SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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<PAGE>
COVER
1997 Summary Annual Report
directions
<PAGE>
INSIDE COVER:
directions
No clear road map exists yet for the evolving electric power industry,
but the general direction is becoming clearer - toward greater competition .
. . low-cost generation . . . innovation . . . customer satisfaction . .
market reach.
That's the direction CSW has been traveling, with considerable success.
In late 1997, we took a major step to prepare for the future by announcing a
proposed merger with American Electric Power Company, Inc.
Today CSW is a successful regional electric utility holding company,
well positioned as a supplier of electricity and other services in the United
States, the United Kingdom and Latin America.
Tomorrow, to benefit our shareholders, customers and employees, CSW
expects to join with AEP to create the nation's premier electric power
company . . . one that will be well positioned for success around the world.
CSW PROFILE
Central and South West Corporation is an investor-owned electric
utility holding company based in Dallas, Texas. CSW owns and operates four
electric utilities in the United States: Central Power and Light Company, Public
Service Company of Oklahoma, Southwestern Electric Power Company and West Texas
Utilities Company. These companies serve 1.7 million customers in an area
covering 152,000 square miles of Texas, Oklahoma, Louisiana and Arkansas. CSW
also owns a regional electricity company in the United Kingdom, SEEBOARD plc,
which serves 2 million customers in Southeast England.
CSW engages in international energy, telecommunications and energy services
businesses through these nonutility subsidiaries:
- CSW Energy, Inc., which develops, acquires, constructs, owns and operates
nonutility power projects in the United States;
- CSW International, Inc., which engages in international activities,
including developing, acquiring, financing and owning exempt wholesale
generators and foreign utility companies;
- C3 Communications, Inc. (formerly CSW Communications, Inc.), which provides
automated metering services to utilities, energy-service providers and other
customers and offers telecommunications services through CSW/ICG ChoiceComSM;
- EnerShop Inc., which provides energy-management analysis, equipment and
information to increase productivity and lower energy costs for commercial and
governmental entities;
- CSW Energy Services, Inc., which markets electricity in competitive retail
markets;
- CSW Credit, Inc., which buys the accounts receivable of our electric
utility subsidiaries and other utilities;
- CSW Leasing, Inc., which owns leveraged leases of capital equipment; and
- Central and South West Services, Inc., which provides management and
professional services, at cost, primarily for the corporation and its four U.S.
electric companies.
Through separate equity investments in various joint ventures, CSW owns
indirect interests in:
- CSW/ICG ChoiceCom, L.P., a joint venture with ICG Telecom Group, Inc., to
provide local and long-distance telephone and data transmission services in
Texas, Oklahoma, Louisiana and Arkansas;
- Numanco, which provides staffing services for nuclear-powered electric
generating plants;
- Diversified Energy Contractors Company, which repairs, upgrades, installs
and maintains steam, power and process systems in the U.S.;
- Empresa de Eletricidade Vale Paranapanema S.A., an electric distribution
company serving 1.1 million customers in southern and central Brazil;
- Enertek, a joint-venture company that owns Mexico's first major
cogeneration project located in Altamira, Tamaulipas;
- Beacon Gas, a joint venture with Amoco to market natural gas throughout the
U.K.; and
- Medway Power, which owns a 675-megawatt independent power station on the
Isle of Grain in the U.K.
<PAGE>
[BAR GRAPH]
RETURN ON AVERAGE COMMON EQUITY
PERCENT
1993 0.106
1994 0.134
1995 0.131
1996 0.121
1997 0.042
CSW
[BAR GRAPH]
EARNINGS AND DIVIDENDS PER SHARE
DOLLARS
Dividends Reported Earnings Significant One-Time Items
1993 $ 1.62 $ 1.63 $ .24
1994 1.70 2.08
1995 1.72 2.10
1996 1.74 2.07
1997 1.74 .72 1.16
HIGHLIGHTS
CENTRAL AND SOUTH WEST CORPORATION
1997 1996
______________________________________________________________________
Financial Data (millions)
Operating Revenues $ 5,268 $ 5,155
U.S. Electric Fuel and Purchased Power 1,266 1,228
United Kingdom Cost of Sales 1,291 1,331
Other Operating Expenses 1,630 1,399
Taxes 346 402
______________________________________________________________________
Operating Income 735 795
Other Income (Expense) 32 (61)
Interest and Preferred Stock Dividends (438) (437)
Income from Discontinued Operations - 12
Gain on Sale of Discontinued Operations - 120
Extraordinary Item (176) -
______________________________________________________________________
Net Income for Common Stock $ 153 $ 429
______________________________________________________________________
Common Stock Data and Dividends
Basic and Diluted Earnings per Share $0.72 $2.07
Dividends per Share $1.74 $1.74
Book Value per Share $16.76 $17.98
Average Common Shares Outstanding (millions) 212.1 207.5
Return on Average Common Equity 4.2% 12.1%
Dividend Yield 6.4% 6.8%
Dividend Payout Ratio 242% 84%
Year-End Market Price $27 1/16 $25 5/8
______________________________________________________________________
Closing Market Price Dividends
High Low Paid
1997
First Quarter $25 3/4 $21 1/4 $0.435
Second Quarter 22 1/8 18 1/4 0.435
Third Quarter 22 7/16 19 3/4 0.435
Fourth Quarter 27 5/16 20 5/8 0.435
______________________________________________________________________
$1.74
______________________________________________________________________
1996
First Quarter $28 1/2 $26 3/8 $0.435
Second Quarter 28 7/8 26 1/2 0.435
Third Quarter 28 1/2 25 3/4 0.435
Fourth Quarter 28 25 1/2 0.435
______________________________________________________________________
$1.74
______________________________________________________________________
The condensed consolidated financial statements in this summary annual
report were derived from the consolidated financial statements that appear in
CSW's 1997 Financial Report to shareholders. Copies of the consolidated
financial statements and the report of Arthur Andersen LLP thereon may be
obtained by calling Central and South West Corporation's Investor Services
Department at 1-800-527-5797.
CONTENTS
CSW Milestones 2
Letter from the Chairman 3
CSW Operations 6
CEO Interview: The Planned Merger 18
Financial Information 24
Comparative Statistical and Financial Record 26
Board of Directors and Officers 27
Shareholder Information 28
1
<PAGE>
CSW Milestones
CORPORATE
- Announced a proposed merger with American Electric Power Company,
Inc., that is expected to create the nation's largest power company.
- Won Edison Electric Institute's National Award for Diversity, recognizing
the corporation's programs for employees, suppliers, customers and communities.
U.S.ELECTRIC UTILITY OPERATIONS
- Ranked second among U.S. electric utilities in customer satisfaction by
the American Customer Satis-faction IndexTM, conducted by the University of
Michigan Business School and American Society for Quality.
- Controlled operating and maintenance costs despite inflation, saving more
than $100 million in 1997 alone.
- Began testing with customers our ClearChoiceSM pricing program, which
helps pay for developing renewable energy and other environmentally friendly
power sources.
- Won the first Innovative Energy Efficiency Financing Award of the National
Association of Home Builders Energy Subcommittee for our new SmartMoveSM
energy-efficiency mortgage program.
INTERNATIONAL UTILITY OPERATIONS
- For the second year in a row, SEEBOARD was ranked as the leading regional
electricity company in customer service by the United Kingdom Office of
Electricity Regulation.
- Expanded our equity investment in Vale, a Brazilian electric distribution
company.
- Vale and its partners acquired a Brazilian electric distribution company
serving some 492,000 customers and won a concession to build an 850-megawatt
hydroelectric power plant as part of Brazil's privatization of its electric
industry.
- SEEBOARD was named the preferred bidder to provide power and services to
the London Under-ground, the world's largest metro rail system.
INDEPENDENT POWER
- Completed construction of the Sweeny Cogen-eration Facility, the first
large-scale U.S. power plant built as a merchant plant.
- Completed construction of the Altamira Project, the first major
cogeneration project to be built in Mexico under a new law that promotes outside
investments in the Mexican energy sector.
ENERGY SERVICES
- EnerShop won new contracts to provide energy-efficiency improvements for a
number of office buildings and governmental entities across Texas.
- Established CSW Energy Services to participate in a limited marketing
of electricity in states where retail competition now exists; Energy Services
signed a major contract with The Home Depot(R) to supply electricity to 14 of
its stores in Southern California, with our C3 Communications subsidiary serving
as the meter data management agent.
- Formed CSW Total EVSM to promote and sell electric-vehicle battery
chargers and to distribute a new line of recreational vehicles, upon regulatory
approval.
COMMUNICATIONS
- Formed CSW/ICG ChoiceCom, a joint venture with ICG Telecom Group, to offer
local telephone, long-distance and data services; ChoiceCom connected its first
customers in Austin, San Antonio and Corpus Christi, Texas.
