable for a period of nine chan a. years after the grant year unless the employce's service is in February 1990, the KCC inued an order to ref unJ $8.7 milhon and redute rates b3 an equal amount. The refund is a At December 31.1989,1,500,000 authori:ed shares of ponion of the Januarv 1989 $14.4 million mtenm rate increase conunon uock are resened for ieuance under the plan. that was subject to refund contmgent on an auda by the KCC 6. Long Term Debt of the Company's 1988 cost of service. The Comp.my haJ Required redemptions and sinking fund payments for 1990 billed $13.7 million as of December 31,1989, and has reduced through 1994 for long term debt are 50.2, $57.2, $0.2, $0.2 1989 revenues b3 $8.2 nuthon. In addamn, the Company has and $0.2 mdlion, respect vely. The redemption requirements accrued $0.4 milhon,,f mterest expense m accordance wnh for 1992 and 1991 would be mereased by $56 and $192 the order. Management beheves its nues reflect ts cost of million, respecovely, m the event that the irrevocable letter of service and will oppose any refund or reduction in na rates. credn agreements with respect to the $63, $87 and $98 million The Company will(de with the KCC a request for adjustable nue senes are not extended or other arrangements reconsideranon. If necessary the Compans will ask the courts for collateral are not made. to review the matter, and seek approval to cononue to col:cct Fuu mongage bonds may be issued in additional amounts, revenm s at current rates until the maner has been fullV hnutel by pmpeny, camings and other provisions of the evrwed. Company's Mortgage dated April 1,1940, as suppiemented in Februarv 1990, the KCC also mued an onler to refunJ m (Mortgage). Electric plant n subject to the lien of the three annual lump sum payments $6 9 milhon plus accrued Mortgage except for transportatua. equipment. interest from the date of collece m to ts retail customers m i l7

