ML20003H542

Annual Financial Rept 1980

ML20003H542
Person / Time
Site:	Wolf Creek
Issue date:	02/23/1981
From:	KANSAS GAS & ELECTRIC CO.
To:
Shared Package
ML20003H539	List: ML20003H538 ML20003H542 ML20003H543
References
NUDOCS 8105060294
Download: ML20003H542 (32)

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l C'ontents '

Afanagement Letter Page 2 Customer Service and Load hianagement Page 10 Important achievements were realized: Earnings Customers feel the effect of changes in the were $2.97, dividends increased, coal generating energy market . We've changed our capacity expanded, rate relief received, nuclear organization to be.ter meet their needs in today's project called "one of the sounder," record new environment.

summer demand met . . But, challenges Regulation Page 12 l centering in government regulation and cost Government regulates more than rates and control remain. Diversity is strength or, KG&E.

earnings . Regulations increase construction l Financial Results Page 4 time and costs . Federal rate case filed in 1977 Record demand resulting from second hottest still unresolved.

summer on record, and timely rate relief raised Employee Participation Page 14 mcome and earnings to record levels.

Beating the summer heat storm demonstrated l

Power Supply Page 6 commitment and skill of KG&E people . . from Extremely hot summer pushes peak up 17% those who planned our system, built it, and who l

Converting generating capacity from gas to coal maintain and improve it today.

l and nuclear continues as fourth coal unit is Nianagement Discussion and Financials Page 15 l completed. Generating capacity i,s now about half coal. Directors and Officers Page 28 Financial Afanagement Page 8 Service Area Page 29 l

$192 million was invested in new facilities in Stockholder Information Page 29 l 1980. . Kansas Corporation Commission action  ;

impeding sale of Wolf Creek Station interest l leaves 1981 capital needs in question.

i

"...To ensure our customers reliable electric service, "4"un ye"j we're using diverse fuels for our power plants... -S uuoa

N!uch of our effort still is directed at meeting the federal deadlme to rendt use of natural gas as fuel... By the mid-1930s, we plan to NUCLEAR use not just one fuel but four- coaf. ranium, gas and, in emergencies, some oil. With contmued r esearch, still others may COAL i be useful." \

(See ages 6 and 7 for additional information about our power - e uncN SUFF YJ , PURCHASED

. POWER KGdcE ACTUAL AND FORECAST OIL ENERGY REQUIRESIENTS \ y:

- e u uscN i AND GENERATING FUELS TO BE UsED

-4uuCN NATURAL gas g ,, -2uucN N k I't.

tWgc%

F M il G Nf Nb d:g

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1960 1970 1980 19 %

I Financial Highlights, Five-Year Comparison 1 fihousands except as noted) 1980 1979 1978 1977 1976 h Operatmg Revenues $293,808 5244,970 5238,460 51 % .236 5142 773 Net Income 5 52,395 5 29,220 S 28,964 5 24,650 5 23,273

! Earrungs Avadable for i Common Stock 5 43,208 5 21,003 5 21,880 5 18,179 5 18.736 .;

Average Sharea of C.'

Common Stock Outstanding 14,562,746 11,400,916 9,615,051 7,990,579 6.516J75 - .i Earrungs Fer Share of .

c . y i , [.

Common Stock $2.97 51.54 52.23 52.28 52,88h;.y QJ; Cash Common Stock Dividends $1.965- - - SL91 51.825 7- S1.77 ' 51.70,$ 4 Year-End Dividend Rate $2.04- SL94 , ~S1.90 y $1.80 1 $1.76 Available Capacity (Kilowatts)

System Peak (Kilowatts) -

2,023,000 1,727;100 . ,' 1473,400'.

~

, 1,968,000-c 11532.,600'.. ~, .4423,

'I,031.000: [ 2,026,000-3

m. _

r Nr A-l Average Use Per Residential

.M44 e

Customer (Kilowatt-Hours)  ? -4. 10,708- > M.Wigy, .. 44 9'49F4 n v.i .. 10,136 #_ g . g- lJ.? g .;9,413 gq w . m @u-dp,%yg p .L ,i Average Price Per Kilowatt Hour -

,7 '1 M N K' % [> W M 5 M ' Y D d 2M *d [

f - n.~5.974

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(Residential) aM.m p.82r.,wW d-

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- Number of Year of Customers at Er}V 7% 229,932.,M223,41SM$;,1J,$g,{w:212;491+ :20er,pypt l j

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s Long-Term Debt - -1  :..  :

... #.cL-: 1%$451 Redemption Required g Preferred-4& um,408 w:a m m..ydn386,519?MUS74.07JMg295,3 .; m,g.mn . 3 .4.ss_,x.e

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34,000, ~.

S' 30,00,0.~ s .~.M . 24,000..1-n  ;* S..r2. .

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-T. otal, Utility. Plant 40

61.* -Y" n (Netf

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I'otat Assets %:.P.k9N -W M31,137,883 =

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2 !, Management Letter ' E 3:5 ~ M T ". i 4 .

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r Nationallv,1980 was a time of electricity ese because of record hot I

uncertainty with major economic ' weather were among reasons for this problems and political change. For record. Of the earnings, 52.67 represents KG&E, it was a year of overall progress i allowance for funds used during with important achievements significant l construction.

to both stockholders and customers. I e Common stock dividends were in-Among them: ' creased to an indicated annual rate of e Earnings per share of common stock ' 52.04. They were 51.94 previously. This were a fiscal year record $2.97, reversing i was the 25th time in as many years that a five-vear downward trend. Rate  ! common stock dividends have been increases and abnormal growth in l increased.

.--:  !

• Jeffrev Energy Center s bv the KCC to make a j~ -

M second coal-fueled unit '

comprehensn e study of g$ .. ,' was completed on the pro!ect c +

, ' .~ '

~

' schedule. Almost hali Even though we i.J .

['."E

f.5 generanng capabihty or the company . made progress m Ns0.

much is lett to do For

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..O s <p ,,*: .. now uses coa! as fuel exampie. restnctions 1 ['. _ AmEF .r- , ; 4: 1 ' ' E' 1 1

• A new approach used placed bv the KCC on y; $Y m . , ' , . -S : l bv the Kan .ac Cor- selhng an mterest m u oli Creek to an electnc l peranon Commis3 ion e

x -

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' .@ i to povide nmelv rate , cooperatn e make it

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y relief resulted m a n 2% virtuai;r impossible to

, 4' y ., ' .; , intenm rate increase complete the saie. This 1- p '

sub!ect to refund. These i !eopardizes tinarang eu  ; 4t "

1. [. , new rates me!uded +5e arranged bv the :o-y f f _t- 1 m eperative And. t mav

~

• - " l value of Ieffrev L~ nit :

, 2 j the rate bace :ust ene force us to mcrease our I. L i.

..,_+-,7.. . ! month after it w as ,M1 nnanane from he

". p : ; compieted 5:04 milhon w e ,ad e ., f , .. , ,.

l l

• Our svetem and planned to raise to 5:S:

milhon to retuna the

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' emplovees . net the 9 .  ; l challenge . of the second monev advanced bv the

. n-j hottest summer ever cooFera tiv e In N

' Our peak wmnt up 13"c 51:4.; milhon w a s u . t' l over the pre tous record raised h e and t ne

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• Welt Creek Generanne court to review ine order.

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! Stanon was called one and a measure hat

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l or the sounder nuclear would eermit t le sale to

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b( ~ the countrv bv the in the Kansa egislature

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the 1980s. This forces us pensive gas as a boiler q.

to finance and carry out fuel, we hold down $F- 1- -

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a massive program of costs because fuel is our building new generating biggest single expense. wd '

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units at a time when the Finally, we're becom-market for all ty; es of securities has become more volatile and ing more aggressive in communicating. We are working more closely ff uncertain and interest with both state and @

rates are at record levels.

o Federal and state national capitals to help ease some at the kg8 g ,,,, ,_ ,,,,,,

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regulations affecting problems created by the Chawman of the Board President utilities sometimes growing involvement of conflict. government in business.

o Stockholders are And, over the past three the Clemens Coal some oil. With contin-justifiably concerned years we have invited Company of Pittsburg, ued research, still others about stock selling virtually every customer had served since 1965, may be useful in a few below book value. we serve - many of Their valuable counsel more years.

o Customers are whom are also stock- will be missed. Glen L The history of KG&E frustrated by rising holders - to meet with Montague, a director is a story of' men and prices and concerned our key managers. In since 1974 and KG&E women who responded about the future all,180 meetings were vice president - ad- to serving the people of availability of energy. held to discuss our ministrative services, this rich, diverse area.

So, what's being done plans, problems and resigned as a director to We realize our future about some of these progress. permit wider outside rests in how well we things at KG&E? In short, we must be representation on the continue to meet the First, much of our attentive to many board. He remains a changing needs of our effort stillis directed at groups that influence or valued senior officer. customers and how well meeting the federal have an interest in how In summary, "di- we provide for the deadline to restrict use the company performs. verse" is a good way welfare of employees of natural gas as fuel. Our objective is to to describe KG&E. and stockholders. The For KG&E and many consider the needs of Our service area's company last year other utilities, this all. economy relies fairly adopted as its slogan, transition is incredibly We have an active equally 'on farming, "We Deliver." It is our difficult and costly. But board of directors and in manufacturing and goal to continue doing on pages 6 and 7 of this 1980 three new directors minerals. This diversity so.

report, you can read the were named: Terence is one reason the un-details of our progress. Scanlon, Wichita in- employment rate here -

Second, with the aid vestor and developer; is about half the national of a consultant, we're Marjorie I. Setter, presi- average and that growth reviewing our long- dent, Setter & Asso- continued in 1980. It Ralph P. Fiebach l

range planning function. ciates, Inc., Advertising was the third successive Chairman of the Board Among decisions to be and Public Relations in year in which we added made are how to meet Wichita; and Donald A. more than 5,000 g customers' needs after Johnston, executive vice customers. . eR ending our current president of Vinylplex, We also have diverse W lson K. Cadman construction programs. Inc., a plastic pipe weather. This is the .

Our decisions will manufacturer at President l edge of the Sun Belt.

I affect not only power Pittsburg. Yet we still have four gupply but earnings and Two members who invigorating seasons.

financial needs. We have served a combmed total February 23,1981 And to ensure our no definite plans for of 42 years retired. customers of reliable new plants after 1986. Clifton C. Otto, retired electric service, we're l Third, we continue to chairman of the board of using diverse fuels for l seriously pursue cost the Western Insurance our power plants. By the i control. One result is Companies of Fort Scott, mid-1950's, we plan to our electric rates remain had served since 1953. use not just one fuel but l comparatively low. As George K. Mackie, Jr., four - coal, uranium, we convert from ex- chairman of the board, gas and, in emergencies,

4 Financial Results . 1 .. M . 1. . M 1 - Z L . 1.1 J 1.

Financial results in 1980 were uni- time in as many years that the rate was i formly at record levels. raised. The new annual rate is now Net income increased $23.2 million or 52.04 compared to $1.94 at the end of 79 'o from 1979, totaling $52.4 million for 1979.

the year. The allowance for funds used Earnings per share of common stock during construction, a non-cash item, in 1980 reached $2.97 in comparison to  ;

was $38.9 million, up from 525.8 million l only $1.84 in 1979 when 28% fewer

{ last year. shares were outstanding. However,

! Common stock dividends were raised 1979 results had been depressed because 21:e per quarter effective with the final of the lack of timely rate relief and a payment of the year. This was the 25th small drop from 1978 in kilowatt-hour sales becaitse or cooler summer weather

! in 1974

! Operating revenues

! for 1950 were 5293.S million. an :ncrease of MS.S million over 1979 l A permanent rate m-

, I crease received October I  ! 1.1979, intenm relief l .

l granted June 1 and a 7 >

! .. : J , i growth m kilowatt-tm c.st.%..m, eC hours used bv customers

'D we serve directiv were nd v

, m , pnmarv reasons for the i mcrease. However. 58 S WG. , million that resulted j

%Q. ' ,

from the intenm rate mcrease is subject to

+fj , refu nd.

Revenues irm

% residennal customers mcreased 24oo to sWl million. Industnal revenues mcreased in oo to 593.5 million while commercial revenues l climbed 19 o to 56e.o million Electncity -eld to other uti!ine3 produced revenu e3 at Se.1 million compared to 510 -

million m 1070 Sales to municipai 3vstems and cooperatives were up 23"o m 1440 over 1o74 to I

324.4 milhon 1

a ,,.*m.r =.~7v, av.s . .; ,

rs , ; y; e; ,_~:, ,v-,-

1 .. .n .. ,-w.

