ML20069D909

Ies Industries,Inc 1993 Annual Rept

ML20069D909
Person / Time
Site:	Duane Arnold
Issue date:	12/31/1993
From:	Leslie Liu IES UTILITIES INC., (FORMERLY IOWA ELECTRIC LIGHT
To:
Shared Package
ML20069D889	List: ML20069D894 ML20069D904 ML20069D909 NG-94-2017, Forwards Corn Belt Power Cooperative 1993 Annual Rept, Central Iowa Power Cooperative 1993 Annual Rept & Ies Industries,Inc 1993 Annual Rept
References
NUDOCS 9406060270
Download: ML20069D909 (35)

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\ Financial Highlights .

\ Report to Shareholders. .4 k Year in Review . .7 h Management's Discussion and Analysis . ,10

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g Selected Consclidated Quorterly Fmoncial Data. 13 Report of Independent Public Accountants . 14

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Management's Responsibility for Consolidated Financial Statements. 14 Consolidated Financial Statements . 15

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Notes to Consolidated

( Financial Statements . .20 j %:;- Selected Consolidated Financial Data . . 31 b Electric Operating Comparison. .32 Gas Operating Comparison. 33 Shareholder Informat;on .34,35 Board of Directors and Officers. .34,35 Quarterly High, Low, and Closing Prices of Common Stock (oottors)

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INDUSTRIES INC ES l Company Profile ,

The Company, IES Industries, was  !

created in July,1991, by the merger of  !

IE Industries Inc. and lowa Southern Inc.

IES Industries is known for its clear successes in diversified investments. Its  :

principal subsidiary, IES Utilities, is  !'

recognized for its economic develop-ment initiatives and customer focus.  ;

The Company is dedicated to providing long-term value for IES Industries shareholders. [

i I

i Financial Highlights of IES Industries .

)

1993 1992 /2 ' "?", ,

exvan n ax m x . , .-: w . , ,

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[f Operating revenue (000's) . $ 801,266 $ 678,296 $ 122,970 18 f8h Ek I f4

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M,9 Operating income (000's) .

. $ 151,269 $ 109,024 $ 42,245 39 .y ':j k' G;t C

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v<j. Net income (000's) . $ 67,938 $ 48,711 $ 19,227 39 r b;;:3}

yy, a>;m m (3 Earnings per overage common shore . . $ 2.45 $ 1.92 $ 0.53 28 h %, [

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, s!R L Q; , yj Dividends declared per common shore. 2.10 $ $ 2.10 $ - gC :

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w le/ ' ,2 t bJ . $ 163,644 $ 191,834 $ (28,190) (15) t ' :q bWa@i Construct;on expenditures (000's) . Lgm $;

$ 177,260 $ 124,631 $ 52,629 42 6Ed W l. Cash flows from operating activities {000's) . '

h a m Soles of electricity to customers (Kwh) [000's) . 8,905,522 7,132,671 1,772,851 25  !

?

fb M w: i

[ Utility gas sales (dekatherms) (000's) . , 39,006 37,035 1,971 5 "g {i

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k @! 33,952 34,838 (886) t4 I

I, f/ ]! Number of common shareholders . (3)p;M V,e1 t

Kc :M Number of full-time employees . 2,792 2,702 90 3 p y wan2 twAM i f

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Wgin southeast towa had a very posi-Je'*k [MW';

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' 7 V%/[t % \ tive impact on our utility business. [

This oreo, which borders the i

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y/ \g 4 Mississippi River and the states N Q Pg; y X 77 g M'l k of Missouri and Illinois,is a major N

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_ $[7 k k industrial center in the Midwest.

I believe that prospective indus-k:

j/ k trial growth in this strategic loco-

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h '4x,ayipi I N%M k tion will further enhance our @

gHjQ @@ -M% future sales and profitability.

In the industriol sector os a

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<l 4N4 c R P [M y whole there was significant Ih "N 7 growth in electric sales, with 76 p ' *1 7 p:M Ne d >P ]j/

\ over 8 percent increase for the E y,ggg, ff 1 from $109 million in 1992 t h large industrial customers. It

$151 million in 1993. Net in- h was both our competitive pric- k

@h N \ come increased to $68 million h ing and the close working relo-9h@p@f3 sy g in 1993 compared with $49 p. tionship with our customers that %y d-b:,yggf milhon in 1992. Although the re-F-A made us a winner at the market 6tg % turn of normal weather cond" M place. The presence of new )$

pqpr g tions in lowa was helpful to our financial performance, the m-enterprises such as PMX, n

Qg ggg h Ajinomoto, Genencor and, now, @M crease in earnmgs was also the result of improvements m pro-

/4 Weyerhaeuseroffiliated Cedar M g$p g h ' Orj River Poper Companyin our ser-ductivity ond higher demand for pHM vice area will greatly enhance dh our products and services. In b ig

,f oddition, we have successfully the economyin Iowa and, of the M some time, contribute to our own 'D y pn j ronsIormotion. ha captured the expected merger- future growth and sales.

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n J Innovation. Speed. k 3 Productivity. Possionya m related benefits, realizing on-by In 1993 we comple+ed a  !.2@Y i 0- --

nual savin 9s estimated at $15 ,mw three-year natural gas expon-  %

7 La toexcel.Thesewords million, and contributing op-sion project, adding fifty-two J

?

express the new paradigm for g this age of intense competition, proximately 30 cents m earn-

- 3 ings per shore. Perhaps, the best (Eh new communities to the @NM d gas delivery system.The project N M

whereby changes are not only gg overallindication of our perfor- M N included 3.8 million feet, or nevitable but also necessary to pg mance is the 13% total return t M 732 miles of distribution lines, Mb guarantee our contmuous suc-cess os a winnin enterprise.

p g our shareholdersjon the basis y ;;; of annual dividends plus

, 03 9,000 new service connects, N and a 7 percent increase in hM 2d Indeed we ave expers- 11 s change m market value), com-e

"' ; 9 5 5 ;*S' enced success in 1993. We ! M9 paring favorably with other utili- A, 5 " 'forIWo ~

Consecutive years hmq we Mi n

have met virtually all the finan- ties in general. The issuance of b%

p , i h ** 5"CC*S5 full * " 9'd '

cial gools and integrated the p ' ]j=i 2.3 million shores of common dM Pe"$

Y M

three utility entities into one co-

[h stock in February 1993 had no besive business unit. The tasks 4 g odverse effect on our returns. QF3 talexpenditures 9 werethrough dget I a]ble we also#3 t and challenges were of ten difI."P'd core ul cult and complex. However, we j Forg,ing Success ,n i M~ M planning and resource$$ el have made good progress in productivity, reduced expend'- k

((M the Core Business y tion. Moreover, in both fossil The core business continues is d and nuclear generation, we in- 9,

-W tures and, at the some time, b j to be the key to our success.The K 5 maintamed one of the best j most significant event of the h]i creased operating efficienc and reduced fuel and produc- h safety records in our mdustry, We are grateful to every one in d year in the core utility business Q tion costs.

P O occurred on December 31, M Eq N

our work force for his or her ef- h , j 1993 when our principal utility d9j D fort and contributions. F ; A subsidiories, Iowa Electric Light p Diversified Strength M I j> and in the Heartland M Financial Results ern Power Co.

Utilities Co. andtolowo merged be- South-U$ p3 Our diversified results in heg IES Industries posted earn- @ N. come IES Utilities Inc. This 1993 were satisfactory. The re-ings of $2.45 per shore in 1993, h merger waspaccomplished with y < @ifkp turn on equity for the lES Energy significantly improved from i broad regulatory support. p J businessunitwasapproxirnately y~

6 p

Unl]i Union Electric service territory in

$ 1.92 per shore in the previous The acquisition of the former iGj 20%. Whiting Petroleum and Ct year. Operating income rose sh4 Industrial Energy Applications A A

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also experienced growth and  ? 'v ^ '

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profitability. These business units ii  % <

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& J are emerging as maior success ._{ .

factors in our diversification U.  % +

1 program.

As I have expressed it in the I

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past, part of our strategic plan is  ; e , ,

lo seek out opportunities to ex- j  %.y o pond in the diversified area. L<4 \

Consequently in 1993 we made a re-entry into the telecommuni-Ni

+1 N.  ;'c, d

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cations business by investing in i i b ,% ,

McLeod Inc. This joint venture I i  %  ?'

creates a new alliance between two old and successful business

[. 4 decisiveness and, most impor- % N ]1 J $ tant of all, passion for excel- O V K ,Y partners. We are very enthused 1 ~ *"

3- lence. In the last few years we V 'a about this latest project, and

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[ have acted strategically to po- I$  %,

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expect to gain access to oppor- sition our company for future y 1 funities in the fast expanding in- Tj

'I competition. Our past actions E \ s .A formation st,per-highways.

P1 were instrumental to our suc- [M cess in 1993 and, in recent f -' d kW ,

Vision Re-visited D r nkings of ut&ty competitive-  %,]H in recent years we have been 3 ness, we have scored high -" ]y hq marks. However, with a sense +  % C3 keenly aware of the changes taiong place in our industry t f j

of urgency, our transformation hd efforts must be accelerated to I-!

b transform from regulated busi-match the rapid pace of K i: 1 s ness to market based enterpnse.

The pace of deregulation and d change in competition and ba 3 j

{L dere ulation. We have suc- i- 'I d3 b competition is accelerating, onj the days of " business as usual  ? .j1ceed d in the past. Guided by ij D ore no longer here. It is today

[ j our past progress, and confi- IJ j;

that we must face the evolving

? dent about our future,1 believe a

that IES Industries is well posi- F1 i a' k reality of tomorrow.  ;

1 , 3 Consolidation and acquisition .';

g tioned not only to manage the f necessary changes but also to k i I

h" N are essential to g,ive us ex- l ponded markets, increased cus-  :

thrive in the new competitive t s i 3' ^l tomer base, and opportunities 3 environment. l

] Salomon levy and Robert j for synergistic savings. How-ever, the framework for w,nning i

I I

Brewer, dedicated long time outside board members, have (( $

bl d.

F Q 3

must be built on transforming our ( j organization into one which is elected not to serve on our h d t l board after this term. We are D 7] 3 process oriented, customer fo-cosed, driven by quality and

, a grateful for their many years of Pcd r '9 continuous improvement, and g

P valuable contribution. l would j I3 N h4 supported by measurable goals and benchmarks. Moreover, we j'

p

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o!s like to recognize Richard McGaughy and Benjamin P}5l 9i

'J Rosencrants, officers retired in L O are compelled to go beyond the traditional mechanism of re- [ 3] the andpast devoted year,service for their longi ! l to our Y j

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organization by in<lepth exami- e a r 1 Rt we do busi- C *P "Y' b'*

! } 1 nation ness, and of the wafe bold deci-to ma sions in improving operations l

f

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, i d and efficiency. [ , fL' j j in additien,I envision a strong  ; j ^j effort on our part in reshaping e d

our corporate culture from inter-

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i.  :

lee Liu i 1

nolly to externally focused, en- Chairman of the j j ergized by cross-functional Board, President & Chief i j teamwork, speed, innovation, p , Executive Officer .

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G:nerating Growth, the Long-term Pattern for Success p

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pr . n 1993, the Com-e [ /g%@gNyg{%M e, a n gy>

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ed implemented in the k) t1T Qff J mid-1980s, brought success to the core utility business os well I as the diversified non-utility in- h'o terests. This year's results k h @. ;

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$W showed real economic growth 9 over the IES Industries Inc. b ' Success in the Heartland (Industries) service area.

Mk There were major victories in h

[e ? economic development activities % -Q

'N The Power of a Leader f $y in Utilities' service territory in i Ws IES Industries and its principal J 1993. In July, the Cedar River Po- 9 d subsidiary, IES Utilities Inc. (Utilk W per Company, owned in part by f 4*

ties), are well future. Indeed, positioned the company

" forging success in the heartland."

(Q ]A is for the 4 Weyerhoeuser Inc., announced n < N plans to build a $230 million po-4 per mill in southwest Cedar Rop-E2 0S

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Communities of every size had positive economic news to report q ids, near IES Utilities' Prairie Creek @{ j

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A Generating Station. The plant will u e in 1993. From existing business N d use recycled cordboard boxes k3 expansions to relocotions of com- h and waste paper os the raw mo-f ponies to Utilities' service area, Qj terial to manufacture corrugoting the Company continued to play a # 1 medium, the paper in the middle p 4 6@d Maytog expansion to lowa.

Leon, a community of 2,000 hg

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key role in industrial and eco- [pw' 3 layer of corrugated cardboard. It  ? S in south centrol lowo, learned in nomic development. Ny is expected to become Utilities' 1 1 Novemberthotitswindowassem- djey 1

The success of our strategy to h Ji largest steam customer and one lM$ bly plant, SNE Enterprises Inc.,  %

enhance the overall area p d of its top 10 elactric customers. Q would be renovated and  %

economy throu h on oggressive Nj in Marshalltown, Lennox M e uipped with state-of-the-art economic deve opment program h6N IndustriesInc.announceditwould is reflected in the positive electric 1 'si be adding 400 to 600 new M fa rication equipment, creating G opproximately80newjobswhen a 71

]h coles figures reported by Utilities # p % the projectis complete.

in 1993. Electric sales volumes for p j manufacturing jobsworked operations. IES Industries ,g The northrentrollowo commu fd to its existing N  :

major industrial customers in- p 3 in concert with community lead- WM nity of Belmond will benefit from bM creased b over 8 percent, on top of a percent increase in &p j ers to retain the LennoxEM@

y furnacedmentand air conditioning in October N that it wouldmanufactur-beEaton Corpor 1992 and a 6 percent increase in kd ing operations in Marshalltown, Q*Q expanding its second (%}

1991. These results are over and and third N3 after the company announced it u h shifts by 50 to 70 employees. gj above the sales increases due to N would be consolidating opera the acquisition of Union Electric's i Sj tions and closing a facility in bM Eaton manufactures products for f d the automotive industry.

bA 4 i

Iowa service territory. Over 20 M either Mo r s h a11 town or M5 Climax Molybdenum, a divi- g/y '

percent of these increases were M3 Columbus, Ohio.

from new industriol customers la "i A il sion of Cypress Minerals, will be c$

coting in Utilities' service territory. 53 fory in January,1994, when Newton scored a similar vic- 8j consolidoting its operations in Ft. fd h Madison in southeast lowo.

The balance is due to net expan-sions amon existing industrial

? % Maytog Corp. decided to ex- C# Corgill, Inc. will build a re- $]p

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customers, w ich is the underlying $[99 ponditsoperationsin odding a new line of energy-Newton by %d search facility and add two productsatils Eddyville com prod-1 new h%j uctsfacility, R@sj$(

strength of our business. While by efficient washing machines, with :

competitive electric, natural gas { M the potential for up to 200 new Q<'1 IES Utilities is positioned to g and steam the cause ofrices are, in part, f

[Q production facility. The commu.d @ manufacturing jobs, ~7 lo its current this growth, working partnerships and relo-close D nity was engaged in head-to- h N ideas and energy solutions for

. M servepartner,its customers providing innovative d as a business

$[M] l businesses already located in its hQ tionships communities and wiIh cusiomers, government officials are integral to this-

% with a community dq headin competition Illinois. forihe service newline territory {h ])h9 and for those M Again, industries was on active p d componies considering a reloco- QQ growth strategy. d3 player in the effort to attract the L,d lion or new venture in Utilities'ser- GM 7

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e . . . o . i y y Building a Team -

l for Success  ! 1 Throughout the organization. l the company focused on produc- I l

tivity in 1993. Every department ;. '

l was charged with making produc-b ' ~<

tivity improvements, working smarter and finding the best ways ,

l to accomplish tasks, while also i Q)E s eliminating activities that are not ,

i I part of our strategic plan. F Fossil plant productivity in- (

creased as units were either oper- s

1. ated at higher capacity factors or [

While Utilities' electric sales investments were made to im- j 3

• have increased, average rev- Prove the efficiency of boiler and g enues per kilowatt hour have turbinegenerator systems. p ,!

fallen each year since 1990. , Field Operations employees l ,'

This demonstrates that Utilities , devoted c nsiderable effort to [

continues to improve its compefi-

' work out sessions focused on '

'.dentifying changes that would y mg osition versus alternatives 7

N tive avai fable to customers For .

them ke them more product;ve. The p j E31ES Utilities . longer term, the economic ben- : 9 IIS' .' k* "" " C*S5 'Y

• E E Service Territory ut I their lobs while focusing on efits from recent mergers and ;t s

teamwork ,in problem solving. -

s3 acquisitions will position Utilih.es ;

A task force called PREPARE I. 1 i

as a strong competitor in the (Paperwork Reduction, Efficiency, I 1 vice territory. These efforts are vis- ng utilties m rket for the [ Productivity and Resources En- [

anfd ne customss, local com~

{

i ible in communities of every size '

munities nd ur shareholders.

hancement) worked with em- ,

1 and inis,every rek, ion of the state.

