ML20126F358
| ML20126F358 | |
| Person / Time | |
|---|---|
| Site: | Trojan File:Portland General Electric icon.png |
| Issue date: | 12/31/1984 |
| From: | Frisbee D PACIFICORP (FORMERLY PACIFIC POWER & LIGHT) |
| To: | |
| Shared Package | |
| ML20126F325 | List: |
| References | |
| NUDOCS 8506170446 | |
| Download: ML20126F358 (64) | |
Text
{{#Wiki_filter:<> PACIFICORP 1984 ANNUAL REPORT
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1 i FINANCIAL HIGHLIGHTS nrunt us ,. Year min. n.or a,n"' o d
/ Amiual l nmo utillions of dollars,except pershare amountsi 1983 1984 Gnnyth im I'or the Year:
Revenues $ 1,598 S1,786 18%
, , , Income Frotn Operations 530 607 24 Net Income 91 245 17 soo At Year Etul:
Assets S4,451 S4,736 9% Capitalization 3,501 3,641 7 Common Equity 1,169 1,383 11
"_" *f8{a2J.,Jd l'er Connnion Share:
Earnings S 3.25l S 3.42 7% O Mining and Henourte newlopment o Telecommunications Dividends Paid 2.16 2.24 3 e nectric otx ration. Cash Flow 2 7.06 7.52 24 nums e nou openmms Book Value O .51 22.47 1 iMillons ol uillarsi Measurernents: l, 3 Heturn on Average Common Equity 14.3%I 16.(Fo Alarket to Book Value (Year End) 119.5% 110.7% Common Equity-% of Capital 33.4% 38.0%
*= Conunon Shares (Avg., Alillions) 56.4 58.6 Shareholders (Thousands) 117.2 111.5
' Adjusted for unusual items; actuals for !!)83: Net income, $71 million: EPS. $0 4 3; Het urn on Equity. 215 2Hesources imm operations. net of diddends.
100 POINTS OF PHOGHESS
, , . , , . , , , , 1984 was a solid operating year for PacifiCorgy. Our overall results display ed
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T_s. as_sasa _ u_s_ _i i g g_._ upward momentum and balance from dnersification, j , gmwth overshadowed a modest teleconununications gain.
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een couum snuts a Combined operating income was up 15 percent,again driven by electric and
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g ,, mining results. t Profitability and growth measures improved the bottmn line.
, 3 oo a Heturn on conunon equity was 16 percent-within our 16-18 pen ent target range for pmfitability.
m Earnings per share gn w 5 pen ent fnnu last year's adjusted anmunt. 2 *' s D vidends were increased 7 percent in June to a S2.32 annual rate. l e Cash flow pershare,after dividends,was up 7 percent. l
"* Financial position and credit quality recovered from 1983 nuclear write-offs.This l
and other positive factors received external recognition. ! e Conunon equity capitalization reached 38 percent.hringing our40 pen ent goal in sight.
"N_ "a_ 8Efaz, n3 ima __ m Eamings quality impnwed nith only to pen ent of EPS represented by $2 46 2_.53_. 2 82_ s t 3 25' *3.42_ _ _ capitalized interest.
Mygg,ggf 5 2*' s PacifiCorp's en dit rating was lifted by all thn e maioragencies; two of them awanting an A ranking.
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# PACIFICORP CONTENTS Ogwration% Ilighlights i fohlout i 3 Chairman's I,etter a ...,3,.,,'
Itwas snore thanjust a 5 19% ) Scramble, A 1 ook Aheaal Ns *,Af . name changewhen Pacific Power & !Jght Company Against a so-so business climate < ' .. y T'.M extra eff(prt pnufut eti silni results v -
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oblaBybecame m im turther buihhng our finan- L]A N[ M e , PaclSCory during1984. W,f I di
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nnore a@ describe the I" t ""'i'i"d I h" ' " t t"'" {* *y;f
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als high-technolop pnnlucts 9g and senices n lated to energ\ ~-,,
n s , , c ~ -ATjf ;- lu .ul t he list < >t neu er s entun's 7 1 " ***- D.. Jc1f 7 1&31$MMng_id. d ._ c-y 21 l'inancial Strength Gaining M[ . I he impiirtant indicators show ,. .. f.
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i that our tinancial st rength is gnm - 3 ? .. , IIlM llll(iIt'l's('()l lll t lh*['j()fl))- .A+ h * .*E p g1 ance as n ell as ([Q ll*('('ll ur pnispects in '[ h.- the s ears ahead ()ur higher debt
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' b tmpnnements 24 l'inancial Section Contents 53 Investor Inforination 54 Iloard of I)irectors 55 Officers ali 5 cope oi()peration% and \ laps I
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3 TO OUR SHAREHOLDERS As you've seen in the opening highlights, gains in cash flow that will enable discre-1984 was a sound year for PacifiCorp. Strong tionary reinvestment while still pmviding performance in most areas more than made dividend gmwth. up for some setbacks. At the bottom line, earnings per share reached a record S3.42. This gives us a better grasp on our destiny. The quality of these carnings was especially The last decade we were often preoccupied satisfying.They included only 19 percent with pmblems thrust upon us, mainly by capitalized interest and no extraordinary volatilities in the energy economy.The de-items.The balance was cash. mands of running our businesses are still not easy, but we are in a stronger position overall results attest to the value of diversi- than ever before to take charge of where fication,and they reflect hant work from our we're going. people. We'll continue to diversify, going into busi-Despite slow sales gmwth and a power nesses that fit our capabilities.The chal-surplus, our electric utility, Pacific Power, lenge, of course,is to make good reinvest-had an outstanding year, fully regaining its ment choices and to apply our talents and historic mle as a pmfitable,self-sufficient resources so we get the best results. operation. Even though the precious metals market was in a down cvele, NERCO also Toward that end,we've intensified the had a fine year, and maile important ad- strategic planning process, taking stock of vances in the coal market,both East and our resources, imposing a hard, disciplined West. look at our options for the next several years.Where we see good prospects in After more than a decade ofimpressive compatible lines of business, we'll pursue carnings growth, Pacific Telecom hit some them. Of course, there are risks, and we'll hard spots in 1984.The transitional effects of undoubtedly make some mistakes. But on deregulation, competition, and Alaska's the whole, we think Pacificorp will come cooling economy slowed our gmwth in the out far ahead by maintaining the initiative. basic telephone business. At the same time, we incurred operating losses in our invest- The following pages describe for our share-ment portfolio and took several write-offs. holders and friends hmv we are managing Still, these am temporaiy setbacks; Pacific our diverse businesses as we assess new Telecom remains very strong. opportunities.We hope you'll agree that these are exciting, promising times to be Ilistorically, this was more than just another involved with PacifiCorp. good year. It was the first year after absorb-ing our nuclear plant write-downs and the Sincerely, second full year oflower capital spending
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requirements from our electric operations. . We have entered a period of gathering Chainnan and Chief Executive Officer financial strength, mflected by improving fundamentals. Given lower spending re-quimments, a reasonably good business climate, and continued sound perfonnance fmm our operations,we foresee significant
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~ -etertric operations. teleronununica-tions and inining and resoun'e develop-
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5 1984: A COMPETITIVE SCRAM LE, , A FRAMEWORK FOR LOOKING AHEAD In 1984 the business climate impmved, but it was far fmm spectacular. Our operating segments made the most of the situation, holding down costs, running lean, and scrambling harder for sales. In our electric and coal businesses we made notable market gains, increasing sales in tradi-tional segments, and making inroads with new customer gmups. There were disappointments, too.We played the waiting game in gold and silver, holding our pmduction inventony until precious metals prices impmve.We encountered a number of factors which impeded growth in our important long-distance telephone business. In addition, Comdial,in which we have a large equity investment, posted losses. On balance, tbough, this was ayear where extra effort prevailed, pmduc-ing stmng earnings on record revenues. The year also contained some important and welcome relief fmm pmb-lems of the recent past, including nuclear investment burdens, pres-sures to build and finance new electric generating plants, and the punishing effects ofinflation and recession. From a long-range perspective, these improvements give us an opportu-nity to assess where we have been and where we are going.The timing for measuring our pmgress and doing some hard,long-range thinking couldn't be better. GHOWING FINANCIAL STHENGTII WILL PROVIDE AN IMPETUS Our focus on the future is spurred in part by steady impmvements in our financial base. Led by healthy cash flows, these improvements in-clude higher quality earnings and a stronger balance sheet. Combined with leverage opportunities and pmper tax planning, our firm equity base will enable us to further expand and solidify the overall enterprise. Over the next fewyears, internal funds gmwth should continue to build our strength, enlarging our capacity to invest in good opportunities. Pacific Power's impmving circumstances have been a fundamental part of PacifiCorp's increasing financial strength.While pmducing gmwing revenues and earnings, our electric utility is beginning to enjoy the l l
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cumulative etTect of diminishing pressure to finance large new generat-ing projects. Internally generated funds are sufficient to cover routine construction requirements in each of our segments. This circumstance, combined with three strong revenue streams, has had a dramatic consolidated impact. On the balance sheet, our debt level has stabilized and our equity base is expanding.The quality of our m.,<j assets has never been better.This gmwing financial strength should be I ample to meet a variety of requirements-to provide dividend gmwth, to meet routine capital needs, and then to do more. We're prepamd to do more.We're convinced that we should stick to our strategy of building upon and expanding fmm our present lines of busi-ness in ways that complement our experience and technical capabili-ties.We support this course not only because we have the financial base to pursue it,but also because we are organizationally equipped to do so. Diversification and expansion helped bring us to our present position of strength.We've been through it; we understand the requirements. Our people have the philosophy and talent to deal with those requirements. Momover, the strategic planning pmcess is established in each of our operating companies and in our corporate headquarters to set priorities
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and sort out options. As a complement to the planning process, our Corporate Policy Group provides a mechanism for the business seg-f ,~%M{ ments to work Ecoperatively toward broad goals. TIIE HASIC BUSINESSES ARE STILL TOP PRIOllITY In our thinking about the future,we haven't neglected the performance of our basic businesses.We know there can't be a successful future unless they are kept in peak form.Their financial results and the cash they pmduce will determine the scale and direction of the investments we can make.That's why the efforts of our people this past year have been so encouraging. Such efforts not only improve our financial foun-dation for entering new ventures, they also hone the skills and readiness of our managers to take on new responsibilities. The basics wen' the focus of at. The following sections of this report describe the ways we're managing tention in en amid compeii- the enterprise at this important juncture-by maintaining the perform-tion and stowed markets in ance of our basic businesses, by extending their market reach, and by INdit$c$Ngh e ic , branching into compatible lines of business.We close this narrative with is racine reiecom s maior busi. a discussion of our growing financial strength and its implications for ness.w hile western coal is the the period ahead. base fmm u hich NFECo builds its operations. I
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bee. chairman and chief ' PACIFICORPS POLICY something of a paradox, the executive orticer: cerant K. Dn.im mond. N ERCO GROUP pmcess works.We see it in Diversification has been suc- caridid give-and-take sessions P"d'id"",'
,i ^"(i$"d"' 2 cessful at PacifiCorp in large as members consider issues in Telecom president. f measum because we have given their own businesses and the f our business heads latitude in overall corporation.This is part q building their enterprises. Still, of what keeps our enterprise 4 we've recognized the need from cohesive and on track. j a corporate level to support In a more formal sense, the and coordinate the individual Policy Group is a vehicle for 3 activities of our businesses. reviewing consolidated finan- "
The Corporate Policy Gmup, cial results, forecasts, and pm-which meets at least monthly,is posed capital expenditures; for the forum for that support and discussing the timing of finan-coordination. One of its pri- cial transactions, and for coor- - a L mary functions is communica- dinating planning. Most agenda -'
- tion. It is a sounding board for . items fortlye Board of Directors decisions,a way for our execu-J are explomd bythe Palicy r
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. another's diverse operations It : ' sions ere errried out through -
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S OUR FIRST ORDER OF BUSINESS: OUR BASIC BUSINESSES Alore than 80 pement of our consolidated revenues come fmm what we describe as our basic businesses: mtail electric service at Pacific Power, western coal sales at NERCO, and local and long-distance telephone sesvice at Pacific Telecom. As the mainstays of PacifiCorp, these busi-nesses remain our top priority, and we strive to keep them at peak perfonnance. THE ELECTHIC HUSINESS SilOWS IlOW IT'S DONE Such perfonnance at Pacific Power was exemplary in 1984, contributing to more than S1 billion in revenues, S175 million in earnings, and a record return on equity.We achieved these results against several adver-sities in the region's electric power industry-slow mtail load gmwth, excess generating capacity, a buyer's market for surplus power, and keen competition fmm other forms of energv. Given these market conditions,we are fortunate to have behind us most of the investment problems stemming from participation in the region's nuclear power development program. A major remaining uncerte nty surrounding our nuclear involvement should be over in 1985, assuming completion of a proposed agreement to msolve litigation over the Wash-ington Public Power Supply System's mothballed Unit 3. The bulk of Pacific Power's higher electric revenues and earnings in 1984 stemmed from necessary retail rate increases, continued cost control, high operating efficiencies, and the lowest level of capital spending we have had since 1972. Ilowever, we've also pmduced additional revenue and income thmugh new sales pmgrams designed to aggressively market our available generating capacity. Our priority is the more stable and pmfitable retail market, but we are also pressing to gain more long-tenn wholesale con-tracts and, secondarily, spot wholesale sales. Our combined long-tenn and spot wholesale revenues grew 21 percent in 1984.We contracted more than 150 megawatts ofincreased annual long-term sales.This is equal to 6 percent of our total load, more than two years of nonnal growth.We've also achieved notable success in holding our dominant share of the residential retail market against oil and gas suppliers,and we've expanded industrial retail sales.We've done this by showing customers that Pacific Power electricity is efficient, economical energv. As a case in point,in 1984 we secured the largest . sale in our history to a single industrial customer. We were granted state commission appmval to serve all of a large Exxon natural gas tmalment plant being built on a
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1O site straddling our seivice territoiy and that of another utility in south-west Wyoming.This will channel more than 150 megawatts of our exist-ing power capacity into retail sales, initially producing S27 million in annual revenue. At the same time, Exxon expects substantial savings over power costs from the other utility, which has appealed the commis-sion's decision. C To further boost sales,we've resumed our historic role of supporting economic development in communities we sene. For example,we have
? q supplied both our own personnel and outside expertise to help the port g authority in Coos Bay, Oregon, study the need for a bunkering facility to 4 yy fuel ocean-going vessels.We have also protided market development
(, ~c'i senices to a young electronics materials firm to help it establish busi-ness in the Pacific Northwest. 7 _ NEllCO KEEPS Tile FOCUS ON CUSTOMEll SEIWICE 5 . Western coal sales,which make up inore than three-fourths of NEHCO y g revenues and even a greater share of earnings,are based on seven large,
%gp long-term contracts to coal-burning utilities.To maintain these vital con- # ,/ tracts,we pay careful attention to product quality and customer senice.
It is significant that at one time or another we have adjusted every one of
'.. , ourwestern coal contracts to meet customer needs.still maintaining the cash flows called for by these agreements.The most notable case has i> been the interim accommodation reached in a long-term coal sales con-
. tract with Houston Industries, a Texas utility. While changing the coal mix to better fit the utility's boilers,we retained the economic value of y,
8 sales under this contract. In several other cases where pricing and deliv-g cry terms of our coal contracts are being contested, our position is s equally firm yet flexible in balancing our needs and those of our 2 d. customers.
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l $ BASIC HUSINESS IIOLDS STEADV AT PACIFIC TELECOM ( Like our electric and western coal businesses, our telephone business is
- y. . anchored by a stable base of customers and reliable levels of sales. Of 4 4 ( 1^.,
,, late, this business has focused on holding its course amid changing k markets and the effects of deregulation.
A commitment to customer In 1984, Pacific Telecom's local exchange companies began the transition
$IiN) IE$$si,[ I" to new systems of charging for telephone senices.This includes charges mines to iminis in the uianest to long-distance carriers such as AT&T for access to our local telephone and sout h and hmught im- customers. I ecause the new arrangements pennit fuller and faster prutea and expanded tel"-
communications facilities to recovery of our current costs while meeting our rate-of-return require-Alaska. In 19M. N EHeo's coal InentS, ollr local telephone earnings have improved. sales wetr 21 million ions.up 18 perrent. llural comununities Although it still exceeds the national average, growth in our long-lines scattered thmughout Alaskaarv connerted to the"outside message traffic in Alaska has meeded to low double-digit levels due to world"hv PacificTelecom's Competition [ rom a rlval carrier in the Anchorage area and a slowdown long-dist'ance se Tice.w hich in the state's economy. Coinbined with a lower revenue supplement showed a 18 purent gain in [ rom AT&T for connection to our Alaska system, these factors have held message s olume in 198 8. g ,3 .g \.
.9-11 The Good Cents Home program stresses ihe effective use of electric energv in new residen-tial constmetion.
