ML20148M782
| ML20148M782 | |
| Person / Time | |
|---|---|
| Site: | Callaway  |
| Issue date: | 12/31/1987 |
| From: | Cornelius W, Schnell D UNION ELECTRIC CO. |
| To: | |
| References | |
| ULNRC-1749, NUDOCS 8804060173 | |
| Download: ML20148M782 (47) | |
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M Statement of Policy -
! We are a business enterprise- security to our employees; providing [
! dependent for success on the high modern facilities for our customers' a quality and fair price of our senice; on expanding needs for energy senice; and I the skill, courtesy, and loyalty of our paying a fair return to our investors who employees;on the confidence of our have provided the funds to make such -
investors; and on the ability of our senice possible.
management to forecast and provide for M pdvate enterprise entrusted with the energy requirements of our area.
an essential public senice, we recognize .=
In the conduct of our business, we our civic responsibility in the communi-will render senice of the highest ties we sen e. We shall strive to advance "
- quality to our customers - promptly, the growth and welfare of these commu-courteously, and efficiently - at the nities and shall participate in chic -
lowest prices consistent with paying fair aethities which fulfill that goal. for we --
wages and affording job satisfaction and believe this is both good citizenship and good business.
a l 1 Contents 2 letter to Stxkholders -
4 Sening Our Markets -
20 Responsibility for Financial Statements 21 FinancialReview l 40 InvestorInformation
- 41 Officers and Directors I
1 Annual Aleeting He Annual Meeting of Stockholders will convene at 10 a.m. Tuesday, _
April 26,1988 at Powell Symphony liall, 718 North Grand, Saint Louis, Missouri, i-
Business Review Union Electric Company ucazmua.we==~~~-ammwmmwmvnn ~~~ m-m wer~~a Highlig/tts Annual Increase
- 10. Year Year Ended Current Rate of December 31,1987 Year Growth Earnings per Average Common Share $2.91 (1.7)% 5.7%
Dhidends per Common Share $ 1.92 3.2 3.5 Common Stock Price-Year End $22 % (22.2) 4.1 Book Value per Common Share S17.97 5.4 1.4 Property and Plant (gross) $6,936,776,000 2.4 8.9 Total Operating Revenues $ 1,946,411,000 7.7 9.8 Total Kilowatt liour Sales 29,008,167,000 2.7 2.3 Residential Kilowatt.Ilour Sales 9,585,324,000 3.3 2.6 Commercial Kilowatt-Ilour Sales 0,581,325,000 3.0 4.2 Industrial Kilowatt flour Sales 8,216,880,000 1.8 .7 l
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} utility company, j rimarily engaged l ? in supplying electric l } service to more than f;- l one million custom-
) ers in the strategic l center ofAmerica - ;
1 4 a 24,000 square
}. : .' } mile area in I *
) Missouri, Illinois, j and lou a, uhich
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{, includes the i Metropolitan St.
- louis area.
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! l n.e w .a a a.-a- -. . . u.. x --..--~~J D Serrice Area l 1
l To Our StockhoMers: E myW ====~2ED5E r
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3-P m a _ - m - m.wam w -nm e n _-_ w . ~.a.a._ ,n m This report prosides a perspective in December 1987, the Missouri enhanced by our Quality Improve-i on the many aspects of our senice to Public Senice Commission issued an ment Process, employees are learn-l customers. Providing our customers order in response to complaints filed ing to draw upon their knowledge with quality senice at an affordable by the Commission Staff and Office of and experience to attain higher stan-price, while providing our stockhold- Public Counsel which alleged that dards of perfonnance.
ers with a fair return on their invest- the Company's return on its invest- . .
ment,is the challenge we face as we Our dedication to quality is evident I ment had become excessive. De at our Callaway nuclear plant which look to the future. order replaced $189 million of reve-C ntinues to operate at an excep-
. nue increases scheduled to be imple- .
Financial results for 1987 exceeded ti nallevel. He average capacity mented over the next three years, our expectations. Although earnings f ctor of 73% achieved by Callaway under a previously approved rate of $2.91 a share were 5 cents below ver the last three years is a credit to i
phase-in plan, with a single S5.6 the resulted $2.96 a share earned last ur nucle r team. He plant, mently million revenue increase effective year,1987 earnings included a desenbed by an official of the U.S.
. December 31,1987. We believe the ,
charge of 23 cents a share resulting Nuclear Regulatory Commission as Commission's action does not pre-from an order of the Missoun Pubhc " ne f the best operatm, g plants in serve a reasonable balance between Senice Commission. the county," provided 21% of our customer and investor interests and ,
electric generation m 1987. % e are Kilowatt hour sales increased by is heavily weighted to short-nm rate ati d th the success
! considerations.
3% over 1986, reflecting a 3% increase p(icularly in sales to both our residential and While we expect 1988 earnings to in minimiring the frequency of un-commereial customers, and a %
, be adversely affected by this action of planned reactor "trips" (unscheduled merease m sales to our industrial the Commission, we will continue to shutdowns). Callaway experienced customers. Unusually warm weather employ cost control and aggressive only one unplanned reactor trip from m the third quaner of 1987 contrib-marketing to provide a solid base for power during 1987 - a remarkable uted to the m , ereased residential and future earnings and dividends. achievement by industy standards.
commercial sales. Our peak demand reached an all-time record of We were successful in implement- He NRC's Systematic Assessment 7,255,000 kilowatts on August 3, ing cost controls and productisity of licensee Perfonnance (SALP) 6.5% over the previous record set in improvements in many areas during repon issued in 1987 evaluated 19S4 and equated in 1986. 1987. For example, our 1987 con- Callaway plant operations for the struction program was reduced to period from June 1986 through May
$151 million, a reduction of more 1987. All sal.P ratings of Callaway than S50 million from earlier esti- were in the two highest categories.
mates. Also, we reduced our invest- His means that we met or exceeded ment in fossil fuel inventories by $25 NRC expectations in all rated areas.
million (25%). Brough teamwork.
l l 2 l
"k'e have undertaken an aggressive marketing progrinn with the goal ofselling more energy without increasing the growth rate in our sununerpeak."
111e NRC's report concludes that, Our ongoing capital restructuring At the 1987 Stockholders hieeting,
' Union Electric Company's conduct
... program continued to take advantage h!arguerite Ross Barnett, chancellor of nuclear activities in connection of favorableinterest rates. During of the University of hiissouri-St.
with the Callaway plant shows an ap- the year, we completed the early Imuis, was elected to the Board of propriate concern for nuclear safety." redemption of $97 million of high Directors. Dr. Barnett replaced
- st preferred stock, as well as $125 retiring Director William L Behan, Callaway's second refueling was .
rst nwngagdads.
nuHmn f In June, NealJ. Farrell, president c:mpleted last Fall. Beginning in We als restructured our bank credit and chief executive officer, hiercan-September, the plant was taken off-agreements and downstzed our line for about two months as we re- tile Bank N.A. and president, hiercan-placed 96 of the 193 fuel assemblies . tile Bancorporation Inc., was elected in the reactor. (One third to one half f,S2 a new director of Union Electric, co a t d th ar r d inption of the fuel assemblies are replaced of $150 million of 15 %% first mort- late in the year.we signed new with fresh assembhes even* eighteen gage bonds, and we have announced labor agreements which provide for months.) ne new fuel assembbes plans to redeem $14.4 million of 13% wage increases averaging 3.58%
incorporated an advanced des,gn i first mortgage bonds in h! arch 1988. retroactive to July 1,1987,3.41% on which will improve fuel utilization,
. . July 1,1988, and 3.5% on July 1,1989.
operating flexibility and cost effec- Proposed acid ra. m leg.islation is an tiveness. issue we are following closely. Irgis- As we look forward to 1988 and the lation has been introduced in Con- years be.rond, I am confident that our We have undertaken an aggress,vei gress that would require further highly qualified employee team will marketing program with the goal of enable us to meet our goals, reductions in sulfur dioxide emis-selling more energy without increas- sions without any scientific evidence tng the growth rate in our summer that lower emistions from power S,SCIY' peak. A key objective is to increase plants in the hiidwest would reduce our share of the residential heating /
acidity in some lakes in the North- .
market substantially. % e are accom- /
plish,ngi this by promoting electne east. His legislation could increase Q the cost of electricity in our area by heat pumps to builders of new homes as much as 25%. Adding substantial William E. Comelius and to existm, g homeowners. Our cost to ekstric bills, and conse. President and Chief Executive Officer marketmg efforts are also producing quently to goods and senices pro. Februao' 9' 1988 a m peak power sales t duced in our senice area,is not St. Imuis, htissouri sound economic pobey unless corre.
sponding benefits in the emironment can be attained.
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[I Our Marketing Enrirwnnent demands of our customers. In '
. our service area, the demands for -
At Union Electric, our basic electricity are much greater dur- 2 t ,, product,, .is electric energy, which t ing the summer than during the 4 we deliver instantly, on demand, to . .
winter, and the facilities m place e more than one million residential, L have been designed to meet the commercial, industrial, and agn.-
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summer peak use of electncity.
- j cultural customers.
Our customers expect their 17or example, the peak demand for electricity in our service area last
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electric service to be available 24 summer was 7,255,000 kilowatts,
{ hours a day, everyday, year-round. 31% higher than the record winter j
ney depend on it to run their peak demand of 5.545,fm kih>-
homes, their businesses, their watts reached in Januan 1988.
factories. Eketricity can't be
- I Berefore, we have ample gen-p produced m. advance and stored c erating capacity to serve additional
- for future use. It must be pro-winter load. As we increase winter duced upon demano for all cus-sales of electricity, the efticiency W+o tomers in a marketplace the is E and protitabih.ty of our electne e affected by weather extremes, and -
system are improved. Ihis bene-h' for an expanding economy with
'- i ts our cuMomem and our ine new commercial structures and
. tors.
1 growing manufacturing output. ,-- 3 ,
b We focus our marketing efforts r Large lurestruents in on those areas of mutual benetit to 2
a E.acilltles customers and the t ompany. :
g, l'nion Electne has large capital e investments in power plants,
' transmission lines, and distribu-tion facilities. 'lhis system has been built over the years to meet 5 the increasing electric energy
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"Ch>ysler's St Lotiis cissei1ibly opercitto1is hctie yrectt putver cierrtctncis. l'rtiott Electric <trisu erect ottr iricrecisitty steects by clirect cortnectiori to their artclitt trcutsntissiott systern. Notr. olt r otrit sithstcitiori citttontctlicctlly clirects potter ichererer recptirect irt oltr plctnts to pret eut costly ottictges.
%) s!t Ins f I.g;; e t ring Nu[ar n .vir t h o < r t . q= irati., F e n ti n M , ~ .u n 1Avv+A 1,>ica 4 a s%Mthea AB,MAM\WFwNreatEWS%*A@#e%95 WriEf&&FMTW42.k%iuin6@*tefAL,ind'MtQX5?aa0P%T4&d.sAYS).4.4f#WR*As R,tsh*1d52%R&t/ss Gh3
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"Wl> repair th>ight cars. design and huild specialty railcars. Our goal is to keep customers 'on trach' through serrice { 'Ilion Electric's se1Tice to our expatuling operations is like that lhel' alu'al s priIl'ille ll' hat it'e !!eetl, ll' hen li'e lleetl it. "
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l l For ex51mple, we carn out a Corporate 3farketing Plan communications program each .
sununer, consisting of news .Dlc niain objectives of our __ !
articles, advertising, and bro- Corpor te M rketing Plan are to nioderate the growth of peak sum- -
chures, offering helpful infonna.
