ULNRC-03169, Union Electric 1994 Annual Rept
| ML20081F396 | |
| Person / Time | |
|---|---|
| Site: | Callaway  |
| Issue date: | 12/31/1994 |
| From: | Schnell D UNION ELECTRIC CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| ULNRC-03169, ULNRC-3169, NUDOCS 9503220119 | |
| Download: ML20081F396 (41) | |
Text
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1901 Chouteau Avenue Post Office Box 143 ,.. .
St Lcuis, Missouri 63166 31# 554-2650 ,
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v Donald F. Schnell Senior Vice President ELECTRIC nucrear "3
$ March 15, 1995 U.S. Nuclear. Regulatory Commission Attn: Document Control Desk Mail Station P1-137 Washington, D. C. 20555 Gentlemen: ULNRC-03169 CALLAWAY PLANT DOCKET NUMBER 50-483 ANNUAL FINANCIAL REPORT Transmitted herewith are twenty-five (25) copies of the Union Electric Company 1994 Annual Report. This information is submitted in accordance with 10CFR50.71(b).
Very truly yours, f
Donald F. Schnell WEK/sid Enclosures P
210176 6 4s h 9503220119 941231
@0o'h l 1f PDR ADOCK 05000483 I PDR
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'cc: 'T. A.
Baxter, Esq.
Shaw, Pittman, Potts & Trowbridge '
2300~N. Street, N.W.
Washington, D.C. 20037 M. H. Fletcher Professional Nuclear Consulting, Inc.
18225-A-Flower Hill Way Gaithersburg, MD 20879-5334 M. J. Farber Chief, Reactor ProjectsSection III A U.S.. Nuclear Regulatory Commission Region III
- 801 Warrenville Road Lisle, IL 60532-4351 Bruce Bartlett i Callaway Resident Office ;
U.S. Regulatory Commission >
RR#1 Steedman, MO 65077 L. R. Wharton (2)
Office of Nuclear Reactor Regulation U.S. Nuclear. Regulatory Commission 1 White Flint, North, Mail Stop 13E21 ;
11555 Rockville Pike Rockville, MD 20852-2738 Manager,' Electric Department ,
Missouri Public Service Commission P.O. Box 360 Jefferson City, MO 65102 ;
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HIGHLIGHTS : MNBAL CNM8E
, 4i
- r. ;n i k U YEAR ENDED CURRENT 10-YEAR RATE s
t V d ": DECEMBER 31,1994 VEAR OF 080NTN
.)
] Earnings per Common Share $3.01 8.7% 0.6%
- y. (j Earnings on Common Stock $307,505,000 8.6 1.2 Dividends per Common Share $2.395 2.6 3.4 9
1 ' ;$g$ Common Stock Price Year End $353/8 (9.9) 7.9 pw ,9 e %F 94 Book Value per Common Share $22.22 2.9 2.7 Tsdjl[%
vy Property and Plant (gross) $8,650,144,000 3.7 2.8 y[9
'g.
Total Operating Revenues $2,056,116,000 (0.5) 3.8 yk 5 g Total Kilowatthour Sales 31,975,000,000 1.3 1.8 kg;.j g y : m%
y bl.'
- N* pg
. * , 4Q_ p:f .c- x f@hs;N}+@!(MABOUT UNION ELECTRIC
[4wc( Am@&
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+
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.4 MW
- s. c -
m' ' WE ARE Union Electric's 6,266 employees provide energy M p 9k /d p f ' (; . y electricity, to 1.2 million customers who live and work in l h b Vd i i uri and southwestern Illinois. UE's electric rates are 7
,'f . hy.;
-qyn h& (( w M k, h hwe than the national average and competitive with those of
,y l
\
F % Y.. "
gsurrounding utilities, and our customers give us high marks for
{ d hd M[!O};jn9 i
![ '
q$ ' hkquIlity service. As a result, our stockholders have bee p .
. ,g ed with a steady stream of cash dividends, paid since 1906.
l
try's highest honor in 1994, the Edison Award (above, left), for g- " heroic efforts" during the previous year's flooding. The award JNM , marked a banner year, as UE earned $3.01 per share, based on kh 4
. (:a;b revenues powered by a rebounding economy and the company's
( Cf continued cost control.
?. %, r ,.
fM WHAT'S AHEAD While our low electric rates give UE a competitive ci %m , w@: advantage, our long-term value to our customers lies in helping AM dMk %, them use energy more efficiently. Of course, our long-term es < i .
i'o n
/I .
value to our stockholders means providing a fair reward for their
.V<"r y
-;@4 ~ l confidence in our ability to succeed in a changing emironment.
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M Ei a __.- ______ _ _ _ - - _ - - _ - _ _ - - _ - _ _
I
STOCKHOLDERS LETTER the Clean Air Act Amendments of 1990, generate about 70 percent of UE's power. And as we reported to our stockholders last year, these plants are meet-ing stringent new clean air standards ahead of schedule without imposing a financial burden on the company.
UE's other plants set impressive records this year. Our Callaway nuclear plant's 1994 capacity factor ranked as the highest in the country and the second high-e:t ,m the world. Capacity factor is one of the most commonly used efficiency DIVIDEND GROWTH measurements in the industry. And the company's Keokuk hydro-powered plant set a new generating record for individual performance in 1994, after DIVIDENDS PAID upgrades in technology and related employee training. PER CDMMON SHARE Underpinning these efficiencies, UE's total fuel cost dropped to 1.01 cents per ,
kilowatthour compared to last year's 1.24 cents, due to many factors - enter- =3 prising use oflower cost, more environmentally friendly coal from the Western 3 OP United States; economic use of purchased power, and aggressive negotiations 357I for fuel-related services. For example, UE reducal tuel cost by almost $19 million I in 1994 by aggressively buying and selling power on the interchange network. 3 jui ? s a Due to UE's companywide cost discipline, we have been able to reduce cus- j: i E ) @J d s q $ s tomers' electricity rates throughout our two-state area over the past six years, j i j g $
making us one of the country's low-cost electricity producers. j Ij l{
a 3
ADDING VALUE S b 4 l h d d Our low rates create a powerful market advantage, but customer satisfaction %( -
drives our business. Our residential customers, whom we routinely survey, . h@
- ) (
>5 h
again signaled increased satisfaction with UE's service in 1994; essentially all of q f jg our wholesale customers decided to renew contracts with us at their first oppor-
}* { }
tunity to leave, and many of our industrial and commercial customers think of a : i d N}
us as energy consultants, not as just the local utility. We know our customers !ENI!
demand more than low-cost reliable service, so we offer expertise, community Ubbbd i leadership in economic development and active corporate citizenship.
UE's history of continuous cash STOCK 110LDERS BENEFIT dividend payments to common stockholders spans 89 years. The Our business success enables us to provide a fair return to our stockholders. In company has increased the divi-1994, UE's Board of Directors increased dividends on common stock to an dend in nine of the last ten years.
annual rate of $2.44, the ninth dividend increase in ten years.
UE provides low rates and good service - a simple, but unbeatable, business formula that's much easier to articulate than to accomplish. At the same time, we know our future in an increasingly competitive industry depends on our abil-ity to improve our business every day.
look to UE to remain focused on our core business, to emphasize cost control, to provide our customers with low-cost energy and high-quality service, and to reward stockholders fairly.
I C.W. Mueller lYesident and Chief Executive Officer February 10,19%
3
During a year that battered electric utility stock prices, Union Electric was rewarded for staying a steady course. Our 1994 annual earnings ranked among ggg the company's best yearly results, we raised stockholders' dividends and our
$10CKHOLDERS stock price outperformed the industry norm, despite rising interest rates that eroded utility stock values.
Fut UCs success came amid a watershed year for the industry, as long-foreseen y
l changes started to become reality. Competition between utilities for wholesale customers - customers who resell electricity they buy from other companies k
- is beginning, and competition for other large-use customers looms closer, l
!j The issue of competition, widely covered k by the business press, is so critical that we devoted the main section of this report to j .
an overview of the topic and its effect on b - UE. I won't belabor the issue here, but
& F 5
1 -
g s please take a few minutes to read the fol-t 3 _
=
1 ,
[ *,be +
lowing pages.
BP '_,7...U EARNINGS RISE 9 PERCENT d -_-.:- a-.
i " " "" The company's 1994 earnings totaled umissum8k8' j $307.5 million, or $3.01 a share, a 9 percent i rise from last year's results of $283.1 million, or $2.77 a share. Much of the increase was predictable, since no refueling at our Callaway nuclear plant was jY M scheduled for 1994. Ilut our higher kilowatthour sales and aggressive cost con-LM Nd trol also translated into bottom-line earnings.
Nhy SALES INCREASE 1.3 PERCENT
%e growing regional economy buoyed kilowatthour sales by 1.3 percent com-h@Q@ff me pared to 1993 sales, led by 2.5 percent and 3.7 percent sales increases to indus-trial and commercial customers, respectively. Residential sales, which tend to
[d
$ fluctuate widely according to weather patterns, fell 2.3 percent from the previ-j l- h"
- ous year.
l That same pick-up in the local economy has changed the view from our St. louis office, which overlooks a newly rebuilt Kiel Center arena. A few blocks away, gj-W construction continues on the new addition to the city's convention complex, and each of the k) cal Ilig %ree automobile plants is undergoing a major expan-j @
~ = 3 sion or retooling. As a result, the local unemployment rate subsided to its lowest levelin 20 years, and we expect to benefit from the area's economic health.
y 4
C COST CONTROL CONTINUES
% dhk ig: e . gg~ JM Cost control, a message we integrate into daily operations, transforms the com-gs 7ya 4 pany's sales increases into additional earnings. For example, UE's seven-year-old program to improve employee productivity through planned attrition has p % hpM j
decreased our employee count by 17 percent from its peak in mid-1987 without d'",> ,
--. nm~
wwm .,
costly layoffs. Now UE's 6,266 employees serve 8 percent more customers and y ,g s j g . produce 11 percent more kilowatthours than before we began the program.
3 m
.m Ae same focus on cost control pays off in cost-efficient power generation. Our i gp6%M. @%
coal-fired plants, subject to varying degrees of environmental regulations under VQgj bEI@i _ __ _ _ __ _ _ -
1
.l l . .' ., Y
- jy s . , l<,l;2 ;-V'.
c d 1 ,, HIGHLIGHTS. 1NL WWAL CNM8E m ' lb e'
YEM ENDE9 CURREE 18. YEAR RAM y.. l e ,- C DECEMBER 31,1994 YEAR OF GROWTN
$ yl% Earnings per Common Share $3.01 8.7% 0.6%
5{ i Earnings on Common Stock $307,505,000 8.6 1.2
( Dividends par Common Share $2.395 2.6 3.4 dM
- 1/4 .s / Common Stock Price-Year End $35 3/8 (9.9) 7.9 4
r
. $ . p V @ igg . . ' ,; Book Value per Common Share $22.22 2.9 2.7 2
1
$ .,L jg@%Q;;' ~ Property and Plant (gross) $8,650,144,000 3.7 2.8 G.h 5 n $b Jf.
MNs ..f Total Operating Revenues 82,056,116,000 (0.5) 3.8 hk k Total Kilowatthour Sales 31,975,000,000 1.3 1.8 l
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' QABOUT UNION ELECTRIC y dd[X>.yNQ[.y M JV f ::" Y Jh ! %w ? A 4
i
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.- k 300 WE ARE Union Electric's 6.266 employees provide energy, ja' l
$.nn P f. ~g; %[w {1 ? c $a7- .I . ,
, m.ly electricity, to 1.2 million customers who live and work in
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}J v p y% ph, . issouri and southwestern Illinois. UE's electric rates are
$i hf[ hh gf? than the national average and competitive with those of h [&" " Sh nr.
bY : yy y surkounding utilities, and our customers give us high marks for N h, $,d( ' g,
)K - O hqu$lity service. As a result, our stockholders have been reward-h a 3 d with a steady stream of cash dividends, paid since 1906.