The 6.8%eries, due 2004, and the 5 7/8% and 6beries The gain of approximately $322 milhon reali:ed a*t th date. due 2007 are pledgcJ as collateral for gullution control of the sale has been deferrcJ for fmancial reportmg purnwes, revenue bonds issued by Kansas municip.dities. and is being amorti:cd over the initial lease term in proportion The four adjustable rate series pollution control revenue to the related lease expense. The Company's 1989,1988 and bonds are secured by irrevocable letters of credit. Interest mte, 1987 lease expense, net of amorti:ation of the defened gain, is for these londs are variable and are determined on the basis of approximately $4 $30 and $7.5 million, respectively. prevailing market rates for debt instruments of like tenor and Future minimum annual lease payments required under the quality. The Company is required to maintain special deposits agreement are approximately $41.9 million for each year to be uscJ for debt service for the $87 and $98 milhon through 1994 and $1,054.6 million over the remainder of the adjustable rate series. Such accounts may be used for interest contract. paymenti, but must be subsequently replenished to the 8. Ilenefit Plans required account tulance of $15.7 million.The followinM The Company has noncontributory, defined bene 6: pension information is applicable to these issucu plans fm aH employees. Plan benents are genendly bawd on years of service and the employer's highest aggregate Weighted compensation in hve consecutive years of the final ten years of Letters of Credit Ascrage Ne. wtvice. Due m the pre,ent funding status of the plans, the Description Expiration Dates Interest Rate Company's current fundmg policy is to contribute the 19M9 J M minimum amount required by federal law. i$t December 17,1993 7.0% 6.0% Net periodic pension cost for 1989,1988 and 1987 included 6 the fonowing componentu Series due 2013 May 1,1992 and- $87 million thember 2,19H 6.2% 5.4% 39gg g9gg 79g Series due 2014 ' gg "') $98 million November 3,1991 6.2% 6.0% hi c M6mamW Series due 20M during period $ 3.2 $ 2.6 $2.7 $79.5 million August 15,1995 6.8% 6.2iL Interest cost on projected benefit The revolving credit agreement, due 1992, is for up to $150 obliption 6.2 5.6 5.3 million. This agreement may be extenJed in one yea' Actual retum on assets (19.8) (14.2) 2.9 increments until 1995 and it may be repaid prior to its duc date Net amorti:ation and deferral _12.6 15 .191) 1 without penahy. As of December 31,1989, the Company had Net periodic pension cost $ 2J f1.5 $1.8 no borrowings under this agreement. The Company has entered into interest rate swap agreements to reduce the impact of changes m interest rates on The following table sets forth the plan's funded status at its fh ating rate debt. At December 31,1989, the Company November 30,1989 and 1988 (the plan years) and a reconciliation of such status ta the December 31,1989 and had outstanding six interest rate swap agreements with 1988 financial statements: financial institutions, having a tota! notional principal amount of $120 million. Undct these swap agreements, the Company will pay the counter parties interest at a fixed rate and the Actuarial present value at November 30: 1989-1988 U""d counter parties will pay the Company interest at a variable rate luwd on the London Interbank Offered Rate (LIIOR) at six Vestanenent obligation $_19.6 $36J month increments. The 6xed rates payable under the swap Accumulated benefit obligation $ M- $ 60.6 agreements range from 8.2 L to 83 b. These swar agreements Man assets at Nmember 30 terminate in increments of $50 million in 1991, $30 million in 1992 and $40 million in 1993. At December 31,1989, the (principally common stock of pubh,c Company had no exposure to credit loss in the event of C"'"P""ICS ""d U 8 R"VC'"*C"' "CC"'IIIC") $105.4 $ 89.4 nonperformance by the other parties to the interest rate swap agreements. At December 31,1989, the amount recogni:ed in Pmjected benent obligan.on at No em (84.4) (79.0) the financial statements for interest rate swar agreements was g, g immaterial. benefit obligaton at November 30 21.0 10.4 The embeddeJ costs oflong.tenn debt at December 31, Unrecogni:ed net gain (mm past 1989,1988 and 1987 were 8.30%,8.46% and 8.93%, experience different from that '0*PCC'iVCI - assumed (28.7) (16.4) Y 7. Sale Leaseback of La Cygne 2 Prior service cost not yet recogni:cd in September 1987, the Company sold and leased luck its in net periodic pension cost 5.9 6.0 50% undivided interest in La Cygne 2.The lease has an initial Recognition of net mset at term of 29 years, with various options to renew the lease or January 1,1986 over 18 years (2.6)- (2.9) repurchase the 50% undivided interest. The Company remains Contribution accrued for December -~(0.2) '_{0.1 ) responsible for its share of opemtion and maintenance costs, Pension liability tecognized in the and other related opera:ing costs of La Cygne 2. The Company balance sheets at December 31 $ (4.6) $ (3.0) has determined the Jease is an operating lease for financial reporting purposes. 18 4

y ', Thefollowing were used in the determination of cciuarial Creck owners (Owners) have purchased the maximum prnent v: lues of the projecied bcnefit obligatiom at available private insurance of $200 million and the hdance is ' November 30: provided by an uswament plan mandated by the Nuclear Regulatory Comminion. Under this plan, the Owners are M69 1M jointly and severally subject to a retrospective auenment of up Weighted average ducount rate 8.0% 8.0% to $63 million ($29.6 million, Compmy's 6 hare) in the event ' Rate ofincrease in future I there is a nuclear incident involving any of the nation's compensation 6.0% 6.0% licemed reactors. If the Owners' share of claims and legal costs leng.:crm rate of retum per incident exceed $63 million, the Owners may be ' o n m ets 8.0% 8.0% surcharged up to an additional 5% of $63 million ($3.15 The Company spmsors defmed contribution plans for all million). There is a limitation of $10 million ($4.7 million. cmployees.The Company's matching contr@ution is based on Qimpany's share) in retrospective anessments per incident per the Company's performance durt Grror year and year. employee contributions. Th: W ape % for toe plans was The Compmy carries the maximum property and $3.9, $6.5 and $1.8 milll@n AW. 39&nd 1987, decontamination insurance, approximately $2 billion, respectively, provided by a combination of

• nuclear insurance pools" and 9.