"l"r demand and to increase sales tion to customers on how to con-trol air conditioning energy use. during off-peak periods. We want to build sales without increasing
'D1is program helps us red'uce the growth in peak demand so we peak summer demand and, at the
! e n delay building another power same time, helps customers re.
duce their summer cooling costs. plant for as long as possible.
~ lhe greatest potential for in-Another way we help customers creasing off-peak energy sales is in
. optimize use of electricity is by rnarketing electric heat. In our providing a financing program for seWice area,156,(xx) homes and t ,Mtomers wishing to add insula.
tion or other energy related home apanmens and 24,% conunercial
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.d inducial comm uh f inlprovemt'ntS. Availablt tbrough electric space heating. Total kihr panicipating contractors, the pro-watts on line for electne space h - gram makes it possible for cus-lleating are 3,487,0 M), an increase toniers to finance energy related d O "m b pWous pan honit improveinciits at reasonable rates, and make monthly pay-illt'nts oil their electric bills. M >rt-titan lei.ikx) custoniers have taken adVantilgt' lbf Illis pr(igraill to imprtiVe ille ent'rgy cIliciency ill their liiiiile s h
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. 'l A major goal in 19M is to in-crease our market share of heat pumps and other electric space heating equipment in the residen-tial and commercial markets. For new single family homes, our goal is 370 of the market; for new multi family units, Mt of the market; our goal for market share j.
of commercial buildings is Mt of
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new construction and 240 of existing structures.
Heat Purnp Opportunities Historically, relatively few heat pumps have been installed in sub-division homes because develo;>
ers did not offer heat pumps as an - ,
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option. To penetrate this market, l'nion Electric is purchasing " ~
energy +fficient, heat puml> _
equipped display homes in strate-gically located major residential developments. 'Iliese display homes demonstrate to new home buyers the comfort and efficiency of the heat pump system and other energy control options, such as extra iflsulation and %ca}ed, double pane Windows.
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"My neu' house n'as built n'ith energy elJiciency in mind. lhe comjntter analysis shou's that my . Hon yround-conj > led heat />umj) system n'ill dramatically cut year-round heating and cooling costs. "
(ddAm k. d wLY Wdham Wat hter. Hornrowner N thciestount \tnv un
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In 1987, we purchased tl.e first of such homes - our Energy Control Home in a new St. Louis County subdivision. ' Die home has been visited by some 5,000 people during the dev flopm^nt of the subdivision and. to date, more than one-third of the homebuyers there have heat pumps in their new homes. In 19x8, we will purchase similar homes in other new developments.
In the existing home market, every homeowner replacing a central air conditioner represents
/ a potential heat pump opportunity, g since electric heat pumps are actually air conditioners that also heat q
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Through advertising and direct and clean. In addition, l'nion F
mail, leads are obtained for the Electric offers a Renter's Cost heating / cooling equipment deal- Control Plan that permits occu-g ers who work closely with us to pants of new apartment buildings l sell heat pumps. A centerpiece of to budget their heating bills with 1 that activity is the (Jnion Electric confidence. The Plan provides for l Five-Sta Heat Pump Dealer Pn>- a cash refund if annual heating gram. The Five-Star program costs exceed l!nion Electric's esti-l challenges the dealers to achieve mates by more than Im.. In 1987, y
higher levels of heat pump sales, electric heat was installed in 6St l along with greater technical of all new apartments.
j competence. As Five-star Heat Custorner Assistance Pump Dealers, they enjoy higher Pi o rains profit margins and an enhanced
- reputation for excellence in sdes, "Energy Plus," a group of spe-cial l'nion Electric community
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g installation, and senice. During 4 1987,90 dealers achieved Five- service programs, was developed b Star status. to address individuni customer needs and to respond to our re-
[ Electrically-Henteel spmsibility to da customers and Apartinents conununities we serve. Ihese '
( Electric heat is attractive to energy programs are available to
! apartment builders because of the assist our customers, particularly I, lower install"d cost of electric the elderly, the handicapped, and L heating equipment Our market others with special needs.
research indicates that electric
[ heat is also appreciated by apan-
, ment residents because it is safe
r "lN street lighting in <>ur small t<> ten l ytm n~ sn urity ancl traffic sali>tv It helps business l
l a>ul vert es !Irc n hiile cc>mnntnity ( 'nicin Electric l
1 pc ip!< pt <a nic rehahl.' service anci pr<>mpt matutenance wnac r lionoki liard
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+m.i wwmm inn ~ mnuwn+wxt usunerw2wwa.:ummmarwwtwanww=s mmwaaac+new Working with volunteer groups Project Comfort provides for tile and social service agencies, we construction of superinsulated provide the following customer as- rooms in poorly insulated dwell-sistance programs: ings. The residents choose one room in the dwelling where they Dollar More .is a utility bill ass.is-spend most of their time. . . e tance program funded by L. .nion -
room is insulated and kept warmer Electne and its customers, which than the rest of the house, allow-makes it possible for customers to ing the customer to lower the add 81 to the.ir bill payments, or central themlostat during ex-make monthly pledges to a fund
. tremely cold weather. Comfort that piovides temporary financial zones have been constructed .in help to people who are having more than < 00 homes.
difficulty paying their energy bills. Through 1987, the Company and IVeatherization Kits provide its customers had contributed pre-packaged, high quality weath-more than $1,l'.0.000 to Dollar erization materials. Community More. volunteers install the kits for older
- adults living in inadequatelv -
E,nergy Aid Grants tund social insulated homes. S,ome 9,000 service agencies involved in home
. . . weatherization kits have been weathen.zation projects. l'he Com- installed. %.e estimate that, on pany provides up to $2,500 per average, each customer saves agency to assist in financing quah.- Sm0 each year after weatheriza-fled energy conservation projects. . :
tion matenals are .mstalled. EnergylVise provides energy conservation seminars for senior citmis. Conducted by teams of Company retirees, the seminars teach low-cost, or no-cost ways to cut en< w expenses. Seminars have bten conduct ( d for more than 26,tXX) seniors. 13 V'y y ; s -y ,. _; ;
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- accidents, stranded motorists, or y public safety hazards, they use __
g their radio communications sys- gm ;;gg. _ ;-:- _ _ . _ _ tems to notify the appropnate -
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_= , 71re Customer .ssistance 5 Program provides a credit counsel-L ing service to customers faced i with bill payment problems. 5 Trained, professional counselors work with customers who are h experiencing immediate credit
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[ ment, sudden illness, or other problems. The program has
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{ R $tet - N _ < p 4 - g served more than 15,000 custom- --- ers since it began in 1986. " E
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y Customar Satisfaction _ 7 Our Customer Relations staff . Myyl
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hy-- yi has thousands of direct contacts "*' daily with our customers and, in q% , . y , j every contact, the emphasis is on dealing with each customer on an #"W# . i a ind: idual basis. r u ae 14 ~ k-
"Alaryville Center is a LOO-acre co?porate campus that ultimately trill have 1.3 millionJeet of ofice space. Wi> had to plan ahead on an electnc concept to serviceJhture load demand. I ~nion Electric n'orked n'ith us on options to assure this reliable sen' ice. "
Edward T Baur. President Baur Propernes ( hesterfield. Miwiun tierrscarmswumvrmwawu na o mvawarr.mswemww;*xwexace.m ter4wx4wa.usLwzwwwnuw muesucw.ww uv -/u m cwn m ___--. Our employees receive g_ g ___ w--=- .- - - - specialized training in customer sensitivity and customer contact skills. Company employees are trained to be sensitive to customer needs and to marketing opportuni-ties as well. We have established a "Cus-tomer Satisfaction Index" that is based on three aspects of cus-tomer service:
- customer outage time.
- customer attitudes toward Union Electric, as measured by opinion research surveys, and c e customer attitudes toward
'" Union Electric, as measured by customer service follow-up m a e ra- interviews.
l ._ t - During 1988, our goal is to im-prove, by 7% the base index that
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i l "Peak-sharing qf high electric cientanciperic>cis significantly - i cuts energe hills. Ou > enter;qency back-up generat<>rs are ; l c<nnputer-cc>ntrc>llect t<> prc>cluce p.>u'er cluring peak tinies. anci recluce cientanci char;qes. ('nic>n Electric tras very suppc>rtire in j helping us iniplenient this netr cc>ncept. " : a C' v&&O f /
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- d % Me. D Energy Experts In outstate Missouri, the City of 'E.
As an integral component of L uisiana asked if we could help ,; them reduce costs of operation for .. n i " our marketing effort, we provide City water pumping. % e provided energy expertise to residential
.nf rmation on how off-peak g a' customers, to the developers of 4 pumping and special digital meier-
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.O planners.
We were instrumentalin sup. Our time-of-day demand rate p rting the cont:nued operation of for commercial and industrial cus- our sixth largest customer, the tomers makes electricity used at
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f rmer Foote Mmeral Co. m night more economical than elec-
~ . Keokuk, Iowa, after the firm s g ege> s. -
tricity used dun.ng the peak load management announced plans,
- "' 7 s afj - ) periods between 10 a.m. and 10 W 1 early in 1987, to close the Keokuk
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o p.m. Therefore, .fi a business can shift the heaviest use of electricity facility. We tailored our service to ! recognize th.is customer's unique a mfN -^ 4 to night,it can save a substantial p wer supply requirements. We amount in energy costs, , g understand our actions were a 7 e . For example, the pastor of major factor ir, keeping the facility y? _ Assumption Church in St. Louis open. Re-named Keokuk Ferro-g'.. g asked Union Electric for recom- Sil, Inc., the plant, which employs
- A. 1 AQ ; mendations to help the church 135 people, provides revenues to N 1. l reduce energy costs. We analyzed Union Electric of more than $5.7
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energy saving recommendations. O We also suggested ways the air conditioning system could be operated to reduce demand
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charges. As a result, the church L , saved $5,000 per year. 17
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; worked with 12Salle Iron Works in electricity to inake huge blocks of L St. lAais to lower use of power ice during the night, which are 4 during peak demand periods. By used to cool the office building installing demand control equip- during the day.
ment, the customer's alectrical
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peak time, and the customer will o' Mc.yn i gme needs end our own obj.ectiver by we c be able to take advantage oflower controlling the growth of our +a= rates, saving an estimated $7,000 aw- * -. summer peak and by increasing h. y , a b I per year. '
" off-peak sales of energy. g j%?$g;4, h Among other customers who - '
4 have taken advantage of our off- s _ m % peak, time-of day demand rates is M' Gundaker REALTORS /I>etter ['g9 [h _ llomes & Gardens. The firm wa ge m a recently m. stalled . .in its aew corpo- - rate headquarters bu! sig a new =+ g' g:
"peak-shifting" commercial air .
conditioning system that promises ~ _wnM 2 .IX:;3 to save about 818,000 a year in f h,
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"This mai.ufacturing complex now uses enough electric power to run a c'ity of 50,000 homes. We replaced steam with electricity to keep pipelines warm and drive equipment. The results: a more manageableplant with minimal energy loss.
