ML20116N726
| ML20116N726 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 12/31/1984 |
| From: | Cadman W KANSAS GAS & ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20116N716 | List: |
| References | |
| NUDOCS 8505070326 | |
| Download: ML20116N726 (43) | |
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- ANNdAL REPORT TO STOCKHOLDERf ^ i ('
tKANSAS GAS AND ELECTRIC COMPANY .
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- WOLF CREEK NUCLEAR UNIT QCENSED e , , #, e
e e de RETAIL SALES INCREANE WE o e '
- OPERA'I1NO REVENUES UP M %
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CONTENTS tettee to Stockhoklers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2
- WolfCreek license marks end of construction program started in 1977. Dividends of $2.36 per share compare to $2.27 in 1983.
Financial Review ..........................................Page4 Employees, Customer Services, Marketing . . . . . . . . . . . . . . . . . . . Page 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
- Three-year construction expenditures average $200 million annually. Sharp reduction in construction projected. Page 8.
- New rates fded for Wolf Creek. Page 11.
- Petail sales increase 6%. Total sales up 2% as wholesale sales decline. Page 12.
- Operating revenues up 5% with retail revenues increasing 8%.
Page 13.
Fmancials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 28 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover Stockholder Information . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover 75 Yur, of Service Elecaricity - renerall nagazines. The industry - and granted . . . essential . the.miracle
, y taken KG&E for - has changed through the energy. years . . . for the better. Why? The For 75 years KG&E has been a following statement made to KG&E vital factor in the development of employees in October,1924, southcentral and southeastern Kansas. provides important insight:
The company was found-d December "The continuous, adapare supply of On the Coven 11,1909, when three struggling light and twer to in automers e an energy comtinies merged to provide Lighu of Wolf CmA Generatin8 obligation in the fulbilment of which the financial, engineering and Kansu Gas and Ehuric Ownpany must
% ym,,og pyn,g, duplay illus:ratmgE's Kbgg,, g gjng insolsonmt management str to offer not fad, and for the fulfillment of which uith hi h tahnok adequate and tella le service to the it must man such forces as shall make Karuas i i/ rst nuchamcrating station.
Wolf Crwk b Kansas communities of Wichita, ewn the meeting of crbes paradonm!!y Pittsburg and Frontenac, commonplace. The senh of any clarric p,,g gymg gg y, ya,c3 g ,g, Success at KG&E has always light and twer annpany b tro titally U"' 8here U".'t any "danic" in rested on a commimwnt to serving enential to the normallife of noy customers through une of new actuall Wol mot*<ratmg omtrol nunahnuchur staf4d tryt=mo p inditifual in the communities sennf to technology and capable people. be oteatal by men other thim those high{y train <d, skdad twofen Today's problems o(the electric shoun n'ght.
utility industry are often highlighted mt=acity for antuturing tmb[cic nadsuhose managing genius by television, newspapers end hate made that senu tomble."
HNANCIAL HIGHLIGHTS, FIVE-YEAR COMPARISON (Dollan in shmsands excrpr per share data) 1984 1983 1982 1981 1980 Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,753 $ 393,053 $ 350,937 $ 313,093 $ 293,808 Ne t Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,858 $ 107,538 $ 84,663 $ 65,975 $ 52,395 Earnings Applicable to Common Stock . . . . . . . . . . $ 106,495 $ 92,027 $ 70.521 $ 53,060 $ 43.208 Average Shares of Common Stock Outstanding . . . 34,698,342 29,912,327 23,503,302 18,631.479 14.562,746 Common Stock Per Share Data Earnings ....................................$ 3.07 $ 3.08 $ 3.00 $ 2.85 $ 2.97 Cash Dividends . ............................ $ 2.36 $ 2.27 $ 2.15 $ 2.06 $ 1.%5 Indicated Yeo r-End Diudend Rate . . . . . . . . . . . . . . . . $ 2.36 $ 2.36 $ 2.24 $ 2.12 $ 2.N Market Value Year-End . . . . . . . . . . . . . . . . . . . . . . . . $ 17.25 $ 17.25 $ 18.375 $ 14.875 $ 14.625 Ikok Wlue (Moaly's Ne'. Tangible Assets)
Year -End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.38 $ 20.31 $ 19.66 $ 20.08 $ 20.22
- Available Capacity (Megauuto) . . . . . . . . . . . . . . . . . . 2,099 2,160 2,029 2.064 2.065 System Perk Responsibility (Mcgauurts) .......... 1,633 1.700 1.626 1.707 1.758 Reserve Capacity (Megauuto) . . . . . . . . . . . . . . . . . . . . 466 460 403 357 307 Average Use Per Residential Customer I (Kdouarclums) ............................... 9,812 9,901 9,529 9.433 10.708 Average Price Per Residential Kilowattimur . . . . . . 6.98c 6.77c 6.05C 5.NC 4.57c Number of Customers at End of Year ........... 242,666 238.591 234.972 213,421 228,992 long Term Debt .............................. $ 991,004 $ 753,242 $ 613,781 $ 607,256 $ 451,608 Redemption Requiral Preferred Stock . . . . . . . . . . . $ 78,000 $ 95,000 $ 95.855 $ 82,000 $ 53,000 I i
Net Plant in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 716,1 % $ 699.529 $ 610,746 $ 608,498 $ 610.846 Construction Work in Progress . . . . . . . . . . . . . . . . 1,2 7 2,8 5 8 957,674 812,297 613,874 451,640 Total Utility Plant (Net) . . . . . . . . . . . . . . . . . . . .' . . . $ I,989,013 $ 1,657,20) $ 1.423,04) $ 1,222,172 $ 1,064.486 _
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Total Anacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,1 5 0, % 8 $ 1,778,232 $ 1.515,517 $ 1,100.495 $ 1.137.883 I ... % _m-. .- ., . .. .
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F LETTER TO STOCKHOLDERS OooS+ - --v a 1984 gave -d beiag an-ea a air retum en anancing win fan sharpiv in 1985.
us a good ity to reflect on this investment while minimi:ing its We have, and will continue to the past to further prepare foe impact on customers. maintain, flexible financing options.
the future. Although Wolf Creek was built in %e number of customers at the in 1964, less time and at lower unit cost than end of 1984 reached 242,666. ne
- Earnings applicable to common the average of other similar si:ed increase in 1984 was 4,075. %e stock reached a new record of nuclear units at single reactor sites, it compound annual growth rate during
$106 million. Eamings per share stillis a huge investment. Our 47% the last five years was 1.7%.
of $3.07 were comparable to the interest is projected to cost $1.33 We are currently estimating an 1983 record high of $3.08 even billion. With that added to our rate annual customer growth rate of with 4.8 million more average base, our revenue needs will increase slightly less than 2% for the next five shares of stock outstanding. substantially. years.
- Common stock dividends were To ease this impact, weve Because we are a summer peaking
$2.36 per share compared to proposed phasing in the increase over utility, load management is especiaHy
$2.27 the year before. five years. For the first year, we have important to our future success. And
- Retail customers used 6% more asked for a 33% revenue increase the load factor improved significantly electricity than in 1983. effective when the plant begins in 1984 to 52.6% from 49.6% in c mmercial service later this year. 1983. His is a measure of use of our
- Financing activity reached a record high of $425 minion. He outcome of our rate request is facilities throughout the year hard to predict. Kansas in 1984
- Em 1 yees again demonstrated ____
adopted a new law which gives state that th are accomplishment oriente$and committed to serving ,'i$r e ecc iion$fYe ". . .yitalityc mes only through cust mers.
generating facilities. Under some anticipation of the future. And
- Our year.long 75th anniversary circumstances the law authori:es the this is what we are about at observance stressed "75 Years of Kansas Corporation Commission to KG&E."
Service." phase in the revenue impact of new Of specialimportance in 1984 was generating facilities and even -
progress on completion of Wolf temporarily or, in some cases Creek Generating Station. On March permanently, deny rate recognition compared to peak demand use.
11,1985, the Nuclear Regulatory for such facilities. load factor will generally increase Our current residential rates are as growth in peak demand is below both state and national controlled and as more electricity is "Licensin gof Wolf Creek brings averages. At the end of the five. year sold during off. peak time periods.
to an end a huge construction phase.in plan, our rates are expected A combination of efforts and program which was started in to be slightly higher than the national programs can be used to help provide average But wia a nadonal trend more efficient use of generating units.
1977 * * *" toward higher electric costs, we Controlling peak growth by
. expect that our charges wiH retum to controlling operating times for air below the national average by the mid conditioning and increased use of the Commission granted the plant an 1990s. efficient electric heat pump and add.
operating license. He plant is With Wolf Creek in service, we on heat pump will spread out power expected to be in cummercial anticipate that 34% of our generation demand and help us operate operation about six months from that will come from this nuclear. fueled profitably and at lower cost to date, unit during its first full year of customers.
1.icensing of Wolf Cteck brings to oper tion. Our five coal. fueled units Even with much of our an end a huge construction program built since 1973 will provide 50%. management attention directal to which was started in 1977, demanded ne balance will come from older completing Wolf Creek, our record financing and plunged us into ga& fired generators which federal and employees again in 1984 a constant maze of changing and state actions have encouraged us to demonstrated their continuing sometimes stifling regulatory phase out. commitment to customers.
requirements. In 1984, financing activity totalled Prairie fires threatenn! our here are, of course,important a record $425 million. With distribution system in early fall. Een challenges remaining in regard to completion of all major construction central Kansas was hard hit by ice Wolf Creek. %ese include bringing projects and if tequestal rate relief is storms. Our personnel worknl the plant lato commercial operation allown!, anticipated need for efficiently both to protect facihtles 2
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More quietly, employees have 2 -
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improvement and cost containment ;
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& Ti' 4 programs. Their support is evident in l ' ; ,, y ' ' r l'
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I am pleased to report the * ~ ~'
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followirig changes in our management P;. F
- .1, YY4' dyt'$ M f ':; ,. ' e organi:ation. Richard M. Haden, an
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president - administration, replacing "o
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August with 43 years of valuable service. We regret that Mr. " d'fi 'd . '. . . W. '.-
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November of cancer. "*l'h N.- '> $ "
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James Haines has been named vice president - r latory affairs in A
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recognition o the importance of
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rates and the more than eight years
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experience Mr. Haints has in this N; __ g- i . ' ;,W 1.7 ~ d? . '-
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s 1 If history teaches us anythin l that vitality comes only througb*, it's
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l anticipation of the future. And this is
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presently engaged in a comprehensive review of our strategic planning =
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processes. This is especially important as our long-term construction program winds down. We will E continue to prosper because we will 4
continue to be forward kx> king. -l' Please let me know if you have questions or comments. i K
DL a Wilson K. Cadman i
Chairman of the ikurd and President March 12,1985 f ;
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FINANCIAL REVIEW Financing Activity Summarized * $17 million raised in October Sales Long-term financing activity in 1984 totalled $425 million. The through the sale of I million shares f c mm n stock at $16.951 per =m
....,,,,,,,a proceeds were used primarily for financing construction including the
- h8 enillion of llution control " * " " " ' " "
- "" " gs revenue bonds lating to Wolf " ' "
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was appbed e preferred stock
'g'30 $1Ymiljon Creek issued in November by the City of Burlington, Kansas. Of f pq
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sinkin fund and $18 million was this. $7,.2 million is held by the 77] 771 y applieb to tax exempt bond accounts. trustee in interest accounts pledged y y- S, g@ p, for debt service and $10.7 million
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Financing activity included: was deposited with the trustee in a 4 . !y
- $32.3 million raised in March construction fund pending F. G+ *'
through the sale of 2 million shares nMitional pollution control '
of common stock at $16.152 per expenditures. " ' '
share.
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- $100 million ma.le available in o
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- $100 million raised in March December by formation of a through the sale of 13H% Series revolving underwriting facility with First Mortgage Bonds due 1989, a group ofinternational banks.
- $50 million raised in September This facility was not used in 1984.
from the sale of first mortgage * $27.4 million was raised during stock under the dividend bonds due 1991: $20 million at the year through the sale of reinvestment and employee stock 14%% and $30 million at 14.05%. 1,852,468 shares of common plans.
Stocks, Bonds Shelf Registered inJ nuary 1985,2.5 million shares KG&E's Diversified Industrial Revenues of common stock for the Company's (Thousards of Dollars) Percent increase Automatic Dividend Reinvestment 1984 1983 Over 1983 and Stock Purchase Plan were Energy Pnx!uction (agr% of total) registered with the Securities and l
Petroleum Refining . . . . . . . . . . . . . . . $ 23,652 $ 23.438 0.9% Exchange Commission.
Petroleum & Gas Pral. . . . . . . . . . . . . 8,679 8,008 8.4 Pipehne Pumping . . . . . . . . . . . . . . . . . 5,839 5,298 10.2 Coal Mining . . . . . . . . . . . . . . . . . . . . . 899 677 32.8 Sut*xal . . . . . . . . . . . . . . . . . . . . . . 39,069 37.421 4.4 Manufacturing (23% of taal)
Ai rcra ft . . . . . . . . . . . . . . . . . . . . . . . . . 19,418 16.639 16.7 Machinery ...................... 9,968 8.532 16.8 M etal Fab. . . . . . . . . . . . . . . . . . . . . . . 4,951 4.447 11.3 Other M fg. Pnsl. . . . . . . . . . . . . . . . . . 2,372 1,953 21.5 Electric Operating Revenues Subtotal . . . . . . . . . . . . . . . . . . . . . . 36,709 31,571 16.3 ',"L;' '7"
Natural Resources (hg of smal) =o -
Chemical . . . . . . . . . . . . . . . . . . . . . . . 19,982 12.950 54.3 [;"1,,, , ,, ,,., ,,,,
Sand. Stone. Clay & Cement Pnsl. . . . 10,096 8.903 13.4 ,q Plastics . . . . . . . . . . . . . . . . . . . . . . . . . 4,4 t M 3,501 26.2 .
