ML20151Y593
| ML20151Y593 | |
| Person / Time | |
|---|---|
| Site: | Quad Cities  |
| Issue date: | 12/31/1995 |
| From: | Bright S, Christiansen R External (Affiliation Not Assigned) |
| To: | |
| Shared Package | |
| ML20151Y560 | List: |
| References | |
| NUDOCS 9809180287 | |
| Download: ML20151Y593 (50) | |
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Wic.American Energy Comaany is lowa's largest utility company with assets of $4.5 billion and annual revenues of $1.7 billion. MidAmerican protides electric and natural gas sertice in a 10,600-square-mile area uith a population of 1.7 million. The sertice area includes much of Iowa and portions ofIllinois, Nebraska and South Dakota.
The largest communities served by MidAmerican are Des Moines, Cedar Rapids, Sioux City, Waterloo, Iowa City and Council Bluf[s, Iowa, the Quad-Cities area ofIowa and Illinois, and Sioux Falls, South Dakota. MidAmerican Invides sertice to 635,000 electric customers and 600,000 naturalgas customers.
MidAmerican has two nonregulated subsidiaries: InterCoast Energy Company and Midwest Capital Group, Inc. InterCoast has assets of $736 million Contents..
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in four business groups: Medallion Production Company, InterCoast Energy Letter to ShareholJers...
2 Marketing and Sertices, InteCoast Capital Company, and InterCoast Rail
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Gas Business Unic..
8 Services and Investments. Midwest Capital Group is a regional business development I"'c'C"*'t Enern..
. 10 Midwest Carital Group..
.12 company with assets of $84 million.
Finanaal Informanon..
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. 46 MidAmerican was fonned July 1,1995, by the merger of Midwest Resources nen...
. 47 Shareholder information... 4s Inc. and loua-Illinois Gas and Electric Company. MidAmerican has 3,600 full-time employees and 73,000 shareholders living in 50 states and ServiceTerritory..
g MINNE SOT A 30 foreign countries. The company's electric h wess pg SOUTP DAKOTA unit is headquartered in Davenport, Iowa, and the gas r
tefloo business unit is based in Sioux City, Iowa. Corporate i
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.nd ILLINOIS MISSOURI lW5 ANfJUAL REPORT I
,To our Sharenolc ers:
1995 was a year of great accomplishment. We formed MidAmerican Energy Company and began implementation of our strategy to pmition the Company as an industry leader in the emerging competitive electric and gas energy markets.
We were two companies when the year began, but we had a single focus. Our task was to complete the merger planning to support completion of the merger in the summer of 1995. We wanted to be ready to begin operation as a new company as soon as all merger regulatory approvals were received.
1 Our short-term goals w-re:
1 Tb complete the merger during 1995.
M To design an organization that could succeed in a competitive market, and pwtide all employees scith a fair oppornmity to be considered for the positions in that organi ation.
7 To more quickly and decisively to achieve the cost savings and benefits of the merger.
T To begin 1996 trith virtually all merger-reLued chcmges and costs behind us, and strategies in pbce to pursue our long-term goals.
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i We are pleased to report that these goals were achieved. The impacts - costs to achieve the 1
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merger, as well as some early benefits are reflected in our results for 1995. After giving effect to I
the costs of completing the merger, which reduced 1995 earnings by 24 cents per share, and write-f
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downs of certain assets of our nonregulated subsidiaries, which reduced earnings by an additional i
- t 10 cents per share, earnings per share for the year were $1.22, unchanged from the prior year.
1995 earnings were favorably affected by an unusually hot summer which, created strong demands for air conditioning. In addition to favorably affecting revenue and earnings, these extreme conditions proviJed a test of the reliability of our energy delivery systems. We are pleased to report that our utility operations met those challenges in an excellent fashion.
The tr jority of the costs of our merger are employee-related. These costs include early retirement incentives, severance payments and relocation costs. While these costs are substan-tial, they were anticipated and considered in the overall evaluation of merger benefits. The long-term savings that will be realized by our restructuring are an essential component for creating Common Stock f(
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At year-end we had achieved an overall staffing reduction of more than 700 positions, or 17 percent of the total employment level prior to the merger. The cost reductions achieved as a result of these staffmg reJuctions will be supplemented by savings that will come from nonlabor operating and maintenance cost reductions.
Intensive work continues to reali:e the potential savings in cost of fuel for generation and l
purchased gas costs. These savings are of immediate benefit to customers as they ilow through the automatic adjustment clauses in our rate schedules.
It is imperative that the Company achieve major changes in anticipation of an accelera-tion of the structural changes taking place in the utility inJustry. In recent years, our letters to w_,
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shareholJers and communications to employees have addressed the impact of the changes on 3,ani,, gnag,,
our industry. The regulatory initiatives, which proJuced a market-driven natural gas industry,
'"J< "' "</" ""J Runell Chrntaanren, eventually led to passage by the United States Congress of major energy legislation in the ch.urman. Are the chwicuaane National Energy Policy Act in 1992. This legislation opened the electric generation business to
,,,,,ga,ngg wholesale competition, and has led to increased interest in retail competition anJ perhaps an MdAmawan Fnce C.omjuny at cwimte expectation that retail competition will become a market-driven reality.
W'""5 '" De' Mames, I,ma, the Our current situation presents great legislative anJ regulatory uncertainty as to the future largest cuy sen eJ by WlAmawan.
pnspects of retail competition. At least 30 states have begun to consider or propose the introduc-tion of retail electric compeurion. While we cannot predict the eventual outcome of the legislative and regulatory paress, we believe that it is likely that market forces will prevail, and that there l'N5 ANNUAL HiPOUT
will be competitive retail markets for segments of the electric and gas energy service businesses.
Our strategies and goals include a strong focus on the need to be competitive and contin-ued emphasis on cost savings. We must also develop opportunities for improving our competitive position through growth. Our growth strategies focus on expanded products and services to our customers, expanded matkets through mergers and acquisitions and improved performance by our nonregulated energy businesses.
l in r,' cognition of the rapidly changing industry environment and the attendant need for maximum flexibility to respond to competition, in January 1996 the 130ard of Directors approved management's recommendation that a proposal to form a holding company be submitted to the shareholders for approval at the 1996 Annual Meeting. The new holding company, to be named MidAmerican Energy Holdings Company, will be exempt from the Pubhc Utility Holding j
Company Act of 1935.
In addition to the shareholders' approval, formation of the new holding company will require approvals from various state and federal regulatory agencies. We believe these necessary approvals will be received during 1996.
In the formation of the holding company, each share of the common stock of MidAmerican Energy Company will be exchanged for one share of the common stock of MidAmerican Energy Holdings. MidAmerican Energy Company and InterCoast Energy Company will become wholly owned subsidiaries of MidAmerican Energy Holdings. Midwest o
o ~ e 5 re A R R Capital Group will continue to be a wholly owned subsidiary of MidAmerican Energy Company.
Continued improvement in our performance also will require legislative and regulatory changes that are needed to make it possible for MidAmerican to compete on a level playing field with othet energy providers. The objectives of these changes are (1) to provide the Company the flexibility to effectively respond to competitive challenges, and (2) to ensure that costs of social programs (such as subsidies for alternative energy producers, costs of energy efficiency programs, disproportionate taxation and costs of unconditional obligations te rovide I
1 service) imposed on electric and gas energy providers by the public sector are imposed on all of those who wish to compete, not just investor owned companies such as MidAmencan Energy.
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l Throughout the process of planning the merger, and in the months since the merger became effective, we have worked to clearly formulate effective strategies to bridge our present business situation to our long-term goals. Our five-year goals are:
3 Tb achieve a compound total return to sharehollers (combining stock price changes and dividend payments) at the top quartile industry level.
3 To reach an indury leadership position in terms of the competitiveness of the prices for and the quality of our services.
3 Tb redefine the markers for our products and services, leading to increased market share and breadth of market services.
3 To effectively address the infonnation technology issues that tvill be critical to our abiiay to take advantage of competitive oppwtunities.
3 Tb substantially complete the process of effectively dealing tvith the regulatory and Id +
m,s that must be addressed in a transition to cumpetitive raadets.
3 Th implement strategic ch.mges needed to mamtain an mdustry leadership position.
As we stated at the beginning of this report,1995 was a year of great accomplishment as we identified and implemented many of the changes that are required to make the Company a strong competitor. The excellent progress reflects outstanding work by the employees of MidAmerican. We very much appreciate the outstanding efforts of our employees and the persoc,1 sacrifices they have made in working to form the new Company.
The past year also has been a very demanding period for our Board of Directors. They were asked to deal with many difficult decisions, which were necessary in launching the new Company. Their contributions are greatly appreciated.
We look forward to our first full year of operations and the opportunity to continue building a strong and competitive MidAmerican Energy, which will bring value to you in the years ahead.
g Russell E. Christiansen, Chairman Stanley J. Bright, President Office of the Chief Executive Officer February 15,1996 IM ANNUAL REPORT 5
Our electric business unit provided reliable records of the predecessor companies. During service to a growing customer base in 1995 the hot weather, business and residential load while also completing the merger related management programs reduced demand by restructuring and downsi:ing. MidAmerican 267 megawatts, helping MidAmerican meet added 7,000 electric customers during the customer demand and still maintain the year, reflecting modest, but steady growth in required capacity reserve margin.
Coal supplies at MidAmerican's gener-the service territory.
The restructuring involved consolidating ating stations improved in 1995, recovering electric service centers from 41 to 23 kications, from the reduced levels caused by the 1993 reducing personnel, and establishing an electric floods, interruptmns in rail service and greater business headquarters in Davenport, Iowa. By demand by utilities for low-sulfur western coal.
consolidating service centers, MidAmerican Burning low-sulfur coal helps MidAmerican f
e < pects to better coordinate personnel and meet applicable clean air requirements. New bumers to reduce nitrogen oxide emissions equipment in responding to service interrup-tions and customer needs. First response were installed at Neal Generating Station personnel are located in 56 communities.
Unit 2 in 1995. They will be adJed to Neal 7 Electric 3usiness Unit creating value in clearic service begins at our coal-fired generating stations where production costs are lower than regional and national av Large industries, a group of customers expected to take advantage of supply choices restd deregulation, also realize value from MidAmerican's competitive industrial prices.
Also as part of the new organi:ation.
Unit 3 in 1996. With the addition of the we expanded the types of transactions that burners, both units will comply with clean air customers can complete with MidAmerican requirements through the year 2008.
by telephone, and consolidated call centers MidAmerican has majority ownership in three ko.uons. With the expanded tele-in four of the five jointly owned, coal-fired phone capabilities, we reduced the number generating units in Iowa. They are highly effi-of customer offices from 44 to 13.
cient, clean burning units with production The growing use of computers and costs well below regional and national averages.
other automated systems in businesses and The Quad Cities Nuclear Station and homes increases the need for reliable electric Cooper Nuclear Station improved their perfor-service. MidAmerican recorded a 99.99 per-mances in 1995. After extensive evaluations, cent reliability record in 1995. On average, the Nuclear Regulatory Commission removed customers experienced only 38 outage minutes.
both stations from its " adversely trendmg" 1995 was the hottest summer in our list. MidAmerican owns 25 percent of the region in six years. With temperatures hitting Quad-Cities Station and purchases 50 percent 100 degrees, MidAmerican established a new of the energy generated at Coopt r under a record peak Jemand of 3,553 megawatts on long term contract. Quad Cities Unit 1 July 13, a 6.9 percent increase from the combined established a Commonwealth Edison record 3...i.d.\\. merican 6
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for boiling-water reactors with 283 days of c antinuous operations.
i As part of the company's restructuring, the electric unit consolidated generation and transmission systems control functions at the Control Center near Des Moines. The Control Center also assumed greater responsibility for local distribution operations throughout MidAmerican's service area.
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electric customers, became effective July 1, farpt of tk commmunes e
1995. The tariffs enable wholesale customers
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filme. o MulArm nam s needs. The tariffs conform to model tariffs i
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proposed by the Federal Energy Regulatory waggne,, gnn Commission for open-access transmission ser-w6nch, cleanc f.ress I
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vices comparable to a transmission provider's dent. twws ik new
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dsm.wn Datenturt's customers in Charles City, Iowa, took advan-l reutahanon.
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tage of a special one-year energy efficiency program in 1995 involving MidAmerican, j
Charles City and an energy consulunt. The purpose of the project is to improve the local business climate by implementing money-saving energy efficiency measures.
h' Regulators approved two electric price a
W changes in 1995. The Iowa Utilities Ibard g
approved a $20.3 million, or 3.4 percent increase, and the South Dakota Public Utilities Commission approved a $344,000, or ff.4 percent increase. The adjustments affected customers formerly served by Midwest Power, one of MidAmerican's predecessor utilities.
Retail electric sales in 1995 totaled l
15 billion kilowatt-hours, a 3 percent mcrease, I
compared with 1994.
Cost reductions related to the electnc
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(roorce Ubbtv Data 1996 capital budget. Spending for construction mai* w9 projects is reduced by 20 percent, compared gogguma with capital expenditures in 1995.
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Innovation and a competitive focus guided supplier from among four companies, including the MidAmerican natural gas business unit MidAmerican. During the one year project during 1995. At the same time, we added that ends in October 1996, MidAmerican 8,000 new customers and implemented the continues to transport all natural gas to its new gas unit restructuring and staffing.
Rock Valley customers and earns a profit on The reorgani:ation, associated with transportation of the gas. The project will j
the July 1 merger, included establishing a gas provide insight into customer reaction to business headquarters in Sioux City, Iowa, choices in the deregulated natural gas market.
reducing the workforce and consolidating gas As part of the merger-related reorgani-service centers in 16 locations. Gas service
- ation, MidAmerican in 1995 surveyed personnel are strategically located in another commercial and industrial custorners about 23 communities. The gas unit organi:ation is their preferences for energy services. In the designed to improve efficiency, reduce costs and survey, customers told us they depend on better meet changing cuemer needs.
MidAmerican for comprehensive energy Regulators in l__
od South Dakota advice. Based on the results, MidAmerican approved price adjustmew m 1995 that included now provides a "one-stop" gas and electric 7 Gas Business Unit Finding ne1e teays m meenhanging cusmmer needs is hoto tee are adding value in our natural gas service. MidAmerican customers continue to pay some of the lowest prices in the country, and for the first time, innovative regulatory policies in lotva and South Dakota tvill allote our shareholders to benefit from economical gas purchases.
an innovative gas supply incentive system for shopping approach: a single company repre-g MidAmerican. For the first time, shareholders sentative is assigned to a particular customer have the opportunity to share in the savings to meet the customer's total energy needs.
associated with our economical purchases of MidAmerican customers will benefit natural gas. The incentive mechanism - one from a new, company-owned natural gas of the first in the country - measures actual pipeline being constructed in Eastern Iowa.
gas costs against a market based benchmark.
The Iowa Utilities Board in 1996 authori:ed The price adjustments approved by the project, a 62-mile,16-inch pipeline Iowa and South Dakota regulators provide an connecting Northern Natural Gas Company's additional $12.5 million in annual revenues.
pipeline near Dubuque to MidAmerican's MidAmerican customers continue to pay system near Davenport. The pipeline will some of the lowest gas prices in the country.
reduce our gas transportation costs and the Rock Valley, Iowa, is the site of another gas supply charges to our customers.
innovative gas project, launched in 1995. We One large-volume customer that will initiated the experimental program to promote be served with the new pipeline is Guardian Aterage ResiJcnrial and better understand customer choice. All Industries Corp. The company selected Naumd Gas Rates Customers m the community were given the MidAmerican to provide natural gas service Gme h Asmaaw of Regiatory Utmty opportunity to select their local natural gas to its new $110 million glass manufacturing ceme-s um t 17f5, g per Theel
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InterCoast Er; rgy Company is a nonregulated record 4 million Barrels of Oil Equivalent subsidiary of hiidAmerican Energy Company.
(BOE) during 1995, a 10.5 percent increase InterCoast mcuses on the acquisition, devel-over 1994. The company also,chieved a opment. production and marketing of oil and significant increase in profitability per unit gas, electric power and gas brokering and of pnduction by reducing lease operating marketing services and rail services. In 1995, expenses and administrative costs by 18 per-Inte Coast contributed 0.6 cents per share to cent, from $4.29 per BOE in 1994 to $3.52 consolidated earnings. This was a 9.6 cents per per BOE in 1995. At year-end, htedallion's share reduction from the contribution to proved reserve base was 32.1 million BOE, earnings in 1994, resulting primarily from consisting of 133.7 Bcf of natural gas and 9.8 merger costs and write-downs of certain assets.
million barrels of oil.
InterCoast has four business groups:
The focus of InterCoast Energy hiedallion Production Company, InterCoast hiarketing is to be a nationalleader in the sale Energy hiarketing and Services, InterCoast of natural gas, electric power and energy ser-Capital Company and InterCoast Rail vices The company's energy marketing efforts Services and Investments.
are segmented by retail and wholesale markets.
7 RterCoast 2nergy By competing in the nation's nonregulated energy markets, InterCoast contributes to MidAmerican Energy's grototh. With whsidiaries located throughout the United States, InterCoast is expanding its sales of natural gas, oil and electricity, and adding neto energy products, and financial and rail services.
hiedallion Paduction Company, a AmGas Inc., a wholly owned non-wholly owned subsiJiary of InterCoast, is an regulated natural gas company headquartered g
independent oil and gas company based in in Dallas, Texas, is a central component for
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Tulsa, Oklahoma. hiedallion focuses on the building the retail energy marketing business.
low-cost accumulation, production and AmGas.narkets natural gas and energy man-marketing of oil and natural gas reserves.
agement services to commercial and industrial hiedallion adds reserves through developmental clients in the hiidwest and areas of the drilling, pnxlucing property acquisitions and Northeastern United States. In 1995, AmGas exploratory drilling.
formed a strategic marketing alliance that hiedallion has a long standing record links AmGas' marketing skills with hiobil of completing approximately 60 percent of its Natural Gas.
development wells as pnxlucers. During 1995, interCoast Energy hiarketing provides the company drilled 29 developmental wells wholesale natural gas marketing services and completed 18 as pnslucers.
through InterCoast Trade 6t Resources Inc., a Despite a decline in natural gas prices recently established natural gas wholesale during 1995, hiedallion's net operating income trading company, and GED Energy Services, hd j
increased to $11.1 million, a 21 percent increase Inc., a full-service natural gas marketing firm Meddlen pnductm over the prior year. hiedallion produced a located in Tulsa, Oklahoma.