UE expanded itsfacilities to accommodate our added load." John Propst 6 Manager, Electrical Engineering Shell Oil Company / Wood River, Illinois
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Responsibilityfor Financial Statements He management of Union Electric Company is responsible for the information and representations contained in the financial statements and in other sections of this Annual Repon. The financial statements have been prepared in conformity with generally accepted accounting principles consistently applied. Other information included in this report is consistent, where applicable, with the financial statements. He Company maintains a system of internal accounting controls designed to provide reasonable assurance as to the integrity of the financial records and the protection of assets. Qualified personnel are selected and an organization structure is maintained that provides for appropriate functional responsibility. Written policies and procedures have been developed and are revised as necessay. He Company maintains and supports an extensive program ofinternal audits with appropriate management follow up. He Board of Directors, through its Auditing Committee comprised of outside directors, is responsible for ensuring that both management and the independent accountants fulfill their respective responsibilities relative to the financial statements. Moreover, the independent accountants have full and free access to meet with the Auditing Committee, with or without management present, to discuss auditing or financial reponing matters. Report ofIndependent Accountants are ceeerre mm Te:em m c5 osco St LNs YO 63101 t Price Uhterhouse & Februay 9,1988 To the Stockholders and Board of Directors of Union Electric Company In our opinion, the accompanying balance sheet and the related statements of income, long-term debt, preferred stock, retained earnings, other paid-in capital, and cash flows present fairly the financial position of Union Electric Company at December 31,1987 and 1986, and the results ofits operations and its cash flows for each of the three years in the period endeo December 31,1987, in conformity with generally accepted accounting principles applied on a consistent basis after restatement for the change, with which we concur, in the method of accounting for plant abandonments and disallowances of plant costs as described in Note 12 to the financial statements. Our examinations of these statements 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, f O_, 20
Union Electric Company SINicilleill OflilCollte Ohousands of Dollare Exce,A Share and Per Share Amounto) Year 1987 Year 1986 Year 1985 Operating Revenues (*): Electric $ 1,869,477 $1,722,680 $1,489,257 Gas 73,518 80,895 99,124 Other 3,416 3.607 3,382 Total operating revenues 1,946,411 1,807,182 1,591,763 Operating Expenses: Operations Fuel and purchased power 419,272 351,854 341,640 Other 327,949 334,275 312,271 747,221 686,129 653,911 Maintenance 158,908 148,173 122,526 Depreciation and amortization 181,040 179,681- 165,202 Income taxes 180,514 92,030 81,548 Other taxes (*) 190,274 181,559 150,000 Total operating expenses 1,457,957 1,287,572 1,173,187 Operating Income 488,454 519,610 418,576 Other Income and Deductions: Callaway rate phase-in plans 92,791 59,861 74,631 Deferred costs disallowed (23,169) - - Callaway Unit No. I costs disallowed - - (393,637) Income tax benefit related to Callaway Unit No. I costs disallowed - - 158,857 Allowance for equity funds used during construction 5,994 3,804 53,709 Miscellaneous, net (15,714) 3,947 (1.7_09) Total other income and deductions, net 59,902 67,612 (108,149) Income Before Interest Chnrges 548,356 587,222 310,427 Interest Charges: Interest on debt 228,961 247,409 254 50 Allowance for bor c.wed funds used during construction (14,483) (12 008) (53,045) Net interest charges 214,478 235,401 201,275 Net income 333,878 351,821 109,152 Preferred Stock Dividends 36,522 49,245 49,836 Earnings on Common Stock 8 297.356 S 302.576 $ 59,316 (') Includes license and franc hise taxes of $91.490.000, $85.4W.M). and $76.514.000 for the years 19F7,1986, and 1935. respectively. Earnings per Share of Common Stock (based on average shares outstanding) $2,91 $2.96 $0.59 Dividends per Share of Common Stock S t.92 81.86 S1.78 Average Number of Common Shares Outstanding 102.123,834 102,123.834 100.403.016 See Notes to Financial Statements on pages 29 through 34. 21
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B/tl(111Ce sirect union siectric campany l Chousands of Dollars) Assets December 31,1987 December 31,1986 Property and Plant, at original cost: Electric $6,644,756 $6,450,660 Gas 99,109 92,332 Other 14,482 14,288 6,758,347 6,557,280 less accumulated depreciation and amortization 1,735,720 1,556,019 5,022,627 5,001,261 Construction work in progress: Nuclear fuelin process 140,439 196,402 Settlement of uranium litigation (14,869) (27,106) Other 52,859 44,679 Total property and plant, net 5,201,056 5,215,234 Deferred Charges and Other Assets: Callaway Unit No. 2 construction abandonment 60,543 66,121 Callaway rate phase in plans 199,508 134,223 Unamortized debt expense 24,405 21,132 Unamortized bond defeasance cost 5,066 4,931 Nuclear decommissioning trust fund 9,084 5,228 Other _ 13,215 13,813 Total deferred charges and other assets 311,821 245,450 Current Assets: Cash 3,940 4,353 Deposits for payment ofinterest and other deposits 2,082 1,266 Accounts recalvable - trade Oess allowance for doubtful accounts of $3,039 and $4,058, at respective dates) 149,866 127,876 Unbilled rever.ue 86,258 82,420 Other accounts and notes receivab'e 12,755 10,173 Materials and supplies, at average cost - Fossil fuel 78,961 104,795 Constmetion and maintenance 100,225 93,123 Other _ 10,847 10,521 Total current assets 444,934 434,527 Total Assets $5,957,811 $5,895,211 See Notes to Financial Statements on pages 29 through 34, 22
Capital and Liabilities December 31,1987 December 31,1986 Ccpitalization: Common stock, $5 par value, authorized 150,000,000 shares; outstanding 102,123,834 shares (excluding 42,990 shares at par value in treasury) $ 510,619 $ 510,619 Other paid-in capital, principally premium on common stock (see accompanying staternent) 714,585 715,772 Retained earnings (see accompanying statement) 610,466 515,312 Total common stockholders' equity 1,835,670 1,741,703 Preference stock, $1 par value, authorized 7,500,000 shares - none outstanding Preferred stock not subject to mandatory redemption, including $1,486 premium (see accompanying statement) 356,270 356,270 Preferred stock subject to mandatory redemption (see accompanying setement) 64,608 165,384 1 Ieng-term debt (see accompanying statement) 2,366,005 2,445,409 Unamortized discount and premium on debt (8,390) (9,317) Total capitalization 4,614,163 4,699,449 Accumulated Dciermi Taxes on Income 621,451 552,379 Accumulated Deferred Investment Tax Credits 187,977 136,219 Accumulated Provision for Nuclear Decommissioning 9,954 6,098 Construction Commitments and Contingencies (Notes 10,11, and 12) Current llabilities: Current maturity oflong tenn debt 101,634 33,967 Accounts payable 161,094 145,835 Wages payable 30,130 27,312 Bank loans 33,000 30,000 Income taxes accrued 34,216 51?S7 Other taxes accrued 17,931 17,511 Interest accrued 78,459 81,375 Dividends declared 8,477 12,162 Other 59,325 51,637 Total current liabilities 524,266 501,066 Total Capital and Liabilities $5,957,811 $5,895,211 23
Long-Terin Debt Union Electric Company Ghosands of Dollars) , December 31,1987 December 31,1986 First Mortgage Honds - note (a) 4 W% Series due 1988 S - S 3,000 4%% Series due 1988 - 35,000 4%% Series due 1990 50,000 50,000 4%% Series due 1991 30,000 30,000 l 5% Series due 1991 2,000 2,000 ! 5%% Series due 1991 3,500 3,500 15 %% Sedes due 1991 -note (b) 150,000 150,000 4 %% Series due 1992 6,000 0,000 15% Series due 1992- note (c) - 125,000 4h% Series due 1993 30,000 30,000 10%% Series due 1994 - note (d) 3,220 3,610 4 h% Series due 1995 35,000 35,000 4%% Series due 1995 3,000 3,000 5W% Series due 1996 30,000 30,000 5%% Series due 1996 5,000 5,000 8h% Series due 1996 10,000 10,000 8%% Series due 1996 100,000 100,000 5h% Series due 1997 40,000 40,000 5%% Series due 1997 5,000 5,000 7% Series due 1998 50,000 50,000 7.95% Series due 1998 4,000 4,000 7%% Series due 1999 35,000 35,000 8% Series due 1999 5,000 5,000 8h% Series due 1999 40,000 40,000 9.95% Series due 1999 - note (d) 78,580 85,720 9% Series due 2000 60,000 60,000 7%% Series due 2001 50,000 50,000 7%% Series due 2001 50,000 50,000 8% Series due 2001 60,000 60,000 9%% Series due 2001 - note (d) 3,900 4,200 9%% Series due 2001 - note (d) 2,260 2,434 9%% Series due 2001 -note (d) 7,800 8,400 8W% Series due 2002 - note (d) 4,200 4,500 7%% Series due 2003 7,000 7,000 8%% Series due 2004 70,000 70,000 10% Series due 2041 - note (d) 8,000 8,500 10%% Series due 2005 70,000 70,000 5.80% Series due 1992 to 2005 - note (e) 27,085 27,085 1 8%% Series due 2006 70,000 70,000 3%% Series due 2007 60,000 60,000 9.35% Series due 2008 - note (d) 55,000 55,000 9.25- 9.625% Series due 2000 to 2010- note (e) 60,000 60,000 13% Series due 2013 - note (b) 14,351 14.351 9%% Series due 2016 100,000 100,000 24
December 31,1987 December 31,1986 Unsecured loans - Foreign credit agreement, due 1991 - note (f) $ 150,000 $ 80,000 Domestic credit agreement, due 1991 - note (g) 275,000 275,000 Unsecured Notes - l 6% Due to 1992 1,505 1,610 Missouri Environmental Improvement - Revenue bonds,5.60 - 6.20% Series due 1983 to 20N 16,500 16,500 1984 Series A due 2014 -note (h) 80,000 80,000 19M Series B due 2014 - note (h) 80,000 80,000 19M Series C due 2014-note (i) 47,500 47,500 1985 Series A due 2015-note C) 70,000 70,000 1985 Series B due 2015-note 0) 56,500 56,500 Nuclear Fuel lease - note (k) 94,104 70,969 lAng Term Debt $2.366,005 $2,445,409 fa) At December 31,1987, substantially all of the propeny and plant was mortgaged under, and subject to tiens of, the respective indentures pursuant to which the boods were issued. (b)ne Company redeemed the 15 %% Series on February 1,1988 at a price of 100 percent of the principal amount, and has an-nounced plans to redeem the 13% Series on March 1,1988 at a price of 110.30 percent of the principal amount. (c) in 1987, the Company completed early redemption of the 15% Series at a price of 104.29 percent of the principal amoun'. (d)To be retired by sinking f and - 10 %% Series to 1993; 9.95% Series to 1998; 9 %% Series and each 9 %% Series to 2000; 8 %% Series to 2001: IM Series to 201A and 9.35% Series from 1989 to 2007, (e) Emironmental Improvement Series. (S In June 1987, the Company entered into a new four year credit agreement with certain foreign banks which permits the Company to borrow up to $150 million in term loans, on which interest rates will vary depending on market con litions and the Company's selection of various options under the agreement, replacing the former $1(0 mibn foreign credit agreement which was due 1987 to 1989 ($20 million is included under 1986 current rnaturity of long-term debt). At December 31,1987, such foreign borrowings were outstanding at an average interest rate of 8.47% based on the 30<1ay london Interbank Offered Rate (IJBOR). (g)in November 1987,(ae Company entered into a new four-year credit agreement with certain domestic banks which permits the Company to borrow up to $275 million, on which interest rates will vary depending on market conditions and the Company's selection of vaious options under the agreement, replacir.g the former $275 million dome stic credit agreement which was iue 1989 to 1990. At December 31,1987, such domestic borrowings were outstanding at an average interest rate of 7.54A based on competitive bid rates. (h) Adjustable-fixed rate, interest rate at 5 %% per annum through May 31,1988; thereafter, interest rates will depend on market conditions and the Company's option to select an adjusted rate for each annual period or a fixed rate until maturity.