.% ' N N T'YJ . ' C +4 y il*., -

l l

l l

t Warmer than average a weuer re,wrs meenor of a cydene

..W-,--r* '

winter temperatures krner at u cygne Generatmg  :& ~2 g - g$ ,, H tended to depress 5"'"'""""'

@ N Y,4 G %ddb%, M. '?O.L Y .

' W-kilowatt-hour sales early

'k " nl va piO.y f*] %9g and late in the year. But fuel went up 8%, total '/ ,

v.

general busines's sales fuel and purchased a

lg3f jumped 21% in Julv, power cost was up 1196 Aew 7 ( ph pF--

'!1% in August and 15% to $124.5 million because -

m September over 1979 more power was a 7 p s :m . 'g-as our area experienced produced. However, - '4 ~ ~ , ik - T $ G."j the secocd hottest sum- increasing generation 1 j *%c 1 < -

~*

. 53 -- J

, mer on reww. the with coal while reducing M.~~ji .,.

d{. Yj j (

_ (( f y3 hottest since 1936. A the use of oil and gas is high temperature of 112 an important step 3 4 - ' N eg .Q f u%g degrees was recorded. toward controlling cost. M""*" '-

~$ 3M iMvh There were 72 days Gas per million Btu when temperatures were costs more than twice as g.

Sc

. . #_l C ,;i *gk

<4 -

3 g^2

/u -(

90 degrees or higher, 44 much as coal. e.1 .2 > -

' @*^y' '

l days with 100 degrees or Taxes amounted to N J ^ ~f [9 .

higher temperatures, and $26.1 million compared . f ..? .; L[]?g

' 8% : q f.lcpQ 9 days of 110 degrees or to S18.9 million in 1979,  ; .

~~

.pjgf r.- .,n -

more. a 38% increase. m:

Customers we serve Nfaintenance costs  ;  ;

directly used 7.6 billion were up 7% from a year I, KG&E's Diversified Industrial Revenues kilowatt-hours in 1980, ago to $24.6 million. . Thousands of ooilars)  % Increase an increase of 7% from Wages and employee 1980 1979 over 1979 (

1979. Residential usage benefits charged to op-jumped 16% but the erations increased 10% ENERGY PRODUCTION (30% of totaD ,

Petroleum Ren,nmg . . 516,612 $14,264 16.0 t result of the national from 1979 and amounted Petroleum and Gas , o,303 4,288 23. <

economic downturn to $22.1 million. o,051 0,010 0. ,,

Pipeline Pumpmg .

and conservation was A new source of reve- Coal Atining. . . 720 698 3.' '

evident as industrial nue, although small in 27,686 24,265 total dollars, was started subtotal.. 14.1 customers - especially aircraft, minerals and in September. An ad. NATURAL RESOURCE (30% of total) 3 Chemical . . 17,634 14,476 21.8 '

construction - in- vertising circular now is .

creased their kilowatt- inserted in customers' 6^h[nt 7,469 6,376 17.1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> usage only 1%. bills m the Wichita area. ".a stics . . 2,347 2,204 6.5 Commercial sales Revenue generated will 27,450 23,056 increased 6?,o . Subtotal.. 19.1 t help offset bill distri-Residential customers bution costs. The inserts NtANUFACTURING (25% of total)

Aircraft.. 11,472 9,028 27.1 accounted for 299o of will be included with achine 6 13 4 total kilowatt-hours monthly billings as long used. Industrial cus- as they receive favorable Other Afanufacturing. 1,715 1,612 6.4 tomers used 37% and customer reaction and Subtotal.. 23,468 19.683 19.2 commercial customers are cost effective.

20%. In 1979 residential AGRICULTURAL, FOOD AND customers used 27%, KINDRED PRODUCTS (10% of total) l .

Grain Afill Products. 3,448 3,366 2.4 mdustrial customers 2,679 2,231 20.1 l Prepared Foods .

09% and commercial 5 feat Products. . 2,986 2,657 12.4 customers used 20%. Dairy Products .

486 386 25.9 Operating expenses Subtotal., 9,599 8,640 11.1 last year were up 13%

SERVICE REI ATED i over 1979 to $231.9 i INDUSTRIES (5% of total) million. Fuel and pur- Subtotal.. . 5,051 3.999 26.3 chased power were the ,

major expense, account. TOTAL (Note). ..$93,254 579,643 17.1 i ing for 34% of our total Note: 199 and 19'9 esdude $245.000 and 5685.000 fuel adjustment operating expenses. dause revenues. respectively.

i While the unit price of l

Power Supply i i 5 a_ J..i1.

~

6 . .

s. -- -

I The uncertainty that can affect long- the next few years to be about 3.5%

range planning was dramatically annually. Yet our system must be ready emphasized in 1980. Peak demand on for the kind of abnormal growth that ,

our system jumped 17% over 1979 to occurred in 1980 when the summer 1,727,100 kilowatts. General business l was the warmest since the all-time j l kilowatt-hour sales increased 7%. records were set in 1936. The alternative l l Dramatic growth like this plagues the is to risk the possibility of costlv, dan- l l people who plan new power plants. gerous shortages of electricitv. i i Over the past 5 years the rate of annual The extreme hot summer weather was l l growth in demand has averaged just responsible for much of the growth in

over 5%. But we expect growth in demand. Yet customers' needs were met j 3 n_ without " blackouts" or Long-term growth in 2

. .q- sv.#+1:f % {..{ $? .. other major interrup- customer demand is one l i_nd= C.n 4 L7e ; - ny tions although on reason for building new I

J.1.1 7 MM~ M .mups. --

Peak-use davs the generating reserves in generating plants. But, l there's an even more  !

j 3 'p - [i.-[- , the Southwest Power  ! pressing reason for new i

,3, -

.:- -q

• ~

, - - - - 4 .

, Pool were less than 5 o. i units. Natural gas -

7!

~

t , . .

Because it now can I with oil back-up - as

~

take as long as 13 years used almost exclusivelv a . '. , .

• te olan, license and bv KG&E for years to

. ,_ ,o  ; btad generating units. fuel its plants. Now bo o

< 1 .

our ability to meet last j fuels are expensive anc

, ?"g,ay ~I ' f. . K"',N: summer's needs was availability is uncertain. l jW Y 'gb.: determined several years . In addition. part of 4)]) :):<,, A< 'r fj l

4 3 .: .f .. ~'Jj%, , y e : ago. And, the plans we l todav's capacity will not '

3

' j 'qp e.- [U make todav will be the be available in the f* g(Cfe #~ ones whicfi shape the future. Our pioneenng ,

power supply of the 3,.1Q, Y; y p. ( : (,,, ,; f 7 - ^ g J 2

y 4

1990s. Even with lead-

! exchange of peaking l power with the i!

I f,C ~M 'y.-@.

-. _ . , .aQ '

times so long, we attempt ! Tennessee Vallev

,, p --

% .E -

__ to be flexible in our plan- ! Authontv is being j 1_ _,-

Ag{ ning, usmg the best  ; phased out.because of h-

.L F g information available i TYA's growing summer l

.. '. ]R. sz.= Q4 .s Q along with proven

~

peak. In 1980 Ive still

%., '~ j i c = .* f ,t < J V .c torecasting techt.iques.  ! had available ~3 A ja, 4 ,. ?  :

A study completed megawatts from TVA to

' .f ~ %gg, 7 L .. ~ U. ... s g" i-:late in 19S0 bv Gilbert  : help meet summer  !';

, ' O 4%

,. . . . . . ,.y - 1'- ~) -7 = .* f it . %

Commonwealth Asso-  ! needs. In 1%1 that ll CM 4,] ' ciates for the Mokan drops to & mw and to '

eg y: s g~

O

<g Power Pool provioes 13 mw in 1W  ;

1. + -

~

data about possible m ,. Plannmg for todav s '

Y V k... "

. [L

< - { N) .#M- e

- '.- % - , .h iuture customer needs i new power plants started in the late 1%0s j

1. y..,% g

. ,.gq

[g* g [ -

.]

.x,

%'ae7  ; 3 { and ways to meet l them. after we anticipated the

%. -r j

,hortage and increasing I

~

/

~

g .+ ~ cv. 4

'/ .

k- -s ./ .M 'a '

' " ^ ' N s ta rm ' cost of gas and oil. The'

"'." Em? " '"m ' a " "a plan calls for rew facil-i7f - g% - fs -

".f -

[l,.M,7"[J" .J ". '"." mes fueled pnmanlv

~rN.. K. yfy.;-*

.g '. 4 esrm a u mearc 2 - with coal and uranium. '

w w .; g 7 -.ia 44 - m m emna er.& me - me

-e-me-r re - " " ' "

i Both are m compara-

.t- m ,p tivelv good supply and u ,{ [ps,,3 f .h, re"*:t <~

E .. 7.m.y e i m,3,'c:en,,.y,,.

m aurete'urice m , are much cheaper than '

~; n ..

,,u,,

l

l l

Following our plan, wrk as comr ered z in =rd-ammer o" Ld"$ 28" "add'-

r- "

. v. __ .

we have completed four W 69._

new coal-fueled units in C'l,$En["'"" "" '?

~MQng the past eight years. A~'

Completion Niay 1 of expected to be some 1 ,.

Jeffrey Energy Center time before it's known if Unit 2 brought company ZWM that offer is accepted. fQ_

coal-fueled capacity to At the end of the Tm 959 megawatts,48% of '

total generating capacity.

year, work on the

' uranium-fueled Wolf IN"

'Y A third Jeffrey unit is Creek Station was 70% 4'@qt scheduled for comple-tion in 1983, the feurth complete. The com-mercial operation date M"

=m in 1986, a year later than l

has been delaved a year

' ' 5 '

previously planned. to 1984.  ?

Completion of these will Late in 1979 the KCC bring the company's initiated a study of Wolf total coal-fueled capa- Creek financing and 1% w bility to 1,231 megawatts. management. After hk[ , - -

With nuclear capacity of completing the 9-month W.W '

477 megawatts to be' on-line in 19S4, total investigation in Novem-ber, Cresap, AlcCormick Md i

non-gas capability by and Paget, Inc., the from Wyoming to fuel were in company 1986 should be 1,708 independent consultants all Jeffrey Energy Center storage at year's end.

megawatts, about equal hired at our expense units and the second An even longer-range to our 1980 peak. by the KCC for the La Cygne unit. The first means of ensuring

All new plants are an' alysis, said, "On the La Cygne unit uses local customers adequate

owned jointly with other basis of our firm's direct coal purchased under a power is research. '

, utilities. Other owners experience in evaluating 30-year contract. In 1980 we collected j of Jeffrey include The nuclear construction Gas as recently as $1.3 million to support '

Kansas Power and Light projects and industry 1972 accounted for local and national Company, Western data in our files, we' nearly all our fuel but projects of the Electric Power Division of Cen- believe that the Wolf provided only 47% in Power Research Institute. l tral Telephone and Creek project is one of 1980. Atost gas comes Research involving

Utilities Corp., and the sounder nuclear from Kansas wells KG&E directly includes Niissouri Public Service projects under way in ' dedicated to company effects of voltage reduc-Company. Kansas City

~

the country." use. The remainder is tion on power demand

( Power & Light Company The report also from an interstate and appliance operation;  ;

owns 50% of La Cygne outlined opportunities to pipeline, but this has at use of wind-powered Station where units improve the project. times been interrupted, generation in connection were completed in 1973 Uranium is being particularly in winter with KG&E service; and 1977. secured primarily when there is a heavy determining if smaller .

KCPL is also a partner through a contract with demand for gas to heat transformers can be cost in Wolf Creek and Westinghouse and a l homes. While more gas effective, and using the Kansas Electric Power subsidiary formed by has been available heat pump principle to Cooperative, Inc., made KG&E an'd KCPL. ~ recently than had been heat water.

up of 26 rural electric Uranium already is projected, the cost has cooperatives, is planning available for the' plant's increased rapidly.

to purchase a 17% initial core and only Residual oil replaces interest. Completion about S00,000 pounds gas during times of cur-of this sale has been must be purchased for tailment. In 1980 only 3

delaved by a KCC order. the 'i st 6 reloads. We 304,000 barrels of oil i See 'pages' 2 and 9 for also have a centract with were used compared other information. l 4 Westinghouse which, sub- with 966,000 barrels in We also have offered a ject to supply and price, 1979 and 1,913,000 in group of municipal will provide the plant's 1978. Using more coal  !

utilities 90 megawatts of needs through 2002. and gas were reasons for capacity from existing Long-term contracts the decline. About and new units. But it's have been made for coal 700,000 barrels of oil s

• - --r-m-. . - . _ _m,,._._____

8 Financial Management J -

T T V- -

~

Spurred by the 1978 federal law which from gas to coal and uranium as fuel for restricts natural gas as fuel for large our power plants.

utility power plants by 1990, the com- Substantially all of the $762 million pany continued its important construc- construction program is expected to tion program in 1980. be financed externally Peak year of During the year $192 million was the period will be 1981 when construc-1 invested in new facilities with $762 tion expenditures are expected to be million to be spent in the five years $200 million.

