ML20151Y566

Mid-American Energy Holdings Co Summary Annual Rept for 1997

ML20151Y566
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Site:	Quad Cities
Issue date:	12/31/1997
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MID AMERICAN ENERGV HOLDINGS COMPANV SUMM ARY ANNU AL REPORT 1997 MidAmerican ENERGY y -f 4

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MID AMERIC AN ENERGY COMPANY BUSINESS UNITS During is07, MidAmerican Energy reorg;mized its operations into four new and distinct business units: energy delivery, transmission, generation and retail. These business units were developed to align with our expectations of the business needs of a restructured energy marketplace. Effective Jan.1,1998, the units began operating as individual entities and profit centers.

Competitive Strategic Business Umt Strengths focus

Background

Energy Delivery Customer-focused reengineering MidAmerican Energy has along Energy deliveryis one of our core competencies and will continue to of work processes. implementing history of providing highly reliable be a profitable and stable busi- competstrve technology and electnc and natural gas service.

ness unit for us in a competitive building a strong labor-MidAmerican serves more than 647,800 electric customers and rnarketplace management partnership are goals n of theenergydeliveryunit.

618.600 natural gas customers.

Transmission Transmission's objective is reliable Thousandsof milesof transmis- The geographic position of MidAmerican's transmission system operatton and optimum sion lines connect MidAmerican's system is a highly valued asset for utilization of facilities to achieve generation facilities with its potential for serving opening the best economic unit cost distribution substations and markets, possible provide interconnections with five surrounding states.

Generation MidAmerican has very competitive Generation's primary focus is on MidAmerican has 4,378 fossil generation costs- cost reduction and growth megawattsof netgenerating consistently among the lowest in Working toward a cost structure capacitr 65 percent fueled by the region and the nation. In addi- that will be successfulin a more coal,18 percent fueled by nuclear tion to producing energy for compet tive environment will be and 17 percent fueled by natural MidAmentar's reta/,;ustomers, key Unit cost improvement will be gas /cil.

the generation unit has a strong achieved through management of bulk power sales business. Our costs and increases in our generation output.

Retail MidAmentan has recognized the The retail un:t is develeping its We are developing new pmducts need to build w capabilities in people, infrastructure and product and services, forming alliance this aret ,d, 9 ting time and offerings. This unit's focus will te relationships that provide co-resource jing a stror; on growing the business by marketing opportunities, and retail orge., ation. providing customers with the best investigating new markets that value available in the ma:ket.

will allow us to grow our business Our first new offenng. an appli-ance warranty product, was intro-duced in late 1996 and now has customers in four states.

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[.I; ENERGY DELIV MidAmerican Energy is building a foundation for competitiveness. By focusing on customer loyalty and shareholder value, we are working to make our vision -

to become the leading regional provider of energy and complementary services - a reality.

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r MID AMERIC AN ENERGY HOLDINGS COMPANY J

--MidAmerican Energy lloidings Company is a $4.3 billion utility hokling company with 60,000 registered shareholders in all 50 states and 33 foreign countries.

MidAmerican Energy Holdings has three subsidiaries:

7 MIDAMERICAN MIDWEST MID AMERIC AN ENERGY C A PIT AL C APIT AL COMPANY GROUP COMPANY MidAmerican Energy Midwest Capital Group, MidAmerican Capital Company is lowa's with assets of $65 Company,with assets of largest energy company million,is the Company's

$671 million,is the with assets of regional economic devel-Company's nonregulated

$3.5 billion and annual opment arm that makes investment subsidiary.

investments in develop- . revenues of $1.7 billion.

MidAmerican Capitars MidAmerican prosides ment projects and works investment strategy eh etric and natural gas centers on using nonreg-I l ventures to attractto the business senice in towa, ulated businesses to including the nu@>r MidAmerican region.

broaden the Company's population centers in the Midwest Capitalis the market ba.se and state, and in portions of developer of the Dakota strengthen our position Illinois, Nebraska and Dunes project, a planned as a regional player.

MidAmerican Capital has community development f South Dakota.

near Sioux City, Iowa.

I or information on investments in communi- MidAmerican Energy The Company also has cations, home and busi- Company business units, investments in sites ness security, and energy see panel at right.

that are available for -

marketing and trading.

economic development projects.

The MidAmerican Energy Region um m Wannun

%N uwm We are strategically bcated in the middle of the JhD emajor Gatewaymarkets 2000 of the Mewest Our semce area is h many intemational companies or major dmsrons of such companies. including A' COA. o n eer .

Pioneer HeBred intemationat and The Pnncipal Rnanaal Group

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3 3 FINANCIAL HIGHLIGHTS l j ....

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! Consolidated Data tsi 1996 1

! Operatmg revenues (000) $1,922,281 $1,872,612 i Net income (000) $ 135,104 $ 131,046

) l j Earnings per average common share $ 1.38 $ 1.30 4

Average common shares outstanding (000) 08,058 100,752 i,  ;

Cash flows from operating activities (000) $ 392,245 $ 321,387 I Iteturn on average common equity 10.8% 10.6%

l Total assets (000) $4,278,001 $4,521,848 l

f Utility Operations rei 1996 Operating revenues (000) $1,662,606 $ 1,635,761 I

l Electric sales (millions of kWh) 22,653 22,000 f Summer peak load (net MW) 3,548 3,537  ;

Natural gas throughput (000 MMBtu) 152,629 155,603 Utility construction expenditures (000) $ 166,932 $ 154,198  ;

o i z $

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3 Bond Rating Data investors Senice & Poor's -

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Mortgage Bonds A2 AA-l 9

j Unsecured Medium-Term Notes A3 A  ;

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i Preferred Stocks a3 A l Commercial Paper P1 A1 l

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TOTAL SH AREHOLDER RETURN I ST0CK PRICE APPRECI ATION (Dwidends + Price Appreciation)

Jan.1,1997 through Dec. 31,1997 MalAmerican Performance Vs Value Line Electric Utihties Jan.1,1997 through Dec. 31,1997 322 h 90 %

21 0%

l MidAmerican j 20 60 % 48.3 %

1 50 %

IO 40 %

j 18 30 %

j 20 %

j 17 10%

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f Jan. Fett March Apr. May June July Aug. Sept. Oct. Nov. Dec.

I Weekly Closing Stock Price i

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share repurchase program, T0 0UR SHAREH0LDER8 we lune acquired 5 million shares of the Company's f MidAmerican's stock price appreciated by common stock at a total cost of $89.2 million.The program 39 percent for the year, from is past year was on

$15.8_, o.on Dec. 31,1996 to is expected to be completed

$22 at year-end 199ae by year end 199s.we believe building a strong foundation,both believe a growing under- the share repurchase 0urfocusth. financially and operationally.

upon which to realize our vision of hecoming the leading regional standing of our strategy to luonudhdading regional prmider of energy and complementary senices, and the progress we have program continues to be onshhe besdnnwnnents for our available cash.The program contributes to decreases in our dhidend outlays and results .m provider of energy and compiementary made .m imgeenting that strategy, have contributed to improvement in earnings services.To meet the substantial the improvement. per share and a lower divi-in conce,1,itn our deci. dena pay a ratio.

challenges of the future competitive sion t focus n the regional We achieve < hop quartile i marketplace, we believe it is essential strategy, MidAmerican has performance in total share-i holder return in 1997, as that the necessary elements be in diyested a number of nonregulated interests that compared to the electric 5 utilities followed by Value place m order to achieve success in were not aligned with that strateg During IW7, these Une. Total shareMder

the tong term. divestitures generated return reflects the return approximately $302 million earned on the value of the Financial Performance reductions,which were f possible as a result of cost in cash. Most recently, in shareholders' imestments,

1997 was a year of strong December the Company combining stock price

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r financial performance for reductions achieved in the completed the sale of appreciation and dividends MidAmerican Energy.1997 1995 merger that formed

$ UNITl!AIN, Inc., a railcar paid. MidAmerican had a earnings are $135.1 million MidAmerican.The 1997

$ management company, and total shareholder return of or $1.38 per share, compared earnings also reflect higher 1 48.3 percent for 1997, Cornhusker Itailcar Senices, with $131.0 million or utility operating expenses f Inc., a railcar maintenance substantially above the

$1.30 per share for 1996, an associated with the median electric utility Companis strategic invest- and repair shop operator, for increase of 6.2 percent in a total of $23.1 million. The company total return of earnings per share. Income ments to develop the divestiture process, and the 30.3 peu ent for t he year.

fmm continuing operations enhanced marketing and favorable market perfor-for 1997 is $139.3 million or sales and customer senice Other Highlights capabilities needed to posi- mance of our investment in

$1.42 per common share, Melmil'SA, have provided implementation of new untity compared with $143.8 tion the Company for us with additional financial business unit structure.

million or $1.43 per share success in competitive flexibility. Some ofIhe Throughout 1997, we worked for 1996. markets. These transition on the development of a costs, and those required to proceeds from the sale of The 1997 results were these nonregulated assets business unit nmdel that is affected by the electric increase the Company's aligned with our expectation information technology were used to reduce debt pricing settlements achieved that a deregulated competi.

resources, are an essential and to fund the $200 million in 1996 and 1997 in Iowa share repurchase program tive market environment and Illinois.The settlements part of MidAmerican's trans-will require separation of formation to become a announced in March 199 <

included prmisions for price Since announcing our the various businesses that strong competitor in the years ahead.

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{ have comprised our histor-i leal vertically integrated gas f and electric utility business, under legislation enacted in

! Effective Jan.1,1998, four lowa a number of years ago.

t 4 business units - energy These cost.s will be recovered I

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delivery, transmission, over the next four years.

generation and retail-were Timely recovery is important established as individual because the cos% might profit centers. otherwise be difficult to

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recover in a competitive

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Approval of our pricing plan emironment. /

by lowa regulators.

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MidAmerican designed this Passage of Illinois restruc-innovative plan and was turing legislation.

~ n, successfulin getting its MidAmerican took an active j approval with all essential role in the development and N si

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elements intact. The plan legislative consideration of .. .

