ML20151Y583
| ML20151Y583 | |
| Person / Time | |
|---|---|
| Site: | Quad Cities  |
| Issue date: | 12/31/1996 |
| From: | Bright S, Christiansen R External (Affiliation Not Assigned) |
| To: | |
| Shared Package | |
| ML20151Y560 | List: |
| References | |
| NUDOCS 9809180285 | |
| Download: ML20151Y583 (34) | |
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g CORPORATE PROFILE M l 3...i.d.A. merica n MIDAMERICAN ENERGY HOLDINGS COMPANY IS A UTILITY HOLDING COMPANY headquartered in Des Moines, Iowa. The Company has three subsidiaries: MidAmerican Energy Company, MidAmerican Capital Company and Midwest Capital Group, Inc.
MidAmerican Energy IIoldings has assets of $4.6 billion and annual revenues of $1.9 billion.
M l
i MidAmerican Energy, Iowa's largest utility, provides electric and natural gas sersice in a 10,600-square-mile area with a population of 1.7 million. The service area includes much of Iowa and portions of i Illinois, Nebraska and South Dakota. The largest communities served by MidAmerican are Des Moines, Cedar Rapids, Sioux City, Waterloo, ;
CI ux City 1
MidAmencan's energy dekv- loWa City and Council Bluffs, Iowa, the Quad-Cities area of Iowa and ;
ery group and vanous sup- ,
porounct.ons a,e easeo in Ilh.nois, and Sioux Falls, South Dakota. MidAmerican provides service l s,oux c ty. iocateo on iowa
- western border.
to 642,000 electric customers and 610,000 natural gas customers. ,
I MidAmerican Capital has assets of $733 million in nonregulated h$k weg % ~
businesses and investments. Operating subsidiaries of MidAmerican A ~ :
7 Capital are: AmGas Inc., InterCoast Power Marketing Company, .g p,'j ..
]
InterCoast Trade & Resources, Inc., Cornhusker Railcar Services, Inc.
. en
. . Y .
l aml UNITRAIN, Inc. Mid imerican Capital has investments in telecom-Quad Cities l munications companies and a portfolio of passive investments. Tne eiecinc generat,on ano Midwest Capital is a regional business development company with [,'(,'}",','*'[',*,*,(( !
assets of $62 million. nert onre oveo-cees afE'a of Iowa and llhnors MidAmerican Energy IIoldings Company has 60,000 shareholders living in all 50 states and 30 foreign countries and 3,600 full-time employees. The Company's trading symbol on the )
New York Stock Exchange is MEC. In addition to headquarters in Des Moines, the Company has management offices in Davenport, Iowa, and Sioux City, Iowa. Information on MidAmerican is available on the Internet at http://www.midamerican.com.
q 'e A rs Jm
mm -- _ _ _ _ - - - _ _ _ - - - - - - - - _ _ _ _ __ - __
ILETTER TO SHAREHOLDERS I
I I
I TO OUR SHAREHOLDERS: As we reflect on the substantial changes acco our goals for the future, we are confident that MdAmerican Energy Compa will position the Company for success in the rapidly changing energy industry.
We are intent on becoming the leading provider of energy and complementary areas we presently serve and the sunounding region. From our strong dd base of op comm:tted to furthering the growth and success of the communities we serve, to p range of products and services to our customers and to obtaining new markets Consistent with this strategic direction, we have begun tod build divesti-a stronger m tion and have initiated the restructuring of our nonregulated assets. The id latter step ture of certan assets, is necessary to align nonregulated activities with our basic s the f:rancial resources to invest in regional growth opportunities.
Our ef+ orts in 1996 were focused on six primary goals:
MidAmerican.
. Re-establishing a smoothly functioning organization following the 1995 merger that fo d developing ways to address all
. Renewing and improving relationships with our large customers, an customer issues promptly and effectively.
. Improving our earnings and dividend payout rrtio.
. Realizing improvement in our common stock price.
. Making significant progress in the regulatory area toompetitive better position.
position MidAmeric
. Achieving relief from government-mandated costs, also to improve our c First, our financial performance. Earnings per share for 1996 increased 6.6 to $1.30, compared with $1.22 per share for 1995. A!though we had hope greater improvement, the divestment of oil and gas production operat to the value of other nonregulated investments, resulted in a charge to e of 21 cents per share. The sale of InterCoast Oil and Gas Company to KC Inc., completed early in 1997, yielded after tax proceeds of $180 milhon.
. Retail natural gas sates increased, largely due to very cold weather that occurred both early and late in 1996. However, the substantially cooler-than-normal summer weather reduced the growth retail electric sales, which increased 2 percent, compared witn 1995.
Customer growth continued in our service territory. During 1996, we 6,900 electric customers and 9,200 natural gas customers. While the increased earnings resulted in some improvement in the dividend pay ratio, further improvement is needed. ;
Russell E. Christiansen Chainnan
-,g-_
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I Illericairi l The uncertainties associated with the outcome of regulatory activity in Iowa and lilinois have resulted in concerns on the part of investors regarding the Company's future earnings and dividend growth prospects. These concerns contributed to the relative weakness in our common stock price in 1996. With a year-end 1995 closing price of 16 %, the price continued to improve for a brief period during 1996 to the $18-$19 range before declining to $15 % at year-end. The settlement of our electric regulatory plan in Iowa, announced in January 1997, and discussed below, substantially lessened the degree of these uncer-tainties. Our ability to achieve sustained earnings progress is essential to future dividend gruwth and stock price improvement.
During 1996, we continued the restructuring of MidAmerican to more effectively meet customer needs and prepare for competitive markets. A key restructusng step was the formation of our new hold ng company, MidAmerican Energy Holdings Company. Under the new corporate structure, M,dAmerican will have increased flexibility to operate more effectively as competition increases. The three wholty owned sub-sidiaries under our holding company are: MidAmerican Energy Company, which conducts our electric and natural gas utility operations, and MCAmerican Capital Company and Midwest Capital Group, Inc.,
Which are involved in nonregulated businesses and economic development.
Last summer, we established a new marketing business group by combining separate electric and gas marketino organizations. This change has already led to signifi-cant advances in our relationships with large customers. In November, we announced further changes in our organization to achieve improved efficiency and economy, and an enhanced quality of customer service. These more recent changes included the formation of a sing!e energy delivery unit, combining the formerly separate electric end gas energy delivery operations, and the combination of the information technology and customer service groups.
These new groups report to Ronald W. Stepien, who was elected executive vice president-marketing and energy delivery. The more complete integration of these critical parts of our Company is essential to our abihty to meet customers' total energy needs. Increasing'y, customers tell us they want comprehensive energy service, not individual electric and natural gas services.
Early in 1996, we made a substantial commitment to a new, state-of-the-art customer information system for MidAmerican. This system, which will be fully opera-tional in 1998, will greatly enhance our ability to effectively respond to customers.
MidAmerican is a major investor in a full-service telecommunications company, McLeod, Inc., based in Cedar Rapids, Iowa. Dunng 1996, we also invested sueg ar-im Pirsident and Chitf Executice Officer i
. . . o s ,. v -niro .
TO SHAREHOLDERS l LETTER in RACOM, a Marsna!l town, Iowa-based company and regional leader in mobile commun l
Security Systems, Inc., a Des Moines-based provider of secunty services. To better serv to have the flexibility to succeed in highly competitive matets, we must take A Message from full advantage of information and communications techno!ogies.
Russell E. Cipistiansen in an additional organizational change in 1996, we formed a h challenge of summanz> separate power generation business un.t in order to more effectively ing one's thoughts em tiu- support the future development of this segment of our energy business.
occashm or retirement fnnn . l During 1996, the movement toward competitive markets in the I Gyearcareer m the utilhy t
industry might he ammunx electric industry accelerated. virtua!iy every state is trying to determ:ne how and if there were a sense of when to replace regulated markets w;th compeave markets. We are working
! muhimlence. Such is met !
the case with me. The qualy within the regulatory and legislative arenas in the states we sente and at the I
ty of life for the natomers federal level in Washington, D.C. to help shape tne new e!ectnc market.
' we sitte is better because We achteved a rna,or goal in 1996 when the Iowa Legislature of the gen.wl work we eks. -
There has been plent. ( of amended the energy effcency law to permt greater plan f exbilty and to l
chamle.mul challenge in eliminate the spend.ng mandate for energy effoency prog arns. This type of \
JK yent% atui we att on the- mandate would be a major disadvantage for M;dAmencan if other energy l verge if even moer anunath.
change, an an era of conigw+ supphers who did not face th:s requirement could compete wtn us.
Ih"' ""w inantets is aix n" Also last year, we fded an innovative e!ectnc regu!atory p!an
' Io unfbld. MidAmerican ahe an ody RaMon d w pnces had N E
l Energy Omrpany is a pnmi- .
net of1hese chamges..asul levels We expect in a compet!tive environment. The p!an also wd provide theimwem of simping a fiexibiMy which is needed to dea! wth industrial and commercial customers as new ">mpany has been competition intensifies. We fDed the plan wth regulatory agencies in Iowa and a rew ng e ..
nois. As of this wnting, a modfied version of our plan is pend:ng before the I of m,> can>er has twen to : lowa Utilities Board. This plan includes the key e:ements of our orig:na! ,
work with esirpkryces who proposal, and reflects agreements we have reached wttn the Off:ce of the !
uphold the inufdions of . '
- service to (mr omtomers. . Consumer Advocate and other interested groups. The Encis Commerce Their performmwe is exem- - Commission did not consider the ments of our plan. but instead conducted a piary arut at times heruir.
