<PAGE>
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-1839
COMMONWEALTH EDISON COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 36-0938600
(STATE OR OTHER (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION
INCORPORATION OR NO.)
ORGANIZATION)
37TH FLOOR, 10 SOUTH DEARBORN STREET,
POST OFFICE BOX 767, CHICAGO, ILLINOIS 60690-0767
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 312/394-4321
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF
TITLE OF EACH
EACH CLASS EXCHANGE
- ---------------------- ON WHICH
REGISTERED
------------------
FIRST MORTGAGE BONDS:
7 5/8% SERIES 25, DUE 8 1/8% SERIES 36, DUE
JUNE 1, 2003 JUNE 1, 2007
8% SERIES 26, DUE 8 1/4% SERIES 37, DUE
OCTOBER 15, 2003 DECEMBER 1, 2007 NEW YORK
8 1/8% SERIES 35, DUE
JANUARY 15, 2007
SINKING FUND
DEBENTURES:
3%, DUE APRIL 1, 1999 7 5/8% SERIES 1, DUE NEW YORK
2 7/8%, DUE APRIL 1, FEBRUARY 15, 2003
2001
2 3/4%, DUE APRIL 1, NEW YORK AND
1999 CHICAGO
COMMON STOCK, $12.50 PAR VALUE NEW YORK, CHICAGO
AND PACIFIC
COMMON STOCK PURCHASE WARRANTS--1971 WARRANTS
AND SERIES B WARRANTS NEW YORK, CHICAGO
AND PACIFIC
CUMULATIVE PREFERENCE STOCK, WITHOUT PAR VALUE:
$1.90; $2.00; $7.24; $8.40; $8.38; AND $8.40 SERIES B NEW YORK, CHICAGO
AND PACIFIC
$1.425 CONVERTIBLE PREFERRED STOCK, WITHOUT PAR VALUE NEW YORK, CHICAGO
AND PACIFIC
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS RE-
QUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
Yes [X]. No [_].
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
THE ESTIMATED AGGREGATE MARKET VALUE OF THE COMPANY'S OUTSTANDING COMMON
STOCK, $1.425 CONVERTIBLE PREFERRED STOCK AND CUMULATIVE PREFERENCE STOCK WAS
APPROXIMATELY $6,500,000,000 AS OF FEBRUARY 28, 1994. IN EXCESS OF 99.97% OF
THE COMPANY'S VOTING STOCK WAS OWNED BY NON-AFFILIATES AS OF THAT DATE.
COMMON STOCK OUTSTANDING AT FEBRUARY 28, 1994: 213,794,548 SHARES
DOCUMENTS INCORPORATED BY REFERENCE:
PORTIONS OF THE COMPANY'S CURRENT REPORT ON FORM 8-K/A-1 DATED JANUARY 28,
1994 ARE INCORPORATED BY REFERENCE INTO PARTS I, II AND IV HEREOF AND PORTIONS
OF THE COMPANY'S DEFINITIVE PROXY STATEMENT RELATING TO ITS ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD MAY 10, 1994 ARE INCORPORATED BY REFERENCE INTO PARTS
I AND III HEREOF.
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<PAGE>
COMMONWEALTH EDISON COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I
Item 1. Business.......................................................... 1
The Company............................................................. 1
Net Electric Generating Capability...................................... 2
Construction Program.................................................... 2
Electric Rates.......................................................... 4
Rate Proceedings........................................................ 4
Fuel Supply............................................................. 6
Regulation.............................................................. 7
Employees............................................................... 14
Interconnections........................................................ 14
Franchises.............................................................. 14
Business and Competition................................................ 15
Executive Officers of the Registrant.................................... 16
Operating Statistics.................................................... 17
Item 2. Properties........................................................ 18
Item 3. Legal Proceedings................................................. 19
Item 4. Submission of Matters to a Vote of Security Holders............... 19
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 20
Item 6. Selected Financial Data........................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 21
Item 8. Financial Statements and Supplementary Data....................... 21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 21
Part III
Item 10. Directors and Executive Officers of the Registrant............... 22
Item 11. Executive Compensation........................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and Management... 22
Item 13. Certain Relationships and Related Transactions................... 22
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 23
Report of Independent Public Accountants on Supplemental Schedules........ 28
Schedule V--Property, Plant and Equipment................................. 29
Schedule VI--Accumulated Depreciation, Depletion and Amortization of Prop-
erty, Plant and Equipment................................... 31
Schedule VII--Guarantees of Securities of Other Issuers................... 33
Schedule VIII--Valuation and Qualifying Accounts.......................... 34
Schedule IX--Short-Term Borrowings........................................ 35
Signatures................................................................ 36
</TABLE>
i
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PART I
ITEM 1. BUSINESS.
THE COMPANY
Commonwealth Edison Company (Company) is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial and industrial customers. The Company
was organized in the state of Illinois on October 17, 1913 as a result of the
merger of Cosmopolitan Electric Company into the original corporation named
Commonwealth Edison Company. The latter had been incorporated on September 17,
1907. The Company's electric service territory has an area of approximately
11,540 square miles and an estimated population of approximately 8.1 million as
of December 31, 1991, approximately 8.2 million as of December 31, 1992 and
approximately 8.1 million as of December 31, 1993. It includes the city of
Chicago, an area of about 225 square miles with an estimated population of
three million from which the Company derived approximately one-third of its
ultimate consumer revenues in 1993. The Company had approximately 3.3 million
electric customers at December 31, 1993. The Company's principal executive
offices are located at 10 South Dearborn Street, Post Office Box 767, Chicago,
Illinois 60690-0767, and its telephone number is 312/394-4321.
The Company's financial condition is dependent upon its ability to generate
revenues to cover its costs. To maintain a satisfactory financial condition,
the Company must recover the costs of and a return on completed construction
projects, including its three most recently completed generating units, and
maintain adequate debt and preferred and preference stock coverages and common
stock equity earnings. The Company has no significant revenues other than from
the sale of electricity. Under the economic and political conditions prevailing
in Illinois, the Company's management recognizes that competitive and
regulatory circumstances may limit the Company's ability to raise its rates.
Therefore, the Company's financial condition will depend in large measure on
the Company's levels of sales, expenses and capital expenditures. See "Rate
Proceedings" and "Business and Competition" below.
In response to the adverse regulatory and judicial decisions in the
proceedings relating to the level of the Company's rates, the Company
implemented a cost reduction plan in 1992 involving various management
workforce reductions through early retirement and voluntary and involuntary
separations. Such reductions, when combined with other actions, are estimated
by the Company to have saved approximately $130 million in operation and
maintenance expenses during 1993. The management workforce reduction resulted
in a charge to income of approximately $23 million (net of income tax effects)
in 1992. In addition, the Company reached agreement in August 1993 with its
unions regarding certain cost reduction actions. The agreement provides for a
wage freeze until April 1, 1994, changes to reduce health care plan cost,
increased use of part-time employment and changes in holiday provisions. The
agreement also includes a continuation of negotiations relative to other
issues. Further, the Company has reduced planned construction program
expenditures by approximately $200 million compared with the common years
(1994-95) of the previously approved three-year construction program.
The Company and union representatives reached agreement in February 1994 and
announced an offer of a voluntary early retirement program. This program is
available to management, non-union and union employees. Participants currently
eligible will be given a 45-day period during which to consider and elect to
participate in this voluntary program.
In addition, the quarterly common stock dividends, payable on and since
November 1, 1992, were reduced by 47% from the seventy-five cents per share
amount paid quarterly since 1982 to forty cents per share. Dividends have been
declared on the outstanding shares of the Company's preferred and preference
stocks at their regular quarterly rates. The Company's Board of Directors will
continue to review quarterly the payment of dividends.
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See "Fuel Supply," "Regulation" and "Item 3. Legal Proceedings" herein for
information concerning administrative and legal proceedings and certain other
matters involving the Company, Commonwealth Edison Company of Indiana, Inc.
(Indiana Company) and Cotter Corporation, a wholly-owned subsidiary of the
Company. The outcome of certain of the proceedings or matters described or
referred to therein, if not favorable to the Company and the Indiana Company
(companies), could have a material adverse effect on the future business and
operating results of the companies.
NET ELECTRIC GENERATING CAPABILITY
The owned (non-summer) generating capability of the companies is considered
by the companies to be 22,522,000 kilowatts. After deducting summer limitations
of 557,000 kilowatts, the net summer generating capability of the companies is
considered by the companies to be 21,965,000 kilowatts. The net generating
capability available for operation at any time may be less due to regulatory
restrictions, fuel restrictions, efficiency of cooling facilities and to
generating units being temporarily out of service for inspection, maintenance,
refueling, repairs or modifications required by regulatory authorities. See
"Item 2. Properties."
The highest peak load experienced to date occurred on August 27, 1993 and was
17,771,000 kilowatts; and the highest peak load experienced to date during a
winter season occurred on January 18, 1994 and was 14,179,000 kilowatts. The
Company's kilowatthour sales and generation are generally higher (primarily
during the summer periods but also during the winter periods) when temperature
extremes create demand for either summer cooling or winter heating.
CONSTRUCTION PROGRAM
The construction program for the three-year period 1994-96 consists
principally of improvements to the companies' existing nuclear and other
electric production, transmission and distribution facilities. It does not
include funds (other than for planning) to add new generating capacity to the
Company's system. The program, as approved by the Company in January 1994,
calls for electric plant and equipment expenditures of approximately $2,450
million (excluding nuclear fuel expenditures of approximately $780 million).
This amount reflects a decrease of approximately $200 million compared with the
common years (1994-95) of the previously approved construction program. In
part, the decrease reflects a reduction in capital spending announced by the
Company in July 1992 due to adverse financial circumstances. For additional
information concerning the cost reduction plan, see "The Company" above. It is
estimated that such construction expenditures, with cost escalation computed at
4% annually, will be as follows:
<TABLE>
<CAPTION>
THREE-YEAR
1994 1995 1996 TOTAL
---- ---- ---- ----------
--MILLIONS OF DOLLARS--
<S> <C> <C> <C> <C>
Production................................. $295 $310 $250 $ 855
Transmission and Distribution.............. 340 445 505 1,290
General.................................... 115 95 95 305
---- ---- ---- ------
Total.................................. $750 $850 $850 $2,450
---- ---- ---- ------
---- ---- ---- ------
</TABLE>
Construction expenditures during 1993 were approximately $842 million.
The Company's gross investment in nuclear generating capacity (excluding
nuclear fuel) is approximately $13.8 billion at December 31, 1993, and the
Company expects that investment to be approximately $14.2 billion by the end of
1996 as a result of improvements.
The Company's forecasts of peak load indicate a need for additional resources
to meet demand, either through generating capacity or through equivalent
purchased power or demand-side management resources, in 1997 and each year
thereafter through the year 2000. The projected
2
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resource needs reflect the current planning reserve margin recommendations of
the Mid-America Interconnected Network (MAIN), the reliability council of
which the Company is a member. The Company's forecasts indicate that the need
for additional resources during this period would exist only during the summer
months. The Company does not expect to make expenditures for additional
capacity to the extent the need for capacity can be met through cost-effective
demand-side management resources, non-utility generation or other power
purchases. To assess the market potential to provide such cost-effective
resources, the Company solicited proposals to supply it with cost-effective
demand-side management resources, non-utility generation resources and other-
utility power purchases sufficient to meet forecasted requirements through the
year 2000. The responses to the solicitation suggest that adequate resources
to meet the Company's needs could be obtained from those sources but the
Company has not yet determined whether those sources represent the most
economical alternative. If the Company were to build additional capacity to
meet its needs, it would need to make additional expenditures during the 1994-
96 period.
The Company has not budgeted for a number of projects, particularly at
generating stations, which could be required, but which the Company does not
expect to be required during the budget period. In particular, the Company has
not budgeted for the construction of scrubbers at its Kincaid generating
station, for the replacement of major amounts of piping at its boiling water
reactor nuclear stations or for the replacement of steam generators at its
pressurized water reactor nuclear stations. See "Regulation," subcaption
"Nuclear" below.
The 1994-96 construction program includes approximately $91 million for
environmental control facilities, of which approximately $39 million, $37
million and $15 million is budgeted for 1994, 1995 and 1996, respectively.
Expenditures on such facilities were $28 million, $22 million and $28 million
during 1991, 1992 and 1993, respectively.
Purchase commitments, principally related to construction and nuclear fuel,
approximated $1,187 million at December 31, 1993. In addition, the Company has
substantial commitments for the purchase of coal under long-term contracts as
indicated in the following table.
<TABLE>
<CAPTION>
CONTRACT PERIOD COMMITMENT(1)
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<S> <C> <C>
Black Butte Coal Co. 1994-2007 $1,212
Decker Coal Co. 1994-2015 $ 862
Peabody Coal Co. 1994 $ 34
Big Horn Coal Co. 1998 $ 21
</TABLE>
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(1) Estimated costs in millions of dollars FOB mine. No estimate of future
cost escalation has been made.
