ITEM 1. BUSINESS.
GENERAL
The registrant, Union Electric Company (the "Company"), incorporated in Missouri in 1922, is successor to a number of companies, the oldest of which was organized in 1881. The Company, which is the largest electric utility in the State of Missouri, supplies electric service in territories in Missouri and Illinois having an estimated population of 2,600,000 within an area of approximately 24,500 square miles, including the greater St. Louis area. Natural gas purchased from non-affiliated pipeline companies is distributed in 90 Missouri communities and in the City of Alton, Illinois and vicinity.
For the year 1994, 95.8% of total operating revenues was derived from the sale of electric energy and 4.2% from the sale of natural gas. Electric operating revenues as a percentage of total operating revenues for the years 1990, 1991, 1992, and 1993 were 95.9%, 95.7%, 95.7%, and 95.2% respectively.
The Company employed 6,266 persons at December 31, 1994. Approximately 70% of the Company's employees are represented by local unions affiliated with the AFL-CIO. Labor agreements representing approximately 4,300 employees will expire in 1996. Two agreements covering 120 employees will expire in 1997.
CONSTRUCTION PROGRAM AND FINANCING
The Company is engaged in a construction program under which expenditures averaging approximately $290 million are anticipated during each of the next five years. Capital expenditures for compliance with the Clean Air Act Amendments of 1990 are included in the construction program -- also see "Regulation", below. The Company does not anticipate a need for additional base load electric generating capacity until after the year 2013.
During the five-year period ended 1994 gross additions to the property of the Company, including allowance for funds used during construction and excluding nuclear fuel, were approximately $1.3 billion (including $314 million in 1994) and property retirements were $197 million.
In addition to the funds required for construction during the 1995-1999 period, $248 million will be required to repay long-term debt and preferred stock as follows: $68 million in 1995, $35 million in 1996, $45 million in 1997, and $100 million in 1999. Amounts for years subsequent to 1995 do not include nuclear fuel lease payments since the amounts of such payments are not currently determinable.
For information on the Company's external cash sources, see "Liquidity and Capital Resources" under "Management's Discussion and Analysis" on Page 18 of the 1994 Annual Report pages incorporated herein by reference.
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FINANCING RESTRICTIONS. Under the most restrictive earnings test contained in the Company's principal Indenture of Mortgage and Deed of Trust ("Mortgage") relating to its First Mortgage Bonds ("Bonds"), no Bonds may be issued (except in certain refunding operations) unless the Company's net earnings available for interest after depreciation for 12 consecutive months within the 15 months preceding such issuance are at least two times annual interest charges on all Bonds and prior lien bonds then outstanding and to be issued (all calculated as provided in the Mortgage). Such ratio for the 12 months ended December 31, 1994 was 6.5, which would permit the Company to issue an additional $2.7 billion of Bonds (8 1/2% annual interest rate assumed). Additionally, the Mortgage permits issuance of new bonds up to (a) 60% of defined property additions, or (b) the amount of previous bonds retired or to be retired, or (c) the amount of cash put up for such purpose. At December 31, 1994, the aggregate amount of Bonds issuable under (a) and (b) above was approximately $1.6 billion. The Company's Articles of Incorporation restrict the Company from selling Preferred Stock unless its net earnings for a period of 12 consecutive months within 15 months preceding such sale are at least two and one-half times the annual dividend requirements on its Preferred Stock then outstanding and to be issued. Such ratio for the 12 months ended December 31, 1994 was 24.0, which would permit the Company to issue an additional $1.3 billion stated value of Preferred Stock (8 1/2% annual dividend rate assumed). Certain other financing arrangements require the Company to obtain prior consents to various actions by the Company, including any future borrowings, except for permitted financings such as borrowings under revolving credit agreements, the nuclear fuel lease, unsecured short-term borrowings (subject to certain conditions), and the issuance of additional Bonds.
RATES
For the year 1994, approximately 89%, 8%, and 3% of the Company's electric operating revenues were based on rates regulated by Missouri Public Service Commission, Illinois Commerce Commission, and the Federal Energy Regulatory Commission ("FERC") of the Department of Energy, respectively.