- C3 Communications was chosen by City Public Service of San Antonio to
install advanced wireless and phone-based utility meter-reading equipment for
5,000 San Antonio customers.
2
<PAGE>
[PIE CHART]
CSW 1997 REVENUES
U.S. Electric 64%
SEEBOARD 35%
Other 1%
Letter From The Chairman
The direction of the electric power industry became dramatically clearer in
1997, and so did the direction of Central and South West Corporation.
In December we announced plans for CSW to merge with American Electric Power
Company, Inc., one of the largest electric utility companies in the country. We
expect to complete the merger in 1999 and to become part of a new, expanded AEP.
Before the merger can be completed, a number of regulatory and other conditions
must be satisfied. We expect that the combined company will become the nation's
premier power company and a major player in the increasingly competitive
worldwide power market.
As the restructuring of the electric utility industry evolves, we believe
the most successful companies will be those large enough to operate in
international markets with low-cost power generation and a culture of innovation
and excellent customer service. In AEP we found a partner that shares
these views as well as common goals and strategies. AEP has established a
successful brand and marketing program in the United States and in other
countries. We are excited about the prospects for the combined company and about
the potential benefits for our shareholders, customers and employees.
The new company will be based in Columbus, Ohio, and will be led by Dr. E.
Linn Draper, Jr., currently chairman, president and chief executive officer of
AEP. I have known Linn for many years as both a colleague and friend. I believe
he is one of the most talented and respected leaders in the electric power
industry. CSW's operations and employees will be in good hands.
I will serve on the board of the new company but will step down from
executive management. Thomas V. Shockley, III, who in 1997 became CSW's
president and chief operating officer, will remain a key senior officer of the
new company's Southwest region.
You will find more information about the merger in an interview with Dr.
Draper and me in this annual report, beginning on page 18.
1997 FINANCIAL CHALLENGES. A number of events caused our stock price to
decline in early 1997. Most damaging was the unprecedented decision of the
Public Utility Commission of Texas in the rate case of our Central Power and
Light Company subsidiary. The commission ruled that $800 million of CPL's
investment in the South Texas Project nuclear electric generating station was
"excess cost over market" and reduced the allowed rate of return on that amount.
In addition, the commission ordered CPL to lower its rates by $19 million in
1997 and by an additional $13 million in 1998 and again in 1999.
This ruling led to a significant drop in the stock prices of CSW and the
other major investor-owned electric utilities in Texas. We have filed an appeal
in court, challenging portions of the commission's decision in the CPL case.
3
<PAGE>
CSW'S SIX STRATEGIES
1. Shape the future of the electric utility industry.
2. Create a client-driven culture.
3. Build a world-class brand and marketing company.
4. Build on our low-cost and reliability positions and pursue growth markets.
5. Aggressively pursue mergers, acquisitions and alliances for growth.
6. Manage our portfolio of assets and businesses to increase shareholder value.
During 1997 several other major financial challenges were resolved.
- In Oklahoma, the settlement of a rate inquiry resulted in our Public
Service Company of Oklahoma subsidiary making a one-time refund of $29 million
and lowering its retail base rates by about $36 million a year, even though its
rates already were among the lowest in the region.
- In the United Kingdom, Parliament approved the new Labour government's
initiative to impose a "windfall profits" tax on privatized electric utilities;
the cost for our SEEBOARD unit was significant - $176 million.
- In litigation with El Paso Electric Company related to the termination of
our proposed merger transaction, we reached a negotiated settlement of all
issues by paying $35 million to El Paso Electric and its various creditors.
Although none of these events reflected on the efficiency of our
operations, the effectiveness of our employees or the ability of CSW to compete
in the electric power marketplace, they significantly hurt CSW's 1997 financial
performance. Earnings per share for 1997 were $0.72, compared to $2.07 for 1996.
In January 1998 our board of directors determined that CSW's dividend would
remain at the annual indicated rate of $1.74. We believe the combination of CSW
with AEP will offer improved prospects for future earnings and dividend growth.
STRATEGIC PROGRESS IN 1997. We have been pursuing a six-step strategy to
prepare us for success in the competitive era ahead. As the 1997 milestones on
page 2 show, we are making substantial progress toward those goals. I am
particularly proud of the way our employees have met the challenge of continuing
to cut costs, of building on our reputation for customer satisfaction and of
taking advantage of growth opportunities through investments in promising new
markets, such as Latin America. We believe all the elements of our strategy will
be advanced through the merger with AEP.
Because the AEP merger must be approved by state and federal regulators,
we are determined to manage CSW so that it remains strong and competitive as a
stand-alone company. We are optimistic that our activities in the United States
and other countries will help us achieve a number of notable milestones during
1998.
We continue to gain new customers for our telecommunications, energy
services and other new businesses, and we hope to win their electric power
business when full retail competition is approved.
4
<PAGE>
We also are continuing efforts to acquire the non-nuclear assets of Cajun
Electric Power Cooperative, Inc., which is operating in bankruptcy. Cajun sells
power to 11 electric distribution cooperatives and one former cooperative that
serve more than 330,000 customers and a population of 1 million in Louisiana.
ELECTRIC POWER POLICIES. Much of 1997 was spent working on a critical part
of our strategy - trying to shape the future of the electric power industry as
deliberations occur in Washington and in the capitals of our four states.
In 1997 the Texas Legislature considered legislation that would have
functionally restructured the state's electric utilities and would have opened
the industry to competition for retail customers. Although the legislation
failed in the final days of the legislative session, we expect the 1999 Texas
Legislature to address this matter again.
In Oklahoma during 1997, a law was enacted requiring retail competition in
electricity to begin by July 1, 2002. The state's lawmakers also mandated that
several studies be completed before implementing any restructuring of the
state's electric utilities. In Louisiana and Arkansas, the state public service
commissions have begun dockets to examine issues surrounding electric utility
restructuring.
We believe that all of our companies will be winners in a competitive
marketplace because of their low prices and strong customer relationships. In
the four states where our U.S. electric companies operate, we are supporting
policies that would open our industry to more competition. We support policies
that are fair to our shareholders and to all our classes of customers. The new
laws must maintain the high degree of electric reliability that consumers expect
today and provide for the recovery of all previously approved costs. We will
oppose any proposals that would violate these principles.
If the new rules for utilities are written fairly, we believe we will be
well positioned as one of the industry's strongest competitors. Our low-cost
generating plants, our strong customer relationships, our investments in the
U.K., Mexico and South America, and our growing energy services business in the
U.S. will make us a formidable competitor on our own. Merging with AEP will make
us part of a new company that we believe will be even stronger.
E. R. Brooks
Chairman and Chief Executive Officer
February 16, 1998
[PHOTOGRAPH OF E.R. BROOKS]
E.R. Brooks
Chairman and Chief Executive Officer
Central and South West Corporation
5
<PAGE>
Position: CSW owns and operates four electric utilities in the Southwest;
they are among the nation's leaders in low-cost power production and customer
satisfaction.
[GRAPH]
U.S. ELECTRIC REVENUES BY CLASS
In Millions
Residential Commercial Industrial Other
1993 1,160 832 736 327
1994 1,156 836 733 340
1995 1,138 810 702 232
1996 1,243 872 781 352
1997 1,253 892 813 363
U.S. ELECTRIC UTILITIES: LOW PRICES, SUPERIOR SERVICE
We believe an electric utility will be successful in the competitive
marketplace largely through two factors: low-cost power production and excellent
customer relationships. In 1997 our U.S. utilities showed once again that they
are succeeding at both.
LOWERING COSTS. Our employees continued efforts to control operating and
maintenance costs of our U.S. electric operations. Excluding extraordinary
items, inflation alone would have added approximately $100 million to those
costs in 1997 if our employees had not found greater efficiencies and savings.
As with O&M costs, employees also cut costs for fuel, fuel transportation
and other expenses. As a result, our production cost of electricity today ranks
among the lowest in the region. Of the 20 most efficient electric power
generating plants in the U.S., eight are owned and operated by CSW.
CUSTOMER SATISFACTION. Our U.S. electric companies have continued to excel
at customer satisfaction. During the past four years, the University of Michigan
Business School, working with the American Society for Quality, has interviewed
more than 50,000 consumers a year to produce the American Customer Satisfaction
Index. CSW has been at or near the top in the electric utility category
nationally and consistently has placed first in our region.
Our U.S. electric companies have launched two initiatives to continue
strengthening relationships with customers.
- A new Performance Commitment Program emphasizes five customer commitments
that our utilities strive to meet at least 95 percent of the time. They include,
among others, the commitment to turn on a customer's electric service within one
working day after a request is made (if a meter is installed), arriving at a
home or residence within an agreed-upon two-hour period and achieving 100
percent accuracy in customer billing.