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D OdM h[ HOW WE DID IN 1994 UE was awarded the electric utility indus-try's highest honor in 1994, the Edison Award (above, left), for kC(n(y
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" heroic efforts" during the previous year's Gooding. The award ih]Q """
marked a banner year, as UE earned $3.01 per share, based on
, revenues powered by a rebounding economy and the company's gq continued cost control,
.g WMT'S ANEAD While our low electric rates give UE a competitive p$W , %$: S;,
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advantage, our long-term value to our customers lies in helping
.j *$; % them use energy more efficiently. Of course, our long-term
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- Q.j@ value to our stockholders means providing a fair reward for their h h k confidence in our ability to succeed in a changing environment.
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ggg. For years,' some have said that heightened competition in the electric utility indus-try is imminent, and recent events indicate they're correct. His talk about compe-
,g tition has concerned some investors and affected utility stocks.
E DM Investors, of course, seek to anticipate the future. Currently, they're trying to sepa-WE'RE GOING rate industry winners from losers in a scenario of increased competition. We are pleased that the investment conununity generally puts UE in the winners' column.
And we believe we know why Wall Street has favored UE during industry turmoil.
He fact is, we have long agreed with the view of Ironard S. Hyman, recently retired first vice president of Merrill Lynch: "The strongest value resides in the utili-ty thatisfs red and run as ifcompetition were already here."
That sums up UE's focus for the last several years. As a result, we have built a company that is, today, a formidable competitor, no matter what may happen in the future.
To provide perspective on the industry's situation - and UE's particular circum-stances - following is an overview of watershed events that have brought change to the industry and to UE.
1978 THE PUBLIC UTILITY REGULATORY POUCIES ACT. Designed to reduce the nation's appetite for imported oil, this Act required local utilities to buy power from other, non-utility power producers, known as qualifying facilities, or QFs, if they could produce power more cheaply than utilities could by building new capacity.
In other words, for the first time in history, utilities had to demonstrate they were more efficient producers than other power generators. With oil prices hovering around $40 a barrel, many utilities couldn't beat these new competitors' prices.
So they had to sign contracts with QFs at prices now above market prices.
UE escaped this trap, because our etisting generating capacity provided low cost ener-gy With inerpensive power producedfrom hydro and abundant, domestic coal, UE could and did beat competitors' prices. Today, with nuclear part af ourgenerating mir, UE pricing continues to be competitive with other power suppliers, including the relatively new independent power-producing companies. That's not the casefor many other utilities.
1984 UE'S CALLAWAY NUCLEAR PLANT BEGAN OPERATION. Some utilities have had problems with nuclear plants. In some cases, they have become financial burdens rather than efficient sources of environmentally friendly energy.
UE's Callarray Plcnt has established itself as one of the country's premier nuclear plants, consistently setting recordsfor effciency and sahiy 1988 UE REALIGNED MANAGEMENT AND INITIATED ATTRITION BASED D0WNSillNG.
To remain competitive, some companies have resorted to expensive layoffs and retirement programs, often with negative effects on morale and customer service.
UE started early to trim personnel costs through attrition, to avoid beingforced into more wrenching and costly actions. Today, UE serves 8 perrent more customers with 17 percent fewer employees. UE people have become more productive than ever
%re, and our customer approval ratings are consistently high.
1998 UE LOWERED RATES. In this year,83 utilities around the country announced plans to increase electricity retes; only 10 companies filed with regulatory commis-sions to reduce their rates.
4 STOCKHOLDERS LETTER the Clea i Air Act Amendments of 1990, generate about 70 percent of UE's power. Anu e we reported to our stockholders last year, these plants are meet-ing stringent new clean air standards ahead of schedule without imposing a financial burden on the company.
UE's other plants set impressive records this year. Our Callaway nuclear plant's j
- 1994 capacity factor ranked as the highest in the country and the second high-
. DMDEND GROWTH est in the world. Capacity factor .is one of the most commonly used efficiency mcasurements in the industry. And the company's Keokuk hydro-powered pl:nt set a new generating record for individual performance in 1991, after DMDENOS PAID PER COMMON SHARE upgrades in technology and related employee training.
Underpinning these efficiencies, UE's total fuel cost dropped to 1.01 cents per ,
kilowatthour compared to last year's 1.24 cents, due to many factors - enter- =3 pnsing use of lower cost, more environmentally friendly coal from the Western 3 b"I United States; economic use of purchased power, and aggressive negotiations 3
. 5 e%q a If for fuel-related services. For example, UE reduced fuel cost by almost $19 million sa 1 i 3
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in 1994 by aggressively buying and selling power on the interchange network. g m m Due to UE's companywide cost discipline, we have been able to reduce cus- f, g- } ,
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tomers' eh*ctricity rates throughout our two-state area over the past six years. ( j ({ >
j making us one of the country's low-cost electricity producers.
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/, j/ J A ADDING VALUE Y N & a k Our low rates create a powerful market advantage, but customer satisfaction i d li j m j drives our business. Our residential customers, whom we routinely survey, y , <
again signaled increased satisfaction with UE's service in 1994; essentially all of .
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our wholesale customers decided to renew contracts with us at their first oppor- ( Nk h tunity to leave, and many of our industrial and commercial customers think of L U i i us as energy consultants, not as just the k> cal utility. We know our customers demand more than low-cost, reliable service, so we offer expertise, community WN d leadership in economic development and active corporate citizenship.
dividend payments to common l STOCKHOLDERS BENIfli stockholders spans 89 years. 'Ihe Our business success enables us to provide a fair return to our stockholders. In company has increased the divi-dend in nine of the tast ten years.
1994. UE's Board of Directors increased dividends on common stock to an annual rate of $2.44, the ninth dividend increase in ten years.
UE provides low rates and good service - a simple, but unbeatable, business formula that's much easier to articulate than to accomplish. At the same time, we know our future in an increasingly competitive industry depends on our abil-ity to improve our business every day.
look to UE to remain focused on our core business, to emphasize cost control, l to provide our customers with low <ost energy and highquality service, and to reward stockholders fairly.
4 % --
C.W. Mueller President and Chief Executive Officer February 10,1995 3
INDUSTRY OVERVIEW UE was one of the few compaaies to cut rates in 1990. To improve our competitive
. position and resolve a long-standing rate design issue, UE reduced ratesfor industdal
'and commercial customers and agreed to hold residential rates at eristing levels in Missouri. At the same time, UE's filinois electricity rates decreased as ne loweredfuel costs. 'these moves reduced revenues. But they also strengthened our competitive posi-tion for the long term. Today, UE residential customers pay IS percent less than the Everage U.S. customer Our commercsal rates are 22 percent laclow the national aver-age, and our industrial rates are 13 percent below average.
CDMPETITIVE CUSTOMER PRICES
- 1ste .THE ClfM M ACT MRAMENTS MM0E0 ENVMONMENAL G0Als but allowed individual utilities some discretionary freedom to choose how to meet them.
UE realized ; hat retmhtting plants to burn low-sulfur coal was the most cost-effective CENTS fen KILDnATin00n solution to meeting mandated environmental goals, because lower coal costs would offset retroft costs. UE successfully managed the change and met environmental goals ahead ofgovernment deadlines - without any borrowing or cost increases e :. a w a.
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1992 THE EERGY P0llCY ACT opened utilities' transmission lines (lines that carry ,.'
large amounts of electricity long distances) for customers that buy ekttricity in : ,
ACTUAL bulk to resell to other customers. 'Ihese wholesale customen could shop for low J,'f. i cost electricity from a host of power suppliers. 4&
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- record with its wholesale customers offers the best evidenceyet ofits compet- 1l4 '
itive a . itage. Customers representing more than 70 percent ofour wholesale busi- l l f l, ~ v}
ness have had options to discontinue UEservice; none did. And we set a new record QlJb' yy in sellingpower to other utilities in 1991,furtherpmofofUE's competitive advantage. .. J c .. }
DECEMBER 1992 - DE COMPLETED A SIGWIFICANT TERRITORY REORGANIZATION, selling a
) } [ ~l[( 3 I small, lowgrowth terdtory in lova and buying a territory in Missouri. UE has nar- ][ , j. _
rowed its long-term focus to two home ctates, which will ultimately reduce cost., and /'~O i b :. : i " ~ '
improve service.
1993 DE AGAW EONERED RATES. Reflecting the end ofdeferred expensesfor construc- y g y : } tion of Callaway, UE reduced Missouri electdc rates 2.S percent,further strengthen-ing the company's competitity position. Since UE's last rate increase in 1987, the average customer's electricity OCTOBER 1993 - STANDARD is P0OR'S REVISE 0 RATING OUTLOOKS on about one-third cost - as measured by ek ctric rev-of the industry. S&P cited concern about increasing interest rates and the potential enues per kilowatthour - dropped effects of competition for its unprecedented move. Ilattered by the threat of rising 43 percent. Adjusting for inflation, interest rates, utility stock prices continued under siege, as shown in the graph above, our customers' electricity costs per kilo.
'lhe company's ratings were not changed. UE's stock price declined with the rest ofthe watthour have declined 24 percent.
, industry, but not as sharply, and our AA- credit ratingfrom S&P and Al frorn Moody's have remained the same despite industry turmoil. 'l "l'* '* , * *"f*'* *,, ] l 1994 UTILITIES PRESSURED STATE COMMISSIONS to set aside long-term contracts mem.
with QFs that had become uneconomic. UE was unaffected by these battles with regulators and QFs. Low production costs *Endudes wholesale customers have meant that UE is competitive with QFs. 1994 THE CAllFORINA PUBLIC UTILITIES COMMISSION ANNOUNCEO A SWEEPWG PRO. POSAL FOR Full-SCALE. STATEWIDE COMPETITION for utility customers beginning in 1996. Consumer advocates criticized the decision, arguing it would hurt poor customers. Emironmental groups voiced concern that cheaper power sources might not be environmentally sound, and owners of small businesses feared increased costs. UE's mies are well below those oflarge California utilities and below the national average, trducing localpublic emphasis on the needfor competition. 5
COMPETITIVE ADVANTAGES h. i% i AND HERE CE ARE QJ 4 Public perceptions aside, increasing competition has not sur-prised many companies in the industry. Predictably, some com- jf panies, including UE, are in far stronger positions than others. py he reason is that some companies have been more effective ! Q.m . than others in responding to change. I n$ LOW FUEL COSTS W RILOWATTil00R UE saw the potential for change coming years ago. He actions that we've tsken haven't necessarily been dramatic. Rey've Q NN FUEL COSTS simply been effective. KQ y jQ Our consistent prescription for success has four parts: [h
,M 33 23 Control costs. ;O 4
Hold down customerprices. g improre serrice continually through I training and technolog. g . g7 Stick to the business see know. W%W kk ' 30$i
,T FIRST, COST CONTROL j C
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For any company in a mature industry to be competitively 44 strong, it must have effective cost control. UE cost control 8+ w . targets three basic areas: employee-related costs, fuel costs, y . and debt expense. We've achieved significant improvement in all three. { p g N. 4 Employee numbers, for example, have declined steadily and f n~Mey
.v without the expense or disruption of layoffs. UE serves 8 per- gn- ly <yg cent more customers than in 1987 -when our employee count fgmgi g-wg'*<M UE continues to decrease fuel costs, as the company uses an ga -w mwnt her peoph 4
g}Q 5'g! increasing proportion of lower-priced, more environmentally We have also driven down our fuel costs dramatically. At the h j h Q)M friendly Western coal. In addition, end of 1994, the company's fuel cost per kilowatthour decreased , , y.wk. Agg , the company reduces fuel costs by aggressively negotiating contracts from 1.2 cents the previous year to 1.0 cents, or over 18 percent. dfp p ~ ei [h g involving nuclear fuel, operating Much of this savings came from greater use of low-sulfur coal, 4y A hydro plants efficiently, and buying which is cheaper and more environmentally friendly than the and selling power on the intercon-Py p )C'Mg
- f: w nected pr>wer network.
hid-suMur, MgMtu coal Es plants wem originah (, ]g y designed to burn.
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selling on the power network. Leveraging the advantage of ,"g q , UE's central location and interconnection with almost 20 utili- fc @a 6.,
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t,es, i our ,mterchange business has almost quadrupled m, less n A # % N v ' ,yy than a decade. Last year, UE offset fuel costs to the tune of ga <p- rs]; ' y
$18.8 million by sales and purchases on the network. '
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'M 3 UE saw the setentialfor ; W, change yea. ago. Sports in Jr ,
our Energy $spply ',pestkr:
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constantly hay and rad elec.