- 0) Adjustablefixed rate, interest rate at 3.95% per annum through February 29,1988; thereafter, interest rates will depend on market conditions and the Company's option to select an adjusted rate for each annual period or a fixed rate urtti maturity.
(j) Interest rates, and the periods during which such rates apply, vary depending on the Company's selection of cenain dermed rate modes, ne average interest rates at December 31,1987, for such Series A and Series B bonds were 5.36% and 5.44 A respectively. (k) At December 31,1987 and 19% $54 mihn in each of the years is included under current maturity oflong-term debt. He Company borrowed an additional $100 million under the Fuel lease in January 1988.
- 0) l'nion Electric Company has an intermediate term credit agreement with cenain foreign banks which permits the Company to borrow up to $40 million through December 1991. At December 31,1987, none of such foreign borromings were outstanding. He Company plans to borrow the S40 million available under this agreement in February 1988.
See Notes to Financial Statements on pages 29 through 34. 25
Preferred Stock Union Electsic Company (Thousands of Dollars) . December 31,1987 December 31,1986 Preferred Stock Not Subject to Mandatory Redemption: Preferred stock outstanding without par value (entitled to cumulative dividends) -note (a) Stated value of $100 per share-
$7.44 Series - 550,000 shares $ 55,000 $ 55,000
$6.40 Series - 300,000 shares 30,000 30,000
$5.50 Series A- 14,000 shares 1,400 1,400
$5.50 Series B - 3,000 shares 300 300
$4.75 Series - 20,000 shares 2,000 2,000
$4.56 Series - 200,000 shares 20,000 20,000
$4.50 Series - 213,595 shares 21,359 21,359
$4.30 Series - 40,000 shares 4,000 4,000 i
$4.00 Series - 150,000 shares 15,000 15,000 l
$3.70 Series - 40,000 shares 4,000 4,000 )
$3.50 Series - 130,000 shares 13,000 13,000 l
Stated value of $97.50 per share -
$8.00 Series of 1971 - 425,000 shares 41,437 41,437 Stated value of $92.25 per share -
$8.00 Series- 350,000 shares 32,288 32,288 Stated value of $25 per share-
$2.98 Series- 3,000,000 shares 75,000 75,000
$2.125 Series - 1,600,000 shares 40,000 40,000 Total Preferred Stock Not Subject to Mandatory Redemption $354,784 $354,784 Preferred Stock Subject to Mandatory Redemption:
Preferred stock outstanding without par value (entitled to cumulative dividends) - note (a) Stated value of $100 per share-
$6.30 Series - 8,580 and 8,840 shares at respective dates, due to 2020 - note (b) $ 858 $ 884 Stated value of $50 per share-
$4.60 Series - 1,275,000 and 1,350,000 shares at respective dates, due to 2004 - note (c) 63,750 67,500 Stated value of $25 per share-
$4.00 Series of 1982 - 3,000,000 shares due 1988 to 2007 - note (d) - 75,000
$2.72 Series - 880,000 shares due to 1998 - note (d) - 22,000 Total Preferred Stock Subject to Mandatory Redemption S 64,608 $165,384 (a) Authorized Union 51ectnc Company total preferred stock - 25.000,0n0 shares.
(b) De Company is required to retire 260 shares at $100 per share on June 1 of each year. R)He Company is required to retire 75.000 shares at $50 per share on August 15 of each year. (d)In 1987, the Company completed early redemption of th S4.N Series of 1982 at $27.65 per share and the $2.72 Series at $26.35 per share. See Notes to Financial Statements on pages 29 through 34. 26
SINatentent of Retainet! Earnings Union Electric Company Ohousands of Dollars) Year 1987 Year 1986 Year 1985 Balance at Beginning of Period, as previously reported $552,743 Cumulative effect of retroactive application of SFAS 90 (30,697) Balance at Beginning of Period $ 515,312 $402,589 522,016 Add: Net income 333,878 351,821 109,152 849,190 751,410 631,198 Deduct: Preferred stock dividends
- 34,679 49,148 49,766 Common stock cash dividends - $1.92, $1.86, and $1.78 per share, respectively 196,078 189,950 178,843 Premium paid on preferred stock reacquired 7,967 - -
238,724 239,098 228,609 (Under mortuge indentures as amended, free and unrestricted retained earnings at December 31,1987 amounted to $553,351) Balance at Close of Period $610,466 $515.312 $402,589
' Preferred stock dhidends include dhidends declared applicable to subsequent periods.
Statentent of Other Paitl-In Capital Ghousands of Do!!ars) Year 1987 Year 1986 Year 1985
$715,772 $715,772 $675,934 Balance at Beginning of Period Excess of sales price over par value of common stock issued for Dividend reinvestment and stock purchase plan - - 39,058 Employee stock ownership plan - - 888 Premium paid on preferred stock reacquired (1,171) - -
Other (16) - (108) Balance at Close of Period $714,585 S715,772 S715,772 See Notes to Financial Statements on pages 29 through 34. 27
Statentent of Cash FlotrS Union Electric Company Ghousands of Dollars) Year 1987 Year 1986 Year 1985 Cash Flows From Operations: Netincome $ 333,878 $ 351,821 $ 109,152 Items not requiring cash-Depreciation and amortization 177,559 177,219 163,552 Callaway Unit No 1 costs disallowed - - 393,637 Amortization of wanium litigation settlement (18,571) (63,143) (46,554) Amortization of r:uclear fuel 47,142 57,685 51,944 Allowance for funds used during constmetion (20,477) (15,812) (106,754) , Fuel expense during constmetion - - 34,027 Deferred taxes on income, net 69,072 17,337 (46,623) Deferred investment tax credits, net 51,758 47,501 (35,031) ! Callaway rate phase-in plans (92,791) (59,861) (74,631) l Deferred costs disallowed 23,169 - - l Changesin assets and liabilities: Receivables, net (28,410) (4,083) (38,337) Materials and supplies 18,732 (15,693) (36,324) Accounts and wages payable 18,077 4,025 34,237 Cancellation charges (2,337) (21,580) (172) Taxes accrued (16,631) 9,765 19,417 Interest and dividends acemed or declared (6,601) (1,16~) 16,381 Other, net 17,232 4,801 (10,285) Net cash provided by operations 570,801 488,815 427,639 Cash Flows From Investing: Constmetion expenditures (150,698) (145,056) (285 97) Allowance for funds used during construction 20,477 15,812 106,754 Nuclear fuelexpenditures (41,738) (87,765) (81,242) Settlement of uranium litigation 6,332 8,201 12,380 Net cash used in investing activities (165,627) (208.808) (248,005) Cash Flows From Financing: Dhidends on preferred and common stock (230,757) (239,098) (228,609) Redemptions - Short-term debt - - (51,000) Nuclear fuellease (137,802) (136,N5) (M,971) Long-term debt (514,902) (163,191) (167,699) Preferred stock (109,914) (7,776) (5,776) Issuances - Nuclear fuellease 160,604 37,282 40,477 Short-term debt 3,000 30,000 - Dividend reinvestment / stock purchase plan - - 54,792 1Ang-term debt 425,000 200,000 226,500 Net cash used in financing activities (404,771) (279,428) (186.286) Net Change in Cash and Cash Equivalents 403 579 (6.652) Cmh and Cash Equivalents at beginning of year 5,619 5,mo 11,692 Cash and Cash Equivalents at end of year $ 6,022 $ 5,619 $ 5,N0 See Notes to Financial Statements on pages 29 through 34. 28
Notes to Financ/alStatements Union eiectric Company Note 1 - Summary of Accounting Policies requires an asset and liability approach for financial account-he Company is subject to regulation by the Missouri Public ing and reporting for income taxes. Adoption of SFAS 96 is Service Commission, Illinois Commerce Commission, Iowa required no later than 1989. He Company has not deter-Utilities Board, and the Federal Energy Regulatory Commis- mined when it will adopt SFAS 96. He adoption of SFAS 96 sion. He accounting policies of the Company are in accor- is not expected to have a material effect on the Company's ' dance with the rate-making practices of the regulatory au- financial position or results of operations. thorities having jurisdiction and, as such, conform to gener-All wance for Funds Used During Construction ally accepted accounting principles as applied to regulated AHowwe f r funds used during construction (AFC) is a public utilities. A description of the Company's significant utility industry accounting practice whereby the cost of bor-accounting policies follows.
- rowed funds and the cost of equity funds (preferred and Property and Plant common stockholders' equity) applicable to the Company's The cost of additions to and betterments of units of property construction program are capitalized as a cost of constme-and plant is capitalized. Cost includes labor, material, appli- tion. %is accounting practice is intended to offset the effect cable taxes, pensions, and certain other items, plus an allow- on earnirigs of the cost of financing construction activity, and ance for funds used during construction. Maintenance expen- results in treating such financing costs in the same manner ditures and renewals of items not considered to be units of as construction charges for labor and materials.
