ML20247F965
| ML20247F965 | |
| Person / Time | |
|---|---|
| Site: | Callaway  |
| Issue date: | 12/31/1988 |
| From: | Cornelius W, Schnell D UNION ELECTRIC CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| ULNRC-1954, NUDOCS 8904040085 | |
| Download: ML20247F965 (41) | |
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4
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Statement of Policy We are a business enterprise - dependent for suc-cess on the high quality and fair price of our service; on <
the skill, courtesy, and loyalty of our employees; on the confidence of our investors; and on the ability of our management to forecast and provide for the energy -
requirements of our area.
In the conduct of our business, we will render service of the highest quality to our customers -
promptly, courteously, and efficiently - at the lowest prices consistent with paying fair wages and affording job satisfaction and security to our employees; provid-ing modern facilities for our customers' expanding needs for energy service; and paying a fair return to our investors who have provided the funds to make such service possible.
As a private enterprise entrusted with an essential On the Cover public service, we recognize our civic responsibility in From the air at night, the communities we serve. We shall strive to advance the St. leuis metropoli- the growth and welfare of these communities and shall tan area is seen as a participate in civic activities which fulfill that goal ... for galaxy oftwinkling we believe this is both good citizenship and good lights clustered around business.
the major traffic arter.
ies. The confluence of the Mississippian Mis-souri rivers appears at d lower right,just north of C*"I'"t*
St. Louis.
letter to Stockholders 2 Annual Meeting i 7he AnnualMeeting of New Organizational Divisions 4 1
Stockholder will Respons.bility i for Financial Statements 16 convene at 10 a.m.
Tuesday, April 25,1989 Financial Review 17 at PowellSymphony Hall, Investor Information 36~
718 North Grand, St. Louis, Missouri. Officers and Directors 37 k
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_ - - _ . - _ _ _ _ _ _ _ _ _ _ - _ - _ - - _ _ _ _ _ _ _ _ . /
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BUSINESS REVIEW Union Electric Company 1
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Highlights Annual Change 10-Year Year Ended Current Rate of December 31,1988 Year Growth Earnings per Average Common Share $2.56 r'2.0)%
. 2.4%
Dividends per Common Share $1.94 1.0 3.3 Common Stock Price-Year End $242/8 7.8 6.1 Book Value per Common Share S18.56 3.2 1.4 Property and Plant (gross) $ 7,126,255,000 2.7 8.1 Total Operating Revenues $2,029,107,000 4.2 8.4
. Total Kilowatt-Hour Sales 30,022,877,000 3.5 2.5 Residential Kilowatt-Hour Sales 9,956,718,000 3.9 2.6 Commercial Kilowatt-Hour Sales 10,009,131,000 4.5 4.7 Industrial Kilowatt-Hour Sales 8,417,023,000 2.4 .8 l i
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ll Union Electricis a \
g, } utilitycompany, W. A primarily engagedin a supplying electric i? -m QR f service to more than p .
[.} one million custom-1 ers in the strategic y
WqY r 3 center ofAmerica -
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ygb; y a 24,000 square C ~.g A mile area in
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e .. 3 Missours, Ills, nots, ylp% , ffQ <
l{ andIowa, which j includes the 6%nu,s Q" ', .
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TO OUR STOCKHOLDERS:
Results for 1988 were gratifying in four major areas: On the cost control front, we met major goals during 1988. We improved availability of our power plants
- Earnings exceeded earlier estimates.
fmm 7% in 1987 to 81% in 1988. The improved availa-
- Common stock dividends increased.
bility, comb,med with other efficiency improvements at
- Both cash flow and our financial position ur power plants, reduced our average production cost were significantly strengthened, a fact recognized by 6% as compared to 1987. Continuing improvements and acted upon by rating agencies.
like these will help us achieve two pnmary objectives
- And our nuclear operation continued to receive
- growth in earnings and dividends and competitive, high marks from the Nuclear Regulatory Commis-aff rdable customer rates.
sion.
In rec gnition of these and other actions taken by the Common stock earnings for 1988 were $2.56 per share Company, Moody's Investors Service and Standara &
- about 30 cents higher than we had estimated. We Poor's have both upgraded Union Electric's credit had expected earnings to fall further from 198Ts $2.91 ratings.
per share mark due to the negative effect of the Mis-souri Commission's December 1987 rate order. Moody's cited our prospects for further financial strengthening when it upgraded our first mortgage However, abnormally hot summer weather caused kilowatt-hour sales to increase 3.5%, about twice our bonds from A-3 to A-2. Standard & Poor's cited our verall financial improvement and our excellent operat-normal rate of growth. All customers consumed more ing record at the Callaway Plant m upgrading our first electricity. Commerical sales improved by 4.5%, resi, mortgage bonds from A-to A. Our preferred stock dential usage by 4%, and industrial consumption by and commercial paper ratings were also upgraded.
2.5%. The hot summer also produced a record peak demand of 7.34 million kilowatts on August 16,1.2% Union Electric received a favorable notice of a different over the previous high set in 1987. kind last year. The Nuclear Regulatory Commission (NRC) concluded a 15-month evaluation of our Cal-Stockholders' quarterly dividends on common stock ,
laway operation with a report that put all our marks ,m ;
were increased by 2 cents per share, bringing the the two highest categories - meaning that Callaway j annual rate to $2.00 per share.
met or surpassed NRC expectations m all rated areas. 1 Cash flow and our overall financial position were The NRC report sa.d,"These i ratings reflect strong strengthened in two ways in 1988 - by taking advan-performance by management and staff , . ." and " man- J tage oflower interest rates and by continued actior to agement . . . was aggressive and proactive in respond- '
control operating costs.
ing to safety concerns.
We took advantage of favorable interest rates by <
Our pn.de m . the contm.ued fine performance at Cal-redeeming $150 million of 15 %% first mortage bonds, I"*"Y SI ""PP #d by the fact that the plant ranked
$14 million of 13% first mortgage bonds, and $75 .
f urth .m production of more than 100 operating nu-million of high-cost preferred stock. Also, we plan to redeem an additional $40 million of preferred stock on clear plants m Me U.R m q88. h pmh 2% oge Company's total electricity m the year, so about one m February 15,1989.
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Turning to the positive, our first reason for confidence in the future is that our marketing focus is sharp -
and working. Our goal to sell more energy without in-creasing summer peah demand is targeted at promot-ing the sale of heat pumps and other electric space heating equipment, b 1988, nearly 5,000 more heat pumps were installed in our market - a significant advance considering strong competition in the residen-tial heating marketplace. Also in 1988, we exceeded an internal goal by achieving a 50% market share for electric heat in new commercial buildings.
rwart W. Smith,Jr. - Vice Chairman, William E. Cornelius -
1 airman and ChiefExecutive Officer, and Earl K. Dille - President Another reason for our confidence is the proven, long-standing ability of our employees to continually im- {
four kilowatt-hours used by customers came from prove the efficiency and productivity of our operat:an Callaway.
as we did in 1988.
What of the future? Can we continue to achieve growth In July, we took another step in this direction in a for stockholders and maintain reasonable rates for re rgardzation that, we believe, refocuses executive custamers?
responsibilities while ensuring managerial strength We believe we can maintain steady improvement in and continuity into the future. This report describes both these missions. Our confidence comes from two our six new organizational divisions and how they factors. However, we also have a caveat. contribute to achieving our corporate goals.
First, the caveat about our future ability to maintain Harvey Saligman, chairman of the board and chief reasonable customer pricing - the acid rain debate, executive officer of INTERCO INCORPORATED, a manu-expected to be a major issue in the 101st Congress. facturer and retailer of consumer products, was elected The Business Roundtable has estimated that compli. a director of Union Electric, effective January 1,1989.
ance with acict rain legislation considered in 1988 would cost $32 billion per year and, at minimum, -
jeopardize 300,000 to 600,000 U.S. jobs. Our studies show that legislation could increase Union Electric William E. Cornelius customers' bills by as much as 25%. These incredible Chairman and Chief Executive Officer costs aside, studies initiated by Congress have not provided conclusive scientific evidence that legislation February 6,1989 would be effective. St. Iouis, Missouri Certainly, we will continue to advance the interests of Union Electric stockholders and customers as this issue is considered.
3
l POWER OPERATIONS l
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Robert O. Piening - Senior Vice President - Power Operations Around the clock,365 days a year, the 1,700 employees ,
in Power Operations must provide the energy our I customers expect when they flip a switch. To meet the challenge, we produce most of our energy at five fossil fuel plants and three hydro-electric generating plants.
Power Operations is also responsible for directing A Hands on instruction at Unicn power for Union Electric's service area and to points Electric's training center in of interconnection with neighboring utilities. This is
"' " "' accomplished at our load Dispatching center. We h gh y coIte <nt for staI##
po r#' '$#
plant operations.
- monitor and schedule energy, minute by minute, to s # meet customers' ever-changing demands.
r-In addition, Power Operations makes continuing
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studies relating to power production. These manage-
7 ment programs maintain a vigil over fuel quality and (
costs as well as plant performance and productivity.
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J' The goalis a simple one: to produce energy reliably p .
and safely at the lowest cost. J b Power Operations is responsible ,
for purchasingfossilfuel. Incoming coal supplies are sampled and analyzedfor adherence to Com- -
pony standards.
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VNerve centerof the power
\ Jis a ing e is ce s power to meetfluctuating i I f
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b Keeping generating plants in good repair assures a reliable sutply ofenergy today and in the
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V Every day, unit trains pulling ctr cs kree la ge to >er plants Coal is the largest cost produe ton udget i
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NUCLEAR i l
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" <3 Callaway is one of the nation's !
top performersfrom the standpoint b ofboth energy production and i j~
nuclear safety records. This is the V Callaway produced more than rssult ofintense training of 9 billion kilowatt-hours last year, dedicated people. Employees in all 26% of the total system output. A ttse plant's work disciplines attend hundred miles west of St. Louis, ;
special accredited courses. the nuclear plant is situated on 7,200 acres, most of which are devoted to agricultural production l
and scildhfe management under e on agreement with the Missouri Department of Conservation.
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simulator, afacility that dupli- :ly cates actualplant operation. Once * :1 licensed, each operator gets six k
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b Engineers planning design modifications can refer to this room-sise scale model of the Callaway Plant.
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namce department received the M NRC's highest rating. , .$
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Donald F. Schnell - Senior Vice President - Nuclear .L.
In 1988, the Callaway Plant produced 26% of all
~'Q electricity supplied to our customers. ' Itis is a record '
'c to be proud of-it underscores the teamwork achieved ... ., /-
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by our organization and the quality of our plant. Early in the year, Callaway became the first plant ofits type to be licensed for increased power output by the Nuclear Regulatory Commission. This helped boost ;j . , ~ ~
Callaway's electrical generation to 9.39 billion kilowatt-hours, fourth highest in the nation for a single unit.