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- ram other.stilitie' to 6"s.*
" reduce UE's feel costs, while
(;i new technology-call resting, voice respesse, on-m-I;; e -6 8.- - heard computers, a new Supervisory Control and Data Acquisities (SCADA) system-m';# f C p helps control expenses. But customer service remains key. For esemple. UE engi-f, meets helped the localUnion se64W. .. Pacific representatives
/ revamp their office energy
' ,f system, os part of the UE l g energy audit program for commercialcustomers.
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Debt costs have been pushed down 25 percent since 1990. Taking advantage of falling interest rates during the early part of the decade, UE has refinanced more than $1.3 billion of long-term debt. In addition, the company issued low-cost debt in the form of tax-free Missouri environmental bonds. Today, UE's embedded cost of debt stands at 6.9 percent - one of thelowestin theindustry. I LOWIR FUf! COSIS. fiEW Lin'IR0TMill AL STANDARDS As dzscribed in our previ-ens annssi reports, UE is actiering self imposed early deadlines to meet n w environmentalregula-tions withgqlincreasing overall generation costs. . Die to the company's finan-cial strength. UE can invest in capital projects - such as buying coal cars, izstalling equipment that reduces nitrogen oxide emissions and retrofitting coal-handling equipment - without increasing debt. Now,lahadie Plant, UI's ! largest baseload plant, has
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met new Federal environ-mental regulations ahead of schedule, and UE's fuel buy-ers have successfully nego-tiated contracts to bringin lower cost INestern coal.
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COMPETITIVE ADVANTAGES HOLD DOGN CUSTOMER PRICES As competitive pressures mount, electricity is regarded more and more as a commodity. Obviously, that makes low prices imperative. UE's record on prices is clear and strong. Since 1990, we have COMPETITIVE
~
lowered rates twice. Today, UE's residential customers pay is PRICES percent less than the average U.S. customer. Our commercial AVERAGE REVENUE
- PER RILOWATTHOUR rates are 22 percent below the national average, and our indus- BY CUSTOMER CATEGORY trial rates are 13 percent below average.
In short, UE doesn't need to play catch-up on pricing. We already g d have a strong competitive position. i e.: IMPROVE SERVICE CONTINUALLY As important as pricing is, customer loyalty also depends on high quality service. [ For large customers, high quality service means relationship- : building and problem-solving. Photographs and brief stories on the surrounding pages illustrate examples of that process and its tangible results for customers.
- For other customers, high quality service means prompt atten- w 00R tion to their needs and knowledgeable, fast responses. UE has .
1 adapted technology to meet those needs economically. CUSTOMERS- 1 g ggg.p gg Meet Barbara, for example. Barbara is the name given to UE's l voice that tirelessly answers our customer phone lines 24 hours ] d y. se tJE f-ROM UI E National 10 ' 7. Here's how Barbara works. A friendly, upbeat voice asks for the Recognizing that low prices provide caller's telephone number, gently urges the customer to stay on substantial competitive advantages, AND FIND the line and provides information and alternate call routing. union giect,;c no,,,oucca r,,es to OPPORTUNI- When the customer gives Barbara his or her phone number, well below national averages. UE's residential rates aie 15 percent 11LS TO Barbara's computer instantly pulls up the caller's service record below average; commercial rates 22 and holds it at the ready if a service representative needs it. percent below average; and indus. Barbara's computer also sends outage reports directly to dis- trial rates la percent below average, patchers, enabling them to quickly pinpoint developing prob- *hM recem ha avaHak UE. lems and speed repair crews to trouble areas. jyrp IQo11uae 2" , UE's voice response unit - Barbara's technical name - is only
. one year old, but already is on the way to winning over customers.
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UE WORKS WITH CUSTOMERS TO FORM 8USINESS PARTNERSHIPS UE's Iergest castomer, Sheu DH. refines petroleem.
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an energy 4stensive besi- g 7 ness. To help Shellmake j ('~~ d 3 the mest of their energy j ~g~ p- 1.
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dellars. LE and Shell employees have formed a 4;; - .4* quality team called QUEST "E l A ..Yi that meets regularly to , , y review Sheirs energy use , @- and UE's servics quality. .... , ; ; 1 !! ' Many of the team's recem-W @ mendations have been implemented, and. just as N* important, the team mem-hers have used each oth-ers' expertise and feedback ., s , to improve their respective .}j - husinesses. Some team 4 i 4 ' ! e members are shews on j '. , this page. ^l
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COMPETITIVE ADVAliTAGES STICK TO THE BUSINESSCE KN00 Little elaboration is necessary on this point. We're proven experts in our business, and we have no intention of diluting y) our focus or our resources. Any new ventures we would con-
$ sider would have to be natural extensions of our existing n
strengths with clear benefits for stockholders and customers. r AND NOW, THE FUTURL WE ENTER IT WITH STRONG CASH FLOW AND THE PRODUCTMTY FLEX 1BILITY CASH FLOW BUYS. NUMBER OF CUSTOMERS i In uncertain times, few advantages are more important to a PER EMPLOYEE company than strong cash flow and the flexibility it provides. h UE enjoys both advantages, to an enviable degree. la ; E4 h
,g Our steady, strong revenue stream produces enormous bene- , E~% i
;a d fits. It helps keep our credit ratings near the top of our industry [3a i 3 y~'MifA
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(AA- from S&P and Al from Moody's), which, in turn, helps ] @}j j [
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'j hold down our debt costs it buys the technology and training l y
that enable UE people to become more productive and provide p [ J better service. And it buys flexibility, an important ability in any w,x*. \) ff j(
. g~ business situation and a critical ability if expanded competition ! M o m z y e
$ were to become reality. O d
i 3% 4 ? 9} n mm h$E! UE's steady cash flow and financial strength also translate into N _ ,3 j g hp_M W % operational strengths which, in turn, increase long-term com- # nw:fgd hg w petitive abilities and service quality. For example, two years [ p]a 2
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$ ago we funded two cash-intensive maintenance efforts at our i 7
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Callaway Plant. We weren't forced to conduct these projects
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( g ?( 0 g at precisely that time. He point is, we could afford to schedule ggggg the projects in a proactive way. And this ability, combined with C st control requires constantly W.U: h Callaway people's expertise, is the reason why the plant runs M improving employee productivity. { q[ ' , at a lifetime capacity factor of 90.8 percent, significantly better
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IIsing better technology and more than the industry average. (A plant's capacity factor refers personnel training, UE has reduced $QC g3 %, hy}g;;J"l' to the amount of time a plant actually operates compared to the the number of employees by 17 per-M' cent since our 1987 peak, even l >Og g._ theoretical maximum for which it was designed.)
] though the company serves 8 per-The cent m re customers.
hhN E 4M M . a Financial strength also has made it possible for UE to modern, employee reduction, handled
"~ Hj# y ize two of our hydro plants, retrofit coal-fired facilities to meet through attrition, means UE now r [lQ,,, e Clean Air Act emission deadlines, provide the best training in has a smaller employee count than the industry to Callaway personnel and use document imaging ""Y *I"" "i"" "
,iM M A A4 to convert decades of records to computer files. The list could mgw go on and on to embrace every aspect of our operations, large j h and small. Ilut the point is clear: UE's financial strength C. ~j Mg hhhh enables us to take advantage of technology to improve service y and increase operating efficiency.
vy 1 11
C0WEUTIVE ADVAlfiAGES Of course, another result of UE's financial strength is our ability to fairly reward our stockholders. We have paid cash dividends annually for the last 89 years, and we have increased the divi-dend nine times in the last ten years. UE'S FUTURE PROSPECTS
%e fact that UE already has a strong competitive position is highly significant. We don't have to play catch-up as many other utility companies do. Instead, we can concentrate on further strengthening our position.
We also have the advantage of a highly diversified market. So DIVERSIFIED we- re not hostage to any single industry or vulnerabie to cycli-CUSTOMER MIX cal downdrafts. Our 50 largest customers account for less than 1994IllLOWAITHOUR SALi$ nu s and our largest cusWmer kss &an o BY CUST0 TIER CLASSIFICATION 1.5 percent. Our diversified market performed wellin 1994. A S2.5 billion ju construction boom altered St. Louis' skyline and helped push
; ]
n . 3 employment to its highest level in 20 years. Each of the area's
] three automobile plants began to either retool or expand last h# year. A new mass transit system completed its first full year of service with ridership well over projections. And St. Louis' new Kiel Center arena opened for business.
An increased reliance on electricity is the theme that links all these new projects. An auto plant, for example, uses an infra-red electrotechnology system to dry paint on cars not just l h faster, but better. The system's precise control improves the quality of the paint job, using methods that are friendlier to the environment. %e Metrounk light rail system runs on electric-ity. And the Kiel Center arena's infrastructure relies on a maze UE's diverse customer mix is one of electrically-powered communications and control systems. of the company's strengths: no sin-gle customer classification domi. UE works closely with local governments to encourage busi-nates the company's sales either in ness expansion and relocation. For example, the company terms of kilowatthour sales, as helped fund the move of a lluffy bicycle plant to Missouri. We shown in the above chart, or in established special incentive rates for new and expanding busi-terms of revenues. Industrial and wholesale customers represent just nesses, and we helped pay for a statewide computer system that 19 percent and 3 percent, respec- tracks community development data for rek>cating businesses. tively, of the company's 1991 ekc-tric revenues. For new and existing customers, we provide axpertise about a variety of electrotechnologies with problem-solving applications for industrial, medical and governmental customers. From all these sources, we project an annual growth rate of 2 percent in electricity sales. 12
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When we combine our market's strengthening economy and CARONDELET CHOSE increased use of electrotechnologies with continued improve. 10 STAY IN UE'S ments in cost control and employee productivity, we have confi-Her 100 years, Carondelet dence in our future. Corporation's foundry began Our stable, sustainable earnings improvement has worked I88kI89I 8'88W I8'98f extremely well for UE and its stockholders for many decades. f,'((,', ,*,,c'a' I ! We don't see that changing. negotiated with UE and a neighboring stility competi-tor, and decided to stay in ecans i pak ersh p with the company had been successfulover the years. Then, after a year in their f IU# new location, Carondelet j" asked UE engineers for O* advice about a change. . The ad hoc team helped with the process and identi-fied other ways the foundry could get the most efficient electricity rate. I i l 9 fy ,
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t l I o' >? D GROWTHIN BOTH J/9lf\L ' THE ECONOMY AND ELECTROTECH-NOLOGY BRIGHTENS ' UE'S FUTURE A revived regionaleceaemy, symbolized bere by a sew bridge across the Messissippilliver at Alton, Illiness, sparked UE's sales this year. Jeffersee City-based Scholastic lac., a 4 publisher and eational dis-tributer of children's books, f lffjj t a' expanded; St.Lemis' new / // ' / / ljl#El 4 .
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take of the Oracks evtlet mall drew tens elthousands of customers. But more was ,, at work than a beeming j, - f j j 'f y : g; p g l f)f f l;. sil I economy. Businesses are j7 // ,
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using electrotechselegies [l j j/' '[j; 3\\ hi
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## ' E @ I. -Yil acts using more environ- '
o g mentally friend'y methods. For erample, the local . ,; , . k ' .(\\ , g.4 GeneralMeters plant, one .
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sithree lecal astemakers , 'g f . , Lj.} l T, i j i iQ espanding er updating
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t ka (1 Body, makes custom ///< 4 j g fp/ jjl3t )h g
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q/::$7.g7.$ UE is ready for the future - whatever it may bring.110 wever,
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s.3::. M/V s'dy..: ;;py;9.q% : from our vantage point in the heart of the country (recognizing 1
; Q>: .,w g that our viewpoint mzy not hold true nationwide), the current '
.f. .: M 9..-':-, h.Q. . .n$ .system isn't broken. Indeed, our customers enjoy some of the
...'.c 7 . ype. .j, j lowest electricity prices and highest quality service.
