ML20091M110

Central & South West Corp 1994 Summary Annual Rept

ML20091M110
Person / Time
Site:	South Texas
Issue date:	12/31/1994
From:	CENTRAL & SOUTH WEST CORP.
To:
Shared Package
ML20091L976	List: ML20091L995 ML20091M013 ML20091M098 ML20091M110 ST-HL-AE-5147, Forwards Current Annual Financial Repts for Licensees for South Tx Project
References
NUDOCS 9508300080
Download: ML20091M110 (24)

Text

..

Central cnd South W:st Corporati:n 1994 Summary Anmoal Report The M

FaceF1 Of1 Change I

PDR

... ~

I;

' Company Pn> file tble of Contents

^

Central and South iIFst Corpration is a public ' tility

. Highlights 1

u holding wnyuny that owns all of the wmmon stock of Chairman's Letter 2

fnu electric operating subsidiaries: CentralIburr and CSW's Core Business S

' Light Conquny, l'ublic Senice Conquny of Oklahoma, CSW's Expanding Horizons 10 Sotahurstern Electric Iburr Conquny and iIbst 1cxas What is ' Competition' for.

Utilities Conquny.1liese mmpanies provide electric service a Regulated Electric Utility?

12 to almost 4.3 million people in a widely ditrrsified Operational l'tofile 14 area wsvring 152,000 square miles. 77 tis area is the Condensed Consolidated Statements second-largest senrd by any electric utility systan in ofIncome 16 the United States.

Condensed Consolidated Statements f Cash Flows li' Other stdvidiatics owned by the corpration are Transok,Inc.,

Condensed Consolidated Balance Sheets 11:

an intrastate naturdgas pipeline and nuttrting wnquny;

[

CSIV Et cyy, Inc., which desrlops, owns and operates non.

Ikp rt ofIndependent Public Accountants 18 utility pourr projeas in the United States; CSIl' Credit, It.eport of Management 19 inc., which bnys the accounts rcccimble of the CSlVsystem Comparative Statistical and Financial IVcord 20 Board of Directors 22 and other urdities; CSIl'Isasing, Inc., which owns lever-Orlicers 23 accd leases; CSIf' Communications, Inc., which desrlops tEromnumicationspcilities related to our business; CSIl' Information for Shareholders 24 Intemational, Inc., which participates in purrgeneration, y%

RV transmission and distribution projerts outside the United W"

^N

(([ \\

."YW" States; and Central and South Iiest Services, Inc., which

'9' T

4-i

,Q provides, at wst, professional servicespr the wrpration and its subsidiariet

' 'amm7 ' f < } gg,,y fg _

w

.,9 '?

r n

4%

M, ' J N SM w" ' h p[ P e %,#S"{r y b g' J k;'

g i p,1

• s

.Q~i*

$ gg ~

]

y

?

d,

-Q b

~

T-1 e

y n

y c.L[

Q:

• ]t 'pg

.~

a

. [g ~ \\ ' Me,n, ;

(~ -

aimane/ Mypp

'y fM.

_M, l

};gW

\\

%e

, < f] '

C Sg 6

Q.

c1 j

<s -

g y

f

~s N'

'y

~

- L: CH h M^ "7 e sc'-s t _

f g

""'3,

.yM J, j -

.,.y<

}ff amamae$,

ug

"*yMq % <

<'y -

in mt w$.

y tems?

somens x-Q Gy :g)4;Q,4.g k '

'% n

'li, [ $[ p.,

[.af[

j gh '

a<

[g 3ki.[gp k)7@ gin %fQ[*.. Y*gl d

a P

~7~-

( -

8"

+.,uei

.. e,um w-%

Elecede Utility Syelem l

[

n Centrad Ibuvr and Lkht Gnnguny L

~

I

'i

} <;.

a !\\ddic Senice Cornjuny of Oklahamsa a Soutinnstern ElatricIkuer Gunjuny a Htst Tixas Utihties Gmtguny

• Gwpontre lleadpaners-11dlas emanee a Elatric Suluiduary 1leadguaners A Spwm interwnowctions with Other Utihties e

mesen.s*

)

Non-UtlEty Businesses T onsek System f

an.m.cuy.

of CSW Entendees

- pijvhnc,

\\

f

- Tiand INjylims a pnyeg,g, P snt-n CSWEnegy1%yas a liansok Iin%aart<rs-Tidu i

L 6

7..,.,

F-7 s

,I g-

' Central attd South Iiht Corparation Petrent r

1994 1993 Change Financial Data (tnilliotn) ;

, Operating Revenues -

$3,623

$3.687

' (1,7) i Fuel arid Purchased linver 1,161 1,209.

(4.0)

Natural Gas and Gas Products 374 482 (22.4) r ; Other Operating Expenses 1,119 1,217 (8.1)

< Taxes:

375 322 1 16.5 i

= Operating Income

'594 457 30.0 l

Other 111 93 19.4 L L l'nterest and Preferred Stock Dividends

- (311)

(288) 8.0 EfTect ofAccounting Changes.

46 t

Net income fbr Conunon Stock 5 394 S 308 27.9

_ Gunmon Stod: Data and Dividend Ibview i

- Earnings per Share

$2.08

$1.63

. Dividends per Share

$1.70

$1.62 i

. Average Common Shares outstanding

(millions) 189.3 188.4 i

'ikturn on Average Common Equity 13.4 %

10.6 %

- Year End Market Price

$22 %

$30 %

' Year En_d 11ook '/alue per Share

$ 16.01

$15.55 Dividend Yield

. 7.5%.

5.4%

l

' Dividend Payout 1.atio -

82 %

99%

Market Price Dividends

.i Iligh Low Paid

~1994 h

First Quarter.

$30%

$24 %

$0.425 -

l Second Quarter 26 %

20 %

'O.425' j

Third Quarter 23 %

20% -

0.425

%wm

' Tburth Quarter 23 %

20 %

0/25

' por Share j

iMlars 1993 no First Quarter

$33 %

$28%

$0.405

~

Second Quarter 34 %

28%

0.405 Li Third Quarter 33 %

32 %

0.405 2"

Iburth Quarter 33 28 %

0.405

{

i.so -

l The wndensed ensolidatedfinancial statements in this suntmary ammal nport urre derimifom the wnsolidased l

finahcial statements that ap; war in Appendix A to the pnwy statement)br the 1995 anrneal meeting ofshareholders.

[

Gopia g(the wnsolid.tted financial statements and the report ofArthur Andersen LLl> thercon may be obtained by i no i

talling Central and Smth i16

C,rporation's shan holder sen>ias dejunment at 1-800 527 5797 o.so

. O f N),

j W 91 42 93 94 i

f B thvidena.

. n,,

'f I

i k

1 J

pw.

Chdrman's Letter This report cown a year of sweeping change for Financhal Performance Central and South West Corporation and the country's Our fmancial performance in 1994 improved signifi-electric utility industry.

cantly over that of1993. Net income for common stock in 1994 increased to $394 million from $308 The milestones for CSW in 1994 included:

nulhon a year ago. Our earnings per share were $2.08

= the restructuring and restatling of our entire system compared to $1.63 in 1993, when we took a charge so that we can focus even more attention on customer of approximately $100 million for the restructuring service, marketing and etliciency; costs. For both net income and earnings per share, our 1994 results were all-time records.

= the start of a new program for allocating capital to help us ensure long-term corporate growth; Ilased on this financial performance, we remain

= the continued success of our intrastate natural gas highly optimistic about the strength ofour core elec-pipeline subsidiary; tric utility business and the promise of our new ventures. Our greatest strength in 1994 once again lay a the first year of profitability for our subsidiary that in the economic health and diversification of the builds and operates non-utility power plants; and eographical areas that our four electric companies a the formation of two new businesses that will offer serve. Our retail kilowatt-hour sales of electricity a range of new services to our utility customers and grew during the year by 3.5 percent. The growth in will extend our investments to other countries.

our service areas makes us confident that our cus-tmner base will grow faster rhm that of the utility p

As the electric power industry evolves from serving industry, on average.

exclusive geographical areas to competing for cus-tomers, we are changing many of our basic philoso-In 1995, we expect to resolve much of the uncer-I}

phies, practices and instincts-our very culture.

tainty surrounding two critical issues: our etTort to

~

Although full" retail" competition in the electric acquire El Paso Electric Company; and Central utility industry does not exist anywhere in the Power and Light Company's rate case resulting from E.R. Brooks, chainnan, United States today, we know CSW must be prepared a lengthy outage at the South Texas Project, the president and chief for it in the future. By the turn of the century, the nuclear generating station partially owned by CPL execuuve officer of cedret and sede most successful electric companies will be far different I assure you our actions on these matters will corporation.

from the electric companies of the past. And we are be focused on the best interests of our shareholders.

determined to be among them.

Capital Allocation and Dividend Policy That's why this report focuses on the people who are As competition in CSW's core electric utility busi-making this ditlicult but essential transition-the ness increases, we are changing how we do business.