[ ployee input to identify options to p

Utilities indec forging success .

reduce paperwork, simplify pro- c 5 in the heartland.

" Diversified for  ! cessing and improve overall ad- [ a Greater Strength ministrative efficiencies.  !

x Strong Relationships  ! The strategic decision to diver- y  !

in the Regulatory sify into areas of strength for Forg,mg Success ,m E Environment the company has proven year af- [ s' the Heartland p ,

in the past two years, indu* From environmental tree plant- r ter year to have been a sound L :l tries has under taken two initiatives philosophy.

1 ing efforts like the Branching L which required several regulatory approvals: the acquisition of Financial results of IES Energy, including Whiting Petroleum "i i Out program sponsored by Utilk ties, t the Good Citizen political { jli y

'1 l

Union Electric's towa electric ser- and Industrial Energy Applico- Process program which encour- y vice territory and the merger of tions, were strong in 1993. These 985 emPl oyees to take active {

the utility businesses. Both of these ,

L' S ES '" M C " "

• 5' D * :. 2; businesses are clearly integml proposals moved very smoothly core businesses of Industries. t

- tive charitable and volunteer ef- 1 -

and quickly through the regulo. Although summer flooding of- I:

I "5' I"d"5"I*5 C "" "

• 5 J l; tory reviews and authorizations. '

emmP There were no ,intervonors or fected the businesses in the ! I "] "5 C TPorate 5* ' "citizenship.

transportation sector, IES Trans- Pl ay an ever-increasing I in role !

government a encies opposing i Portation performed well for the  ; j-either proposa . ( > stimulating economic growth in Currently, Uti!nies has no pric- < Y" n f rthe future,lESTranspor- ,

Iowa. A vigorous dedication to F, -p t t.' n'5Posihoningitself tobenefit -

providing focused customer ser- f ing issues pending with the lowo L Utilities Board. We expect, how- fr m the intermodal and techn ~ f vice, expanded community in- h '

ever, to move toward pricing con- I 9'c I Ch 09e PPortunities I volvement and sustained solidatim for the three current , v il ble in that industry i economic vitality will continue to [

electric pricing districts at the ear. , These diversified businesses 4 make the companya driving force L "

liest opportunity. Customer, local Provide vital services for many in the growth of the heartland. '

community and employee uncer- < customers and communities ,l By fusing insight, resources, toinhes about price expectations i that are also supplied by '

ambition and ability, Industries ,

su gest that we move toward con- Utilities. These services often will help forge a brighter future for

• so dation sooner than we had complement the growth of its customers, employees and originally planned. Utilities' industrial sales. '

shareholders.  :]

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w"' wjg:ye 9eh gn v%uuaa,s%u#Wie

-5 a *** gep L ~.m y 2 . .b g7eT7mq Q. 4 % s gma4GQgf3* g

}; &

1

D,

$ GAS REVENUES Th Company's ope -

Gas revenuesincreased (decreased) 5 c mPored with the pnor year as otin income increased f U *5

[~- $42.2 mikion and $5.7 million 1993 1992

.p during 1993 and 1992, respectively, lin minions) os compared to prior years. Reasons

\g ,js - for the changes m the results of Gas Revenues:

Utilities ...... . $14.9 $ 8.4 hg operations are explained in the follow- Industrial Energy mg discussion. Applications, Inc.

\

\fo' Tbe ELECTRIC REVENUES Electric revenues and Kwh sales (ex-(IEA) . (0.1) 12.4

$14.8 $20.8 9[ ,

[Off0WID9 cluding off-system soles) for Utilities in-dlSCUSSIOD creased $87.5 million and 25%, re'

'q 4 ~

ODOlyZe5 Sig- 5Pectively, dunn 1993. In 1992, electnc Gos soles in therms (includin trans-orted volumes), which also reffect the O Di[lCODlCbODgeS eHects f we ther, incre sed 5.3% in mil on nd r spe tL;yThe 1

< In lbe CompODODIS sales increase is attributable to the oc-1993 and were flat in 1992 for Utilities.

Adjusting for the effects of weather, d Of Del IDCOme odd quisition of the UE territory and a return Utilities gas sales decreased 1.5% m k . -

[lDODClOf COndillOD to more normal weather conditions.

After cidjusting for these items, underly-1993 and increased 1.5% in 1992.

Utilities' toriffs include purchased gas

[ tom lbe prior peTIOdS ing electric sales increased 6% in 1993, which reflects the economic odjustment clauses (PGA) that are de- '

O [OT lE3 In dOStrieS lDC. Si9ned to currently recover the cost of growth in the industrial and commer-Cy 3 (IndUStrie Ond itS con- c,g cos,,,,, so,,~ gas sold. See Note 1(j) of the Notes to

" Consolidated Financial Statements for SOfidOledS bSidlOrieS[lbe The 1992 Kwh soles decrease re.

C:n flects unusually mild weather conditions discussion of the PGA.

COmpODy). Gos revenues increasedin 1993 and in Utilities' service territory. Residential sales, which are the most weather sen. 1992 substantially because of increased sitive, decreased 9.5%. However, in. costs of gas recovered through the PGA RESULTS OF dustrial soles, which are less sensitive and the effect of gas rate increases in  !

l OPERATIONS to weather, increased approximately the former service territory of both IE Industries' moior subsidiaries are lES 5.5%. Adjusting for the effects of and 15, which become effective in  ;

Utilities Inc. (Utilities) and IES Diversi- weather, Kwh soles increased 2.7%, September 1992. The 1993 soles in-  !

reflecting economic growth in Utilities' crease also contributed to the revenue I fied Inc. (Diversified). Utilities was formed by the merger of Industries' former wholly- ser vice territory. increase for that year. See Note 3(o) owned subsidiaries, Iowa Electric Light Utilities' electric tarifis include energy of the Notes to Consolidated Financial -

ond ibwer Company {lE) ond lowo Southem odjustment clauses (EAC) that are de- Statements for a discussion of the gas i Utilities Company (IS), effective December signed to currently recover the costs of rate increases. I 31,1993. The Company's results of op- fuel and the energy portion of purchased The increase in IEA's gas revenues )

erotions and liquidity and capitol re- power billings to customers. See Note for 1992 resulted from increased sources ore principally offected by Utilities. 1(j) of the Notes to Consolidated Fi- natural gas marketing and delivery The Company's netincomeincreased noncial Statements for discussion of the activities. >

$19.2 million and $11 million during E AC. The increase in electric revenues i 1993 and 1992, respectively.The 1993 for 1993 is primarily because of the OTHER REVENUES results reflect Utilities' ocquisition of the sales increase and increased recovery Other revenues increased $20.6 lowa service territory of Union Electric of fuel costs through the EAC. million and $15.5 million during 1993 Company (UE) (as discussed in Note The revenue decrease in 1992 was and 1992, respectively. Approximately 2(c) of the Notes to Consolidated primarily related to the lower Kwh sales $10 million of the 1993 increase re-Financial Statements) and a return to discussed above and lower off4ystem lotes to the acquisition of certain resort more normal weather conditions in soles to other utilities. A rate decrease properties in March 1993; Diversified Utilities' service territory. The floods in in the former 15 service territory that previously held on equity interest in o .

Iowa in 1993 did not significantly of- become effective in September 1991 company that owned the properties.

fect the Company's results of opero- contributed to the revenue decrease to Approximately $5 million and $11 mil-tions. The 1993 results also reflect the a lesser extent. These items were por- lion of the 1903 and 1992 increases, recording of certain property write- tiolly offset by the effect of the rate respectively, relate to the merger with downs at Diversified and a $2.5 million increase in the former IE service terri- Whiting Petroleum Corporation (Whit-contribution to the lES industries Chori- tory that become effective in Decem- ing). (See Note 2(b) of the Notes to table Foundation. The 1992 results were ber 1991. See Note 3(b) of the Notes Consolidated Financial Statements.) The remaining 1993 and 1992 increases l adversely oflected by extremely cool to Consolidated Financial Statements summer weather and a mild winter in for a discussion of the electric rate case ore because of increased operating Utihties' service territory. in the former IE service tenitory. octivities of Diversified's subsidiaries 10 i

and, in 1993, on increase in Utihties' 1992. The 1992 increase included $5.6 of debt outstanding and interest ex-steam revenues million related to Whiting. Other than pense related to Utilities' reserves for Whiting expenses decreased $4.9 mil- rate refunds.

OPERATING EXPENSES h n, substantially related to o regulo- Miscellaneous, net reflects expense Fuel for production increased $14 3 t ry dis 11 w nce f $3.9 mahon re- of $2.9 million m 1993 ond income of millio,n in 1993 because of increased c rded by Utilities in April 1991, after $7.5 million and $3.7 million in 1992 ovanabihty o; Utilities fossil-fueled en~

the lowo Utilities Board (IUB) denied and 1991, respectively. The change for eroting stations, which experience e x.

recovery of previously deferred former 1993 includes certain property write-tended maintenance outages in 1992, manufactured gas plant (FMGP) cleon- downs recorded in 1993 at Diversified, and because of mcreased sales. Fuel up costs. Lower non-lobor costs of the a contribution to the lES industries Charitable for production decreased $ 17.8 million DAEC and lower Nuclear Regulatory Foundation recorded in 1993, o loss durin 1992 primarily becauseof o nuclear Commission fees, rtially offset by in- recorded in 1993 on the defeasance of refu ing outage of the Duone Arnold creased labor onc benefit costs at Utili- Industnes' debentures and a reduction Energy Center (DAEC), maintenance out-ties, also offected 1992. in interest income. These items were oges ot Utihties, fossil fueled generating Maintenance expenses increased partially offset by gains on sales of stations and the lower electnc sales.

$7.5 milhon and $0 2 million during assets at Whiting and IE A oggregating a d 9N, bu n$ such ou$ag$ 1991. .M3 any q92, respectively. The 1993

$2.6 million. The change in 1992 is The decrease in Kwh eneration during incrMse '5 Pnrnanly because of inaeawd primarily because of $6.2 million of the refueling oncf maintenance m inten nce t Utihties fossil-fueled merger expenses recorded in 1991, portially outages was s'ubstantially replaced by gener ting st ti ns nd the DAEC. The off>et by reduced interest income.

1992 increase is attributable to increased Federal and state income taxes ,n. i purchased power Purchased power increased $ 18.7 m inten nce ssil-fueled gener ting cre sed $13.2 million and $2.1 million si h n5, 5 "6 h b I *" 'n 2, re5Pectively. The milhon in 1993, of which opproximately

• I"'*" increases result from increases in tax-

$14.7 million represents increased en- ".ce c sts t the DAEC.

Depreciation and amortization in- oble income and, in 1993, on increase ergy purchases and approximately

$4.0 million is a net increase in capoc.

cre sed during both years primarily of 1% in the Federal statutory income ity charges. The increase in ener becouw of inawses in utility plant in tax rate. Adjustments of $1.5 million, pur-choses is because of the increasecfKwh service, including the cqu siti n f the recorded in the second quarter of 1992, UE territory on December 31,1992. An to reviously recorded tax reserves also sales. The increased capacity costs re-flect the contracts associated with the incrN5e in the ver 9e 9 5 utility Pro. of ected the comporobility of both years Perry depreciation rate, resulting from with prior periods.

acquisition of the UE service territory, n updated depreciation study, als partiolly ofIset by the expiration, in April c nu ed to Se M3 inaeow. %e LIQUIDITY AND ,

1993, of the purchase power agree- CAPITAL RESOURCES ment with the City of Muscatine. (See eHect f the Whiting merger also con The Company's capitoi requirements Note 12(b) of the Notes to Consoli- ".ibuted to the 1992 increase. Depre~ ore rimarily attributable to Utilities' dated financial Statementsj Purchased

ti n nd amortization expenses for construction programs, its debt moturities both ywrs ,nclude i $5.5 million for the and sinking fund requirements and

. biower ecause of inacased $4.5during increased purchoses million .DAEC in 1992 decommissioning provision, which is c llected through rates.

Industries' diversification activities. In the refuehnc and maintenance outages, 1993, cash flows from operating activi-Taxes other than income taxes .in~

artially of set b lower purchases re- ties wer e $ 177 million. These funds were bated to lower offsystem soles. umsed $4.8 million and $1.1 milhon primorily used for construction and oc-Gos purchased for resole increased during 1993 and 1992, respectively, quisition expenditures and in support Primarily because of increased prop-

$7.6 million ond $17.1 million during of financing activities.

1993 and 1992, respectively. The 1993 *"Y Y'5' "'""""'5

• l The Company antici otes that future increase is primarily because of increased '*d' '". Part, to the acquisition of the capital requirements wi be met by cash per unit gas costs at Utilities and the * * '" N ' Y' generated from operations and exter-increased sales Approximately $ 12 million INTEREST EXPENSE nal financing. The level of cash gener-of the 1992 increase is related to in. AND OTHER ated from operations is partiolly de-creased gas activities at IEA; increased Interest expense decreased in 1993 pendent upon economic conditions, per unit gas costs at Utilit;es also con- because of a lower overage interest legislative activities, environmental mat-tributed to the increose. rate for the year, portially offset by on ters and timely rate relief for Utilities.

Other operating expenses increased increase in the overage amount of debt (See Notes 3 and 12 of the Notes to

$20.3 million in 1993, of which op- outstanding The lower overage inter- Consolidated Financial Statements.)

proximately $9 million relates to the est rate reflects the refinancing of cer. Access to the long-term and short-term ocquisition of the resori properties in toin long term debt issues of lower rates capital and credit markets is necessory March 1993. The remaining 1993 in. and lower cost shortterm borrowings for obtaining funds externally.

crease is primarily because of increased outstonding for interim periods between Utilities' liquidity and capitol resources labor and beneht costs at Utilities and the redemption of certain long-term will be offected by environmental increased operating activities at several debt series and the issuance of their and legislative issues, including the ulti-of Diversified's subsidiaries, including longlerm replacements. Interest expense mote disposition of remediction issues IEA and Whiting. Other operating ex- increased during 1992 primarily because surrounding the FMGP issue, the Cleon penses increased $0.7 milhon during of on increase in the average amount Air Act as amended, the National 11

l Energy Policy Act of 1992, and Federal mental, nuclear and other regulatory t;es in the transaction were used to re-Energy Regulatory Commission (FERC) outhonties, ocquisition opportunities, the deem $ 10.2 million of Pollution Control Order 636, as discussed in Note 12 of ovoilability of o!ternato energy and pur- Obligations,5.75%, due serially 1995-the Notes to Consolida+ed Financial State- chased power sources, the ability to 2003 ond on oggregate of $9.2 mil-ments Consistent with rate making pnn- obtain adequate and timely rate rehef, lion of first Mortgage Bonds, Series P ciples of the IUB, monogement beheves escalations in construction costs and & O,6.7%, due 2006.

that the costs incurred for the above conservation and energy effic;ency pro. In October 1993, Utilities sold $100 motters will not have a mater;ol adverse grams. million aggregate principal amount of ef fect on the f noncial position or results Collateral Trust Bonds, 6% Senes, due LONG-TERM FINANCING of operations of the Company 2008, and 7% Series. due 2023. A por-Other than Utihties' eriodic sinking The IUB hos adopted rules which re- fund requirements, whic Utihties intends tion of the proceeds from the Collaterol quire Uthties to spend 2% of electric to meet by pledging odd;tional prop. Trust Bonds was used to retire short term and 1.5% of gas gross retail o eroting ert y, the following debt will mature prior debt, with the balonce used for general ,

revenues annually for energy e ficiency to December 31,1998: corporate purposes, including support of programs, Energy efficiency costs in excess Utihties' construction program.

of the amount in the most recent electric issue: in May 1993, Utilities redeemed First MAow and gas rate cases are being recorded Mortgage Bonds Series K,8-5/8%, prin-Utilities . . . . . . ...... $124 os regulatory assets by Utities At De' CiPol ornwnt of $20 milhon, and Series Diversified's variable cember 31, 1993, Utities had $ 18.5 R, 8-1/4%, principal amount of $25 rate credit facility ....... 32 mdhon of such costs recorded as regu- nn n nd First Mortgage Bonds Se-Other subsidiaries' debt. 8 totory assets. Utities wdl moke as initial fihng for recovery of the costs in 1994.