property are charged to income as incurred. When units of Under accepted rate-making practice, cash recovery of AFC, depreciable property are retired, the ongmal cost and removal as well as other construction costs, occurs when completed cost,less salvage, are charged to accumulated depreciation. rojects are placed in sersice and reflected in customer rates. He Company adopted Statement of Financial Accounting AFC rates are established by the Company consistent with Standards No. 90,"Regulated Enterprises - Accountmg for the methodology prescribed by the Federal Energy Regula-Abandonments and Disallowances of Plant Costs in Decem- tory Commission. Average annual AFC rates were 10.3% in l ber 1987 and, as provided, restated prior period financial 1987,10.4% in 1986, and 11.5% in 1985. AFC, net of taxes, statements. See Note 12. amounted to 5%,3%, and 136% of earnings on common stock Depreciation for 1987,1986, and 1985, respectively. Except for the Callaway nuclear plant, depreciation is pro- Callmy Rate Phase-In Plans vided over the estimated hves of the various classes of depre-ne Callaway rate phase-in plans effective in 1985 as a result ciable property by applying composite rates on a straight- of regulatory commission orders provide for (1) partial defer-line bas:s. Callaway plant depreciation is computed on a unit- ral of a cash recovery of costs related to the Callaway plant of-production basis.'Ihe provision for depreciation in 1987 is during the early years of the plans with recovery of such equivalent to approximately 2.8% of the average depreciable deferrals in the later years of the plans, (2) three-year amor-cost (2.91,in 1986 and 3.1% in 1985).He provision for depre- tization of certain Callaway-related accumulated deferred ciation melor a an allowance for future nuclear decommis- income taxes, and (3) two-year amortization of certain pro-stomng costa, ceeds from the Company's settlement of uranium litigation with Westinghouse.See Note 12 regarding an orderissued by Nuclear Fuel De cost of nuclear fuelis amortized to fuel expense on a unit. the Missouri Public Service Commission in December 1987. of-production basis. A provision for spent fuel disposai costs is ne amount of costs for which cash recovery is deferred charged to expense based on kilowatt-hours generated. under the plans is recognized as income currently in the Statement of Income. Such noncash income, net of taxes, Income Taxes amounted to 26%,20% and 126% of earn, m gs on common Deferred income taxes are provided for timing differences stock for 1987,1986, and 1985, respectively. between book and taxable income as permitted for rate. making purposes. Investment tax credits utilized are deferred Unbilled Revenu. and amortized over the usefullives of the properties to which he Company records on its books the estimated amount of they relate. accrued, but unbilled, revenue and also the accrued liability In December 1987, the Financial Accounting Standards for the related taxes. Board issued Statement of F'mancial Accounting Standards No. 96, "Accounting for Income Taxes" (SFAS 96). SFAS 96 29
Notes to F/nanc/al Statements (continued) Union Electric Company Note 2 - Income Taxes Investment tax credit canyfonvards, unrecorded as of De-Total income tax expense for 1987 resulted in an effective tax cember 31, 1987, amounted to approximately $70 million rate of 37% on earnings before income taxes [21% in 1986 and which may be utilized by the Company to reduce future (203)% in 1985).%e principal reasons such rates are less than income tax liabilities through 2002. the statutory Federal rate are as follows: . 1987 1986 1985 Deferre6 income taxes are provided for differences between Statutory Federal income tax rate 40% 46% 46% book and taxable income to the extent permitted for rate-Increenes (Decrea.es) from: making purposes. At December 31,1987, the wmulative net Depreciation differences 6 8 240 amount of income tax timing differences for which deferred Canaway rate phase-in plans - income taxes have not been provided was $1.1 billion. Other income (5) (6) (95) Amortization of prior years' Note 3 - Capital Stock () () (l) During the three years ended December 31,1987, of the Amor of uranium litigation credits 26,000,000 shares of common stock, $5 par value, reserved (1) (3) (23) A!!awance for equity funds used for the Union Electric Company Dividend Reinvestment and l during constnsction (1) - (67) Stock Purchase Plan,2,901,122 shares were issued in 1985; investment tax credits related to and of the 4,500,000 shares reserved for the Union Electric M e s. 4 _5) C]*"y mployee l
- Stock Ownership Plan,68,102 were is-Efective Federal income tax rate 37% 21% (203)% i in 1985, due to the nominal amount of book income as a result During the same three-year period, preferred stock, wirhout par value, was retired or redeemed as follows: m 1957, the of the write-off of Callaway Unit No.1 costs disallowed, differ, Company retired 880,000 shares, $2.72 Senes and 3,000,000 ences between tax and financial reporting income (even in shares, S4.00 Scn,es of 1982. In 1986 and 1985, the Company relatively minor amounts) cause, on a percentage basis, un-redeemed 160,000 shares and 80,000 shares, $2.72 Senes, usual changes in the effective tax rate, respectively. He Company redeemed 260 shares, $6.30 income tax expense components for the years shown are as Series and 75,000 shares, S4.60 Series in each of the years follows (in thousands): 1987,1986, and 1985.
1987 1986 1985 Tcxes currently payable Preferred Stock Eventual (principally Federal): Re:lempdon Pdees Current Minimum laciuded in operating expenses S 91,585 S 35.595 $ 21.827 (Per Share) (Per Share) Included in other income - $7.44 Series $102.50 $101.00 Callaway Unit No. I costs $6.40 Series 101.50 101.50 disallowed -
- (13.217) $5.50 Series A 110.00 110.00 Miece!!aneous, net (9.149) (13,762) (104)
$5M Sedes B 103 M 103 M Deferred taxes $4.75 Series 102.176 102.176 (prindpally Federal): $4.56 Series 102.47 102.47 included in operating expenses - $4.50 Series 110.00 110.00 (a) taberahzed depreciation 77,078 95.835 112.958 $4.30 Sedes 105.00 105.00 Repair allowance 4,927 5.573 5.543 S4.00 Series 105.625 105.625 Allowance for borrowed funds used during constrvetion 5,493 $3.70 Series IN.75 10435 4.631 21.590 Unbilled revenue (12,648) - -
$3.50 Series 110.00 110.00 Other (pnmanly capitalized costs) 2,764 10.518 18.260 S8 00 Senes of 1971 98 2 98.50 Callaway rate phase-in plans $8.00 Series 96.25 93.25 amomzation of prior years S2.98 Series 27.98 (b) 25.00 deferrals (34,337) (107.901) (81.356) $2.125 Series 2515 25.25 Prosisions deferred in prior years (5,148) (5.1 64) (5.0G8) $6.30 Series (c) 100.00 100.00 Other (6,679) - -
$4.60 Series (d) 54.60 (b) 50.50 Included in other income -
C y L it No. I costs (a) In the event of voluntary liquidation. S105.50. Ca!!away rate phase-in plans 15,533 - - edemWon s W to cenain reWom regardng rekn&ng perauons. Miscellaneoes, net (principaDy liberalized depreciation) 9,440 13.M5 4.265 (c) The Company is required to redeem 260 shares at $1(0 per share on June 1 of each year. ed a 57,479 t g ex s 52.943 (12.270) 5 e e Included in other income - Callaway l' nit No. I costs disa!) owed - - (22,761) Total income tax expenne $ 196,338 $ 92,113 $(73,148) 30
Note 4 - Preferred Stock Subject to Mandatory he Company has capitalized the cost, including certain Hedemption interest costs, of the leased nuclear fuel and has recorded the During each of the five years 1988 through 1992, the Company related lease obligation. During the years 1987,1986,and willbe required to redeem $3,776,000 of the preferred stock 1985, the total interest charges under the lease were $15.3 outstanding at December 31,1987. million, $16.0 million, and $20.9 million (based on an average interest rate of 7.6%,8M, and 9.2%, respectively) of which $9.4 Note 5 - Debt Retirement Provisions nulli n, $8.9 milli n, and $11.3 million, respectively, were During the five years from December 31,1987, the amounts of capitalized. debt maturities totaling $820,685,000 are: $101,634,000 in 1988; $12,539,000 in 1989; $62,539,000 in 1990; $623,289,000 Note 7 - Short-Term Borrowings in 1991; and $20,6M,000 in 1992. However, $150,000,000 of the Short term borrowings of the Company consist of bank loans requirement in the year 1991 has been eliminated as a result (maturities not in excess of 270 days) and commercial paper of the Company's early redemption of the 15%% Series on (maturities generally within 10-45 days). Information relative February 1,1988.ne Company has announced plans for the to short-term borrowings is as follows (in thousands except early redemption on March 1,1988 of the $14,351,000,13% rates): Series, due March 1,2013. Amountc for years subsequent to 1987 1986 1985 1988 do not include nuclear fuel lease payments since the Bank loans at year end - Amount outstanding 833,000 $30.000 - amounts of such payments are not currently determinable. 7.6% 7.5% Composite interest rate - Debt retirement provisions contained in most mortgage Commercial paper at year end - - - bond indentures of the Company require, subject to certain al-ternatives, the redemption annually of 1% of the principal [QQ,'Z'j" amount (as defined) of each series of bonds. In substantially uring the year 884,000 $94.000 $154.700 all instances, as permitted by the indentures, the Company has been following the practice of pledging property additions Awrage daily short term borbings outstanding during the year - in lieu of such redemptions. Aggregate amount $47,794 $45.130 $ 65.594 Weighted composite interest rate 6.9% 7.7% 8.6% Note 6 - Nuclear Fuel IEase Re Company has a lease agreement which provides for the ne above weighted composite interest rates were calculated financmr of the costs of up to $250 milhon of the Company's by dividing the applicable interest expense for the year by nuclear fuel. Pursuant to the terms of the lease, the Company the average daily short-term borrowings shown above. has assigned to the lessor certam contracts for purchase of nuclear fuel. He lessor obtains, through the issuance of At December 31,1987, the Company had bank lines of credit commercial paper backed by the Company's credit or from aggregating $212 million ($179 million of which were unused direct loans under a committed revolving credit agreement at such date) which make available interim financing at vari-from commercial banks, the necessary funds to purchase the ous rates ofinterest, not to exceed prime, based on the London InterBanx Offered Rate (UBOR), the bank certificate of de-fuel and make interest payments when due. posit rate, or other options, and in support of which the ne Company .is obligated to reimburse the lessor for all ex- Company has both written and unwritten agreements with its penditures for nuclear fuel. interest, and related costs. Obh,ga- lending banks to pay annual fees ranging from 0.125% to tions u nder this lease become due as the nuclear fuelis utilized 0.25%. nese lines of credit are renewable annually at various at the Company's Callaway nuclear plant. During 1987, the dates throughout the year. Company reimbursed the lessor $58.6 million, including $5.8 million of interest charges applicable to nuclear fuel in heat Note 8 - Settlement of Uranium utigation In 1979, the Company and Westinghouse Electric Corpora-production, and $85 million for fuel repurchased from lessor. During 1986, the Company reimbursed the lessor $M.0 mil- tion settled the Company's suit to require Westinghouse to lion, including $7.3 million of interest charges applicable to fulfillitscontractualobligation todeliver10million poundsof nuclear fuelin hert production, and $80 million for fuel repur- uranium U3 0, to the Company.ne settlement provides for chased from lessor. During 1985, the Company reimbursed cash and discounts on uranium, goods, and senices over the the lessor $65.8 million, including $10.8 million of interest period 1980 2010. In accordance with rate orders of regula-4 charges appheable to nuclear fuelin heat production. tory authorities, settlement proceeds are being amortized as a reduction of fuel expense. 1 31
. ~- . .
~- .. - . _ _ . . - - . . . - Notes to F/nanc/nl Statements (continued) Union Electric Company , Note 9 Employee Retirement Plan and Related retirement age while working for the Company. He costs of Benefits retiree health care and life insurance benefits are recognized
%e Company has a non-contributory, defined-benefit retire. on the basis of claims paid. Such costs totaled $6 million, $5 inent plan covering substantially all ofits employees. Benefits million, and $3 million for 1987,1986, and 1985, respectively, are based on years of senice and the employees' compensa- Note 10 - Construction Commitments tion during years of employment. He Company's funding he Company is engaged in a construction program under policy is to contribute annually at least the minimum amount which expenditures averaging approximately $235 million required by government funding standards,but not more than are anticipated during each of the next five years.
that which can be deducted for Federal income tax purposes. Plan assets consist principally of common stocks and fixed Note 11 - Contingencies income securities (including S5 million of Company securities In late 1981, the Company canceled construction of Unit at December 31,1987). No. 2 at its Callaway plant. At December 31,1987, $61 million , ($36 million net of tax) is recorded as an asset representing ! Pension costs for the years 1987,1986, and 1985 were $15 the present value of future cash flows expected to be received i million, $11 million, and $17 million, respectively, of which ap- as recovery for the cost of Callaway Unit No. 2. (See Note 12 , proximately 17%,1?%, and 21%, respectively, were charged to regarding the Financial Accounting Standards Board.) constmetion accounts. He Company's adoption in 1986 of In 1983, the Missouri Public Senice Commission (MoPSC) Statement of Financial Accounting Standards No. 87,"Em- ruled that recovery of Callaway Unit No. 2 costs applicable to ployers' Accounting for Pensions" reduced 1986 pension the Missourijurisdiction is barred by a state statute prohibit. costs $6 million. ing recovery of costs of a facility before it is fully operational ne plan's funded status follows (in millions): and used for senice. %e Company appealed this ruling and , At December 31. in 1985 the Missouri Supreme Court ruled that the statutory ! 1987 1986 ban does not apply to canceled plants and remanded the issue Actuarial present value of benefit ot 4*tions: to the MoPSC for further proceedings. In March 1986, the . Vested bene 6t obligation $(324) S(301) MoPSC again denied recovery.ne Company appealed this ! Accumulated benefit obligation $(359) S(338) second denial to the Missouri Circuit Court and in December i Projected benest obligation for senice rendered 1987, the Circuit Court affirmed the MoPSC's denial. He to date $(445) S(422) Company has appealed to the Missouri Coart of Appeals, Plan assets at fair alue 448 433 where the case is now pending. At December 31,1987, $52 Excess of plan assets over projectaf benefit million ($32 million net of tax) of the recorded asset related to obligation 3 11 Callaway Unit No. 2 is applicable to the Missourijurisdiction. t'nrecognhed net (gain) or los. (11) 8 Recc<ery of Callaway Unit No. 2 costs applicable to other pe <od7c en$n e 26 - regulatory jurisdictMns is presently reflected in rates. In the tinre<vgnized net assets at transition (16) (17) opimon of management, unrecovered amounts if any, would Prepaid penolon cost 8 2 $ 2 not be material to the financial position of the Company. Pension costs include the following components ne Company's insurance coverage for its Callaway plant, (in millions): the maximum amount currently available to the Company, is 1987 1986 as follows: senice cost - benents earned during the period 8 14 $ 12 rest cost on projected benent obligation Property insurance coverage of $500 million pro-1
.g Net amordzation and deferral (9) 16 Mutual Atomic Energy Ijability Underwriters Pension cost S 15 S 11 (MAELU).