For additional information concerning these coal contracts and the Company's
fuel supply, see "Fuel Supply" below and Notes 3, 17 and 19 of Notes to
Financial Statements in the Company's Current Report on Form 8-K/A-1 dated
January 28, 1994 (the "January 28, 1994 Form 8-K/A-1 Report").
The construction program will be reviewed and modified as necessary to adapt
to changing economic conditions, rate levels and other relevant factors
including changing business and legal needs and requirements. The Company
cannot anticipate all such possible needs and requirements. While regulatory
requirements in particular are more likely, on balance, to necessitate
increases in construction expenditures than decreases, the Company's financial
condition may require compensating or greater reductions in other construction
expenditures. See "Rate Proceedings," "Regulation" and "Item 3. Legal
Proceedings" herein.
The Company has forecast that internal sources will provide approximately
one-half of the funds required for its construction program and other capital
requirements, including nuclear fuel expenditures, contributions to nuclear
decommissioning trusts, sinking fund obligations and refinancing of scheduled
debt maturities (the annual sinking fund requirements for preference stock and
long-term debt are summarized in Notes 7 and 8 of Notes to Financial
Statements in the January 28, 1994 Form 8-K/A-1 Report). The forecast assumes
the rate levels reflected in the Rate Matters Settlement (described below),
and reflects the payments required to be made to customers under the Rate
Matters Settlement and the Fuel Matters Settlement (described below). See
"Rate Proceedings" herein for additional information.
3
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The Company periodically reviews its projection of probable future demand for
electricity in its service territory. It currently projects long-term average
annual growth of 2% in annual peak load and 1.75% in annual output.
Gross additions to and retirements from utility property, excluding nuclear
fuel, of the companies for the five years ended December 31, 1993 were $4,640
million and $511 million, respectively.
See Note 1 of Notes to Financial Statements and "Results of Operations"
subcaption "Other Items" in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the January 28, 1994 Form 8-K/A-1
Report for information concerning Allowance for Funds Used During Construction.
ELECTRIC RATES
The following table summarizes rate increases granted in the Company's major
rate proceedings before the Illinois Commerce Commission (ICC) since January 1,
1985. Revenues actually realized as a result of the rate increases may vary
depending on levels of kilowatthour sales to each class of customers. See Notes
2 and 3 of Notes to Financial Statements in the January 28, 1994 Form 8-K/A-1
Report.
<TABLE>
<CAPTION>
ANNUAL
AMOUNT
REQUESTED AUTHORIZED
(IN ----------------------------------------------------------------
MILLIONS) PERCENT END OF
AND ANNUAL INCREASE TWELVE-MONTH
DATE OF AMOUNT (IN OVER PREVIOUS TEST PERIOD CITED IN
FILING EFFECTIVE DATE MILLIONS)(a) REVENUES(a) FINAL RATE ORDER
- ------------ ---------------- ------------ ------------- --------------------
<S> <C> <C> <C> <C>
$583
November 29,
1984 October 29, 1985 $495(b) 11.0 December 1984
$1,415
August 21,
1987 January 1, 1989 $235(c) 4.5(c) December 1987
$1,231
April 12,
1990 March 20, 1991 $750(d) 14.0(d) December 1991
</TABLE>
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(a) The amounts granted and the related percent increases are based on the test
periods cited in the rate orders and exclude add-on revenue taxes.
(b) Includes approximately $81 million of revenue included in rates effective
January 1, 1987 pursuant to a phase-in plan. The phase-in plan reflects the
recovery of the $81 million postponed portion of the increase and an
additional recovery ($56 million) of a full return on the postponed portion
over a two-year period.
(c) Represents the first step of a rate increase relating to Byron Unit 2 and
Braidwood Units 1 and 2 (Units) authorized by a December 1988 rate order
which was reversed by the Illinois Supreme Court on December 21, 1989 and
excludes a $56 million decrease resulting from completion of the recovery
period referred to in note (b). This rate increase was rolled back,
effective July 1, 1990.
(d) Represents the aggregate amount of the rate increase, which was to be
phased-in over a three-year period. As a result of subsequent proceedings
and the Rate Matters Settlement described below, only an increase of
approximately $144 million in annual electric operating revenues remains
effective. See "Rate Proceedings," subcaption "Settlements Relating to
Certain Rate Matters" below and Note 2 of Notes to Financial Statements in
the January 28, 1994 Form 8-K/A-1 Report.
RATE PROCEEDINGS
The Company's revenues, net income, cash flows and plant carrying costs have
been affected directly by various rate-related proceedings. During the periods
presented in the financial statements, the Company was involved in proceedings
concerning its October 1985 ICC rate order (which related principally to the
recovery of costs associated with its Byron Unit 1 nuclear generating unit),
4
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proceedings concerning its March 1991 ICC rate order (which related principally
to the recovery of costs associated with the Units), proceedings concerning the
reduction in the difference between the Company's summer and non-summer
residential rates that was effected in the summer of 1988, and ICC fuel
reconciliation proceedings principally concerning the recoverability of the
costs of the Company's western coal. In addition, there were outstanding issues
related to the appropriate interest rate and rate design to be applied to a
refund that was made in 1990 following the reversal of a December 1988 ICC rate
order and a rider to the Company's rates that the Company was required to file
as a result of the change in the federal corporate income tax rate made by the
Tax Reform Act of 1986. The uncertainties associated with such proceedings and
issues, among other things, led to the Rate Matters Settlement and the Fuel
Matters Settlement (which are discussed below).
The effects of the aforementioned rate proceedings during the periods
presented are discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Results of Operations" in the
January 28, 1994 Form 8-K/A-1 Report. For additional information regarding such
proceedings, see Notes 2 and 3 of Notes to Financial Statements in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1993.
Settlements Relating to Certain Rate Matters
On September 24, 1993, the Company's Board of Directors approved two proposed
settlements which the Company's management had reached with parties involved in
several of the proceedings and matters relating to the level of the Company's
rates for electric service. One of the proposed settlements (Rate Matters
Settlement) concerned the proceedings relating to the Company's 1985 and 1991
ICC rate orders, the proceedings relating to the reduction in the difference
between the Company's summer and non-summer residential rates, the outstanding
interest rate and rate design issues, and a rider related to the change in the
federal corporate income tax rate made by the Tax Reform Act of 1986. The other
proposed settlement (Fuel Matters Settlement) related to the ICC fuel
reconciliation proceedings involving the Company for the period from 1985
through 1988 and to future challenges by the settling parties to the prudency
of the Company's western coal costs for the period from 1989 through 1992. Each
of these settlements was subject to appropriate action by the ICC or the courts
having jurisdiction over the proceedings.
As a result of subsequent ICC and judicial actions, the Rate Matters
Settlement became final on November 4, 1993. Under the Rate Matters Settlement,
effective as of November 4, 1993, the Company reduced its rates by
approximately $339 million annually and commenced refunding approximately $1.26
billion (including revenue taxes), plus interest at five percent on the unpaid
balance, through temporarily reduced rates over an initial refund period
scheduled to be twelve months (to be followed by a reconciliation period of no
more than five months). The Company had previously deferred the recognition of
revenues during 1993 as a result of developments in the proceedings related to
the March 1991 ICC rate order, which resulted in a reduction to 1993 net income
of approximately $160 million. The recording of the effects of the Rate Matters
Settlement in October 1993 reduced the Company's 1993 net income and retained
earnings by approximately $292 million or $1.37 per common share, in addition
to the effect of the deferred recognition of revenues and after the partially
offsetting effect of recording approximately $269 million (or $1.26 per common
share) in deferred carrying charges, net of income taxes, authorized in the ICC
rate order issued on January 6, 1993 (as subsequently modified, the Remand
Order). In January 1994, a purported class action was filed in the Circuit
Court of Cook County, Illinois challenging the making of refunds to current
rather than to historical residential customers in the Rate Matters Settlement.
The Company does not believe that the complaint has any merit.
As a result of subsequent ICC actions, the Fuel Matters Settlement became
final on November 15, 1993. Under the Fuel Matters Settlement, effective as of
December 2, 1993, the Company commenced paying approximately $108 million
(including revenue taxes) to its customers through
5
<PAGE>
temporarily reduced collections under its fuel adjustment clause over a twelve-
month period. The Company recorded the effects of the Fuel Matters Settlement
in October 1993, which effects reduced the Company's net income and retained
earnings by approximately $62 million or $0.29 per common share.
Other Rate Matters
On February 10, 1994, the Company filed a request with the ICC to increase
electric operating revenues by approximately $460 million, or 7.9%, on an
annual basis above the level of revenues approved in the Rate Matters
Settlement. This request principally reflects the inclusion of the Units in the
Company's rate base as fully "used and useful," increased operation and
maintenance expenses over the level reflected in the Remand Order, increased
contributions to the external trust funds which the Company is required to fund
to cover the eventual decommissioning of its nuclear power plants and lower
debt and equity costs. The ICC has suspended the rates, appointed hearing
examiners and ordered an investigation. Under the Illinois Public Utilities
Act, the ICC must decide the case by early January 1995.
In the Remand Order, the rate determination was based upon, among other
things, findings by the ICC with respect to the extent to which the Units were
"used and useful" during the 1991 test year period of the rate order. With
respect to the "used and useful" issue, the ICC applied a needs and economic
benefits methodology, using a twenty percent reserve margin and forecasted peak
demand, and found Byron Unit 2 and Braidwood Units 1 and 2 to be 93%, 21% and
0%, respectively, "used and useful." The Company has not recorded any
disallowances related to the "used and useful" issue. The Company considers the
"used and useful" disallowance in the Remand Order to be temporary. The ICC
concluded in the Remand Order that the forecasts in the record in that
proceeding indicate that Braidwood Units 1 and 2 will be fully "used and
useful" within the reasonably foreseeable future.
FUEL SUPPLY
The kilowatthour generation of the companies for 1993 was provided from the
following fuel sources: nuclear 75%, coal 23%, oil 1% and gas 1%.
Nuclear Fuel
The Company has uranium concentrate inventory, supply contracts and
subsidiary resources sufficient to meet the majority of its uranium concentrate
requirements through 1994 and portions of its requirements for periods beyond
1994. The Company's contracted conversion services are sufficient to meet all
of its uranium conversion requirements through 1995. All of the Company's
enrichment requirements have been contracted for through 1999. Commitments for
fuel fabrication have been obtained for the Company's nuclear units at least
through 1999. The Company does not anticipate that it will have any difficulty
in negotiating contracts for uranium concentrates, conversion, enrichment and
fuel fabrication services for periods after the dates indicated.
The Company has contracted with the United States Department of Energy (DOE)
for the final disposal of spent nuclear fuel and high-level radioactive waste
beginning not later than January 1998; however, this delivery schedule is
expected to be delayed significantly. The Company has the primary
responsibility for providing interim storage for its spent nuclear fuel. The
Company's capability to store spent fuel is more than adequate for some years
to come. All stations except Dresden and Zion stations will have spent fuel
capacity at least through the year 2005. Dresden station has capacity through
2001. Zion station has capacity through 2003. Meeting spent fuel storage
requirements beyond the years described above could require new and separate
storage facilities, the costs for which have not been determined. See
"Regulation," subcaption "Nuclear" herein for further information concerning
the disposal of radioactive waste.
6
<PAGE>
Coal
The Company burns low sulfur western coal at all but one of its coal-fired
stations. The other coal-fired station burns Illinois coal. This Illinois coal
is provided under a contract which expires in 1994. The Company's present
policy is to maintain a coal inventory equal to 30 days of high utilization. As
of February 28, 1994, coal inventories approximated 30 days. The average cost
per ton of coal consumed by the companies for the years 1991, 1992 and 1993,
including transportation charges, was $50.31, $52.57 and $49.42, respectively.
Compared to other utilities, the Company has relatively low average fuel
costs. This results from the Company's reliance predominantly on lower cost
nuclear generation. The Company's coal costs, however, are high compared to
those of other utilities. The Company's western coal contracts and its rail
contracts for delivery of the western coal were renegotiated during 1992
effective as of January 1, 1993, to provide, among other things, for
significant reductions in the delivered price of the coal over the duration of
the contracts. However, the renegotiated contracts provide for the purchase of
certain coal at prices substantially above currently prevailing market prices
and the Company has significant purchase commitments under its contracts. For
additional information concerning the Company's coal purchase commitments, fuel
reconciliation proceedings and coal reserves, see "Construction Program" above
and "Fuel Adjustment Clause" below and Notes 2, 17 and 19 of Notes to Financial
Statements in the January 28, 1994 Form 8-K/A-1 Report.
Oil and Gas
The Company's fast-start peaking units use middle distillate oils.
Approximately half of this capacity can also be fueled with natural gas. The
Company's 2,698,000 kilowatt Collins station is fueled with natural gas and
residual oil. The Company purchases oil under various purchase orders. The
recent cost for oil at Collins station, including transportation charges, has
been $16 per barrel. The conversion of three of the five units at Collins
station to dual fuel capability (residual oil and natural gas) was
substantially completed during 1993. The Company expects the conversion of all
three units to be completed in the near future. The Company has a contract for
the delivery and storage of natural gas from gas pipelines to Collins station
which expires in 2003.