-ga ries 8 3/4%, principal amount of $15 million. The redemptions were completed with proceeds from short term borrow-CONSTRUCTION AND The Company intends to refinance the majorit of the debt maturities with ings nd, s discussed bove, long-ACQUISITION PROGR AM term debt was ultimately issued to re-T he Company's construction and oc. long term bt.

Pl ace tne shortierm borrowings.

quisition program anticipates expendi- In order to provide on up-to-date in.

tures of $203 milhon for 1994, of which strument for the issuance of bonds, notes in J nu ry 1993, $ 13 mdlion of the Industries Series 1986, 8-1/8 %

approximately $ 150 milhon represents or other evidente of indebtedness, Utihties DeMres (onginally scheduled to mature expend,tures at Ut,hties and opproxi. has entered into an Indenture of Mort-In September 1993) were redeemed motely $53 mdlion represents expendi- gage and Deed of Trust dated Septem. "d a defeasance was completed tures of Diversified. Of the $150 mdhon ber 1,1993 (New Mortgage). The lien f r the remainder of the debentures of Utihties' expenditures, 44% repre- of the New Mortgage is subordinate to sents expenditures for efectric transmis the hen of Utihties' first mortgages until $32mAont ,

InJawary 1993, D.ivasified expanded sion and distobution facihties, 18 % such time os ol! bonds issued under the its v ri ble rote credit facihty to $100 represents fossilfueled generation en first mortgages have been rehred and m@ n At December 31,1993, $32 pendituremnd 10% represents nuclear such mortgages satisfied The New Mort.

mWon was bonowed at 3.5625% un-generation expenditures. Diversified's gage provides for, among other things, the issuance of Collaterol Trust Bonds der this facihty and was due January ontici >ated expenditures include opproxL upon the basis of First Mortgage Bonds 21, 1994. The credit facility extends mate $25 mdlion at Whinng und on being issued by Uhlities. Accordingly, through Jonuary 1997, with c one-year oggregate of $14 m4on for compa.

n;es ia the transportation industry Sub- to the extent that Utihties issues Collat. extension available to Diversified. in-stonhal commitments have been mode eral Trust Bonds on the basis of First terest rates and maturities are set of the in connection with such expend,tures Mortgcge Bonds, it must comply with time of borrow,ng The interest rate op-The Company's levels of construc- the rec,uirements for the issuance of First tions are based upon quoted market tion and acquisit;on expend:tures are Mortgage Bonds under Uthfies' first rates and the moturities are less than projected to be $ 193 milhon in 1995, mortgages. Under the terms of the New one year. Diversified intends to con-

$176 m3on in 1996,1181mdlion H Mortgage. Utihties has covenanted not tinue borrowing under the ienewal op-1997 and $194 million in 1998. It is to issue any additional First Mortgage bons of the facihty and, occordingly, estimated that opproximately 70% of Bonds under its first mortgages except this debt is classified as long term in the I

construction expenditures will be pro- to provide the basis for issuance of Consohdated Balonce Sheets.

vided by cash from operatinq octmt es Collateral Trust Bonds. The Indentures pursuont to which (of ter payment of dividends) for the five in November 1993, Uhhhes entered Utihties issues First Mortgage Bonds con-year period 1994-1998. into arrangements with various cities in stitute direct first mortgoge liens upon Capital expenditure and investment the State of lowo (Cities), whereby the substantially all tangible public utility and financing plans are subject to con- Cities issued on aggregote of $19.4 property and contain covenants which tinual review and change. The copital million of pollution control revenue re- restrict the omount of odditional bonds expenditure and investment programs funding bonds (PCRRBs), all at 5.5%, which may be issued. At December 31, may be revised significantly as a result due 2023. Each series of the PCRRBs is 1993, such restrictions would have 01 of mony considerations including changes secured. in part, by payments on o lowed Uhhties to issue $258 million of in economic conditions, variations in conesponding principal amount of Utilities additional First Mortgage Bonds. UtilL actual sales ond lood growth compared Collaterol Trust Bonds, at 5.5% due t;es intends to file in the first quarter of to forecasts. requirements of environ ~ 2023. The proceeds received by UtdL 1994 with the FERC for authority to

__ ___ ______ ______ __ _ _M

issue $250 mdlion of long-term debt. sold $53.2 million under the agreements. has a letter of credit in the amount of Utehties is currently authorized by the At December 31, 1993, the Com- $3.4 milhon supporting two of its vari-SEC to issue $50 mdiion of long-term pony had bank lines of credit aggre- able rate pollution control obhgations.

debt under on vistmg registration state- gating $77.7 milhon (Industries - $ 1.5 ment. UtJmes expects to issue up to million, Utihties - $67.7 mdhon, Diversi. EFFECTS OF INFLATION

$ 150 mdlion in 1994. Tne proceeds are feed - $7.5 million and Whiting - $ 1.0 Under the rate making principles pre.

expected to be used for the early re- milhon). Utihties was using $ 19.0 mil. scribed by the regulatory commissions demption of three series of First Mort. hon of its hnes to support commercial to which Utihties is subject, only the gage Bonds aggrega*ing $55 million, paper and $7.7 million to support cer. historical cost of plant is recoverable in which have not yet been colled, and fain pollution control obhgations. Com. revenues as depreciation. As a result, for general corporate purposes, includ- mitment fees are paid to maintain these Utihties has experienced economic losses I ing support of its construction progrom. lines and there ore no cond:tions which equivalent to the current year's impact l In the first qucrier of 1993, Indus- restrict the unused hnes of cred:t. In of inflation on utility plant.

tries sold 2.3 million shores of its com- addition to the above, Utilities has on in addition, the regulatory process mon stock in a public of fering The shares uncommitted credit facihty with a f non- imposes a substantial time lag between were priced at $ 30 per shore. Net pro- cial institution whereby it con borrow the time when operating and capitol ceeds to Industries from this sole were up to $50 milhon. Rates are set of the costs are incurred and when they are opproximately $67 mdhon. time of borrowing and no fees are paid recovered. Utilities does not expect the The Articles of Incorporation of to maintain this facihty. At December effects of inflo' ion at current levels to Utihties authorize and hmit the aggre- 31,1993, $5 0 milhon was borrowed have o significant effect on its results of gate amount of additional shores of at 3 4% under this facility. Utihties also operations.

Cumulative Preferred Stock and Cumv.

latwe Preference Stock which may be Selected Consolidated Quarterly issued At December 31, 1993, Utihties could have issued on cdd:tional 700,000 Financial Doto (unoudited) i shores of Cumulative Preference Stock. The following unoudited consohdoted quarterly dato,in the opinion of the Com-l and 100.000 odditional shares of Cu- pany includes adjustments, which are normal and recurring in nature, necessary mulative Preferred Stock. In addition, for th,e fair presentation of the results of operations and financial position.

Industries had 5,000,000 shares of Cu-mulative Preferred Stock, no por value, Quarter Ended authorized for issuance, none of which

• March June September December were outstanding at December 31,1993.

The Company s capitalization ratios 31 30 30 31 ct year-end were os follows. Dn thousands, except per shore ornounts) 1993 1993 1992* Operating revenues. . $213,077 $170,470 $212,052 $205,667 Long-term debt. 47% 50% Operating income. 34,514 27,455 57,767 31,533 Preferred stock. 2 2 Net income . 13,935 11,740 27,957 14,306 Common equity . 51 48 Earnings per average .

100% 1_00% common share. 0.53 0.42 0.99 0.51 , .

% mim m+ us + a gem

~sy w%eng Wausm himes as ua 1992 ENNNIOaNN,L"'"*"' Operating revenues. $181,298 $148,442 $161,320 $187,236 Operating income. 24,286 19,091 38,439 27,208 SHORT-TERM FINANCING Net income . 10,046 8,341 18,555 11,769 for interim financing, Utihties is au- Earnings per average thorized by the FERC to issue, through common share. 0.40 0.33 0.73 0.46 1994, up to $ 125 milhon of short term notes. This availability of short term fi-noncing provides Utihties flexibility in Utilties' results of operation are a Consolidated Financial Statements.

the issuance of long term secunties At significant portion of the conschdoted The comparabihty of earnings per ov-December 31, 1993, Utihties had out. results The above amounts were of- eroge common shore is offected by the stonding short term borrowings of $24 fected by seasonal weather conditions sale of 2.3 million shares to the public million and the timing of utility rate changes. in the first quarter of 1993 as d.scussed Utihties has two agreements, both of Rate activities f or Utihties ar e discussed in Note 8 of the Notes to Consolidated which expire in 1994, with separate in Note 3 of the Notes to Consolidated Financial Statements. Refer to financial institutions to sell up to $65 Financial Statements. Management's Discussion and Analy-mdhon of its utihty occounts receivab!e. The 1993 results are of fected by the sis for o discussion of the adverse ef-Utihties intends to cor sohdate the agree- ocquisition of the Iowa service territory fect of weather upon 1992 results, pri-ments into one new ogreement in 1994. hom Union Electric Company, os dis. morily in the third quarter.

At December 31, 1993. Utiht;es had cussed in Note 2(c} of the Notes to 13

ALPDAT Of INDIPIHDtHT PUell( 4((0VHTaHT5 To the Board of Directors of IES Industries Inc.:

We have audited the accompanying conso!idated balance sheets and statements of capitalization of IES Industries Inc. (an Iowa corporation) and subsidiary compornes as of December 31,1993 and 1992, and the related consolidated statements of inccme, retained eamings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibsty of the Company's monogement Our responsibihty is to express on cpinion on these financial statements based on our oudas We conducted c ur audits in accordance with generally accepted aud. ting standards Those standards require that we p'an and perform the oudit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An aud>t includes examining. on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also ncludes assessing the accounting principles used end significant est; mates made by management, as well as evoluoting the overall financial statement presentation We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IES Industnes Inc. and subsid ory componies os of December 31,1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles As discussed in Note 7 to the consolidated financial statements, effective January 1,1993, IES Industries Inc. and subsidiary companies changed their method of accounting for postretirement benefits other than pensions.

% ,g Arthur Andersen & Co.

Chman llhnom jo%m y M 19W maHMImINT5 AL5P0H5lelllTY E0A (0H50LIDaTID flHaH(lal STATIMINT5 ,

The Company's management has prepared and is responsible for the presentation, integiity and objectivity of the consolidated financial statements and related information included in this report. The consolidated financial statements have been prepored in conformity with generally accepted account ng principles appled on a consistent basis and, in some cases, include estimates that are based upon management's judgment and the best available information, giving due consideration to materiality. Financial information contoined elsewhere in this report is consistent with that in the consolidated financial statements.

The Company maintains a system of internal cccounting controls which it believes is adequate to provide reasonable assurance ,

that assets are safeguarded, transactions are executed in accordance with management authorization and the financial records 'g are re l iable for preparing the consolidated financial statements. The system of internal accounting controls is supported by written policies and procedures, by a staff of internal ouditors and by the selection and training of quahtied personnel. The internal audit staf f conducts comprehensive audits of the Company's system of internal accounting controls. Monagement strives to maintain an adequate system of internal controls, recognizing that the cost of such a system should not exceed the benefits derived. In accor.

dance with genero!!y accepted auditing standards, the independent public accountants (Arthur Andersen & Co ), obtained a sufficient understanding of the Company's internal controls to plan their audit and determine the nature, timing and extent of other tests to be performed. No material internal control weaknesses have been reported to management, nor is management aware of any such weaknesses.

The Board of Directors, through its Audit Committee comprised entirely of outside directors, meets periodically with manage-ment, the internal auditor and Arthur Andersen & Co to discuss financial reporting matters, internal control and auditing To ensure their independence, both the internal auditor and Arthur Andersen & Co. have full and free access to the Audit Committee.

gW cN-;'L_ D- . b -- h $

lee Liu Blake O. Fisher, Jr. - ' hard A. Gobbianelli l

Chairman of the Board, Executive V,ce President & Chief Controller & Chief President & Chief Executive Officer Financial Of ficer Accounting Officer l

14

i (0H50llDaTLD 5TaTfm{HT5 DT IH(0m{

t Year Ended December 31 1993 1992 19 91 hn thoumndt ocept per share amounts) >

Operating revenues: .

Electric . $ 550,521 $ 462,999 $ 482,578 Gas . 181,923 167,082 146,237 j Other 68,822 48,215 32,723 .

801,266 678,296 661,538 Operating expenses:

fuel for production . 87,702 73,368 91,182 Purchased power . 93,449 74,794 70,245 '

Gas purchased for resale 135,830 128,259 111,206 ,

Other operating expenses . 162,642 142,348 141,626 -

Maintenance . 48,913 41,415 41,265 j Depreciation and amortization . 77,012 69,392 64,088 , l Taxes other than income taxes . 44,449 39,696 38,569 649,997 56E272 558,Tlil ,

Operating income . 151,269 109,024 103,357 ~l.

Interest expense and other: l Interest expense . 44,440 45,426 40,599 l

, Allowance for funds used during construction (1,972) (3,177) (2,086)

Preferred and preference dividend requirements of subsidiary 914 1,729 2,170

• Miscellaneous, net . 2,908 (7,495) (3,700) 46,290 36,483 36,9H3 j inccme before income taxes . 104,979 72,541 66,374 Fed:rol and state income taxes . 37,041 23,830 21,717 Net income. $ 67,938 $ 48,711 $ 44,657 e..-e,...w.>. - . --..&,-

Avarege number of common shores outstanding. 27,764 25,389 24,156 Earnings per overage common shore , $ 2.45 $ 1.92 $ 1.85 The accompanying Notes to Consohdated IinancialStatements are on integralpart of these statements.

(DH50LIDATID 5TaTIBIHT5 OT SITalHID Ia4HING5 Year Ended Decernber 31 ,

1993 1992 1991 I (in thousands)

Bolonce at beginning of year $ 202,919 $ 202,882 $ 207,339 I Add:

Net income 67,938 48,711 44,657 Acquisition of Whiting Petroleum Corporation -

5,233 - ,

Decivet:

Cash dividends declared on common stock, at per share rates of $2.10, $2.10 and $2.03, respectively 59,107 53,350 49,114 Preferred stock redemption premiums of subsidiary -

557 -

Bolonce at end of year

($18,209,000 restricted as to payment of cash dividends) $ 211,750 $ 202,919 $ 202,882 The accompany,ng Na res to Cc-sohdared FmancialStatements are on integralpart of these statements.

15

(0H50LIMTG MLaHCI MG December 31 Assets 1993 1992 (in thousands)

Property, plant anci equipment, at original cest:

Ut lity -

Plant in service -

Electric $ 1,707,278 $ 1,641,536 Gas . 147,956 137,227 Other . 75,845 73,970

~ 13931,079 1,852,733 less - Accumulated depreciation . _ _81_3,312 759,7_54 1,117,767 1,092,979 leased nuclear fuel, nct of amortization . 51,681 48,505 Construction work in progress . 41,937 30,324 1,211,385 1,171,808 Other, nct of accumulated depreciation and amortization of $35,007,000 and $27,835,000, respectively . 124,275 92,961 l

1,335,660 1,264,769 1

l '

l Current assets:

Cash and temporary cash investments 7,465 7,341 Accounts receivable -

Customer, less reserve . 33,642 35,243 Other . . . . . . . . . . . . . . .

10,421 10,449 income tax refunds receivable 9,061 13,026 Production fuel, at average cost . 14,338 19,418 Materials and supplies, at overage cost. 29,046 30,876 Adjustment clause balances. - 1,217 Regulatory assets. .... 6,421 3,636 Prepayments and other . 34,781 25,132 145,175 146,338 investments:

Nuclear decommissioning trust funds . 28,059 21,327 Diversified equity investments 7,089 15,788 Other . 8,705 -

8,107 43 853 45,222 Other assets:

Regulatory assets . . . . . . . . . . 149,978 118,215 Deterred charges and other 25,153 19R38 175,131 138,053

$1,699,819 $ 1,594,382 The accompanyng Notes ta Consolodated hnanaal Statements are on inseyal port of these statements.

16

l 4 (0H50LIMID STATfmfHT5 Of (N fl0M

a 0 Year Ended December 31 f 1993 1992 1991 Dn twsonds) i Cash flows from operating activities: l

- Net mcome. .. . . . . . . . - $ 67,938 $ 48,711 $ 44,657 i

! Adjustments to reconcile net income to net cash flows l l Itom operating activities - l Depreciation and amortization ._.. . . . . 77,012 69,392 64,088 t i

Print ipal payments under capital lease obligations . 11,429 11,725 15,471 l Deferred taxes and investment tax credits . 9,254 (1,374) (14,547)  ;

] Amortization of deferred charges . 860 961 7,778 l Pefuehng outage provision ~ . . . . . (4,889) (5,503) 11,553 -

Al!owance for equity funds used during construction (824) (1,831) (820) 3 (Goin) loss on disposition of assets, net . (3,001) 143 164  :

Other . . _ . . . . . . . . 8,176 (4,258) (3,487) i Other changes in assets and liabilities - l j Accounts receivable . . . . . . (8,861) (4,000) (5,920) 1 Sale of utihty accounts receivable . .. 10,490 7,710 (5,000)

Production fuel, materials and supplies 5,836 83 (962) ,

Accounts poycble . 7,984 (3,894) 3,697  !