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.. - ,[.d:l.r[i h $ 7.X::k.On the other hand, we also believe that change in our industry gg
[hk. gjd WMME [h$h h has had positive effects. It has forced managements to re-exam-ine " business as usual." It has led to increased productivity and gg (f 5 new efficiencies. These changes benefit utilities, their cus- TOTAL KILOWATTHOUR SALIS tomers and stockholders. And that, obviously,is all to the good. SiXins) [..[hjh.
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Change also could encourage incentive regulation. Incen- ! tive regulation would mean recognition -long overdue, in j our opinion - that efficient companies' success should M. . 4f,4 e M:#nryJy be rewarded.
.c W .# M. . jJ '
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*;r:y :% Bottom line: UE stands ready, today, to succeed in whatever
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- .; q - . i, st. hsi : a environment the future may bring. That doesn't mean we're i -
i
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, . :lfy g C adopted Merrill Lynch analyst Ironard ifyman's view that, to [
.k:[" . ', l repeat, "The strongest value resides in the utility that is } ,
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,[
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}.$w/(p_;* ' '%fa Control costs.
M' j M.gM .. a . "g lloid down customer prices. - g f. 7d g v. - 'f@g Improve service continually through training
? W and technology. UE's kilowatthour sales have been
,M n an upward trend ver the past
-No i5 Stick to the business we know.
few years. The company expects t . (IQhQ:/M$) kd%g
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- qg
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.h wa m.y k /* contiuues to grow in the future.
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MANAGEMENTS DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS properties of Arkansas Power & Light Company in March , F.arnings and earnings per share fluctuated due to many 1992. In 1993, normalized kilowatthour sales decreased 0.8% l conditions, the prirnary ones being: weather variations, reflecting the loss of sales from disposition of our Iowa and electric rate reductions, sales growth, fluctuating operating northern Illinois service territory partially offset by an costs, the purchase and sales of utility properties, new improved local economy. In 1994, normalized kilowatthour accounting requirements, changes in interest expense and in sales were 2.9% over 1993, demonstrating an improving local income and property taxes. economy. Other less significant factors contributing to variations in electric sales are conservation, installation of i of k more significant items affecting revenues, energy efficient appliances, and changes to and from costs, and earnings during the past several years are analyzed ahnnadve fuels. and discussed below. ELECTRIC OPERATING REVENUES OPERATING EXPENSES Variadon from Prior Year g p (Millions of Dollars) 1994 1993 1992 (Millions of Dollars) 1994 1993 1992 Mate variations - _$
$(42.9) ' '$ (.9) Fuel:
Effect of abnormal weather (33.9) 74.9 . (135.7) Variation in generation $ 52.6 $(18.3) $(36.7) Growth and other 37.5 4.5 59.8 Price (76.9) (.4) (6.1)
$ 3.6 $ 36.5 $ (76.8) Amortization of uranium litigation settlement - -
2.7
' Generation efficiencies (3.6) 6.7 (.3)
The increase in 1994 electric revenues reflects growth in sales Department of Energy assessment 1.6 .4 - to commercial and industrial customers, offset by reduced Net interchange sales and Purchased power mriation (57.2) 17.6 35.7 sales to residential customers, primarily due to milder weather
$(83.5) $ 6'0 $ (4.7) in the first and third quarters of 1994 compared to 1993.
The increase in 1993 electric revenues primarily reflects e decreased 1994 Fuel and Purchased Power costs reflect increased sales from colder, more nonnal winter weather in I wer fuel prices from burning low-sulfur coal at our fossil fuel the first quarter 1993 followed by warmer spring and summer power plants and greater Callaway Plant generation due to the weather when compared to 1992. These increased revenues absence of a nuclear refueling outage in 1994. Higher were partially offset by the November 1992 Missouri rate generation, resulting in greater fuel costs, was more than settlement effective January 1,1993, which decreased rates for ffset by reduced net purchased power costs and increased all Missouri electric customers and reduced annual revenues generating efficiencies. The increased 1993 Fuel and by approximately $42 million. %e sale of the Company's Iowa Purchased Power costs reflect increased purchased power and and northern Illinois retail properties in December 1992 I wer generating efficiencies offset in part by greater hydro reduced 1993 electric revenues $52 million which was offset genua n and reduced fossMuM gennahn. haeased by growth in other service areas, including the territory p wer purchases from other utilities were required in 1993 purchased from Arkansas Power & Light Company in March when flooding interrupted coal deliveries to several of the 1992. The lower 1992 eketric revenues were primarily due to Company's fossil-fueled power plants. The decreased 1992 unusually mild summer weather which reduced air Fuel and Purchased Power costs reflect reduced generation conditioning use as compared to 1991. associated with lower electric sales and a Callaway refueling
%e variation in electric revenues attributable to growth and outage in 1992, greater hydro generation and lower fuel prices, other factors in 1992,1993, and 1994 primarily reflects the offset in pad by greater net purchased power costs, differences in economic growth in the Company's service Other variations in 1992 through 1994 operating expenses territory for these periods. In 1992, normalized kilowatthour reflect recurring conditions such as growth, inflation, and sales increased 3.2% compared to 1991, which reflects both an wage and benefit increases. In 1994, operations expenses, improved h> cal economy and the addition of new customers resulting from the purchase of the Missouri distribution en an and purchad pown com deceased W million, primarily due to a $7 million reduction of natural gas 16
purchased for reside, a $5 million decrease in labor costs and a In 1994, other taxes charged to operating expenses increased $3 million decrease in employee benefit expenses, partially $4 million, primarily due to increased real estate taxes and offset by increased provision for injuries and damages and greater corporate franchise taxes. In 1993 other taxes higher consulting and communication expenses. In 1993, charged to operating expenses increased $6 million, primarily operations expenses, other than fuel and purchased power due to higher gross receipts and real estate taxes. In 1992, costs, increased $64 million, primarily due to a $32 million other taxes charged to operating expenses increased $3 increase in employee postretirement benefits expense million due to a $7 million increase in real estate taxes, pursuant to Statement of Financial Accounting Standards partially offset by a $4 million reduction in gross receipts taxes (SFAS) No.106 -Employers' Accounting for Postretirement associated with lower revenues. lienefits other than Pensions", a 614 million increase in natural CALLAWAY RATE PHASE IN PLANS ; gas purchased for resale, a $5 million increase in labor costs, See Note 1 under Notes to Financial Statements for I and higher pensions, professional and computer services, information relative to Callaway rate phase in plans. l regulatory fees, and provision for injuries and damages. In INTEREST 1992, operations expenses, other than fuel and purchased In 1994 interest expense increased $12 million, primarily due power costs, increased $7 million, primarily reflecting a $5 to greater amount of total debt outstanding and higher interest million increase in labor costs, a $4 million increase in rates on variable rate debt. In 1993 and 1992 interest expenses employee benefit expenses, a S2 million increase in natural gas decreased $6 million, and $32 million, respectively, primarily i purchased for resale, offset in part by a $5 million decrease in ! due to the refinancing of high-cost debt with lower cost issues, nuclear spent fuel disposal cost, primarily due to the refueling lower interest rates on variable rate debt and a reduction in outage at Callaway Plant and a refund of overcharges from the total debt outstanding. Department of Energy. CONTINGENCIES In 1994, maintenance expenses increased $8 million primarily See Note 10 under Notes to Financial Statements for material due to increased maintenance expenses at our fossil fuel issues existing at December 31,1994 that could affect the power plants and greater tree trimming expense, partially Company. offset by lower Callaway Plant maintenance (no refueling LIQUIDITY AND CAPITAL RESDURCES outage in 1994) and reduced labor costs. In 1993, maintenance expenses increased $3 million primarily due to flood-related labor expenses. In 1992, maintenance expenses increased $17 Actual Forecast million, due to a $20 million increase in Callaway Plant 1 9 9 4 1995 1996 1997 1998 1999 maintenance expenses primarily associated with Callaway's Ntgns e>F nditures fifth refueling, partially offset by reduced maintenance at other
% of Construction Requirements fossil-fueled generating plants. Generated Internally 1 03 % 113% 105% 140% 106% 100%
Depreciation expenses increased $6 million in each of the The Company completed the constmetion of its Callaway Plant years 1994 and 1993, due to increased depreciable property. in 1 te 1984. Additional base load electric generation capacity Depreciation expense increased $10 million in 1992, primarily is n t anticipated until after the year 2013. In addition to funds due to the purchase of the Missouri distribution properties of Arkansas Power & light Company in early 1992, a $3 million required for construction expenditures during the 1995-1999 increase in nuclear plant decommissioning expense and paiods, S248 million will be required to repay long-term debt increased other depreciable property. and preferred stock maturities. Income taxes from operations in 1991 increased $27 million due to higher pre-tax income and a higher effective Missouri ^ income tax rate. Income taxes from operations in 1993 reflect ("d[8d & Pm's Duff & Phelps A+ a higher federal income tax rate offset by lower pre-tax income. Income taxes from operations decreased $43 million Under the Clean Air Act Amendments of 1990, the Company is in 1992 due principally to lower pre-tax income. required to significantly reduce total annual emissions of 17
MANAGEMENTS DISCUSSIDN AND ANALYSIS (continued) sulfur dioxide by the year 2000. Significant reductions in one time up to $600 million of short-term unsecured debt nitrogen oxide will also be required. With switching to low- instruments. sulfur coal and early banking of emission credits, the Company TAX MATTERS anticipates that it can comply with the requirements of the See Income Taxes in Note 7 under Notes to Financial
- law with no significant revenue increases because the related Statements regarding Statement of Financial Accounting capital costs, estimated at about $300 million, are largely Standards No.109," Accounting for income Taxes."
offset by lower fuel costs. At December 31,1994 about 65 ABOUT THE DIVIDEND percent of the Clean Air Act related capital costs had been The Board of Directors does not set specific targets or payout
**P"" parameters for the Company's dividend payments. In their -
On March 12,1992, the Company purchased the Missouri annual review of dividend payments, however, the Board retail electric distribution properties of Arkansas Power & considers various issues, including the following: the IJght Company (a subsidiary of Entergy Corporation) for $63 Company's historic earnings and cash flow; the Company's - million. His acquisition increased the Company's customers projected earnings, cash flow and potential cash flow by 26,000 in 10 counties in soetheastern Missouri adjacent to requirements; dividend increases among other utilities; the Company's existing service territory. In connection with return on investments with similar risk characteristics, and
. the transaction, the Company entered into a long-term power overall business considerations. In 1994, Union Electric paid purchase agreement with AP&L which allows the Company to 79.6 percent ofits earnings to its common stockholders.
serve the new customers cost-effectively and without building ABOUT OUR STRATEGY additional generating capacity. The Company's management and Board of Directors in December 1992, the Company sold its towa retail and recognize the increasing probability of more intense wholesale electric distribution properties to Iowa Electric competition in the utility industry in the future. Although no Light & Power (a subsidiary of IES Industries, Inc.) and its one can accurately predict the time or precise nature of this northern Illinois electric distribution properties to Central competition, the Company operates its business assuming this Illinois Public Service Company. The Company served competition will occur. Union Electric's basic business approximately 21,000 customers in the areas sold. The net strategy is threefold: 1) to improve our competitive position by book value of the properties sold was $34 million. Sales continually enhancing customer service; 2) to maintain proceeds totaled $68 million. As a result of these sales, the competitive electricity rates, and 3) to reduce costs to the Company realized a gain in 1992 of $18 million, net of tax. The lowest levels possible without compromising customer service. Company's hydroelectric generating station near Keokuk, employee safety, environmental stewardship, fair returns to Iowa and related transmission facilities were not included in stockholders and fair rewards to employees. the sales. EFFECTS OF INFLATION AND CHANGING PRICES A nuclear fuel lease agreement provides financing for the ne current replacement cost of the Company's utility plant Company's nuclear fuel requirements. Effective February 1, substantially exceeds its recorded historical cost. Under 1994, the maximum which can be financed under the existing regulatory practice, only the historical cost of plant is recoverable from customers. As a result, cash flows designed agreement was increased from $100 million to S120 million. At December 31,1994, S118 million of nuclear fuel was financed to provide recovery of historical plant costs thtough depreciation may not be adequate to replace plant in future under the lease. years. However, past practice indicates the Company will be The Company plans to continue utilizing short-term debt as allowed to earn on and to recover the . increased cost of support for normal operations and other temporary . replacement facilities when replacement occurs. The . impact requirements (see Note 3 under Notes to Financial on common stockholders .is mit.igated to the extent Statements). The Company is authorized by the Federal . depreciable property is financed with debt that can be repaid Energy Regulatory Comm.issmn to have outstand.mg at any with dollars of less purchasing power. 18
RESPONSIBILITY FOR FINANCIAL STATEMENTS
'the management of Union Electric Company is responsible for the information and representations contained in the financial statements and in other sections of this Annual Report; The financial statements have been prepared in conformity with generally accepted accounting principles. Other l infonnation included in this report is consistent, where applicable, with the financial statements.