For determining the actuarial present value of the projected Excess property insurance of $775 million pro-benefit obligation in 1987 and 1986, the weighted average dis- vided by Nuclear Electric insurance Limited count rates were 8% and 7.5%, respectively, and the rate of (NEIL), a mu tualinsurer established by the utility increase in future compensation was 6% in both years. He .ndu stry. Under this policy, the Company could be expected long term rate of return on plan assets was 7.5% in subject to a maximum retrospective premium 1987 and 1986' assessment of SM mEon in any one poUcy year if NEIL's property losses exceed available funds. In addition to providing pension benefits, the Company pro-vides certain health care and life insurance benefits for re- Excess property insurance of $250 million pro-tired employees. Substantially all of the Company's employ- vided by ANI and MAELU. ees may become eligible for those benefits if they reach 32
On August 1,1987, the Prica-Anderson amend- Note 12 - Callaway Nuclear Plant ments to the Atomic Energy Act, covering liability In early 1985, the MoPSC authorized a $455 million increase to third parties, expired. Untillegislation is passed in annual electric revenues for costs related to Callaway Unit by Congress to further amend the Act, the Com- No. l.nat increase was to be phased in over a six year period. pany continues to be covered by the expired (In early 1987, the MoPSC reduced the final four annual rate amendment which limits such liability to $720 increases, from 7.3% to 4.6%, to reflect expected income tax ex-million for each nuclear incident. Coverage of the pense reductions from theTax Reform Act of 1986.) He first-first $160 million of liability is provided by ANI and year increase, effective April 1985, was $149 million (15%); the MAELU. %e balance is provided by utility indus- increase in the second year, effective April 1986, was $112 try retrospective assessments. He Company's million (10%), the increase in the third year, effective April maximum potential assessment under this plan 1987, was $57 million (4.6%); to be followed by annual in-would be $5 million per incident but not more than creases of 4.6% in each of the next three years, totaling $189
$10 million per year. Proposed legislation in Con- million.
gress would substantially increase limits of liabib ity and the Company's potential assessments. ne in April 1987, the Staff of the MoPSC and the Office of Public Company is unable to predict the outcome of such Counsel of the State of Missouri filed with the MnPEC com-legislation. plaints against the Corupany which alleged that the Company's return on its investment had become excessive. Effective January 1,1988, a new Master Worker He complaints sought, (i) a reduction in t1 e Company's thei. Policy was issued by ANI and MAELU with an ag- current electric revenues in a range of $45 million to $37 g egate limit of $160 million for the nuclear indus- million, (ii) elimination of $189 million of revenue increases try as a whole and will cover claims of workers as scheduled to be implemented over the next three years under a result of radiation exposure on or afterJa nuary 1, the Missouri rate phase-in plan previously authorized by the 1988.ne policy was issued for a term of five years MoPSC, and (iii) a material reduction in the Cal'away-related with a five-year discovery period and provides for deferred cost balance accumulated under the Missouri rate retrospective prernium assessments. The phase-in plan. On December 21,1987, after conducting hear-Company's maximum potentialassessment under ings, the MoPSC issued an order in response to the com-the policy is $2.7 million. plaints he order eliminated the $189 million of scheduled revow e increases and instead authorized a single revenue Accidental outage replacement power cost insur. increase of $5.6 million effective Dect mber J1,1987,in addi-ance provided by NEIL hereunder, the Com. tion, the order effectively prevents the recovery of $23 milhon pany is insured for up to $1.2 million per week for one year, commencing 26 weeks after initiation of f Callaway-related deferred costs accumulated under the Missouri rate phase-in plan. As a result, the Company char ged the outage, and for up to $0.6 million per week for an additional year. Under this policy, the Company
$23 million (S.23 per share) to expense in 1987. (He order could be subject to a maximum annual retrospec. provides that the remaimng $159 million deferred cost bal-ance applicable to Missoun be recovered m rates over the tive premium assessment of $2.0 million.
five years 1988 through 1992.) To the extent that any losses arising from a nuclear incident at Eff(ctive during 1985, the Illinois Commerce Conunission, Callaway phnt exceed the limits of, or are not subject to, .n- the Iowa Utilities Board, and the Federal Energy Regulatory surance, or to the extent such insurance becomes u navailable Commission authorized rate phasein plans comparable to m the future, the Company wdl retain the nsk ofloss as a self- those ordered by the MoPSC in 1985. insurer. Although the Company has no reason to anticipate a serious nuclear incident at Callaway plant, if such an incident Regulatory commission orders authorizing the respective did occur,it could have a material but presently undetermin- rate phase in plans, disallowed a total of $440 million of Cab able adverse impact on the Company's financial position, laway Unit No.1 costs from rate base (includ.ng $44 million al-located to the canceled Callaway Unit No. 2, see Note 11). He Company ,s .i mvoh.ed in legal and adm. ims. trative proceed-ings before various cotm and agencies with respect to mat- In December 1986,the Financial Accounting Standards Board ters arising in the ordinary course of business, some of which issued Statement of Financial Accounting Standards No. 90, involve st bstantial amounts. Mr.nagement is of the opinion "Regulated Enterprises-Accounting for Abandonments and that the final disposition of these proceedings will not have a Disallowances of Plant Costs' (SFAS 90). SFAS 90 requires material adverse effect on the financial position of the Com- that the Company write off and charge to income the Callaway pany. 33
Notes to FinancialStatements (continued) Union Electric Company Unit No. I costs disallowed from rate base. He Company Note 13 - Supplementary Information adopted SFAS 90 in December 1987 and, as provided by SFAS 1987 1986 1985 SD, restated prior period financial statements. %e write +ff, Ghousands of Dollars) totaling $394 million (S235 million net of taxes), was recorded mintenance and repairs, charged retroactive to 1985. direcoy to: Operating expenses $ 158,908 $148,173 $122.526 SFAS 90 also requires the Company to write down the invest- Other accounts (a) 9,674 d 665 8.378 ment in the abandoned Callaway Unit No. 2 to the present $168,sa2 si56.838 s130.9m value of the future cash flows expected to be received as Depreciation, depletion and recovery for the cost of Callaway Unit No. 2 (see Note 11).%is amortiaation of fixed ind intangible write-down, retroactive to 1981, is required because the ex-
**Q' j,',',*dY ' 8177,559 $176,200 $162.705 pected recovery of such costs does not include a return on such Other income and deductions -
1.019 M7 costs from the date of cancellation (1981) through the recovery Other accounts (a) 3,746 3.563 3.216 period. %e cumulative effect of this write-down on January 1, 8181,30s $180,782 S166.768 1985 retained earnings is $31 million. Taxu, other than payroll and income taxes, charged directly to: Adoption af SFAS 90 increased net income and eamings on Operating expenses - common stock for 1987 and 1986 by $2.5 million ($.02 per share) Real estate and personal property 8 79,306 S 77,422 $ 56.959 and $7.9 million ($.07 per share), respectively, and decreased ' and franchise 9 7 4 net income and earnings on common stock for 1985 by $228.1 (*"'h
, 173,20s 19,N2 135,180 milh,(.n ($2.27 per share).
Other accounts 3,394 3,334 13,(07 Under the Nuclear Waste Policy Act of 1982, the U. S. Depart- $176,599 $168.176 $148.187 ment of Energy (DOE) is responsible for the permanent stor-age and disposal of spent nuclear fuel. DOE currently charges (a) A substantialportion of amounts charged to otheraccountsis allocated j one mill per kilowatt hour generated for future disposal of to operating expenses through clearing accounts. spent fuel. Electric rates charged to customers provide for (b)ne amountsof payroll taxes for the years 1987,1986, and 1985 were
$17, 69,000, $16,717,000, and $14.820.000, respectively.
recovery of such costs. (c) ne amounts of royalties and advertising costs were not material. Callaway plant decommissioning costs are estimated to be (d)Totalinterei,t paid (net of amount capitalized) in 1987,1986, and 1985 was s202 million. $225 million. and $170 million, respectively.
$143 million in current year dollars. Electric rates charged to (e) Total income taxes paid in 1987,1986, and 1985 were S87 million, customers provide for recovery of decommissioning costs $13 million and S9 million. respectively.
over the life of the Callaway plant. Amounts so collected from customers are deposited in a trust fund which has been estab-lished to provide for decommissioning costs. At December 31, 1987, $9,0M,000 was on deposit in the decommissioning tmst fund. . 1 This regirt and the financial statements contained herein are submitted for the information of the stockholders of the Company and are not intended to induce, or for uv in cont.ection with, any sale or purchaw of any securities of the Company. j J 34
Managenwnt's Discussion and Analysis Union Electric Company Rcsults of Operations ne increase in total fuel and purchased power costs in 1987 primarily reflects decreased amortization of uranium litiga-Earnings and earnings per share fluctuated due to many con-tion settlement proceeds and increased sales of electricity to ditions, the primary conditions bemg: the effect of weather all classes of customers. He increase in total fuel and vanations, growth m customers use of electticity, the timmg purchased power costs in 1986 reflects increased sales of and amounts of rate increases, fluctuating operatmg costs, electricity to residential and commercial customers. De de-and the wnteoff of construction costs disallowed from rate crease in 1986 fuel costs attributable to reduced generation base by regulatory authonties. With , implementation in early and the increase in 1986 net interchange and purchased 1987 of the third series of rate increases under the Callaway pg,g. costs primarily reflect the increased availability and rate phase-m plans, the Company s internal cash flow im- huod reladvely low cost purchased power. proved and the proportion of earnings represented by cash increased (see Note 12 under Notes to Financial Statements ne large reduction in total fuel and pu rchased power costs in for information concerning such raie increases). However, 1985 primarily reflects improved e'ficiencies and greater in-AFC and the partial deferral of a cash recovery of costs re- terchange sales due to the initial impact of the additional lated to the Callaway plant during the early years of the generation available from Callaway plant which was first Callaway rate phase-in plans (both noncash income items) reflected in operations in early 1985. constituted a significant portion of earnings (see AFC below and Callaway Rate Phase In Planc, under Note 1 of Notes to Other Operadng Expmu Vadation from Prior Year Fmancial Statements), otam m uan) 1987 m m Callaway plant effect on: We impacts of the more significant items affecting revenues. Operations expense other than fuel and purchased power S(4.9) S16.6 $57.0 costs, and earnings d uring the past several years are analyzed Maintenance expene 5.7 17.2 13.9 and discussed below. Depreciation erynse (7.8) 9.2 59.9 Electric Opei sting Revenues ne Callaway plant effect on 1987 operating expenses reflects Variation from Paor year continued operating efficiencies and the second Callaway stations of Dottars) 1987 tw 19 4 plant refueling in late 1987. De Callaway plant effect on 1986 Rate variations S 82.7 S170.2 S180.1 operating expenses, versus comparable 1985 expenses, re-Effed of weather variations (19.5) 32.5 (12.7) fbets a full year of Callaway operations as compared to a panial Grumth and other 83.6 3n.7 29 8 year in 1985, and costs attributable to the first Callaway plant
$ 140.8 S233.4 S1w.2 refueling in early 1986.