Fuel Adjustment Clause
Through its fuel adjustment clause, the Company recovers from its customers
the cost of the fuel used to generate electricity and of purchased power as
compared to fuel costs included in base rates. The amounts collected under the
fuel adjustment clause are subject to review by the ICC, which, under the
Illinois Public Utilities Act, is required to hold annual public hearings to
reconcile the collected amounts with the actual cost of fuel and power
prudently purchased. In the event that the collected amounts exceed such actual
cost, then the ICC can order that the excess be refunded.
For additional information concerning the Company's fuel reconciliation
proceedings and coal reserves, see Notes 2, 17 and 19 of Notes to Financial
Statements in the January 28, 1994 Form 8-K/A-1 Report and Note 3 of Notes to
Financial Statements in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1993.
REGULATION
The companies are subject to state and federal regulation in the conduct of
their respective businesses, including the operations of Cotter Corporation.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. The Company is subject to regulation
7
<PAGE>
by the ICC as to rates and charges, issuance of securities (other than debt
securities maturing in not more than twelve months), service and facilities,
classification of accounts, transactions with affiliated interests as defined
in the Illinois Public Utilities Act and other matters. In addition, the ICC in
certain of its rate orders has exercised jurisdiction over the Company's
environmental control program.
The Company is subject to the jurisdiction of the Federal Energy Regulatory
Commission (FERC) with respect to the issuance of debt securities maturing in
not more than twelve months. The Company is also subject to the jurisdiction of
the FERC and the DOE under the Federal Power Act with respect to certain other
matters, including the sale for resale of electric energy and the transmission
of electric energy in interstate commerce, and to the jurisdiction of the DOE
with respect to the disposal of spent nuclear fuel and other radioactive
wastes.
On July 13, 1993, legislation became effective in Illinois which permits the
Company to create certain unregulated subsidiaries, and to form a holding
company, without being required to obtain the approval of the ICC. The Company
has created an unregulated subsidiary to engage in energy service activities
and is in the process of obtaining necessary shareholder and Federal regulatory
approvals to create a holding company structure for its operations.
The Company is a holding company as defined by the Public Utility Holding
Company Act of 1935 because of its ownership of common stock of the Indiana
Company. By filing an exemption statement annually, the Company is exempt from
most of the provisions of such Act.
The Indiana Company, an "affiliated interest" of the Company within the
meaning of the Illinois Public Utilities Act, is subject to regulation by the
Indiana Utility Regulatory Commission and to the jurisdiction of the FERC, the
DOE and federal and state of Indiana pollution control and other agencies.
Currently, the ICC is conducting a focused management audit of the Company's
fuel procurement process, which began in December 1993 and is scheduled to be
completed in midyear 1994.
Nuclear
The Illinois Department of Nuclear Safety (IDNS) has jurisdiction over
certain activities in Illinois relating to nuclear power and safety, and
radioactive materials. Effective June 1, 1987, the IDNS replaced the Nuclear
Regulatory Commission (NRC) as the regulator and licensor of certain source,
by-product and special nuclear material in quantities not sufficient to form a
critical mass, including such material contained in various measuring devices
used at fossil-fuel power plants. The IDNS has promulgated regulations which
are substantially similar to the corresponding federal regulations. The IDNS
also has authority to license a low-level radioactive waste disposal facility
and to regulate alternative methods for disposing of materials which contain
only trace amounts of radioactivity.
The Company is subject to the jurisdiction of the NRC with respect to its
nuclear generating stations. The NRC regulations control the granting of
permits and licenses for the construction and operation of nuclear generating
stations and subject such stations to continuing review and
regulation. The NRC review and regulatory process covers, among other things,
operations, maintenance, and environmental and radiological aspects of such
stations. The NRC may modify, suspend or revoke licenses and impose civil
penalties for failure to comply with the Atomic Energy Act, the regulations
under such Act or the terms of such licenses. Attempts are made from time to
time by various individuals or citizen groups to prohibit the development or
use of nuclear power
8
<PAGE>
through initiation of proceedings before the NRC, other agencies or courts.
Such proceedings frequently involve attacks on the validity of NRC rules which,
if successful, could provide a basis for challenges to permits and licenses
granted by the NRC in the past.
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the
selection and development of repositories for, and the disposal of, spent
nuclear fuel and high-level radioactive waste. The Company, as required by that
Act, has signed a contract with the DOE to provide for the disposal of spent
nuclear fuel and high-level radioactive waste from the Company's nuclear
generating stations beginning not later than January 1998. The contract with
the DOE requires the Company to pay the DOE a one-time fee applicable to
nuclear generation through April 6, 1983 of approximately $277 million, with
interest to date of payment, and a fee payable quarterly equal to one mill per
kilowatthour of nuclear-generated and sold electricity after April 6, 1983. The
Company has elected to pay the one-time fee, with interest, just prior to the
first scheduled delivery of spent nuclear fuel to the DOE, which is scheduled
to occur not later than January 1998; however, this delivery schedule is
expected to be delayed significantly. The costs incurred by the DOE for
disposal activities will be paid out of fees charged to owners and generators
of spent nuclear fuel and high-level radioactive waste. The Company has primary
responsibility for the interim storage of its spent nuclear fuel. The Company
anticipates the possibility of serious difficulties in disposing of high-level
radioactive waste. See "Fuel Supply," subcaption "Nuclear Fuel" herein for
further information.
The Company currently disposes of its low-level radioactive waste at a site
in the state of South Carolina. There are no other commercial operating sites
in the United States for the disposal of low-level radioactive waste available
to the Company. The federal Low-Level Radioactive Waste Policy Act of 1980
provides that states may enter into compacts to provide for regional disposal
facilities for such waste, subject to approval by the United States Congress
(Congress) of each such compact. Under the 1985 amendments to that Act, a
compact could restrict the use of a region's disposal facilities after January
1, 1993 to waste generated within the region. South Carolina belongs to a
regional compact. South Carolina has granted the Company access to its waste
disposal site for an 18-month period which began January 1, 1993. Illinois has
entered into a compact with the state of Kentucky, which has been approved by
Congress. The IDNS had estimated that a low-level radioactive waste disposal
facility would be operational in Illinois by March 31, 1994 at the earliest.
However, in 1992, an independent panel rejected the only site in Illinois then
being considered for a low-level waste disposal facility. Illinois has since
enacted legislation changing the procedures for siting a low-level waste
disposal facility. The Company has temporary on-site storage capacity at its
nuclear generating stations for a limited amount of low-level radioactive waste
and is planning additional such capacity pending development of disposal
facilities by the state of Illinois. The Company anticipates the possibility of
serious difficulties in disposing of low-level radioactive waste. The
continuing viability of commercial nuclear power is subject to resolution of
the issues of spent nuclear fuel storage and disposal of radioactive waste.
Federal regulations provide that any operating nuclear generating facility
may be required to cease operation if the NRC determines that there are
deficiencies in state, local or utility emergency preparedness plans relating
to such facility and the deficiencies are not corrected within four months of
such determination. Under the regulations, the NRC may permit the operation of
facilities, even though the emergency preparedness plans are deficient, upon an
examination of other factors, including whether the deficiencies are
significant for the facility in question, whether adequate interim compensatory
actions have been or will be taken promptly and whether other compelling
reasons exist for operation consistent with public health and safety. The
Company's emergency preparedness plans for all of its nuclear generating
stations have been approved by the NRC. State and local plans relating to the
Company's nuclear generating stations have been approved by the Federal
Emergency Management Agency. The Company continues to cooperate with the NRC
and appropriate local and state agencies in Illinois, Indiana, Iowa and
Wisconsin on emergency preparedness issues.
9
<PAGE>
In February 1993, the Company was notified by the NRC that the Company's Zion
station, which was placed on the NRC's list of plants to be monitored closely
in early 1991, was removed from that list. In January 1994, the Company was
notified by the NRC that the Company's Dresden station, which was placed on the
NRC's list of plants to be monitored closely in early 1992, would remain on
that list. Also in January 1994, the NRC noted adverse performance trends at
Quad-Cities station as well as at LaSalle County station. The Company had
already identified and was working to correct most of the problems cited. As a
consequence, the Company anticipates continued increased expenditures in
connection with those stations.
In accordance with a commitment to the NRC, the Company examined its
operating boiling water nuclear generating units in 1983 to determine the
existence or extent of inter-granular stress corrosion in certain of the large
diameter piping in those units. Inter-granular stress corrosion was discovered
in the Dresden and Quad-Cities units. The Company replaced the stainless steel
piping susceptible to stress corrosion at Dresden Unit 3 and is taking
alternative remedial actions which are intended to minimize the need to replace
such piping at Dresden Unit 2, Quad-Cities Units 1 and 2 and LaSalle Units 1
and 2. If the Company is required to replace all of such piping, the estimated
construction expenditures, in current-year dollars, would be approximately $520
million.
The Company has studied the possibility of having to replace the steam
generators at its Zion nuclear generating plant. The initial studies were
completed in early June 1991 and additional follow-up studies are continuing.
Based on the findings of these studies, the Company plans to replace the Zion
Unit 1 steam generators, for service in 2000, at an estimated cost of
approximately $225 million. The Company is also studying the replacement of the
steam generators at Byron Unit 1 and Braidwood Unit 1 and expects such
replacement may be needed; initial and on-going studies indicate possible
replacements as early as 2000 for Byron Unit 1 and 2002 for Braidwood Unit 1;
however, alternative remedial actions are also being explored. If required, the
replacement cost of the steam generators at Byron Unit 1 and Braidwood Unit 1
would be comparable to Zion Unit 1. Approximately $3 million of preliminary
engineering expenditures are included in the 1994-96 construction program. See
"Item 3. Legal Proceedings" concerning litigation by the Company against
Westinghouse Electric Corporation concerning steam generators.
During the year 1993, civil penalties were imposed on the Company by the NRC
on seven occasions for violations of NRC regulations in amounts aggregating
$562,500. Since January 1, 1994, there have been no violations of NRC
regulations identified which have resulted in civil penalties. However, there
are several potentially enforceable issues currently outstanding and under
review by the NRC.
The uranium mining and milling operations of the Company's subsidiary, Cotter
Corporation, are subject to regulation by the state of Colorado and the NRC.
Environmental
The companies are subject to regulation regarding environmental matters by
the United States and by the states of Illinois, Indiana, Iowa and, in the case
of Cotter Corporation, Colorado, and by local jurisdictions where the companies
operate their facilities. The Illinois Pollution Control Board (IPCB) has
jurisdiction over environmental control in the state of Illinois, which
includes authority to regulate air, water and noise emissions and solid waste
disposal, together with the Illinois Environmental Protection Agency (Illinois
Agency), which enforces regulations of the IPCB and issues permits in
connection with environmental control. The United States Environmental
Protection Agency (Federal Agency) administers certain federal statutes
relating to such matters. The IPCB has published a proposed rule under which it
would have the power to regulate radioactive air pollutants under the Illinois
Environmental Protection Act and the Federal Clean Air Act Amendments of 1977.
10
<PAGE>
Air quality regulations, promulgated by the IPCB as well as the Indiana and
Hammond Departments of Environmental Management in accordance with federal
standards, impose restrictions on the emission of particulates, sulfur dioxide,
nitrogen oxides and other air pollutants and require permits from the
respective state and local environmental protection agencies for the operation
of emission sources. Permits authorizing operation of the Company's fossil-
fueled generating facilities subject to this requirement have been obtained
and, where such permits are due to expire, the Company has, in a timely manner,
filed applications for renewal or requested extensions of the existing permits.
Under the Federal Clean Water Act, National Pollutant Discharge Elimination
System (NPDES) permits for discharges into waterways are required to be
obtained from the Federal Agency or from the state environmental agency to
which the permit program has been delegated. Those permits must be renewed
periodically. The companies either have NPDES permits for all of their
generating stations or have filed applications for renewals of such permits
under the current delegation of the program to the Illinois Agency or the
Indiana Department of Environmental Management. The Company is also subject to
the jurisdiction of certain pollution control agencies of the state of Iowa
with respect to the discharge into the Mississippi River from the Quad-Cities
station. Reissued NPDES permits for several generating facilities establish
schedules by which the facilities must meet tighter discharge limits when using
certain biocides in condenser cooling water systems. The Company has embarked
on a program to obtain compliance with the new permit requirements by the April
1995 compliance date.
On August 10, 1990, the Sierra Club filed suit in the U.S. District Court
under Section 505 of the Federal Clean Water Act alleging violations of state
of Illinois water quality standards with respect to thermal effluents at the
Company's Fisk, Crawford, Will County, Joliet and Dresden generating stations.
In July 1991, the Sierra Club and the Company reached a settlement of this suit
which was approved by the Court on November 1, 1991. Under the settlement, the
Company has agreed to perform an ecological study of the thermal effluents
discharged from the generating stations. Ultimately, this study, which is
currently underway, may determine whether the installation of closed cycle
cooling facilities or operational restrictions are necessary at one or more of
these stations.
