Item 2. Properties
The Company's principal electric generating stations at December 31, 1993, are as follows:
Net Kilowatts Accredited Major Generating Name and Location of Station Fuel Type Capability
Duane Arnold Energy Center, Palo, Iowa Nuclear 371,000 (1) Ottumwa Generating Station, Ottumwa, Iowa Coal 339,840 (2) Prairie Creek Station, Cedar Rapids, Iowa Coal 234,000 Sutherland Station, Marshalltown, Iowa Coal 145,500 Sixth Street Station, Cedar Rapids, Iowa Coal 66,000 Peaking Turbines, Marshalltown, Iowa Oil 210,000 Diesel Stations, all in Iowa Oil 12,200 Burlington Generating Station, Burlington, Iowa Coal 211,800 Grinnell Station, Grinnell, Iowa Gas 47,200 George Neal Unit 3, Sioux City, Iowa Coal 144,200 (3) Total generating capability 1,781,740
(1) The capability represents the Company's 70% ownership interest in the 530,000 Kw generating station. The other owners are Central Iowa Power Cooperative (20%) and Corn Belt Power Cooperative (10%). The plant is operated by the Company.
(2) The Company owns 48% of this 708,000 Kw generating station. The plant is operated by the Company.
(3) This represents the Company's 28% ownership interest in this 515,000 Kw generating station which is operated by an unaffiliated utility.
At December 31, 1993, the transmission lines of the Company, operating from 34,000 to 345,000 volts, approximated 4,259 circuit miles (all located in Iowa). The Company owned 107 transmission substations (all located in Iowa) with a total installed capacity of 8,426.4 MVa and 464 distribution substations (all located in Iowa) with a total installed capacity of 2,445.3 MVa.
The Company's principal properties are suitable for their intended use and are held subject to liens of indentures relating to its First Mortgage Bonds.
Item 3.
Item 3. Legal Proceedings
On December 24, 1990, IS filed in the United States Federal District Court (Court) for the Southern District of Iowa, a Complaint for Declaratory and Other Relief against the Iowa Department of Transportation (IDOT) for declaratory relief and contribution under CERCLA to recover costs that have been and will be incurred by IS (subsequently the Company) in connection with FMGP clean-up costs related to certain real property located in the City of Burlington, Iowa, and nearby areas, including the Mississippi River. On February 11, 1991, IDOT filed an Answer and Counterclaim against IS pursuant to CERCLA, alleging that it had incurred costs and expenses in excess of $1.3 million responding to the release of contamination and requesting judgment against IS for such costs and for all such future costs. Subsequently, in correspondence to IS's counsel, IDOT alleged that it had incurred in excess of $4.7 million in response costs.
On June 3, 1993, the Court approved a Settlement Agreement and Order Confirming Settlement between IS (subsequently the Company) and IDOT. Under the terms of the agreement, the Company and IDOT agreed to dismiss the suit and countersuit discussed above. Additionally, the Company and IDOT have agreed to a cost-sharing arrangement for future investigation and clean-up costs at the Burlington site, whereby the Company will absorb the next $15 million of such costs and 75% of additional costs thereafter, to the extent any such costs are incurred pursuant to clean-up plans acceptable to regulatory agencies. The Company will also supervise the investigation and clean-up activities.
Reference is made to Notes 4 and 12 of the Notes to Financial Statements for a discussion of the Company's rate proceedings and environmental matters. Also see Item 1. "Business - Environmental Matters."
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
At a special meeting of the IE preferred shareholders held on October 22, 1993, the proposed merger of IE and IS was voted upon and approved. A summary of the results of the vote is as follows:
Shares Eligible Shareholder Class to Vote For Against Abstain
4.30% preferred 120,000 110,917 - 308 4.80% preferred 146,406 91,625 267 2,535 6.10% preferred 100,000 63,174 - 2,853
The Company's sole common shareholder, Industries, approved the merger on May 4, 1993.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
All outstanding common stock of the Company is held by its parent (Industries) and is not publicly traded.
The amounts of dividends declared for the last two years are as follows:
Quarter Dividends Declared (000's) First Quarter $ 10,000 Second Quarter 5,700 Third Quarter 3,800 Fourth Quarter 11,800 $ 31,300
First Quarter $ 13,231 Second Quarter 3,000 Third Quarter 4,462 Fourth Quarter 4,028 $ 24,721
Under terms of the Fifty-fifth and Fifty-sixth Supplemental Indentures relating to Series W and Series X First Mortgage Bonds, the Company has agreed that no cash dividends shall be paid or declared, nor shall any distribution be made on any capital stock, nor shall any shares of such stock be purchased, redeemed or otherwise acquired for any consideration by the Company or any subsidiary of the Company, if after immediately giving effect to such payment, distribution or retirement, (A) the principal amount of all outstanding defined Unsecured Indebtedness exceeds 20% of defined Total Capitalization, or (B) the aggregate amount of all such payments, distributions and retirements made since December 31, 1987 exceeds net income since December 31, 1987 plus $50,000,000. Pursuant to these terms, at December 31, 1993, $18,209,000 of retained earnings was restricted as to the payment of cash dividends. The Company may periodically pay cash dividends on any shares of its preferred or preference stock at any time issued and outstanding, provided that all such payments shall be included in the above payments as determined since December 31, 1987.
Item 6.
Item 6. Selected Financial Data
The following selected financial data, in the opinion of the Company, includes adjustments, which are normal and recurring in nature, necessary for the fair presentation of the results of operations and financial position. See Item 7.
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in the components of net income and financial condition during the years 1993 and 1992. See Note 1 of the Notes to Financial Statements for a discussion of the merger of Iowa Electric Light and Power Company (IE) and Iowa Southern Utilities Company (IS), effective December 31, 1993, that formed the Company.
RESULTS OF OPERATIONS
The Company's net income increased $23.5 million during 1993 and decreased $1.8 million during 1992. The 1993 results reflect the acquisition of the Iowa service territory of Union Electric Company (UE) (as discussed in Note 3 of the Notes to Financial Statements) and a return to more normal weather conditions in the Company's service territory. The floods in Iowa in 1993 did not significantly affect the Company's results of operations. The 1992 results were adversely affected by extremely cool summer weather and a mild winter in the Company's service territory.
The Company's operating income increased $25.0 million and $0.6 million during 1993 and 1992, respectively, as compared to prior years. Reasons for the changes in the results of operations are explained in the following discussion.
ELECTRIC REVENUES
Electric revenues and Kwh sales (excluding off-system sales) increased $87.5 million and 25%, respectively, during 1993. In 1992, electric revenues and Kwh sales decreased $19.6 million and 1.5%, respectively. The 1993 sales increase is attributable to the acquisition of the UE territory and a return to more normal weather conditions. After adjusting for these items, underlying electric sales increased 6% in 1993, which reflects the economic growth in the industrial and commercial customer base.
The 1992 Kwh sales decrease reflects unusually mild weather conditions in the Company's service territory. Residential sales, which are the most weather sensitive, decreased 9.5%. However, industrial sales, which are less sensitive to weather, increased approximately 5.5%. Adjusting for the effects of weather, Kwh sales increased 2.7%, reflecting economic growth in the Company's service territory.
The Company's electric tariffs include energy adjustment clauses (EAC) that are designed to currently recover the costs of fuel and the energy portion of purchased power billings to customers. See Note 2(g) of the Notes to Financial Statements for discussion of the EAC. The increase in electric revenues for 1993 is primarily because of the sales increase and increased recovery of fuel costs through the EAC.
The revenue decrease in 1992 was primarily related to the lower Kwh sales discussed above and lower off-system sales to other utilities. A rate decrease in the former IS service territory that became effective in September 1991 contributed to the revenue decrease to a lesser extent. These items were partially offset by the effect of the rate increase in the former IE service territory that became effective in December 1991. See Note 4(b) of the Notes to Financial Statements for a discussion of the electric rate case in the former IE service territory.
GAS REVENUES
Gas revenues increased $14.9 million and $8.4 million during 1993 and 1992, respectively. Gas sales in therms (including transported volumes) increased 5.3% in 1993 and were flat in 1992. Gas sales also reflect the effects of weather. Adjusting for the effects of weather, gas sales decreased 1.5% in 1993 and increased 1.5% in 1992.
The Company's tariffs include purchased gas adjustment clauses (PGA) that are designed to currently recover the cost of gas sold. See Note 2(g) of the Notes to Financial Statements for discussion of the PGA.
Gas revenues increased in 1993 and 1992 substantially because of increased costs of gas recovered through the PGA and the effect of gas rate increases in the former service territory of both IE and IS, that became effective in September 1992. The 1993 sales increase also contributed to the revenue increase for that year. See Note 4(a) of the Notes to Financial Statements for a discussion of the gas rate increases.
STEAM REVENUES
Steam revenues increased $1.1 million during 1993 and decreased $0.6 million during 1992, primarily related to fluctuations in sales volumes among large industrial customers.
OPERATING EXPENSES
Fuel for production increased $14.3 million in 1993 because of increased availability of the Company's fossil-fueled generating stations, which experienced extended maintenance outages in 1992, and because of increased sales. Fuel for production decreased $17.8 million during 1992 primarily because of a nuclear refueling outage at the Duane Arnold Energy Center (DAEC), maintenance outages at the fossil-fueled generating stations and the lower electric sales. There were refueling outages in 1993 and 1992, but no such outage in 1991. The decrease in Kwh generation during the refueling and maintenance outages was substantially replaced by purchased power.
Purchased power increased $18.7 million in 1993, of which approximately $14.7 million represents increased energy purchases and approximately $4.0 million is a net increase in capacity charges. The increase in energy purchases is because of the increased Kwh sales. The increased capacity costs reflect the contracts associated with the acquisition of the UE service territory, partially offset by the expiration, in April 1993, of the purchase power agreement with the City of Muscatine. (See Note 12(b) of the Notes to Financial Statements). Purchased power increased $4.5 million in 1992 because of increased purchases during the refueling and maintenance outages, partially offset by lower purchases related to lower off-system sales.
Gas purchased for resale increased $7.5 million and $5.1 million during 1993 and 1992, respectively. The increases are primarily because of increased per unit gas costs, and in 1993, increased sales.
Other operating expenses increased $3.6 million in 1993 and decreased $5.2 million during 1992. The 1993 increase is primarily because of increased labor and benefit costs and higher electric and gas transmission and distribution costs, partially offset by lower non-labor costs at the DAEC. The 1992 decrease was substantially related to a regulatory disallowance of $3.9 million recorded in April 1991, after the Iowa Utilities Board (IUB) denied recovery of previously deferred former manufactured gas plant (FMGP) clean-up costs. Lower non-labor costs at the DAEC and lower Nuclear Regulatory Commission fees, partially offset by increased labor and benefit costs, also affected 1992.