Accrued taxes . . . . . . . . . . 7,549 7,111 (24,922) ;l 9 Provision for rote refunds. (350) 7,528 (197)  :

Adjustment clouse bolonces . 6,366 (4,122) 184 )

e hepayments and other . (9,649) (4,654) (2,676) l Def erred energy efficiency costs . (9,747) (6,877) (1,905)  ;

Other . . . . .. _ _ 1,687 7.780 4, 019 Net cash flows from operating activities. 177,260 124,631 91,175 l Cash flows from financing activities:

Dividends declared on common stock . (59,107) (53,350) (49,114) '

s D;vidends payable . . . . . . . . . . 1,727 13,679 113 hoceeds from issuance of common stock . .... 79,746 10,726 8,052 ,

Net chonae in IES Diversified inc. credit facihty . 25,000 7,000 -

l

hoo4ds frc m issuance of other long term debt . 121,734 107,400 95,505 Sinking fund requirements and reduct;ons in long term debt and preferred and preference stock . (126,803) (70,158) (33,460) I j Net change in short-term borrowings . . . . . (68,000) 51,100 (9,100)  ;

Punopa! payments under capitollease obhgations . (11,276) (12,337) (14,738)

Other . . . . . . 46 ___{24 8) R2.)

Net cash flows from financing activities . (36,933) 53,812 (2,834' ,

Cash flows from investing activities: l Construction and ocquisition expenditures -  ;

Utihty (113,212) (171,013) (105,009) li P

Other . . . . . . . . . . (50,432) (20,821) (14,812)

Nudear decommissioning trust funds . (5,532) (5,532) (5,505)

investments in unconsolidated offiliates . (5,373) (686) -

~

hm.eeds from disposition of assets 28,790 1,106 299 ,

Other .. . . . ___ 5,5 56 _ 1.878 _{2,617J  !

Net cash flows from investing activities . (140,203) (195,068) (127,644) het increase (decrease) in cash and temporary cash investments 124 (16,625) (39,303)

Cash and temporary cash investments of beg:nning of year . 7,34_1 __23,966 63,269 Cash and temporary cash investments at end of year. $ 7,465 $ 7,341 $ 23,966 Supplemental cash flow information: i Cash paid during the year for -

nterest . $ 45,153 _$ 42,480 $ 41,284 f incorne taxes . . . . . . . $ 22,179 $ 23,539 $ 55,720

, Noncash investing and financing activities - ,

Capitol lease obhgations incurred . $ 14,605 $ 1,973 $ 11,874 ,

ne accce;>anying Notes to Consol, dated financ,a! Statements are an integral part of these stawments

Q .

4(%-

\ Refer to the individual footnotes rei-energy re- erenced above for a discussion of the

( lated transactions offecting Utilities. Such specific items reflected in re ulatory assets. The amounts reflecte for en-( transactions are mode at prices ergy efficiency programs are o result g*g which approximate market value of on IUB mandate whereby 2% of and the ossociated costs are recover- electric and 1.5% of gas gross retail ,

dX able from Utilities' customers through the rote making process.

operating revenues are to be ex-pended annually for energy efficiency 3 Certain prior period amounts have been reclassified on a basis consis-programs. Under this mandate, Utilit;es will make its initial filing for recovery ol ,

tent with the 1993 presentation. the costs in 1994.  !

% (b) Regulation - (d) Income Taxes -

Industries is currently exempt f rom The Company follows the liability ,

regulation under the Public Utility method of accounting for deferred q Holding Company Act of 1935. Utili- income taxes, which requires the es- .

g ties is subject to regulation by the tablishment of deferred tax liabilities lowo Utilities Board (IUB) and the (g (1)

SUMMARY

Federal Energy Regulatory Commis-and assets, as oppropriate, for all temporary differences between the OF SIGNIFICANT sion (FERC). tax basis of ossets and liabilities and C::d ACCOUNTING POLICIES: the amounts reported in the financial (c) Regufotory Assets -

Utilities is subject to the provisions statements. Deferred taxes are re-q (c) Base.s of Consolidats.on- of Statement of Financial Accounting corded using currently enacted tax q The Consolidated Financial State- rates.

Standards No. 71 " Accounting for q ments include the accounts of IES In- Except as noted below, income tax the Effects of Certoin Types of Regu.

dustries Inc. (Industnes) and its lotion" (SFAS 71). The regulatory expense includes provisions for de-consolidated subsidiaries (collec- assets represent probable future rev. fened taxes to reflect the tax effects tively the Company), All significant of temporary differences between enue to Utilities ossociated with cer.

subsidiories for which industries owns the time when certain costs are re-tain incurred costs os these costs are directly or mdirectly more than 50% corded in the accounts and when recovered through the rate making of the voting stock are included os they are deducted for tax return process. At December 31, 1993, consolidated subsidiaries. Industnes Purposes. As temporary differences regulatory assets were comprised of wholly-owned subsidiaries are IES reverse, the related occumulated the following items, and were re_

Utilities Inc. (Utilities) and IES Diversi- deferred income taxes are reversed '

fied inc. (D, iversified). Utibties was flected in the Consolidated Bolance Sheets os follows: to income. Investment tax credits for formed as the result of the merger of Utilities have been deferred and industries' former wholly-owned sub- Regulatory are subsequently credited to income sidiaries lowo Electric Light and Assets over the overage lives of the related Power Cornpany (IE) and lowo wraw propert y.

Southern Utihties Company (IS), ei- Deferred income Consistent with rate making proc-fective December 31,1993, os dis- $ 88.6 tices for Utilities, deferred tax taxes (Note 1(d)).

cussed in Note 2(o). Energy efficiency expense is not recorded for certain investments for which the Com- prcgrams . 18.5 temporary differences (primarily pony has at least a 20% interest are Employee pension and...... related to utility property, plant and generally accounted for under the 14.1 equipment). Accordingly, Utilities benefit costs (Note 7) .

equity method of accounting. These Environmental liabilities has recorded deferred tax liabilities investments are stated at acquisition 12.9 and regulatory assets, os discussed (Note 12(f)) . . . . .

cost, increased or decreased for the National Energy Policy in Note 1(c).

Company's equity in undistributed 12.5 Act of 1992 (Note 12(h)) .

net income or loss, which is included FERC Order No. 636 (e) Temporcry Cash in " Interest expense and other Mi5- 5.0 Investments -

transition costs (Notel2(i)) .

cellaneous, net" in the Consolidated Concelled plant costs 3.3 Temporary cash investments are Statements of Income. Regulatory siudy costr. 1.5 st ted at cost which approximates All signifimnt intercompany bol. m rket v lue nd are considered 1'56'4 cash equivalents for the Consoli-onces and transactions have been eliminated from the Consolidated ss cuent ornounts . M dated Statements of Cosh Flows.

Financial Statements, other than . $150,0 These investments consist of short-20

I

• I term liquid investments which have sents the cost during the construction Sheets as a current asset or current maturities of less than 90 days from period of funds used for construction liability, pending automatic reflection ,

the date of ocquisition. purposes, is capitchzed by Utilities as in future billings to customers. l (f) Depreciation of Utility C *P "en' *I'he ' I "'ib'Y (k) Accurnulated Refueling Property, Plant and Pl ant. The amount of AFC applicable g p, j,g , j Equiprnent - t debt funds and to other (equity) The IUB allows Utilities to collect, l The overage rates of depreciation funds, n n-c sh item, is computed as part of its base revenues, funds to

'n cc rdance with the prescribed for electric and gas properties of offset other operating and mainte-Util; ties, including Uti!ities' nuclear FERC formula. The oggregate gross nonce expenditures incurred during generating station, the Duone Amold r tes used by Utilities for 1993-1991 were 5.7 4, 9.2% and 8.5 5, refueling outages at the DAEC. As Energy Center (DAEC), which is be. these revenues are collected, on re5Pec'ively-ing depreciated over a 36 year hfe equivalent amount is charged to using a remaining hfe method, were (h) Oil and Gas Properties - other operating and maintenance ex-as follows: Whiting Petroleum Company penses with a corresponding credit (Whiting), a wholly-owned subsid- to a reserve. During a refueling out-1993 1992 19 91 iary of Diversified, uses the full cost age, the reserve is reversed to offset Electric . 3.5% 3.5% 3.5% method of accounting for its oil and the refueling outage expenditutes.

Gas . 3.5% 3.0% 3.0% gas properties. Accordingly, all costs (2) MERGERS AND Based on the most recent site spe. ' '9"# "' exP oration l and devel- ACQUISITIONS:

Pment of properties are capitalized.

cific study, completed in 1992, Utili.

tics' 70% shore of the estimated cost

^'"

'Ph n Proved oil and gas Properties is calculated using the (a) Merger of IE and 15 - ,

to decommission the DAEC and re. On June 4,1993, Industries on-turn the underlying property to its nd of Production method. At De- nounced that its wholly. owned utility cember 31, 1993, capitchzed costs subsidiaries, IE and IS, filed applico-original state approximated $223 ,

less rel ted occumulated amortiza- tions for regulatory authority to million in 1992 dollars. The study is based on the prompt removal and ti n do not exceed the sum of (1) the merge. The merger become elfective dismantling decommissioning alter. Present value of future net revenue December 31, 1993, following re-native and is assumed to begin at the frpm estim ted production of proved ceipt of all necessary Boards of end of the DAEC's operat;ng license gil nd gas reserves (colculated us- Directors, shareholder and regulo-

'"9 '""ent Prices); plus (2) the cost tory approvals.

in 2014. The level of annuai recovery f roperties P not being amortized, if IE is the surviving corporation and through rates of decommissioning costs is $5.5 million, which is depos. nYi P us (3) the lower of cost or l

has been renamed IES Utilities ited in external trust funds, and is e5hm fed f 8f V IUe f Unproved inc. The separate existence of IS has Propahes included in the costs be- ceased. Utilities serves a total based on a remaining hfe recovery method. The onnuol recovery levelis !ng m rtized, if any; less (4) of 325,000 electric and 170,000 inc me t x effects ret ted to differ- natuial gas retail customers as well reviewed and, if necessary, adjusted ences in the book and tax bas,s of oil in each rate case. Decommissioning i

os 32 resale customers in more nd gas properties. than 550 lowa communities.

costs, at the level collected through rates, are included in "DeprecioHon (i) Operating Revenues . The merger was accounted for un-and amortization" expense in the The Company accrues revenues der a method of accounting similar to Consolidated Statements of income. for services rendered but unbilled at Pooling of interests, which combined in addition to the $28.1 million in. month +nd in order to more properly the wnership interests of IE and IS.

vested in the external trust funds os match revenues with expenses. The ossets and liabilities of IE and 15 indicated in the Consolidated Bol. were combined at their recorded ance Sheets, Utihties has on internal (j) Adjustrnent Clauses - omounts as of the merger date.

Utilities tariffs providu I subse-decommissioning reserve o; $21.7 million recorded as occumulated de' quent adjustments to its elec+ and (b) Merger with Whiting - ,

natural gas rates for changes in the Effective February 18,1992, Whit-preciation. Earnings on the external funds are recognized as income and cost of fuel and purchased energy ing merged with a subsidiary of and in the cost of natural gas pur- Industries. The merger, which was ac-a corresponding amount of interest chased for resole. Changes in the counted for os a pooling of interests, expense is recorded for the reinvest-under/over collection of these costs was not material to the Consolidated ment of the earnings.

are reflected in " Fuel for production" financial Statements and, accordingly, (g) Allowance for Funds Used and "Gos purchased for resale" in prior period Consolidated Financial During Construction - the Consolidated Statements of in- Statements have not been restated and The allowance for funds used dur- come. The cumulative effects are re- are presented as if the merger had oc-ing construction (AFC), which repre- flected in the Consolidated Balance curred on January 1,1992.

21

(c) Acquisition ofIowa 15 refunded approximately $0.2 mil- provides for annual one year exten-Service Territory of lion, including interest, in the second sions and Utilities intends to exercise Union Electric Cornpany - quarter of 1993. such extensions through the DAEC's Effective December 31,1992, IE operating life. Interest costs under the acquired the Iowa distribution system (b) 1991 Electric Rate Case - lease are based on commercic,I pa-and a portion of the Iowa transmis. In October 1991, IE opplied to the per costs incurred by the lessor. I sion facihties of Union Electric Com. IUB for on increase in interim and Utihties is responsible for the poyment pony (UE) for $65.0 million in cash. final retail electric rates of $18.9 mil- of taxes, maintenance, operating The ocquisition was accounted for as lion annually, or 6.0%. The IUB oP cost, risk of loss and insurance relot-a purchase. The net book value of the Proved on interim rate increase of ing to the leased fuel.

ocquired ossets was approximately $15.6 million, annually, which be- The lessor has on $80 million come effective in December 1991, credit agreement with a bank sup-

$34.4 million and the amount of the purchase price in excess of the book subject to refund. porting the nuclear fuel lease The value ($30.6 million) has been re- In July 1992, the IUB issued its agreement continues on a year to corded as an acquisition adjustment. " Final Decision and Order" approv- year basis, unless either party The acquisition adjustment is being ing on annual efectnc rote increase provides at least a three year notice amortized over the life of the prop. of $7.9 million. The application of of termination; no such notice of ter-erly and is included in " interest ex. double leverage rotemaking theory mination has been provided by ei-  !

pense and other - Miscellaneous, ne,~ to IE's capitol structure accounted for ther party.

in the Consolidated Statements of in- oPProximately $4 million of the dif- Annual nuclear fuel lease ex-come. Recovery of the acquisition od- ference between the interim rate level penses include the cost of fuel, based justment through rates will be and the amount allowed in the Or- on the quantity of heat produced for addressed in future Utihties' rate pro. der. Alter a limited reheoring of the the generation of electric energy, plus ceedings. See Note 12(b) for a dis. double leverage issue, the lU B issued the lessor's interest costs related to cussion of the purchase power its " Order On Rehearing" in Decen> fuelin the reactor and administrative contracts between Utilities and UE ber 1992, which affirmed the origi- expenses. These expenses (included associated with this acquisition. nol decision. in " Fuel for production" in the IE appealed the IUB's Order to Consolidated Statements of income)

(3) R ATE MATTERS: the Iowa District Court (Court). In for 1993-1991 were $12.4 million,  !

December 1993, the Court issued it5 $12.9 million and $17.5 million, (a) Gas Rate Cases - dec,s,i ion, which upholds the IUB s ,espect;yely, former IE Service Territory Order. Utilities did not appeal The Company's operating lease in July 1992, IE applied to the the Court's decision to the Iowa Su- rental expenses for 1993-1991 were IUB for on increase in gas rates of preme Court. $9.1 million, $7.7 million and $7.4

$6.3 million annually, or 5.9%. Elfec- in the second quarter of 1993, IE million, respectively, tive September 30, 1992, the IUB refunded approximately $4.1 mil ]

authorized on interim increase of lion, including interest, which repre-sented a refund down to the level of The Company,s future minimum

$5.4 million, subject to refund. On revenues that would have resulted le Se Payments by year are os April 30,1993, the IUB issued its *Fi-had it won the appeal. An additional Id *5 l nol Decision and Order," which op-refund, including interest, of $ 8.7 mil-Cap.tal Operating i

proved stipulations between IE and Year lease Leoses certain intervenors providing for an lion is required at December 31, 1993, as a result of the Court's deci- 0" '""d'l annualincrease in revenues of $5.5 million. IE did not have any refund sion. The refund is expected to be 1994 $16,994 $ 7,901 ,

liability as a result of the Order. completed in the second quarter of 1995 11,970 7,771 '

1994. There will be no elfect on elec- 1996 10,784 6,191 Former 15 Service Territory tric revenues, net income and earn- 1997 9,940 4,348 l In July 1992, IS applied to the IUB ings per average common shore 1998 _... 4,145 4,351 l for on increase in gas rates of $2.3 when the additional refund is made 1999 2003. _4,111 13M3 milhon annually, or 6.2% Fffective because Utihties hos been reserving 57,944 $43,575 September 30,1992, the IUB autho- for the offect of the additional refund. Less: Amount rized on interim increase of $1.9 representing million, subject to refund. In February (4) LEASES: interest 6,263 1993, the IUB opproved stipulations Utihties has a capital lease cover-Present valUe between 15 and certain intervenors ing its 70% undivided interest in p

• in the proceeding that provided for nuclear fuel purchased for the DAEC. e on annual increase in revenues of Future purchases of fuel may also be $_5_l,681 ayments ~

$ 1.6 million. As a result of the Order, added to the fuel lease. This lease l

22

. +

(OliS0llDaTD 5IRTimCiT5 Of CaPITalllall0li December 31 1993 1992 (m thousands)

Common equity:

Common stock no par value - authorized 48,000,000 shares; outstonding 28,304,188 and 25,556,963 shares, respectively . $ 360,301 $ 279,810 Retained earnings -~211,750 202,919 572,051 482,721 Cumulative preferred stock of IES Utilities Inc. 18,320 18,320 Long-term debt:

IES Industries Inc.