34,4 % 25,354 "
Sul m nal . . . . . . . . . . . . . . . . . . . . . . 36.1 o._
- d Agricultural, Faxi & .
"' 4 Kindred Prmlucts (:o% of total) ,, i. L Grsin Mill iklucts . . . . . . . . . . . . . . . 4,870 4.iS2 2.5 ,,, . ..
I'repared Fa sts . . . . . . . . . . . . . . . . . . . 3,598 3.115 8.5 3
h' i M eat Pn ducts . . . . . . . . . . . . . . . . . . .
Dairy Pnshx ts . . . . . . . . . . . . . . . . . . .
4,078 666 3.563 624 14.4 6.7 4
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Sut * >tal . . . . . . . . . . . . . . . . . . . . . . . . 13,212 * -
12.254 7.8 Service Related (rt ofioral) 9,454 7,243 30.5 g- -- - =
u we E'E Toul lndustrial . . . . . . . . . . . . . . . . . 13,2940 2
$113,H4 3 16.8 ** r*
Note: n/4 and avH.i cshJe $( e,%),orx)) atJ $ 8 57o,rxxi fwl aJpstrnme due mmws, engstndy 4
Shelf registered securities include W e -<x m.7,mm - '
$20 million of first mortgage bonds,
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$50 million of preferred stock and 3 1
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million shares of common stock 't e v'M which could be sold publicly. #9 V SR 3 ~% .
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KG&E common stock was listed c Y '5 "" '
on the Pacific Stock Exchange i a l September 5,1984.
Part of the 1984 common stock dividend represented a return of I e 'f [ -
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capital and can be exduded by f ..
stockholders from income in determining 1984 income taxes.
1' -~ST-He return of capital was C% of
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first quarter dividends and 83% of dividends the last three quarters.
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Stockholders will have to reduce the s J, i, e l'.
cost basis of the stock by a * < '.- i .
A05 3 corresponding amount. -
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Estimates are that between 20% i ,-
and 40% of common stock dividends E
5 in 1985 will represent a return of capital. nis has been revised from L.d i; +'
the 50% to 80% estimate included m ,
the Company's fourth quarter 1984 report. He revision reflects changes in scheduling of Wolf Creek -
commercial operation and related rate relief.
Dividend Reinvestment Offered - .- 4. -.. -
He Automatic Dividend EO '"" ##h Reinvestment and Stock Purchase p are W - p6ning, daignig Plan permits preferred and common stockholders to automatically reinvest
,**M" their dividends, invest optional cash payments monthly of up to $5,000 quarter, or both, in newly issued purch i e of d e r i.s 95% in 1984 Sources of Revenue 1984 Uses of Revenue the case of reinvested dividends, and 100% in the case of optional cash UcP ma m.
payments, of the average of the high "
and low sales prices on the investment date. -
! See Management's Discussion and
%s %,
Analysis of Financial Condition and Results of Operations for additional **
information concerning financial c,% 50**%.
roi ae-h-ar--
management.
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1 EMPLOYEES, CUSTOMER SERVICES AND MARKETING
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Ti bv'~~, Through Neighborhoal him Watch
'~ KGSEers now r@ ort ernergency or suspicous acnvities to public wfety offuxrs.
a arensnumm.
t Safety Record Set with the objective being to cut costs. stressed in 1984.
Overall safety record for the Ee plan supplemented the Employee One unusual program was a series company was the best in 34 years. Cost Reduction Sugestion Program of make-your-own storm window For the first time since 1%7, that attracted a record number of 59 workshops. nrough a minimum employees worked more than 2 c st reduction ideas. investment only for materials, million hours without a lost-time High Tech Speeds Work participants made more than 2,000 accident. .
storm windows. Nine workshops t gy is bg d were sponsored cooperatively with Jim Schuessler' purchasing thrmghmt the Company. local schools and businesses, and department, was recognized at the 1984 stockholders meeting for saving A major re-building of Gordon staffed by employee volunteers.
the life of a co-worker by applying Evans Station Unit I was com eted A two-year residential energy audit ahead of schedule with credit e in program was completed. More than the Heimlich Maneuver when the colleague was choking.
p nt a comprehensive 3,500 customers have now benefited being And employees continued to n7 major from these professionally-conducted
- M"o inspections of their homes.
demonstrate their interest in the maintenance and construction communities they serve by whole- projects. KG&E customers provided more heartedly cooperating in a new than $1.6 million for research. His Because of the high level of success Neighborhood Radio Watch , includes work of the Electric Power in using computers to process outage program -initiated at the end of the Research Institute supported data during storm emergencies, year as a 75th anniversary activity. nationally by the electric utility ogramming is being Under the plan, line personnel and additional developed (nking specific customersndustry and the Electric Utility meter readers received special training Research Program established to specific equipment. This should so they can effectively report unusual shorten times customers are without thrmgh the Kansas Corporatim or suspicious conditions or service and save money through Commssion m cooperanon with emergency events they observe t Kansas Board of Regents colleges and improving the system of locating ,
appropriate pubhc safety officers. pass ble problems. universmes.
He Productivity Task Force In three years, Project DESERVE, organized in 1983 within the Customers Are Special established by KG&E with the operating department was continued Service to customers continues to American Red Cross, has provided in 1984. More than 150 employees be the primary focus of the company. more than $500,000 to the elderly have participated in a systematic And ways for customers to effectively and handicapped to pay for review of practices and procedures use electrical energy were continually emerg ncy energy expenses.
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KG&E offices started a prcgram in 3. " ~. 5
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special needs during hot summer :'.;6fE. & . L . Msi 3,y.., {4 e.
months. : 7 ;... W g.,. ..
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Marketing Supports Efficiency 28 .: .~ '~
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Marketing programs continue to be UN4 'l i J'.' -'I,kT b ". t '~;
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other facilities. Approximately 14%
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of residential customers now use
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electricity as primary home heating. r"'
]e Key advantage of the electric heat D 4 ,i .se g .. i
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l mp is that it provides winter l. (. ./] , _ ' ";t _. H. jg .
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Demand for electricity for heating in
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Economic development has also ? 4 4 '.W . 4 / $$ . . . h
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become an important part of the total 0-7Ekg,' . f marketing effort. Concern is to build S%%.n[ -E
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5 operation of the total system with These are the KG&E cusaner senice existing as well as new industries. representatites uho rner 5984 rnarkenng and z Any increase in energy use that does advantages for all customers. aher goals. _
not create growth in peak demand In 1984,15 companies indicated improves tne load factor and system plans to establish new facilities in our when soms durupt senia, high ecchnology -
efficiency and offers economic service area creating 645 new jobs. helps laure the prob!cm, speafing up ;
restoration of senia.
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i Management's Discussion and Analysis of Financial Condition and Results of Operations Construction Expenditures Creek by the NRC on March 11, financing the unit since 1973. Since ne Company has been involved 1985. %e Company anticipates a commercial operation will be about in a major construcnon program for 'od of approximately six months stx months after fuelloading, Wolf more than a decade. Net construction een fuelloading and full-power Creek's cost will be in excess of this expenditures have been more than operation, estimate, but the final cost is not
$100 million each year since 1977 However, there is no assurance that known at this time. As of December oximately delays may not be experienced due to 31,1984, $2.63 billion, including and have averaged
$200 million annual aYl during the further past licensing proceedings, other AFC, had been spent on the unit, of three years. Since 1973, KG&E has NRC actions, litigation or other which KG&E's share was $1.24 completed five jointly-owned coal- events. billion.
fired generating units with its share of ne July,1984 total project cost Table 1 and the related graph the capability being 1062 MW. The estimate for Wolf Creek, based on depict actual expenditures and AFC last of these,Jeffrey Energy Center spring 1985 commercial operation, is for Wolf Creek and other Unit 3, began operation in May $2.9 billion, including $912 million construction in 1982-1984 and 1983. of AFC, the capitali:ed cost of esumates, based on a spring 1985 Dunng the three years ended c mmercial operation of Wolf Creek, December 31,1984, $473 million of f r 1985-1987.
the $600 million net construction Total Construction Expenditures expenditures were related to the Includes AFC ,.
nuclear-fueled Wolf Creek.JEC Unit C Z I"" c .
3, transmission, distribution and m,""-~- "The Cornpany was granted a eral lant facilities accounted for ,o
, gow, power operating license
- C'-
- for Wolf Creek . . ."
Wolf Creek is the sole generating ,
facility under construction. The Company serves as project director m gM M ~~
w % '
and will operate the unit which has a .' 5j nominal rating of 1150 MW. KG&E 9 54 "'
%e Company's net construction owns 47%, Kansas City Power & a 77 ,, ,,, expenditures are expected to total I ight Company owns 47% and EE $216 million for the years 1985 Kansas Electric Power Cooperative, c
.E .
through 1987. These projections Inc. owns 6%. '", '" l'" ,,,'1 reflect a significant decline in He Company was granted a low- construction following the power operating license for Wolf completion of Wolf Creek.
Table 1 1982-1987 Construction Expenditures Actual Estimated (Thousands) (Thousands) 1982 1983 1984 1985 1986 1987 Wolf Creek Generation . . . . . . $171,412 $217,692 $313,591 $ 81,258 $- $-
All Other Construction . . . . . . 57,126 46,210 40,492 44,082 54,561 57,683 Total Construction . . . . . . . . 228,538 263,902 354,083 125,340 54,564 57,683 Nuclear Fuel . . . . . . . . . . . . . . . (227) (1,382) 10,740 3,759 8,314 9,562 Total . . . . . . . . . . . . . . . . . . . 228,311 262,520 364,823 129,099 62,878 67,245 Less: AFC . . . . . . . . . . . . . . . . . 66,117 83,143 106,464 41,876 650 1,154 Net Construction Expenditures . . . . . . . . . . . $162,194 $179,377 $258,359 $ 87,223 $ 62,228 $ 66,091 :
At dusk, the lights of Wolf Crak Gmeranng Stanon highlight the plant against the Kansas prairie.
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Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and required cash 'tures far in opinion that it has adequate financial excess ofint y generated funds, resources to meet its anticipated 1985 Capital Resources as shown in Table 2. capital requirements. These resources Internal cash generation of at least ""' **
50% of capital requirements, a common stock market value at least (a) %e Company's first mortgage equal to book value and a common "The Companyisof theopinion bond indenture contains equity ratio of about 45% are the that it has adequate financial provisions which restrict the Company's long-term financial goals. resources to rneetits anticipated issuance of additional bonds.
Aclueving these goals should result m Based on 1984 earmngs and 1985 capital requirernents.,, allowing for the refunding of the an improvement in the first mortgage
~
bond ratings from their present levels 16%% series first mortgage bonds
~.
of 9 Baa 3 and BB+ by Duff and to take place on April 1,1985, Phelps, Moody's and Standard & At year-end 1984 KG&E's sinking the Company could issue up to Poor's, respectively. %e Company's fund and debt maturities on $49 million of bonds.
common stock market value at outstanding long-term debt and %e Company's Restated December 31,1984 was 85% of the preferred stock were $25 million, Articles ofIncorporation contain year-end book value and the $84.3 million and $50.3 million in no financial tests limiting the common equity ratio was 39%. All 1985-1987, respectively. issuance of additionalshares of of the Company's capital Capital requirements are typically preferred stock.
requirements were generated financed initially with short-term (b) He Company has short-term externally in 1984. ne " Capital borrowings and are then refinanced lines of credit totaling $91 Structure" graph covers the 1979- by sales of long-term debt, preferred million, of which $13 million was 1984 period. stock or common stock. During the outstanding at December 31, 1982-1984 period, the Company 1984.
sold $469 million oflong-term debt, Capi
,_ {Syre $15 million of preferred stock and (c) ne Companditloan revolving cre facilities.ha
. re., $287 million of common stock, an The first for $100 million expires 7g aggregate of $771 million. August 31,1986, and the second
- w. So far in 1985, the Company has for $200 million expires May 31,
" sold $30 million of 10%% two year 1987, at which times the
" E E '
E amounts then outstanding under B B - ! E first mortgage bonds, the proceeds of these facilities may be converted n ,. which will be used to redeem on ,
April 1,1985, the first call date, an to four-year term loans. As of !
outstanding 16%% bond issue oflike December 31,1984, $50 million amount due in 1987. Subsequent was outstanding under each of permanent financingwilldependon these agreements, leaving $200 a
the outcome of the Wolf Creek rate million still available.
1 i ,
case with respect to the amount of (d) In December 1984, the Company i 7 increase authorized and the date entered into a 3% year $100 !
3 Ia
~ ~ ~ ~ ~ ~
granted. The Company is of the Table 2 million revolving underwriting 1982-1984 Capitel Requirements (Thousands)
Since 1978, Kansas law has 1982 1983 1984 virtually prohibited the inclusion of $162,194 $179,377 $258,359 CWIP in the rate base upon which Net Construction Expenditures ....
Add: Sinking Fund and custcmer rates are set. Because Wolf 23,202 51,343 1,614 Creek represents a major investment, Debt Maturities . . . . . . . . . . . . . . .
CWIP has become increasingly large, Total CapitalRequirements ....... $185,3% $230.720 $259,973 representing 175% of net electric Sources of these capital requirements plant in service as of December 31, . have been as follows:
1984. Cash is not generated from this Extemal . . . . . . . . . . . . . . . . . . . . . 93.4 % 100.0 % 100.0 %
mvestment. The construction Internal . . . . . . . . . . . . . . . . . . . . . 6.6 0.0 0.0 program, debt maturities and cash 100.0 % 100.0 %
Total Sources . . . . . . . . . . . . . . . 100.0 %
sinking fund requirements have 10
facility with a group of associated with JEC Unit 3 which Of the 503 MW,297 MW are more intemational banks.nis were not included in the interim rate than 30 years old.
agreement enables the Company increase granted in May 1983 and He Company also intends to make to sell promissory notes in costincreases since thelast application to the FERC for rate foreign markets or to borrow permanent rate increase in April . increases applicable to Wolf Creek from intemational banks in an 1983. with r to the Company's amount of up to $100 million. The Company estimates that, whol e revenues, which presently He Company did not borrow under the phase-in plan, rate requests account for about 7% of annual under this agreement in 1984. will be as follows: operating revenues.