Maintenance expenses increased $6.6 million during 1993 and were flat in 1992. The 1993 increase is primarily because of increased maintenance at the Company's fossil-fueled generating stations and the DAEC. The 1992 maintenance expenses reflect increased maintenance at fossil-fueled generating stations, substantially offset by lower maintenance costs at the DAEC.
Depreciation and amortization increased during both years primarily because of increases in utility plant in service, including the acquisition of the UE territory on December 31, 1992. An increase in the average gas utility property depreciation rate, resulting from an updated depreciation study, also contributed to the 1993 increase. Depreciation and amortization expenses for both years include $5.5 million for the DAEC decommissioning provision, which is collected through rates.
Property taxes increased $4.8 million during 1993, primarily because of the acquisition of the UE service territory and increases assessed values.
Federal and state income taxes included in operating expenses increased $18.0 million in 1993 primarily because of increases in taxable income and an increase of 1% in the Federal statutory income tax rate. Such income taxes decreased $1.9 million in 1992 primarily because of adjustments of $1.5 million recorded in the second quarter of 1992 to previously recorded tax reserves and a reduction in taxable income.
INTEREST EXPENSE
Interest expense (long-term debt and other combined) increased in 1993 and 1992 primarily because of an increase in the average amount of debt outstanding. A reduction in the average interest rate in 1993 substantially offset the effect of the higher average outstanding debt. The lower average interest rate reflects the refinancing of certain long-term debt issues at lower rates and lower-cost short-term borrowings outstanding for interim periods between the redemption of certain long-term debt series and the issuance of their long-term replacements. Interest expense related to the Company's reserves for rate refunds also contributed to the increase in 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily attributable to its construction programs and debt maturities. Cash and temporary cash investments increased $16.6 million during 1993. In 1993, cash flows from operating activities were $149 million. These funds were primarily used for construction and acquisition expenditures and to pay dividends.
It is anticipated that the Company's future capital requirements will be met by cash generated from operations and external financing. The level of cash generated from operations is partially dependent upon economic conditions, legislative activities, environmental matters and timely rate relief. (See Notes 4 and 12 of the Notes to Financial Statements). Access to the long-term and short-term capital and credit markets is necessary for obtaining funds externally.
The Company's liquidity and capital resources will be affected by environmental and legislative issues, including the ultimate disposition of remediation issues surrounding the FMGP issue, the Clean Air Act as amended, the National Energy Policy Act of 1992, and Federal Energy Regulatory Commission (FERC) Order 636, as discussed in Note 12 of the Notes to Financial Statements. Consistent with rate making principles of the IUB, management believes that the costs incurred for the above matters will not have a material adverse effect on the financial position or results of operations of the Company.
The IUB has adopted rules which require the Company to spend 2% of electric and 1.5% of gas gross retail operating revenues annually for energy efficiency programs. Energy efficiency costs in excess of the amount in the most recent electric and gas rate cases are being recorded as regulatory assets. At December 31, 1993, the Company had $18.5 million of such costs recorded as regulatory assets. The Company will make its initial filing for recovery of the costs in 1994.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program anticipates expenditures of $150 million for 1994, of which approximately 44% represents expenditures for electric transmission and distribution facilities, 18% represents fossil-fueled generation expenditures and 10% represents nuclear generation expenditures. Substantial commitments have been made in connection with such expenditures.
The Company's levels of construction and acquisition expenditures are projected to be $149 million in 1995, $144 million in 1996, $149 million in 1997 and $160 million in 1998. It is estimated that approximately 80% of construction expenditures will be provided by cash from operating activities (after payment of dividends) for the five year period 1994-1998.
Capital expenditure and investment and financing plans are subject to continual review and change. The capital expenditure and investment program may be revised significantly as a result of many considerations including changes in economic conditions, variations in actual sales and load growth compared to forecasts, requirements of environmental, nuclear and other regulatory authorities, acquisition opportunities, the availability of alternate energy and purchased power sources, the ability to obtain adequate and timely rate relief, escalations in construction costs and conservation and energy efficiency programs.
LONG-TERM FINANCING
Other than periodic sinking fund requirements which the Company intends to meet by pledging additional property, $124 million of long-term debt, including four series of First Mortgage Bonds aggregating $123 million, will mature prior to December 31, 1998. The Company intends to refinance the majority of the debt maturities with long-term debt.
In order to provide an up-to-date instrument for the issuance of bonds, notes or other evidence of indebtedness, the Company has entered into an Indenture of Mortgage and Deed of Trust dated September 1, 1993 (New Mortgage). The lien of the New Mortgage is subordinate to the lien of the Company's first mortgages until such time as all bonds issued under the first mortgages have been retired and such mortgages satisfied. The New Mortgage provides for, among other things, the issuance of Collateral Trust Bonds upon the basis of First Mortgage Bonds being issued. Accordingly, to the extent that the Company issues Collateral Trust Bonds on the basis of First Mortgage Bonds, it must comply with the requirements for the issuance of First Mortgage Bonds under the Company's first mortgages. Under the terms of the New Mortgage, the Company has covenanted not to issue any additional First Mortgage Bonds under its first mortgages except to provide the basis for issuance of Collateral Trust Bonds.
In November 1993, the Company entered into arrangements with various cities in the State of Iowa (Cities), whereby the Cities issued an aggregate of $19.4 million of pollution control revenue refunding bonds (PCRRBs), all at 5.5%, due 2023. Each series of the PCRRBs is secured, in part, by payments on a corresponding principal amount of Collateral Trust Bonds, at 5.5%, due 2023. The proceeds received by the Company in the transaction were used to redeem $10.2 million of Pollution Control Obligations, 5.75%, due serially 1995-2003 and an aggregate of $9.2 million of First Mortgage Bonds, Series P & Q, 6.7%, due 2006.
In October 1993, the Company sold $100 million aggregate principal amount of Collateral Trust Bonds, 6% Series, due 2008, and 7% Series, due 2023. A portion of the proceeds from the Collateral Trust Bonds was used to retire short-term debt, with the balance used for general corporate purposes, including support of the Company's construction program.
In May 1993, the Company redeemed First Mortgage Bonds Series K, 8-5/8%, principal amount of $20 million, and Series R, 8-1/4%, principal amount of $25 million and First Mortgage Bonds Series 8-3/4%, principal amount of $15 million. The redemptions were completed with proceeds from short-term borrowings and, as discussed above, long-term debt was ultimately issued to replace the short-term borrowings.
The Indentures pursuant to which the Company issues First Mortgage Bonds constitute direct first mortgage liens upon substantially all tangible public utility property and contain covenants which restrict the amount of additional bonds which may be issued. At December 31, 1993, such restrictions would have allowed the Company to issue $258 million of additional First Mortgage Bonds. The Company intends to file in the first quarter of 1994 with the FERC for authority to issue $250 million of long-term debt. The Company is currently authorized by the SEC to issue $50 million of long-term debt under an existing registration statement. The Company expects to issue up to $150 million in 1994. The proceeds are expected to be used for the early redemption of three series of First Mortgage Bonds aggregating $55 million, which have not yet been called, and for general corporate purposes, including support of its construction program.
The Articles of Incorporation of the Company authorize and limit the aggregate amount of additional shares of Cumulative Preferred Stock and Cumulative Preference Stock which may be issued. At December 31, 1993, the Company could have issued an additional 700,000 shares of Cumulative Preference Stock and 100,000 additional shares of Cumulative Preferred Stock.
The Company's capitalization ratios at year-end were as follows:
1993 1992
Long-term debt 48% 50% Preferred stock 2 2 Common equity 50 48 100% 100%
SHORT-TERM FINANCING
For interim financing, the Company is authorized by the FERC to issue, through 1994, up to $125 million of short-term notes. This availability of short-term financing provides the Company flexibility in the issuance of long-term securities. At December 31, 1993, the Company had outstanding short-term borrowings of $24 million.
The Company has two agreements, both of which expire in 1994, with separate financial institutions to sell up to $65 million of its utility accounts receivable. The Company intends to consolidate the agreements into one new agreement in 1994. At December 31, 1993, the Company had sold $53.2 million under the agreements.
At December 31, 1993, the Company had bank lines of credit aggregating $67.7 million and was using $19.0 million of its lines to support commercial paper and $7.7 million to support certain pollution control obligations. Commitment fees are paid to maintain these lines and there are no conditions which restrict the unused lines of credit. In addition to the above, the Company has an uncommitted credit facility with a financial institution whereby it can borrow up to $50 million. Rates are set at the time of borrowing and no fees are paid to maintain this facility. At December 31, 1993, $5.0 million was borrowed at 3.4% under this facility. The Company also has a letter of credit in the amount of $3.4 million supporting two of its variable rate pollution control obligations.
EFFECTS OF INFLATION
Under the rate making principles prescribed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revenues as depreciation. As a result, the Company has experienced economic losses equivalent to the current year's impact of inflation on utility plant.
In addition, the regulatory process imposes a substantial time lag between the time when operating and capital costs are incurred and when they are recovered. The Company does not expect the effects of inflation at current levels to have a significant effect on its results of operations.
Selected Quarterly Financial Data (unaudited)
The following unaudited quarterly data, in the opinion of the Company, includes adjustments, which are normal and recurring in nature, necessary for the fair presentation of the results of operations and financial position.
Quarter Ended March June September December 31 30 30 31 (in thousands) Operating revenues $193,784 $148,919 $187,392 $183,655 Operating income 24,100 18,095 36,095 25,629 Net income 14,422 10,491 26,213 16,844 Net income available for common stock 14,193 10,262 25,985 16,616
Operating revenues $166,494 $132,843 $145,003 $165,922 Operating income 17,721 15,755 26,034 19,429 Net income 9,522 7,501 17,561 10,707 Net income available for common stock 9,022 7,002 17,059 10,479
The above amounts were affected by seasonal weather conditions and the timing of utility rate changes. Rate activities are discussed in Note 4 of the Notes to Financial Statements.
The 1993 results were affected by the acquisition of the Iowa service territory from Union Electric Company, as discussed in Note 3 of the Notes to Financial Statements. Refer to Management's Discussion and Analysis for discussion of the adverse effect of weather upon 1992 results, primarily in the third quarter.
Item 8.
Item 8. Financial Statements and Supplementary Data
Information required by Item 8. begins on page 48.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company's management has prepared and is responsible for the presentation, integrity and objectivity of the financial statements and related information included in this report. The financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis and, in some cases, include estimates that are based upon management's judgment and the best available information, giving due consideration to materiality. Financial information contained elsewhere in this report is consistent with that in the financial statements.
The Company maintains a system of internal accounting controls which it believes is adequate to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with management authorization and the financial records are reliable for preparing the financial statements. The system of internal accounting controls is supported by written policies and procedures, by a staff of internal auditors and by the selection and training of qualified personnel. The internal audit staff conducts comprehensive audits of the Company's system of internal accounting controls. Management strives to maintain an adequate system of internal controls, recognizing that the cost of such a system should not exceed the benefits derived. In accordance with generally accepted auditing standards, the independent public accountants (Arthur Andersen & Co.), obtained a sufficient understanding of the Company's internal controls to plan their audit and determine the nature, timing and extent of other tests to be performed. No material internal control weaknesses have been reported to management, nor is management aware of any such weaknesses.