8,055 employees of the CSW system. Although we in A much larger portion of the CSW system will be management can set goals for greater etliciency-involved in highly competitive markets in the future.

cost-savings, customer service and marketing, our Therefore, we will be required to use our cash flow emph)yees are the ones who must make them happen. differently to build future shareholder value.

Through a competitive staffmg process in 1994, we In particular, we have revised the corporation's capital hand-picked each employee for every position in our spending and dividend policy to focus on ensuring new organization, in many cases, employees were that new investments build value. In the past, we reassigned to new ftmetions or locations.

mvested m our electric utility system, filed rate cases CSW's tramformation has only begun. We have to recover the costs and earned a regulated rate of entered a new era of continual re-evaluation and mod-return. Our opportunity to earn significantly above-ification-one that we will be in for the rest of or below-average returns was very limited.

our careers. In this era, our emphayees are the faces of With greater competition and diversification, we will change because they hold the key to CSW's success have both more opportunity to earn higher returns as a competitor.

and more risk of earning below-average returns.

Therefore, our capital allocation process must achieve maximum value from every dollar invested. As 2

"5nCe 199 V/O haVe

"'i'i'Y "'i"**'; P""d

"' ' 'e "'i'i'Y

"'i"e";

b b

expand our non-utility businesses; and pursue fman-been Systematically pur-ci>""i">"

Restructuring our electric utility business by cen-Spillg Our fOur-part trahzing certain management, engineering and sup-port functions is helping us enhance our core Strateg.tC plan: enhance business. our feur mdises can new e>ncemrate entirely on serving our customers. As a result of this

'Our Core eleCir,IC Utility reuruceming, we also reauced our umd employ-ment by more than 7 percent, even though we business; expand Our aim 2ay were thiniy nairea by mdity inaustry man-dards. The restructuring cost $88 million, which we Core utility bHSmeSS; apui m rmwer in fial by eady a Our two principal non-utility businesses continued OXpand Our n0ll-Ut*l*t.y ii m m,te progressin m 7,an a,ou,;mrastate nat_

bUSiDeSSeS; and pHTSUO ural gas pipeline subsidiary, continued to operate in an nonomy of depressed natural gas prices. Never-inanClal =n=it=ial=VOS.yy theless, it increased its earnings to $25 million. CSW a

i l

energy co m pictea three new cogene,at;on power always, we will fund only those investment alter _

plants, and for the first time the unit contributed a natives that we believe will otrer satisfactory returns.

p fa of neady $2 million.

Comistent with our strategic plan, we expect We continue to see our geographical location and to continue making additional investments in CSW 80-year relationship with Mexico as one ofour Energy,Transok and other non-utility businesses.

long-term strengths. I espite the devaluation of As part of our emphasis on capital allocation, we also the pesa we expect to see opportunities to help have revised our dividend policy. CSW's primary meet the future power needs of Mexico because of long-term goal is to achieve a 75 percent payout ratio the many benefas of the North American Free within five years. Ily slowing the rate of growth in Trade Agreement and the possible privatization of our dividend, we are strengthening our financial P"*#f f'CIII'i#5-position and providing lower-cost funding for strate-In 1994, we expanded our independent power initia-gic initiatives. This will help ensure our long-term tives to other parts of the world by forming a new growth.

subsidiary, CSW International. Its goal is to develop, in January 1995, the board of directors raised our build and operate electric generating plants in Latin disidend 1.2 percent, marking the corporation's 44th Amenc n European and Asian countries that otrer consecutive annual dividend increase.The indicated sutlicient political and economic stability.

dividend for 1993 is $1.72, compared to the $1.70 divi-We also formed CSW Communications to help our dend paid in 1994.

customers benefit from new telecommunicatiom technologies, such as fiber optics. An example of the use of fiber optics in the electric utility business is Since 1990, we have been systematically pursum.g our four-part strategic plan: enhance our core electnc the CSW system's test program in Laredo, Texas.

We are installing connectiom to approximately 2.500 homes served by our Central power and Light 3

_____J

f Company subsidiary to study the advantages of high-diagnostic evaluation of the plant and inJune 1993 speed, two-way communication with our customers placed STP on its " watch" list primarily because of and how better information will affect their use of plant management problems.

electricity. With this technology, we can offer variable STP Unit I returned to full operation in April 1994, rates, based on our actual cost of generating electricity and Unit 2 resumed full operation in June 1994.

at any given time, and our customers can plan their Since then, they have operated at record levels of use of energy to achieve savings. Telecommunications formance. In February 1995, the NitC removed can greatly enhance the service to our customers-STP Rom its " watch" list and noted that significant f

and can help us succeed against competing suppliers.

improvements had been made at the plant.

Ongoing Challenges A remaining challenge is to reconcile the cost of Several developments during the year posed new the plant's outage, including fuel costs that CPL paid challenges. First, the investment community turned for replacement power. Depending on the outcome unduly pessimistic toward electric utilities. The entire of a regulatory review, we expect this amount could industry essentially was downgraded by security range from $70 million to $80 million. In addition, analysts concerned about the rise in interest rates, the a number of parties are claiming that STP did rapidly emerging competitive environment and the not benefit CPL's customers during the outage.They overall maturing of our industry. We recognize that have initiated rate proceedings before the Public this more cautious view means the industry n;eds to Utility Commission ofTexas, arguing that CPL should rebuild investor confidence as part of the ongoin8 reduce its base rates. While the rate case proceeds, l

transition-CPL has been seeking to negotiate with state author-Second, events occurred that threaten our proposed ities, the cities it serves and other customer groups merger with El Paso Electric Company. For exam.

in an attempt to resolve these issues.

ple, the threat that El Paso Electric could lose a Freedom to Compete major portion ofits customer base grew as a result cf The evolution of the electric utility industry is a vote by the citizens of Las Cruces. New Mexico, occurring rapidly. Utilities are feeling pressure from approving a referendun to acquire El Paso Electric's many types of new competitors, and regulators in system that serves the city.

eral states are considering measures to let large retail in September, we notified El Paso Electric that this customers choose any electric supplier they prefer.

development and others could prevent us from In Tem wkre we & rive more than 60 percent of completing the merger. Although we are continuing our electric revenues, independent power producers to use our best ettorts to consummate the merger, and some large industrial companies are promoting we cannot predict at this time whether or not the legislation to authorize retail competition among merger will be consummated' electric power suppliers.

Third, an extended outage continued until mid-year Any transition to retail competition will raise many at the South Texas Project Nuclear Generating complicated and costly issues. Among them is how to Station. Our Central Ibwer and Light Company sub-ggy.,armded investments." These are plants and sidiary owns 25.2 percent of the plant, which is Geilities built with investor funding and dedicated to operated by Houston Lighting & Power Company.

public service under a regulatory compact that pro-lloth generating units at STP were taken out of vides ihr the recovery of the investment and a fair service in February 1993 because of an accidental return on it. These investments and related regula-malfunction of feedwater pumps. In March 1993, tory costs will be at risk if the law changes and the the Nuclear llegulatory Conunission conducted a customr As service fm motkr pmvida 4

L-

i S Competition in CSW'S P"'id " '"d f"r8 PP""

ide' i" "*Pe66" situations because of the m.""hetent regulatory delay.

Core eleCiric utility

'" ' f'** "i"5 "'"Pc66" " odd dd' "e" layer ofregulation can make CSW much less com-bUsmeSS WCreaseS, We P"""*

Ten years ago in our 1984 Annual Report, we first are Changing how we do caiica fer reveai efibis act. nering the rast accade, we have encouraged the introduction oflegislation business. A much larger m meaify d>e im Tea, aieng wid, d,e edier reg-istered electric utility holding companies, we are Port, ion of the CSW weruing for fuii reneai. if net freca frem the acts

~

discriminatory restrictions soon, we are considering system w,ill be, yolved a en.

• es,och as die po,ihdity ofrestru a uring m

the CSW system to achieve the same freedom of

h. hly competit.ive aniene+yeadyed>ereiearicmdities.

m ig markets in ihe future."

'"'"""*'"'""f"'"'""""'""""f'"'"S*

will progress as a leader among electric companies.

Whether or not retail competition is allowed soon, We already are dedicated to meeting the needs of utilities in the future will have to compete simply to our shareholders and our customers. We are adapting keep their current customers.

our str tegy and management methods to keep pace with the coming changes. We will continue to We are becoming well msitioned for this new envi-do so diroughout the current transition and into i

ronment. Our service areas are healthy and growing; the era of open competition to maximize sharebokler our cost structure is, ti>r the most part, very com-and customer value.

petitive; and our non-utility businewes are prepared to meet the competition in this country and in other parts of the worLI. Ilowever, we &ce one bar-rier that only Congress can eliminate: the federal g gggy Public Utility Ilokling Comp.my Act of1935.