Income Tna duelcar Electric Imurance Limited (NEIL). The minimum See Statmm> ofincome Taxes. cmwe punemly recited by the Nuclear Regulatory At Ikcember 31,1989, the Comsmy has unused Commissmn is $1.06 billion. The Company abo carries asklitional maurance with NEll to cover the cmts of-inve:tment tax credits of approximately $24.2 million wplacement power during a prolonged outage at Wolf Creek, if ' available for carryforward to future years which, if not utilind. lones incurred under the NEIL policies exceed premiums,. will expire in the years 2000 thmugh 2002. These credits have been applied in determining the Company's net deferred wsm es and other NEIL resources, the Company may be income tax liability and corresponding deferred regulatory . subject to retrospective assessments of approximately $5

• ig "

rcvenue anet at Ikcember 31,1989, in addition, the Company {'[*,"'y'n ikccmber 1987 Kansas City Power & Ligh't i has net operating loss carryforwank for regular income tax purposes of $8.9 million which expire in 2003 and 2004 and Company (KCPL), the operator of La Cygne 1, requested, alternative minimum tax credits, which carryforward without suspension of shipments of high sulfur coal (mm Pittsburg and expiration, of $15.6 million which may be used to offset future MiJway Coal Mining Company (P&M) in order to comply. regular tax to the extent the regular tax exceeds the alternative with various unte and Federal air emission standards. In minimum tax. January 1988, KCPL and the Company filed suit against P&M.

10. Commitments and Contingencien to determine the rights and obligations of the panies under this contract. In February 1989, P&M countersued for breach Spent Nuclear Fuel Disposal. Under the Nuclear Waste of contract and bad faith, claiming damages exceeding $75 '

Policy Act of 1982, the U.S. Depanment of Energy (DOE) is million. In December 1989, the Company and KCPL entered resp (msible for the uhimate storage and disposal of spent into a settlement agreement with P&M concluding the legal nudear fuel removed from nuclear reactors. Under a contract with the DOE for disposal of spent nuclear fuel, the CompmY proceedings. The Company has filed an application with the KCC for authority to defer and recover its share of the pays a quarterly fee to ICE of I mill per kilowatt hour on net settlement, $22.5 million, which is recorded in deferred nuclear generation. Such fees were $4.6 million for 1989 and regulatory revenue, through the fuel adjustment clause. $3.1 million for 1988 and 1987, respectivelY-llearings may be held to determine the amount and method of ' Decommissioning The Comsmy's share of Wolf Creek recovery. Management believes the settlement yields net decommissioning costs is estimated to be approximately $97 benefits to the Company and its customers by enabling the million in 1988 dollars. Decommissioning costs are being Company to procure and burn less expensive, cleaner coal at : charged to operating expemes. Electr e rates charged to La Cygne 1 and should be recoverable through the fuel customers provide for recovery of these decommissioning costs adjustment clause. over the life of Wolf Creck. Amounts no collected from in February 1987, Chevron U.S.A., Inc. (Chevron) filed an customers are deposited in an external trust fund and will be action in the United States District Court for the District of med miely for the physical decommissioning of the plant. At Kansas agaimt Kansas Gas Supply (KOS), a natural gas December 31,1989 and 1988, $3.7 and $2.7 million. tcspectively, were on deposit in the decommissioning fund. supplier of the Company, alleging a failure to purchase During 1988, the Nuclear Regulatory Commission issued final contmeted amounts of natural gas and to pay price increases. In January 1983, KGS filed a third party complaint against the! regulations on decommissioning licensed nuclear facilities which require among other things, that licemed electric Company seeking recovery from the Company for any damages which Chevron may recover from KOS. Chevron is seeking : utilities submit a decommissioning report within two years-damages in excess of $250 million. In July 1989, Barbara Oil The effects these new regulatiom will have on the Company. Company and Pickrell Drilling Company filed a similar action including a detennination of funding requirements beyond in the Barber County District Court against KGS seekmg those presently provided through rates, are under review by the damages in excess of $50 million. In September 1989, KOS Company-filed a thini party complaint against the Company in this ' Nuclear Insurance.The Price Anderson Act limits the additional action. In both cases, KGS alleges that it had combined public liability of the owners of 115 nuclear power obligated itself to purchase gas for the benefit of the Company, ~ lants to $7.8 billion for a single nuclear incident. The Wolf that the Compmy's dealing with it were not consistent with p .i 19' I e 3