. trad;tional rate-reduction proceeding that resuded in a two-Step elecinc rate I am pnnut to have hsen
~ abh to spemi a caper work. L reduction for our l!!inoIS customers.
ing aiut associating with - As we work to improve our financia! per'ormance and comoe%ve i them. It has iruhwi !=en '
position, we will continue to pursue achievement of these longer-term goais: l
- g6tunt work. ] -
. Achieve a tota! returri to sha'eholdets (tne combination of annua! dividends !
~ ~
.. Q'? \
and stock pnce changes) at the top quarue indust y level
. Reach an industry leadersnio pcsCon in service quaty and pace.
~
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' C 0 Ci 0 A N N' U A' L Q O D O ' O @ 5
. Id HieriCatt
. Redefine our markets for, and the ranges of, our products and services, leading to improved growth prospects through increased market share and breadth of market sen/ ices.
. Effectively address information technology issues that w:ll be crincal to our ability to take advantage of competitive opportun, ties.
. Substantially complete the process of dealing with regulatory and legislative issues that must be addressed in tne transition to competitive markets.
. Continue to implement strategic changes needed to maintain an industry leadership position. '
To achieve these goals, we rely on a skilled and experienced group of employees. During 1996, they again demonstrated their ability to provide outstanding service to customers and shareholders.
As we move toward the highly competitive energy markets that we expect in the future and continue to deal with the difficult decisions that are associated with this transition, the demands on our Board of Directors continue to be significant. Their contribution to our Company is very much appreciated.
In a competitive environment, it will be essential that our customers distinguish MidAmerican from other energy providers. An important step toward this end is to establish a brand personality. Through advertising that begins in 1997, MidAmerican is beginning the process of creating a distinctive brand that will help encourage customers to choose the Company as their energy provider.
Our industry is undergoing fundamental and historic transforma-tion, which is occurring at a faster pace than was predicted only a few years ago. To succeed in this environment we cannot simply react and follow; we must anticipate and lead. This is what we are doing and will continue to do. We very much appreciate your investment in MidAmerican, and we are committed to the provision of greater value for your investment in the Company.
l
/ 'k k
Russell E. Christiansen Stanley J. Bright Otairman President and '
Chitf E'recutice Officer
SERVICE TERRITORY l MID AM E RIC AN Oi f II'0t
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- Other Utihty - Iouisa Generating Station D ANR Pipeline Company as Jointly Owned Lines d Riverside Generating Station C Northern Natural Gas Cornpany Q Natural Gw Pipeline d Quad Cities Nuclear Power Station Major Generating Facilities:
Company of America d Neal Generating Stations d Council Bluffs Energy Center
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AND A CHANGING INDUSTRY l MID AM E RIC AN THE UTILITY INDUSTRY IS UNDERGOING FUNDAMENTAL RESTRU that is transforming significant portions of the traditional rate-regulated environment to competitive markets. Deregulation of the natural gas industry has been underway for mote than a decade, and clumge within the electric industry is accelerating. TL , dramatic change is being driven by many factors, including: changes in utility laws and regt....nons, advances in technology, price pressure and the perceived success in deregulating other industries.
Eventually, retail customers wili be able to choose their energy providers.
ha this section of the MicLAmerican annual report, tee anstver some of thefrequently-
. tsked questions about changes in the industry, how MidAmerican is positioning itselffor competitive markets and how tee are teorking to add valueforshareholders and customers.
tric markets by certain dates. AlidAmerican believes POSITIONING FOR COMPETITION congressional action will be needed to ensure that the What is the status of electric industry new markets for electricity are open to all suppliers at restructuring, regionally and nationally? the same time in an equitable manncr.
Alany states, including three states we serve - lowa, Illinois and South Dakota - are studying how and Who decides when customers can choose their electric and natural gas suppliers?
when to begin retail electric competition. The Iowa Utilities Board heard extensive public comment at it is likely to be a combination of state utility town meetings held in 1996, but decided against regulators, state legislatures, the Congress and the making recommendations on retail competition Federal Energy Regulatory Commission (FERC).
to the 1997 lowa Legislature. In Illinois, a legislative The competition to supply large business customers task force has submitted a report to the General is well tmderway in the natural gas industry, and Assembly summarizing three proposals expected t test projects are being conducted to see how indus-be introduced in 1997. MidAmerican is a member of trial, small business and residential customers the Illinois Coalition for Responsible Electricity respond when given choices among natural gas Choice, a group that will sponsor one of these and electricity suppliers. The National Energy Policy proposals. The Coalition. backed proposal would Act of 1992 opened the electric generation business begin retail choice pilot projects throughout Illinois to wholesale competition, and in 1996, FERC issued in 1998 and phase in competition for all customers rules governing wholesale competition in the between the years 2000 and 2005.
transmission of electricity.
Pressure for competition in the electric industry is particularly strong in states that have relatively What factors are important for MidAmerican high electric prices, such as California and New to be a strong competitor?
Ilampsisire. Full retail competition is scheduled to begin in New Ilampshire in 1998.
CUSTOMER FOCUS. When retail customers can m se enMgy pm&, by am kly to faw Several bills are expected to be introduced in suppliers who most effectively tailor products and Congress in IVJ7 that would require competitive elec-
3
% l 3 .11.<t..\mc rira n i
l senices to their needs while rejecting those who is MidAmerican in position to l offer generic, one-size-fits-all products and senices. be a strong competitor?
MidAmerican is listening to customers in onter to llased on both regional and national comparisons,
! effectively meet their energy-related needs.
MidAmerican is well-positioned for the competitive I QUALITY SERVICE. MidAmerican is improving marketplace. Electric production costs for 1995 l processes that are involved in sening customers. at MidAmerican's six coal-fired generating stations A state-of-the-art customer infonnation system to were 1.32 cents per kilowatthour. This average cost improve communications with customers will be in is lower than the average for utilities in the place within two years. The use of new mobile data Mid-Continent Area Power Pool region and across the j tenninals also willimprove senice response. U.S., according to the Utility Data Institute. Low elec-
! tric production costs will give MidAmerican a l PRICE. Customer surveys show that price will be a competitive edge over owners of generating facilities l leading factor, particularly in choosing an electricity that have higher production costs.
supplier. MidAmerican is aligning costs, products and MidAmerican has a diversified, low-cost natural services with pricing levels that will attract and retain gas supply portfolio. Transportation senice to the customers in the competitive marketplace.
MidAmerican gas distribution system is provided CKILLED EMPLOYEES. MidAmerican's success will from three interstate gas pipelines. Supply is also depend largely on the skill and experience of its provided from company-owned liquefied natural gas employees. The Company emphasizes continuing and liquefied propane facilities. These gas supply education to ensure high-quality senice to customem. pti ns ensure that MidAmerican has choices in its gas supplies. A significant measure of MidAmerican's i FLEXISILITY. The competitive marketplace is strong competitive position in natural gas is I likely to produce unexpected situations and oppor- the average rate for residential customers. I tunities that require quick response. According to the most recent report of the I MidAmerican is designing systems and j procedures to enhance the Company's ability l to respond quickly to customer needs. l Who does MidAmerican see l as competition?
Retail competition will lead to a greater variety of suppliers of natural gas, electricity and related services. In addition to investor-owned utilities, competitive market participants will include independent power producers, marketers, energy brokers and alliances that may not exist today. While some pending utility mergers seek to combine neighboring companies, others involve l companies at opposite ends of the country m that are seeking to establish national )
marketing bases. l
i.... uat u,oa1 AND A CH AN GING INDUSTRY l MID AM ERIC AN National Association of Regulatory Utility Conunis- energy efficiency programs and economic develop-sioners, MidAmerican's average residential price is ment assistance.
On the natural gas side, MidAmerican hosted 20 percent lower than the national average price. 1 a one-year test project in Rock Valley, Iowa that Can you give examples of MidAmerican's provided customers a choice among three natural !
experience with competition? gas suppliers. The project, which began Nov.1,1995, was the first of its kind in the country. From this In December 1996, MidAmerican was selected from project, MidAmerican confirmed that pricing is the among 20 potential wholesale suppliers to provide key issue in a competitive natural gas market.
electricity for the Resale Power Group of Iowa (RPGI), an organization of 27 municipal utilities, one What will MidAmerican do to improve itt rural electric cooperative and one investor-owned competitive position in 1997 and beyond?
utility. RPGI members serve approximately 27,000 customers. Mk!American will provide electricity to We continue to reshape our organization to ensure that our generation and r- ' services operate !
the utilities for five y. ,, begirming Jan.1,1999.
MidAmerican's winning proposal features a price successfully in a competitive marketplace, and to for electricity that is expected to provide substantial ensure that senices that continue to be regulated -
savings to RPGl members, compared with their primarily energy delivery senices - are provided present contract with IES Utilities. In addition, reliably, efficiently and at reasonable cost. Our core MidAmerican offers to provide a variety of energy- mission is to become the regional leader in providing j related senices to the RPGI members, energy and complementary senices. The unified ,
including substation marketing and sales unit we established in 1996 will maintenance,\ ; provide a single point of contact for customers on all Ida products and services. MidAmerican is seeking growth through tSe provision of a broader range of Pat Reethier .
products and services to customers withm. and Community Developer, .