1 gives MidAmerican unique the landmark electric

• i flexibility in pricing.The industry restructuring bill 1 , .-

l plan also allows us the recently adopted in Illinois.  ;

opportunity to earn returns Signed into law in December,  !

above those that we would the legislation outlines a .  ;

i be likely to achieve under nine-year transition to full y

traditional rate base rate of competition. Customers will Above, Stan Bright, chairmar president and chief executive $

return regulat. ion to be given choice in energy officer, visits with sharehnid <rs prior to an October share-compensate for the added suppliers in phases begin- h

. . holder meeting in Council Blifts, Iowa.

risk the Company is nmg in 1999. MidAmer.ican  ;

assuming as we move was supportive of the bill MidAmerican Energy has expanded its regional shareholder

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toward competitive market because it properly meeting schedule,last year hosting meetings in  ;

d conditions. The plan elimi- addressed our key interests. Des Moines, Sioux City, Council Bluffs Davenport and ,

nates the energy adjustment MidAmerican will continue Waterloo, Iowa. i clause in customer billing to take a lead role in shaping Because MidAmerican believes tis important to keep and moves us toward more' the discussion of restruc-shareholders informed of the changing energy marketplace uniform electric prices for turing in Iowa, and what MidAmerican is doing to prepare, the Company our residential customers will host meetings in those locations again in 1998, and will across the state. Development of a strong add meetings in Cedar Rapids, Iowa, and Minneapolis, Minn.

brand name. Acthities taking initiating energy efficiency place throughout the Company Shareholder meetings are just one way MidAmerican cost recovery. In October, are coming together under c mmunicates with shareholders. Quarterly reports, the MidAmerican began acceler- our branding strategy. A new Company's Web site (http1/www.midamerican.com), and our toH-free shareholder service number (1-800-247-5211),

ated recovery of costs asso- advertising and public rela-clated with the mandated tions campaign will be are other ways shareholders can get information about energy efficiency programs unveiled during the first MidAmerican Energy.

that have been pro"i k<!

Our management team is committed to the successful transformation concerns and needs.They part of 1998.The goalis to "in be assiani"x a vriority effectively differentiate our of MidAmerican Energy from a to the need to personally company in the marketplace in a way that win appeai to regulated utility into a leading communicate with

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our customers. our branding customer-driven Competitor. Company's objectives,why effort will reflect the way we our existing core business demonstrates the value of the attainment of those think, feel and act as a being proacthe. objectives is critical, and what company. We know that base, the retail business MidAmerican has taken a each employee can do to successful brand advertising unit has a wide range of lead role in designing and help meet those objectives.

efforts must be backed by product and senice ideas at various stages of develop- building support for a prop-strong performance, and we erty tax reform proposal Building Customer Loyalty are committed W meeting ment, which represent that is important to the As you will read in the next this challenge. You will read growth opportunities. As an success of industry restruc- few pages, building stronger more about our branding example, our new appliance turing in Iowa. This customer loyalty is receiving plans in the next few pages, warranty product, launched in late 1990, already has proposal, which is being major emphasis at

{ almost 10,000 customers. discussed by the Iowa legis- MidAmerican. We believe

Strategic Business Objectives lature, would preserve and this effort and the achieve-As we hok to the future, our stabilize local government ment of our business objec-Cost reductions. We are l efforts in 1998 and beyond tives are intertwined. The continuing to reduce costs and school tax revenues and

! will be guided by four in order to reinvest in ensure that out-of-state foregoing strategic business

strategic business objectives

I customer senice improve- energy companies that do objectives - growth, cost

= To achieve higher leveh O

of business growth ments. Our investment in a not own property in Iowa reduction, management of new customer information would not have an unfair the external emironment

= To achieve continued

{ advantage against the and transformation -

cost reductions system is an example of this.

The new technologies we Company in a competitive reflect what we are doing to

= To improve the effective-ness of the management of are putting in the hands of market situation. shape what the customer S

our field senice employees, sees. As we succeed in h our external emironment such as mobile data termi- Transfonnation. Our manage- achieving these objectives, 1 = To complete the trans-5 nals, which you will read ment team is committed to the customer will see major formation of MidAmerican from a regulated company to about later in the report, the successful transformation improvements in price, a strong competitive are an additional example. of MidAmerican Energy senice and reliability and provider from a regulated utility into willidentify with a strong Management of the external a leading customer-driven MidAmerican Energy brand.

Growth.We will pursue environment.The effective competitor. Itecognizing the We believe the achievement growth opportunities management of our external enormous challenge this of our strategic objectives through the addition of emironment requires that transformation presents, will result in increased products and senices that MidAmerican take a strong senior managers have begun customer loyalty and complement our core utility leadership role in legislative to spend significantly more improved returns for our offerings. Although the focus and regulatory aethities time with our customers and shareholders.

of our retail organization that impact the Company. our employees who are close during the past year has Our success in developing to customers in order to Making it Happen been on the need to secure and securing approval of our ensure that we maintain a The changes the energy lowa electric pricing plan full awareness of our industry will experience in customers' evohing

} from the time of the merger the next decade will be that formed the Company on defining.The changes July 1,199fi until his retire-i

MidAmerican Energy must ment on May 31,1997. I was make are equally significant. pleased to work closely wuh The Company's success in Russ from the time we nego-making these changes will tiated the m ter in mid-be the direct result of our 1994 until his retirement employees' continued strong htst year. Ilis many contribu-contributions. I want to tions to the merger process recognize our employees for and to helping deal with the 'i ..

their achievements and complex issues that had to

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their hani work on the be addressed in the new -

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Company's behalf during Company's formative stages -

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4 1997. I deeply appreciate were much appreciated. .. .. . . -

their contributions. Russ continues to serve on -

'$l A personal goal of mine the boant of directors and 5 ,

for the htst year was to as a member of the execu-

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improve communications tive committee of the board. .

with employees about our As we approach the year .

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mission, our vision and the $n) and anticipate the major challenges we face. I competitive market condi- .

and other members of the tions in which our business .

j senior officer group spent a will be conducted in the 21st great deal of time trave!ing O

centmy,it is appropriate to STANLEY J. BRlGHT  ;

1 our senice area, visiting our take note of the very signifi- y facilities and sharing this cant contributions that are i information with employees, being made by the board of  ;

We view this communication directors. The demands on 2 a

effort as a commitment to our board continue to  ;

be met on a continuing increase. Their ashice and basis in 199S and the years counsel are welcomed and >

ahead and a key part of the highly valued.

work we need to do to prepare our employees for the new world. Our commit-ment to developing h employees is reflected in the expansion of our new company-wide education Stanley J. Bright and development program. Chairman, President and The program provides timely Chief Executive Officer and purposeful learning as we work to tr:msform the way we do business.

Russ Christiansen served as chairman of MidAmerican i

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As we focus on building a foundation to compete successfully in a competitive market-place, the link between building customer loyalty and building shareholder value becomes 1 increasingly apparent. l

$ i he essence of a with contributing to the were most important to competitive emiron- realization of our vision to them. Our research identi-  :. ,

ment in any industry become the leading regional fled key factors that " drive" -

is customer choice. provider of energy and O

our customers' loyalty. From ,

Our challenge will be complementary senices. these loyalty drivers we E  !

to provide customers with Customer loyalty is the determined that it is imper- [

compelline easons to select essentialingredient in our ative that our business units ,  ;

MidAmerican Energy pr4 formula to compete success- perform even better in these

' { l ucts and services. We are fully. We define customer four areas: -

taking ma}or steps to meet loyalty not as a " blind" = Reliability  ; '

that challenge now. loyalty, but as a sviid confi- = Senice 5 .

MidAmerican took a dence in MidAmerican that = PriceNalue major step on Jan.1,1998, is earned by our actions. = Brand Identity l

by structuring itselfinto MidAmerican Energy will four business units: genera- build that loyalty not by tion, transmission, energy simply meeting customers' delivery and retail. Each expectations, but by was established as an indi- exceeding them - time and ... S0, what are we doing?

vidual profit center, charged time again.

j in 1997, we asked our l j customers what characteris-l ties of an energy provider l l

RELIABILITY SERVICE PRICE /VALUE BRAND IDENTITY L-MidAmerican, accounting for an estimated 24 percent of all outages.The outages occur when animals bridge power lines and disrupt the gap between trans- senice. Tests have demon- initiative in this area is a strated that the guards can tree-trimming program with formers and the powerlines overhead.These outages, prevent up to 90 percent of a three-year cycle. In addi-flip a switch, they these types of outages. tion, tree-planting guide-expect the lights which typically result in the Whencustomersto go on.

MidAmerican Energy has an excellent death of the animals when they make contact with the electric equipment,incenve-Lightning Arrestors. Lightning strikes cause 10 percent of all senice disruptions. To lines have been developed and distributed to land.

scapers, nurseries and homeowners.

reconi of providing our nience customers and result customers with that type of in significant senice address this problem,line

{ restoration costs. crews are installinglowrost improving Operations

senice, with reliability in Processes

excess of 99.9 percent. .

MidAmerican Energy MidAmerican has initiated a l Nonetheless, the Company 5 is committed to building on enhances the reliability .!

't review of processes within of its electrical system t the energy delivery business

this record - first, by by installing spider- 4 unit to identify steps to preventing interruptions of O senice and second, by like " critter control" improve response times devien stop trans- during electric outages and restoring senice as soon as

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formers to prevent ~ at the report of gas leaks.

possible when interruptions

' outages caused by squirrels and other animals. Here, Line Crew The electric outage do occur.