The Great Lakes Critical Programs Act of 1990 requires that, following the
issuance of guidance by the Federal Agency, the states of Illinois and Indiana,
among others, adopt water quality standards, policies and procedures to assure
protection of the water quality of the Great Lakes. Water quality standards and
procedures that the states would be required to adopt under the current version
of the Federal Agency's draft guidance ultimately could require that the
Company install additional pollution control equipment or restrict operations
at its facilities that discharge, either directly or indirectly, into Lake
Michigan. The Federal Agency is expected to issue final guidance in 1995.
The Clean Air Act Amendments of 1990 (Amendments) will require reductions in
sulfur dioxide emissions from the Company's Kincaid station. The Amendments
also bar future utility sulfur dioxide emissions except to the extent utilities
hold allowances for their emissions. Allowances which authorize their holder to
emit sulfur dioxide will be issued by the Federal Agency based largely on
historical levels of sulfur dioxide emissions. These allowances will be
transferable and marketable. The Company's ability to increase generation in
the future to meet expected increased demand for electricity will depend in
part on the Company's ability to acquire additional allowances or to reduce
emissions below otherwise allowable levels from its existing generating plants.
In addition, the Amendments require studies to determine what controls, if any,
should be imposed on utilities to control air toxic emissions, including
mercury. The Company's Clean Air Compliance Plan for Kincaid station was
approved by the ICC on July 8, 1993. In late 1993, however, a federal court
declared the Illinois law under which the approval was received to be
unconstitutional and compliance plans prepared and approved in reliance on the
law to be void. Under the Plan approved by the ICC, the Company would have been
allowed to burn low sulfur Illinois coal at Kincaid station without the
11
<PAGE>
installation of pollution control equipment for the years 1995 through 1999,
and to purchase any necessary emission allowances that are expected to be
available under the Amendments during this period. Also, under the Plan, the
Company expected to install pollution control equipment for Kincaid station by
the year 2000. When the final outcome of the federal litigation is known, the
Company will determine whether any changes are required.
The Amendments also will require reductions in nitrogen oxide emissions from
the Company's fossil fuel generating units. The Illinois Agency has proposed
rules with respect to such emissions which would require modifications to
certain of the Company's boilers. The Company's construction program for the
three-year period 1994-96 includes $25 million for such modifications.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA) provides for immediate response and removal actions coordinated
by the Federal Agency to releases of hazardous substances into the environment
and authorizes the federal government either to clean up sites at which
hazardous substances have created actual or potential environmental hazards or
to order persons responsible for the situation to do so. Under CERCLA,
generators and transporters of hazardous substances, as well as past and
present owners and operators of hazardous waste sites, are made strictly,
jointly and severally liable for the clean-up costs of waste at sites, most of
which are listed by the Federal Agency on the National Priorities List (NPL).
These responsible parties can be ordered to perform a clean-up, can be sued for
costs associated with a Federal Agency directed clean-up, or may voluntarily
settle with the federal government concerning their liability for clean-up
costs, or may voluntarily begin a site investigation and site remediation prior
to listing on the NPL under state oversight. Various states, including
Illinois, have enacted statutes which contain provisions substantially similar
to CERCLA. The Company and its subsidiaries are or are likely to become parties
to proceedings initiated by the Federal Agency, state agencies and/or other
responsible parties under CERCLA with respect to a number of sites, including
manufactured gas plant (MGP) sites, or may voluntarily undertake to investigate
and remediate sites for which they may be liable under CERCLA. MGPs
manufactured gas in Illinois from approximately 1850 to 1950. The Company
generally did not operate MGPs as a corporate entity but did, however, acquire
MGP sites as part of the absorption of smaller utilities. Approximately half of
these sites were transferred to Northern Illinois Gas Company as part of a
general conveyance in 1954. The Company also acquired former MGP sites as
vacant real estate on which Company facilities have been constructed. While
there is a possibility that in the aggregate the cost of MGP site investigation
and remediation will be substantial over time, the Company is not able to
determine the most probable liability for MGPs. In accordance with accounting
standards, the Company recorded a provision of $25 million in 1991 which
reflects the low end of the range of its estimate of the liability associated
with former MGPs. In 1993, the Company recorded a provision of $5 million which
reflects the low end of the range of its estimate of the liability associated
with cleanup costs of remediation sites other than former MGP sites. The
Company presently estimates that its costs of investigating and remediating
these other sites pursuant to CERCLA and state environmental laws will not in
the aggregate be material to the business or operations of the Company. These
cost estimates are based on currently available information regarding the
responsible parties likely to share in the costs of responding to site
contamination, the extent of contamination at sites for which the investigation
has not yet been completed and the cleanup levels to which sites are expected
to have to be remediated.
On July 17, 1991, the United States Government (Government) filed a complaint
in U.S. District Court alleging that the Company and four other defendants are
"potentially responsible parties" (PRPs) under CERCLA for remediation costs
associated with surface, soil and groundwater contamination alleged to have
occurred from the disposal by other persons of hazardous wastes at a site
located near the Company's Byron station in Byron, Illinois. The Government
alleges that a portion of the site is owned by the Company. The Government is
presently seeking reimbursement from the PRPs for study and response costs
associated with the site. The Company presently expects
12
<PAGE>
such costs to total approximately $10 million. The Company is currently
pursuing cost recovery from other PRPs that have been identified at this site.
On October 16, 1992, the Federal Agency notified the Company and four other
companies, including the site operator, that they were PRPs under CERCLA for
the costs associated with the investigation and removal of contaminated soil at
the Elgin Salvage and Supply site in Elgin, Illinois. The Company sent
substantial amounts of scrap cable and other scrap metal to the site. The site
investigation and remediation is currently estimated to be approximately $8 to
$10 million. The operator is currently in default of his 50% portion of the
interim allocation. Therefore, this share has been reapportioned among the
remaining PRPs with the Company's present allocation being between $3 and $4
million. In February 1994, the Company recorded a provision of $3 million which
reflects the low end of the range of its estimate of this additional liability,
and also recorded a receivable of $3 million as this additional $3 million is
probable of recovery from insurance companies and/or other PRPs. In addition,
the Company and the other PRPs have filed a cost recovery action against the
site operator and the site owner to require that they provide their share of
the remediation costs.
In the operation of its electric distribution system, the Company has
utilized equipment containing polychlorinated biphenyls (PCBs). Such equipment
included transformers located in customer-owned buildings and in sidewalk
vaults. Under regulations adopted by the Federal Agency, these transformers
containing PCBs were required to be modified (with non-PCB fluid) or be
replaced. The Company has completed the replacement of over 2,000 PCB fluid
transformers that were located in or near commercial buildings and were subject
to the federal regulations. The estimated cost to the Company of replacing or
modifying these transformers and disposing of the PCB fluid was approximately
$120 million, which had been expended through the end of 1993. Some of the
Company's electrical equipment containing PCBs was sent to scrap and salvage
facilities and, as a result, the Company may be liable for penalties and for
the costs of cleanup of those facilities. An accident or spill involving PCB
oil filled electrical equipment, resulting in exposure of persons or property
to PCBs or their by-products, could result in material liability claims against
the Company.
In September 1990, the IPCB replaced existing landfill regulations with new,
more stringent design and performance standards. These regulations are expected
to increase the cost to the Company for disposal of coal combustion by-products
at its Joliet station. At Joliet, an existing landfill utilized for disposal of
coal ash may require the installation by 1997 of engineered retrofits designed
to protect groundwater. The Company intends to request exemptions from certain
of the new regulations from the IPCB. If its request is denied, then
alternative landfill siting, commercial disposal, or retrofitting of the
existing facility could result in significant increases in disposal
expenditures.
The outcome of many of the regulatory proceedings referred to above, if not
favorable, could have a material adverse effect on the Company's future
business and operating results.
An unresolved issue is whether exposure to electric and magnetic fields
(EMFs) may result in adverse health effects or damage to the environment. EMFs
are produced by virtually all devices carrying or utilizing electricity,
including transmission and distribution lines as well as home appliances. If
regulations are adopted related to EMFs, they could affect the construction and
operation of electric equipment, including transmission and distribution lines
and the cost of such equipment. The Company cannot predict the effect on the
cost of such equipment or operations if new regulations related to EMFs are
adopted. In the absence of such regulations, EMFs have nonetheless become an
issue in siting facilities and in other land use contexts. Litigation has been
filed in a variety of locations against a variety of defendants (including the
Company) alleging that the presence or use of electrical equipment has had an
adverse effect on the health of persons. If plaintiffs are successful in
litigation of this type and it becomes widespread, the impact on the Company
and on the electric utility industry is not predictable, but could be severe.
13
<PAGE>
From time to time, the companies are, or are claimed to be, in violation of
or in default under orders, statutes, rules or regulations relating to
environmental controls and other matters, compliance plans imposed upon or
agreed to by them or permits issued by various state and federal agencies for
the construction or operation of the companies' facilities. The Company does
not believe, so far as it now foresees, that such violations or defaults will
have a material adverse effect on its future business and operating results,
except for events otherwise described in this Annual Report on Form 10-K which
could have such an effect.
EMPLOYEES
The total number of employees of the companies was approximately 19,008 at
December 31, 1993. Of that amount, about 11,214 employees of the Company are
represented by 17 local unions of the International Brotherhood of Electrical
Workers (AFL-CIO) (IBEW), and about 182 employees of the Indiana Company are
represented by the United Steelworkers of America, Local 12502. The Company has
been notified that effective May 1, 1994, the 17 local unions of the IBEW will
be reorganized into one local union. Collective bargaining agreements with the
unions are effective through March 31, 1995 with a wage reopener to be
effective April 1, 1994. In March 1994, the Company and the unions reached
agreement on a general wage increase effective April 1, 1994, including an
incentive pay element which provides for additional compensation based on the
achievement of specified corporate financial results in 1994. The agreement is
subject to ratification by the unions' membership. Increases in the rates of
compensation for supervisory and administrative employees are made from time to
time. An incentive compensation arrangement has been implemented under the
Company's 1993 Long-Term Incentive Plan for supervisory and administrative
employees for 1994, with payments based upon the achievement of specified
financial and other goals. Supplemental agreements covering life insurance,
savings and investment, medical, dental and vision care plans are effective
until March 31, 1995. Supplemental agreements covering pension matters are
effective until March 31, 1995. See "The Company" above for information
relating to changes to union agreements during 1993.
INTERCONNECTIONS
The Company has interconnections for the transmission of electricity with
Central Illinois Light Company, Central Illinois Public Service Company,
Illinois Power Company, Indiana Michigan Power Company (a subsidiary of
American Electric Power Company), Interstate Power Company, Iowa-Illinois Gas
and Electric Company, Northern Indiana Public Service Company, Wisconsin
Electric Power Company and Wisconsin Power and Light Company for the purpose of
exchanging energy and for other forms of mutual assistance.
The Company and thirteen other Midwest power systems are members of MAIN.
The members have entered into an agreement to work together to ensure the
reliability of electric power production and transmission throughout the area
they serve.
FRANCHISES
The Company's franchises are in general deemed adequate to permit it to
engage in the business it now conducts.
In the city of Chicago, the Company operates under a nonexclusive electric
franchise ordinance effective January 1, 1992, and continuing in force until
December 31, 2020. The Company derives approximately one-third of its ultimate
consumer revenues from the city of Chicago.
The electric business outside of the city of Chicago is conducted in
municipalities under nonexclusive franchises and, where required, under
certificates of convenience and necessity granted
14
<PAGE>
by the ICC. The following tabulation summarizes as of December 31, 1993 the
expiration dates of the electric franchises held in 395 of the 396
municipalities outside of the city of Chicago capable of granting franchises
and in which the Company currently provides electric service.
<TABLE>
<CAPTION>
FRANCHISE ESTIMATED
EXPIRATION NUMBER OF AGGREGATE
PERIODS MUNICIPALITIES POPULATION
- ---------- -------------- ----------
<S> <C> <C>
1996-2006....... 4 108,000
2007-2017....... 15 113,000
2018-2028....... 4 5,000
</TABLE>
<TABLE>
<CAPTION>
FRANCHISE ESTIMATED
EXPIRATION NUMBER OF AGGREGATE
PERIODS MUNICIPALITIES POPULATION
- ---------- -------------- ----------
<S> <C> <C>
2029-2039....... 1 *
2040 and subse-
quent years.... 367 3,995,000
No stated time
limit.......... 4 71,000
</TABLE>
*Less than one thousand people.
BUSINESS AND COMPETITION
The electric utility business has historically been characterized by retail
service monopolies in state or locally franchised service territories.
Investor-owned electric utilities have tended to be vertically integrated with
all aspects of their business subject to pervasive regulation. Although
customers have normally been free to supply their electric power needs through
self-generation, they have not had a choice of electric suppliers and self-
generation has not generally been economical.