The Board of Directors, through its Audit Committee comprised entirely of outside directors, meets periodically with management, the internal auditor and Arthur Andersen & Co. to discuss financial reporting matters, internal control and auditing. To ensure their independence, both the internal auditor and Arthur Andersen & Co. have full and free access to the Audit Committee.
/s/ Lee Liu (Signature)
Lee Liu Chairman of the Board, President & Chief Executive Officer
/s/ Blake O. Fisher, Jr. (Signature)
Blake O. Fisher, Jr. Executive Vice President & Chief Financial Officer
/s/ Richard A. Gabbianelli (Signature)
Richard A. Gabbianelli Controller & Chief Accounting Officer
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of IES Utilities Inc.:
We have audited the accompanying balance sheets and statements of capitalization of IES UTILITIES INC. (an Iowa corporation) as of December 31, 1993 and 1992, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and the financial statement schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IES Utilities Inc. as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules listed in Item 14(a)2 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
As discussed in Note 8 to the financial statements, effective January 1, 1993, IES Utilities Inc. changed its method of accounting for postretirement benefits other than pensions.
/s/ Arthur Andersen & Co. (Signature)
ARTHUR ANDERSEN & CO.
Chicago, Illinois, January 28, 1994
IES UTILITIES INC. STATEMENTS OF INCOME Year Ended December 31 1993 1992 1991 (in thousands) Operating revenues: Electric $550,521 $462,999 $482,578 Gas 154,318 139,455 131,019 Steam 8,911 7,808 8,396 713,750 610,262 621,993
Operating expenses: Fuel for production 87,702 73,368 91,182		 Purchased power 93,449 74,794 70,245 Gas purchased for resale 109,122 101,605 96,504 Other operating expenses 123,210 119,607 124,855 Maintenance 46,219 39,573 39,571 Depreciation and amortization 69,407 64,107 61,466 Property taxes 36,426 31,586 31,770 Federal and state income taxes 39,411 21,422 23,307 Miscellaneous taxes 4,885 5,261 4,800 609,831 531,323 543,700
Operating income 103,919 78,939 78,293
Other income and deductions: Allowance for equity funds used during construction 824 1,831 820 Miscellaneous, net 2,248 2,803 3,950 3,072 4,634 4,770
Interest: Long-term debt 34,926 35,689 31,171 Other 5,243 3,939 5,595 Allowance for debt funds used during construction (1,148) (1,346) (1,266) 39,021 38,282 35,500
Net income 67,970 45,291 47,563 Preferred and preference dividend requirements 914 1,729 2,170 Net income available for common stock $ 67,056 $ 43,562 $ 45,393
The accompanying Notes to Financial Statements are an integral part of these statements.
IES UTILITIES INC. STATEMENTS OF RETAINED EARNINGS
Year Ended December 31 1993 1992 1991 (in thousands) 						 Balance at beginning of year $153,106 $134,822 $134,750 Add: Net income 67,970 45,291 47,563 221,076 180,113 182,313	 		 Deduct: Cash dividends declared - Common stock 31,300 24,721 45,321	 Preferred stock, at stated rates 914 1,665 1,956 Preference stock, at stated rates - 64 214 Preferred stock redemption premiums - 557 - 32,214 27,007 47,491 			 Balance at end of year ($18,209,000 restricted as to payment of cash dividends) $188,862 $153,106 $134,822 	 								
The accompanying Notes to Financial Statements are an integral part of these statements.
IES UTILITIES INC. BALANCE SHEETS December 31 1993 1992 (in thousands) ASSETS Utility plant, at original cost: Plant in service - Electric $1,707,278 $1,641,536 Gas 147,956 137,227 Other 75,845 73,970 1,931,079 1,852,733 Less - Accumulated depreciation 813,312 759,754 1,117,767 1,092,979 Leased nuclear fuel, net of amortization 51,681 48,505 Construction work in progress 41,937 30,324 1,211,385 1,171,808
Current assets: Cash and temporary cash investments 18,313 1,743 Accounts receivable - Customer, less reserve 22,679 24,517 Other 10,330 10,429 Income tax refunds receivable 8,767 - Production fuel, at average cost 14,338 19,418 Materials and supplies, at average cost 26,861 28,765 Adjustment clause balances - 1,217 Regulatory assets 6,421 3,636 Prepayments and other 31,502 26,085 139,211 115,810
Other assets: Regulatory assets 149,978 118,215 Nuclear decommissioning trust funds 28,059 21,327 Deferred charges and other 18,345 13,731 196,382 153,273 $1,546,978 $1,440,891
CAPITALIZATION AND LIABILITIES Capitalization (See Statements of Capitalization): Common stock $ 33,427 $ 33,427 Paid-in surplus 279,042 229,042 Retained earnings 188,862 153,106 Total common equity 501,331 415,575
Cumulative preferred stock 18,320 18,320 Long-term debt 480,074 441,522 999,725 875,417 				 Current liabilities: Short-term borrowings 24,000 92,000 Notes payable - associated companies - 560 Capital lease obligations 15,345 13,211 Sinking funds and maturities 224 224 Accounts payable 47,179 45,384 Dividends payable 5,229 229 Accrued interest 9,438 9,247 Accrued taxes 39,763 41,987 Accumulated refueling outage provision 2,660 7,549 Adjustment clause balances 5,149 - Provision for rate refund liability 8,670 9,020 Other 27,038 17,848 184,695 237,259
Long-term liabilities: Capital lease obligations 36,336 35,294 Liability under National Energy Policy Act of 1992 11,984 12,054 Environmental liabilities 9,130 9,815 Other 25,197 17,645 82,647 74,808
Deferred credits: Accumulated deferred income taxes 237,464 206,099 Accumulated deferred investment tax credits 42,447 47,308 279,911 253,407
Commitments and contingencies (Note 12) 				 $1,546,978 $1,440,891 				
The accompanying Notes to Financial Statements are an integral part of these statements.
IES UTILITIES INC. STATEMENTS OF CAPITALIZATION December 31 1993 1992 (in thousands)
Common equity: Common stock - par value $2.50 per share - authorized 24,000,000 shares; outstanding 13,370,788 shares $ 33,427 $ 33,427 Paid-in surplus 279,042 229,042 Retained earnings 188,862 153,106 501,331 415,575
Cumulative preferred stock - par value $50 per share - authorized 466,406 shares; outstanding 366,406 shares - 6.10% - Outstanding 100,000 shares 5,000 5,000 4.80% - Outstanding 146,406 shares 7,320 7,320 4.30% - Outstanding 120,000 shares 6,000 6,000 18,320 18,320
Long-term debt: Collateral trust bonds - 6% series, due 2008 50,000 - 7% series, due 2023 50,000 - 5.5% series, due 2023 19,400 - 119,400 -
First mortgage bonds - Series J, 6-1/4%, due 1996 15,000 15,000 Series K, 8-5/8%, retired in 1993 - 20,000 Series L, 7-7/8%, due 2000 15,000 15,000 Series M, 7-5/8%, due 2002 30,000 30,000 Series P & Q, 6.70%, retired in 1993 - 9,200 Series R, 8-1/4%, retired in 1993 - 25,000 Series W, 9-3/4%, due 1995 50,000 50,000 Series X, 9.42%, due 1995 50,000 50,000 Series Y, 8-5/8%, due 2001 60,000 60,000 Series Z, 7.60%, due 1999 50,000 50,000 6-1/8% series, due 1997 8,000 8,000 9-1/8% series, due 2001 21,000 21,000 7-3/8% series, due 2003 10,000 10,000 7-1/4% series, due 2007 30,000 30,000 8-3/4% series, retired in 1993 - 15,000 339,000 408,200
Pollution control obligations - 5.75%, retired in 1993 - 10,200 4.90% to 5.75%, due serially 1994 to 2003 3,920 4,144 5.95%, due 2007, secured by First mortgage bonds 10,000 10,000 Variable rate (3.15% at December 31, 1993), due 2000 to 2010 11,100 11,100 25,020 35,444
Unamortized debt premium and (discount), net (3,122) (1,898) 480,298 441,746
Less - Amount due within one year 224 224 480,074 441,522 $ 999,725 $ 875,417 						
The accompanying Notes to Financial Statements are an integral part of these statements.
IES UTILITIES INC. STATEMENTS OF CASH FLOWS
Year Ended December 31 1993 1992 1991 (in thousands) Cash flows from operating activities: Net income $67,970 $45,291 $47,563 Adjustments to reconcile net income to net cash flows from operating activities - Depreciation and amortization 69,407 64,107 61,466 Principal payments under capital lease obligations 11,429 11,725 15,471 Deferred taxes and investment tax credits 10,531 (2,406) (13,068) Amortization of deferred charges 860 961 7,778 Refueling outage provision (4,889) (5,503) 11,553 Allowance for equity funds used during construction (824) (1,831) (820) (Gain) loss on disposition of assets, net (655) - 30 Other (1,321) (4,742) (4,026) Other changes in assets and liabilities - Accounts receivable (8,553) (571) (3) Sale of utility accounts receivable 10,490 7,710 (5,000) Accounts payable 5,620 345 569 Accrued taxes (10,991) 6,118 3,375 Production fuel 5,080 2,579 1,234 Adjustment clause balances 6,366 (4,122) 184 Deferred energy efficiency costs (9,747) (6,877) (1,905) Provision for rate refunds (350) 7,528 (197) Other (1,281) (4,519) 2,307 Net cash flows from operating activities 149,142 115,793 126,511 						 Cash flows from financing activities: Dividends declared on common stock (31,300) (24,721) (45,321) Dividends on preferred and preference stock (914) (1,729) (2,170) Proceeds from issuance of long-term debt 119,400 83,400 88,700 Equity infusion from parent company 50,000 - 40,000 Net change in short-term borrowings (68,560) 51,660 (55,750) Sinking fund requirements and reductions in long-term debt and preferred and preference stock (79,624) (39,429) (31,589) Principal payments under capital lease obligations (11,276) (12,337) (14,738) Dividends payable 5,000 - - Other (1,295) 476 (500) Net cash flows from financing activities (18,569) 57,320 (21,368) 						 Cash flows from investing activities:	 Construction and acquisition expenditures (113,212) (171,013) (105,009) Nuclear decommissioning trust funds (5,532) (5,532) (5,505) Proceeds from disposition of assets 837 - 203 Other 3,904 (246) (620) Net cash flows from investing activities (114,003) (176,791) (110,931) 						 Net increase (decrease) in cash and temporary cash investments 16,570 (3,678) (5,788) Cash and temporary cash investments at beginning of year 1,743 5,421 11,209 Cash and temporary cash investments at end of year $ 18,313 $ 1,743 $ 5,421 						 Supplemental cash flow information: Cash paid during the year for - Interest $ 39,747 $ 36,503 $ 36,932 Income taxes $ 40,130 $ 23,640 $ 32,925
Noncash investing and financing activities - Capital lease obligations incurred $ 14,605 $ 1,973 $ 11,874 						
The accompanying Notes to Financial Statements are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS
(1) GENERAL:
IES Utilities Inc. (the Company) is a wholly-owned subsidiary of IES Industries Inc. (Industries) and is subject to regulation by the Iowa Utilities Board (IUB) and the Federal Energy Regulatory Commission (FERC).