Y Foreman Larry Palmer installs an animal guard in Des Moines. process redesign team developed and is already f Preventing Electric Outages To prevent electric outages, To thwart these incidents, lightning arrestors, which implementing nearly three a

5 MidAmerican is addressing last fall MidAmericanline protect sensitive electric dozen action recommenda-three factors that account crews began installing a equipment and maintain tions, including-for half of the outages we do protective metallic guard, senice. . Addicg an electric experience, with " spider-like" legs. The system switching censole to low <ost device delivers a Tree Trimming Trees are also reduce switching times and Animal Guards. Squirrels mild shock to the animals a source of outages speed outage restoration.

may be small, but they and before they contact the (7 percent ef the total) = Using technology to other smallanimals are a through contact with both improve access to technical big problem for overhead and underground lines. MidAmerican's mWor

r data for coordinators in our distribution operations Q -

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e Creating a tracking to ruptured gas lines by ]g'(gg # .n gM ifg!'Q7; system to identify problem dispatching both senice - $2 4 ,' "Dg%g.dh - d$ h}

trends in the restoration process and identify and distribution trucks simultaneously. P

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opportunities for further h ,

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improvements. Looking for ways to prevent E $

Likewise, the gas leak outages and improve senice

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response team developed a is an ongoing process. Even number of recommenda- so, some senice interrup- l tions. liere, too, some of the tions are unavoidable. I suggestions were quickly Communication is important  ;

translated into action. to maintaining customer I e Providing pagers and loyalty during these infre-O cellular phones to gas quent occurrences. E senicemen for greater flexi. MidAmerican has a number 1ll l l [

bility and speed in ofinitiatives under way to l ll l l l  ;

responding to emergencies improve the quality of our l l Ill l l S and for direct customer communication with l l l Il}

l j l f h contact. customers during periods I! lg l lll l l l fl ll e Making programming when outages exist. We see ll ll 5 changes to ensure flawless them as a key step to the l l Nl system routing for all emer- next imperative. I gency gas leak orders.

. Ensuring consistency in rt .ponse and quick repair P

I BusinessAdvantage l RELIABILITY SERVICE resulted from market PRICE /VALUE BRAND IDENTITY research that revealed the need to supply more exten she senice to these larger customer service represen-tatives so that inquiries can readers,fielf crew volume customers. The employees and others). program was announced to be handled faster and more accurately. Each of these employees is, general business customers For quicker informatien in effect, an ambassador through a communications after regular hours, the who can influence customer pmgram with the message, Company set up an on-call loyalty. "When your business has an enice, a natural corol-customer senice represen. To serve as an umbrella energy need, help isjust a lary to reliability,is tative program.When large for all training efforts, the call away."

being taken to new system outages occur, these Company has created Typical calls involve:

levels at MidAmerican representatives are charged MidAmerican Learning answering billing and rate Energy.The Company is making major steps to with quickly stalling the Systems, a new program questions, ordering routine Davenport center. One of that provides training in ser' ice work, providing provide state-of the-art the goals is a 100 percent areas critical to the energy-saving advice and

$ senice to all ofits customers.

providing information on a Customer Call Response

- MidAmerican MidAmerican products and m.im ma n) , ._ g N- extends a new senices.The senice repre-l Central to the efforts is the l consolidation of our call j service to gas sentatives have a goal of j eenters into a single call .

transportation handling 95 percent of the calls themselves, referring center in Davenport, Iowa, _; q. customers with O employingleading edge its pioneering customers to the appro-M E telecommunications and Internet site. priate corporate resource computer technology. The for the remaining 5 percent.

r newcallcenter will be fully On another front, early cwam =en-u um wime e. - ~~-

j operational by the summer - - - - c,== , *,= .c - -co last year MidAmerican

of 1998 and allof the launched what we believe

supporting computer tech- call-back to customers who Company's success and was the industry's first 5 nologywillbe online by the have reported outages to let shares best practices Internet site through which fall of 1998, them know when power throughout the organization. business customers can MidAmerican has already restoration will occur, arrange for the transporta-implemented significant Customer specialists and Serving Business Customers tion of natural gas they senice improvements, as a on-call representatives To better meet the needs purchase on the open response to surveys that undergo special training, ofits general business cus- market. Customers also can showed customers wanted and MidArnerican's tomers, MidAmerican Energy monitor their gas shipments better communications from expanded training efforts hasintnnluced a dedicated and usage, current weather the Company. MidAmerican extend into other senice business senice center. conditions and much more has hired customer care areas as well. Called BusinessAdvantage", through tius interactive site.

specialists to get up-to-date For example, during the the senice provides a Developed internally, this information from crews to first quarter of 1998, the unique toll-free phone innovative system simplifies Companyis conducting mimber for business the process of monitoring "ambassadct" training for customers to call specially the transportation of natural all field employees (meter trained customer senice representatives about their energy needs.

gas, putting MidAmerican at the forefront of gas trans-portation senice.

MidAmerican also has work, track the progress of taken a new approach to jobs and eliminate paper economic development. forms (see sidebar).

Traditionally, MidAmerican Until the terminals are has supported economic installed on a broad-scale development efforts to add basis, MidAmerican Energy J to its customer base and is using pagers, cellular improve the vitality of the phones, laptop computers communities it serves. In and hand-held radios in .

1997, these efforts iwcame senice vehicles to improve more project-oriented, response time. Such m including supporting the communications equipment -

development ofindhidual is projected to reduce the  ;

businesses, industries and total time to respond to h

entrepreneurs. With this customer emergency calls new approach, not only does by 1,300 hours0.00347 days <br />0.0833 hours <br />4.960317e-4 weeks <br />1.1415e-4 months <br /> atinually.  ;

MidAmerican help commu- Other field technoiogy nities and add customers, improvement projects under  ;

IlHird a but it also builds relation- way include.

ships with businesses for = Automated Information O

the future. and Mapping System - E

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This system is loaded on z Field Operations Improvements laptops and used by field i MidAmerican's commitment personnel to quickly and 1 I -

to customer senice accurately lwate and iden-  ;

improvement extends to lify gas vahes, electric j field operations. Integral to system switches, and other >

this effort are several facilities, technology-based applica- = Electrical Outage J

tions that will allow field Management System -

pers<mnel to better and When complete, this system

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more quickly respond to will track electric outages l l customer needs. from the time they are [ '

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l MidAmerican has placed reported through , ,l more than 100 state-of-the- dispatching and restoration.

m art mobile data terminals in gas department senice vehi-cles and more are on the way. The termirials schedule

~~

R EllABlLITY SERVICE PRICE /VALt!E BR AND lDENTITY J = Iowa residential customers received annual customers. Within the limits price reductions of established in the plan several opportunities for $23.5 million, including a proposal, the Market Access improvement. Significant $5 million reduction to be Senice project will a!!ow savings are projected by the made on June i,1998. these customers to select

= llalf of all earnings their eh etric supplier, with end of 2001.

More than 35 specific between 12 and 14 percent electricity delivered through return on equity can be MidAmerican's system. The actions to increase effi-ciency and reduce costs retained by shareholders. program will offer a learning rice and value are extremely important were identified and are now = $10 million is available experience for the Company being implemented. for Iowa business customers and customers alike on Pfactorinselection to customers and are often the determining for innovative contracts, doing business in a competi-Pricing initiatives pilot programs or base rate tive energy market.

among competing senice A number of customer reductions by June 1,1998. Although initial participa-pricing initiatives will also = Elimination of the tion is limited,it is expected k providers. MidAmerican Energy is in an emiable help prepare for the energy a@ustment clause in the project will be expanded

{ in ihe future.The program,

position as a low cost energy which reflects a cooperative

prosider. Even so, the MidAmerican's pricing initiative will effort between MidAmerican

! Company is working to bring decrease and stabilize down costs even more. electricity costs for Energy and major

} "'- customers, requires lowa customero

• Jyr'y #.~ N Q' Supply Chain Review through the approvalby the IUB and the

{'

During 1997, the Company year 2000.

[Ch}N Federal Energy Regulatory initiated a review ofits g4 y Commission (FERC).

supply chain with the dual - "5 purpose of reducing costs Reducing Generation Costs

{

and increasing inventory approaching competitive customer billing. While the The generation business l, turnover.The numbers climate. elimination of this clause unit is on the leading edge 5 involved are significant

In June, the Iowa Utilities subjects the Company to the of MidAmerican's corporate-MidAmerican's average Board (IUB) closely impact of any cost wide commitment to reduce

, spending on materials and reviewed and approved an increases,it also creates costs. Generation is looking senices, excluding coal, electric pricing settlement opportunkies for to reduce unit costs, or totals nearly $450 million that was designed to MidAmerican to manage generation costs per annually, with more than decrease and stabilize these costs and benefit from megawatt-hour, by 25

$50 million in inventory at prices for lowa customers the savings created. percent by 2001.

any time in 38 energy through the year 2000.The in connection with the As discussed earlier, delivery k> cations and four settlement encompasses all settlement and approval of MidAmerican's generation generating facilities. the major elements of an MidAmerican's pricing plan, costs are lower than most The studyidentified innovative plan MidAmerican the Company also filed witl; ofits regional competitors.

proposed to the IUB in 1906. the IUB in 1997 for permis- On a national scale, Specific elements follow: sion to conduct a pilot MidAmerican's electric competition program for generation production costs large industrialand commercial electric

$5?

/,

p< MS.

r s - ', .

ranked eighth lowest among 4 ;g

- s , .

.14 h*?O the 100 largest investor-h l @= -

='==w5 w =a w d52 owned utilities, according to

-4%

the most recent available There were environ-FERC data. And, a 1997 Utility mental developments in Data Institute report placed 1997 that may have a signifi-five of MidAmerican's steam cant effect on the future of generating units among the our industry and country's 25 lowest-cost MidAmerican. First, the fossil-fueled facilities out of Emironmental Protection a total of 777 units. Agency issued new air-The generation business quality standards on partic-unit is continuing to k>ok for ulate matter and ozone.

ways to bring down its unit While Iowa is better posi-costs. One innovative step tioned with respect to the a was to construct a 6.25 mile combined impact of these h

railline into MidAmerican's standards than states to the g  ;

I Council Bluffs Energy east, the standards may

!Q l Center. The additional rail impact the emissions at our T[  !

route brought competition generating units and will fd*

in rail services to the likely affect future market facility, lowering fuel costs @

prices for electricity.

significantly (see sidebar). Second, the global warming $

fuel costs represented 74 sumad! jn Kyoto, Japan percent of our generating resulted in a conimitment  ;

plants' 1997 production by the Clinton costa. Ot her avenues to Administration to reduce -

^

reduce fuel costs are being emissions attributed with pursuoi For instance, causing global warming - >

currently about 45 percent primarily carbon dioxide. We of MidAmerican's coal will be carefully watching l purchases are covered by activities in the environ-long-term contracts expiring mental area and taking between 1998 and 2Wil. necessary steps to protect Since prices under these the Company's interests.

contracts are above spot coal prices, additional savings should be achiev-able. Some contracts have already been successfully '

renegotiated.