1981-1985. After 1985, the level of invest- Our financing plans call for raising '

ment is expected to fall off because we'll $204 million in 1981 from outside have completed most of the transition sources. If a proposed sale of an 8.5%

=

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interest in Wolf Creek 3-year pollution control delivered to KG&E and established, 702,000 Station to Kansas Elec- revenue bonds were other Wolf Creek shares have been tric Power Cooperative, issued in August partners. purchased under the Inc.,is not completed, total through the City of Citing inadequate plan, producing $11.3 financing needs could Burlington. earnings, restricted cash million in new capital.

rise to $282 million.

• S24.4 million was flow, heavy construction The amount of reinvest-Although the Kansas realized from the sale requirements, limited ment by stockholders has Corporation Commission of 1.75 million shares financial flexibility and increased each year.

in October granted of common stock in lack of timely anii The number of em-approval for the coop- November at $14.50 per adequate rate relief, ployees participating erative to become a share. rating agencies reduced in the employee stock part-owner of Woli e $3.8 million was raised company bonds from A purchase plan estab-Creek, it imposed through sales of com- to Baa and from A- to lished in 1979 also in-restrictions which make mon stock through the BBB, commercial paper creased during the year.

it almost impossible to dividend reinvestment from P2 to P3 and Under this plan, em-complete the sale, and employees' stock preferred stock from ployees through payroll KEPCo, KG&E and purchase plans. BBB to BBB- and from deduction or cash pay-KCPL have asked a Bank loans and A to Ba. ment buy unissued stock l court to review the KCC commercial paper are On January 1,1981, at 959'o of market value.

! decision. The Kansas used as short-term the First National Bank In 1980 almost $250,000 legislature also began financing. Outstanding of Chicago became the was invested by 296 par-considering a billin short-term loans at the New York transfer and ticipating employees who January 1981 that wculd end of the year totaled registrar agent for KG&E bought 17,131 shares.

remove KCC jurisdiction $26 million, down from stock replacing Irving Total number of in this case. KEPCo's the $42 million out- Trust Co. and the common stockholders l

advances amounting to standing last year. Registrar and Transfer grew by 5,186 to 42,931 I

$64.5 million plus Also in 1980 we ex- Co. Also, KG&E is now in 1980. There were accumulated interest tended for two years handling stockholder 3,177 preferred stock-must be paid to KEPCo our $100 million revolv- record keeping and holders, about the same if the sale is not ing loan from a group of dividend payment as in 1979. Stockholders completed. This could domestic and foreign previously handled by live in every state and l affect our ability to fi- banks. Interest is based Irving Trust Co. This several foreign countries.

I nance our construction on a combination of includes administration No stockholder owns as l commitment on reason- prime and federal funds of the dividend rein- much as 19'o of the stock.

able terms. rates. As of February 6, vestment plan for Protecting stockholder In 1980, to finance our $22 million was out- stockholders. interests is a stated ob-investment, we raised standing under this Stockholder partici- jective of the company.

$124.5 million from agreement. The re- pation in the Dividend several sources: maining $78 million is Reinvestment Plan o $30 million of 16%9'o reserved to repay continued to grow in 7-year first rnortgage KEPCo advances if 1980. Dividends on bonds were sold in necessary. Any out- stock owned by partici-l Niarch. standing balance in pants are automatically l o $23.8 million was October 1982 becomes a reinvested each quarter three-year term loan.

realized in Nfarch from in newiv issued com-the sale of 1.5 million Advances totaling mon stock at 95 6 of shares of common stock $19.5 million were market price at the time.

at $16.375 per share. received from KEPCo Participante may also

o $15 million of 6%9'o toward the purchase of invest with no broker's 1

3-year pollution control its 8.59b interest in Wolf fee i p to an additional

! revenue bonds were Creek Station. 55,000 each quarter at issued in July through Settlement of litiga- market price.

the City of Wamego. tion with Westinghouse Details of the plan can o $25.5 million of 7%% Electric Corporation be obtained by writing:

completed in Nfarch Secretary, KG&E, P.O.

c uisata umts ,ww rr w e neutu resulted in our receiving Box 208, Wichita, KS i w cacers gencurmwraarv- $19 milh,on m cash with 67201.

umt u te uev acrgy center am additional goods and Since 1977 when the mmrl<rd on se< Ale m .% services still to be reinvestment plan was

1 l

1 10 ~ Customer Services and Load Management V E Z: 731 : '

i Recent changes are having a great Thus, wise promotion of key electrical j impact on the energy market: equipment helps curtail the need for I o Fast-rising natural gas prices are higher rates, directly benefits those we l giving electricity an edge in competing serve. and helps conserve natural gas. ;I with natural gas utilities for important e State regulatory bodies now are  !!

off-peak business like home heating.

e A study completed in 1980 by Cresap, working to implement the federally-mandated National Energy Act of 1978.

ll II McCormick and Paget, Inc., says Among other things, Kansas and other l l growing sales as well as rate increases states must consider such rate-making l are required to meet KG&E revenue principles as marginal or incremental '

needs through the first half of the 1980s. pricing which could unrealistically i increase the prices i programs to increase i a l customer understanding I' 3 , ,

'~

- i. ! people pay for energy.

l' * -

e Efficient use or energy ot energy use and for  !

i. . - .*

a

, 4 %mI- remains a key in KG&E's showing customers how  ! l

.. c

( Iftbf:

f >( .

communications with its to get creater value from l

n. :

l : .- -... .

customers Although

, the electncal dollar. l

l. .-  ;.

' 2

• y wise use has been em- Customer Services

. ' ( .\

l., 4 .

. phasized for many l also promote ~ such 7

, {  ! vears, growmg energv  ; energv erficieni +ip-

.. - ..m 4 , -

. t l pnce and suppiv l ment as heat pumps tor ! ,

(( ; ' . . , ; k / % o. ' O  ! problems have increased i indoor heating and l 4 f the importance or and cooling and electne

.r a p-c <

e.". * *e' need tar conservation. blankets to maintain

,gS ..: /

f;,;< [f. [.

, ,. ][3 g .; .

• Customers continue to comfort. In 1480 there  !

L.

' j. .*i

~cf

.c s

... '/ - 1

, g4 .,{ be perplexed by the need to separate tact

, w ere 404 new residential I heat pump customers

4. '

from fiction in the i added to compant lines.

p;U J. emotionally charoed l -() 7 '

. f. 4 l Equipment which uses 3:5i V energy debate, particu- I electncity for space

}. ,, -

, 'c 3'; larly about nuclear l heating improves our i - -

energy. j efficiency and lowers

^

y ". "',. ,.. ,

To deal with these l unit costs or electricitv.

i < y . ,

< *. changes. the companv's  ; Use or electncits vanes 3 *

\larketing Services j throughout the vear as 7 .

• g - ,, .

.g ' f "' .A Department was redes- , n ell as the dav For our

+ =<: g g , ;. J* , g' r- ,

ignated as Customer svstem. the peak use is

A ,s- -

Services Department m  : during the heat or

< [ ". JpIIB l c +- f i 1980. This move again  ! summer when there is I  %, "# . .. ' * '

emobasizes that the heas . Jemand for air

,- ,'g A l  ! .. , 4 pnnury responsibility or conditionmg

(+ <# '

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arranges for service to and we have no practical

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be installed. expanded war to store laree l ..

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industrial customers also 'turmany powrud @ support  ;

are advised on efficient 'Y"'""""'"*#'"'#"*

so sn a potver emergency. they rutive l enetgy nnanagement prwrity consideratwn.

equipment and prac-tices. This year, KG&E's -

participation in the night. This spreads out Nadonal Energy Watch ***

use throughout the  ?.

was extended beyond 24-hour day.

residences to include To comply with pro- /

larger customers as well. visions of the National i National Energy Energy Conservation '

Watch is a voluntary Policy Act of 1978, e program developed KG&E expects to offer a N:. ,

by the electric utility residential customers

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industry. KG&E's com- home energy audits as A  :

mercial and industrial soon as the conservation 4,, '

customers are encour- plan of the KCC is 4 aged to avoid energy approved by the Depart- _

waste in buildings and ment of Energy.

l to utilize such presently The company's Energy

[ available energy efficient Efficiency Award Program means of dealing with save them money. But equipment as heat promotes conservation unusually large bills. conservation also reduces I pumps and heat reclaim in new construction. We A Third Party Notifi- energy consumption and systems. Sixteen work closely with cation plan now permits dependence on foreign commercial or industrial architects and builders customers to arrange oil which is good for the buildings qualified for to ensure that homes for billing information to economy and the entire NEW awards in 1980, and other buildings will also be sent to another country.

Over the longer term, be heated and cooled person. This is especially We remain committed reducing growth in efficiently. helpful for some elderly to meeting customers' the peak load can ease In January, all resi- persons who receive needs for power on the the need for adding dential customers were assistance in conducting short-term and long-generating equipment informed of new uni- their affairs. range basis. In 1980, we and provide more form billing practices A Life Support Service added 5,579 more effective use of facilities. which govern utility identifies customers customers. Additional To help achieve that, practices in discontin- who depend upon elec- customers will become our rates are higher uing service, disputing tricity for life support dependent upon us in during the peak months bill?, security deposits equipment. Customers the years ahead. We are l - July, August and and late payments. All so identified receive anxious that our cus-1 September. This is a division offices now priority consideration if hmers be aware of our way to notify customers have access to central an outage should occur. problems of planning that on-peak use creates computerized files to For the third year in uncertain times.

additional expenses handle quickly questions Town Meetings were Customers must also which are being passed about customer accounts, held throughout the understand our need for along to those respon- As a way to help service area for resi- timely and appropriate sible for them. customers cope with dentia! cmcomers. rate relief.

For several years we rising energy costs, the During Gir series, also have promoted the company offers resi- virtually all residential concept of " wait 'til 8" dential customers an customers received a in performing high average billing plan personal invitation to electricity use projects which helps spread the meet with company around the house - year's highest bills over officers and managers.

laundry, dishwashing all 12 months. About Emphasis was on and cooking. 22% of eligib'e resi- answering customer Customers are en- dential customers use questions.

couraged to use elec- this bill paying method. Our customers have tricity at "off-peak" During the extrems heat demonstrated a willing-hours - around 8.:r. the of last summer, this ness to conserve energy.

morning or after 8 at was a widely accepted in part, doing so will

12 i Regulation E ?. . O. .. '. i 1 " i t. L #7 - ~+ o 1-C Regulatory agencies long have 1980 in the KCC's practice for dealing

, approved utility rates and set maximum with rate requests. The KCC used a new l levels of return utilities could earn on plan to speed up action on requests of i investment. KG&E rates and many of its five utilities sharing ownership in two j l practices are regulated by the Kansas generating units completed last summer. l l Corporation Commission, a three- The result was interim rate relief just

nember group appointed by the one mocrh after the new units began l governor, and by the Federal Energy serving customers. For KG&E this meant j Regulatory Commission whose members a 6.2o'o increase - about S13.9 million -

are chosen by the president. effectis e June 1 to help pay costs of There was marked improvement in operating the new second unit at Jeffrey 4 .

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Energy Center. These .mtenais are premrei to accommrs rates are subject to the arrucatwn nr an weatmg i -

licenu for Wdf Cruk s:atwn which ruund. But we cxpect to ws submrtcJ to the .vaclear i request new permanent Regulatery commssen.

rates, which include the interim increase, early in In February 1980 a 1981. request for a 53.6 million Fourteen months increase in rates charged passed before rate relief wholesale municipal was granted for the first systems was filed to take .