Charles City ' .-
.~ beyond our traditional service territory.
. MidAmerican will continue working to improve its competitive position by: (1) reduc-
, te . o < v r%nas e.u op. 4 m- .
.. .i w t a m Mota n .o.' ') ing its unit costs of energy, (2) reducing other a u e un i < on 6 mtn - we .
.. l ' costs of operations and administration and (3)
.cs m m . m m n S m ,. a v:Ae -
investing in the technologies and alliances required to
.- .- . .~ - provide competitive products and senices.
m . o m , u g e a. o o r nps mn:
We will continue to pursue regulatory and legisla-
.. t . .m w n m e n ti , . m w 4 c.
$ tive changes that are needed to enable our electric and gas operations to compete in changing markets.
msn # to t y . m e n si u .
1 u my n e opwm , e .mo This includes seeking final regulatory approval in huO m..e5 kUfL MW/w a,n-
- .. L lowa of our electric pricing proposal. We will contin-
?
ue the incentive gas supply program launched in 1996.
> ; mmn, decopment oth nis .'
In this program, regulators in Iowa and South Dakota m edw mte aa e pw.
, .- .;;g allow the Company to realize a contribution to
.g earnings from its gas supply operations - for the first i time -if costs are kept below an industry benchmark.
3-
q l M l 3 ...i.tt.\. me rica n In 1996, we were successful in arguing for j elimination of a state-mandated program that would,
- if continued, put MidAmerican at a competitive I disadvantage with other energy suppliem. The Iowa Legislature eliminated the energy efficiency spending j ,,,,,,,,,,,,,,,,,
- requirement that affected MidAmerican and other .. sr**= Pror.ce investor-owned utilities in Iowa.
bdf The focus of our 1997 legislative program in Iowa '"""~'*""
i is on replacement of the property tax system for a-5 U -~
investor-owned utilities. Currently, our industry ,t",,,,,,,,,,,,,
has a greater tax burden than other industries l operating in Iowa. Without change, this tax system is a competitive disadvantage for MidAmerican.
1 What is the status of MidAmerican's innovative alsctric pricing plan for Iowa and Illinols?
l l On June 4,1996, we filed the plan with the Iowa Utilities Board (IUB) and the Illinois Conunerce
, Commission (ICC). The plan offered an innovative method of setting electric prices and the rate of return the Company is permitted to earn. As of mid-February 1997, an agreement that contains the key elements of the MidAmerican plan and reflects input from consumer organizations is pending before the IUB. A decision on the agreement is expected tion proceeding, which resulted in a $13.1 million by June 1997, electric rate reduction in 1996 and an additional The agreement provides for additional residential $2.4 million reduction for June 1997. The outcome price reductions through June 1998, and after a small in Illinois was disappointing because the Illinois increase, essentially stable prices for business General Assembly had approved legislation in 1996 customem over a three-year period. As part of the that gave the ICC authority to approve alternative original pricing plan, MidAmerican reduced prices for plans for electric regulation. The ICC did not consid-most Iowa residential customers by 3 percent in er the merits of the MidAmerican plan.
November 1996.
One of the key elements in the agreement is new How did MidAmerican's generating flexibility for MidAmerican to negotiate pricing stations perform in 19967
- arrangements with customers. This is particularly A number of production records were set in 1996.
importmt as MidAmerican meets the complex energy Council Bluffs Energy Center Unit 3 and the louisa needs of business customers. The agreement filed Generating Station both set records for net genera-with the IUB also allows for a sharing of Iowa electric tion. These same units, plus Neal Generating Station jurisdictional earnings above a 12 percent return on Unit I set records for total coal burned. The Cooper equity with our customers.
Nuclear Station, which sells one-half of its energy to in Illinois, MidAmerican withdrew the voluntary MidAmerican under a long-term contract, set a record plan after the ICC imtiated a traditional rate reduc-in 1996 for total energy generated. Also in 1996,
,,,,,,,,,c m _ _ _ _ _ _ _ _ - - _ _
AND A C H AN GIN G INDUSTRY l MID AM E RIC A N
~
v MidAmerican sold more than 6 million mega- to be in service in 1998, will replace outdated watthours in off-system energy sales. As part technology, and will allow MidAmerican service j
i of MidAmerican's continuing emironmental compli- representatives to provide more complete and cance, the Company installed new equipment at two timely information to customers. We are installing coal-fired generating stations to further reduce new mobile data terminals and radio communications nitrogen oxide emissions. equipment to improve the efficiency of our personnel I
who are responding to customer needs in the field.
REDESIGNING SERVICE DELIVERY An effective conununications system is critical to our ability to deliver a full range of energy-related How is MidAmerican enhancing products and senices.
service to customers? Customers can transact most of their business Late in 1996 we organized a single energy delivery with MidAmerican by telephone, 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day.
group, combining the former separate gas and In addition, bill payments can be made by mail, electric delivery operations. The group is headed by by automatic checking account deduction or at l Beverly A. Wharton, senior vice president-energy pay stations ami customer offices. These options delivery. The single energy delivery group provide customers convenience and flexibility.
@ aligns energy delivery operations with the To ensure that the new customer infonnation combined marketing organization, system and other technology investments are fully MidAmericanis makinginvestments aligned with customer service needs, customer l senice information systems and communications that strategically position the Company to take advantage of state-of-the-art technology now report to a single senior officer, communications technologies David J. Levy, senior vice president-technology designed to improve customer and customer senice. .
[ '
Other service improvements include a new service. For example, new natural gas pipeline between Dubuque and
[ equipment installed MidAmerican call centers at Davenport, Iowa, that provides another supply early in 1997 more effec- source, Northern Natural Gas, for MidAmerican tively connects customers customers in Davenport and surrounding areas.
to available senice represen- The 62-mile pipeline, completed in 1996, is expected tatives. The new customer to enable the Company to realize reductions in gas information system, scheduled costs that can be passed on to customers, bi What type of new products and services will MidAmerican provide?
The connections we have with customers' homes and businesses will form the basis for the products and senices we offer. With the acquisition of AAA i Security Systems, Inc. in 1996, MidAmerican can offer security senices to customers. In 1996, l MidAmerican launched Extended Senice Protection !
(ESP) on a test basis in Sioux Falls, South Dakota.
yggg, , , ,,,,,
u l i
3 ...h.t.A. m erica n ESP offers customers several options to GROWING purchase additional appliance protection. INVESTOR VALUE Senice and repair work under ESP contracts with our customers is done % What is MidAmerican doing o i" to create shareholder value?
by local appliance dealers and contrac- = ~
tors under contract with MidAmerican. -
We met sure the creation of share-holder value in terms of the total Hsw does MidAmerican meet the sp:clal needs of the largest n um to our santoMem Total return butiness customers? reflects the sum of (1) our annual divi-dend and (2) the changes in our stock These customers - including manufacturers, price. We aim to create shareholder value processors, major retailers, hospitals and by focusing on our core mission to be a schools - represented 4.6 percent of natural leading regional provid(r of energy and gas sales aml 30.7 percent of our electric complementary senices.
sales in 1996. MidAmerican has energy By est tblishing MidAmerican as a senices personnel specifically assigned to leading service provider, we expect to gain each of these customers to meet their unique customers, improve our financial perfor-energy supply and service reliability needs. mance mulincrease the value of shareholder By working as their energy partner, investments. We continue to restructure our MidAmerican is able to help these nonregulated businesses to align them customers find ways to use energy with our core mission.
more efficiently and, as a result, real-ize cost savings. What is the outlook for dividend growth?
t How do we learn more about l
cur customers' needs? The MidAmerican board of directors established the annual quarterly In addition to personal contact, dnidend at 30 cents per share (indi-MidAmerican conducts extensive cated annual divideiul of $1.20 per research that involves in-depth inter- share) at the time of the merger that views with customers. Through this formed MidAmerican. With the type of research, we gain valuable impending arrival of competitive insight into the factors that customers markets and the added risks associat-consider in detennining how satisfied ed with competition, it is imperative they are with our Company and the Company reduce its dividend what new products and services payout ratio. Accordingly, any they want. Increasing customer increase in the current indicated loyalty by improv5g customer satis- annual dividend of $1.20 per share faction is a priorit, ior MidAmerican. must be preceded by earnings Understanding customer perceptions improvement and resulting improve-end opinions is increasingly impor- ment in the dividend payout ratio.
tant as we move from regulated to competitive markets.