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Callaway operates with strict safety requirements set 'M by the NRC. Our training program is a key factor in [
assuring that we can meet these requirements as well '
gj as our operational goals. We are convinced that ongoing, intense training provides the foundation for p i long-term, safe, reliable plant operation. Callaway has consistently received high ratings from the NRC.
g,,,,,,,,, ,,,3 i,, 3,,,,i,g houses the largest power generat.
1% ing equipment in the system, with
"' % net capacity of 1.150 megawatts.
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CUSTOMER SERVICES l G
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<3 At our central supply warehouse in St. Louis County. maintei.ance crews refurbish, process and issue s im ' * ' '
transformers, meters, and other line hardware. y Charles J. Schukai- Senior Vice President - Customer Services J
Customer Services has a two-fold responsibility:
3 .
the marketing of energy and its distribution to our
?# ' - customers.
We feel that marketing is more than just developing new business. We also focus on providing better serv-f ice to customers and helping them to use energy i efficiently. Our programs provide special services, s.- , .s ,
such as weatherization materials to senior citizens to
,, .- y. make their homes more energy efficient and assistance
.i for elderly, low-income, and handicapped customers with special needs.
Energy distribution is a function that involves all our customers - the 942,000 residential customers and the 124,000 commercial / industrial users. Customer Services delivers the energy through 35,000 miles of distribution lines and more than 700 sub-I stations. Our electric service is 99.9%
reliable and, when there is trouble, we locate it and fix it promptly.
~~
r"n?q%p mg -
b UE employees are trained to keep the Company's enormous de- -- ^"'
- v. .
[ggl4 livery system, with its millions of parts, running efficiently. Splicing f Y F W 'B. ' L i
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h9 underground cables is a prime skill 1 of these craftsmen.
{
> As real estate development l expands across UEs serruce area.
the demands for power increase.
Putting new buildings on linefor electric service requires installa-l tion oflines. cables, and trans-formers. , ,
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i; i f,g i ers ik irect) wh 'E repres - l.;" 3. y '
tatives about payment programs .
and special assistance needs. Our ?);l; fseld personnel also have frequent >
W contact with customers. 1; \, ,
,: Sk .
6 Jefferson City, Missouri's cap-itol, is the centerfor the Regional West portion of the Company's fere inemen u k on cil ties that distribute electricity to customers.
K.u b UE's customer relations people handle 8,000 incoming calls a day and do it in a manner that en-hances customer satisfaction with the Company and the service we provide.
l l
l TECHNICAL SERVICES e <l Engineers from Quality Services 9 & %i y ix :
f' ~ <
qualify vendors whose products enter the UE system. Our inspect. ,
ors meet with suppliers' employees h,. % and observe manufacturing
, [ processes to verify adherence to
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rigid performance specifications.
_h'.ph-e V Keeping in touch - people to ---% :l l;;; ~~~*
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.} };;[Q'1 ' t people, people to equipment, by
- voice and data - is accomplished 'W Y by the Company's internal telecom- -
- n. , ,,c T Vinsuring the reliable operation munications system. A network of 2 of equipment in our bulk power 60 microwave stations and more .. distribution system is a prime re.
than 2,000 mobile radios help link sponsibility of our mobile System the three-state service area.
f'_ ,
Relay Services group. Here, a crew tests the oilfrom a trans-
~.- formerfor its insulation quality, s *
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l C> Laboratory Services perform l tests of welds, strength / failure y '
j analyses, and line hardware eval-nations, as well as analyses of
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I coal, water, and oil. Here, coal l samples from power plants are chrcked in the laboratoryfurnace for sulfur content. _.
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power plant employees, teaching n
them to handle a broad range of m
, y industrialfires.
)
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2 .,
Charles A. Bremer - Senior Vice President - Technical Services ,
Our mission in Technical Services is to provide l ~*
) the expertise and coordination needed to improve ,,3
) operational efficiency, customer service, and quality assurance by the use of technology, r f
Our regular chemical and metallurgical analyses , ,
of water, coal, oil, and materials are critical to the !
I Company's ability to operate reliably and protect the f health and safety of our employees, the public, and l
our environment. They also help insure the integrity of our operations by assuring the quality of goods and materials we use. $j We are significantly improving the quality of our service and containing operating costs by installing
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and upgrading information systems, and by installing / g m a state-of-the-art Company-wide communications ., .; *si system, .
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V-% L L Company computers print over a million customer bills each month, more than 110,000 dividend checks quarterly, and a variety ofinternal reports.
I I i 1 11
FINANCE AND ACCOUNTING .
b Q
V Union Electric common stock -
102 million shares -is atened by 140,000 investors from all 50 states and around the world.
Donald E. Brandt - Senior Vice President - Finance and Accounting To provide quality service at an affordable price, while providing our stockholders with a fair return on their investment, Union Electric must utilize its economic resources efficiently. Finance and Accounting is responsible for controlling these resources to ensure that these goals become a reality and for communicat-ing our progress to stockholders and management.
Our capital restructuring program is now in its fifth
- +
ps year. We have increased our equity ratio, and signifi-h.
g"grp h s & # C r-
, slj0 cantly lowered the cost of our senior securities. We plan to build on this past achievement and to fully L :e [] { jg jGJ8 develop opportunities in the capital markets which will strengthen the Company's fmancial condition.
In late 1988, both Moody's Investors Service and Standard & Poor's recognized our improving financial condition with upgraded credit ratings. Standard &
4' Poor's acknowledged, "In large measure, the improve-
. ment can be traced to an aggressive internal cost-cutting program.. " Through a commitment to cost s- d control and productivity improvement, we will en-
- deavor to provide a solid base for earnings and b dividend growth into the next century.
l b With our ability to accessfunds Y ~%~
on a global basis, sophisticated **wn '
forecasting models facilitate cash y m ,g. "[, """
management.
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l ADMINISTRATIVE SERVICES
' < < The Quality improvement Process is a Company-wide effort V Every new employer receives W*% that gives employees systematic primary training conducted by methods for identyying work fluman Resources. The Video problems and improving the way E-;'
Communications staffproduces the jobs are done. The East St.
training tapes, along with our Louis QlP team developed this employee TV news program and new sleeve device; it simplifies other video presentations. connecting aerial baskets to truck arms.
i I
V To improve material handling, this new cable reelforklift has been '
customized so it can transport 10-ton reels within the storage yard of the underground supply warehouse.
uw
<] Corporate Planning develops strategies to meetfuture energy a:, p ,
requirements. Theyforecast
" electricity sales and peak demand, J
coordinate power generation
,y planning, and design rate structu res.
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14
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> Union Electric operates a fleet -
of more than :),000 specialized motor vehicles. Vehicle mainte- ,' $ " -
nonce employees perform around- ,
the-clock maintenance on aerial .. o basket trucks, utility vans, cable-burying trenchers, equipment t trailers, etc. ,.
Charles W. MucIler -Senior Vice President - Administrative Services _
Administrative Services, Union Electric's overall support organization, operates in three broad areas: ,
personnel, logistical support, and planning.
Quality employees are essential to meeting the Com- e pany's service responsibility. To develop such employ-l ees, we provide effective training, motivation, and our N
Quality improvement Process. 3 ..
Our Supply Service group manages all our diverse real estate, our vehicles, warehousing, and the purchasing Q
P .y function. M '% .
~
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Our Corporate Planning organization identifies future S'3
. 9 energy requirements and the methods we'll use to .7 -
Ed meet them. Meanwhile, we also *
- j
- concentrate on controlling the , ,
P"WM $
growth of peak loads. This ,
minimizes the need for major y ,
investments in new gener- -
~
ating capacity. ,- -
,~ -
& s b The hec:. rters office ex-pansion, t: ~mpleted in mid-1989, will c. olidate more em-ployees in a sungle location and eliminate office rentals elsewhere.
I 15
RESPONSIBILITYFOR FINANCIAL STATEMENTS The management of Union Electric Company is responsible for the information and repre-sentations contained in the financial statements and in other sections of this Annual Report.
The financial statements have been prepared in conformity with generally accepted account- 4 ing principles. Other information included in this report is consistent, where applicable, with the financial statements.
The Company maintains a system of internal accounting controls designed to provide reason-able assurance as to the integrity of the financial records and the protection of assets. Quali-fled personnel are selected and an organization structure is maintained that provides for appropriate functional responsibility.
Written policies and procedures have been developed and are revised as necessary. The Company maintains and supports an extensive program of internal audits with appropriate I management follow up.
'lhe Board of Directors, through its Auditing Committee comprised of outside directors,is responsible for ensuring that both management and the independent accountants fulfill their respective responsibilities relative to the financial statements. Moreover, the independent accountants have full and free access to meet with the Auditing Committee, with or without management present, to discuss auditing or financial reporting matters.
REPORT OFINDEPENDENTACCOUNTANTS One Boatmen's Plaza Telephone 314 425-0500 St Lows MO 63101 Price 1Ihierhouse To the Stockholders and Board of February 3,1989 Directors of Union Electric Company In our opinion, the accompanying balance sheet and the related statements of income, long-term debt, preferred stock, retained earnings, other paid-in capital, and cash flows present fairly, in all material respects, the financial position of Union Electric Company at December 31,1988 and 1987, and the results ofits operations and its cash flows for each of the three years in the period ended December 31,1988, in conformity with generally accepted account-ing principles. These financial statements are the responsibility of the Company's manage-ment; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
.Al D WMo_-
16 l
- _ - - - - _ _ - - _ _ - - I
STATEMENT OFINCOME Union Electsic Company
- (Ihousands of Dollars Except Shares and Per Share Amounts)
Year 1988 ' Year 1987 Year 1986 6 Operating Revenues (*):
Electric $1,938,296 $1,869,477 $1,722,680 .
Gas 87,263 73,518 80,895 I Other 3,548 3,416 3,607 Total operating revenues 2,029,107 1,946,411 1,807,182 Operating Expenses:
,. Operations Fuel and purchased power 422,297 419,272 351,854 Other 335,073- 327,949 334,275 757,370 747,221 686,129 Maintenance 162,977'. 158,908 148,173 Depreciation and nuclear decommissioning 195,684 176,703 179,412 Amortization of phase-in plans deferred costs 39,703 4,337 269 Income taxes 194,211 180,514 92,030 Other taxes (*) 195,008 -190,274 181,559 Total operating expenses 1,544,953 1,457,957 1,287,572 Operating Income 484,154 488,454 519,610
. Other Income and Deductions:
Callaway rate phase-in plans 2,408 92,791 59,861 -
Deferred costs disallowed - (23,169) -
Allowance for equity funds used during construction 2,002 5,994 3,804 Miscellaneous, net (10,648) (15,714) 3,947 Total other income and deductions, net (6,238) 59,902 67,612 Income Before Interest Charges 477,916 548,356 587,222 Interest Charges:
Interest on debt 199,241 228,961 247,409 Allowance for borrowed funds used during construction (12,883) (14,483) (12,008)
Net interest charges 186,358 214,478 235,401
- l. Net Income 291,558 333,878 351,821 Preferred Stock Dividends 30,425 36,522 49,245 Earnings on Common Stock $ 261,133 - $ 297,356 $ 302,576
(*) Includes license and franchise taxes of S95,608,000, S91,490,000, and $85,494,000 for the years 1988,1987, and 1986, respectively.