Jeffrey unit completed m mto account completion - -

, July 1978, a major factor of the second Jeffrey T l.

i in our low earnings in unit. Last general

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interim relief was appealed to the Kansas which buy electricity for resale from KG&E was

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j State Supreme Court. granted in 1975. Action ,

w New permanent rates on a rate request filed in  ;

were approved by the September 197* fol-KCC in September, 1979, amounting to S17.3 lowing the completion of the second unit at N."+ s.

million, or 9% In 1980, La Cygne is still

the Kansas Supreme pending, and has been requirements have regulations, KG&E has Court ruled the KCC included in the current increased the cost of increased the size of its had acted within its request. nuclear fueled projects. staff to be informed i jurisdiction in not Government regu- Cresap, NicCormick about and to assure allowing the interim lates far more than rates and Paget, Inc., con- compliance with l relief. and earnings. Plans sulting firm hired by regulations. In addition, The 1980 session of for implementing the the KCC to make a public information the Kansas legislature National Energy Act detailed study of the prograno have been also took steps to help passed in 1978 are still Wolf Creek project, expanded to alert the reduce regulatory lag in being developed. But, reported in November public to the cost and

! rate making. The KCC provisions of this legis- that a utility which other implications. We must now have full lation are far reaching, decided in 1973 to have also increased l hearings under way ranging from specifying construct a nuclear plant communication with j within eight months of a fuel that can be used in could have reasonably both legislative and rate request being filed. generating plant boilers expected the plant to congressional Failure by the KCC to to procedures that must cost $470 milhon, delegations.

l act means the utility can be followed in customer including infhtion rates,

( begin charging the new billings. In January 1981 increased mterest l rc:es proposed. the KCC held two weeks charc.1 and some

Regulate-v lag at the of hearing on four of the changes in regulatory federal level is much standards of the Public requirements.

l worse than in Kansas. Utilities Regulatory But because of new I Two rate increase re- Policies Act (PURPAk regulations, " . a plant quests are pending with This act requires states committed to in 1973 j the Federal Energy to consider rate designs will ultimately cost in Regulatory Commission. that in some cases are excess of $1.4 billion, or

! not based on recovering more than three times l the cost of providing 'he original estimate.

.4 Acst semst rewms one e service from the Nioreover, it will take

. the tests re.n.:rd d rew ria,e customers who create about five years more

1sdaret we t., mur new acas the costs. to complete . ,"

l N Ne nDr,',Z,,. Impact of growing according to Cresap, rew :ts wrt d 53 m :w, Nsgera N regulation at all levels of NicCormick and the Paten Dortment e ccmrly government is dramat- Paget, Inc.

, N U n 7 4 [!, 3 " I'rh/ ically illustrated by how Because of this w e. new and changing massive increase in 1

Employee Participation < . X  :.

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l I l Emplovees provide the initiative, $700,000. Cash awards are given j

energy and know-how to efficiently through the Employee Cost Reduction l

! manage and operate the company. Their Plan to people whose ideas improve 4

value was particularly evident in 1980 work results.

when the company's system and A tuition reimbursement plan emplovees proved equal to the encourages emplovees to take advantage challenges of the second hottest summer of formal educational opportunities. Too, of record. most departments provide specialized Job productivity is aided by training on-the-job training. Training for along with proper equipment and tools. ,

apprentices is provided in cooperation Capital mvested for each job averages  ! with the International Brotherhood of l Electncal Workers .vhich local companies

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represents KG&E Technical positions

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, penence with the com-

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or longer The low mcrease m the two-vear pg[-

p  : i turnover rate is im- penod met wage

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Kansas na Elcctric Company 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Major trends and events affecting the compan financing arrangements. In October M80 the KCC au-1978-80 are p resented here with factors expectes.y to have during thorized the purchase by KEPCo, but upon conditions a major impact on future operations. which would materially alter the agreed upon terms of the sale in a manner unacceptable to the parties. Both CONSTRUCTION KEPCo and the company have appealed this order to the During this period, the company expended large Kansas courts.

amounts on construction to provide adequate electric in addition to the proposed sale to KEPTo, the com-service within its service area and to comply with federal pany is negotiating the sale of up to 90 MW of generating

'aw which requires the company to cease burning gas for capacity, including up to 52 MW of Wolf Creek, with the g:neration by 1990. Regulatory, environmental and Kansas Municipal Energy Agency (KMEA), an organiza-safety matters have added greatly to the time required to tion of municipal utilities.

complete construction projects, further adding to their The company cannot determine whether or when costs. Inflation has also substantially increased construc- either of these proposed sales will be completed.

tion expenditures.

From 1973 through 1980, the company added 959 MW FINANCING REQUIREMENTS, LIQUIDITY of coal-fired capacity, 48% of its present total capacity. AND CAPITAL RESOURCES These facilities cost $347 million representing an average To satisfy long term capital needs, the company has cost of $362 per kilowatt. frequently sold bonds and stock. Interim construction Estimated construction and nuclear fuel expenditures financing has been by short-term borrowing.

for 1981-1985 are $823 million ir.cluding $223 million al- During 1978-1980, the company spent approximately lowance for funds used during construction (AFC). Of $425 million for construction, excluding AFC, and retired this, about $370 million will be invested in Wolf Creek, $34 million of outstanding debt and preferred stock, a

$61 million in nuclear fuel and $164 million in Units 3 and total cash outlay of $459 million. Approximately 73% of 4 of Jeffrey Energy Center (JEC). From a high of $217 these funds were obtained from long term and 1% from million in 1o81, these expenditures are expected to de- short-term borrowing,14% from KEPCo advances relat-cline to $110 million in 1985. ing to the purchase et an interest in Wolf Creek, and 12%

These amounts assume annual cost escalation rates from internal cash generation. Long-term financing of ranging from 7% to 11% and an AFC gross rate of $336 million consisted of 55% debt,10% preferred, and 10.6%. They also reflect a 50% interest in Wolf Creek in 35% common, the latter representing an increase of 80%

! 1%1 and 41.5% commencing in 1982, assuming the sale in outstanding shares. Details of sources of funds during l by the company of an 8.5% interest to Kansas Electric 1978-1980 are in the financial statements under State-Power Cooperative, Inc. (KEPCo). Construction needs ments of Sources of Funds for Construction.

are continuously reviewed and changed in light of load During 1978-1 % 0, capitalization ratios improved to forecasts, financial and economic conditions and other 49% long-term debt,3% short-term debt,12% preferred factors. equity and 36% common equity compared with goals of JEC 3 is scheduled to be completed in 1983 at an esti- 50% total debt,12% preferred equity and 38% common mated cost to the company of $83 million or $612 per equity.

kilowatt. JEC 4 is tentatively scheduled for completion in The company anticipates that substantially all of the i 1%6 at an estimated cost to the company of $113 million approximately $600 million of 1981-1%5 net construction I or $828 per kilowatt, subject to Kansas Corporation expenditures, together with approximately $113 million l Commission (KCC) approval under Kansas siting laws. of sinking fund payments and long-term debt maturities i Wolf Creek is scheduled to be completed in 1984 at an during that period, will be financed externally. Should it l estimated cost to the company of $689 million or $1,443 be required to repay the KEPCo advances with respect to per kilowatt. Changes in the scope of the Wolf Creek the sale of a portion of Wolf Creek and to finance 50%

project including safety features resulting from the Three rather than 41.5% of Wolf Creek construction costs, the Mile Island accident, added federal requirements and company will require approximately $136 million of addi-delays in meeting construction milestones have caused tional external financing during this period. Should the two one-year delays in the in-service date. They also sale of generating capacity to KMEA be comp leted, ex-hive contributed to the approximate 60% increase in the ternct financing requirements would be reduced by ap-preject's estimated cost since the first definitive estimate proximately $100 million. The company's ability to fulfill in 1976. The Nuclear Regulatory Commission (NRC) has these external financing needs will depend upon its fi-commenced proceedings for the Wolf Creek operating nancial condition, the availability of substantial amounts

, license. However, unless the NRC's current schedule is of external funds and adequate and timely rate increases.

accelerated, more delay and cost increases are possible. In 1981 and 1982, the company plans approximately

$2M million and $142 million, respectively, of external

, SALE OF PROPERTIES financing. Approximately $25 million is expected in early l

The company has agreed to sell to KEPCo approxi- 1981 from a two-year banker's acceptance financing se-mately 8.5% of Wolf Creek. This sale is subject to the cured by the company's coal and fuel oil inventories.

receipt by KEPCo of necessary authorizations from the Approximately $30 million is expected to be derived from KCC and to the completion by KEPCo of permanent the sale of preferred stock in March. The company in-l

16 Kansas M Electric Ormpany tends to sell up to 2 million shares of common stock in RESULTS OF OPERATIONS Apnl. The types, amounts and timings of subsequent During 1978-1980, the following changes had a signifi-1981 1%5 financings will depend on market conditions, cant effect upon the company's operanon:

adequacy of future rate relief and other factors affecung Operating revenues increased in 19S0 principally as a financial position and results of operations. result of an abnormally hot summer and general rate Recent downgrading of the company's securities is increases. A cooler surnmer in 1979 caused a slight de-increasing the cost and difficulty of external financing. In cline in general business revenues as compared to 1978.

1080, the company's first mortgage bonds were down- Revenues also increased due to the recovery of increased rated by Stoodv's Investors' Senice, Inc. (hfoody's) from fuel costs under the fuel adjustment clauses contained in A to Baa and b'y Standard & Poor's Corporation (S & P) the company's rate schedules which pernut recoveries of from A - to BBB; its preferred stock was downrated by increasing fuel cost on a current basis.

Ntoody's from A to Baa and by S & P from BBB to BBB , Operating expenses increased throughout the period and it's commercial paper w'as downrated by hfoody's due to inflation, increased maintenance at coal-fired from P2 to P3. In February 1981, the company's preferred plants, rising fuel costs and increased fuel consumption stock was further downrated by N!oody's to Ba. dunng the summer of 19R0.

The company has a $100 million bank loan commit- AFC is a non-cash item which, on the Statements of ment matunng in 1085 of which 522 million is presently Income, offsets the interest expense and preferred stock outstanding. The unused portion of this commitment is disidends incurred to finance facilities under construc-

.: served for repayment of the KEPCo advances should tion and provides a return on common equity invested in this be required. The come any is negotiating a four-year construction projects at a rate equal to the mos' ecent 530 million commeraal paper revolving credit financing allowable equity return. AFC varies with the level of i to be backed by a letter of credit. This should permit the construction work in progress and cost of financing. It paper to be rated Al P1 with a resulting lower cost of increased in each of the past three years because oflarger interest to the company. amounts of construction work in progress and increases The Federal Energy Regulatory Commission has au- in rates of computation. AFC as a per cent of earnings thonzed up to $100 million in short trrm borrowings. available for common stock was 55% in 1978,109'o in The company has shert term credit arrangements for 570 1979 and 90*o in 1980, and is esumated at over 100*o in million. 1981 and 1982. In 1979 the company in connection with The company's mortgage contains various earnings an order of the KCC adopted flow-through accounting tests restricting the issuance of additional bonds. Under treatment for the income tax effect on the borrowed the most restnctive of these tests, the company, based funds portion of AFC. This reduces income tax expense upon its net earnings for 1950, could issue 5110 million of and thereio:e revenue requirements. Income tax effect additional bonds at an assumed interest rate of 15'o. As on borrowed funds is being capitalized and is expected to of December 31,1980, the company had approximately be recovered in future penods under regulatorv practices

$475 million of unfunded net property additions, suffi- of the KCC. Without this treatment, internal cash genera-cient to fund issuance of up to 5332 mdlion of additional tion would have been increased by about 516 nullion in bonds. 1050.