As with any rate request, the Company has no assurance as to the Wolf Creek Rate Increases KansasJurisdictional amount or timing of rate relief which he Company appbed in Rate Requests may be granted by the KCC or by the November 1984 to the Kansas Amount Percent FERC with respect to Wolf Creek. ,
Corporation Comnussion for a retail Year (Millions) Increase Failure to receive adequate and timely
, rate increase to become effective at 1985 $144.9 39.4 % rate relief with respect to Wolf Creek the time Wolf Creek begms 1986 61.1 11.5 e uld have a substantial adverse effect commercial operation. He request is 1987 65.9 10.8 upon KG6tE's finandal condition, i
based on a retum en equity of 1988 59.8 8.2 including dividend paying capacity.
15.50% and an overall cost of capital 1989 39.2 4.6 For furtherinformation with of 11.98%. Instead of requesting respect to rates, see Note 2 of the immediate rate relief for all of the Displacing fossil fuel with nuclear Notes to Financial Statements.
$373 million 1985 test year revenue generation could result in deficiency, KG&E proposed a phase' approximately $25 million in fuel m of revenue requirements over five savings during the first full year of years. The phase-in has been designed operation of Wolf Creek. These fuel to lessen the sudden and heavy savings would reduce the impact of burden that would be imposed on the first year rate increase to $120 customers by the immediate
. million or a 33% increase.
recognition of this revenue deficiency. Subsequent to 1985, rate increases With the phase-in of rates, a full under the phase-in plan will be cash retum on the Company's requested annually to reflect investment in Wolf Creek would be operating results at the time. %e delayed until that total revenue Company anticipates that the 1985 requirement is recognued in 1%9. rate case will be acted upon by the
. Hat portion of revenue requirements KCC coincident with commercial which is not recovered during the operation of Wolf Creek.
phase-in period will be capitalized net in April 1984, a Kansas law of taxes and ultimately recovered over the depreciable life of the um.t. became effective which broadened the authority of the KCCin utility rate Under the Company's plan, rate cases. Under this law, the KCC can
- . levels at the end of the ph .se-in exclude from rate base that portion of
_ period will be at a level which ensures recovery of the deferred revenue and costs which the KCC considers to
- have resulted from management en appropriate return. mprudency and the cost of facilities During the phase-in, the constituting excess capacity. The Company's reported earnings will KCC also can deny the recovery of include cash and non-cash deferred carrying or financing charges on the '
revenues. %us, the cash component value of excess capacity while - '
of earnings willimprme as rate deferred or excluded from rate base.
- increases are granted by the KCC; The Company anticipotes having w +,dingly, the non-cash reserve capacity of up to 944 MW or
. component of earnings will decline. 57% at the time of commercial
, Wolf Creek accounts for operation of Wolf Creek. This '
approximately 93% of the revenue includes 503MW of gas / oil fired !
, deficiency. He balance includes costs capacity which is over 25 years old. l I
11
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l i Management's Discussion and Analysis of Financial Condition and Results of Operations bi .
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Table 3 Sales and Customer Statistics Results of Operations
'"##**** **'*}
Details of sales and customer changes are presented in Table 3.
9 [ 98 Electric Percent Electric Percent A 6% increase in retail sales in Sales Change Sales Change 1984 over 1983 reflects growth in Electric Sales (M kWh) the Company's service area. Sales in Residential . . . . . . . . . . . . . . . . . 15,909 0.8% 99,880 5.0%
all major retail sales categories Commercial . . . . . . . . . . . . . . . 59,248 3.9 26,874 1.8 i increased. A 12% increase in Industrial . . . . . . . . . . . . . . . . . 295,640 12.0 (141,165) (5.4) i industrial sales was a major factor in Public Street &
the growth of retail sales. Highway Lighting . . . . . . . . . . (2,049) (3.1) (134) (0.2) i Improvement in the national Retail Rates . . . . . . . . . . . . . . 368,748 6.0 (14,545) (0.2) economy was a primary reason for Wholesale Rates . . . . . ...... (188,708)(16.9) 36,979 3.4 industrial expansion. Although Total Sold . . . . . . . . . . . . . . 180,040 2.5% 22,434 0.3%
industrial sales growth was
- distributed throughout various Percent Percent 4
industrial customers,53% resulted Customers (End of Year) Customers Change Customers Change from increased sales to KG&E's Residential . . . . . . . . . . . . . . . . . 3,691 1.7% 3,121 1.5%
! largest customer. Commercial sales in Corrmercial . . . . . . . . . . . . . . 299 1.5 403 2.1 l 1984 were also up, posting nearly a Industrial . . . . . . . . . . . . . . . 51 1.1 54 1.2 l 4% increase. Sales to residential Public Street & i
- customers increased less than 1%. Highway Lighting . . . . . . . . . 35 5.3 43 7.0 l
- Wholesale sales accounted for Retail Customers . . . . . . ... 4,076 1.5 1.7 3.621 i 12% and 15% of the total electric Wholesale Customers . . . . . . . .
sales m, 1984 and 1983, respectively.
(1) (2.5) (2) (4.8) j Total Customers . . . . . . .. 4,075 1.7% 3,619 1.5%
. Because of a change in power
)
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1 requirements by wholesale customers, wholesale sales are not expected to Sources of Energy return to former levels. "A 6% increase in retail sales in =-
He decrease in wholesale sales in 1984 limited the gain in total electric 1984 over 1983 reflects growth M I in the Company's service area." "c ' '
sales to 2% over 1983. , ,
In 1983 sales were unchanged from "'
ao the 'or year in both the retail and , o_,_1 o _
totafsales categories. Above average Total 1984 operating revenues summer temperatures in 1983 were up 5% Greater sales to retail * -
prompted greater air conditioning customers and two spring 1983 retail usage by residential and commercial rate mereases contnbuted to an 8% . -
customers. Electricity usage increased increase in 1984 retail revenues over 5% and 2% respectively.1.owered 1983. Wholesale revenues m 1984 2 -
requirements from KG&E's largest declined 27% because of a drop m customer, which began cogenerating sales to municipalities.
g ,, , ,, ,_
power in late 1982, and the generally Because of the two spring 1983 depressed economy caused a 5% retail rate increases and the recovery dropin 1983 industrial sales. of an 11% increase in the combined 1
Details of changes in revenues, fuel cost of fuel and purchased power, costs, rates and energy supply are 1983 revenues increased by 12% Fuel Cost Data
.n. _ .m, shown in Tables 4 and 5 and the accompanying graphs.
ver 1982. Electric sales were tmchanged from the previous year.
q
- w %, ,
- c..i Operating Expenses ""?
- Table 4 Operating Revenues Fueland Purchasal Pouer ~L u,
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2 Revenue Increase With fuel and purchased power or (Decrease) costs making up 69% of total fu mj '_
(Dollars in Thousands) 1984 over 1983 *P"*U " *"0 "**"*" " ' [r the Company condnuaHy wo minimize these costs by using the to w"
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"4 1983 least expensive generation available. , f.n 98 +
Retaih his s reflected in the increased usage ;
Electric Sales Fuel of coal-fired generation, representing
$15,939 $ 2,156 64% of fuel usage on a Btu basis in [
,,,A ,a ,e, (193) 12,570 1982,67% in 1983 and 75% in ,;, ,;, ,,
Rate Increases 12,991 22,362 1984. His increase in coal usage has Other 150 26 resulted in a decline in use of natural Total Retail 28,887 37,114 gas. He average cost per million Bm because of the deregulation of rail Wholesale (11,187) 5,002 ofcoal bumed was $1.41 m 1984 transportation. Le cost of Total Revenue $17,700 $42,116 c mpared to $3.25 for natural gas. transporting coal from Wyoming Average fuel cost per million Bru now represents about 67% of the was $1.86 in 1984, $1.87 in 1983 total cost per ton as compared with and $1.68 in 1982. He Company's 58% in 1982. Coal cost per million Btu increased by 5% in 1984 and 9%
Table 5 coal costs have continued to increase in 1983. Natural gas cost per million Retail Rate Increases Bru increased by 9% in 1984 and Received, 1982-1984 19% m 1983 over prior years.
Amount Percent Percent Allowed However, by year-end 1984, gas costs Allowed were at 1983 levels.
Granted of Amount Increase in Return on Return on Date (Millions) Requested Revenues Rate Base Common Equiry %e Company regularly purchases 4/83 $15.2 32% electricity from other utilities when 4.4% 11.52 % 15.50 %
5/83 18.9* 93 5.5 the price is lower than its incremental 11.37 15.50 cost of generation. In addition, the CSubject to refund purchased power markets are important when KG&E generating 13
Management's Discussion and Analysis of Financial Condition and Results of Operations units cannot meet demand because of just under 10% in 1983 for similar amounts will be subsequently weather conditions, maintenance or reasons. recovered through higher rates when other factors. the assets represented by the Tm investment begin service to ne Company purchased 27% less Inmme taxes charged to operations electricity in 1984 than in 1983, customers.
amwnted to $41 milhon m 1984, a AFC will substantially decline upon resultingin a 26% decrease in 3% increase over 1983. Income taxes commercial operation of Wolf Creek.
purchased power expense. He decline in 1984 ".1983 were up 40% from 1982 (See " Construction Expenditures, primarily from t$urchases pacapally because of higher income resulted Table 1"). Under the p oposed rate e full-year generated by the spring 1983 rate increases for Wolf Creek, AFC availability of coal-fired JEC Unit 3 mcreases. The Company's effective would be replaced by cash earnings which began federal income tax rate and changes m.
and greater un Ntionon of in Lamid-1983 Cygne income taxes for the last three years from higher rates and non-cash Unit 1. deferred revenues to be collected during the depreciable life of the in 1983 the Company purchased 23% more electricity than in the f*e^"de$'"t***"t8-led in Note 9 of theplant. Notes (See "t Wolf Creek Rate previous year, resulting in a 25% Other Statement ofInmme Items Increases.")
increase in purchased power expense. AFC comprised allof the Interest on long-term debt
%e primary factor leading to the Company's camings applicable to increased 33% in 1984 and 7% in increase was unseasonably cold common stock in 1984, up from 1983, primarily due to increased debt weather in December 1983 that froze 90% in 1983 and 94% in 1982. He incurred to finance construction. He coal piles, impairing the operation of large amount of AFC for each year 1984 increase reflects a full year's certa:n units. primarily reflects KG&E's investment interest on $157 million tax exempt in Wolf Creek. He KCC generally pollution control revenue bonds sold
.Other Operatim Expmes does not permit utilities to earn a in 1983. He 1983 increase was Other operation expenses were up cash return on investments in assets moderated by generally lower interest 13% in 1984, primarily because of until the assets begin providing rates during the year.
inflation, an increase in uncollectible service to customers. Instead, the Company records the cost of money Emings and Nidends customer accounts and increased administrative and general expenses associated with the investment as Earnings per average share of relating to JEC and la Cygne plants. current earnings. His is done with common stock and common Other operation expenses increased the understanding that these non-cash dividends paid are detailed for the 1
Service Area Map CC.u;Ogr Map legend 2 Ripley Steam Electric Station.
92 MW, Natural Gas 8 Division Headquarter EO8W Cit;es
- 3 Wehita Steam Electric
'/.
y
- Station,23 MW, Tremission bes
, -/ x Natural Gas 4 Murray Gill Steam Electric i
( .w n W J. b , . ' %.
/W "'x! Interconnections and Power Pool Mernbenhips Station,324 MW, i
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- . 73 F es ~ r g. p ' .mA - utihties and the Company is a *'"'* ""
M&J d b 'E. . T__ @Wd'EE.f member of the Southwest 6 1.a Cygne Steam Electric
.a; ;p s. g,5 3F Power Pool and the Mokr.n Station.658 MW*, Coal
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?!/_f + lurid no mda nmthaur of onoa oua Natural Gas WLhaa. Nor she on m+
14
1979-1984 period in the accompanying graph.
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"Earningsapplicable tocommon . : .- .M . . I t stockin 1984 were $106.5 mill- .. N e- - C a . << . '- U w ~ . ' - ~.: =' N ion, a $14.5 million or 16% %:.kI. ; M N -; 1. N:N::).17.. # V;.~b%fI increase over 1983." J~$[l(%1'->k
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.N..J .
. .. , Ac v ,2%g,s> A.
$14.5 million or 16% increase over 1983. Earnings of $92.0 million in archcraft Stanhip i kng dayW i Bath Aircraft Caporation with randern 1983 were $21.5 million or 30% wings, np sails, pusher jerfan engines and h.igher than 1982 earnings of $70.5 grWm rnarenals dernonstrates &
t million. Earned retum on average dynarnic qdry of Wichua indue l common equity was 15.4% m 1984, j 15.8% in 1983 and 15.5% in 1982. Market Price and Book Value l Dividends paid on common stock of Common Stock in 1984 were $2.36 per share. Future '"
-l .'NYsE M.wbv IM Rary cash dividends will be affected by the . a.m ., v ..a
- Company's future earnings, financial $2'
- requirements and other factors. (See
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" Wolf Creek Rate Increases.")
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! Impact of Inflation G ,,no 1
! and Changing Prices M u. w a mw t
Inflation has had a continuing n
' impact on the Compmy's operations. "L ,u," b ,as'"' 2 A discussion of its effects is included , , . .
i in Note 14 of the Notes to Financial so Statements. v- im i~ i-i i-2 i-i i~
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Kansas Gas and Electric Company
,__._.,_m_.____.__._._ - _ = _ _ . . ~ .