L l
Earnings per Share of Common Stock (based on average shares outstanding) $2.56 $2.91 $2.96
) I t Dividends per Share of Common Stock S1.94 $1.92 $1.86 l
! Average Number of Common Shares Outstanding 102,123,834 102,123,834 102,123,834 j
See Notes to Financial Statements on pages 25 through 30.
l 17
BAIANCE SHEET - Union Electric Company -
Ghousands of Dollars)
Assets December 31,1988 December 31,1987 Property and Plant, at original cost: o Electric $6,773,814 $6,644,756 !
Gas 106,110 99,109 .
Other 15,009- 14,482 6,894,933 - 6,758,347 Irss accumulated depreciation and amortization 1,974,391 1,735,720 l
4,920,542 5,022,627 l
Construction work in progress: ,
Nuclear fuelin process 173,870 140,439 'l Settlement of uranium litigation (11,297) ~ (14,869) !
Other 68,749 52,859 ;
Total property and plant, net 5,151,864 '5,201,056 i
j Deferred Charges and Other Assets Callaway Unit No. 2 construction abandonment 58,283' 60,543 L Callaway rate phase-in plans 133,290 199,508 ;
Unamortized debt expense 27,611 29,471 1 Nuclear decommissioning trust fund 13,223 9,084 i Other 15,906 13,215 Total deferred charges and other assets 248,313 311,821 i
l l l
l Current Assets: i Cash 827 3,940 j Deposits for payment of interest and other deposits 2,738 2,082 i Accounts receivable - trade (less allowance for doubtml accounts of $5,123 and $3,039, at respective dates) 151,765 149,866 j Unbilled revenue 96,768 86,258 j Other accounts and notes receivable 11,053 12,755 ;
Materials and supplies, at average cost -
Fossilfuel 65,376 78,961 Construction and maintenance 87,619 100,225 Other 10,923 10,847 Total current assets 427,069 444,934 I
I Total Assets $5,827,246 $5,957,811 %
1 See Notes to Financial Statements on pages 25 through 30. ,
l l
l 18 f
_ _ -__ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ . . _ _ _ _ _ _ _ J
y STATEMENT OFINCOME ' Union Electric Company
' Ghousands of Dollars Except Shares and Per Share Amounts)
L Year 1988 Year 1987 : Year 1966 h, Operating Revenues (*):
Electric $1,938,296 $1,869,477 $1,722,680 Gas 87,263 73,518 80,895 .
Other :3,548 3,416 3,607-Total operating revenues 2,029,107 1,946,411 1,807,182 Operating Expenses:
~
- i. Operations l-Fuel and purchased power . 422,297 419,272 351,854 Other 335,073 327,949 334,275 757,370 747,221 686,129 Maintenance 162,977 158,908 148,173 Depreciation and nuclear decommissioning 195,684 176,703 179,412 Amortization of phase-in plans deferred costs 39,703 -4,337 269 Income taxes 194,211 ;180,514 92,030 Other taxes (*) 195,008 190,274 181,559 Total operating expenses 1,544,953 1,457,957 .1,287,572 -
Operating Income 484,154' 488,454' 519,610 Other Income and Deductions:
Callaway rate phase-in plans 2,408 92,791 59,861 Deferred costs disallowed -
(23,169) -
Mlowance for equity funds used during construction 2,002 5,994 3,804 Miscellaneous, net (10,648) (15,714) 3,947 Total other income and deductions, net (6,238) 59,902 67,612 Income Before Interest Chames 477,916 548,356 587,222 Interest Chages:
Interest on debt 199,241 228,961 247,409
' Allowance for borrowed funds used during construction (12,883) (14,483) (12,008)
Net interest chages 186,358 214,478- 235,401 Nct Income 291,558 333,878 351,821 Preferred Stock Dividends 30,425 36,522 49,245 Earnings on Common Stock 6 261,133 $ 297,356 $ 302,576
(*) includes license and franchise taxes of 895,608,000, S91,490,000, and $85,494,000 for the years 1988,1987, and 1986, respectively.
Earnings per Share of Common Stock (based on average shares outstanding) $2.56 $2.91 $2.96 i Dividends per Share of Common Stock $ 1.94 $1.92 $1.86 Average Number of Common Shares Outstanding 102,123,834 102,123,834 102,123,834 See Notes to Financial Statements on pages 25 through 30.
17
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . - - -. - .J
l Cgpital and Liabilities December 31,1988 December 31,1987 i Capitalization:
Common stock, S5 par value, authorized 150,000,000 shares -
outstanding 102,123,834 shares (excluding 42,990 shares I
at par value in treasury) $ 510,619 $ 510,619 Other paid-in capital, principally premium on common stock (see accompanying statement) 716,071 716,071 ,
Retained earnings (see accompanying statement) 668,670 610,466 !
Totalcommon stockholders' equity 1,895,360 1,837,156 f
I Preference stock, $1 par value, authorized 7,500,000 shares -
none outstanding Preferred stock not subject to mandatory redemption j (see accompanying statement) 279,784 354,784 ;
Preferred stock subject to mandatory redemption (see accompanying statement) 60,832 64,608 long-term debt (see accompanying statement) 2,196,129 2,366,005 !
) Unamortized discount and premium on debt (7,515) (8,390)
Total capitalization 4,424,590 4,614,163 Accumulated Deferred Taxes on Income 657,965 621,451 Accumulated Deferred Investment Tax Credits 214,964 187,977 Accumulated Provision for Nuclear Decommissioning 14,093 9,954 Construction Commitments and Contingencies (Notes 10,11, and 12)
Current Liabilities:
Current maturity of long-term debt 66,870 101,634 Accounts payable 157,490 161,094 Wages payable 33,425 30,130 Bank loans 38,500 33,000 Commercial paper 20,000 -
Income taxes accrued 40,082 34.216 Other taxes accrued 18,365 17,931 Interest accrued 70,136 78,459 Dividends declared 6,155 8,477 Other 64,611 59,325
? Total current liabilities 515,634 524,266 5
Total Capital and Liabilities $5,827,246 $5,957,811 l
I
~
19 i __ __
., . .~
LONG-TERM DEBT Union Electric Company Ghousands of Dollars)
December 31,1988 December 31,1987 First Mortgage Bonds - note (a) 4%% Series due 1990 'S. 50,000 $ 50,000 4%% Series due 1991 30,000 30,000 Series due 1991 2,000 2,000 {,
5%
5%% Series due 1991 3,500 3,500 '
15 %% Series due 1991 - note (b) .- 150,000 4 %% Series due 1992 6,000.. 6,000' Series due 1993 '30,000 30,000 4%%
Series due 1994 - note (c) 2,800 3,220 f
10%% ';
4%% Series due 1995 35,000' 35,000 4%% Series due 1995 3,000 3,000 5%% Series due 1996 30,000 30,000 5%% Series due 1996 5,000 3,000 8%% Series due 1996 10,000 10,000-8%% Series due 1996 100,000 100,000 5%% Series due 1997 40,000- 40,000 5%% Series due 1997 5,000 5,000 7% Series due 1998 50,000 50,000 7.95% Series due 1998 4,000 4,000 ~
7%% Series due 1999 35,000 35,000 8% Series due 1999 5,000 5,000 8%% Series due 1999 40,000 40,000-9.95% Series due 1999 - note (c) 71,440 78,580 9% - Series due 200(, 60,000 60,000 7%% Series due 2001 50,000 50,000 7%% Series due 2001 50,000 50,000 8%% Series due 2001 60,000 60,000 9%% Series due 2001 - note (c) 3,600 3,900 9%% Series due 2001 - note (c) 2,086 2,260 9%% Series due 2001 - note (c) 7,200 7,800 8%% Series due 2002 - note (c) 3,900 4,200 7%% Series due 2003 7,000 7,000 8%% Series due 2004 .70,000 70,000 10% Series due 2004 - note (c) 7,500 8,000 10 %% Series due 2005 70,000 70,000 5.80% Series due 1992 to 2005- note (d) 27,085 27,085 8%% Sedes due 2006 70,000 70,000 8%% Series due 2007 60,000 60,000 9.35% Series due 2008 - note (c) 52,250 55,000 9.25-9.625% Series due 2000 to 2010 - note (d) 60,000 69,000 13% Series due 2013 - note (b) - 14,351 9%% Series due 2016 100,000 100,000 2)
I p m.,asummenmemam %,.w. mm m m.,.4,,w. v ~mr,mw m m m u.o u ..o.m ...: - .
.~...- s : . .
1 i
December 31,1988 December 31,1987 1
U_nsecured loans -
- Foreign credit agreement, due 1991 - note (e) $ 150,000 $ 150,000 ;
Domestic credit agreement, due 1991 - note (f) 275,000 275,000 Unsecured Notes -
6% Due to 1992 1,400 1,505 i
l Missouri Environmental Improvement -
Revenue borAs,5.6(k6.20% Series due 1989 to 2004 16,250 16,500 1984 Series A due 2014 -note (g) 80,000 80,000 1984 Series B due 2014-note (h) 80,000 80,000 1984 Series C due 2014 - note (i) 47,500 47,500 1985 Series A due 2015- note 0) 70,000 70,000 1985 Series B due 2015-not 0) 56,500 56,500 Nuclear Fuel lease - note (k) 101,118 94,104 Ieng-Term Debt $2,196,129 $2,366,005 (a) At December 31,1988, substantially all of.the property and plant was mortgaged under, and subject to tiens of, the respective indentures pursuant to which the bonds were issued.
(b) ne Company redeemed the 15 %% Series on February 1,1988 at a price of 100 percent of the principal amount, and redeemed the 13% Series on March 1,1988 at a price of 110.30 percent of the principal amount.
(c) To be retired by sinking fund - 10 %% Series to 1993; 9.95% Series to 1998; 9 %% Series and each 9 %% Series to 2000; 8 %% Series to 2001; 10% Series to 2003; and 9.35% Series from 1989 to 2007, (d) Environmental Improvement Series.
(e) Credit agreement with certain foreign banks which permits the Company to borrow up to $150 million in term loans, on which interest rates will vary depending on market conditions and the Company's selection of various options under the agreement. At December 31,1988, such borrowings were outstanding at an average in'erest rate of 9.33%, based on the london Interbank Offered Rate (LIBOR).