Tha Restated Articles of Incorporation contain no fi- Construction of Wolf Creek accounted for about 560 nancial tests limiting the issuance of additional shares of million of the 574 million of AFC recorded during 1975-preferred stock. 1950. AFC will continue to increase while the unit i, To satisfy its substantial external financing require- under construction. After the unit is placed in senice, the ments dunng 1981-1055, the company must increase in- company wdl be entitled, under KCC policies, to recover ternal generation of cash to be able to service long-term through increased electric rates a return on, and depre-debt and prefer ed stock and to pay dividends at com- ciation of, its investment in that unit, including cap-petinte rates on common stock. In recent years the com- itali2ed AFC.

pany has earned a return on common equity that has Interest charges and preferred dividends increased averaged about 3.5% less than the percentage estab- substantially in each penod pnncipally because of addi-lished by the KCC as fair and reasonable for Kansas tional secunties issued to finance construction.

customers. Regulatory polices of the KCC and Kansas Earnings per share of common stock were depressed law prohibiting construction work in progress to be in- in both 1978 and 1979 due to inadequate and delayed rate cluded in rate base have also contnbuted to the com- relief. Rate increases in 1979 and 1950 and increased sales pany's inadequate internal cash generation. As dis- resulting from an abnormally warm summer contnbuted cussed below, non-cash AFC constituted the bulk of to higher earnings in 1950. The company does not antici-earnings available for common stock dunng 1978-1 % 0. pate that any additional rate increase granted in 1981 will Unless the company can obtain prompt and adequate have a significant effect on its results of operations in rate relief in the future, it may be required to sell addi- 1081.

tionalinterests in generating units in existence and under The impact of inflation and changmg prices on the construction, and to extend the schedule for the comple- company's revenues and income from operations is dis-tion of Wolf Creek. This could affect the abihty of the cussed in Note 13 of the Notes to Finanaal Statements.

company to extend senice to new customers in the fu-ture and require limits upon the use of electricity by eusting customers during penods of peak demand.

17 Statements Of Income 1980 1979 1978 For the Years Ended December 31 (Thousarids of Dollars)

Operating Revenues (Note 2) . ... . .. .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S29 3,808 5244,970 5238,460 Operating Expenses:

Fuel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,221 101,927 96,017 1>e ferred fu el . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . - 1,347 6,127 Purchased power. .. .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,233 8,535 4,162 O th er opera tion . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .. . . . . . .. . . . . . . . . . . . . 31,383 27,675 25,062 Maintenance . ... . .. . . . . ..... . .... .. . . ... ...... ..... ............... .... 24,583 22,999 15,292 Depreciation .. . ... ... .. ... . .. .... . .. . . . . . . . . . . . . . . . . . . . . . . . . 25,368 23,625 21,924 Taxes - other than income taxes . . ... ....... . . . ... . .. . . . . ... . . . ...... . . . . ..... .. . .. . 12,019 11,910 12,207 Income taxes (Note 9) ........ .. ..... .. ... .... . . . . . . . . . . . . . . . . . . . . . . . . . 14,098 7,022 18,697 Total opera ting ex pe nses . . . . . . . . . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,905 '05,040 199,488 Operating Income..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,903 39,930 38,972 Other Income and Deductions:

Allowance for other funde used during construction ................. ........... 20,353 13,358 8,716 Income taxes - net (Note 9) ................ ... ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . (408) (259) (38)

Miscellaneous - net . . . . ........ .. .. ... .... . .. .. .. .. ... . . . . . . . . . . . . . . . . . . . . . . . . . 7_72, 479 73 Total other income and deductions. ........... ... . .. ..... . ........ . . . . . . . 20,y 13,578 8,751 Income Before Interest Charges ... ..... .. .. ...... .. ..... ...... ..... ........ ...... 8',620 53,508 47,723 Int: rest Charges:

Interest on long-term debt . . . . . . . . . . . . ... .. ... ............ . ......... 39,582 31,726 23,746 i

Other interest.. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 8,749 4,752 1,815 Amortization of debt premium, discount and expense - net .. ... ... ... . .. 412 209 197 Allowance for borrowed funds used during construction (Note 2). . . . . (18,518) (12,399) (6.999)

Total interest charges ... . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,225 24,288 18,759 NI t In co m e. . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 52,395 29,220 28,9M Preferred Stock Dividends.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,187 8,217 7.084 Earnings Applicable to Common Stock ..... ......... . .. ....... ........ . . . .. . S 43,208 S 21.003 S 21,880 Average Shares of Common Stock Outstanding.. .... ...... . . . .... . .14,562,746 11,400,916 9,615,051 Earnings Per Share of Common Stock.. .. . .... . . . . . . . . . . . . . . . . . . . . S 2.97 5 1.84, S 2.28 Statements of Retained Earnings Fcr the Years Ended December 31 2980 2979 2978 (Thousands of Dolhrs)

Balance at Beginning of the Year . . ....... ...........................................$89,407 $ 91,015 5 87,224 Net Income... . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,395 29,220 28,964 To tal . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . .. . . . . . . . . . . . . . 141,802 120.235 116,188 Deduct:

l Cash Dividends:

Preferred stock (at prescribed rates of each series - Note 3) ........... .... ...... . 9,187 8,217 "',084 l

Common stock - $1.965 in 1980; $1.91 in 1979; SI.825 in 1978.. ..... . . . ..... 29,618 22,272 17,944 Capital Stock Expense..... .. .. ... ......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 133 339 145 Total .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,938 30.828 25.173

, Balance at End of the Year.. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 5102,8M S 89,407 5 91,015 l

l See notes to financial statements.

l l

1 l

l _-_-----_. - . _ _ - - --

18 Kansas in Elsctric Company , 3 1980 1979 Balance Sheets December 31,1980 and 1979 (Thousands of Doiiars>

Assets Electric Plant at Original Cost: (Notes 1 and 6)

Plant in service... .... . . .. . .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 811,416 5735,201 Less accumulated provision for depreciation . ..... ........... ....... . .. .. . . . .. ..... 200,570 178,113 Net plant in service.......... . ... .. . . ... . . . . . . . . . . . . . .. . . . . .. . . 610,846 557,088 Construction work in progress ....... .... ...... .. . . ......... . . . . . . . . . . . .. . . .. 455,114 343,016 Nuclear fuel.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,474) 13,345 Total electric plant - net.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,064,486 913,449 Other Property and Investments - a t cost ....... .. ... .. ....... .. . .......... .. .. . .... .. .. 13 180 Current Asrets:

Cash (Note 3) . . . . ... . ... .. . . . . . . . . . . . . . . . . . , . . . . . . . . . . . .. .. . . .. ... . ...... 2,199 2,342 Special deposits. . ..... ...... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... ...... . 5,347 5,152

% ounts receivable - net . .. . . . .. .. .. .. .. . . . . . .. . . .. .. . . . . ... . . . .. . . ... ... ...... ...... 22,512 16,530 F el - a' everage cost.. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .... . . .. . ....... 25,451 28,681 Materials and supplies - at average cost ... .... ........... ... .. .. ... . ... .... ... ... . .. . . 9,600 9,563 Prepayments and other current assets.. . . ... . . . . . . . . . .....

. . ... ....._ 847 708 Total current assets ...... . .. ... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6'p, 6 62.976 Deferred Dedits:

Unarr 3rtized debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,287 4,208 Oth er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . ... .. .. . .... 1,%1 2.824 Total deferred debits . .. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ... ... ..._ 7,268 7,032 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 51,137,883 $983,637 Liabilities Capitalization:

Common stock, without par value, authorized 20,000,000 shares; outctanding, 16,890,05.7 and 13,240,277 shares, respectively (Note 4) . . .. .. ... .. .. . .. $ 238,403 $184,397 Retained earnings (Note 6) . . .. .................... .. . ... 102,864 89,407 l . . . . . .. . . . ... . .. . .

Comm an stock equity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . . . . . .. .. 341,267 273,804

' Prefer.eu stock, including premium - redemption not required (Note 5).. ...... .. ....... 63,993 63,993

- Preferred stock - redemption required (Note 5)..... . ....... . .. . . . . .... . . .. .. .. 53,000 54,000 Long-term debt (Note 6) . . .. . .. .. . .. . .. . .. .. . . . . .. . .. .. . . . .. . . . . . . . . . . . . . . . . ... .. .. . .. 451,608 386,519 Total capitalization... . . . ...... . . . . . . . . . . . . . . . . . . . . .... .. . .. ... .. .. .. 909,868 778.316 Current Liabilities:

Short-term borrowings (Note 3) . ..... . . ..... ...... .. ..... ... . . . .... . .... . ..... 25,650 41,800 Securities due within one yr.ar... . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . - 1,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . ... . ..... .. .. 20,008 24,220 Customer deposits .. ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,513 1,384 Taxes acerued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. ... . . . . . 9,816 4,009 Interest accrued... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ..... .. . . .. .. .. 10, % 2 8,754 Dividends declared . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. 2,279 2,327 Other current liabilities . . . . . . . . . . . . . . . . . . ................. . . . .. . .. .. 259 138 Total current liab3ities . . . . . .. . . . . . . . . . . . . . . .... .. . . 70,487 83,632 Deferred Credits:

Accumulated deferred income taxes (Note 1)....... ...... ... .. . ... .. . . .. . ...... . . 53,650 46,318 Accumulated deferred investment tax credit.. . . . . . . . . . . . . . .. .... .. . . . 28,859 26,797 Customer advances for construction .. . . . . . . .. ... ... . . . . ... . . . 1,647 1,252 Advance - Kansas Electric Power Cooperative, Inc. (Note 7)..... . . . . .. .... ... 72,712 46,893 Other . ... . . . .. . .. . . . . . . . . . . . . . . . . . .. . . . .... . 347 171 Tctal deferred credits.. . . . . ... . . . . . . . . . . . . ... . . . . . . 157,215 121.431 Reserve for Injuries and Damages .. .. . . . . . . . . . . . . . . . . . . . . . . . . . . 313 258 i

Commitments and Contingent Liabilities (Notes 7 and 10)

Total.. . . ... . . . . . . . . . . . . . . . . . . . . . . .... . . .$1,137,883 $983,637 See notes to financial statements.

I

(

t

19 Statements of Source of Funds for Construction 2980 1979 1978 F:r the Years Ended December 31 (Thousands of Dollars)

Source of Funds From Operations:

Net income . . ..... . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . .. . . .. $ 52,395 5 29,220 $ 28,9M Non-cash charges ( .ts) to net income-Depreciation. . ... ... . ... ....... .. . . . .. . . . . . . . . . . . . . . . . 25,368 23,625 21,924 i Deferred income tax and investment tax credit .. . .. . . . . . . . . . 9,394 9,639 18,711 Allowance for funds used during construction (AFC).. ... .. .. . . .. 0 8,871) (25,757) (15,715)

AFC credits on KEPCo advance.. ... .... . . ... 6,319 1,893 -

l . . . . . . . . . . . . . . . . .....

Other - net... . ... . . . . . . . . . . . . . . . . . . . . . .. . 412 209 197 Funds from cperations. . . . . . . . . . . . . . . . . . . . . . . .. . . .. 53,017 38,829 54,081 Dtvidends . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 38,805 30,489 25,028 Funds retained in business. . . . . . . . . . . . . . . . . . . . . . . . . 16,212 8,340 29,053 From Financing:

Long. term debt proceeds...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,129 12,464 81,697

Securities redemption . ... . . .. . . . . . . . . . . . . . .. . . . . .. (26,024) (3,000) (5,000)

Preferred stock.. .. .. . . . . . . . . . . . . . . .. .. - 25,000 10,000 Common stock... . . ... . . .. . . . . . . . . . . . 54,006 33,061 29,680 Increase (decrease) in short-term borrowings... . . . . . . . . . . . . (16,150) 41,800 (21,700)

Funds from financing... . . . ... . .... .. .. . . . . . . . . 101,%1 109,325 94,677 l

! Advance - Kansas Electric Power Cooperative, Inc. . . .. .. .. . . . . 19,500 45,000 -

(Increase) decrease in working capital (other than short-term borrowings) . 25 (1.588) (5,730)

Other - net.. . .. . . . . . . . . . . . . . .. . 852 14 7,034 Total E.2ds Used for Construction (excludes AFC) . . . . . 5138,550 5161,091 5125,034 i See notes to financial statements.