1 R E LI A BILITY SERVICE l I

PRICE /VALUE BRAND IDENTITY would find important and l complementary to energy. l The initial offerings in the During 1997, MidAmerican MidAmerican listens to its Company's operating terri-placed emphasis on begin-ning to develop a brand customers to best provide tory are appliance exceptional value in warranties and security hile reliability, identity that will differen-tiate the Company in a exceeding their expectations systems, pricehalue and for energy and other essential MidAmerican began competitive marketplace, Wsenicearethethree operational imperatives that MidAmerican Energy must A series of newspaper ads and television commercials in 1997 focused on relia-needs.

The Company has distilled this positioning marketing appliance warranties in the Sioux Falls, South Dakota area and has expanded the achieve, a fourth is needed bility and value, since these into the following simple elements are important to overall promise to senice to Cedar Rapids, to solidify our position in customers. Ads will continue customers: Sioux City, Iowa City, Port the market.

to stress these points in the We're sa*isfied only when Dodge, Ottumwa and future; however, MidAmerican you are. Des Moines, Iowa; and the Advertising This imperative is brand Quad Cities area of Iowa h

MidAmerican and Illinois. Response has a identity, which must answer _,

this question:llow will \ g extends its brand been solid, with nearly h

10,000 warranties in force at MidAmerican differentiate itself from its competition, d\Muum ,

identity through complementary the end'of 1997. Further and how will the Company Y services such as expansion is planned during O communicate this difference

.sk e Extended Service 1998. Participating to customers? .,,,,

Protection - ESP customers paying a modest Highly regulated indus- - an appliance monthly fee receive protec-z tries usually do not have the warranty program. Here. a serviceman prepares tion against costly and sameimpetus to launch to check an air conditioning unit. unavoidable appliance

{

branding campaigns that repairs. And,theylike 2 marketers of soft drinks, believes that exceptional This promise will be the dealing with a companythat 5 coffee, cereal and deter- service will ultimately differ- focal point of a totally inte- they trust.

gents do. But that, too,is entiate the Company from grated marketing communi- MidAmerican also has changing. The telecommuni- other providers, cations program that will secured a major owmership cations industry, which is MidAmerican willfocus on play an important role in position in AAA Security, ahead of the electric utility enhancingits ability to achieving the Company's one of theleading providers industry on the restruc- satisfy customer needs vision.This initiative will of home security systems in turing path, has long been better than anyone else in be urr/eiled in the first part the Midwest. AAA Security aggressively marketinglong- the marketplace, of 1998. recently expanded into the distance and cellular phone Our desired brand posi. Quad Cities and Cedar senices. It is a prime tion can be stated as Complementary Services Rapids areas. Its Quad cxample of how building a follows: Since part of MidAmerican's Cities operation was strong brand impacts a brand identity deals with enhanced when company's success. essential senices, the Company took concrete steps in 1997 to offer customers senices they l

l

With the theme " Power of MidAmerican acquired Focus," the program was

, llettendorflock and implemented through Security Senices, the area's several venues, including largest lock company. direct mail to 400 key In !)ecember of 199#, mvestment professionals, MidAmerican extended its group presentations in reach into this attractive major financial markets, field with the acquisition of and scores of one-on+ne Omaha-based A/C Security, meetings with financial

-s one of the fastest-growing analysts and institutional .

security companies in the investors throughout the Midwest, in addition to United States.

Omaha, A/C Security also The " Power of Focus" 1 ope rates in Sioux City, Iowa, program was well-received

• h and throughout Nebraska by analysts and institu-and South I)akota. In totad, tional investors, with over-7 l more than 15J)00 homes whelmingly positive g- f I and businesses receive feedback. As the year .

~'

security services through a MidAmerican security unfolded, the Company's  ? 2 k ]I common stock attracted operalion. more attention.

MidAmerican plans to

[

MidAmerican's stock price k i offer other complementary senices to capitalize on rose 39 percent for the full ll  :

year. That stock apprecia-M%  :

market needs. tion, plus the dividend yield, allowed the Company to

}

Power of Focus reach its goal of being in the 3 l

MidAmerican also is differ- top quartile of returns to l entiating itselfin the invest- shareholders of publicly l l ment conununity as a part of held utilities. llecognizing l

its efforts to build share- Ihe need to continue effer- l l' holder value. This type of tise communication with l

" branding" was initiated in investors, an intensive March 1997, as l

communications program MidAmerican undertook an with investors and the effort to effectively commu- financial media will nicate its vision and strate- continue in 1998.

gies to the in\estment community.

)

4 MIDAMERICAN AT A GLANCE I

M ARKET V ALUE AND DIVIDENDS  !

ELECTRIC S ALES E ARNINGS PER ,

mmonson g CDMMON SH ARE DECLARED

. l $24 l

i 22  ; ,

i 20 18

a 16 Ii 14 I

h

=

" i 12 i=!"I":

I h!h  !

O

_t to n 2 2 93 94 95 96 97 93 94 95 96 97 93 94 95 96 97 93 94 95 96 97

- E Market Range and Close a Retail

' i = Book Value a Sales for Resale i 1997 earnings totaled MidAmerican's indicated MidAmerican's stock price 1997 electric retali sales

$135.1 million or $1.38 per annual dhidend is $1.20. appreciated by 39 percent increased 2.6 percent, share. Redeployment of MidAmerican, together with during 1997, compared with compared with 1996. Modest MidAmerican's nonregu- its predecessor companies, the Value Line Utilities customer growth and a more lated assets contributed to has paid a dhidend continu- Index appreciation of favorable cooling season an increase in earnings per ously since 1950. 22 percent. contributed to the increase.

share. Utility income was reduced in part due to rate reductions implemented during late 1996 and 1997, and due to increases in operations expenses t.icurred as the Company )

continues its strategic initiatives.

l

-.- . - . - . . . . . _ . . - - ._ - _ _. - - . .. .. . . . .. .. _ _ _ - . . . - - - . - . - _ . - - ~ . - ~ ~ - . - - . . . . - . . ~

i j

i i

(

4 i UTILITY OEBT AS A COMMON SH ARES G AS THROUGHPUT '

l PERCENTAGE OF TOT AL OUTSTANOING

(** = 'MMBM C APIT ALiZ AT1ON emnions of shares ei month endi 5 1 . .

..b h h h h-h 5!5bl5!5 0!l5!$l$

i l i 4 ,

i l

I i -

A l ,

e

!  ! o I i . \

} l l l j i ,

l

.I _

4 5

2 1 , i l

l 1

e C

\

, a L g 93 94 95 96 97 93 94 95 96 97 94 95 96 97 98 DE MacJune Sm Dec 1 m Retail u Electric a Gas 96 97 97 97 97 s Transport ** *"am '* 'a$ 2 usm! dar ng constuhon; 4 n

Retail natural gas sales in 1ko main factors have led to 1997 utility capital expendi- Since announcing a share >

1997 decreased 7.1 percent, a reduction in MidAmerican's tures totaled $167 million. repurchase program in compared with 1996 retail debt ratio compared to prior The increase in expendi- March 1997, MidAmerican sales, due mainly to warmer years. MidAmerican Energy tures from 1996 is due to has reacquired roughly 5 conditions during the first iloidings reduced long-term the significant capital million shares, or 5 percent and fourth quarter heating debt (excluding current investments MidAmerican is ofits outstanding common l

seasons of 1997. portion) by $361 million in making to employ state-of- stock. Reacquired shares 1 1997. Also, MidAmerican the-art information and are retired, benefiting recorded its investment in communications technoh>- shareholders by increasing McLeodliSA, a regional gies. We believe these tech- earnings per share and telecommunications nologies will be critical to reducing dividend costs, provider, at market value our ability to be competitive while maintaining the indi- l resulting in an increase of in the future. cated annual dividend. l

$138.3 million in common equity.

EAWNINGS OVERVIEW Illinois, MidAmerican reduced its Illinois electric senice 77te condensedfinancial statements pirsented in this prices by $13.1 million annually on November 3,1996, and summary annual report are derimffrem the auditedfinan-

$2.4 million annually on June 1,1997. Also in June 1997, the cial statements of the Company A copy of the Company's Iowa Utilities Board (IUB) approved a settlement agreement consolidatedfinancial statements uith the report of the regarding MidAmerican's lowa c:ectric senice prices.

independent accountants is included in Appendi.e A in the Accordingly, prices for lowa residential customers were 1998 Pmry Statement. forward-looking statements reduced by $8.5 million annually beginning November 1,1996, contained in this Summary Annual Report are qualified by and $10 million annually effective July 11,1997. Residential the cautionary language included in Appendi.r A in the 1998 prices will be reduced an additional $5 million annually f Prary Statement. Thefollouing discussion is an oterrier qf  !

the moir significant items in 1997 and prior years. beginning June 1,1998. Prices for commercial and industrial customers will be reduced $10 million annually by June 1, 1998, in part through pilot projects and negotiated price 1997 Eamings Earnings per share for 1997 totaled $1.38. The 8 cent increase reductions.

Modest customer growth and a hotter summer in 1997 than over the $1.30 per share reported for 1996 was due primarily to continued redeployment of our nonregulated business in 1996 (though cooler than normal) resulted in a 3 percent investments. In 1997, the Company's nonregulated subsidiaries increase in electric retail sales. The number of natural gas

[ custo. is also increased in 1997; however, the impact of

contributed 20 cents per share to continuing operations, an increase of 31 cents per share compared to 1996. As discussed milder heating seasons in 1997 than in 1996 resulted in a j below, the 1996 earnings of nonregulated subsidiaries included 7 percent decrease in retail sales of natural gas. Overall, the impact of customer growth and weather increased 1997

< write-downs of certain energy-related investments which j reduced earnings for that year. Utility earnings decreased in earnings by 5 cents per share compared to 1996.