Gdritum Nura aid Oi@n> @iar The act places CSW and to ther registered electric IHruary 1.1, 1995 o

ut lity holding companies at a datinct disadvantage compared to other companies, including other utilities. Under this outdated law, we must ask the

- Securities and Exchange Commission to approve our business activities and transactions. Our competitors can act quickly to acquire new businesses or raise new fmancing while we must file-and wait-thr permission from the SEC before we can act.This process means we must disclose our competitive s

l 1

Significant Electricity Milestones l

l 1879-Ink 4 18N5-1894 1895-1904 1905-1914 1915-1924 1925-1934 I

l Thomas Edison invents Cities begin issuing fran-States create regulatory Amencan industry adopts SamuelInsult consolidates Holding companies with a practicalincandescent chises for the distribution commissions to oversee mass production and numerous electric com-complex organizational light bulb.

of electricity.

growth of" utility" services, automation; electrification panies serving millions of structures control the I

I Edison centralizes the George Westinghouse N

I "

supply of elecidcity by develops the alternating opening the nation's first current transformer, The first steam turbine President Franklin D.

gsnerating plant on Peart making possible the trans-generator goes into service.

Roosevelt and Sen. George Street in New York City; mission and distdbution Norris of Nebraska head a

g slectricity is destined to of electricity overlong the effort that brings elec.

g replace kerosene, gas and distances, y to rural Ame&a panies into large holding candles as the source for largely through the Tenn-srtificial light.

essee Valley Authority and g

of communities to provide Administration.

g, N

j h

.. ii3

[

y-A o __

A mfRE POWER 8 Utili CO.

\\

O!

kk ' $;- [,

g

- e

+ c =E

~

SamuelInsull Thomas A. Edison t

s

! g (.[

Congress enacts the Electric utilities diversify N

Federal Water Power Act, into ice, transit and other

+

- ' g;f, jy i the first federal regulation businesses.

of slectric power.

The Great Depression halts s

,C"I economic growth around i

't t

the world and leads to the I collapse of many utility g

pg MD stocks and bonds.

)

W

.o

.I t

1

[

o gs

,a

.r;-

Y I

'l vg u.

e

• =

6

19E1944 1945-1M 4 1955-1904 1 % 5-1974 1975-1984 1985 1994 Congress passes the Public Electricity demand grows The Securities and A transmission gt;tch Environmental activists Congress passes rigorous Utility Helding Company rapidly because of Worid Exchange Commission near Niagara Falls cuts off protest util:ty investments amendments to the Clean Act of 1935 (PUNCA) to War il production and declares the PUNCA's mis-electricity to 30 million in nuclear energy; many Air Act including strin.

break up large utility the post-war boom in new sion accomplished after Northeasterners, including utilities cancel proposed gent constraints on power trusts.

housing and electric the last of the large utility New York City.

nuclear power plants.

plant enWen l

P'"

Congress greatly expands Dozens of utilities decide Congress and PreslGnt Utilities embark on ambi-the jurisdiction of the to invest in nuclear Carter create the U.S.

tious programs to conserw Federal Power Commission Electricity is generated for power plants to insulate Department of Energy electricity.

to regulate wholesale the first time by nuclear themselves from oil ad as Carter declares the power and interstate trans-energy at Shippingpat, PA. natural gas price spikes.

" moral equivalent of gg mission service.

war"on wasteful energy g;

g p

Air Act to curb pollution.

generation and setting SW N>

P.:

0 j

i

l,

_4 i

4

(

PMEE

) --

b e

wm., -

y e

(

w 80Y WAR BONDS 9

{

/

Peacetime population and A cold winter and spot Congress passes Public the stage for heightened economic growth increase shortages of coal and nat.

Utility Regulatory Policies competition in the trans-demand for electricity ural gas trigger elect icity Act of 1978 to encourage mission and distribution of about 7 percent annually.

" brownouts"in Texas cogeneration of steam and electricity.

and several Atlantic Coast electricity by mandating 7

for a war on pollution in ulatory

-issues qua ng her book Sileaf Spring, Arab oil embargo triggers its first transmission planting the seeds for the large gaps between the mandah under the Energy environmental movement.

prices of different fossil Congress passes the Fuel Policy Act, ordering fuels used to generate Use Act strictly limiting Florida Peser & Light Co.

electricity.

natural gas burning for to provide transmission electric power generation. service for the Florida

@'L n a own gency Three Mile Island nuclear plant accident halts the new development of A handful of utilities nuclear energy for electric cut dividends and restruc-power generation; by now, ture their electric pcwer utilities have cancelled operations.

more that 180 proposed N CM'M PM Utilities Commission pro-Iran triggers the decade's poses to deregulate its second oil embargo and electriclty market by 2000, shortage; spot oil prices skyrocket to $40 a barrel.

An oversupply of oil and natural gas and a world-wide economic downturn send fossil fuel prices falling as the energy boom goes bust.

7

i l

I CSW's Core Business-Our Electric Companies Central and South West's core business is economic activity and intensified market-greater cost-etrectiveness in this segment conducted by four electric utihty operating ing. Sales of electricity to wholesale of our corporation.

companies serving customers in Texas, customers increased 21.9 percent, bringing fly freeing our utilities from the respon-Oklahoma, Louisiana and Arkansas. That our total kilowatt-hour sales growth to sibilities for support services, they business accounted fbr 85 percent of our 5.5 percent for the year. During the next can focus solely on the needs that will revenues in 1994.

10 years, we expect our total kilowatt-demiu hir loom um-hour sales gmwth to approximate 2.4 per-satisfying their customers, building their liecause the regions they serve are grow-C#"' " Y'd

business and expanding their services.

ing and economically diverse, our electric companies will provide us a strong finan-Our electric business continued chang-The restructuring in 1994 included cial foundation for years into the fliture.

ing-to improve customer service, reduce restatEng all the positions throughout the Our retail kilowatt-hour sales of electricity costs and help us succeed in a more com' CSW system. Hundreds of employees increased by approximately 3.5 percent petitive environment.

were assigned to new ftmetions and new in 1994,largely as a result of expanding locations. The restructuring reduced I

egawt7

" Consolidating fuel pur.

% g" y chases for the CSW system tg y

3 is like buying milk; a gallon

'g

.q u"

7, d costs less than four quarts,"

i*

r

a R'

h~

l says Les Dillahunty, CSWS M

~

Y g j{f vice president of fuels.

.J "Our consolidated purchas.

N

'+

g y

ing contributed more than N

~

<4

[*

$1 minion of operating and s***

h -.

maintenance savings in "We're having to take on a In 1994, we restructured our electric Jand WHw, M reading lot more responsibiHty,"

meters for SWEPCO in companies under a new business unit called GHmer, Tem, surveys her says Ronnie Muniz, a CPL serviceman. "When we CSW Electric and centralized most 7..

customers' hating and cooling equi ment. "I'm P

s using mobHe data common service fimctions into Central computers in our trucks, so familiar with the terri-we were scared of them.

and South West Services, Inc. This single tory, i know who needs But the more we got into organization is now responsible for certain a new one," she says, ihr attention has helped her it, the more we liked it. In management f.undons rebling to power customers save money by my opinion, the computer has been a real caset. it's plant operations, engineering activities, replacing old equipment new heat pinnps.

madi a big difference."

administrative support, accounting, billing, data processing and other ftmetions. As

• Employees are learning a result, we expect major improvements in to work with new team efficiency and productivity to create meenbers and leam leaders, requidng them to commit fupy as a team playn They Sam Hunt, WTU manager also are taking responsi-j,,

d ubstation maintenance, bility for continuing their "My employees maintain 13 own educahn. Dan the electric power equip-an meNent way to impree ment located la sub-stations to ensure high your own value and that Me wganizahn," says l,

reliability of electric ser.

LHNan Ray, P50 equal s

vice for WTU customers.

employment opportunity y

As a result of restaffing, and amtmauve acha i

we've delegated many consu b ut.

increased ressonsibilities to crew foremen. In addi-tion to working on WTU equipment, we now offer Angelina $tevenson, P50 maintenance services telephone service repre-to outside customers, such sentative,is working to as municipalities and rural fully meet her customers' electric cooperatives."

rweds with just one phone call. "We want customers to feel satisfied and con-fident that their needs are being met and that they don't have to call us back to make sure we're foHow-Ing through," she says.

8

l 1

4

)'Nsw our utilities

" * """' r ="d"'"' """ '" """ ""'r "i -i'"d * * " """" "

• r'"'"" i"-""r

step may be totally ditierent from our profdes of every customer group served by 7

traditional approach. The goal of our re-our electric companies. Through personal en t have to worry engine,,in,es,,,_whia,is om f,n, in,e,vimv,, we have yathe,ca de,,iied stage of a dynamic process of continual infbrmation about their use of electricity absut payrogls, w

im p,oveme m _i, m,cdure even fu,a,e, ana meofene,ysin y.ne,ai. Wia,aus the rate of growth of our operating and data, we have gained a better understand-Coal tra= ins, IHVolC-

=

=

maintenance expense achievea oirough our ing of our customers' needs to hdp us 1994 restructuring and restafling.

serve them better. We also have found m

Our electric utilities also will continue to insights into opportunities for new elec-distraetions. They place a greater emphasis on understanding tricity-related services. These can increase en,em mm,,,.s,u,fyinga,e,, nee,na eur saies by mpanaieg a,e vaiue ef eer

~ ~ ' " ~ " ' "

Can focus on ihe

""""'"ri" " """ '""""' " ""' r * ""'

g-4

- - q y aq.