1 l

l NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies system of accounts as the net cost during the period of System of Accounts - The Company is subject to the construction of borrowed funds used for construction jurisdiction of the State Corporation Commission of Kan- purposes and a reasonable rate on other funds when so sas (Kansas Commission) and the Federal Energy Reg- used. This allowance has been added to all major Con-ulatory Commission (FERC) and maintains its accounts struction projects with semi-annual compounding at an in accordance with the uniform system of accounts pre- annual 10.6% gross rate for lo80,10% gross rate for i

scribed by these regulatory commissions. As a regulated August through December 1979, 9.8 % (7.6 % net of in-utility, the accounting principles applied by the Com- come taxes) for January through July 1979, and 9.5%

pany differ in certain respects from those applied by (7.3% net of income taxes) for 1978.

non-regulated business. Deprecirtion - For accounting purposes, the Com-Electric Plant - The Company performs a portion of pany is depreciating the original cost of property by the its construction work and capitalizes general overhead straight-line method over its estimated remaining service and engineering expenses related to construction proj- life, as determined by independent engineers. Deprecia-ects. Maintenance and repairs of property and replace- tion provision stated as a percent of original cost of de-ments and renewals of items determined to be less than preciable property was 3.4% for 1980,1979, and 1978.

units of property are charged to operating expenses. The Income Taxes-In the calculation ofincome taxes, the cost of units of property replaced or renewed, plus re- Company (i) uses liberadzed depreciation for additions moval costs, less salvage i Garged to the accumulated since 1954 and the ADR system for additions since 1972.

provision for dep.e-ir' on, and the cost of related re- and (ii) utilizes other tax benefits as permitted by the placements and renewals is added to electric plant. Bet- Internal Revenue Code, consisting principally of differ-terments are charged to electric plant. ences in straight-line depreciation and the deduction Nuclear Fuel - The cost of nuclear fuel in process of currently for interest and taxes capitalized for book pur-refinement, conversion, enrichment, and fabrication is poses. Deferred taxes are provided for those items in-recorded at orig;inal cost to the utilities. The account has cluded in (i) above as approved by the Kansas Commis-been credited for the proceeds received to-date from a sion. Effective August 1979 in connection with an Order I settlement agreement with Westinghouse Corporation. fren .a Kansas Cummission, AFCis recordedin Electric Allowance for Funds Used During Construction - Pi at on . gross basis. Under the gross basis the income Allowance for funds used dunng construction (AFC), a tax effect on the borrowed funds portion of the AFC is non-cash item, is defined in the applicable regulatory capitalized for financial reporting purposes. For 1978 and l

l

~

20 Kansas na Elcctric Q:mpany January through July 1979 AFC is recorded in Electric 4. Common Stock- Changes in Common Stock were Plant on a net basis. However, an amount equivalent to as follows:

the income tax effect on the borrowed funds portion of Shat'* ^=an' the AFC was charged to deferred taxes under operating expenses and credited to AFC. gnj5 The Company defers and amortizes the investment tax Balance January 1, credit over the life of the applicable property, in accor. 1978 ... ... ..... .. . . 14,000,000 9,357,310 $121,656 dance with an nder of the Kansas Commission. Additional shares Revenues -- Operating revenues and accounts receiv. sold ...... ... ... . 1,600,000 27,824 able include amoun ts actually billed for services rendered Dividend Reinvest-and fuel adjustment clause variances. The Company ment Plan.. . ... 97,193 1,856 does not accrue an estimate for unbilled revenue. Balance December 31, Fuel Adjustment Clause Revenue - The Company's 1978.... ..... .. . .. . 14,000,000 11,054,503 151,336 rate schedules include a fuel adjustment clause which Additional shares permits current recoveries of fuel costs on an estimated sold............ 2,000,000 29,880 basis. Effective May 1979 the Company started recording Employee Stock variances resultin'g from the fuel adjustment clause. Purchase Plan and These variances are cleared two months after they are Dividend Reinvestment recorded as an adjustment through the fuel adjustment Plan . ..... ... 185,774 3,181 clause. Additional shares authorized . . 6,000,000

2. RateMatters-InJune1980,theKansasCommission Balance December 31, issued an order granting the Company an interim annual 1979... ..... . . . 20,000,000 13,240,277 184,397 rate increase of 513.9 million. which is being collected, Additional shares subject to refund, by the addition of a uniform percen- sold . .. ... 3,250,000 48,232 tage surcharge to each customer's bill. For the year ended Employee Stock December 31, 1980, approximately 58.8 n.illion of rev-enues were collected subject to refund. Purchase Plan and In September 1979, the Kansas Commission issued an Dividend Reinvestment Plan. . .. 399, 80 5,774 order granting the Company an annual rate increase of 517.3 million. In tiu,s order the Commission set rates on Balance December 31 the basis of flow-through accounting treatment for the 1980.... .. . 20,000,000 16,890,057 $238,403 income tax effect on the borrowed funds portion of the AFC. This accounting treatment reduces income tax ex- 5. Cumulative Preferred Stock pense and therefore related revenue requirements. The Redemption not required except at the Company's '

income tax effect on the borrowed funds is being Ption.

9_ ,

capitahzed and is expected to be recovered in future 1979 Call Price

--29eo periods under the regulatory practices of the Kansas ---

(At Commission. Ghasands Decen+er of Dollars) 31, 2980)

3. Short-Term Bormwings - At December 31, 1980 4%%, 5100 par value; and 1979, the Company had established lines-of-credit authorized and with various banks tot'aling 564 million la whkh the outstanding, 82,011 banks are compensa ted with either a fee or compensating shares. .. . .5 8,201 5 8,201 S110.00 ance. Compensating balances are not legally re- Senal 5 00 a  ;

The Compa ny draws upon the bank lines-of-credit and shares:

sells commercial paper to obtain short-term construction 4.28% series, out-funds. At December 31,1980 and 1979 the short-term standing 45,000 borrowings outstanding amounted to 525,650,000 and shares. . 4,500 4,500 101.00 541,S00,000, respectively. Average interest costs are 4.32% series, out-based upon daily average outstanding loan balances. The standing 60,000 maximum amount outstanding during 1%0 and 1979 was shares. . . . . . 6,000 6,000 101.64 546,350,000 on January 18,1980 and 550,200,000 on June 7.44% series, out-29, 1979, respectively. The weighted average interest standing 150,000 rate, including fees, on short-term borrowings was shares.. . 15,000 15,000 106.81 18.1% for 1980 and 13.5% for 1979. Serial, without par value (see Note):

S8.66 series, out-standing 300,000 shares. .. 30,000 30.000 108.66 Premium on Preferred Stock. . . . 292 292 Total.. . .563,993 563,993

I Redemption required. All of these redemptions will be made at stated value D mber 3 plus unpaid accumulated dividends.

(At 6. Long-Term Debt (Thousands December December 31, of Douars) 31, 1980) 1980 1979 Serial, without par value (Thousands (see Note): of Douars) 52.42 series, outstanding First Afortgage Bonds:

720.000 and 800,000 3%% series, due 1982..... ....$ 12,000 5 12,000 l

shares, respectively.. 518,000 $20,000 5 27.42 3%% series, due 1983.......... 10,000 10,000 58.125 series, out- 6%% series, due 1983..... .. 15,000 -

standing 100,000 7% % series, due 1983..... .... 25,500 -

shares . . . . .. . . .. . 10,000 10,000 107.71 3%% series, due 1985.......... 10,000 10,000

$8.00 series, out- 3%% series, due 1986.......... 7,000 7,000 standing 150,000 16%% series, due 1987.. . . 30,000 -

l 4%% series, due 1991. ........ 7,000 7,000 l shares. . . . . .. . . . . . 15,000 15,000 None l 58.25 series, out- 5%% series, due 1996.... ..... 16,000 16,000 standing 100,000 8%% series, due 2000.... . ... 35,000 35,000 I shares.. . . . .. . . . . . 10,000 10,000 107.33 8%% series, due 2001... .... 35,000 35,000 l 53,000 55,000 7%% series, due 2002... .. 25,000 25,000 Subtotal ...._.... .

6.8% series, due 2004.. .. . .. 14,500 14,500

( Less: sinking fund 1,000 9%% series, due 2005.. .... .. 40,000 40,000 requirements.. .. .... -- 8%% series, due 2006.. . 25,000

.. 25,000 Total" * " * * *" $53'000 554'000 8%% series, due 2007...... ... 25,000 25,000 6% series, due 2007...... . .. 10,000 10,000 Note: Serial Preferred Stock without par value,6,000,000 Sh % series, due 2007....... . 21,940 21,940 shares authorized. 8% % series, due 2008.... . ... 30,000 30,000 The Company issued Serial Preferred Stock, cumula- Less: certain securities held

! tive, without par value, in the amount of 100,000 shares by Trustee . .. . . . . . . . (7,778) (1,964) j of 58.125 series in hfarch 1978, 100,000 shares of $8.25 To ta! . . . . .. . .. . . . . . ... 386,162 321,476 series and 150,000 shares of $8.00 series in July 1979. Guarantee of pollution control The following preferred stock may not be redeemed revenue bonds - 5% %

prior to the date shown through the use, directly or series, due 2003. . 15,000 15,000 mdirectly, of the proceeds of indebtedness or of the is- Term bank loan . . . . . 50,000 50,000 suance of stock of equal or prior rank, at an effective cost Bank mortgages.. . ... .. 419 -

t to the Company ofless than the amount shown (except in Unamortized premium and I the case of the $2.42 and $8.25 Serial Preferred Stock for discount - net.. . . . . . . . 27 43 mandatory or optional sinking fund purposes): Total .. . . . . . ..$451,608 S386,519 Effective Series Date Cost First htortgage Bonds may be issued in additional 58.6o. October 1,1981 8.66 % amounts, limited only by property, earnin s and other

$2.42 Niarch 1,1985 9.68 % provisions of the Compa'ny's htortgage dated as of April 58.125 April 1,1988 8.125 % 1,1940, as supplemented (hfortgage). Electric plant is

$8.2a July 1,1989 8.25 % subject to the lien of the hfortgage except for transporta-l The mandatory sinking fund obligation for the $2.42 tion equipment.

j series is designed to retire that series by Aprill,1999, and The hfortgage contains provisions which, under cer-i provider for the redemption of a minimum of 40,000 tain conditions, restrict distributions on or acquisitions of shares per year and a maximum of 80,000 shares per year, its Common Stock. At December 31,1980 and 1979, none commencing April 1,1980. Stock has been purchased of the retained earnings was restricted thereby.

and recorded in the accounts for the 1981 sinking fund The 6%% and 7%% series due 1983,6.8% series due requirement. 2004, and 5% % and 6% series due 2007 are pledged as The mandatory sinking fund obligation for the $8.125 collateral for Pollution Control Revenue Bonds issued by series is designed to retire that series by Aprill,2018, and Kansas municipalities. The proceeds of the Bonds, in provides for the redemption of a minimum of 3,333 excess of certified construction costs, are held by the shares per year and a maximum of 6,666 shares per year, Trustee and invested in interest-bearing securities pend-commencing April 1,1989. ing application to the cost of a pollution control project The Company is obligated to redeem all 150,000 shares being constructed at the Jeffrey Energy Center and Wolf of the 58.00 series on Afarch 28,1985. Creek.

The mandatory sinking fund obligation for the 58.25 The term bank loan for up to $100 million is comprised series is designed to retire that series by July 1,1989, and of a revolving credit until October 1982 followed by a provides for redemption of 20,000 shares on July 1,1986, three-year term loan with right of prepayment at any 50.000 shares on July 1, 1987, 15,000 shares on July 1, time without penalty. The effective interest rate on this 1988, and 15,000 shares on July 1,1989. borrowing was 15.6% for 1980 and 13.2% for 1979. The

22 Kansas le Electric Company ,

Company paid $27 million of the oustanding balance The reasons with the related percentage effects are:

under the term bank loan on January 30,1981, and 1980 1979 1978 pledged the unused commitment to satisfy the contin- Statutory Federalincome tax rate... 46% 46 % 48 %

gent repayment of KEPCo advances should such repay-ment be reqmred. (See Note 7). Add (Deduct) income tax effects of timing differences:

In July 1980, the Company assumed bank mortgages Allowances for funds used with unamortized balances aggregating 5443,000 in con- durin; construction. ..

nection with the purchase of an office Suilding adjacent .(23) (24) (9) to the Company's main office building in Wichita. The Additional straight line depreciation. . .. . . . . . 1 3 2 r..ortgages mature m June 1985 and February 1993 with Tr. :s and mterest rates of 10*o and 8%, respectively. capitalize 7nsions

. . . . . . (3) (4) (3)

Amoritzation of investment

7. Advance-Kansas Electric Power Cooperative,Inc. tax credit .. . .. (2) (3) (2)

(KEPCo) - The Company and Kansas City Power & Other items - net (no one item Light Company each presently own 50% of the Wolf makes up more than 2*o).. .- (1) -

Creek Generatmg; Station. However, they have agreed t sell KEPCo a 17% mterest in the station subject to reg- Effective Federal income tax rate . .19% 17 % 36 %

ulatory approval and to KEPCo obtaining permanent income taxes as recorded in the Statements of Income financing. If the sale should not be completed, the Com- are:

pany would be required to repay to KEPCo the amount of 1%0 1979 1978 its advances to the Company on the purchase price (Thousands of Dollars)

(S64,500,000 at December 31, 1980), together with in- Operating expenses:

terest thereon amounting to approximately 511,800,000 Currently payable -

at December 31,19S0. At December 31,1980 the Com- Federal. ... . . 5 3,f42 S(2,2%) S(1,085) pany had accrued at AFC rates $8,212,000 which would State. .. . 1,062 (321) 1,071 be offset against such accrued interest. In October 1980, Deferred - Federal... 6,313 6,495 6.772 the KCC issued an order authorizing the purchase by - State.. 1,019 1,048 1,022 KEPCo, but upon conditions which would materially Deferred - Tax effect of alter the agreed upon terms of the sale in a manner AFC - borrowed . ... - 2,857 3,605 unacceptable to the parties. Both KEPCo and the Com- Investment tax credit -

pany have appealed this order to the Kansas courts. The net .. . .. 2,062 _ (761) 7,312 advanced payments and accrued interest thereon are Total .. . . 14,098 7,022 18,697 l eing recorded as a deferred credit on the balance sheet, pending resolution of the transaction. (See Note 6). Other income and deductions:

Currentiv payable -

8. Retirement Plan - The Company has a non- Federa'l.. 352 224 33 contnbutory retirement plan for all emplo'yees. The total State.. . .. . 56 33 5 cost for the years 1980 through 1978 was 52,139,000, S2.129,000, arid $1,959,000, respectively, which includes Total. . 408 259 38 amortization of prior service costs over a ten-year period. Income tax Of these amounts, 5817,000, 5643,000, and $471,000, re- expense-net. 514,506 5 7,281 S18,735 spectively, were included in plant construction costs.