1997 due in part to electric price reductions implemented in Beginning September 29,1997, revenues included an f

- 1996 and 1997. Additionally, utility operating expenses increase for additional recovery of costs related to the Company's energy efficiency programs. On that date, the IUB

increased as we continued strategic realignment of the Company 5 and focused on preparing for a competitive emironment. issued an order allowing MidAmerican to begin collecting all l In 1997, the Company sold assets of its railcar leasing and remaining energy efficiency costs related to prior years as repair businesses, recognizing an after-tax gain of 6 cents per well as the ongoing costs of those programs. Based on the

{

I share. An additional gain of 5 cents per share resulted from current level of such m , MidAmerican will collect approxi-mately $49 million annually in additional revenues over the

! the sale of a portion of the Company's investment in the common stock of McLeodUSA Incorporated. The transfer of shares of McLeodUSA stock to the Company's tax exempt cootiNo DEGREE D AY$ HE ATlNC DEGREE D AYS foundation contributed 3 cents per share to 1997 earnings. Based on a tese temperawe Based ce a base tempemue of 65degreesFatuenheit of 65degreesFahrenneit Also, the Company used a portion of the cash proceeds from the January 1997 sale of its oil and gas exploration and devel- lf  :

I ( __

opment business to retire long-tenn debt, significantly .

reducing interest costs for the nonregulated subsidiaries.

Reductions in MidAmerican's prices for basic electric t senices reduced earnings per share by approximately 7 cents Ia compared to 1996. As a result of a negotiated settlement in  !

,r j..

L L , _L L 93 94 95 96 97 93 94 95 96 97 E Actual = Normal

• I E Actual = Normal'

• Normal changes once each decade and when serwce temtory changes

l I

four-year period that began September 29,1997. During that Electric retail sales in 1996 increased approximately same period, other operating expenses will include an addi- 2 percent compared to 1995 sales. Modest cus.omer growth, a tional $42 million annually as the related costs are charged favorable heating season and an increase in sales that are hw to expense, dependent on weather all contributed to the improvement.

Continued restructuring of the Company in preparation for The impact of these factors was partially offset by the effect a competitive utility industry has resulted in additional costs. of cooler-than-normal weather conditions during the summm MidAmerican has increased its emphasis in marketing-related of 1996.

efforts, as well as customer senice operations, resulting in Retail sales of natural gas in 1996 improved approximately I increases in consulting costs, advertising and other related 3 percent compared to 1995 due to a colder-than-normal l expenses. Utility operating expenses for 1997 also reflect heating season and customer growth. Compared to normal, costs for the partial-year effect of the increase in energy effi- the net effect of weather on electric and gas sales reduced ciency expenses. The Company incurred $2 million in mainte- 1996 earnings by an estimated 4 cents per share.

nance expenses related to a damaging snowstorm that hit the Earnings for 1996 were also influenced by changes in elec- l senice territory in October 1997. tric and gas prices during 1996 and 1995. Electric and gas  !

In September 1997, MhlAmerican received a $15 million sales in 1996 reflect a full-year's effect of increases imple- m cash payment from Nebraska Public Power District (NPPD) mented in mid 1995. The benefit of these increases was offset f

as settlement for a lawsuit filed by MidAmerican against by the price reductions in the last half of 1996.  ;

NPPD. Approximately $12 million was refunded to The Company's gas utility operations sold certain storage ,

MidAmerican's customers. The remaining amount was gas supplies for a gain in 1996 and also received an award for $

retained by MidAmerican for recovery oflitigation costs success achieved under the Company's incentive gas procure- I incurred in 1997 and prior years. ment program. Together these transactions added 3 cents per {

As in 1996, Midm..erican received awards for successful share to 1996 earnings.

f performance under its incentive gas procurement program. In August 1996, the Company proposed a merger with IES  ;

The awards contributed 3 cents per share to 1997 earnings. Industries Inc. (IES). The Company discontinued its attempt Discontinued operations for 1997 include an additional loss to merge with IES after the IES board of directors and i for the sale of a subsidiary which developed and operated a holders of a majority of IES common stock rejected the l computerized information system for real-time exchange of proposal in favor of a pending merger with two other utility [

power in the electric industry. The Company disposed of the companies. Costs incurred in the effort reduced 1996 earnings

{

investment in October 1997. Discontinued operations reduced by 5 cents per share. e 1997 earnings by 4 cents per share.

. RETAIL ELECTRIC RET AIL G AS "N S ALES BY S ALES BY The Company's earnings pershare were $1.30 for 1996, an J U RI $ DiC T10 N JURISDlCTION

"" ** ' *"'esi gs a mm or aar saw improvement of 8 cents from the $1.22 reported for 1995.

income from continuing oparations for 1936 increased 24 cents per share to $1.43. The increase in earnings reflects the -

realization in 1996 of savings from the marger that created MidAmerican, as well as the absence of the costs which were incurred in 1995 to complete the merger and achieve the savings.

r South Dakota 1% Nebraska 1%

EARNINGS OVERVIEW 1995 Earnings During 1996, the Company redeployed certain ofits nonreg-Earnings for 1995 totaled $1.23 per share. Temperatures in ulated investments as part ofits strategy of becoming the the summer were hotter than normal, which resulted in leading regional provider of energy and complementary higher retail sales of electricity and a positive impact on services. The Company decided to sell several subsidiaries earnings of approximately 15 cents per share. The benefit of that were not meeting earnings expectations or that no longer this increase was offset by costs related to the Company's aligned with the Company's objectives. The Company's finan-cial statements reflect these operations as discontinued. 1995 merger.

During 1995, the Company incurred merger related costs In December, the Company sold a portion of its nonregu-which reduced 1995 earnings by 24 cents per share. Other lated operations to KCS Energy Inc. for warrants to purchase KCS common stock and $210 million in cash. The sale, which operating expenses for 1995 include $33.4 million for costs of a restructuring plan that included a work force reduction.

was completed in January 1997, included the oil and gas Costs 'o complete the merger totaled $4.6 million and are f exploration and development operations of the Company. The included in Other, Net in the Consolidated Statements of Company's 1996 earnings reflect a loss of 7 cents per share for Income. j the transaction.

Write-downs of certain investments of the nonregulated In addition, the Company recorded in 1996 an anticipated 7 subsidiaries reduced 1995 earnings by approximately 10 cents g loss of 4 cents per share for disposal of the computerized l Information system subsidiary sold in October 1997, per share. The investments were primarily alternative energ j l

pmjects. Earnings for 1995 also reflect 5 cents per share for

In October 1996, the Company received $15.3 million in gains on the sales of a partnership interest in a gas marketing i l

2 cash as final settlement for the sale of a former coal mining 1 1

subsidiary reflected as discontinued operations in 1982 by one organization and a telecommunications subsidiary. The pre- l

tax amount of the write-downs ($18.0 million) and the gains

of the Company's predecessors. The final settlement included f

y reacquisition by the buyer ofits preferred equity issued to the on sales ($8.5 million) are included in Other, Net in the Consolidated Statements of Income.

Company and settlement of rechunation rese ves.The l

( Company's 1996 earnings reflect a loss of 3 cents per share.

5 Purther evaluation of nonregulated investments resulted in write-downs of certain assets, primarily alternative energy l

[ projects. These write-downs, totaling $15.6 million before Common Stock Dividends and Prices j taxes, reduced earnings by 9 cents per share.

High PriceRange low Declami Close

[ 2 l 2 1997 4th Quarter $0.30 $225/8 $ 17 $ 22 ruEt Max.

INSTALLED FUEL mix- 3rd Quarter 0.30 17 5/8 16 5/16 17 1/4 C AP AClTY. GENEMON** l r

2nd Quarter 0.30 17 7/16 16 3/8 17 5/16 1st Quarter 0.30 17 7/8 15 1/2 17 1/8 Oil / Gas 1%

1996 4th Quarter $0.30 $ 161/4 $ 14 3/4 $ 15 7/8 l 3rd Quarter 0.30 17 3/4 15 3/8 15 7/8 l

2nd Quarter 0.30 17 7/8 16 1/4 17 1/4 1st Quarter 0.30 18 7/8 16 1/4 17 7/8 l t l

l

' Nuclear n:lude:. a pntly owned plant and output purtlesed under a king term power purchase comract from another fachty Coal and OWGas are owned or pntly owned faaktees

• • As a percent of 19ti7 generation

- . _ _ . ~ __m_._____._m. - _ __ --. ..----_- -..-~m __ .-.._.m___._ __..

i' CONSOLIDATED STATEMENTS OF INCOME (In thousaruls, exceptper shm armunis) liers EndedDecember31 1991 1996 1995 Operating Revenues Electric utility $1,126,300 $1,099,008 $1,094,647.

Oas utility 536,306 536,753 459,588 Nonregulated 259,675 236,851 95,106 1,922,281 1,872,612 1,649,341 a, -m

...rr .