(O Credit ac. eement with certain domestic banks which permits the Company to borrow up to $275 million, on which interest rates will vary oepending on market conditions and the Company's selection of various options under the agreement. At December 31, 1988, such borrowings were outstanding at an average interest rate of 9.15%, based on competitive bid rates.
(g) Adjustable. fixed rate. interest rate at 5.40% per annum through May 31,1989; thereafter, interest rates will depend on market conditions and the Company's option to select an adjusted rate for each annual period or a fixed rate until maturity.
(h) Adjustable-fixed rate, interest rate at 5.35% per annum through May 31,1989; thereafter, interest rates will depend on market conditions and the Company's option to select an adjusted rate for each annual period or a fixed rate until maturity.
(i) Adjustable-fixed rate, interest rate at 5 %% per annum through February 28,1989; thereafter, interest rates will depend on market conditions and the Company's option to select an adjusted rate for t ach annual period or a fixed rate until maturity.
(j) Interest rates, and the periods during which such rates apply, vary depending on the Company's selection of certain defined rate modes. De average interest rates at F ecember 31,1988, for such Series A and Series B bonds were 6.12% and 6.14%, respectively.
(k) At December 31,1988 and 1987, $54 million in each of the years is included under current maturity of long-term debt.
The Company financed an additional S30 million under the Fuel lease in February 1989.
)
See Notes to Financial Statements on pages 2; through 30.
21
PREFERRED STOCK Union Electric Company
. (Thousands of Dollars)
December 31,1988 December 31,1987 Preferred Stock Not Subject to Mandatory Redemption:
Preferred stock outstanding without par value (entitled to cumulative dividends)-note (a)
Stated value of $100 per share-
$7.44 Series - 550,000 shares S 55,000 $ 55,000 .
$6.40 Series - 300,000 shares 30,000 30,000
$5.50 Series A- 14,000 shares 1,400 1,400
$5.50 Series B- 3,000 shares 300 300
$4.75 Series - 20,000 shares 2,000 2,000
$4.56 Series - 200,000 shares 20,000 20,000
$4.50 Series - 213,595 shares 21,359 21,359
$4.30 Series - 40,000 shares 4,000 4,000
$4.00 Series - 150,000 shares 15,000 15,000
$3.70 Series - 40,000 shares 4,000 4,000
$3.50 Series - 130,000 shares 13,000 13,000 Stated vabe of $97.50 per share -
% GA Series of 1971 - 425,000 shares 41,437 41,437 Stated value of $92.25 per share -
$8.00 Series- 350,000 shares 32,288 32,288 Stated value of $25 per share-
$2.98 Series- 3,000,000 shares - note (b) - 75,000
_ $2.125 Series - 1,600,000 shares - note (c) 40,000 40,000 Total Preferred Stock Not Subject to Mandatory Redemption $279.784 $354,784 Preferred Stock Subject to Mandatory Redemption:
Preferred stock outstanding without par value (entitled to cumulative dividends) - note (a)
Stated value of $J)0 per share- >
$6.30 Series - 3,320 and 8,580 shares at respective dates, due to 2020 - note (d) $ 832 $ 858 i Stated value of $50 per share-
$4.60 Series - 1,200,000 and 1,275,000 shares at respective dates, due to 2004 - note (e) 60,000 63,750
' Total Preferred Stock Subject to Mandatory Redemption $60,832 $64,608 (a) Authorized Union Ekrtric Company total preferred stock - 25.000.000 shares.
(b) In 1988, the Company completed early redemption of the 82.98 Series at $26.99 per share.
(c) The Company plans to redeem this Series, in its entirety, on February 15,1989, at $25.75 per share.
(d) The Company is required to retire 260 shares at $100 per share on June 1 of each year. ,
(e) The Company is required to retire 75,000 shares at $50 per share on August 15 of each year. q See Notes to Financial Statements on pages 25 through 30.
22
STATEMENTOFRETAINED EARNINGS Union Electric Company Ghousands of Dollars)
Year 1988 ' Year 1987 Year 1986 Balance at Beginning of Period $610,466 8515,312 S402,589 Add:
Net income 291,558 333,878 351,821 902,024 849,190 754,410 I) educt:
) Preferred stock dividends
- 29,264 34,679 . 49,148 Common stock cash dividends - $1.94, $1.92, and $1.86 per share, respectively 198,120 196,078 - 189,950 Premium paid on preferred stock reacquired 5,970 7,967 -
233,354 238,724 239,098 (Under mortgage indentures as amended, free and unrestricted retained earnings at December 31,1988 amounted to $611,555)
Balance at Close of Period $668,670 8610,466 $515,312
- Preferred stock dividends include dividends declared, applicable to subsequent periods.
m . x c ay e...:.u~;.. . .,:
STATEMENT OF OTHER PAID-IN CAPITAL l Ohousands of Dollars) -
Year 1988 Year 1987 Year 1986 Balance at Beginning of Period $716,071 8717,258 8717,258 j Premium paid on preferred stock reacquired - (1,171) - I
)
Other -
(16) -
Balance at Close of Period 8716,071 8716,071 $717,258 See Notes to Financial Statements on pages 25 through 30.
23
STATEMENTOF CASHFLOWS Union Electric Company I Ghousands of Dollars)
Year 1988 Year 1987 Year 1986 Cash Flows From Operations:
Net income $ 291,558 $ 333,878 $ 351,821 Items not requiring cssh -
Depreciation and amortization 231,906 177,559 177,219 Amortization of uranium litigation settlement (7,510) (18,571) (63,143)
Amortization of nuclear fuel 68,656 47,142 57,685 (
Allowance for funds used during construction (14,885) (20,477) (15,812)
Deferred taxes on income, net 36,514 69,072 17,337 Deferred investment tax credits, net 26,987 51,758 47,501 Callaway rate phase-in plans (2,408) (92,791) (59,861)
Deferred costs disallowed - 23,169 -
Contract' acquisition expense 28,845 - -
Changesin assets and liabilities:
Receivables, net (10,707) (28,410) (4,083)
Materials and supplies 26,191 18,732 (15,693)
Accounts and wages payable (309) 18,077 4,025 Cancellation charges - (2,337) (21,580)
Taxes accrued 6,300 (16,631) 9,765 Interest and dividends accrued or declared (10,645) (6,601) (1,167)
Other, net 9,404 17,232 4,801 Net cash provided by operations 679,897 570,801 488,815 Cash Flows From Invesdng:
Construction expenditures (174,903) (150,698) (145,056)
Allowance for funds used during construction 14,885 20,477 15,812 Nuclear fuel expenditures (33,526) (41,738) (87,765)
Settiement of uranium litigation 3,938 6,332 8,201 Net cash used in investing activities (189,606) (165,627) (208,808)
Cash Flows From Financing:
Dividends on preferred and common stock (227,384) (230,757) (239,098)
Redemptions -
Nuclear fuellease (108,753) (137,802) (136,645) long-term debt (253,368) (514,902) (163,191)
Preferred stock (84,746) (109,914) (7,776)
Issuances -
Nuclear fuellease 116,003 160,604 37,282 Short-term debt 25,500 3,000 30,000 long-term debt 40,000 425,000 200,000 Net cash used in financing activities (492,748) (404,771) (279,428) j Net Change in Cash and Cash Equivalents (2,457) 403 579 Cash and Cash Equivalents at beginning of year 6,022 5.619 5,040 Cash and Cash Equivalents at end of year S 3,565 S 6,022 8 5,619 See Notes to Financial Statements on pages 25 through 30.
24
I NOTES TO FINANCIAL STATEMENTS Union Electric Company i
' Note 1 - Summary of Accounting Policies SFAS 96 in 1990. The adoption of SFAS 96 is not expected to i-He Comoany is regulated by the Missouri Public Service have a material effect on the Company's Gnancial position or
}.
Commission, Illinois Commerce Commission, Iowa State results of operations.
3 Utilities Board, and the Federal Energy Regulatory Commis-All wance for Funds Used During Construction sion. The accounting policies of the Company are in accor.
Allowance for funds used during construction (AFC) is a j dance with the rate-making practices of the regulatory au.
utility industry accounting practice whereby the cost of bor-T thorities having jurisdiction and, as such, conform to gener.
rowed funds and the cost of equity funds (preferred and l ally accepted accounting principles as applied to regulated common stockholders' equity) applicable to the Company's public utilities. A description of the Company's significant ,
construction program are capitalized as a cost of construc-accounting policies follows.
tion. His accounting practice is intended to offset the effect Property and Plant on earnings of the cost of financing current construction, and
%e cost of additions to and betterments of units of property results in treating such financing costs in the same manner and plant is capitalized. Cost includes labor, material, appli- as construction charges for labor and materials.
cable taxes, and overheads, plus an allowance for funds used Under accepted rate-mak.mg pract. ice, cash recovery of AFC, during construction. Maintenance expenditures and the re- as well as other construction costs, occurs when completed newal ofitems not considered units of property are charged to projects are placed m service and reflected m customer rates.
income as incurred. When units of depreciable property are retired, the original cost and removal cost, less salvage, are AFC rates are established by the Company consistent with I charged to accumulated depreciation. the methodology prescribed by the Federal Energy Regula-tory Commission. Average annual AFC rates were 8.7% in Depreciation 1988,10.3% in 1987, and 10.4% in 1986.
Depreciation is provided over the estimated lives of the various classes of depreciable property by applying compos. Callaway Rate Phase-In Plans ite rates on a straight-line basis. %e provision for deprecia. Tne Calla:ry rate phase-in plans effective in 1985 as a result tion in 1988 is eqsdent to approximately 3.0% of the average of regulatory commission orders provide for (1) partial defer-depreciable cost (2 M in 1987 and 2.9%in 1986). (As permit- rM of a cash recovery of costs related to the Callaway plant
' ted for rate-making purposes, Callaway plant depreciation during the early years of the plans with recovery of such was computed on a unit-of-production basis through March deferrals in the later years of the plans, (2) three-year amor-1988, and on a straight-line basis thereafter.) tization of certain Callaway-related accumulated deferred income taxe ,, and (3) two-year amortization of certain pro-Nuclear Fuel ceeds from the Company's settlement of uranium litigation The cost of nuclear fuel is amortized to fuel expense on a unit- with Westinghouse. See Note 12 regarding;an order issued by of-production basis. A provision for spent fuel disposal costs the Missouri Public Service Commission in December 1987.
is charged to expense based on kilowatt-hours generated.
The amount of costs for which cash recovery is deferred Income Taxes under the plans is recognized as income currently in the Deferred income taxes are provided for timing differences Statement of Income. Such noncash income, net of taxes, between book and taxable income as permitted for rate- amounted to 7%,26%, and 20% of earnings on common stock making purposes. Investment tax credits utilized are de- for 1988,1987, and 1986, respectively.
ferred and amortized over the usefullives of the properties to which they relate.