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ti provides electronic services to electric energy b r. '
buyers and sellers nationwide. Headquartered in Atlanta, Georgia, Continental has developed b'
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p wholesale energy. At year-end, CPEX* had 23 If utihty participants.
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InterCoast Capital Company holds TaasAxJ ddun 1 is :gp InterCoast Energy's marketable securities "1 '"'cC*' E"oo "
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$270.2 million as of December 31,1995, a 35 e/1*c= -wy g((}
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a percent increase over the prior year.
'k m4a o!"m' f T; hi portfolio is invested in investment-grade utility 3 " '"
[p@p preferred stocks. In 1995, InterCoast Capital D
diversified the financial securities portfolio by aa investing more than $50 million into income
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InterCoast Rail Services and Investments s ~ s-.s.,~..-.~. i a is made up of two operating companies,
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E Mehm0 & Serv +ces $13 5 g
UNITRAIN, Inc. and Cornhusker Railcar
'i Services, Inc., and several passive invest-1 ments. UNITRAIN is an integrated railcar services company that provides management services for more than 2,300 railcars, and owns and leases more than 400 railcars.
Cornhusker, with facilities in Nebraska, provides a wide range of maintenance services includmg wreck repair, program maintenance and reconditioning of railcars for utilities, pul. gas. smJ railroads and other rail equipment owners.
Em e. u % % r w 11
state agencies. In 1995, these efforts NiC. West capita con eut.d m th_,-on oo.e s in hiidAmerican's service territory.
Group success in economic huwest Capas iaremms-m is Dakota Dunes, the 2,000 acre planned i
det'elopment requires a long-term residential and commercial development in southeastern South Dakota. The development's commitment, commtmity-based impressive growth continued in 1995 with the addition of apartments, single famuy homes and restaurant and hotel facilities. Two companies leadership and support from state announced plans to add more ihan 20,000 GHd local got'ernment.
square feet in office space in the business park.
After six years of steady growth, more than 280 residential lots have been sold and 7 sgf[.
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m hiidwest Capital Group is the hiidAmerican 190 homes are occupied. hiidwest Capital pAta n-features an Anu,u Energy subsidiary that is responsible for markets Dakota Dunes as a total living expe-Palm &desiend e#
service area business development.
rience and economical business kication.
carx and canto dub As part of the merger-related reorgani-hiidwest Capital is investigating the in a smuc wttmg afgwu zation in 1995, hiidwest Capital assumed the potential for the growth of service area related to de Emuri Rner m businesses that complement the pnxlucts and active management of service area investments g,,y of both predecessor companies. hiidwest Capital services now provided by hiidAmerican. A Dktat RmallSwpen, has assets of $S4 million, and also has a $25 strong service area presence throuch the MJuest Captal ycw dem, n Aown near de million line of credit with hiidAmerican delivery of a range of products and services will enhance the economic development of d"* '"
- to support economic development projects.
hiidAmerican's economic development our service territory.
staff works with hiidwest Capital to iJentify hiidwest Capital also owns the 20-story Hub Tower office building in Ib hioines and potential economic development projects.
These typically involve the combined efforts has an investment in the new Radisson Quad of individual companies, communities and City Pla:a Hotel in downtown Davenport.
5...i.d.\\. me ric a n 12 M
l Management's Discussion and Analysis of Financial Condition and Results of Operations Cerporate Overview f
l MidAmerican Energy Company (the Company or merger, busines: restructuring and work force reduction.
i MidAmerican) was formed on July 1,1995, as a result of the The merger is being accounted for as a pooling-of-inter-merger of Iowa-Illinois Gas and Electric Company (lowa-ests, and the Consolidated Firancial Statements included in Illinois), Midwest Resources Inc. (Resources) and its utility this Annual Report are presented as if the merger was con-subsidiary, Midwest Power Systems Inc. (Midwest). Pursuant to summated as of the beginning of the earliest period presented.
the merger, each outstanding share of preferred and preference Portions of the 'ollowing discussion provide information related stock of the predecesser companies was converted into one share to material changes in the Company's financial conditior and of a similarly designated series of MidAmerican preferred stock, results of operations between the periods presented, based on the no par value. Each outstanding share of common stock of combined historical information of the predecessor companies.
Resources and Iowa-Illinois was converted into one share and 1.47 It is not necessarily indicative of what would have occurred shares, respectively, of MidAmerican common stock, no par value.
had the merger actually been consummated at the beginning The Company's utility operations (the Utility) consist of of the earliest period.
two principal business units: an electric business unit head-In January 1996, the Company's Board of Directors approved quartered in Daveriport, Iowa, and a natural ga bunness unit the formation of a holding company structure. The holding headquartered in Sioux City, Iowa. The Company's corporate company would have two wholly owned subsidiaries considing headquarters, which includes various staff functions, is in Des of MidAmerican (utility operations) and InterCoast. Midwest Moines, lowa. InterCoast Energy Company (InterCoast) and Capital would remain a subsidiary of MidAmerican. The Midwest Capital Group, Inc. (Midwest Capital) are the non eg.
Board of Directors and management believe a hciding compa-ulated suhsidiaries of the Company and are headquartered in Des ny structure will provide a more flexible organi:ation better Moines. laterCoast conducts various nonregulated activities of designed to operate in a more competitive environment.
the Company, while MiJwest Capital functions as a regional Consummation of the holding company structure is subject to business development company in the utility service territory.
approval by holders of a majority of the outstanding shares of Management anticipates that the merger will permit the the Company's common stock. In addition, certain orders Company to derive benefits from more efficient and economic must be received from the Illinois Commerce Commission use of the combined facilities and resources ofits predecessors.
(ICC), the Iowa Utilities Board (lUB), the Federal Energy Savings from avoided cats and cost reductions are estimated to Regulatory Commission (FERC), and the Nuclear Regulatory total in excess of $500 million over the next 10 years. Ahhough Commission (NRC). St bject to such approvals, each share of the Company began reali:ing some benefits of the merger in MidAmerican common stock will be exchanged for one share 1995, adJitional benefits and savings will be realized in 1996 of the holding company's common stock. It is management's and future years. As discussed below, the Company has intent, if possible, to complete the formation of the holding incurred significant costs related to consumm'ation of the company and share exchange by the end of 1996.
Cocults of Operations Earnings The following tables proviJe a summary of the earnings contri-butions of the Company's operations for the past three years:
.1995.
,,1994
.199[
Eamings (in millions) 1995 1994 1993 Eamings Per Common Share:
Utility operations
$124.5
$110.6 $ 125.5 Utility operations
$ 1.24 $ 1.12 $ 1.29 Nonregulated operations (2.1) 15.2 13.8 Nonregulated operations (0.02) 0.16 0.14 Income (loss) from Income (loss) from discontinued operations 0.4 (5.6)
(3.8) discontinued operations (0.06)
(0.04)
Consolidated earnings
$122.8
$120.2 $ 135.5 Consolidated eamings
$ 1.22 $ 1.22 $ 1.39 1995 ANNUAL REPORr
[3
i l
7 Management's Discussion and Analysis of Financial Condition and Results of Operation i
Eamings per share for 1995 were unchanged compared to Write downs of certain assets of the Company's nonregu-1994. Increases in the gross margins of utility electric and lated subsidiaries reduced 1995 earnings by approximately natural gas operations favorably affected eamings for 1995.
$10.2 million, or $0.10 per share. The pre tax amount of the Gross margin is the amount of revenues remaining after write-downs, which is included in Other Non-Operating deducting electric fuel costs or the cost of gas sold, as eppro-Income, in the Consoliited Statements of Income, reflects priate. Decreases in nuclear operations and maintenance costs other than-temporary declines of $18.0 million in the value also favorably affected earnings. Merger.related costs and of those nonregulated investmena. The investments are pri-write-downs of certain nonregulated assets had a significant marily attemative energy projects.
Eamings for 1994 decreased $15.3 million from the 1993 adverse affect on 1995 eamings.
The increases in utility gross margins were due primarily level due primarily to merger transaction costs in 1994 and to electric and gas service rate increases filed prior to the recognition of an $11.5 million aftertax gain on the exchange merger. Recent rate activity is discussed in greater detail later of gas service territory in 1993.
in this section. A portion of the rate increases relate directly Utility Operating Revenues to increases in certain operating expenses. The gross margin for Electric:
electric operations, net of the increase in directly-related A combination of factors contributed to the $73.0 million operating expenses, contributed $0.26 per share more to earn-ings in 1995 than in 1994. In addition to increases in electric increase in electric operating revenues for 1995.
rates, increased sales due to hot weather in the third quarter of Various increases in retail electric rates contributed to the increase in electric revenues. In October 1994 and January 1995, though offset somewhat by less extreme temperatures in the heating season, resulted in a 3% increase in electric 1995, the Company implemented rate increases for Iowa energy retail sales for 1995 compared to 1994. The gross margin for efficiency cost recovery filings which allow a total increase in gas operations, net of the increase in directly-related operating electric revenues of $31.7 million over a four-year period. In expenses, contributed $0.07 per share more to eamings in August 1995, the Company began collection of $18.6 million 1995 than in 1994. An increase in retail natural gas sales also over a four-year prospective period related to another energy contributed to the improved gross margin due to colder efficiency cost recovery filing. In connection with an Iowa temperatures in the fou:th quarter of 1995 compared to 1994, electric rate filing, the Company began collecting in January As part of the process of merging the operations of 1995 interim rates representing an increase of $13.6 million in MidAmerican's predecessors, the Company developed a annual electric revenues. A final rate increase in the proceed-restructuring plan which includes employee incentive early ing, representing an increase of $20.3 million in annual electric retirement, relocation and separation programs. The restruc-revenues, was effective in August 1995. The new rates include turing plan, which was completed in 1995, resulted in the a component for the recovery of other postretirement employee elimination of over 700 positions. During benefit (OPEB) costs on an accrual basis instead of the pay as-E 5.
1995 the Company recorded $33.4 million you-go basis previously used. Approximately $8 million of the of restructuring costs which included the
$20.3 million increase in annual revenues relates to additional Company's estimate of the remaining expensing of OPEB costs. Increases in revenues due to OPEB amount of such costs to be incurred.
and energy efficiency costs have an immaterial impact on net These costs are primarily reflected in income due to corresponding increases in operating expenses.
Other Operating Expenses in the An 11% increase in retail sales of electricity for the 1995 Consolidated Statements of Income.
third quarter compared to the 1994 third quarter was the main in addition, the Company incurred cause of the increase in electric retail sales for 1995. The nonrecurring costs to accomplish consum-increase in sales was primarily the result of warmer temperatures mation of the merger. These " transaction which, measured in cooling degree days, were 56% warmer in costs," which are included in Other the 1995 third quarter than in the comparable 1994 quarter.
Non-Operating Income, in the Consolidated The Company has been allowed current recovery from Statements o> Income, totalled $4.6 million most of its electric utility customers for fuel and purchased in 1995 and $4.5 million in 1994, power costs through energy adjustment clauses (EACs). As in total, restructuring and transaction the cost of energy to serve those customers fluctuates, revenues costs reduced 1995 eamings by $0.24 per fluctuate accordingly with no impact on gross margin or net share, while transaction costs reduced income. In 1995, the average energy cost per unit decreased 1994 earnings by $0.05 per share.
4.5%. As a result,1995 revenues collected through the EACs g-decreased compared to 1994.
Elecmc Retad Sales Mons of Mh) 5..l.i.d.\\. merica n S
14
Revenues from sales for resale accounted for $21.2 million of lower PGA revenues. In January 1995, the Company of the increase in electric revenues. Sales for resale volumes implemented a gas service rate increase resulting from findings increased 53% for 1995 compared to 1994. Greater availability in an Iowa energy efficiency cost recovery filing which allows of nuclear generating facilities in 1995 increased the amount of an increase in gas revenues of $6.7 million over a four-year energy available for sales for resale. Coal deliven uncertainties period. In October 1994, the Company began collecting also limited the Company's sales for resale activity in 1994.
interim rates for an Iowa gas rate filing representing an Sales for resale have a lower margin than other sales and, increase of $8.2 million in annual gas revenues. A final rate accordingly, increases in related revenues do not increase net increase of $10.6 million in annual gas revenues was effective income as much as increases in retail revenues.
in August 1995. Approximately $2.5 million of the $10.6 The Company is a 25% owner in Quad-Cities Nuclear million increase in annual revenues relates to the recovery of Power Station (Quad-Cities Station), which is jointly owned OPEB costs on an accrual basis. Increases in revenues due to and operated by Commonwealth Edison. The Company also OPEB and energy efficiency costs have an immaterial impact purchases 50% of the energy of Cooper Nuclear Station on net income due to corresponding increases in operating (Gmper), which is owned and operated by Nebraska Public expenses. Retail sales of natural gas increased slightly due to a Power District (NPPD), through a power purchase agreement 4% increase in residential sales. This was due mostly to colder which terminates in 2004. NPPD took Cooper out of service weather in the fourth quarter of 1995.
on May 25,1994. Pending satisfaction of the concerns of the Gas operating revenues for 1994 decreased $47.0 million NRC, Cmper remained out of service until February 1995 compared to 1993 due to a decrease in retail natural gas sales.
when it retumed to service following NRC approval to restart.
Temperatures, measured in heating degree days, decrea-d con-In May 1995, the Company filed a lawsuit seeking unspecified siderably in 1994 compared to 1993, resulting in th h:rease i
damages from NPPD related to the 1994-95 Cooper outage. In in retail sales. In addition, an exchange of gas service w ories June 1995, the NRC removed Cooper and the Quad-Cities in the third quarter of 1993 resulted in a decrease in natural Station from its list of adversely trending plants.
gas customers. A reduction in revenues collected through the Total electric operating revenues for 1994 increased PGAs also contributed to the decrease in retail revenues. The
$18.7 million compared to 1993. Electric retail revenues effect of rate increases partially offset the decrease in revenues increased $38.2 million in 1994 compared to 1993. The due to reduced sales volumes and PGA revenues.
increase in retail revenues was partially offset by a decrease of approximately $20 million in sales for resale revenues. As Utility Operating Expenses discussed above, outages at Cooper in 1994 and coal delivery Changes in the cost of electric fuel, energy and capacity uncertainties limited the Company's sales for resale activity-(collectively, Energy Coses) reflect fluctuations in genera-An increase in retail sales, due mostly to increased sales to tion levels and mix, fuel cost, and energy and capacity pur-chases. Energy Costs for 1995 increased general service customers, was the primary cause of the 8% compared to 1994 due primarily to a increase in retail revenues. An increase in the cost of energy Rate increases also contributed to the increase in electric increase in Energy Costs as a result of
~ 5 5S5 13% increase in total electric sales. The E
per unit sold also increased revenues through the EACs in 1994
~ ~~~
revenues for 1994 compared to 1993 as discussed below.
greater sales of electricity was partially in July 1993, the Company implemented electric rates for offset by a 5% decrease in the average some ofits towa customers designed to increase annual electric Energy Cost per unit. Energy Costs for revenues by $6.8 million. Aho in July 1993, an annual electric 1994 decreased 2% compared to 1993 due primarily to the reduction in sales rate increase in Illinois of $9.6 million became effective.
for resale. The decrease due to reduced Gas:
sales of electricity was partially offset by Gas operating revenues for 1995 decreased $32.4 million a 7% increase in the average Energy compared to 1994. A reduction in revenues collected through Cost per unit. Part of the fluctuation in the purchased gas adjustment clauses (PGAs) was the primary the average Energy Cost per unit was cause of the decrease in revenues. This was due to a signifi, due to changes in the availability of cant decrease in the average cost of gas per unit sold.
nuclear generation throughout the Variations in revenues collected through the PGAs reflecting three-year period.
changes in the cost of gas and volumes sold do not affect Cost of gas solJ for 1995 decreased gross margin or net income.
c mpared to 1994 Jue to a 15% decrease An increase in sales and rates offset part of the impact in the average cost of gas per unit sold.
mmgg Gas Thnmghput
(%ms of MM8ta)
IM ANNUAL RPORT 15
l l
3 Management's Discussion and Analysis of Financial Condition and Results of contributed to the increase in revenues for 1995.
Cost of gas sold decreased in 1994 compared to 1993 due primarily to a 9% decrease in sales which was due in part to a Nonregulated Operating Expenses gas property exchange.
Cost of sales includes expenses directly related to sales of oil, Other operating expenses increased $45.5 million in natural gas and real estate. The factors discussed above for 1995 compared to 1994 due primarily to costs related to the revenues, including natural gas sales volumes, lower gas prices restructuring plan discussed in the opening section of Results of and reduced real estate sales, also affected the variances in Operations. Utility operating expenses include $31.9 million of cost of sales for the years 1993 through 1995. Cost of sales for the $33.4 million total restructuring costs. As discussed above, the newly acquired natural gas firm aho contributed to the 1995 expenses also include increases from deferred energy increase in 1995 compared to 1994.
efficiency and OPEB costs. The increases for 1995 were Other nonregulated expenses increased $3.0 million for partially offset by an $8.6 million reduction in nuclear opera-1995 compared to 1994. The 1995 amount includes $1.5 tions costs. Expenses for 1994 were reduced by $3.0 million million of expenses for the Company's restructuring plan.
due to capitalizing previously expensed energy efficiency costs The $5.7 million increase in 1994 compared to 1993 was due to comply with the IUB regulation of these costs.
primarily to expenses of the natural gas marketing business Other operating expenses in 1994 increased $13.5 million acquired in January 1994.
compared to 1993. Increased nuclear operations costs related Reah. zed Gains and Losses on Secun. ties, Net to extended outages at Cooper and Quad-Cities Station during Reali:ed gains and losses on securities decreased $6.9 million 1994 contributed to the increase. The increase in nuclear f r 1995 compared to 1994. The decrease resulted primarily costs was partially offset by the adjustment to energy efficiency fmm the sale of a single holding in 1994 which generated a costs mentioned above.