Operating Expenses Utility:

Cost of fuel, energy and capacity 235,760 234,317 230,261 Cost of gas sold 346,016 345,014 279,025 Other operating expenses 429,794 350,174 390,648 Maintenance 98,090 88,621 85,363 Depreciation and amortization 170,540 164,592 158,050 Property and other taxes 101,317 92,630 96,350 1,381,517 1,275,348 1,249,597 Nonregulated:

Cost of sales 240,182 218,256 70,209  ;

Other 30,076 35,370 37,181  ;

270.258 253,626 107,390 Total operating expenses 1,651,775 1,528,974 1,356,987  ;

Operating lacon.e 270,506 313,638 292,354

{*

. Non. Operating Income Interest income 5,318 4,012 4,485

. Dividend income 13,792 16,985 16,954 I Realized gains and losses on securities, net - 7,798 1,895 688 G Other, net 22,111 (4,020) (10,467) ,

49,019 18,872 11,600

{*

Fixed Charges j Interest on long-term debt 89,896 102,900 105,550 l Other interest expense 10,034 10,941 0,449 l Preferred dividends of subsidiaries 14,468 10,689 8,059  :

Allowance for borrowed funds (2,597) (4,212) (5,552) l 111,803 120,327 117,500 l

l Income From Continuing Operations Before income Taxes 207,722 242,183 186,508 Income Taxes 68,390 98,422 66,803 j Income From Continuing Operations 139,332 143,761 119,705 l

1 Discontinued Operations Income (loss) from operatiens (net of income taxes) (118) 2,117 3,059 i Loss on disposal (net of income taxes) , (4,110) (14,832) - I (4,228) (12,715) . 3,059 L

Net income $ 135,104 $ 131,046 $ 122,764 Average Common Shares Outstanding 98,058 100,752 100,401 1

Earnings Per Commen Share Continuing operations $ 1.42 $ 1.43 $ 1.19 ,

Discontinued operations (0.04) (0.13) 0.03 1

$ 1.38 $ 1.30 $ 1.22 l

I Dividends Declared Per Share $ 1.20 $ 1.20 $ 1.18

~ ~ . . . .. - - . . - . - . . - - . _ - . - . . - .

/

l C0%50LlDATED BALANCE SHEETS .

b

' (in thousands) 1991 1996 As q(thrember31 ASSETS Utility Plant

$4,084,920 $4,010,947 Electric 756,874 72t 191 Gas 4.841,794 4,734,338 2,275,099 2,153,058 Less accumulated der *ciation and amortization

- ~"

2,566,695 2,581,280 Construction work in progress 55,418 49,305 2,622,113 2,630,585 Power Purchase Contract 173,107 190,897 Investment in Discontinued Operations --

166,320

. Current Assets Cash and cash equivalents 10,468 97,749 Recehables 207,471 312,015

- Inventories 86,091 90,864 Other. 18,452 11,031

~5 I. ~"

322,482 511,659 Investments 799,524 622,972 f 360,865 Other Assets 399,415

{4 .

Total Assets $4,278,091 $4,521,848 l  !

o-, CAPITAll2AT10N AND LIABILITIES 3 Capitalization Common shareholders' equity $1,301,286 $1,239,946 Preferred securities 181,763 181,769 l long-term debt (excluding current portion). . . . .

1,034,211 1,395,103 I Current Liabilities 1 Notes payable 138,054 161,990 i Current portion oflong-term debt 144,558 79,598 ,

Current portion of power purchase contract 14,361 13,718 Accounts payable 145,855 169,800 l

i Taxes accrued 92,629 82,254 l Interest accrued 22,355 28,513 Other 38,766 22,830 596,578 558,709 Other Liabilities Power purchase contract - 83,143 97,504 Deferred income taxes 761,795 722,300 Investment tax credit 83,127 88,842 l Other 236,198 237,675 l 1,164,253 1,146,321 Total Capitalization and Liabilities $4,278,091 $4,521,848 l

l

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousawls)

Yeon EndedIkcember 31 1997 1996 1995 Net Cash Flows From Operating Activities Netincome $13L104 $ 131,046 $ 122,764 Adjustments to reconcile net income to net cash provided:

Depreciation and amortization 197,454 190,511 181,636 Net increase (decrease) in deferred income taxes and investment tax credit, net , (71,1 91) (7,894) (961)

Amortization of other assets 33,761 20,541 19,630 Cash proceeds from accounts receivable sale 70,000 - -

Capitalized cost of realestate sold 1,859 3,568 1,744 Loss (income) from discontinued operations 4,228 12,715 (3,059)

Gain on sale of securities, essets and other investments (9,996) (10,132) (1,050)

Other-than-temporary decline in value of investments 3,795 15,566 17,971 Impact of changes in working capital, net of effects from discontinued operations 28,098 (53,752) (21,024)

Other (867) 19,218 19,369 Net cash provided 392,245 321,387 337,020 nit Cash Flows From Investing Activitier  !

Utility construction expenditures (166,932) (154,198) (100,771)

Quad Citks Nuclear Power Station decommissioning trust fund (9,819) (8,607) (8,636)

Deferred energy efficiency expenditures (12,258) (20,390) (35,841)

Nonregulated capital expenditures (14,066) (55,788) (12,881) l" Purchase of securities (159,770) (198,947) (164,521)

Proceeds from sale of securities 180,890 243,290 94,493 -

Proceeds from sale of assets and other investments 57,433 33,285 34,263  :

Investment in discontinued operations Other investing aethities, net 181,321 (1,360)

(5,984) (9,752) y 8,308 6,946 ,

Net cash provided (used) 55,439 (159,001) (286,700)

{

N:t Cash Flows From Financing ActMtles Common dhidends paid (117,605) (120,770) (118,828)

Issuance of long-term debt, net of issuance cost -

99,500 12,750 Y Retirement of lon0 term debt, including reacquisition cost (122,300) (136,616) (110,351) ",

Reacquisition of preferred shares (6) (58,176) (10)

Reacquisition of common shares (96,618) - - o issuance of preferred shares, net ofissuance cost -

96,850 - 3 Increase (decrease) in MidAmerican Capital Company unsecured revolving credit facility (174,500) 44,500 95,000 1ssuance of common shares - -

15,083 Net increase (decrease) in notes payable (23,936) (22,810) 60,300 Net cash used 534,965) "U,522)

( .(46,056)

N1t lacrease (Decrease) in Cash and Cash Equivalents (87,281) 64,834 4,264 Cash and Cash Equivalents at Beginning of Year 97,749 32,915 28,651 Cash and Cash Equivalents at End of Year $ 10,468 $ 97,749 $ 32,915 Additional Cash Flow Information:

Interest paid, net of amounts capitalized S 96,805 $ 107,173 $ 116,843 Income taxes paid $ 130,521 $ 85,894 $ 69,319

ACCOUNTANTS' AND M AN AGEMENT'S REPORTS Report of Management Report ofIndependent Accountsnts To the Shareholders of MidAmerican Energy Management is responsible for the preparation of all informa-tion contained in this summary annual report, including the lloldings Company:

We have audited, in accordance with generally accepted condensed financial statements. The statements and related fmancial information have been prepared in cenformity with auditing standards, the consolidated balance sheets and statements of capitalization of MidAmerican Energy lloldings generally accepted accounting principles. In the opinion of management, the fm' ancial position, results of operation Company and subsidiaries as of Pecember 31,1997 and 1996, and cash flows of the Company are reflected fairly in the and the related consolidated statements ofincome, retained condensed statements. The consolidated financial statements, earnings, and cash flows for each of the three years in the from which the information contained herein was derived, period ended December 31,1997, appearing in Appendix A have been audited by the Company's independent public to the proxy statement for the 1998 Annual Meeting of Shareholders of MidAmerican Energy Holdings Company (not accountants, Coopers & Lybrand L.LP.

The Company maintains a system of internal controls presented herein). In our report dated January 23,1998, also which is designed to provide reasonable assurance, on a cost-

, appearing in that proxy statement, we expressed an unquali-effective basis, that transactions are executed in accordance fled opinion on those consolidated financial statements.

f with management's authorization, the financial statements

% In our opinion, the information set forth in the accompa-j are reliable and the Company's assets are properly accounted

nying condensed consolidated financial statements is fairly for and safeguarded. The Company's internal auditors contin-

$ stated, in all material respects, in relation to the consolidated 5 ually evaluate and test the system of internal controls and financial statements from which it has been derived.

actions are taken when opportunities for improvement are 3 de"ttcmd. Mana,menuwueu s thauhnysten onntental 6 -

- 4W# controls is effective.

The Audit Committee of the Board of Directors, the

[ members of which are directors who are not employees of 5 Coopers & Lybrand LLP.

the Company, meets regularly with management, the internal i Kansas City, Missouri auditors and Coopers & Lybrand LLP. to discuss accounting, l January 23,1998 auditing, internal control and financial reporting matters.

I The Company's independent nublic accountants are appointed 5

' annually by the Board of Directors on recommendation of the Audit Committee. The internal auditors and Coopers &

Lybrand LLP. each have full access to the Audit Committee, without management representatives present.

\

Stanley J. Bright Alan L Wells Chairman, President and Senior Vice President-Chief Executive Officer Finance and Chk f Financial Officer

. _ - ~ _ _ . - . _ _ _ _ - . . . - - . - - . _. . _ - - - . _ - - - . - - . - _ - -

UNAUDITED UTILITY FIVE-YEAR ELECTRIC STATISTICS i

h 11ers Emini M 31 1997 1996 1995 1994 1993 Revenues (in thousands)

Residential $ 417,845 8 415,954 4 434,105 $ 400,346 $ 386,047 Smallgeneral senice 246,927 237,466 252,427 253,703 242,205 i

Large general senice 249,444 241,172 219,075 204,481 193,616 Other sales 62,261 60,476 t>0,160 57,731 56,198 i Sales for resale 124,741 121,452 105,472 84,260 104,461 Total from electric sales 1,101,218 1,076,520 1,071,239 1,000,521 982,527

, Other electric revenue 25,082 22,488 23,408 21,139 20,443

$ 1,126,300 $ 1,099,008 $ 1,094,647 $ 1,021,660 $ 1,002,970 Sales (KWhinthousands)

Residential 4,740,688 4,652,031 4,767,608 4,500,265 4,475,883 Small general senice 3,725,873 3,565,459 3,920,792 4,062,993 3,937,360 Large general senice 6,204,087 0,067,325 5,351,933 5,091,685 4,851,493 Other 995,295 988,022 957,463 938,620 930,117 Sales for resale 6,987,268 6,727,326 5,509,161 3,605,092 5,566,208 l 22,653,211 22,000,163 20,506,957 18,198,655 19,761,001 Revenues From Sales as a % of Total  %