STATEMENTS OFINCOME For the Yarrs Endai Darmher 3 1984 , 1983 1982 (Thousands of Dollars)
Operating Revenues (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,753 $ 393,053 $ 350,937 Operating Expenses:
Fuel ....................................................... 148,959 139,339 128,043 Purchased power - net ....................................... 18,221 24,541 19,587 Other operation ............................................. 48,573 43,050 39,179 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,108 27,871 29,064 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,433 29,919 27,288 Taxes other than incomes taxes ........ ........................ 16,063 15.078 13,419 Income taxes (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,024 39,903 28,447 Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,381 319,701 285,027 Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,372 73,352 65,910 Other Income and Deductions:
Allowance for other funds used during construction . . . . . . . . . . . . . . . . . 78,345 63,068 46,948 Equity in earmngs of subsidiary companies (Note 7) . . . . . . . . . . . . . . . . 1,603 1,400 1,327 Miscellaneous - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,299 659 377 Income taxes - net (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,993) (1,061) (893 Total other income and deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,254 64,066 47,759 Income before Interest Charges ................................ 159,626 137,418 113,669 Interest Charges:
Interest on long-term debt ..................................... 87,508 65,948 61,650 Other interest ............................ .................. 5,372 3,031 4,508 Amortuation of debt premium, discount and expense - net . . . . . . . . . . 729 768 916 Allowance for borrowed funds used during construction . . . . . . . . . . . . . (55,841) (39,867) (38,068 Total interest charges - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,768 29,880 29,006 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,858 107,538 84,663 P.4. mi Stock Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,363 15,511 14,142 Earnings Applicable to Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106,495 $ 92,027 $ 70,521 Average Shares of Common Stock Outstanding . . . . . . . . . . . . . . . . . . 34,698,342 29,912,327 23,503,302 Earnings Per Share of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.07 $ 3.08 $ 3.00 STATEMENTS OF RETAINED EARNINGS For che Years Endal Daxrnber 3: 1984 1983 1982 (Thousands of Dollars)
Balance at Beginning of the Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 157,810 $ 134,544 $ 116,949 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,858 107,538 84,663 Total.................................................. 279,668 242,082 201,612 Deduct:
Cash Dividends:
Preferred Stock (at prescribed rates of each series - Note 5) . . . . . 15,363 15,511 14,142 Common Stock - $2.36 in 1984; $2.27 in 1983; $2.15 in 1982. . . 82,723 68,572 52,253 Capital Stock Expense ...................................... 130 189 673 Total.................................................. 98,216 84,272 67,068 Balance at End of the Year $ 181,452 $ 157.810 $ 134,544 See noces to fmanaal sraranents 16 wv-
BALANCE SHEETS DECEMBER 31,1984 and 1983 1984 1983 ASSETS (T1ocands of Dollars)
Electric Plant at original cost (Note 6):
Plant in service ........................................ $1,009,838 $ %5,268 Less accumulated provision for depreciation . . . . . . . . . . . . . . . . . 293,683 265,739 Net plant in service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716,155 699,529 Construcnon work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,251,193 946,749 Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,665 10,925 Total electric plant - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,989,013 1,657,203 Other 1%ny and Investments:
Investment in subsidiary companies (Note 7) . . . . . . . . . . . . . . . . 13,589 13,684 Special interest accounts - adjustable rate series (Note 6) . . . . . . 22,356 14,789 Other................................................ 191 191 Total other property and investments . . . . . . . . . . . . . . . . . . . . 36,136 28,664 Current Assets:
Cash................................................ 1,355 1,917 Temporary cash investments ............................. 39,000 -
Accounts receivable - net . . ..................... ...... 32,022 42,474 Fuel - at average cost (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,822 27,801 Materials and supplies - at average cost . . . . . . . . . . . . . . . . . . . . 9,340 8.329 nepe ments r and other current assets ...................... 769 1,192 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,308 81,713 Deferred Debits:
Unamortued debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,662 6,690 Other................................................ 7,439 3,%2 Total defern d debits . . . . . . . . . . . . . . . . . . . . . . . . . ........ 16,101 10,652 Total.................................................. $2,150,558 $1,778,232 CAPITALIZATION AND LIABILITIES Capitalization:
Common stock, without par value, authori:ed 50,000,000 shares; outstandmg 36,524,434 and 31,671,966 shares, respectively (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 561,106 29.9% $ 484,405 31.2%
Retamed earnings (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,452 9.7 157,810 10.1 Other paid-in capital (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,661 0.1 959 0.1 Common stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 744,219 39.7 643,174 41.4 Preferred stock - redemption not required (Note 5) . . . . . . . . . . 63,701 3.4 63,701 4.1 Preferred stock - redemption required (Note 5) ............ 78,000 4.1 95,000 6.1 long-term debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991,004 52.8 753,242 48.4 Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,876,924 100.0% 1,555,117 100.0 %
Current Liabilities:
Short-term borrowings (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000 9,000 Securities due within one year (Notes 5 and 6) . . . . . . . . . . . . . . . 25,000 73 Accounts payable ...................................... 65,189 69.030 Customers
- deposits .................................... 2,471 2,176 Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.117 9,489 Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,998 15,957
. Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 133 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 139,899 105,858 Deferred Credits:
Accumulated deferred income taxes (Note 9) . . . . . . . . . . . . . . . . %,669 82,970 Accumulated deferred investment tax credit ................. 32,724 30,642 Customers' advances for construction . . . . . . . . . . . . . . . . . . . . . . 2,540 2,285 Other................................................ 1,802 1,360 Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,735 117,257 Commitments and Contingent Liabilities (Notes 2 and 10)
Total.................................................. $2,150,558 $1,778,232 See notes to financial statements 17 1
Kansas Gas and Electric Company .
STATEMENTS OF SOURCES OF FUNDS FOR CONSTRUCTION For the Years Enda!
Dearnber 3:
1984 1983 1982 (Thousands of Dollars)
Soiarces of Funds From Operations:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,858 $ 107,538 $ 84,663 Non-cash charges (credits) to income:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,433 29,919 27,288 Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,435 32,741 26,512 Deferred investment tax credit .............................. '
2,082 4,252 571 Allowance for funds used during constructon (AFC) ........... (134,186) (102,935) (85,016)
Other - net ............................................ ; 729 768 916 Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,351 72,283 54,934 Dividends .......................... ..................... 98,086 84,083 66,395 Funds retained (used) in business . . . . . . . . . . . . . . . . . . . . . . . . . . (34,735) (11,800) _ 11,461)
(
From Financing:
First Mortgage Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 - -
Other long-term debt .................................... .. 98,000 157,000 64,400 Trustee investment fund - net ............ .................. (1,058) (17,213) 2,695 Securities redemptions (including other long-term debt) . . . . . . . . . . . (1,614) (51,343) (23,202)
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 15,000 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... 76,701 100,624 109,370 investment in subsidiary companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (13,500)
Investment in special interest accounts . . . . . . . .. .............. (7,200) (15,045) -
Increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . . . 4,000 9,000 (4,775)
Funds from financing .................................. 318,829 183,023 149,988 (Increase) decrease in working capital (other than short-term borrowings and securities due within one year)
Cash....................................... .... ....... 562 5,507 1,551 Temporary cash investments . . . . . . . . ........... ..... ....... (39,000) 4.700 5,300 Accounts receivable ........................................ 10,452 (18,439) (4,254)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 (2,554) (2,679)
Accounts payable .................. ....................... (3,841) 24,014 18,098 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,669 2,324 6,138 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 (3,776) 670 Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,481) 11,776 24,824 Other - net ................................................ (3,254) (3,622) (1,157)
Total Funds Used for Construction (excludes AFC) . . . . . . . . . . . . $ 258,359 $ 179,377 $ 162,194 See noces to financul staranents l
1 i
18
NCYrES TO FINANCIAL STATEMENTS adjustment clause variances. He Company does not accrue an estimate for unbilled revenue.
- 1. Summary of Significant Accounting Policies:
Fuel Adjustment Clause Revenue-He Company's rate System of Amounts - He Company is subject to the schedules include a fuel adjustment clause which permits current jurisdiction ofthe State Corporation Comnussion of the State of recoveries of fuel costs on an estimated basis. He variances Kansas (KCC) and tl.r Federal Energy Regulatory Commission between actual and esumate are adjusted through the fuel (FERC) and maintains its accounts in accordance with the uni- adjustment clause two months after they are recorded.
form system ofaccounts prescribed by these regulatory comnus-Accounes Payable - Accounts payable includes checks sions. As a regulated utility, the accounting principles applied by wr tren in amounts exceeding the balance of funds held in certain the Company differ in certain respects from those applied by ncm-regulated business bank accounts pursuant to an agreement between the Company and the bank.
Electric Plant - He Company performs a portion ofits construction work and capitali:es general overhead and engineer- 2. Rate Matters:
ing expenses related to construction projects. Maintenance and State:
repairs of property and replacements and renewals of items In April 1984, Kansas legislation became effective which, deternuned to be less than units of property are charged to among other things, granted the KCC the authority, under cer-opwing expenses. He cost of units of property replaced or tain circumstances, to deny or defer rate recognition of property renewed, plus removal costs, less salvage, is charged to the values from rate base and revenue requirements of a public accumalated provision for depreciation, and the cost of related utility. ne KCC may deny or defer rate recognition on all or a replacements and renewals is added to electric plant. Betterments portion of the acquisition, construction or operating costs of are chargcd to electric plant. such property which are determined by the KCC to have resulted Nuclear Fuel - The cost of nuclear fuel in process of in whole or in part from a lack of efficiency or prudence or the refinement, conversion, enrichment, and fabrication is recorded acquisition or construction of excess capacity. The KCC may at origmal cost. The account has been credited for the proceeds also deny the recovery of carrying or financing charges on the received to date from a settlement agreement with Westinghouse value ofany excess capacity while deferred or excluded from rate Corporation. base and must deny such recovery if it finds that the excess Allowance for Funds Used During Construction - capacity resulted from a lack of efficiency or prudence in facility Allowance for funds used during construction (AFC), a non- planning. Upon commercial operation of Wolf Creek Generat-cash item, is defined in the applicable regulatory system of ing Station, Unit No.1 (Wolf Creek), the Company anticipates accounts as the net cost during the period of construction of having reserve capacity above its peak responsibility of up to j borrowed funds used for construction purposes, including 60%. See Note 12 for Wolf Creek estimates. l' nuclear fuel, and a reasonable rate on other funds when so used. The legislation may adversely affect the amount of rate relief nis allowance has been added to all major construction projects which the KCC may grant the Company with respect to its with semi-annual compounding. Effective May 1,1982, upon investment in WolfCreek. Failure to receive adequate and timely receiving approval fr'om the FERC, the Company adopted a rate relief with respect to Wolf Creek could have a substantial policy of updating its AFC rate monthly. The annual average net adverse effect upon the Company's financial condition, includ-AFC rate (net ofincome taxes) for 1984,1983 and 1982 was ing its dividend paying capacity.
9.72%,9.81% and 9.72%, respectively. However, management believes the outcome of present and Depreciation - For financial reporting purposes, the Com- subsequent rate determinations, as applicable under the legista- 1 pony is depreciating the original cost of property by the straight- tion referred to above, will permit the Company to ultimately )
line method over its estimated remaining service life, as deter- recover its recorded value of Wolf Creek assets along with ;
mined by independent engineers. Depreciation provision stated associated operating and carrying costs.
as a percent oforiginal cost ofdepreciable property was 3.4% for He KCC has under most circumstances 240 days in which to 1984 and 3.3% for 1983 and 1982. render a decision on a rate case application. In November 1984, Income Taxes - In the calculation of income taxes, the the Company filed a retail rate increase based on a revenue Company (i) uses liberalized depreciation for additions for 1973 deficiency in the amount of $373.4 million to become effective through 1980 and ACRS begmning in 1981, and (ii) utili:es concurrent with the then anticipated spring 1985 commercial other tax benefits as permitted by the Internal Revenue Code, operation of Wolf Creek. To reflect the presently anticipated consisting principally of differences in straight-line depreciation mid-year commercial operation of Wolf Creek, the Company and the deduction currently for interest and taxes capitalized for amended this application on January 31,1985 for the purpose of book purposes. Deferred taxes are provided for such items as changing to that date the commencement of the 240 day period.
approved by the appropriate regulatory commission and as Wolf Creek is estimated to account for 93% of the rate required by the Internal Revenue Code. In connection with an deficiency. He balance includes costs associated with Jeffrey order from the KCC, AFC is recorded in Electric Plant on a net Energy Center Unit 3 (JEC-3) which were not included in the basis with an amount equivalent to the income tax effect on the interim increase issued in May 1983 and cost increases since the borrowed funds portion of the AFC charged to deferred taxes Company's last permanent rate increase in April 1983. The under operating expenses and credited to AFC request is based on a rerum on equity of 15.5% and an overall The Company defers and amortizes the investment tax credit cost of capital of 11.98%
over the life of the applicable property, in accordance with an The Company has proposed that the revenue deficiency order of the KCC. referred to above be phased in over a five year period. The Revenues - Operating revenues and accounts receivable requested increase for the first year of commercial operation of ,
include amounts actually billed for services rendered and fuel Wolf Creek under the Company's five year phase-in plan is 19
Kansas Gas and Electric Company
$144.9 mdhon, representing a 39.4% increase in retail revenues. Shares Amount As a result ofthe anticipated fuel savings, the net increase in retail (Thsana revenues is esumated to be $120 million or a 33% increase.
Authorized Outstanding of Dollan)
Subsequent increases under this phase-in plan will be requested Balance annually to reflect operating results and trends.