On June 4, 1993, Industries announced that its wholly-owned utility subsidiaries, Iowa Electric Light and Power Company (IE) and Iowa Southern Utilities Company (IS), filed applications for regulatory authority to merge. The merger became effective December 31, 1993, following receipt of all necessary Boards of Directors, shareholder and regulatory approvals.
IE is the surviving corporation and has been renamed IES Utilities Inc. The separate existence of IS has ceased. The Company serves a total of 325,000 electric and 170,000 natural gas retail customers as well as 32 resale customers in more than 550 Iowa communities.
The merger was accounted for under a method of accounting similar to pooling of interests, which combined the ownership interests of IE and IS. The assets and liabilities of IE and IS were combined at their recorded amounts as of the merger date.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (a) Regulatory Assets -
The Company is subject to the provisions of Statement of Financial Accounting Standards No. 71 "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). The regulatory assets represent probable future revenue associated with certain incurred costs as these costs are recovered through the ratemaking process. At December 31, 1993, regulatory assets were comprised of the following items, and were reflected in the Balance Sheets as follows:
Regulatory Assets (in millions)
Deferred income taxes (Note 2(b)) $ 88.6 Energy efficiency programs 18.5 Employee pension and benefit costs (Note 8) 14.1 Environmental liabilities (Note 12(f)) 12.9 National Energy Policy Act of 1992 (Note 12(h)) 12.5 FERC Order No. 636 transition costs (Note 12(i)) 5.0 Cancelled plant costs 3.3 Regulatory study costs 1.5 156.4 Less current amounts 6.4 $150.0
Refer to the individual footnotes referenced above for a discussion of the specific items reflected in regulatory assets. The amounts reflected for energy efficiency programs are a result of an IUB mandate whereby 2% of electric and 1.5% of gas gross retail operating revenues are to be expended annually for energy efficiency programs. Under this mandate, the Company will make its initial filing for recovery of the costs in 1994.
(b) Income Taxes -
The Company follows the liability method of accounting for deferred income taxes, which requires the establishment of deferred tax liabilities and assets, as appropriate, for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the financial statements. Deferred taxes are recorded using currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred taxes to reflect the tax effects of temporary differences between the time when certain costs are recorded in the accounts and when they are deducted for tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes are reversed to income. Investment tax credits have been deferred and are subsequently credited to income over the average lives of the related property.
Consistent with ratemaking practices, deferred tax expense is not recorded for certain temporary differences (primarily related to utility property, plant and equipment). Accordingly, the Company has recorded deferred tax liabilities and regulatory assets, as discussed in Note 2(a).
(c) Temporary Cash Investments -
Temporary cash investments are stated at cost which approximates market value and are considered cash equivalents for the Statements of Cash Flows. These investments consist of short-term liquid investments which have maturities of less than 90 days from the date of acquisition and at December 31, 1993, include $15 million invested with affiliated companies.
(d) Depreciation of Utility Property, Plant and Equipment -
The average rates of depreciation for electric and gas properties, including the Company's nuclear generating station, the Duane Arnold Energy Center (DAEC), which is being depreciated over a 36 year life using a remaining life method, were as follows:
1993 1992 1991 Electric 3.5% 3.5% 3.5% Gas 3.5% 3.0% 3.0%
Based on the most recent site specific study, completed in 1992, the Company's 70% share of the estimated cost to decommission the DAEC and return the underlying property to its original state approximated $223 million in 1992 dollars. The study is based on the prompt removal and dismantling decommissioning alternative and is assumed to begin at the end of the DAEC's operating license in 2014. The level of annual recovery through rates of decommissioning costs is $5.5 million, which is deposited in external trust funds, and is based on a remaining life recovery method. The annual recovery level is reviewed and, if necessary, adjusted in each rate case. Decommissioning costs, at the level collected through rates, are included in "Depreciation and amortization" expense in the Statements of Income. In addition to the $28.1 million invested in the external trust funds as indicated in the Balance Sheets, the Company has an internal decommissioning reserve of $21.7 million recorded as accumulated depreciation. Earnings on the external funds are recognized as income and a corresponding amount of interest expense is recorded for the reinvestment of the earnings.
(e) Allowance for Funds Used During Construction -
The allowance for funds used during construction (AFC), which represents the cost during the construction period of funds used for construction purposes, is capitalized as a component of the cost of utility plant. The amount of AFC applicable to debt funds and to other (equity) funds, a non-cash item, is computed in accordance with the prescribed FERC formula. The aggregate gross rates used for 1993-1991 were 5.7%, 9.2% and 8.5%, respectively.
(f) Operating Revenues -
The Company accrues revenues for services rendered but unbilled at month-end in order to more properly match revenues with expenses.
(g) Adjustment Clauses -
The Company's tariffs provide for subsequent adjustments to its electric and natural gas rates for changes in the cost of fuel and purchased energy and in the cost of natural gas purchased for resale. Changes in the under/over collection of these costs are reflected in "Fuel for production" and "Gas purchased for resale" in the Statements of Income. The cumulative effects are reflected in the Balance Sheets as a current asset or current liability, pending automatic reflection in future billings to customers.
(h) Accumulated Refueling Outage Provision -
The IUB allows the Company to collect, as part of its base revenues, funds to offset other operating and maintenance expenditures incurred during refueling outages at the DAEC. As these revenues are collected, an equivalent amount is charged to other operating and maintenance expenses with a corresponding credit to a reserve. During a refueling outage, the reserve is reversed to offset the refueling outage expenditures.
(i) Reclassifications -
Certain prior period amounts have been reclassified on a basis consistent with the 1993 presentation.
(3) ACQUISITION OF IOWA SERVICE TERRITORY OF UNION ELECTRIC COMPANY:
Effective December 31, 1992, the Company acquired the Iowa distribution system and a portion of the Iowa transmission facilities of Union Electric Company (UE) for $65.0 million in cash. The acquisition was accounted for as a purchase. The net book value of the acquired assets was approximately $34.4 million and the amount of the purchase price in excess of the book value ($30.6 million) has been recorded as an acquisition adjustment. The acquisition adjustment is being amortized over the life of the property and is included in "Other income and deductions - Miscellaneous, net" in the Statements of Income. Recovery of the acquisition adjustment through rates will be addressed in future rate proceedings. See Note 12(b) for a discussion of the purchase power contracts with UE associated with this acquisition.
(4) RATE MATTERS: (a) Gas Rate Cases - Former IE Service Territory
In July 1992, IE applied to the IUB for an increase in gas rates of $6.3 million annually, or 5.9%. Effective September 30, 1992, the IUB authorized an interim increase of $5.4 million, subject to refund. On April 30, 1993, the IUB issued its "Final Decision and Order," which approved stipulations between IE and certain intervenors providing for an annual increase in revenues of $5.5 million. IE did not have any refund liability as a result of the Order.
Former IS Service Territory
In July 1992, IS applied to the IUB for an increase in gas rates of $2.3 million annually, or 6.2%. Effective September 30, 1992, the IUB authorized an interim increase of $1.9 million, subject to refund. In February 1993, the IUB approved stipulations between IS and certain intervenors in the proceeding that provided for an annual increase in revenues of $1.6 million. As a result of the Order, IS refunded approximately $0.2 million, including interest, in the second quarter of 1993.
(b) 1991 Electric Rate Case -
In October 1991, IE applied to the IUB for an increase in interim and final retail electric rates of $18.9 million annually, or 6.0%. The IUB approved an interim rate increase of $15.6 million, annually, which became effective in December 1991, subject to refund.
In July 1992, the IUB issued its "Final Decision and Order" approving an annual electric rate increase of $7.9 million. The application of double leverage ratemaking theory to IE's capital structure accounted for approximately $4 million of the difference between the interim rate level and the amount allowed in the Order. After a limited rehearing of the double leverage issue, the IUB issued its "Order On Rehearing" in December 1992, which affirmed the original decision.
IE appealed the IUB's Order to the Iowa District Court (Court). In December 1993, the Court issued its decision, which upholds the IUB's Order. The Company did not appeal the Court's decision to the Iowa Supreme Court.
In the second quarter of 1993, IE refunded approximately $4.1 million, including interest, which represented a refund down to the level of revenues that would have resulted had it won the appeal. An additional refund, including interest, of $8.7 million is required at December 31, 1993, as a result of the Court's decision. The refund is expected to be completed in the second quarter of 1994. There will be no effect on electric revenues and net income when the additional refund is made because the Company has been reserving for the effect of the additional refund.
(5) LEASES:
The Company has a capital lease covering its 70% undivided interest in nuclear fuel purchased for the DAEC. Future purchases of fuel may also be added to the fuel lease. This lease provides for annual one year extensions and the Company intends to exercise such extensions through the DAEC's operating life. Interest costs under the lease are based on commercial paper costs incurred by the lessor. The Company is responsible for the payment of taxes, maintenance, operating cost, risk of loss and insurance relating to the leased fuel.
The lessor has an $80 million credit agreement with a bank supporting the nuclear fuel lease. The agreement continues on a year to year basis, unless either party provides at least a three year notice of termination; no such notice of termination has been provided by either party.
Annual nuclear fuel lease expenses include the cost of fuel, based on the quantity of heat produced for the generation of electric energy, plus the lessor's interest costs related to fuel in the reactor and administrative expenses. These expenses (included in "Fuel for production" in the Statements of Income) for 1993-1991 were $12.4 million, $12.9 million and $17.5 million, respectively.
The Company's operating lease rental expenses for 1993-1991 were $8.4 million, $6.8 million and $7.0 million, respectively.
The Company's future minimum lease payments by year are as follows: Capital Operating Year Lease Leases (in thousands)
1994 $ 16,994 $ 6,511 1995 11,970 6,353 1996 10,784 4,865 1997 9,940 3,420 1998 4,145 3,549 1999-2003 4,111 12,130 57,944 $ 36,828 Less: Amount representing interest 6,263 Present value of net minimum capital lease payments $ 51,681
(6) UTILITY ACCOUNTS RECEIVABLE:
Customer accounts receivable, including unbilled revenues, arise primarily from the sale of electricity and natural gas. At December 31, 1993, the Company was serving a diversified base of residential, commercial and industrial customers consisting of approximately 325,000 electric and 170,000 gas customers.