,oeo m m vuvwv - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
AND A CHANGING INDUSTRY l MID AM E RIC AN 4
i will impact our financial results. What the electric 6 .
market will look like is not yet defined. Ilowever, Kathryn Curran Legislative Communicettens . MidAmerican is active in the legislative and regulato-k CeeMinator, Dep Moines ry arenas at the state and federal levels in an effort hathwn pr ed MidAmerfl% ~ to help shape the new market environment. We are Lea ynn m a neMy matmi seeking assurance that government-mandated costs that would put MidAmerican at a competitive F- Maw w a ve m oonnu disadvantage with other energy suppliers will be
' duthos < uuudor Mn tAmencan m w, eng u a to m heve lege,M fairly addressed. We know from die largely deregulat-u ano myaLuos y changes a ed natural gas market that the ability to competitive-
' .hehove am no e my v., d<' ly price our products and senices is a key to success.
hminem in a mmpennve muket This experience will help us with the transition from pW e Donny the W% se""'" regulated pricing to pricing determined by competi-
- w 4 wved one < d our piam tion in electric markets.
wtu r, Inu inwa i eye,L don vi ded What are MidAmerican's priorities for
" ' N""i"" hP""*'9 " " O d"5 investing in nonregulated businesses?
lor energy ethuena pn > grams These investments must be aligned with the Company's core mission to be the leading regional M.
provider of energy and complementary senices. In 1996, MidAmerican began a major repositioning of its nonregulated businesses and investments. This What factors influence our stock price?
process will continue in 190'7. Significant progress was made in 1996 with the sale of our oil and gas Stock price is affected by many factors, including business, InterCoast Oil and Gas.
perceptions in the financial market of our prospects L nder our MidAmerican Capital Company sub-for future growth and profitability. L'tility stocks today are particularly influenced by perceptions of sidiary, we operate businesses involved in electric how well utilities will make the transition to competi- and natural gas marketing and railcar repair and don, and concerns over the regulatory climate in the management. MidAmerican Capital also maintains a states in which they operate. Expectations in regard substantial passive investment portfolio. Midwest to future interest rates also influence utility stock Capital Group, another subsidiary, oversees our prices. liigher interest rate expectations generally regional economic development efforts and property lead to declines in utility common stock prices. investments, including the Dakota Dunes planned What impact will a more competitive market-place have on financial performance?
Many fmancial analysts are concerned about increased risk resulting from the shift from regulated What is MidAmerican doing to promote business expansion in our region?
to competitive pricing. A competitive market will create downward pressure on prices as new Our (conomie development staff delive . full range suppliers attempt to gain market share. At this f business up nsi n and site selectior, services to somewhat early and uncertain stage, it is impossible businesses that locate new jobs and investment in the to predict how nmeh a restractured electric industry MidAmerican service territory.
t 9 9 5 A N UAL R 5P O R 7 l
5.M.i.st.imerican Today's fast business location decisions require is building a 300,000-square-foot distribution center a ready supply of available buildings and sites. in Cedar Rapids, and IUP, inc. is constructing a new MidAmerican has a national marketing campaign that international headquarters at Dakota Dunes, South highlights available commercial and industrial Dakota. Development of the Mississippi riverfront at buildings and sites in our territory. To promote Moline, Illinois, continues with a new Radisson llotel, location of business in the areas we serve, and in Iowa City, construction of a 1 million-square-MidAmerican has earmarked $3.5 million for foot shopping mall is underway.
low-interest loar.s to local development organizations to develop and promote available industrial buildings. How is the economy performing in the The growth in exports of processed and manufac. MidAmerican service territory?
tured goods from our service territory is significant.
B neuly all measures, the economy is strong. Iowa MidAmerican contributes to this gowth by providing and South Dakota continue to register unemployment export market information, market reports and trade rates well below the national average,3.3 percent in leads to interested companies and organizations.
Iowa and 2.0 percent in South Dakota. Iowa's person-This information can be accessed online by visiting al income is forecast to grow faster than the national MidAmerican's Web site, http //www.midamerican.com.
avemge ho@ ID9E Iowa's mmh tusg morts What kind of business expansions "* " " " ' *E #
and new locations are taking place?
Is MidAmerican's customer base growing?
Some of the most significant new business locations include: Bunge's $100 million soybean oil refinery """""""'"#** "'""" N#""
in Council Bluffs, Hyder Integrated legistics' new '" ' ^"" " " " ' " I" cus onunam , natuWauusmuns.
distribution center that will serve the Deere & Co.
Waterloo assembly plant, a Ilunt-Wesson Foods Swiss Miss brand dessert plant in Waterloo's new MidPort America business park and OSI's 600-employee pork processing plant at Oakland, Iowa.
Business expansions within our service territory during the past year include Ag Processing, Inc.'s announcement of two plants in western Iowa, Tone's Spices' expatuion near Des Moines, new -
.a z, offices for Pioneer Ili-Bred International in Des -
7,acu n-Moines, and a new soybean seed processing plant in rural Cherokee County, Iowa. IPSCO Steel also expanded its Camanche, Iowa, steel fabrication plant.
Large-scale projects of note include 3M I
Company's $125 million expansion of its Illinois adhesives plant, the $25 million expansion of Terra Industries in Sioux City, start-up of the $110 million Guardian Glass production facility at DeWitt, Iowa, and new office buildings in Des Moines for Principal ' "
Financial Group, EMC Insurance Companies and Equitable ofIowa that have a combined value of more than $130 million. Nordstrom's, a department store, D'%
. . . 4 ~ ~ v T crtrrnner------
AND OFFICERS l DIRECTORS DIRECTORS Nancy L Seifert John W. Aalfs Frank S. Cottrell 31 cline, Illinois Cedar Rapids, lotta Sioux City, lotca Executive Vice President Vice President, General Counsel President, Aa{p James E Seifert & Sons L.L.C.
and Seerttary, Deere & Company Afanufacturing, Inc.
(54/4) (67/11)
(56/8)
Jack W. Eugster W. Scott Tinsman Stanley J. Bright Davenport, Iowa Des 31oines, forca hiinneapolis, Afinnesota Co-oumer and Vice President, Chainnan, President and President and CEO, Twin-State Engineering and l CEO, hinsicland Stores Corp.
AfidArnerican Energy Chemical Company Holdings Company (51/9)
(64/8)
(56/10) Mel Foster, Jr.
Davenport, Iowa Leonard L Woodruff Robert A. Burnett Fort Dodge, Iowa Chainnan, hiel Foster Co., Inc.
Des Afoines, Iowa President, %odnJf Retired Chainuan, (69/24)
Construction 31eredith Corycnntion Nolden Gentry (68/24)
(69/13)
Des hioines, Iowa Partr.er, Law Finn of Brick, Ross D. Christensen During 1996, William C. Fletcher of Wateioo, Iowa Gentnj, Bowers, Swartz, Stoltze, Schuling & Levis, P C. Cedar Rapids, lowa, and Richard Orthodontist in Private Practice (59/13) A. Schneider of Sheldon, Iowa.
(56/14) reured frorrt the Board of Directors James M. Iloak, Jr.
Russell E. Christiansen and Betty T. Asher of Vermillion, Dakota Dunes, South Dakota Dallas, Tc. ras Chainnan, hiidAmerican Chainnan,lleritage Afedia Corp.
' South Dakota resigned. Richard Enerijy Holdings Company (53/13) C. Engle retired as Executive Vice (61/37) President of MidAmerican after 31 Richard L Lawson Washington, D.C. years of service to i Company.
John W. Colloton President and CEO, National Iowa City, Iowa We appreciate the outstanding Vice Firsident, Statewi ~ Afining Association and General U$.t- ' Ret.) leadership these individuals have Health Sereices, University oflowa (67/8) 70,;ded ,o our Com any.
(66/4)
Robert L Peterson Dakota City, Nebraska Chainnan, President and CEO, IBP, inc. j I
(ogelyears of serrice) (04!0)
3,,,gg,j ,,,,,,
l 3 .M..i.d..im e rica n OFFICERS Russell E. Christiansen Beverly A. Wharton Stephen E. IIollonbeck Chairman Senior Vice President- Vice President-(61/37) Energy Delit'ery Field Operations (43/20) (47/10)
Stanley J. Bright IWsident and CEO Jack L. Alexander James J. Iloward (56/10) Vice President- Vice President-Human Resources Energy Suppiy and lynn K. Vorbrich (4924) Administmtion
, Executite Vice President (54/32)
I James Averweg (58^24)
Vice President- Paul J. Leighton Ronald W. Stepien Engineering and Vice President and Executit'e Vice Forsident. Opemtions Support Corpomte Secrrtary hiarketing and Delitvery (50?26) (43/18)
(50/6)
James R. Bull Dennis II. Melstad David J. Levy Vice Pmsident-Genemtion Vice President-Senior Vice IWsident- (55f21) Ditersified Opemtions Technology and Customer Sereice (44t20)
(42/20) John J. Cappello Vice President- J. Sue Rozema Philip G. Lindner Marketing and Sales Vice President and Ibrasurer Senior Vice Prrsident and (50/1) (44/17)
Chief Financial OJficer (53/8) Brent E. Gale Larry M. Smith Vice Pmsident- Vice President and Controller John A. Rasmussen, Jr. Lato and Regulatory A(fairs (41/11)
Senior Vice President and (4500)
Geneml Counsel Alan L. Wells (51/10) Keith D. Martje Vice President-Vice President- Corpomte Detelopment Stephen E. Shelton Corporate Communications (37/4)
Senior Vice President. (47/21)
Genemtion (49f26)
i-ii i a's u a t o o o o a v OVERVIEW l E AR NINGS Retail safes of natural gas in 1996 improved approxi-The condensed financial statements presented in this mately 3% compared to 1995 due to a colder-than-normal summary annual report are derived from the audited finan-cialstatements of the Company. A copy of the Company's heating season and customer growth. Compared to nor-consolidated financial statements and the report of the mal, the net effect of weather on electric and gas sales reduced 1996 earnings by an estimated 4 cents per share.
independent public accountants is included in Appendix A Earnings for 1996 were also influenced by changes in in the 1997 Proxy Statement.
electric and gas prices during 1996 and 1995. Electric and The year 1996 was the first full calendar year of gas sales in 1996 reflect a full-yea;'s effect of increases implemented in mid-1995. The benefit of these increases operations for the Company since the merger of its was partially offset by price reductions in the last half of predecessors in July 1995. In addition to forming a hold-ing company structure in December 1996, the Company 1996. Refer to *Other Matters" for more discussion.
continued to take steps it believes will better prepare it The Company's gas u+ility operations sold certain for the future competitive utility environment. The following storage gas supplies for a gain in 1996 and also received an award for success achieved under the Company's discussion is an overview of the more significant items incentise gas procurement program. Together these trans-in 1996 and prior years, actions added 3 cents per share to 1996 earnings.