The Company's policy is to fund pension costs accrued current:v. Unfunded past service cost at December 31, At December 31,1080, the Company has unused m.-

1980 was approximately 25,800,000. The actuarial present vestment tax credits of approximately 544 million avail .

values, using an assumed 6%% rate of return, of ac- able for carryforward to future years. If not utilized, the cumulated plan beneSts for vested employees and non- remaining canyf mard credit will expire in the years veste i employees at November 30, 1980 were 1985 throu milhon, angh Sb1987 million,m the amounts of 511 milhon, SIS respectvely.

S32,0bJ,000 and $500,000, respectively. Market value of net assets available for benefits at November 30,1980 was

$28,468,000. 10. Construction Budget - The construction budget In 1980 the Companyincreased benefits under the plan (exclusive of nuclear fuel) for 1981, as approved by the and changed the assumed earnings rate on invested Board of Directors, is S199,558,000 assuming 50% owner-funds to 6%% from 5%. The cost of the 1980 amend. ship of Wolf Creek project which would be reduced to ments is due to improved benefits and will be partiali; -

5175,796,000 assuming 41 % % ownership. The Company offset by the change in the assumed earnings rate. has substantial purchase commitments in connection with its construction program.

9. Income Taxes - The effective Federal income tax rates differ from the amounts computed by applying the Federal statutory rates to income before income taxes.

23

11. Financial Statistics (Unaudited) (b) Jointly owned with Kansas City Power & I.ight (Thousands except per share) Company.

39go (c) Jointly owned with The Kansas Power and I.ight 4th 3rd 2nd 1st Company, Central Telephone and Utilities Corp. and I Miss un Public Service Company.

Qtr* Qtr* Qtr* Qtr*

(d) Jointly owned with Kansas City Power & Light Operating Revenues $66,703 5100,642 561,583 564,880 Operatmg Income . 12.262 25,041 12,319 12,281 Comhany (ge, ot'e7).and Kansas Electric Power Cooperative, Inc.

Net Income . .. 10,317 22,817 9,079 10,182 (e) Estimated construction costs.

Earnings Applicable t Amounts and capacity represent the Company's share Common Stock. 8,039 20,514 6,776 7,879 and are financed by the Company. Operating expenses Average Shares of plants in service are included in the operating ex-Outstandin ... . 15,716 15,027 14,184 13,324 penses on the Statements of Income.

Earnings Per ghare. 50.51 51.37 50.48 50.59 1979 4th 3 rr* 2nd 1st 13 SUPPl ementary Information To Disclose The Ef-fects of Changing Prices (Unaudited)- The estimates of Qtr. Qe. Qtr. Qtr.

the effeet of infla tion on the opera tion of the Company, as O Peratin8 evenues R 560,982 5 67,351 551,685 564,952 set forth below, were prepared on bases prescnbed by Operating income . 11,570 13,942 5,351 9,06[ the Financial Accounting Standards Board (I ASB)

Net income . .. ... 8,447 11,502 2,636 6,633 Statement No. 33, " Financial Reporting and Changing Earnings Applicable t Prices. This statement requires adjustments to historical Common Stock. 6,120 9,254 814 4,81'_

costs to estimate the effects that general inflation (Con-Average Shares stant Dollar) and changes in specific prices (Current Cost)

Outstandmg . . 12,236 11,162 11,122 11,084 have had on the Company's results of operations. These Earnings Per Share. 50.50 50.83 $0.0< $0.43 data are not intended as substitutes for earnings reported These quarterly amounts are unaudited, but in the on a historical cost basis. They offer some perspective of opinion of the Company, include all adjustments, con- the approximate effects of inflation rather than a precise sisting only of normal recurring accruals, necessary to a measurement of these effects.

fair presentation thereof. Estimated property, plant and equipment (plant),

Market Prices and Dividend Rates of Common Stock: primarily consisting of plant in service and construction Common-NYSE High, Low Market Price Dividends work in progress, was determined for constant dollars by 1980 1979 1980 1979 applying the Consumer Price Index for All Urban Con-sumers (CPI-U) to the historical cost of plant. The current First Quarter 16  % 13 19  % 18  % 5.485 5.475 17%,

cost estimates were measured by appivmg the Handv-1 Second Quarter 16% 13[,e 19 .483 16 % 14;. 18_:e 16% .4 .'? Whitman Index of Public Utility Construction Costs to 1 Third Quarter .483 .473 each major class of plant. Curre'nt cost is an estimate of Fourth Quarter 15 % 13 % 17% la .a1 .48' the cost of currently replacing existing plant. The result-The Company had 42,931 common stockholders as of ng adjusted data for plant under either of the above December 9,1980.

methods is not indicative of the Company's future capital requirements because the actual replacement of existing

12. Joint Ownership of Utility Plants (Unaudited): plant will take place over many years and is not likely to

~ '

Company's Ownership at December 31,1980 l be a reproduction of presently existing plant.

In- Invest- Costs Accum. The difference between current cost and the constant service ment In Through Provision Per-Dates (al Millions 1980 for Depr. ofw) cent dollar data results from specific prices of plant increasing j

La Cygne June The accumulated provision for depreciation for con-

1. 1(b) . 1973 5108 532 370 50 % stant dollars and current cost was developed by appiv-La Cygne May ing, for each major class of plant, the same percentai;e

1. 2(b) . 1977 117 16 315 50 relatonship that existed between gross plant and ac-Jeffrey July cumulated provision for depreciation on a historical basis

1. 1(c). 1978 68 6 138 20 to the respective adjusted plant data.

Jeffrey May Depreciation expense for both methods was deter-

1. 2(c). 1980 54 1 1% 20 mined by applying the Company's depreciation rates to Jeffrey the respective indexed plant amounts.

1. 3(c). 1983 83 (e) $ 23 136 20 The reculatory prooss limits the Company to the re-Jeffrey covery oithe historical cost of service in its ra'tes. There-l

1. 4(c). 1986 113 (e) - 136 20 fore, 'any excess of the value of plant under constant Wolf Creek dollars or current cost must be reduced to the net recov-

1. 1(d) . 1984 689 (e) 348 477 41.5 etable cost, which is historical cost. The amount of this (a) The Company's needs are monitored and its fore- excess that accrued as a result of inflation in the current casts revised as needed to minimize construction. Com- year must be reduced to net recoverable cost.

pletion dates are changed to meet changing needs. The Company, by holding assets such as receivables, Amounts are estimated for in-service dates after 1980. prepayments, and inventory, suffers a loss of purchasing

1

. 1 1

24 Kansas in EMctric Csmpany  !

power during periods of ir !!ation because the amount of period between the incurrence of these costs and their -

cash received in the future for these items will purchase recovery through the fuel adjustment clause. I less. Conversely, by holdir g monetary liabilities, primar- The regulatory process limits the amount of deprecia-ily long-term debt, the C impany benefits because the tion expense included in the Company's revenue allow-payment in the future wir, be made with nominal dollars ance and limits utility plant in rate ba'se to original cost.

hning less purchasing power. The Company has sig- Such amounts produce cash flows which are inadequate ruficant amounts of lorg. term debt outstanding which to replace such property in the future or preserve the will be paid back in dollars having less purchasing power purchasing power of common equity capital previously and, therefore, for purposes of these calculations, has a invested. While this effect is partially mitigated by the net g:in from holding monetary liabilities in excess of benefit derived from holding long-term debt, the Com-monetary assets. pany has a net purchasing power loss which is experi-As allowed by FASB Statement No. 33, items in the enced by the common shareholder and can only be over-Income Statement, other than depreciation expense, come as a result of adequate rate relief. However, the were not adjusted. The cost of fuel used in electric pro- Company believes that it will be able to establish rates duction was not adjusted because the effect on earnings which will cover the increased costs of new plant when was not material due to the relatively short turnover such casts are incurred.

SUPPLEMENTAL STATEMENT OF INCOME ADJUSTED FOR CHANGING FRICES For the Year Ended December 31,1950 Constant Dollar Current Cost Conventional Average Average Historical Cost 1980 Dollars 1980 Dollars (Thousands of Dollars)

Operating revenues. . . 5293.808 5293.808 5293,S08 Fuel. .. . . . . 115,221 115,221 115,221 Purchased power . . . 9,233 9,233 9,233 Depreciation expense. '5,368 47,552 53,824 Other operating and maintenance expense.. . 67,985 67,985 67,985 Income tax expense - net.. . . 14,506 14,506 14,506 Interest expense - net .. . . . 30,225 30,225 30,225 Other income and deductions - net.. . (21,125) (21,125) (21.125)

Subtotal. . . . . 241,413 263.597 269.869 Income from operations (excluding reduction to net recoverable cost). . . S 52,395 5 30.211 3 23,939 Increase in specific prices (current cost) of property, plant and equipment held dunng the year

• S135,959 Reduction to net recoverable cost.. . . . . . 5 (93,465) (27,034)

Effect of increase in general price level . . (1%.07S)

Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost. (87,153)

Gain from decline in purchasing power of net amounts owned., . . S0,431 80,431 Net . . . . S (13.034) S,(6.722)

Net assets at year-end at net recoverable cost. . S325.947 S325,947

• At December 31,1%0, current cost of utility plant net of accumulated depreciation was $1,806.856,000, while historical cost or net cost recoverable through depreciation was $1,064,486,000.

FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (In Thousands of Average 1980 Dollars)

Years Ended December 31, 1980 1979 1978 1977 1976 Constant dollar information Operating Revenues.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $293,808 $278,098 5301,187 $266,838 $206 665 Income from Operations (excluding reduction to net recoverable cost). .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,231 5 14,337 income per Common Share (after dividend requirements on preferred and preference stock & excluding reduction to net recoverable cost)..... ...... .... .......... . ... . ...$ 1.44 $ .44

, Net Assets at Year.End at Net Recoverable Cost..... .. ........ .. 5325,947 $293,932 Current cost Information Income from Operations (excluding reduction to net recoverable cost) ... . . .. ..... . ....... ................ ......... $ 23,939 Income per Common Share (after dividend requirements on preferred and preference stock) . ... ..... ... ..... .. ......... . 5 1.01 Excess of Increase in General Price Level Over Increase in Specific Prices After Reduction to Net Recoverable Cost . ....... ..... . . . . . . . . . . . . .. . . . . . . . . . . . $ (87,153) l Net Assets at Year.End at Net Recoverable Cost . . . . . . . . . . .. 5325,947 Grneral information Gain from Decline in Purchasing Power of Net Amounts Owed . . . ........ . . . . . . . . .. ..$ 80,431 5 80,999 Cash Dividends Declared per Common Share.. . . ..... . . .. ....$ 1.%5 5 2.17 5 2.31 5 2.41 S 2.46 Market Price per Common Share at Year.End . .. . . .. ... . .. . ..$ 14.625 5 17.31 5 22.89 5 27.54 5 31.12 Average Consumer Price Index. .. . . . . . , . . . . . . . . . . . . 246.8 217.4 195.4 181.5 i70.5 Auditors' Opinion To the Stockholders and the Board of Directors of Kansas Gas and Electric Company:

We have examined the balance sheets of Kansas Gas and Electric Company as of December 31,1980 and 1979 and the relared statements ofincome, retained earnings, and of source of funds for construction for each of the three years in the period ended December 31, 1980. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

As discussed in Note 2 to the financial statements, the Company was granted an interim rate increase in 1%0 and is I collecting certain revenues subject to refund pending final determination by the State Corporation Commission of Kansas. The ultimate outcome of this proceeding cannot presently be determined.