Series 1986 debentures,8-1/8%, retired in 1993 -

45,000 lES Utilities Inc.

Collateral Trust Bonds -

6% series, due 2008 . 50,000 -

7% series, due 2023 . 50,000 -

5.5% series, due 2023 19,400 -

119,400 -

First Mortgage Bonds -

Series J,6-1/4%, due 1996. . 15,000 15,000 Senes K, 8-5/8%, retired in 1993. -

20,000 Series t, 7-7/8%, due 2000 . 15,000 15,000 Series M,7-5/8%, due 2002. 30,000 30,000 Series P & O,6.70%, retired in 1993. - 9,200 Series R,8-1/4%, retired in 1993. -

25,000 Series W,9-3/4%, due 1995 50,000 50,000 Series X,9.42%, due 1995 . 50,000 50,000 Series Y, 8-5/8%, due 2001 60,000 60,000 Series Z,7.60%, due 1999 . 50,000 50,000 6-1/8% series, due 1997. 8,000 8,000 9-1/8% series, due 2001 21,000 21,000 7-3/8% series, due 2003. 10,000 10,000 7-1/4% series, due 2007. 30,000 30,000 8-3/4% series, retired in 1993. ___._-._ 15,000 339,000 408,200 Pollution control obligations -

5.75%, retired in 1993. .

10,200 i 4.90% to 5.75%, due serially 1994 to 2003. . . . . . 3,920 4,144

' 10,000 10,000 5.95%, due 2007, secured by First Mortgage Bonds Variable rate (315% at December 31,1993), due 2000 to 2010. 11,100 11,100 25,020 35,444 Total IES Utilities Inc. 483,420 443,644 IES Diversified Inc.

Variable rate credit facility (3.5625% at December 31,1993) . 32,000 7,000 Other subsidiaries' debt maturing through 2013 . 10,510 ~