$5.9 million pre-tax gain. During 1993, InterCoast reali:ed Maintenance expenses decreased $15.9 million in 1995 ignificant gains on some of its investments in marketable compared to 1994. Quad-Cities Station maintenance expenses securities due to the impact of favorable market conditions.
decreased $5.5 million due in part to the 1994 outage. The timing of power plant maintenance and a reduction in various Non-Operating Incorne - Other, Net distribution maintenance accounted for much of the remaining The adjustments to nonregulated investments discussed at the beginning of Results of Operations were the primary variation between years.
cause of the decrease in Other, Net, for 1995 compared to Depreciation expense increased compared to each prior year due primarily to additions to utility plant in service.
1994. In addition, merger transaction costs reduced Other, Net, in 1995 and 1994. A gain on the sale of an investment Nonregulated Operating Revenues in lever ged lease in 1994 also contributed to the compara-Revenues for the Company's nonregulated subsidiaries tive decre se f r 1995 compared to 1994. Gains totalling decreased $7.8 million for 1995 compared to 1994. A decrease
$8.5 million on the sales of a partnership interest in a gas in real estate revenues and reduced revenues due to the impact of m rketing organization and a telecommunications subsidiary the sale of a telecommunications subsidiary in early 1995 in 1995 partially offset the decreases. The decrease from 1993 accounted for most of the decrease. Revenues from the 1994 is due primarily to an $18.5 million pre tax gain on t
Company's oil and gas production subsidiary were basically the exchange of natural gas service territories in 1993.
unchanged with increases in gas production volumes and oil prices offsetting decreases due to lower prices for natural gas.
Interest Charges A 16% decrease in sales volumes for a nonregulated retail nat-Increased interest on long-term debt in 1995 compared to ural gas marketing subsidiary resulted in a $13.9 million 1994 was due primarily to the issuance of $60 million of decrease in nonregulated gas revenues for 1995. As decrease 7.875% Series of mortgage bonds in November 1994. The was offset by $14 2 million in revenues of a wholesale natural decrease in interest on long-term debt from 1993 to 1994 gas marketing firm acquired in December 1995.
reflects refinancing of several series oflong-term debt at Revenues for 1994 increased $36.3 million compared to lower interest rates in 1993.
1993 due primarily to a $33.4 million increase in revenues Discontinued Operations from retail sales of natural gas. The increase in retail natural in 1994, the Company announced its intent to divest its gas sales and revenues for 1994 is attributable primarily to the construction subsidiaries and recognized the anticipated loss )
4 purchase of the assets of an existing nonregulated natural gas on disposal. The sale of certain assets of one of the subsidiaries business in January 1994. Higher production volumes reflecting was completed in December 1994, and the sale of the other additional acquired reserves and successful drilling results also construction subsidiary was completed in March 1995.
i i
3...i.d.A. rnerica n M
16
Settlement of a construction receivable in the second quarter in the Consolidated Statements ofIncome. Based on NPPD of 1995 resulted in $0.4 million of income in 1995.
estimates, the Utility expects to pay approximately $54 mil-Preferred Dividends lion for Cooper decommissioning during the per;od 1996 The decrease in the preferred dividend requirement for 1995 through 2000. NPPD invests the funds in instruments similar compared to 1994 was due mostly to the redemption of three to those of the Quad-Cities Station trust fund. The Company's series of outstanding preferred shares in December 1994.
obligation for Cooper decommissioning may be affected by the actual plant shutdown date and the status of the power Liquidity and Capital Resources purchase contract at that time. The Company currently recovers Quad Cities Station decommissioning costs charged The Company has available a variety of sources of liquidity to Illinois customers through a rate rider on customer billings.
and capital resources, both internal and external. These
%per and Quad-Cities Station decommissioning costs resources provide funds required for current operations, debt charged to lo.va customers are included in base rates, and retirement, dividends, construction expenditures and other increases in those amounts must be sought through the nor-capital requirements.
mal ratemaking process. Refer to Note 4(d) of Notes to For 1995, the Company had net cash provided from Consolidated Financial Statements (Notes) for additional operating activities of $382 million and net cash used of details regarding decommissioning.
$320 millian and $54 mi!! ion for investing and financing Capital expenditures of nonregulated subsidiaries were activities, reapectively.
$56 million for 1995. Capital expenditures of nonregulated investing Activities subsidiaries depend upon the availability of suitable investment Utility construction expenditures, including allowance for opportunities and other factors. For 1996, such expenditures funds used during construction (AFUDC), Quad Cities are forecasted to be approximately $85 million, primarily related to InterCoast.
Station nuclear fuel purchases and Cooper capital improve' ments, were $191 million for 1995. The decrease from the InterCoa;t invests in a variety of marketable securities 1994 total of $212 million reflects the Company's efforts t which it holds for indefinite periods of time. For 1995, limit construction expenditures.
InterCoast had net cash outflows of $67 million from its Forecasted utility construction expenditures for 1996 are marketable securities investment activities. In the
$166 million including AFUDC. The 1996 plan includes $35 Consolidated Statements of Cash Flows, the lines Purchase million for Cooper capital improvements and Quad-Cities of Securities and Proceeds from Sale of Securities consist Station nuclear fuel purchases and construction expenditures.
primarily of the gross amounts of these activities, including For the years 1996 through 2000, the Company forecasts $818 realized gains and losses on investments in marketable securities.
million for utihty construction expenditures, $154 million of E c=
which is for nuclear expenditures. The Company presently Financing Activities "y
p ggy expects that all utility construction expenditures for 1996 The Utility currently has authority from through 2000 will be met with cash generated from utility the FERC to issue short-term debt in the operations, net of dividends.
form of con mercial paper and bank notes. 1 In general, decommissioning of a nuclear facility means to ggregating $400 million. As of safely remove the facility from service and restore the property to December 31,1995, the Utility had bank l
a condition allowing t.nrestricted use. Dunng 1995, the Utility lines of credit of $250 million to provide l
contributed approximately $9 million to an external trust short term financing for utility operations.
i established for the investment of funds for decommissioning the in January 1996, the Utility entered into Quad-Cities Station. Based on information presently available,
$250 million revolving credit facility the Utility expects to contribute $45 million to the trust during agreement to replace those lines of credit.
the period 1996 through 2000. The funds are invested The Utility's commercial paper borrowings, predominately in investraent grade municipal, and U.S.
which totalled $185 million at December Treasury, bonds. In addition, approximately $9 million of the 31,1995, are currently supported by the 1995 payments made under the power purchase contract with rev Iving credit facility. The Ut lity also i
NPPD were for decommissioning funding related to Cooper.
has lines of credit and revolving credit The Cooper costs are reflected in Other Operating Expenses f cmd s which are dedicated to provide p3aaa b
unbn consm<cuan Encndmnes (smy _
1995 mm nrr>orn g
1 Management's Discussion and Analysis of Finincial Condition and Results of Operations liquidity for its obligations under outstanding pollution con-million oflong-term debt outstanding at December 31,1995, trol revenue bonds that are periodically remarketed.
that matures in 1996 and is supported by a guarantee from In January 1995, $12.75 million of floating rate pollution the Utility. In addition, Midwest Capital has a $25 million control refunding revenue bonds due 2025 were issued.
line of credit with the Utility.
Proceeds from this financing were used to redeem $12.75 mii.
During the third quarter of 1995, InterCoast entered lion of collateralized pollution control revenue bonds,5.8%
into a $64 million unsecured revolvmg crect facility agree-ment which matures in 1998. The facility was used primarily Series, due 2007.
The Utility has $347 million oflong-term debt maturities to refinance maturing Senior Notes. InterCoast also has a and sinking fund requirements for 1996 through 2000, $1
$110 million unsecued revolving credit facility agreement million of which matures in 1996.
' which matures in 1999. Borrowings under these agreements The Utility is currently considering several long-term may be at a fixed rate, floating rate or competitive bid rate financing options for 1996. Proceeds from those issuances basis. All borrowings under these agreements are without wocid be used to reduce commercial paper outstanding and to recourse to the Utility. At December 31,1995, InterCoast refinance higher cost securities.
had $130 million of debt outstanding under these two
~ As of December 31,1995, the Utility had the capability revolving credit facility agreements.
to issue approximately $1.3 billion of mortgage bonds under in addition, InterCoast has entered into two floating rate the current Midwest indenture. The Utility does not expect to fixed interest rate swaps each in the amount of $32 million.
to issue additional debt under the Iowa Illinois indenture, but The interest rate swaps have fixed rates of 5.97% and 6.00%,
may if necessary.
respectively, and are for three-year and two-year terms, respec.
During the first six months of 1995, Resources and lowa-tively, with an optional third year on the latter.
Illinois sold original issue shares of common stock through InterCoast's aggregate amounts of maturities and sinking certain of their employee stock purchase and dividend rein-fund requirements for long-term debt outstanding at vestment plans. On a MidAmerican share basis, 1,065,240 December 31,1995, are $39 million for 1996 and $287 mil-shares of common stock were issued. The Company has the lion for the years 1996 through 2000. Amounts due in 1996 necessary authority to issue up to 6,000,000 shares of common are expected to be refinanced with debt instruments.
stock through its Shareholder Options Plan (the Company's On January 24,1996, the Company's Board of Directors dividend reinvestment and stock purchase plan). Since the declared a quarterly dividend on common shares of 50.30 per effective date of the merger, the Company has used open share payable March 1,1996. The dividend represents an
. market purchases of its common stock rather than original annual rate of $1.20 per share.
issue shares to meet share obligations under its Employee Operating Activities Stock Purchase Plan and the Shareholder Options Plan. The The Utility is subject to regulation by several utility regulatory Company currently plans to continue using open market agencies. The operating environment and the recoverability of purchases to meet share obligations under these plans.
costs from utility customers are significantly influenced by the Subsequent to the consummation of the merger, the regulation of those agencies. The Company anticipates that Utility made a $55 million equity contribution to InterCoast.
changes in the utility industry will create a more competitive in addition, nonregulated businesses not related to regional environment. Although these anticipated changes may create business development were transferred from Midwest Capital opportunities, they will also create additional challenges and to interCoast. The equity contribution was then used t risks for utilities. The Company is evaluating strategies that extinguish Semor Notes and variable interest rate Notes will ass st it in a more competitive environment.
Payable, thus eliminating several financial relationships A possible consequence of competition in the utility between the Company's utility and nonregulated operations.
ndustry is the discontinued applicability of Statement of One support agreement remains between the Utility and F nancial Accounting Standards (SFAS) No. 71. SFAS 71 Midwest Capital related to a performance guarantee by sets forth accounting principles for all, or a portion, of a com-Midwest Capital of a jomt venture turnkey engmeering, pany's operations that are regulated and meet certain criteria, procurement and construction contract for a cogeneration For operations that meet the criteria, SFAS 71 allows, among project. The project received preliminary acceptance from the other things, the deferral of costs that would otherwise be
- "fr in 1995, which pursuant to the construction contract, expensed when incurred. The Company's electric and gas ehmmates the potential for hquidated damages being
" i I I*'
' '""'" b '" " ' '
- P' incurred related to the project. Midwest Capital also has $25 SFAS 71. Should the utihty mdustry become more competitive l
5...I.M.. merica n M
18
as presently anticipated, the Company will reexamine the cost recovery filings. A recent district court ruling was issued applicability of SFAS 71. If a portion of the Company's utility which affirmed in all respects the IUB decisions allowing l
operations no longer meets the criteria of SFAS 71, the such recovery. In another cost recovery filing, the IUB issued '
Company could be required to eliminate from its bahnce theet an order approving the collection over a four-year prospective assets and liabilities related to those operations that resulted period of $18.6 million. Collection related to this filing began from actions of its regulators (i.e., regulatory assets and liabili-August 8,1995. As of December 31,1995, the Company had ties). A material adjustment to camings in the appropriate approximately $68 million of energy efficiency costs deferred period could result from the discontinuance of SFAS 71. Refer on its Consolidated Balance Sheet for which recovery will be to Note (1)(c) of Notes for a discussion of regulatory assets.
sought in future energy efficiency filings.
The Energy Policy Act (EPAct) was enacted in 1992.
The United States Environmental Protection Agency This law promotes competition in the wholesale electric (EPA) and state environmental agencies have determined power market. The FERC has taken action to establish rules that contaminated wastes remaining at certain decommis-and policies in compliance with provisions of the EPAct sioned manufactured gas plant facilities may pose a threat to through a Notice of Proposed Rulemaking issued March 29, the public health or the environment if such contaminants 1995. The Company has been active in providing filed, writ-are in sufficient quantities and at such concentrations as to ten comments with the FERC in an effort to shape new warrant remedial action.
transmission policies in ways that will best serve the interests The Company is evaluating 26 properties which were, at ofits customers and shareholders. In conjunction with the one time, sites of gas manufacturing plants in which it may Merger, the Company submitted an open access transmission be a potentially responsible party (PRP). The purpose of tariffin 1994 which was accepted for filing by the FERC in these evaluations is to determine whether waste materials are June 1995.
present, whether such materials constitute an environmental Legislation enacted by the State ofIllinois in 1995 allows or health risk, and whether the Company has any responsibility public utilities to file for regulatory approval of nontraditional for remedial action. The Company's present estimate of prob-rate design. Altemative forms of rate design may include price able remediation costs for these sites is $21 million. This esti-caps, flexible rate structures and other modifications of the mace has been recorded as a liability and a regulatory asset for cost-based method currently used to determine rates for elec-future recovery through the regulatory process. Refer to Note tric and gas services. The Company is evaluating its options in (4)(b) of Notes for further discussion of the Company's envi-light of the new legislation. If appropriate, the Company may ronmental activities related to manufactured gas plant sites file a request in 1996 for alternate rate design in Illinois.
and cost recovery.
In 1992, the FERC issued Order No. 636, directing a Although the timing of potential 7,
restructuring by interstate pipeline companies for their natural incurred costs and recovery of such cost gas sales and transportation services. The unbundling of pipeline in rates may affect the results of opera-555hh services increased the Company's access to moly options and tions in individual periods, management its supply responsibilities. Certain trandon costs incurred by believes that the outcome of these issues interstate natural gas pipelines for their compliance with Order will not have a material adverse effect on ' :~ L 636 will be paid to the pipeline companies over the next several the Company's financial position or
~
years. The Company's Consolidated Balance Sheet as of results of operations.
Ihcember 31,1995, includes a $41 million noncurrent liability The Clean Air Act Amendments and regulatory asset recorded for transition costs. The Company of 1990 (CAA) were signed into law in 2
may incur other transition costs in conjunction with future November 1990. The Company has five purchases of gas, but does not expect these billings to have a jointly owned and five wholly owned material impact on the cost of gas. The Company is currently coal-fired generating stations, which recovering costs related to Order 636 from its customers.
represent approximately 65% of the Electric and gas utilities in Iowa are required to spend Company's electric generating capability.
approximately 2% and 1.5%, respectively, of their annual Two of the Company's coal-fired lowa jurisdictional revenues on energy efficiency activities. In generating units were subject to the October 1994 and in January 1995, the Company began col-requirements of the CAA beginning in lecting over a four year prospective period $19.7 million and 1995. These units were given a set number
"*3
$ 18.7 million, respectively, related to prior energy efficiency of allowances b'f the EPA. Each hm Elecmc CaNMty and peak Lkmal (Ow%d CapaCdy plus net purchases o MW) 1993 AP#4UAL REPORT 19
7 Management's Discussion and Analysis of Financial Condition and Results of Operations allowance permits the units to emit one ton of sulfur dioxide.
Accounting issues The Company las completed most of the modifications necessary in March 1995, the Financial Accounting Standards Board to one unit to bum low sulfur coal and to install nitrogen (FASB) issued SFAS No.121 regarding accounting for asset oxides controls an an emissions momtoring system. Under impairments. This statement, which will be adopted by the d
proposed regulatior., the second unit will require additional Company in the first quarter of 1996, requires the Company capital expenditures to reduce emissions of nitrogen oxides.
to review long-lived assets for impairment whenever events The Company's other coal-fired generating units are not or changes in circumstances indicate that the carrying amount materially affected by the provisions of the CAA. Due to the of such assets may not be recoverable. SFAS 121 also requires use of low-sulfur westem coal, the Company does not anticipate rate-regulated companies to recognize an impairment for the need for additional capital expenditures to lower sulfur regulatory assets that are not probable of future recovery.
dioxide emission rates to ensure that allowances allocated by Adoption of SFAS 121 is not expected to have a material the federal govemment are not exceeded. While the Company impact on the Company's results of operations or financial estimates that sufficient emission allowances have been position at the time of adoption.
allocated on a system-wide basis for its units to operate at the The staff of the Securities and Exchange Commission capacity factors needed to meet system energy requirements, has questioned certain of the current accounting practices of additional purchases of allowances may be necessary to meet the electric utility industry, including those of the Company, desired sales for resale levels. By the year 2000, some Company regarding the recognition, measurement and classification of coal fired generating units will be required to install controls nuclear decommissioning costs in the financial statements. In to reduce emissions of nitrogen oxides. Essentially all utility response to these questions, the FASB has added a project to generating units are subject to CAA provisions which address its agenda to review the accounting for closure and removal continuous emission monitoring, permit requirements and costs, including decommissioning of nuclear power plants. If fees, and emission of toxic substances. Based on currently current electric utility industry accounting practices for such proposed CAA regulations, the Company does not anticipate decommissioning are changed, the annual provision for its remaining construction costs for the installation of low decommissioning could increase relative to 1995, and the nitrogen oxides bumer technology and emissions monitoring total estimated cost for decommissioning could be recorded as system upgrades to exceed $16 million, a liability, with recognition of an increase in the cost of related nuclear power plant. The Company has not determined what impact, if any, it would have on the Company's operation and financial position.