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s a BUILDING SALE 8 THROUGH; practices alone.The balance of - i THE BOTI'OM LINE the savings will be achieved. thmugh investments in heat E Two marketing pingrams , L i that Pacific Power launched in - pumps, clock thermostats, air-t 1984 arp boosting electricity : to-air heat exchangers, fan sys- ..# ' ! sales beyond the expected _- 5 tems, and energy etBelent light-gmwth rate.'In particular,1, _ ing.While such investments; , j [ fJ Operation Bottom Line and the ; 'save energy daltars for our cus- - ! 9 Good Cents Home pmgram arei temers, naarqy af them displace [E H pmving competittee against oE ? n use of oil and gas with electric- +
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As one way of countering these factors,we're enhancing the value of our d_ long-lines sewices to Alaskans.This past year we started a sideo confer-encing system linking major Alaska cities with one another and with ' population centers in the Lower 48 states.We've also been providing customers with a sewice known as AlaskaNet, a digital transmission $ network that enables computer users to access data by way of time j sham networks. AlaskaNet puts small users in touch with information g sewices. Among other applications,it permits larger users such as . merchants to instantly validate credit card transactions. 1l a qj
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1 l l 18 I EXTENDING THE REACH OF OUR BASIC BUSINESSES In the course of serving our principal markets,our people are ahvays on i the lookout for mlated market segments that can use services and prod-ucts of the kind we're almady providing.We meet these market needs whenever we can, and often at little added cost. It makes good business sense.We broaden our revenue base while extending the value of pms-ent personnel and msources. SPECIALTY NETWORKS BHOADEN PACIFIC TELECOM BUSINESS Pacific Telecom exemplifies this concept. Using its expertise in transmis-sion and switching, combined with its satellite and earth station facilities, our telecommunications business serves a wider number of markets than just our traditional long-distance and local telephone . customers. We've derived significant added revenue, for instance, by providing gov-ernment and corporate customers private satellite network services. ARCOnet is a case in point. Set up in 1983,it uses our satellite network to link Atlantic Hichfield offices in Anchorage, Los Angeles, Denver, Dallas, Philadelphia,and oil production facilities at Prudhoe Bay. To serve other customers, we're extending this network capability by adding earth stations in San Diego, NewYork City, and the San Francisco Bay area. Other Lower 48 connections are under negotiation or study. Each new installation is a building block, extending our ability to offer special network senices to large customers. We've used our telecommunications experience to invest in American Network,a discount long-distance telephone service.Through its recent merger with SaveNet,Inc.,another independent, and the companion acquisition of CP National's Passport senice, American Network has become the largest non-Bell long-distance carrier in the Pacific North-west. In addition,we've acquired Shamd Use Network Service (SUNS), a business that provides both individuals and gmups least-cost long-distance network service. For a management fee, SUNS directs calls j through the cheapest routing available at any given time. NEHCO MAKES GAINS IN EASTERN COAL NERCO's ently into the eastern coal business was our first move to extend our western coal mining experience into a related marketplace. In 1978,we bought our first eastern mine and we have been gradually expanding our eastern coal business since. l
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14 - Securing a foothold and fighting a recessionary market in the East have been tough, but we are making heachvay. During 1984, operating income in our eastern coal business impmved dramatically, moving into the black in the spring and staying there most of the year. By year-end,our sales volume had doubled over 1983.We now have 170 customers in the East, compared to fewer than 60 in 1982. N A rebound in industrial activity had a lot to do with this improvement, but persistent,cmative marketing and cost contml also deserve credit. The last fewyears our eastern operation has been tenacious in position-ing itself as a provider of coal products and sersices tailored to customer needs.These include everything from specially sized and blended coal to shipping and handling services. Despite the spot-purchase nature of the eastern market,we signed three longer term contracts in 1984 for a combined minimum of 750,000 tons peryear. As we keep gaining stature with eastern customers, we believe we will secure additional multi-year sales in the period ahead, stabiliz-ing business against down cycles in the market. i In conjunction with its sales efforts, our eastern coal business has been
] building a distribution network. Acquisitions of barge and railloading facilities, along with other distribution properties, mark our transition in the East from solely a mining operation to a combined mining, market-s
" ing,and distribution business.The ability to move and handle coalin the East is giving our mining operations an edge against the competition while pmviding additional revenue.
WESTERN COAL DESTINED FOR NEW HOILERS Although our western coal business is founded on a large base oflong-term sales to utilities, new growth in the utility market is limited. As a way around this problem, our people at NEHCO began to court the western industrial coal market more than a year ago. In 1984, NERCO signed a three-year contract to supply more than half a million tons of coal annually to American Crystal Sugar Company.We also signed three smaller contracts with other sugar refineries. In aggm-
- gate, these new sales added S5 million of net revenue to our western Ability to work with customers I c ! t hip OPENING NEW MARKETS FOR ELECTRICITY ot racificorp husinesses in mst Pacific Power is using cmative price packaging as an incentive to create several fomst pmducts fimis. new market opportunities. For example, we have attracted several
" " N rthwest lumber operations to shut down their co-generation facilities IIIti NnUt i i g in order to buy our power through mnewable short-term contracts.
facilities in response to racific 1%er's attractiw rate package. While they have benefitted from a price below their production cost,we Eastem coal continued expand- have sold more than 11 megasvatts of available power at margins above ing its base, adding coal ths-tribution and railloading our wholesale rates. facilities. l 1
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t& _ yJp' o 15 Pacific Telecom's ex-panding network serv-ice includes a teleport serving New York City. AN EAST COAST service network at Pacific Tele-NETWORK LINK com. Along with existing earth With the acquisition of Satel- station sites served by our lite Gateway Communications, ARCOnet system, Satellite
' Inc.,in December, Pacific Tele- Gateway forms the basis of a com has gmally expanded its Nonh American network tied network service capability, together by our own satellite, p . tying in the East Coast's largest Aumra I. In conjunction with a L urban communications market. telepon we are developing on ;
} Satellite Gateway owns and . San Francisco Bay, Satellite .
[ operates a teleport in Cartemt, , Gateway makes us a leader in [. .New Jersey, just 15 miles teleport service to major urban , l [ - southwest of New York City. . markets'on both coasts. 1 [ *1hmugh clear microwave paths : Satellite Gateway's primary j between the teleport and Man , focus has been in cable and j {p X hattan, AasmIHam Gateway links _ television network video com-
% maior television and cable not munication, but it is adding
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Other pricing packages are being discussed with regulatory agencies and potential new customers. In Oregon, for example, regulators have expmssed favorable interest in our proposal to otter discount rates to industries as an incentive for siting new plants.The result could be economic development which expands our customer base.
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16 OlVERSIFICATION STILL MOVING ALONG DESPITE 1884 SETBACKS In the years since we branched off as an electric utility to build busi-nesses in mining and teleconununications, all three of our segments have extended the heritage of diversification, developing and acquiring compatible operations and assets. Some of these interests are operating subsidiaries, some, joint-venture partnerships, some, partial ownership equity investments. In aggmgate, these interests were profitable in 1983, but not in 1984. Still, we believe they merit support.They have pmmise, they fit an acceptable corporate-wide risk pmfile, and they match up well with our resources and backgmund. MINING KNOWilOW MADE METALS A LOGICAL MOVE NERCO's strategy in precious metals is a good example of how our com operations have used expertise in one business to enter another. Experience in large-scale surface coal mining is one of the factors that made it logical for NERCO to move into open-pit precious metals mining in 1983.That year we acquired our first two precious metals interests in Nevada-ownership of the Candelaria silver mine and halfinterest in the Alligator Ridge gold mine. In our first year of ownership, these mines paid off with substantial profit while moving us into the top ranks of U.S. precious metals producers. However, precious metals prices are cyclical, and they were down in 1984.This prompted NERCO to hold on to finished metal inventory-3.5 million ounces of silver and 40,000 ounces of gold at year end-until prices return to a satisfactory level. Depressed metals prices made a number ofgood operating mines avail-able for purchase at attractive prices in 1984,and we took advantage of this buyer's market to expand our production base.We acquimd inter- ! ests in three mines-in Nevada, Colorado, and Idaho-two of which were not operating at year end.These properties increased our potential annual silver production capacity fmm 2.4 million to 3.7 million ounces, and boosted our potentialyearly gold pmduction from 38,000 to 65,000 ounces. In 1984, pmduction from our existing mines and our new ac-quisitions advanced us to one of the five largest silver producers in the country and made us one of the top ten gold producers. Altogether, these acquisitions augmented our deposits by more than 14 million ounces of silver and 200,000 ounces of gold. Moreover, each new acquisition brought with it potential for discovery of significant added reserves.This puts us in a strong position to expand production when the metals market improves.
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18 - uw . . IllGil-TECil ENTIW PIlOVIDED BY PACIFIC TELECOAl With its experience in such technologies as satellite conununication, digital switching, and fiber optics, Pacific Telecom has pmtided Pacifi-Corp's entiy into a number of nonregulated high-technology businesses. Comdial Corporation, manufacturer of telephone equipment and cus- - tom integrated circuits,is one of several such businesses related to our _ background in basic telephone senice.We have a 40 percent equity position in Comdial, representing a S31 million investment.We continue 2 to support Comdial's efforts, despite soft 1984 sales of consumer hand-sets,large operating deficits,a loss from a plant closure and manufactur-ing consolidation, and uncertain markets. Comdial is making adjustments. It is now intmducing a new product _
/ line emphasizing systems for the more stable small business market. In J addition to selling pmducts through its nonnal distribution channels,
- the company also sells directly to six of the seven regional Bell com-panies.
Some of our earlier high-technology investments include Flight Dynamics,which makes holographic-based instrument displays forlow
% y visibility aircraft operations; EyeDentify, which makes a biometric y! S m bg , identification system attuned to retina patterns; and Arnav, which pm-1 c hh duces Loran navigation gear for aircraft.
- M Alore recent investments include Proactive Systems,which pmduces
, ,L M subliminal, anti-theft messaging systems for retail stores; Catalina Alarketing,which provides automated coupon dispensing and catalog-y fi ing systems for supermarkets; and Alicrorim, a leading personal com-f C k
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NEHCO has paved PacifiCorp's entry into the high-technology materials
]O Q%& g business with the recent acquisition of Spectrum Technology Inc.,a L 3%~ , j Alassachusetts firm. Spectrum manufactures gallium arsenide semi-conductor wafers which are used in the high-speed computer and Nonwgulatein>usinesses oner high frequency communications industries.
opimrtunity for the futum as diversification within each line PACIFIC POWER BUILDS ON ENEllGY EXPERIENCE 1 *N) s t$. I Drawing from our background in producing and distributing electricity, tifv, now has its security - Pacific Power is diversifying into nonregulated areas of the energy field. identification system on the We recently entered into a joint venture,Impell Pacific, to produce and " t-market computer software that we originally designed to improve the c d f ing pumhasing.wamhousing efficiency of our own coal-fired power plants. Initial marketmg has been and distribution activities plans aimed at electric utilities,but process industries are also potential to pmvide materials, such as customers. transfonners, to Pacific Power and ather companies. We have also formed an independent industrial distribution subsidiaiy. Western Distribution Service evolved from Pacific Power's organization M
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4 IIOW A" COAL COMPANY" mmoved fmm the solution and = TAKES TO SILVER MINING smelted for shipment to a re- 3 In early 1983, NERCO bought finery. 3 the Candelaria silver mine in We've reduced unit costs a j western Nevada as part ofits number of ways-by revising e Si strategy to acquire and effici- the mining plan, by impmving ently operate undervalued pre- are grade selection techniques, clous metals mines, by putting equipment to work j At Candelaria, we have done that was partially idle, and by - 3 _- just that, mducing the fully fully utilizung underground
- loaded cost of silver production leaching facilities to operate in
/at the time of acquisition by Nevada's cold season.We have i more than 40 percent to less also cut annual cyanide costs (
kthan $7'per sunce during 1984. by nearly'SI.5 million and -
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a for distributing supplies to a six-state utilits system.The new company j will continue to serve as purchasing and distribution agent for Pacific : Power as it deselops other customers. Paritic Power purchases now 1 handled hs \\estei . 1)istribution exceeded S40 million in 1984 Sales 4 growth in 1983 uill include 35 million added through a new y acquired
\\;s oming compan.s that distributes mining and industrial supplies. j
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21 GROWING FINANCIAL STRENGTH MARKS PERFORMANCE, OPTIONS PacifiCorp gained financial stirngth in 1984 as our com businesses nu,n umn ,um, bolstered earnings and cash flow. Despite disappointments in our newer l precious metals operations and technology investments, advances of 12 ,VFD noo percent in mvenues and 15 percent in operating income led to a 5 percent l l increase in adjusted earnings per shart. l l '" Cash flow gmw faster than income. Funds generated from operations -
- pb reached a record $441 million,11 percent abose last year. Along with l declining construction needs within our basic businesses, cash flow P !!
growth should furnish ample capital to deploy in areas of opportunity. @j 4 J; io.
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" 4 IAIPIlOVING FINANCIAL QUALITIES IIECEIVE IIECOGNITION l In 1984,our attention Io financial quality earned upgrades in credit MM ratings.The late 1983 write-offof most ofourinvestment in the WPPSS Unit R- *-m 82_ _g i 3 nuclear project, plus reduced need for new financing, boosted the 2;;'i,'"dal'f,'f7 -
quality ofourincome statement and balance sheet. All three majorcredit rating firms-Aloody's, Standant &, Poor's,and Duff & Phelps-respond-ed. After a decade,we regained our A ranking with two of the agencies. Cmuunnum
'I'enynt oficar End Capitalisationi The nuclear investment write-down was a turning point;yet our better / 40s debt rating primarily mflects ongoing improvement in credit worthiness.
PacifiCorp's 2.7 times pm-tax interest coverage is 35 percent higher than thme years ago. Earnings quality also has impmved. In 1984, capitalized 3, intemst was 19 petrent of earnings, down sharply fmm 32 percent in 1983. PacifiCorp's capitalization strengthened with a larger portion of common equity. Weakened in 1983 by nuclear allowances, this ratio grew 5 pement- 3o age points in 1984 to 38 percent of capital structum.This gain resulted fmm higher earnings as well as timely recapitalization financings. Our near-tenn equity Iarget of 40 percent should be attainable by 1986. Growth in our equity base above this level can support leverage for new investment. 'M L*N$_ GilOWING DISCllETIONAllY CASil FLOW SIGNALS OPPOllTUNITY PacifiCorp's evolution into a bmadly diversified utility was accomplished T,"Ii';'O';;n7,,, despite a decade of modest internal cash flows and heasy reliance on ioos outside financing to meet Ihe capital requirements of our basic busi- [ nesses.That era is over and a new period of development has begun. ( ,, i Capital spending in our foundation businesses declined fnnu S540 8 million in 1979 to $370 million in 1984.OverIhe same span, internal funds inemased dramatically from under$100 million 1o over$440 million. Cash flow in excess of capital needs pmvides us mom potential for discretion- u ary invest ment. I 1979 '80 '81 '82 '83 IIN*4 40% 57 6G 43 42 34% E 60 43 40 57 58 66 O E F lertrw- 0 Non-Electric
' Construction expenditures.acqubitions, and inwstments.
g,, . 22 nEun%ouunum We began 1983 with nearly $140 million in cash.Our forecasts for the next inuuouuun three years pmject internal cash flows after dividends aggregating about
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4 ins St.5 billion agair.st sustaining capital expenditures of $1.1 billion.The difference, augmented by bormwings and cash flows from reinvestment, could result in as much as $800 million in expansionary capitalinvest-
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ment by 1987. Our strategic planning etTort has key importance,because timing and deployment of this new capital will influence PacificCorp's future perfonnance. m We have substantial experience in deploying capital beyond our electric utility business. Since 1978.54 percent of capital spending has under-g written diversification in mining and telecommmiications.We continued tlus trend m, 1984,investm, g GG percent of capital m nonelectn,e pmj,ects. vi7id ririigTin ow . lM lM l",lM lM l$ E SUPERIOR PHOFITABILIIT HEA1AINS ATARGET In the meantime, financial performance of our existing businesses re-EfbNni$.Ab. n sundania n,. r. gn.sh4.a,_ _ mains our number one priority.This performance has two dimensions, D',"I,""",'l""3 'sNCT.'n7;"; pmfitability and gmwth. in 1983
#fahmated Profitability is usually measured in tenns of return on common equity (ROE), the rate of earnings on shareholder capital. PacifiCorp's record sanuum iuuuuuouinne here has been noteworthy. Our consolidated ROE was 16 percent in 1984, y um moving up steadily from below 12 percent in 1979. Our equity returns in 1984 again exceeded yardsticks for electric utilities and generalinctustry.
For the near future,our goal is to sustain overall ROE in the lG 1018 percent 3= range. In addition,we are aiming for ROES in each of our core businesses at least 1/2 to 1 percent above those of comparable industries. Equity returns in our three business units have,for the most part,contri-buted to consolidated improvement. Pacific Power's return was up again in 1984. NERCO earned an ROE over 20 percent. Only at PacificTelecom MM did ROE fall offin 1984. 1979 '80- '81 A2 83 1 9864 - siriu inas arvuny a N GHOMTII ALSO TARGETED TO ENHANCE PERFOHA1ANCE 2 46 2 54 2 76 3 04 33'I 3.74- .
- 24. zu 2n i.n zu uni n Alaintaining attractive equity returns is part of the performance equation; e we're setting our sights on the growth component as well.