91 108

~~~525,930 SD3,752 Unamortized debt premium and (discount), net .

' (3,123) - 5D(2'11 522,807 922)

,63D less - Amount due within one year . 464 45,398 T522;3.4.3 4573 32

$ 1,112,714 $ 958,481 The oc vmmwymg Notes to Conwhdared Fmanual Svarements one ao wr m yal pwt of these staremoort 18

December 31 Capitalization and Liabilities 1993 1992 i 0n thousands) l Capitalization (See Consolidated Statements of Capitalization): ,

Common stock . $ 360,301 $ 279,810 ,

Retained earnings 211,750 202m919 Total common equity .......... .. 572,051 482,729 Cumulative preferred stock of IES Utilities Inc. 18,320 18,320 tong term debt . 522,343 457 432 1,112',714 958,481 ,

Current liabilities: t Short-term borrowings . 24,000 92,000 Capital lease obligations . 15,345 13,211 Sinking funds and maturities . 464 45,398 Accounts payable. 53,980 46,667 Accrued interest . 9,471 10,415 Accrued taxes ... .. . . 42,368 38,784 ,

Accumulated refueling outage provision . 2,660 7,549 '

Dividends payable ..... 15,519 13,792 '

Adjustment clause balances.... 5,149 -

Provision for rate refund liability . 8,670 9,020 Other . 32,667 22J11 l 210,293 299,153 1!

Long-term liabilities: l 35,294 Capital lease obligations . .... . . . 36,336 liability under National Energy Policy Act of 1992 11,984 12,054 Environmental liabilities . 9,340 10,415 Other . . 40,562 25 m94_4 98,222 83,707 Dcferred credits:

Accumulated deferred income taxes . ..... , 236,131 205,698 Accumulated deferred investment tax credits . 42,459 47 343 278,590 25/D4]

i Cemmitments and contingencies (Note 12)

$ 1,699,819 $ 1,594,382 l

l l

17

Q '

Refer to the individual footnotes rei- I energy re- erenced above for a discussion of the Q lated transaction 5 offecting Utilities. Such specific items reflected in regulatory

[g transactions are mode of prices which approximate market value assets. The amounts reflected for en-ergy efficiency programs are a result of on IUB mandate whereby 2% of and the associated costs are recover -

% electric and 1.5% of gas gross retail ,

hX oble f rom Util ties' customers through the rate making process.

operating revenues are to be ex-pended annually for energy efficiency 9 Cer toin prior period amounts have programs. Under this mandate, Utihties been reclassified on a basis consis- will make its initial filing for recovery of tent with the 1993 presentation. the costs in 1994.

% (b) Regulation - (d) Income Taxes -

Industries is currently exempt from The Company follows the liabihty g te9ulation under the Public Utility method of accounting for deferred  !

q Holding Company Act of 1935. Utili- income taxes, which requires the es-g ties is subject to regulation by the tablishment of deferred tax liabilities (g (1)

SUMMARY

lowo Utihties Board (IUB) and the Federal Energy Regulatory Commis-and assets, as appropriate, for all temporory differences between the  :

OF SIGNIFICANT sion (FERC). tax basis of ossets and habilities and i ACCOUNTING POLICIES: the amounts reported in the financial (c) Regulatory Assets - l Utihties is subject to the provisions statements. Deferred taxes are re-q (a) Base.s of Consoliclots.on- of Statement of financial Accounting corded using currently enacted tax q The Consolidated Financial State ~ rates.

StandorJs No. 71 " Accounting for q ments include the accounts of IES In~ Except os noted below,incomo tox the Effects of Certain Types of Regv.

dustries Inc, (Industries) and its expense includes provisions for de-lot on" (SF/,5 71). The regulatory consolidated subsidiories (collec- assets represent probable future rev. ferred taxes to reflect the tax elfects tively the Company). All significant of temporary differences between enue to Utilities ossociated with cer.

subsidiaries for which Industries own the time when certoin costs are re-directly or mdirectly more than 50 toin incurred costs as these costs are

• ?

recovered through the rate making corcied in the accounts and when of the voting stock are mcluded as they are deducted for tax return  :

process. At December 31, 1993, consohdoted subsidiaries. Industnes Purposes. As temporary differences regulatory assets were comprised of wholly. owned subsidiaries are IEp the following items, and were re. reverse, the related occumulated Utilities Inc. (Utilities) and IES Divers" deferred income taxes are reversed flected in the Consolidated Balonce l fied inc. (Diversified). Utihties was Sheets as follows: to income. Investment tax credits for t formed as the result of the merger of Utilities have been deferred and Industries' former wholly-owned sub- Regulatory are subsequently credited to income sidiories lowo Electric Light and Assets over the average hves of the related Power Company (IE) and lowo Wim,,a proper ty. '.

Southern Utilities Company (IS), ef- Deferred income Consistent with rate making proc-fective December 31,1993, os dis- $ 88.6 tices for Utilities, deferred tax taxes (Note 1(d)) .

cussed in Note 2(a). Energy efficiency expense is not recorded for certain Investments for which the Com- programs . _.. 18.5 temporary differences (primarily pony has at least o 20% interest are Employee pension and related to utility property, plant and 9enerally accounted for under the 14.1 equipment). Accordingly, Utilities benefit costs (Note 7) .

equity method of accounting. These Environmental liabilities hos recorded deferred tax liabilities investments are stated at acquisition 12.9 and regulatory assets, os discussed (Note 12(f)) . . . . .

cost, increased or decreased for the National Energy Policy in Note 1(c).

Company's equity in undistributed Act of 1992 (Note 12(hl) . 12.5 net income or loss, which is included FERC Order No. 636 lel Temporary Cash in " Interest expense and other - Mis- 5.0 Investments -

transition costs (Note 12(i)) .

cellaneous, net" in the Consolidated Concelled plant costs . 3.3 Temporary cash investments are Statements of income. Regulatory study costs . 1.5 stated at cost which approximates All significant intercompany bol' m rket v lue nd are considered 156 4 onces and transactions have been c sh equivalents for the Consoli-less current amounts. 64 dated Statements of Cosh flows.

eliminated from the Consohdated Financial Statements, other than . . .. $150.0 These investments consist of short-20

i ,

?

(OM0LIMID STaTIMENT5 OE (El TLOM  :

Year Ended December 31 ,

1993 1992 1991 l

[n thousands) [

Cash flows from operating activities:

Net income . . . . . . . . . . . . . . . $ 67,938 $ 48,711 $ 44,657  ;

Adjustments to reconcile net income to net cash flows  ;

from operating activities -  :

Depreciation and omertization . ... . . . . 77,012 69,392 64,088  ;

Principal payments under capital lease obligations . 11,429 11,725 15,471 '

Deferred taxes and investment tax credes . 9,254 (1,374) (14,547) ,

Amortization of ci krred charges . 860 961 7,778 [

Refueling outage provision . . . . . . . (4,889) (5,503) 11,553 Allowance for equity funds used during construction (824) (1,831) (820)  ;

(Goin) loss on disposition of assets, net . (3,001) 143 164 Other . . . . . . . . . . . . . 8,176 (4 258) (3,487)  !

Other changes in assets and liabilities - i Accounts receivable . . . . . . (8,861) (4,000) (5,920) r Sale of utility accounts receivable .... 10,490 7,710 (5,000)

Production fuel, materials and supplies . 5,836 83 (962)  ;

Accounts payable . 7,984 (3,894) 3,697  ;

Accrued taxes . . . . . . . . . . 7,549 7,111 (24,922)  :

Provision for rate refunds . (350) 7,528 (197) ll Adjustment clause balances . 6,366 (4,122) 184  :

Prepayments and other . (9,649) (4,654) (2,676)

Deterred energy efficiency costs . (9,747) (6,877) (1,905)

Other . . . . . . . ..... 1,687 7.780 4t 019 Net cash flows from operating activities . _177,260 124,631 91,175 i Cash flows from financing activities:  !

Dividends declared on common stock. (59,107) (53,350) (49,114)

Dividends payable . .... ..... 1,727 13,679 113 Proceeds from issuance of common stock . .... 79,746 10,726 8,052 Net change in IES Diversified Inc. credit facility . 25,000 7,000 -

Proceeds from issuance of other long-term debt . 121,734 107,400 95,505 Sinking fund requirements and reductions in long term debt and preferred and preference stock . (126,803) (70,158) (33,460)

Net change in short term borrowings. ...~. (68,000) 51,100 (9,100) ,

Principal payments under capital lease obligations . (11,276) (12,337) (14,738) ,

Other ...... .... .... 46 . 2 48) _ _(92)

Net cash flows from financing activities . (36,933) 53,812 (2,834)

Cash flows from investing activities:

Construction and acquisition expenditures -

Utility (113,212) (171,013) (105,009)

Other .. . . . . . . (50,432) (20,821) (14,812)

Nuclear decommissioning trust funds . (5,532) (5,532) (5,505)

Investments in unconsolidated affiliates . (5,373) (686) -

Proceeds from disposition of assets 28,790 1,106 299 Other . . . . . . . . . . 5,556 1187__8 _. .(2 m6.1Z)

Net cash flows from investing activities . (140,203) . (195,068) (127,644)

Net increase (decrease) in cash and temporary cash investments 124 (16,625) (39,303)

Cash and temporary cash investments of beginning of year . 7,341 23,966 63,269 Cash and temporary cash investments at end of year. $_7,465 $_ 7,341 $ 23,966  ;

Supplemental cash flow information:

Cash paid during the year for -

1 Interest. $ 45,153 $ 42480 _

$ 41,284 ,

locome taxes . . . . . $ 22,179 $ 23,539 $ 55,720

= = = =

Noncash investing and financing activities- ,

Capital lease obligations incurred . $ 14,605 $ 1,973 $ 11,874 <

a The accompanying Notes ta Consaludared FinancalStavments are on ,ntegral part of these statements

1

)

(c) Acquisition oflowo IS refunded opproximately $0.2 mil- provides for annual one year exten-Service Territory of lion, including interest, in the second sions and Utilities intends to exercise l Union Electric Company - quarter of 1993. such extensions through the DAEC's l Elfective December 31,1992, IE operating life. Interest costs under the 1 ocquired the lowo distribution system (b) 1997 Electric Rote Case - lease are based on commercial po- l ond a portion of the Iowa transmis. In October 1991, IE applied to the per costs incurred by the lessor. j sion facilities of Union Electric Com. IUB for on increase in interim and Utihties is responsible for the payment  !

pony (UE) for $65.0 million in cash. finol 'etail electric rates of $18.9 mil- of taxes, maintenance, operating  !

The acquisition was accounted for as lion annually, or 6.0%. The IUB oP- cost, risk of loss and insurance relot- I o purchase. The net book value of the Proved on interim rate increase of ing to the leased fuel.

ocquireJ ossets was approximately $ 15.6 million, annually, which be- The lessor has on $80 million ,

come of fective in December 1991, credit agreement with a bank sup- l

$34.4 million and the amount of the purchase price in excess of the book subject to refund. porting the nuclear fuel lease. The volve ($30 6 million) has been re. In July 1992, the IUB issued its agreement continues on a year to corded as on acquisition adjustment. "f'nal Decision and Order" approv- year basis, unless either por1y 1 The acquisition adjustment is being Mg on annual dednc rate bmase provides at least a three year notice 4 omortized over the hie of the prop. of $7.9 milhon. The application of of termination; no such notice of ter-erty and is included in " Interest ex. double icverage ratemaking theory mination has been provided by ei- i pense and other - Miscellaneous, ne,- to IE's cop 'ol structure accounted for ther party. I in the Consohdoted Statements of in. opproximately $4 milhon of the dif- Annual nuclear fuel lease ex- t come. Recovery of the acquisition ad. ference bet ween the interim rate level penses include the cost of fuel, based i justment through rates will be and the amount allowed in the Or- on the quantity of heat produced for addressed in future Utilities' rate prc> der. After a limited reheoring of the the generation of electric energy, plus ceedings. See Note 12(b) for o dis. double leverage issue, the lU B issued the lessor's interest costs related to cussion of the purchase power its " Order On Rehearing" in Decem- fuel in the reactor and administrative contracts between Utilities and UE ber 1992, which offirmed the origi- expenses. These expenses (included i associated w:th this acquisition. nol decision- in " Fuel for production" in the i IE oppealed the IUB's Order to Consolidated Statements of income) l (3) R ATE MATTERS: the lowo District Court (Court). In for 1993-1991 were $12.4 million, December 1993, the Couriissued its $12.9 million and $17.5 million, (a) Gas Rote Cases - dec,s,on, ii which upholds the IUB s respectively. i Former lE Service Territory Order. Utilities did not appeal The Company's operating lease  ;

in July 1992, IE applied to the the Court's decision to the lowo Su- rental expenses for 1993-1991 were IUB for on increase in gas rates of preme Court. $9.1 million, $7.7 million and $7.4

$6.3 million annually, or 5.9%. Ef fec. In the second quorter of 1993, IE million, respectively.

tive September 30, 1992, the IUB refunded opproximately $4.1 mil-authorized on interim increase of lion, including interest, which repre-sented a refund down to the level of The Company,s future minimum

$5.4 milhon, subject to refund. On April 30,1993, the IUB issued its 'Fi. revenues that would have resulted le Se Payments by year are os no! Decision and Order,* which op- had it won the oppeal. An additional f II *5 refund, including interest, of $8.7 mil. Cap.tal Operating i

proved stipulations between IE ond lion is required at December 31, Year lease leases certain intervenors providing for on 1993, os a result of the Court's deci- b" *' "5 "d5) annualincrease in revenues of $5.5 million. IE did not have any refund sion. The refund is expected to be 1994 $16,994 $ 7,901 liabihty as a result of the Order. completed in the second quarter of 1995 11,970 7,771 1994.There will be no elfect on elec- 1996 10,784 6,191 Forrner 15 Service Territory tric revenues, net income and earn- 1997 9,940 4,348 in July 1992,15 opplied to the IUB ings per overage common shore 1998 . . . . . . . ~ , 4,145 4,351 '

for on increase in gas rates of $2.3 when the additional refund is made 1999-2003. 13R 3 milhon annually, or 6.2%. Effective because Utilities has been reserving 21_1_1.

57,944 $43,575 September 30,1992, the IUB outho- for the elfect of the additional refund. Less: Amount nzed on nterim increase of $1.9 representing million, subject to refund. In February (4) LEASES: 0'

1. '**I -

1993, the IUB opproved stipulations Utilities has a capital lease cover- I Present between 15 and certain intervenors ing its 70% undivided interest in in the proceeding that provided for nuclear fuel purchased for the DAEC.

on annual increase in revenues of Future purchases of fuel may also be COPi tal lease Payments . $_ 51,681

$ 1.6 milli on. As a result of the Order, added to the fuel lease. This lease 22

)

term liquid investments which have sents the cost during the construction Sheets as a current asset or current maturities of less than 90 days from period of funds used for construction liability, pending automatic reflection the date of ocquisition. purposes, is capitalized by Utilities as in future billings to customers.

(f) Depreciation of Utility ' *P **n' *I 'he ' 5' I U'iII'Y (k) Accurnulated Refueling Property, Plant and Pl ant. The amount of AFC applicable g pg,g, Equipinent - t debt funds and to ofher (equity)

The IUB allows Utilities to collect, The overage rates of depreciation funds, a nc,n-cosh item, ,is computed as art of its base revenues, funds to for electric and gas properties of '" CC 'd "Ce *'th the prescribed offset other operating and mainte-Utilities, including Utilities' nuclear FERC formula. The aggregate gross nonce expenditures incurred during 9enerating station, the Duane Arnold r les used by Utilities for 1993-1991 were 5.7m, 9.29. and 8.59o, refueling outages of the DAEC. As Energy Center (DAEC), which is be. these revenues are collected, on ing depreciated over a 36 year life re5PectiveIY- equivalent omount is charged to using a remaining ble method, were (h) Oil and Gas Properties - other operating and maintenance ex-as follows: Whiting Petroleum Company penses with a corresponding credit (Whiting), a wholly-owned subsid- to o reserve. During a refueling out-1993 1992 1901 , ,

iory of Diversified, uses the full cost age, the reserve is reversed to offset Eluctric . 3.5% 3.5% 3.5% method of accounting for its oil and the refueling outage expenditures.

Gas . 3.5% 3.0% 3.0% gas properties. Accordingly, all costs I (2) MERGERS AND Based on the most recent site spe. f C4uisiti n,"P, oration and deveI- ACQUISITIONS:

Pment of properties are capitalized.

cific study, completed in 1992, Utili-Am Proved oil and gas (a) Merger of IE and 15 -

ties' 70% share of the estimated cos, z? nH Properties is calculated using the On June 4,1993, Industries on-to decommission the DAEC and re.

turn the underlying property to its Uni's f Production method. At De- nounced that its wholly-owned utility

'** , c P talized i costs subsidiaries, IE and IS, filed applico-original state approximated $223 less rel ted' occumulated amortiza- tions for regulatory authority to milhon in 1992 dollars. The study is based on the prompt removal and ti n do not exceed the sum of (1) the merge. The merger became effective dismantling decommissioning aber-

• * "' v e I e netr m nue December 31, 1993, following re-im ted production of proved native and is assumed to begin of the f'Pm est. ceipt of all necessary Boards of end of the DAEC's operating license il nd 9 5 reserves (c Icul ted us- Directors, shareholder and regulo-

'n9 Current Prices); plus (2) the cost tory approvals.

in 2014. The level of annuai recovery I ProPerties not being amortized,if IE is the surviving corporation and through rates of decommissioning nY; Pl us (3) the lower of cost or has been renamed IES Utilities costs is $5.5 mil! ion, which is depos.

ited in external trust funds, and is estin, ted fa_r i value of unproved Inc. The separate existence of IS has Properties included in the costs be- ceased. Utilities serves a total based on a remaining IJe recovery method. The annuai recovery level is !n9 m rtized, if ny; less (4) f 325,000 electric and 170,000 inc me t x eHuts r ted to differ- natural gas retail customers as well reviewed and, if necessary, adjusted ,

en n n s 32 rmk mtonws s ne in each rate case. Decommissioning nd 9 5 Properties. than 550 lowa communities.

costs, at the level collected through rotes, are included in *Deprecio6on (i) Operating Revenues - The merger was accounted for un-and amortization" expense in the The Company accrues revenues der o method of accounting similar to Consolidated Statements of income. for services rendered but unbilled at Pooling of interests, which combined in addition to the $28.1 million in- monthend in order to more properly the ownership interests of IE ond 15.

vested in the external trust funds as match revenues with expenses. The assets and liabilities of IE and 15 indicated in the Consolidated Bal. were c mbined of their recorded once Sheets, Utihties has an internal (j) Adjustinent Clauses - amounts as of the merger date.

Utilities tariffs provide for subse-decommissioning reserve of $21.7 a liion recorded as occumulated de-quent adjustments to its electric and (b) Merger with Whiting -

natural gas rates for changes in the Effective February 18,1992, Whit-preciation. Earnings on the external cost of fuel and purchased energy ing merged with a subsidiary of funos are recognized as income and and in the cost of natural gas pur- Industries. The merger, which was ac-a corresponding amount of interest chased for resale. Changes in the counted for as a pooling of interests, >

expense is recorded for the reinvest ~

under/over collection of these costs was not rnoieial to the Consolidated ment of the cornings.

are reflected b " Fuel for production" Financial Statements and, accordingly, (g) Allowance (or Fur'ds Used and " Gas purchased for resole" in prior peric,d Consolidated Financial During construction - the Consolidated Statements of In- Statements have not been restored and The allowance for funds used dur- come. The cumulative effects are re- are presented as if the merger had oc-ing construction (AFC), which repre- flected in the Consolidated Balance cuned on January 1,1992.

21 t

4 (5) UTILITY ACCOUNTS The overall effective income tax rates shown below were computed by divid.

RECEIVABLE: ing totalincome tax expense by income before income taxes.

Customer accounts receivable, in-ciuding unbilled revenues, arise pii. Year Ended December 31 morily f tom the sale of electricity and 1993 1992 19 91 natural gas. At December 31, 1993, Statutory Federal income tax rate . 35.0% 34.0% 34.0%

Utilities was serving a diversified base of residential, commercial and Add (deduct):