FUEL SUPPLY
COAL. Because of uncertainties of supply due to potential work stoppages, equipment breakdowns and other factors, the Company has a policy of maintaining a coal inventory of 75 days, based on normal annual burn practices. See "Regulation" for additional reference to the Company's coal requirements.
NUCLEAR. The components of the nuclear fuel cycle required for nuclear generating units are as follows: (1) uranium; (2) conversion of uranium into uranium hexafluoride; (3) enrichment
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of uranium hexafluoride; (4) conversion of enriched uranium hexafluoride into uranium dioxide and the fabrication into nuclear fuel assemblies; and (5) disposal and/or reprocessing of spent nuclear fuel.
The Company has agreements to fulfill its needs for uranium, enrichment, and fabrication services through 1999. The Company's agreements for conversion services are sufficient to supply the Callaway Plant through 1997. Additional contracts will have to be entered into in order to supply nuclear fuel during the remainder of the life of the Plant, at prices which cannot now be accurately predicted. The Callaway Plant normally requires re-fueling at 18-month intervals and re-fuelings are presently scheduled for the spring of 1995 and fall of 1996.
Under the Nuclear Waste Policy Act of 1982, the U. S. Department of Energy ("DOE") is responsible for the permanent storage and disposal of spent nuclear fuel. DOE currently charges one mill per kilowatt-hour sold for future disposal of spent fuel. Electric rates charged to customers provide for recovery of such costs. DOE is not expected to have its permanent storage facility for spent fuel available until at least 2010. The Company has sufficient storage capacity at the Callaway Plant site until 2005 and has viable storage alternatives under consideration. Each alternative will likely require Nuclear Regulatory Commission approval and may require other regulatory approvals. The delayed availability of DOE's disposal facility is not expected to adversely affect the continued operation of the Callaway Plant.
OIL AND GAS. The actual and prospective use of such fuels is minimal, and the Company has not experienced and does not expect to experience difficulty in obtaining adequate supplies.
REGULATION
The Company is subject to regulation by the Missouri Commission and Illinois Commission as to rates, service, accounts, issuance of equity securities, issuance of debt having a maturity of more than twelve months, and various other matters. The Company is also subject to regulation by the FERC as to rates and charges in connection with the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce, and certain other matters. Authorization to issue debt having a maturity of twelve months or less is obtained from the FERC.
Operation of the Company's Callaway Plant is subject to regulation by the Nuclear Regulatory Commission. The Company's Facility Operating License for the Callaway Plant expires on October 18, 2024.
The Company's Osage hydroelectric plant and its Taum Sauk pumped-storage hydro plant, as licensed projects under the Federal Power Act, are subject to certain federal regulations affecting, among other things, the general operation and maintenance of the projects. The Company's license for the Osage Plant expires on February 28, 2006, and its license for the Taum Sauk Plant expires on June 30, 2010. The Company's Keokuk Plant and dam located in the Mississippi River between Hamilton, Illinois and Keokuk, Iowa, are operated under authority, unlimited in time, granted by an Act of Congress in 1905.
The Company is exempt from the provisions of the Public Utility Holding Company Act of 1935, except Section 9(a)(2) relating to the acquisition of securities of other public utility
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companies and Section 11(b)(2) with respect to concluding matters relating to the 1974 acquisition of the common stock of a former subsidiary. When the Securities and Exchange Commission approved such acquisition it reserved jurisdiction to pass upon the right of the Company to retain its gas properties.
The Company is regulated, in certain of its operations, by air and water pollution and hazardous waste regulations at the city, county, state and federal levels. The Company is in substantial compliance with such existing regulations.
Under the Clean Air Act Amendments of 1990, the Company is required to significantly reduce total annual emissions of sulfur dioxide by the year 2000. Significant reductions in nitrogen oxide will also be required. With switching to low-sulfur coal and early banking of emission credits, the Company anticipates that it can comply with the requirements of the law with no significant increase in revenue needs because the related capital costs, currently estimated at about $300 million, will be largely offset by lower fuel costs. As of the end of 1994 about 65% of the Clean Air Act related capital costs had been expended.