Unbilled Revenue The Company records on its books the estimated amount of in December 1987, the Financial Accounting Standards accrued, but unbilled, revenue and also the accrued liability Board issued Statement of Financial Accounting Standards for the related taxes.
No. 96, " Accounting for Income Taxes" (SFAS 96). SFAS 96 requires an asset and liability approach for financial account.
Financial Statement Reclassification Certain reclassifications have been made to prior years'finan- ,
ing and reporting forincome taxes. Under current account. ei i statements to confonn to the 1988 presentation. I ing standards the Company is permitted and intends to adopt
)
25
l NOTES TO FINANCIAL STATEMENTS (continued > Union Electric Company Note 2 - Income Taxes making purposes. At December 31',1988, the cumulative net Total income tax expense for 1988 resulted in an effective tax amount of income tax timing differences for which deferred -
l rate of 38% on earnings before income taxes (37% in 1987 and income taxes have not been provided was $1,1 billion.
I 21% in 1986). He principal reasons such rates differ from the statutory Federal rate are as follows: Note 3 - Preferred Stock j During the three years ended December 31,1988, preferred 1988 1987 1986 stock, without par value, was retired or redeemed as follows:
Statutory Federal income tax rate 34% 40% 46% in 1988, the Company redeemed 3,000,000 shares, $2,98 Se-l Increases (Decreases) fmm: ries; in 1987, the Company redeemed 880,000 shares, $2.72 a$a Series and 3,000,000 shares, $4.00 Series of 1982; and, in 1986, l te p ba [lans-l Other income 3 (5) (6) the Company redeemed 160,000 shares, $2.72 Senes. He .
Amortization of prior years' Company retired 75,000 shares, $4.60 Series and 260 shares, tax deferrals (1) (6) (23) $6.30 Series in each of the years 1988,1987, and 1986, Amortization of uranium litigation credits -
(1) (3)
Miscellaneous, net (4) 3 (1) Preferred Stock Eventual Effective Federal income tax rate 38% 37% 21%
Redemption Prices Cunent Minimum (Per Share) (Per Share)
$7.44 Series $101.00 $101.00 Income tax expense components for the years shown are as $6.40 Series 101.50 101.50 follows (in thousands): $5.50 Series A 110.00 110.00 -
1988 1987 1986 $5.50 Senes B 103.50 103.50 Taxes cunently payable $4.75 Series 102.176 102.176 (principally Federal):' $4.56 Series 102.47 102.47 Included in operating expenses $128,139 $ 91,585 $ 35,595 $4.50 Series 110.00 110.00 (a) included in otherincome- $4.30 Series 105.00 105.00 Miscellaneous, net (7,840) (9,149) ' (13,762)
$4.00 Series 105.625 105.625 Deferred taxes $3.70 Series 104.75 104.75 (principally Federal): $3.50 Series 110.00 110.00 .I included in operating expenses - $8.00 Series of 1971 98.50 98.50 Liberalized depreciation 65,845 77,078 95,835 $8.00 Series 96.25 93.25 Repair allowance 3,204 4,927 5,573
$2.125 Series (b) 25.75 ' 25.25 Allowance for borrowed funds
$6.30 Series (c) 100.00 100.00 l used during construction 3,036 5,493 4.631 Unbilled revenue (10,655) (12,648) -
$4.60 Series (d) 54.60 (e) 50.50 Other (primarily capitalized costs) 137 2,764 10,518 Callaway rate phase-in plans (a) In the event of voluntary liquidation, S105.50.
amortization of prior years' (b)Re Company has announced plans to redeem, on February 15,1989, deferrals (3,527) (34,337) (107.901) the 1.6 million outstanding shares at a price of $25.75 per share, the Provisions deferred in prior years (18,204) (5,148) (5,164) redemption price at such date.
Other (7,269) (6,679) -
(c) He Company is required to retire 260 shares at $100 per share on included in other income- June 1 of each year.
Callaway rate phase-in plans - 15,533 -
(d)ne Company is required to retire 75,000 shares at $50 per share on Contract acquisition expense (13,912) - -
August 15 of each year.
liber i d pree t on 7,204 9,440 13,845 o ra on Deferred investment tax credits, net included in operating expenses 33,505 57,479 52,943 4, gg Total income tax expense $ 179,663 $ 196,338 $ 92,113 Provisions During each of the five years 1989 through 1993, the Company Deferred income taxes are provided for differences between will be required to redeem $3,776,000 of the preferred stock 4
book and taxable income to the extent permitted for rate. outstanding at December 31,1988, t
i 26 <
l l'
Note 5 - Debt Retirement Provisions Note 7 - Short-Term Borrowings During the five years from December 31,1988, the amounts of Short-tenn borrowings of the Company consist of bank loans
~
debt maturities totaling $666,956,000 are: $66,870,000 in 1989; (maturities not in excess of 270 days) and commercial paper
$62,539,000 in 1990; $473,289,000 in 1991; $20,684,000 in 1992; (maturities generally within 10 45 days). Information relative and $43,574,000 in 1993. ' Amounts for years subsequent to to short-term borrowings is as follows (in thousands except 1989 do not include nuclear fuel lease payments since the rates):
amounts of such payments are not currently determinable. 1988 1987 1986 Debt retirement provisions contained in most mortgage "*[" """ ** ,1,***jng ~ 8 38,500 833.000 830.000 bond indentures of the Company require, subject to certain al- composite interest rate 10.4% 7.6% 7.5%
ternatives, the redemption annually of 1% of the principal amount (as defined) of each series of bonds. h o, substantially commercial paper at year end -
allinstances, as permitted by the indentures, the Company has Am unt utstanding 8 20,000 - -
- been following the practice of pledging property additions in conwsmntesuaw m - -
lieu of such redemptions. Maximum aggregate short-term bonwings at any month end Note 6 - Nuclear Fuel Imase dunng the year $142,000 $84.000 $94.000 The Company has a lease agreement which provides for the financing of the costs of up to $200 million of the Company's Average daily short-term borrowings nuclear fuel. Pursuant to the terms of the lease, the Company outstanding during the year -
has assigned to the lessor certain contracts for purchase of Aggregam amount 8 88,255 $47,794 $45,130 nuclear fuel. The lessor obtains, through the issuance of Eghed conesiw intmsuate m W 73 commercial paper or from direct loans under a committed revolving credit agreement from commercial banks, the nec. He above weighted composite interest rates were calculated essary funds to purchase the fuel and make interest payments by dividing the applicable interest expense for the year by the l when due. average daily short-term borrowings shown above.
The Company is obligated to reimburse the lessor for all ex. At December 31,1988, the Company had bank lines of credit penditures for nuclear fuel, interest, and related costs. Obliga. aggregating $212 million ($173.5 million of which were un-tions under this lease become due as the nuclear fuel is utilized used at such date) which make available interim financing at at the Company's Callaway nuclear plant. During 1988, the various rates of interest, not to exceed prime, based on the Company reimbursed the lessor $67.9 million and $50 million London Interbank Offered Rate (IlBOR), the bank certificate for fuel repurchased from lessor. During 1987, the Company of deposit rate, or other options, and in support of which the l Company has both wntten and unwritten agreeraents w,th i its reimbursed the lessor $58.6 million and $85 million for fuei re.
purchased from lessor. During 1986, the Company reim. lending banks to pay annual fees ranging from 0.125% to bursed the lessor $64 million and $80 million for fuel repur. 0.25%. These lines of credit are renewable annually at various chased from lessor. dates throughout the year.
The Company has capitalized the cost, including certain Note 8 - Settlement of Uranium utigation interest costs, of the leased nuclear fuel and has recorded the In 1979, the Company and Westinghouse Electric Corpora-related lease obligation. During the years 1988,1987,and tion settled the Company's suit to require Westinghouse to 1986, the total interest charges under the lease were $17.0 fulfillits contractual obligation to deliver 10 million pounds million, $15.3 million, and $16.0 million (based on average of uranium U3 0, to the Company.ne settlement provides for interest rates of 82%,7.6%, and 8.0%, respectively) of which cash and discounts on uranium, goods, and services over the
$7.9 million, $9.4 million, and $8.9 million, respectively, were period 1980-2010. In accordance with rate orders of regula-capitalized. tory authorities, settlement proceeds are being amortized as a reduction of fuel expense.
27 1
1 NOTES TO FINANCIAL STATEMENTS (continued) Union Electric Company j Note 9 - Employee Retirement Plan and Related in addition to providing pension benefits, the Company pro-Benefits vides certain health care and life insurance benefits for re-ne Company has a non-contributory, defined-benefit retire. tired employees. Substantially all of the Company's employ-ment plan covering substantially all ofits employees. Benefits ees may become eligible for those benefits if they reach are based on years of service and the employees' compensa. retirement age while working for the Company. The costs of tion during years of employment. The Company's funding retiree health care and life insurance benefits are recognized t
policy is to contribute annually at least the minimum amount on the basis of claims paid. Such costs totaled $7 million, $6 required by government funding standards, but not more than million, and $5 million for 1988,1987, and 1986, respectively. l that which can be dedu ited for Federal income tax purposes. Note 10 - Construction Commitments Plan assets consist pnneipally of common stocks and fixed He Company is engaged in a construction program under income securities (including $6 milh,on of Company securities which expenditures averaging approximately S200 million at December 31,1988)* are anticipated during each of the next five years.
Pension costs for the years 1988,1987, and 1986 were $15 Note 11 - Contingencies milhon, $15 milhon, and S11 milhon, respectively, of which ap- In late 1981, the Company canceled construction of Unit proximately 17% in each year was charged to construct,on i ac- No. 2 at its Callaway plant. At December 31,1988, $58 million counts. ($34 million net of tax) is recorded as an asset representing
%e plan's funded status follows (in millions): the present value of future cash flows expected to be received At December 31, as recovery for the cost of Callaway Unit No. 2.