l teamnable standards of fair dealing in the trale, that the

12. Qu rterly Financl:1 St:thtics (Un:udited) l Compang acted in bad faith and that the Compan)'s actions (neands, exetit ter dwe ammntd constituted fraud. KOS further alleges it was acting as an agent of the Company when contracting for gas supplies.

_4th Qtr. 3rd Qtr. 2nd Qtr. - Ist Qir, 1989 _ hianagement has denied the allegations of KOS and believes thm it has, at all times, fulfdled its contractual obligations w th Operating respect to the supplier, has acted in gml faith and that KOS llevenues $120,737 $164,716 $136,365 $111.715 was not an agent of the Company. Operating While the resolution of these matters may have an impact income 23.153 48,133 34,985 21.324 on the financial tesults of the year in which the matter i, Net income 944 30,200 15.016 1.333 settled, management believes that the ultimate disposition of Eaniings A yticaNe these matten will not have a material advene effect upon the Pl business or (mancial pwltion of the Company. mnwn 3 95 two Id28 Special Depwits, ne Company routinely purcha es short-g gg term investment grade commercial paper for special depnit interest accounts associated with tax.csempt p>llution control Outstanding 34,068 34,066 34.205 34,793 bonds (See Note 6). On February 1,1990, the Company g'"[re p 0.02 $ 0.88 $ 0.43 $ 0.03 purchased $6.6 million of Drext I l\\urnham Lamtwrt Group inc. commercial paper. On February 13,1990, Drexe! ITurnham 39gg Lamtwrt Group inc. filed for bankruptcy. The posible effects of this event on the reali:able value of this c mmercial paper 4th'Qtr. 3rdQtr. 2nd Qtr. 16: Qtr. . annot presently be determined Revenues $118,528 $174,099 $115,279 $118,314 Operating i1. Joint Ownership of Utility Plants income 18,158 60,508 25,442 25,144 _CenD Oa nershicatJ.httm.ber 31.1989 in.Scrvice Irnest. Accumulateil Net per. Eamings _potn_ _ ment Ikrrwiatim (MW) unt Applicable (M h d to Common La Cygne 1(a) June 1973 $ 123 $ 70 343 50 Stock 6,855 45,934 12,157 11,416 Jeffrey 1(b) July 1978 65 22 133 20 Average Jeffrey 2(b) hiay 1980 64 18 134 20 Shares Jeffrey 3(b) hlay 1983 90 20 137 20 Outstanding 34,943 34,826 37,457 38,399 Wolf Creek 1(c) Sept 1985 1,359 166 534 47 Earnings Per Share 0.20 $ .1,32 0.32 0.30 (a) jointly owned with Kansas City Power & Light Company. (b) jointly owned with The Kansas Power and Light As discussed in Note 2, the Company's operating revenues Company, Centel Corporation and Utilicorp United, Inc. and interest charges have been adjusted to renect the KCC (c) jointly owned with Kansas City Power & Light Company orden for refunds. Accordingly, the results for prior 1989 and Kansas Electric Power Cooperative, Inc. quanen m previously reported have been restated. The effect Amounts and capacity represent the Company's share and was to decrease 1989 first, second and third quarter revenues have been financed by the Company. The Company's share of by $9.6, $2.0 and $2.8 million, respectively. Net income and operating expenses of the plants in service above, as well as earnings applicable to common dc:reased by $6.5, $1.4 and such expenses for a 50% undiviJed interest in La Cygne 2 $1.9 million, and earnings per share decreased by $.19, $.04 (representing 315 htW capacity) sold and leased back to the and $.06 for the first, second and third quarters, respectively. Company in 1987, are inchuled in the operating expenses on The Company's business is subject to seasonal nuctuations the income statements. The Company's share of other with the peak period occurring during the summer months. transactions associated with the plants is included in the Accordingly, earnings information for any three-month period appropriate classification in the Company's financial shouki not be considered m a basis for estimating results of siatements. operations for a full year. Market Prices and Dividend Rates of Common Stock llir.l&= Market Prict._ _.EiyAndt Commun NYSE 19M9 19H8 j989 J 9,88 ' brst Quartcr 522 % $19 $21% $18% $.40 $.37 - Siwnd Qturter 22 % 19 % 20 % 18 % .40 .37 Third Qturter 24 % 21 % 20 % 18 % .40 37 l'ounh Qtuner 24 21 %. 21 % 19 .41 40 The Company had 30,591 common stockhoklers as of December 31,1989. 1 20 -,,.,,,.A