December On March 15,1983, the Company nled for an interim retail 31,1982 ..... 35,000,000 26,412,589 $383,781 rate increase with the KCC in the amount of $28.0 million Additional shares annually or a m xi-telyo 8.6% ne interim rate increase s Id . . . . . . . . . . 4,000,000 76,828 request was subsequently amended downward to $20.3 million Employee Stock annually, or approximately 6% The request included the esti- Purchase Plan, mated investment for JEC.3, which commenced commercial Employee Stock operation on May 27,1983. ne KCC granted an $ 18.9 million Ownership Plan interim rate increase, subject to refund, effective May 28,1983, and Dividend based on a return on common equity of 15.5% and a return on Reinvestment rate base of 11.37%. *" .......... 1,259,377 23,7 %
For the years ended December 31,1984 and 1983, approxi- Addm.onal shares mately $19.7 and $11.3 million of revenues, respectively, were authori:ed . . . . . 15,000,000 collected subject to refund under the interim rate 61ing above.
Management of the Company does not believe any significant Balance amount of such revenues will be refunded. December On August 13,1982, the Company fded with the KCC for a 31,1983 ..... 50,000,000 31,671,966 484,405 retail rate increase in the amount of $48.0 million annually, or Additional shares sold .......... 3,000,000 49,255 approximately 14% %e 61ing provided for rates of return of 18.5% on common equity and 13.07% on rate base. An order Employee Stock Purchase Plan, was issued on April 8,1983 granting the Company $15.2 mil-lion, with rates of return of 15.5% on common equity and Employee Stock 11.52% on rate base. He increase became effective April 25, Ownership Plan 1983, and Dividend Reinvestment Federah 1,852,468 27,446 Plan . . . . . . . . . .
During the last quarter of 1984, the Company refunded $6.8 million in revenues collected from customers under the jurisdic- Balance December 31,1984 ..... 50,000,000 36,524,434 $561,106 tion of FERC. Refunded amounts included in revenues for the years 1983 and 1982 were $2.5 and $2.1 million, respectively.
He Other Paid-in Capital represents the cumulative gain on
- 3. Short-Term Bormwings: the reacquired preferred stock and premium on initial sale of At December 31,1984 and 1983, the Company had bank preferred stock.
credit arrangements in the amounts of $91 and $100 million, Common Stock issues in 1984 were:
respectively. ne Company draws upon these sources to meet Date of Number of Issue Price short-term cash requirements. Interest costs are based upon daily Sale Shares Per Share average outstanding loan balances. He maxunum amount out- March 1984 2,000,000 $16.152 standing during 1984 and 1983 was $66,500,000 on March 2, October 1984 1,000,000 $16.951 1984 and $59,000,000 on December 20,1983. %e weighted average interest rate, including fees, was 12.0% for 1984 and Book Value Per Share II 3* I ' I903' Actual Pro Forma Percent Date of Before After Dilutive
- 4. Common Stock and Other Paid-in Capital: Sale Issuance issuance Effect Changes in Common Stock were as follows: $19.90 1.2%
March 1984 $20.14 Shares Amount October 1984 $20.52 $20.42 0.5%
(Thousana Authorized Outstanding of Dollan)
Common stock issues under the Dividend Reinvestment Pro
- Balance gram, Employee Stock Purchase Plan and Employee Stocl L January 1, Ownership Plan on a monthly basis do not materially affect bool 1982 ........ 35,000,000 19,507,086 $274,411 value per share.
Additional shares ne construction program is nnanced through a combinatioi sold .......... 6,000,000 95,335 of debt, preferred stock, and common stock issuances. Th Employee Stock amount and timing of capital needs are assessed on a continuin i Purchase Plan and basis and the capitali:ation structure components are analy:ed a i Dividend they relate to total capitalization and to budgeted fmancing:
Reinvestment Efforts are made to issue securities when market conditions at Plan . . . . . . . . . . 905,503 14,035 most favorable, after giving consideration to cash requirement-l 20 L..
- 5. Cumulative P...' ..J Stock: Note: Serial Preferred Stock, without par value, has 6,000,000 December 31, shares authorized.
1984 1983 Call Price %e $ 13.25 Series Serial Preferred Stock may be redeemed on (At and after October 1,1987 at $100 plus unpaid accumulated (hsands of Dollars) December dividends, if any. ne dividend rate on the $13.25 Series will be 31,1984) $13.25 through September 30,1987. From October 1,1987 Redemption through September 30,1992, the rate will be determined by a not requimi- formula which is based on an average prime interest rate in the except at the year ended September 30,1987.
Company's option: %e following preferred stock may not be redeemed prior to 4%%, $100 par the date shown below through the use, directly or indirectly, of value; authorned the proceeds ofindebtedness or of the issuance ofstock of equal and outstanang, or prior rank, at an effective cost to the Company ofless than the 82,011 shares . . . . . $ 8,201 $ 8,201 $110.00 amount shown (except in the case of the $2.42 and $8.25 Series Serial, $100 par for sinking fund purposes):
value; authorned, 255,000 shares: Effective l Serie. Date Cost 1 4.28% series, mtstandmg $2.42 March 1,1985 9.68 % l 45,000 shares . . . . 4,500 4,500 $15.50 March 1,1986 15.50 %
101.00 4.32% series, $8.125 April 1,1988 8.125 %
$8.25 July 1,1989 8.25 %
60 shares.... 6,000 6,000 101.64 He mandatory sinking fund or redemption obligations for 7gg the various Series are:
mtstandmg "
,000 shares . . . 15,000 Period N be 15,000 104.95 Series Commencing Completion of Shar par value (Note): $2.42 April 1,1980 April 1,1999 40,000
$8.66 series, $8.125 April 1,1989 April 1,2018 3,333 outstandmg $8.00 March 28,1985 -
150,000 )
300,000 shares . . . 30,000 30,000 106.50 $8.25 July 1,1986 - 20,000 '
Total . . . . . . . . . $63,701 $63,701 July 1,1987 - 50,000 July 1,1988 -
15,000 Redemption required: July 1,1989 -
15,000 Serial, without $15.50 April 1,1987 April 1,1991 60,000 par value (Note): $13.25 October 1,1988 October 1,1992 30,000
$2.42 series, Amounts related to shares to be redeemed within the next year outstandmg have been shown as a current liability. Purchases of the $2.42 520,000 and and $8.125 Series in excess of the minimum can be used to 602,914 shares, satisfy future muumum requirements.
respectively . . . . . . . $13,000 $15,073 $ 27.42 All sinking fund redemptions will be made at $100 per share i
$8.125 series. (except for the $2.42 Series at $25 per share) plus unpaid i outstandmg accumulated disidends.
100,000 shares . . . 10,000 10,000 106.88 He embedded cost of preferred stock was 9.86% for 1984,
$8.00 series, 1983 and 1982.
m_ e nding 1
150,000 shares . . . 15,000 15,000 none
$8.25 series, outstandmg 100,000 shares . . . 10,000 10,000 103.66
$15.50 series, outstandmg 300,000 shares . . . 30,000 30,000 109.69
$13.25 series, outstanding 150,000 shares . . . 15,000 15,000 none Subcotal . . . . . . . 93,000 95,073 Less: Securities due within one year . . . . . . . . 15,000 73 Total . . . . . . . . $78,000 $95.000 21
Kansas Gas and Electric Company - - _ . - . _ _ _ . .
- 6. Iong-Term Debe $160,200,000, respectively. He redemption requirements for December 31, 1988 and 1989 would be increased to include both adjustable ,
1984 1983 rate series, due 2013, and the adjustable rate series, due 2014, ggy respectively, in the event that the irrevocable letter of credit agreements are not extended or other arrangements for collateral First Mortgage Bonds:
$ 10,000 am not made.
3%% series, due 1985 . . . . . . $ 10,000 3%% series, due 1986 . . . . . . 7,000 7,000 First Mortgage Bonds may be issued in additional .unounts, 16%% series, due 1987 . . . . 30,000 30,000 limited by property, carrungs and other provisions of tne Com-14%% series, pany's Mortgage dated as of April 1,1940, as supplemented 30,000 30,000 (Mortgage). Electric plant is subject to the lien of the Mortgage due 1987-1991 . . . . . . . . .
13%% series, due 1989 . . . . 100,000 -
except for transportation equipment.
4%% series, due 1991. . . . . . 7,000 7,000 He Mortgage contains provisions which, under certain condi-14.05% series, due 1991 ... 30,000 -
tions, restrict distributions on or acquisitions of the Company's 14%% series, due 1991 .... 20,000 -
common stock. At December 31,1984 and 1983, none of the 16,000 16,000 retained carrungs were restricted thereby.
5%% series due 1996 . . . . . .
16% series, due 1996 . . . . . . 25,000 25,000 %e 6.8% series due 2004, and the 5%% and 6% series due 8H% series, due 2000 . . . . . . 35,000 35,000 2007 are pledged as collateral for Pollution Control Revenue 8%% series, due 2001. . . . . . 35,000 35,000 Bonds issued by Kansas municipalities.
7%% series, due 2002 . . . . . . 25,000 25,000 Proceeds of the three adjustable rate series were used to refund 6.8% series, due 2004 . . . . . 14,500 14,500 certain First Mortgage Bonds initially pledged as collateral for 9%% series, due 2005 . . . . . . 40,000 40,000 Pollution Control Revenue Bonds issual by Kansas munici-8%% series, due 2006 . . . . . . 25,000 25,000 palities, pay costs incurred on existing pollution control facilities, 5%% series, due 2007 . . . . . . 21,940 21,940 and establish special interest accounts with the trustee which are 6% series, due 2007 . . . . . . . 10,000 10,000 pledged for debt service. ne balances were deposited with the 8M% series, due 2007 . . . . . . 25,000 25,000 trustee and invested pending construction of additional pollu-8%% series, due 2008 . . . . . . 30,000 30,000 t'on control facilities.He letter ofcredit agreements with respect to such series permit extensions on an annual basis upon mutual Total First .
Mortgage Bonds . . . . . . 536,440 386,440 agreement of the banks and the Company. The variable interest rate is determined on the basis of prevailing market rates for debt Other long-Tenn Debt ins rumentsofliketenorandquality.nefollowinginformation Pollution control revenue bonds: is applicable to these issues: .
5%% series, due 2003 . . . . 15,000 15,000 Weighted 1
Adjustable rate series, ;
70,000 70,000 Letter f Credit Average Net i due 2013 . . . . . . . . . . . . Description Initial Expiration Date Interest Rate Adjustable rate series, due 2013 . . . . . . . . . . . . 87,000 87,000 1984 1983 Adjustable rate series, Series due 2014 . . . . . . . . . . . . 98,000 -
due 2013 Securities held by Trustee- 570 million June 1,1988 a) 6.3% 5.5%
adjustable rate series . . . (18,533) (17,842) Series 16%% promissory note, due 2013 due 1989 . . . . . . . . . . . . . . 39,400 39,400 $87 million December 1,1988 b) 6.0% 5.8%
Credit agreement, Series due 1986 . . . . . . . . . . . . . . 50,000 59,000 due 2014 Revolving bank loan, $98 million November 30,1989 c) 6.5% -
due 1990 . . . . . . . . . . . . . . 50,000 100,000 a) ne interest rate currently varies weekly.
Revolving bank loan, b) He interest rate for a portion of this series was fixed through ,
due 1991 . . . . . . . . . . . . . . 50,000 - July 31,1984 and the interest rate for the entire series cur-Bankers acceptance rently varies weekly. 1 agreement, due 1986 . . . . . 23,000 23,000 c) He interest rate is fixed through April 30,1985; thereafter !
Other long-term agreements . 714 255 the interest rate will vary.
Unamorti:ed premium %e long-term debt on financial statements has been reduced and discount - net . . . . . . (17) (11) by funds (plus accrued earnings) held by trustees for future Total Other construction expenditures. He construction fund investment Long-Term Debt . . . . . . 464,564 366,802 will be withdrawn upon incurrence of qualified expenditures.
He special interest accounts are invested and used for interest Subtotal . . . . . . . . . . . . . . . 1,001,004 753,242 payments and subsequently replenished up to the original
'C"""**
account balances of $22.245 million.
due within one year ..... 10,000 -
He 16M% promissory note due May 1,1989, was issued to a Total . . . . . . . . . . . . . . . . . $ 991,004 $753,242 wholly-owned offshore financial subsidiary, Kansas Gas and Electric International Finance N.V. ne Company's First Mort-Required redemptions for 1985 through 1989 amount to gage Bonds 15 %% series due May 1,1989, in the amount of $40
$10,000,000, $82,300,000, $38,300,000, $20,800,000 and 22
million, are pledged as collateral for guaranteed notes issued by h cost of the 1983 amendment and actuarial cost method the sul=6y (see Noee 7). change will be partially offset by the changes in assumed earnings He credit agreement, which expires on July 8,1986, enables rate and amorti:ation period.
the Company to sell up to $50 mdhon in commercial paper supported by a bank letter of credit or obtam certam revolving 9. Income Taxes:
credit loans. W weighted average interest rate, including fees, He effective Federal income tax rates differ from the amounts l was 11.2% for 1984 and 10.0% for 1983. computed by applying the Federal statutory rates to income :
h Company has two revolving bank loans. One loan, due before income taxes. He reasons, with related percentage effects, l 1990, for up to $100 million is compnsed of a revolving credit are:
loan until September 1,1986, followed by a four-year term loan. )
A second loan, due 1991, enables the Company to borrow up to 1984 1983 1982 !
$200 million on a revolving credit basis until May'31,1987, Statutory Federalincome tax rate . . . . 46% 46 % 46 % I followed by a four-year term loan. Both loans may be repaid at any time without penalty. he weighted average interest rate, Add (Deduct) income tax effects of: )
Allowances for other funds used including fees, was 12.4% for 1984 and 10.1% for 1983.
during construction . . . . . . . . . . . . (23) (20) (20) ne bankers acceptance agreement, which expires on Febru- Depreciation timmg differences . . . . . 1 1 1 ary 28,1986, enables the Company to borrow up to $25 million Taxes and p capitained . . . . .
by collateralizing its coal and fuel oil inventories at rates based (1) (2)
Amortuation of j upon the banks' discount and acceptance charge. The weighted investment tax credit average interest rate, including fees, was 11.4% for 1984 and
........... (1) (1) (1)
Other items - net (no one item !