i The Company maintains a system of internal accounting controls designed to provide reasonable '~ assurance as to the integrity of the financial records and the protection of assets. Qualified personnel are selected and an organization structure is maintained that provides for appropriate functional responsibility. Written policies and procedures have been developed and are revised as necessary. The Company maintains and supports an extensive program of internal audits with appropriate management follow up. The Board of Directors, through its Auditing Committee comprised of outside directors, is responsible for ensuring that both management and the independent accountants fulfill their respective responsibilities relative to the financial statements. Moreover, the independent accountants have full and free access to meet with the Auditing Committee, with or without management present, to discuss auditing or financial reporting matters. REPORT OF INDEPENDENT ACCOUNTANTS , One Boatmen s Plaza Telephone 314 425-0500 St. Louis, MO 63101 Pdce Watediouse LLP To the Stockholders and Board of Directors January 31,1995 of Union Electric Company in our opinion, the accompanying balance sheet and the related statements of income, long-term debt, preferred stock, retained earnings, other paid-in capital, and cash flows present fairly, in all material respects, the financial position of Union Electric Company at December 31,1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 8 to the financial statements, the Company changed its method of accounting for postretirement benefits other than pensions in 1993. 19
~
) i STATEMENT OF INCOME Um0N EuCTmc C0mNy-Ghousands of Dollars Except Shares and Per Share Amounts) -
- Year 1994 car 1993 - Year 1992 OPERATING REVENUES:
- Electric $1,969,533 $1,965,980 .$1,929,468 --
Gas 86,109 99,552 84,159 474 '472 1,494 : Other Total operating revenues 2,056,116- 2,066,004 2,015,121 OPERATING EXPENSES: Operations Fuel and purchased power. 329,562 413,054 407,067 Other 435,666 445,535 381,690 765,228 858,589 788,757 Maintenance , 197,760 190,097 187,267 Depreciation and nuclear decommissioning 226,045 219,633 - 214,029 32,291 Amortization of phase-in plans deferred costs - - Income taxes 206,421 179,475 179,691 Other taxes 210,476 206,913 201,069 Total operating expenses 1,605,930 1,654,707 1,603,104 OPERATING INCOME '450,186 411,297 412,017 OTHER INCOME AND DEDUCTIONS: Gain on sales of electric property - - 34,810 L income taxes related to gain on sales of electric property -
.- (16,711)
Allowance for equity funds used during construction -5,767- 6,418' 3,115 - Miscellaneous, net 403 3,919 (71) Total other income and deductions, net 6,170 10,337 21,143 INCOME BEFORE INTEREST CHARGES 456,356 421,634 433,160-INTEREST CHARGES: Interest 141,112- 129,600 135,319 Allowance for borrowed funds used during construction (5,513) (5,126) (4,907) Net interest charges 135,599 124,474' 130,412 NETINCOME 320,757 297,160 302,748 PREFERRED STOCK DIVIDENDS 13,252 14,087 14,058 EARNINGS ON COMMON STOCK S 307,505 S 283.073 S 288.690 . EARNINGS PER SHARE OF COMMON STOCK (hawd on averace shares outstandind $3.01 S2.77 S2.83 OlV10EN05 PER SHARE OF COMMON STOCK $2.395 S2.335- $2.26 102,123,834 102,123.834 102,123,834 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING See Notes to Financial Statements on pages 27 through 32. 28
~ STATEMENT OF CASH R0WS uNiaNEtECTRiCCoMe4Ny -
. (thousands of Dollars)
' Year 1994 Year 1993 Year 1992 CASH FLOWS FROM OPERATING: _.
Net income S 320,757 8 297,160 $ 302,748 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 216,731 210,341 237,659 Amortization of nuclear fuel 44,267 46,441 47,816 Gain on sales of electric property - - '(34,810) Allowance for fund used during construction (11,280) (11,544). (8,022) - . Postretirement ber it accrual 24,680 31,970 - Deferred income taxes, net (18,430) 51,154 '44,950. Deferred investment tax credits, net (6,182) (7,626) ~ (7,414) Changes in assets and liabilities: Receivables, net 23,020 (23,568) 22,408 Materials and supplies (10,643) 46,741 (9,938) Accounts and wages payable (94,180) (8,258) 12,207 Taxes accrued 10,710 (5,762) (10,958) Interest and dividends accrued or declared 14,657 2,351 (4,242) Other, net 29,966 (2,378) (1,393) Net cash provided by operating activities 544,073 627,022 591,011 CASH FLOWS FROM INVESTING: Construction expenditures (314,050) (266,433) (259,652) Acquisition of electric property - - (62,430) Sale of water property - - 8,500 Sales of electric property - - 68,702 Allowance for funds used during construction 11,280 11,544 8,022 Nuclear fuel expenditures (30,458) (37,494) (63,779) Net cash used in investing activities (333,228) (292,383) (300,637) CASH FLOWS iROM FINANCING: Dividends on preferred and common stock (257,838) (252,546) (244,858) Environmental bond funds 12,583 30,474 (4,915) Redemptions - Nuclear fuellease (32,137) (52.907) (50,693) Short-term debt (59,600) - (34,500) 12mg-term debt (25,000) (605,500) (520,076) Preferred stock (26) (73,751) (26) Issuances - Nuclear fuellease 51,386 51,593 40,534 Short-term debt - 37,600 - long-term debt 100,000 455,000 521,500 Preferred stock - 74,438 - Net cash used in finnneing netivities (210,632) (335,599) (293,034) NET CHANGE IN CASH AND CASH EQUIVALENTS 213 (960) (2,604 ) - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,297 2,257 4,917 !' CASH AND CASH EQUlVALENTS AT END DF YEAR S 1,510 8 1,297 8 2,257 Cash and cash equivaients include cash on hand and temporary investments purchased with a maturity of three months or less. l Cash paid during the pr nods: L Interest (net of amount capitalirwD A 108,119 $112,296 $128,007 I Income taxa 8217.417 $145,129 $169.910 See Notes to Financial Statements on pages 27 through 32. 21
l BALANCE SHEET em0NEucistC0wAn:
. (thousands of Dollars) '
'< ASSETS ~-
December 31,1994 -' December 31,1993 : PROPERTY AND PLANT, AT ORIGINAL COST: Electric $8,200,094 $7,916,493 Gas 160,729 149,167 > 35,033 34,884 Other - 8,395,856- 8,100,544 less accumulated depreciation and amortization -3,305,582 3,079,509 5,090,274 5,021,035: Construction workin progress: Nuclear fuelin process 134,815- -101,265-119,473 -142,656 Other Total property and plant, net -. 5,344,562 > 5,264,956; _ 732,478- 762,331 REGULATORY ASSET- DEFERRED INCOME TAXES DEFERRED CHARGES AND OTHER ASSETS: Unamortized debt expense . '49,432 53,451-Nuclear decommissioning trust fund 53,906 44,420 22,508 28,552 Other-Total deferred charges and other assets 125,846 126,423 - CURREN ASSETS: Cash 1,510 1,297 Accounts receivable - trade (less allowance for doubtftd accounts of $6,277 and $6,194, at respective dates) - 164,803 178,559 Unbilled revenue ' 71,321- 79,957 Other accounts and notes receivable 17,691 18,319 Materials and supplies, at average cost-Fossil fuel 61,533 53,123 Construction and maintenance 89,683- 87,450 Other 15,274 23,155 Total current assets 421,815 441,860 TOTAL ASSETS $6,624,701 $6.595.570 See Notes to Financial Statements on pages 27 through 32. 22
y '
+
P - December 31,1994 : ' December 31,1993
- CAPITAL ANO UASIUTIES 'CAPITAUZATION:
Common stock, $5 par value, authorized 150,000,000 shares -
- outstanding 102,123,834 shares (excluding 42,990 shares _d
' at par value in treasury). : $ .: 510,619 -
- $ 510,619.-
~
- Other paid-in capital, principally premium on common stock (see accompanying statement) 717,669 ~ 717,669:
Retained earnings (see accompanying statement) .1,040,766 977,880 Totalcommon stockholders
- equity. :2,269,054 2,206,168 Preference stock, $1 par value, authorized 7,500,000 shares -
none outstanding -
]
I
- Preferred stock not subject to mandatory redemption (see accompanying statement) - 218,497 218,497 '!
Preferred stock subject to mandatory redemption (see accompanying statement)- 676 702 long-term debt (see accompanying statement) - 1,833,623- 1,777,153 ~j Unamortized discount and premium on debt (10,134) (10,498) Total capitalization - .4,311,716 4,192,022 ACCOMULATED BEFERREBINCOME TAXES - 1,349,239 1,360,159 ACCUMULATED DEFERRES INVESTMENT TAX CREDITS 172,705 178,887 REGULATORY LIA81HTY (Note 7) 229,333 266,399 ACCUMULATED PROVisl0N FOR NUCLLAR DECOMMIS$10NING 55,579. 46,093 OTHER DEFERREO CREDITS AND LIABILITIES 131,543 92,227 CONSTRUCTION COMMITMENTS AND CONTINGENCIES (Notes 9,10, and 11) CURRENT LIABILITIES: Current maturity oflong-term debt 68,318' 30,539 Accounts payable 61,575 153,474 Wages payable 35,045 37,326 13ank loans .- 59,600 Accumulated deferredincome taxes 28,574 28,871 income taxes accrued .36,481 25,147 Other taxes accrued '16,954 17,578 Interest accrued 55,909 41,252 Dividends declared 3,301 3,301 Other 68,429 62,695 Etid current liabilities 374,586 459,783 TOTAL CAPITAL AND LIABILITIES $6,624,701 $6,595.570 23
1 F LONG TERM DEBT UNiONEucimecomNv;
- Ghousands of Dollars)
December 31,1994 December 31,1993 FIRST MOR1 GAGE BONOS SERIES - note (a)
'4%% Due 1995 $ - S 35,000' '
4%% Due 1995 : -- 3,000
- 5 %% Due 1996 30,000 30,000 i: ' 5 %% Due 1996 5,000 5,000 1
5 %% ~ Due 1997 40,000 40,000 - 5%% Due 1997 5,000 5,000.- 6%% Due 1999 100,000 100,000- , 8.33% Due 2002 75,000 75,000 . 7,65% Due 2003 100,000 100,000 6%% Due 2004 188,000 188,000 7%% Due 2004 85,000 85,000 6%% Due 2008 148,000 148,000 L 7.40% Due 2020- note (b) 60,000 60,000 8%% Due 2021 125,000 125,000 8% Due 2022 85,000' 85,000 8%% Due 2022 104,000 104,000 7.15% Due 2023 75,000 75,000 7% Due 2024 100,000 -- 5.45% Due 2028 - note (b) 44,000 44,000 . UNSECURED LOANS-note (c) Commercial paper- note (d) -- 25,000 : MISSOURI ENVIRONMENTAL IMPROVEMENT - Revenue bonds, 1984 Series A due 2014- note (e) 80,000 80,000 1984 Series B due 2014 -note (e) 80,000 .80,000 1985 Series A due 2015-note (0 70,000 70,000 1985 Series B due 2015-note (0 56,500 56,500 1991 Series due 2020-note (0 42,585 42,585 1992 Series due 2022-note (0 47,500 47,500 NUCLEAR FUEL LEASE-note (g) 88,038 68,568 LONG TERM DEBT- note (h) S1,833,623 $1,777,153 (a) At December 31,1994, substantially all of the property and plant was mortgaged under, and subject to liens of, the respective indentures pursuant to which the bonds were issunt. (b) Environmentalimprovement Series. (c) A bank credit agreement due 19W 1rrmits the Company to borrow up to S200 million. Interest rates will vary depending on market conditions , and the Company's wk ction of various options under the agreement. At Decembn 31,1994, no such borrowings were outstanding. (d) A bank credit agreement duc 1997 permits the Company to borrow or to support commercial paper borrowings up to $300 million. Interest rates will vary depending on market conditions. At December 31,1994, no such borrowings were outstanding. , (c) On June 1 of each year, the interest rate is established for the following year, or alternatively at the option of the Company, may be fixed until maturity. A per annum rate of 3.75% is effective for the year ending May 31,1995. Thereafter, interest rates will depend on market conditions and the nek ction of an annual versus remaining life rate by the Company. (0 Interest rater., and the periods during which such rates apply, vary depending on the Company's selection of certain defined rate modes. De average interest rates for the twelve months ended December 31,1994, for 1985 Series A,1985 Series B,1991 Series and 1992 Series bonds , were 2.85% 2.91% 3.07% and 3.12% respectively. (g ) In addition to Nuclear Fuel trase long-Term Debt, at December 31.1994 and 1993,830 million and $31 million, respectively, were included under current maturity of king-term debt. ( h) The estimated fair value oflong-term debt at December 31,1994 is $1,728,346.000. This estimate is based primarily on market values of actual or comparable securities at year end. He estimate may not represent actual values of financial instruments that could have been realized as of year end or that may be realized in the future. See Notes to Financial Statements on pages 27 through 32, 24
[ { t 't O , E' PREFERRED STOCK mientuCTaitCOMPAny [TThousandsof Dollarn) : ilt
- December 31,1994 December 31,1993 '
PREFERRED STOCK NOT SUBJECT TO MANDATORY REBEMPTION:
. Preferred stock outstanding without par value' ,
F: ; (entitled to' cumulative dividends) - note (a) , iStated value of $100 per share- ..