- In early 1998, we formed a new Customer Relations group dedicated to
satisfying customers and maintaining long-term relationships with them.
ENVIRONMENTAL PROTECTION. Our electric companies have been recognized for
their strong environmental programs and renewable energy projects. In 1997 we
expanded these efforts with our new ClearChoice pricing program, which allows
customers to help pay for the use of renewable energy sources.
6
<PAGE>
[PHOTO] Streamlining maintenance procedures and improving computerized parts
inventories for power plants help our U.S. electric utilities control
operating and maintenance expenses. These efforts by our employees to save
costs have made our generating facilities some of the most efficient in the
nation.
[PHOTO] When the Tulsa World installed new printing presses in downtown
Tulsa, major changes were required in the underground electric equipment that
serves the newspaper. Public Service Company of Oklahoma quickly and
efficiently added new facilities to keep the newspaper's presses rolling on
time and to keep a major customer satisfied.
[BAR GRAPH]
U.S. ELECTRIC AVERAGE FUEL COSTS
Per Million Btu
1993 $ 2.11
1994 1.82
1995 1.58
1996 1.81
1997 1.83
[LINE GRAPH]
1997 CSW TOTAL PERFORMANCE COMMITMENT PROGRAM
1997 Target 95%
JAN 98%
FEB 98%
MAR 97%
APR 97%
MAY 96%
JUN 96%
JUL 96%
AUG 97%
SEP 97%
OCT 97%
NOV 97%
DEC 97%
7
<PAGE>
[PHOTO] The Harmon Science Center in Tulsa is one of four public institutions to
which CSW has contributed solar energy systems to show how renewable energy can
be used. CSW is also providing solar systems for 19 public schools in Texas,
Louisiana and Arkansas.
- ------------------------------------------------------------------------------
CSW's U.S. Electric Utilities
Company Headquarters Customers
Central Power and Light Company Corpus Christi, Texas 627,900
Public Service Company of Oklahoma Tulsa, Oklahoma 481,400
Southwestern Electric Power Company Shreveport, Louisiana 415,900
West Texas Utilities Company Abilene, Texas 186,700
- ------------------------------------------------------------------------------
8
<PAGE>
[MAP] U.S. Electric Utilities
Headquarters
Generating Stations
345,000-Volt Transmission Lines
Our West Texas Utilities Company subsidiary in October launched ClearChoice
in San Angelo, Texas. Customers there can opt to pay an additional $5, $10 or
$20 a month on their electric bills to fund 250, 500 or 1,000 kilowatt-hours,
respectively, of electricity generated at a hydroelectric renewable energy
source.
On behalf of three of our electric companies, we issued requests for
proposals to add up to 160 kilowatts of new photovoltaic power sources, to be
installed on the rooftops at 19 schools. As a result of these efforts, we
believe students and others in the community will learn more about photovoltaic
technology, and our customers will benefit from the use of solar energy.
The National Association of Home Builders Energy Subcommittee gave us its
first Innovative Energy Efficiency Financing award in 1997 to honor our new
SmartMove program. SmartMove offers our utility customers competitive financing
rates for energy-efficiency improvements to new or existing homes without adding
to customers' down payments. By lowering household energy bills, SmartMove
increases consumers' buying power.
SmartMove also helps protect the environment by reducing energy use as it
helps us forge stronger relationships with our customers. Central Power and
Light Company first introduced the program, and our other U.S. electric
utilities plan to offer it in 1998.
[PIE CHART]
U.S. ELECTRIC 1997 ENERGY SOURCES
Natural Gas 36%
Lignite 9%
Purchases 7%
Nuclear 7%
Coal 41%
9
<PAGE>
[PHOTO] SEEBOARD and its partners have been selected as the preferred bidder to
upgrade and operate the electric distribution system for the giant London
Underground metro rail system.
POSITION: CSW owns SEEBOARD plc, a regional electricity company in Southeast
England, and has equity investments in Latin America, including an investment in
Empresa de Eletricidade Vale Parana-panema S.A. (Vale), a large electric
distribution utility in Brazil. Through these affiliates, CSW has more electric
utility customers in other countries than in the United States.
[MAP] SEEBOARD Service Area
SEEBOARD
________________________________________________________________
Location Southeast England, including much of Surrey
and West Sussex, all of East Surrey and most of
Kent
________________________________________________________________
Headquarters Crawley, West Sussex, United Kingdom
________________________________________________________________
Services Electricity distribution
Electric power supply
Natural gas marketing by Beacon
Gas, a joint venture with Amoco Retail
appliance stores Contracting and
consulting services
________________________________________________________________
Customers 2 million electric customers;
150,000 Beacon Gas customers
INTERNATIONAL UTILITIES: PROVIDING GROWTH AND EXPERIENCE
UNITED KINGDOM. SEEBOARD fits well with CSW's U.S. electric utilities in
terms of its operation and culture. Placing the same emphasis on excellent
customer service, reliability and innovation, it is contributing the steady
growth and earnings that we anticipated when we acquired it in 1995.
Our one disappointment has been the magnitude of the "windfall profits" tax
that was imposed on privatized utilities by the U.K. government. For SEEBOARD,
the full tax assessment was $176 million, which we recognized in 1997.
In both 1996 and 1997, SEEBOARD was the top-rated utility in England for
customer service (by the Daily Telegraph and British Telecom) and was given the
highest rating for customer service by the U.K. government's Office of
Electricity Regulation.
A SEEBOARD consortium has been selected as the preferred bidder to upgrade
and operate the electric distribution system of the London Under-ground, the
largest metro rail system in the world. The contract for operating, maintaining
and upgrading the distribution system for 250 miles of track and more than 270
stations will be, if signed, the largest operating contract ever awarded to a
U.K. regional electricity company.
For several years SEEBOARD has been preparing for retail competition in the
U.K. electric power market, which now is scheduled to begin in September 1998.
British authorities delayed the opening of competition beyond April 1998 after
they found that most utilities were unable to meet the deadline because of
information-technology issues. SEEBOARD was one of only four companies found to
be ready to compete in April.
From SEEBOARD's experience - transitioning from government to private
ownership and now to open competition - CSW is learning much to prepare its U.S.
electric utilities for the coming competition in this country.
SOUTH AMERICA. In 1997 we invested an additional $150 million in South
America. We made a further investment in Vale of approximately $69 million of
convertible securities in early 1998.
Vale - in which we now own a 37 percent interest - expanded its activities
across Brazil as the country continued privatizing its power industry.
In association with Inepar, a Brazilian electric and telecommunications
company, Vale acquired a controlling interest in Centrais Eletricas
10
<PAGE>
[PHOTO] CSW has increased its investment in Vale, a Brazilian electric utility
with six affiliates. CSW International's executive director of Brazilian
operations, Gilbert Moreno (at left), and Vale's Andres Deixler inspect a new
substation under construction at Cuiaba, Mato Grosso.
Matogrossenses S.A. (CEMAT), an electric distribution company serving 492,000
customers in the state of Mato Grosso.
A second consortium, in which Vale owns 36 percent, was awarded a
federal concession contract to build and operate the Lajeado Plant, an
850-megawatt hydroelectric power plant in the state of Tocantins in central
Brazil.
Vale also won a concession to build the Rosal hydroelectric power plant
on the Itabapoana River, which forms the border between the Brazilian states of
Rio de Janeiro and Espirito Santo. Construction of the 55-megawatt plant is
under way, with commercial operation planned for the end of 1999.
As one of Latin America's largest economies, Brazil continues to show much
promise for future development, with electricity demand growing at current rates
of 7 to 10 percent. At the same time, Vale's excellent management team has
achieved continued system improvements. In November the company was honored by
Eletricidade Moderna magazine with seven of 12 first-place titles in the
Brazilian industry's 1997 Electricity Awards.
Vale
_____________________________________________________
Location Brazilian states of Sao Paulo,
Parana, Tocantins, Minas Gerais
and Mato Grosso
_____________________________________________________
Headquarters Sao Paulo, Sao Paulo, Brazil
_____________________________________________________
Services Electricity distribution Electric
generation
Electric power supply
Investment in six other Brazilian
electric systems
_____________________________________________________
Customers 1.1 million electric customers
[MAP] Vale and Affiliates Service Area, CEMAT, CNEE, CAIUA, VALE, CFLO, EEB,
CELTINS
11
<PAGE>
[PHOTO] CSW Energy put into commercial operation its Sweeny Cogeneration
Facility - the first large power facility built in the United States as a
merchant plant. Both steam and electricity from the plant are delivered to the
Phillips 66 refinery and petrochemicals complex in the background, with the
plant's remaining electric output sold to wholesale buyers.