10.0% for 1983. makes up more than 2%) . . . . . . . - -
(1)
A revolving underwriting facility agreement was entered into on December 19,1984 and expiresJuly 1,1988.nis agreement Effective Federal income tax rate . . . . 23% 25 % 23 %
enables the Company to sell promissory notes or borrow from international banks in an aggregate amount of up to $100 mil- Income taxes as recorded in the Statements ofIncome are:
lion. & Company did not utilize this agreement in 1984. 1984 1983 1982 He embedded cost oflong-term debt for 1984,1983 and 1982 was 9.80%,9.45%, and 9.66%, respectively.
gg)
Operating expenses.
- 7. Finance Subsidiary: Currently payable - ;
h Company uses the equity method to account for the Federal . . . . . . . . . . . . . . . . .$(1,749) $ 1,7% $ 948 investment in its whollyewned offshore finance subsidiary, State................... 256 1,114 416 i Kansas Gas and Electric International Finance N.V. The original Deferred - Federal . . . . . . . 10,984 11,191 6,578 I capital investment in this subsidiary was $13,500,000. His - State . . . . . . . . . . 1,729 1,758 1,035 subsidiary was formed to permit the Company to secure Euro- Deferred - tax effect of dollar funds (See Note 6). AFC - borrowed . . . . . . 27,722 19,792 18,899 Investment tax
- 8. Retirement Plaru credit - net ............ 2,082 4,252 571 h Company has a non-contributory retirement plan for all Total . . . . . . . . . . . . . . . . 41,024 39,903 28,447 employees.h total cost for the years 1984,1983 and 1982 was
$3,143,000, $2,204,000 and $2,399,000, respectively. Of these Other income and deducdons:
emounts, $2,171,000, $1,271,000 and $1,178,000, Currently payable -
respemveiy, we,e inauded in piant _st,um. _ h Cm,.ny.s e end -. amrued _dy.
Fa-i . . - - . - - . . . . . . g22 state - - - .-.- - - -
Total . . . . . . . . . . . . . . . . . 1,993
1,061 893 Actuarial Present Value of Benefits at n 7.5% Assumed Rate of Return November 30,1983 IDC""
- net . . . . . $43,017 $40,964 $29,340 Vested participants $36.9 million Non-vested participants 3.4 million Total $40.3 million At December 31,1984, the Company has unused investment Market value of net assets available tax credits including those related to the Employee Stock for benefits $50.7 million Ownership Plan of approximately $104 million available for
& above data is as of the latest actuarial evaluation. carryf rward to future years.1(not utilized, the remaining carry.
forward credits will expire in the year 1993 through 1999 in the In December 1983, the Company adopted plan amendments amounts of $3, $20, $16, $13, $17, $15, and $20 million, to change the benefit formula and improve benefits under the respectively.
plan.%e assumed earnings rate on invested funds was increased %e Company has not been allowed to record deferred income from 6M% to 7M% and the actuarial valuation for November 30, taxes on certain items, primarily payroll and property taxes, 1983,in the table above has been restated using 7M%. h pensions, and removal costs, prior to May 1983. ne cumulative actuarial cost method and assumptions were changed including a net amount ofsuch timing differences for whids deferred income change from 10 to 30 year amortuation ofunfunded past service taxes have not been provided is approximately $ 14 million as of cost and a change in the actuarial method of asset recognition. December 31,1984.
23
Nbm ~_
- 10. Commitments and Contingent 1.iabilities: 13. Quarterly Financial Statistics (Unaudited):
ne construcnon budget (exclusive ofnuclear fuel) for 1985 is (Thousands exc@t per share) approximately $125 million which indudes the estimated $81 1984 million to complete the Wolf Creek nuclear project. ne Com- 4th 3rd 2nd 1st pany has substantial commitments in connection with its con- q,,, g, q,,, g '
struccon program Operating On January 27,1983, three Kansas municipalities Gled a suit Revenues . . . . $84,734 $131,588 $95,599 $98,832 in the Federal District Coun for the District of Kansas seeking Operating
$21 million in damages for alleged violations by the Company of Income ..... 14,409 30.207 16,955 17,801 Federal and Kansas antitrust laws. The complaint alleges that the Net income . . . . 25,162 41,391 27,365 27,940 Company unlawfully has refused to wheel wholesale power for pmg3 these municipalities. On May 27,1983, the Court entered an Applicable to order enjoining the Company from refusing to wheel power for Common the municipalities, pending final determmation of the suit on the Stock ....... 21,344 37,576 23,500 24,075 merits. ne Company has appealed this order. In the opinion of Average Shares management, damages, ifany, which might arise from this matter Outstandmg 36,509 35,056 34,499 32,729 would not have a material effect on the financial position of the Eamings Per Company. Share . . . . . . . $ 0.58 $ 1.07 $ 0.68 $ 0.74 See Note 2 - rate matters.
39g3 4th 3rd 2nd 1st
- 11. Financing:
The Company entered into a financial agreement on Janu-Qtr. Qtr. Qtr. Qtr.
Operating ary 22,1985 for the sale of $30 million First Mortgage Bonds, Revenues . . . . $97,588 $134,172 $80,064 $81,229 10%% Series due 1987. The proceeds are to be payable Operating February 1,1985. Income ..... 16,283 30,488 13,418 13,163 Net Income . . . 25,826 38,610 21,154 21,948
- 12. Joint Ownership of Utility Plants: Eamings company's ownership at December 31,1%4 Applicable to In. Invest. Accum. Common Semce ment in Pmvision Per- Stock ....... 21,958 34,735 17,272 18,062 Data Millions for Depr. (MW) geni Average Shares 1.a Cygne June Outstanding 31,647 31,328 29,001 27,675
- 1(a) . . . . . . 1973 $ 108 $45 343 50 Earnings Per 1.a Cygne May Share . . . . . . . $ 0.69 $ 1.11 $ 0.60 $ 0.65
- 2(a) ...... 1977 117 34 315 50 %ese quanerly amounts are unaudited, but in the opinion of Jeffrey July the Company, include all adjustments, consisting only of normal
- 1(b) . . . . . . 1978 68 13 132 20 recumng accruals, necessary to a fair presentation thereof.
Jeffrey May
- 2(b) ...... 1980 54 9 136 20 Market Prices and Dividend Rates of Common Stock:
Jeffrey May High/ low Market Price Dividends
- 3(b) ...... 1983 80 5 136 20 Common-NYSE 1984 1983 1984 1983 WolfCreek
- 1(c) . . . . . . 1985(d) 1,237(d) -
541(c)47 First Quarter 19 15 % 20% 18 % $.59 $.56 Second Quarter 16 12M 21% 19 % .59 .56 (a) Jointly owned with Kansas City Power & 1.ight Company. Lird Quarter 17 % 12 % 20% 18 % .59 .56 (b) Jointly owned with ne Kansas Power and Light Company, Fourth Quarter 18 % 16 21% 16 % .59 .59 Central Telephone and Utilities Corp. and Missouri Public ne Company had 59,850 common stockholders as of Service Company. December 31,1984.
(c) Jointly owned with Kansas City Power & 1.ight Company and Kansas Electric Power Cooperative, Inc. 14. Supplementary Information to Disclose the Effects (d) Estimated in-service date; Total construction costs are f Changing Prices -(Unaudited):
estimated to be $1,332 million. (Unaudited) The estimates of the effect ofin0ation on the operation of the (e) Based on a nominal rating of 1,150 MW for the total unit. Company, as set forth below, were prepared on bases prescribec:
by the Financial Accounting Standards Board's (FASB) State-Amounts and capacity represent the Company's share and are ment No. 33, " Financial Reporting and Changing Prices" (as financed by the Company. ne Company's share of operating amended). His statement requires adjustments to historica' expenses of plants in service are included in the operating costs to estimate the effects that specific prices (Current Cost' expenses on the Statements ofIncome. have had on the Company's results ofoperations. His data is not intended to serve as a substitute for earnings reported on a historical cost basis. It does offer some perspective of the approx.
imate effects ofinflation rather than a precise measurement on these effects.
24
SUPPLEMENTAL STATEMENT OF INCOME ADJUSTED FOR CHANGING PRICES For the Year Endal Dannber 3 r,1984 Current Cost Conventional Average Historical Cost 1984 Dollars (Thousands of Dollars)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,753 $ 410,753 Fuel...................................................................... 148,959 148,959 Purchased power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,221 18,221 Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,433 73,753 Other operating and maintenance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,744 90,744 Income tax expense - net ....... ............................. .............. 43,017 43,017 Interest expense - net ....................................................... 37,768 37,768 Other income and deductions - net ............................................ (82,247) (82,247)
Subtotal................................................................. 288,895 330.215 Income from operations (excluding reduction to net recoverable cost) . . . . . . . . . . . . . . . . . . $ 121,858 $ 80,538 Increase in specific prices (current cost) of property, plant and equipment held during the year * ..................................... $ 94,103 Reduction to net recoverable cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ (14,628)
Effect of increase in general price level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,054)
Excess ofincrease in general price level over increases in specific prices after reduction to net recoverable cost . . . . . . . . . . . . . . . . . . . . . . . . ........... (29,579)
C-in from decline in purchasing power of net amounts owed . . . . . . . . . . . . . . . . . . . . . . . . . 43,453 Net....................................................................... $ 13,874 Net assets at year-end at net recoverable cost . . . . . . . . ............................. $ 733,840
- At December 31,1984, current cost ofutility plant net ofaccumulated depreciation was $3,019,204,000, while historical cost or net cost recoverable through depreciation was $1,989,013,000.
Estimated property, plant and equipment (plant), primarily ments, and inventory, suffers a loss of purchasing power during consisting of plant in service and construction work in progress, periods ofinflation because the amount of cash received in the was determined for current cost by applying the Handy. future for these items will purchase less. Conversely, by holding Whitman Index of Public Utility Construction Costs to each monetary liabilities, primarily long. term debt, the Company major class of plant. Current cost is an estimate of the cost of benefits because the payment in the future will be made with currently replacing existing plant.%e resulting adjusted data for nominal dollars having less purchasing power.ne Company has plant is not indicative of the Company's future capital require- significant amounts oflong-term debt outstanding which will be ments because the actual replacement of existing plant will take paid back in dollars having less purchasing power and, therefore, place over many years and is not likely to be a reproduction of for purposes of these calculations, has a net gain from holding presently existing plant. monetary liabilities in excess of monetary assets.
The accumulated provision for depreciation for current cost As allowed by FASB Statement No. 33, items in the Income was developed by applying, for each major class of plant, the Statement, other than depreciation expense, were not adjusted.
same percentage relationship that existed between gross plant He cost of fuel used in electric production was not adjusted and accumulated provision for depreciation on a historical basis because the effect on earnings was not material due to the to the respective adjusted plant data. relatively short turnover period between the incurrence of these Depreciation expense was determined by applying the Com, c sts and their recovery through the fuel adjustment clause.
pany's depreciation rates to the respective indexed plant he regulatory process limits the amounts of depreciation amounts. expense included in the Company's revenue allowance and limits utility plant in rate base to original cost. Such amounts produce Heregulatorypromssh. .mitstheCompany tothe recoveryof cash flows which are inadequate to replace such property in the the historical cost of service in its rates. nerefore, any excess of future or preserve the purchasing power of common equity the value of plant under current cost must be reduced to the net capital previously invested. While this effect is partially mitigated recoverable cost, wmch is histoncal cost. He amount of this by the benefit derived from holding long-term debt, the Com-excess that accrued as a result ofinflation in the current year must pany has a net purchasing power loss which is experienced by the be reduced to net recoverable cost. common shareholder and can only be overcome as a result of The Company, by holding assets such as receivables, prepay- adequat: rate relief.
25
A N D-Kansas Gas and Electric Company _ _, , ._
FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECIS OF CHANGING PRICES For the Yarrs Endaf Demmber 3r 1984 1983 1982 1981 1980 (in 7buands of Aterage 984 Dollars)
Current cost informatiom Income from operations (excluding reduction to net recoverable cost) . . . . . . . . . . . . . . . . . . . . . . $ 80,538 $ 73,416 $ 50,889 $ 35,882 $ 30,176 Income per common share (after dividend requirements on preferred and preference stock) . . . . . . . . . . . . $ 1.88 $ 1.92 $ 1.52 $ 1.13 $ 1.27 Excess of increase in general price level over increase in specine prias after reduction to net recoverable cost . . . . . . . . . . . . . . . . . . . . . $(29,579) $(22,317) $(13,841) $(74,127) $(109,859)
Net assets at year-end at net recoverable cost ..... $733,840 $659,280 $552,386 $432,834 $ 411,219 Generalinformatiom Gain from decline in purchasing power of net amounts owed . . . . . . . $ 43,453 $ 37,400 $ 35,127 $ 75,527 $101,386 Cash dividends declared per common share . . . . . . $ 2.36 $ 2.37 $ 2.31 $ 2.35 $ 2.48 Market price per common share at year <nd . . . . . . $ 17.25 $ 17.98 $ 19.77 $ 16.99 $ 18.44 Average consumer price index . . . . . . . . . . . . . . . . . 311.1 298.4 289.1 272.4 246.8 Management Statement of Responsibility for Financial Statements ne management of Kansas Gas and Electric Company is responsible for the financial statements, notes thereto, and other information in this report. The accompanying financial statements have been prepared by management in accordance with generally accepted accounting principles consistently applied. ne accounting system is in accordance with the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission and the State Corporation Comnussion of the State of Kansas.
He integrity of accounting records is upheld by a comprehensive system ofinternal accc,unting controls, monitored on a regular basis by the internal audit staff of the Company. ne system ofinternal control is complemented by a set of accounting policies and procedures which provide the necessary guidance needed to institute effective internal control.