Q

~l L

f

, og, yy

}Y p.

4 a n,

y r;

4 kk i

n w &2; W

Y.

b

.y issues that count layneChandler,aSWEPC0 A major storm outage in resources, they also dis-

"We've come to reallre our

,,,d s-ed.e.inmg cove,ed s,ne,g,es,e, wee.

e.gmee,ms tem..m t,u. p,od.ct is..t.

of Sammie Cox, SWEPCO their offices, which are Texarkana, took her daily kilowatt-hour," says Tom area manager at DeQueen, located only a half hour ggg gggg gsgyq ggg yq customer contacts to a new Reynolds, P50's director Arkansas; Tom Shoemake, apart in a remote, moun-EEB BBB6 wMw UEEEwaw level. $he sold 144 area of business ventures. "It's P50 area manager at tainous region. *ll's very and security lights in a com. the comfort of air con-Broken Bow, Oklahoma; easy to do things differently nny panvwide campaign that is ditioning, the efficiency of and Brad Roberts,PS0 area because more decisions V PJ F O

adding more than $400,000 electrotechnology tiet manager at Idabel, Okla-are being made at the local to SWEPCO's non-fuel improves a paint drying Costs and exnand-

- 1,e,.s,. m can levei, sa,s s,eemake.

-~~

we support each other in "We work in a climate that g'

we're a5 part of marketing," an electric compressor future emergencies to get lets us open our minds Chandler says.

on a gas pipeline. We're a

yy the power to our custo-to things no one would have in oHI' reVeHue1 6 **='as a '""-='"

mers refored suicker? la considered a few years company-and a better deciding to pool their ago."

business partner to our

-1 larry D Mutiwn, Exmaitr iice l'rcsidcut customers."

our total work force by more than 7 per-ef CSil'and l'nxidcnt and Chi <f Inmaiir cent systemwide.

gliccr qf CNil' Electric During the year, we also completed several fuel settlements and renegownons wnh mne nmre pr ductive and profitable.

suppliers as well as pipelines and railroads F,r example, Public Service Company that deliver fuel to our plants. rhe benefits of tilahoma is working with 20 industrial from thne settlements for our cmtomers cusmmen m provide real-time pricing are estimated to have a net present value nd variable rates for electricity, allowing

• • mnen t adjust their use of energy exceeding $260 million.

to ume permds when n is less expensive.

In 1993, we will begin re-engineering our Southwestern Electric lbwer Companv business. We will examine many of the is developing a similar program.We intend services we provide to identify the most to help our communities attract new employers that wam to take advantage of this benefit.

s

CSW's Expanding Horizons-New Services, New Customers Electric utilities no longer can achieve CSWInternational will provin k same financial stability and cooperativeness.

desired growth simply from increases in type of project services in otle, suntries.

'lbud Our largest non-utility subsidiary is electric sales to their traditional customers.

It also will enable us to participate in trans-Transok, Inc., an intrastate natural gas We must develop new services and new mission and distribution projects in other pipeline and nurketing company. Operating customers related to our core business.

countries, usually teamed with a local imray in Oklaom Tramok gaders CSW recognized this reality five years ago P'""#

processes, stores and nurkets natural gas when we began placing greater emplusis CSW International will reinfbrce our errorts and transports it to serve our electric oper-on non-utihty businesses. Since then, we in Mexico, where we have close relation-ating companies md other customers.

have been growing these businesses sys-ships with both government and industry.

Since 1990, Transok has expanded its pipe-tenutically, being careful not to move into it also will help us to expand into other line to 6,436 miles from 2,225 miles and new territory too fast or to wander from countries in Latin America, Europe and has more than doubled the volume of gas it our core skills and expertise. These new Asia that meet our criteria for political and tramports annually to 506 billion cubic untures-grouped in a new business unit feet from 213 billion cubic feet. In 1994,it called CSW Enterprises-already have begun paying off. Furthermore, they luve earnirigs capability in the years to come.

@Q.

the potential of addmg significantly to our e

CMt 'l ncrvy Our subsidiary that develops 9

and operates independent power and j

i cogeneration projects, CSW Energy, Inc.,

passed a major milestone in 1994. For the first time,it contributed to our corporate earnings. Afle. low of $6 million in Jeff Schroeter, director of to fit unique niches."To win, A major project begun in project development we omst offer lower costs, 1994 is revising C$W's 1,>(13, CSW Energy turned the corner and at CsW Energy, finds most better solutions and more capitmi anocation program.

posted a profit of almost $2 million in electric utilities taking a value for our customers "We will be using our cash 1994. I)espite continuing start-up costs to

" wait and see" approach than other alternatives,"

to create as much share-to budding power plants he says, holder value es possible,"

develop new projects,its contribution today. Therefore, CSW say Wendy Hargus, CSW should continue rising in ihe years ahead.

Energy is developing non-contro5er.*We wig be enter-utility gaaerating projects ing a new era of higher In 1994, CSW Energy completed three gas-risk and reward as a result nereased canpmen?

tired cogeneration plants: a ll7-megawatt 7

"Our chauenge at C5W is project in Ilorida; a 272-megaWJtt project "j

in Colorado; and a 6Lmegawatt project i ~.:.

balance sheet to a new in Colorado. It expects to complete another focus en customet rotation-l project in ilorida in 1995 and is working

,1",,'["' ',$,

l in various stages of development on 19 g

simone CsW vice press.

others, havmg a total capacity of more than Ff yy',""'"8 d'"

5,000 megawatts.

c monic,tio,,,

CN1l' Inn nuxnd liased on CSW Energy's nperience with building and operating gg W e th.. yma two-way telecommunicat. ions non-uraity powc r plants in several regions of the United States, we formed a new subsiaiary in m4, Csw intenutional, With our customers can help them save Inc. Maiuged as part of CSW Energy, on the,ir electn.

bilise it gives them e

a much greater degree of choice and control over their energy use."

-Thonus 1: Mia y. Ill, ihn n:nv i 1,c lbidcut 4 CSil'and Chict Ihnwiw 0;!i.cr giC5li ~ Enterpri,cs 10 t

completed an important 41-mile pipeline part in this pilot program. Of 2,500 homes investments needed to meet peak demands.

extemion that connects the western part of that are candidates for this demonstration, in addition, we will be able to read meters its system more directly with the eastern we hope to attract nine o-t of10, or remotely, detect outages and provide other part. With this line, Transok can provide approximately 2,250 homes, during 1995.

information ser ices, such as customer more efficient service to its principal mess g ng and itemized billing.

This project will demonstrate the energy customer, our Public Service Company of efficiency and cost savings that result These energy-etriciency services will use Oklahoma subsidiary. Transok also com-from giving customers greater choice and only a portion of the capacity of the pleted the first phase of extensive improve-ontrol over their electric service using telecommunications lines we are installing.

ments to its gathering and compression high-speed, two-way telecum... nications. In the future, we see potential for leasing j

facihnes.

Our utility customers will know the or otherwise using the remaining capacity Transok contributed $25 million to our exact cost of electricity throughout the day for other services-possibly telephone consolidated net income in 1994, a 32 and night, allowing them to schedule set vice, cable television, home security sys-percent increase over its 1993 contribution many of their uses for periods oflow-cost tems or gateways to the "information superhighway."

l "Transok's success is standy Randolph, vice presi-

]y directly dependent on our dont of gas resources for

[t alditty to deliver a wide Trannok."We share the CSW f'

range of natural-gas ser-commitment to the pursidt d

vices from the wenhead to of unconditionalcastemer y

the burner tip at the lowest satisfaction."

cost and with the highest

{d f' _

I reliability and convenience p

to the customer," says i

of $19 million. As the electric industry power. Their monthly bills will itemize Bill Morrow, leader of the showing them how much j

continues to change, Transok's expertise the cost of their heating and air condition-cs j J

choi prdect in natural gas is expected to grow all the ing system, water heater and one other in Laredo, Texas, u.s "our custanns soon win more important to CSW.

i..yor appliance, showing the amount of great potential for more find a genie's lamp at their rapid and increased con.

door step in the form of elec&icity each uses and the cost of that t,,t.iin,,,, tom,,,

gn. i,ormation upnhigh.

Olr Cmmmnonim in 1994, we estab-lished a new business,CSW Conununica-energy.

using advanced fiteer optic way," Morrow says. "Our and telecommunications M is te offer them enwgy i

tions, Inc., to expand our services to This informaton will help our customers technology.The taredo pilot solutions that win satisfy customers through fiber optics and other reduce their electric bills. If their patterns

%$"j,,,

thu wish Hst."

telecommunications technologies. CSW of electricity use shift to periods oflower Conununications will consolidate the consumption, we will be able to defer our future design, construction, maintenance generation, transmission and distribution and ownership of our systens telecom-munications networks.

Fiber optic cable provides high-capacity pathways in February, we announced a $9 million for two-way communica-

'M",','",ij'

project in Laredo, Texas, to install fiber optic lines and coaxial cable to residential

~

customers who have volunteered to take e,

/

11

=

What is *Cornpetition' for a Regulated Dectric Utility?