[MAP]
CSW ENERGY AND CSW INTERNATIONAL PROJECTS
______________________________________________
Total Capacity and CSW's Ownership Interest
______________________________________________
Brush II 68 megawatts
Brush, Colorado 47% interest
______________________________________________
Fort Lupton 272 megawatts
Fort Lupton, Colorado 50% interest
______________________________________________
Mulberry Cogeneration 120 megawatts
Bartow, Florida 50% interest
______________________________________________
Orange Cogeneration 103 megawatts
Bartow, Florida 50% interest
______________________________________________
Newgulf 85 megawatts
Near Boling, Texas 100% interest
______________________________________________
Sweeny Cogeneration 330 megawatts
Old Ocean, Texas 50% interest
______________________________________________
Medway Power Station 675 megawatts
Isle of Grain, Kent, U.K. 37.5% interest
______________________________________________
Altamira 109 megawatts
Altamira, Tamaulipas, Mexico 50% interest
12
<PAGE>
POSITION: CSW has independent power plants in the United States, the United
Kingdom and Mexico; it is aggressively seeking additional opportunities to
develop, acquire, construct, own and operate plants.
INDEPENDENT POWER PLANTS: DEVELOPING NONUTILITY GENERATION
U.S. PROJECTS. CSW Energy owns an interest in six cogeneration or
independent power plants and operates four of them. The six power plants - two
each in Colorado, Florida and Texas - have a total capacity of 978 megawatts.
Our newest and largest project began commercial operation in early 1998,
ahead of schedule and under budget. The Sweeny Cogeneration Facility
is providing 90 megawatts of electricity to Phillips Petroleum Company's
refining and petrochemicals complex at Old Ocean, Texas. The remainder of the
plant's 330-megawatt capacity is offered to electric utilities and power
marketers on a merchant basis. The Sweeny project is the country's first large
power plant built to operate as a merchant plant.
Our Newgulf Project, which began commercial operation in 1997, is Texas'
first exempt wholesale generator intended to take advantage of power market
fluctuations. Like Sweeny, it is designed to operate successfully both today and
in the future in the competitive market for electric power.
INTERNATIONAL PROJECTS. CSW International's Altamira Project, located near
Tampico on the eastern coast of Mexico, went into operation in the first quarter
of 1998. We have commitments for all of the plant's steam as well as all of its
109 megawatts of electric capacity.
The Altamira Project is a significant milestone in the Mexican power
industry. It is the first major cogeneration project to be built under Mexico's
new legal framework, in which power projects are regulated by the Comision
Reguladora de Energia, Mexico's energy regulatory commission.
The Altamira Project also is the first project to have long-term
contractual agreements with the Comision Federal de Electricidad for the
interconnection, backup and transmission of energy and with Petroleos Mexicanos
for natural gas to fuel the plant. The project is owned by Enertek, a joint
venture between CSW International and Alpek, S.A. de C.V., a subsidiary of the
ALFA Group. CSW International and Alpek own equal shares in the project.
Through SEEBOARD, we own a 37.5 percent interest in the Medway Power
Station on the Isle of Grain in Kent. The 675-megawatt, combined-cycle gas
turbine unit is owned and operated through a joint venture among SEEBOARD,
Southern Electric Power Generation Limited and AES Medway Electric Ltd.
13
<PAGE>
POSITION: Through its EnerShop subsidiary, CSW is helping commercial, industrial
and governmental customers use energy more efficiently; a new subsidiary, CSW
Energy Services, is marketing power in states that now permit retail
competition; and another new subsidiary, CSW Total EV, plans to promote and
market electric vehicles and battery chargers.
[PHOTO]
CSW Energy Services, a new CSW subsidiary, was launched in 1997 to supply
electricity to major retail customers in selected states. One of its first
agreements was with The Home Depot to supply 14 of the company's stores in
Southern California.
ENERGY SERVICES: HELPING CUSTOMERS USE ENERGY EFFICIENTLY
EnerShopSM. EnerShop
identifies better ways for customers to manage and use energy, designs the
improvements and shares in the savings. Its main customers are large commercial
businesses, light industrial manufacturers and government institutions.
In 1997 EnerShop won contracts to improve the energy efficiency at 15 major
facilities. Among these were several large office buildings in Dallas.
EnerShop also announced an alliance with Honeywell, Inc., to jointly market
energy-conservation services for municipal and county buildings in Texas. A new
state law allows local and county governments to use performance contracting for
energy-conservation improvements.
EnerShop's newest product is a state-of-the-art energy monitoring and
optimization service, called EnerACTSM, that was developed jointly with Perot
Systems. EnerACT communicates with all brands and models of energy-management
systems and utility meters, collects load profiles of many facilities for
single-source purchasing of energy and optimizes energy controls of multiple
buildings using simulation modeling.
CSW ENERGY SERVICES. CSW entered the competitive retail electricity market
in 1997 with the formation of CSW Energy Services, Inc. Headquartered in Boston,
Energy Services is marketing electricity supply in selected states where retail
competition is now permitted.
Initial efforts have focused on California and New England. California
opened its retail markets March 31, 1998, allowing electric suppliers to buy
power directly from generators or through a power exchange and then sell
the power to users.
Typical of these contracts is Energy Services' pact with The Home Depot,
Inc., North America's largest home-improvement retailer. Energy Services will
provide an estimated 28 million kilowatt-hours of electricity for 14 Home Depot
(R) retail centers in the San Diego area.
Energy Services also has signed a retail supply contract with La Quinta
Inns, Inc., to deliver an estimated 10 million kilowatt-hours to 12 major La
Quinta properties in California.
[MAP: State Activities on Electric Restructuring and Competition]
U.S. State Map
Legislative - 3 Legislative and Regulatory - 29
Regulatory - 3 Adopted Retail Competition - 16
All 50 states and the District of Columbia are addressing reforms to retail
electric service. Sixteen states so far have adopted plans to implement
electricity restructuring.
14
<PAGE>
[PHOTO] In the EnerACT command center in Dallas, employees monitor energy
consumption and control energy use to save clients money. Using advanced
technologies developed by CSW's EnerShop and Perot Systems, EnerACT provides
building managers throughout the country with critical information about their
facilities.
Energy Services' new contracts and customers are expected to improve
CSW's knowledge of competitive markets while offering customers low costs and
excellent service.
CSW TOTAL EV. With concerns about air emissions growing, the
potential for electric-powered vehicles appears more promising than ever. For
many years, CSW's U.S. electric companies have studied and tested electric
vehicles and investigated how they could be used by customers. Now, through a
new nonutility business, CSW Total EV, we propose to enter this market.
CSW Total EV initially expects to pursue two areas of the business:
selling, installing and maintaining battery chargers for electric cars, trucks
and buses; and selling and distributing a new line of recreational vehicles,
including electric bicycles and scooters. Operations are expected to be
conducted in Texas, Oklahoma, Louisiana, Arkansas, New Mexico, Colorado, Kansas
and Missouri.
CSW so far has donated more than 50 electric bicycles to police departments
in our service-area cities that have air-quality problems. Approval to sell the
electric bikes is pending at the Securities and Exchange Commission.
In 1997 CSW was the first electric utility to take delivery of the
Chevrolet S-10 Electric pickup, the automotive industry's first factory-built
electric truck. CSW is using 10 of the S-10 Electric trucks in daily utility
operations to promote electric vehicle technology with customers.
CSW Total EV is working with the Metropolitan Tulsa Transit Authority to
obtain electric buses for the city. It also is helping the Tulsa International
Airport Authority electrify the tugs, baggage tractors, loaders and other
equipment at three gates.
[PHOTO]
CSW was the first electric utility to take delivery of the Chevrolet
S-10 Electric pickup.
15
<PAGE>
[PHOTO]
C3 Communications' ChoiceCom partnership is offering alternative telephone and
data services in major Texas cities, using the latest technology, such as Lucent
5ESS switches.
[PHOTO]
C3 Communications provides automated meter reading systems to utilities and
energy-service providers. C3 also has been certified in California as a meter
data management agent to offer independent metering to customers.
16
<PAGE>
POSITION: CSW is working to become an industry leader in communications-based
utility automation and in telecommunications with its C3 Communications
subsidiary and ChoiceCom joint venture.
COMMUNICATIONS: TELEPHONES AND AUTOMATED METER READING
TELEPHONE SERVICE. In 1997 CSW entered the telephone business through a
joint venture between our C3 Communications subsidiary and ICG Telecom, a
subsidiary of ICG Communications, Inc. The joint venture, CSW/ICG ChoiceCom,
connected its first customers with local telephone service in Austin, Corpus
Christi and San Antonio, Texas.
In early 1998, ChoiceCom began marketing local telephone service in Dallas
and Houston. It plans to offer local telephone, long-distance and data
transmission services to businesses in selected cities in Texas, Oklahoma,
Louisiana and Arkansas.
ChoiceCom owns and operates high-capacity fiber-optic lines that link
several cities in Texas and Louisiana and is completing lines that will connect
Dallas, Houston, Austin and San Antonio. It has installed state-of-the-art
Lucent Technologies 5ESS(R) telephone switches in Austin, Corpus Christi and San
Antonio and plans to install 5ESS switches in Dallas and Houston during 1998.
UTILITY AUTOMATION. C3 Communications' Utility Automation Division provides
metering automation services to utilities and energy-service providers. Focusing
on meter data rather than individual system components and communications
technologies, C3 can provide the best automation solution for its clients by
choosing from a variety of technologies.
C3 Communications was selected by City Public Service, San Antonio's
natural gas and electric utility, to provide project management, systems
integration and marketing services for an initial 5,000 meters. By installing
advanced wireless and phone-based meter-reading equipment, the utility will be
able to read customers' electric, gas and water meters at any time.
Work on similar metering projects continued in Austin and Georgetown,
Texas. The City of Austin automated 400 water and 800 electric meters and is
considering expanding the project in 1998. Installation of Georgetown's citywide
automated metering technology will be completed in mid-1998.
In addition, C3 Communications was approved as a meter data management
agent (MDMA) for California's open electricity market. C3 is one of only a few
nonutility companies in the U.S. to be approved by all three of the state's
utility distribution companies to serve the meter data market. MDMAs read
meters; validate, edit and estimate meter reading data; publish data to the MDMA
server; and archive meter data.
17
<PAGE>
[PHOTO]
"This is the boldest move in the history of CSW, and we believe the
new combined company will be the epitome and envy of the industry."- E. R.
Brooks
BEHIND THE DECISION TO CREATE AMERICA'S PREMIER ELECTRIC COMPANY
A conversation with E. R. Brooks, chairman and chief executive officer of
Central and South West Corporation, and Dr. E. Linn Draper, Jr., chairman,
president and chief executive officer of American Electric Power Company, Inc.
YOU BOTH SAID WHEN ANNOUNCING THIS MERGER THAT AEP AND CSW WERE IDEAL MERGER
PARTNERS. WHY?
Brooks: We had been looking for an opportunity to merge with a successful
company that shared our strategy and our culture. We wanted a partner
that was dedicated to serving our shareholders in the competitive era
ahead by becoming an innovative, diversified leader in global energy
markets and related services - our strategy. And one that emphasized
low-cost generation and excellent customer service - our culture.
In my 36 years of experience, I've never seen a company that was a more
perfect fit with CSW than AEP.
Draper: As we've learned more about each other in the past few months, we've
found that our culture is even more compatible than we initially had
realized. Except for the climate, our service areas are very similar. We
both primarily serve large rural areas and small to mid-size cities.
When you think about it, Fort Wayne and Roanoke in AEP's territory are a
lot like Tulsa and Shreveport in CSW's. We shouldn't have any trouble
adapting to each other's territories because, in all of them, the same
types of personal relationships with customers are especially important.
18
<PAGE>
Brooks: AEP also brings us some important capabilities that we need. We have
been working to develop a significant electric power trading and
marketing business. AEP already has that. Together, we will have a name
brand identity that will be a great springboard for marketing
electricity and other products and services throughout the United
States.
Draper: We have many more similarities than differences, but even many of the
differences are strengths. AEP's industrial customers are largely in
primary metals, like steel and aluminum; CSW's industrial customers are
largely in petrochemicals and refining. AEP is primarily a coal-burning
utility, with a little nuclear power; CSW has a large natural gas
capability. This means that we will have greater diversity in types of
customers and in fuel use, which will be an important competitive
advantage.
HOW WILL THIS MERGER BENEFIT SHAREHOLDERS?
Draper: We expect shareholders of both companies to benefit from the outset.
Our studies show that the merger will add to cash flow from day one, and
our financial models show that the merger will dilute the earnings per
share of AEP and CSW shareholders only slightly in the early years. The
greatest benefit to the shareholders will be the potential of the new
combined company. We will have a diversified portfolio of low-cost power
plants, a presence in 11 states and three power pools, 38,000 megawatts
of generating capacity and a base of customers approaching 5 million
nationally. We'll be positioned to be a major player in the
international retail energy market as well.
[PHOTO]
A company that is good at energy delivery with strong customer service
and that has a portfolio of low-cost generating plants will be a very strong
competitor."- E. Linn Draper, JR.
19
<PAGE>
Brooks: Both of these companies have been successful on a stand-alone basis.
Together, they will be even more competitive. And they will have the
financial wherewithal to implement our strategy in bolder ways, around
the world, than either of us could have done separately. All that should
turn into shareholder value.
HOW WELL WILL THE INTERNATIONAL ACTIVITIES FIT TOGETHER?
Brooks: CSW and AEP also mesh well in our international activities. AEP is
primarily active in Asia, where we have long-term ambitions; CSW is
primarily active in Latin America, where AEP has longer-range ambitions.
We overlap only in the United Kingdom, where CSW owns a regional
electricity company and AEP owns 50 percent of another regional
electricity company. We believe that the merger will create a real
global powerhouse.
Draper: We also complement each other in the capabilities we offer to other
countries. AEP's international work has focused on building efficient
coal-fired facilities. CSW has experience in building and operating
gas-fired generation and Western-U.S.-type-coal plants. So together we
will have the capability to build the type of plant that makes the most
sense in any region where we are working.
WHAT KIND OF OBSTACLES WILL THIS MERGER FACE?
Draper: We expect to complete the merger in the first half of 1999. Along the
way, we expect two issues to be closely examined. The first is a concern
about whether the merger could create a market-dominant company. We
strongly believe that the proposed merger would not have this effect.
AEP and CSW do not operate in the same states or power pools. Neither
company is now dominant in any state it serves; the combined company
will not be dominant in any state it serves. We'll have more footprints,
but none of them will be bigger in any geographic area.
[PHOTO] "It's impressive that over the past three years both companies have been
rated among the top four utilities in the country for customer satisfaction."-
E. Linn Draper, JR.
20
<PAGE>
[PHOTO] During the merger process, we'll be moving forward aggressively to
assure that, when the merger is consummated, we can hit the ground running."-
E. R. Brooks
The second issue revolves around the Public Utility Holding Company Act
of 1935, which requires a holding company to operate, or to be capable
of operating, as an integrated public utility system. Historically, this
has been interpreted to mean that a holding company system must operate
in contiguous states. We are not contiguous, but there is only one
energy provider separating us. We will purchase the right to use the
transmission system of that company to exchange power between the
eastern and western operations of our combined company. We believe that
the combined company will be able to operate as an integrated system in
this way.
Brooks: This will be the biggest merger in the history of U.S. electric
utilities. We expect a lot of regulatory review and a lot of third-party
intervention. We will seek the approval of all four states that CSW
serves and based on our initial communications with them, I believe the
response will be positive. We believe that we do not need formal
approval from the seven states that AEP serves, but some of them are
expressing a strong interest. If the country truly is serious about
creating a competitive electric power industry, we believe this merger
between these two similar companies should be a model for future
transactions. We are confident it will succeed.
HOW WILL THE OPERATING COMPANIES BE KNOWN?
Brooks: One of the strengths of our U.S. electric companies is their strong
relationships and name recognition with their customers. That's a
competitive advantage. So we expect that CSW's four operating companies
will continue using their established names and identities, at least for
the near future.
Draper: All nonregulated competitive activities will probably operate under the
name of AEP, with our brand as America's Energy PartnerSM. Today there's
an ongoing debate as to what extent regulated electric companies can use
the same names and identities for other services being marketed to their
customers. We probably won't change the names of the CSW electric
companies until that matter has been decided.
21
<PAGE>
[PHOTO] "We will be a global power company with a healthy diversity of fuels,
types of industrial customers and climate patterns, and dynamic international
operations." -E.R. Brooks
HOW WILL EMPLOYEES BE AFFECTED?
Draper: The vast majority of employees who are directly involved with serving
customers or producing electricity will not be affected. The jobs that
overlap are largely corporate and administrative functions. We have
identified about 1,100 duplicate positions that we are planning to
eliminate. But we have plenty of time during the regulatory approval
process to take advantage of retirements and other attrition and to find
employment opportunities in our other growing businesses. We believe the
real number of job losses will be much fewer than 1,100.
Brooks: The employees who lose their jobs will be treated fairly. Both companies
have a strong tradition of treating their employees well. For the great
majority of employees who work for the new combined company, I'm sure
there will be a great sense of pride, because they will be working at
one of the largest and most successful companies in this changing
industry, and of excitement, because they will see a myriad of
opportunities that this new company will offer.
[MAPS] AEP + CSW Utility Service Area; United Kingdom - Yorkshire Electricity
and SEEBOARD
22
<PAGE>
AEP + CSW: A PERFECT FIT
The proposed merger of Central and South West Corporation with American Electric
Power Company will bring together two utilities ideally suited for the
competitive environment ahead. Our size, our market presence, our geographic
location and our international operations present us with opportunities that few
other companies will have.
The combined system will operate in 11 states. We'll supply power to 4.7 million
U.S. customers, making us the single largest electricity supplier in the nation.
Our mix of coal, gas and nuclear facilities will give us a diversity of low-cost
generation. Our global subsidiaries will operate in some of the fastest-growing
markets in the world and will provide significant opportunities for growth and
expansion.
Our shared commitment to excellence, customer service, customer choice,
technology, and employee growth and development provides the synergies necessary
for a company preparing to meet the competition head-on.
Fast Facts CSW AEP* Combined**
________________________________________________________________________________
Headquarters Dallas, Texas Columbus, Ohio Columbus, Ohio
Kilowatt-Hour
Sales U.S. (millions) 63,157 145,423 208,580
Kilowatt-Hour
Sales U.K. (millions) 19,203 14,756 33,959
Employees U.S. 7,254 17,844 25,098
Employees U.K. 4,161 3,977 8,138
Service Area U.S.
(square miles) 152,000 45,400 197,400
Service Area U.K.
(square miles) 3,000 3,900 6,900
Customers U.S.
(average number) 1,712,000 2,959,000 4,671,000
Customers U.K.
(average number) 2,014,000 2,071,000 4,085,000
Generating Stations U.S. 38 38 76
Generating Stations U.K. 1 10 11
Generating Capacity U.S.
(megawatts) 13,739 23,759 37,498
Generating Capacity U.K.
(megawatts) 675 329 1,004
Revenues (thousands) $5,268,000 $6,161,000 $11,352,000
Net Income for Common
Stock (thousands) $153,000 $511,000 $664,000
Operating Cash Flow
(thousands) $726,000 $1,198,000 $1,924,000
Assets (thousands) $13,451,000 $16,615,000 $30,066,000
*AEP acquired a 50 percent interest in Yorkshire Electricity Group plc, a U.K.
electric distribution company, on April 1, 1997, whichis accounted for on an
equity basis. AEP's kilowatt-hour sales U.K. are for the nine months ended
December 31, 1997.
[**Revenues vary from combined totals due to reclassifications.]
23
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Central and South West Corporation
For the Years Ended December 31, 1997 1996 1995
________________________________________________________________________________
(millions, except per share amounts)
Revenues
U.S. Electric $ 3,321 $ 3,248 $ 2,883
United Kingdom 1,870 1,848 208
Other Diversified 77 59 52
________________________________________________________________________________
5,268 5,155 3,143
________________________________________________________________________________
Expenses
U.S. Electric Fuel and Purchased Power 1,266 1,228 1,045
United Kingdom Cost of Sales 1,291 1,331 158
Operations and Maintenance 1,133 935 712
Depreciation and Amortization 497 464 353
Taxes 346 402 254
________________________________________________________________________________
4,533 4,360 2,522
________________________________________________________________________________
Operating Income 735 795 621
________________________________________________________________________________
Other Income (Expense) 32 (61) 99
Interest and Other Charges (438) (437) (343)
________________________________________________________________________________
Income from Continuing Operations 329 297 377
________________________________________________________________________________
Income from Discontinued Operations - 12 25
Gain on Sale of Discontinued Operations - 120 -
________________________________________________________________________________
Income Before Extraordinary Item 329 429 402
Extraordinary Item - U.K. Windfall
Profits Tax (176) - -
________________________________________________________________________________
Net Income for Common Stock $ 153 $ 429 $ 402
________________________________________________________________________________
Average Common Shares 212.1 207.5 191.7
Basic and Diluted Earnings per Share $ 0.72 $ 2.07 $ 2.10
Dividends Paid per Share $ 1.74 $ 1.74 $ 1.72
The condensed consolidated financial statements in this summary annual report
were derived from the consolidated financial statements that appear in CSW's
1997 Financial Report to shareholders. Copies of the consolidated financial
statements and the report of Arthur Andersen LLP thereon may be obtained by
calling Central and South West Corporation's Investor Services Department at
1-800-527-5797.
Certain matters discussed in this summary annual report are forward-looking
statements intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as CSW "believes," "anticipates" or "expects,"
or words of similar import. Similarly, statements that describe CSW's future
plans, objectives and goals also are forward-looking statements. Such statements
address future events and conditions concerning capital expenditures, earnings,
litigation, rate and other regulatory matters, liquidity and capital resources,
and accounting matters. Actual results in each case could differ materially from
those currently anticipated in such statements, by reason of factors such as
electric utility industry restructuring, including ongoing state and federal
legislative and regulatory activities; future economic conditions; developments
in the domestic and international markets in which CSW and its subsidiaries
operate; state and federal regulatory approvals or proceedings and other
conditions precedent to the proposed merger with AEP, which may or may not be
satisfied; and other circumstances affecting anticipated business activities,
revenues and costs.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Central and South West Corporation
For the Years Ended December 31, 1997 1996 1995
________________________________________________________________________________
(millions)
Operating Activities
Net Income for Common Stock $ 153 $ 429 $ 402
Depreciation and Amortization 529 521 425
Other Adjustments to Net Income and
Changes in Assets and Liabilities 44 (75) (28)
________________________________________________________________________________
726 875 799
________________________________________________________________________________
Investing Activities
Construction Expenditures (507) (521) (474)
Acquisition Expenditures - (1,394) (421)
CSW Energy/CSW International Projects (382) (124) 109
Cash Proceeds from Sale of Subsidiary - 690 -
Other (15) 63 (26)
________________________________________________________________________________
(904) (1,286) (812)
________________________________________________________________________________
Financing Activities
Common Stock Sold 20 477 57
Trust Preferred Securities Sold 323 - -
Change in Debt and Preferred Stock 44 219 597
Payment of Dividends (383) (376) (348)
________________________________________________________________________________
4 320 306
________________________________________________________________________________
Effect of Exchange Rate Changes on Cash (5) (56) -
Net Change in Cash and Cash Equivalents (179) (147) 293
________________________________________________________________________________
Cash and Cash Equivalents - January 1 254 401 108
________________________________________________________________________________
Cash and Cash Equivalents - December 31 $ 75 $ 254 $ 401
24
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
Central and South West Corporation
For the Years Ended December 31, 1997 1996
(millions)
Assets
Electric $ 13,596 $ 13,337
Other Diversified 250 84
Accumulated Depreciation (5,218) (4,940)
________________________________________________________________
Fixed Assets 8,628 8,481
Current Assets 1,390 1,509
Deferred Charges and Other Assets
Goodwill 1,428 1,525
Other 2,005 1,817
________________________________________________________________
$ 13,451 $ 13,332
________________________________________________________________
Capitalization and Liabilities
Common Stock $ 3,556 $ 3,802
Preferred Stock 202 325
Trust Preferred Securities 335 -
Long-Term Debt 3,898 4,024
________________________________________________________________
Total Capitalization 7,991 8,151
Current Liabilities 2,499 2,425
Deferred Credits 2,961 2,756
________________________________________________________________
$ 13,451 $ 13,332
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Central and South West
Corporation:
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheets of Central and South West Corporation (a Delaware
corporation) and subsidiary companies as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997, appearing in
the Central and South West Corporation 1997 Financial Report for the 1998 annual
meeting of shareholders of the Corporation (not presented herein). Our report
dated February 16, 1998, also appearing in the Central and South West
Corporation 1997 Financial Report, contained an explanatory sentence calling
attention to the fact that we did not audit the financial statements of CSW UK
Finance Company (1997 - which includes CSW Investments) and CSW Investments
(1996) which statements reflect total assets and revenues of 22 percent and 35
percent in 1997 and 23 percent and 36 percent in 1996, respectively, of the
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, insofar as it relates to the
amounts included for those entities, is based solely on the reports of the other
auditors.
In our opinion, based on our audits and the reports of other auditors, the
information set forth in the accompanying condensed consolidated balance sheets
as of December 31, 1997 and 1996, and in the related condensed statements of
consolidated income and cash flows for each of the three years in the period
ended December 31, 1997, are fairly stated, in all material respects, in
relation to the consolidated financial statements from which it has been
derived.
Arthur Andersen LLP
Dallas, Texas
February 16, 1998
REPORT OF MANAGEMENT
The condensed consolidated financial statements in this summary annual report
were derived from the consolidated financial statements that appear in the
Central and South West Corporation 1997 Financial Report for the 1998 annual
meeting of shareholders. Management is responsible for preparing the
consolidated financial statements, in accordance with generally accepted
accounting principles appropriate in the circumstances, and for maintaining the
Corporation's systems of internal accounting controls.