In 1983, the Missouri Public Service Commission (MoPSC)
Actuarial present v'due of benefit obligations:
Vested benefit obligation ruled that recovery of Callaway Unit No. 2 costs applicable to I 8(329) $(324) $(301) i the Missourijurisdiction is barred by a state statute prohibit-l Accumulated benefit obligation 8(353) $(359) $(338) ing recovery of costs of a facility before it is fully operational and used for seivice.%e Company appealed this ruling and i bligation for serv.ic in 1985 the Missouri Supreme Court ruled that the statutory P'[.
r r "a te 0) ) 22) ban does not apply to canceled plants and remanded the issue Plan assets at fair value 503 448 433 Excess of plan assets over projected benefit to the MoPSC for further proceedings. In March 1986, the obligation 83 3 11 MoPSC again denied recovery.The Company appealed this Unrecognized net (gain) or loss (91) (11) 8 second denial to the Missouri Circuit Court and in December Prior service cost not yet recognized in net 1987, the Circuit Court affirmed the' MoPSC's denial. The periodse pension cost 28 26 -
Unrecognized net assets at transition (15) (161 (17) Company appealed to the Missoun Court of Appeals and on i Prepaid pension cost 8 5S 2 $~~l November 1,1988 the Court of Appeals affirmed th e MoPSC's decision. He Company has filed for a transfer of the case to Pension costs include the following components the Missouri Supreme Court, where that request is now (m milhons): pending. At December 31,1988, $52 million ($32 million net i 1988 1987 M86 of tax) of the recorded asset related to Callaway Unit No. 2 is !
sen ce benefits earned during applicable to the Missourijurisdiction. Recovery of Callaway l 13 12 Interest cost on projected benefit obligation 35 31 29 Unit No. 2 costs applicable to other regulatoryjurisdictions is Actual return on plan assets (66) (21) (46) presently reflected in rates. In the opinion of management, )
Net amortization and deferral 33 (9) 16 unrecovered amounts, if any, would not be material to the l Pension cost 8 15 S 15 S 11 financial position of the Company. l i
i Re Company's insurance coverage for its Callaway plant is i l For determining the actuarial present value of the projected as follows: I benefit obligation in 1988,1987, and 1986, the weighted aver-age discount rates were 9%,8%, and 7.5%, respectively. The Property insurance coverage of $500 million pro-rate of increase in future compensation was 6% and the ex. vided by American Nuclear Insurers (ANI) and pected long term rate of return on plan assets was 7.5% in each Mutual Atomic Energy liability Underwriters year. (MAELU).
(
i i
28
Excess property insurance of $825 million pro- pate a serious nuclear incident at Callaway plant, if such an
} vided by Nuclear Electric Insurance Limited incident did occur, it could have a material but presently un-(NEIL), a mutual insurer established by the utility determinable adverse impact on the Company's financial l industry. Under this policy, the Company could be position.
subject to a maximum retrospective premium as-legislative proposals are pending in the U.S. Congress that sessment of $7.6 million in any one pobey year if NEIL s property losses exceed available funds. expressly seek to control acid deposition in the eastern por-tion of the United States. If any of these proposals becomelaw, Excess property insurance of $400 million pro- significant reductions in the emissions from various existing vided by ANI and MAELU. fossil-fueled generating plants of the Company could be re-A Master Worker Policy issued by ANI and quired These reductions could er, tail substantial capital and MAELU with an aggregate limit of $160 million for peratm, g costs that, m turn, couki require the Company to the nuclear industry as a whole to cover claims of request substantial rate mcreases.
! workers as a result of radiation exposure on or He Company is involved in legal and administrative proceed-l after January 1,1988. Under this policy, the ings before various courts and agencies with respect to mat-Company could be subject to a maximum retro. ters arising in the ordinary course of business, some of which i spective premium assessment of $2.7 million. involve substantial amounts. Management is of the opinion l . that the final disposition of these proceedings will not have a Accidental outage replacement power cost .msur-material adverse effect on the financial position of the Com-ance provided by NEIL Thereunder, the Com-pany.
pany is insured for up to $1.4 million per week for one year, commencing 21 weeks after initiation of Note 12 - Callaway Nuclear Plant the outage, and for up to $0.7 million per week for in early 1985, the MoPSC authorized a $455 million increase an additional year. Under this policy, the Com- in annual electric revenues for costs related to Callaway Unit pany could be subject to a maximum annual retro- No. l.That increase was to be phased in over a six-year period.
spective premium assessment of $2.2 million. (in early 1987, the MoPSC reduced the final four annual rate I increase , from 7.3% to 4.6%, to reflect expected income tax ex-1 On August 20,1988, the Pr. ice Anderson amendments to the pense reductions from the Tax Reform Act of 1986.) The first-Atomic Energy Act, covering liability to third parties for a year increase, effective April 1985, was $149 million (15%); t he I nuclear meident were taodified and extended ic August 1, increase in the second year, effective April 1986, was $112 2002. The modified Act currently limits such liability t million (10%); the increase in the third year, effective April approximately $7.3 bilhon for each nuclearm, eident. Cover-1987, was $57 million (4.6%); to be followed by annual in-age of the first $160 milbon ofliability is provided by ANI and creases of 4.6% in each of the next three years, totaling $189 MAELU. The balance ,s i prov,ded i by utility mdustry retro- .
- *U *."-
spective assessments. He Company's maximum potential assessment under this plan would be $63 million perincident in April 1987, the Staff of the MoPSC and the Office of Public payable in annual installments of not more than $10 million. Counsel of the State of Missouri filed complaints agaiut the Additionally,if the sum of all public liability claims and legal Company with the MoPSC alleging that the Company's return costs arising from a nuclear incident exceeds the amo mt of on its investment had become excessive. On December 21, primary and excess coverage in force, the Company can be 1987, after conducting hearings, the MoPSC issued an order assessed an additional $3 million. in response to the complaints. The order eliminated the $189
. million of scheduled revenue increases and instead author-To the extent that any losses an. .smg from a nuclear m.eident ized a single revenue increase of $5.6 million effective Decem-at Callaway plant exceed the limits of, or are not subject t '
ber 31,1987. In addition, the order effectively prevents the insurance, or to the extent such insurance becomes unavail-recovery of $23 million of deferred costs accumulated under able m the future, the Company may retain the risk of loss as
, the Missouri rate phase-in plan. As a result, the Company a self-insurer. Although the Company has no reason to antic'-
charged $23 million ($.23 per share) to expense in 1987. (The L
1 L
29
NOTES TO FINANCIAL STATEMENTS (continued > Union Electric Company order provides that the remaining $159 million deferred cost Note 13 - Supplementary Information balance at December 31,1987, applicable to Missouri be recov- 1988 1987 1986 ered in rates over the five years 1988 through 1992.) (nousands of Dollars)
"' n NPain, charged Effective during 1985, the Illinois Commerce Commission, the d c1 Iowa State Utilities Board, and the Federal Energy Regulatory operating expenses $162,977 $158,908 $148,173 Commission authorized rate phase-in plans comparable to other accounts (a) 10,749 9,674 8.665 (
those ordered by the MoPSC in 1985. 8173,726 $168,582 $156,838 d "*
During 1988, the Company obtained long-term power supply ['[tioo ofr $d$ntangible contracts with certain ofits wholesale customers. As a condi- assets, chamed directly to: f tion of such contracts, the Company will not recover $29 million operating expenses 8231,906 $177,559 $176.200 i i
Other income and deductions - - 1,019
($15 million net of tax) of phase-in plan deferred costs appli.
other accounts (a) 4,148 3.746 3,563 cable to these customers. As a result, the Company charged 8236,054 8181,305 8180,782
$15 million net of tax ($.15 per share) to expense in 1988.
Taxes, other than payroll and Under the Nuclear Waste Policy Act of 1982, the U, L Depart. Income taxes, chamed directly to:
ment of Energy (DOE) is responsible for the permanent stor, operating expenses - {
Real estate and pmonal propeny 6 79,098 8 79,306 6 77,422 age and disposal of spent nuclear fuel. DOE currently charges License and franchise 95,608 91,490 85,494 One mill per kilowatt-hour generated for future disposal of Miscenaneous 2,213 2,409 1,926 spent fuel, Electric rates charged to customers provide for 176,919 173,205 164,842 recovery of such costs. Other accounts 3,850 3,394 3,334 8180,769 $176,599 $168,176 Callaway plant decommissioning costs are estimated to be
$191 million in current year dollars. Electric rates charged to . 3 customers provide for recovery of deconunissioning costs over (a) A substantial portion of amounts charged to other acceunts is allocated t perating expenses through clearing accounts.
the life of the Callaway plant. Amounts so collected from mne am unts f payr n taxes f r the years 1988,198 .and 1986 wen customers are deposited in a tmst fund which has been estab- $18,089,000, $17,069,000, and $16,717,000, respectively.
lished to provide for decommissiomng costs. At December 31, (c) The amounts of royalties and advenising costs were not material.
1988, $13 million was on deposit in the decommissioning trust (d) Total interest paid (net of amount capitalized) in 1988,1987, and 1986 was s179 million,8202 million, and $225 million, respectively.
fund.
(e) Totalincome taxes paid in 1988,1987, and 1986 were $104 million,
$87 million, and $13 million, respectively.
)
His report and the Snancial statements contained herein are submitted for the information of the stockholders of the Company and are not intended to induce, or for use in connection with, any sale or purchase of any securities of the Company. j i
l l
I 30
MANAGEMENTS DISCUSSIONAND ANALYSIS union Electric company l
l . Results of Operations reflects increased sales of electricity to residential and com-mercial customers. The decrease in 1986 fuel costs attribut-l Earm.ngs and earnings per share fluctuated due to many able to reduced generation, and the increase in 1986 net
( conditions, the primary ones be,m g: the effect of weather interchange and purchased power costs primarily reflect the variations, the t,mmg i and amounts of rate increases, growth increased availability and utilization of relatively low-cost
[ m customers use of electricity, fluctuating operat,mg costs, purchased power.
> and the effect of construction costs disallowed from rate base by regulatory authorities. Other variations in operating expenses during the years 1986
. . through 1988 generally reflected recurring conditions such The. impacts of the more sigmficant items affecting revenues, as growth, inflation, and wage increases. In 1988, operations costs, and earnings dun,ng the past several years are analyzed expenses, other than fuel and purchased power costs, in-and discussed below. creased $7 million, due primarily to a $6 million increase in l wages and other employee benefit expenses and a $3 million Electn.e Operating Revenues increase in natural gas purchased far resale, partially offset by Variation from Prior Year a $2 million decrease in Callaway plant expenses, in 1988, (Millions of Dollars) 1988 1987 1986 maintenance expenses increased $4 million, primarily reflect-Rate variations $23.7 8 82.7 $170.2 ing increased maintenance expenses at all major coal gener-Effect of weather variations 43.5 (19.5) 32.5 ating plants offset by an $11 million reduction in Callaway plant maintenance expenses due to Callaway plant's second 66 S1 82 3 ] refueling in late 1987. In 1987, operations expense, other than The increases in 1988,1987, and 1986 electric revenues appli. fuel and purchased power decreased $6 million, primarily due cable to rate variations reflect a series of rate increases under to an $8 miWon decrease in natural gas purchased for resale the regulatory approved Callaway rate phase-in plans. offset by a $2 million increase in other operations costs.