9w,,.
In October 1995, the FASB issued SFAS No.123 tegarding stock-based compensation plans. SFAS 123, which l
is effective for reporting periods beginning January 1,1996, allows for attemative methods of adoption. The Company does not expect the accounting provisions or alternative disclosure provisions of SFAS 123 to have a material impact on the Company's results of operations.
l
(
Generarian Mrx (aNwn as a percer4 of 1995 net geceraw3n) i l
5...id.imerican 20 M
1
Consolidated Statements ofIncome Years Ended December 31 1995 1994 1993 Tin thAusahds, ex'ceptier 'ha're amoun'ts[
^
s Operating itevenues Electric utility
$ 1,094,647
$ 1,021,660
$ 1,002,970 Gas utility 459,588 492,015 538,989 Nonregulated 169,409 177,235 140,976 1,723,644 1,690,910 1,682,935 Operating Expenses Utility:
Cost of fuel, enetgy and capacity 230,261 213,987 217,385 Cost of gas sold 279,025 326,782 366,049 Other operating expenses 399,648 354,190 340,720 Maintenance -
85,363 101,275 101,601 Depreciation and amortization 158,950 154,229 150,822 Property and other taxes 96,350 94,990 93,238 1,249,597 1,245,453 1,269,815 Nonregulated:
Cost of sales 128,685 130,621 96,656 Other 44,230 41,230 35,568 172,915 171,851 132,224 1,422,512 1,417,304 1,402,039 Oper-ting income 301,132 273,606 280,896 Non Operating income Interest income 4,485 4,334 5,805 l' Dividend income 16,954 17,087 17,601 Reali:ed gains and losses on securities, net 688 7,635 7,915 l Other, net (10,467) 4,316 20,842 11,660 33,372 52,163 Intere;t Charges Interest on long-term debt 110,505 105,753 111,065 Other interest expense 9,449 6,446 5,066 Allowance for borrowed funds (5,552)
(3,955)
(2,186) 114,402 108,244 113,945 income From Continuing Operations setore income Taxes 198,390 198,734 219,114 income Taxes 67,984 62,349 71,409 income From Continuing Operations 130,406 136,385 147,705 income (Loss) From Discontinued Operations 417 (5,645)
(3,854)
. Not income 130,823 130,740 143,851 Preferred olvidende 8,059 10,551 8,367 Earnings on Common stock 122,764 120,189 135j84 Averas. Common shares Outstanding.,
100,401 98,531 97,7,62 Earning 3 Per Common sharo Continuing operations 1.22 1.28 1.43 Discontinued operatioru (0.06)
(0.04)_
Earnings per average common share 1.22 1.22 1.39 The accompanying notes are an integral part of these statements.
IM ANNUAL REPORT 21
1 Consolidated Balance Sheets As of December 31 1995.,,_
,.....1994,
(in thousands) i Assets i
Utility Plant
$ 3,881,699
$ 3,765,004 Electric 695,741 663,792 Gas 4,577,440 4,428,796 2,027,055 1,885,870 Less accumulated depreciation and amortization 2,550,385 2,542,926 104,164 101,252 Construction work in progress 2,654,549 2,644,178 212,148 221,998 Power purchase Centract investment in Discontinued Operations 15,249 Current Assets 41,216 33,778 i
Cash and cash equivalents Receivables, less reserves of $2,296 and $2,099, respectively 261,105 212,902 85,235 92,248 Inventories 22,252 19,035 l
Other 409,808 357,963 826,496 752,428 investments 420,520 423,958 Other Assets
$ 4,523,521
$ 4,415,774
)
Total Assets l
- Capitalization and Liabilities Capitalization (see accompanying statement)
Common shareholders' equity 1,225,715
$ 1,204,112 Preferred shares, not subject to mandatory redemption 89,945 89,955 l
Preferred shares, subject to mandatory redemption 50,000 50,000 Long-tenn debt (excluding current portion) 1,403,322 1,398,255 2,768 seis 2,742,322 Current Liablittles Notes payable 184,800 124,500 l
Current portion oflong-term debt 65,295 72,872 l
Current portion of power purchase contract 13,029 12,080 Accounts payable 142,759 110,175 Taxes accrued 81,898 91,653 l
l Interest accrued 30,635 30,659 l
Other 57,000 54,473 f
l 575,416 4W412 i
Other Liabilities Power purchase contract 112,700-125,729 Deferred income taxes 746,574 725,665 Investment tax credit 95,041 100,871 Other 224,808 224,775 1,17D323 1,17TD4D Total Capitalisation and Liabilities
$ 4,523,521
$ 4,415,774 The accompanying notes are an integral part of these statements.
I 5...i.d.A. merican M
22 -
Consolidated Statements of Cash Flows Ye.ars Ended December 31
.199.5_
_,,,,1991,,,,,,
,1993,,
(In thousands)
Not Cash Flows From Operating Activities Net income -
130,823 130,740 143,851 Adjustments to reconcile net income to net cash provided:
Depreciation, depletion and amortization 202,542 198,049 193,199 Net increase in deferred income taxes and investment tax credit, net 10,278 36,926 1,935 Amortization of other assets 20,047 9,731 5,447
- Capitalized cost of real estate sold 1,744 3,723 5,737 1 oss (income) from discontinued operations (417) 5,645 3,854 Gain on sale of assets and long-tenn investments (1,050)
(6,409)
(25,428)
- Other-than temporary decline in value of investments and other assets 17,971 1,791 2,939 Impact of changes in working capital, net of effects from discontinued operations (19,075)
(9,270) 20,066 Other 18,809 10,624 (7,746)
Net cash provided 381,672 381,550 343,854 Not Cash Flows From Investing Activities Utility construction expenditures (190,771)
(211,669)
(215,081)
Quad-Cities Nuclear Power Station decommissioning trust fund (8,636)
(9,044)
(7,918)
Deferred energy efficiency expenditures (35,841)
(28,221)
(24,104)
Nonregulated capital expenditures (56,162)
(52,609)
(86,505)
Purchase of securities (164,521)
(113,757)
(197,490)
Proceeds from sale of securities 94,493 142,307 205,767 Pmceeds from sale of assets and other investments 34,263 6,433 55,582 Other investing activities, net 7,060 (7,957) 13,716 Net cash used (320,115)
(274,517)
(256,033)
Not Cash Flows From Financing Activities Dividends paid (126,892)
(125,065)
(122,410)
Issuance of long term debt, net of issuance cost 12,750 180,410 796,897 Retirement oflong term debt, including reacquisition cost (110,351)
(102,472)
(895,900)
Issuance of preferred shares, net of issuance cost 68,140 Reacquisition of preferred shares, including reacquisition cost (9)
(20,142)
(32,629)
Increase (decrease) in InterCoast Energy Company unsecured revolving credit facility 95,000 (9,500) 44,500 Issuance of common shares 15,083 27,760 Net increase (decrease) in notes payable 60200 (48,535) 52,791 Net cash used (54,119)
(97,544)
(88,611)
Not increase (Decrease) in Cash and Cash Equivalents 7,438 9,489 (790)
Cash and Cash Equivalents at Beginning of Period 33,778 24,289 25,079 Cash and Cash Equivalents at End of Period 41,2,16 33,778 24,289 Additional Cash Flow Informatiom Interest. paid, netsf amounts capitali:ed_
,116#43.., $., 105,004.,
,,$,,,1,i 1,133 Income taxes paid
,88,863 38,195 54,346 The accompanying notes are an integral part of these statements.
1995 ANNUAL REPORT 23 i
J Consolidat'ed Statements of Capitalization As of December 31 1994..
j
..1995.
commen shorehendece' Equity Common shares, no par; 350,000,000 shares authorized; 100,751,713 and 99,686,636 shares outstanding, respectively 801,227 786,420 I
430,589 426,683
. Retained earnings Valuation allowance, net of income taxes (6,101)
(8,991) 1,225,715 44.3 %
1,204,112 43.9%
Preferred shores (100,000,000 shares authorized) l Cumulative preferred shares outstanding; not subject to mandatory redemption:
$3.30 Series,49,523 and 49,622 shares, respectively 4,952 4,962
$3.75 Series,38,320 shares 3,832 3,832 1
$3.90 Series,32,630 shares 3,263 3,263
$4.20 Series,47,369 shares 4,737 4,737
$4.35 Series,49,950 shares 4,995 4,995
$4.40 Series,50,000 shares 5,000 5,000
$4.80 Series,49,898 shares 4,990 4,990 i
$1.7375 Series,2,400,000 shares 58,176 58,176 Cumulative preferred sh=es outstanding; subject to mandatory redemption:
$5.25 Series,100,000 shares 10,000 10,000
$7.80 Series,400,000 shares 40,000 40,000 139,945 5.0%
139,955 5.1%
Long-Term Debt Mortgage bonds:
5.875% Series, due 1997 22,000 22,000 Adjustable Rate Series, due 1997 (8.8% and 7.6%, respectively) 25,000 25,000
. 5.05% Series, due 1998 50,000 50,000 6.25% Series, due 1998 75,000 75,000_
7.875% Series, due 1999 60,000 60,000 6% Series, due 2000 35,000 35,000 6.75% Series, due 2000 75,000 75,000 8.15% Series, due 2001 40,000 40,000 7.125% Series, due 2003 100,000 100,000 7.70% Series, due 2004 60,000 60,000 7% Series, due 2005 100,000 100,000
- 7.375% Series, due 2008 75,000 75,000 8% Series, due 2022 50,000 50,000 7.45% Series, due 2023 30,000 30.000 8.125% Series, due 2023 100,000 100,000 6.95% Series, due 2025 50,000 50,000 Pollution control revem obligations:
5.15% to 5.75% S 4 p, due periodically through 2003 10,984 11,544 12,750 5.8% Series, due 1A (secured by first mortgage bonds) _
- 5.95% Series, due 2023 (secured by general mortgage bonds) 29,030 29,050 i
Variable Rate Series-Due 2016 and 2017 (5.0% and 5.7%, respectively) 37,600
.37,600 Due 2023 (secured by general mongage bonds,5.05% and 5.55%, respectively) 28,295 28,295 Due 2023 (5.1% and 5.6%, respectively) 6,850 6,850 Due 2024 (5.25% and 5.1%, respectively) 34,900 34,900 Due 2025 (5.1%)
12,750 The accompanying notes are an integral part of these statements.
5...i.d.%. me rica n M
24
i Consolidated Statements of Capitalization As of December 31 l
.1,995.
, _,,,.,,(In thousands)_,..
1994 l
Long Term Debt (Continued)
! : Notes:
9% to 15% Series, due annually through 1996.
22 8.75% Series, due 2002 240 240 6.4% Series,'due 2003 through 2007 2,000 2,000
- Obligation under capital lease 2,218 2,356 Unamortized debt premium and discount, net (4,126J (4,706)
Total utility 1,107,741 1,107,881 1 Subsidiaries:
I
- Notes -
l.
- 9.30% Series, due 1995 and 1996 9,000
-- 8.7% Series, due arinually through 1996 25,508
- Adjustable Rate Series, due semiannually through 1996 13,100 I
10.20% Series, due 1996 and 1997 30,000 60,000 i
9.87% Series,'due annually through 1997 11,664 l '. 7.34% Series, due 1998 20,000 20,000 7,76% Series, due 1999 45,000 45,000 8.52% Series, due 2000 through 2002 70,000 70,000 9% Series, due annually through 2000 489 8% Series, due annually through 2004 581 613 Borrowings under unsecured revolving credit facility (6.3%)
64,000 Borrowings under unsecured revolving credit facility (6.4% 'and 6.6%, respectively) 66,000 35,000 Total Subsidiaries 295,581 290,374 i
1,403,322 50.7 %
1,398,255 51.0 %
(.
T***8. capitasiaation,
,$ 2,768,982 100.0%
$ 4742,322 100.0 %
' Consolidated Statements of Retained Earnings Years Ended December 31_ _..._,
.1995...
1994_,,
1993 (in thousands, except per share amour ts) seeinning of Year S
426,683
$ 421,358
$ 400,621 Not income 130,823 130,740
.143,851 Deduct (Addh
'(Gain) loss on reacquisition of preferred shares (5) 312 672 Dividendi declared on preferred shares 8,064 10,141 8,350 Dividends declared on common shares of $1.18, $1.17 and $1.17 per share, respectively 118,828 114,924 114,060 Other -
30 38 32 126,917 125,415 123,114 End of Year 430,589
$ 426,683
$ 421,358 The accompanying notes are an integral part of these statements.
1995 ANNUAL REPORT.
25 ~
1 7 Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies:
Accounting for the Effects of Certain Types of Regulation. The i
following regtdatory assets, primarily included in Other Assets (a) Mergers in the Consolidated Balance Sheets, represent probable future On July 1,1995, Iowa-Illinois Gas and Electric Company (lowa' revenue to the Company because these costs are expected to Illinois), Midwest Resources Inc. (Resources) and Midwest be recovered in charges to utility customers (in thousands):
Power Systems Inc. (Midwest) merged to fann MidAmerican Energy Canpany (MidAmerican or Company). The merger was 1995_ _
1994,,
accounted for as a pooling-of-interests and the financial state-Deferred income taxes
$ 144,257 $ 139,577 ments included herein are presented as if the companies were Energy efficiency costs 101,541 72,694 merged as of the earliest period shown. MidAmerican is a utility Debt refinancing costs 44,370 47,879 company with two wholly owned nonregulated subsidiaries:
FERC Order 636 transition costs 40,824 56,608 InterCoast Energy Company (InterCoast) and Midwest Capital Retirement benefit costs 15,354 18,287 Group, Inc. (Midwest Cepital).
Environmental costs 23,076 23,535 Each outstanding share of preferred and preference stock Unamortized costs of retired plant 11,618 10,824 of the predecessor companies was converted into one share of Enrichment facilities decommissioning 8,970 9,807 a similarly designated series of MidAmerican preferred stock, Other 7,396 10.479 no par value. Each outstanding share of common stock of Total
-$ 397,406 $ 389,690 Resources and Iowa-Illinois was converted into one share and (d) Revenue Recognition:
1.47 shares, respectively, of MidAmerican common stock, no Revenues are recorded as services are rendered to customers.
par value.
The Company records unbilled revenues, and related energy Resources' operating revenues and net income for the costs, representing the esumated amount customers will be billed six months prior to the merger were $534.2 million and $37.7 for services rendered between the meter-reading dates in a million, respectively. Iowa Illinois' operating revenues, as p rticular month and the end of such month. Accrued unbilled reclassified to include nonregulated revenues in operating revenues are $61.0 million and $65.6 million at December 31, revenues consistent with MidAmerican's presentation, and 1995 and 1994, respectively, and are included in Receivables net income for the six months prior to the merger were on the Consolidated Balance Sheets.
$298.9 million and $27.1 million, respectively.
The majority of the utility's electric and gas sales are subject <
(b) Consolidation Policy and Preparation to adjustment clauses.These clauses allow the utility to adjust of Financial Statements:
the amounts charged for electric and gas service as the costs of.
The accompanying Consolidated Financial Statements mclude gas, fuel for generation or purchased power change. The costs the Company and its wholly owned nonregulated subsidiaries, recovered in revenues through use of the adjustment clauses i
InterCoast and Midwest Capital. All significant intercompany are charged to expense in the same period.
transactions have been eliminated.
The preparation of financial statements in conformity with (e) Depreciation and Amortization The Company's provisions for depreciation and amorti:ation for generally accepted accounting principles requires management to make estimates and assumptions that affect the reported its utility operations are based on straight-line composite rates.
The average depreciation and amortization rates for the years amounts of assets and liabilities and disclosure of contingent ended December 31 were as follows:
liabilities at the date of the financial statements and the 1995 1994 1993 reported amounts of revenues and expenses during the report-
_,.. Electric 3.9%
3.8%
3.8%_
ing period. Actual results may differ from those estimates.
Gas
,3.7%.
3.6%
3.9%
(c) Regulation:
The Company's utility operations are subject to the regulation of Utility plant is stated at original cost which includes the Iowa Utilities Board (IUB), the Illinois Commerce overhead costs, administrative costs and an allowance for Commission (ICC), the South Dakota Public Utilities funds used during construction.
Commission, and the Federal Energy Regulatory Commission The cost of repairs and minor replacements is charged to (FERC). The Company's accounting policies and the accompa-maintenance expense. Property additions and major property nying Consolidated Financial Statements conform to generally replacements are charged to plant accounts. The cost of accepted accounting principles applicable to rate-regulated depreciable units of utility plant retired or disposed of in the enterprises and reflect the effects of the ratemaking process.
normal course of business is eliminated from the utility plant The Company's utdity operations are subject to the provisions accounts and such cost, plus net removal cost, is charged to of Statement of Firuacial Accounting Standards (SFAS) No. 71, accumulated depreciation.
5...i.dA. rnerica n M.
26
An allowance for the estimated annual decommissioning the present value of proved reserves as determined under costs of the Quad-Cities Nuclear Power Station (Quad-Cities) rules of the Securities and Exchange Commission.
equal to the level of funding is included in depreciation (h) Consolidated Statements of Cash Flows:
expense. See Note 4(d) for additional information regarding decommissioning costs.