Why does an electric utility have to over its lines for a publicly filed fee. The Qmuna Under the Public Utility compete?

Energy lblicy Act of1992 encouraged Regulatory lblicies Act of1978, preference Traditionally. U.S. utilities have had exclu-wlmlesak competition, and in many areas is given to generating facilities that use sive servi < e areas. In exchange for the today, the competition for the wholesale the excess steam from industrial operations business has become intense.

or that provide excess steam to mdustrial obligation to serve every customer at a price set by regulatory authorities, utilities Uh Regulated utilities no longer have operations. For example, a CSW Energy received franchises that eliminated the exclusive right to generate and sell

""E"""'*"

" P a n t p vides excess steam l

for a commercial greenhouse. Withm competition from other potential suppliers electric power. Virtually any organization cert m restrictions, any electricity pr duced of electricity, can become an independent power producer, or IPP, simply by installing a by a cogeneration facility must be pur-Today, ihme ground rules are changing chased by the local utility for the same rapidly. Ilecause of policy changes at both power plant. An 11,P can sell its power to any wholesale customer.

amount it would pay to generate its own the national and state levels-in particular, additional electricity.This amount is called Sharon Peavy, CSW investor $treet's downshing and the y-E>s relations director, says her resulting decrease in analyst W:

group % ndssion is to accu.

research. As a result, we j

rately represent C5W to the have taken more responsi.

j Rnancial community and to bility for c

'-h give exemplary service to with the financial commu.

(,

investors. "In recent years, nity and have solidified our y...

a dramatic changes have comndtment to proactive h

occurred in the financial investor relations at CSW,"

r 4

d connnunity, driven by WaN she says.

/<

d the federal Energy lblicy Act of1992-3'"y nuckaha, sWEPCO hiary canion was one of engineering technician at many C$W system empicy-utilities now face direct competition for Texarkana, researched ees reassigned in 1994, "u holesale" transactions. And the possi-

• dual certified" territory moving from the C5WS bility of complete, wide-open competition to find customers eligible huir.an resources division to switch to $WEPCO.

to C$W's shareholder for" retail" customers h> oms on the horizon.

His recearch led the way to services group. "Just as adding a new line in Red a newborn has to learn to in this more competitive environment, the niver County and to more eat, rest, wolk, talk and challenges that electric utihties now face customm taking service relate to othm in order to

,,,.m.n.

e from SWEPCO.

survive," Cairen says,"we ditfer fundamentally from those of the past at CsW have to do the une

)/

-and so does much of the vocabulary of y

to compete in this chang-

'"8 "*3F" the business. The following list highlights L,

phrases and concepts that are shaping the new competitive era, along with brief explanatiom:

g

,3 i4 IIM4 omm< rx Other utilities that buy

[

j bu k power, towns that operate municipal

[

l l

power systems and rural electric e >pera-y.

J

'~ "

tives are customers defmed as " wholesale" because they buy the pov er for resale.

They have the choice of buying their 1.Af indM power from any supplier they choose: the h> cal utility, another utility, a cogenerator changes aimost dany or an independent power supplier.The because the technoiogy is leapfrogging forward,"

hical utihty must transmit the electricity uys A sindau, supmi-ser of CPL's central meter l

shop. Bludau's employees call him a model boss becaese he includes them in decision making, keeps them weu informed and encourages innovation in their work procedures.

I 12t

the utility's " avoided cost" to build new Nrm!al inmtmr nr Many power plants M 'l/C.1 I&lb Sixty years after it was generating capacity.

completed in the 1980s turned out to be enacted, the Public Utility Holding

.%!byrnaatim Factories, government emmely expensive. Often, the reasons Company Act of1935 continues to con-facilities and even large connnercial devel-wne outside the control of the utility strain certain multistate electric utility sys-opments, such as office buildings and wnem high inflation rates, high interest tems. For decades the law has been shopping centers, can install power plants cmts, reguluory ays, aanging federal unnecessary, as numerous studies by the to generate their electricity. Future tech-enngy policies, sknvdowns in the growth federal government have shown. With nologies-ranging from small fuel celh to "f *"#TY *#' '"' Eme power plants c mpetition intensifying in the mdustry,

]

more etlicient renewable energy sources-mm generate electncity at costs that the act has become a serious obstacle i

cotdd make this option mcre competitive.

potentially could render them uneconom-to the 11 registered electric utility holding

)

ical in a competitive market.The utihties companies hke CSW that must get 1 burr br&rs Several fbrms of"brokering" still must pay for the capital cost of those approval from the Securities and Exchange j

electric power are being introduced today plants over the next 20 to 30 years. If Commission before they can make a l

in the marketplace. Using computerized they cannot charge their customers for bulletin boards, middlemen buy and sell those costs, the utilities will face great excess electric power among utilities and difficulties in carrying these " stranded" 7=

wholesale customers. Soon, we likely will investments. How this issue is resolved v

see the rise of trading floors where elec-will have enormous implications for the 'hk 4

tricity is marketed as a commodity.This financial stability of the electric utihty creation of a " spot market"lbr buying industry and the future competitiveness

~

i and,elling electricity in the U.S. wouki ofindividual electric companies.

promote " retail" competition for electric companies.

Cm;wahir n.mm6mo <rdc. The Federal Energy Regulatory Commission is pursu~

ait's eu a meter d mmde, aChase is kind at excit.

1& tail mmp Ishm Individual customers do ing a goal of equalizing the access to uys Roland PeAa, an eco-Ing," uys Carron Rapach, not have the option to select their electric utihty transinission systerns.The result, the

"""3' d"*'*8"n"a*"spe'n'ds l

'*!'b ' " " * " ' " " * '

ist at WTU. Pe vices department at CPL.

power supplier. In Calipirnia, Micgiigan FERC says, should allow the lowest-cost much of his time traveling Rarach, who has been and other states, regulators are considerin8 electricity to be transmitted to the cus-to attract businum to recogntred by coworkm such an arrangement, at least for large tomer b} removinE artificial barriers, service area. "I believe notes:"We're not having customers. Retall competition would Specifically, the FERC has determined th/t in the vision and gnis that tutay with the old ways mean that customers could buy electricity transmission service that is not unduly C$W has set. Our system we used to de things. We philosophy wiR provide the are getting the opportu.

frOm the Iocal utility, a more distant discriminatory or anti-competit ve should attitude and latitude to nity to reinvent how we de utility, an independent power plant, a co-offer third parties access to a transmission adapt to change and to things. And te me, that's generation facility, a power broker or system on the same or comparable basis,

",*'*****h*""8"

' " ' ~

any other supplier. The kical utility would and under comparable terms and condi-have to trammit the energy for a set tions, as the transmission system owner's

'k" '"# ' i""

fee. The situation wouki be similar to the uses of d.e system.

deregulation of the long-distance tele-not directly related to their traditional phone industry,in which many suppliers The FERC's goal of having all transmis-electric power business. Many other utihties today are competing for the consumers, sion syuan ownns o6n such comparable are structured as holding companies and g.

transmission service to others has been some even operate in more than one state extended to transmitting utilities involved but are exempt from most provisions of in mergers.The FERC has required El this law. We believe the law is discrimina-Paso Electric, PSO and SWEPCO to offer tory and needs to be repealed.

such services over their transmission I

facilities as a condition to approval of the merger between El l'aso Electric and CSW. The result of this and other "compa-rability" cases now pendmg before the FERC could determine whether trans mitting utihties can expect to derive meaningful benefit from transminion ownership in the future.

13

=

' Operational Profile

[Qvtral and Smth Iiht Corporation unt,

Veer Opersung Not h Earnings Return en Aseress Cephelhetion Rudes Revenues ser Ceaunen per Comumen stock c=n. h*

twf=st tow-am nuam nuh=(,

Mh M%

refunty %

Seat %

fkk V.

Central and Sosah !!Est Girporation, 1994

$3,623

$394

$2.08 13.4 48 5

47 a public utility holding company, 1993 3,687 308 1.63 10.6 49-6 45 owns four electric operating sub-1992 3,289 382 2.03 13.5 49 6

45 sidiaries, an intrastate gas pipeline subsidiary and six other subsidiaries.

CentralIbmr and Lkht Gwyuny 1994

$1,218

$192

$ 1.01 13.3 45

'8 47 provides electricity to 603,000 1993 1,224 158 0.84 11.1 47 9

~44 customers in south Texas.

1992 1,113 202 1.07 14.2 47 9

44

~ 15dilic Sen ice Genfuny of Oklalunna 1994

$740

$67

$0.36 15.1 52 2

46

- provides electricity to 470,000 1993 708 46 0.24 10.5 51 2

47 customers in eastern and south-1992 622 45 0.24 10.5 50 2

48 western Oklahoma..

Southuntern Elurric lburr Gvnfuny 1994

$825

$102

$ 0.54 15.5 51 4

45 provides electricity to 403,000 1993 837 79 0.42 12.0 50 4

46 customers in northwestern louisiana, 1992 778 91 0.49 14.4 53 4

43 '

northeast Texas and western Arkansas.