1996 Earnings in August 1996, the Company proposed a merger with IES Industries Inc. (lES) which the Company believes The Company's earnings per share were $1.30 for 1996, would have been beneficial to both companies. The an improvement of 8 cents from the $1.22 reported for 1995. Income from continuing operations for 1996 Company discontinued its attempt to merge with IES after the IES board of directors and holders of a majority of IES increased 24 cents per share to $1.43. The increase in common stock rejected the proposal in favor of a pending earnings reflects the realization in 1996 of savings from the merger with two other utility companies. Costs incurred in merger that created MidAmerican, as well as the absence Se effort reduced 1996 earnings by 5 cents per share.
of the costs which were incurred in 1995 to complete the During 1996, the Company began to redeploy its non-merger and achieve the savings.
Electric retail sales in 1996 increased approximately regulated investments as part of its strategy of becoming the leading regional provider of energy and complemen-2% compared to 1995 sales. Modest customer growth, a favorable heating season and an increase in sales that are tary services. This resulted in the decision to sell several subsidiaries, as discussed below, that were not meeting less dependent on weather all contributed to the improve-ment. The impact of these factors was partially offset by earnings expectations or that no longer aligned with the effect of cooler-than-normal weather conditions during the Company's objectives. The Compeny's financial statements reflect these operations as discontinued.
the summer of 1996.
Cooling Degree Days Natural Gas Electric Retail Sales in o on a taie iemperatur. Throughput mmons of mN of 65 degr a Fahr.nn.it) (meons of MM8tu) 7 92 93 94 ps es e5 e6 er 93 94 es ss GB 93 94 acw gram ...
U , % T J E "!"
(emfory CiW1pe$
OObOANNUA LQ0POa7
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ - - _ _ - _ - - ~ '
S erica n 3 ..l.i.t h.
In December, the Company sold a portion of its in 1995. These improvements were offset by costs related nonregulated operations to KCS Energy, Inc. for $210 to the merger.
million in cash and 435,000 warrants to purchase KCS During 1995, the Cornpany incurred merger-related common stock. The sale, which was completed in January costs which reduced 1995 earnings by 24 cents per share.
1997, included the oil and gas exploration and develop- Other operating expenses for 1995 include $33.4 million ment operations of the Company. The Company's earn- for costs of a restructuring plan that included work force ings reflect a loss of 7 cents per share for the transaction. reduction. Costs to complete the merger totaled $4.6 mil-In addition, the Company decided to dispose of a lion and are included in Other, Net in the Consolidated subsidiary that develops and operates a computerized Statements of income.
Information system which facilitates real-time exchange of Write-downs of certain investments of the nonregulat-power in the electric industry. The Company expects the ed subsidiaries reduced 1995 earnings by approximately disposition to occur in the first half of 1997 and has reflect- 10 cents per share. The $18.0 million pre-tax amount ed a loss of 4 cents per share in 1996, of the write-downs is included in Otwe r, Net in the In October 1996, the Company received $15.3 million Consolidated Statements of Income. The investments are in cash as final settlement for the sale of a former coal primarily alternative energy projects.
mining subsidiary reflected as discontinued operations in Earnings for 1995, also reflect 5 cents per share for 1982 by one of the Company's predecessors. The final gains on the sales of a partnership interest in a gas mar-settlement included reacquisition by the buyer of its keting organization and a telecommunications subsidiary.
preferred equity issued to the Company and settlement of reclamation reserves. The Company's 1996 earnings 1994 Earnings reflect a loss of 3 cents per share. Merger transaction costs reduced 1994 earnings per Further evaluation of nonregulated investments share by 5 cents per share. Extended outages at nuclear resulted in write-downs of certain assets, primarily alter- facilities resulted in increased operations and maintenance native energ,y projects. These write-downs, totaling $15.6 expenses in 1994. Gains on the sales of a security holding million before taxes, reduced eamings by 9 cents per share. and an investment in a leveraged lease contributed favorably to 1994 earnings.
1995 Earnings in 1994, the Company announced its intent to divest Eamings per share for 1995 were unchanged from the its construction subsidiaries and reflected a loss of 4 cents
$1.22 in 1994. An improvement in utility electric and gas per share in 1994 earnings. The sales were completed in sales, due primarily to weather, and price increases result- the first quarter of 1995.
ed in an increase of approximately 23 cents per share Hasting Degree Days Fuel Mix
$%',,$, %, '," Installed capacity
- ceneration Mix **
nn2 = tu % n, u = =
- w D **= +=.
NZ%",d** 'Y' lorrary Chripes
I i . o o wccrmw-------________ ____.___ _ ____ __ _ _ _ . _ _ _ _ _ _
OVERVIEW lE ARNING S Other Matters approval by the Iowa Utilities Board. The agreement in June 1996, the Company filed an electric pricing would enable the Company to extend long-term electric proposal in Illinois and towa which would provide the contracts to more businesses, improve recovery of certain Company more flexibility to negotiate with customers nuclear costs and provide for accelerated recovery of and reduce rates over a five-year period. The Company certain deferred costs, in turn, the Company would reduce later withdrew the proposal in Illinois and reached a settle- residential rates approximately $20 million annually by ment with the Illinois Commerce Commission that reduced June 1,1998, including a voluntary $8.5 million red electric rates by $13.1 million annually in 1996 and an implemented in November 1996. Commercial and ind additional $2.4 million in mid-1997. al rates would be reduced $10 million annually by In January 1997, the Company reached agreement the same date. The agreement does not affect state-with the Office of Consumer Advocate and other parties to mandated programs, but would lessen the impact on the Iowa proceeding. The agreement, which includes key tomers of cost increases associated with those programs elements of the Company's pricing proposal, is subject to Electric Capability
- Capital Expenditures and Peak Demand
<s m means. sches snowance er (en Mwp funds used durmg constructon) ii4 it, $, H E,t E
E
= l E
=
E
=
e Y y h '
. , 2 e
! g
-1 - m-
-2 ._ _:-
I I I
., unusuam M SystemPeak M Doctre ' System nesern l Gas
- capacery plus COMMON STOCK DIVIDENDS AND PRICES Price Range Iowa-Illinois Resources Dividends Declared MidAmerican High Low High Low IWG MWR High Low MEC 1996 S - S - S -
- S - S 16 % $ 14 % S -
4th Ouarter S 0.30 S 15 % - - - -
0.30 - - 17 %
3rd Quarter - - -
- 17 % 16 % -
2nd Quarter 0.30 -
- 18 % 16 % -
1st Quarter 0.30 -
1905 $ -
$ 0.30 $ -$ -
$ 17 % $ 15 $ - $ -
4th Quarter - - -
13 %
0.30 - - 15 %
3rd Quarter - 22 19 % 15 13 %
- 0.4325 0.29 -
2nd Quarter - 22 % 19 14 % 13 %
- 0,4325 0.29 -
1st Quarter wasno,s au .no recue ceny <ma m wwa> ans voar newca roc cnemen uwm we weecemw wmewan b ._
0 0 0 0 A N N U A L Q 0 D 0 Q 17
_ ___ _. _ - _ ~ - - - - - - ~
CON S O LID ATE D STATEMENTS OF INCOME M
Years Ended December 31 3...i.el.A. merica n On thmsand, ex@ per share amourtis) 1996 1993 1994 Opsrating Revenues Electric utility $ 1,099,008 $ 1,094,617 $ 1,021,660 Gas utility 536,753 459,588 492,015 Nonregulated 236,851 95,106 117,550 1,872,612 1,619,341 1,631,225 Operating Expenses Utility:
Cost of fuel, energy and capacity 234,317 230,261 213,987 Cost of gas sold 345,014 279,025 326,782 Other operating expenses 350,174 399,648 351,190 Maintenance 88,621 85,363 101,275 Depreciation and amortization 164,592 158,950 151,229 Property and other taxes 92,630 96,350 94,990 1,275,348 1,219,597 1,245,453 Nonregulated:
Cost of sales 218,256 70,209 84,515 Other 35,370 37,181 36,765 253,626 107,390 121,280 Total operating expenses 1,528,974 1,356,987 1,366,733 Operating income 343,638 292,354 264,492 Non-Operating income interest income 4,012 4,485 4,334 Dividend income 16,985 16,954 17,087 Realized gains and losses on securities, net 1,895 688 7,635 Other, net (4,020) (10,467) 4,316 18,872 11,660 33,372 Fixed Charges Interest on long-term debt 102,909 105,550 101,267 Other interest expense 10,941 9,449 0,446 Allowance for borrowed funds (4,212) (5,552) (3,955)
Preferred dividends of subsidiaries 10,689 8,059 10,551 120,327 117,506 114,309 Income From Continuing Operations Before income Taxes 242,183 186,508 183,555 income Taxes 98,422 66,803 60,457 Income From Continuing Operations 143,761 119,705 123,098 Discontinued Operations Income from operations (net of income taxes) 2,117 3,059 856 Loss on disposal (net of income taxes) (14,832) -
(3,765)
(12,715) 3,059 (2,909)
Nst income $ 131,046 $ 122,764 $ 120,189 Average Common Shares Outstanding 100,752 100,401 98,531 Earnings Per Common Share Continuing operations $ 1.43 $ 1.19 .$ 1.25 Discontinued operations 0.03 (0.03)
(0.13)-
Eamings per average comraon share $ 1.30 $ 1.22 $ 1.22 Dividends Declared Per Share $ 1.20 $ 1.18 $ 1.17
o o u u a w w u a t inrvvvv--------
BALANCE SHEETS l C O N SO LID ATED As of December 31 1996 1995 on mouando ASSETS Utility Plant $ 4,010,847 $ 3,881,699 Electric 723,491 695,741 Gas 4,734,338 4,577,440 2,153,058 2,027,055 Less accumulated depreciation and amortization 2,650,385 2,581,280 49,305 104,164 Construction work in progress 2,654,549 2,630,585 190,897 212,148 Power Purchase Contract 196,356 177,300 investment in Discontinued Operations Current Assets 97,749 32,915 Cash and cash equivalents 228,128 312,930 Receivables 90,864 85,235 Inventories 11,696 18,428 Other 513,239 364,706 628,791 646,456 investments 399,415 414,938 Other Assets
$ 4,559,283 $ 4,470,097 Total Assets CAPITALIZATION AND LIABILITIES Capitalization $ 1,239,946 $ 1,225,715 Common shareholders' equity 139,945 181,769 Preferred securities 1,395,103 1,403,322 Long-term debt (excluding current portion) 2,816,818 2,768,082 Current Liabilities 161,990 184,800 Notes payable 79,598 65,295 Current portion of long-term debt 13,029 13,718 Current portion of power purchase contract 169,806 122,055 Accounts payable 82,254 81,898 Taxes accrued 28,513 30,635 Interest accrued 30,229 46,267 Other 566,108 543,979 Other Liabilities 97,504 112,700 Power purchase contract 752,336 724,587 Deterred income taxes 88,842 95,041 investment tax credit 237,675 224,808 Other 1,176,357 1,157,136
$ 4,559,283 $ 4,470,097 Total Capitalization and Liabilities I
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0000ANNUALsE POs?