$7,64 ' Series - 330,000 shares ~ $ 33,000 $ 33,000 -
. $7,44 Series - 330,001 shares '33,000 33,000 L
. $6.40 Series -' . 300,000 shares 30,000 30,000 - -
$5.50 Series A- 14,000 shares l 1,400 1,4001
, $5.50 Series B - 3,000 shares 300 :-300
' $4.75 Series '- E 20,000 shares . -2,000 - 2,000:
$4.56 Series - 200,000 sharest 20,000 20,000 :
$4.50 Series '- 213,595 shares - 21,359 21,359 a
' $4.30 Series - 40,000 shares 4,000 14,000
$4,00 Series - 150,000 shares : 15,000 15,000
$3.70 Series - 40,000 shares , , 4,000 4,000 -
$3.50 Series - 130,000 shares 13,000 13,000 Stated value of $25.00 per share -
- $1,735 Series- 1,657,500 shares 41,438 41,438 TOTAL PREFERRED STOCK NOT SURJECT TO MANDATORY REDEMPTION 8218,497 S218.497: 4 i
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION: l' referred stock outstanding without par value (entitled to cumulative dividends) - note (a) ! Stated value of $100 per share- !
- $6.30 Series - 6,760 and 7,020 shares at respective dates, due 2020- note (b) $676 $702 :
TOTAL PREFERRED STOCK SURJECT TO MANDATORY REDEMPil0N 8676 $702 (a) Authorized Union Electric Company total preferred stock-25.000,000 sharen. 0)) The Comgany in required to retire 200 shares at $100 per share on June 1 of each year. See Notes to Financial Statements on pages 27 through 32. , 25
n:
' STATEMENT OF RETAINED EARNINGS vNmNEucmccomm
' Ghousands of Dollars)
Year 1994 Year 1993 Year 1992 BALANCE AT BEGINNING OF PERl00 - $ 977,880 $ 93g,919 $ 877,029 Add: Netincome , 320,757 297,160 302,748-1,298,637- 1,232,079- 1,179,777 Deduct: Preferred stock' dividends
- 13,252 14,087 14,058-Common stock cash dividends - $2.395, $2.335, and $2.26 per share, respectively 244,586 238,459 230,800 i Cjapital stock expense - 33 1,653 ;
257,871 254,199 244,858 , BALANCE AT CLOSE OF PERIOD $1,040,766 S 977.880 $ 934,919
- (Under mortgage indentures as amended, free and unrestricted retained earnings at December 31,1994 amounted to $1,005.284.000.)
Preferred stock dividends include dividends declared, applicable to subsequent periods. F STATEMENT OF OTHER PAID IN CAPITAL Ohousands of Dollars) Year 1994 ' Year 1993 Year 1992' BALANCE AT BEGINN,NG OF PERIOD $717,669 $718,482 $718,507 . Capital stock expense - (813) (25) , BALANCE AT CLOSE OF PERIGO $717,669 $717,669 $718,482 1 i SELECTED QUARTERLY INFORMATION mnaudited>- Ghousands of Dollars Except Per Share Amounts) on Per Share Operating Operating Net Common - of Stock Revenues Income income Stock Outstanding QUARTER ENDE0: March 31,1994 $438,900 $ 65,151 $ 38,226 $ 34,913 $.34 March 31,1993 452.966 75,049 44,204 40,523 .40 June 30,1994 532,944 127,806 97,392 94,078 .92 June 30,1993 512,209 115,298 86,846 83.401 .82 September 30,' 1994 677,240 205,473 166,475 163,163 1.60 September 30,1993 689,330 188,513 161,288 157,641 1.54 December 31,1994 407,032 51,756 18,664 15,351 .15 December 31,1993 411,499 32,437 4,822 1,508 .01 i Net income and Earnings on Common Stoc k for the fourth quarter of 1993 reflect the Callaway Plant refueling, the effect of which decreased earnings on common stock by about $21 million ($.20 per share). The cost of flooding in the Company's service territory in 1993 reduced earnings on common stock by $10 million (S.10 per share) primarily in the third quarter. See Notes to Financial Statements on pages 27 through 32.
-N
NOTES TO FINANCIAL STATEMENTS =0N ascrRic cOMrANr NOTE 1 -
SUMMARY
OF ACCOUNTING POLICIES common stockholders
- equity) applicable to'the Company's The Company is regulated by the Missouri Public Service construction program are capitalized as a cost of construction.
; Commission, Illinois Commerce Commission, and the Federal - . His accounting practice offsets the effect on earnings of the Energy Regtdatory Commission. He accounting policies of ' cost of financing current construction, and treats such financing the Company are in accordance with the rate-making practices costs in the same manner as construction charges for labor and of the regulatory authorities having jurisdiction and, as such, materials.
conform to generally accepted accounting principles as applied Under accepted rate-making practice, cash recovery of AFC, as
- to regulated public utilities. Following is a description of the well as other construction costs, occurs when completed
' Company's significant accounting policies: projects are placed in service and reflected in customer rates.
Property and Plant AFC rates are established by the Company consistent with the ne cost of additions to and betterments of units of property methodology prescribed by the Federal Energy Regulatory and plant is capitalized. Cost includes labor, material. Commission. Average annual AFC rates were 8.9% in 1994, applicable taxes, and overheads, plus an allowance for funds 7.8% in 1993, and 6.2% in 1992. used during construction. Maintenance expenditures and the Callaway Hate Phase-In Plans renewal of items not considered um.ts of property are charged He Callaway rate phase-in plans effective .m 1985 as a result of to income as incurred. When um.ts of depreciable property are
.. regulatory commission orders provided for the .
retired, the origmal cost and removal cost, less salvage, are partial deferral of a cash recovery of costs related to the charged to accumulated depreciat. ion. Callaway Plant during the early years of the plans with Depreciation recovery of such deferrals in the later years of the plans. Depreciation is provided over the estimated hves of the various A 1987 order of the Missouri Public Service Commission classes of depreciable property by applying composite rates on a provided that $159 million of deferred costs at December 31, straight 4ine basis. The provision for depreciation in 1994,1993, . 1987, applicable to M.issoun be recovered .m rates over the five and 1992 was approximately 3% of the average depreciable cost. 988 k@ 1991 Nuclear Fuel Revenues
%e cost of nuclear fuel is amortized to fuel expense on a unit of-The Company accrues on its books estimated, but unbilled, production basis. Spent fuel disposal cost is charged to expense revenue.
based on kilowatthours sold. Operating Revenues include excise taxes of $97.9 million, I"# * "" $97.8 million and $93.0 million for the years 1994,1993,and Effective January 1993, the Company adopted Statement of 1992, respectively. Financial Accounting Standards (SFAS) No.109, " Accounting for Income Taxes". Under SFAS No.109, deferred tax assets NOTE 2-OEBT RETIREMENT PROVISIONS and liabilities are recognized for the tax consequences of During the five years from December 31,1994, the amounts of transactions that have been treated differently for financial debt maturities totaling S248 million are: $68 million in 1995; $35 reporting and tax return purposes, measured using statutory million in 1996; S45 million in 1997, and $100 million in 1999. tax rates. Amounts for years subsequent to 1995 do not include nuclear fuellease payments since the amounts of such payments are not Investment tax credits utilized in prior years were deferred currently determinable. and are being amortized over the usefullives of the properties to which they relate. Debt retirement provisions contained in some mortgage bond indentures of the Company require, subject to certain Alhnvance for Funds Used During Construction alternatives, the redemption annually of 1% of the principal Allowance for funds used during construction (AFC) .is a utility amount (as defined) of each series of bonds. In substantially all
.industry account.ing pract. ice whereby the cost of instances, as permitted by the indentures, the Company has borrowed funds and the cost of equity funds (preferred and been pledging property additions in lieu of such redemptions.
27 l
! NOTES TO FINANCIAL STATEMENTS Um0NEtEctmcc0mNr (Continued) -
NOTE 3-SNORTTERM RORROWINGS 1992, the total interest charges under the lease were S5.2 Short-term borrowings of the Company consist of bank loans million, $3.1 million, and S4.4 million (based on average (maturities generally on an overnight basis) and commercial = interest rates of 4.7%,3.6%, and 4.3%, respectively) of which paper (maturities generally within 1045 days). At December $2.7 million, St.4 million, and $1.3million, respectively, were ' 31,1994, no such borrowings were outstanding.1he weighted . capitalized. average interest rate on borrowings outstanding for each of the NOTE 5-PREFERREO STOCK L periods ended December 31,1993 and 1992 was 3.3% DW Ge Mee years ended December 31,1994, preferred At December 31,1994, the Company had committed bank lines - stock, without par value, was issued or redeemed as follows: of credit aggregating $184 million (all of which were unused) issued 1,657,500 shares, S1.735 Series and 330,000 shares,' S7.64 - which make available interim financing at various rates of' Series in 1993; redeemed 350,000 shares, S8.00 Series and interest 'r,wd c., I.lBOR, the bank certificate of deposit rate, . - 425,000 shares, $8.00 Series of 1971 in 1993. The Company - or other options, and in support of which the Company has retired 260 shares S6.30 Series in 1994,1993, and 1992. agreeraents with its lending banks to pay annual fees up t Preferred stock Redernption Price - 0.125% 'lhese lines of credit are renewable annually at various - 7 Fr W e~j dates throughout the year. 87.64 series $103.82 (a)
$7.44 series 101.00 NOTE 4-NUCLU.R FUEL LEASE $6.40 series 101.50 I
. The Company has a lease agreement which provides for the ,'^ 3$ ' financing of nuclear fuel. Effective February 1,1994, the $4.75 series 102.176 maximum amount which may be financed under the agreement $4.56 series 102.47 I was increased from S100 million to $120 million. Pursuant to the j"" terms of the lease, the Company has assigned to the lessor St.00 series 105.625 certain contracts for purchase of nuclear fuel.1he lessor obtains. 8330 series 104.75 -
. through the issuance of commercial paper or from direct loans 83.50 series 11 m ,
under a committed revolving credit agreement from commercial s 2 c) g g 3 banks, the necessary funds to purchase the fuel and make . .. ta) lleginning February 15. 200'I. eventually declining to S100 gr share-. m
, ierest payments when due. (b) In the event of voluntary liquidation. s105.50.