The Company considers all cash and highly liquid debt instruments purchased with a remaining maturity of three (f) lxvestments:
months or less to be cash and cash equivalents for purposes Investments, managed primarily through the Company's of the Consolidated Statements of Cash Flows.
nonregulated subsidiaries, include the following amounts as of Net cash provided (used) from changes in working capital, December 31 (in thousands):
net of effects from discontinued operations and exchange of
"***** ""' ' f 11"** (i" *h "'""J')#
1995 1994 Investment's:
Marketable securities
$ 270,162 $ 199,514 Oil and gas properties 160,831 142,378
_,,,,,1995
,,,,1994
,,,1993,
Receivables
$ (48,203) $13,152 $ 149 Equipment leases 90,729 123,603 Inventories 7,013 8,427 (2,067)
Nuclear decommis.sioning trust fund 64,781 49,432 Other current assets (3,217) 5,876
_ 605 Energy projects 44,741 51,150 Accounts payable 32,584 (19,329) 13,741 Special-purpme funds 47,046 34,767 Interest accrued (24)
(362)
(374)
Real estate 65,232 72,721 Taxes accrued (9,755) (19,270) 9,338 Corporate owned hfe insurance 22,743 18,832 Other current liabilities 2,527 2,236 (1,326)
Non-public preferred stock 14,372 24,451 Total
$ (19,075) $(9,270) $20,066 Coal transportation equipment 10,216 11,616 Communications 16,332 4,793 Other 19,311 19,171 During 1993, the Company exchanged its Minnesota gas Total
$ 826,496 $ 752,428 pr perties, with a book value of $52 million, for gas distribution properties in South Dakota, with an appraised fair value of $32 million, and $38 million cash. A pre-tax gain on the transaction Marketable securities generally consist of preferred stocks, of $18 million was recorded.
common stocks and mutual funds held by InterCoast.
(i) Accounting for Long Term Power On January 1,1994, the Company adopted SFAS No.115, Purchase contract:
Accounting for Certain Investments in Debt and Equity Securities.
Under this statement, investments in marketable securities Under a long-term power purchase contract with Nebraska classified as available-for-sale are reported at fair value with net Public Power District (NPPD), expiring in 2004, the Company unreali:ed gains and losses reported as a net of tax amount in purchases one half of the output of the 778-megawatt Cooper Other Common Shaieholders' Equity until reali:ed.
Nuclear Station (Cooper). The Consolidated Balance Sheets investments in marketable securities that are classified include a liability for the Company's fixed obligation to pay 50%
as held to-maturity are reported at amortized cost. An other' of NPPD's Nuclear Facility Revenue Bonds and other fixed than temporary decline in the value of a marketable security liabilities. A like amount representing the Company's right to is recogni:ed through a write-down of the investment t purchase power is shown as an asset.
eamings.
Capital improvement costs for new property, including Investments held by the nuclear decommissioning trust carrying costs, are being deferred, amorti:ed and recovered in fund for the Quad-Cities units are classified as avadable-for' rates over the term of the NPPD contract. Capital improvement sale and are reported at fair value with net unreali:ed gains and costs for property replacements, including carrying costs, are bemg losses reported as adjustments to the accumulated provision for deferred, amorti:ed and recovered in rates over a five-year. period.
nuclear decomnussioning.
The fuel cost portion of the power purchase contract is included in Cat of Fuel, Energy and Capacity on the Consolidated (g) Oil and oms:
Statements ofIncome. All other costs the Company incurs in The Company uses the full cost method of accounting for oil relation to its long-term power purchase contract with NPPD and gas activities. Under the full cost method, all acquisition, are included in Other Operating Expenses on the Consolidated exploration and devekyment costs are capitali:ed and amorti:ed Statements of Income.
over the estimated production from proved oil and gas reserves.
See Notes 4(c),4(d) and 4(e) for addnional information Under the full cost method, net capitali:ed costs may not exceed regarding the power purchase contract.
1993 ANNUAL REPORr 27
7 Notes to Consolidated Financial Statements (j) Statement of Financial Accounting Standards have a material impact on the Company's results of opera-tions or financial position at the time of adoption.
No.121:
In March 1995, the Financial Accounting Standards Board (k) Statement of Financial Accounting Standards (FASB) issued SFAS No.121 regarding accounting for asset No.123:
i impairments. This statement, which will be adopted by the In October 1995, the FASB issued SFAS No.123 regarding Company in the first quarter of 1996, requires the Company accounting for stock-based compensation plans. His statement, to review long lived assets for impairment whenever events which is effective for reporting periods begining January 1,1996, or changes in circumstances indicate that the carrying allows for alternative methods of adoption. The Company does amount of an asset may not be recoverable. SFAS No.121 not expect the accounting provisions or the alternative dis-also requires rate regulated companies to recognize an closure provisions of SFAS No.123 to have a material impact impairment for regulatory assets for which future recovery is on the Company's results of operations.
l not probable. Adoption of SFAS No.121 is not expected to (2) Long-term Debt:
l The Company's sinking fund requirements and maturities of agreements or renewable lines of credit to provide liquidity for long-term debt and preferred stock for 1996 through 2000 are holders of these issues.
$65 million, $80 million, $209 million, $171 million and $134 Substantially all the former lowa Illinois utility property and million, respectively.
franchises, and substantially all of the former Midwest electric I
The interest rate on the Company's Adjustable Rate Series utility property in Iowa, is pledged to secure mortgage bonds.
Mortgage Bonds is reset every two years at 160 basis points over InterCoast's unsecured Notes are issued in private place.
the average yield to meturity of 10-year Treasury securities. The ment transactions. All Notes are issued without recourse to 1
rate was reset in 1995.
MidAmerican.
The Company's Variable Rate Pollution Control Revenue InterCoast has $64 million and $110 million unsecured i
Obligations bear interest at rates that are periodically established revolving credit facility agreements, which mature in 1998 and through remarketing of the bonds in the short-term tax-exempt 1999, respectively. Borrowings under these agreements may be market. The Company, at its option, may change the mode of on a fixed rate, floating rate or competitive bid rate basis.
interest calculation for these lunds by selecting from among sev-InterCoast has entered into two floating rate to fixed interest eral attemative floating or fixed rate modes. The interest rates rate swaps, each in the amount of $32 million.The interest rate shown in the Consolidated Statements of Capitali:ation are the swaps have fixed rates of 5.97% and 6.00%, respectively, and are weighted average interest rates as of December 31,1995 and 1994 for three-year and two-year terms, respectively, with an optional l The Company maintains dedicated revolving credit facility third year on the latter. All InterCoast borrowings are without l recourse to MidAmerican.
(3) Jointly Owned Utility Plant:
Under joint plant ownership agreements with other utilities, the each jointly owned unit. Each participant has provided Company had undivided interests at December 31,1995, in financing for its share of each unit. Operating Expenses on jointly owned generating plants as shown in the table below.
the Consolidated Statements of Income include the Company's l The dollar amounts below represent the Company's share in share of the expenses of these units (dollars in millions).
_ Nuclear ~ __ _ _ __ _ _ _ _ _ _ _ __. _oal fi_ red C
Quad-Cities Neal Council Bluffs Neal Ottumwa Louisa Units No.1 & 2 Unit No. 3 Unit No. 3 Unit No.4 Unit No. I Unit No.1 in service date 1972'
'1975 1978 "1979 ~
1981" "195F l Utility plant in service 200.4 111.7 286.5 155.8 202.2 526.0 Accumulated depreciation 70.6 64.8 138.8 78.9 89.3 204.3 Unit capacity-MW 1,539 515 675 624 716 700 Percent ownership 25.0 %
72.0 %
79.1 %
40.6 %
52.0%
88.0 %
5..l.i.d.A. me rican S
28
(4) Cornmitments and Contingencies:
(c) C:pital Expenditures:
The estimated recorded liabilities for these properties are Utility construction expenditures for 1996 are estimated to be based upon preliminary data. Eus, actual costs could vary signif-
$166 million, including $17 million for Quad-Cities nuclear fuel icantly from the estimates. The estimate could change materially and $9 million for beer capital improvements. Capital insed on facts and circumstances derived from site investigations, expenditures for nonregulated subsidiaries depend upon the changes in required remedial action and changes in technology i
availability of investment opportunities and other factors.
relating to remedial altematives. In addition, insurance recoveries During 1996, such expenditures are estimated to be approxi-for some or all of the costs may be possible, but the liabilities mately $85 million.
recorded have not been reduced by any estimate o(such recoveries.
(t ) Environmental Matters:
Although the timing of potential incurred costs and The United States Environmental Protection Agency (EPA) and recovery of such costs in rates may affect the results of opera-the state environmental agcncies have determined that contami, tions in individual periods, management believes that the nated wastes remaining at certain decommissioned manufactured outcome of these issues will not have a material adverse effect gas plant (MGP) facilities may pme a threat to the public health on the Company's financial position or results of operations.
or the environment if such contaminants are in sufficient quanti-(c) Long Term Power Purchase Contract:
ties and at such concentrations as to warrant remedial action.
Payments to NPPD cover one half of the fixed and operating The Company is evaluating 26 properties which were, at costs of Cooper (excluding depreciation but including debt one time, sites of gas manufacturing plants in which it may be a service) and the Company's share of nuclear fuel cost (including potentially responsible party (PRP). The purpose of these evalua-nuclear fuel disposal) based on energy delivered. The debt tions is to detennine whether waste materials are present, whether service portion is approximately $1.5 million per month for such materials constitute an environmental or health risk, and 1996 and is not contingent upon the plant being in service.
whether the Company has any responsibility for remedial action.
In addition, the Company pays one-half of NPPD's decom-The Company is currently conducting field invess;;ations at five missioning funding related to Cooper.
sites and has completed investigations at three sites. In addition, The debt amortization and Department of Energy (DOE) the Company is currently n' moving contaminated soil at three enrichment plant decontamination and decommissioning sites, and has completed removals at two sites. The Company is component of the Company's payments to NPPD were $12.0 continuing to evaluate several sites to determine the future liabil-million, $10.8 million and $9.9 million and the net interest ity, if any, for conducting site investigations or other site activity.
component was $4.6 million, $5.4 million and $5.7 million The Company's present estimate of probable remediation each for the years 1995,1994 and 1993, respectively.
cotts for the sites discussed above is $21 million. This estimate The Company's payments for the debt principal portion has been recorded as a liability and a regulatory asset for future of the power purchase contract obligation and the DOE recovery. The Illinois Commerce Commission has approved enrichment plant decontamination and decommissioning the use of a tariff rider which permits recovery of the actual payments are $13.0 million, $13.6 million, $14.3 million, costs of litigation, investigation and remediation relating to
$15.0 million and $15.8 million for 1996 through 2000, former MGP sites. The Company's present rates in Iowa pro-respectively, and $54.0 million for 2001 through 2004.
vide for a fixed annual recovery of MGP costs. The Company
. intends to pursue recovery of the remediation costs from (d) Decommissioning Costs:
other PRPs and its insurance carriers.
Based on site-specific decommissioning studies that include The estimate of probable remediation costs is established on decontamination, dismantling, site restoration and dry fuel a site specific basis. The costs are accumulated in a three-step storage cost, the Company's share of expected decommissioning process. First, a determination is made as to whether the costs for Cooper and Quad Cities, in 1995 dollars, is $420 mil-
. Company has potential legal liability for the site and whether lion. In Illinois, nuclear decommissioning costs are included information exists to indicate that contaminated wastes remain in customer billings through a mechanism that permits annual
- at the site, if so, the costs of performing a preliminary investi-adjustments. Such costs are reflected as base rates in Iowa tariffs.
gation are accrued. Once the investigation is completed and For purposes of developing a decommissioning funding plan ifit is determined remedial action is required, the best estimate for Cooper, NPPD assumes that decommissioning costs will esca-of remediation costs is accrued. If necessary, the estimate is revised when a consent order is issued.
1995 ANNuALREPOm N
1 Notes to Consolidated Financial Statement.s late at an annual rate of 4%. Although Cooper's operating Quad-Cities), insurance purchased directly by the Company, license expires in 2014, the funding plan assumes decommis-and the mandatory industry-wide loss funding mechar. ism sioning will start in 2004, the currently anticipated plant afforded under the Price-Anderson Amendments Act of 1988 The coverage falls into three categories: nuclear liability, shutdown date.
As of December 31,1995, the Company's share of funds set property coverage and nuclear worker liability.
aside by NPPD in internal and extemal accounts for decom-NPPD and Commonwealth Edison each purchase nuclear missioning was $49.4 million. In addition, the ftmding plan also liability insurance in the maximum available amount of $200 assumes various funds and reserves currently held to satisfy million. In accordance with the Price-Anderson Amendments NPPD Bond Resolution requirements will be available for plant Act of 1988, excess liability protection above that amount is decommissioning costs after the bonds are retired in early 2004.
provided by a mandatory industry-wide program under which The funding schedule assumes a long-term retum on funds in the owners of nuclear generating facilities could be assessed the trust of 6% annually. Certain funds will be required to be for liability incurred due to a serious nuclear incident at any invested on a short-term basis when decommissioning begins commercial nuclear reactor in the United States. Cunently, and are assumed to cam at a rate of 4% annually. NPPD is the Company's maximum potential share of such an assess-recognizing decommissioning costs over the expected service ment is $79.2 million per incident, payable in installments life of the plant, and 50% of the costs are included as a component not to exceed $10 million annually.
of the Company's power purchased costs. During each of the years The property coverage provides for property damage, sta-1995,1994 and 1993, $8.9 million of the Company's power bili:ation and decontamination of the facility, disposal of the purchased costs were for Cooper decommissioning and are decontaminated material and premature decommissioning. For included in Other Operating Expenses in the Consolidated Quad-Cities, Commonwealth Edison purchases primary and Statements of Income. Eamings from the intemal and extemal excess property insurance protection for the combined interest trust funds, which are recogni:ed by NPPD as the owner cithe plant, in Quad-Cities totalling $2.1 billion. For Cooper, NPPD are tax exempt and serve to reduce future funding requirements.
purchases primary property insurance in the amount of $500 The Company has established an extemal trust for the million. Additionally, commencing December 31,1995, the investment of funds for decommissioning the Quad-Cities Company and NPPD separately purchase coverage for their units. The total accrued balance as of December 31,1995, respective obligation of $1.12.5 billion each in excess of the was $64.8 million and is included in Other Liabilities and a
$500 million primary layer purchased by NPPD. This structure like amount is reflected in Investments and represents the provides that both the Company and NPPD are covered for value of the assets held in the trust.
their respective 50% obligation ln the event of a loss totalling The Company's provision for depreciation includes costs
$2.75 billion. The Company also directly purchases extra for Quad-Cities nuclear decommissioning of $8.6 million, expense / business interruption coverage to cover the cost of
$9.1 million and $7.9 million for 1995,1994 and 1993, replacement power and/or other continuing costs in the respectively. The provision charged to expense is equal to the event of a covtred accidental outage at Cooper or Quad Cities.
funding that is being collected in rates. The decommissioning The coverages purchased directly by the Company, and the fundmg component of the Company's Illinois tariffs assumes that primary and excess property coverages purchased by decommissioning costs, related to the Quad-Cities unit, will Commonwealth Edison, contain provisions for retrospective escalate at an annual rate of 5.3% and the assumed annual premium assessments should two or more full policy-limit retuni on funds in the trust is 6.5%. The Quad-Cities decom-losses occur in one policy year. Currently, the maximum missioning funding component of the Company's towa tariffs retrospective amounts that could be assessed against the l
assumes that decommissioning costs will escalate at an annual Company for its obligations associated with Cooper and l
rate of 63% and the assumed annual retum on funds in the trust Quad-Cities combined total $19.4 million.
is 6.5%. Eamin'gs on the assets in the trust fund were $2.5 The master nuclear worker liability coverage is an indus-million, $2.2 million and $f0 million for 1995,1994 and 1993.
try wide [mlicy with an aggregate limit of $200 million for the nuclear industry as a whole, which is in effect to cover tort (e) Nuclear insurance:
The Company maintains financial protection against cata.
claims of workers as a result of radiation exposure on or after strophic loss associated with its interest in Quad-Cities and J nuary 1,1988. The Company's share, based on its interest Cooper through a combination of insurance purchased by in Cooper and Quad-Cities, of a maximum potential share of NPPD (the owner and operator of Cooper) and a retrospective assessment under this program is $3.0 million.
Commonwealth Edison (the joint owner and operator of 5...i.d.imerican M
M
(f) Financial Guarantees Company expects to supplement these coal contracts with The Company has letters of credit amounting to $20.4 million spot market purchases to fulfill its future fossil fuel needs.
and financial guarantees amounting to $11.3 million which are The Company has entered into various natural gas supply not reflected in the consolidated financial statements. Letters and transportation contracts for its utility operations. The of credit and financial guarantees are conditional commitments minimum commitments under these contracts are $98 million, issued by, or on behalf of, the Company to secure performance
$87 million, $49 million, $26 million and $23 million for the for a third party. The guarantees are primarily issued to support years 1996 through 2000, respectively, and $96 million for the private borrowing arrangements and similar transactions.
years thereafter. During 1993 FERC Order 636 became effective, Mar,agement believes that the likelihoal of material cash requiring interstate pipelines to restructure their services. The payments by the Company under these agreements is remote.
pipelines will recover the transition costs related to Order 636 (g) Coal and Natural Gas Contract Commitments:
from the local distribution companies. The Company has The Company has entered into coal supply and transportation recorded a liability and regulatory asset for the transition costs contracts for its fossil-fueled generating stations. The contracts, which are being recovered by the Company through the pur-require minimum payments of $65 million, $45 million, $28 chued gas ad ustment clause. The unrecovered balance recorded million, $26 million and $16 million for the years 1996 through by the Company as of December 31,1995, was $41 million.
2000, respectively, and $28 million for the years thereafter. The (5) Common Shareholders' Equity:
Common shares outstanding changed dunng the years ended December 31 a3 shown in the table below (in thousands):
1995 1994.._..