He Board of Directors maintains its oversight responsibility through an Audit Committee, consisting of three outside directors. %e Committee meets with Management, the Internal Auditors, and the Independent Auditors in connection with its review of matters relating to the Company's financial reporting; the Company's Internal Audit Program; the Company's system ofinternal accounting controls; and services of the Independent Auditors.He Committee meets with the auditors without management present in order to assure independent treatment of matters brought to its attention. ne Committee also recommends to the Directors the selection of Independent Auditors.
Wichita, Kansas Howard J. Hansen January 31,1985 Group Vice President - Finance Auditors' Opinion To the Stockholders and the Board of Directors of i Kansas Gas and Electric Company:
We have examined the balance sheets of Kansas Gas and Electric Company as of December 31,1984 and 1983 and the related statements ofincome, retained earnings, and of sources of funds for construction for each of the three years in the period ended December 31,1984.
Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, such financial statements present fairly the financial position of the Company at December 31,1981 and 1983 and the results ofits operations and the sources ofits funds for construction for each of the three years in the period ended December 31,1984, in conformity with generally accepted accounting principles applied on a consistent basis.
Kansas City, Missouri January 31,1985 Deloitte Haskins & Sells
. 26 1
COMPARATIVE ELECTRIC STATEMENTS Annual Compound Growth Rate 5 10 1984 1983 1982 Year Year Electric Operating Revenues (Thousands):
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.7 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. %,304 . . . . . . $ 147,547 88,976$ 142,02979,282
$ 120,980 14.7 11.5 14.8 Ind ustrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,080 115,413 109,628 10.3 16.8 Pubhc street and highwsy lighting . . . . . . . . . . . . . . . . . . . . . . . . 4,305 4,080 3,523 14.8 14.4 Retail rates ........................................ 379,236 350,498 313,413 12.3 16.2 Wholesale rates ...................................... 25,294 41,390 36,388 ( 3.9) 8.9 Total sales of electricity .............................. 404,530 391,888 349,801 10.7 15.5 Other .............................................. 6,223 1,165 1,136 35.6 23.1 Total electric operating revenues . . . . . . . . . . . . . . . . . . . . . . . $ 410,753 $ 393,053 $ _
350,937 10.9 15.6 Sales in Kilowarthours (Thousands):
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,114,880 2,098,971 1,999,091 2.5 3.8 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,586,723 1,527,475 1,5Q601 2.6 3.9 Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750,126 2,454,486 2,595,651 ( .2) 2.1 Public street and highway lighting . . . . . . . . . . . . . . . . . . . . . . . . 63,243 65,292 65,426 -
1.0 Retail rates ........................................ 6,514,972 6,146,224 6,160,769 1.3 3.0 Wholesale rates ...................................... 925,966 1,114,674 1,077,695 ( 8.7) ( .9)
Total kilowatthours sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,440,938 _ 7,260,898 7,238,464 ( .4) 2.4 Customers at End of Year:
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,510 213,819 210,698 1.7 2.1 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,853 19,554 19.151 .7 .6 Ind ustrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,574 4,523 4,469 4.4 6.4 Public street and highway Itghting . . . . . . . . . . . . . . . . . . . . . . . . 690 655 612 8.9 10.8 Retail rates ........................................ 242,627 238,551 234,930 1.7 2.0 wholesale rates ...................................... 39 40 42 (17.5) ( 8.4)
Total electric customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,666 238,591 234,972 1.7 2.0 Residentiah Average kilowatthours per customer . . . . . . . . . . . . . . . . . . . . . . 9,812 9.901 9.529 .7 1.6 Average revenue per customer . . . . . . . . . . . . . . . . . . . . . . . . . . . $684.54 $669.% $576.70 12.7 14.2 Average revenue per kilowarthour . . . . . . . . . . . . . . . . . . . . . . . . 6.98$ 6.77$ 6.05$ 11.9 12.4 Kilowatthours Generated & Purchased (Thauands):
Generated (net after station use) . . . . . . . . . . . . . . . . . . . . . . . . . . 7,194,861 6,806,286 6,894,437 ( 1.0) 1.9 Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822,000 1,128.312 919,055 11.6 8.8 Total available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,016,861 7,934,598 7,813,492 -
2.4 Company use, line loss, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,923 673,700 575,028 4.7 2.5 Total kilowatthours soki . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,440,938 7,260,898 7,238,464 ( .4) 2.4 Averase BTU per Net Kilowarthour Generated . . . . . . . . . . . 11,161 10,979 Aversee Fuel Cost per Million BTU . . . . . . . . . . . . . . . . . . . . .
11,063 .3 ( .1)
$1.86 $1.87 $1.68 8.6 18.9 Power Resources (Mqaucas)
Available capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,099 2,160 2,029 1.3 2.0 System peak responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,633 1,700 1,626 2.1 2.1 l Reserve capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466 460 3
_403 ( 1.2) 1.5 Utility Plant at Original Cost (Thousands):
Begmmns of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,922,942 $ 1,668,929 $ 1,444,080 16.0 16.1 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,823 262,520 228,311 14.7 22.5 Retirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,069 8,507 3,462 ( 6.0) 9.0 End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282,6 % 1,922,942 1,668,929 15.9 16.9 Accumulated provision for depreciation . . . . . . . . . . . . . . . . . . . 293,683 265,739 245,886 10.5 11.2 Net utility plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,989,013 $ 1,657,203 $ 1,4 2 3,04 3 16.8 18.1 Employese at Year.end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,277 2,016 1,856 9.7 5.8 27
DIRECTORS *
~
Frank J. Becker (1981) Robert A. Brown (1953) A. Dwight Button (1976) Wilson K. Cadman (1978; (t 4) Gamnan and Quef Exe_wse (3) Gairman of the nurd, (t,2,4) Rmral Chamnan of the (t) Wdita, Cha rman of the Offurr, arker Onturatum & First The Ifome Narunal Ibnk of Burd, Fowth Fmancul G4, nurd and Ndw of the Nanonal Ibnk & Tnot On., El Dwalo Arkansas Gry (Rmral)+ W aita G,ntuny C.T. Carter (1968) C.Q. Chandler (1974) Robert T. Crain (1981) Ralph P. Fiebach (1%7)
(t,3) frdtedewr, Rmral Vre (t,4,3) Chamnan of the Burd, (3) Fort Saxe Cram RazIry Waira, Rarol CAurman of Nufent, INrline Transporurwn, First Natwnal ibnk in Wdiu Gwntuny rAc n=nd of the Gnnruny Atlantic Rafield Ownrd'y
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Ralph Foster (1970) Donald A.Johnston(1980) Russell W. Meyer, Jr. (1982) Terence J. Scanlon (1980)
(4) Wdita, Vre Ndw . (2,3) Laurence, Naw, (3) Wdiu, Chamnan and (2,3,4) Wdira, lmesuw and Gvuval Gnauci of the Urusersary Sure Ibnk Chicf Exawtne Offuv, Gssna fbtl+v Gwntuny Amvaft Owntuny -
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i j. r committee auignments, g y ,i Committecs: ( t ) Emawie.
-=- . .- - (2) Comtcuarum, (3) Auda, I (4) Sharchouts Rclarunu,
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N*'"n smah, physum, Marjorie 1. Setter (1980) Donald C. Slawson (1983) Lyle E. ht (1969)
(4) Wdaa, Naw, Sctra Wdua, Chamnan of the flaston, CAa mun of the A ""* " C'O' "''""I and Asmuata,Inc., AJtetums Snud and Ndu, Slause nurrJ, Ilasum Gwtuwarum I0'""" ' ' ' ' *"' '
and INN c Rclarunu Oil Gnnt=mus (Ritmd)+
28
. I
7 OFFICERS Wilson K.P A- w 57* James S. Haines,Jr.,38 Michael A.Gayoso,36 c%,wi /d hint %s= vu %&u . R,,r,=,y A#es Anurm:Cd Kent R. Brown,40* Glenn L. Koester,59' Jack Skelton,54 o ,v a % sw .T.1 % ds = = va % &u. wa., Amm= Canou, Richard M. Haden,45' Bernard R=h. 61 Joe R. Gibbens,39 1 cw av %&=..Mrh va %&m.Engewnna Ammw Severy l Howard J. Hansen,63* W.R. Whitmer,51 J.F. Kl=am, 55 l o ,va % &=.F a 7,aanew Ammw Treanaer Robert L Rives,51' E.D. Prothro,52 William B. Moore,32 cw va%&=.Cna aRdams CanoUamf Asnaw Sars y Manager of Foura mi Ammw Trauwer 1 Ralph Foster,56* Richard D. Terrill,30 Verna L Ridgeway,57 va %s=.c at cm.wl Sm Ammw vn %&w .Camere A#.urs
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l STOCKHOLDERINFORMATION Annual Meeting Fiscal Agents AdditionalInformation The annual stockholders' meenng Preferred Stock: Transfer Agent - The company'2 Form 10.K is filed will be held May 22,.1985, at the First National Bank in Wichita; with the Securities and Exchange Ala=ader Auditorium, Fine Arts Registrar-The Fourth National Comnussion and is available from Center, Friends University in Bank and Trust Company, Wichita. that ag:ncy or from the Company.
Wichita. Proxies for this meenng will Common Stock: Transfer Agents For a copy of KG&E's "Fmancial be solicited by the management. A - First National Bank in Wichita and Statistical Report 1974-1984" or proxy statement willbe mailed to and First National Bank of Chicago; other information, contact:
stockholders about April 19,1985. Registrars -The Fourth National This report is prepared pnmarily Bank and Trust Company, Wichita, A Farha Ga]
g, tor Relations Department for the informanon of company and First Nanonal Bank of Chicago.
at xkholders and is not transmitted in Listed N.Y.S.E. and P.S.E.; ticker K*^5*8 Gas and connection with the sale of any symbol- KGE. p[,(C Co 208 P
erurities or offer to buy any Bonds: Trustee, Registrar and Wichita, KS 67201 enes. Paying Agent - Morgan Guaranty Trust Company of New York. Phone:(316) 2616380 Stockholder Records and Dividend Reinvestment KG&E Stockholder Records Department P.O. Box 208 Wichita, KS 67201 Phone:(316) 2616640
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Audited Financial Statements J KANSAS ELECTRIC POWER COOPERATIVE, INC.
December 31, 1984 I
I i
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Statements of Patronage Capital (Deficit) and Other Equities . . . . 4 Statements of Operations . . . . . . . . . . . . . . . . . . . . . . 5 Statements of Changes in Financial Position. . . . . . . . . . . . . 6 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . 7 i
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i i Ernst&Whinney 2000 city cenie, square 1100 Main Street Kansas City, Missouri 64105 l
l 816/474-8050
\
Board of Trustees Kansas Electric Power Cooperative, Inc.
Topeka, Kansas l
l We have examined the balance sheets of Kansas Electric Power Cooperative, Inc. as of December 31, 1984 and 1983 and the related statements of patronage capital (deficit) and other equities, operations, and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the financial position of Kansas Electric Power Cooperative, Inc. at December 31, 1984 and 1983 and the results of its operations and changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
i vh Kansas City, Missouri February 12, 1985 1
BALANCE SHEETS KANSAS ELECTRIC POWER COOPERATIVE, INC.
December 31 1984 1983 ASSETS UTILITY PLANT l
Electric plant in service $ 272,036 $ 110,648 Construction work in progress--Note B 194,119,910 145,659,623 194,391,946 145,770,271 Less allowances for depreciation 71,242 50,579 194,320,704 145,719,692 INVESTMENTS IN ASSOCIATED ORGANIZATIONS 6,249,108 5,956,424 CURRENT ASSETS Cash and short-term investments
, (including amounts restricted for l construction of $490,187 and $927,544 at 1984 and 1983, respectively) 1,601,921 1,753,044 Accounts receivable from members--Note D 5,757,442 6,249,522 Receivable frem power supplier 3,385,412 Other 12,679 6,461 10,757,454 8,009,027 l
DEFERRED DEBITS 27,119 160,214
$211,354,385 $159,845,357 l
December 31 1984 1983 LIABILITIES AND PATRONAGE CAPITAL PATRONAGE CAPITAL (DEFICIT)
AND OTHER EQUITIES Membe r., hips S 2,800 $ 2,800 Patronage capital (deficit) (2,008,329) (930,212)
Other equities 157,938 62,991 (1,847,591) (864,421)
LONG TERM DEBT--Note C 201,370,290 148,067,281 CURRENT LIABILITIES Accounts payable 6,898,406 6,988,010 Accounts payable to members--Note H 3,986,263 600,851 Payroll and payroll related liabilities 18,164 22,372 Accrued property taxes 337,261 284,243 Accrued interest payable 13,665 4,747,021 Current portion of long-term debt--Note C 577,927 ---
11,831,686 12,642,497 C0KMITMENTS AND LITIGATION--Notes B, C, E and H
$211,354,385 S159,845,357 See notes to financial statements f 1
1 STATEMENTS OF PATRONAGE CAPITAL (DEFICIT) AND OTHER EQUITIES KANSAS ELECTRIC POWER COOPERATIVE, INC.
Patronage Capital Member- (Deficit) Other ships Unallocated Equities Total Balance at January 1, 1983 $2,800 $ (948,266) $ 30,433 $ (915,033) 1983 Net Margin ---
18,054 32,558 50,612 Balance at le:2mber 31,1983 2,800 (930,212) 62,991 (864,421) 1984 Net Margin (loss) ---
(1,078,117) 94,947 (983,170)
Balance at December 31, 1984 S2,800 $(2,008,329) $157,938 $(1,847,591)
See notes to financial statements STATEMENTS OF OPERATIONS KANSAS ELECTRIC POWER COOPERATIVE, INC.