industrial customers consisting of ap- Amortization of investment tax credits ..... (2.6) 3.9 I proximately 325,000 electric and State income taxes, net of Federal benefits .. 5.5 (5.8) (6.64.3) i 170,000 gas customers. Property related temporary differences ,

Utilities has entered into two for which deferred taxes are not i agreements, one with limited re- Provided under rote making principles . 1.5 0.4 2.3  :

course, to sell undivided fractional Reversal through tariffs of deferred taxes l interests of an aggregate of $65 mil. Provided at rates in excess of the current lion in its pool of utility accounts re. statutory Federal income tax role . . . .

(1.7) 2.4 3.9  ;

ceivable. At December 31, 1993, Adjustment of prior penod taxes . (2.3)  ! 1.6))

1.7-

~

$53.2 million was sold under the Other items, net . .

(0.1) 0.6 (0.3) agreements The agreements expire Overall effective income tax rate . 35.3% 32.9% 32.7% i in June and December 1994.

Utihties intends to consolidate the agreements into one new agreement (7) BENEFIT PLANS: jected benefit obligation were sub-in 1994. The Company has one contribu- stantially equivalent.

tory and two non<ontributory retire- The Company's policy is to fund l ment Pl ans which, collectively, cover the pension cost at an amount which j (6) INCOME TAXES: substantially all of its employees. Plan is at least equal to the minimum fund-1he components of Federol  !

and state income taxes for the benefits are generally based on ing requirements mandated by the '

y w rs f service nd compensation Employee Retirement incomo Secu-foears lio,5: ended December 31, were during as the employees' latter years of rity Act (ERISA) and which does not  !

employment. Payments rnade from exceed the maximum tax deductible 1993 1992 19 91 the pension funds to retired employ- amosnt for the year.  !

H ab"4 ees and beneficiaries during 1993 Pursuant to the provisions of SFAS Current tax totaled $10.5 million. In addition to 71, certain adjustments to Utihties' xpe se. . $27.8 $25.2 $36.3 these payments, the Company pur. pension provision are necessary to  !

chased annuities totaling $6.3 mil- reflect the accounting for pension i ex n . 14.1 1.4 (11.7) h nI r U P'evi U5 en P loyees who cost 5 000Wed 'n its most recent rate Amortization

& odjustment h d retired s f J nu ry 1993, un- cases.

of investment der one of the plans. The cost of the The components of the pension tax credits . nnuities nd the eduction in the pro. provision are as follows:

(4.9) (2.8) (2.9) ,

$37.0 $23.8 $21.7 Year Ended December 31 1993 1992 19 91 Service cost. ......... . . . . . $ 4,34 2 [Y,[2h $ 4,587 tax s o$ s I f th (e[ wn .

Interest c 5' n Projected benefit the Consolidated Bolonce Sheets  ;

orise from the following temporary bligotion . . . . . . . . . 11,314 10,219 9,090 r differences: Assumed return on plans' assets. (12,363) (11,872) (10,163)

December 31 Amortization of unrecognized gain (767) (135) (20) j 1993 1992 Amortization of poor service cost . _ 1,213 956 785 i' g a.ong Amortization of unrecognized plans' ssets s U nuary 1,1987. p89) (389) _ 1383 Property related . $280 $262 investment tax Pension cost . . . . 3,350 3,308 3,890  ;

credit related . (30) (32) Adjustment to funding level. (2,940) 294 (237)  :

Decommissionin9 . Total ension costs paid to 01

$216 $7(T6 Actual return on plans' assets . . . $ 12,880 $ 8,949 .$37,638 23 l

A reconciliation of the funded status of the plans to the amounts recognized in the Consolidated Bolonce Sheets is presented below:

December 31 1993 1992

[m thousorids)

Fo:r market value of plans' assets . . . . $176,935 $ 180,388 Actucrial present value of benefits rendered to date -

Accumulated benefits based on compensation to date, including vested benefits of $102,621,000 and

$92,787,000, respectively . . . . 112,561 101,929 Additional benefits based on estimated future salary levels . . . 43,673 31,897 Projected benefit obligation . .. 156,234 133,826 Plans' assets in excess of projected benefit obligation . . . . 20,701 46,562 Remaining unrecognized net asset existing  !

at January 1,1987, being amortized over 20 years . . . (4,177) (5,331)

Unrecognized prior service cost . . . . . 16,985 15,197 ,

Unrecognized net gain. . (29,278) (53,513) ,

Prepaid pension cost recognized in the Consolidated Balance Sheets . . . .. $ 4,23.1 $ 2,915 Assumed rate of return, all plans . . .. . . 8.00% 8.00%

Weighted overage discount rate of .

projected benefit obligation, all plans . 7.50% 8.25%

Range of assumed rates of increase in future compensation levels for the plans . . 4.00-5.75 % 4.00-5.75 %

f The decrease in the discount rate cost of postretirement benefits other SFAS 106 costs until the earlier of: 1) used to compute the projected ben- than pensions during the employees' on order in on electric rate cose, or elit obligation, from 8.25% of De- years of service. The IUB has 2) December 31, 1995, Ac-cember 31,1992 to 7.50% of adopted rules stating that post- cordingly, pursuant to the provisions December 31,1993, accounted for o retirement benefits other than pen- of SFAS 71, Utilities had deferred significant portion of the reduction in sions will be included in Utilities' rates $2.9 million of such costs at Decem- l the unrecognized net gain between pursuant to the provisions of SFAS ber 31,1993, and it expects to file '

periods and, similarly, contributed to 106. The rules permit Utilities to am- electric rate cases seeking recovery I the increase in the projected benefit ortize the transition obligation as of of the deferred costs before Decem-  !

obligation at December 31,1993. January 1,1993 over 20 years and ber 31,1995. l 1he Company provides certoin require that all amounts collected are The tronsition obligation for the benefits to retirees (primarily health to be funded into on external trust to non-regulated operations was ex- l core benefits). Through 1992, the pay benefits as they become due. pensed in 1993 and is reflected in l Company expensed such costs as Beginning in 1993, the gas portion of other operating expenses. l benefits were paid, which was con- these costs is being recovered in Utili-  !

sistent with rnte making practices. ties' gas rotes, and is funded in exter. '

Such costs totaled $2.2 million for nol trust funds; recovery of the 1992 and $2.0 million for 1991. electric portion will k udressed in Effective January 1,1993, the future electric proceedings. The IUB I Company adopted SFAS 106, which has adopted a rule that permits a '

requires the occruol of the expected deferrol of the incremental electric 24

The components of postretirement benefit costs for the year ended December 31,1993, are os follows:

1993 On thousands)

Service cost. . . . . $ 1,744 ,

Interest cost on accumulated postretirement benefit obligation . . . . . . . . . 3,363 Amortization of transition obligation existing at January 1,1993, for regulated operations.. 2,024 Write-off of transition obligation existing at January 1,1993, for non-regulated operations. . 1,434 Postretirement benefit costs . . 8,565 Less: Deferred postretirement benefit costs . . . .. 2,858 Net postretirement benefit costs . . 4 5,707 A reconciliation of the funded status of the plans to the amounts recognized in the Consolidated Bolonce Sheets is presented below:

December 31, January 1, 1993 1993 hn thousands)

Fair market value of plans' assets . . . . $ 1,171 $ -

Accumulated postretirement benefit obligation -

Active employees not yet eligible . 19,092 19,007 Active employees eligible . . . 4,294 3,801 Retirees . . . . . . . . ., . 20,739 19,114 Total accumulated postretirement  :

benefit obligation . . . 44,125 41,922 Accumulated postretirement benefit obligation in excess of plans' assets . . . (42,954) (41,922) >

Unrecognized transition obligation . .. 38,463 41,922 Unrecognized net gain . . . . (1,175) -

Accrued postretirement benefit cost in the Consolidated Balance Sheets . . . .. $ (5,666) $ -

Assumed rate of return . . . . . 8.0% -

Weighted average discount rate of accumulated postretirement benefit obligation . . 7.5% 8.25%

Medical trend on paid charges:  ;

~

initial trend rate . . . . 12.0% 13.0%

Ultimate trend rate. ..

6.5% 8.0%

L The assumed medical trend rates postretirement benefit obligation statement requires that benefits of-are critical assumptions in determin- of December 31,1993 by $6.9 fered to former or inactive employees ing the service cost and occumulated million (16%). offer terminu%n of employment, but postretirement benefit obligation re- The Company will adopt the provi- before retirement, be occrued over lated to postretirement benefit costs. sions of SFAS 112 " Employers' Ac. the service lives of the employees if ,

A 1% change in the medical trend counting for Postemployment all of the following conditions are rates, holding oli other assumptions Benefits" as of January 1,1994 and met: 1) the obligation relates to ser-constant, would have changed the its adoption will not have o material vices ofready performed,2) the em-1993 service cost by $1.1 million offect on the Company's financial po- ployees' rights vest,3) the payments (22%) and the occumulated sition or results of operations. This are probable, and 4) the amounts 25

are reasonably determinable. Other. able.The Company has generally oc- (10) DEBT:

wise, such obligations are to be rec- counted for these obligations as they (a) long-Term Debt -

ognized at the time they become were paid. In November 1993, Utilities en-probable and reasonably determin- tered into arrangements with various cities in the St te fIw (Cities),

(8) COMMON STOCK: whereby the Cities issued an aggre-in the first quarter of 1993, industries sold 2.3 mi:iion shares of its common stock in a public offering. The shares were priced at $30 per share. Net proceeds to 9 te f $l9 4 milli n I Pollution con-Industries from this sale were approximately $67 million.

V " "9 "

'[P Bs d* 0 Each series of the PCRRBs is secured, in port, by payments on a corre-The following table presents information relating to the issuance of sp nding principal amount of Utilities common stock. Collateral Trust Bonds, at 5.5%, due Common Stock 2023. The proceeds received by Number of Shores Utilities in the transaction were used Outstanding Amoun, to redeem $10 2 million of Pollution Control Obligations, 5.75%, due 0" 'h "$""d5) serially 1995-2003 and on oggre-Balance, December 31,1990. 23,975,082 $ 251,793 gate of $9.2 million of First Stock plan issuances

• 325,858 8,705 Mortgage Bonds, Series P & O, Adjustments * * (2J33) (84) 6.7%, due 2006.

Bolance, December 31,1991 24,298,807 260,414 in October 1993, Utilities sold l Stock plan issuances

• 404,324 11,473 $100 million aggregate principal l moet of Collateral Trust Bends,6%

Shares issued in conjunction Series, due 2008, and 7% Series, with the Whitin9 mer9er --853,832 7 923 C due 2023. A portion of the proceeds Bolonce, December 31,1992 25,556,963 279,810 from the Collateral Trust Bonds was Public offering 2,300,000 66,555 useJ to retire short-term debt, with the Stock plan issuances

• _ 447,225 . 13,936 balonce used for genarol corporate Balance, December 31,1993. 28,304,188 $ 360,301 purposes, including support of Utili-ties' construction program.

Shares reserved for a.suance in May 1993, Utilities redeemed pursuant to the Company's First Mortgage Bonds Series K, stock plans at December 31,1993* 2,736,763 8-5/8%, principal amount of $20 million, and Series R, 8-1/4%, princi-l Dnndend Renve9 ment and sta L Purchase Plan. Employee stock Purthose Plans. Employee sowngs Plan' pal amount of $25 million and First tonaTe,m incento rian of sat iEs Bonus stock o.nonh p rian and whmng sexk opnan rians g g l

" ITyI mci,$ I " " " "" " "'

• principal amount of $15 million. The redempsons were completed with proceeds from short-term borrowings Effective with its 1992 merger with 6.10%,4.80% and 4.30% Series had and, as discussed above, long-term Whiting, Industries issued stock op. 100,000,146,406 and 120,000 debt was ultimately issued to eeplace lions to replace existing stock options shares, respectively, outstanding of the short-term borrowings.

held by Whiting stockholders. At De. both December 31,1993 and 1992. In January 1993, $13 million of cember 31,1993, there were options TI,ese shores are redeemoble of the the Industries Series 1986, 8-1/8 %

outstanding to purchase 6,340 option of Utilities upon 30 days no- Debentures (originally scheduled to shores of Industries' common stock tice at $51.00, $50.25 and$51.00 mature in September 1993) were re-of option prices ranging from $9.70 per share, respectively, plus accrued deemed and o defeasance was com-to $18.40 per shore, expiring in dividends. pleted for the remainder of the February 2000. In addition, there are 5,000,000 debentures ($32 million).

shares of Industries Cumulative Pre- In January 1993, Diversified ex-(9) PREFERRED ferred Stock (no par value) and ponded its variable rate credit facility AND PREFERENCE STOCK: 700,000 shares of Utihties Cumulo- to $100 million. At December 31, Utilities hos 466,406 shares of Cu- tive Preference Stock ($100 par 1993, $32 million was borrowed at 1 mulative Preferred Stock, $50 par value) authorized for issuance, of 3.5625% under this facility and was i value, authorized for issuance of De. which none were outstanding at due January 21,1994. The credit fo-cember 31, 1993, of which the December 31, 1993. cihty extends through January 1997, 26 1

~

{

i I

with a one-year extension available Utilities' indentures and Deeds of (a) Current assets and i to Diversified. Interest rates and Trust securing its First Mortgage current tiabilities -

maturities are set of the time of bor- Bonds constitute direct first mortgage The carrying amount opproximates rowing. The interest rote options are liens upon substantially oli tangible fair value because of the short motu-  ;

based upon quoted market roles and public utility proper ty. Utilities' inden- rity of such financialinstruments. l the maturities are less than one year. ture and Deed of Trust securing its . . .

Diversified intends to continue bor- Collaterol Trust Bonds constitutes o (b) Nuclear decommisssomng rowing under the renewal options of second lien on substantially all ton. trust funds -

The estimated fair value of these trust  ;

the facility and, accordingly, this debt gible public utility property while is classified os long-term in the Con- First Mortgage Bonds remain out-fund 5, 5 fePorted by the trustee solidated Bolonce Sheets. standing. based upon current market values, is

$29.5 million.

Total sinking fund requirements, which Utilities intends to meet by pledging (Cl Cumulafive Preferred additional property under the terms of Utilities' indentures and Deeds of Trust, stock of Utilitses - l and debt maturities for 19941998 ore os follows: The estimated fair value of this stock of $12.8 million is based upon Debt Maturities quoted market prices.

(m thousands)

Debt issue 1994 1995 1996 1997 1998 (d) Long-term debt. ,

The carrying amount of long-term Utilities - debt was $523 million compared to Sinking Fund estimated fair value of $550 million.

Requirements . $ 780 $ 780 $ 630 $ 550 $ 550 The estimated fair value of long-term debt is based upon quoted mor.

Pollution Control . 224 140 140 140 140 ket prices' Series W . -

50,000 - - -

Since Utilities is subject to regulation, Series X . -

50,000 - - -

any gains or losses related to the ,

Series ) . - -

15,000 - -

difference between the carrying 6-1/8% Series . - - - 8,000 -

amount and the fair value of finan-ciol instruments may not be realized Diversified - by the Company's shareholders.

Variable Rote Credit Focility . 32,000 - - - -

(12) COMMITMENTS AND Other Subsidiories' CONTINGENCIES:

Debt . . 240 8,246 52 57 62 (a) Construction Program -

Total. .

$33,244 $109,166 $15,822 $ 8,747 $ 752 The Company's construction and acquisition program anticipates ex.

The Company intends to refinance the majority of the debt maturities with penditures of opproximately $203 long-term debt. million for 1994, which includes $ 150 million at Utilities and $53 million at (b) Short-Term Debt - million. Rates are set at the time of Diversified. Substantial commitments At December 31,1993, the Com- borrowin9 ond no fees have been made in connection with pony had bank lines of credit aggre- are paid to maintain this facility. At such expenditures.

goting $77.7 million (industries - December 31,1993, $5.0 million .

$1.5 million, Utilities - $67.7 million, was borrowed at 3.4% under this (b) Purchase Power  !

Diversified - $7.5 million and Whit- facility. Utilities also has a letter of Contracts -

ing - $ 1.0 million). Utilities was using credit in the amount of $3.4 million Utilities has a purchase power con-

$ 19.0 million to support commercial supporting two of its variable rate tract with Terro Comfort Company paper and $7.7 million to support pollution control obligations. (Terro Comfort), a wholly-owned sub-certoin pollution control obligations. sidiory of Diversified, for annual co-  !

Commitment fees are paid to mcin. (11) ESTIMATED FAIR pocity purchases of 114 Mw that toin these lines and there are no con- VALUE OF FINANCIAL expires on December 31,1994.

ditions which restrict the unused lines INSTRUMENTS: In connection with the acquisition of credit. In addition to the above, The estimated fair values of finan- of the UE properties discussed in Utilities has on uncommitted credit ciol instruments of December 31, Note 2(c), Utilities is purchasing facility with a financial institution 1993, and the basis upon which they power from UE under o five-year firm ,

whereby it con borrow up to $50 were estimated are os follows: capacity contract with a 1994 l 27

1 l

requirement of 120 Mw of delivered (e) Nuclear insurance Utilities has been named as a Po-capacity declining to 60 Mw in Programs - tentially Responsible Party (PRP) for  !

1997. Utilities will also purchase an The Price-Anderson Amendments certain former manufactured gas ,

odditional maximum interruptible co- Act of 1988 (1988 Act) provides Utili- plant (FMGP) sites by either the lowo pacity of up 13 54 Mw of 25 Hz ties with the benefit of $9.4 billion of Department of Natural Resources power. This 25 Hz power purchase public liability coverage consisting of (IDNR) or the Environmental will extend through 1998 and will $200 million of insurance and Protection Agency (EPA). Utilities is continue thereaf ter unless either $9.2 billion of potential retroactive working with the IDNR and EPA to party gives a three-year notice of assessments from the owners of investigate its 27 sites and to deter-concellation- nuclear power plants. Under the mine the oppropriate remediation The costs of capacity purchases 1988 Act, Utilities could be ossessed activities that may be needed to miti- ,

for these contrccts are reflected in a maximum of $79 million per gate health and environmental con-

" Purchased power" and Terra nuclear incident, with a maximum of cerns. Such investigations are Comfori s revenue related to its $10 million per year (of which Utili- expected to be completed by 1999 contract is mcluded n Other rev. ,,3 70% ownership portion would ond site-specific remediations ore on-enues in the Consolidated State- be $55 million and $7 million, re- ticipated to be completed within ments of locome.

spectively) if losses relating to the in- three years offer the completion of Total copocity charges under all cidents exceeded $200 million. the investigations of each site. Urili-existing contracts will opproximate These limits are subject to odjustments

$21.0 million, $ 14.7 million, ties may be required to monitor these for inflation in future years. sites for a number of years upon

$ 11.4 million, $8.7 million and Pursuant to provisions in various completion of remediation.

$0.3 million for the years 1994' nuclear insurance policies, Utilities Utilities is investigating the possibil-1998, respectively*

could be assessed retroactive premi- ity of insurance and third party cost (c) Cool Contract ums in connection with future occi- sharing for FMGP clean-up costs.The Commitments . dents at a nuclear facility owned by amount of shared costs, if any, con Utilities has entered into coal sup. o utility participating in the porticular not be reasonably determined and, ply contracts which expire between insurance plan. With respect to ex- accordingly, no potential sharing has 1994 and 2001 for its fossil-fueled Ce55 Property damage and replace- been recorded. Regulatory assets of generating stations. At December 31, ment power coverages, Utilities could $12.9 million have been recorded in  !

1993, the contracts cover opproxi. be assessed annually a maximum of the Consolidated Balonce Sheets, motely $147 million of cool over the $8.5 million and $1 million, respec- which reflects the future recovery that life of the contracts, which includes tively,if the insurer's losses telating to is being provided through Utilities'