The market in which electric utilities like the Company operate has become
more competitive and many observers believe competition will intensify. Self-
generation can be economical for certain customers, depending on how and when
they use electricity and other customer-specific considerations. A number of
competitors are currently seeking to identify and do business with those
customers. In addition, suppliers of other forms of energy are increasingly
competing to supply energy needs which historically were supplied primarily or
exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
FERC to order electric utilities to transmit or "wheel" wholesale power for
others, and facilitates the creation of non-utility electric generating
companies. Although the Company cannot now predict the full impact of this Act,
it will likely create and increase competition affecting the Company.
The Company is facing increased competition from several non-utility
businesses which seek to provide energy services to users of electricity,
especially larger customers such as industrial, commercial and wholesale
customers. Such suppliers include independent power producers and unregulated
energy services companies. In this regard, natural gas utilities operating in
the Company's service area have established subsidiary ventures to provide
heating, ventilating and air conditioning services, attempting to attract the
Company's customers. Also, several utilities in the United States have
established unregulated energy services subsidiaries which pursue business
opportunities wherever they exist. In addition, cogeneration and energy
services companies have begun soliciting the Company's customers to provide
alternatives to using the Company's electricity.
On July 13, 1993, legislation became effective in Illinois which permits the
Company to create certain unregulated subsidiaries, and to form a holding
company, without being required to obtain the approval of the ICC. The
legislation gives the Company and its affiliates flexibility to compete with
unregulated competitors to provide energy services. The Company has created an
unregulated subsidiary to engage in energy service activities and is in the
process of obtaining necessary shareholder and Federal regulatory approvals to
create a holding company structure for its operations. For additional
information, see "Item B. Corporate Restructuring Plan" in the Company's Proxy
Statement relating to its Annual Meeting of shareholders to be held May 10,
1994.
15
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
EFFECTIVE DATE OF ELECTION
NAME AGE POSITION TO PRESENT POSITION
------------------ --- --------------------- --------------------------
<S> <C> <C> <C>
James J. O'Connor 57 Chairman March 1, 1980
Samuel K. Skinner 55 President February 1, 1993
Thomas J. Maiman 55 Senior Vice President June 10, 1992
Robert J. Manning 51 Senior Vice President June 10, 1992
Donald A. Petkus 52 Senior Vice President June 10, 1992
Cordell Reed 56 Senior Vice President June 5, 1987
Michael J. Wallace 46 Senior Vice President December 9, 1993
John C. Bukovski 51 Vice President February 1, 1989
Louis O. DelGeorge 46 Vice President April 22, 1992
Harlan M. Dellsy 46 Vice President September 15, 1986
William H. Downey 49 Vice President June 10, 1992
J. Stanley Graves 57 Vice President June 5, 1987
Emerson W. Lacey 52 Vice President November 17, 1992
Paul D. McCoy 43 Vice President June 10, 1992
Robert A. Paul 50 Vice President January 26, 1994
James A. Small 50 Vice President July 1, 1993
Pamela B. Strobel 41 Vice President and June 1, 1993
General Counsel
John J. Viera 62 Vice President March 29, 1977
Roger F. Kovack 45 Comptroller February 1, 1989
Dennis F. O'Brien 48 Treasurer February 1, 1989
David A. Scholz 52 Secretary February 1, 1989
</TABLE>
The present term of office of each of the above executive officers extends to
the first meeting of the Company's Board of Directors after the next annual
election of Directors scheduled to be held on May 10, 1994.
Each of the above executive officers (except for Messrs. Skinner, Paul and
Small and Ms. Strobel), has been employed by the Company for more than five
years in executive or management positions. Since January 1, 1989 and prior to
his election as President of the Company, Mr. Skinner was a partner in the law
firm of Sidley & Austin prior to February 1989, Secretary of the United States
Department of Transportation from February 1989 to December 1991, Chief of
Staff to the President of the United States from December 1991 to August 1992,
and General Chairman of the Republican National Committee from August 1992 to
January 1993. Since January 1, 1989 and prior to his election as Vice
President, Mr. Paul was employed at Digital Equipment Corporation in the
following capacities: prior to 1989 as Group Technology Manager, from 1989 to
1992 as Corporate Technology and Business Acquisition Manager and from 1992 to
January 1994 as Corporate Purchasing Manager. Since January 1, 1989 and prior
to his election as Vice President, Mr. Small was General Manager of Fuel
Services at Georgia Power Company. Since January 1, 1989 and prior to her
election as Vice President and General Counsel, Ms. Strobel was a partner in
the law firm of Sidley & Austin. Since January 1, 1989 and prior to election to
the positions shown above, the following officers held other positions in the
Company: Messrs. Maiman, Manning and Petkus were Vice Presidents; Mr. Wallace
was Manager of Projects and Construction Services prior to February 1, 1989,
Manager of Engineering and Construction Services prior to July 25, 1990 and
Vice President
16
<PAGE>
thereafter; Messrs. Bukovski and DelGeorge were Assistant Vice Presidents; Mr.
Downey was Operating Manager prior to September 1990 and Manager of Marketing
and Customer Services thereafter; Mr. Lacey was Operations Manager--Fossil
Stations prior to November 1989 and Fossil Engineering and Construction
Manager thereafter; Mr. McCoy was Division Operating Manager--Northern from
April 1988 to September 1990, Operating Manager from September 1990 to
September 1991 and Manager of Transmission and Distribution Operations
thereafter; Mr. Kovack was Assistant Comptroller; Mr. O'Brien was Assistant
Treasurer; and Mr. Scholz was Assistant Vice President.
There are no family relationships among the executive officers, directors
and nominees for director of the Company.
OPERATING STATISTICS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Electric Operating Revenues (thousands of
dollars)(1):
Residential............................... $2,341,155 $2,146,523 $2,306,940
Small commercial and industrial........... 1,962,662 1,874,393 1,905,920
Large commercial and industrial........... 1,437,680 1,373,939 1,408,725
Public authorities........................ 474,034 452,508 464,895
Electric railroads........................ 27,593 27,633 28,458
Provisions for revenue refunds--ultimate
consumers................................ (1,281,788) (18,372) (851)
Sales for resale (net of provisions for
revenue refunds)......................... 237,573 113,603 107,755
Other revenues............................ 61,531 56,094 53,691
---------- ---------- ----------
Total.................................. $5,260,440 $6,026,321 $6,275,533
---------- ---------- ----------
---------- ---------- ----------
Sales (millions of kilowatthours):
Residential............................... 20,818 19,269 21,603
Small commercial and industrial........... 23,463 22,662 23,152
Large commercial and industrial........... 22,917 22,163 22,575
Public authorities........................ 6,741 6,562 6,776
Electric railroads........................ 405 410 422
Sales for resale.......................... 13,417 4,614 4,073
---------- ---------- ----------
Total.................................. 87,761 75,680 78,601
---------- ---------- ----------
---------- ---------- ----------
Sources of Electric Energy (millions of
kilowatthours):
Generation--
Nuclear.................................. 70,403 66,683 63,512
Fossil................................... 23,839 13,188 18,500
Fast-start peaking units................. 24 18 34
---------- ---------- ----------
Net generation......................... 94,266 79,889 82,046
Purchased power........................... 637 2,555 3,374
Company use and losses.................... (7,142) (6,764) (6,819)
---------- ---------- ----------
Total.................................. 87,761 75,680 78,601
---------- ---------- ----------
---------- ---------- ----------
Cost of Fuel Consumed (per million Btu):
Nuclear................................... $0.52 $0.52 $0.49
Coal...................................... $2.89 $2.96 $2.84
Oil....................................... $3.03 $3.02 $3.37
Natural gas............................... $2.70 $2.36 $2.48
Average all fuels......................... $1.15 $0.97 $1.07
Peak Load (kilowatts)...................... 17,771,000 15,994,000 17,733,000
Number of Customers (at end of year):
Residential............................... 3,009,508 2,981,141 2,955,962
Small commercial and industrial........... 283,764 282,092 279,660
Large commercial and industrial........... 1,503 1,527 1,509
Public authorities........................ 12,023 11,886 12,029
Electric railroads and resale............. 19 18 18
---------- ---------- ----------
Total.................................. 3,306,817 3,276,664 3,249,178
---------- ---------- ----------
---------- ---------- ----------
Average Annual Revenue Per Residential
Customer
(excludes light bulb service)............. $779.54 $721.27 $780.43
Average Use Per Residential Customer
(kilowatthours)........................... 6,954 6,497 7,333
Average Revenue Per Kilowatthour(2):
Residential (excludes light bulb
service)................................. 11.21c 11.10c 10.64c
Small commercial and industrial........... 8.36c 8.27c 8.23c
Large commercial and industrial........... 6.27c 6.20c 6.24c
</TABLE>
- --------
(1) See "Rate Proceedings" above.
(2) Average revenue per kilowatthour after reflecting provisions for revenue
refunds and after reflecting revenue refunds and related interest credited
to customers in 1993, 1992 and 1991, respectively, were as follows:
17
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------- -------------------------------- --------------------------------
AFTER DEDUCTIONS FOR AFTER DEDUCTIONS FOR AFTER DEDUCTIONS FOR
-------------------------------- -------------------------------- --------------------------------
PROVISIONS FOR REVENUE PROVISIONS FOR REVENUE PROVISIONS FOR REVENUE
REVENUE REFUNDS REFUNDS CREDITED REVENUE REFUNDS REFUNDS CREDITED REVENUE REFUNDS REFUNDS CREDITED
--------------- ---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Residential 8.61c 10.78c 10.90c 10.45c 10.61c 10.45c
Small commercial and
industrial 6.80c 8.16c 8.20c 8.02c 8.22c 8.13c
Large commercial and
industrial 5.07c 6.10c 6.13c 5.97c 6.23c 6.16c
</TABLE>
ITEM 2. PROPERTIES.
The Company's electric properties are located in Illinois and the Indiana
Company's electric facilities are located in Indiana. In management's opinion,
the companies' operating properties are adequately maintained and are
substantially in good operating condition. The electric generating,
transmission, distribution and general facilities of the companies represent
approximately 69%, 9%, 19% and 3%, respectively, of their gross investment in
electric plant and equipment in service.
The electric generating stations, substations and a portion of the
transmission rights of way of the companies are owned in fee. A significant
portion of the electric transmission and distribution facilities are located
over or under highways, streets, other public places or property owned by
others, for which permits, grants, easements or licenses (deemed satisfactory
by the Company, but without examination of underlying land titles) have been
obtained. The principal plants and properties of the Company are subject to
the lien of the Company's Mortgage dated July 1, 1923, as amended and
supplemented, under which the Company's first mortgage bonds are issued.
The net generating capability of the Company and the Indiana Company is
derived from the following electric generating facilities:
<TABLE>
<CAPTION>
NET GENERATING
CAPABILITY
STATION LOCATION (KILOWATTS)
------- ---------------- --------------
<S> <C> <C>
Nuclear--
Zion Zion 2,080,000
Dresden Near Morris 1,588,000
Quad-Cities Near Cordova 1,183,000(1)
LaSalle County Near Seneca 2,156,000
Byron Near Byron 2,240,000
Braidwood Near Braidwood 2,240,000
Fossil--
Collins Near Morris 2,698,000
Powerton Near Pekin 1,400,000
Joliet 6 Near Joliet 302,000
Joliet 7 & 8 Near Joliet 1,025,000
Kincaid Near Taylorville 1,108,000
Will County Near Lockport 1,092,000
Waukegan Waukegan 725,000
Crawford Chicago 542,000
State Line Hammond, Indiana 490,000
Fisk Chicago 321,000
Fast-Start Peaking Units(2) Various 1,332,000
----------
Net non-summer generating capability 22,522,000
Deduct--Summer limitations 557,000
----------
Net summer generating capability 21,965,000
----------
----------
</TABLE>
- --------
(1) Excludes the 25% undivided interest of Iowa-Illinois Gas and Electric
Company in the Quad-Cities station.
(2) Generating units normally designed for use only during the maximum load
period of a designated time interval. Such units are capable of starting
and coming on-line quickly.
18
<PAGE>
Major electric transmission lines owned and in service are as follows:
<TABLE>
<CAPTION>
VOLTAGE CIRCUIT
(VOLTS) MILES
------- -------
<S> <C>
765,000........................................................... 90
345,000........................................................... 2,513
138,000........................................................... 2,692
</TABLE>
The Company's electric distribution system includes 37,275 pole line miles of
overhead lines and 29,666 cable miles of underground lines. A total of
approximately 1,315,024 poles are included in the Company's distribution
system, of which about 589,957 are owned jointly with telephone companies.
ITEM 3. LEGAL PROCEEDINGS.
During 1989 and 1991, actions were brought in federal and state courts in
Colorado against the Company and its subsidiary, Cotter Corporation (Cotter),
alleging that Cotter has permitted radioactive and other hazardous material to
be released from its mill into areas owned or occupied by the plaintiffs
resulting in property damage and potential adverse health effects. The
plaintiffs seek from Cotter and the Company unspecified compensatory, exemplary
and medical monitoring fund damages, unspecified response costs under CERCLA,
and temporary and permanent injunctive relief. Although the cases will
necessarily involve the resolution of numerous contested issues of fact and
law, the Company's determination is that these actions will not have a material
adverse impact on the Company's financial statements.
In October 1990, the Company filed a complaint in the Circuit Court of Cook
County, Illinois (Circuit Court), against Westinghouse Electric Corporation
(Westinghouse) and certain of its employees. The complaint alleges that the
defendants knowingly concealed information regarding the durability of the
metal used in the steam generators (a major component of the nuclear steam
supply systems) at the Zion, Byron and Braidwood stations. The complaint
further alleges that the defects in the steam generators will prevent the
plants from maintaining their full power output through their forty year design
life without costly remanufacture or replacement of the steam generators.
Damages, including punitive damages, in an unspecified amount are claimed.
Westinghouse has filed a counterclaim against the Company which seeks recovery
of Westinghouse's costs of defense and damages of approximately $13 million.
Shareholder derivative lawsuits were filed on October 1, 1992 and on April
14, 1993 in the Circuit Court against current and former directors of the
Company alleging that they breached their fiduciary duty and duty of care to
the Company in connection with the management of the activities associated with
the construction of the Company's four most recently completed nuclear
generating units. The lawsuits sought restitution to the Company by the
defendants for unquantified and undefined losses and costs alleged to have been
incurred by the Company. Both lawsuits were dismissed by the Circuit Court;
however, appeals are pending before the Illinois Appellate Court.
A number of complaints have been filed by former employees with the Equal
Employment Opportunity Commission, and several lawsuits have been filed by
former employees in the United States District Court, alleging that the
employees' terminations (which occurred as part of the Company's management
workforce reductions that were implemented in the second half of 1992) involved
discrimination on the basis of age, race, sex, national origin and/or
disabilities, in violation of applicable law. The complainants are seeking,
among other things, awards of back pay and lost benefits, reinstatement,
pecuniary damages, and costs and attorneys' fees.
See "Item 1. Business," subcaptions "Construction Program," "Rate
Proceedings," "Fuel Supply" and "Regulation" above for information concerning
legal proceedings involving various regulatory agencies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
19
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The current ratings of the Company's securities by three principal securities
rating agencies are as follows:
<TABLE>
<CAPTION>
STANDARD DUFF &
MOODY'S & POOR'S PHELPS
------- -------- ------
<S> <C> <C> <C>
First mortgage and secured pollution control bonds.. Baa2 BBB BBB
Publicly-held debentures and unsecured pollution
control obligations................................ Baa3 BBB- BBB-
Convertible preferred stock......................... baa3 BBB- BB+
Preference stock.................................... baa3 BBB- BB+
Commercial paper.................................... P-2 A-2 Duff 2
</TABLE>
The foregoing ratings reflect downgradings during 1992 and in January 1993 as
a result of developments in the proceedings leading to, and the issuance of,
the Remand Order. In December 1993, Standard & Poor's affirmed its ratings of
the Company's debt, although on October 27, 1993, it changed its "outlook" on
the Company's ratings from stable to negative as part of its larger assessment
of the electric utility industry. In December 1993, Moody's and Duff & Phelps
affirmed their ratings of the Company's securities, and Moody's rating outlook
on the Company remained stable.
The above ratings reflect only the views of such rating agencies and each
rating should be evaluated independently of any other rating. Generally,
rating agencies base their ratings on information furnished to them by the
issuing company and on investigations, studies and assumptions by the rating
agencies. There is no assurance that any particular rating will continue for
any given period of time or that it will not be changed or withdrawn entirely
if in the judgment of the rating agency circumstances so warrant. Such ratings
are not a recommendation to buy, sell or hold securities.
The following is a brief summary of the meanings of the above ratings and the
relative rank of the above ratings within each rating agency's classification
system.
Moody's top four long-term debt ratings (Aaa, Aa, A and Baa) are generally
considered "investment grade." Obligations rated Baa are considered as medium
grade obligations, neither highly protected nor poorly secured. Such
obligations lack outstanding investment characteristics and in fact have
speculative characteristics. (A numerical modifier in Moody's system shows
relative standing within the principal rating category, with 1 indicating the
high end of that category, 2 the mid-range and 3 the low end.) Standard &
Poor's top four bond ratings (AAA, AA, A and BBB) are generally considered to
describe obligations in which investment characteristics predominate.
Obligations rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. It normally exhibits adequate protection
parameters, but adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay. (A plus or minus sign in Standard &
Poor's system shows relative standing within the major rating categories.)
Both Moody's and Standard & Poor's preferred stock ratings represent relative
security of dividends. Moody's top four preferred stock ratings (aaa, aa, a
and baa) are generally considered "investment grade." Moody's baa rating
describes a medium grade preferred stock, neither highly protected nor poorly
secured. Standard & Poor's top four preferred stock ratings (AAA, AA, A and
BBB) are generally considered "investment grade." Standard & Poor's BBB rating
applies to medium grade preferred stock which is below A ("sound") and above BB
("lower grade").
20
<PAGE>
Duff & Phelps' credit rating scale has 17 alphabetical categories, of which
ratings AAA through BBB (with AAA being the highest rating) represent
investment grade securities. Ratings of BBB+, BBB and BBB- represent the
lowest category of "investment grade" rating. This category describes
securities with below average protection factors but which are considered
sufficient for institutional investment. Considerable variability in risk
occurs during economic cycles. Ratings of BB+, BB and BB- describe below
investment grade securities which are deemed likely to meet obligations when
due. Present or prospective financial protection factors of these securities
fluctuate according to industry conditions or company fortunes.
Moody's Prime-2 (P-2) rating of commercial paper is the second highest of
three possible ratings; P-2 describes a strong capacity for repayment of short-
term promissory obligations. Standard & Poor's rates commercial paper in four
basic categories with A-2 being the second highest category. Duff & Phelps
rates commercial paper in three basic categories, with Duff 2 indicating the
middle category.
Further explanations of the significance of ratings may be obtained from the
rating agencies.
Additional information required by Item 5 is incorporated herein by reference
to the "Price Range and Dividends Paid Per Share of Common Stock" on page 26 of
the January 28, 1994 Form 8-K/A-1 Report.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Items 6, 7 and 8 is incorporated herein by
reference to the "Summary of Selected Consolidated Financial Data" on page 26,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 10 through 22, and the audited consolidated financial
statements and notes thereto on pages 25 and 27 through 51 of the January 28,
1994 Form 8-K/A-1 Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 relating to directors and nominees for
election as directors at the Company's Annual Meeting of shareholders to be
held on May 10, 1994 is incorporated herein by reference to pages 12 through 14
of the Company's definitive Proxy Statement (1994 Proxy Statement) filed with
the Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934. The information required by Item 10 relating
to executive officers is set forth in Part I of this Annual Report on Form 10-K
under "Item 1. Business," subcaption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein by reference to
the paragraph labelled "Compensation of Directors" on page 14, under the
heading "Executive Compensation--Summary Compensation Table" on page 16 and
under the heading "Executive Compensation--Service Annuity System Plan" on page
17 of the 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated herein by reference to
the stock ownership information under the heading "Security Ownership of
Certain Beneficial Owners and Management" on pages 10 and 11 of the 1994 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS:
<TABLE>
<CAPTION>
PAGE OF
JANUARY 28,
1994 FORM
8-K/A-1
REPORT
-----------
<S> <C>
The following financial statements are incorporated herein by
reference to the Company's January 28, 1994 Form 8-K/A-1 Re-
port:
Report of Independent Public Accountants..................... 25
Statements of Consolidated Income for each of the three years
in the period ended December 31, 1993....................... 27
Consolidated Balance Sheets--December 31, 1993 and December
31, 1992.................................................... 28-29
Statements of Consolidated Capitalization--December 31, 1993
and December 31, 1992....................................... 30
Statements of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1993................. 31
Statements of Consolidated Retained Earnings for each of the
three years in the period ended December 31, 1993........... 32
Statements of Consolidated Premium on Common Stock and Other
Paid-In Capital for each of the three years in the period
ended December 31, 1993..................................... 32
Notes to Financial Statements................................ 33-51
</TABLE>
<TABLE>
<CAPTION>
PAGE OF THIS
REPORT ON
FORM 10-K
------------
<S> <C>
The following supplemental schedules are included herein:
Report of Independent Public Accountants on Supplemental
Schedules.................................................. 28
Schedule V--Property, Plant and Equipment for each of the
three years in the period ended December 31,
1993........................................... 29-30
Schedule VI--Accumulated Depreciation, Depletion and Amorti-
zation of Property, Plant and Equipment for
each of the three years in the period ended
December 31, 1993............................. 31-32
Schedule VII--Guarantees of Securities of Other Issuers at
December 31, 1993............................ 33
Schedule VIII--Valuation and Qualifying Accounts for each of
the three years in the period ended December
31, 1993.................................... 34
Schedule IX--Short-Term Borrowings for each of the three
years in the period ended December 31, 1993... 35
</TABLE>
The following schedules are omitted as not applicable or not required
under rules of Regulation S-X: I, II, III, IV, XI, XII, XIII and XIV.
Significant information required by Schedule X--Supplementary Income
Statement Information is included as Note 15 of Notes to Financial
Statements incorporated herein by reference to the January 28, 1994
Form 8-K/A-1 Report.
23
<PAGE>
Individual financial statements and schedules of the Company have been
omitted because it is primarily an operating company and all subsidiaries
included in the consolidated financial statements are totally-held
subsidiaries.
Financial statements and schedules of the Company's nonconsolidated
subsidiaries have been omitted because the investments are not material in
relation to the Company's financial position and results of operations. As
of December 31, 1993, the assets of the nonconsolidated subsidiaries in the
aggregate approximated 1% of the Company's consolidated assets and for the
year 1993 annual revenues of the nonconsolidated subsidiaries in the
aggregate were less than 1% of the Company's consolidated annual revenues.
The following exhibits are filed herewith or incorporated herein by
reference. Documents indicated by an asterisk (*) are incorporated herein
by reference to the File No. indicated.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(3)-1 Restated Articles of Incorporation of the Company effective February 20,
1985 (File No. 1-1839, Form 10-K for the year ended December 31, 1985,
Exhibit (3)-1).
*(3)-2 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$9.30 Cumulative Pref-
erence Stock," dated December 10, 1985 (File No. 1-1839, Form 10-K for
the year ended December 31, 1992, Exhibit (3)-2).
*(3)-3 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$9.00 Cumulative Pref-
erence Stock," dated July 25, 1990 (File No. 1-1839, Form 10-K for the
year ended December 31, 1990, Exhibit (3)-2).
*(3)-4 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$6.875 Cumulative Pref-
erence Stock," dated May 21, 1993 (File No. 1-1839, Form 8-K dated May
21, 1993, Exhibit (3)-1).
*(3)-5 By-Laws of the Company, effective September 2, 1988 (File No. 1-1839, Form
10-Q for the quarter ended September 30, 1988, Exhibit (3)).
*(3)-6 Amendment to By-Laws of the Company, effective July 1, 1989 (File No.
1-1839, Form 10-Q for the quarter ended June 30, 1989, Exhibit (3)).
*(3)-7 Amendment to By-Laws of the Company, effective February 1, 1991 (File No.
1-1839, Form 10-K for the year ended December 31, 1990, Exhibit (3)-4).
*(3)-8 Amendment to By-Laws of the Company, effective September 10, 1992 (File
No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (3)-
6).
*(4)-1 Mortgage of the Company to Illinois Merchants Trust Company, Trustee (Con-
tinental Illinois National Bank and Trust Company of Chicago, successor
Trustee), dated July 1, 1923, Supplemental Indenture thereto dated August
1, 1944, and amendments and supplements thereto dated, respectively, Au-
gust 1, 1946, April 1, 1953, April 1, 1966, November 1, 1966, December 1,
1966, March 31, 1967, April 1, 1967, February 1, 1968, July 1, 1968, Oc-
tober 1, 1968, February 28, 1969, May 29, 1970, January 1, 1971, June 1,
1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May
31, 1974, July 1, 1974, June 13, 1975, May 28, 1976, January 15, 1977,
June 1, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Exhibit 2-1).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, December 1, 1977, May 17, 1978, August 31, 1978, June 18, 1979, June
20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984,
March 1, 1985 and April 15, 1985 (File No. 2-99665, Form S-3, Exhibit
(4)-3).
*(4)-3 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, April 15, 1986 and May 1, 1986 (File No. 33-6879, Form S-3, Exhibit
(4)-9).
*(4)-4 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 12,
1987 (File No. 33-13193, Form S-3, Exhibit (4)-6).
*(4)-5 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 30, 1989
(File No. 33-32929, Form S-3, Exhibit (4)-11).
*(4)-6 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, February 15, 1990 and June 15, 1990 (File No. 33-38232, Form S-3, Ex-
hibits (4)-11 and (4)-12).
*(4)-7 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-
44018, Form S-3, Exhibits (4)-12, (4)-13 and (4)-14).
*(4)-8 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1,
1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1991,
Exhibit (4)-18).
*(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992
(File No. 33-48542, Form S-3, Exhibit (4)-14).
*(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, July 15, 1992, September 15, 1992 and October 1, 1992 (File No. 33-
53766, Form S-3, Exhibits (4)-13, (4)-14 and (4)-15).
*(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, February 1, 1993 and March 1, 1993 (File No. 1-1839, Form 10-K for
the year ended December 31, 1992, Exhibits (4)-14 and (4)-15).
*(4)-12 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Exhib-
its (4)-12 and (4)-13).
*(4)-13 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May
21, 1993, Exhibits (4)-1 and (4)-2).
*(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993
(File No. 1-1839, Form 10-Q for the quarter ended June 30, 1993, Exhibit
(4)-1).
(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15,
1994.
*(4)-16 Indentures of the Company to The First National Bank of Chicago, Trustee
(Harris Trust and Savings Bank, successor Trustee), dated April 1, 1949,
October 1, 1949, October 1, 1950, October 1, 1954, January 1, 1958, Janu-
ary 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year
ended December 31, 1982, Exhibit (4)-20).
*(4)-17 Indenture of the Company dated February 15, 1973 to The First National
Bank of Chicago, Trustee (LaSalle National Bank, successor Trustee), and
Supplemental Indenture thereto dated July 13, 1973 (File No. 2-66100,
Form S-16, Exhibit (b)-2).
*(4)-18 Indenture dated as of September 1, 1987 between the Company and Citibank,
N.A., Trustee relating to Notes (File No. 33-20619, Form S-3, Exhibit
(4)-13).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(4)-19 Supplemental Indenture to Indenture dated September 1, 1987 dated Septem-
ber 15, 1987 (File No. 33-20619, Form S-3, Exhibit (4)-14).
*(4)-20 Supplemental Indenture to Indenture dated September 1, 1987 dated May 18,
1988 (File No. 33-23036, Form S-3, Exhibit (4)-14).
*(4)-21 Supplemental Indenture to Indenture dated September 1, 1987 dated July 14,
1989 (File No. 33-32929, Form S-3, Exhibit (4)-16).
*(4)-22 Supplemental Indenture to Indenture dated September 1, 1987 dated April 1,
1991 (File No. 33-44018, Form S-3, Exhibit (4)-21).
*(4)-23 Supplemental Indenture to Indenture dated September 1, 1987 dated April
15, 1992 (File No. 33-48542, Form S-3, Exhibit (4)-22).
*(4)-24 Supplemental Indenture to Indenture dated September 1, 1987 dated July 15,
1992 (File No. 33-53766, Form S-3, Exhibit (4)-24).
*(4)-25 Supplemental Indenture to Indenture dated September 1, 1987 dated October
15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended September 30,
1993, Exhibit (4)-1).
*(4)-26 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison
Company, as borrower, the Banks named therein and the other Lenders from
time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991, Exhibit (4)-27).
*(4)-27 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison
Company, as borrower, the Banks named therein and the other Lenders from
time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991, Exhibit (4)-28).
(4)-28 Letter Agreement dated as of October 4, 1993, among Commonwealth Edison
Company and certain of the Banks party to the Credit Agreement dated as
of October 1, 1991.
*(4)-29 Term Loan Agreement dated as of January 7, 1992, between Commonwealth Edi-
son Company, as borrower, and The First National Bank of Chicago, indi-
vidually and as agent (File No. 1-1839, Form 10-K for the year ended De-
cember 31, 1992, Exhibit (4)-28).
*(4)-30 Term Loan Agreement dated as of January 15, 1992, between Commonwealth Ed-
ison Company, as borrower, and Westpac Banking Corporation, Chicago
Branch, individually and as agent (File No. 1-1839, Form 10-K for the
year ended December 31, 1992, Exhibit (4)-29).
*(4)-31 Term Loan Agreement dated as of January 16, 1992, between Commonwealth Ed-
ison Company, as borrower, and The Bank of New York, individually and as
agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992,
Exhibit (4)-29).
(10)-1 Nuclear Fuel Lease Agreement dated as of November 23, 1993, between CommEd
Fuel Company, Inc., as Lessor, and Commonwealth Edison Company, as Les-
see.
*(10)-2 1993 Long-Term Incentive Plan (File No. 1-1839, Proxy Statement dated
March 26, 1993, Exhibit A).
(10)-3 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1995 under the 1993 Long-Term Incentive Plan.
(10)-4 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1996 under the 1993 Long-Term Incentive Plan.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
(10)-5 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1997 under the 1993 Long-Term Incentive Plan.
(10)-6 1994 Variable Compensation Award for Management Employes under the 1993
Long-Term Incentive Plan.
*(10)-7 Deferred Compensation Plan (included in Exhibit (3)-1 above).
*(10)-8 Management Incentive Compensation Plan, effective January 1, 1989 (File
No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)-4).
*(10)-9 Amendments to Management Incentive Compensation Plan, dated December 14,
1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended
December 31, 1989, Exhibit (10)-5).
*(10)-10 Amendment to Management Incentive Compensation Plan, dated March 21, 1991
(File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit
(10)-6).
*(10)-11 Retirement Plan for Directors, effective January 1, 1987 (File No. 1-1839,
Form 10-K for the year ended December 31, 1988, Exhibit (10)-5).
*(10)-12 Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the
year ended December 31, 1980, Exhibit (10)-3).
*(10)-13 Amendment to the Executive Group Life Insurance Plan (File No. 1-1839,
Form 10-K for the year ended December 31, 1981, Exhibit (10)-4).
*(10)-14 Amendment to the Executive Group Life Insurance Plan dated December 12,
1986 (File No. 1-1839, Form 10-K for the year ended December 31, 1986,
Exhibit (10)-6).
*(10)-15 Amendment of Executive Group Life Insurance Plan to implement program of
"split dollar life insurance" dated December 13, 1990 (File No. 1-1839,
Form 10-K for the year ended December 31, 1990, Exhibit (10)-10).
*(10)-16 Commonwealth Edison Company Supplemental Management Retirement Plan (File
No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit
(10)-6).
*(10)-17 Amendment of Executive Group Life Insurance Plan to stabilize the death
benefit applicable to participants dated July 22, 1992 (File No. 1-1839,
Form 10-K for the year ended December 31, 1992, Exhibit (10)-13).
*(10)-18 Letter Agreement dated December 16, 1992 between Commonwealth Edison Com-
pany and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended
December 31, 1992, Exhibit (10)-14).
(12) Statement re computation of ratios of earnings to fixed charges and ratios
of earnings to fixed charges and preferred and preference stock dividend
requirements.
(21) Subsidiaries of Commonwealth Edison Company.
(23) Consent of experts.
(24) Powers of attorney of Directors whose names are signed to this Form 10-K
pursuant to such powers.
(99) Commonwealth Edison Company's Current Report on Form 8-K/A-1 dated January
28, 1994.
</TABLE>
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company hereby
agrees to furnish to the Securities and Exchange Commission, upon
request, any instrument defining the rights of holders of long-term
debt of the Company not filed as an exhibit herein. No such instrument
authorizes securities in excess of 10% of the total assets of the
Company.
(B) REPORTS ON FORM 8-K:
None.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULES
To Commonwealth Edison Company:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Commonwealth Edison Company and subsidiary
companies incorporated by reference in this Annual Report on Form 10-K, and
have issued our report thereon dated March 18, 1994. Our report on the
financial statements includes an explanatory paragraph that describes the
Company's change in its method of accounting for postretirement health care
benefits and income taxes as discussed in Notes 13 and 14, respectively, to the
financial statements.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed on page 23, Item
14.(a), are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen & Co.
Chicago, Illinois
March 18, 1994
28
<PAGE>
SCHEDULE V
(PAGE 1 OF 2)
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT (a)
--THOUSANDS OF DOLLARS--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------- ----------- ---------- -------- ---------- -----------
OTHER
BALANCE AT CHANGES--
BEGINNING ADDITIONS RETIRE- ADD BALANCE AT
CLASSIFICATION OF YEAR AT COST MENTS (DEDUCT) END OF YEAR
- -------------------------------- ----------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1991
- --------------------------------
Utility Plant:
Plant and equipment, at original
cost:
Electric--
Plant in service--
Production................... $16,834,598 $ 235,290 $ 34,820 $ (733,759)(b) $16,303,717(b)
2,408 (c)
Transmission................. 1,933,689 82,242 729 1,535 (c) 2,016,737
Distribution................. 3,830,855 356,703 45,103 (1,708)(c) 4,140,747
(146)(c)
General...................... 379,574 51,254 4,848 (5,767)(e) 420,067(d)
Construction work in progress.. 816,247 219,748(f) -- -- 1,035,995
383 (c)
Plant held for future use...... 455,532 94,609(g)(h) -- (16,480)(i) 534,044
----------- ---------- -------- ---------- -----------
$24,250,495 $1,039,846 $ 85,500 $ (753,534) $24,451,307(b)
=========== ========== ======== ========== ===========
Nuclear fuel, at cost.......... $ 2,008,268 $ 248,089(j) $151,797 $ (31)(k)(l)(m)(n) $ 2,104,529(o)
=========== ========== ======== ========== ===========
FOR THE YEAR ENDED DECEMBER 31,
1992
- --------------------------------
Utility Plant:
Plant and equipment, at original
cost:
Electric--
Plant in service--
Production................... $16,303,717(b) $ 314,497 $ 37,475 $ (40)(c) $16,580,699
Transmission................. 2,016,737 67,464 9,736 42 (c) 2,074,507
Distribution................. 4,140,747 387,214 44,213 (57)(c) 4,483,691
7 (c)
General...................... 420,067 96,217 10,412 (4,389)(e) 501,490(d)
(2,535)(p)
Construction work in progress.. 1,035,995 132,153(f) -- (461)(c) 1,165,152
(138)(c)
Plant held for future use...... 534,044 78,297(g)(h) -- (16,920)(i) 595,283
----------- ---------- -------- ---------- -----------
$24,451,307(b) $1,075,842 $101,836 $ (24,491) $25,400,822
=========== ========== ======== ========== ===========
Nuclear fuel, at cost.......... $ 2,104,529 $ 217,821(j) $302,841 $ (6,762)(k)(l)(m)(n) $ 2,012,747(o)
=========== ========== ======== ========== ===========
</TABLE>
See Notes on Page 2 of 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
29
<PAGE>
SCHEDULE V
(PAGE 2 OF 2)
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT--CONCLUDED (a)
--THOUSANDS OF DOLLARS--
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------ ----------- --------- -------- --------- -----------
OTHER
BALANCE AT CHANGES--
BEGINNING ADDITIONS RETIRE- ADD BALANCE AT
CLASSIFICATION OF YEAR AT COST MENTS (DEDUCT) END OF YEAR
- ------------------------ ----------- --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DE-
CEMBER 31, 1993
- ------------------------
Utility Plant:
Plant and equipment, at
original cost:
Electric--
Plant in service--
Production........... $16,580,699 $ 430,013 $ 98,593 $ (71)(c) $16,912,048
Transmission......... 2,074,507 129,380 (322) 820 (c) 2,205,029
Distribution......... 4,483,691 275,533 25,044 (807)(c) 4,733,373
General.............. 501,490 126,042 13,062 (2,789)(c) 615,443(d)
3,762 (e)
Construction work in
progress.............. 1,165,152 (123,853)(f) -- (590)(c) 1,040,014
(695)(p)
Plant held for future
use................... 595,283 4,453 (g)(h) -- (1,921)(c) 592,027
(5,788)(i)
----------- --------- -------- --------- -----------
$25,400,822 $ 841,568 $136,377 $ (8,079) $26,097,934
=========== ========= ======== ========= ===========
Nuclear fuel, at cost.. $ 2,012,747 $260,703 (j) $200,627 $ 1,215 (k)(l)(m) $ 2,074,038(o)
=========== ========= ======== ========= ===========
</TABLE>
Notes:
(a) Reference is made to Note 1 of Notes to Financial Statements in the
Current Report on Form 8-K/A-1 dated January 28, 1994, incorporated herein
by reference, for information relating to the accounting policies for
depreciation of plant and equipment and amortization of nuclear fuel.
(b) The 1991 balance includes a reduction of $733,759 from plant in service
reflecting the write-offs in March and November 1991 of disallowed plant
costs relating to Byron Unit 2 and Braidwood Units 1 and 2.
(c) Transfers to and from nonutility property and between other plant and
equipment accounts.
(d) Includes plant and equipment under capital leases of $11,266, $6,877 and
$10,639 at December 31, 1991, 1992 and 1993, respectively.
(e) Leased plant and equipment capitalized net of amortization.
(f) Net of transfers to plant in service and to nonutility property.
(g) Includes investment in coal reserves of $78,678, $79,961 and $43 during
the years 1991, 1992 and 1993, respectively.
(h) Net of transfers of property to construction work in progress.