1993 Amount Shares Amount Shares Amount Shares iblance, beginning of year
$ 786,420 99,687 $ 759,120 97,782 $ 759,610 97,778 Changes due to-Issuance of common shares 15,083 1,065 27,760 1,911 Capital stock expense (276)
(377)
(442)
Other (83)
(6)
(48) 4 Balance, end of year
$ 801,227 100,752 $ 786,420 99,687 $ 759,120 97,782 j (6) Retirement Plans:
The Company has noncontributory defined benefit pension 1995 1994 1993 plans covering substantially all employees. Benefits unJer the Service cost benefit eamed plans are based on participants' compensation, years of service during the period
$ 9,817 $13,241
$11,140 and age at retirement.
Interest cost on projected Funding is based upon the actuarially determined costs of benefit obligation 27,934 26,822 25,431 the plans and the requirements of the Internal Revenue Code Decmase in pension costs from and the Employee Retirement locome Security Act. The utility actual return on assets (63,593)
(7,835) (22,149) has been allowed to recover funding contributions in rates.
Net amortization and deferral 32,126 (21,030)
(6,075)
Net periodic pension cost includes the following compo-One time charge 15,683 nents for the years ended Decembcr 31 (in thousands):
Regulatory deferral ofincurred cost (10,470)
(2,871)
(2,018)
Net periodic pension cost
$ 11,497 $ 8,327 $ 6,329 During 1995, the Company incurred a one time charge of
$15.7 million related to the early retirement portion of its restructuring plan. Of such cost, $3.0 million was charged to expense and the remaining amount was deferred for future recovery through the regulatory process.
1995 ANNUAL RfPORr 3I
7 Notes to Consolidated Financial Statements The plan assets are stated at fair market value and are primarily comprised of insurance contracts, United States g ment debt and corporate equity securities. The following table presents the plans' funding status and amounts reco Company's Consolidated Balance Sheets as of December 31 (dollars in thousands):
Plans in which:
Assets Exceed Accumulated Accumulated Benefits Exceed Benefits Assets i
56tuarial'present vaiue 3 inn'eYif AS'igations:
1994""
~1995" "1994~
1995 Vested benefit obligation
$ (293,985)
$ (224,488)
$ (32,429)
$ (18,915)
Nonvested benefit obligation (7,516)
(5,881)
( 816)
(1,744)
Accumulated benefit obligation (301,501)
(230,369)
(33,245)
(20,659)
Provision for future pay increases (94,633)
(66,414)
(5,455)
(2,357)
Projected benefit obligation (396,134)
(296,783)
(38,700)
(23,016)
Plan assets at fair value 385,598 335,809 Projected benefit obligation (greater) less than plan assets (10,536) 39,026 (38,700)
(23,016)
Unrecognized prior service cost (15,866) 22,520 2,884 6,896 Unrecognized net loss (gain) 29,541 (40,151) 9,431 2,603 Unrecogni:ed net transition asset (21,521)
(24,112)
Other (6,860)
(7,142)
Pension liability recognized in the Consolidated Balance Sheets
$ (18,382)
(2,717)
$ (33,245)
$ (20,659) 1 Assumptions used were:
7.0%
8.5%
Discount rate Rate of increa,e in compensation levels 5.0%
5.0%
Expected long-term rate of return on assets 8.75-9.0%
8.75-9.0 %
4 The Company currently provides certain health care and accrual basis for its Illinois customers and certain of its Iowa i
life insurance benefits for retired employees. Under the plans, customers in 1993 and including provisions for such costs in substantially all of the Company's employees may become rates for these customers. For its remaining lowa customers, the 4 _
eligible for these benefits if they reach retirement age while Company deferred the portion of these costs above the " pay as-working for the Company. However, the Company retains you-go" amount already included in rates until recovery on an j the right to change these benefits anytime at its discretion.
accrual basis was established in 1995. The Company is currently i in January 1993, the Company adopted SFAS No.106, amortizing the deferral, expensing the SFAS No.106 accrual Employers Accounting for Postretirement Benefits Other Than and including provisions for these costs in rates.
Pensions. The Company began expensing these costs on an Net periodic postretirement benefit cost includes the following components for the year ended December 31 (in thousands):
~
1995 1994 1993 5Arvice cost h'e'AeE earndduring the peris!"
T T,583"
' ~ " ~ ~2,147" "2,25'2" {
Interest cost 7,185 7,221 8,644 i Increase (decrease) in benefit cost from actual return on assets (2,090) 894
( 468)
Amortization of unrecogni:ed transition obligation 5,291 5,442 5,449 Other (262)
(1,991) 293 )
One time charge for early retirement 4,353 Regulatory recognition ofincurred cost 5,140 (6,218)
(9,126)
Net periodic postretirement benefit cost
$ 21,200 7,495 7,044 3...i.d.\\inerican M
32
During 1995, the Company recorded a one-time expense For purposes of calculating the postretirement benefit of $4.4 million related to the early retirement portion ofits obligation, it is assumed that health care costs for covered restructuring plan.
individuals prior to age 65 will increase by 11% in 1996, and The Company has established external trust funds to meet that the rate ofincrease thereafter will decline by 1% annually its expected postretirement benefit obligations. The trust funds to an ultimate rate of 5% by the year 2002. For covered are comprised primarily of guaranteed rate investment accounts individuals age 65 and older, it is assumed that health care and money market investment accounts. A reconciliation of costs will increase by 9% in 1996, and that the rate of increase the funded status of the plan to the amounts reali:ed as of thereafter will decline by 1% annually to an ultimate rate of December 31 is presented below (dollars in thousands):
5% by the year 2000.
If the assumed health care trend rates used to measure the
...1995 1994,,
expected cost of benefits covered by the plans were increased l Accumulated present value of bene 6t obligations:
by 1%, the total service and interest cost would increase by Retiree bene 6t obligation
$ (67,488) $ (55,233)
$0.9 million and the accumulated postretirement benefit Active employees fully eligible obligation would increase by $7.6 million.
for benents (5,904)
(6,127)
The Company sponsors defined contribution pension Other active employees (33,949)
(26,939) plans (401(k) plans) covering substantially all employees.
"E
'"'" udms t e
ns, ch adased Accumulated benefit obligation (107,341)
(88,299)
P*
"N " " ' " ***'#
Plan assets at fair value 26.916 18.200 Accumulated benefit obligation
' "'P**"'
P*" 'Y "" " *d**
' "'E'" *** $ '
million, $3.6 million and $3.6 million for 1995,'1994 and greater than plan assets (80,425)
(70,099) 1993, respectively.
Unrecogni:ed net gain (13,880)
(25,894)
Unrecogni:ed transition obligation 89,952 95,993 Postretimment benefit liability recogni:ed in the Consolidated Balance Sheets
$ (4,353) $
Assumptions used were:
Discount rate 7.0%
8.5%
Expected long tenn rate of return on assets (after taxes):
Midwest Resources union plan 9.0%
9.0%
Midwest Resources salaried plan 4.6%
4.6%
lowa-Illinois plans 3.0%
3.0%
(7) Short-term Borrowing:
Interim financing of working capitai needs and the construction program may be obtained from the sale of commercial paper or short term borrowing from banks. Information regarding short-term debt follows (dollars in thousands):
~ Balance at year-end......
1995 -.
199
.....4. -..... 1993..
$ 184,800 $ 124,500 $ 173,035
' Weighted average interest rate on year-end balance 5.7%
6.1%
3.4%
Avence daily amount outstanding during the year
$ 114,036 $ 105,72c. I17,445 Weighted average interest rate on average daily amount outstanding during the year 6.0%
4.4%
3.3%
At December 31,1995, the Company had bank lines of In January 1996, the Company entered into a $250 credit of $250 million to provide i.hort-term financing for its million revolving credit facility agreement to replace the utility operations. As of December 31,1995, the Company lines of credit. The Company's commercial paper borrowings has regulatory authority to borrow up to $400 million of are currently supported by the revolving credit facility.
short-term debt for its utility operations.
lWS ANNUALREPoRr 33
7 Notes to Consolidated Financial Statements (8) Rate Matters:
The table below shows the Company's recent material general The table below summari:es the results of the Company's recent material energy efficiency cost recovery filing activities rate activitier (dollars in thousands):
(dollars in thousands):
Filing entity Midwest Midwest
.._ Midwest Midwest lowa-Illinois State of filing, Iowa lowa Filing entity Service Gas Electric btate of filing lowa lowa Iowa Final revenue Interim revenue increase:
Amount 8,200 15,600 ncrease granted * $
19,700 $
18,700 $
18,600 Percent 3.2%
2.7%
Deferred charges Date collection began Oct.18,1994 Jan.1,1995 to be amortixd* $
14,100 $
13,400 $
13,800 Final revenue increase:
Date collection Amount 10,600 20,300 Percent 4.1%
3.4%
began Oct.12,1994 Jan.21,1995 Aug.3,1995 Date collection began Aug.1,1995 Aug. I1,1995 MewerQam,nuawn me/astsear nrJ (0) Discontinued Operations:
sented on the Consolidated Balance Sheets as Investment in The Company reflected as discontinued operations at Discontinued Operations. Proceeds received from the disposition September 30,1994, all activities of a subsidiary that con-of the construction investments through December 31,1995, structed generating facilities and a subsidiary that constructed electric distribution and transmission systems. Essentially all were $4.1 million. Revenues from discontinued activities, as of the assets of these subsidiaries have been sold.
well as the results of operations and the estimated income Midwest Capital, under the terms of certain sale agreements, (loss) on the disposal of discontinued operations for the years has indemnified the purchasers of the construction subsidiaries ended December 31 are as follows (in thousands):
. 1995 _,, _ 1994 _ 1993..
for specified losses or claims relating to construction projects which occurred prior to the date of their sale. In addition, Operating Revenues S 7,334 $ 69,958 $94,350 Midwest Capital has guaranteed performance on a joint venture income (kiss) from tumkey engineering, procurement and construction contract for discontinued operations a cogeneration project. The Company has provided a support before income taxes
$ 880 $ (2,788) $(7,033) agreeme" to Midwest Capital related to this project. In October income tax benefit (expense)
(463 )
908 3,179 1995, th i reject received pmliminary acceptance from the ower.
Total
$ 417 $ (1,880) $(3,854)
Man.v.,e at believes that the likelihood of a material adverse Loss on disposal before impact to the L,ompany under any indemnity provision of the income taxes
- $(11,576) $
sale agreements or construction contracts or material cash pay-
=mW 811 ments by the Company under the support agreements is remote.
Total
- $ (3,765) $
Net assets of the construction subsidiaries are separately pre.
(10) Concentration of Credit Risk:
The Company's electric utility operations serve 549,000 cus-credit to customers, substantially all of whom are h> cal businesses tomers in Iowa,83,000 customers in westem Illinois and 3,000 and residents. As of December 31,1995, billed receivables from customers in southeastem South Dakota. The Company's gas the Company's utility customers totalled $126 million.
The Company has investmencs in preferred stocks of utility operations serve 471,000 customers in Iowa,65,000 companies in the utility industry. As of December 31,1995, customers in westem Illinois,60,000 customers in southeastem South Dakota and 4,000 customers in nonheastem Nebraska.
the total cost of these investments was $163 million.
InterCoast has entered into leveraged lease agreements with The largest communities served by the Company are the Iowa companies <n the airline industry. As of December 31,1995, and Illinois Quad-Cities; Des Moines, Sioux City, Cedar Rapids, Waterloo, Iowa City and Council Bluffs, Iowa; and Sioux Falls, the receivables under these agreements totalled $38 million.
South Dakota. The Company's utihty operations grant unsecu ed 5....d.A. merican Mi 34
(11) Preferred Shares:
On December 15,1994, the Company redeemed all ofits out-redeemed at $100 per share each May 1, beginning in 2001 standing $4.36 Series, $4.22 Series and $7.50 Series preferred through May 1,2006.
shares. The redemption was made at a premium, which resulted The total outstanding cumulative preferred stock that is not in a charge to net income on common shares of $312,000.
subject to mandatory redemption requirements may be redeemed The $5.25 Series Preferred Shares, which are not at the option of the Company at prices which, in the aggrc.
redeemable prior to November 1,1998 for any purpose, are gate, total $95.1 million. The aggregate total the holders of all subject to inandatory redemption on November 1,2003 at preferred stock ot tstanding at December 31,1995, are entitled
$100 per share. The $7.80 Series Preferred Shares, which are to upon involuntary bankruptcy is $141.8 million plus accrued not redeemable prior to May 1,1996 for any purpose, have dividenJs. Annual dividend requirements for preferred stock sinking fund requirements under which 66,600 shares will be outstanding at December 31,1995, total $9.1 million.
(12) S:gment Information:
Information related to segments of the Company's business is as follows for the years ended December 31 (in thousands):
Utility Nonregulated 1995.
.1991, 1993_.
_._ Revenues
$ 169,409 $ 177,235 $ 140,976
,,,,, _1995 _. _..,1991...... _l W3..,
~... Electric -
Operating revenues
$1,094,647 $1,021,660 $ 1,002,970 Cost of sales 128,685 130,621 96,656 Cost of fuel, energy Depreciation, depletion and capacity 230,261 213,987 217,385 and amortization 26,573 24,884 18,771 Depreciation and Other operating amorti:arion expense 136,324 132,886 129,814 expenses 17,657 16,346 16,797 Other operating Operating income (k>ss)
(3,506) 5,384 8,752 expenses 459,344 438,811 424,589 Other income 15,734 37,084 30,978 Operating income
$ 268,718 $ 235,976 $231,182 Interest charges 30,425 31,638 30,421 Gas -
Income (loss) from Operating revenues $ 459,588 $ 492,015 $ 538,989 continuing operations Cost of gas sold 279,025 326,782 366,049 before income taxes (18,197) 10,830 9,309 Depreciation and Income taxes (16,114)
(4,410)
(4,508) amorti:ation experise 22,626 21,343 21,008 Income (kws) from con.
Other operating t nuing operations (2,083) $ 15,240 $ 13,817 expenses 122,017 111,644 110,970 Capital expenditures S 56,162 $ 52,609 $ 86,505 Operating income
$ 35.920 $ 32.246 $ 40,962 Operating income
$ 304,638 $ 268,222 $ 272,144 Asset information
'Other income (expense)
(4,074)
(3,712)
-21,185
.._ Idem diable assets-Interest charges 83,977 76,606 83,524 1995
_1994
- 1993, Income from continuing Electric W
$2,947,832 $2,915,749 $2,891,487 operations before Gas W 709,742 693,203 662,634
. income taxes 216,587 187,904 209,805 Used in overall utility Income taxes 84,098 66,7_59 75,917 operations 46,644 71,399 67,622 Income fmm continuing Nonregulated 819,303 735,423 749,518 operations
$ 132,489 $ 121,145 $ 133,888 Total
$4,523,521 $4,415,774 $4,371,261 i Capital expenditures (a) Utihty plant lesuccumulated provision for Jerreciation, accounts Electric
$ 133,490 $ 164,870 $ 178,903 receivable accrueJ unbilled revenues, inventones, deferred gas Gas
$ 57,281 $ 46,799 $ 36,178 expenw, energy adjustment clause balance, nuclear decommissioning trust fund and regulatory assets.
1W5 ANNUA RPORT 35
3 Notes to Consolidated Financial Statements (13) Fair Value of FinancialInstruments:
The following methods and assumptions were used to estirnate future cash flows expected to be received from such investments.
the fair value of each class of tlnancial instruments. Tariffs for Equity investments carried at cost - Fair value is based on an esti-the Company's utility services are established based on historical mate of the Company's share of partnership equity, offers from cost ratemaking. Therefore, the impact of any realized gains unrelated third parties or the discounted value of the future or losses related to financial instruments applicable to the cash tiows expected to be received from such investments.
Company's utility operations is dependent on the treatment Notes payable - Fair value is estimated to be the carrying i
authorized under future raremaking proceedings.
amount due to the short maturity of these issues.
Preferred shares - Fair value of preferred shares with mandatory Cash and cash equivalents -The carrying amount approximates redemption provisions is estimated based on the quoted market fair value due to the short maturity of these instruments.
prices for similar issues.
Quad-Cities nuclear decommissioning trust fund - Fair value Long-term debt - Fair value of long-term debt is estimated based is based on quoted market prices of the investments held by n the quoted market prices for the same or similar issues or the fund.
on the current rates offered to the Company for debt of the Marketable securities - Fair value is based on quoted market prices.
same remammg matunnes.
Debt securities - Fair value is based on the di.scounted value of the
'Ihe following table presents the carrying amount and estimated fair value of certain financial instruments as of December 1995 1995 1994 1994
)
Carrying Fair Carrying Fair Amount Value Amount Value Financial Instruments Owned by 5e Company:
Equity investments carried at cost S
58,972 61,316 22,352 23,930 Financial Instruments issued by the Company:
j Prefened shares; subject to mandatory redemption 50,000 52,800 50,000 50,836 l Long tenn debt, including current portion 1,468,617 1,528,504 1,471,127 1J91,372 i The amorti:ed cost, gross unrealized gain and losses and estimated fair value of investments in debt and equity securities at December 31,1995 and 1994, are summarized as follows (in thousands):
1995 1995 1995 1995 Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available-for sale:
Equity securities S 254,111 S
7,132 S
(9,278)
$ 251,965,
Municipal Bonds 38,098 3,228 (210) 41,116 l Cash equivalents 8,092 8,092 l Other debt securities 42,734 355 (6,507) 36,582 '
S 343.035 S
10,715
$ (15.995)
$ 337,755 Held-to maturity:
Equity securities S
11,389 S
(786) 10,603 i Debt securities 19,440 31 (921) 18,550 S
30,829 31 S
(1,707) 29,153 5...id.American M..