Year Ended December 31 1984 1983 Operating revenue from member cooperatives $64,980,587 $46,420,699 Operating expenses:
Power purchased 63,888,314 45,565,999 Administrative and general 1,745,480 1,458,559 Depreciation and amortization 30,799 13,449 Interest 394,111 309,124 66,058,704 47,347,131 LOSS FROM OPERATIONS (1,078,117) (926,432)
Other income (expense):
Interest income 94,947 62,991 Refunda from power suppliers 7,843,213 917,783 Refunds to member cooperatives (7,843,213) (917,783) 94,947 62,991 LOSS BEFORE ASSESSMENT (983,170) (863,441)
Assessment to members--Note D ---
914,053 MARGIN (LOSS) BEFORE TAXES (983,170) 50,612 Income taxes ---
8,434 MARGIN (LOSS) BEFORE EXTRAORDINARY ITEM (983,170) 42,178 Extraordinary item:
Reduction of income taxes arising from carryforward of net operating loss ---
8,434 NET MARGIN (LOSS) $ (983,170) $ 50,612 See notes to financial statements l
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STATEMENTS OF CHANGES IN FINANCIAL POSITION KANSAS ELECTRIC POWER COOPERATIVE, INC.
Year Ended December 31 1984 1983 SOURCES OF WORKING CAPITAL Net margin (loss) $ (983,170) $ 50,612 Charges to income not affecting working capital:
Depreciation and amortization 30,799 13,449 Amortization of deferred debits --- 51,381 TOTAL FROM OPERATIONS (952,371) 115,442 Proceeds from long-term debt 53,891,412 33,199,000 Decrease in deferred debits 133,095 42,481 Net carrying amount of disposed equipment 1,050 20,568 Other ---
1,834 53,073,186 33,379,325 APPLICATION OF WORKING CAPITAL Increase in investments in associated organizations 292,684 112,244 Additions to utility plant 48,632,861 34,881,937 Reduction of long-term debt 588,403 ---
49,513,948 34,994,181 INCREASE (DECREASE) IN WORKING CAPITAL $ 3,559,238 $(1,614,856)
CRANGES IN COMPONENTS OF WORKING CAPITAL Increase (decrease) in current assets:
Cash and short-term investments $ (151,123) $ 679,780 Accounts receivable from members (492,080) 4,187,652 Receivable from power supplier 3,385,412 ---
Other 6,218 378 2,/48,427 4,867,810 Increase (decrease) in current liabilities:
Note payable ---
(2,670,000)
Accounts payable (89,604) 4,859,559 Accounts payable to members 3,385,412 (481,727)
Payroll and payroll related liabilities (4,208) 468 Accrued property taxes 53,018 43,023 Accrued interest payable (4,733,356) 4,745,302 Current portion of long-term debt 577,927 ---
Other --- (13,959)
(810,811) 6,482,666 INCREASE (DECREASE) IN WORKING CAPITAL $ 3,559,238 $(1,614,856)
See notes to financial statements l
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L NOTES TO FINANCIAL STATEMENTS KANSAS ELECTRIC POWER COOPERATIVE, INC.
December 31, 1984 NOTE A-
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES '
Kansas Electric Power Cooperative, Inc. (KEPCo) maintains its accounting records in accordance with the Federal Energy Regulatory Commission's (FERC) chart of accounts as adopted by the Rural Electrification Administration (REA). The more significant accounting policies are described below. '
Property. Plant and Equipment: Property, plant and equipment is stated at cost.
Provision for depreciation is computed on the straight-line method on the basis of the following estimated useful lives:
Transportation Equipment 3-4 years Office Furniture and Fixtures 10 years Leasehold Improvements 3 years Depreciation for 1984 and 1983 amounted to $14,885 and $15,283, of which
$14,885 and $13,449, respectively, was charged to depreciation expense with the remaining amount being charged to various deferred debits, member clearing accounts and construction in progress.
Leases which meet the criteria of the Financial Accounting Standards Board (FASB) Statement No.13 are accounted for as capital leases. Amortization of equipment under capital leases is computed on the straight-line method over the lease period and is included with depreciation expense. Amorti-zation expense amounted to $15,914 for 1984. Rentals paid under operating leases are charged to operations as incurred.
Investments in Associated Organizations: Investments in associated organ-izations consist principally of patronage capital certificates of the National Rural Utilities Cooperative Finance Corporation.
Short-Tern Investments: Short-term investments are stated at cost which is approximately equal to market.
Receivable From Power Supplier: Receivable from power supplier consists I of refunds from Kansas Gas and Electric Company (KGE) for retroactive rate and fuel adjustments. A corresponding payable to member cooperatives is included in accounts payable to members.
Refunds From Power Suppliers / Refunds to Member Cooperatives: Refunds from power suppliers for retroactive rate and fuel adjustments are received by KEPCo and are remitted to member cooperatives in accordance with Kansas Corporation Commission (KCC) guidelines.
_ _ _ _ _ _ _ _ _ - _ _ _ - - _ _ _ _ - _ _ _ _ _ _ _ _ _ - _ = _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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l NOTES TO FINANCIAL STATEMENTS--CONT'D r
NOTE A--
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES--CONT'D l- Reclassifications: Certain amounts in the 1983 financial statements have l .been reclassified to conform with'the 1984 presentation.
I NOTE B--WOLF CREEK NUCLEAR PLANT KEPCo owns six percent of the Wolf Creek Nuclear Plant (Wolf Creek), being l ' constructed near Burlington, Kansas. The remainder is owned by the Kansas City Power and Light Company (KCPL) and KGE. Wolf Creek is expected to commence commercial operation in September 1985 in which case, KEPCo's management estimates KEPCo's total investment will be approximately
$225,000,000 including interest and administrative costs during construc-tion, and first project developmental costs incurred prior to January 1, 1982. At December 31, 1984, KEPCo has an approved Federal Financing Bank (FFB) loan guaranteed by REA in the amount of $200,000,000. REA has also guaranteed an additional loan of $30,000,000. KEPCo's investment in Wolf
. Creek at December 31, 1984, was $194,119,910, including approximately
$1,589,100 that management invoiced to KCPL and KGE for reimbursable con-struction costs. Amounts reimbursed will be credited to construction in progress when received.
l~ NOTE C--LONG TERM DEBT Long term debts consists of:
December 31 1984 1983 Mortgage notes payable to FFB at rates varying'from 9.658% to 14.724% payable in quarterly installments (interest only through 1988) through 2018. Sub--
- stantially all of KEPCo's assets are pledged as collateral. $200,000,000 $147,510,000-Nortgage notes payable to FFB at 11.495%
payable in quarterly installments (in-terest only through 1985) through 2015.
Substantially all of KEPCo's assets are pledged as collateral. 1,265,000 ---
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NOTES TO FINANCIAL STATEHENTS--CONT'D NOTE C--LONG TERM DEBT--CONT'D December 31 1984 1983 Advances from member and non-member cooperatives 557,281 557,281 Capital lease obligation 125,936 ---
201,948,217 148,067,281 Less current maturities 577,927 ---
$201,370,290 $148,067,281 Aggregate maturities of mortgage notes payable to the FFB as of December 31, 1984 are as follows:
Year Amount 1985 $ ---
1986 5,021 1987 5,598 1988 6,242 1989 698,376 Thereafter 200,549,763
$201,265,000 Leased computer equipment with a cost of $136,412 and accumulated amorti-zation of $15,914 at December 31, 1984, has been capitalized in accordance with FASB Statement No. 13 and is included in electric plant in service.
Fucure minimum payments, by year and in the aggregate, under the capital lease obligation are as follows:
Year Ending December 31 1985 $ 41,255 1986 41,255 1987 41,255 1988 41,255 1989 17,190 Total minimum lease payments 182,210 Amount representing interest 56,274 Present value of net minimum lease payments 125,936 Less current portion _ 20,646 S105,290
NOTES TO FINANCIAL STATEMENTS--CONT'D NOTE C--LONG TERM DEBT--CONT'D KEPCo has the option on the initial $200,000,000 in FFB mortgage notes to elect short-term maturity dates of not less than two years nor more than seven years af ter the date of the initial advance or may elect a long-term maturity date of 34 years after the end of the calendar year in which the initial advance was made. On the maturity of a short-term advance, KEPCo may refinance the advance with another short- term advance with a maturity date of not greater than seven years from the date of the original advance or may elect to refinance with a long-term maturity date of 34 years af ter the end of the calendar year in which the initial advance was made. At December 31, 1984, KEPCo had $25,116,500 of advances with short-term matur-ity dates between January 1, l'>85 and December 31, 1985. KEPCo intends to refinance these advances as described above or under other terms and condi-tions approved by REA. Accordingly these advances have been classified as long-term debt for financial statement purposes.
KEPCo has the option on the remaining $30,000,000 in FFB mortgage notes to elect short-term maturity dates of two years or a long-term maturity date of December 31, 2015. On the maturity of a short-term advance, KEPCo may refinance the advance with another short-term advance with a maturity date of two years or may elect the long-term maturity date of December 31, 2015.
At December 31, 1984, no advances had maturity dates between January 1, 1985 and December 31, 1985.
Advances of funds from member and non-member cooperatives resulted from the transfer of assets and liabilities from the Kansas Electric Coopera-tive Inc. to KEPCo during 1977. These funds were used to finance eco-nomic, engineering, legal and administrative investigations of projects that were being contemplated. The agreements with the cooperatives state that should an investigation result in the construction of a project or projects, amounts of investigation and development costs transfered to project utility plant accounts are to be reimbursable to the systems parti-cipating in the agreements on a pro rata basis.
During 1984 and 1983, interest incurred totaled approximately $20,930,000 and $17,600,000, of which $394,111 and $309,124, respectively, was charged to interest expense and the remaining amount was capitalized as part of the cost of capital assets under construction.
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i-NOTES TO FINANCIAL STATEMENTS--CONT'D NOTE D--SPECIAL ASSESSMENT Pursuant to a KCC order dated October 31, 1983, KEPCo was ordered to assess its members $934,757 (1982 net loss of $914,053 and $20,704 in 1981 lobbying expenses initially charged to construction work in progress) together with interest on the uncollected balance during the collection period. The KCC ordered that KEPCo collect the assessment over a twelve month period. Collection of the assessment began in November 1983 and was completed in 1984.
NOTE E--OPERATING LEASE The Company leases office space under a non-cancellable operating lease.
The lease expires in 1988 and may be renewed for five years. In addition, the lease includes options to lease additional office space at identical terms. The related rental expense for 1984 and 1983 was $44,625 and
$36,575, respectively. Future minimum lease payments for space currently leased at December 31, 1984 are as follows:
! Year Amount 1985 $44,625 1986 44,625 1987 44,625 1988 44,625 The minimum lease payments can be increased to the extent that taxes and insurance paid by the lessor exceed 1984 levels.
NOTE F--PENSION PLAN KEPCo participates in the National Rural Electric Cooperative Association (NRECA) retirement and security program for its employees. KEPCo makes annual contributions to the plan equal to the amounts accrued for pension costs. Prior to January 1, 1984, KEPCo employees were required to contri-bute a percentage of their salary to the plan, but, effective January 1, 1984, are no longer required to do so. In the master multiple-employee plan, which is available to all members of NRECA, the accumulated benefits and plan assets are not determined or allocated by individual employees.
KEPCo's pension cost for the plan for the years ended December 31, 1984 and 1983 was $35,707 and $40,605, respectively.
NOTES TO FINANCIAL STATEMENTS--CONT'D l
NOTE G--INCOME TAXES At December 31, 1984, KEPCo had net operating loss carryforwards totalling approximately $59,190,000 available to reduce future taxable income and investment tax credit carryforwards of $3,240 as follows:
Net operating Investment loss tax credit Available carryforward carryforward Through
, $ 8,199,000 $ ---
1996 12,410,000 1997 17,124,000 1,378 1998 21,457,000 1,862 1999
$59,190,000 $3,240 The difference between the net operating loss shown in the accompanying financial statements and the net operating loss for tax purposes is due primarily to interest costs related to construction which is capitalized as part of construction work in progress for financial statement purposes and expensed for tax purposes.
NOTE H--CONTINGENCIES During 1982, KEPCo became a defendant in certain litigation concerning disputed power billings from KGE of approximately $746,000. The dispute was over the effective date of a rate increase and the allowability of a capacity credit related to 30 MW of KEPCo's hydro power that was used in l KGE's control area in May, 1982. In 1983, the litigation relating to the effective date was dismissed without prejudice and in 1984 final
! resolution of the rate increase issue was settled but the capacity credit issue was not resolved. Consequently, KEPCo member funds in the amount of approximately $596,000 have been retained, with the approval of the KCC, for use as needed upon final resolution of this issue. The $596,000 is
! included in accounts payable to members at December 31, 1984 and 1983.
I In connection with the purchase of KEPCo's six percent interest in Wolf l
Creek, KGE and KCPL have made a claims against KEPCo for approximately l $3,700,000 of KEPCo's capital credits from CFC. KEPCo's management believes there is no basis to the claims, however, should KGE and KCPL prevail, any amounts paid will be added to KEPCo's investment in Wolf Creek. In addition, the purchase agreement provided that KGE and KCPL l
NOTES TO FINANCIAL STATEMENTS--CONT'D NOTE H--CONTINGENCIES--CONT'D would be indemnified for the tax consequences of the sale of Wolf Creek to KEPCo. KCPL and KGE have received unfavorable Internal Revenue Service rulings which assessed KCPL and KCE approximately $3,000,000 and
$250,000 respectively in additional taxes resulting from the sale. If KCPL and KGE are unsuccessful in appealing these rulings, they have indicated they will make claims against KEPCo for the amount of additional taxes paid. Any amounts paid by KEPCo as a result of thase claims will be added to KEPCo's investment in Wolf Creek.
KEPCo is a defendant in various lawsuits which are in various stages of invastigation and litigation. In the opinion of management and KEPCo's legal counsel, these lawsuits are of doubtful merit and will be settled in KEPCo's favor.
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