Maintenance expenses in 1987 increased $11 million, reflect-The effect of weather variations on 1988 electric revenues ing increased maintenance at Callaway plant during the refu-reflects the abnormally hot 1988 summer weather as com- eling and increased maintenance at all major coal generating pared to 1987. 'Ihe effect of weather variations on 1987 a7d plants except the labadie plant. In 1986, operations expense, 1986 electric revenues primarily reflects the increased sales other than fuel and purchased power, increased $22 million, of electricity due to extremely warm weather in the second primarily reflecting a $17 million increase due to Callaway and third quarters of1986. plant's first full year of operation, and $5 million of increases Operating Expenses in other operations costs. In 1986, maintenance expenses mcmased $26 milh,on, pn, manly reflectmg an increase of $17 Fuel and Purchased Power - Variation from Prior Year million in maintenance at Callaway plant during its first full (Millions of Dollars) 1988 1987 1986 year of operations, as well as increases in other power plant Fuel: maintenance.
Variation in generation 852.5 S (3.0) S(39.2)
Price (19.7) (1.2) 21.0 Depreciation expense increased $19 million in 1988 primarily Amortization of uranium due to the effect of the 1987 Callaway refueling outage and the
)
G eiraIo"n c$nc$s 9 change in 1988 from the unit-of-production method to the
( )
Net interchange sales and purchased straight-line method of computing Callaway plant deprecia-power variation (30.3) 20.9 42.1 tion in accordance with regulatory commission orders.
S 3.0 $ 67.4 $ 10.2 The 1988 increase in other taxes charged to operating ex-The increase in total fuel and purchased power costs in 1988 penses is due to a $4 million increase in license and franchise reflects greater generation due to increased sales of electric- taxes resulting from increased revenues. The 1987 increase ity to all classes of customers offset by greater interchange in other taxes charged to operating expenses is due to a $6 sales and lower fuel prices. The increase in total fuel and million increase in license and franchise taxes resulting from purchased power costs in 1987 primarily reflects decreased increased revenues, and a $2 million increase in real estate amortization of uranium litigation settlement proceeds and taxes. The 1966 increase in other taxes charged to operating increased sales of electricity to all classes of customers. The expenses is due to a $9 million increase in license and fran-increase in total fuel and purchased tx)wer costs in 1986 chise taxes resulting from increased revenues, and a $20 31
. = n ,c nw a x -
/. .we, , .; ;w MANA GEMENTS DISCUSSIONAND ANALYSIS (continued) Union Electric Company i million increa ,e in real estate taxes reflecting the first full year Tax legislation
= of Callaway operations. The Tax Reform Act of 1986 (TRA) and the Technical and i Miscellaneous Revenue Act of 1988 (TAMRA) contain numer- ]
Income taxes from operations increased in 1988 due princi-us provisions that affect the Company. The most significant pally to decreased amortization of certain Callaway-related ac-provisions of TRA with respect to the Company are a reduced ;
cumulated deferred income taxes, offset in part by a decrease Inarginal corporate income tax rate, restrictions on the utihza- ;
in pre-tax income (see Callaway Rate Phase-In Plans in Notes tion of mvestment tax credit canyfonverds, and ehmmat,on i of 1 and 2 under Notes to Financial Statements). Income taxes O', Vesynennamedit on construction expenditures. The in 1987 and 1986 increased in response to higher pre-tax ,
m st s.igmficant provision of TAMRA was the substantive law l income. Ilowever, the greater amortization of Callaway-change contamed in theTechmcal Corrections sections of the related accumulated deferred income taxes in 1986 and 1987 Act which retroactively extended the 35% reduction m ITC partially offset the increase in income taxes resulting from carryforwards as enacted by the TRA to also apply to ITC higher pre-tax income in 1986, and to a much lesser degree,
. carryforwards generated by plant placed m service before '
offset such .merease m 1987.
~
1986. In 1987,while total provisions for Federal income taxes Interest on Debt were reduced as a result of the reduced tax rate, the amount The 1988 and 1987 decreases in interest on debt primarily of income taxes currently payable increased principally as a reflect the refinancing of high-cost debt with lower-cost issues result of the restrictions on utilization ofinvestment tax credit ,
I and reduced total outstanding debt. The $7 million decrease carryforwards enacted as part of TRA. In 1988, the effect was in 1986 interest on debt primarily reflects reduced interest on similar except that the increase in taxes currently payable was i long-term debt issues, reduced short term interest rates, and principally the result of the reduction ofITC carryforwards as reduced average da9y short-term borrowings. enacted by TAMRA. In 1989 and future years, both total provisions for Federalincome taxes and the amount ofincome Callaway Rate Phase-In Plans taxes currently payable are expected to be reduced as a result See Notes 1 and 12 under Notes to Financial Statements for f the reduced tax rate. As a result of the Company s cibstan-information relative to Callaway rate phase-in plans.
tially reduced levels of construction, ehmmation of the invest-Contingencies ment tax credit on future construction expenditures is not See Note 11 under Notes to Financial Statements for situ- expected to have a material effect on the Company.
ations existing at December 31,1988, that could affect the ,
Company. Effects ofInflation and Changing Prices j The Company's financial statements reflect the historical cost Liquidity and Capital Resources, of events and transactions occurring at times when the pur-Connruction apenditures averagmg approximately $200 chasing power of the dollar was different from the present.
million are anticipated during each of the years 1989 through The effects ofinflation and changing prices on the Company's ,
1993. The Company completed the construction of its Cal- financial statements are most significant in the areas of depre-laway plant in late 1984. Additional electric generation capa- ciation and property, plant, and equipment.
city is not anticipated before the late 1990s. For funds re-quired in addition to construction expenditures, see Notes 3, The current replacement cost of the Company's utility plant 4, and 5 under Notes to Financial Statements. substantially exceeds its recorded historical cost. However, the regulatory process limits the Company to the recovery of A nuclear fuel lease provides for the financing of up to $200 the historical cost of utility plant through depreciation. While million of the Company's nuclear fuel requirements. At De- the regulatory process does not reflect the current cost of cember 31,1988, $155 million of nuclear fuel was financed replacing utility plant, past practice indicates the Company under the lease. will be allowed to earn on and to recover the increased cost of The Company plans to continue utilizing short-term debt as its net investment after facilities are replaced.
support for normal operations and other temporary require- The Company, by having assets such as receivables, fuel and ments (see Note 7 under Notes to Financial Statements). materials inventory, and deferred charges, incurs a loss of Union Electric is authorized by the Federal Energy Regula- purchasing power during periods of inflation because after tory Commission to incur up to $300 million of short-tenu conversion, the cash received for these items will purchase !
unsecured indebtedness; however, short-term debt is not less. More than offsetting such assets, however, are signifi-expected to exceed $250 million. cant amounts of long-term debt, preferred stock subject to mandatory redemption, deferred income taxes, and current liabilities which will be paid with dollars of reduced purchas-ing power.
I 32
/
OPERATING STATISTICS Union Electric Company 1988 1987 1986 1985 1984 a l
J Electric Operating Revenues (000):
Residential $ 778,121 S 749,786 $ 681,002 S 572,423 $ 495,346 ]
Commercial 659,075 628,067 580,323 501,913 430,913 I Industrial 403,837 393,597 373,196 335,576 294,245 Other electric utilities 70,133 71,160 63,428 56,078 50,702 Miscellaneous 27,130 26_,867 24,731 23,267 20 880 Total Electric Operating Revenues $ 1,938,296 $1,869,477 $1,722,680 $1,489,257 S1,292,086 Kilowatt-Hour Sales (000,000):
Residential 9,95"i 9,585 9,283 8,844 8,764 Commercial 10,009 9,581 9,306 8,823 8,441 l Industria! 8,417 8,217 8,073 8,038 7,928 i Other electric vtilities 1,501 1,487 1,450 1,430 1,503 Miscellaneous 139 138 145 160 164 l Total Kilowatt-Hour Sales 30,023 29,008 28,257 27,295 26,800 Electric Customers (End of year)-
Residential 941,673 929,776 916,261 901,777 888,026 Commercial 117,333 114,858 111,322 109,099 106,760 Industrial 6,576 6,569 6,595 6,333 6,334 Electric utilities 21 21 21 23 24 Other 1,569 1,548 1,498 1,410 1,400 Total Electric Customers 1,067,172 1,052,772 1,035,697 1,018,642 1,002,544 Residential Customer Data (Average):
Kilowatt-hours used 10,645 10,390 10,227 9,901 9,951 Annual electric bill $831.91 $812.73 $750.24 $641.02 $562.60 Revenue per kilowatt-hour 7.82 C 7.82C 7.340 6.47C 5.650 i
f Gross Instantaneous Peak Demand (Kilowatts) 7,340,000 7,255,000 6,810,000 6,335,000 6,810,000
)
i Capability at Time of Peak, Including Net Purchases (Kilowatts) 8,028,000 8,236,000 7,955,000 8,231,000 7,912,000 Generating Capability at Time of Peak (Kilowatts) 7,791,000 8,040,000 8,031,000 8,097,000 ' 6,952,000 Coal Burned (Tons) 10.876,000 10,245,000 9,961,000 10,126,000 11,820,000
}
f l Price per Ton of Coal 835.25 S37.31 S37.01 $34.79 833.76 l
1 SELECTED FINANCIALINFORMATION Union Elec Company j Ghousands of Dollars Except Shares and Per Share Amounts and Ratios) 1988 1987 1986 1985 ,
Re:ults of C; crations Operating revenues $2,029,107 $1,946,411 $1,807,182 $1,591,763 Operating expenses 1,544,953 1,457,957 1,287,572 1,173,187 Operating income 484,154 488,454 519,610 418,576 Callaway rate phase-in plans 2,408' 92,791 59,861 74,631 Deferred ecsts disallowed - (23,169) - -
Callaway Unit No.1 costs disallowed, net - - - .(234,780)
Loss on cancellation of Callaway Unit No. 2, net - - - -
Allowance for all funds used during construction 14,885 20,477 15,812 106,754 Miscellaneous, net (10,648) (15,714) 3,947 (1,709)
Interest on debt 199,241 228,961 247,409 254,320 Net income 291,558 333,878 351,821 109,152 Preferred stock dividends 30,425 36,522 49,245 49,836 Earnings on common stock 261,133 297,356 302,576 59,316 Average common shares outstanding 102,123,834 102,123,834 102,123,834 100,403,016 Assets, Obligations, and Equity Capital (Year End)
Total assets $5,827,246 $5,957,811 $5,895,211 $5,738,620 long-term debt obligations 2,188,614 2,357,615 2,436,092 2,454,687 Preferred stock subject to mandatory redemption 60,832 64,608 165,384 173,160 Preferred stock not subject to mandatory redemption 279,784 354,784 354,784 354,784 Common equity 1,895,360 1,837,156 1,743,189 1,630,466 Financial Indices Earnings per share of common stock (based on average shares outstanding) $2.56 $2.91 $2.96 $0.59 Cash dividends per share of common stock $ 1.94 $1.92 $1.86 $1.78 Return on average common stock equity 14.08% 16.79% 18.16% 3.81%
Ratio of earnings to fixed charges (a) 3.35 3.30 2.79 1.14 Book value per common share $18.56 $17.99 $17.07 $15.97 Capitalization Ratios (Year End)
Common equity 42.8% 39.8% 37.1% 35.3%
Preferred stock not subject to mandatory redemption 6.3 7.7 7.6 7.7 Preferred stock subject to mandatory redemption 1.4 1.4 3.5 3.8 long-term debt 49.5 51.1 51.8 53.2 100.0% 100.0% 100.0% 100.0%
(a) Earnings used in computing the ratio of earnings to fixed charges consist of net income plus Exed charges (interest on ds.St and an appropriate amount of rentals charged to operating expenses) and income taxes.