36
1994 1994 1994 1994 Amorti:ed Unrealized Unrealized Fair Cost Gains Losses Value Available-for-sale Equity securities 171,201 2,388
$ (14,703) 158,886 Municipal bonds 43,034 749 (1,773) 42,010 Cash equivalents 5,836 5,836 Other debt securities 4,102 4,102
$ 224,173 3,137
$ (16,476)
$ 210,834
- Held-to-maturity Equity securities 40,628 (1,374) 39,254 Debt securities 14,804 39 (1,849) 12,994 55,432 39 (3,223) 52,248 9
At December 31,1995, the debt securities held by the The proceeds and the gross realized gains and losses on Company had the following maturities (in thousands):
the disposition of investments held by the Company for the Amortized Fair years ended December 31, are as follows (in thousands):
Cost Value 1995 1994 W'itEn l' year 5
2,575 "5' 2M54 Ee550m salAs "5"107,692 T 15,E69
~~
1 thmugh 5 years 38,345 36,934 Gross reali:ed gains 3,923 10,338 5 through 10 years 35,788 32.239 Gross realized losses Over 10 years 23,564 24,621
""(3,158)""
5,234
~~
During 1995, the Company re-evahmted the classification ofits securities classified as held-to-maturity and available-for-sale As a result, certain securities, with a total amortized cost of
$33.1 million and a market value of $33.8 million, were trans-ferred from securities classified as held-to-maturity to available-for sale securities.
e (14) Income Tax Expense:
Income tax expense from continuing operations includes the Included in Deferred Income Taxes in the Consolidated
- -following for the years ended December 31 (in thousands):
Balance Sheets as of December 31 are deferred tax assets and
- 1995, 1994,
,1993 deferred tax liabilities as follows (in thousands):
Income taxes 1995 1994
' Current Deferred tax assets Federal
$ 45,635 $ 20,036 $ 57,179 Related to:
State 12,071 5,387 12,295 Investment tax credits
$ 63,374
$ 67,279 57,706 25,423 69,474 Unreali:ed losses 7,548 4,008 Deferred Pensions 17,938 16,834 Federal 15,905 37,316 7,610 AMT credit carry forward 18,738 34,555 State 2,550 6,565 3,996 Nuclear reserves and 18,455 43,881 11,606 decommissioning 8,367 8,340 Investment tax credit, net (8,177)
(6,955)
(9,671)
Other 10,679 14,640 Totalincome tax expense $ 67,984 $ 62,349 $ 71,409 Total
$ 126,644
$ 145,656 1995 ANNUAL REPORT N
7 Notes to Consolidated Financial Statements 4
1995 1994 The following table is a reconcihation between the effective IEr~r'e[taxliaEiiities income tax rate, before preferred stock dividends, indicated by I
the Consolidated Statements of Income and the statutory Related to:
Depreciable property
$ 533,750 $ 563,099 federal income tax rate for the years ended December 31:
1995 1994 1993 Income taxes recoverable
._ Effective federal and state through future rates 207,631 206,856 intangible drilling costs 38,278 17,062 income tax rate 34 %
31 %
33 %
Energy efficiency 28,616 17,635 Amorti:ation ofinvestment Reacquired debt 17,595 18,575 tax credit 4
4 4
FERC Order 636 16,073 17,939 Resolution of prior year 2
Other 31,275 30,155 tax issue Total
$ 873,218 $ 871,321 State income tax, net of federal income tax benefit (5)
(4)
(5)
Dividends received deduction 2
2 2
Other 1
Statutory federalincome tax rate 35 %
35%
35 %
(15) Inventories:
Inventories include the following amounts as of December 31 (in thousands):
,,_ 1994 1995 Matenals and supplies, at average cost $ 27,442 $ 31,688 Coal stocks, at average cost 32,163 26,878 Fuel oil, at average cost 1,523 1,907 Gas in storage, at LIFO cost 21,883 30,347 Other 2,224 1,428 Total
$ 85,235 $ 92,248 At December 31,1995 prices, the current cost of gas in storage was $31.4 million.
(16) Other Information:
The Company has completed a merger-related restructuring plan during 1995. Other operating expenses in the Consolidated Statements of Income for 1995 includes $33.4 million related to the restructuring plan.
Non-Operating - Other, Net, as shown in the ConscJidated Statements of Income, includes the following for the years ended December 31 (in thousands):
1995 1994 1993 11Eancele equityluduselduring construction
~481' d2 ~
T Gain on sale of assets, net 8,570 4,468 20,164 Income (loss) from equity method investments
( 312) 2,712 2,073 Energy efficiency carrying charges 3,092 1,681 1,172 j
Merger costs (4,624)
(4,510)
Other-than-temporary declines in value of investments and other assets (17,971)
(1,791)
(2,939)
Other 297 1,304 372 i
Total
$ (10,467)
$ 4,316
$ 20,842 j 5...i.d.i. merica n 38 M
(17) Holding Company Proposal:
The Company's Board of Directors has approved the formation orders must be received from the ICC, IUB, FERC and the of a holding company for MidAmerican's organizational Nuclear Regulatory Commission. Subject to such approva.3, structure. The holding company would have two wholly owned each share of MidAmerican common stock will be exchanged subsidiaries consisting of MidAmerican (utility operations) and for one share of the holding company's stock. It is management's InterCoast. Consummation of the holding company structure is intent, if possible, to complete the formation of the holding subject to approval by holders of a majority of the outstanding company and share exchange by the end of 1996, shares of the Company's common stock. In addition, certain (18) Unaudited Quarterly Operating Results:
1995 1 st Quart.e..r....... 2nd.Q...u. arter 3.rd..Q. uarter.... 4th Quarte'r (In thousands, except per share amounts)
Operating revenues S 461,422
$ 371,712
$ 434,623
$ 455,887 Operating income 78,841 56,312 99,887 66,092 Income from continuing operations 37,577 26,674 37,457 28,698 Income (loss) from discontinued operations 516 (99)
Earnings on common stock 35,296 24,908 35,780 26,780 Earnings per average common share:
Income from continuing operations 0.35 0.24 0.36 0.27 income (loss) from discontinued operations 0.01 Earnings per average common share 0.35 0.25 0.36 0.27 1994 lst Quarter 2nd Quarter 3rd.Q.. uarter*.... 4th Quarter (in thousands, except per share amounts)
Operating revenues
$ 529,422
$ 368,126
$ 382,492
$ 410,870 Operating income 86,855 55,949 85,570 45,232 Income from continuing operations 47,468 24,748 42,125 22,044 Loss from discontinued operations
( 759)
( 603)
(4,236)
( 47)
Earnings on common stock 44,136 21,571 35,315 19,167 Earnings per average common share:
Income from continuing operations 0.46 0.23 0.40 0.19 loss from discontinued operations (0.01)
(0.01)
(0.04)
Earnings per average common share 0.45 0.22 0.36 0.19
- Includes the estimated loss on the disposal of the anstruction sulwidianes.
The quarterly data reflect seasonal variations common in the utthty inJustry.
1995 ANNUAL REPORT 39
1 Report ofIndependent Public Accountants and Report of Management Report of Independent Public Accountants To the Shareholders and Board of Directors of MidAmerican Energy Company and Subsidiaries:
We have audited the accompanying consolidated balance We conducted our audits in accordance with generally sheets and consolidated statements of capitalization of accepted auditing standards. Those standards require that we MidAmerican Energy Company (an Iowa corporation) and plan and perform the audit to obtain reasonable assurance aluut subsidiaries, as of December 31,1995 and 1994, and the related whether the financial statements are free of material misstate-consolidated statements ofincome, retained eamings and cash ment. An audit includes examining, on a test basis, evidence flows for each of the three years in the period ended December supporting the amounts and disclosures in the financial state-31,1995. These financial statements are the responsibility of ments. An audit also includes assessing the accounting principles the Comp;my's management. Our responsibility is to express an used and significant estimates made by management, as well opinion on these financial statements based on our audits. We as evaluating the overall financial statement presentation. We did not audit the 1994 and 1993 financial statements of Iowa-believe that our audits provide a reasonable basis for our opinion.
Illinois Gas and Electric Company, one of the companies merged in out opinion, based on our report and the report of the in 1995 to fonn MidAmerican Energy Company in a transaction other auditors, the financial statements referred to above present accounted for as a pooling-of interests, as discussed in Note fairly, in all material respects, the financial position of (1)(a). Such statements are included in the consolidated MidAmerican Energy Company and subsidiaries as of December financial statements of MidAmerican Energy Company and 31,1995 and 1994, and the results of their operations and their subsidiaries and reflect total assets constituting 42% in 1994 cash flows for each of the three years in the period ended and total revenues constituting 36% in 1994 and 1993, of the December 31,1995, in conformity with generally accepted related consolidated totals. These statements were audited by accounting principles.
other auditors whose report has been fumished to us and our lowa lllinois Gas and Electric Company, is based solely upon
[
opinion, insofar as it relates to the amounts included for the report of the other auditors.
Chicago, Illinois January 26,1996 Arthur Andersen LLP Report of Management Management is responsible for the preparation of all The Company's independent public accountants are appoint-information contained in this Annual Report, including the ed annually by the Board of Directors on recommendation of financial statements. The statements and related financial the Audit Committee. The intemal auditors and Arthur information have been prepared in conformity with generally Andersen LLP each have full access to the Audit Committee, accepted accounting principles. In the opinion of mariage-without management representatives present.
ment, the financial position, results of operation and cash flows of the Company are reflected fairly in the statements.
The statements have been audited by the Company's inde-l pendent public accountants, Arthur Andersen LLP.
The Company maintains a system ofintemal controls which
/
4 is designed to provide reasonable assurance, on a cost effective l
basis, that transactions are executed in accordance with man-agement's authori:ation, the financial statements are reliable Stanley J. Bright and the Company's assets are properly accounted for and President, Office of the Chief Executive Officer safeguarded. The Company's intemal auditors continually evaluate and test the system ofintemal controls and actions are taken when opportunities for improvement are identified. Management believes that the system of internal controls is effective.
The Audit Committee of the Board of Directors, the members of which are directors who are not employees of the Lance E. Cooper Company, meets regularly with management, the internal Group Vice President, Finance and Accounting auditors and Arthur Andersen LLP to discuss accounting, auditing, intemal control and financial reporting matters.
5...i.d.\\merican M
40
Five-Year Financial Statistics 1995 1994 1993 1992 1991
,_, Earnings per average common share -
Continuing operations:
Utility operations 1.24 1.12 1.29 0.82 1.33 Nonregulated activities (0.02) 0.16 0.14 0.01 (0.01)
Discontinued operations (0.06)
(0.04) 0.01 Earnings per average common share 1.22 1.22 1.39 0.84 1.32 Return on average common equity (%)
10.1 10.1 11.6 7.1 11.2 Cash dividends declared per common share 1.18 1.17 1.17 1.28 1.38 Common dividend payout ratio (%)
97 96 84 152 105 Ratio of earnings to fixea charges Consolidated 2.8 2.8 2.9 1.9 2.5 Utility only 3.4 3.3 3.4 2.3 2.9 Ratio of earnings to fixed charges and Cooper Nuclear Station debt service Consolidated 2.7 2.7 2.8 1.9 2.4 Utility only 3.3 3.2 3.3 2.2 2.8 Capitali:ation ratios (%)-
Common shareholders' equity 44.3 43.9 44.0 43.8 42.9 Preferred shares, not subject to mandatory redemption 3.2 3.3 4.1 2.8 2.8 Preferred shares, subject to mandatory redemption 1.8 1.8 1.9 1.8 3.0 Long-term debt 50.7 51.0 50.0 51.6 51.3 Book value per common share at year-end S
12.17 12.08
$ 12.07
$ 11.86
$ 12.12 l Quarterly earnings per average common share j
outstanding -
1st Quarter 0.35 0.45 0.44 0.28 0.36 2nd Quarter 0.25 0.22 0.22 0.13 0.27 3rd Quarter 0.36 0.36 0.52 0.26 0.47 4th Quarter 0.27 0.19 0.20 0.17 0.22 Number of full-time employees -
Utility 3,331 4,077 4,196 4,305 4,370 Nonregulated 271 274 347 200 140 Utility construction expenditures
$ 190,771
$ 211,669
$ 215,081
$ 188,344
$177,061 Net cash from utility operations less dividends as a % of construction 134 121 103 71 100 Common Stock Dividends and Prices Prke Range.
_ _ Dividends Declared.... _
. MidAmerican _
. lowa-Illinois _.
_ _ _,_. Resources._,
MEC IWG MWR High Low High Low 1995 High Low 4th Quarter
$ 0.30
$ 171/8 $ 15 3rd Quarter 0.30 15 5/8 13 5/8 2nd Quarter 0.4325 0.29 22 19 7/8 15 13 5/8 1st Quarter 0.4325 0.29 1994 22 1/8 19 14 5/8 13 3/8 4th Quarter
$ 0.4325
$ 0.29
$ 205/8 $ 18 7/8
$ 141/2 $ 12 7/8 3rd Quarter 0.4325 0.29 22 1/2 19 1/4 15 3/8 13 1/2 2nd Quarter 0.4325 0.29 24 1/2 19 7/8 16 3/4 13 7/8 ist Quarter 0.4325 0.29 24 3/4 22 3/8 18 16 1995 ANNUAL.RFPoRT 4]
1 Five-Year Consolidated Statements of Income Years Ended December 31
_1995...
199.4.
1993 1992
.1991
.g..
gg.
O,.r. ting n.venu.s Electric utility
$1,094,647 $ 1,021,660 $ 1,002,970 $ 936,027
$ 968,799 Gas utility 459,588 492,015 538,989 484,687 573,251 Nonregulated 169,409 177,235 140,976 70,344 46,513 1,723,644 1,690,910 1,682,935 1,491,058 1,488,563 Operating Expenses Utility:
- Cost of fuel, energy and capacity 230,261 213,987 217,385 211,924 212,647 i
Cost of gas sold 279,025 326,782 366,049 326,097 323,113 Other operating expenses (2) 399,648 354,190 340,720 329,911 306,508 i
Maintenance 85,363 101,275 101,601 93,769 91,548 Depreciation and amortization 158,950 154,229 150,822 144,646 135,062 Property and other taxes 96,350 94,990 93,238 97,479 94,872 1,249,597 1,245,453 1,269,815 1,203,826 1,163,750 Nonregulated (2) 172,915 171,851 132,224 69,522 46,692 j
1,422,512 1,417,304 1,402,039 1,273,348 1,210,442 Operating income 301,132 273,606 280,896 217,710 278,121 Non-Operating income (3) 11,660 33,372 52,163 15,656 28,023 !
Interest Charges Interest on long-term debt 110,505 105,753 111,065 114,732 106,538 Other interest expense 9,449 6,446 5,066 5.899 16,380 Allowance for borrowed funds (5,552)
(3,955)
(2,186)
(2,i62)
(4,347) 114,402 108,244 113,945 118,469 118,571 income From Continuing Operations
.sofore income Taxes 198,390 198,734 219,114 114,897 187,573 income Taxes 67,984 62,349 71,409 26,812 59,604 locome From Continuing Operations 130,406 136,385 147,705 88,085 127,969 income (Loss) From Discontinued Operations (net of income taxes) (4) 417 (5,645)
(3,854) 794 203 Not income 130,823 130,740 143,851 88,879 128,172 Preferred Dividends 8,059 10,551 8,367 8,735 9,708
.E.arni.n..gs..on Com, m. on S. t.oc. k...
.$ 122.,764. $.
120.,.189 135,484 80,144. $..
118..,464 Average Common Shares Outstanding 100,401 98,531 97,762 95,430 89,844 '
Earnings Per Common Share 1.22 $
1.22 1.39 0.84 1.32 l
(1) The Company was formed on July 1,1995, through a merger, as discussed (3) Dunng 1995, the Company recorded approximately $18 nulhon of in Note (1)(a) of Notes to Consolidated Financial Statements (Notes).
expense for the wnte down of certain nonreguaed assets. In 1993, the l All data on this statement reflect the pooled amounts of the predecewor Company recorded an $18.5 million pre-tax gain on the exchange of companies. Non Operatbg income includes $4.5 million and $4.6 mil-natural gas service territory. The exchange resuhed in a decrease of lion of merger related costs in 1994 and 1995, respectively.
approximately 33.000 natural gas customers.
(2) Urihty other operating expenses include $31.9 million of costs related to (4) in 1994 the Company announced its mtent to dwest its wnstruction a restructunng and work force reduction plan implemented and com-suliidiancs. Refer to Note (9) of Notes.
pleted in 1995. In addition, nonregulated other expenses for 1995 includes $1.5 million of related costs.