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D hlattdanl & hmWs 400 huluMdals M=he te- u *C _ _ . Earnings per share (EPS) growth is the most common measurement.Our U"5Eo72S"'? TA"ITO'%7 EPS grew at a 7 percent rate over the past fiveyears to $3.42 in 1984.This growth rate exceeded 3 percent for industrial companies over the same period,but was somewhat less than 9 percent for electric utilities. WH A IMDTuE%T nEU H% g,ggi +="a"ie We have set an objective of reaching and supporting an EPS growth rate of 8 to lo percent. If reflected in stock price appreciation, this performance, i7s with dividends,should provide a competitive total return for share-m holders. PACIFICORP INTENDS TO HUILD VALUE FOR SilAREHOLDERS n 3 , n , Total investment return is a direct measure ofincreasing shareholder value. Over the last five years, the tatal investment return from PacifiCorp o Pacifinny_.___ _ ___ C 51andant at 15mir s Z2 Elcot. irs U $tamlani & nners 40ll_InuluM_dain_ _ _ i l
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A U ~ I 23 r J coontinating financial activities of all tlure segments to achieve racifiCogis overall cor-porate objectives is the job of financial staffs at N ERCo. rar"'cTelecont racific Power anct {.x racifiCogilevels.
.A .
-TIIE IMIMCT OF FINANCINGS PacifiCorp debentures funded a IN 1984 $50 million mpurchase ofour18 An array of financings stress- percent mortgage bonds.
! ing tjuality and stability marked A pmgram begun in 1984 re-an activeyear for our corporate duced our exposure to fluctuat-and business unit staffs. ing interest rates. Four swap Linking three million new agreements fixed interest cost PacifiCorp conunon shares to on $228 million of variable rate prefened stock mdemption pollution contml bonds for 7 to boosted conunon equity 13 years. PacificTelecom also capitalization and fixed charge stabilized interest on $20 mil-l coverage. Pmceeds fmm Sep- lion of bank debt with a 3-year [ tember's $70 million conunon swap. [ . o% ring wem used to call our . NEHCO's $140 million place-4 [ $3.75 prefe:Ted stock and to. ment of15-year notes fixed l . purchase other pmferred ' interest by retiring a $95 million l shares; bank loan,and netted $45 mil- [L ~A tender offer for pollution lion of ne_w capital.' .
- contml bonds mduced annual Four other deals added $159 k ' interest cost almut $800.000.We million of expansion furids:a _
[ bought S35 million of these se , $55 million incmase in Pacific ~ j t ?: D curities at a discount, mfinanc ' L Telecom's bank facility, two is- j i h ing them with S28.5 million of sues of pollution contml bonds - [ inew issues. ._ forS78 million,and a S26 million j [ fl\vo transactions cut yearly . ohring of NERCO common ] F interest another $1.3 million. A shares.
' sale in Japan of new, lower-cost - ))
n , f1 l
.a a _ :. m u. w .. w w u a = - - .c = u .. . a w . w - a i stock was 17 percent peryear.This return was composed of 7 percent appreciation and 10 perrent dividend yield. Comparative tof al returns were 14 percent for industrials and 19 percent for utilities.
PacifiCorp's dividend growth in the same five-year period was 3 percent peryear. In 1984 the dividend rate was raised over 7 percent to S2.32 annually. Future dividends should rise with earnings. Price appreciation moment um has also continued, raising overall ret urn and reflecting grow-ing shareholdervalue.The price of PacifiCorp stock reached a 20-year high of over $27 per share in early 1985.
I 24 FINANCIAL CONTENTS 1 1 25 Selected Financial Data,Managernent's Financial */ D - k' f l Heview and Industry Segruents .g -' 32 Liquidity and Capitalliesources y ;- o r
.mi_ _ _ ' = . .
3gs . 34 Heport of Managernent Ed 4 PACIFICORP
' ~ ~ ~
34 Opinion ofIndependent Certified Public -- Accountants
~
35 Staternents of Consolidated Incorne and Hetained - Earnings ,4, ' -{i((l{lg((3[5] - 36 Consolidated Balance Sheets d'- !.A wp2 ' e t 38 Staternents of Consolidated Source and Use of ~ - - - Financial Hesources 39 Notes to Consolidated Financial Staternents 49 Suppleinentary Inforruation REVENt'E COMPOSITION 22 O57% 21 IDM:
$1,786 Million 1979:
$777 Million 5 Mining and Resourre Dewlopment (NEllCOI E Tekrommunications IPacific Telecom)
E Electric Operations (Pacific INnverl
25 SELECTED FINANCIAL DATA, MANAGEMENT'S FINANCIAL REVIEW, ANO INDUSTRY SEGMENTS PacifiCoqi (t he Company") is a diversified enterprise equity investments; and (2100.5% of NEHCO,Inc.,a which conducts three separate businesses: Electric subsidiary engaged in coal and pmcious metals min- l Operations; Telecommunications;and Aliningand Re- ing, minerals and precious metals exploration, and oil l' sourte Development. Under the name of Pacific Power and gas exploration and development in several re-
&, Light Company,the Company furnishes electric sesv- gions of the United Statea.
Ice in six Western states.Thmugh its wholly-owned These thme principal businesses when combined am l subsidiary, Inner PacifiCorp,Inc.,the Company owns: hereinafter refermd to as the Companies. (1) 89% of Pacific Telecom,Inc.,a subsidiary which pm- PacifiCorp also has a Corporate headquarters gmup of vides telecommuntcations senices in Alaska,six other employees who pmvide cenain financial and policy Mestern states and Wisconsin,and is engaged in cer- related senices to the Companies, tain nonregulaten activities ihmugh subsidiaries and RESULTS OF OPERATIONS CONSOLIDATED
- 5. Year
. For ihe year 1984 to 1983 Compound IYrrentage Annual (Alillions of Dollars) 1979 1980 1981 1982 1983 1984 comparison Gnm1h Herenues: Electric Operations $497.7 $589.2 $ 721.9 $ 802.0 $ 878.6 $1,009.8 15% 15% Telecommunications 142.4 231.4 279.5 343.4 386.2 399.1 3 23 A11ning and Resource Development 163.7 215.1 372.1 349.7 415.4 470.9 13 24 Coal sales to affili-ated companies (26.9) (60.2) (84.9) (893) (81.8) (93.7) 14 28 Total 776.9 975.5 1,288.6 1,405.8 1,598.4 1,786.1 12 18 income from operations (1): Electric Operations 114.6 148.9 200.9 280.0 319.9 375.8 17 27 Telecommunications 44.2 70.4 98.7 118.0 137.1 125.6 (8) 23 Alining and Resource Development 49.4 49.1 62 3 60.6 72.8 105.4 45 16 208 2 268.4 361.9 458.6 529.8 606.8 15 24 Total Totalotherexpense (income) 5.9 (11.2) ( .8) 12.6 (17.0) 33.0 - - Income contribution beforc extraordinary cnd accounting change items (2): 75.6 72 3 06.8 1292 173.0 175.4 1 18 Electric Operations
'.4 42.8 63.7 15.0 (76) 11 Telecommunications 8.8 15.E Alining and Resoume Development 28.1 46.1 3 262 40.4 54.2 34 14 133.9 167.5 198 2 277.1 244.6 (12) 17 Total 112.5 Net income $112.5 $13't.9 $ 167.5 $ 1973 $ 70.9 $ 244.6 -
17 Errnings per share: Befom extraordinary and accounting
$2.53 $2.82 $3.05 $4.11 $3.42 (17) 7 change items $2.46
$2.53 $2.82 $3.03 $ .45 $3.42 - 7 Total $2.46 (11 Income imm operations by segment does not reflect elimination ofintercompany profits on intersegment coal sales.
(2) Income contribution before extraordinary and accounting change items by segment: Ld floes not reflect elimination for interest on intercompany bonuwing arrangements. th)Irriudes income taxes on a separate-company basis. (c) Ikes not reflect allocation of equity capital costs.
26 - - 1984 Business Operations Review muum suxuiuce a Consolidated revenues impmved 12% to writedowns of nuclear plant assets u3 reaching $1.8 billion. partially offset by an accounting
= ElectricOperations'mvenuesincreased change.
2, 15%, topping the $1 billion mark,with a = 1984 net income reflects stmng perfor-general energy volume increase of 3% mances by Electric Operations and
,, and impmved prices for sales to other Mining and Resourte Development.
utilities. 1984 EPS was weakened by several fac-io = Coal sales contributed significantly as tors in Telecommunications: reduced tons sold incmased 18% to 25 million. settlement revenue fmm AT&,T,$37 s = Telecommunications' revenues ru. million ofincreased losses fmm equity
- mained virtually unchanged, although and ather investments and writedowns originating messages mse 11% to 112 in certain diversified technology in-million. vestments.
nn m si _s2 as is** a Earnings per share (EPS) incmased from = Interest income rose $9.4 million due to sis us m. zis 24% s2r. increase in temporary cash invest-
$.45 in 1983 to $3.42 in 1984.
rnents.
= 1983 EPS rvilects a negative $3.66 net impact of extraordinary items relating 1983 Business Operations Heview e EPS for 1983 was $4.11 compared to 1982's = 1982 EPS included appmximately S.58
$3.05 on income before extraorxlinary and per sharu of capitalized interest on accounting change items. nuclear power plant investments sub-
= 1983 EPS included approximately $.86 stantially written offin 1983.
per share of nonrecurring items. M4RAET TD BfM)k VMEE H.4Tios 5-) ear i9a4 to iSA3 Compound sig Pernanuge Annual 32 " For theyear 1979 1980 1981 1982 1983 1984 compa,$.on on-in Income data: Retum on average cornmon equity 11.7% 12.5% 133% 13.7%1 17.7%1 16.0% - - Pre-tax intemst coverage
~*
(all debt) 2.0 2.0 2.0 2.4 3.01 2.7 (10)% 6% 4o Common stock data (at year-end): Book value per share $21.28 $21.06 $21.53 $2223 $20.51 $22.47 to 1
, , , 7 7 Market value per sharu $ 18 $ 21% $ 17% $ 21% $ 24% $ 24% 2 7 Market to book ien 'no 's t 'a2 as isma_.._ ratio-percent 84.6 100 3 83.0 95.0 119.5 110.7 (7) 6 ass too sa ss izo ins Price-earnings U.l[* *[ofg,M"' multiple-times 73 8.3 63 6.91 6.01 7.3 - -
Stockholders (Thousands) 116.7 125.4 122.0 121.9 117.2 111.5 (5) (1) Cash dividends per common share: Paid $1.92 $2.04 $2.04 $2.16 $2.16 $2.24 4 3 Declared 1.95 2.04 2.07 2.16 2.16 1.702 _ _ Total assets (in millions at year-end) $3,129 $3,559 $4,017 $4,412 $4,451 $4,736 6 9 Corporate identifiable assets (in millions at year-end)3 $ 32.5 $ 37.8 $ 49.2 $ 48.8 $ 84.7 $149.5 77 36 8 Based on eamings on common stock befom extraortlinary and accounting change items. 8 Due to a shift in declaration and payment dates, them wem only three common stock dividends declared in 1984. 8 Corporate assets are principally cash. temporary cash inwstmes.ts.and other inwstments.
27 ELECTIUC OPERATIONS For theyear muoim comM ZEEC/lE"i),g* Pme ntage Annual 1979 1980 1981 1982 1983 1984 comp.,$.on ca,wth (Millions of Dollat a) su Operating revenues: 14% 16% Electric-General sales $406.4 $459.8 $554.1 $630.9 $747.5 S848.7 ~"
-Sales to other - a utilities 74.6 1092 147.7 146.0 107.1 129.6 21 12 Steam heat, water, 20.2 20.1 25.1 24.0 31.5 31 14 and other 16.7 497.7 5892 721.9 802.0 878.6 1,009.8 15 15 nmetsigi_o umon _ _ _ _ . . _
Total scener iinemimie. a salcohicaaleno other ths Operating expenses: " ""' * " " " # " # Depmciation and amodization 60.8 69.2 74.1 81.4 92.4 103.2 12 11 Operations, maintenance, and other 322,3 371.1 446.9 440.6 466.3 530.8 14 11 Total 383.1 440.3 521.0 522.0 558.7 634.0 13 11 Income from operations 114.G 148.9 200.9 280.0 319.9 375.8 17 27 Income contribution befom extradinary and accountingchangeitems S 75.6 $ 72.3 $ 106.8 $129.2 $173.0 $ 175.4 1 18 Identifiable assets
$2,361.4 $2,608.2 $2,881.1 $2,979.6 $2,835.2 $2,848.1 0 4 (at year-end) 1984 Compared to 1983 tion expenditures, completion of Col- stscruic opmarrioss tscous e Hevenues inemased $131 million,or 15%. strip Unit 3,and discontinuance of cgnyn capitalization ofinterrst on Supply Sys-e General sales were up 14% due to rate um tem Unit 3.
inemases and a 3% volume increase.
= Income taxes were up $17 million: $34
= Sales to otherutilities mse 21% due to inilli n due to higher taxable income, ,
impmved prices; volume dmpped due iTset by $17 million ofincreased to low margin nonrecurring 1983 sales investment tax crrdit amodization. of appmximately 923,000 mwh. 100 0 Operating expenses inemased $75 million 1983 Compared to 1982 or 13%. m Hevenues increased 10% or $77 million. a
= Wheeling expenses wem $9 milh.on = General sales rates were up.
higher primarily because Colstrip Unit 3 began operation in January 1984. = Sales to other utilities wem down 27% due to hydm omsupply conditions
= Fuel expenses were up $30 million,duc amilimited access to transmission ., .
to a 15% coal consumption increase and f cilit,es. i , , , , , , , , higher prices. o Maintenance expense incmased $8
= Operating expenses incmased 7% or $37 ggn i g.n um ug-
"" I "-
million or 12%.
= Fuel prices mse ($8 million);deprecia-e Pmperty taxes wem up 13% ($3 million). tion rates were up ($11 mdhon).
= Deptrelat. ion and amonization mse $11
= Purchased powerincreased $10 miUion million or 12% due to inemased plant in as less costly purrhased hydmpower service and amortization of recoverable was used to replace thermal genera-nuclear pmject costs, tion' o income contribution befom extraordinary ' me contributionbefom extraonlina;y I"
and accounting change items mse $2 and accounting change items inemased million or 1%. by $44 million or 34%.
. Income fmm operations increased $5G = Income fmm operations was up $40 million or17%.
- on ami ng in emst npense (y
= Intemst capitalized declined $30 ch.ned $17 milhon,ofTset by $19 nulhon milh.on due to reductions in construc-of higher income taxes.
28 ELECTHIC OPERATIONS (CONTINUED) KI2LM OPEfLA110N5 ENEHGY BARES 54 car (Siltons ofIMMI 1984 to 1,83 Compuund For theyear 1DM c7d*m Engups am= Energy sales 1979 1980 1981 1982 1983 cD'h
,, (Billions of KWII):
General sales 18.4 18 5 18.6 18.9 18.9 19.5 3% 1% ' l u Sales to other utilities 4.4 4.5 5.5 5.8 5.5 4.9 (10) ? Io Total 22.8 23.0 24.1 24.7 24.4 24.4 0 1 Residential average
- annual usage (KWil) 13,062 12,609 12,091 12,621 11,709 12,289 5 (1)
Nurnber ofcustomers
/' (Thousands,at ten w wi az s3 lan4 year-end) 629.6 643.8 652.4 657.6 650.4 655.7 1 1 22 A 23D 24 1 24 7 24 4 24.4 O Sales Mholesalelto Other Utihters I O U
! U Generniinerani s.ie. Coal 65 66 60 59 54 64 19 0 Ilydru 14 15 13 17 18 17 (6) 4 Purthase and exchange contracts 21 19 27 24 28 19 (32) (2) Numberofernployees (at year-end) 4,294 4,564 4,731 4,713 4,352 4,437 2 1 I I TELECOMMUNICATIONS 1YE1(DMML NicAi10%M S; car Hamti anurOnniOs For theyear is tois.3 compuono (Millions of Dollars) 19791 1980 1981 1982 1983 1984 comM GYh w* Operating revenues: [ ,, Local senice $ 152 $ 17.1 $ 19.8 $ 21.6 $ 25.1 $ 27.5 10% 13% Toll senice 97.8 163.9 204.9 257.6 280.4 280.9 0 24 {g j Private line senico 21.2 37.4 39.7 46.5 E3.8 56.6 5 22
% 7 Other 82 13.0 15.1 17.7 26.9 34.1 27 33 Total 142.4 231.4 279.5 343.4 386 2 399.1 3 23 )
! ISM: 8399 Millkesa l l 643;;g- Operating expenses: l l C m
- unesen** Depreciation and l D3 ni,
~~~ ~
amortization 202 36.0 35.6 42.7 67.8 71.5 6 29 Operations, maintenance, and other 78.0 125.0 145 2 182.7 181.3 202.0 11 21 Total 982 161.0 180.8 225.4 249.1 273.5 10 23 income from operalions 442 70.4 98.7 118.0 137.1 125.6 (8) 23 Net income contribution S 8.8 $ 15.5 $ 27.4 $ 42.8 $ 63.7 $ 15.0 (76) 11 Identifiable assets (at year-end) $519.2 $572.8 $636.8 $854.6 $961.1 $961.9 0 13
' Includes Alascom since acquisition on June 1.1979.
l l _ _ . _ . _ - - - - . . - - - . _ _ _ _ _ _ - ~ U-------
29 1ELEcoMut'NicA110%s 1984 Cornpared to 1983 ruillion of pm-tax losses fmm disposi- ncous comusenos o llevenues inervased $13 million or 3%. tion of an intemst in Evotek and SG million f pm-tax losses fmm a cable se
= Itevenues and operating expenses both telensmn padnerslup.
increased SIG million due to FCC man-dated accounting classification for ac- = $22 million of pre-tax gains in 1983 fmm cess charges, issuances of PacificTelecom and Com- . dial stock. e Toll senice decreased SIG million (be-fom FCC mandated accounting classifi-cation) due to decreased AT&T long 1983 Compared to 1982
- lines contractual settlements and in- a llevenues incmased $43 million or 12%.