Ilist 7exas Utilitics Gvnfuny provides 1994

$ 343

$37

$ 0.19 13.8 56 1

43

. electricity to 185,000 customers in 1993 315 29 0.16 10.9 59 1

40 north-central and west Texas.

1992 319 34 0.18 12.9 54 3

43 Veer Operedag Notincess Earnings Return se Average Par" h Renes Revenues for Connuen per Ceaunen Stock G=nran Saak I%fwnt low-arrm m&ms nukms CSW Share Equlty %

Equay %

Stak %

ikbt %

7Fansok, Inc., an Oklahoma natural gas 1994

$647

$25 50.13 9.4 60 40 gathering, transportation and marketing 1993 705 19 0.10 8.8 56 44-company, delivers gas for system com-j993 543-20 0.11 11.3 58 42 p.unes and ihr non-a0ihated customers; it also operates pas processing plants and selh gas to markets across the United States.

Note: 1inandal and operating statistics}w CSIl' subsidiaries do not npect the climination ofinterwmpuny transactions u th affilutes.

s The wndensed wnsolidatedfnancial statements in this sumnury anmaal report urcre derivedfrom the wnsdid,ned fnancial statements that appear in.4ppendsx A to the puny statement}w the 1995 arumal meetirg of sharchdders.

Gpcs of the unsobd.nedpnancialstatements and the npwt <f,Anhur Anderwn U2' thernm may be obtained by callity Centml and Mah If est Gwroration's slurrholder services dqurtmera at 1-It00-527-5797 -

f.

l i

14 '

neemm per none d IWometI4eer Residensel Genereung Peak Averess FuelImx Neunber of Nussbar of Customers Sales IWowettener Cepehmty*

Demand FuelCest Gu Gul Qnar %1a N*, ors Customers Employees to temployees amn ;

ma pr ne naamns wennnn per nRum Bru -

tlammuis

'57.3 7.06v -

14,177 11,434 51.82 44 36 9

6 5

1,661 8,055 L

54.4 7.29 14,316 11,464 2.11 42 40 9

1 8

1,033 8,707

'51,8 7.17 14,184 10,606 1.92 37 40-9 8

6 1,599 8,595 19.1 7.97g -

4,410 3,732 51.75 50 22 17 11

~603 1,933 312 17.6 8.45 4,410 3,518 2.17 53 26 2

19 589 2,299 256

-17.2 7.99 4,414 3,347.

1.70 47 24 24 5

577 2,308 250 15.1 6.24v 3,902 3,167

$1.96 53 38 9

470 1,552 303 14.2 6.28 4,058 3,147 2.38 49 41 10 466 1,970 237 13.4 6.24 3,907 3,010

.2.34 47 39 14 462 2,035 227.

19.5 6.41 r 4,464 3,526

$1.75 21 43 26 10 403 1,777 227 18.4 -

6.65 4,464 3,651 1.94 14 50 26 10 396 2,033 195 16.8 6.73 4,464 3,237 1.93 10 55 27 8

379 1,982 191 6.5 7.86c 1,401 1,262

$1.88 56 40 4

185 1,090 170 6.6 7.92 1,384 1,201 1.9i 57 38 5

182 1,239 147 6.0 7.93 1,399 1,118 1.82 56 41 3

181 1,249 145

'

• hf.tximurn peak tajubility (anmul r,Iting); iruludes 557 megsnmits in long-term storagepr 1994 and 719 mcq,nnuts in long-term sismtgcht 1993 and 1991 Neheral Gas Liquido Not Systeen Producson Pipenne Capabinty 1994 Electric velames Throusnput asses at Peak Demand linenses by State niin,ms um Aleptuurts o(pam if aes f11 Texas 62%

399 506 6,436 is ni Arkanm a -

356 490 6,373 3""i'i'"' "

" mmna 2n 361 448 5,347 l

12Mx) 9M10 m

6M10 3MJU D

90 91 92 93 94 E Net sy, tem up4Niny a Peak darund 15

' Condensed Consolidated Staternents of income Castral and Seth iiht Caporation For the Years Ended December 31, 1994 1993 1992 (millions except per share amounts) 4 I

ikvenues Electric

' $3.065.

$3,055

$2,790

' Gas and Other 558 632 499-

' 3,623 3.687 3,289 r

Expenses Fuel and Purchased Ibwer 1,161 1,209 1,035 Natural Gas and Gas Products '

374 482 378 Operations and Maintenance 763 887 660 Depreciation and Amortization -

356 330

.311.

Taxes 375 322.

317 3,029 3.230 2,701 Operating income 594 457 588 Other Income (includes Mirror CWIP Amortization of $68, $76, and $83 in 1994, 1993, and 1992, respectively) 111 93 82 Interest Charges (293)

(269) l(266) _ ;

Cumulative EITect of Changes in Accounting Principles 46 Net Income 412 327 404 Preferred Stock 18 19 22 Net Income for Conunon Stock

$ 394

$ 308

$ 382-Average Common Shares 189.3 188,4 188.3 Earnings per Share

$ 2.08

$ 1.63

$ 2.03 Dividends Paid per Share

$ 1.70

$ 1.62

$ 1.54 nmanes by Return on Average Customer Class Conunon Eguity

. Wilm in Aldhons i

4,(nc 14 l

3.5m 12 3,mo g

g 2.5W ft 2,(n o 6

1,5m

(

4 1,NO 2

qc l

The ansknsed avisehdatedfnanci.d statnneras in this o

i n

sl#nnk#7 aNinkd urpwt nfst' dCrilYd[RVN the aWsolidaded g,

9} 93 93 94 99 9] 93 ty3 9.g fnanaal staterncnts that aggwar in Ajymhx A to the a g,,,,,,,

prary statertwnsfw the 1995 amand trurting efsIntrrisolders e c,,,,,,c,cus G, pia c(the wnsohd.ned}nancial statements and the esmtmuu nport ofArthur Andersen L1P therron nuy be obtained by a us 1,,, neune alliry Central and Snah it est Corpwation's slum holder a venn mica dejunnwnt at I 800.27-3797 e Ga, at t un 16

I H Condensed Consolidated Statements of Cash Flows -

Gemraland kah IiFst Corpwation

' For the Years Ended December 31, 1994 1993 1992

' (millions)

Operating Activities

? Net income..

5412 5 327

$404 Depreciation and Amortization 402 366 351 Other Adjustments to Net income and Changes in Assets and Uabilities

_ 50)

I (69)

(

764 694 686 f Investing Activities

' Capital, Acquisition, and C5W Energy Project Expenditures (714)

(741)

(486)

Collections (Punhases) of Non-affiliated Accounts Receivable 11 (314) 11 Other (14)

(14)

(8)

(717)

(I,069)

(483)

Financing Activities

. Change in Common Stock 50 1

2

Change in Debt and Preferred Stock 208 651 158

. Payment of Dividends (340)

(325)

(312)

(82) 327 J152)

Net Change in Cash and C:sh Equivalents (35)

(48)

. 51

' Cash and Cash Equivalents -January 1 62 110 59

- Cath and Cash Equivalents - December 31 5 27 5 62

.$110 Condensed Consolidated Balance Sheets Central ami kah i1 bit Corporation As of December 31, 1994 1993 (millions)

Assets Utility Plant

$11,055 510,595 Gas and Other Diversified Plant 813 748

' Accumukted Depreciation (3,870)

(3,550)

Net Plant 7,998 7,793 Current Assets 1,189 1,254 Deferred Charges and Other Assets (includes approximately $1,000 in regulatory assets for 1994

.and 1993) 1,722 1,557

$10,909

$10.604

. Capitahzation and Liabilities

. Common Stock

$ 3,052

$ 2,930

- Preferred Stock 327 350

'long-term Debt 2,940 2,749-Total Capitalization 6,319.

6,029 Current Liabilities 2,107 2,143

- Deferred Credits 2,483 2,432

$10,909

$10.604 17

Report of Independent Public Accountants To the Shareholders and Board ofI)irectors of Central and South West Corporation:

We have audited,in accordance with generally accepted auditing standards, the consolidated balance sheets of Central and South West Corporation (a 1)elaware corporation) and subsidiary companies as of!)ecember 31,1994 and 1993, and the related consolidated statements ofincome, retained earnings and cash Cows for each of the three years in the period ended I)ecember 31,1994, appearing in Appendix A to the proxy statement for the 1995 annual meeting of shareholders of the Corporation (not presented herein). Our report dated February 13, 1995, also appearing in that proxy statement.

contained an explanatory paragraph calling attention to certain changes in methods of accounting in 1993 discussed in Note 1 to those consolidated fman-cial statements, in our opinion, the information set forth in the accompanying condensed consolidated balance sheets as ofI)ecember 31,1994 and 1993, and in the related condensed statements of consolidated income and cash Dows for each of the three years in the period ended I)ecember 31,1994, is fairly stated, in all material respects, in relation to the consolidated Gnancial statements from which it has been derived.

M M d/

Arthur Andersen lil' IMlas, Ttxas ikbruary 13, 1995 i

18

Report of Management LThe condensed consolidated financial statements.

in this summary annual report were derived from the

. consolidated financial statements that appear in Appendix A to the proxy statement for the 1995 annual meeting of shareholders. Management is responsible for preparing the consolidated fmancial statements, in accordance with generally accepted accounting principles appropriate in the circum-stances, and for maintaining the Corporation's systems

-ofinternal accounting controls.