5...i.d.A. merican M
42
Five-Year Consolidated Balance Sheets As of December 31
. 1995
,,1993,,
,,,, _,,1,993,,,,,,,,,
,1,992,,
,.,,1991,_
(In thousands)
Arsets Utility Plant i
Electric
$3,881,699 $ 3,765,004 $ 3,642,415
$ 3,534,703 $ 3,455,061 Gas 695,741 663,792 639,276 628,856 575,113 4,577,440 4,428,796 4,281,691 4,163,559 4,030,174 Less accumulated depreciation and amortization 2,027,055 1,885,870 1,801,668 1,680,033 1,572,946 2,550,385 2,542,926 2,480,023 2,483,526 2,457,228 Construction work in progress 104,164 101,252 111,726 67,664 51,176 2,654,549 2,644,178 2,591,749 2,551,190 2,508,404 Power Purchase Centract 212,148 221,998 248,643 243,146 248,949 investment in Discontinued Operations 15,249 22,206 23,686 23,854 Current Assets Cash and cash equivalents 41,216 33,778 24,289 25,079 30,384 Receivables, less reserves 261,105 212,902 226,054 225,566 205,440 Inventories 85,235 92,248 100,675 98,608 91,753 Other 22,252 19,035 24,911 26,182 20,277 409,808 357,963 375,929 375,435 347,854 hv3ctments 826,496 752,428 760,308 727,929 673,789 Other Assets 420,520 423,958 372,426 192,630 107,819 Totrl A: sets
$4,523,521
$ 4,415,774, $ 4,371,2,6,1,,, $ 4,1,,14,016,,$ 3,910,6,69 Capitalisation and Liabilities Capitilisation Common shareholders' equity
$1,225,715 $ 1,204,112 $ 1,180,510 $ 1,159,676 $ 1,128,858 Preferred shares, not subject to mandatory redemption 89,945 89,955 109,871 74,242 74,291 Preferred shares, subject to mandatory redemption 50,000 50,000 50,000 48,625 79,200 Long term debt 1,403,322 1,398,255 1,341,003 1,368,784 1,351,385 2,768,982 2,742,322 2,681,384 2,651,327 2,633,734 Current Liabilities Notes payable 184,800 124,500 173,035 120,244 67,629 Current portion oflong-term debt 65,295 72,872 66,371 32,952 10,991 Current portion of power purchase contract 13,029 12,080 10,830 8,065 8,948 Accounts payable 142,759 110,175 129,504 115,763 117,573 Taxes accrued 81,898 91,653 110,923 101,585 101,879 Interest accrued 30,635 30,659 31,021 31,395 31,678 Other 57,000 54,473 52,237 53,563 39,378 575,416 496,412 573,921 463,567 378,076 Other Liabilities Power purchase contract 112,700 125,729 140,655 138,085 141,890 Deferred income taxes 746,574 725,665 670,288 596,144 525,056 Investment tax credit 95,041 100,871 106,729 113,846 119,989 Other 224.808 22A775 198,284 15LO47 111,924 1,179,123 1,177,040 1,115,956 999,122 898,859 Totes Capitaitaation and Liabilities
$4.523,521
$ 4,415,774 $ 4,371,261
$ 4,114,016, $ 3g10,669 1995 ANNUAL REPORT 4}
1 Five-Year Electric Utility Statistics For the Years Ended December 31 1995
,1994, 1993
- 1992, 1991 Revenues (In thousands)..... -.
Residential
$ 434,105 $ 400,346 $ 386,047 $ 343,842
$ 379,240 Small general service 252,427 253,703 242,205 236,292 241,277 Large general service 219,075 204,481 193,616 199,256 197,795 Other sales 60,160 57,731 56,198 30,878 31,354 Sales for resale 105.472 84,260 104,461 106,982 98,748 Total from electric sales 1,071,239 1,000,521 982,527 917,250 948,414 Other electric revenue 23,408 21,139 20,443 18,777 20,385
$ 1,094,647 $ 1,021,660 $ 1,002,970 $ 936,027
$, 968,799 Total KWh Sales (in thousands)
Residential 4,767,608 4,500,265 4,475,883 4,098,567 4,540,923 Small gen.ral service 3,920,792 4,062,993 3,937,360 3,885,898 3,989,071 Large general service 5,351,933 5,091,685 4,851,493 4,993,213 4,895,098 I
Other 957,463 938,620 930,117 470,444 479,257 Sales for resale 5,509,161 3,605,092 5,566,208 6,386,957 6,163,480
)
Total 20,506,957 18,198,655 19,761,061 19,835,079 20,067,829 Revenues by Customer Class (ko[totalI Residential 40.5 40.0 39.3 37.5 40.0 1
Small general service 23.6 25.4 24.7 25.7 25.4 Large general service 20.5 20.4 19.7 21.7 20.9 j
Other 5.6 5.8 5.7 3.4 3.3 Sales for resale 9.8 8.4 10.6 11.7 10.4 Total 100.0 100.0 100.0 100.0 100.0 Sales as a % of Total Residential 23.2 24.7 22.7 20.6 22.6 Small general service 19.1 27.3 19.9 19.6 19.9 Large general service 26.1 28.0 24.5 25.2 24.4 ;
Other 4.7 5.2 4.7 2.4 2.4 i Sales for resale 26.9 19.8 28.2 32.2 30.7.l 100.0 100.0 100.0 100.0 100.0 Total Retail Electric Sales by Jurisdiction (%)
lowa 89.5 88.6 88.7 87.8 87.6 i Illinois 9.9 10.9 10.9 11.8 12.1 (
l South Dakota 0.6 0.5 0.4 0.4 0.3 Customers (end of year) l Residential 551,384 548,106 541,220 536,767 530,869 Small general service 72,616 69,905 68,829 71,843 71,127 Large general service 945 743 744 833 838 Other 9,744 9,518 9,572 5,156 5,044 Sales for resale 55 59 63 61 t>l Total 634,744 628,331 620,428 614,660 507,939 Annual Average Por Residential Customer l
Revenue per kWh (cents) 9.11 8.90 8.62 8.39 8.35,
KWh sales 8,670 8,265 8,310 7,681 8,598 Cooling Degree Days Actual 1,112 912 813 603 1,303,
Percent warmer (colder) than normal 14.1 (6.5 )
(16.4 )
(38.5 )
33.0 i l
Electric Peak Demand (net MW) 3,553 3,226 3,284 2,902 3,227 ;
Summer Net Accredited Capability (MW) 4,311 4,145 4,072 4,116 3,996 ;
1,igmerican 44
1 Five-Year Gas Utility Statistics For the Years Ended December 31 R2 venues (In thousands)....
1995
- 1994, 1993 1992 1991 Residential
$ 279,819 $ 287,171
$ 319,359 $ 282,688 $ 271,312 Small general service 128,501 142,894 150,913 133,384 127/@
Large general service 23,280 36,729 37,761 43,919 47,107 Sales for resale and other 5,303 5,514 10,376 2,648 5,340 Total revenue from gas sales 436,903 472,308 518,409 462,639 451,359 Gas transported 16,677 12,842 13,457 17,473 16,231 Other gas revenues 6,008 6,865 7,123 4,575 5,661 Total 1 T%.xr ;r (MMBru in thousands)._
$ 459,588 $ 494015
$, 538g89.$
484,687 $ 473,251 Sales Residential 57,153 54,732 60,612 56,072 57,770 Small general service 32,786 32,677 34,504 31,894 32,464 Large general service 6,222 8,253 9,681 12,357 13,616 Sales for resale and other 3,582 3,231 4,305 837 2,213 Total sales 99,743 98,893 109,102 101,160 106,063 Gas transported 50,695 43,293 39,570 34,686 30,052
, Total 150,438 142,186 M8,672 135,846 136,115 llowenues by Customer Class (% of total)
- Residential 61.7 59.2 60.0 58.9 58.0 Small general service 28.3 29.4 28.4 27.8 27.3 Large general service 5.1 7.6 7.1 9.1 10.1 Sales for resale and other 1.2 1.1 2.0 0.6 1.1 Gas transported 3.7 2.7 2.5 3.6 3.5 Total 100.0 100.0 100.0 100.0 100.0 Sales co a % of Total (excluding gas transported)
Residential 57.3 55.3 55.6 55.5 54.5 Small general service 32.9 33.0 31.6 31.5 30.6 Large general service 6.2 8.4 8.9 12.2 ~
12.8 Sales for resale and other 3.6 3.3 3.9 0.8 2.1 Total Ret:11 Gas Sales by Jurisdiction (%)..
100.0 100.0 100.0 100.0 100.0 lowa 78.0 76.6 74.5 73.4 74.1 Illinois 10.7 11.9 11.4 11.6 11.8 South Dakota 10.6 10.8 5.4 2.2 2.0 Other 0.7 0.7 8.7 12.8 12.1 Customers (end of year)
Residential 541,732 535,301 526,863 552,660 542,084 Small general service 57,207 55,855 54,972 54,918 54,189 Large general service 830 876 868 1,020 1,059 Gas transported and other 1,128 171 128 123 98 Total 600,897 592,203 582,831 608,72,1 597,430 Annual Averages Per Residential Customer
- Revenue per MMBru 4.90 $
5.25 5.27 5.04 $
4.70 MMBru sales 106 103 111 103 108 Heating Degree Days Actual 6,841 6,565 7,097 6,302 6,505 Percent colder (warmer) than normal 0.9 (3.5) 3.2 (8.7)
(7.3)
Cost per Mustu 2.80 $
3.30 $
3.36 $
3.22 $
3.05 m s m uu n nteoni 45
l I
1 Directors John W. Aalfs John W. Colloton Richard L. Lawson Sioux City, Iowa lowa City, Iowa Washington, D.C.
President, Aalfs Vice President, Statewide President and CEO, National Manufacturing, Inc.
Health Services, Mining Association and (55/7)
University of Iowa General USAF (Ret.)
(65/3)
(66/7)
Betty T. Asher Vermillion, South Dakota Frank S. Cottrell Robert L. Peterson l
President, University of Moline, Illinois Dakota City, Nebraska South Dakota Vice President, General Chairman, President and (51/2)
Counsel and Secretary, CEO, IBP, inc.
Deere & Company (63/5)
Stanley J. Bright (53/3)
Des Moines, Iowa Richard A. Schneider President, Office of the CEO, Jack W. Eugster Sheldon, Iowa MidAmerican Energy Minneapolis, Minnesota President, Security Company Chainnan, President and CEO, State Bank (55/9)
Musicland Stores Corp.
(60/13)
(50/8)
Robert A. Burnett Nancy L. Seifert Des Moines, Iowa William C. Fletcher Cedar Rapids, Iowa Retired Chairman, Cedar Rapids, Iowa Executive Vice President, Meredith Corporation Chairman, Perpetual James E Seifert & Sons L.L.C.
(68/12)
Midwest Financial, Inc.
(66/10)
(69/18)
Ross D. Christensen W. Scott Tinsman Waterk>o, Iowa Mel Foster, Jr.
Davenport, Iowa j
Orthodontist in Private Davenport, Iowa Co-founder, Vice President, i
Practice Chairman, Mel Foster Co. Inc.
Twin State Engineering and (55/13)
(68/23)
Chemical Company (63/7)
Russell E. Christiansen Nolden Gentry Dakota Dunes, South Dakota Des Moines, Iowa Leonard L. Wo<druff Chairman, Office of the CEO, Partner, Law Firm of Brick, Fort Dodge, Iowa MidAmerican Energy Gentry, Bowers, Swart:,
President, Woodruff Company Stohe, Schuling & Levis, P.C.
Construction Company l
(60/36)
(58/12)
(67/23) 1 James M. Haak, Jr.
1 Dallas, Texas i
1 Chairman, Heritage Media Corporation (52/12)
(agelyem d memce) 46 3..l.i.d.e S
mn ican
7 Officers Russell E. Christiansen John A. Rasmussen, Jr.
James J. Howard InterCoast Energy Company Chairman, Office of the CEO Group Vice President and Vice President-(60/36)
General Counsel Gas Administrative Services Donald C. Heppermann (50/9)
(53/31)
President and Chief StanleyJ Bright Operating Officer President, Office of the CEO Ronald W. Secpien PaulJ. Leighton (53/5)
(55/9)
Group Vice President-Vice President and Strategic Planning and Corporate Secretary Norman R. Foreman Lynn K. Vorbrich Corporate Development (42/17)
President, President, Electric Division (49/5)
InterCoast Energy Marketing (57/23)
DavidJ. Levy and Services Company Stephen E. Hollonheck Vice President-Human (58/7)
Beverly A. Wharton Senior Vice President-Resources and Information President, Gas Division Gas Operations Technology William E. Wamock, Jr.
(42/19)
(46/9)
(41/19)
President, Medallion Production Richard C. Engle Stephen E. Shelton J. Sue Rozema Company Executive Vice President Senior Vice President-Vice President-(43/3)
(61/31)
Electric Distribution Investor Relations (48/25)
(43/16)
Daniel E. Lonergan Lance E. Cooper Vice President-Finance Group Vice President-James R. Bull Keith M. Giger (39/11)
Finance and Accounting Vice President-Treasurer (52/4)
Generation and Transmission (37/5)
Dennis H. Melstad (54/20)
President, Philip G. Lindner Lmy M. Smith InterCoast Rail Services Group Vice President-Brent E. Gale Controller and Investments Corporate Services Vice President-(40/10)
(43/19)
(52/7)
Law and Regulatory Affairs (44/19)
Midwest Capital Group Ronald W. Stepien '
President (49/5)
' Alan L. Wells Vice President-Finance and Investments (36/3) 1 l
1995 ANNUAL REPOm
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7 Shareholder Information 1696 Annual Meeting the dividend check to be issued to the new owner. If you are This year's annual meeting will be April 24, beginning at the new owner, your broker will claim the payment from the 10 a.m. at the Des Moines Airport Holiday Inn. Shareholders previous owner for you.
of record Februan 26,1996, will be eligible to vote on mat-ters to be addressed at the annual meeting.
Safekeeplng I
Safekeeping is a convenient feature of the Shareholder Suplicate Annual Reports Options Plan designed for shareholders who prefer to have Duplicate mailings of Annual Reports occur when the names their shares held on accounc rather than receive a stock cer-on your stock certificates differ, or when other individuals in rificate. You do not have to reinvest your dividends to take your home own stock. Duplicate Annual Report mailings are advantage of Safekeeping. When you sign up for Safekeeping, costly, so please notify us in writing about them. List which you will receive a Safekeeping receipt in place of your certifi-
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account numbers should not receive annual report materials.
cate. Contact Shareholder Services for a Safekeeping form Of course, each account will continue to receive separate and additional information.
dividend checks and proxies as required by the Securities and Exchange Commission.
Direct Deposit of Dividends You may elect to have your dividends electronically deposited Form 10 K Reports for into your checking or savings account at your bank, savings MidAmerican Energy Company and loan institution or credit union. Direct Deposit of The Form 10-K will be available after March 31. To request a Dividends is a safe, efficient and reliable means of receiving copy, please write in care of Shareholder Services.
your dividends. You may obtain an application form by con-tacting Shareholder Services.
Common Stock Listing 1
Common stock of MidAmerican Energy Company is traded Replacement of Dividend Check on the New York Stock Exchange under the ticker symbol if you do not receive a dividend check, please notify "MEC." Daily newspapers carry quotes on the stock.
Shareholder Services in writing so that payment on your check can be stopped. When the bank confirms the stop Elvidend Reinvestment and Stock Purchase order, a replacement check will be issued.
The Company's Shareholder Options Plan provides individu-als with a convenient method for purchasing additional shares Transierrine Stock of common stock by reinvesting their cash dividends, by mak-To transfer stock, endorse the certificate or Stock Power Form ing optional cash purchases, or both. A prospectus describing exactly as the name appears on the face of the certificate. Your the plan may be obtained by contacting Shareholder Services.
signature must be guaranteed with a MEDALLION IMPRINT affixed by a financial institution enrolled in the MEDALLION l
Record and Payment Dates PROGRAM. Fill in the name, address and social security
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Remaining record dates for 1996, to be set by the board of number of the person to whom the shares are to be transferred.
directors, are expected to be May 8, August 8 and November 8.
Send the certificate to us, or to our co-transfer agent if you Corresponding dividend payment dates are expected to be prefer. To do this, we recommend registered mail, which allows June 1, September 1 and December 1.
you to insure the contents of the package. For registered mail, we suggest a value of 2 percent of the current market price, Ctock Bought or Sold Close to Record Date which is the fee you will be charged by the insurance company Stock is sometimes bought or sold soon before a record date, to replace certificates if they become lost.
but the transaction is not transferred by the broker in time for 1
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Loot, Destroyed or Stolen Certificate Shareholder Services by Telephone Please contact ShareholJer Services immediately if a certifi-The Company maintains a toll-free number for you to call.
cate becomes lost, stolen or destroyed. A stop transfer will be If you live outsiJe the Des hioines area, the number is placed on our records to prevent an unauthori:ed person from 1800-247-5211. If you live in the Des hioines area, you transferring shares. An indemnity bond must be purchased by may call 281-2560.
you to replace stock certificates. The cost of this bond is 2 percent of the current market value. As a security measure, Financial Contact keep certificates in a safe place and do not endorse one until J. Sue Ro:ema you are ready to transfer it. Once endorsed, the certificates Vice PresiJent Investor Relations could be improperly transferred if lost or stolen.
Phone: 515 281-2250 Stock Held in Brokerage Accounts Common Stock Transfer Agents
("Strost Name")
hiidAmerican Energy Company When you purchase your stock and it is held for you by your Shareholder Services broker, it is listed with the Company in the broker's name, or P. O. Box 9244
' street name " The Company does not know the identity of 666 Grand Avenue-28th Fkior individual shareholders who hold their shares in this manner; Des hioines, IA 50306-9244 we simply know that a broker holds a certain number of shares, which may be for any number of customers. Accounts Continental Stock Transfer and Trust Co.*
held in street name are not eligible to participate in the 2 Broadway-19th Fkior Company's Shareholder Options Plan. Also, you receive all New York, NY 10004 dividend payments, annual reports and proxy materials through your broker. Regular quarterly financial reports may Preferred Stock Transfer Agent
- be obtained directly from the Company b, contacting hiidAmerican Energy Company ShareholJer Services Shareholder Services.
P. O. Box 9244 666 Grand Avenue-28th Floor Addross Changes Des hioines, IA 50306 9244 Please notify us of your former anJ current aJJresses. For your protection, we ask that changes be reported to us in writing.
Executive Offices hildAmerican Energy Company Taxpayer identification Number 666 Grand Avenue The Internal Revenue Service requires shareholders to furnish P. O. Box 657 a tax identification number to every company in which they Des hioines, IA 50303-0657 own shares. Generally, it is your Social Security number (a W-9 Form is required to change a taxpayer identification number). If the number does not appear on your dividend check stub or reinvestment statement, or if it is incorrect, please contact Shareholder Services.
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Coronental Stak Transfer and Trust Company also is co-trander agent tor the $1.m5 Senen of Preferred Stak
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