8 Toll senice was up 9%, reflecting a 15% cruased competition forinterstate serv-ices,despite a 14% increase in originat- message volume inemase. ing message volume. = local senice incmased 1G% due to ac-e Other revenue was up $7 million or27% quisitions. ,, ., y y y , , , due largely to carrier access senice m- = Private line sonice mse 16% as a result of s, is 27 u sai sis lated billings by Pacific Telecom's local additional contracts. 'Bes- unusuannmn= iiem a sa mma operating companies. = Other mvenues increased $6 million e local senice rose $2 million or 10% pri- fmm satellite transponder leases, marily as a result of the acquisition of n Operating expenses wem up $24 million Cencom,Inc.in April 1983. or11%. o Operatingexpensesincreased $24 million = incmased support senices and ex-or10%. penses for satellite acquired in late 1982 e $16 million inemase due to FCC man- partially offset by decmased leased cir-dated accounting classification. cuit costs.
= Depmeiation and amortization was up . Depmciation mse $25 million as a msult
$4 million due to incmased plant in ofincreased plant in senice and mvised senice; administrative and general was depmciation rates.
up $3 million due to January 1984 wage a Net income contribution increased $21 t g g "n"% N Yss Ne"s incmases and increased employee million or 49%. iumw benefits. = $22 million of pre-tax gains fmm issu- no o Net incomo contribution declined $49 ance of Pacific Telecorn and Comdial million or 76%. stock. e losses fmm equity and otherinvest- "
= Net intemst expense declined 54 ments mse $37 million in 1984 primarily inillion or 10%.
due to $16 million in losses fmm Com- a dial Corporation,appmximately $7 s-vear so i984ioiss3 compound P>rrentage Annual 1979 1980 1981 1982 1983 1984 comparbon Gn=th For the year Originating messages im m u u u isu (Millionsh sa 7s na ici ina longlines 25.9 29.9 36.0 43.1 48.5 55.0 14% 16% si local 34.8 385 41.7 44.7 52.3 56.6 8 10 g unn Total 60.7 68.4 77.7 87.8 100.8 111.6 11 13 Access lines (Thousands, at year-end) 115.1 125.9 129.8 136.5 159.4 164.6 3 7 Number of employees 2,262 2,33G 2,302 2,651 2,935 2,824 (4) 5 (at year-end) i
i 30 MINING AND RESOURCE DEVELOPMENT MINIM AND REMWRCg 5-war im.wPMEVF REmLES. For theyear isa4ionas compouna St*thanoonhallarsi Pmentage Annual B!illions of Dollars) 1979 1980 1981 1982 1983 1984 connp +.on Growth Ssm Operating revenues: Coal' $163.7 $215.1 $371.1 $343.7 $376.8 $467.8 24% 23% Gold, siher,and other - - 1.0 6.0 38A 3.1 (92) -
^
3m Total 163.7 215.1 372.1 349.7 415.4 470.9 13 24 Operating expenses: 2" Depreciation, depletion and amortization 9.4 12.1 19.6 35 5 49.2 38.8 (21) 33 Operations, main-tenance, and other 104.9 153.9 290.2 253.6 293.4 326.7 11 26 Total 114.3 166.0 309.8 289.1 342.6 365.5 7 26 im so 's : s2 m asa4 Income fmm operations 49.4 49.1 623 60.6 72.8 105.4 45 16 _ SiG4 2is 372 350 415 $4M w .wninown ov en.m,mpany .ah Net income contribution $ 28.1 $ 46.12 $ 33.3 $ 262 $ 40.4 $ 54.2 34 14 Identifiable assets " (at year-end) $215.7 $3402 $449.7 $528.9 $570.2 $694.6 22 28 - 8 Before elimination ofinterrompany coal sales. 2 Includes a $9 4 million gain on the sale of a long-term imestment. MNNG A%D REMKRCE 1984 Compared to 1983 = Included in operating income is a $5.4
,7;Q"g '"8 m Total rewnues mse $55 million or13%. million pre-tax gain from the sale of an S'*aan e . Revenues fmm Western coal operations Eastern coal mine.
,,, increased $41 million or13% primarily = Pre-tax gain of $33 million fmm sale of due to an 11% incmase in coal volume NEHCO common stock in an August sold. 1984 public offering,largely offset by
- Hevenues fmm Eastern coal operations $22 million of minority interest msult-wem up $50 million, more than doubl- ing imm such sale.
Ing the prioryear,as a result of a 90% rise = Income taxes increased $13 million as a in coal volume sold. result of higher taxable income. 2"
= Gold silver,and otherrevenues wem down $36 million or 92% as pmcious 1983 Compared to 1982 metals pmduction was inventoried in a Total revenues were up $66 million or19%.
1984. = Western coal revenues were up $32 l
= Operatingexpenses increased $23 million million on a 9% volume incmase.
I am no si u ra asu or7%. = Eastern coal mvenues were up $2
" " 2" " E'* = Operations wem up $21 million primar- million due to impmved marketing ily as a result ofincmased coal volume practices sold. . Gokl,siher,and other ruvenues in-
= Administrative and general costs mse cmased $33 million largely due to ac-appmximately $8 million due largely to quisitions of gold and silver pmperties.
gmwth in operations. m Operating expenses were up $54 million
= Depreciatlon, depletion,and amortiza- or 18%.
tion declined $10 million generally due . Costs mse primarily due to increased to reduced asset valuation adjust- coal purchased for msale, asset valua-ments. tion adjustments,and costs attributable a Net income contribution incmased $14 to newly acquimd gold and sihcr million or 34%. operations.
= Operating income was up $33 million, a Net income contribution incmased $14 partially offset byinemased net intemst million.
expense of $6.5 million primarily due to = Operating income increase of $12 the issuance of additional long-term million accompanied by a 2% incmase debt ofTset by increased temporary cash in intemst expense. investments.
31 5-Dear MINING A%DltE50titCE 1944 to 1983 compound DEntA)pggENT COAL IMIES Pertenlage Annual IMdlu>ns o(Tons > 1979 1980 1981 1982 1983 1984 companaon cro h For theyear ** Tons of coal sold (Millions): 12.4 162 21.9 17.2 16.0 17.9 11% 8% Mined
.3 1.0 .5 1.9 5.0 6.8 38 87 l'urchased for rusale Total 12.7 17.2 22.4 19.1 21.0 24.7 18 14 -
is Ounces sold (Thousands)': 3 31 7 (77) - Gold - - - Siher - - - - 960 - - - Number of Ernployees 987 1,536 2,104 1,888 1,879 2,196 17 17 (at year-end)
' Ounces mined are included in the table below. no 'n i 's2 397s a3 n_su 12 7 17 2 22 4 19 1 21 0 34.7 E Purrhamed for Rede The following information is presented in accontance with the guidelines pruvided in State- a um_a_
ment No.39 of the Financial Accounting Standards Board. l Supplementary Operating Statistica 1980 1981 1982 1983 1984 (InThousands) l'rown and probable resents: 1,224,400 1,268,000 1.184,000 1,260,000 1,299,000 Coal-tons 6,400 23,200 Siher-ounces - - - 144 450 Gold-ounces - - - Amounts mined: 19,100 19,200 18,000 19,700 Coal-tons 23,900 3,260 1,600 Sihur-ounces - - - 3 38 44 Gold-ounces - - Resents purchased-net: GG,000 1,700 42,400 Coal-tons - 8,000 13,000 Sihur-ounces - - - 216 1GO Gold-ounces - - - Average sales price: Coal-per ton $14 $16 $ 18 $ 19 $ 20 14 - Siher-per ounce - - - 377 505 371 Gold-per ounce - -
'In addition to roal actinties by NERCO,Inc Electric Operations has interests in two coal mines which exclusiwly supply coal to electric generating facilities. Information conceming these mines is included in the coal tonnage disclosurva atxwe and the following items relating to such actidties are classified under Electric Operations:
For the year (Millions of Dollarsl 1979 1980 1981 1982 1983 1984 Fuel expense tivvenuc equivalent) $44.8 $46.2 $41.6 $467, $50.3 $53.9 3.7 42 4.8 4.7 4.9 5.5 Depreciation Construction expenditutes 7.2 10.7 G.0 11.1 10.0 3.4 Identifiable assets 51.8 64.9 G2.3 72.2 78.9 81.8
32 LIGUlOITY AND CAPITAL RESOURCES r.wrrumnisc n:snE For theyear(Alillions of Dollars) 1979 1980 1981 1982 1983 1984 8%TEllMLIA' Ilesources from operations t: Electric Operations $104 $115 $166 $250 $301 $300 Telecommunications 40 GG 79 117 142 150 su Alining, and Resource Development 47 83 83 8G 122 129 w Total 191 264 328 453 565 579 Less Dividends (93) (114) (133) I153) (167) (138)
, Net S 98 $150 $195 $300 $398 $441 8 Resourtes from operations are deriwd frum consolidated net income plus depreciation,deferrvd taxes,defened innst ment tax credits and ot her items not rwtuiring or pmsiding cunent resourres.The compound annual gmwth rate in irsources fmm operations foryears 1979 thmugh 19M was 35T..
.iCaCaCa2 '*2 * * ' " The businesses continued to generate capital spending wem generated fmm sid.hubtbhddNbTg lacmasing portions of their respective capi- operations.One of the results of this tmnd la
*mi.ui%imei n-wis tal mquimments fmm their operations. On a that the businesses wem able to mom than consolidated basis for 1982,1983 and 1984, double cash and temporary cash invest-appmximately 51%,101% and 118% (100% ad- ments fmm $53.4 inillion at December 31, justed for dividends declamd in January 1983 to $138.4 million at December 31,1984.
1985),respectively,of the funds requimd for Actual Projected For theyear(Alillions of Dollars) 1979 1980 1981 1982 1983 1984 1985 1986 1987 Construction expenditures (excludes interest capitalized on equity funds): Electric Operations $219 $283 $281 $251 $165 $125 $159 $154 $130 Tehmommunications 58 72 84 189 105 GG 105 113 110 Alining and Resource Development 57 123 51 79 57 52 122 79 83 Corporate - - - - - 5 - - - Acquisitions and investments: Electric Operations - - - - - - Telecommunications 209 9 22 41 41 G2 50-100 50-100 50-100 Alining and Resourre Destlopment - 7 29 26 26 G2 Total capital spending 543 494 467 58G 394 372 436-486 396-446 373-423 Ataturities oflong-term debt and sinking fund requirements: Electric Operations 5 9 6 157 95 47 59 17 3 Telecommunications 3 35 25 24 48 45 26 17 45 Alining and Resource Dettlopment _ _ 26 9 48 19 7 22 11 18 7 Total 34 53 79 200 150 114 96 52 55 ljefinancings __ - - - - - 174 _ _ _ _ - - Total capital mquimments $577 $547 $546 $786 $544 $G00 $532-582 $448-498 $428-478 in 1984, Electric Operations,with nominal capitalin 1984 to increase its holdings in gold nuclear constmetion expenditums,was and sih er mines, Eastem coal, and oil and successful in mducing capital spendind 24% gas operations,while reducing its capital ex-compared 101983 and 50% compamd 101982. penditums in Western coal mining Alining and Hesource Development used operations. 1
33 (MPITU l/ATloN
*H= "' ""na""
During 1984, Telecommunications con- tions anticipates its 1985 capital spending tinued to invest in diversified technology will include appmximately $48 million for u companies and to make advances to those the acquisition of certain Alaskan local tele-acquired in pmvious years. phone companies. ' To finance it s 1985-1987 capit al spending.the The Restated Articles ofIncorporationlimit Company anticipates that none of the the amount of unsecumd debt outstanding requimd consolidated funds will have to be to the equivalent of 30% of total defined 2 obtained fnun external sources. Electric equity and secumd debt. Under this pmvi-Operations' construction is expected to be sion,appmximately $475 million principal limited to completion of Colstrip Unit 4 and amount of additional unsecumd debt could the mtmfit of coal-fimd plants with pollution have been outstanding at December 31,1984. abatement equipment in the period 1985 Issuance of first mortgage bonds or pmfermd thmugh 1987. Virtually all of the $122 million stock is limited by earnings coverage and to be spent on the pollution abatement fundable pmperty pmvisions of the Com- , , m m facilities during this period has almady been pany's mortgage indenture and Hestated di~ ~27s3 73~ ,,~
~ ~ ~ ~ ~~as~sa.s~ ~ ~ ~
financed with the issuance of pollution con- Articles of Incorporation. trol mvenue bonds, the pmceeds of which In 1984, the Company began a recapitaliza-am on deposit with trustees and are tempo- tion pmgram using redemptions,mpur-rarily invested until spent on the construc- chases,and intemst rate exchanges in order tion of the facilities. Mining and Resoume to decmase leverage (debt and pmfermd Development's 1985 capital spending will in- stock),impmve mtemst and prefened divi-clude completion of the Antelope mine in dend coverage and mduce interest expense Wyoming. NEHCO's capital spending plans volatility.This recapitalization pmgram is for 1985 thmugh 1987 include some uniden- continuing in 1985. tified acquisitions in related areas. In Feb- For infonnation regarding bank emdit ruary 1985, Telecommunications spent $22 agreements, lines of civdit and other short-million to increase its ownership percentage tenn bormwing facilities and related limita-Imm 40% to 94% in a cable television opera- t ons on bonuwings,see Note 3 to Consoli-tion in Anchorage, Alaska.Telecommunica- dated Financial Statements. emtwr 31 1979 1980 19M 1982 1983 19M4 1%lillions of Dollarsi Amount % Amount % Amount % Amount % Amount % Amount % Capitalli.atioin Common equity $ 809 31 $ 967 33 $1,094 34 $ 1,233 35 $ 1,169 33 S1,383 38 Pmfenvd stock 227 9 226 8 276 8 351 10 352 10 291 8 Hedeemable pm-ferred stock 50 2 50 2 67 2 67 2 67 2 67 2 long-tenn debt 1,515 58 1,669 57 1,824 56 1,852 53 1,913 55 1,900 52 Total $2,601 100 $2,912100 $3.261 100 $3.503100 $3,501100 $3,641100 During 1984, the Company was able to take Inflation the initial steps to achieve a higher equity The Company is sensitive to inflation be-ratio.The Company took advantage of favor- cause significant amounts of capital must be able market conditions by selling thwe raised for construction pmgrams and be-million shares of common stock for $23 625 cause utility service prices are regulated per sham at the time when the Company's generally using historical cost in the rate book value was appmximately $21.86 per bases. Electric Operations and Telecom-sham.The pmceeds fmm the common stock munications expect to continue to pursue issuance wem used to rydeem and repumh- adequat and timely rate reliefin the future ase pmfenvd stock. During 1984, the Com- to otTset the impact ofinflation and other pany was also able to miinance a portion of incmases in Ihe cost of pmviding utility serv-its long-tenu debt and to rvduce its exposure ices.They also will continue to urge im-to intervst rate volatility. pnnement in mgulatory practices to limit the effect of attrition caused by mgulatory lag. See Supplementary Infonnation-Effect of Inflation on pages 49 to 51.