$34 million expected to be incurred accidents exceeded its reserves. rates (See Note 1(c)). Considering l in 1994. Utilities expects to supple. While assessments may also be the recorded reserves for environ-ment these cool contracts with spot mode for losses in certain prior years, mental liabilities and the post rate ,

market purchases to fulfill its future Utilities is not owore of any losses in treatment allowed by the IUB, man-fossil fuel needs. such years that it believes are likely agement believes that the clean-up to result in on assessment. costs incurred by Utilities for these (d)Information Technology FMGP sites will not have o material  !

Services . (f) Environmentalliabilits.es- adverse effect on its financial posi-in 1992, the Company entered At December 31,1993, the tion or results of operations.

into on agreement with Electronic Company's Consolidated Balonce Dato Systems Corporation (EDS) for Sheet reflects $13.5 million (includ- (g) Clean Air Act-information technology services. The ing $4.2 million as current) of envi-ronmentol liobilities, which, pursuant The Clean Air Act Amendments term of the contract is twelve years Act of 1990 (Act) requires emission and the contract is subject to declin- to 9enerolly accepted accounting reductions of sulfur dioxide and nitro-ing termination fees. The Company's Pnnciples, represents the mmimum gen oxides to achieve reductions of anticipated expenditures under the amount of the eshmoted range of atmospheric chemicals believed to agreement for 1994 are such costs that the Company expects cause ocid rain. The provisions of the estimated to be approximately $9.4 to incur. The minimum amount of the ronge is used because n Act will be implemented in two million. Future costs under the agrec.

ment are variable and are depen. omount with_m the range repre- P b I & 'm M d sents a better estimate. These est,-i Utilities' units beginning in 1995 and dent upon the Company's level of usage of technological services from mates are sub,ect j to continuing Pb H &% d 2 @%

rev'ew. in the year 2000.

EDS, as well as inflation.

28

Utilities expects to meet the require- (3) allows pipelines to abandon long- pipelines have also made filings with ments of the Act by switching to lower term (one year or more) transporta- the FERC to begin collecting their re-sulfur fuels and through capital ex- tion service to a customer whenever spective transition costs. Utilities be- i penditures primarily related to fuel the customer fails to match the high- gan paying the transition costs in '

burning equipment and boiler modifi- est rate and longest term (up to 20 November 1993, and has recorded cations. Utilities estimates capital ex- years) offered to the pipeline by a liability of $5.0 million for such penditures at approximately $28 other customers for the particular ca- transition costs that have been in-million, including $4 million in 1994, pacity, and (4) provides for a mecho- curred by the pipelines to date, in-in order to meet these requirements nism under which pipelines con cluding $1.7 million expected to be of the Act. recover prudently incurred transition billed in 1994. While the magnitude costs associated with the restructur- of the total transition costs to be (h) National Energy ing process. Utilities may benefit from charged to Utilities cannot yet be de-P:licy Act of 1992 enhanced access to competitively termined, Utilities believes any transi-The National Energy Policy Act of priced gas supply and more flexible tion costs the FERC would allow the 1992 requires owners of nuclear transportation services as a result of pipelines to collect would be recov-power plants to pay a special assess- Order 636. However, Utilities will be ered from its customers, based upon ment into o " Uranium Enrichment De. required to pay certain transition past regulatory treatment of contamination and Decommissioning costs passed on from its pipeline sup- similar costs by the IUB. Accordingly, Fund " The assessmentis based upon Pliers as they implement Order 636. regulatory assets, in amounts corre-prior nuclear fuel purchases and, for Utilities' three pipeline suppliers sponding to the liabilities, have been the DAEC, averages $ 1.3 million an. have filed new tariffs with the FERC recorded to reflect the anticipated nually through 2007, of which Utih. implementing Order 636 and the recovery.

ties' 70% share is $0.9 million.

Utilities is recovering the costs associ-(13) JOINTLY-OWNED ELECTRIC UTILITY PLANT:

ated with this assessment through its Under joint ownership agreements with other lowa utilities, Utilities has undi-electric fuel adjustment clauses over vided ownership interests in jointlyowned electric generating stations and re-the period the costs are assessed. lated transmission facilities. Each of the respective owners is responsible for the Utilities' 70% share of the future financing of its portion of ,he construction costs. Kilowatt hour generation and assessment, $12.7 million payable operating expenses art divided on the same basis as ownership through 2007, has been recorded with each owner reflecting its respective costs in its Statements of Income.

as a liability in the Consolidated Information relative to Utilities' ownership interest in these facilities at Balance Sheets, including $0.7 mil- December 31,1993 is as follows:

lion included in " Current liabilities -

other," with a related regulatory as- Ottumwa Neal set for the unrecovered amount (See DAEC Unit 1 Unit 3 Note 1(c)). is in maons)

Utility plant in service. $ 484 $ 179 $ 43 (i) FERC Order No. 636 -

The FERC issued Order No. 636 Accumulated depreciation . $ 221 $ 69 $ 22 (Order 636) in P92. Order 636, as Construction work in progress $ 7 $ - $ -

modified on reheasg, (1) requires Plant capacity - Mw . 530 708 515 Utilities' pipeline suppliers to un-bundle their services so that gas sup. Percent ownership . 70% 48% 28%

plies are obtained separately from In-service date . 1974 1981 1975 transportation service, and transpor-tation and storage services are oper-ated and billed as separate and distinct services, (2) requires the pipe-line suppliers to offer "no notice" fronsportation service under which firm transporters (such as Utilities) can receive delivery of gas up to their contractual capacity level on any day without prior scheduling, 29

- .- -. . = - .-.. .- - .-. - ..

I (14) SEGMENTS OF  !

BUSINESS: tric energy by Utilities and the pur- owned subsidiary of Diversified. Cer-The principal business segments of chose, distribution and sole of natu- toin financial information relating to ,

Industries are the generation, trans. rol gas by Utilities and Industrial En- Industries' significent segments of '

mission, distnbution and sole of elec. ergy Applications, Inc., a wholly- business is presented below:

Year Ended December 31 1993 1992 1991 lin thou* Jnds)

Operating results:

Revenues -

Electric . . .. . $ 550,521 $ 462,999 $ 482,578 Gas . . . . 181,923 167,082 146,237 Operating income - .

Electric . . 128,994 90,891 100,402 Gas . . 13,673 .9,164 65*

Other information:

Depreciation and ornortization - '

Electric . . 63,832 59,707 57,612 Gas . . 5,186 4,024 3,480 Construction and acquisition expenditures -

Electric . . .

84,720 154,902 77,646 Gas . . 12,582 17,323 21,100  ;

Assets .

Identifiable assets -

Electric . 1,288,505 1,226,614 1,115,310 i Gas . . . 168,800 147,395 113,670 <

1,457,305 1,374,009 1,228,980 Other corporate assets . . . . . . . 242,514 220,373 219,512 Total consolidated assets. .. $1,699,819 $ 1,594,382 $ 1,448,492 i

• Includes a $3 9 million pretax writeoff of previously defened FMGP cleon-up costs pursuant to disallowance of recovery in on IUB order.

30

o 51L{(TLD (0H50llDaT{D LIHaHClaL Data 1993 1992 19 91 1990 1989 1988 l

Income statement dato (000's):

Operating revenue $ 801,266 $ 678,296 $ 661,538 $ 624,214 $ 599,838 $ 606,320 Operating income . 151,269 109.024 103.357 98,043 106,592 101,555 Net income 67,938 48,711 44,657 80,330* 53,565 52,563 l Common stock data (per shore except percentages): -l Ear nings _.. ... .. $ 2.45 $1.92 $1.85 $ 3.37 $ 2.27 $ 2.26 1 Dividends declared . 2.10 2.10 2.03 1.82 1.77 1.74 Return on average common equity . ..... 12.4% 10.3% 9.7% 18 4% 13.2% 13.6%

Market price at year-end . $31.25 $29.50 $27.25 $27.75 $27.63 $22.63 j Book value at year end . 20.21 18.89 19.07 19.15 17.52 16.95 1 Ratio of morbi price to '

book value at y orend 155% 156% 143% 145% 158% 134%

Capitalization:

Common equity ..... .. 51 % 48% 50% 53% 49% 48%

Preferred and preference stock 2 2 3 3 4 4 Long term debt . 47 _50 47 44 _47 _48 100 % 100% 100% 100% 100% 100%

Other selected financial dato:

Total assets (000's) . $1,699,819 $1,594,382 $1,448,492 $1,400,802 $1,342,615 $1,279,212 Non-utility assets {000's) . 152,841 155,144 145,283 141,739 127,684 99,480 Construction expenditures (000's) . 163,644 191,834 " 119,821 103,154 87,381 81,810 Times interest earned ,

before income taxes . 3.38 2.63 2.69 4.45 3.10 3.13 l Selected financial data for IES Utilities Inc.:

Utility plant in service (000's). $1,931,079 $1,852,733 $1,680,108 $1,587,886 $1,475,550 $1,416,337 Accumulated Depreciation (000's) . 813,312 759,754 691,015 639,211 579,160 534,131 Construction expenditures (000's) . I13,212 171,013** 105,009 95,075 79,919 72,923 Times interest earned before income taxes ... 3.64 2.67 2.93 3.04 3.36 3.20 Electric Kwh sales (excluding off-system) (000's) 8,905,522 7,132,671 7,244,209 6,880,136 6,671,474 6,759,725 Gas Dth sales (including transported volumes) (000's) 39,006 37,035 37,129 36,486 40,050 39,374

• Indu&s a pre tax mr. of $66 m4on on sale of Tekom e USA stor k

• Indodes $61 mdhon for the a qmition of d.e Iowa s,rme 'emtory from Uruon (loctric Company i

31

m ILECTAK OKMTIM (0mMAB0H mr231 1993 1992 1991 1990 1989 1988 growth (1) ;

Operating revenue (OOO's): 1 Residential and Rural . .$ 206,561 $ 177,625 $ 189,194 $ 185,302 $ 175,899 $ 180,520 Commercial 145,898 124,829 124,320 119,908 112,662 110,587 Industrial . . . _ . . . . . . 137,595 103,886 100,733 97,788 94,222 97,723 Street lighting and public authorities 6,098 SJ10 6,332 6,478 6.282 6J7_8 Total from ultimate consumers. 496,152 411,750 420,579 409,476 389,065 395,208 Sales for resale . 20,254 18,602 19,745 19,582 18,214 17,104 Off system . 29,400 28,304 36,596 31,144 2F,,281 30,332 Other . 4,715 4,343 5,658 3,047 2,773 3,015

$ 550,521 $ 462,999 $ 482,578 $ 463,249 $ 438,533 $ 445,659 Energy sales (000's Kwh): 1 Residential and Rural . 2,528,220 2,158,768 2,367,979 2,254,913 2,222,152 2,269,001 2.2% -

Commercial 2,078,635 1,771,357 1,764,495 1,686,132 1,626,046 1,579,086 5.7 {

Industrial .. . . . . . . . . . . . . . 3,674,217 2,612,803 2,467,533 2,312,109 2,236,388 2,359,596 9.3 i Street lighting and public authorities _ _ 63,17_4 __60,991 87,022 88.305 .___86,635 88,870 (6.6) .

Total to ultimate consumers . 8,344,246 6,603,919 6,687,029 6,341,459 6,171,221 6,296,553 5.8 !

Sales for resale . . 561,27_6 528 752 557,180_13BA71 500 253 463E2 3.9 l Sales of electricity to customers . 8,905,522 7,132,671 7,244,209 6,880,136 6,671,474 6,759,725 5.7 i Off system . 2,068,01.5 127_5J16 2,738,1591282,20_41359J28 8 2,075,037 (0.1) 10,973,537 9,408,287 9,982,368 9,162,340 8,631,302 8,834,762 4.4% ,

Sources of electric energy (000's Kwh): I Generation -

Fossil, primarily coal . 5,356,930 4,317,154 4,758,720 4,354,697 4,063,974 4,403,738 Nuclear (2) . 2,264,507 2,402,501 2,902,768 2,108,100 2,228,068 2,214,243 Hydro . . _ _ 7,2.01 7,57.9 6,54_7 4.195 1,902 3,300 7,628,638 6,727,234 7,668,035 6,466,992 6,293,944 6,621,281 Purchases . . _3,949,296 _3,322,182 _2,994,216 _3128248_6 2,891,808 2,810,225 11,577,934 10,049,41610,662,251 9,749,878 9,185,752 9,431,506 Net capability at time of peak load (Kw)-

Generating capability . 1,733,700 1,718,600 1,719,150 1,684,700 1,633,000 1,632,500 Purchase capability . 248,000 207,000 227,000 179,000 170,000 90,000 Capacity credits (3) . -

- - 18,960 20,650 -

1,981,700 1,925,600 1,946,150 1,882,660 1,823,650 1,722,500 2.8% i Net peak load (Kw) (4) 1,716,380 1,425,441 1,607,606 1,547,826 1,486,243 1,543,864 2.1%

Number of customers at year-end 327,265 325,172 305,663 304,265 302,632 300,701 1.7% ,

Revenue per Kwh (excluding off-system) in cents . 5.85 6.09 6.16 6.28 6.15 6.14 1 The fwe-year compound growth rates include the effect of the acquisition of the Iowa service terntory from Union Electnc Cornpany on December 31,1992. <

'? Represents IES Utaties' 70% undivided interest in the Duane Arnold Energy Center which is operated by IES UtSties 4 s$t g ed l

l 32

i

@ OKRATlHG COMMAB0H um 1993 1992 19 91 1990 1989 1988 dELh ,

Operating revenue (000's): '

Residential .. $ 90,462 $ 78,685 $ 74,114 $ 66,513 $ 68,751 $ 71,484 Commercial . 45,528 39,780 37,613 35,378 38,035 38,918 Industrial . _ 15,593 18,649 17,383 21,500 25 172 _2_4,693 151,583 137,114 129,110 123,391 131,958 135,095 i Other . __ 2,735 __ 2 1 341 _ l 908 1,884 1,923 1,514 154,318 139,455 131,018 125,275 133,881 130,609

{1 $1 $ $T3 $D $IT37 Energy sales (000's dekotherms): [

Residential .. 16,971 15,098 15,571 14,315 15,878 15,573 1.7%

Commercial . 10,133 8,479 9,389 8,798 9,854 9,523 1.2 Industrial . 4,618 6,175 5 980 6 7,409 7,780 (9.9) )

31,722 ~ ~79,752 7 0,,910 7

~

@640 53 33,141 7ZB76 (0.7) ,

industrial - transported volumes . . . . . ...... ..... 7,284 7,283 6.189 6,733 6,909 6,498 2.3 1 Total volumes delivered by Utilities . 39,006 37,035 37,129 36,486 40,050 39,374 (0.2) >

Brokerage . 12,493 14,830 7,666 4,465 624 491 91.0 ,

~ 5f,~499 7 TB35 44,795 ~~~40!95T ~ 40 673 ~ 3935 5.3% i I

Operating Statistics for IES Utilities Inc.:

Cost per dekatherm of gas ,

$3.49 purchased for resale. $3.36 $3.10 $3.23 $2.95 $3.42 Sendout capability at time j of peak demand 5 (dekatherms in 000's) . 274,570 273,270 266,563 267,443 271,140 300,231 (1.8)%

Peak daily sendout (dekatherms in 000's) . 268,419 254,989 266,344 272,089 311,600 286,196 (1.3)%

Number of customers et year-end . 170,719 167,813 164,078 161,794 160,792 159,931 1.3%

Revenue per dekatherm sold for IES Utilities Inc.

(excluding transported vclumes) . $4.78 $4.61 $4.17 $4.15 $3.98 $4.11 33

p f# *p - ,

,~ ., 4 7 .

,7

/ ,, ,,

F ARD i,

g- h- OF DIRECTORS I T C.R.S. Anderson (E)(A)

'.n Retired Choirman of the Board of the

, [ Company l J. Wayne Bevis (A)

U Vice Chairman & Chief t.ecutwe Ofhcer, Pello Corporahon (Window and Door Mono-factonng), Pello. Iowa Robert F. Brewer

< Fetaed Chairman of the Board & Chief Executwe Of hcer. Iowa Southern Utibbes Company Centerville, Iowa Dr. George Daly (C)

,4 Dean, Leonard Stern Schoolof Business. New i

York Unwersay. New York. New York Blolce O. Fisher, Jr.

E xecutwe Vice President & Chief financial Othcer of the Company G. Sharp Lonnom, IV (C)

C Presrdent & Ch.ef Executnre Ofhter Delong )

Sportswear, Inc (Sportswear Manufactur-I eng), Gonnell, Iowa Dr. Solomon Levy (C)

Chairman & Chief Execuhve Ofhcer. 5 levy incorporated (Engmeenng and Monogement Consulting), Campbell. Collornia Lee Liu (E)(N)

Choaman of the Board. Premdent & Chief

'- Executwe Ofhcer of the Componv 5tanding David G Peed, C R.Ss Anderson, Bloke O. Fisher, Jr.,J. Wayne Bevis, Robert W. Schlutz ..

Sooted: Dr. George Daly, Roberi D. Roy. Lee liv Rens H. Moles a  ; _

President and Group E mecut ve. Generation and Eng ncenng Group of If 5 Uhhhes Inc Robert D. Roy (A)(N)

President & Chief Executwe Olhcer, Blue Cross and Blue Shield of Iowa (Insurance),

Des Moneuowa i SNNU AL MEETING David Q. Reed (E)(N)

The annual meeting of the shareholders will be held at 2.00 p m , Centrol Daylight Time on gno,ney and Counselt.t at ta*. Kansas City.

Tuesday, May 17,1994 at the IE Tower,6th floor,200 first Street S E. in Cedar Rapids, Iowa. M,ssoon A proxy statement with respect to this meeting will be mailed on or about April 4,1994. Larry D. Root All common shareholders are cordially invited to attend. However, those who are unable to President and Group Execuhve, Energy De-Iwer y and Nuclear Group ol IE S Uhhnes inc attend in person are urged to promptly sign and return their proxy.

Henry Royer (E) (C)

Chairman of the Board & President.

TOCK EXCHANGE LISTING y'iS "jf i (*d"' " P'd' " ^"*d IES Industnes Inc. common stock is listed on the New York Stock Exchange under the sym- Robert W. Schlutz (A)

Pres' dent. Schlutz Enterposes (Deversihed bol IES. Newspaper hstings of ten use the symbol IES IND.

Forming and Retoihng), Columbus Junchon.Iowo

~

ENERAL INQUIRIES ^"'Io "T IC**f7,}"ule Of nce,.

c nend " f rn re Shareholder inquiries, including the replacement of dividend check s, address changes, trans- a$ r r or$'"""stC b "h" B 9, fer or reissuance of stock certificates, and requests from the general public for any financial iowa publ; cations may be directed to:

DIRECTOR EMERITUS IES Industries Inc. '

Attn.: Shoreholder Services P.O. Box 351 Cedar Rapids, lowo 52406 p ,', ,, har t Ce unids, Iowa 1-800-247-9785 or 319-398-7755 (EI Member Eset vrwe Commater (Al Memt cr Audd ComemHer (N) Member Nomnea6ng Commaree

'""""'"*""""*"'"""~""

HERE TO BUY AND SELL STOCK Common stock may be purchased and sold privately or on the open market through a brokerage firm. A shareholder enrolled in the Company's Dividend Reinvestment and Stock Purchase Plan con purchase additional common stock with no brokera,ge fees through the optional cash feature of the Plan.

Shores held in the Dividend Reinvestment and Stock Purchase Plan can be sold through the Plan Adrninistrator upon wotten request of the shareholder, who will receive all proceeds of the sales less any brokeroge commission.

34

_ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ A

FFICERS

• IVIDEND REINVESTMENT AND STOCK PURCHASE PLAN IES INDUSTRIES INC. The Company has a Dividend Reinvestment and Stock Purchase Plan which allows shareholders to automatically reinvest their cash dividends in additional shores of common stock. IE S Industries au nif't[e .oma. Pres,rient & ouer Inc., Shareholder Services, P O Box 351, Cedar Rapids, Iowa 52406 octs as the Plan Administrator.

imunv. ofhter A prospectus descnbing the Plan con be c,btained by wnting to Shoreholder Services.

i Blohe O. Fisher, Jr. (49, 3)

I f.necuhve Vic e f resident & Chrel rinorca C*'

Dr. Etobert J. latham (51, IC)

UPLICATE ACCOUNTS AND MAILINGS Sen.or vcc h e udent. F ,nonc e and Shoreholders sometimes receive more than one Annual Report because 1,hores owned Corporate Af fairs. & Treaso,er by one shareholder rnoy be registered with shght variations in names. The Company is Stephen W. Southwick (47. Is) required to mail on Annual Report to each nome on the shoreholder list unless the shareholder vice heudent & Gene,al Coumel requests that duplicates be ehminated To ehminate duphcote maihngs, please send a written Robert J. Kucharski !61,19] request to Shoreholder Services Vge heuent Admmistra%n & Scoptary j Thomas R. Seldon (55, el .

v.<e ne + t.nemor * '" " "'

Dean Ekstrom (4A B) IN 3 FORM 10LK AVAILABLE ON REQUEST

, V.ce Preudent Management 5prems The Company files onnually with the Secunties and Exchange Commission on Annual

! Peter W. Dietrich (54 6) Report form 10 K. This required report contains certoin other information not made o part of vee P% dent ccupmwe Dn.ebome"' this report. The Company will be happy to send you o copy of our 1993 Form 10 K without

{ Richard A. Gobbianelli (37,11) charge. Requests should be made to Shareholder Services

, Cc,iaroner a ch.el An.ounhng Olbw IES UTlWTIES INC.

IVIDEND PAYMENT DATES Lee Liu (60. 36)

Chaamun of the Booid. heudent & Cnmi Scheduled Dividend Payment and Record Dates for 1994 ore:

j [ m vhve C h er Re ord Dates Much 11,1994 June 10.1994 September 9,1994 December 9,1994 Larry D. Root (57. 23! Payment Date Apnl 1,1994 July 1,1994 October 1,1994 January 1,1995 i Preucient and Groep f eec ubve Energy i j Dehvey and Nudem Gmop Dividends paid on common stock in 1993 were fully taxable for federalincome tax purposes.

• Rene H. Males (61. 3) t, heuant nnd Gmep t.eivhve, Generm.on l

and i ng.neenng Group ' h j

Blake O. Fisher, Jr. (49 3)

RANSFER AGENT & REGISTRAR-l if t motive vee hesident & Chd imonc ini IES Industries Inc. Stock Transfer Dept 300 Sheridon Avenue, Centerville,lowo 52544 i

f olht er 1800627 9070 or 515-437 5205 e

[h Dr. Robert J. Lotham (SI.10) IES Industries Inc. - Common Stock #

Semor vic e President, F,nonc e and ffS yrd, ties /nc.- Preferred StocA Corporate AHun & 1reasurer

~

'~~ ' ~

/j

[;e f Stephen W. Southwick (47. m) f . .JN. ". f,'2 M l Viee F<evant & General Counsel ' Standing Lorry D,* Jat, Henry Royer, G. Sharp lunnom, hf, Rond H. Mab' p John F. Franz, Jr. (54 2) Seated: Robed E Brewer, Dr. Salomon levy,, Anthony R. Weder - . 4 vee heudent Nodcar +' * -+ ' ' - " /;.

Philip D. War d (53, 20)

/{ ~

, vae hevdent Eng4necong Harold W. Rehrover (56. 21)

Q

• g I

Vee Prevdent, field Operorions j$ f

~

f

[

~

l Thomas R. Seldon (15. 6) -

Vice heudent. Hsman Fesources t.l Robert J. Kucharski (6f.19/ '

Veo heuent, Admmistrahan & Secretary t 3 ,' (

Richard A. Gobbianelli(37. n) '

! ConnoDer & Chief Anovnhng Ofhter

, Fp.m m puen%.n rep.ewt mie and rem or servece

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