34
1 1984 1983 1982 1981 1980- 1979 1978 h $1,412,414 $1,401,086 - $1,217,705 $1,105,536 $1,077,876 $946,797 . $903,988
[ '1,172,128. 1,160,816- 1,013,054 922,647 886,720 780,331 ' 727,756 240,286 240,270 204,651 182,889 191,156 166,466 176,232 .
. - - (28,469) - - -
[
329,669 251,307 198,093 .155,625 92,055 58,093 31,469 1,619 ' 2,509 2,364 (787) 3,638 879- 2,896 247,308: 218,530- 200,554 180,312 131,725 106,995 90,309 324,266 275,556; 204,554 128,946 '155,124 118,443 ~ 120,288
.50,185 46,118' 40,344. 29,863 30,082 27,336 ' 23,430-274,081 229,438 164,210 99,083 125,042 91,107 96,858 96,5"'4,699 - 86,744,282 76,251,024 67,179,275 59,675,995 52,577,432 48,260,5% >
$5,819,996 - $5,146,666 $4,573,783 $3,992,742 $3,552,104 $3,168,998 $2,800,209 2,457,381; 2,108,047 2,000,405 1,719,927 1,479,229 1,307,990 1,238,860 178,936 180,962' 182,988 110,014 112,040 114,066 41,092
,354,784- 354,784 279,784 279,784 279,784 279,784 279,784 1,695,239 1,526,188 1,299,814 1,135,826 1,045,120 931,946 '837,591
$2.84 $2.64 $2.15 $1.47 $2.10 $1.73 $2.01'-
$1.72 $1.66 $1.58 $1.52 $1.48 ' $1.44 $1.40 17.23% 16.79% 14.17% 9.46% 13.11% 10.71% 12.61%
2.88 2.89 2.49 2.00 2.85 2.62 3.20
$17.10 $16.12 $15.40 $15.19 $15.81 $15.85 $16.14 36.2% 36.6% 34.5% 35.0% 35.8% 35.4% 34.9%
7.6 8.5 7.4 8.6 9.6 10.6 11.7 3
3.8 4.3 4.9 3.4 3.9 4.3 1.7 52.4 50.6 53.2 53.0 50.7 49.7 51.7 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
35 j i
1
~ SELECTED QUARTERLYINFORMATION Union Electric Company Ghousands of Dollars Except Per Share Amounts)
Earnings Earnings .
on ' Per Share Operating ' Operating Net Common .
of Stock Revenues Income Income Stock: Outstanding
. Quarter Ended: March 31,1988 $463,737 8 95,712- $ 48,330 $ 39,853 $ _ .39 March 31,1987 406,617 111,236 71,429 60,767 .60 June 30,1988, 486,357 118,938 74,798 66,321 .65 June 30,1987 508,441 131,756 73,763 65,498 .64 September 30,1988 656,780 194,230 146,336 139,020 1.36 September 30,1987 617,554 179,086 152,228 143,110 1.40 December 31,1988 422,233 75,274 22,094 15,939 .16 December 31,1987 413,799 66,376 - 36,458- 27,981 .27 Expnses related to the acquisition of long-term power supply contracts decreased net income and earnings on common stock by $3.7 million (S.04 per share) in the third quarter of 1986, and $11.2 million (S.11 per share) in the fourth quarter of 1988. 'Ihe second quarter of 1987 reflects a charge to expense resulting from a Missouri Public Service Commision order which reduced net income and earnings on common stock by S23 million ($.23 per share). See Note 12 under Notes to Financial Statements.
COMMONSTOCKPRICES AND DIVIDENDSw 1988 Price Range _ .
1988 -
1987 Price Range 1987
- High low - Dividends (2) Quarter Ended - High Low Dividends Per Share: $25 .6218/s 48C March 31 $31% $28' 48C 248/a ' 213f. 48 June 30 28 % 22 % 48 23%: 21 % 48 September 30 25 % 22 % 48 25 23 % 50 December 31 25 % 19 % 48 (1) At December 31,1988, Union Electric Company common stockholders totaled 140,203. (New York Stock Exchange symbol: UEP.)
(2) At Det ember 31,1988, retained earnings totaled $668.670.000; under the Company's amended mortgage indentures, $57,115,000 of tot;d retained earnings was restricted against payment of common dividends - except those payable in common stock.
INVESTOR INFORMATION Dividend Reinvestment and Stock Purchase Plan Office Trustees, 12Salle National 1901 Chouteau Transfer Agents, Bank, Trustee
'Ihe Dividend Reinvestment and Stock Purchase Plan Avenue Registrars, and Chicago,IL60690 provides common and preferred stockholders, employ- St.Io uis, M O Paying Agents Bankers Trust ees, and customers the opportunity to purchase shares (314) 621-3222 For First Mortgage Company of common stock of the Company, without the payment Mailing Address Bonds New York, NY of brokerage commissions or service charges, by auto- P.O. Box 149 10015 matically reinvesting dividends and/or investing op. St. Louis, MO 63166 Boatmen's Trust Company, Trustee Continental Bank tionalcash payments. Transfer Agent N.A.
and Registrar St. lou s, MO 63101 Chicago,IL 60697 Information regarding your account, the transfer of Pre- The Boatmen's Union Electric ferred or Common Stock or the Dividend Reinvestment Company National Bank of and Stock Purchase Plan may be obtained by writing St. louis, MO 63166 St. louis, Trustee or calling: St. Iouis, MO 63102 Union Electric Company Harris Trust and Stockholder Services Department k l yVid Ns 999 P.O. Box 149
[
! St. Louis, MO 63166 Co-Trustees Chicago,IL60690 Toll-free telephone 1-800 255-2237 local calls 554-3502 36 j
p q OFFICERS AND DIRECTORS
. Officers Board of Directors William E. Cornelius James J. Beisman
- J. A. Baer II k' Chairman and Vice President-Customer Service Management- Business Consultatit.
- Chief Executive Officer Former Chairman and Chief Executive j
- Ikmaid W. Capone Officer- Stix, Baer & Fuller. 1 Stewart W. Smith, Jr. Vice President- Engineering and g
Vice Chairman Construction ** Marguerite Ross Barnett Chance,llor, University of Missouri- -
Earl K. Dille William J. Carr - St. Louis. -
President Vice President-RegionalWest
. Sam B. Cook Donald E. Brandt G. J. Haven Chairman- Central Bancompany and Semor Vice President - Vice President-Research and its subsidiary, Central Bank, which Finance and Accountmg . Development - conducts a general banking business.
j Charles A. Bremer . William E. Jaudes
- William E4 Cornelius i Semor Vice President - Vice President and General Counsel Chairman and Chief Executive Officer
- Techm, cal Services !'
f ,
R. Alan Kelley --
- Earl K. Dille j Charles W. Mueller Vice President-Energy Supply President t Semor Vice President - i
- Charles J. Dougherty J Administrative Senices s n uman Resources Former Chairman and R rt . "'"g H. G. Meyer Chief Executive Officer ;
, y ce re Ident-Vice President -Information Senices ** Neal J. Farrell Power Operations Michael J.' Montana Former President-Vice President - Industrial Relations Mercantile Bancorporation Inc.
Ser o Vic res nt -
- . Nuclear William A. Sanford
- John Peters MacCarthy Vice President-Supply Service Chairman and Chief Executive Officer-f Charles J. Schukal Boatmen's Trust Company, l l SeniorVice President- Robert J. Schukal *' " "' " " "#" #" * " * " " "
Customer Senices Vice President- Power Plants
- Richard A. Meyer {
Wilh.am C. Shores ** Former President -
Vice President - Reg.ional East Anheuser-Busch,Inc. I j Jerrel D. Smith John K. Riedy Vice, President - Environmental Consultant.
Senices Former Chairman of the Board-H. E. Wuertenbaecher, Jr. INTERCO INCORPORATED.
[
~
Vice President- Public Relations
- Stewart W. Smith, Jr.
1 Ronald C. Zdellar Vice Chairman 4 1
Vice President-Transmission and
{ , Distribution 2 Adviser to the Board Joseph M. Pfeifer
! Controller Isaac B. Grainger Former President-Chemical Bank.
)
James C. 'Ihompson a
Secretary ;
L A. Esswein
- Member of Executive Committee
{ ** Member of Auditing Committee f; Treasurer s
t
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- 314 554 2650 yy Donald F. SchneII Eusenuc March 28, 1989 %" ':~:"'"*"
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U. S. Nuclear Regulatory Commission Attn: Document Control Desk Mail Station P1-137 Washington, D.C. 20555 Gentlemen: ULNRC-1954 DOCKET NUMBER 50-483 CALLAWAY PLANT ANNUAL FINANCIAL REPORT Transmitted herewith are twenty-five (25) copies of the Union Electric Company 1988 Annual Report. This information is submitted in accordance with 10CFR 50.71(b). ,
Very truly yours, Donald F. Schnell JMC/cas '
Enclosures i
l 96
cc: Gerald Charnoff, Esq.
Shaw, Pittman, Potts & Trowbridge 2300 N. Street, N.W.
Washington, D.C. 20037 Dr. J. O. Cermak CFA, Inc.
4 Professional Drive (Suite 110)
Gaithersburg, MD 20879 R. C. Knop Chief, Reactor Project Branch 1 U.S. Nuclear Regulatory Commission Region III 799 Roosevelt Road Glen Ellyn, Illinois 60137 Bruce Little Callaway Resident Office U.S. Nuclear Regulatory Commission '
RR#1 Steedman, Missouri 65077 Tom Alexion (2)
Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission 1 White Flint, North, Mail Stop 13E21 11555 Rockville Pike Rockville, MD 20852 Manager, Electric Department 3 Missouri Public Service Commission P.O. Box 360 Jefferson City, MO 65102 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555 J
- 3 ,
bcc: D. Shafer/A160.761
/QA Record (CA-758)
Nuclear Date E210.01 DFS/ Chrono D. F. Schnell J. E. Birk J. V. Laux M. A. Stiller G. L. Randolph R. J. Irwin H. Wuertenbaecher W. R. Campbell A. C. Passwater R. P. Wendling D. E. Shafer j D. J. Walker O. Maynard (WCMOC)
M. P. Goel (Bechtel)
T. P. Sharkey NSRB (Sandra Auston) i i
i
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