(c) On or after August 1.1998. The Company is obligated to reimburse the lessor for all (d)'the company is required to retire 260 shares at $100 per share on expenditures for nuclear fuel, interest, and related costs. June l of cach ycar. Obligations under this lease become due as the nuclear fuel is consumed at the Company,s Callaway nuclear plant. The NOTE 6 - PREFERRE0 STOCK MANDATORY RE0EMPil0N
. PROVISIONS
' Company reimbursed the k*ssor $34.5 million during 1994, $55.0 million during 1993, and $54.3 million during 1992. During each of the five years 1995 through 1999, the Company - will be required to redeem $26,000 of the preferred stock The Company has capitalized the cost, including certain outstanding at December 31,1994. interest costs, of the leased nuclear fuel and has recorded the related lease obligation. During the years 1994,1993,and 28
- NOTE 7-lNCOME TAXES expected to occur when the temporary differences reverse, Total income tax expense for 1994 resulted in an effective tax . has been recorded along with a corresponding deferred tax .
rate of 39% on earnings before income taxes (38% in 1993 and liability. ~ Also, a Regulatory Liability recognizing the lower :
- 39% in 1992) The principal reasons such rates differ from the expected revenue resulting from reduced income taxes statutory Federal rate are as follows: associated with amortizing accumulated deferred investment
~1994 1993 1992 tax credits, has been recorded. The deferred tax asset Statutory Federal income tax rate 35% ' 35% ~34% corresponding to this Regulatory liability has been combined increawen (Decreases) from:
Depreciation differences with the deferred tax liabilities. 1 2 1 Calb y rate phase-in plans ' 2 g ] SFAS No.109 requires that deferred tax liabilities be adjusted hiiscellaneous, net . (1). _(1) jl) - _ for enacted changes in tax laws or rates. Accordingly, the
- Effective income tax rate 39% 38% 395 Company reduced its deferred tax liabilities for amounts income tax expense components for the years shown are previ usly recorded in excess of the current statutory rate, Recognizing that regulators will probably reduce future es follows (in thousands):
revenues for these excess tax deferrals, the reduction in the
- - M- -
deferred tax liability was credited to the Regulatory Liability. Taxes currently payable Mng . M increasd M aMs and HaWes at In di i r i g expenses $232,811 $147.062 $147.887 included in other income. December 31,1994 and 1993, by approximately $732 million Miscellaneoun. net (4,373) (7.874) 11.586 and $762 million, respectively, but did not affect the Company's
. Deferred taxca earnings on common stock in these years. - (principally Federal):
Included in operating expenses - Under SFAS No.109, temporary differences gave rise to deferred tax assets and deferred tax liabilities at year end 1994 trN it f ( ) - Other (8,795) 2.394 1.630 and 1993 as follows (in millions): Included in other income- 1994 1993 I)epreciation differences 816 9.638 6,978 Depreciation k 8b $ (hi Other 963 1,477 (1,246) Regulatory asset-net 503 496 Deferred investment tax credits, net Capitalized taxes and expenses 117 127 included in operating expenses (6.182) (7.626) (7,414) Deferred benefit costs (41) (30) Disallowed plant costs (10)
--(10)
Total income tax expense 8_.2. _03,82_7 S._182 _,716 $_19.~7,009 Total accumulated deferred income tax liabilities $1,378 S1,389 Effective January 1993, the Company adopted SFAS No.109, NOTE 8-RETIREMENT BENEFITS
" Accounting for income Taxes." Prior to 1993, in accordance lhe Company has non-contributory, defined-benefit retirement with accepted ratemaking practice, deferred income taxes were plans covering substantially all of its employees. Benefits are not provided for certain temporary differences flowed through based on the employees' years of service and compensation.
to customers and the equity component of Allowance for Funds The Company's funding policy is to contribute annually at least Used During Construction. SFAS No.109 requires recognition the minimum amount required by government funding of the income tax effect of such temporary differences. standards, but not more than can be deducted for Federal Accordingly, a Regulatory Asset, representing the probable income taxes. Plan assets consist principally of common stocks recovery from customers of future income taxes which is and fixed income securities. 29
_ +.. e - , NOTES TO FINANCIAL STATEMENTS emaniciacanui
- (Continued) -
NOTEI-RETIREMENT BENENTS (cont'd) Effective January 1993, the Company' adopted.SFAS Pension costs for the years 1994,1993, and 1992, were No.106 " Employers' Accounting for Postretirement Benefits 1 ( $31 'million, $27 million, and $25 million, respectively, of which other than Pensions," which requires accrual of expected . approxinuitely 18% was charged to construction accounts in ' - postretirement benefit costs during employees' ye'ars'.ofi each of the years. service. Postretirement benefit costs for the years 1994 'and 1993 were $46 million and $53 million, respectively, of which' e The plans' funded status follows (in millions); approximately 18% was charged to construction accounts in e m er 3 each of the years. The Company's transition obligation at
~~
iActuarial present value of benefit 'obligatiom December 31,1994 is being amortized over the next 18 years.? 1 Vested benefit obligation $552 . $607 $492
. 'llie plans' status follows (in millions):
Accumulated benefit obligation $622 $686 : $521 At December 31,' ; 1994.' 1993 J Projected benefit obligation for service km p d de
*m eligible for benefits $ 42 $ 47 less: I t fair value (
de Deficiency of plan annets vemus Other active employees - 60 _109-projected benefit obligation 73 - 82 17 linrecognized net gain 18 4 55 Total benefit obligation -290 325 Prior nervice cost not yet recognized in net Unrecognized - transition obligation (225) . (265) -
. periodic pennion cost (89) (93)- (84) - gain /(loss) ~~
4- (21) : threcognized net assets at transition 10 11 12 Accrued postretirement benefit costs $ 69'
~
69 Accrued pension coat
$ 12 $4 $ _ --. _ . -
Pension costs include the following components (in millions): follows (in millions):
~~1994 ~~1993 "^1992 ..
Serdce coat - benefits earned during Service cont - benefits earned during the period . .$ 11 $9 the period $ 21 S 18 $ 17 Interest cost on projected benefit obligation i 214 .28 Interest cost on projected benefit obligation 60 Amordzadon - transition obligation 13- 16 ; 59 56 Actual return on plan annets 8 (89) (52) - unrecognized loss 1 - Net amortization and deferral (58) _ 39 4 Net periodic cost $ 46 '$ 53 .g
~ ~
Pension cost 6 31 $J $ 25
~ ~ ~ ~ ~
Assumptions for the obligation measurements are Assumptions for actuarial present value of projected benefit as follows:
- obligations are as follows:
Discount rate at measurement date . 8.5% 7.25% _1994 1993 1992 Medical cost trend rate-Initial 11.0 % ' 11.25% Discount rate at measurement date 8.5% 7.25% 8.5% - ultimate 6.0% 5.25% t increase in future compensation 5.5% 4.25% 6m 11timate medical cost trend rate expected in year 2000 2000 Plan annets long-term rate of return 8.5% 8.5% 8.5% A one percent increase in the medical cost trend rate is in addition to providing pension benefits, the Company provides estimated to increase the net periodic cost and the certain health care and life insurance benefits for retired accumulated postretirement benefit obligation by employees. Substantially all of the Company's employees may approximately $3 million and $22 million, respectively. i become eligible for those benefits if they reach retirement age while working for the Company. Prior to 1993, the costs of Adopting SFAS 106 reduced the Company's earnings on . retiree heahh care and life insumnce lwnefits were recognized common stock by $14 million or 14 cents per share in 1994 and -
$20 million or 20 cents per share in 1993.
on the basis of claims paid. For 1994,1993, and 1992, the actual - claims paid were $15.6 million, $14.6 million, and $13.5 million. respectively. 38
k i
/ f
~
- NTE 9-CMSTWCilH CellIllTIIENTS _ available, the Company will self-insure the risk. - Although the
! De Company is engaged in a construction program under - Company has no reason to anticipate a serious nuclear which expenditures averaging approximately $290 million- . incident, if one did occur it could have a material but including AFC are anticipated during each of the next five undeterminable adverse effect on the Company's f'mancial-yearsf position.
MTE 10-CONTINGEllCIES _ . Under the Clean Air Act Amendments of 1990, the Companyis 7the Company's insurance coverage for its Callaway Plant is as required to reduce total annual emissions of sulfur dioxide significantly by the year 2000.' Significant reductions in gggjgg Type and So'urce of Coverage -
~
nitrogen oxide will also be required. -With switching to low-
- (Millions of Dollars) Maximum sulfur coal and early banking of emission credits, the Company.
Maximum Assessments for anticipates that it can comply with the requirements of the law Coverages Singleincidents . , , with no significant revenue increases because the related Public liability: Amt rlean Nuclear Insurers $ 200.0 $- ' capital costs, estimated at about $300 million, are largely offset
' Pool Participation 8,720.3' ; 79.3(a) - by lower fuel costs. 'At year-end 1994 about 65 percent of the L Nuclear Worker Liability; an a a sa n expenM L American Nuclear insurers $ 200.0(c) $ 3.1 As of December 31,1994, the Company was designated a Proprty I)amage:
American Nuclear insurers S 500.0 $- potentially responsible party (PRP) by federal and state J Nuclear Electric lnsurancel.td. 2,250.0(d) 19.6 environmental protection agencies at five hazardous waste
$2,750.0 $ 19.6 sites. Other hazardous waste sites have been identified for' 1 1 Insurance ttd. S 419.l(e) S 3.2 which the Company may be responsible but has not been designated a PRP. The Company continually reviews the
.__ _ ____ _ ~'i (c) Retrospective premium under the lMce-Anderson liability provisions of remediation costs that will be' required for these sites.
the Atomic Energy Act of 1954, as amended. (PriceAnderson). Subject to retrospective assessment with respect to loss from an meident at any llowever, such costs are not expected to have a material tLS. reactor. payable nt $10 million per year, adverse _effect on the Company's financial position. (b) limit of liability for each Incident under PriceAnderson. (c) Total industry potential liability from workers claiming exposure to the .The Company-is involved in legal and administrative-hazard of nuclear radiation. "Ihe policy includes an automatic - proceedings before various courts and agencies with reinctatement thereby providing total coverage of $400 million. (dlincludes up to $250 million for premature decommissiomng costs m respect to matters arising in the ordinary course of business, excess of costs previously collected. - some of which involve substantial amounts. ne Company (c) Weekly indemnity of $3.1 million, for 52 weeks which commences after the first 21 weeks of an outage, plus 82.5 million per week for 104 believes that the final disposition of these proceedings will not have a mater,al adverse effect on its financ,ali pos,t,on. weeks thereafter. i ii Price-Anderson limits the liability for claims from an incident in November 1992, the Missouri Public Service Commission
-involving any licensed U.S. nuclear facility. Such limit is based (MoPSC) approved.a settlement among various parties
- on the number of licensed reactors and is adjusted at least involving the Company's Missouri electric rates. Under the every five years based on the Consumer Price Index. Utilities terms of the settlement, rate decreases for all classes of owning a nuclear reactor cover this exposure through a Missouri electric customers reduced 1993 annual revenues by combination of private insurance and mandatory participation approximately $42 million.
in a financial protection pool as established by Price-Anderson. See Management's Discussion and Analysis -IJguidity and if losses from a nuclear incident at Callaway Plant exceed the Capital Resources for information regarding the Company's limits of, or are not subject to, insurance, or if coverage is not acquisition and sales of electric properties. 31
t
~ ; NOTES TO FINANCIAL. STATEMENTS umoN meme comm (Continue (0 -
p NOTE 11-cALLAWAY NUCLEAR PLANT Accounting Standards Board is reviewing the accounting for removal costs, including nuclear decommissioning. Under the' Nuclear Waste Policy Act of 1982, the U.S.