Independent Auditors' Report To the Stockholders and the Ibard of 11 rectors of Kansas Gas anJ Elecint Company: Wc have audacJ the accompanying balante sheet, and statements of capaahzation of Kansas Gas anJ Elecinc Company as of thember 11,1989 and 1988 and the related statements of mcome, conunon stock equity, mcome taxes anJ cash flows for each of the three years in the renoJ ended ikcember 31 1989. These fmancial statements are the responsibihts of the Comp.my's management Our responsibihty is to express an opinion on these financial statements based on our audits. We conducted our audits in nuordance with generally accepted auditing stanJards. Those standard require that we plan and perform the auJit to obtam reasonable assurance about whether the financial statements are free of matenal misstatement. An anda includes examining, on a test basis, evidence supporting the amounts and dnclosures in the fmanual statements An audit also includes assessmg the accounting principles used and sigmficant estimates made by managonent, as well as evaluating the overall fmancial statement piesentation. We beheet that our auJus provide a reasonable basis for our opnuon. In our opinion, such financial staicments present fairly, in all matenal respects, the financial position of the Compans as of thember 11,1989 and 1988, and the resuhs of its operations and its cash flows for each of the three years in the penal ended ikcember 11,1989 in conformity with generally accepted accounting pnnciples. Ikloitte & Touche Kansas Cits, Mn3oun February 28,1990 21