As of December 31, 1994, the Company was designated a potentially responsible party ("PRP") by federal or state environmental protection agencies for five hazardous waste sites. Other hazardous waste sites have been identified for which the Company may be responsible but has not been designated a PRP. The Company continually reviews the remedial costs that will be required for these sites. However, such costs are not expected to have a material adverse effect on the Company's financial position.
Other aspects of the Company's business are subject to the jurisdiction of various regulatory authorities.
INDUSTRY ISSUES
The Company is facing issues common to the electric and gas utility industries which have emerged during the past several years. These issues include: changes in the structure of the industry as a result of amendments to federal laws regulating ownership of generating facilities and access to transmission systems; the potential for more intense competition; continually developing environmental laws, regulations and issues; public concern about the siting of new facilities; increasing public attention on the potential public health consequences of exposure to electric and magnetic fields emanating from power lines and other electric sources; proposals for demand side management programs; and public concerns about the disposal of nuclear wastes and about global climate issues. The Company is monitoring these issues and is unable to predict at this time what impact, if any, these issues will have on its operations or financial condition.
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OPERATING STATISTICS
The information on Page 33 in the Company's 1994 Annual Report is incorporated herein by reference.
OTHER STATISTICAL INFORMATION
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ITEM 2.
ITEM 2. PROPERTIES.
The following table sets forth information with respect to the Company's generating facilities and capability at the time of the expected 1995 peak.
In planning its construction program, the Company is presently utilizing a forecast of kilowatthour sales growth of approximately 1.8% and peak load growth of 1.1%, each compounded annually, and is providing for a minimum reserve margin of approximately 18% to 22% above its anticipated peak load requirements.
See "Operating Statistics", incorporated by reference in Part I of this Form 10-K, for information on loads and capability during the five-year period ended 1994.
See "Liquidity and Capital Resources" under "Management's Discussion and Analysis" on Page 18 of the 1994 Annual Report pages incorporated herein by reference for information on the 1992 purchase and sale of certain properties.
The Company is a member of one of the nine regional electric reliability councils organized for coordinating the planning and operation of the nation's bulk power supply - MAIN (Mid-America Interconnected Network) operating primarily in Wisconsin, Illinois and Missouri. The Company has interconnections for the exchange of power, directly and through the facilities of
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others, with fifteen private utilities and with Associated Electric Cooperative, Inc., the City of Columbia, Missouri, the Southwestern Power Administration and the Tennessee Valley Authority.
The Company owns 40% of the capital stock of Electric Energy, Inc. ("EEI"), the balance of which is held by three other sponsoring companies -- Kentucky Utilities Company ("KU"), Central Illinois Public Service Company ("CIPS"), and Illinois Power Company ("IP"). EEI owns and operates a generating plant with a nominal capacity of 1,000 mW. As of January 1, 1994, 60% of the plant's output is committed to the Paducah Project of the DOE, 20% is committed to KU, 10% to the Company, and 5% each to IP and CIPS.
As of December 31, 1994, the Company owned approximately 3,315 circuit miles of electric transmission lines and substations with a transformer capacity of approximately 44,697,000 kVA. The Company owns four propane-air plants with an aggregate daily natural gas equivalent capacity of 31,590 million cubic feet and 2,590 miles of gas mains. Other properties of the Company include distribution lines, underground cable, steam distribution facilities in Jefferson City, Missouri and office buildings, warehouses, garages and repair shops.
The Company has fee title to all principal plants and other important units of property, or to the real property on which such facilities are located (subject to mortgage liens securing outstanding indebtedness of the Company and to permitted liens and judgment liens, as defined), except that (i) a portion of the Osage Plant reservoir, certain facilities at the Sioux Plant, certain of the Company's substations and most of its transmission and distribution lines and gas mains are situated on lands occupied under leases, easements, franchises, licenses or permits; (ii) the United States and/or the State of Missouri own, or have or may have, paramount rights to certain lands lying in the bed of the Osage River or located between the inner and outer harbor lines of the Mississippi River, on which certain generating and other properties of the Company are located; and (iii) the United States and/or State of Illinois and/or State of Iowa and/or City of Keokuk, Iowa own, or have or may have, paramount rights with respect to, certain lands lying in the bed of the Mississippi River on which a portion of the Company's Keokuk Plant is located.