In our opinion, subject to the efftet, if any, on the 1980 financial statements of the revenues subject to refund referred to in the preceding paragraph, such financial statements present fairly the financial position of the Company at December 31,1%0 and 1979 and the results ofits operation 3 and the source ofits funds fer construction for each of the three years in the period ended December 31, 1980, in conformity with generally accepted accounting principles applied on a consistent basis.

Deloitte Haskins & Sells January 30,1%1 Wichita, Kansas

26 Kansas na Electric Ccmpany Comparative Electric Statements Annual Compound Growth Rates 1980 1979 1978 5 Year 10 Year Sales in Kilowatt-Ilours (Thousands):

Residential .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,171,529 1,870,597 1,947,538 5.8% 6.0%

Commercial.... . . . . . . . .. . ... ...... .. ... . .... 1,476,589 1,398,942 1,402,986 4.1 4.9 Industrial. . . . .. .. . . . . . . . . . . ..... ... . . . . . . 2,815,921 2,777,807 2,679,630 4.4 4.7 Public street and highway lighting.. .. .. . ........ .... 64,217 63,385 62,808 1.8 3.2 Sales for resale - municipals and cooperatives .. ... 1,026,939 927,395  % 5,187 8.4 8.2 General business.. . . . . . . . . . . . . . . . . . . .

. 7,555,195 7,038,126 7,058,149 5.2 5.6 Sales for resale - other electric utilities... .... . . . . . 284,055 534,925 921,338 2.8 (12.7)

Total kilowatt hours sold..... ..... . .. .. ...... 7,839,250 7,573.051 7,979,487 5.1 3.6 Customers at End of Year:

Residential . ... . .. . . . .. . .... . . . . . . . . . . . . . . . . 205,265 200,024 194,773 2.3 2.0 Commercial. .. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,217 19,141 18,970 -

.6 Industrial . . .. .. .. ..... . . . . . . . . . . . . . . 3,923 3,6% 3,392 8.5 5.2 Public street and highway lighting.. . . . . . . . . . . 485 450 413 7.9 11.0 Sales for resale - municipals and cooperatives . . . 92 92 91 1.1 1.8 General business.. . . . . . . . . . . . . . . . . . . . . . 228,982 223,403 217.639 2.2 2.0 Sales for resale - other electric utilities.. . . . .. 10 10 10 -

2.3 Total electric customers. . . . . . . . . . . . . . . 228,992 223,413 217,649 2.2 2.0 Residential:

Average kwh per customer.. . .... . . . 10,708 9,4 % 10,136 3.2 3.9 Average revenue per customer... . . . . . . . . ... $489.34 $376.76 $383.49 15.6 12.8 Average revenue per kwh . .. . . . . . . . . . . . . . . . . 4.57e 3.97c 3.78c 12.0 8.6 Kilowatt Hours Generated and Purchased (Thousands):

Generated (net after station use) . . .. .... . 7,958,094 7,554,258 8,130,424 5.1 3.2 Purchased. . . . . . . . . . 522,948 475,866 334,683 7.0 12.9 Total . . .. . .. .. . . . ... . 8,481,042 8,030,124 8,465,107 5.2 3.6 Less: Sales for resale - other electric utilities. . . . . 284,055 534,925 921,338 2.8 (12.7)

Net . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,1 % ,987 7,495,199 7,543,769 5.3 5.4 Company use, line loss, etc. . .. . . . . . . .. 641,792 457,073 485,620 6.7 4.6 Energy sold - general business . .. .... ... .. . 7,555,195 7,038,126 7,058,149 5.2 5.6 Average BTU per Net Kilowatt-Hour Generated . .. 10,912 10,998 10,802 .1 .5 Average Fuel Cost per Million BTU . .. . . . . . . . 51.33 51.23 $1.09 17.8 19.5 Power Resources (Kilowatts)

Available capacity . . . . . . . . . . . . . . . . . . . . 2,023,000 1,968,000 2,031,000 3.3 4.4 System peak .. . . . . . . . .. .... . . 1,727,100 1,473,400 1,532.600 5.2 4.8 Reserve..... . . ... .. . 295,900 494,600 4 % ,400 (4.9) 2.1 Utility Plant at Original Cost (Thousans):

Beginning of year.. . . . . . . . . . .. .. .51,091,562 5 914,460 5780,181 18.0 14.9 Capital expenditures. ... .. . . . . . . . . 177,421 183,991 137,144 15.0 17.4 Retiremer.ts.. .. . . . . ... .. . 3,927 6,889 2,865 11.2 7.0 End of year. .. .. .. . . . . 1,265,056 1,091,562 914,460 17.5 15.2 Accumulated provision for depreciation... .. .. 200,570 178,113 160,673 12.1 10.9 Net utility plant. . . . . . . .. 51,064,486 _$ 913,449 $753,787 18.7 16.3 Employees at Year-End. . . . . .... . . 1,561 1,432 1,385 3.9 2.1

4 9

Comparative Financial Statistics < Thousands)

Annual Compound Growth Rates 1980 1979 1978 5 Year 10 Year Electric Operating Revenues:

Residential ... . ...... ... .. . .. . . . . . . . . $ 99,235 5 74,215 5 73,683 18.6 % 15.2 %

Commerdal . . .. .. .... . . .. . ... ... .. 66,M2 55,990 53,588 15.7 14.0 Industrial . . .. . . . . .. . .. . . . . . . . . . 93,498 80,328 72.848 19.7 17.7 Public street and highway lighting...... . . . . .. 2,501 2,161 2,034 14.0 12.6 Sales for resale - municipals and cooperatives... . 24,786 20,1M 19,177 24.3 22.4 General business . ... ... .. . . .. .. .. ... .. 286,662 232,878 221,330 18.6 16.1 Szles for resale - other electric utilities. . .. .. .. 6,104 10,737 15,7 % 14.2 1.6 Total sales of electricity . .. . . . ... .... .. ..... . 292,766 243,615 237,124 18.5 15.4 Other ... .. . .. . . . .. ... . . . .. . ... 1,042 1,355 1.336 3.3 6.5 Total electnc operating revenues... . . . . . .. 293,808 244,970 238,460 18.4 15.4 Oper: ting Expenses:

Fuel.. . . . . . .. .. . . . . ... .. . 115,221 101,927  %,017 24.0 24.0 -

Deferred fuel . .. . .. .. .. . . . . . . . .. - 1,347 6,127 - -

Pure sed power... . . .. .. . . . . . .. . ..... 9,233 8,535 4,162 26.7 17.2 Other operation . .. . . . . . . . ... 31,383 27,675 25,062 13.7 11.6 Maintenance. .. . . . . . .. .. 24,583 22,999 15,292 27.3 21.2 Depreciatien. . . . . . . . . .. . . . .. 25,368 23,625 11,924 14.1 13.5 Taxes other than income taxes. . .. ... .. . . 12,019 11,910 12,207 6.2 3.7 i

Income taxes.. .. . . . . . .. .. . .... . 14,098 7,022 18,697 1.6 4.1 Total operating expenses . . . . . .. . 231,905 205,M 0 _199.488 18.7 15.6 Operzting Income . . . . .. . . . .... . 61,903 39,930 38,972 17.5 14.5 Other Income and Deductions:

AFC - other.. . .. .. . .. . . .. . . ... . ... 20,353 13.358 8,716 - -

Income taxes - net . . ... . .. .. ..... . . . .. . (406) (259) (38) - -

l Miscellaneous - net.. . . ... .. . . .. . .. . 772 479 73 - -

Incom2 Before Interest Charges.. .. . . . ... ... 82,620 53,508 47.723 19.1 16.7 Interest Charges:

Interest on long-term debt. . .. ... . . . . 39,582 31,726 23,746 24.3 22.2 Other interest . . .. . ... .. . . . . . .. 8,749 4,752 1,815 26.4 33.0 Amortization of debt premium, discount and expense - net . . . . . . .. . . .. 412 209 197 60.2 82.6 AFC - borrowed.. . . ..... . . . . ... . (18,518) (12,399) (6,999) - -

Net Income . ..... . .. .. . . ... . . 52,?35 29,220 2S,964 23.2 16.1 Preferred Stock Dividends . . . . . . . .. 9,187 8,217 7,0 M 20.8 27.3 Earnings Applicable to Common Stock.... . . .. . $ 43,208 5 21,003 5 21.880 23.8 14.7

, Sh res of Common Stock Outstanding l (End cf Year). . .. . . . .. ... . .. 16,890 13,240 11,055 25.1 13.6 Earnmgs per Average Share of Common Stock . . . $2.97 1.84 52.28 .4 2.5 Cash Dividends Paid per Share On Common Stock. . . . . ... . . . . . . .. 51. % 5 St.91 51.825 4.1 3.4 Crpitalization: (Amount and Percent)

Long-term debt (less current maturities) . . . . . H51,608 49.6 S386,519 49.7 5374,071 52.7 14.4 15.7 Preferred stock including premium . . . .. . 116,993 12.9 117,993 15.1 93,993 13.2 16.7 20.0 Common equity:

Common stock... . . . . . . 238,403 1M,397 151,336 39.1 22.3 Retained earnings.. .. . . . . . . . . 102,8M 89,407 91,015 6.1 6.3 Total common equity . . . . . . . . 341,267 37.5 273,8N 35.2 242.351 34.1 22.8 14.6 Total capitalization.. . . . . . . . .. $909,868100.0 5778,316100.0 5710,415100.0 17.5 15.7 Short-term Borrowings (End of Year). .. $ 25,650 M1,800 5 -

Embedded Interest Cost of Long-Term Debt. . . . . . . . . . . 9.37 % 7.39 % 7.36 %

28 Directors '

!and the year they usre elected)

Robert A. Brown (1953) Ralph P. Fiebach (1967)

Arkansas City, Chairman of the Board Wichita, Chairman of the Board The Home National Bank of of the Company Arkansas City Ralph Foster (1970)

A. Dwight Button (1976) Wichita. Vice President - General Wichita, Chairman of the Board Counsel of the Company The Fourth National Bank and Trust Company, Wichita Donald A. Johnston (1980)

Pittsburg, Executive Vice President, Wilson K. Cadman (1978) Vinylplex, Inc.

Wichita, President of the Company Terence 1. Scanlon (1980)

C. T. Carter (1968) Wichita, investor and Developer independence, Retired Vice President.

Starjorie I. Setter (1980) -

Pipeline Transportation, Wichita, President. 3 '

Atlantic Richfield Company Setter and Associates, Inc.

C. Q. Chandler (1974) Advertising and Public Relations Wichita, Chairman of the Board Dwane L. Wallace (1953) and President, First National Bank Wichita, Senior Consultant, in Wichita Cessna Aircraft Company Startin K. Eby (1957) Robert L. Williams (1968)

Wichita Retired Chairman of the Board. Wichita, Owner of Imperial Oil Company Afartin K. Eby Construction Co., Inc.

Lyle E. Yost (1%9)

G. W. Evans (1947) Hesston, Chairman of the Board, Wichita, Consultant and Retired Hesston Corporation Chairman of the Board of the Co*npany Officers (including their ages and titles)

Ralph P. Fiebach,63 R. E. Tate, 64 '

Chairman of the Board Treasurer Wilson K. Cadman,53 E. D. Prothro,48 President Controller and Assistant Secretary Dennis L. Evans,46 Jack Skelton,50 Vice President - Customer and Assistant Secretary Community Service? J. F. Klassen,51 Ralph Foster,52 Assistant Treasurer Vice President - General Counsel wilt;am g. Sgoore,28 Howard J. Hansen,59 Assistant Treasurer Vice President - Finance Verna L. Ridgeway,53 Glenn L. Koester,55 Assistant Vice President i

Vice President - Nudear Glen L. hiontague,61 Vice President - Administrative Services Robert L. Rives,47 Vice President - System Services Bernard Ruddick,57 Vice President - Engineering W. B. Walker, 60 Vice President - Accounting -

and Secretary

_ _ _ _ . . - _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ - _ . - _ -