Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report March 26, 1999
(Date of earliest event reported)
MidAmerican Energy Holdings Company
(Exact name of registrant as specified in its charter)
Iowa 0-25551 94-2213782
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation or
organization)
666 Grand Avenue Des Moines, IA 50309
(Address of principal executive offices) Zip Code
Registrant's Telephone Number, including area code: (515) 242-4300
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
Cautionary Statements. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of
1995 (the "Reform Act"), MidAmerican Energy Holdings Company (the
"Company") is hereby filing cautionary statements identifying
important factors that could cause the Company's actual results
to differ materially from those expressed or implied by forward-
looking statements of the Company made by or on behalf of the
Company, whether oral or written. The Company wishes to ensure
that any forward-looking statements are accompanied by meaningful
cautionary statements in order to maximize to the fullest extent
possible the protections of the safe harbor established in the
Reform Act. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the
following important factors, among others, that could cause the
Company's actual results to differ materially from those
expressed or implied by forward-looking statements of the
Company made by or on behalf of the Company.
The Company cautions that the following important factors,
among others (including but not limited to factors mentioned from
time to time in the Company's reports filed with the Securities
and Exchange Commission), could affect the Company's actual
results and could cause the Company's actual consolidated results
to differ materially from those expressed or implied by any
forward-looking statements of the Company made by or on behalf of
the Company. The factors included here are not exhaustive.
Forward looking statements, by their nature, are speculative and
are based on then current expectations involving a number of
known and unknown risks and uncertainties that could cause the
actual results and performance of the Company to differ
materially from any expected future results or performance,
expressed or implied, by the forward-looking statements.
Further, any forward-looking statement speaks only as of the date
on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements
to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can
it assess the impact of each such factor on the business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those expressed or
implied by any forward-looking statements. Therefore, forward-
looking statements should not be relied upon as a prediction of
actual future results.
1. Acquisitions. The Company's recent growth has been
achieved, in part, through strategic acquisitions in the energy
industry which complement and diversify the Company's existing
business. The Company intends to continue to pursue its growth
by acquisition strategy for the foreseeable future. The
Company's ability to pursue acquisition opportunities
successfully will depend on many factors, including, among
others, the Company's ability to (i) identify suitable
acquisition opportunities, (ii) consummate the acquisition,
including obtaining any necessary financing and regulatory
approvals on satisfactory terms, and (iii) successfully integrate
acquired businesses. The acquisition and integration of acquired
businesses entails numerous risks, including, among others, the
risk of diverting management's attention from the day-to-day
operations of the Company, the risk that the acquired businesses
will require substantial capital and financial investments and
the risk that the investments will fail to perform in accordance
with expectations. There can be no assurance that future
acquisition opportunities, if any, can be consummated on
favorable terms or that the Company's integration efforts will be
as successful as expected.
2. Development Uncertainty. The Company is actively
seeking to develop, construct, own and operate new energy
projects (including, without limitation, generation,
distribution, exploration/production, storage and supply
projects, and related services), both domestically and
internationally, the completion of any of which is subject to
substantial risk. Development can require the Company to expend
significant sums for preliminary engineering, permitting, fuel
supply, resource exploration, legal and other expenses in
preparation for competitive bids which the Company may not win or
before it can be determined whether a project is feasible,
economically attractive or capable of being financed. Successful
development and construction is contingent upon, among other
things, negotiation on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales or other
contracts with other project participants, receipt of adequate
security for the obligations of project participants, receipt of
required governmental permits and consents and timely
implementation of construction. Projects under construction are
subject to customary risks associated with the construction of
power plants including risks of delay in completion, cost
overruns and failures to perform in accordance with the contract
terms. Further, there can be no assurance that the Company,
which is substantially leveraged, will obtain access to the
substantial debt and equity capital required to continue to
develop and construct energy projects or to refinance projects.
The future growth of the Company is dependent, in large part,
upon the demand for significant amounts of additional energy
(including the generation, distribution, exploration/production,
storage and supply thereof) and related services and its ability
to obtain contracts or favorable markets to service portions of
this demand . There can be no assurance that development or
construction efforts on any particular project, or the Company's
development efforts generally, will be successful.
3. Uncertainties Related to Doing Business Outside the
United States. The Company has various projects under
construction outside the United States, a number of projects
under award outside the United States and a number of projects in
operation outside the United States. The financing, development
and operation of projects conducting business outside the United
States entails significant political and financial risks
(including, without limitation, uncertainties associated with
privatization efforts in the countries involved, currency
exchange rate fluctuations, currency repatriation restrictions,
changes in law or regulation, changes in government policy,
political instability, civil unrest, contract abrogation and
expropriation) and other risk/structuring issues that have the
potential to cause substantial delays in respect of, or material
impairment of, the value of the project being developed,
constructed or operated, which the Company may not be capable of
fully insuring against. The uncertainty of the legal environment
in certain foreign countries in which the Company owns or is
developing or may develop or acquire, directly or indirectly,
projects in the future could make it more difficult for the
Company to enforce its rights under agreements relating to such
projects. In addition, the laws and regulations of certain
countries may limit the ability of the Company to hold a majority
interest in some of the projects that it may develop or acquire
(as is the case with "qualifying facility" projects in the U.S.).
The Company's international projects may, in certain cases, be
delayed, suspended or terminated by the applicable foreign
governments or may be subject to risks of contract abrogation or
other uncertainties resulting from changes in government policy
or personnel or other reasons. (In this regard, the Company
notes that there are significant uncertainties associated with
the Dieng, Patuha and Bali projects in Indonesia as a result of a
series of actions taken by the Government of Indonesia in 1997
and 1998 (including nonpayment of all monthly "take or pay"
invoices for Dieng Unit I, which became operational in March
1998) which have effectively abrogated the contracts held by such
projects.) Furthermore, the central monetary authorities of
certain countries may have the authority in certain circumstances
to suspend, restrict or otherwise impose conditions on foreign
exchange transactions or to approve distributions to foreign
investors. Although the Company may structure certain power
purchase agreements and other project revenue agreements to
provide for payments to be made in, or indexed to, United States
dollars or a currency freely convertible into United States
dollars, there can be no assurance that the Company will be able
to achieve this structure in all cases or that a power purchaser
or other customer will be able to obtain sufficient dollars or
other hard currency or that available dollars will be allocated
to pay such obligations. In addition, the Company's investment
in certain international companies (including without limitation,
Northern Electric plc ("Northern")), where payments are to be
made in the foreign currency and any dividends or distributions
of earnings in respect of such investment may be significantly
affected by fluctuations in the exchange rate between the United
States dollar and the British pound or other applicable foreign
currency. Although the Company may enter into certain
transactions to hedge risks associated with exchange rate
fluctuations, there can be no assurance that such transactions
will be successful in reducing or eliminating such risks.
4. Leverage. The Company is substantially leveraged,
which presents the risk that the Company might not generate
sufficient cash to service the Company's indebtedness or that its
leveraged capital structure could limit its ability to finance
future acquisitions, develop additional projects, compete
effectively and operate successfully under adverse economic
conditions.
5. Holding Company Structure. The Company is a holding
company which derives substantially all of its operating income
from its subsidiaries and joint ventures. The Company expects
that its future development efforts will be similarly structured
to involve holding companies, operating subsidiaries and joint
ventures. The Company is dependent on the earnings and cash
flows of, and dividends from, its direct and indirect
subsidiaries and joint ventures to generate the funds necessary
to meet its obligations. The availability of distributions from
such entities is subject to the satisfaction of various covenants
and conditions contained in the applicable subsidiaries' and
joint ventures' financing documents and to certain statuary and
regulatory restrictions. Furthermore, the Company anticipates
that future project level financing will contain, certain
conditions and similar restrictions on the distribution of cash
to the Company. Any right of the Company to receive any funds or
other assets of any of its subsidiaries or other affiliates upon
any liquidation or reorganization of the Company will be
effectively subordinated to the claims of any such subsidiary's
or other affiliates' creditors and preferred stockholders
(including trade creditors and holders of debt or preferred stock
issued by such subsidiary or other affiliate).
6. Exploration, Development and Operation Uncertainties of
Geothermal Resources. Geothermal exploration, development and
operations are subject to uncertainties similar to those
typically associated with oil and gas exploration and
development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs,
the geographic area and sustainable output of geothermal
reservoirs can only be estimated and cannot be definitively
established. There is, accordingly, a risk of an unexpected
decline in the capacity of geothermal wells and a risk of
geothermal reservoirs not being sufficient for sustained
generation of the electrical power capacity expected. In
addition, both the cost of operations and the operating
performance of geothermal power plants may be adversely affected
by a variety of resource operating factors. Production and
injection wells can require frequent maintenance or replacement.
Corrosion caused by high-temperature and high-salinity geothermal
fluids may compel the replacement or repair of certain equipment,
vessels or pipelines. New production and injection wells may be
required for the maintenance of operating levels, thereby
requiring substantial capital expenditures.
7. Exploration, Development and Production of Gas
Resources. The exploration, development and production of gas
resources involve resource-based and geologic risks similar to
those for geothermal resources described above, including dry
holes, uncontrolled releases and uncertainties relating to
resource production, required capital and operating expenditures,
and resource quality, quantity, extractability, sustainability
and extent of reserves.
8. General Operating Uncertainties. The operation of a
utility (including transmission and distribution systems) or
power generating facilities involves many risks, including the
breakdown or failure of power generation equipment, pipelines,
transmission and distribution lines or other equipment or
processes, fuel interruption, and performance below expected
levels of output or efficiency, operator error and catastrophic
events such as severe storms, fires, earthquakes or explosions.
The occurrence of any of these events could significantly reduce
or eliminate revenues generated by the Company or significantly
increase the expenses of the Company, thereby adversely affecting
the ability to receive distributions from project companies. The
Company currently possesses property, business interruption,
catastrophic and general liability insurance. There can be no
assurance that such comprehensive insurance coverage will be
available in the future at commercially reasonable costs or terms
or that the amounts for which the Company is or will be insured
will cover all potential losses. Sales and revenues of a utility
may also be adversely affected by general economic, regulatory
and business conditions and weather conditions in its territory.
Each generating facility may depend on a single or limited number
of entities to purchase electricity or thermal energy, to supply
water, to supply or transport gas, coal or other fuels to dispose
of wastes or to wheel electricity. The failure of any such third
party to fulfill its contractual obligations could have a
material adverse impact on the Company.
9. Fuel Supply Operations. The primary fuel source for
certain of the Company's affiliate's generating facilities is
natural gas or coal and a substantial portion of the operating
expenses of such facilities consists of the costs of obtaining
natural gas or coal through gas and coal supply agreements and
transporting that gas or coal to the projects under
transportation agreements. Although the Company believes that
its affiliates have contracted for natural gas and coal supply
and transportation in sufficient quantities to satisfy the needs
of its affiliates generating facilities, the gas and coal
suppliers are not required in all cases to provide dedicated
reserves in support of their contractual obligations. Unless the
gas or coal generating facilities were able to obtain substitute
volumes of natural gas and coal, including the requisite
transportation services, for such volumes at a price not
materially higher than the sum of the contract price under the
existing gas and coal supply agreements and any damages paid by
the supplier for failure to deliver, the sustained failure of a
supplier to deliver natural gas or coal in accordance with its
contract could have a material adverse effect on the cash flows
to the Company. In addition, under certain gas and coal supply
contracts the Company is obligated to pay for a certain minimum
quantity of natural gas and coal even if it cannot utilize it.
The Company intends to manage its requirements for contract
volumes under the gas and coal supply agreements so as to meet
the minimum take requirements through a combination of
utilization of nominated volumes in operations and resales of the
remainder of the volumes to third-party customers, if necessary.
Finally, the state, federal and foreign regulatory authorities
that have jurisdiction over natural gas and coal transportation
have the right to modify aspects of the rates, terms and
conditions of those contracts. It is possible that such a
modification could materially increase the fuel transportation
costs of the projects or give the transporter a right to
terminate or suspend or decrease its performance under its
contract.
10. Competition and Industry Restructuring. The
international power production market is characterized by
numerous strong and capable competitors, many of which have more
extensive and more diversified developmental or operating
experience (including international experience) and greater
financial resources than the Company. Many of these competitors
also compete in the U.S. market. Further, in recent years, the
domestic power production industry has been characterized by
strong and increasing competition with respect to the company's
efforts to obtain new power sales agreements. In that regard,
many utilities often engage in "competitive bid" solicitations to
satisfy new capacity demands. In addition, industry
restructuring activity may cause certain utilities or other
contract parties to attempt to renegotiate contracts or otherwise
fail to perform their contractual obligations, which in turn
could adversely affect the Company's results of operations.
Throughout the United States, the utility industry continues
to move towards a competitive environment. Although the extent of
restructuring varies between states, increased competition is
becoming a reality in virtually every region of the country.
Numerous states have passed restructuring legislation, some of
which initiated a phase-in of customer choice in 1998.
Legislators and regulators in many other states are addressing
the issue. As part of many restructuring legislation packages,
electric utilities are required to unbundle traditional services
previously provided as a "packaged product" under their rate
tariffs. Unbundling allows customers to choose their energy
supplier and the level of energy delivery and retail services
they desire. Gas utilities are also experiencing separation of
the merchant and delivery functions for all classes of customers.
The generation segment of the electric industry will be
significantly impacted by competition. The introduction of
competition in the wholesale market has resulted in a
proliferation of power marketers and a substantial increase in
market activity. As retail competition evolves, margins will be
pressured by competition from other utilities, power marketers
and self-generation. In addition, many states are implementing or
considering regulatory initiatives that would increase access to
electric utilities' transmission and distribution systems for
independent power producers, utilities, power marketers and
electricity customers. Although the anticipated changes in the
U.S. electric utility industry may create opportunities, they
will also create additional challenges and risks for utilities.
Competition will put pressure on margins for traditional electric
services.
These and other industry restructuring efforts by states in
the midwest (such as Iowa and Illinois) where MidAmerican Energy
Company ("MidAmerican Energy") has or expects to have substantial
operations could materially impact the results of operations of
the Company and MidAmerican Energy in a manner which is difficult
to predict, since such efforts will depend on the terms and
timing of such restructuring.
11. MidAmerican Energy Company Regulatory Environment.
MidAmerican Energy is subject to comprehensive regulation by
several utility regulatory agencies which significantly
influences the operating environment and the recoverability of
costs from utility customers. That regulatory environment has to
date, in general, given MidAmerican Energy an exclusive right to
serve electricity customers within its service territory and, in
turn, the obligation to provide electric service to those
customers.
In Illinois, the electric retail business is opening up to
competition which will be phased in between October 1999 and May
2000.
In Iowa, if MidAmerican Energy's annual electric
jurisdictional return on common equity exceeds 12%, then an equal
sharing between customers and shareholders of earnings above the
12% level begins; if it exceeds 14%, then two-thirds of
MidAmerican's share of those earnings will be used for
accelerated recovery of certain regulatory assets. MidAmerican
Energy is precluded from filing for increased rates prior to 2001
unless the return on common equity falls below 9%. Other parties
signing the agreement are prohibited from filing for reduced
rates prior to 2001 unless the return on common equity, after
reflecting credits to customers, exceeds 14%.
Prior to July 11, 1997, MidAmerican Energy recouped its fuel
costs for electricity generation from its Iowa customers on a
current basis through the Iowa energy adjustment clause, and
thus, fuel costs had little impact on net income. Since then,
base rates for Iowa customers include a factor for recovery of a
representative level of fuel costs. However, to the extent actual
fuel costs vary from that factor, earnings are impacted.
However, there is no assurance that future regulatory action
could not have a material adverse effect on the Company's fuel
costs or results of operations.
MidAmerican Energy provides gas service at retail pursuant
to non-exclusive municipal franchises.
In connection with the recent approval by the Iowa Utilities
Board of the MidAmerican Merger, MidAmerican Energy agreed, among
other things, to use all commercially reasonable efforts to
maintain an investment grade credit rating for MidAmerican Energy
and its long-term debt and to seek the approval of the Iowa
Utilities Board of a reasonable utility capital structure if
MidAmerican Energy's common equity level decreases below
specified levels (42% and 39%, respectively, of total
capitalization) under certain circumstances.
Statement of Financial Accounting Standards (SFAS) No. 71
sets forth accounting principles for operations that are
regulated and meet certain criteria. For operations that meet
the criteria, SFAS 71 allows, among other things, the deferral of
costs that would otherwise be expensed when incurred. A possible
consequence of the changes in the utility industry is the
discontinued applicability of SFAS 71. The majority of
MidAmerican Energy's electric and gas utility operations
currently meet the criteria of SFAS 71, but its applicability is
periodically reexamined. If utility operations no longer meet
the criteria of SFAS 71, MidAmerican Energy would be required to
write off the related regulatory assets and liabilities from its
balance sheet and thus, a material adjustment to earnings in that
period could result.
12. Northern Regulatory Environment. Northern's
electricity distribution and supply businesses are subject to
extensive regulation in the United Kingdom.
Pricing Regulation of Distribution. Revenue from
Northern's distribution business is controlled by a formula
(the "Distribution Price Control Formula") which determines
the maximum average price per unit of electricity (expressed
in kilowatt ("kW") hours, a "unit") that a regional
electricity company (a "REC") in the United Kingdom may
charge. The Distribution Price Control Formula is expected
to have a five year duration and is subject to review by the
Director General of Electricity Supply (the "Regulator") at
the end of each five-year period and at other times in the
discretion of the Regulator. At each review, the Regulator
can propose adjustments to the Distribution Price Control
Formula. In July 1994, a review resulted in a 17% reduction
in allowed distribution income compared to the original
formula, before allowing for inflation, effective April 1,
1995. In July 1995, a further review of distribution prices
was concluded by the Regulator for fiscal years 1997 to
2000. As a result of this further review, Northern's
allowed distribution income was reduced by a further 13%
effective April, 1996, with additional reductions for each
of fiscal years 1998-2000 of 3% after allowing for
inflation. There can be no assurance that any future price
reviews by the Regulator will not have a material adverse
effect on the Company's results of operations.
Competition in Supply. The market for customers with a
maximum demand above 1 MW has been open to competition for
suppliers of electricity since privatization, and prices to
these customers are not subject to regulation. The market
for customers with a maximum demand of above 100 kW became
competitive in April 1994. The market for customers with
demand of less than 100 kW is being progressively opened to
competition by geographic area, with competition in all
areas expected by the summer of 1999. Within Northern
Electric's authorized supply area, prices to these domestic
and small non-domestic customers are subject to a price cap
which requires tariffs prevailing at August 1997 to be
reduced by 4.2% after allowing for inflation, effective from
April 1, 1998, with a further reduction of 3% after allowing
for inflation, effective from April 1, 1999. There can be no
assurance that competition among suppliers of electricity
will not have a material adverse effect on the Company's
results of operations. The domestic gas market is also open
to competition and there can be no assurance that
competition among suppliers of gas will not have a material
adverse effect on the Company's results of operations.
Pool Purchase Price Volatility. Northern's supply business
generally involves entering into fixed price contracts to
supply electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts
primarily by purchases from the wholesale trading market for
electricity in England and Wales (the "Pool"). Because the
price of electricity purchased from the Pool, Northern is
exposed to risk arising from differences between the fixed
price at which it sells and the fluctuating prices at which
it purchases electricity, unless it can effectively hedge
such exposure. In addition, the United Kingdom government
has announced plans to reform the wholesale trading market
for electricity by eliminating the Pool and creating a
bilateral wholesale trading market. The announced date for
elimination of the Pool is April, 2000. Elimination of the
Pool will create risks of a mismatch between the prices at
which Northern purchases electricity from wholesale
suppliers and the price at which it has, or will, contract
to sell electricity to its customers. Northern's ability to
manage such risks at acceptable levels will depend, in part,
on the specifics of the supply contracts that Northern
enters into, Northern's ability to implement and manage an
appropriate contracting and hedging strategy, and the
development of an adequate market for hedging instruments.
There can be no assurance that this risk will be effectively
mitigated.
Changes in Government Policy. There can be no assurance
that possible changes in tax or utility regulation by the
United Kingdom government, by whichever party it is
controlled, would not cause a material adverse effect on the
Company's results of operations.
13. Impact of Environmental, Energy and Other Regulations.
The Company is subject to a number of environmental and other
laws and regulations affecting many aspects of its present and
future operations, including the disposal of various forms of
waste, the construction or permitting of new facilities and the
drilling and operation of new and existing wells. Such laws and
regulations generally require the Company to obtain and comply
with a wide variety of licenses, permits and other approvals.
The Company also remains subject to a number of complex and
stringent laws and regulations that both public officials and
private individuals may seek to enforce. There can be no
assurance that existing regulations will not be revised or that
new regulations will not be adopted or become applicable to the
Company which could have an adverse impact on its operations.
The structure of federal and state energy regulation is currently
undergoing change and has in the past, and may in the future, be
the subject of various challenges, initiatives and restructuring
proposals by utilities and other industry participants. The
implementation of regulatory changes in response to such
challenges, initiatives and restructuring proposals could result
in the imposition of more comprehensive or stringent requirements
on the Company, electric utilities or other industry
participants, which would result in increased compliance costs
and could have a material adverse effect on the Company's results
of operations. In addition, regulatory compliance for the
construction of new facilities is a costly and time-consuming
process, and intricate and rapidly changing environmental
regulations may require major expenditures for permitting and
create the risk of expensive delays or material impairment of
project value if projects cannot function as planned due to
changing regulatory requirements or local opposition.
The Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA"), and the Public Utility Holding Company Act of
1935, as amended ("PUHCA"), are two of the laws (including the
regulations thereunder) that affect the Company's and certain of
its subsidiaries operations. PURPA provides to qualifying
facilities ("QFs") certain exemptions from federal and state laws
and regulations, including organizational, rate and financial
regulation. PUHCA regulates public utility holding companies and
their subsidiaries. The Company currently is exempt from PUCHA
based on the intrastate exemption and is not and will not be
subject to regulation as a holding company under PUHCA (except
for Section 92) as long as its utility operations remain
predominately in the state of Iowa, the domestic power plants it
owns are QFs under PURPA (and the Company's ownership interest is
limited to 50%) or are exempted as exempt wholesale generators
("EWGs"), and its foreign utility operations are exempted as EWGs
or foreign utility companies or are otherwise exempted under
PUHCA. QF status is conditioned on meeting certain criteria
including the maximum ownership limitations which apply to the
Company now that it owns MidAmerican Energy Company. In addition
to these limitations, the QF status of the Company's affiliates
facilities depends upon certain other criteria and would be
jeopardized, for example, in the case of the Company's
cogeneration facilities by the loss of a steam customer or
reduction of steam purchases below the amount required by PURPA.
The Company's four cogeneration facilities have steam sales
agreements with existing industrial hosts which agreements must
be maintained in effect or replaced in order to maintain QF
status. In the event the Company were unable to avoid the loss
of QF status for one or more of its affiliates facilities, such
an event could result in termination of a given project's power
sales agreement and a default under the project subsidiary's
project financing agreements, which could have a material adverse
effect on the Company.
In addition to Congressional initiatives, many states are
implementing or considering regulatory initiatives designed to
increase competition in the domestic power generation industry
and increase access to electric utilities' transmission and
distribution systems for independent power producers and
electricity consumers. The Company cannot predict the final form
or timing of the proposed industry restructuring or the results
of its operations.
The Company is subject to a number of environmental and
other laws and regulations affecting many aspects of the
Company's present and future operations, including the operation
of coal-fired generating facilities, including the disposal of
various forms of waste, the construction or permitting of new
facilities and air and water quality. Such laws and regulations
generally require the Company to obtain and comply with a wide
variety of licenses, permits and other approvals. The Company
will also be subject to a number of complex and stringent laws
and regulations that both public officials and private
individuals may seek to enforce. There can be no assurances that
existing regulations will not be revised or that new regulations
will not be adopted or become applicable to the Company which
could have an adverse impact on its operations. The
implementation of regulatory changes imposing more comprehensive
or stringent requirements on the Company, to the extent such
changes would result in increased compliance costs or additional
operating restrictions, could have a material adverse effect on
the Company's results of operations.
In addition, regulatory compliance for the construction of
new facilities is a costly and time-consuming process, and
intricate and rapidly changing environmental regulations may
require major expenditures for permitting and create the risk of
expensive delays or material impairment of project value if
projects cannot function as planned due to changing regulatory
requirements or local opposition.
14. Nuclear Risks. In particular, regulatory requirements
applicable in the future to nuclear generating facilities could
adversely affect the results of operations of the Company and
MidAmerican Energy. Following the MidAmerican Merger, the
Company became subject to certain generic risks associated with
utility nuclear generation, including risks arising from the
operation of nuclear facilities and the storage, handling and
disposal of high-level and low-level radioactive materials;
limitations on the amounts and types of insurance commercially
available in respect of losses that might arise in connection
with nuclear operations; and uncertainties with respect to the
technological and financial aspects of decommissioning nuclear
plants at the end of their licensed lives. The Nuclear Regulatory
Commission ("NRC") has broad authority under federal law to
impose licensing and safety-related requirements for the
operation of nuclear generating facilities and in the event of
non-compliance, has the authority to impose fines or shut down a
unit, or both, depending upon its assessment of the severity of
the situation, until compliance is achieved. Revised safety
requirements promulgated by the NRC have, in the past,
necessitated substantial capital expenditures at nuclear plants,
including those in which the Company's affiliate has a long-term
power purchase contract or ownership interest, such as the Cooper
and Quad-Cities units, and additional such expenditures could be
required in the future. In addition, although the Company has no
reason to anticipate a serious nuclear incident at the units in
which the Company has an interest, if such an incident did occur,
it could have a material but presently undeterminable adverse
effect on the Company's financial condition.
15. Year 2000. The "Year 2000" issue arises from the
widespread use of computer programs that rely on two-digit date
codes to perform computations or decision-making functions. Many
of these programs may fail due to an inability to interpret
properly date codes beginning January 1, 2000. The Company has
undertaken an extensive ongoing project to address its
information technology ("IT") and non-IT (including embedded
technology) systems potentially affected by the year 2000 date
change. The Company has completed the inventory, assessment and
planning phases for substantially all of the Company's systems
and currently expects to complete the resolution and
implementation phases for nearly all of the Company's high-and
medium-priority systems to ensure that such systems are suitable
for continued use into the year 2000 by June 30, 1999. Despite
the comprehensive nature of the Company's year 2000 project, it
is possible that the Company may experience random, widespread
and/or simultaneous failures in its subsidiaries generation,
transmission and distribution systems during January 2000, or
later or that third party failures may effect the Company.
Although the Company is developing contingency plans for
anticipated risks of interruption to the generation or
distribution of energy, the Company cannot give assurances that
outages will not occur. Although the impact on the Company's
future operations and revenues is unknown, any failure of the
Company's systems to perform because of year 2000 implications
could result in operating problems and costs material to the
Company. Although the Company believes its compliance project
will be completed sufficiently in advance of January 1, 2000,
unforeseen and other factors could cause delays in the project
and/or require material expenditures by the Company, which could
have a material adverse effect on the Company's results of
operations. In addition, the Company cannot give assurances that
it will not be adversely affected by year 2000 problems
experienced by third parties.
SIGNATURE
Pursuant to the requirements 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.
MIDAMERICAN ENERGY HOLDINGS COMPANY
Dated: March 26, 1999 By: /s/ Douglas L. Anderson
Douglas L. Anderson
Vice President