Substantially all of the Company's property and plant is subject to the direct first lien of an Indenture of Mortgage and Deed of Trust dated June 15, 1937, as amended and supplemented. As part of the 1983 merger of the Company with its utility subsidiaries, the Company assumed the mortgage indenture of each subsidiary. Currently, the prior liens of two former subsidiary indentures extend to the property and franchises acquired by the Company from such subsidiaries. Such indentures also contain provisions subjecting to the prior lien thereof after-acquired property of the Company constituting (with certain exceptions) additions, extensions, improvements, repairs, and replacements appurtenant to property acquired in the merger. In addition, one such indenture contains a provision subjecting to the prior lien thereof after-acquired property of the Company situated in the territory served by the former subsidiary prior to the merger.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business, some of which involve substantial amounts. Management is of the opinion that the final disposition of these proceedings will not have a material adverse effect on the Company's financial position.
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INFORMATION REGARDING EXECUTIVE OFFICERS REQUIRED BY ITEM 401(b) OF REGULATION S-K:
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All officers are elected or appointed annually by the Board of Directors following the election of such Board at the annual meeting of stockholders held in April. There are no family relationships between the foregoing officers of the Company except that Charles J. Schukai and Robert J. Schukai are brothers. Each of the above-named executive officers has been employed by the Company for more than five years in executive or management positions.
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PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information required to be reported by this item is included on page 37 of the 1994 Annual Report and is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Information for the 1990-1994 period required to be reported by this item is included on pages 34 and 35 of the 1994 Annual Report and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information required to be reported by this item is included on pages 16, 17 and 18 of the 1994 Annual Report and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company on pages 20 through 32, the report thereon of Price Waterhouse LLP appearing on page 19 and the Selected Quarterly Information on page 26 of the 1994 Annual Report are incorporated herein by reference.
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PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Any information concerning directors required to be reported by this item is included under "Item (1): Election of Directors" in the Company's 1995 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference.
Information concerning executive officers required by this item is reported in Part I of this Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Any information required to be reported by this item is included under "Compensation" in the Company's 1995 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Any information required to be reported by this item is included under "Security Ownership of Management" in the Company's 1995 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Any information required to be reported by this item is included under "Item (1): Election of Directors" in the Company's 1995 definitive proxy statement filed pursuant to Regulation 14A and is incorporated herein by reference.
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PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements: *
*Incorporated by reference from the indicated pages of the 1994 Annual Report
2. Financial Statement Schedules:
The following schedule, for the years ended December 31, 1994, 1993, and 1992, should be read in conjunction with the aforementioned financial statements (schedules not included have been omitted because they are not applicable or the required data is shown in the aforementioned financial statements).
3. Exhibits: See EXHIBITS, Page 16
(b) Reports on Form 8-K. None
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Union Electric Company
Our audits of the financial statements referred to in our report dated January
31, 1995 appearing in the 1994 Annual Report to Stockholders of Union Electric
Company (which report and financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion,
this Financial Statement Schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
financial statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP St. Louis, Missouri January 31, 1995
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UNION ELECTRIC COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Note: Uncollectable accounts charged off, less recoveries.
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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.
UNION ELECTRIC COMPANY (Registrant)
CHARLES W. MUELLER President and Chief Executive Officer
Date March 10, 1995 By /s/ James C. Thompson (James C. Thompson, Attorney-in-Fact)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
By /s/ James C. Thompson March 10, 1995 (James C. Thompson, Attorney-in-Fact)
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EXHIBITS
Exhibits Filed Herewith
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EXHIBITS INCORPORATED BY REFERENCE
The following exhibits heretofore have been filed with the Securities and Exchange Commission pursuant to requirements of the Acts administered by the Commission. Such exhibits are identified by the references following the listing of each such exhibit, and they are hereby incorporated herein by reference under Rule 24 of the Commission's Rules of Practice.
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Note: Reports of the Company on Forms 8-K, 10-Q and 10-K are on file with the SEC under file number 1-2967.
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