The Company has entered into two agreements, one with limited recourse, to sell undivided fractional interests of an aggregate of $65 million in its pool of utility accounts receivable. At December 31, 1993, $53.2 million was sold under the agreements. The agreements expire in June and December 1994. The Company intends to consolidate the agreements into one new agreement in 1994.
(7) INCOME TAXES:
The components of federal and state income taxes for the years ended December 31, were as follows: 1993 1992 1991 (in millions) Classified as Federal and State Income Taxes: Current tax expense $ 28.4 $ 24.0 $ 36.3 Deferred tax expense 15.9 0.2 (10.1) Amortization and adjustment of investment tax credits (4.9) (2.8) (2.9) 39.4 21.4 23.3
Included in Miscellaneous, net: Current tax expense (0.9) (0.8) 0.4 Deferred tax expense (0.5) 0.1 (0.2) (1.4) (0.7) 0.2 Total income tax expense $ 38.0 $ 20.7 $ 23.5
The overall effective income tax rates shown below were computed by dividing total income tax expense by income before income taxes.
Year Ended December 31 1993 1992 1991
Statutory Federal income tax rate 35.0% 34.0% 34.0% Add (deduct): Amortization of investment tax credits (2.5) (4.2) (4.0) State income taxes, net of Federal benefits 5.8 5.6 6.4 Property basis and other temporary differences for which deferred taxes are not provided under ratemaking principles 1.5 0.5 2.1 Reversal through tariffs of deferred taxes provided at rates in excess of the current statutory Federal income tax rate (1.7) (2.7) (3.7) Adjustment of prior period taxes (2.0) (2.0) (1.3) Other items, net (0.3) 0.2 (0.4) Overall effective income tax rate 35.8% 31.4% 33.1%
The accumulated deferred income taxes as set forth below and in the Balance Sheets arise from the following temporary differences:
December 31 1993 1992 (in millions)
Property related $ 272 $ 256 Decommissioning related (12) (11) Investment tax credit related (30) (32) Other 7 (7) $ 237 $ 206
(8) BENEFIT PLANS:
The Company has one contributory and two non-contributory retirement plans which, collectively, cover substantially all of its employees. Plan benefits are generally based on years of service and compensation during the employees' latter years of employment. Payments made from the pension funds to retired employees and beneficiaries during 1993 totaled $10.4 million. In addition to these payments, the Company purchased annuities totaling $6.3 million for all previous employees who had retired as of January 1993, under one of the plans. The cost of the annuities and the reduction in the projected benefit obligation were substantially equivalent.
The Company's policy is to fund the pension cost at an amount which is at least equal to the minimum funding requirements mandated by the Employee Retirement Income Security Act (ERISA) and which does not exceed the maximum tax deductible amount for the year.
Pursuant to the provisions of SFAS 71, certain adjustments to the Company's pension provision are necessary to reflect the accounting for pension costs allowed in the most recent rate cases.
The components of the pension provision are as follows:
Year Ended December 31 1993 1992 1991 (in thousands)
Service cost $ 4,275 $ 4,439 $ 4,517 Interest cost on projected benefit obligation 11,131 9,999 8,959 Assumed return on plans' assets (12,177) (11,640) (10,026) Amortization of unrecognized gain (763) (135) (19) Amortization of prior service cost 1,195 938 775 Amortization of unrecognized plans' assets as of January 1, 1987 (384) (382) (392) Pension cost 3,277 3,219 3,814 Adjustment to funding level (2,867) 301 (228) Total pension costs paid to the Trustees $ 410 $ 3,520 $ 3,586
Actual return on plans' assets $ 12,718 $ 8,861 $ 37,085
A reconciliation of the funded status of the plans to the amounts recognized in the Balance Sheets is presented below:
December 31 1993 1992 (in thousands)
Fair market value of plans' assets $ 174,133 $ 177,514 Actuarial present value of benefits rendered to date - Accumulated benefits based on compensation to date, including vested benefits of $100,905,000 and $91,303,000, respectively 110,676 100,288 Additional benefits based on estimated future salary levels 42,938 31,324 Projected benefit obligation 153,614 131,612 Plans' assets in excess of projected benefit obligation 20,519 45,902 Remaining unrecognized net asset existing at January 1, 1987, being amortized over 20 years (4,109) (5,256) Unrecognized prior service cost 16,708 14,961 Unrecognized net gain (28,830) (52,709) Prepaid pension cost recognized in the Balance Sheets $ 4,288 $ 2,898
Assumed rate of return, all plans 8.00% 8.00% Weighted average discount rate of projected benefit obligation, all plans 7.50% 8.25% Range of assumed rates of increase in future compensation levels for the plans 4.00-5.75% 4.00-5.75%
The decrease in the discount rate used to compute the projected benefit obligation, from 8.25% at December 31, 1992 to 7.50% at December 31, 1993, accounted for a significant portion of the reduction in the unrecognized net gain between periods and, similarly, contributed to the increase in the projected benefit obligation at December 31, 1993.
The Company provides certain benefits to retirees (primarily health care benefits). Through 1992, the Company expensed such costs as benefits were paid, which was consistent with ratemaking practices. Such costs totaled $2.2 million for 1992 and $1.9 million for 1991.
Effective January 1, 1993, the Company adopted SFAS 106, which requires the accrual of the expected cost of postretirement benefits other than pensions during the employees' years of service. The IUB has adopted rules stating that postretirement benefits other than pensions will be included in rates pursuant to the provisions of SFAS 106. The rules permit the Company to amortize the transition obligation as of January 1, 1993 over 20 years and require that all amounts collected are to be funded into an external trust to pay benefits as they become due. Beginning in 1993, the gas portion of these costs is being recovered in the Company's gas rates, and are funded in external trust funds; recovery of the electric portion will be addressed in future electric proceedings. The IUB has adopted a rule that permits a deferral of the incremental electric SFAS 106 costs until the earlier of: 1) an order in an electric rate case, or 2) December 31, 1995. Accordingly, pursuant to the provisions of SFAS 71, the Company had deferred $2.9 million of such costs at December 31, 1993, and it expects to file electric rate cases seeking recovery of the deferred costs before December 31, 1995.
The components of postretirement benefit costs for the year ended December 31, 1993, are as follows: (in thousands)
Service cost $ 1,685 Interest cost on accumulated postretirement benefit obligation 3,247 Amortization of transition obligation existing at January 1, 1993 2,024 Postretirement benefit costs 6,956 Less: Deferred postretirement benefit costs 2,858 Net postretirement benefit costs $ 4,098
A reconciliation of the funded status of the plans to the amounts recognized in the Balance Sheets is presented below:
December 31, January 1, 1993 1993 (in thousands)
Fair market value of plans' assets $ 1,171 $ - Accumulated postretirement benefit obligation - Active employees not yet eligible 18,325 18,232 Active employees eligible 4,130 3,698 Retirees 20,140 18,558 Total accumulated postretirement benefit obligation 42,595 40,488 Accumulated postretirement benefit obligation in excess of plans' assets (41,424) (40,488) Unrecognized transition obligation 38,463 40,488 Unrecognized net gain (1,167) - Accrued postretirement benefit cost in the Balance Sheets $ (4,128) $ - Assumed rate of return 8.0% - Weighted average discount rate of accumulated postretirement benefit obligation 7.5% 8.25% Medical trend on paid charges: Initial trend rate 12.0% 13.0% Ultimate trend rate 6.5% 8.0%
The assumed medical trend rates are critical assumptions in determining the service cost and accumulated postretirement benefit obligation related to postretirement benefit costs. A 1% change in the medical trend rates, holding all other assumptions constant, would have changed the 1993 service cost by $1.1 million (22%) and the accumulated postretirement benefit obligation at December 31, 1993 by $6.7 million (16%).
The Company will adopt the provisions of SFAS 112 "Employers' Accounting for Postemployment Benefits" as of January 1, 1994 and its adoption will not have a material effect on the Company's financial position or results of operations. This statement requires that benefits offered to former or inactive employees after termination of employment, but before retirement, be accrued over the service lives of the employees if all of the following conditions are met: 1) the obligation relates to services already performed, 2) the employees' rights vest, 3) the payments are probable, and 4) the amounts are reasonably determinable. Otherwise, such obligations are to be recognized at the time they become probable and reasonably determinable. The Company has generally accounted for these obligations as they were paid.
(9) PREFERRED AND PREFERENCE STOCK:
The Company has 466,406 shares of Cumulative Preferred Stock, $50 par value, authorized for issuance at December 31, 1993, of which the 6.10%, 4.80% and 4.30% Series had 100,000, 146,406 and 120,000 shares, respectively, outstanding at both December 31, 1993 and 1992. These shares are redeemable at the Company's option upon 30 days notice at $51.00, $50.25 and $51.00 per share, respectively, plus accrued dividends.
The Company also has 700,000 shares of Cumulative Preference Stock ($100 par value) authorized for issuance, of which none were outstanding at December 31, 1993.
(10) DEBT: (a) Long-Term Debt -
In November 1993, the Company entered into arrangements with various cities in the State of Iowa (Cities), whereby the Cities issued an aggregate of $19.4 million of pollution control revenue refunding bonds (PCRRBs), all at 5.5%, due 2023. Each series of the PCRRBs is secured, in part, by payments on a corresponding principal amount of Collateral Trust Bonds, at 5.5%, due 2023. The proceeds received by the Company in the transaction were used to redeem $10.2 million of Pollution Control Obligations, 5.75%, due serially 1995-2003 and an aggregate of $9.2 million of First Mortgage Bonds, Series P & Q, 6.7%, due 2006.
In October 1993, the Company sold $100 million aggregate principal amount of Collateral Trust Bonds, 6% Series, due 2008, and 7% Series, due 2023. A portion of the proceeds from the Collateral Trust Bonds was used to retire short-term debt, with the balance used for general corporate purposes, including support of its construction program.
In May 1993, the Company redeemed First Mortgage Bonds Series K, 8-5/8%, principal amount of $20 million, and Series R, 8-1/4%, principal amount of $25 million and First Mortgage Bonds Series 8-3/4%, principal amount of $15 million. The redemptions were completed with proceeds from short-term borrowings and, as discussed above, long-term debt was ultimately issued to replace the short-term borrowings.
The Company's Indentures and Deeds of Trust securing its First Mortgage Bonds constitute direct first mortgage liens upon substantially all tangible public utility property. The Company's Indenture and Deed of Trust securing its Collateral Trust Bonds constitutes a second lien on substantially all tangible public utility property while First Mortgage Bonds remain outstanding.