i 34 . REPORT OF MANAGEMENT The accompanying consolidated financial required to assess and balance the relative statements were pmpared by management, cost and expected benefits of these controls. who is msponsible for the integrity and The systems are supported by a staff of pm-objectivity of the data pmsented, including fessional corporate auditors who, among amounts that must necessarily be based on other duties, evaluate and monitor the sys-judgments and estimates.The consolidated tems ofintemal accounting contml in coor-financial statements were prepamd in con- dination with the independent auditors. formity with generally accepted accounting The corporate auditors am supplemented principles, and in situations where accept- by operating company internal auditors able alternative principles exist, manage- who conduct special and operational ment selected the method that was most audits. appmpdate in the cirrumstances. Financial The Audit Committee of the Board of Direc-infonnation appearing thmughout this An- tors, composed solely of outside dimctors, nual fleport is consistent with the consoli- meets periodically with the independent dated financial statements- certified public accountants, management, In mcognition of its msponsibility for the and corporate auditom to review the work consolidated financial statements, man- of each and ensum that each is pmperly agement maintains and relies upon systems discharging its msponsibilities.The inde-ofintemal accounting contmls.The systems pendent public accountants and coiporate aru designed to pmvide masonable assur- auditors have fme access to the Committee, ance that assets are safeguarded and that without management pmsent, to discuss transactions am executed in accortlance the msults of their audit work and their with management's authorization and evaluations of the adequacy ofintemal con-pmperly recorded to pennit preparation of trols and the quality of financial reporting. reliable financial statements. Judgments are OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Directors and Stockholdem of PacifiCorp: We ham examined the consolidated balance the financial position of the companies at sheets of PaciflCorp and subsidiaries as of December 31,1983 and 1984 and the msults December 31,1983 and 1984 and the related of their operations and the changes in their statements of consolidated income and m- financial position for each of the thme years tained camings and of consolidated sourre in the period ended December 31,1984,in and use of financial msources foreach of the conformity with generally accepted account-thme years in the period ended December ing principles applied on a consistent basis, 31,1984. Our examinations were made in except for the change,with which we concur, accortlance with generally accepted audit- in 1983 in the method of recording mvenues ing standards and, accordingly, included as described in Note 1. such tests of the accounting records and such other auditing pmcedums as we con-sidemd necessary in the ciruumstances. do _w dms vM In our opinion,the above-mentioned con. Portland,Omgon solidated financial statements pmsent fairly Febmary 15,1985
35 STATEMENTS OF CONSOLIDATED INCOME AN RETAINED EARNINGS Year Ended December 31 (Thousands of Dollars) 1982 1983 1984 IMX)us ruou ortntrioss toMroSITio% Hevenues $1,405,798 $1,598,380 $1,786,120 u w- t m.1 hree iears' Expenses: Operations 407,377 451,916 528,570 m hiaintenance 126,160 137,147 146,479 _u Administrative and general 144,666 153,204 162,416 Depmciation and amortization 159,664 209,393 213,607 Taxes, other than income taxes 109,348 116,896 128,274 '5 Total 947,215 1,068,556 1,179,346 - Income From Operadons 458,583 529,824 606,774 - - _ _ _ _ - - - _ - . - - _ E Wnirg and Resotm e Dewhipment Interest Expense and Other: y ;E, R",;,_,, ,,, ,, ,, Interest expense 209,622 208,015 223,362 s tieonc oper.iinn. iraorw n,wer. Interest capitalized (58,593) (69,939) (38,829) Gains fmm issuances of subsidiaries' and equity investee's stock - (22,466) (3,300) Alinority intemst 9,981 15,979 13,138 losses from equity and other imustments 699 3,789 41,027 Other expense (income) 1,958 (14,279) (17,820) Total 163,667 121,099 217,578 Income Befom Income Taxes, Extraordinary Items and Cumulative Effect of Unbilled Revenue Accmal 294,916 408,725 389,FS Income Taxes 96,759 131,592 144,571 Income Beforu Extraortlinary Items and Cumulative Effect of Unbilled Revenue Accrual 198,157 277,133 244,625 Extrcordinary Items: Gain fmm debt extinguishment 55,153 - l Pruvision for nuclear pmjects unmcover- nouve courosmos
" " * 'h"*""
! ability, net ofincome tax benefits: 1982-$28,901 and 1983-$121,236 (55,996) (228,282) - Total (843) (228,282) - Cumulative Effect to January 1,1983 of _ ,7 Unbilled Revenue Accrual, Net of Defened Taxes of $20,556 (Note 1) - 22,069 - i7 Nst Income 197,314 70,920 244,625 Retained Eamings, January 1 283,166 326,825 230,500 crsh DhIdends Declared (Note 4): a umi,w.na R,.ourm tweiormeni PmferTrd stock (40,240) (45,395) (38,346) E Emunir.imn. ir.<inc reieromi Common stock-per share: 1982 and s o w op, r.non.1rm* nmen 1983-$2.1E,1984- $1.70 (113.415) (121,850) (99,885) 'I'=ne Mare n'm=Ima'y and *="'- 1,g rha,ge items
- - - - - - - ~ - - - - - ~ ~ ~ -
Ret:Ined Earnings, December 31 $ 326,825 $ 230,500 $ 336,894 Errnings on Common Stock (Net Income less preferred dhidend recluirements) $ 157,074 $ 25,525 $ 200,626 Average number of common shams outstanding (thousands) 51,916 56,364 58,602 Errnings (Loss) Per Common Share: Income before extraordinary items and cumu-lative effect of unbilled ruvenue accrual $3.05 $4.11 $3.42 Extraortlinary items (.02) (4.05) - Cumulati e effect to January 1,1983 of unbilled nwenue accrual (Note 1) - .39 - Total $3.03 $ .45 $3.42 (See tcrompanying Notes to Consolidated Financial Statemental
36 CONSOLIDATE BALANCE SHEETS Assets gel December 31 (Thousands of Dollars) 1983 1984 Property, Plant,and Equipment: Electric $2,857,998 $3,021,365 Telecommunications 850,797 925,316 Afining and Resourre Development 442,023 531,594 4 Accumulated depmciation and amonization (970,987) (1,134,699) Net 3,179,831 3,343,576 Construction work in pmgmss 309,198 234,953 Exploration and development pmpenies 63,986 61,747 Total propeny, plant, and equipment 3,553,015 3,640,276 Current Assets: Cash and temporary cash investments 53,400 138,405 Accounts receivable (less allowance for doubtful i P M _ " C 8 C 82_ a3 '?** _ _ accounts: 1983-$3,281; 1984-$4,222) 285,915 325,643 p' 3 8 _ _*?_.
- i_ 4 3_**:?--- Ataterials, supplies, and fuel stock (at average cost) 80,378 63,863 Inventory 54,214 93,520 Pmpayments 9,317 12,033 Total curmnt assets 483,224 633,464 Other Assets:
Unmcovemd investments in terminated or delayed nuclear pmjects 255,761 255,761 Allowance for estimated unmcoverability (255,761) (255,761) Net (Note 2) - - Estimated mcoverable nuclear pmject costs (less accumulated amonization:1983-$3,394; 1984-$11,242) (Note 2) 135,205 127,404 Investments in and advances to affiliated companies 87,279 112,249 Excess of cost over net assets of businesses acquired 74,323 72,988 DeferTed charges 33,154 38,164 Other 84,961 111,387 Total other assets 414,922 462,192 Total Assets $4,451,161 $4,735,932 (See accompanying Notes to Consolidated Financial Statements)
37 Capitalization and Liabilities 1983 1984 w n m uo m sn m nios December 31 (Thousands of Dollars) Cepitalization: 325 Common stock, $325 par value:
- 3.
authorized 75,000,000 shares; outstanding 1983-56,981,561;1984-61,539,764 shams $ 185,190 $ 200,0G1 787,648 879,157 Pmmium or) apital stock ' 8 Installmen* ceived on common stock 46 118 -
~
(34,662) (33,388) Capital at cense 230,500 336,894 lletaine( js _
,,,,,,3,,,,,,
Total common etjuity 1,168,722 1,382,785 8 ta* "m '* Prefemd stock 351,459 291,597 N2ZiDI U""*"" "'** fledeemable prefend stock G7,000 67,000 long-term debt 1,913,460 1,899,690 Total capitalization 3,500,641 3,641,072 Current Liabilitics: Long-term debt currently maturing 110,022 92,492 Notes payable 11,155 38464 Accounts payable 76,051 106,727 Taxes accrued 81,988 110,175 Dividends and intemst payable 84,536 47,506 Customer deposits 49,757 44,683 Other 79,081 76,299 Total cumnt liabilities 492,590 516,346 Dcierred Credits: Defemd income taxes 159,745 217,122 Defemd investment tax credits 97,120 133,021 Customer advances for constniction and other 109,046 106;t04 Accrued metamation and other mining deferrals 41,766 44,370 Total defemd omdits 407,677 500,777 Minority Interest 50,253 77,737 Commitments and Contingencies-sce Notes Total Capitalization and Liabilitics $4,451,161 $4,735,932 ISee accompanying Notes to Consolidated nnancial Statements) l
1 38 - STATEMENTS OF C JNSOLIDATED SOURCE AND USE OF FINANCIAL RESOURCES Source of Fin ncian Mesoure ..s: un rux Or mrsuu.nruxmms Year Ended December 31 (Thomands of Dollars) 1982 1983 1984 avassa - Operations: 1 m Income befort extraordinary items and cumulative n effect of unbilled revenue accrual $198,157 $277,133 $244,625 Items not requiring (providing) current resources: _ 22 Depmciation and amortization 159,664 209,393 213,607 Defened income taxes and investment
" tax cmdits-net 88,027 97,558 93,278 Interest capitalized on equity funds (22,252) 140,678) (21,108)
Minority interest 9,981 15,979 13,138 Cnn. manas. sn.: uin=n Losses fmm unconsolidated entities 699 3,789 36,501 biYpYiT[szi4 NN="n Accrued reclamation costs and pmduction tpher hemn inni Ope rytyyns SI20 Mdlkin taxes 4,427 15,405 2,198 Other-net 14,663 9,043 172 Gain fmm issuance of equity investee's stock - (11,584) - Gains fmm issuances of subsidiaries' stock (included in pmceeds below) - (10,882) (3,300) Total resourtes fmm operations 453,366 565,156 579,111 l'inancings: long-tenn debt 288,764 152,116 254,762 Common stock 91,406 31,612 107,669 Preferred stock 79,69 ~ Issuances of subsidiaries' stock 1,210 35,874 31,467 Totalirsoumes fmm financings 461,075 219,602 393,898 Effect on resourtes of extraordinary items and cumulative effect of unbilled mvenue accrual-net 55,153 22,069 - Utility assets sold under thmat of condemnation - 16,348 - l Total $969,594 $823,175 $973,009 Use of Financial Resource 8: m Construction expenditurrs (excluding intemst l as capitalized on equity funds) $508,529 $317,135 $233,639 Exploration and developsuent expenditums 10,187 10,515 14,242 u Operating companies acquired-net 34,835 36,047 64,003 7 Investments in and advances to affiliated 8 companies 32,332 30,354 60,471 Dividends 153,655 167,245 138,231 long-tenu debt mduc' ion 200,264 149,942 288,056 Os,7,'IM$Z."[$"$"t umi Redemption and repuirhases of prefened stock - - 59,862 g'*g,8g,',6',a ,, Increase in temporary cash investments Cincreamed ranh tnmenwnn 564 Mdik,n (rlet of shordterrn debt) 144 87,338 63,639 D other rm. SSI Mdiken Other use (source) (3,171) (15,578) 5,551 Incmase in working capital (excluding shordtenn debt and temporary imestments) 32,819 40,177 45,315 Total $969,594 $823,175 $973,009 ISee accompanying Notes to Consolidated Financial Statementsi
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31,1982,1983, and 1984
- 1. Surnrnary of Significant Accounting Policies Basis of Presentation The excess of cost over net assets of busi-The consolidated financial statements of nesses acquimd is generally being amor-PacifiCorp (the" Company") encompass two tized over 40 years.
businesses primarily of a utility naturu- Inventory Valuation Electric Operations and Telecommumca- Irwent ries am generally valued at average tions; and a Alining and Resourre Develop- c st or market whichever is lower. ment business, including a 50% intemst in the assets, liabilities, and results of opera- Interest Capitalized tions of a commercial coal mining joint ven- Debt and equity costs of funds applicable to tum.Together these businesses am refermd utility pmpenies are capitalized during to hemin as the Companies. All businesses constmetion. Generally, the composite arv included since dates of organization or capitalization rate used was 11.5% for 1982, acquisition. Significant intercompany trans- 12.6% for 1983 and 12% for 1984. Intemst actions and balances have been eliminated. capitalized on mining and resourte devel-The financial activity of each of the above opment properties is limited to interest cost operational segments is separately mported incurred to finance constmetion and cer-in the tables immediately following the cap- tain exploration and development activities. tions" Electric Operations,""Telecommuni- Income Taxes cations,'and " Alining and Resourre De- Defened Taxes-Electric Operations pm-velopment' on pages 27,28 and 30,respec- vides deferrud taxes for diffemnces due to tively,of this report. Such infonnation is an book versus tax depmciation lives and integral pan of these financial statements, methods with respect to post-1980 property The Company's pmponionate share of in- additions and certain other timing differ-come or loss fmm equity investments and ences. Telecommunications pmvides de-certain majority owned investments is in- femd taxes for the total tax versus book de-cluded in losses fmm equity and other in- pmciation diffemnces. Defened income vestments. taxes aru not pmvided for certain other dif-femnces in the utility business. It is ex-Hegulatory Authorities pected that regulatory practices affecting Accounting for the utility businesses con-the utility businesses will pennit mcovery fonns with generally accepted accounting thmugh revenues of income taxes, not pm-principles as applied to mgulated public vided for curmntly, when such taxes be-utilities and as pmscribed by Federal agen. come payable. cies and the commissions of the various states in which the utility businesses oper. Deferred income taxes are pmvided for all ate. timing diffemnces in the Alining and Re-sourre Development operations. Property, Plant,and Equipment Investment Tax Credits-Federal income Pmpeny, plant, and equipment am stated at tax mductions msulting imm the invest-original cost of contracted seivices, dimet ment tax cmdits relating to Electric Opera-labor and material, interest capitalized dur- tions, and Telecommumcat,ons' i plant ing construction, and indirect charges for placed in senice are defened and amor-engineering, supenision, and similar mer-head items.The cost of depreciable utility dwd generally oyer the usefullife of the tv-I ted asset. In Ahm,ng and Resourre Devel-pmpeities retimd, including the cost of re- pment, investment tax cmdits flow moval,less salvage,is charged to accumu- , thmugh to income in the year the credit is lated depreciation. mcognized in the financial statements. Depreciation and Amortization Depmclation is computed generally by the Hevenue Hecognition straight-line method mer the estimated use- In 1983, Electric Operations changed its method of accounting for rtvenues and fullives of the related assets. Ihnisions for depmelation in the utility businesses were began accruing estimated unhilled mvenues 3.68%,4.41% and 4.47% of average deptrci. for services pmvided after cycle billing able pmperty, plant, and equipment for thmugh month-end. in prioryears, revenues 1 1982,1983, and 1984, mspectively. weru generally recognized on the basis of
4O cycle billings and reconled when customers subsidiaries or equity inmstees as income were billed.The after tax effect of the change orloss at the time of such sale. was to incmase 1983 net income $273 Sale of Tax Benefits million ($.48 per sham), of which an incmase The pmceeds of the sale by Electric Opera-of $5.2 million ($.09 per share) was reflected tions of tax benefits related to a major trans-in operations and $22.1 million ($.39 per mission line, $43.9 million received in 1981 share) the cumulative effect of the change as and 1982,wem mcorded, as mquired for util-ofJanuary 1,1983,was mported as a separate ity pmperty,as other defened emdits.These component of net income.Tne pm fonna proceeds aru being amortized to income effect of this change for 1982 would have over 30 years, the book life of the transmis-been an incmase in net income of $2.9 sion line. million and an increase in earnings per share of $.05. Hedrenmnt Plans Substantially all employees of the Com-Hecognhion of Carrying Value panies am covemd under vadous mtire-Changes of Investments ment plans. Pension costs am funded as the The Companies' policy is to recognize liability accmes, based on actuarial deter-changes in canying value fmm sales to the minations. Unfunded prior senice costs am public of prmiously unissued securitics by amonized and funded over not more than a 30-year period.
- 2. Nuclear Projects The cost of thme terminated nuclear pruj- suance of Serial Pmfermd Stock in exchange ects and a pmject subject to extended con- for First Mortgage Bonds and cancellation of stmction delay,less the tax benefits realiza- obligations on Pollution Contml Revenue ble fmm loss ofinmstment in such projects, Bonds.
has been mcorded as investment in tenni- In the second quarter ofl983, and again in nated or delayed nuclear pmjects.The the founh quarterof the sameyear,the estimated amounts determined by the Company pmvided $81.9 million and $146.4 Company to be recoverable, based on mga- million, mspectively, as extraordinary losses latory actions in the vadous jurisdictions in for unrecoverability of nuclear pmjects. which the Company operates, am trans-fened to estimated recoverable nuclear Estimated Recoverable Nuclear Project pmject costs ta be amortized as mcovered Costs in rates.The estimated amounts deter. At December 31,1984, the Company had on mined to be unlikely of recovery am charged its balance sheet nuclear pmject costs of to income as extraordinary losses and $127 million which it estimates are mcover-reflected as allowance for estimated unre. able thmugh rates as a msult of mgulatory coverability.The excess,if any, of the allow. commission actions in Washington and ance over the amounts finally determined to Omgon, the only states in which mcovery of he unrecoverable is restored to income. any terminated nuclear pmject costs has been allowed. As of December 31,1984, the Estimated Unrecoverable Nuclear Company has mceived orders fmm these Project Costs commissions to amortize,over the period During 1982 and 1983, the Company offset 1983 to 1989,$64 million of terminated its $573 million inmstment in terminated nuclear project costs.Thmugh December nuclear pmjects and in Washington Public 31,1984, $11 million of this amount had Power Supply System (Supply System) Unit been amonized.The $75 million of nuclear 3 thmugh allowances for estimated unm- pmject costs not covemd by orders mpm-coverability ($284 million), expected tax sents capitalized costs fmm tenninated and benefits ($150 million) and asset accounts to delayed nuclear pmjects for which the
~
be mcovemd thmugh rate recovery already Company ~ has not vet requested amortiza-granted,or expected to be granted ($139 mil- tion,but would expect to recoser when re-tion). quested because of the prior mgulatory ac-In 1982 the Company mcorded a $56 million tions. Consumer gmups in Oregon and extraordinary loss fmm abandonment of Washington have appealed the commission nuclear pmjects which, consistent with the decisions allowing amonization and am Omgon Commissioner's dimetion, offset an seeking denial of any recovery of terminated extraortlinary gain of $55.2 million ($ t.06 per nuclear pmject costs. sham) realized by the Company upon is- Action in the Washington lawsuit contesting
)
41 arnortization of these costs lias been stayed 1983 denial of recovery for two tenninated pending the decision of theWashington nuclear pmjects is pending in a state court. Supmme Court in similar litigation invohing The Company will continue its eiTon,whem another utility, challenging the authority of practicable, to seek rvcovery of its invest-the Washington Utilities and Transportation ments in any tenninated nuclear pmjects. Commission (%UTC) to grant direct amorti-Delayed Nuclear Project zation of an investment in a terminated The Company continues to be a 10% owner nuclear pmject. A decision that the WUTC of Supply System Unit 3, constmetion of did not have authority to grant direct amor_ tization would cause the Company to seek which was suspended by the Supply System an alternative method of mcovery in Wash. and the Bonneville Power Administration (BPA) in May 1983.The pmject is no longer ington for the 578 million portior's of its m. viewed by the Company as a tvliable sourve maining investment in terminated or de. of futum power at a masonable cost.Them-laved nuclear projects attributable to that
~
fore,in 1983 the Company made an extraor-state. dinary pmvision thmugh a charge to 1983 In 1)cccmber 1983, the Oregon Public Utility ~ Conunissioner (OPUC) granted amortization canungs of jts estimated unrecoverable hustment m Unh 3 thmugh Dmndwr 31, of appmximatelv $20 million of after-tax 1983 and estimated additional temu, nation nuclear pmject' costs over five years.Them-
~
costs to be incuned forv, the Company carries costs on all ter-The Company is seeking judicial relief fmm minated and delayed nuclear pmject costs any obligation to panicipate further in the applicable to Omgon which were incurred prior to 1979($53 million pm-tax) as"Esti. construction of Unit 3 and seeks to mcowr mated Recoverable Nuclear Project Costs." damages msulting from the suspension of construction. In November 1984, a Federal In acconlance with the December 1983 District Court ruled,on motions for sum-onler, the Company has amortized thmugh rates $3 8 rnillion thmugh December 31 many judgment,that there had been a breach of the contract by the Supply System 1984. A consumer gmup has appealed the and BPA, leaving for further pmceedings the OPUC's onler, opposing the allowance of materiality of the bmach and detennination any recovery.The Company has also ap. of damages.The Company has agreed to a pe'aled the OPUC's order, to obtain rvcovery of all expenditurvs. In Febmary 1985, the ' pmposed settlement in principle to msolve Orrgon Attorney General filed li brief assert. the litigation. Under the pmposed settle-ment, BPA would have (1) an option to ac-ing that any amortization was contrary to Orrgon law. In the event the OPUC's oriler is quim at cost the Company's share of the ultimately mversed, the Company would be output of Unit 3,pmportionate to the un-completed ponion of the unit,which option obligated to charge to income as an ex. traonlinary after-tax loss $29 ruillion of BPA would be tvquimd to exercise befom it could mstart constmetion,and (2) an option pm-1979 n'uclear pmiect costs attributable to Omgon. Refunds of amounts collected to acquire the Company's share of output thmugh rates, together with interest pmportionate to the currently completed thervon,would also be rvquirvd. portion of Unit 3 in exchange for BPNs as-sumption of the related costs of operation St:tus of Other itecovery Efforts and maintenance,which acquisition would nyoming--The nyoming Public Senice be eiTective at the time the unit is placed in Commission denied the Company tycovery commercial operation.The Company would ofits investment in two tenninated nuclear be obligated to advance its pro rata sham of pmjects and the nyoming Supmme Court pmscivation costs, up to a specified maxi-aiTinned the Commission's denial.The mum, subject to refund with interest fmm United States Supmme Court,without BPA. In the event BPA acquims the Com-comment,let stand thenyoming Supmm" pany's sham of output pmportionate to the Coun ruling. uncompleted portion, the Company might California-The Company's requests in be obligated to finance the constmetion California for amortization of two tenni- costs with ruimbursement, including cany-nated nuclear pmjects wem denied by the ing costs, fmm BPA. California Public Utilities Commission.The in a separate element of the pmposed Company's petition for inview has been de' settlement,the Company would have an op-nied by the California Supmme Court. tion to enter an exchange arrangement at Montana---The Company's appeal of the any time befom January 1,1994,under which Montana Public Senice Commission's April the Company would irceive power fmm
42 BPA in an amount generally equivalent to Company would then malize the deferred the expected output ofits share of the cur- tax deduction forloss ofits imestment. rently con.pleted portion of Unit 3.The However, if the pruposed settlement is not Company would be obligated, in exchange, consummated and ' the Company is ulti-to pmvide BPA, at BPA's option,with an mately unsuccessful in the litigation and con-equal amount of energy fmm combustion struction of Unit 3 is resumed, the Company turbines or other resoumes.'Ihe exchange may be obligated under the Unit 3 mvner-an angement would also provide for cash ship agmement to continue to fund its payments to equalize the value of the power share of constmetion costs and to malize its and energy being exchanged. deferted tax deduction over the depmciable In the event the pmject is terminated, the life of the unit.
- 3. Short-Term Borrowing Arrangement 8 The Company's short-term bormwing ar- million bank credit agmement limit unse-rangements total $575 million, consisting of cumd short-tenn bonuwings to 10% of a $300 million bank cmdit agreement, a $100 defined capitalization.This would have lim-million Eumnote facility, authority to sell ited such bonuwings to approximately $400 commerrial paper in amounts not to exceed million as of December 31,1984.Them am
$150 million, and lines of cmdit aggmgating no compensating balance mquirements $25 million.These bortuwing arrangements under any of the credit facilities. Commit-were not used during 1984. Subsidiaries ment fees,which are typically 1/4 to 3/8 of have $235 million revohing lines of cmdit 1% of the unused amount of the bonuwing and term loan agreements and $100 million arrangement, approximated $1.6 million in of commerrial paper capability. Under these 1984.The Companies have an umbmlla loan facilities, the subsidiaries had $130 million agreement pmviding forloans of funds be-term loan and commemial paper capacity at tween members at market rates available to December 31,1984. Covenants of the $300 the Company.
- 4. Commo_n and Preferred Stock In June 1984, the Board of Directors shifted payment dates,there were only thme com-shareholder financial reporting to a calen- mon stock dividends declared in 1984.
dar quarter basis and consequently delayed Changes in shams of capital stock and the the dividend declaration and payment excess of net pmceeds over par or stated dates about 35 days.The dividends nor- value credited to premium on capital stock mally declared and accmed in December am as follows: were shifted to January. Due to the shift in Shares Pmmlum Common Pmferted On Capital (In Thousands) Stock Stock Stock Balance, January 1,1982 50,801 7,565 $674,505 1982-Issuance under Employees' Stock Plan 312 - 4,087
-Sales thmugh Dwidend Reinvestment and Stock Purchase Plan 1,204 - 18,046
-Sales to public 3,175 3,000 63,857 Balance, December 31,1982 55,492 10,565 760,495 1983-Issuance under Employees' Stock Plan 278 - 4,160
-Sales thmugh Dividend Reimestment 1,212
_._ami Stock P_urrhase Plan - 2_22 99:1 Halance, December 31,1983 56,982 10,565 787,648 1984-Issuance under Employees
- Stock Plans 242 - 4,401
-Sales thmugh DMdend Reinvestment and Stock Purthase Plan 1,316 - 25,997
-Sales to public 3,000 - 61,125 d
-Redemption ari _repurrhases - 12,154) (14)
Halance, December 31,1984 61,540 8,411 $879,157
43 At December 31,1984, there wem 1424,203 tion of the $3.75 series No Par Serial Prefer-authorized but unissued shams of common red shams and various mpurchases of other stock reserved for issuance under the Divi- prefermd shams.The par value and any dend Heinvestment and Stock Purchase premium or discount on such pmferTed Plan;919,224 authorized but unissued sharts were removed from total capitaliza-shares of common stock reserved for is- tion. In accordance with the Oregon Com-suance under the Employees' Stock Purch- missioner's order, gain or loss on the repur-ase Plan of which 252,118 wem held for un- chase of these shams is deferred until the comp'eted employee subscriptions; and recapitalization pmgram is complete, at 971,987 authorized but unissued shairs of which time the net gain or loss,if material, common stock mserved for issuance under will be amortized thmugh rates over a five-the Employee Stock Ownership Plan and year period. 'ITust. Generally, prefe:Ted stock is redeemable at During 1984, the Company began a mcapi- stipulated prices plus accrued dividends, talization pmgram with the issuance of subject to certain restrictions. Upon invol-thme million shares of common stock, the untary liquidation, all pmferred stock is en-pmceeds of which were used for mdemp- titled to par or stated value per sham. Prrferred stock outstanding at December 31, (In Thousands) 1983 1984 Series Shams Amount Shares Amount Serial Preferred $100 par value per share,3,500 shares authorized Subject to mandatory redemption: 9.15% 500 $50,000 500 $50,000 15.00% 170 17,000 170 17h00 Total subject to manda tory redemption $67,000 $67,000 Not subject to mandatory redemption: 452% 2 $ 207 2 $ 207 7.00% 18 1,806 18 1,806 6.00% 6 593 6 593 5.00% 42 4,200 42 4,200 5.40% 70 7,000 67 6,715 4.72% 100 10,000 72 7,143 456% 100 10,000 85 8,515 8.92% 150 15,000 132 13,216 9.08% 300 30,000 290 29,031 7.96% 250 25,000 244 24,352 5% Preferred,$100 par value,127 shares cuthorized and outstanding 127 12,653 127 12,653 No Par Serial Preferred,$25 stated vilue,16,000 shares authorized:
$2.48 1,600 40,000 1,577 39,432
$2.13 1,200 30,000 1,183 29,578
$2.29 1,600 40,000 1,566 J9,156
$3.75 2,000 50,000 - -
$4.07 3,000 75,000 3,000 75 000 Total not subject to mandatory mdemption $351,459 $291,597 Mandatory redemption requirements on value) am 11,333 shams annually beginning the 15% Serial Preferred Stock ($100 par in 1988, and on the 9.15% Serial PmferTud
44 Stock ($100 par value) am 31,250 shams an- subject to mdemption at the following nually beginning in 1989; both at par vsJue prices: 9.15% Series at $106.74 per share to plus accrued dividends. If the Company is October 31,1985,15% Series at $115.00 per in default in its obligation to make any such sham to January 10,1987; plus accmed divi-pumhases,it may not pay cash dividends on dends. Each series is redeemable at m-common stock. duced amounts, to par, after such respective At the Company's option,the shams am also dates.
- 5. Long-Term Debt Outstanding at December 31 (Thousands of Dollars) 1983 1984 First Mortgage Bonds:
Alaturing 1985 thmugh 1988 3%% Series due 1985 $ 10,000 $ - 4%% Series due Alay 1,1986 14,454 14,454 4%% Series due 1988 14,900 14,900 4%% Series due July 1,1988 17,675 17,675 Alaturing 1990 thmugh 1991 - 5 % %-13% 249,271 168,803 Alaturing 1992 through 1995 - 4 % %-5% 115,121 114,755 Alaturing 1999 thmugh 2001-7%%-9%% 138,510 138,348 Alaturing 2002 through 2006-7%%-15.7%8 284,090 271,559 Alaturing 2007 thmugh 2013-6%%-14%% 333,393 321,966 Total First Mortgage Bonds 1,177,414 1,062e860 Guaranty of Pollution Control Revenue Bonds: Sweetwater County, Wyoming 6%-8%% due 2003 thmugh 2005 50,425 36,900 Sweetwater and Converse Counties, Wyoming due 2013 thmugh 20142 120,000 163,500 City of Forsyth, Rosebud County, Atontana, due 2011 2 45,000 45,000 l City of Gillette, Campbell County, Wyoming, due 20142 - 63,000 Funds held by trustees (116,335) (179,429) Eurodollar loan agmement due 1989 3 75,000 75,000 7.50% debentums due 1991 - 70,000 First Mortgage Notes: l 5%-12% Maturing through 1998 12,912 12,048 2%-11%% Maturing thmugh 2018 36,397 42,999 Unsecumd 6%-12% notes due thmugh 2007 20,733 19,118 Revohing credit and term loan agmements 3 104,000 25,000 Commemial Paper 34 - 65,000 8%% Notes due thmugh 1997 78,000 72,000 Notes due 19853
- 105,000 105,000 6%-15% Notes due thmugh 2002 72,155 59,929 Cmdit and *.. m loan agmement 95,000 -
138/4% Notes due 1990-1909 - 140,000 Capitalized lease obligations 40,983 38,679 Unamortized pmmium and discount (11,281) (23,875) Miscellaneous 8,057 7,361 Total 736,046 837,230 Total Longirerm Debt $1,913,460 $1,899,690
' includes $50,000.000 in bonds. Intemst rate t15.7% at December 31,19MI fluctuates, not to exceed 24% or decline below 10% per annum, based upon Treasury rates.
2Thmugh February 15,1985, the Company has substantially fixed the rate on $228 million of these bonds thmugh four intemst rate exchanges which have a maturity of seven to thirteen years; the rates fixed thmugh such exchanges appmrimate 6.7% to 7.7%.The mmainder am at floating interest rates 15.9%-Es% at December 31.19Mi not to exceed 15% per annum. 2 Huctuate based on various rates. primanly un certificate of deposit rates, interbank tu nuwing rates or prime rates.
- rhe Company has the abihty to support commercial paper bormwings and rurmnt debt being refinanced on a long-tern basis thmugh subsidiaries' nwidng line of credit and term loan agreements and themfore, based upon management's intent. has classified these hormwings as long-tenn debt.
45 Substantially all of the Companies' assets, lh pmperty, camings, and other pmvisions including the ownership interest in the of the mongage indentum. Telecommunications business, secum Ataturity and sinking fund requirements on long-tenn debt. First Alongage Bonds of the ]c,ng-tenn debt and mdeemable pmferred Company may be issued in amounts limited stock outstanding are as follows: For the Year (Thousan$1s of Dollars) 1985 1986 1987 1988 1989 Total mquimments $95,705 $52,321 $55,423 $88,612 $133,502 Podion of total payable in cash 92,492 49,406 52,508 85,903 131,068 Pmperty additions cedifiable in lieu of cash
- 5,355 4,858 4.858 4,515 4,056
*Ctsh sinking fund requirements may be satisfied on the basis of 60% of pmperty additions.
During 1984, the Company issued $70 verse and Sweetwater Counties Pollution million 7.50% debentums with the proceeds Contml Bonds and collateralized Fimt of approximately $55 million primarily used Alongage Bonds were retimd with proceeds to mpurchase $41.7 million of the Com- ofissuances of $28.5 millon of Pollution , pany's 18% Fimt Afortgage Bonds at a cost of Control Bonds. In accordance with the Om-appmximately $49.0 million.The pmmium gon Commissioner's oitier, gain or loss on } 4 on the repurchased bonds will be amor- these transactions is deferred until the re-tized over seven years, the term of the new capitalization pmgram is complete, at debt. which time the gain orloss,if material,will The Company made a tender offer under be amonized thiough rates omr a five-year which appmximately $34.9 million Con. period. O. Hestrictions on Consolidated Hetained Earnings Cedain loan agmements, pmfermd stock available for dividends at December 31,1984 agreements,and legalinterpmtations of the amounted to $160 million. On January 9, law in the state of the Company's incorpora- 1985 the Board of Directom declamd a quar-tion restrict, either dimctly or indimctly, the terly dividend of $9.3 million for preferred pryment of common dividends. Under the stock and $35.7 million for common stock to most conservative interpmtation of these holders of record on January 21,1985, pay-limitations, consolidated retained earnings able on Febmary 15,1985.
- 7. Cornmitments and Contingencies Construction and Other 94% in a cable television operation located in Construction pmgrams am estimated at Anchorage, Alaska. Under the terms of the
$386 million for 1985. As a part of these pm- agmement, Telecommunications paid $22 grams, substantial commitments have been million for its increased owr.ership. Tele-made, communications has also reached an agree-Electric Operations has agreed to purrhase ment to acquim two local telephone operat-fmm a non-affiliated supplier an aggregate of ing companies in Alaska for appmximately 40 million tons of coal over a 35-year period $48 million in cash.The Department of Jus-beginning in 1990. tice (DOJ) has notified Telecommunications Tclecommunications is committed thmugh that it intends to oppose the pmposed ac-1990 for tracking, contml and emergency quisition. During January 1985, the Alaska b:ck-up ofits satellite at a cost of appm'xi- Public Utilities Commission approved trans-mitely $11 million per year. fei of myneminp and Telecommunications is seeking reconsideration by the DOJ.