Comparative Electric Statements 1 Annual Compound Growth Rates l 5 10' 1989 1988 1987 Year Year Electric Operating Revenues (Thousands) ResiJential $ 187,657 $ 197,109 $ 187,256 4.9 9.7 Commercial 135,740 133,049 129,667 7.1 9.3 - Industrial 153,%0 154,368 155,644 3.2 6.7 Public street and highway lighting 5,7R 5,170 SA72 5.9 10.3 Retail 482,500 490,096 478,039 4.9 8.5 Wholesale ._ jp,8.li _ _ 2.6,240 _ l 6.383 10.1 2.8. Total sales of electricity 523,334 516,336 504,422 5.3 7.9 Other 10 9,884 9,910 10.4 22.4 Total electric operating revenues O)]M,199l GMT0 GL4J3J 5.4 8.1 Sales in Kilowatthours (Thousands) Residential 2,104,718 2,187,725 2,076,150 (0.1) 1.2 Commercial 1,748,434 1,725,446 1,631,847 2.0 2.3 Industrial 2,978,423' 2,941,944 2,862,695. 1.6 0.7 Public street and highway lighting 49.743 51.307 5)M2 (4.7) (2.4) Retail 6,881,318 6,906,422 6,673,714 1.1 1.2 Wholesale 2.062.967 1.166.713 _l,253.644 17.4 - 3.5 Total kilowatthours sold 8,944,285 8,073,136 7,927,358 3.7 1.7 Customers at End of Year Residential 228,958 226,235 224,162 1.0 .1.4 Commercial 20,697 20,432 20,619 0.8 0.8 Industrial 4,307 4,346 4,365 (1.2) 1.5 Public street and highway lighting 801 727 785 3.2 6.0 Retail 254,771 251,810 249,931 1.0 1.3 Wholesale 39 39 39 (9.2) Total electric customers 254,810 251,849 249,970 1.0 1.3 Residential Average kilowatthours per customer 9,248 9,726 9,314 (1.2) (0.3) Average revenue per customer $ 824.54 $ 876.27 $ 840.07 3.8 8.1 Average revenue per kilowatthour 8.92c 9.01e 9.02e 5.0 8.4 Kilowatthours Generated and Purchased (Thousands) Generated (net after stanon use) 9,585,827 8,429,402 8,348,820 5.9 2.4 - Purchased 57dM _30014!!7 _ 2262 11 (41 3) (19.1). Total available 9,643,215 8,736,889 8,575,071 3.8 1.8 Less: Company use, line loss, etc 698,930 663,753 647,713 3.9 , 4.3 Total kilowarthours sold 8,944,285 8.073,136 _7,927,358 3.7 1.7 Average 13TU per Net Kilowatthour Generated 10,818 11,033 11,010 - (0.6) (0.2) Average Fuel Cost per Million llTU 0.96 1.10 1.10 (12.4) (2.4) Power Resources (Megawatts) Available capacity 2,380 2,376 2,399 2.5 ' l.9 System peak responsibility 1.JM1 1 671 1.613 (0.8) 0.6 Reserve capacity 811 699 _716 11.7 5.1 Electric Plant at Original Cost (Thousands) Beginning of ycar $2,395,207 $2,373,210 $2,450,673 4.5 - 10.1 Capital expenditures 56,775 52,853 53,489 (31,1) (11.1). Retirements 54M . _ 10,856 130,9_52 2.3 (1.9) 5 End of year 2,446,294 2,395,207 2,373,210 1.4 8.4 Accumulated depreciation _iUJ80 497.378 446473 14.2 12.4 Net electric plant $L814,9L4 $.1,8_91819 $1926 iL6 (1.2) 7.5 Employees at year end 1,330 1,316 1,275 (10.2) (0.7) 1 -l 1 22

Stockholder Information Annual Meeting Registrars The annual stocklmider's meetmg will be helJ May 23,1990, at the General Othte of the aimpan3, 120 East First, Wahna. Proxies for this meenng wdl Preferred Stocks be sohatcJ b3 the Juector> of the uimpany. A proxg FLANK IV Wahita, N.A statement will be madcJ to sim tholders about April 13,1990. Common Stock: BANK IV Wu hita, N.A., anJ 1989 Annual Report Fm,i Chicago Trust Company of New York This repon is preparcJ primarih-for the information of compans stockholders anJ is not issued m Bonds: Trustee, Registrar and Paying Agent uinnecnon with the sale, or otter for sale ot, or solicitatmn of an offer to buy an3 seuinties of the Morgan Guarant3 Trust Compans of New York 30 West Bniadwas uimpany. New York, New York 10007-2193 General Offices 120 East First Stock E,xchange lating p,g. gg,, 7 g3 The company's aimmon stock is h:,tcJ on the WK hita, Kansas 672010208 New York and Pacific Stock Exchanger. Phone: (116) 261-6611 5'"'k SY'nbol: KGE h, amfer Agems Stockholder Records and Dividend Reinvestment KG&E Stakholder Records Department Preferred Stock: P.O. Ilox 208 First Natmnal Bank m Wicluta Wichita, Kansas 67201-0208 Trust Department Phone 1800 527 2495 Ikix One Local 261 -6640 Wicluta, Kansas 67201 5000 Common Stock: Additional Information First Nanonal Bank in Wahna The compan3's Form 10 K is fded with the Tru,t Department Secunties and Exchange Commission and n, Ikix One avadable upon request trom that agency or Wicluta. Kansas 67201 5000 from the company First Chicago Trust Co. of New York or a cory of K &Es "Finanaal anJ pg gg,x gq39 Statisucal Report 1979 1989,' or other Church Street Statun '"I""""""""*"'" New York, New York 1000 5 3984 KG&E Investor Relations Department P.O. Ikix 206 Wichita, Kansas 67201 -0208 Phone: 1-800-613 4389 Local 261-6380 Service Map Area Generating Station, Map Legend Capability and Fuel c,ne,.,aa m,,,,ne, u,,3,,%,,,,,, I ine i r. ~. ;.. - / r iu i ~ " " 'n - ft. t. C-nim,, siem, neon .i , :1.. y v ,,,,n,,, m w n,,,,,s z.,y.,7,. .....,.,. f 3,.j Interconnections and .~ i. +- m /' I ' y ',, ' . ',, l;l, '[ '