C O N S O LID AT E D STATEMENTS OF CASH FLOWS
. lijl}merica Years Ended December 31 On h58'*8) 1996 1995 1994 Nst Cash Flows From Operating Activities Net income $ 131,046 $ 122,7M $ 120,189 Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization 190,511 181,636 179,918 Net increase (decrease) in deferred income taxes and investment tax credit, not 22,142 34,103 (961)
Amortization of other assets 20,541 19,630 9,731 Capitalized cost of real estate sold 3,568 1,744 3,723 Loss (income) from discontinued operations 12,715 (3,059) 2,009 Gain on sale of securities, assets and other investments (10,132) (1,050) (6,409)
Other-than-temporary declines in value of investments 15,566 17,971 1,791 Impact of changes in working capital, net of effects from discontinued operations (53,752) (21,024) (6,917)
Other 19.218 19,369 10,831 Net cash provided 351,423 337,020 349,869 Nst Cash Flows From investing Activities Utility construction expenditures (154,198) (190,771) (211,669)
Quad Cities Nuclear Power Station decommissioning trust fund (8,607) (8,636) (9,044)
Deferred energy efficiency expenditures (20,390) (35,MI) (28,221)
Nonregulated capital expenditures (55,788) (12,881) (0,095)
Purchase of securities (198,947) (IM,521) (113,757)
Proceeds from sale of securities 243,290 94,493 142,307 Proceeds from sale of assets and other investments 33,285 34,263 6,433 Investment in discontinued operations (36,020) (9,752) (23,695)
Other investing activities, net 8,308 6,946 (7,957)
Net cash used (189,067) (286,700) (2M,698)
Nat Cash Flows From Financing Activities Common dividends paid (120,770) (118,828) (114,924) issuance of long-term debt, net of issuance cost 99,500 12,750 180,410 Retirement of long-term debt, including reacquisition cost (136,616) (110,351) (102,472)
Reacquisition of preferred shares (58,176) (19,916)
(10)
Issuance of preferred shares, net of issuance cost 96,850 - -
Increase (decrease) in MidAmerican Capital Company unsecured revolving credit facility 44,500 95,000 (0,500)
Issuance of common shares -
15,083 27,760 Net increase (decrease) in notes payable (22,810) 60,300 (48,535)
Net cash used (97,522) (46,056) (87,177)
Nst increase in Cash and Cash Equivalents 64,834 4,264 7,094 Cash and Cash Equivalents at Beginning of Year 32,915 28,651 20,657 Cash and Cash Equivalents at End of Year $ 97,749 $ 32,915 $ 28,651 Additional Cash Flow Information:
Interest paid, not of amounts capitalized $ 107,179 $ 116,843 $ 105,004 income taxes paid $ 85,894 $ 69,319 $ 50,713
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& MANAGEMENT'S REPORTS l ACCOUNTANTS' Report of Management Report of Independent Public Accountants Management is responsible for the preparation of all To the Shareholder', of MidAmerican information contained in this summary annual report, Energy Holdings Company: including the condensed financial statements. The state-We have audited, in accordance with generally accept-ments and related financial information have been ed auditing standards, the consolidated balance sheets prepared in conformity with generally accepted account-of MidAmerican Energy Holdings Company (an Iowa ing principles, in the opinion of management, the financial corporation) and subsidiary companies as of December position, results of operation and cash flows of the 31,1996 and 1995, and the related consolidated state-Company are reflected fairly in the condensed statements.
ments of income, retained earnings and cash flows for The consolidated financial statements, from which the each of the three years in the period ended December 31, information contained herein was derived, have been 1996, appearing in Appendix A to the proxy statement audited by the Company's independent public accoun-for the 1997 Annual Meeting of Shareholders of tants, Arthur Andersen LLP.
MidAmerican Energy P ..ngs Company (not presented The Company maintains a system of internal contro!s here;a), in r - ,w.st dated January 24,1997, also which is designed to provide reasonable assurance, on appearing in that proxy statement, we expressed an a cost effective basis, that transactions are executed in unqualified opinion on those consolidated financial accordance with management's authorization, the finan-statements. ;ial statements are reliable and the Company's assets are In our opinion, the information set forth in the properly accounted for and safeguarded. The Company's accompanying condensed consolidated balance sheets internal auditors cont;nually evaluate and test the system as of December 31,1996 and 1995, and the related of internal controls and actions are taken when opportuni-consolidated statements of incomo and cash flows forties for improvement are identified. Management believes each of the three years in the period ended December 31, that the system of internal controls is effective.
,196, is fairly stated, in all material respects, in relation The Audit Committee of the Board of Directors, the to the consolidated financial statements from which it members of which are directors who are not employees has been derived. of the Company, meets regularly with management, s the internal auditors and Arthur Andersen LLP to discuss accounting, e $ ting, internal control and financial report-ing matters. The Company's independent public accoun-A 0 4A tants are appointed annually by the Board of Directors on recommendation of the Audit Committee. The internal Arthur Anderson LLP auditors and Arthur Andersen LLP each have full access Chicago, Illinois to the Audit Committee, without management representa-January 24,1997 tives present.