The Company may be obligated under the ownership agmement of Washington Public The Companies am panies to various legal Power Supply System Unit 3,in the event claims, actions, and complamts, certain of construction is resumed and in the event a which invohn material amounts. Although it pmposed settlement orlitigation is unsuc- is impossible to pmdict the outcome, man-cessful, to continue to fund its 10% share of agernent does not expect thsposit,on i of these construction costs. (See Note 2) matters to have a material effect on the con-solidated results of operations. In Febmary 1985, Telecommunications in-ctrased its effective ownership fmm 40% to j
46 - Telecommunications has a book invest- atinglosses. In the opinion of manage-ment of $28 million and is the guar- ment,the subsequent losses,if any, of antorof $16 million in obligations of an Comdial Corporation will not have a mate-equity irwestee (Comdial Corporation) that rial effect on the Company's consolidated is curmntly experiencing significant oper- msults of operations. Jointly Owned and Leased Plants At December 31,1984, Electric Operations' participation in plants jointly owned and jointly leased am as follows: Electric Plant Construction Operations' In Accumulated Work In (Thousands of Dollars) Sham Senice Depreciation Pmgress Joindy Owned Plants: Operating: Centralia 47.5% $152,994 $ 57,433 $ 284 Jim Bridger Units 1,2,3, and 4 66.7 580,084 127,557 27,360
'lh)jan 2.5 15,198 4,196 326 Colstrip Unit 3 10.0 136,111 3,828 -
Under Construction: Colstrip Unit 4 10.0 - - 68,785 Jointly Leased Plant Operating-Wyodak 80.0 - - - Each participating utility is msponsible for centage of pmject annual costs (operating financing its share of construction costs. expenses and debt senice).These costs am The costs of operating and leasing the included in operations expense. Electric plants are similarly shamd and Electric Op- Operations is mquimd to fund its portion of crations* portion is recortled in its applica- the debt whether or not any power is pm-ble operations, maintenance,and tax ac- duced.The arrangements pmvide for firm counts. power and most of them also pmvide for Consolidated mvenues include coal sales to additional power, withdrawable by the the Jim Bridger Power Plant joint-ventum owner upon one to five years notice. For partner of 1982-$33 million,1983-$31 1984, purchases appmximated 8.5% of million and 1984-$34 million. energy mquimments;10% was obtained Substantial amounts of power am pur- thmugh other purrhase and net inter-chased under long-tenn arrangements with change arrangements. Electric Operations was notified that the capacity available to it public utility districts. Purchases am made will be mduced 37,168 kw by January 1,1987. on a" cost-of-service" basis for a stated per_ centage of pmject output and for a like per-A summary of the arrangements is as follows: Electric Operations
- Sham at December 31,1984 Generating Year Contract Capacity Pertentage Annual Facility Expims (kw) of Output Costs' Wanapum 2009 174,562 21.0 $3,351 Priest Rapids 2005 123,006 15.6 2,376 Rocky Reach 2011 64,297 53 1,220 Wells 2018 64,263 83 1,337
$8,284 ' Annual costs, stated in thousands, include debt service of $4.210.
47 Leases The Companies lease certain pmperties,in- for options to purchase at fair market value. ciuding the Wyodak coal-fired generating The Companies are also committed to pay plant, undcrleases expiring during the next all taxes, expenses of operation (other than 23 years. Rentals on lease renewals are sub- depreciation) and maintenance applicable ject to negotiation. Certain leases pmvide to the leased pmperty. Rent expense was as follows: For the Year (Thousands of Dollars) 1382 1983 1984 Total mnt expense $79,049 $65,220 $ 74,487 Less rent fmin subleases 775 849 1,463 Net rent expense $78,274 564,371 $ 73,024 At December 31,1984, minimum runtals under noncancellable Operating Capitalized Less Net leases (Thousands of Dollars) Leases Leases Subleases Hentals 1985 $ 63,378 $ 5,375 $ 1,044 $ 67,709 1986 39,020 5,088 569 43,539 1987 35,824 3,849 472 39,201 1988 32,628 3,658 331 35,955 1989 27,977 3,572 238 31,311 Thereafter 266,573 47,395 2,680 311.288 Total $465,400 68,937 $ 5,334 $529,003 Irss imputed interest 27,664 Present value of minimum mntal payments 41,273 les3 cununt portion 2,594 Long-term capitalized lease obligations $ 38.679 State mgulatory agencies have tmated Elec- 1983-$3 million and 1984-$2 million. tric Operations
- leases as operating leases Atanagement believes that the majority of for rate-making pugmses even though some such incmases would have been mflected in othenvise meet the accounting criteria for additional mvenues if capitalization were capit;.1 leases. In accortlance with such accepted for rate-mak!ng purposes and that regulitory rate-making tmatment, the operating income, themfor , would have Wyodak jointly leased plant and other cap- been substantially unchanged. Futum ittlizable leases have not been capitalized, minimum mntal payment:; pertaining to In:terd, the lease payments am charged to these leases total approximately $366 operating expenses, llad these leases been million,with minimum mntals appmximat-c pitalized, December 31,1983 assets and ing $20 million annually thmugh 2003.
liabilities would have increased by approx- At December 31,1983 and 1984, Mining and im;tely $174 million and $205 million, re- Hesoume Development held pmperty under spectively, and December 31,1984 assets and capitalleases totaling $51 million and $50 liabilities would hasu incmased appmxi- million, mspectively.These amounts am m-mitily $166 million and $201 million, m- corded as pmperty, plant, and equipment, spectively. together with $12 million and $14 million, re-The effect of such capitalization on o'perat- spectively,of mlated accumulated deprecia-ing expenses befom income taxes would tion and amortization. hasu been an incmase of1982-$5 million,
48
- 8. Incotne Taxc8 Income tax expense for the thrveyears fore income taxes, extraordinary items and ended December 31,1984 was less than the cumulative effect item.The reasons for the amounts computed by applying the statu- difTemnces are as follows:
tory federal income tax rate to income be-For the Year (Thousands of Dollars) 1982 1983 1984 Computed federal income taxes $135,661 $ 188.014 $179,030 Reduction in tax resulting from: Intemst capitalized during constmetion 21,986 28,495 11,878 Excess of tax over book depreciation (flow-thmugh basis) 2,838 3,509 4,360 Investment tax credit 6,501 14,060 31,727 Depletion 5,084 9,196 7,765 i Effect ofitems taxed as capital gains 571 5,174 (493) l Elimination of amounts pmvided in prioryears 1,241 - - Losses fmm equity investments - (5731 (8,105) Other items capitalized and miscellaneous l differences 6.037 6.322 (3,723) I 1 Federal tax reductions 44,258 66,183 43,409 Federal income tax 91,403 121,831 135,621 r State income tar, net of federalincome tax l benefit 5,356 9,761 8,950 l ) Income tax expense on income befom extraordinary items and cumulative effect of unbilled revenue accrual 96,759 131,592 144,571 Income tax effects of: Extraonlinary items (28,901) (121,236) - Cumulative effect of unbilled revenue accmal - 20,556 - Total income tax expense $ 67,858 $ 30,912 $144,571 Income tax expense consists of the following: For the Year (Thousands of Dollars) _ 1982 1983 1984 Taxes currently provided: Federal $ 7,350 $ 12,347 $ 40,297 State 1,382 10,867 10,91HI Deferred income taxes: , Deprvciation ditTerences 21,605 33.642 38,726 l Mining costs and production financing 2,566 (7,701) 12,378 Tenninated or delayed nuclear pmjects 29,925 (83,440) - Cumulative effect of unbilled revenue accrual - 20,550 0:her (1,5741 (1,7I I) I,485 6,604 46,352 40,689 Investinent tax credits _ net Total income tax expense $ 67,858 $ 30,912 $144,571 At December 31,1984, all investment tax ferrvd taxes have not been pmvided crvdits, including both canyfonvant and amounted to approximately $690 million, cuntnt generation,have been utilized. During 1984, upon appmval fmm n gulatory Defenvd income taxes have not been pm. authorities, the Company began amortizing vided on certain book and tax timing difTer. investment tax civdits generated prior to ences as the method of rate-making is based 1981 based on the year of generation rather on laws cununtly payable, and it is expected than the year of utilization. Income taxes that Ihere will be recovery of future taws wem rvduced $16 6 million in 19&4 to irtlect through ruvenues. At December 31,19&l.ac. amortization of investment tax civdits curnulated timing ditTervnces for which de. utilized in prioryears.
49 C. Hetirement Plans The Companies have several pension plans ance was charged to constmeti.on accounts. covering substanticlly all employees. Pen- The Companies make annual contnbutions sion costs for 1982,1983 and 1984 weru $20 to the plans equal to the amounts accrued million, G19 million and $17 million, respec- for pension cost. tively,which includes the amortization of The following infonnation, as of January 1, prior service costs generally over 30 years. the date of the most recent actuarial study of these amounts, $15 million in 1982,$15 for that year, tvilects weighted average as-million in 1983, and $14 million in 1984 were sumed ra+es of arturn of 7%-8% in 1982,8% in chtrged to operating expenses and the bal- 1983 and 8%-9% in 1984: For the Year (Thousands of Dollam) 1982 1983 1984 Actuarial Present Value of Accumulated Plan Benefits: Vested $130,244 $137,021 S159,399 Nonvested 9.675 7,368 5,M54 Total $139.919 $144,389 $165,253 Net Assets Available for Benefits $122,365 $163,276
$211,175 The Companies pnnide health cam and life benefits,w hich is charged to expense as insurance benefits for their irtimes on a incuntd,was appnnimately $4 million basis substantially consistent with those for 1984.
who am actim employees.The cost of these SUPPLEMENTARY INFORMATION Effect of Inflation (Unatulltetl) _ _ - - - The accompanying supplementary infonna- The pnnision for depmelation was deter-tion has been pn pamd in accordance with mined by applying the actual functional the guidelines pnnided in Statement No.33 class depmelation rates to the irspective of the Financial Accounting Standants class indexed plant amounts. Board and applicable amendments. Such Fuel imrntories, the cost of fuel used in statement was issued in an attempt to pm- generation,and purchased power have not vide infonnation conceming the etTects of been restated fmm their histmical cost in changes in specific prices on operations nominal dollan. Itegulation limits the and financial position.The methods used to recmtry of fuel costs thmugh the basic rate calculate the effect ofinflation involve schedules to actual costs. For this mason numemus assumptions, appmximations fuel inventories am effectively monetary and estimates.The traulting infonnation assets. should be viewed as a highly subjectim As pmscribed in Statement No.33,incomo estimate. taxes wem not adjusted. The cunrnt cost of pmperty, plant,and Under the rate-making prescribed by the equipment was detennined by applying the n gulatmy commissions to w hich the utility ll:ndyMhitman index, or, for electric companies am subject,only the historical generating plant other ll.an hydm,on the cost of plant is tremvrable in mvenues as basis of an engineering study of cunrnt cost deprvelation.Themfom, the excess of the per megawatt of tuplacing the pivsent mix cost of plant, stated in terms of cunrnt cost of nuclear, coal, oil and gas turbine generat-ing plant.
50 over the historical cost of plant,is not pres- regulation, the mduction of net pmperty, ently recoverable in rates as depmciation, plant, and equipment to net mcoverable and is mflected as a mduction to net mcov- cost should be offset by the gain fmm the crable cost.While the rate-making pmcess decline in purrhasing power of net gives no recognition to the curmnt cost of amounts owed.The gain fmm the decline in mplacing pmperty, plant, and equipment, purrhasing power of net amounts owed is based on past practices, the utility com- primarily attributable to the substantial panies believe they will be allowed to earn amount of debt and pmferred stock (treated on the incmased cost of their net invest- as debt) which has been used to finance ment when mplacement of facilities actually pmperty, plant, and equipment. Since the occurs. depmciation on plant is limited to the During a period of inflation, holders of recovery of historical costs, the Company monetary assets (claims to receive a fixed does not have the opportunity to malize a sum) suffer a loss of general putrhasing holding gain on debt and is limited to power while holders of monetary liabilities mcovery only of the embedded cost of debt (obligations to pay a fixed sum) experience a capital. gain.To further reflect the economics of rate Staternent of Income Adjusted for Inflation for the Year Ended Deccinber 31,1984 Adjusted for l Changes in IIistorical Specific Prices (Thousands of Dollars) Cost (Curmnt Cost! Ilevenues $ 1,78G,120 $1,786,120 Expenses: Operation, maintenance, and administrative and general 837,465 837,465 Depreciation and amortization 213,607 440,498 Taxes,other than income taxes 128,274 128,274 income taxes 144,571 144,571 Intemst expense and other _ 217,578 217,578 1,541,495 1,768,386 Net Income (excluding mduction to net recoverable cost) $ 244,625 $ 17,734 Increase in specific prices (current cost) of property, plant, and equipment held during theyear s 466,905 lleduction to net mcoverable cost (116,308) Effect of increase in general price level (346,586) Excess ofinemase in specific prices (after mduction to net tvcoverable cost) over increase in general price level 4,011 Gain fmm decline in purrhasing power of net amounts owed 103,010 Net $ 107,021 At December 31,1984,cunrnt cost of prop- equipment curnmt cost of $8,493 million, erty, plant, and equipment, net of accumu- with mlated historical cost or net cost lated deprvelation was $9,143 million which recoverable thmugh depmelation of 13.612 encompasses utility pmperty, plant,and million. 1 l L
51 Five-Year Comparison of Selected Supplementary Financial Data Adjusted for F,ffects of Inflation (Thousands of Average 1980 1981 1982 1983 1984 1984 Dollars) Disclosure for effects of inflation $1,512,776 $1,666,407 $1,786,120
$1,229,570 $1,471,622 Hevenues Income (loss) befom ex-traonlinary items and 49,373 17,734 (2,537) 3,578 (2,020) cumulative effect itemt Gain fmm decline in purchasing pmver of 105,950 107,130 103,010 323,584 232,356 net amounts owed Heduction to net 106,581 116,308 920,519 290,227 88,430 mcoverable cost Excess (deficiency) of inemase in general price level over incmase in specific prices (after tuduc-tion to net mcover- 188,952) (4,011) 272,918 118,471 (61,704) able cost)
Net assets at year-end, at net mcoverable 1,197,988 1,363,501 1,164,308 1,208,679 1,312.316 cost Per Share information income (loss) before extraordinary items and cumulative (0.44) (0.72) 10.63) (0.88) 0.04 clTect itemt 1.70 2.55 2.35 2.32 2.25 Cash dividends declared 24.53 25.43 19.76 22.48 25.11 Market price at year-end Average consumer price 246.8 272.4 289.1 298.4 311.1 inder
%rimling nuluction to twt nw owrable rost.
52 l Quarterly Information (Unaudited) Matrh June September December Quarter Ended (Thousands of Dollars) 31 30 30 31 1983: Revenues $383,317 $372,251 $401,057 $441,755 income fmm operations 139,037 115,856 122,494 152,437 Income befom extraordinary items and cumulatim effect item 72,133 55,803 54,227 94,970 Net income (loss) 94,2021 (26,06612 54,227 (51,44313 Eamings (loss) on common stock 82,854 (37,416) 42,879 (62,792) Earnings (loss) per common sham: Income befom extraortlinary items and cumulative effect item 1.09 .79 .76 1.47 Total 1.48 ( .67) .76 (1.10) Common dividends declamd .54 .54 .54 .54 Common stock price (NYSE) liigh 21 % 24 % 23 % 25 % Low 20 20 % 21 % 23 IDM: Revenues $446,150 $395,500' S450,6604 $493,810 income from operations 167,024 130,541 133,484 175,725 Net income 67,300 49,198 51,161 76,966 Eamings on common stock 55,951 37,849 39,854 66,972 Earnings per common sham .98 .66 .69 1.09 Common dividends declamd .54 .58 5 .58 Common stock price (NYSE) liigh 25 23 % 24 % 25 % l Low 21 % l 21 _ _,% 21 23 % A significant portion of the operations are of a seasonal nature. i ! 8 Reflects the cumulatim effect as of January 1,1983 in the net after-tax amount of $221 million ofange
. a May 1983 ch in accounting principle to recognize enbilled electric rewnues Also reflects a gain fmm issuance of subsidiarya 2
and equity investre a stock of $15.4 million after defened taxes of $7.1 mulion. Reflects a pmvision for nuclear pmject unrecoverability in the net amount of $81.9 million. 3 Reflects a prmision for a clear pmject unrecoverabdity in the net amount of $146.4 million. Net income also reflects a pre-tax gain on sale of utility pmpeny of appmmimately $10.1 mdlion.
" Revenues and operating expenses have been increased by $1.4 million in second quarter and $51 mdlion in thirti quarter of 1984 to reflect the Federal Communications Commission's ruling regarding accounting treatment for access charges.
'In June 1984. the Boarti of Directors shifted the sharrholder financial reporting to a calendar quarter basis and delayed the dividend payment date about 35 days. The dividend normally declared in September and paid in October was declared in October and paid in Nosember l
l } l
RETlJRN THE CARD BELOW IF . . . . .
- You are intemsted in receiving information on PacifiCorp's dividend minvestment plan.The plan allowsyou to minvest dividends on your PacifiCorp stock, as well as cash, to acquire additional shares of stock-automatically and with no commis-sion fees.