He increases in 1987,1986, and 1985 electric revenues ;.ppli- Other variations in operating expenses du ring the years 1985 cable to rate variations reflect the first three series of rate through 1987 generally reflected recurring conditions such increases under the Callaway rate phase ,n i plans. as growth, inflation, and wage increases. However, in 1987,
%e effect of weather variations on 1987 and 1986 electric operations expense, other than fuel and purchased power revenues primarily reflects the increased sales of electricity and Callaway related costs, ceased $1 million, due primar-in 1986 due to extremely warm weather in the second and ily to decreased natural gas purchased for resale, which more third quaners of 1986. De effect of weather variations on than offset these increases. Also in 1987, maintenance ex-1985 electric revenues was relatively minor. penses, other than those at Callaway plant, increased $5 million, reflecting increased maintenance at all major coal Opnadng %nus generating plants except the labadie plant. In 1986, opera-Fuel and Purchawd Power - Vadation from Prior Year tions expense, other than fuel and purchased power and Otillions of D311an) 1987 1986 19 4 Callaway-related costs, increased S5 million, primarily reflect-Fuel: ing higher power plant operations costs, provisions for in-Variation in generation 8(3.0) $(39.2) $ 55,9 surance and tree trimming costs, partially offset by reduced
(' ) ' n tural gas purchases for resale and decreased pension o tion or uranium , titigation $cttlement 44.6 (16 6) (46.6) expense. Also in 1986, mamtenance expenses, other than Callaway generation efficiencies - - (49.9) Callaway- related maintenance, increased $8 million, primar-Other generation efficiencies 6.1 29 42 ily reflecting increased power plant maintenance. Net interchange males and purchased power variation 20.9 42.1 (73 0) De 1987 increase in other taxes charged to operating ex-867,4 S 10 2 SW 2) penses is attributable to a $6 million increase in license and 35
Aiatingernerit's Discussion and Analysis wontinuca) Union Electric Company franchise taxes resulting from increased revenues, and a S2 He Company plans to continue to utilize short-term debt as million increase in real estate taxes reflecting increased tax support for normal operations or other temporary require-rates and property additions.ne 1986 increase in other taxes ments (see Note 7 under Notes to Financial Statements). charged to op rating expenses is attributable to a $9 million Union Electric is authorized by the Federal Energy Regula-increase in license and franchise taxes resulting from in- tory Commission to incur up to $300 million of short term creased revenues, and a $20 million increase in real estate unsecured indebtedness; however, short-term debt is not taxes reflecting increased tax rates, property additions, and a expected to exceed $250 million. fullyear of Callaway operations. Tax Reform Act of 1986 Income taxes generally increased in response to higher pre- he Tax Reform Act of 1986 (TRA) contains numerous provi-tax income (see Callaway Rate Phase-In Plans in Notes 1 and sions that affect the Company. He most significant provi-2 under Notes to Rnancial Statements). However, the rapid sions of the TRA with respect to the Company are a reduced amortization of certain Callaway-related accumulated de- marginal corporate income tax rate, restrictions on the utiliza-ferred income taxes more than offset the inctease in income tion ofinvestment tax credit carryforwards, and elimination of taxes resulting from higher pre-tax income in 1985; partially the investment tax credit on construction expenditures. offset such increase in 1986, and, to a much lesser degree. Hrough 1988, while total provisions for Federal income taxes offset such increase in 1987, will be reduced as a result of the reduced tax rate, the amount Interest on Debt Hnc me taxes cumuy payaW pnemase principany as ne 1987 decrease in interest on debt primarily reflects refi- result of the restrictions on utilization of investment tax er dit carryforwards. Ruch an incre" se in income taxes cur-nancing high-cost debt with lower-cost issues and reduced total outstanding debt. He 1986 decrease in interest on debt [ently payable will reduce the amount of cash generated internally. In years beyond 1988, as a result of the reduced tax primarily reflects reduced interest on long-term debt issues, rate, both total provisions for Federal income taxes and the reduced short-term interest rates, and reduced average am unt of income taxes currently payable are expected to daily short-term borrowings. decrease. As a result of the Comsny's substantially reduced Allowance for Funds Used During Constructien (AFC) levels of constmetion, elimination of the investment tax credit in recent years AFC constituted a substantial portion of earn- on future construction expenditures is not expected to have a ings due to the amount of construction work in progress, material effect on the Company. primarily the $3 billion Callaway plant, and increased AFC rates (see Note 1 under Notes to Mnancial Statements). Ef!'ects of Inflation and Changing Prices However, AFC declined substantially after the Callaway plant He Company's financial statements reflect the historical cost was reflected in operations in early 1985. of events and transactions occurring at times when the pur-chasing power of the do9ar was different from the present. Callaway Rate Phase-In Plans He effects ofinflation and changing prices on the Company's See Notes 1 and 12 under Notes to Financ.al Statements for financial statements are most significant in the areas of depre-mfonnation relative to Callaway rate phase-in plans. ciation and property, plant, and equipment. Liquidity and Capital Resources ne current replacement cost of the Company's utility plant Construction expenditures averaging approximately $235 substantirJly exceeds its recorded historical cost. However, million ar' anticipated during each of the years 1988 through the regulatory process limits the Company to the recovery of 1992. He Company completed the construction of its Call- the historical cost of utility plant through depreciation. While away plant in late 1984. Additional electric generation capa- the regulatory process does not reflect the current cost of city is not anticipated before the late 1990s. For funds required replacing utility plar.; past practice indicates the Company in addition to construction expenditures, see Notes 4 and 5 will be allowed to earn on and to recover the increased cost of under Notes to Financial Statements. its net investment after facilities are replaced. A nuclear fuellease provides for the financing of up to $250 he Company, by having assets such as receivables, fuel and million of the Company's nuclear fuel requirements. At De- materials inventory, and deferred charges, incurs a loss of cember 31,1987, S148 million of nuclear fuel was financed purchasing power during periods of inflation because after under the lease. He Company financed an additional $100 conversion, the cash received for these items will purchase million under the fuellease la January 1988. less. More than offsetting such assets, however, are signifi-r n wt c oreigt b ks hic its th liabilities which will be repaid with dollars of reduced pur-Company to borTow up to $40 million through December 1991. At December 31,1987, none of such fa eign borrowings chasing power, were outstanding. He Company plans to borrow the $40 million available under this agreement in February 1988. 36
operating statistics Unicn Electric Company 1987 1986 1985 1984 1983 Electric Operating Revenues (000): Residential $ 749,786 $ 681,002 $ 572,423 $ 495,346 $ 524,792 Commercial 628,067 580,323 501,913 430,913 402,737 Industrial 393,597 373,196 335,576 294,245 281,397 Other electric utilities 71,160 63,428 56,078 50,702 46,428 Miscellaneous 26,867 24,731 23,267 20,880 25,800 Total Electric Operating Revenues $ 1,869,477 $1,722,680 $1,489,257 $1,292,086 $1,281,1M Kilowatt Ilour Sales (000,000): Residential 9,585 9,283 8,844 8,7M 8,979 Commercial 9,581 9,306 8,823 8,441 7,653 Industrial 8,217 8,073 8,038 7,928 7,478 Other electric utilities 1,487 1,450 1,430 1,503 1,498 Miscellaneous 138 145 160 1M 321 l Total Kilowatt flour Sales 29,008 28,257 27,295 26,800 25,929 Electric Customers _(End of year): Residential 929,776 916,261 901,777 888,026 879,156 Commercial 114,858 111,322 109,099 106,760 110,048 Industrial 6,569 6,595 6,333 6,334 5,126 Electric utilities 21 21 23 24 24 Other 1,548 1,498 1,410 1,400 3,297 Total Electric Customers 1,052,772 1,035,697 1,018,M2 1,002,544 997,651 Residential Customer Data (Average): Kilowatt hours used 10,390 10,227 9,901 9,951 10,283 Annual electric bill $812,73 $750.24 $N1.02 $562.60 $601.03 Revenue per kilowatt hour 7.82c 7.340 6.47c S.650 5.Mc Gross Instantaneous 7,255,000 6,810,000 6,335,000 6,810,000 6,598,000 Peak Demand (Kilowatts) Capability at Time of Peak, Including Net Purchases (Kilowatts) 8,236,000 7,955,000 8,231,000 7.912,000 7,633,000 Generating Capability at 8,040,000 8,031,000 8,097,000 6,952,000 6.948,000 Time of Peak (Kilowatts) 10,245,000 9,961,000 10,126,000 11,820,000 11,371.000 Coal Humed (Tons) Price per Ton of Coal S37.31 S37.01 $34.79 $33.76 $33.33 37 i