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Kansas Gn, end Electric Company Key Number 10 Bulk liatia P.O. Box 208 U.S. Postage PAID Wichita, Kansas 67201 Permit 165 Wichita, KS AcLhess Correcrim Requested Rerum Postage Gwiranteed Directors

• Frank J. Becker (1981)

Ralph Foster (1970) Donald C. Slawson (1983) (l.4,7) PersonalInvestments (4,7) Vice President General' (3,7) Chairman of the Baaid and El Dorado, KS Counselof the Comfuny, President, Slawson Comismies, Glenn Biggs (1986) Wichita, KS Wichita, KS (3,6) PerumalIncestments Donald A.Johnston (1980) Dr. Newton Smith (1985) San Antonio, TX (2,5) Corturare General Manager, (5) Physician, Ark <msas City, KS Iloward Brenneman (1985) Maupinniur, Inc., Lawrence, KS Lawrence E. Walsh (1986) (2) Intestment/Fmancial Glenn L. Koester (1986) (6) Arronwy and Fonner Federal Consultant,Hession. KS Vice President Nuclear of the ' District Cour: Judge, Wilson K. Cadman (1978) Comfuny, Wichita, KS Oklahoma City, OK (1,7) Chairman of the Board and Russell W. Meyer, Jr. (1982) . Advisory Director President of the Comtuny, (1,7) Chainiwn and Chief A. Dwight Button (1976) Wichita, AS Executise Officer, Retired Chainnan of the Board, A aft Company' Fourth Financial Corp., Wichita, KS C.T. Carter (1968) gss (1,3) Rerived Vice Presklent, Pipeline Transfor atum, James J. Noone (1986) ' Year el ied and commitice Atlantic RichficLI Comluny, (6) Airorney and Retired tIce$1) Exnunve. - C Independence,KS Admmurraint Judge for the Districe Q) com rion und Iwnen O) un C.Q. Chandier (1974) Court of Sedgwick County, g gg,ia,, g,i,,,iony

1. 1. b'd' Nb (l,4.5,7) Chainnan of the Ikurd.

0) Nommand) %@mtWm First Nationalihmk in Wichita, KS Marjorie 1. Setter (1980) n)ri nning.

Robert T. Crain (1981) (4) Presklent, Setter & Assockues, (2,5) Crain Realry Company, h"[G',,^,f3,jNl$',"hubik Fort Scott, KS Officers Wi'.non K. Cadman,62* Robert L. Rives,56* William B. Moore,37 Richard D. Terrill,35 Chainnan of the Board and Group Vice Presiden Vice President. Finance Secretary and Accorney. Presidern James T. Clark,49 Tom Underwood,52 W.R. Whitmer, 56h. Kent R. Brown,45* Vice Presiden Accounting Vice Presiden Iluman Treasurer Group Vice President Ralph Foster,61* J.E Klassen,60 N'5"'7"8 Richard M. Iladen,50* Vice President General E.D. Prothro,57 Assistant Treasurer Group Vice President Counsel Controller and Assistant Jack Skelton,59 James S. liaines, Jr.,43* Glenn L. Koester,64* S'C7d77 A33is m S m Group Vice Presiden Vice Presiden - Nuclear

• roticy aroup Member

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