- Your addmss is listed incorrectly and needs to be changed.
- You are mceiving duplicate copies of mailings to shamholders becauseyou have mom than one account but would pmfer only one set of the mailings. Dividend checks and pmxies,however,will continue to be sent to alllisted accounts.
- You hold stock in more than one registered account but would be intemsted in consolidating into one. A slight diffemnce in the way certificates are registemd cmates separate accounts even if not intended. lf stock pumhased at one time is mgistered as John J.
Jones and stock pumhased at another time shows John Jones, without the middle initial,two accounts am mquired.
- You are a holderin street name who would like to receive informa-tion directly fmm the company hvith the exception of dividend checks and pmxies which the law requires must be sent to your bmker nominee).
- You would be interested in having a mgional shareholders infor-mation meeting in your area in the future.
- You support a toll-fme 800 telephone number for shamholders.
- You have another pmblem or comment.
Name Addmss City and State Zip Check Boxes that Apply: O I would like to receive dividend minvestment infonnation. O Please cormet my addmss as shown above. O Please eliminate mailings to Accrunt(s) No. Continue mailing to Accountis) No 1Arrount Numberappears on at Wiend check statement nr didiend trinwstment plan statementJ O I would like to consolidate my accounts. Please send me infomiation that I would need to do so. O l'm a stmet namcholder and would like dimet mailing. O l'd be intemsteriin attending a shareholders meeting if one is held in my ama. O I support a shareholder toll-fme 800 number. O Othercomment or pmblem:
GEOGRAPHIC OISTRIBLJTION OF PACIFICORP SHAREHOLDERS
/ '
1,900 . 13,000 l . 170 l m_____ , 3,800 l
--} ' -
[ 400 ( __ soo
;3.000 v
{T 2,000 I
~A s s c
24,400 1,400 -- x __j - ~ L- ____.__._.a '1 600 2,200 600 r# / ; - ' I br" / 3'
.__ _ J q 1,300 '.___ _ j f 6,000 m
(775 l r----- - 1 7 6 2,600 890 ! E.,3OO 635 ;1,soo[-] $30 {1,2_O0' 11O f500[ s s - 4 7 - -- -- 4_ _ 390 l 400 l225/ l' 3b 1,900! ~M f110 525 '*300 l430 370 2,600
)290~
M ' 5.000 w 840 FOREIGN 245 2,200 650 f v- G c-Q9@ y), , 53 1
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NO 14)SIAGE AECt%\HY II' MAlttp IN 't IIL t'NII En 51 Arts Ht!NINENN ILEl'IX MAII, flR$ t t lA%4 IN mut %s 4401 IO M il AN D. oR l'OSTAGl' Wil I. IlE l' AID IW 1%Cll'ICOll!' Investor llelations Del>aritnent 1600 l'lTC MSI SW Sixth Avenue l'o 11 anal, Oil 97204
53 INVESTOR INFORMATION Corporate IIcadquartern Stock Exchange Listings PacifiCogi PacifiCogis common stock (Symbol: PPW) is 851 SW. Sixth Avenue listed on the New York Stock Exchange and Por11and, Oregon 97204 the Pacific Stock Exchange. 503)243-5190 The Company's $4.07 series of no par pm-Annual Meeting fened stock is listed on the New York Stock The annual meeting of PacifiConi sham. Exchange. holders will be July 10,1985,at 130 p.m.at the Other series of preferred stock and Westin Benson flotel,309 SW. Broadway, PacifiCogis first mortgage bonds are infm-Portland, Orrgon. quently traded in the over-the-counter mar-Pmxy material will be mailed to shamhold. Let. ers of rvconi in the last week of May. Investor, Hroker, Security Analyst Con tact Shareholder Information Financial analysts, stockhmkers and other Inquiries concerning lost certificates, divi. investors desiring infonnation about dend payments, change of addruss, account Pacificorp should contact: status,and dividend minvestment plan Steve Hafoth should be dirreted to PacifiCogis Stock Corporate Investor flelations
'fransfer Agent and Hegistrar: (503)243-4565 Fimt Interstate Bank of Orrgon, N.A. Public Information Coq)orateTmst Department Financial media personnel desiring general PO. Box 2971 in'onnation about the company should con-Por11and, Oregon 97208 tact:
1503)225-3768 Doloms Chenoweth Sharrholders interested in other infonna- Cogiorate Investor Relations tion about their accounts or the company (503)243-4757 should contact: Form 10-K Dick Sampson Sharrholdem may rvquest a copy of the x a inestor Sem.res ' comp > s 1984 l'0-K, filed with the Securities and lachange Commission, by contacting Dhidend Payment Corporate Investor Helations at the corpo-Dividends on Ihe company's common and rate headquarters addrvss. pmfenvd stock in 1985 arv expected to be Dividend Heinvestment Plan paid on or about: The company's dividend minvestment plan
~
Fehmary 15 is a convenient way for sharrhohlem to in. M"? 15 cmase theirimustruent in the company.
^"E"'I IO Under the plan, quarterly dividends (ab or a November la, ;gg ,g gg; ;g g, g
Dividend tyconi dates am generally early in want purchase of additional shairs of com. the last week ofIhe month hefom the month mon stock. In addition, cash contributions of payment. may be made.Them is no service fee or bmk-tkmdholder Information erage commission. Purvhases am made at inquiries conceming lost bonds,intervst market prices. payments, change of addrvss and other first Under the Economic HecoveryTax Act of mmigage bond matters should be directed 1981. dividends tvinvested in t he plan qualify to PacifiCoqin Mor1 gage'nustee: for income tax esclusions thruugh 1985. Ex-Morgan GuarantyTtust Company of New clusions can be taken on tvinvested divi-York dends up to $1500 each tasable year on joint Corporate'lhist Departruent tvlurns or $750 on single Ivturns. Contact 30 West Ilruadway Ihe Stork Transfer Agent and Registrar for a New York, New Yor k 10015 pruspectus and enorv infonnation. (2121587-6017 Independent Accountants llomlhohlem needing further assistance !)eloitte liaskins & Sells should contari: 1)ick Sampsen Coq > orate inwstor Services (5036243 4260 J
y :
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Q. 54 %'. . 4 ' I e H 1} rV m. . < g i h I Seated left to right: John C. llampto n. Imuis B. Peny, E Paul Cadson. C. NI. Bishop.Jr. Ihm C. I'risbee, Philip il. Knight, A.W. Sweet. Standing left to Hght: Hohert A.Skotheim. Eugene L.Shichts. Charles M. Binkley. Stanley K. llathaway. Conrad E I.undgren. KennethW.Self. Betty E.llawthorne.Roy AToung. PACIFICORP BOARD OF DIRECTORS Charles u llinkley .lohn C. llarnpts n Conrad 1. l.undgren t. M. Su cel Pnsulent C hainnan and Chirt' t.wruine Co4)nner ( hainnan of the floant Alaska lliwimn v hir ()ttirer t our 5e.isons \1otor inn nester n llank l'airbanks. Alaska liainplon Hesoun es Inc hahspell. \lontana Coos 11.6 (In gun C. u. Ill%ho p. J r. Poi 11and ()iegon 1.ouis ll. Pe rr3 l(o3 \.)oung Pnwident 5ta nic3 k. llathaw ay rh.nnnan \lanaging 1)n ei f or Pendleton Moolen \hlls Part ner 5ta nd. nil In su r ance ('onipa ny llosi e I honipson hnlitnie Poi 11and ()regon llathan.i) 5peight .nni hun / Pol 11.nid ()iegon for Plant Heseari h I'. Pa ul Ca rlson Attorney s at Ian heinicth H. 5cif ( 'on iell l 'u n e mt3 I)in rtor Pn sident anni Chief ( he3einie.u3 nnung i onner ( h.unnan of the llo.uil tthara New inik 1;wr u t n e ()ttirer llett) I;. llan t horne I reightliner Corporation ()irgon GI.nluate (' enter I)can lanent us Pol 11.tud ()n gun lleawrton ()iegon ('ollege of Horne la onornirs I;ugene I. 5hields lion C. I'risbee (In gun 5 tate t niwisity Pn sident Chainnan aml( luet I.wi utne Conalks t hrgon 5hields Bag A Print:ng to ()tfia er Philip II. k night iakinia Mastungton Pai itif orp Pnwideni and ( hamnan Hoher T.5Lotheim Portland (In gon of the lloan! Pn.s nlen t Bo.n d ronuninees an-
\llst. Inc u hitnian ( ollege I wentne \iidit Pei sonnel lle.nerton ()n gon Malla'\alla hashington iinance Nonunahng
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l 1)asid l' llolender g n'c Pn sulent ( hau man of th. Bo.uil ( h.nnnan ( lements 1.ncip hu P"'" I"" 8 \lon/ \orthern \nlines Inc National llank of \l.nka ()klahoina t its ()Llatunna P.u ilir Pour' Nome \l.nu \ni in ir age \l.nka G. I.ldon 1)rennan 1:duard H.Coole)
.lohn H. Geiger 4. hark % I;. Hobinson Un s u h ni i onner \ n e ( h.nnnan Pirsn lent .n u l ( lurt Pi es u len t pn.i nnin(.nipaits( oip of the lloani ()per ating()ttu er P.n ihr I rl"' ' "" Poril.u n t ( h egon I " lhI "lU l hght ih n.unn s hn lloherl 1. 5neddon
'Hetty 1;. ll.in thorn" Gerard A.llrnnnnond thlishoni f lo gon Plant M.nius.: P' "' " '" " ' \ I "" ( '
'I.ugene 1. 5hichl= g, y , c h.a son \o.n inula \hnununn
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lace ut ne t ilh. el ( ohnnina i alls \tontana '5t.inic) h. llat h.eu a) P.\(ll l(: 11 11.( ( )\1 P.n iln Irleioin 51dney H. 5n3 der 'henneth H. 5cli
't haric% \l. Hinkley linwell 1. llartm.in Pi r s n I"o t Hall. ore 1. linrnell..f r. \ne hesnleni s ul wnpri m.n kri In.
weintan 1n.nneri \d m u n,h a t ion sc.n irn M aslunaton Pol.n n kn estment ( omp.u n i .ntei n M.ninngrin t
- g,n Nu ce Ianhanks \l.nk a state i narisits 'llu,iness athhat n m niited
( hrines M.nhnngtoni in n tr e P.n the in ls h.i.n tl int nig '
55 OFFICERS PACIFICORP IMCIFIC THANSITIONS POLICY GROUP TELECOM Hoard-Hellred Don C. Frisbec A.%I. Gleamon Iloward Vollurn Chainnan and Chief Chainnan and Chief Vice Chairrnan of the Board Tektninix,Inc. Executive Officer Executive Officer Pordand.On gon A.ht.Gleamon Charlem E.Hobinson a years lxiarti senice President Prvsident and Chicf ICunvntly sening on Pacific David F. Holender Operating Officer Pouvr Boani s Researvh Prvsident. Pacific li2wer Dennis W. Elliott "'"""""' Gerard K. Drurninond Executive Vice livsident liesident. N EHCO. ine. Vern K. Dunhain C'#I"#"I SeniorVice President Of6 cum-Hedred Charles F.Hobinson Prvsident, Pacific Telecoin. Inc. Charles E. Peterson G.Eldon Drennan SeniorVice Prv3ident Vice Chairinan of the Board Ga31 e L.Veber " }"3f8 "I 5"RE" SeniorVice Prvsident and Jarnes P.Hent Chief Financial Officer Vice livsident and Pacine Puner Contmiler Officern-Hellred 1%C*IFICOHP STAFF " "' Y """ '" Vice Prvsident
"*'""'"'dd""""
SeniorVice firsident Hohert F. Lanz Edward H. Geiger 29 s ears of senice
\ ice livnident and.I.rvasun r Vice firsident Hr'ure G. Heatuloin Mtan 11. Starks Charles Kcgicy. Jr. %, ice firsident Vice IWsident V ce firsident ,,
Steven F. Hafoth John E..%IcGill Vice livsident Vice firsident " "'"' "* ""N# ## Nally A.Nofilger Wre Pirsident H.Charica Hummell Coquerate Secretary Vice livsident 35)""I""I"""IC" George N.Shaginaw Holwrt H. Linhakken
""" ' * " id" " ' " "' ""'
1%CIFIC POWER Jarnen C.Harwick 38 years of senice Dagld F. Holender filen W. Spicer Vice Prwident
"'"I""I VIC" lirsident
. Hrlan %I.Hirkkala N"" *""'"" "# " " "
t e eI sident Holwrt %I.Nerilth Senior Vice livsident GENEllAL COUNSEL Hodney %I.Houcher NEHCO Vlec Prvsident 88oct, Hiven. Holcy, Frann Gerard K. Drurn.nond F. Hlchard Hruntu Prvsident p,",',j' ', g,, Den livnident Andrew Franklin
%I. Wayne Goin SeniorVice Prvsident j Vice firsident Charica C. Adarns John %IcInichuk Vice Prvsident and Chief Vire Prvsident Financial Officer J nwm F. Picenni Holwrt J. Deurloo Vice livsident Vice firsident Fredric 11. Itced I,an rence I:. liciner Vice firsident Vice firsident H lilia ns II. Holwrtson.Jr. Ellmuorih P. Ingrahans Vice Prvsident Vice firsident J. %I. Manilwr Milliam W. l.)one Vice lirsident Vice IWsident I.cc H.Helslogel Harnesh %f alhotra Vico livsident Vice IWsident I,arry A.Olwm Hilliaria C.Mentt 'hvanusvr Vice IWsident J:enen T.H atuni %Iary ll Old= hue Contruller 'livastuvr
_ _ _ _ _ - __ _ _ _ _. _ _ _ )
r 56 SCOPE OF OPERATIONS Pacific Power serves 656,000 customers in (Millions f Dollars) 1983 1984 % Change 260 communities thmughout Oregon, Washington,ldaho, Atontana, northern operating revenues s 879 s1,010 15% Operating income 320 37s 17 California, and Myoming.The service terri. Net income tory encontpasses 63,000 scluare miles and a mntMmuon s 132* s 17s 33 network of some 50 local offices. Installed generating capacity totals nearly four million Energy Sales kilowatts,with approximately 75 percent of thillions of KWlu 24 24 .- that amount capacity at five coal-fired power customers wear-end, thousands) 650 ass 1 plants.The generation system also includes Eniployees 32 hydroelectric plants. In addition, the 4,352 4,437 2 Wear-end) company operates four water systerns,
~
supplies stearn heat in downtown Portlanc' 'Bef"'mkaonhnan and unusualincome items. and has developed businesses in computer software and materials distribution. PacificTelecom handles virtually all long- Neons of Dollars) 1983 1984 % change distance telephone needs for the state of Alaska through a network of mom than 180 Operating mvenues s 386 s ass 3% satellite earth stations, a colupany-owned Operating income 137 126 18) satellite, more than 3,000 miles of miemwave *'I"""'" contr uucui 5 56' s is (73; radio links, and three major switching cen-ters.The company also pnwides local tele. Originating phoite service to some 171 exchanges with messages 1 millions) 101 112 11 ACC"8813""8 165,000 access lines in eight states-Oregon, Weassemi, thousands) 159 tes a Washington, Idaho, Alontana, Nevada, California, Alaska, and Wisconsin. Pacific E*E"F"""I ca mD 2.935 2.824 (4) Telecom has investments in cable television
*Monmuaonhnay an.1 unusuanncome Hemt and discount toli service,as well as e({uity positions in several technology companies.
NEllCO's coal operations encompass to IMillions of I)ollarsi 1983 1984 % Change mines in six states-Myoming. Montana, Tennessee,I:uliana, Alabama and Operating ivvenues s 415 s 471 13% Kent ucky-wit h t hive nt her mines cu rrendy
' 73 "" 45 under development. Coal gathering and dis-
[i ["C'""" mntmiudon s 40 s 54 34 tribution facilities aiu located in Iwo states. NI'itCO has five gold and silver mines in Tons of coal Nevada, Idaho and Colorado. It is involved in sold indllionsi 21 25 in Uunces of silwr exploration for precious metals in Nevada I"4
" ' I "" 8 '*""
and On'gon, and for minerals on five million g,'[,[Ij,'j",*""d"' acn.s oficased land in Alasta. ine company ou,,a om,,,a , 38 , ,8 is also engaged in oil and gas exploration and Employ een recently pturhased a small technology com- n ear endi IN9 2,1twi 17 pany developing gallium arsuolde semicon-ductor wafers s,,,, s,,, y,,,,,a nn,n,.i.d nai4manag m nr nnanmi w and industrergitwnis" st Af1&ng on page 28 fut funhefiteladS
l ISACIFIC POWl ll u senice aivas j ((
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. gg plants X a llegional otlices l
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y ;8 PACll'IC TEl,ECO\l
- - I u incalexchange
- I senice arvas l e 5atellite earth
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station complex
. . . .. A .\laior su itching facilities
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.\l:180 0 0 Coal niines 4 Coalilistribution l'arilities p '- u P vrious nietals
. niines (g. *'
Minerals aml
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. . .; ; esploration sites m Oil anil gas 4) 3 , esploration siles
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9 PACIFICORP BS1 S W SW TH AVENUE POATLANO. OREGON 9 720<3 I t t l
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