Selected FinancialInforniation Union Electric Company (Ihousands of Do!!ars Except Share and Per Share Amounts and Ratios) 1987 1986 1985 1984 Results of Operations Operating revenues $ 1,946,411 $1,807,182 $1,591,763 $1,412,414 Operating expenses 1,457,957 1,287,572 1,173,187 1,172,128 Operatingincome 488,454 519,610 418,576 240,286 Callaway rate phasein plan 92,791 59,861 74,631 - Deferred costs disallowed (23,169) - - - Callaway Unit No.1 costs disallowed, net - - (234,780) - 1 Ass on cancellation of Callaway Unit No. 2, net - - - - Allowance for all funds used during construction 20,477 15,812 106,7M 329,669 Miscellaneous, net (15,714) 3,947 (1,709) 1,619 Interest on debt 228,961 247,409 254,320 247,308 Net income 333,878 351,821 109,152 324,266 Preferred stock dividends 36,522 49,245 49,836 50,185 , Earnings on common stock 297,356 302,576 59,316 274,081 Average common shares outstanding 102,123,834 102,123,834 100,403,016 96,574,699 Assets, Obligations, and Equity Capital O' ear End) Total assets $5,957,811 $5,895,211 $5,738,620 $5,819,996 long-term debt obligations 2,357,615 2,436,092 2,454,687 2,457,381 Preferred stock subject to mandatory redemption 64,608 165,3&4 173,160 178,936 Preferred stock not subject to mandatory redemption 356,270 356,270 356,270 356,270 Common equity 1,835,670 1,741,703 1,628,980 1,693,753 Financial Indices Eamings per share of common stock (based on average shares outstanding) 82.91 $2.96 $0.59 $2.84 l Cash dividends per share of common stock $ 1.92 S1.86 $1.78 $1.72 Return on average conunon stock equity 16.79% 18.16% 3.81% 17.23% Ratio of eamings to fixed charges (a) 3.30 2.79 1.14 2.88 Book value per common share $ 17.97 $17.05 $15.95 $17.08 Ccpitalization Ratios 0' ear End) Common equity 39.8% 37.1% 35.3% 3624 Preferred stock not subject to mandatory redemption 7.7 7.6 7.7 7.6 Preferred stock subject to mandatory redemption 1.4 3.5 3.8 3.8 long-term debt 51.1 51.8 53.2 52.4 100.0% 100.0% 100.0% 100.0% (a) Earnings used in computing the ratio of earnings to fixed charges consist of net income plus fixed charges (interest on debt and an appropriate amount of rentals charged to operating expenses) and income tax *s. Adoption of Statement of Rnancial Accounting Standards No. 90 decreased net income and earnings on common stock for 1985.1983, 1982, and 1981 by $228.073 ($2.27 per share), $981 (S.02 per share), $1.296 ($.02 per sharch and $23.522 (S.43 per share), resredively, and increawd net income and earnings on common stock for 1986 by $7,9.M (S.07 per share). 38
1983 1982 1981 1980 1979 1978 1977
$1,401,086 $1,217,705 $1,105,536 $1,077,876 $946,797 $903,988 $765,102 1,160,816 1,013,054 922,647 886,720 780,331 727,756 605,963 240,270 248,651 182,889 191,156 166,466 176,232 159,139
- - (28,469) - - - -
- 251,307 198,093 155,625 92,055 58,093 31,469 19,022 2,509 - 2,364 (787) 3,638 879 2,896 1,389 218,530 200,554 180,312 131,725 106,995 90,309 83,624 275,556 204,554 128,946 155,124 118,443 120,288 95,926 46,118 40,344 29,863 30,082 27,336 23,430 ?0,758 229,438 168,210 99,083 125,042 91,107 96,858 75,168 i
l 86,744,282 76,251,024 67,179,275 59,675,995 52,577,432 48,260,596 45,110,245 i -
$5,146,666 $4,573,783 $3,992,742 $3,552,104 $3,168.998 $2,800,209 $2,521,181 2,108,417 2,000,405 1,719,927 1,479,229 1,307,990 1,238,860 1,189,080 t
180,962 182,988 110,014 112,040 114,066 41,092 41,118 356,270 281,355 281,355 281,355 281,355 281,355 281,355 1,524,702 1,298,243 1,134,255 1,463.549 930,375 836,020 733,111 a i
$2.64 $2.15 $1.47 $2.10 $1,73 $2.01 $1.67
$1.66 $1.58 $1.52 S t .',8 $1.44 $1,40 $1.36
, 16.79% 14.17% 9.46% 13.11% 10.71% 12.61% 10.68% 2.89 2.49 2.00 2.85 2.62 3.20 2.83
$16.10 $15.38 $15.17 f.15.78 $15.82 $16.11 $15.66 ,
i [ i , 36.6% 34.5% 34.9% 35.8% 35.3% 34.9% 32.7% 8.6 7.5 8.7 9.7 10.7 11.7 12.5 t i 4.3 4.8 3.4 3.8 43 1.7 1.8 50.5 53.2 53.0 50.7 49.7 51.7 53.0 100.0% 100.0% 100.04 100.0% 100.0% 100.0% 100.0% I I i 39 l
Selected Quarterly Infortnation Union Electric Company Ghousando of Dollars Except Per Share Amounts) Earnings Earnings on Per Share Operating Operating Net Common of Stock Revenues Income Income Stock Outstanding Quarter Ended: Alarch 31,1987 S406,617 $ 111,236 $ 71,429 $ 60,767 $ .60 h1 arch 31,1986 376,782 M& 55,180 42,823 .42 June 30,1987 508,441 131,756 73,763 65,498 .64 June 30,1986 458,838 144,075 93,844 81,487 .6J September 30,1987 617,554 179,086 152,228 143,110 1,40 September 30,1986 575,508 187,176 144,540 132,226 1.29 December 31,1987 413,799 66,376 36,458 27,981 .27 December 31,1986 396,054 103,933 58,257 46,040 .45 iiie first three quarters of 1987 and all quarters of 1986 have been restated to reflect the adoption of Statement of Fmancial Accounting Standartb No. 90 which increased net income and earnings on common stock by $2.6 men ($.03 per share) in the first quarter of 1987, $3.0 million (S.03 per share) in the second quarter of 1987, S32 million ($ 03 per share) in the third quarter of 1987, $1.4 million (S.01 per share ) in the first c,uarter of 1986, $1.5 million ($.02 per share) in the second quarter of 1986, $2.6 million (S.02 per share) in the third quarter of 1986, and $2.4 million ($.u2 per share) in the fourth quarter of 1986. Also, the second quarter of 1987 has been restated to reflect a charge to cxpense resulting from an order of the Missouril%blic Service Commission w hich reduced net income and earnings on common stock by $23 million (S22 per share). See Note 12 under Notes to Fmancial Statemer,ts. s Connnon Stock Prices and Dividends m 1987 Price Range 1987 1986 Price Range 1986 liigh low Dividen is(2) Quarter Ended High low Dividends Per Share: $31 % $28 48C 51 arch 31 $25W $20% 46C 28 % 22 % 48 June 30 25 % 22 % 46 25 % 22 7/a 48 September 30 31 % 25 46 25 % 19 % 48 December 31 31 27 % 48 (1) At Decen5er 31,1987, Union Electric Company common stockholders totaled 145.661. (New York Stock Exchange nmbol: UEP) (2) At Decemoer 31,1987, retained camings totaled $610.466.000; under the Company's amended mortgage indentures
$57,115930 of total retained earnings was restricted agairn; payment of common dhidends - except those payable in coranon stock.
inteStor infornlation Dividend Reinvestment and Stock Purchase Plan Office Trustees, 12Salle National 1901 Gratiot Street Transfer Agents, Ilank, Trustee The Dividend Reinvestment and Stock Purchase Plan St. louis, h10 Registrars, and Chicago,IL 60690 provides common and preferred stockholders, employ- (314) 621-3222 Paying Agents Bankers Trust ces, and customers the opportunity to purchase shares 51 ailing Address Company For First Sto of common stock of the Company, without the payment P.O. Box 149 Ilond of brokerage commissions or senice charges, by auto. St. Iouis, A10 63166 Centerre Tmst matically reinvesting dividends and/or investing op- Transfer Agent Company of Continentalillinois tionalcash payments. and Registrar St. louis, Trustee National Bank and Union Electric St. Inuis,510 63101 Tnist Ccmpany of Informat. ion regardmg your account, the transfer of Pre- Chicago ferred or Conunon Stock or the Dividend Reinvestment ht$o is h10 63166 ###
- and Stock Purchase Plan may be obtained by writing i aNan of St. Louis Trustee or calling: St. Iouis,510 63102 Union Electric Company liarris Trust and Stockholder Senices Department Savings Bank P.O. Box 149 and J. L Spreng, St. Louis, hiO 63166 Co-Trustces Chicago, IL 60690 Toll-free telephone 1-800'255 2237 40
Officers and Directors Officers Board of Directors W1111am E. Coruelius J. A. Ilaer 11 President and Chief Fr.ecutiw Cfficer Management Business Consultant: Former Chairman and Chief Executive Omen - Stix, Ban & FuHe. ve " President 4 Stewart W. Smith, Jr. "Starguerite Ross Barnett Executive Vice President Chancellor. University of Missouri-St. Louis. James J. Beisman Sam B. Cook Vice President- Customer Senice Chairman - Cen'ral Bancompany and its subsidiary, Donald E. Brard' Central Bank. which conducts a general Vice Preadent and Controller banking business. Charles A. Bremer
- William E. Cornelius Vice President-Supply Senice President and Chief Executive Officer
, David C. liarrison
- Earl K. Dille Vice President- RegionalWest Executive Vice President C'*
- Charles J. Dougherty r
\ ce
- U8Y'"en t- Engineering and Former Chairman and Chief xecutive Officer Willbm E. Jaud , Neal J. Farrell Vice Prr sident and General Counsel President and Director-Mercantile Bancorporation Inc..
I,r <.cs.s R. Lengefeld a bank holding company.
%ce President - Regional East Edwin S. Jones i lierbeit W. loch . Former Chairman of the Board-Vice President-liuman Resources Centerre Bancorporation, a bank hold,ing II. G. Meye- company.
Via Yesident ComputerSenices
- John Peters MacCarthy Charia W. Mueller President ~nd Direc'or- l Vice Pusident- Finance Centerre Bancorporation,' bank holding l
" *P "I' I Robert O. Piening Vice President - Rates
- Richard A. Meyer nnu es ent -
William A. Sanford Anheuser-Busch. Inc. ; Vice President - Industrial Relations i John V, Riedy D,onald F. Schne l Consuunt. Former Chairman of
\ ice President - Nuclear the Board -INTERCO INCORPORAED.
Charles J. Schukal . . * $tewart W. Smith, Jr. Vice Pnmdent _1ransmission and Executive Vice President Distribuuon Edgar J. Telthorst Vice President- Powe ' ' cationa Adviser to the Board II. E. Wuertenb% , f r. Isaac 11. Grainger Vice President <dations ..rmer President - Chemical Bank. l James C. Iho v s Secretary - ember of Executive Committee L A. Esswin r ' . ember of Auditing Committee Treasurer u
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b 1901 Gratet Street. St. Loun Donald F. SchneH Vce President March 25, 1988 U.S. Nuclear Regulatory Commission , Attn: Document Control Desk Washington, D.C. 20555 ULNRC- 174 9 DOCKET NUMBER 50-483 CALLAWAY PLANT ANNUAL FINANCIAL REPORT Transmitted herewith are twenty-five (25) copies of the ' Union Electric Company 1987 Annual Report. This information is submitted in accordance with 10CFR50.71(b). , very truly yours, t Donald F. Schnell JMC/ mig Enclosures I t<, I i Ma.hng Address: P 0, Box 149. St. Louis, MO 63166
E cc Gerald Charnoff, Esq. Shaw, Pittman, Potts & Trowbridge 2300 N. Street, N.W. Washington, D.C. 20037 Dr. J. O. Cermak CFA, Inc. 4 Professional Drive (Suite 110) Gaithersburg, MD 20879 W. L. Forney Chief, Reactor Project Branch 1 U.S. Nuclear Regulatory Commission Region III 799 Roosevelt Road Glen Ellyn, Illinois 60137 Bruce Little Callaway Resident Office U.S. Nuclear Regulatory Commission RR#1 Steedman, Missouri 65077 Tom Alexion (2) Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Mail Stop 316 7920 Norfolk Avenue Bethesda, MD 20014 Manager, Electric Department Missouri Public Service Commission P.O. Box 360 Jefferson City, MO 65102
i . bcc: D. Ehafor/A160.761
/QA Record (CA-758)
E210.01 Nuclear Date DFS/ Chrono
- n. F. Schnell J. E. Birk J. F. McLaughlin A. P. Neuhalfen R. J. Schukai M. A. Stiller G. L. Randolph R. J. Irwin H. Wuertenbaccher W. R. Campbell A. C. Passwater R. P. Wendling D. E. Shafer D. J. Walker O. Maynard (WCNCC) (
R. C. Slovic (Bechtel) G56.37 (CA-460) T. P. Sharkey NSRB (Sandra Auston) r}}