\
Stanley J. Bright President and Chief Executive Officer
/ f Philip G. Lindner Senior Vice President and Chief Financial Officer I
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UTILITY FIVE-YEAR ELECTRIC S T ATI S TI C S M
3 ...i.d.A. m e rica n For the bars Ended December 31 1996 1995 1994 1993 1992 Revenues (in thousands)
R: idential $ 415,954 $ 434,105 $ 400,346 $ 386,047 $ 343,842 l Small general service 237,466 252,427 253,703 242,005 236,292 L:rge general service 241,172 219,075 204,481 193,616 199,256 Othir sales 60,476 60,160 57,731 56,198 30,878 Silts for resale 121,452 105,472 84,260 104,461 106,982 Total from electric sales 1,076,520 1,071,239 1,000,521 982,527 917,250 i Oth:r electric revenue 22,488 23,408 21,139 20,443 18,777 i Tota! $1,099,008 $ 1,091,617 $ 1,021,660 $_1002,970_
1 $ 936g27 KWh Sales (in thousands)
R:sidential 4,652,031 4,767,608 4,500,265 4,475,883 4,098,567 Small general service 3,565,459 3,920,792 4,062,993 3,937,360 3,885,898 Lcrge general service 6,067,325 5,351,033 5,091,685 4,851,493 4,993,213 Other 988,022 957,463 938,620 930,117 470,444 SilIs for resale 6,727,326 5,509,161 3,605,092 5,566,208 6,386,957 Total 22,000,163 20,506,957 18,198,655 19,761,061 19,835,079 Revenues as a % of Total RIsidential 38.6 40.5 40.0 39.3 37.5 Small general service 22.1 23.6 25.4 21.7 25.7 Largs general service 22.4 20.5 20.4 19.7 21.7 Othtr 5.6 5.6 5.8 5.7 3.4 Salas for resale 11.3 9.8 8.4 10.6 11.7 Total 100.0 100.0 100.0 100.0 100.0 Salso as a % of Total R:sidential 21.1 23.2 24.7 22.7 20.6 Small general service 16.2 19.1 22.3 19.9 19.6 Largs general service 27.6 26.1 28.0 24.5 25.2 Othst 4.5 4.7 5.2 4.7 2.4 Silas fc resale 30.6 26.9 19.8 28.2 32.2 Yote, 100.0 100.0 100.0 100.0 100.0 R till Electric Sales by Jurisdiction (%)
lowa 88.7 88.4 88.6 88.7 87.8 Illinois 10.6 11.0 10.9 10.9 11.8 South Dakota 0.7 0.6 0.5 0.4 0.4 Total 100.0 100.0 100.0 100.0 100.0 Curtomers (End of year)
R sidential 557,637 551,384 548,106 541,220 536,767 Small general service 73,022 72,616 60,905 68,b29 71,843 Large general service 982 945 743 744 833 Oth:r 9,937 9,744 0,518 0,572 5,156 Siles for resale 55 55 59 63 61 Total 641,633 634,744 628,331 620,428 614,660 Annual Average Per Residential Customer Ravenue per kWh (cents) 8.94 9.11 8.90 8.62 8.39 KWh sales 8,392 8,670 8,265 8,310 7,681 Cooling Degree Days Actual 788 1,112 912 813 603 Parcsnt warmer (colder) than normal (17.5) 14.1 (6.5) (10.4) (38.5)
Electric Peak Demand (net MW) 3,537 3,553 3,226 3,284 2,902 summer Not Accredited Capability (MW) 4,301 4,311 4,145 4,072 4,116
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s o o O A N EFUTTh-FIV E-Y E A R GAS ST ATISTIC S l UTILITY For the Years Ended December 31 '
1992 1995 1994 1993 1996 Revenues on ttuusands)
$ 279,819 $ 287,171 $ 319,359 $ 282,688
$ 338,605 133,384 Residential 128,501 142,894 150,913 153,616 Small general service 36,729 37,761 43,919 17,670 23,280 Large general service 5,514 10,376 2,M8 2,050 5,303 Sales for resale and other 472,308 518,409 462,639 511,941 436,903 Total from gas sales 13,457 17,473 20,155 16,677 12,M2 Gas transported 6,865 7,123 4,575 4,657 6,008 Other gas revenues
$ 459,588 $ 492,015 $ 538,989 $ 484,687
$ 536,753 Total Throun hput (MMBtuinitmusands)
Sales 54,732 60,612 56,072 61,732 57,153 Residential 32,677 34,504 31,894 33,642 32,786 Small general service 8,253 9,681 12,357 4,634 6,222 Large general e arvice 4,305 837 977 3,582 3.231 Sales for resale and other 98,893 100,102 101,160 100,985 99,743 Total sales 43,293 39,570 34,686 54,618 50,695 Gas transported 142,186 148.672 135,846 155,603 150,438 Total Revenues as a % of Total 61.7 59.2 60.0 58.9 63.6 Residential 29.4 28.4 27.8 28.9 28.3 Small general service 7.6 7.1 9.1 3.3 5.1 Large general service 1.1 2.0 0.6 0.4 1.2 Sales for resale and other 2.7 2.5 3.6 3.8 3.7 Gas transported 100.0 100.0 100.0 100.0 100.0 Total Sales as a % of Total (Excluding gas transported) 55.6 55.5 61.1 57.3 55.3 Residential 33.0 31.6 31.5 33.3 32.9 Small general service 8.4 8.9 12.2 4.6 6.2 Large general service 3.3 3.9 0.8 1.0 3.6 Sales for resale and other 100.0 100.0 100.0 100.0 100.0 Total Retall Gas Sales by Jurisdiction (9.) 74.5 73.4 78.0 77.1 76.6 lowa 11.9 11.4 11.6 11.0 11.6 tilinois 10.8 5.4 2.2 10.3 10.6 South Dakota 0.7 8.7 12.8 0.7 0.7 Other 100.0 100.0 100.0 100.0 100.0 Total Customers (End of year) 526,863 552,660 550,786 541,732 535,301 Residential 55,855 54,972 54,918 58,059 57,207 Small general service 876 868 1,020 821 830 Large generai service 171 128 123 504 1,128 Gas transported and other 592,203 582,831 608,721 610,170 600,897 Total Annual Averages Per Residential Customer 5.04
$ 5.49 $ 4.90 $ 5.25 $ 5.27 $
Revenue per MMBtu 111 103 113 106 103 MMBtu sales Heating Degree Days 6,565 7,097 6,302 7,445 6,841 Actual 3.2 (8.7) 10.1 0.9 (3.5)
Percent coloer (warmer) than normal 3.22
$ 3.42 $ 2.80 $ 3.30 $ 3.36 $
Cost per Mustu
FIV E-Y E A R FIN A N CI AL S T ATIS TIC S M l 3 ...i.d.A. rnerican For the Years Ended December 31 1996 1995 1994 1993 1992 Earnings per average common share Continuing operations:
Utility operations $ 1.54 $ 1.24 $ 1.12 $ 1.29 $ 0.82 Nonregulated activities (0.11) (0.05) 0.13 0.09 (0.03)
Discontinued operations (0.13) 0.03 (0.03) 0.01 0.05 Eunings per average common share $ 1.30 $ 1.22 $ 1.22 $ 1.39 $ 0.84 Averige shares of common stock outstanding (in thousands) 100,752 100,401 98,531 97,762 9 5,4'10 Return on average common equity (%) 10.6 10.1 10.1 11.6 7.1 Ccsh dividends declared per common share $ 1.20 $ 1.18 $ 1.17 $ 1.17 .$ 1.28 t Common dividend payout ratio (%) 92 97 96 84 152 Ritio of earnings to fixed charges Consolidated 3.3 2.8 2.8 2.8 1.9 Utility only 4.1 3.4 3.3 3.4 2.3 Ratio of eamings to fixed charges and Cooper Nuclear Station debt service Consolidated 3.1 2.7 2.7 2.8 1.8 Utility only 4.0 3.3 3.2 3.3 2.2 Quarterly earnings per average common share outstanding 1st quarter $ 0.51 $ 0.35 $ 0.45 $ 0.44 $ 0.28 2nd quarter 0.29 0.25 0.22 0.22 0.13 3rd quarter 0.22 0.36 0.36 0.52 0.26 4th quarter 0.28 0.27 0.19 0.20 0.17 Totti essets (In millions) $ 4,559 $ 4,470 $ 4,389 $ 4,352 $ 4,103 Capitalization (In millions)
Common shareholders' equity $ 1,240 $ 1,226 $ 1,204 $ 1,181 $ 1,160 Preferred securities 182 140 140 160 123 Long-term debt (excluding current portion) 1,395 1,403 1,398 1,341 1,369 Capitilization ratios %
Common shareholders' equity 44.0 44.3 43.9 44.0 43.8 Preferred securities 6.5 5.0 5.1 6.0 4.6 Long-term debt (excluding current portion) 49.5 50.7 51.0 50.0 51.6 Book value per common share at year-end $ 12.31 $ 12.17 $ 12.08 $ 12.07 $ 11.86 Utility construction expenditures (In thousands) $ 154,198 $ 190,771 $ 211,669 $ 215,081 $ 188,344 Nit cash from utility operations less dividends as a % of construction 127 108 09 86 85 Numbtr of full-time employees Utility 3,370 3,331 4,077 4,196 4,305 Nonregulated 236 271 274 347 200 t
a o o o a s u v m t avvvus IN F O R M ATIO N l SHAREHOLDER 1997 Annual Meeting Stock Bought or Sold Close to Record Date This year's annual meeting will be April 23, begin- Stock is sometimes bought or sold soon before a ning at 10 a.m. at the Sioux City Convention Center. record date, but the transaction is not transferred Shareholders of record February 21,1997, will be by the broker in time for the dividend check to be eligible to vote on matters to be addressed at the issued to the new owner. If you are the new owner, annual meeting. your broker will claim the payment from the previ-ous owner for you.
Duplicate Annual Reports Duplicate mailings of Annual Reports occur when Safekeeping the names on your stock certificates differ, or when Safekeepingis a convenient feature of the Shareholder other individuals in your home own stock. Duplicate Options Plan designed for shareholders who prefer Annual Report mailings are costly, so please notify to have their shares held on account rather than us in writing about them. List which account num- receive a stock certificate. You do not have to bers should not receive annual report materials. reinvest your dividends to take advantage of Safe-Of course, each account will continue to receive keeping. When you sign up for Safekeeping, you separate dividend checks and proxies as required will receive a Safekeeping receipt in place of your by the Securities and Exchange Commission. certifica'e. Contact Shareholder Services for additional information.
Form 10 K Reports for MidAmerican Energy Holdings Company Direct Deposit of Dividends The Fonn 10-K wih be available after March 31. To You may elect to have your dividends electronically request a copy, please write to Shareholder Services. deposited into your checking or savings account at your bank, savings and loan institution or credit Common Stock Listing union. Direct Deposit of Dividends is a safe, efncient Common stock of MidAmerican Energy IIoldings and reliable means of receiving your dividends.