' Department of Energy (DOE) is responsible for the Electric rates charged to customers provide for recovery of permanent storage and disposal of spent nuclear fuel. DOE Callaway Plant decommissioning costs over the life of the . currently charges one mill per kilowatthour sold for future - plant, based on an assumed 40-year life, ending with expiration disposal of spent fuel. Electric rates charged to customers of the plant's operating license in 2024. The Callaway site is-provide for recovery of such costs. DOE is not expected to assumed to be decommissioned using the DECON have its permanent storage facility for spent fuel available until (immediate dismantlement) method. Decommissioning costs, at least 2010. He Company has sufficient storage capacity at including decontamination, dismantling and site restoration, the Callaway Plant site until 2005 and has viable storage are estimated to be $383 million in current year dollars and are alternatives under consideration. Each alternative will likely expected to escalate 4.5% per year through the end of.
reluire Nuclear Regulatory Commission approval and maY decommissioning activity in 2033. Decommissioning costs are -- require other regulatory approvals. %e delayed availability of charged to depreciation expense over Callaway's service life DOE's' disposal facility is not expected to adversely affect the and amounted to $6.7 million in each of the years 1994 and continued operation of the Callaway Plant. 1993, and $1.7 million in 1992. Every three years, the MoPSC The Balance Sheet at December 31,1994, includes a $21 requires the Company to file updated cost studies for decommissioning Callaway and electric rates may be adjusted
.million liability and a corresponding asset representing a at such times to reflect changes in assumptions. Costs special DOE assessment on all utilities owning nuclear plants.
collected from customers are deposited in an external trust The assessment is for the future decontamination, decom. fund established to provide for Callaway's decommissioning. missioning and reclamation of DOE uranium enrichment Fund earnings are expected to average 10.4% through 2017 facilities. It will be paid and charged to expense and recovered in rates owr the next 14 years. and 8.4% thereafter. If the assumed return on trust assets is not earned, the Company believes " is probable that such The staff of the Securities and Exchange Commission has earnings defic.iency will be recove - in rates. Trust fund questioned certain accounting practices of the electric utility earnings, net of expenses appear the balance sheet as.
. dustry, regard.mg the recognit. ion, measurement and in increases in Nuclear decommissioning trust fund and in the classification of decommissioning costs for nuclear generating . .
Accumulated prov. .ision for nuclear decomm.issiomng. stations. In response to these questions, the Financial his report and the financial statements contained herein are submitted for the information of the stockholders of the Company and are not intended to induce, or for use in connection with, any sale or purchase of any securities of the Company. l l, 32
f',;' ~
? OPERATING STATISTICS mismC=CC0nAni a. > + <
1994' 1993 1992' -1991 '1990 :
. s i ELECTRIC OPERATING REVENUES (000): .. ;, f Residential . $ ? 800,117 $ 817,713 - S 754,667. $ - 831,106 $ ' 763,539 :
Commercial 1705,505; 684,446 .676,7611 685,799 673,037: iIndustrial . )368,450 :'373,353- '410.370: . 395,116 1411,809-
- Other electric utilities t :61,985' l 59,160 . 57,226 65,317 : 62,167 =
' Miscellaneous .33,476- 31,308~ 30,444 - 28,920 - 28,619.
- TOTAL ELECTRIC OPERATING REVENUES ' $1,969,533 ' $1,965,980 ! $1,929,468. $2,006,258 $1,939,171l
' RlLOWATTN004 SALES (000,000):
~ Residential '10,619 10,867 L 9,690 10,646 9,810
- Commercial : '11,393- 10,989 - 10,553 10,678 10,276 Industrial - ~ 8,203 - ;8,003 - 9,030 8,524 8,706 :
Other electric utilities "1,623 1,580 - 1,488 1,623 1,511 Miscellaneous :137: 139- 144 139 142 TOTAL KILOWATTN00R SALES 31,975. 31,578 30,905 31,610 30,445 *
- ELECTRIC CUSTOMERS (End of year):
Residential 985,609 976,390 972,153 . 962,629 - .957,102; Commercial 1128,505 ~ 126,542 125,196 ~ 122,152 121,090 l Industrial 6,228 6,605 6,530 6,778 . 6,752 ! Electric utilities 17 17 19 20 21 Other - -1,628 1,630 1,599 1,599 1,644 j
. TOTAL ELECTRIC CUSTOMERS . .1,121,987: 1,111,184 -1,105,'497 -1,093,178 1,086,609 RES40ENTIAL CUSTOMER D ATA'(Average):
. Kilowatthours used 10,80J 11,151 . 9,864 11,106 10,283 ~
~
. Annualelectric bill $816,25. $839.11 $768.20 $867.00 $800.80 Revenue per kilowatthour 7.54c 7.52C 7.790 7.810 . 7.780 l GROSS INSTANTANEOUS
- PEAR DEMAND (Kilowatts) 7,430,000. 7,540,000 7,135,000 7,365,000 - 7,465,000 .
CAPARILITY AT TIME Of PEAK, INCLUDING NET PURCHASES (Kilowatts) 8,469,000 8,597,000 8,'407.000 8,285,000 8,132,000. [
^
L GENERATING CAPA81UTY AT k TIME OF PEAK (Kilowatts) 8,057,000 7.963,000 7,868,000 7,868,000 7,760,000 C0AL BURNED (Tons) 11,444,000 9,803,000 10,314,000 10,732,000 10,643,000 !
. PRICE PER TON 0f C0AL $24,49 $31.66 $31.96 $32.26 $33.85
~
33 5
~
SELECTED FINANCIAL;lNFORMATION nm0NaEctmec0=ANv Ohousands of Dollars Except Shares and Per Share Amounts and Ratios)
~1994 1993~ 1992 1991 RESULTS OF OPERAil0NS:
$2,056,116 - $2,066,004 . $2,015,121 $2,096,940 -
. Operating revenues Operating expenses : '1,605,930 .1,654,707 1,603.104 1,614,127 450,186 411,297 412,017; 482,813
' Operating income .
Callaway rate phase-in plans - - ' -- 60 107 , Deferred costs disallowed . . .- Callaway Unit No. I costs disallowed, net - - loss on cancellation of : Callaway Unit No. 2, net - Allowance for allfunds used during construction 11,280 11,544 8,022 8,519 _ Gain on sales of electric property, net - .
- 18,099 .
Miscellaneous, net . 403 - 3,919 (131) (2,718)
-.(141,112) (129,600) (135,319) (167,209)
Interest 320,757 297,160 302,748 321,512 Netincome 13,252 14,087 14,058 14,059 Preferred stock dividends Earnings en common stock 307,505 283,073 288,690 307,453 Average common shares outstanding 102,123,834 102,123,834 102,123,834 102,123,834 ASSETS OBLIGATIONS, AND EQUITY CAPITAL (YEAR ENO):
' $6,624,701 $6,595,570 $5,797,363 $5,733,479 Totalassets long-term debt obligations 1,823,489 1,766,655 1,659,553 1,730,277 Preferred stock subject to mandatory redemption - 676 702 728 754 Preferred stock not subject to .
mandatory redemption - 218,497 218,497 217,784 217,784 Common equity 2,269,054 2,206,168 ~ 2,164,020 2,106,155 FINANCIALIN01CES: Earnings per share of common stock (based on average shares outstanding) $3.01 $2.77 $2.83 $3.01 Cash dividends per share of common stock $2.395 ' $2.335 - $2.26 $2.18 Return on average common stock equity 13.84% 13.01% 13.70% 14.99% Ratio of earnings to fixed charges (a) 4.68 4.66 ' 4.66 4.21 Book value percommon share $22.22 ' $21.60 - . $21.19 $20.62 CAPITAllZATION RATIOS (YEAR EN0): Common equity . 52.6% . 52.6% 53.5% 51.9% Preferred stock not subject to mandatory redemption 5.1 5.2 5.4 . 5.4 .' Preferred stock subject to mandatory redemption . - - - long-term debt 42.3 42.2 41.1 42.7 100.0% '100.0% 100.0% 100.0% (a) Earnings used in computing the ratio of earnings to fixed charges consist of net income plus fixed charges (interest on debt. amortization of debt discount, premium and expense, and a portion of rentals representative of the interest factor) and income taxes. 34
1990 1989 1988 1987 1986 1985 1984
$2,023,017 $2,010,306 S2,029.107 $1,946,411 $1,807,182 $1,591,763 $1,412,414 1,565,477 1,543,838 1,544,953 1,457,957 1,287,572 1,173,187 1,172,128 457,540 466,468 484,154 488,454 519,610 418,576 240,286 237 227 2,408 92,791 59,861 74,631 -
- - - (23,169) - - -
- - - - - (234,780) -
- (30,196) - - - - -
14,145 17,908 14,885 20,477 15,812 106,754 329.669 9,881 7,769 (10,648) (15,714) 3,947 (1,709) 1,619 (187,584) (176,571) (199,241) (228,961) (247,409) (254,320) (247,308) 294,219 285,605 291,558 333,878 351,821 109,152 324,266 14,693 19,134 30,425 36,522 49,245 49,836 50,185 279,526 266,471 261,133 297,356 302,576 59,316 274,081 102,123,834 102,123,834 102,123,834 102,123,834 102,123,834 100,403,016 96,574,699 S5,702,341 $5,760,322 $5,827,246 $5,957,811 $5,895,211 SS,738,620 $5,819,996 1,948,024 2,106,776 2,188,614 2,357,615 2,436,092 2,454,687 2,457,381 780 806 60,832 64,608 165,384 173,160 178,936 218,004 227,582 279,784 354,784 354,784 354,784 354,784 2,021,299 1,954,481 1,895,360 1,837,156 1,743,189 1,630,466 1,695,239
$2.74 $2.61 $2.56 $2.91 $2.96 $0.59 .$2.84
$2.10 $2.02 $1.94 $1.92 $1.86 $1.78 $1.72 14.16% 14.03% 14.08% 16.79% 18.16% 3.81% 17.23%
3.57 3.63 3.35 3.30 2.79 1.14 2.88
$19.79 $19.14 $18.56 S17.99 S17.07 $15.97 $17.10 48.3% 45.6% 42.8% 39.8% 37.1% 35.3% 36.2%
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DIRECTORS AND OFFICERS miniacimecoway BOARS Of BiREcTORS . ADVISERS TO Tile BOARD
- William E. Cornelius Charles J. Dengherty Paul A. Agathen Retired Chairman and Retired Chairraan and Vice President - Environmental Chief Executive Officer Chief Executive Officer and Safety.
- nomas A. Hays Isaac H. Grainger M. Patricia Harrett Deputy' Chairman -De May - Retired President- Vice President- Corporate Department Stores Company, ChemicalBank Communications a nationwide retailing organization.
James J. Heisman
- nomas H.Jacobsen Vice President- Customer Service
** Chairman, President, and Chief Executive Officer- Mercantile OFFICERS Donald W. Capone Bancorporation Inc., a bank Vice President- Engineering and -
holding company. Charles W. Mueller Construction ' President and
"- Richard A. LJddy .
Chief Executive Officer William J. Carr President and Chief Executive Officer- Vice President-RegionalWest General American lifeInsurance Donald E. Brandt Company, which provides insurance Senior Vice President- William E.Jaudes Finance and Corporate Vice President and GeneralCounsel products and services. Services
- John Peters MacCarthy R. Alan Kelley Charles A. Hremer Vice President- Energy Supply
. Chairman and Chief Executive Officer-Boatmen's Trust Company. Senior Vice President-Information Services Herbert W. loeh which conducts a general Vice President-lluman Resources trust business. . .
Robert O. Pienmg
., Senior Vice President - Michael J. Montana
~
Power Operations Vice President - Industrial Relations res dent h f Executive Officer-P. L Miller & Associates, a Donald F. Schnell Gary L Rainwater management consulting firm. Senior Vice President- Vice President-Corporate Planning Nuclear Charles W. Mueller Garry L Randolph President and Charles J. Schukal Vice President - Nuclear Operations . Chief Executive Officer Senior Vice President - Customer Services William A. Sanford Robert H. Quenon Vice President- Supply krvice Retired Chairman of the Board - Peabody Holding Company,Inc. Robert J. Schukai Vice President- Power Plants
** Harvey Saligman Retired Chairman of the Board - William C. Shores INTERCO INCORPORATED. Vice President- Regional East
- Janet McAfee Weakley Jerrel D. Smith
" President. Janet McAfee. Inc., Vice President- Environmental a residential real estate company, and Safety (retired February J.1995)
- Member of Executive Committee Ronald C. Zdellar
*
- Member pf Auditing Committee Vice President-Transmission r
and Distribution Joseph M. Pfeifer Controller James C. %ompson Secretary Jerre E. Birdsong Treasurer
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