Residential 37.9 38.6 40.5 40.0 39.3 1 Smallgeneral senice 22.4 22.1 23.6 25.4 24.7 Large general senice 22.7 22.4 20.5 20.4 19.7 Other 5.7 5.6 5.6 5.8 5.7 l' l Sales for resale 11.3 11.3 9.8 8.4 10.6 100.0 100.0 100.0 100.0 100.0  ;;

i Sales as a % of Total Residential 20.9 21.1 23.2 24.7 22.7 O Smallgeneral senice 16.5 16.2 19.1 22.3 19.9 5 Large general senice 2L4 27.6 26.1 28.0 24.5 ,

Other 4.4 4.5 4.7 5.2 4.7 I 1 Sales for resale 30.8 30.6 26.9 19.8 28.2 =

100.0 100.0 100.0 100.0 100.0 g Retail Electric Sales by Jurisdiction (%) s lowa 88.6 88.7 88.4 88.6 88.7  ;

lilinois 10.7 10.6 11.0 10.9 10.9  ;

South Dakota 0.7 0.7 0.6 0.5 0.4 100.0 M0.0 100.0 100.0 100.0 Customers (End ofyear)

Residential 563.189 557,637 551,384 548,100 541,220 Small general senice 73,488 73,022 72,616 69,905 68,829 Large general senice 1,000 982 945 743 744 Other 10,047 9,937 0,744 9,518 9,572 Sales for resale 47 55 55 59 63 647,771 641,633 634,744 628,331 620,428 Annual Average Per Residential Customer Revenue per kWh (Cents) 8.81 8.94 9.11 8.90 8.62 KWh sales 8,463 8,392 8,670 8,265 8,310 Coollng Degree Days Actual 883 788 1,112 912 813 Percent warmer (colder) thm normal (7.5) (17.5) 14.1 (6.5) (16.4)

Electric Peak Demand (Net MW) 3,548 3,537 3,553 3,226 3,284

~

Sanmer Net Accredited Capability (MW) 4,293 4,301 4,311 4,145 4,072 ww

UN AUDITED UTILITY FIVE-YEAR G AS STATISTICS 1MI 1996 1995 1994 1993 kars Emid December 31 Revenues (In thousands) $287,171 $319,359

$339,924 $338,605 $279,819 Residential

• 150,913 152,661 153,616 128,501 142,894 Smallgeneralsenice 15,201 17,670 23,280 36,729 37,761 Large general senice 2,914 2,050 5,303 5,514 10,376 Sales for resale and other ~

510,700 511,941 436,903 472,508 518,409 Total revenue from gas sales 20,443 20,155 16,677 12,842 13,457 Gas transported 5,163 4,657 ,.6,008 6,865 7,123 Other gas revenues _

$536,306 $536,753 $459,588 $492,015 $538,989 m'

Throughput (MMBtu in thousands) l Sales 57,039 61,732 57,153 54,732 60,612 Residential 31,066 33,642 32,786 32,677 34,504 i Small general sen-ice 3,920 4,634 6,222 8,253 9,681 l Large generalsenice 1,800 977 3,582 3,231- 4,305 Sales for resale and other ,

93,825 100,985 99,743 98,893 100,102 Total sales 58,804 54,618 50,695 43,293 39,570 Gas transported .

2 152,629 155,003 150,438 142,186 148,672 I

. Revenues From Throughput as a % of Total

Residential 64.0 63.6 61,7 59.2 60.0 29.4 28.4

Smallgeneral senice 28.7 28.9 28.3 7.1

< Large general senice 2.9 3.3 5.1 7.6 0.5 0.4 1.2 1.1 2.0  :

Sales for resale and other

Gas transported 3.9 3.8 3.7 2.7 2.5 100.0 100.0 100.0 100.0 100.0

! h Sales as a % of Total (Excludes gas transported) r

Residential 60.8 61.1 57.3 55.3 55.6 i -

Small general senice 33.1 33.3 32.9 33.0 31.6 l  ! Large general senice 4.2 4.6 6.2 8.4 8.9 S Sales for resale and other 1.9 1.0 3.6 3.3 3.9 l [ 100.0 100.0 100.0 100.0 100.0 l $ Retall Gas Sales by Jurisdiction (%)

s Iowa 79.1 78.0 77.1 76.6 74.5 Illinois 10.4 11.0 11.6 11.9 11.4 South Dakota 9.8 10.3 10.6 10.8 5.4 Other 0.7 0.7 0.7 0.7 8.7 ,

100.0 100.0 100.0 100.0 100.0 Customers (End of year)

Residential 558,501 650,786 541,732 535,301 526,863 Small general senice 58,739 58,059 57,207 55,855 54,972 Large general senice 767 821 830 876 868 l

Gas transported and other 569 504 1,128 171 128 618,576 610,170 600,897 592,203 582,831 Annual Averages Per Residential Customer Revenue per MMBtu $ 5.96 8 5.49 8 4.90 $ 5.25 8 5.27 MMBtu sales 103 113 106 103 111 Heating Degree Days Actual 6,872 7,445 6,841 6,565 7,097 Percent colder (warmer) than normal 1.6 10.1 0.9 (3.5) 3.2 Cost per MMBlu $ 3.69 $ 3.42 $ 2.80 $ 3.30 $ 3.36 l

UNAUDITED FIVE-YEAR FINANCIAL STATISTICS nara Ended December.11 1997 1996 1995 1994 1993 Earnings Statistics Earnings per average common share Continuing operations:

Utility operations 3 1.22 $ 1.54 8 1.24 $ 1.12 $ 1.29 Nonregulated aethities 0.20 (0.11) (0.05) 0.13 0.09 Discontinued operations (0.04) (0.13) 0.03 0.01 (0.03)

$ 1.38 8 1.30 $ 1.22 $ 1.22 $ 1.39 Average shares of common stock outstanding (In thousands) 98,058 100,752 100,401- 98,531 97,762 Return on average common equity (%) 10.8 10.6 10.1 10.1 11.6

' Cash dhidends declared per common share $ 1.20 $ 1.20 $ 1.18 $ 1.17 $ 1.17 Common dhidend payout ratio (%) - 87 92 97 96 84 Ratio of earnings to fixed charges Holdings 3.0 3.2 2.8 2.8 2.8 MidAmerican 3.1 4.1 3.4 3.3 3.4 Ratio of earnings to fixed charges and Cooper  ;

Nuclear Station debt service o IIoldings 2.9 3.1 2.7 2.7 2.8 i MidAmerican 3.0 4.0 3.3 3.2 3.3 [

Quarterly earnings per average common share  ;

outstanding z ist quarter $ 0.34 8 0.51 4 0.35 8 0.45 8 0.44 2nd quarter 0.25 0.29 0.25 0.22 0.22 -

3rd quarter 0.48 0.22 0.36 0.36 0.52 3 4th quarter 0.31 0.28 0.27 0.19 0.20 g Balance Sheet Statistics 5

$ 4,278 $ 4,522 4 4,470 $ 4,389 Total assets (In millions) $ 4,352

[

Capitalization (in millions)

Common shareholders' equity $ 1,301 $ 1,240 $ 1,226 $ 1,204 $ 1,181 Preferred shares, not subject to t mandatory redemption 32 32 90 90 110  :

Preferred shares, subject to l

mandatory redemption 150 150 50 50 50 S 1,034 '

Long-term debt (excluding current portion) 1,395 1,403 1,398 1,341  !

Capitalization ratios (%)

Common shareholders' equity 51.7 44.0 44.3 43.9 44.0 l Preferred shares, not subject to mandatory redemption 1.2 1.1 3.2 3.3 4.1 l Preferred shares, subject to l . mandatoryredemption 6.0 5.4 1.8 1.8 1.9 Long-term debt (excluding current portion) 41.1 49.5 50.7 51.0 50.0 l Book value per common share at year-end $ 13.65 $ 12.31 $ 12.17 8 12.08 8 12.07 Utility construction expenditures (In thousands) $166,932 $154,198 $100,771 $211,669 $215,081 Other Net cash from utility operations less j dhidends as a % of construction 153 127 108 09 86 l Number of full. time employees Utility 3,467 3,370 3,331 4,077 4,196 Noncegulated 163 236 271 274 347 P-t y

DIRECTORS Nolden Gentry Nancy L Seifert John W. Aalfs John W. Cak. ton Des Moines, Iowa Cedar Rapids, Iowa Sioux City, Iowa lowa City, Iowa Partner, Law Firm of Brick, Executive Vice President, President, Aalfs Vice President, Statewide Ilealth Senices, Gentry, Bowers, Swartz, James F. Seifert & Sons Manufacturing,Inc.

University ofIowa Stoltze, Schuling & Levis, LLC.

(57/9)

P.C. (68/12)

(67/5)

Stanley J. Bright (60/14)

W. Scott Tinsman Des Moines, Iowa Frank S. Cottrell Moline, Illinois James M. Hoak, Jr. Davenport, Iowa Chairman, President Dalle.s, Texas Coevner and Vice President, and CEO, Vice President, General Counsel and Secretary, Chairman, Twin-State Engineering and MidAmerican Energy Deere & Company lloak Capital Corp. ChemicalCompany lloldings Company (55/5) (M/14) (65/9)

(57/11)

Jack W. Eugster Richard L Lawson Leonard L Woodruff

- Ross D. Christensen Minneapolis, Minnesota Washington, D.C. Fort Dodge, Iowa Waterloo, Iowa

[

• Chairman, President and President and CEO, President, Woodruff Orthodontist in Privne NationalMining Association Construction

Practice CEO, Musicland Stores l l (57/15) Corp. and General USAF (Ret.) (69/25) 5 (52/10) (GM))

l Russell E. Christiansen

[ {

Dakota Dunes, South Dakota Mel Foster, Jr. Robert L Peterson f Retired Chairman, Davenport, Iowa Dakota City, Nebraska

MidAmerican Energy Chairman, Mel Foster Co . inc. Chairman, President i lloidings Company (70/25) and CEO,IDP, Inc.