Company is traded on the New York Stock Exchange You may obtain an application form by contacting under the ticker symbol "MEC." Daily newspapers Shareholder Services.
carry quotes on the stock.
Replacement of Dividend Check Dividend Reinvestment and Stock Purchase If you do not receive a dividend check, please notify The Company's Shareholder Options Plan provides Shareholder Services in writing so that payment on individuals with a convenient method for purchasing your check can be stopped. When the bank confirms additional shares of common stock by reinvesting the stop order, a replacement check will be issued.
their cash dividends, by making optional cash pur-chases, or both. A prospectus describing the plan Transferring Stock may be obtained by contacting Shareholder Services. To transfer stock, endorse the certificate or Stock Power Form exactly as the name appears on the Record and Payment Dates face of the certificate. Your signature must be Remaining record dates for 1997, to be set by the guarcnteed with a MEDALLION IMPRINT affixed board of directors, are expected to be May 8, August by a financial institution enrolled in the MEDAir 8 and November 7. Corresponding dividend payment LION PROGRAM. Fill in the name, address and dates are expected to be June 1, September 1 and social security number of the person to whom the December 1. shares are to be transferred. Send the certificate to us, or to our co-transfer agent if you prefer. To do this, we reconunend registered mail, which allows you to insure the contents of the package.
For registered mail, we suggest a value of 2 percent of the current market price, which is the fee you will
0000A NNuAL000009 n M l 3...i.ct.i. me rica n be charged by the insurance company to replace Address Changes certificates if they become lost. Please notify us of your former and current address-es. For your protection, we ask that changes be Lsct, Destroyed or Stolen Certificate reported to us in writing.
Please contact Shareholder Services immediately if a certificate becomes lost, stolen or destroyed. Shareholder Services by Telephone A stop transfer will be placed on our records to The Company maintains a toll-free number for you prevent an unauthorized person from transferring to call. If you live outside the Des Moines area, the shares. An indemnity bond must be purchased by number is 1-800-247-5211. If you live in the Des you to replace stock certificates. The cost of this Moines area, you may call 281-2560.
bond is 2 percent of the current market value. As a security measure, keep certificates in a safe place Financial Contacts and do not endorse one until you are ready to J. Sue Rozema transfer it. Once endorsed, the certificates could Vice President and Treasurer be improperly transferred iflost or stolen. Phone: 515-281-2250 Stock Held in Brokerage Accounts L. Jene Spurgin
("Ztreet Name") Investor Relations Administrator When you purchase your stock and it is held for Phone: 515-281-2204 you by your broker, it is listed with the Company in the broker's name, or " street name " The Common Stock Transfer Agents Company does not know the identity of individual MidAmerican Energy lloidings Company shareholders who hold their shares in this manner; Shareholder Senices we shuply know that a broker holds a certain P. O. Box 9244 number of shares, which may be for any number 666 Grand Avenue-28th Floor of customers. Accounts held in street name are Des Moines, IA 50306-9244 not eligible to participate in the Company's Shareholder Options Plan. Also, you receive all Continental Stock Transfer and Trust Co.
dhidend payments, annual reports and proxy 2 Broadway-19th Floor materials through your broker. Regular quarterly New York, NY 10004 financial reports may be obtained directly from the Company by contacting Shareholder Senices. Preferred Stock Transfer Agent MidAmerican Energy lloklings Company T;xpayer Identification Number Shareholder Senices P. O. Box 0244 The Internal Revenue Senice requires shareholders 666 Grand Avenue-28th Floor to furnish a tax identification number to every Des Moines, IA 50306-0244 company in which they own shares. Generally, it is your Social Security number (a W-9 Fonn is required Executive Offices to change a taxpayer identification number). If the MidAmerican Energy lloidings Company number does not appear on your dividend check 066 Gnmd Avenue stub or reinvestment statement, or if it is incorrect, P. O. Box 657 please contact Shareholder Senices.
Des Moines,IA 5030S0057
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MIDAMERICAN INTRODUCED AN IMPORTANT RESOURCE FOR SHAREHOLDERS, customers, the media and the financial community last year. We are pleased to provide you access to timely company information through our World Wide Web site, http//www.midamerican.com. On these pages, we have put together tips on navipting the site and information on the resources available online.
Home Page (Screen 1) Y MidAmerican's home page is the first thing you will Development reas of the site. Each of these main areas has its own subject page. You may also click on see when you visit the Web site. From here, you may the Index icon to find a complete listing of and links to choose to visit the Company Information, Investor Information, Energy Supply and Delivery, or Business the pages in the site.
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learn about dividends, stock certificates, and purchasing or transferring stock. The Fman-cial Contacts link gives you all the names, addresses and telephone numbers you need to conduct your shareholder business. Click on Financials to link to the Company's financial reports (see Screen 3 below).
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MidAmerican's current and historical stock 1996 Second-Ouarter P met !
(PDF 37 KBr4Pe.ee performance. Click on the SEC Reports icon to access MidAmerican's filings with the U m m u,, u r we Securities and Exchange Commission. 1995 w pm t r..no.i sniuan, y f-gasmii asema a,; , o #,. ~ wo -arum; CwerpW W Parracape Carrucarew Cap As afwa eserwsd Dus page mer nor as msr**sd a carmoa neuJ Fe empress earfsr* peranseur of Amracape Adsvecce e a gpsiperf Ferjempt OF Adefacesse Caryrwgsnons Cap Othtr features:
An overview of Company operations and industry -
A Business Development area has information on ,
issues, information about organizational structure the service territory economy and resources.
1 and management team, and an archive of news Companies looking to locate or expand into the releases are some of the things you can find under region will be able to access an online database of Company h1 formation. available sites and buildings.
The Energy Supply and Delivery section gives infor- Visitors to the site can e-mail the Company with mation about electric and gas services. In 1997, questions or concerns and be assured a prompt industnal customers will be able to make gas nomi- response.
nations and monitor system conditions via the MidAmerican Web site.
,,, , g OF TERMS
] GLOSSARY Mid-Continent Area Power Pool (MAPP)- A voluntary Book Value - The value of a company determined orgar ization of 58 electric utilities and energy by subtracting its liabilities from its assets. Usually marketing entitin interconnected to obtain greater expressed on a per share basis.
reliability ami economy through the coordination Capitalization - The total of .long-tenu debt, Mh M&& m h MP preferred stock and common stock equity. region encompasses Iowa, Nebraska, Minnesota, North and South Dakota, and Manitoba and Customer information System - A comprehensive Saskatchewan, Canada.
computer system designed to manage all customer-related information, including: cust omer accounts, MMstu - One million British Thermal Units (Btu).
customer contacts, senice orders, billings, cash A Btu is e standard unit for measuring heat energy.
processing, accounts receivable and collections. One thousand cubic feet of natural gas contain Dividend Payout Ratio - The proportion of earnings approximately one MMBtu of energy.
a company pays to shareholders in the funn of divi- National Energy Policy Act - Approved by Congress dends, calculated on a per share basts. The annual in 1992, this legislation provided for competition dividend per share divided by the earnmgs per in the electric generation business. The law also share for the same period provides the percent- e FERC authority to require that utilities provide l age share ratm. ss m Os mMssioWe m odwr Dow Jones Utilities Average - A published index electric suppliers seeking to compete in the wholesale market.
comprising the average of 15 utility stocks as defined by Dow Jones & Company, Inc. Office of Consumer Advocate (OCA)- A division of the Iowa Department of Justice established to Earnings per Average Share - The earnings available investigate the legality of all rates, charges, rules to common stock for a stated period divided by the ami practices of utilities operating within Iowa.
weighted average number of shares outstanding during the period. Peak Demand - The greatest demand for electric Federal Energy Regulatory Commission (FERC) - energy which occurred at a specific time.
An independent agency within the U.S. Department Retait Competition - A situation in which end.use of Energy, FERC is vested with broad regulatory customers or groups may select energy supphes authority. Virtually every facet of electric ami natural rom among a number of different providers, gas production, transmission and sales conducted Retained Earnings - The net accumulated earnings by private investor-owned utilities, corporations or public marketing agencies is under commission of a business that have not been distributed to shareholders and have not become a part of the puniew if any aspect of their operations is common stock of a company.
conducted in interstate commerce.
Return on Average Common Equity - The ratio of net Illinois Commerce Commission (ICC) - The Illinois income to common equity that measures the rate of governmental agency that has authority to regulate the retail sales, safety and senices of public utilities return on the common shareholders' investment.
operating in the state. South Dakota Public Utilities Commission (SDPUC)-
The South Dakota governmental division that has lowa Utilities Board (sus)- The Iowa governmental authority to regulate retail sales, safety and senices division that has authority to regulate the retail sales, safety and senices of public utilities operating of public utilities operating in the state.
in um state Throughput - The total volume of natural gas moved through a company's distribution system, including Kilowatthour (kWh) - The basic unit of electric energy equal to one kilowatt (1,000 watts) of power gas sold ami gas transported.
supplied to or taken from an electric circuit steadily Total Shareholder Return Stock price growth plus for one hour. Um annual dividend, divided by the initial stock price.
Megawatt (Mw)- One megawatt equals one million wholesale Competition - A situation in which bulk watts, or 1,000 kilowatts. i of & M - se fm de or Wed consumption) may be provided from different sources through the use of transmission systems.
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