Total sinking fund requirements, which the Company intends to meet by pledging additional property under the terms of the Company's Indentures and Deeds of Trust, and debt maturities for 1994-1998 are as follows:
Debt maturities (in thousands)
Debt Issue 1994 1995 1996 1997 1998 Sinking Fund Requirements $ 780 $ 780 $ 630 $ 550 $ 550 Pollution Control 224 140 140 140 140 Series W - 50,000 - - - Series X - 50,000 - - - Series J - - 15,000 - - 6 1/8% Series - - - 8,000 - $1,004 $100,920 $ 15,770 $ 8,690 $ 690
The Company intends to refinance the majority of the debt maturities with long-term debt.
(b) Short-Term Debt -
At December 31, 1993, the Company had bank lines of credit aggregating $67.7 million and was using $19.0 million to support commercial paper and $7.7 million to support certain pollution control obligations. Commitment fees are paid to maintain these lines and there are no conditions which restrict the unused lines of credit. In addition to the above, the Company has an uncommitted credit facility with a financial institution whereby it can borrow up to $50 million. Rates are set at the time of borrowing and no fees are paid to maintain this facility. At December 31, 1993, $5.0 million was borrowed at 3.4% under this facility. The Company also has a letter of credit in the amount of $3.4 million supporting two of its variable rate pollution control obligations.
(11) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of financial instruments at December 31, 1993, and the basis upon which they were estimated are as follows:
Current assets and current liabilities - The carrying amount approximates fair value because of the short maturity of such financial instruments.
Nuclear decommissioning trust funds - The estimated fair value of these trust funds, as reported by the trustee based upon current market values, is $29.5 million.
Cumulative preferred stock - The estimated fair value of this stock of $12.8 million is based upon quoted market prices.
Long-term debt - The carrying amount of long-term debt was $480 million compared to estimated fair value of $507 million. The estimated fair value of long-term debt is based upon quoted market prices.
Since the Company is subject to regulation, any gains or losses related to the difference between the carrying amount and the fair value of financial instruments may not be realized by the Company's parent.
(12) COMMITMENTS AND CONTINGENCIES: (a) Construction Program -
The Company's construction and acquisition program anticipates expenditures of approximately $150 million, for which substantial commitments have been made.
(b) Purchase Power Contracts -
The Company has a purchase power contract with Terra Comfort Company (Terra Comfort), a wholly-owned subsidiary of Industries, for annual capacity purchases of 114 Mw that expires on December 31, 1994.
In connection with the acquisition of the UE properties discussed in Note 3, the Company is purchasing power from UE under a five-year firm capacity contract with a 1994 requirement of 120 Mw of delivered capacity declining to 60 Mw in 1997. The Company will also purchase an additional maximum interruptible capacity of up to 54 Mw of 25 Hz power. This 25 Hz power purchase will extend through 1998 and will continue thereafter unless either party gives a three-year notice of cancellation.
The costs of capacity purchases for these contracts are reflected in "Purchased power" in the Statements of Income.
Total capacity charges under all existing contracts will approximate $21.0 million, $14.7 million, $11.4 million, $8.7 million and $0.3 million for the years 1994-1998, respectively.
(c) Coal Contract Commitments -
The Company has entered into coal supply contracts which expire between 1994 and 2001 for its fossil-fueled generating stations. At December 31, 1993, the contracts cover approximately $147 million of coal over the life of the contracts, which includes $34 million expected to be incurred in 1994. The Company expects to supplement these coal contracts with spot market purchases to fulfill its future fossil fuel needs.
(d) Information Technology Services -
In 1992, the Company entered into an agreement with Electronic Data Systems Corporation (EDS) for information technology services. The term of the contract is twelve years and the contract is subject to declining termination fees. The Company's anticipated expenditures under the agreement for 1994 are estimated to be approximately $8.9 million. Future costs under the agreement are variable and are dependent upon the Company's level of usage of technological services from EDS, as well as inflation.
(e) Nuclear Insurance Programs -
The Price-Anderson Amendments Act of 1988 (1988 Act) provides the Company with the benefit of $9.4 billion of public liability coverage consisting of $200 million of insurance and $9.2 billion of potential retroactive assessments from the owners of nuclear power plants. Under the 1988 Act, the Company could be assessed a maximum of $79 million per nuclear incident, with a maximum of $10 million per year (of which the Company's 70% ownership portion would be $55 million and $7 million, respectively) if losses relating to the incidents exceeded $200 million. These limits are subject to adjustments for inflation in future years.
Pursuant to provisions in various nuclear insurance policies, the Company could be assessed retroactive premiums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. With respect to excess property damage and replacement power coverages, the Company could be assessed annually a maximum of $8.5 million and $1 million, respectively, if the insurer's losses relating to accidents exceeded its reserves. While assessments may also be made for losses in certain prior years, the Company is not aware of any losses in such years that it believes are likely to result in an assessment.
(f) Environmental Liabilities -
At December 31, 1993, the Company's Balance Sheet reflects $13.1 million (including $4.0 million as current) of environmental liabilities, which, pursuant to generally accepted accounting principles, represents the minimum amount of the estimated range of such costs that the Company expects to incur. The minimum amount of the range is used because no amount within the range represents a better estimate. These estimates are subject to continuing review.
The Company has been named as a Potentially Responsible Party (PRP) for certain former manufactured gas plant (FMGP) sites by either the Iowa Department of Natural Resources (IDNR) or the Environmental Protection Agency (EPA). The Company is working with the IDNR and EPA to investigate its 27 sites and to determine the appropriate remediation activities that may be needed to mitigate health and environmental concerns. Such investigations are expected to be completed by 1999 and site-specific remediations are anticipated to be completed within 3 years after the completion of the investigations of each site. The Company may be required to monitor these sites for a number of years upon completion of remediation.
The Company is investigating the possibility of insurance and third party cost sharing for FMGP clean-up costs. The amount of shared costs, if any, can not be reasonably determined and, accordingly, no potential sharing has been recorded. Regulatory assets of $12.9 million have been recorded in the Balance Sheets, which reflects the future recovery that is being provided through the Company's rates (See Note 2(a)). Considering the recorded reserves for environmental liabilities and the past rate treatment allowed by the IUB, management believes that the clean-up costs incurred by the Company for these FMGP sites will not have a material adverse effect on its financial position or results of operations.
(g) Clean Air Act -
The Clean Air Act Amendments of 1990 (Act) requires emission reductions of sulfur dioxide and nitrogen oxides to achieve reductions of atmospheric chemicals believed to cause acid rain. The provisions of the Act will be implemented in two phases with Phase I affecting two of the Company's units beginning in 1995 and Phase II affecting all units beginning in the year 2000.
The Company expects to meet the requirements of the Act by switching to lower sulfur fuels and through capital expenditures primarily related to fuel burning equipment and boiler modifications. The Company estimates capital expenditures at approximately $28 million, including $4 million in 1994, in order to meet these requirements of the Act.
(h) National Energy Policy Act of 1992 -
The National Energy Policy Act of 1992 requires owners of nuclear power plants to pay a special assessment into a "Uranium Enrichment Decontamination and Decommissioning Fund." The assessment is based upon prior nuclear fuel purchases and, for the DAEC, averages $1.3 million annually through 2007, of which the Company's 70% share is $0.9 million. The Company is recovering the costs associated with this assessment through its electric fuel adjustment clauses over the period the costs are assessed. The Company's 70% share of the future assessment, $12.7 million payable through 2007, has been recorded as a liability in the Balance Sheets, including $0.7 million included in "Current liabilities - other," with a related regulatory asset for the unrecovered amount (See Note 2(a)).
(i) FERC Order No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992. Order 636 as modified on rehearing, (1) requires the Company's pipeline suppliers to unbundle their services so that gas supplies are obtained separately from transportation service, and transportation and storage services are operated and billed as separate and distinct services, (2) requires the pipeline suppliers to offer "no notice" transportation service under which firm transporters (such as the Company) can receive delivery of gas up to their contractual capacity level on any day without prior scheduling, (3) allows pipelines to abandon long-term (one year or more) transportation service to a customer whenever the customer fails to match the highest rate and longest term (up to 20 years) offered to the pipeline by other customers for the particular capacity, and (4) provides for a mechanism under which pipelines can recover prudently incurred transition costs associated with the restructuring process. The Company may benefit from enhanced access to competitively priced gas supply and more flexible transportation services as a result of Order 636. However, the Company will be required to pay certain transition costs passed on from its pipeline suppliers as they implement Order 636.
The Company's three pipeline suppliers have filed new tariffs with the FERC implementing Order 636 and the pipelines have also made filings with the FERC to begin collecting their respective transition costs. The Company began paying the transition costs in November 1993, and has recorded a liability of $5.0 million for such transition costs that have been incurred by the pipelines to date, including $1.7 million expected to be billed in 1994. While the magnitude of the total transition costs to be charged to the Company cannot yet be determined, the Company believes any transition costs the FERC would allow the pipelines to collect would be recovered from its customers, based upon past regulatory treatment of similar costs by the IUB. Accordingly, regulatory assets, in amounts corresponding to the liabilities, have been recorded to reflect the anticipated recovery.
(13) JOINTLY-OWNED ELECTRIC UTILITY PLANT:
Under joint ownership agreements with other Iowa utilities, the Company has undivided ownership interests in jointly-owned electric generating stations and related transmission facilities. Each of the respective owners is responsible for the financing of its portion of the construction costs. Kilowatt-hour generation and operating expenses are divided on the same basis as ownership with each owner reflecting its respective costs in its Statements of Income. Information relative to the Company's ownership interest in these facilities at December 31, 1993 is as follows:
Ottumwa Neal DAEC Unit 1 Unit 3 ($ in millions) Utility plant in service $ 484 $ 179 $ 43
Accumulated depreciation $ 221 $ 69 $ 22
Construction work in progress $ 7 $ - $ -
Plant capacity - Mw 530 708 515
Percent ownership 70% 48% 28%
In-service date 1974 1981 1975
(14) SEGMENTS OF BUSINESS:
The principal business segments of the Company are the generation, transmission, distribution and sale of electric energy and the purchase, distribution and sale of natural gas. Certain financial information relating to the Company's significant segments of business is presented below:
Year Ended December 31 1993 1992 1991 (in thousands)
Operating results: Revenues - Electric $ 550,521 $ 462,999 $ 482,578 Gas 154,318 139,455 131,019
Operating income (pre-tax) - Electric 128,994 90,891 100,402 Gas 13,750 8,367 (360)*
Other information: Depreciation and amortization - Electric 63,832 59,707 57,612 Gas 5,186 4,024 3,480
Construction and acquisition expenditures - Electric 84,720 154,902 77,646 Gas 12,582 17,308 21,100
Assets - Identifiable assets - Electric 1,288,505 1,226,614 1,115,310 Gas 164,773 141,801 108,851 1,453,278 1,368,415 1,224,161 Other corporate assets 93,700 72,476 79,949
Total assets $1,546,978 $1,440,891 $1,304,110
* Includes a $3.9 million pre-tax write-off of previously deferred FMGP clean-up costs pursuant to disallowance of recovery in an IUB order.
Item 9.
Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons of the Registrant
Information regarding the identification of directors is included in Exhibit 99 and is incorporated herein by reference. Exhibit 99 is primarily an excerpt from IES Industries Inc. definitive proxy statement prepared for the 1994 annual meeting of stockholders, which will be filed on or about April 4, 1994. The executive officers of the registrant are as follows:
Executive Officers of the Registrant (Effective February 1, 1994)
Lee Liu, 60, Chairman of the Board, President & Chief Executive Officer. First elected officer in 1975.
Larry D. Root, 57, President and Group Executive, Energy Delivery and Nuclear Group and Director. First elected officer in 1979.
Rene H. Males, 61, President and Group Executive, Generation and Engineering Group and Director. First elected officer in 1991. (i)
Blake O. Fisher, Jr., 49, Executive Vice President & Chief Financial Officer and Director. First elected officer in 1991. (ii)
Dr. Robert J. Latham, 51, Senior Vice President, Finance and Corporate Affairs, & Treasurer. First elected officer in 1985.
Stephen W. Southwick, 47, Vice President & General Counsel. First elected officer in 1982.
John F. Franz, Jr., 54, Vice President, Nuclear. First elected officer in 1992. (iii)
Phillip D. Ward, 53, Vice President, Engineering. First elected officer in 1990.
Harold W. Rehrauer, 56, Vice President, Field Operations. First elected officer in 1987.
Thomas R. Seldon, 55, Vice President, Human Resources. First elected officer in 1987.
Robert J. Kucharski, 61, Vice President, Administration & Secretary. First elected officer in 1976.
Richard A. Gabbianelli, 37, Controller & Chief Accounting Officer. First elected officer in 1994.
Officers are elected annually by the Board of Directors and each of the officers named above, except Rene H. Males, Blake O. Fisher, Jr. and John F. Franz, Jr., have been employed by the Company (or IS) as an officer or in other responsible positions at such companies for at least five years. There are no family relationships among these officers. There are no arrangements or understandings with respect to election of any person as an officer.
(i) Prior to the appointment of Rene H. Males as an officer of IS in 1990, he was President of Joy Environment Equipment Company of Monrovia, California. He was Senior Vice President for Wisconsin Electric Power Company from 1987 to 1989.
(ii) Prior to the appointment of Blake O. Fisher, Jr. as Executive Vice President & Chief Financial Officer of the Company in January 1991, he was employed by Consumers Power Company as Vice President Finance and Treasurer.
(iii) Prior to the appointment of John F. Franz, Jr. as Vice President, Nuclear in 1992, he was employed by Philadelphia Electric Company as Plant Manager, Peach Bottom Atomic Power Station.
Item 11.
Item 11. Executive Compensation
Information regarding executive compensation is included in Exhibit 99 and is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of certain beneficial owners and management is included in Exhibit 99 and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is included in Exhibit 99 and is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page No.
(a) 1. Financial Statements -
Included in Part II of this report -
Management's Responsibility for Financial Statements. 45 - 46
Report of Independent Public Accountants. 47
Statements of Income for the years ended December 31, 1993, 1992 and 1991. 48
Statements of Retained Earnings for the years ended December 31, 1993, 1992 and 1991. 49
Balance Sheets at December 31, 1993 and 1992. 50 - 51
Statements of Capitalization at December 31, 1993 and 1992. 52
Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991. 53
Notes to Financial Statements. 54 - 81
(a) 2. Financial Statement Schedules -
Included in Part IV of this report -
Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other Than Related Parties for the years ended December 31, 1993, 1992 and 1991. 87
Schedule V - Utility Plant for the years ended December 31, 1993, 1992 and 1991. 88 - 90
Schedule VI - Accumulated Depreciation for the years ended December 31, 1993, 1992 and 1991. 91
Schedule VII - Guarantees of Securities of Other Issuers as of December 31, 1993. 92
Schedule VIII - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 1993, 1992 and 1991. 93
Schedule IX - Short-term Borrowings for the years ended December 31, 1993, 1992 and 1991. 94
Other schedules are omitted as not required under Rules of Regulation S-X.
(a) 3. Exhibits - See Exhibit Index beginning on page 97.
(b) Reports on Form 8-K and Form 8-K/A -
Items Financial Reported Statements Date of Report File No.
5,7 None December 9, 1993 0-4117-1 (1) 5,7 None December 9, 1993 0-849 (2) 2,5,7 None January 7, 1994 0-4117-1 (3) 2,7 None January 7, 1994 0-849 (3) 7 (4) March 2, 1994 0-4117-1 (4)
Notes: (1) Form 8-K filed by Iowa Electric Light and Power Company. (2) Form 8-K filed by Iowa Southern Utilities Company. (3) Form 8-K filed by IES Utilities Inc. subsequent to the merger of Iowa Electric Light and Power Company and Iowa Southern Utilities Company effective December 31, 1993. (4) Form 8-K/A filed by IES Utilities Inc. amending Form 8-K filed on January 7, 1994, File No. 0-4117-1, providing the audited financial statements of the Company for the year ended December 31, 1993.
IES UTILITIES INC. SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES BALANCE AT DECEMBER 31
(in thousands)
Affiliated Company 1991 1992 1993
Cedar Rapids and Iowa City Railway Company $ 54 $ 46 $ 19
IES Industries Inc. 842 613 985
IES Diversified Inc. - - 48
Industrial Energy Applications, Inc. 41 130 21
Total $ 937 $ 789 $1,073
NOTE: All receivables are collected from the affiliated companies within one month, thus all amounts are current and are recorded in the Balance Sheets as Current Assets - Accounts Receivable - Other.
IES UTILITIES INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Column A Column B Column E Balance Balance Description January 1 December 31 (in thousands) 1993: Accumulated provision for uncollectible accounts $ 567 $ 268
Accumulated provision for rate refunds $ 9,020 $ 8,670
1992: Accumulated provision for uncollectible accounts $ 804 $ 567
Accumulated provision for rate refunds $ 1,492 $ 9,020
1991: Accumulated provision for uncollectible accounts $ 727 $ 804
Accumulated provision for rate refunds $ 2,022 $ 1,492
IES UTILITIES INC. SCHEDULE IX--SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
Column A Column B Column C Column D Column E Column F
Average Weighted Category of Weighted Maximum Daily Daily Aggregate Average Amount Amount Average Short-term Balance Interest Outstanding Outstanding Interst Rate Borrowings December 31 Rate During During During the Period the Period the Period
1993: Commercial paper $19,000,000 3.50% $92,000,000 $39,182,000 3.33%
Uncommitted Credit Facility $ 5,000,000 3.40% $ 5,000,000 $ 1,027,000 3.30%
1992: Commercial paper $92,000,000 3.71% $92,000,000 $ 9,160,000 4.14%
1991: Commercial paper $40,900,000 5.02% $51,000,000 $30,298,000 6.43%
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of March 1994.
IES UTILITIES INC.
By /s/ Blake O. Fisher, Jr. Blake O. Fisher, Jr. Executive Vice President & Chief Financial Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated on March 29, 1994:
/s/ Lee Liu Chairman of the Board, President & Lee Liu Chief Executive Officer (Principal Executive Officer)
/s/ Blake O. Fisher, Jr. Executive Vice President & Chief Blake O. Fisher, Jr. Financial Officer and Director (Principal Financial Officer)
/s/ Richard A. Gabbianelli Controller & Chief Accounting Officer Richard A. Gabbianelli (Principal Accounting Officer)
/s/ C.R.S. Anderson Director C.R.S. Anderson
/s/ J. Wayne Bevis Director J. Wayne Bevis
/s/ Robert F. Brewer Director Robert F. Brewer
/s/ Dr. George Daly Director Dr. George Daly
/s/ G. Sharp Lannom, IV Director G. Sharp Lannom, IV
/s/ Salomon Levy Director Dr. Salomon Levy
/s/ Rene H. Males Director Rene H. Males
/s/ Robert D. Ray Director Robert D. Ray
/s/ David Q. Reed Director David Q. Reed
/s/ Larry D. Root Director Larry D. Root
/s/ Henry Royer Director Henry Royer
/s/ Robert W. Schlutz Director Robert W. Schlutz
/s/ Anthony R. Weiler Director Anthony R. Weiler
EXHIBIT INDEX
The Exhibits designated by an asterisk are filed herewith and all other Exhibits as stated to be filed are incorporated herein by reference.
Exhibit
2(a) Agreement and Plan of Merger between IE and IS dated as of June 4, 1993 (Agreement and Plan of Merger) (Filed as Exhibit 2 to the Company's Current Report on Form 8-K, dated June 4, 1993 (File No. 0-4117-1).
2(b) Amendment 1 dated June 16, 1993, to the Agreement and Plan of Merger (Filed as Exhibit 2(b) to the IE Registration Statement on Form S-3, dated September 14, 1993 (File No. 33-68796)).
2(c) Amendment 2 dated September 8, 1993, to the Agreement and Plan of Merger (Filed as Exhibit 2(c) to the IE Registration Statement on Form S-3, dated September 14, 1993 (File No. 33-68796)).
2(d) Amendment 3 dated September 27, 1993, to the Agreement and Plan of Merger (Filed as Exhibit 2(d) to the IE Current Report on Form 8-K, dated December 9, 1993 (File No. 0-4117-1)).
3(a) Articles of Incorporation of the Registrant, Amended and Restated as of January 6, 1994. (Filed as Exhibit 4(b) to the Company's Current Report on Form 8-K, dated January 7, 1994 (File No. 0-4117-1)).
* 3(b) Bylaws of Registrant, Amended as of February 1, 1994.
4(a) Indenture of Mortgage and Deed of Trust, dated as of September 1, 1993, between the Company (formerly IE) and the First National Bank of Chicago, as Trustee (Mortgage) (Filed as Exhibit 4(c) to IE's Form 10-Q for the quarter ended September 30, 1993).
4(b) Supplemental Indentures to the Mortgage:
IE File Number Dated as of Reference Exhibit
First October 1, 1993 Form 10-Q, 11/12/93 4(d) Second November 1, 1993 Form 10-Q, 11/12/93 4(e)
4(c) Indenture of Mortgage and Deed of Trust, dated as of August 1, 1940, between the Company (formerly IE) and the First National Bank of Chicago, Trustee (1940 Indenture) (Filed as Exhibit 2(a) to IE's Registration Statement File No. 2-25347).