A description of these controls, along with manage-ment's opinion about their overall effectiveness, is contained within the Report of Management

included in Appendix A to the proxy statement for the 1995 annual meeting of shareholders. The consolidated fmancial statements were audited by Arthur Andersen LLP, the Corporation's inde-pendent public accountants, whose report on the condensed consolidated fmancial statements appears elsewhere in this summary annual report.

- Ell llrooks Chairman, Presidcnt and CIdef Executhe Ojlicer Q

Glenn Il 16silier Senior i 7cc IWsident and Chief Financial Olliccr i

l h

dyh j

O Wend;

3. Ilargus Controller i

4 1

19

Comparative Statistical and Financial Record Central and South liht Corporation 1994 1993 1992 1991 1990 Operatirze Rettruocs (rnillions)

Electric Residential 5 1,156

$ 1,160

$ 1,046

$ 1,081

$ 1,003 Connnercial 836 832 773 778 724 Industrial 733 736 659 632 596 Sales fbr resale 204 179 17 7 173 159 Other 136 148 135 139 128 Gas and other 558 632 499 244 134 5 3,623

$ 3.687 5 3,289 5 3,047

$ 2,744 Sales (Kilouutt-hours in anillions)

Residential 16.368 15,903 14,593 15,236 14,857 Commercial 13,463 12,966 12.370 12,512 12,321 Industrial 18,869 18,205 17,257 16,739 15,980 Sales fbr resale 7,133 5,852 6,262 5,942 5,526 Other 1,501 1,434 1,363 1,346 1,329 57,334 54,360 51,845 51,775 50,013 Accra,qe Number of Custonsers (thousands)

Residential 1,403 1,378 1,353 1,335 1,322 Conunercial 203 198 195 193 192 Industrial 24 25 25 25 25 Other 13 12 12 12 11 1,643 1,613 1,585 1,565 1,550 Nounbcr of Custorners -

find ofIlrial (thousands) 1,661 1,633 1,599 1,577 1,560 Residential Sales Awrgs Kwh per customer 11,665 11,541 10,786 11,413 11,238 Revenue per customer 5 824 5 842 5 773

$ 810

$ 759 Revenue per kilowatt-hour 7.06v 7.29v 7.17r 7.10v 6.75 r

'Ibral filectric Rcwnne per Ku h 5.35c 5.62c 5.389 5.41c 5.22g Sptcrn liak Iktnand (nnyauutts) 11,434 11,464 10,606 10,203 10,397 Fuct Ikra Average litu per net Kwh 10,344 10,391 10,482 10,461 10,456 Cost per million Iltu

$ 1 82

$ 2.11

$ 1.92

$ l.87

$ 1,95 Cost per Kwh generated (mills) 18.80 21.90 20,12 19.59 20.45

• l3 tall >lant (unflions)

Cost

$11,868

$11,343

$10,826

$ 10,788

$ 10,251 Annual additions 616 594 457 578 694 Accumulated depreciation 3,870 3,550 3,265 2,986 2,701 Capitah:ation (millions)

Conunon stock

$ 3,052

$ 2,93C

$ 2,927

$ 2,834

$ 2,743 lYeferred stock 327 350 367 389 394 Long-term debt 2,940 2,749 2,647 2,518 2,513 to

i I

1989 1988 1987 1986 1985 1984

$ 921

$ 911 5 857

$ 885

$ 894

$ 864 673 657 635 666 (72 650 567 553 554 651 72 4 768 179 181 170 175 238 305 120 120 134 111 116 129 89 90 93 67 57 50

$ 2,549 5 2,512 5 2,443

$ 2,555

$ 2.711

$ 2,766 14.268 14,036 13.518 13,338 13,321 12,853 11,993 11,663 11,319 11,256 11,004 10,464 15,181 14,578 14,168 14,997 15,591 15,587 5,448 5,920 5,435 4,907 6,391 7,784 1,308 1,284 1,259 1,279 1,333 1,321 48,198 47.481 45,699 45,777 47,640 48,009 1,308 1,298 1,292 1,291 1,281 1,259 190 189 188 187 184 179 25 25 25 25 25 25 12 1_1 11 12 12 11 1,535 1,523 1,516 1,515 1,502 1,474 1,546 1,531 1,523 1,518 1,515 1,494 10,908 10,814 10,463 10,332 10,399 10,209

$ 704 5 702 5 663

$ 685

$ 698

$ 686 6.46c 6.49c 6.34v 6.64 r 6.71 r 6.72v 5.10v 5.10v 5.14 v 5.44r 5.57v 5.66c 10,008 10,138 9,668 10,243 9,802 9,830 10,474 10,340 10,367 10,414 10,365 10,377

$ 2.01 5 2.01

$ 1.94

$ 2.16

$ 2.48

$ 2.72 21.02 20.83 20.16 22.52 25.74 28.29

$ 9,634 5 9,370

$ 8,961 5 8,441

$ 7,911

$ 7,361 327 466 562 676 851 910 2,448 2,219 2,015 1,827 1,703 1,544 S 2.647

$ 2,594 5 2,514

$ 2,359

$ 2,206

$ 2,030 397 396 365 442 385 428 2,537 2,514 2,410 2,343 2,269 2,169 21

. Board of Directors T J. Ilarlow Committees of the Board at Directors Retired Cluirnun and Chicf Excastia Ql/iwr 1, The Audit Conunittee reconunends to the board Anderson, Clayton & Ct, llonston, 7?xas ofdirectors the independent public accountants to Glenn Iliggs be appointed, subject to shareholder approval.The

/>rcsident, liiges & Cnnjuny, S,nr Antonig 7Fxa, Audit Conunittee reviews with the independent pubh.c accountants and the Corporanons internal Molly Shi lloren auditors the scope of external and internal audits Anomcy, Nonnan, Oklahona and the adequacy of, and the compliance with, the j

E.lt llrooks Corporation's system ofinternal accounting controls.

Clairnun, l' resident and Chief fixcanisv Olliar

2. The Executive Compensation Conunittee reviews Gyar,d and South Ilbt Corluration benefit programs and management succession pro-Dallas, 'Exas grams and determines the compensation of executive Donaki M. Carlton officers.

l'rcsident and Clainnan ef the ILurd

3. The Nominating Conunittee reviews the com-Radian Corporation, Austin,7txa#

pensation of the board of directors and reconunends Joe it Iby candidates fbr membership Retired ihrtner, Ilracenril and Ibitetson

4. The iblicy Conunittee reviews and makes recom-Kcm ille, 7ixa' mendations to the board of directors concerning ih> bat W. Umk'ss major pohcy issues; considers on a continuing basis l'asidcra and Cldef fixcaniw Ot/icer the composition, structure and functions of the 7Fxas Tidi Uniwrsity and board of directors and its committees; and reviews 7/xas 7tch Unbrrsity llcalth Science Center existing corporate policies and recommends changes lad >lu k, 7txas when appropriate. The Policy Committee has Ilarry 11 Mattison authority to act in place of the board of directors Exca int lia l'rcsident when the board is not in session, to the extent Central and South Ithe Corporation per itted by law.

11dlas, 7txas Membership of these committees is as follows:

J.unes L limell T J. liarlow (3) (4)

JLuuhing and hnrstusents, Ibrt,% Nawtt, 7?xas Chainnan qf the Nooninating Cornonince Arthur E. Rasmussen Glenn Iliggs (1) (3)

Retired Cluirnun and Cidefli.wcutlw Olticer gyyy,9g and Chainnan of the liscaniw Conunince Ilonwhold hacrnational, Chicaqs Illinois E IL llrooks (4)

Chainnan yf the iblicy Gnntninec Thomas V Shockley,111 lixconiw 17w I'rcsiden, Donaki M. Carlton (1) (3)

Centaland South IIest Corporation Joe 11. ly (2) (4) y iAdla<, 7txas Chaintun qf the Excaniw Gunpensation Conunittee l-J.C. 'n mpleton Ib>bert W Lawless (1) (2)

IrnYstonentS, $louston, fixas James L lbwell (2) (3) l 1 loyd D. Ward Arthur E. Rasmuv,en (1) (4)

Dw...aston l'rnident - L_,eraral Chainnan of the Audit L,ornnu.nce

1..rao-lity. Inc,1 Adlas,.fixas J.C Templeton (1) (2)

Lhiyd 12 Ward (1) (3) 22

4 Officers.

Central and South West C, i CSW Electne UL Dra if try D Mattison Chairrnan, ncsident and Chief &ccutin Ofar U"'sMan and Outf Graaiw Ofar

Thonus V Shockley,111 Central Power and Light Company Ihraalw I1cc President 16bert il Carey Harry D Mattison President and Chief &raairr Ofcer i heanix l-ice Picsident Public Service Company of Oklahoma

" _ Ferd. C Meyer.Jr.