A description of these controls, along with management's opinion about their
overall effectiveness, is contained within the Report of Management included in
the Central and South West Corporation 1997 Financial Report for the 1998 annual
meeting of shareholders. The consolidated financial statements were audited by
the Corporation's independent public accountants, whose report on the condensed
consolidated financial statements appears above.
E. R. Brooks
Chairman and Chief Executive Officer
Glenn D. Rosilier
Executive Vice President and Chief Financial Officer
Lawrence B. Connors
Controller
25
<PAGE>
COMPARATIVE STATISTICAL AND FINANCIAL RECORD
Central and South West Corporation
1997 1996 1995 1994 1993
________________________________________________________________________________
U.S. Utilities
Electric Revenues
(millions)
Residential $1,253 $1,243 $1,138 $1,156 $1,160
Commercial 892 872 810 836 832
Industrial 813 781 702 733 736
Sales for Resale 243 255 224 204 179
Other 120 97 9 136 148
________________________________________________________________________________
$3,321 $3,248 $2,883 $3,065 $3,055
________________________________________________________________________________
Sales (kilowatt-hours
in millions)
Residential 17,995 17,883 16,872 16,368 15,903
Commercial 14,546 14,256 13,755 13,463 12,966
Industrial 21,087 20,266 19,321 18,869 18,205
Sales for Resale 7,824 8,428 8,468 7,133 5,852
Other 1,705 1,592 1,518 1,501 1,434
________________________________________________________________________________
63,157 62,425 59,934 57,334 54,360
________________________________________________________________________________
Average Number of Customers
(thousands)
Residential 1,462 1,443 1,425 1,403 1,378
Commercial 214 209 207 203 198
Industrial 23 24 24 24 25
Other 13 14 13 13 12
________________________________________________________________________________
1,712 1,690 1,669 1,643 1,613
________________________________________________________________________________
Number of Customers -
End of Period
(thousands) 1,724 1,704 1,683 1,661 1,633
Residential Sales
Averages
Kilowatt-Hours per
Customer 12,310 12,392 11,840 11,665 11,541
Revenue per Customer $857 $861 $799 $824 $842
Revenue per
Kilowatt-Hour (cents) 6.96 6.95 6.75 7.06 7.29
Total Electric Revenue per
Kilowatt-Hour (cents) 5.26 5.20 4.81 5.35 5.62
System Peak Demand
(megawatts) 13,105 2,613 12,314 11,434 11,464
Fuel Data
Average Btu per Net
Kilowatt-Hour 10,405 10,440 10,299 10,344 10,391
Cost per Million Btu $1.83 $1.81 $1.58 $1.82 $2.11
Cost per Kilowatt-Hour
Generated (mills) 19.02 18.86 16.30 18.80 21.90
CSW System
Total Plant Cost
(millions) $13,846 $13,421 $13,778 $11,868 $11,343
Annual Additions 675 583 1,933 616 594
Accumulated
Depreciation 5,218 4,940 4,761 3,870 3,550
Capitalization (millions)
Common Stock $3,556 $3,802 $3,178 $3,052 $2,930
Preferred Stock 202 325 326 327 350
Trust Preferred
Securities 335 - - - -
Long-Term Debt 3,898 4,024 3,914 2,940 2,749
________________________________________________________________________________
The condensed consolidated financial statements in this summary annual report
were derived from the consolidated financial statements that appear in CSW's
1997 Financial Report to shareholders. Copies of the consolidated financial
statements and the report of Arthur Andersen LLP thereon may be obtained by
calling Central and South West Corporation's Investor Services Department at
1-800-527-5797.
26
<PAGE>
BOARD OF DIRECTORS
Molly Shi Boren
Attorney
Norman, Oklahoma
E. R. Brooks
Chairman and Chief Executive Officer
Central and South West Corporation
Dallas, Texas
Donald M. Carlton
President and Chief Executive Officer
Radian International LLC
Austin, Texas
T. J. Ellis
Chairman and Chief Executive
SEEBOARD plc
Crawley, West Sussex, United Kingdom
Joe H. Foy
Retired Partner, Bracewell & Patterson
Kerrville, Texas
William R. Howell
Chairman Emeritus
J. C. Penney Company, Inc.
Dallas, Texas
Robert W. Lawless
President
The University of Tulsa
Tulsa, Oklahoma
James L. Powell
Ranching and Investments
Fort McKavett, Texas
Richard L. Sandor
Chairman and Chief Executive Officer
Centre Financial Products Limited
Chicago, Illinois
Thomas V. Shockley, III
President and Chief Operating Officer
Central and South West Corporation
Dallas, Texas
COMMITTEES OF THE BOARD OF DIRECTORS
1. The Audit Committee recommends to the board of directors the independent
public accountants to be appointed, subject to shareholder approval. The Audit
Committee reviews with the independent public accountants and the Corporation's
internal auditors the scope of external and internal audits and the adequacy of,
and the compliance with, the Corporation's system of internal accounting
controls.
2. The Executive Compensation Committee reviews benefit programs and management-
succession programs and determines the compensation of executive officers.
3. The Nominating Committee reviews and recommends candidates for election to
the board of directors.
4. The Policy Committee reviews and makes recommendations to the board of
directors concerning major policy issues; considers on a continuing basis the
composition, structure and functions of the board of directors and its
committees; and reviews existing corporate policies and recommends changes when
appropriate. The Policy Committee has authority to act in place of the board of
directors when the board is not in session, to the extent permitted by law.
Membership of these committees is as follows: Molly Shi Boren (1) (2); E. R.
Brooks, chairman of the Policy Committee (4); Donald M. Carlton (1) (3); Joe H.
Foy, chairman of the Executive Compensation Committee (2) (3) (4); William R.
Howell (2) (3); Robert W. Lawless, chairman of the Audit Committee (1) (2) (4);
James L. Powell, chairman of the Nominating Committee (1) (3) (4); and Richard
L. Sandor (1) (2).
OFFICERS
CENTRAL AND SOUTH WEST CORPORATION
E. R. Brooks
Chairman and Chief Executive Officer
Thomas V. Shockley, III
President and Chief Operating Officer
Ferd. C. Meyer, Jr.
Executive Vice President and General Counsel
Glenn D. Rosilier
Executive Vice President and Chief Financial Officer
Glenn Files
Senior Vice President, Electric Operation
Thomas M. Hagan
Senior Vice President, External Affairs
Venita McCellon-Allen
Senior Vice President, Customer Relations and Corporate Development, and
Assistant Corporate Secretary
Stephen J. McDonnell
Vice President, AEP Merger
Kenneth C. Raney, Jr.
Vice President, Associate General Counsel and Corporate Secretary
Michael D. Smith
Vice President, Business Opportunities
Lawrence B. Connors
Controller
Wendy G. Hargus
Treasurer
CENTRAL AND SOUTH WEST SERVICES, INC.
Richard H. Bremer
President, Energy Services
Richard P. Verret
President, Production
Robert L. Zemanek
President, Energy Delivery
M. Bruce Evans
Vice President, Customer Relations
Lana L. Hillebrand
Vice President, Human Resources
Mark W. Menezes
Vice President, Governmental Affairs
Mark D. Roberson
Vice President, Regulatory Affairs
SEEBOARD plc
T. J. Ellis
Chairman and Chief Executive
CSW Texas
Alphonso R. Jackson
President
CSW Oklahoma
T. D. Churchwell
President
CSW Louisiana/Arkansas
Michael H. Madison
President
Central Power and Light Company
J. Gonzalo Sandoval
General Manager-President
Public Service Company of Oklahoma
T. D. Churchwell
President
Southwestern Electric Power Company
Michael H. Madison
President
West Texas Utilities Company
Paul J. Brower
General Manager-President
CSW Energy, Inc.
Terry D. Dennis
President and Chief Executive Officer
CSW International, Inc.
Terry D. Dennis
President and Chief Executive Officer
C3 Communications, Inc.
Richard H. Bremer
President
EnerShop Inc.
Richard H. Bremer
President
CSW Energy Services, Inc.
Richard H. Bremer
President
CSW Credit, Inc.
Glenn D. Rosilier
President
CSW Leasing, Inc.
Glenn D. Rosilier
President
27
<PAGE>
SHAREHOLDER INFORMATION
COMMON STOCK LISTING
Central and South West Corporation's common stock is traded under the ticker
symbol CSR and is listed on the New York and the Chicago stock exchanges. You
can obtain stock quotations from the New York Stock Exchange report in most
daily newspapers.
COMMON STOCK DIVIDENDS
Dividends of 43.5 cents a share were paid in each quarter of 1997. All dividends
paid by the Corporation represent taxable income to shareholders for federal
income tax purposes.