4(d) Supplemental Indentures to the 1940 Indenture:
Number Dated as of IE File Reference Exhibit
First March 1, 1941 2-25347 2(a) Second July 15, 1942 2-25347 2(a) Third August 2, 1943 2-25347 2(a) Fourth August 10, 1944 2-25347 2(a) Fifth November 10, 1944 2-25347 2(a) Sixth August 8, 1945 2-25347 2(a) Seventh July 1, 1946 2-25347 2(a) Eighth July 1, 1947 2-25347 2(a) Ninth December 15, 1948 2-25347 2(a) Tenth November 1, 1949 2-25347 2(a) Eleventh November 10, 1950 2-25347 2(a) Twelfth October 1, 1951 2-25347 2(a) Thirteenth March 1, 1952 2-25347 2(a) Fourteenth November 5, 1952 2-25347 2(a) Fifteenth February 1, 1953 2-25347 2(a) Sixteenth May 1, 1953 2-25347 2(a) Seventeenth November 3, 1953 2-25347 2(a) Eighteenth November 8, 1954 2-25347 2(a) Nineteenth January 1, 1955 2-25347 2(a) Twentieth November 1, 1955 2-25347 2(a) Twenty-first November 9, 1956 2-25347 2(a) Twenty-second November 6, 1957 2-25347 2(a) Twenty-third November 4, 1958 2-25347 2(a) Twenty-fourth November 3, 1959 2-25347 2(a) Twenty-fifth November 1, 1960 2-25347 2(a) Twenty-sixth January 1, 1961 2-25347 2(a) Twenty-seventh November 7, 1961 2-25347 2(a) Twenty-eighth November 6, 1962 2-25347 2(a) Twenty-ninth November 5, 1963 2-25347 2(a) Thirtieth November 4, 1964 2-25347 2(a) Thirty-first November 2, 1965 2-25347 2(a) Thirty-second September 1, 1966 Form 10-K, 1966 4.10 Thirty-third November 30, 1966 Form 10-K, 1966 4.10 Thirty-fourth November 7, 1967 Form 10-K, 1967 4.10 Thirty-fifth November 5, 1968 Form 10-K, 1968 4.10 Thirty-sixth November 1, 1969 Form 10-K, 1969 4.10 Thirty-seventh December 1, 1970 Form 8-K, 12/70 1 Thirty-eighth November 2, 1971 2-43131 2(g) Thirty-ninth May 1, 1972 Form 8-K, 5/72 1 Fortieth November 7, 1972 2-56078 2(i) Forty-first November 7, 1973 2-56078 2(j) Forty-second September 10, 1974 2-56078 2(k) Forty-third November 5, 1975 2-56078 2(l) Forty-fourth July 1, 1976 Form 8-K, 7/76 1 Forty-fifth November 1, 1976 Form 8-K, 12/76 1 Forty-sixth December 1, 1977 2-60040 2(o) Forty-seventh November 1, 1978 Form 10-Q, 6/30/79 1 Forty-eighth December 1, 1979 Form S-16, 2-65996 2(q) Forty-ninth November 1, 1981 Form 10-Q,3/31/82 2 Fiftieth December 1, 1980 Form 10-K, 1981 4(s) Fifty-first December 1, 1982 Form 10-K, 1982 4(t) Fifty-second December 1, 1983 Form 10-K, 1983 4(u) Fifty-third December 1, 1984 Form 10-K, 1984 4(v) Fifty-fourth March 1, 1985 Form 10-K, 1984 4(w) Fifty-fifth March 1, 1988 Form 10-Q, 5/12/88 4(b) Fifty-sixth October 1, 1988 Form 10-Q, 11/10/88 4(c) Fifty-seventh May 1, 1991 Form 10-Q, 8/31/91 4(d) Fifty-eighth March 1, 1992 Form 10-K, 1991 4(c) Fifty-ninth October 1, 1993 Form 10-Q, 11/12/93 4(a) Sixtieth November 1, 1993 Form 10-Q, 11/12/93 4(b)
4(e) Indenture or Deed of Trust dated as of February 1, 1923, between the Company (successor to IS as result of merger of IS and IE) and The Northern Trust Company (The First National Bank of Chicago, successor) and Harold H. Rockwell (Richard D. Manella, successor), as Trustees (1923 Indenture) (Filed as Exhibit B-1 to File No. 2- 1719).
4(f) Supplemental Indentures to the 1923 Indenture:
IS File Dated as of Reference Exhibit
May 1, 1940 2-4921 B-1-k May 2, 1940 2-4921 B-1-l October 1, 1945 2-8053 7(m) October 2, 1945 2-8053 7(n) January 1, 1948 2-8053 7(o) September 1, 1950 33-3995 4(e) February 1, 1953 2-10543 4(b) October 2, 1953 2-10543 4(q) August 1, 1957 2-13496 2(b) September 1, 1962 2-20667 2(b) June 1, 1967 2-26478 2(b) February 1, 1973 2-46530 2(b) February 1, 1975 2-53860 2(aa) July 1, 1975 2-54285 2(bb) September 2, 1975 2-57510 2(bb) March 10, 1976 2-57510 2(cc) February 1, 1977 2-60276 2(ee) January 1, 1978 0-849 2 March 1, 1979 0-849 2 March 1, 1980 0-849 2 May 31, 1986 33-3995 4(g) July 1, 1991 0-849 4(h) September 1, 1992 0-849 4(m)
10(a) Agreement dated December 15, 1971 between Central Iowa Power Cooperative and IE. (Filed as Exhibit 5(a) to IE's Registration Statement File No. 2-43131).
10(b) Duane Arnold Energy Center Ownership Participation Agreement dated June 1, 1970 between Central Iowa Power Cooperative, Corn Belt Power Cooperative and IE. (Filed as Exhibit 5(kk) to IE's Registration Statement, File No. 2-38674).
10(c) Duane Arnold Energy Center Operating Agreement dated June 1, 1970 between Central Iowa Power Cooperative, Corn Belt Power Cooperative and IE. (Filed as Exhibit 5(ll) to IE's Registration Statement, File No. 2-38674).
10(d) Duane Arnold Energy Center Agreement for Transmission, Transformation, Switching, and Related Facilities dated June 1, 1970 between Central Iowa Power Cooperative, Corn Belt Power Cooperative and IE. (Filed as Exhibit 5(mm) to IE's Registration Statement, File No. 2-38674).
10(e) Basic Generating Agreement dated April 16, 1975 between Iowa Public Service Company, Iowa Power and Light Company, Iowa- Illinois Gas and Electric Company and IS for the joint ownership of Ottumwa Generating Station-Unit 1 (OGS-1). (Filed as Exhibit 1 to IE's Form 10-K for the year 1977).
10(f) Addendum Agreement to the Basic Generating Agreement for OGS-1 dated December 7, 1977 between Iowa Public Service Company, Iowa-Illinois Gas and Electric Company, Iowa Power and Light Company, IS and IE for the purchase of 15% ownership in OGS-1. (Filed as Exhibit 3 to IE's Form 10-K for the year 1977).
10(g) Fuel Lease dated August 21, 1973, as amended by Amendment No. 1 dated August 29, 1973, and by Amendment dated September 17, 1987, between Arnold Fuel, Inc. and IE for the procurement and financing of nuclear fuel. (Filed as Exhibit 10(l) to IE's Form 10-K for the year 1984).
10(h) Amendment dated as of September 17, 1987 to the Fuel Lease dated as of August 21, 1973 between Arnold Fuel, Inc. and IE. (Filed as Exhibit 10(i) to IE's Form 10-K for the year 1987).
10(i) Second Amended and Restated Credit Agreement dated as of September 17, 1987 between Arnold Fuel, Inc. and the First National Bank of Chicago and the Amended and Restated Consent and Agreement dated as of September 17, 1987 by IE. (Filed as Exhibit 10(j) to IE's Form 10-K for the year 1987).
MANAGEMENT CONTRACTS AND/OR COMPENSATORY PLANS (EXHIBITS 10(j) THROUGH 10(u))
10(j) Service Contract between S. Levy, Incorporated and IE. (Filed as Exhibit 10(m) to IE's Form 10-K for the year 1985).
10(k) Supplemental Retirement Plan. (Filed as Exhibit 10(l) to Industries' Form 10-K for the year 1987).
10(l) Management Incentive Compensation Plan. (Filed as Exhibit 10(m) to Industries' Form 10-K for the year 1987).
10(m) Key Employee Deferred Compensation Plan. (Filed as Exhibit 10(n) to Industries' Form 10-K for the year 1987).
10(n) Long-Term Incentive Plan. (Filed as Exhibit 10(o) to Industries' Form 10-K for the year 1987).
10(o) Executive Guaranty Plan. (Filed as Exhibit 10(p) to Industries' Form 10-K for the year 1987).
10(p) Executive Change of Control Severance Agreement. (Filed as Exhibit 10(s) to Industries' Form 10-K for the year 1989).
10(q) Amendments to Key Employee Deferred Compensation Agreement for Directors. (Filed as Exhibit 10(u) to Industries' Form 10-Q for the quarter ended March 31, 1990).
10(r) Amendments to Key Employee Deferred Compensation Agreement for Key Employees. (Filed as Exhibit 10(v) to Industries' Form 10-Q for the quarter ended March 31, 1990).
10(s) Amendments to Management Incentive Compensation Plan. (Filed as Exhibit 10(y) to Industries' Form 10-Q for the quarter ended March 31, 1990).
10(t) Director Retirement Plan. (Filed as Exhibit 10(t) to Industries' Form 10-K for the year 1993).
10(u) Copy of Supplemental Retirement Income Plan and Form of Supplemental Retirement Income Agreement. (Filed as Exhibit 10-A-6 to File No. 33-3995).
10(v) Agreement for Purchase and Sale of Certain Assets and Real Estate and Assignment of Easements, Leases and Licenses between Union Electric Company (Seller) and IE (Buyer). Filed as exhibit 10(t) to IE's Form 10-K for the year 1991.
10(w) Copy of Coal Supply Agreement, dated July 27, 1977, between IS and Sunoco Energy Development Co., and letter memorandum thereto, dated October 29, 1984, relating to the purchase of coal supplies for the fuel requirements at the Ottumwa Generating Station. (Filed as Exhibit 10-A-4 to File No. 33-3995).
10(x) Receivables Purchase and Sale Agreement. (Filed as Exhibit 10(a) to IE's Form 10-Q for the quarter ended June 30, 1989).
10(y) Terra Comfort Capacity and Energy Agreement dated August 14, 1989 between IE and Terra Comfort Corporation. (Filed as Exhibit 10(n) to IE's Form 10-K for the year 1989).
10(z) Capacity and Energy Agreement dated December 20, 1990 between Terra Comfort Corporation and IE.
10(aa) Operating and Transmission Agreement between Central Iowa Power Cooperative and IE.
10(ab) Capacity and Energy Agreement dated April 3, 1991 between Terra Comfort Corporation and IE. (Filed as Exhibit 10(r) to IE's Form 10-Q for the quarter ended March 31, 1991).
*12 Ratio of Earnings to Fixed Charges.
*23 Consent of Independent Public Accountants.
*99 Director and Officer Information.
Note: Pursuant to (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company has not filed as an exhibit to this Form 10-K certain instruments with respect to long-term debt that has not been registered if the total amount of securities authorized thereunder does not exceed 10% of total assets of the Company but hereby agrees to furnish to the Commission on request any such instruments.