16bert L Zemanek Senior l' ice Pnsident and General Counsel 14csident and Chief Exnutix Ofcer (Glenn D 16silier m%

Senior Viw 14csident and Chief hnana,al Oficer Richard IL Bremer Thonus M. Hagan President and Chief Exantix Oficer

.1 Ta I4csident, Gowrnnient Relations-Ogice of the Chainnan West Texas Utillbes Company Glenn Files Lawrence E. De Simone I Tu President, Strasmic Plannity U"'suna and Clugbraaiw Oflar 7iansition Excanix, El Paso Electric Tiansition 7 Fain G. Hohnan King 11ce 14csident, Meycrs and Acquisitions Central and South west Services, Inc.

M. Bruce Evans Kenneth C Raney,Jr.

iice Ikesident and Assistant General Counsel 14aident, Opaation Screices Michael D Smith Richard P Verret Iin Picsident, Corporate Screias President,1%Inction Senices Frederic L Frawley Corporate Secretary and Senior Attorney CSW Enterprises Thomas V Shockley,111

• "E" President and Chief Graaix Ofcer Stephen J. McDonnell Transok, Inc.

7icasuns EJoseph Bectaft Ivesident and ChiefExantiw Ofiar CSW Laasing, Inc.

Glenn 11 Itosilier CSW Energy, Inc.

IVesident Terry D Dennis 14csident and Chief &cwrix Ofar CSW Credit, Inc.

~

Glenn 11 Rositier CSW Commumcations, Inc.

14csident.

Lawrence E. De Simone I resident CSW International,Inc.

Terry D Dennis President and Chief Exraaiw Ofccr 23

h

=

liiformation for Sharehold:rs Conumen Stock Listing -

TaxpayerID Nuniber Central and South West Corporatior6 conunon stock Federallaw requires each shareholder to provide a tax-

- is traded under the ticker symbol CSR and listed on payer identification number for all shareholder the New York and the Chicago stock exchanges.

accounts For individual shareholders, your ID number You can obtain stock quotations from the New York is y ur S cial Security number.

l:

Stock Exchange report in mest daily newspapers under You must provide your ID number whenever you the listing CenSoW open a new account in eur stock, even if you already own stock in existing accounts in your name. If -

U*"""*" E**I vou do not provide the ID number, the Corporation is Dividends of 42.5 cents a share were paid in each required to withhold 31% federal income tax from quarter of1994. All dividends paid by the Corporation your dividends.

represent taxable income to sharehoklers for federal income tax purposes, if your stock is registered in ajoint account, it is important to tell us the taxpayer ID number of the pri- -

The Corporatims board of directors in january 1995 mary owner you desigiute. Ifyou are a custodian for increased the quarterly dividend rate to 43 cents a a minor or act as a trustee on an account, please provide share, payable on February 28,1995, to shareholders of the beneficial owner's tax identification number. This record on February 8,1995. The increase marked the will ensure that your dividends am reported under the.

44th consecutive year of higher dividends paid by the correct name, address and taxpayer ID number.

Corporation. The Corporation is one of only three companies listed on the New York Stock Exchange Ifyou have not yet given us your taxpayer ID number, to have such an uninterrupted record of dividend please contact our shareholder services department increases.

to request a W-9 form. Complete, sign and return the Traditionally, the Corporations board ofdirectors has declared dividends to be payable on the last business Duplicate Annual Report Malhngs day of february, May, August and November.

We are required to mail an annual report to all of om shareholders. You will receive duplicate mailings Lost Devidend Checks or Stock Certificates fmm us if there are two or more shareholders at the if you do not receive your dividend check or stock same address or ifyour shares are registered in ditTer-certificate, or if they are lost, destroyed or stolen, ent, but similar, names.

please call our shareholder services department immediately.

Direct Deposst We are pleased to ofter direct deposit of dividend mod hansfer payments to your checking, savings or credit unior :

Central and South West Services, Inc.,is the transfer account at any financialinstitution that accepts elec-agent and registrar for Central and South West tronic direct deposits. Direct deposit eliminates the Corporatims conunon stock anc' for the preferred possibility of your check being lost or stolen, and the -

stocks of the Corporatiots subsidiary companies.

funds are credited to your account on the dividend To transfer your stock to another name, write the.

payment date. If you would like an enrollment card, new name, address and tax identification number on please call our shareholder services department.

the back of the certificate and sign your name

• *"d " d*"d "*""8 exactly as it appears on the front.Then, have your signature Medallion-guaranteed by a coinmercial DupUcate mailings of proxies and dividend checks bank or a stockbroker whose firm is a member firm c nnot be eliminated unless the registration is the same I ' 'N IY "' "#' """

of the New York Stock Exchange. Signatures cannot be Medallion-guaranteed by a notary public.

Ifyour account registrations are identical, notify our Your stock certificate should be sent to our shareholder shareholder services department that you want to services department bv registered or certified mail.

combine your accounts. If your account registrations are difTerent and you want to combme your accounts, if you have questions about transferring your all certificates must be issued in the one registration shares, you can write or call our shareholder services you prefer. To have your certificates reissued, follow department-the instructions under Stock Transfer.

24 t

1995 Ananal Alesting We also offer automatic electronic investment to E The 1995 annual meeting of shareholders is scheduled participants in the PowerSharea Plan. Optional cash l for April 20. It will he held at the Marriott Hotel, payments can be electronically processed directly 900 N. Shoreline Blvd., Corpus Christi, Texas.

from your checking, savings or credit union account

. The meeting' will begin at 10:45 a.m. Central Day-at any financial institution that accepts electronic light ' time, if you will not be attending the meetiag, direct debits.

please vote yout' shares by signing and returning 7ks does not mustitute are pr to sell or solicit.uion dan 6 r to your proxy card as soon as possible.

l>uy securities. Sude ogrs'arad soluit.uions are made by uuy of prospatus ordy No sales of CSIl'mmmon stoa under the plan will be made or commitments to ymthase accepted until a myy of the prospeaus is ddiwred. There u no oblyation to particip ne in the The Corporation ofTers u.s shareholders a conve-ple ar,d the aw dus ut mrutimte csili rewmmendation to nient way to purchase additional shares of particip,ne in the plan, conunon stock through its PowerShare* Dividend Reinvestinent and Stock Purchase Plan.

A&litionallsfonnation We will be pleased to send you additional copies r t.The plan offers shareholders, non-shareholders of of this sununary annual report. Also available are legal age who are residents of Arkansas, Loumana, Appendix A to the proxy statement for the 1995 Oklahoma and}iexas, and employees and cligible annual meeting of shareholders,2 Th4r Financial retirees of the Corporanon or ts subsidianes a conve-and Statistical Reelem of the Central and South Ilist nient and economical way to purchase the Sptctn and our latest Ernironmental Report of the Central Corporations conunon stock.

and South Ilisi Sptern.

Once participants are enrolled in the plan, cash The Corporation is subject to the infin mational dividends, as well as any cash im estments and/or pay-requirements of the Securities Exchange Act ofl934 roll or pension deductions, may be used to purchase and files reports and other information statements with shares of common stock.

the Securities and Exchange Commission. These Participants may make optional cash purchases from reports may be inspected at the SEC and at the New a $25 minimum up to $100,000 per calendar year hk and the Chicago stock exchanges.

(annual limit) for the purchase of common stock.

We will provide copies of these reports without CSW shareholders of record may enroll in charge to any Central and South West shareholder.

IbwerShare* simply by completing and returning the If you would like to receive a report, please write or enrolhuent form received from the Corporation.

call our shareholder services department.

- Empkiyees and cligible retirees of the Corporation or h ar d ander W L its subsidiaries may purchase shares ofconunon stock our shareholder services staffis available from 9 a.m. to through automatic payroll or pension deductions.

4 p.m., Central time, Monday through Friday to Full imesonent of funds is possible under the plan answer questions you may have. Our address and

. (subject to minimmu and maximum purchase telephone number is:

requirements) because both full and fractional shares Central and South West Corporation will be credited to participantf plan accounts.

Shareholder Services Department Participants may deposit all of their certificates of EO. Box 660164 common stock with our sharehokter services depart-Dallas, Texas 75266-0164 ment for safekeeping and will receive credit to their or call:

plan accounts for such shares.

1-800-527-5797 thrticipants will receiw quarterly statements of account Security Analyst Contact with a record of their activity as soon as practicable Security analysts should contact:

following each dividend payment date and will Sharon R. Peavy. Director ofInvestor Relations

- receive written confirmations ofinvestments upon Central and South West Corporation opening plan accounts or making optional cash 214-777-1277

- purchases of plan shares. Statements of account are a If you would like to be included on our investor rela-participant's continuing record of transactions and tions mailing list to receive news releases and other should be retained for tax purposes.

corporate information, please contact cur shareholder Through the plan, participants may sell shares ofcom-services department.

mon stock held or deposited in their plan accounts.

Osntrd and South West Corporation -

' 1616 Woodall Rodgers Freeway 18.0. Ilox 660164

. Dallas Texas 75266-0164 s

' 1 l

i l

I i

1 l

l i

._ - - _ - - _. _ - -. - - - - _ _ - - _. _ _ - _ - - _ _ - - _ - _. - - - - - - - - - - >