! (62/38) (6V7)

Y 1

2 0

(age / years of service)

0FFICERS 1

l Stanley J. Bright Jack L Alexander l Chairman, President Vice President-and CEO Iluman Resources l

i (57/11) (50/25)

I Ronald W. Stepien ames Ameg Vice President-Executive Vice President-Engineering and Transmission and Operations Support Energy Delivery (51/17)

(51/l)

Brent E. Gale Wayne 0. Smith V ce President-Executive Vice President-Regulatory Law Generation (473;)

(54/1) _

Ronald J. Giaier f

John J. Cappello Vice President and Treasurer  :

Senior Vice President- (49/l)  ;

Retail  ?

Keith D. Hartje z 51/2)

Vice President-  ;

Corporate Communications  !

David J. Levy Senior Vice President- (4&^22) o Technology and Customer Stephen E. Hollonbeck I SeMee Vice President (43f21) (4g,ig) a John A. Rasmussen, Jr. James J. Howard s Senior Vice President and Vice President- $

2 General Counsel Regulatory Affairs (52/11) (5Vd3)

""I 'Ia "

Alan L Wells Vice President and Senior Vice President-Com> rate keretary Finance and Chief Financial Ofncer (44/I0}

(3 E 3, gg, a,,,

Vice President-Beverly A.Wharton Financial Services Senior Vice President (45/18)

(44f21)

Larry M. Smith Vice President and Controller (42/12)

SH AREHOLDER INFOR;1 AT10N 1997 Annual Meeting Common Stock Listing Stock Bought or Sold Close to Replacement of Dividend This year's annual meeting Common stock of Record Date Check will be April 29, beginning MidAmerican Energy Stock is sometimes bought If you do not receive a dhi-at 10 a.m. at the Polk IIoldings Company is traded or sold soon before a record dend check, please notify County Convention Complex on the New York Stock date, but the transaction is Shareholder Senicesin in downtown Des Moines, Exchange under the ticker not transferred by the writing so that payment on Iowa. Shareholders of symbol MEC. Daily newspa- broker in time for the dhi- your check can be stopped, record Feb. 20,1998, will be pers carry quotes on the dend check to be issued to When the bank confirms the eligible to vote on matters stock. the new owner. If you are stop order, a replacement to be addressed at the the new owner, your broker check will be issued.

annual meeting. Dividend Reinvestment and will claim the payment from Stock Purchase the previous owner for you. Transferring Sto;k Duplicate Annual Reports The Company's Shareholder To transfer stock, endorse Duplicate mailings of annual Options Plan provides indi- Safekeeping the certificate or Stock

_ reports occur when the viduals with a convenient Safekeeping is a convenient Power Form exactly as the names on your stock certifi- method for purchasing addi- feature of the Shareholder name appears on the face of f

cates differ, or when other tional shares of common Options Plan designed for the certificate. Your signa-

individuals in your home , stock by reinvesting their shareholders who M fer to ture must be guaranteed l own stock. Duplicate annual cash dhidends, by making have their shares wid on with a MEDALLION 5 report mailings are costly, so optional cash purchases, or account rather than receive IMPRINT affixed by a finan-please notify us in writing both. A prospectus a stock certificate. You do cialinstitstion enrolled in

{

about them. List which describing the plan may be not have to reinvest your the MEL)ALLION f obtained by contacting dhidends to take advantage PLOGAM, Fillin the name,

- account numbers should not receive annual report mate- Shareholder Senices. of safekeeping. When you address and Social Security rials. Each sacount will sign up for safekeeping, you number of the person to

" whom the shares are to be continue to receive separate Record and Payment Dates will receive a safekeeping dhidend checks and proxies Remaining record dates for receiptin place of your transferred. Send the certifi-

{~

as required by the Securities 1998, to be set by the board certificate. Contact cate to us, or to our co-of directors, are expected to Shareholder Senices for transfer agent if you prefer.

! and Exchange Commission.

' To do this, we recommend be May 8, August 8 and additionalinformation.

Form 10-K Iteports for November 7. Corresponding registered mail, which MidAmerican Energy dividend payment dates are Direct Deposit of Dividends allows you to insure the Holdings Company expected to be June 1, You may elect to have your contents of the package. For The Form 10-K will be avail- September 1 and December 1. dhidends electronically registered mail, we suggest able after March 31.To deposited into your a value of 2 percent of the request a copy, please write checking or savings account current market price, which or call Shareholder Senices. at your bank, savings and is the fee you willbe loan institution or credit charged by the insurance union. Direct deposit of dhi- company to teplace certifi-dends is a safe, efficient and cates if they become lost.

reliable means of recehing your dhidends. You may obtain an application form by contacting Shareholder Senices.

- . . - - -- . - . - - - _ . _ . . - - _ - . ~ . . - . . - . - - - - - - - - - -

d Lost. Destroyed or Stolen Stock Held in Brokerage Address Changes Preferred Stock Transfer Certificate Accounts (" Street Name") Please notify us of your Agent Please contact Shareholder When you purchase your former and current MidAmerican Energy Servicesimmediatelyif a stock and it is held for you addresses. For your protec- lloidings Company f

certificate becomes lost, by your broker,it is listed tion, we ask that changes be Shareholder Senices stolen or destroyed. A stop with the Companyin the reported to us in writing. P.O. Box 9244 transfer will be placed on broker's name, or " street 666 Grand Avenue, our records to prevent an name " The Company does Shareholders Services by 28thFloor unauthorized person fmm not know the identity of Telephone Des Moines,IA 50306-9244 transferring shares. An indiddualshareholders who The Company maintains a indemnity bond must be hold their sharesin this toll-free number for you to Executive Offices purchased byyou to replace manner;we simply know call. If you live outside the MidAmerican Energy stock certificates. The cost that a broker holds a certain Des Moines area, the Iloldings Company of this bond is 2 percent of number of shares, which number is 1-800-247 5211. If P.O. Box 657 the current market value. As may be for any number of youlive in the Des Moines 666 Grand Avenue -

a security measure, keep customers. Accounts held in area, you may call 2812560. Des Moines,IA 50303-0657 5 certificatesin a safe place street name are not eligible h {

and do not endorse one to participate in the Investor Relations  ;

untilyou are ready to Company's Shareholder To make changes to or be  !

transfer it. Once endorsed, Options Plan. Also,you added to our finan : 5 the certificates could be receive all diddend analyst mailing list,, ease

{

improperly transferred if lost or stolen.

payments, annual reports call 515-2812421.

y and proxy materials through - - !

a your broker. Regular quar- Common Stock Transfer "

terly financial reports may Agents I be obtained directly from MidAmerican Energy l the Company by contacting IIoldings Company

{ '

Shareholder Senices. Shareholder Senices  ?

P.O. Box 0244 5 Taxpayeridentification Number 666 Grand Avenue, The Internal Revenue Senice 28th Floor requires shareholders to Des Moines,IA 50306-9244 furnish a taxidentification number to every companyin Continental Stock Transfer which they own shares. and Trust Co.

Generally,it is your Social 2 Broadway,19th Floor i i

Security number (a W 9 New York, NY 10004 '

Form is required to change a taxpayeridentification number). If the number i does not appear on your dhi-dend check stub or reinvest- .

i ment statement, or ifit is '

incorrect, please contact Shareholder Senices.

l

GLOSSARY OF TERMS Megawatt (MW) Return on Average Federal Energy Regulatory Book Value One megawatt equals Common Equity The value of a company Commission (FERC) one million watts, or The ratio of netincome to determined by subtracting Anindependent agency 1,000 kilowatts. ommon equitywhich within the U.S. Department its liabilities from its assets.

of Energy, FEHC is vested measures the rate of return Usually expressed on a per with broad regulatory MMBtu on the common share-share basis.

One million BritishThermal holders' investment.

authority. Virtually every i

Capitalization facet of electric and natural Units (Btu). A Btu is a '

standard unit for measuring South Dakota Public Utilities The total oflong-term debt, gas production, transmission and sales conducted by heat energy.One thousand Commission (SDPUCl preferred stock and cubic feet of naturalgas The South Dakota common stock equity. private investor-owned utili-contain approximately one governmentalagency that ties, corporations or public marketing agencies is under MMBtu of energy, has authority to regulate Customer Loyalty commission puniewif public utilities operating liefined as those customers any aspect of their opera- Office of Consumer in the state.

who say they are likely to stay a customer of a - tions is conducted in inter- Advocate (DCA) f state commerce. A dhision of the Iowa Throughput

company, even when given a Department of Justice The total volu11e of natural 3 ; choice among suppliers.

established to investigate gas moved through the l $ lllinois Commerce Commission (ICC) the legality of all rates, Company's distribution 5 Dividend Payout Ratio i

j The proportion of earnings The agency ofIllinois charges, rules and practices system, including gas sold and gas transported.

a company pays to share- government which has of utilities operatingwithin f

- holders in the form of dhi- authority to regulate the the state ofIowa and to e

retail sales, safety and institute chilproceedings to Total Shareholder Return

dends.The annual dhidend A percentage expression of i per share dhided by the senices of public utilities address any illegality.

• operating in the state. the annualchange in worth earnings per share for the same period prosides the Peak Demand of shareholders' investment

{

Iowa Utilities Board (108) The greatest demand which in a company. Calculated by

? payout ratio.

The Iowa government occurred at a specific time. combining dhidend yield f' Earnings per Average Share dhision which has authority and common stock price

! The earnings available to to regulate the retail sales, Retail Competition appreciation.

t common stock for a stated safety and senices of A situation in which end use public utilities operatingin customers or gmups may Value Line,Inc.

period divided by the weighted average number of the state. select energy supplies from Publishes The lhlueLine shares outstanding among a number of different InrestmentSurrey Provider during the perkxl. Kilowatthour(kWh) providers. of research on stocks, The basic unit of electric mutual funds, etc. Indexes energy equal to one kilowatt Retained Earnings the financial performance (1,000 watts) of power The net accumulated earn- ofindustry groupsincluding supplied to or taken from an ings of a business which electric utilities.

electric acuit steadily for have not been distributed one hour. to shareholders and have not become a part of the common stock of the company.

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MidAmerican ENERGY 666 Grand Avenue l

P0. Box 657 Des Moines, Iowa 50303-0657 http://wwwmidamerican.com

\

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