In January 1998 the Corporation's board of directors maintained the quarterly
dividend rate of 43.5 cents a share. Traditionally, the board of directors has
declared dividends to be payable on the last business day of February, May,
August and November. Future cash dividends will be dependent upon the policies
of the board of directors and the Corporation's earnings, financial condition
and other factors.
LOST DIVIDEND CHECK OR STOCK CERTIFICATE
If you do not receive your dividend check or stock certificate, or if it is
lost, destroyed or stolen, please call our Investor Services Department
immediately.
STOCK TRANSFER
Central and South West Services, Inc., is the transfer agent and registrar for
Central and South West Corporation's common stock and for the preferred stocks
of the Corporation's subsidiaries.
To transfer your stock to another name, write the new name, address and tax
identification number on the back of the certificate and sign your name exactly
as it appears on the front. Then have your signature Medallion-guaranteed by a
commercial bank or stockbroker. Signatures cannot be Medallion-guaranteed by a
notary public.
Your stock certificate should be sent to our Investor Services Department by
registered or certified mail. If you have questions about transferring your
shares, you can write or call our Investor Services Department.
TAXPAYER ID NUMBER
Federal law requires each shareholder to provide a taxpayer identification
number for all shareholder accounts. For individual shareholders, your ID number
is your Social Security number.
You must provide your ID number whenever you open a new account in our stock,
even if you already own stock in existing accounts in your name. If you do not
provide the ID number, the Corporation is required to withhold 31 percent
federal income tax from your dividends.
If your stock is registered in a joint account, it is important to tell us the
taxpayer ID number of the primary owner you delegate. If you are custodian for a
minor or act as a trustee on an account, please provide the beneficial owner's
tax identification number. This will ensure that your dividends are reported
under the correct name, address and taxpayer ID number.If you have not yet given
us your taxpayer ID number, please contact our Investor Services Department to
request a W-9 form. Complete, sign and return the form as soon as possible.
DUPLICATE ANNUAL REPORT MAILINGS
We are required to mail an annual report to all of our shareholders. You will
receive duplicate mailings from us if there are two or more shareholders at the
same address or if your shares are registered in different but similar names.
DIRECT DEPOSIT OF DIVIDENDS
We are pleased to offer direct deposit of dividend payments to your checking,
savings or credit union account at any financial institution that accepts direct
electronic deposits. Direct deposit eliminates the possibility of your check
being lost or stolen, and the funds are credited to your account on the dividend
payment date. If you would like an enrollment card, please call our Investor
Services Department.
PROXY AND DIVIDEND MAILINGS
Duplicate mailings of proxies and dividend checks cannot be eliminated unless
the registration is the same name for all of your accounts.If your account
registrations are identical, notify our Investor Services Department that you
want to combine your accounts.
If your account registrations are different and you want to combine your
accounts, all certificates must be issued in the one registration you prefer. To
have your certificates reissued, please follow the instructions under Stock
Transfer.
1998 ANNUAL MEETING
The 1998 annual meeting of shareholders is scheduled for May 28. It will be held
at the Dallas Museum of Art, 1717 North Harwood Street, Dallas, Texas. The
meeting will begin at 10:30 a.m. Central time. If you will not be attending the
meeting, please vote your shares by signing and returning your proxy card as
soon as possible.
28
<PAGE>
Inside Back Cover
ADDITIONAL INFORMATION
We will be pleased to send you additional copies of this Summary Annual Report.
Also available are the 1997 Financial Report, the Joint Proxy
Statement/Prospectus for the 1998 Annual Meeting of Shareholders, a preliminary
quarterly financial report, a Five-Year Financial and Statistical Review of the
Central and South West System and our latest Environmental Report of the Central
and South West System.
The Corporation is subject to the informational requirements of the Securities
Exchange Act of 1934 and files reports and other information statements with the
Securities and Exchange Commission. These reports may be inspected at the SEC's
offices and on its Internet site as well as at the New York and Chicago stock
exchanges.
We will provide copies of these reports without charge to any Central and South
West shareholder. If you would like to receive a report, please contact our
Investor Services Department.
INVESTOR SERVICES
Our Investor Services staff is available Monday through Friday from 9 a.m. to
4 p.m. Central time to answer your questions. Our address and telephone number
are:
Central and South West Corporation
Investor Services Department
P. O. Box 660164
Dallas, Texas 75266-0164
1-800-527-5797
E-mail: [email protected]
INVESTOR RELATIONS
Security analysts should contact:
Becky Hall
Director of Investor Relations
Central and South West Corporation
214-777-1277
If you would like to be added to our mailing list to receive our news release
and other information, please contact our Investor Services Department.
POWERSHARE(R) DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLAN
The Central and South West Corporation (Corporation) PowerShare Dividend
Reinvestment and Stock Purchase Plan (Plan) provides a convenient and
inexpensive way to reinvest dividends and purchase shares of the Corporation's
common stock, $3.50 par value per share (Common Stock).
NONSHAREHOLDERS OF LEGAL AGE WHO ARE RESIDENTS OF THE 50 STATES OF THE UNITED
STATES OR THE DISTRICT OF COLUMBIA MAY ENROLL IN THE PLAN BY MAKING AN INITIAL
CASH INVESTMENT OF $250. Employees and eligible retirees of the Corporation and
its subsidiaries may elect to purchase Common Stock through automatic payroll or
pension deductions, with a minimum of $10 per pay period.
ABOUT POWER SHARE
- - Easy Enrollment.
- - $25 Minimum Additional Investments. Once an initial investment of $250 has
been made, the minimum additional investment or optional cash purchases of up
to $100,000 per calendar year for CSW Common Stock can be made.
- - Dividend Reinvestment and Payment Options. Participants may elect to have cash
dividends on all or any portion of their shares of Common Stock automatically
reinvested in CSW Common Stock. Cash dividend payments not reinvested will be
paid to participants by check or electronic direct deposit.
- - Safekeeping Service for CSW Common Stock Certificates. PowerShare participants
may deposit certificates for CSW Common Stock with CSW's Investor Services
Department for safekeeping, and the shares will be credited to those
participants' PowerShare accounts.
- - Shares Are Purchased Weekly.
FOR MORE INFORMATION AND A PROSPECTUS
The more information you have, the better your ability to make sound investment
decisions. The CSW prospectus provides more details about PowerShare and about
Central and South West Corporation. We encourage you to read this information
before deciding whether to enroll in the Plan or to send any money.
If you have any questions, please call CSW's Investor Services Department
toll-free at 1-800-527-5797 weekdays between 9 a.m. and 4 p.m. Central time.
(C) 1998 Central and South West Corporation. All rights reserved. CSW Total
EV(TM) is a trademark of Central and South West Corporation. EnerShopSM,
SmartMoveSM, ClearChoiceSM and PowerShare(R) are service marks of Central and
South West Corporation. ChoiceComSM is a service mark of CSW/ICG ChoiceCom, L.P.
EnerACTSM is a service mark of EnerShop Inc., a subsidiary of Central and South
West Corporation.
American Electric Power(R) is a registered trademark of, and AEP: America's
Energy PartnerSM is a service mark of, American Electric Power Company, Inc.
The Home Depot(R) and Home Depot(R) are registered trademarks of Homer TLC, Inc.
CSW is not affiliated with The Home Depot, Inc. The services described in this
annual report are solely those of CSW and are not endorsed by Homer TLC, Inc.,
The Home Depot, Inc., or Home Depot U.S.A., Inc.
Design: Walsh & Associates
Photography: Phillip Radcliffe; Jim Reisch; Image Bank/Color Day Productions;
Ricardo Azoury/Black Star
Printed on recycled paper
<PAGE>
TEAR OUT FROM BACK COVER:
[BACK OF CARD]
POWERSHARE
POWERSHARE
Yes! I want more information about PowerShare(R).
Please type or print clearly and mail
this completed form to:
Central and South West Corporation
Investor Services Department
P.O. Box 660164
Dallas, Texas 75266-0164
Last Name First Name Middle Initial
ADDRESS
CITY STATE ZIP
This does not constitute an offer to sell or a solicitation of an offer to buy
securities. Such offers and solicitations are made by way of prospectus only,
and no sales of common stock under the plan will be made or commitment to
purchase accepted unless a copy of the prospectus is delivered. There is no
obligation to participate in the plan, and these materials do not constitute the
Corporation's recommendation to participate in the plan.
<PAGE>
[FRONT OF CARD]
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 2551 DALLAS TX
POSTAGE WILL BE PAID BY ADDRESSEE
CENTRAL AND SOUTH WEST CORPORATION
INVESTOR SERVICES
PO BOX 660164
DALLAS TX 75266-9874
<PAGE>
BACK OUTSIDE COVER:
Central and South West Corporation
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266-0164
http://www.csw.com
Printed in U.S.A.
CSWAR97 250