(i) Coal reserves transferred to fuel inventory.
(j) Excludes nuclear fuel expenditures related to nonutility property of
$2,470, $2,473 and $667 for 1991, 1992 and 1993, respectively, for uranium
exploration and mine development.
(k) Includes additions of $148,652, $230,454 and $286,977 for discharged
nuclear fuel assemblies previously leased during the years 1991, 1992 and
1993, respectively.
(l) Includes reductions for nuclear fuel sold and leased back to the Company
of $240,263, $190,830 and $204,254 for the years 1991, 1992 and 1993,
respectively.
(m) Includes net additions/(reductions) for leased nuclear fuel capitalized of
$94,880, $(37,145) and $(81,508) for the years 1991, 1992 and 1993,
respectively.
(n) Charged to expense for writedowns of $3,300 and $9,241 for the years 1991
and 1992, respectively, to reflect the decline in realizable value of
uranium ore inventory.
(o) Includes leased nuclear fuel capitalized of $1,362,433, $1,325,287 and
$1,243,779 at December 31, 1991, 1992 and 1993, respectively.
(p) Write-off of expenditures for preliminary engineering and analysis deemed
to be not useful.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
30
<PAGE>
SCHEDULE VI
(PAGE 1 OF 2)
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT (a)
--THOUSANDS OF DOLLARS--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------ ---------- ---------- -------- --------- -----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES--
BEGINNING COSTS AND RETIRE- ADD BALANCE AT
CLASSIFICATION OF YEAR EXPENSES MENTS (DEDUCT) END OF YEAR
- ------------------------ ---------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1991
- ------------------------
Accumulated Provision
for Depreciation of
Plant and Equipment:
Electric--
Production............ $4,112,035 $632,782 $ 62,278 $(82,689)(b) $4,552,347
(47,503)(c)
Transmission.......... 640,563 45,859 3,332 1,110 (c) 684,200
Distribution.......... 1,961,534 153,811 62,139 (1,115)(c) 2,054,748
2,657 (d)
General............... 135,847 20,783 5,395 (103)(c) 151,132
---------- -------- -------- --------- ----------
$6,849,979 $853,235 $133,144 (e) $(127,643) $7,442,427
========== ======== ======== ========= ==========
Accumulated Provision
for Amortization of
Nuclear Fuel........... $1,295,733 $ 18,987 $151,797 $ 228,664 (f)(g) $1,391,587(h)
========== ======== ======== ========= ==========
FOR THE YEAR ENDED
DECEMBER 31, 1992
- ------------------------
Accumulated Provision
for Depreciation of
Plant and Equipment:
Electric--
Production............ $4,552,347 $651,010 $ 88,621 $ (1)(c) $5,114,735
Transmission.......... 684,200 47,479 13,173 (266)(c) 718,240
Distribution.......... 2,054,748 155,115 62,466 270 (c) 2,149,953
2,286 (d)
General............... 151,132 24,369 11,981 (3)(c) 163,517
---------- -------- -------- --------- ----------
$7,442,427 $877,973 $176,241(e) $ 2,286 $8,146,445
========== ======== ======== ========= ==========
Accumulated Provision
for Amortization of
Nuclear Fuel........... $1,391,587 $ 14,565 $302,841 $ 243,472 (f)(g) $1,346,783(h)
========== ======== ======== ========= ==========
</TABLE>
See Notes on Page 2 of 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE VI
(PAGE 2 OF 2)
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY,
PLANT AND EQUIPMENT--CONCLUDED (a)
--THOUSANDS OF DOLLARS--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------ ---------- ---------- -------- --------- -----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES--
BEGINNING COSTS AND RETIRE- ADD BALANCE AT
CLASSIFICATION OF YEAR EXPENSES MENTS (DEDUCT) END OF YEAR
- ------------------------ ---------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1993
- ------------------------
Accumulated Provision
for Depreciation of
Plant and Equipment:
Electric--
Production............ $5,114,735 $ 668,668 $134,636 $ (334)(b) $5,647,056
(1,377)(c)
Transmission.......... 718,240 49,790 3,022 228 (c) 765,236
Distribution.......... 2,149,953 165,781 40,286 (199)(c) 2,278,845
3,596 (d)
General............... 163,517 29,147 15,757 (20)(c) 176,887
---------- --------- -------- -------- ----------
$8,146,445 $ 913,386 $193,701(e) $ 1,894 $8,868,024
========== ========= ======== ======== ==========
Accumulated Provision
for Amortization of
Nuclear Fuel........... $1,346,783 $ 17,944 $200,627 $247,375 (f)(g) $1,411,475(h)
========== ========= ======== ======== ==========
</TABLE>
Notes:
(a) Reference is made to Note 1 of Notes to Financial Statements in the Current
Report on Form 8-K/A-1 dated January 28, 1994, incorporated herein by
reference, for information relating to the accounting policies for
depreciation of plant and equipment, nuclear plant decommissioning and
amortization of nuclear fuel.
(b) The year 1991 includes reversal of prior years' depreciation on disallowed
plant costs recorded in March and November 1991 discussed on page 30 note
(b). The year 1993 includes net adjustments of prior years' provisions
relating to additional disallowed plant costs recorded in October 1989 and
May 1990 for Byron Unit 1.
(c) Transfers between reserves for plant and equipment and to and from
nonutility property. Also includes a reclassification, in 1991, of nuclear
chemical cleaning from accumulated provision for depreciation of plant and
equipment for years prior to 1991 of $48,373, to other noncurrent
liabilities.
(d) Reimbursements for highway relocations.
(e) Includes removal costs, less salvage, of plant and equipment retired.
(f) Includes discharged nuclear fuel assemblies previously leased of $148,652,
$230,454 and $286,977 for the years 1991, 1992 and 1993, respectively.
(g) Includes net additions/(reductions) for accumulated amortization for leased
nuclear fuel capitalized of $80,012, $13,018 and $(39,602) for the years
1991, 1992 and 1993, respectively.
(h) Includes accumulated amortization for leased nuclear fuel capitalized of
$793,973, $806,991 and $767,389 for the years 1991, 1992 and 1993,
respectively.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
<PAGE>
SCHEDULE VII
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VII--GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G
---------------------------- ----------------- ------------ ------------ ---------- ---------- -----------
NATURE OF
ANY
DEFAULT BY
ISSUER
OF
SECURITIES
GUARANTEED
IN
PRINCIPAL,
INTEREST,
AMOUNT SINKING
OWNED BY AMOUNT IN FUND OR
NAME OF ISSUER OF SECURITIES PERSON OR TREASURY REDEMPTION
GUARANTEED BY PERSON TITLE OF ISSUE OF TOTAL AMOUNT PERSONS FOR OF ISSUER PROVISIONS,
FOR EACH CLASS OF GUARANTEED WHICH OF OR
WHICH STATEMENT IS SECURITIES AND STATEMENT IS SECURITIES NATURE OF PAYMENT OF
FILED GUARANTEED OUTSTANDING FILED GUARANTEED GUARANTEE DIVIDENDS
---------------------------- ----------------- ------------ ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edison Development Promissory note $ 1,760,000(b)(c) -- -- Principal --
Company (a) and
interest
Cotter Corporation (d) (e) (e) -- -- (e) --
CommEd Fuel Company, Commercial paper, $516,144,000(g) -- -- Principal, --
Inc. (f) bank borrowings interest
and intermediate and other
term notes financing
costs (h)
Northwind Inc. (i) Letters of Credit $ 2,500,000 -- -- Principal --
and
interest
</TABLE>
Notes:
(a) Edison Development Company is a wholly-owned subsidiary which owns coal
land, land rights, and mineral rights to low-sulfur coal, owns certain
other real estate investments, and has an interest in uranium ore deposits
for the purpose of furnishing Commonwealth Edison Company with a future
source of fuel for electric generation.
(b) Represents portion of purchase cost of coal land.
(c) Excludes interest, which is at a rate of prime plus 1%.
(d) Cotter Corporation is a wholly-owned subsidiary which owns uranium mining
properties in Colorado and other Western states and a mineral processing
plant to furnish a supply of uranium concentrate for Commonwealth Edison
Company's nuclear fuel requirements.
(e) Cotter Corporation received from the state of Colorado the renewal and
amendment of its existing license to operate its uranium mill and
associated tailings impoundment at its Canon City uranium mill by obtaining
a $10,500,000 Performance Bond. An insurance company agreed to provide
Cotter Corporation with the required bond for a premium of $65,625 per
year. In addition, Cotter Corporation obtained Performance Bonds
principally for the reclamation of certain Western Slope mines and the
Charlie Orebody mine, and other related facilities. An insurance company
agreed to provide Cotter Corporation with Performance Bonds in the amount
of $3,981,825 for premiums of $25,779 per year. Commonwealth Edison Company
guaranteed payment of these premiums and any losses sustained by the
insurance company under the bonds.
(f) CommEd Fuel Company, Inc. (CommEd Fuel Company) is a non-affiliated company
established to lease nuclear fuel materials to the Company under a nuclear
fuel lease agreement. CommEd Fuel Company owns the nuclear fuel materials
and finances the purchase of such materials through its sale of commercial
paper and intermediate term notes, and bank borrowings.
(g) A maximum of $700,000,000 of obligations may be incurred, consisting of
$300,000,000 of commercial paper or bank borrowings and $400,000,000 of
intermediate term notes.
(h) The Company has agreed in its nuclear fuel lease agreement with CommEd Fuel
Company to make rent payments thereunder in amounts sufficient to cover the
principal, interest and other financing costs of CommEd Fuel Company
incurred in connection with its purchase and lease of nuclear fuel
materials to the Company.
(i) Northwind Inc. is an indirect, wholly-owned subsidiary which has been
formed to provide energy-related services to the Company's customers and
others.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33
<PAGE>
SCHEDULE VIII
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
--THOUSANDS OF DOLLARS--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------- --------- ------------------ ---------- --------
ADDITIONS
------------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
- -------------------------- --------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1991
- --------------------------
Reserves Deducted From As-
sets In Consolidated Bal-
ance Sheet:
Reserve for nonutility
property................ $ 742 $ 20 $ -- $ (762)(b) $ --
======= ======= ======== ======= =======
Provision for uncollecti-
ble accounts (a)........ $12,300 $(4,900) $ -- $ -- $ 7,400
======= ======= ======== ======= =======
Other Reserves:
Estimated Liabilities As-
sociated with
Remediation Costs and
Former Manufactured Gas
Plant Sites............. $ -- $25,112 $ -- $ (112)(c) $25,000
======= ======= ======== ======= =======
FOR THE YEAR ENDED
DECEMBER 31, 1992
- --------------------------
Reserves Deducted From As-
sets In Consolidated Bal-
ance Sheet:
Reserve for nonutility
property................ $ -- $ -- $ -- $ -- $ --
======= ======= ======== ======= =======
Provision for uncollecti-
ble accounts (a)........ $ 7,400 $ 5,576 $ -- $ -- $12,976
======= ======= ======== ======= =======
Other Reserves:
Estimated Liabilities As-
sociated with
Remediation Costs and
Former Manufactured Gas
Plant Sites............. $25,000 $ -- $ -- $ (478)(c) $24,522
======= ======= ======== ======= =======
FOR THE YEAR ENDED
DECEMBER 31, 1993
- --------------------------
Reserves Deducted From As-
sets In Consolidated Bal-
ance Sheet:
Reserve for nonutility
property................ $ -- $ -- $ -- $ -- $ --
======= ======= ======== ======= =======
Provision for uncollecti-
ble accounts (a)........ $12,976 $(2,066) $ -- $ -- $10,910
======= ======= ======== ======= =======
Other Reserves:
Estimated Liabilities As-
sociated with
Remediation Costs and
Former Manufactured Gas
Plant Sites............. $24,522 $ 6,010 $ -- $(1,010)(c) $29,522
======= ======= ======== ======= =======
</TABLE>
Notes:
(a) Bad debt losses, net of recoveries, and provisions for uncollectible
accounts were charged to operating expense and amounted to $27,541, $33,708
and $28,867 in 1991, 1992 and 1993, respectively.
(b) Transfer to Reserve for Depreciation of Electric Plant in Service.
(c) Expenditures for site investigation and cleanup costs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
34
<PAGE>
SCHEDULE IX
COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE IX--SHORT-TERM BORROWINGS
--THOUSANDS OF DOLLARS--
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ------------------------ ----------- -------- ----------- ----------- -----------
WEIGHTED
MAXIMUM AVERAGE AVERAGE
WEIGHTED AMOUNT AMOUNT INTEREST
AVERAGE OUTSTANDING OUTSTANDING RATE DURING
CATEGORY OF AGGREGATE BALANCE AT INTEREST DURING THE DURING THE THE YEAR
SHORT-TERM BORROWINGS END OF YEAR RATE YEAR (a) YEAR (b) (c)
- ------------------------ ----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1991
- ------------------------
Commercial paper (d).... $ -- -- % $ -- $ -- -- %
Bank loans (e).......... $2,000 6.31% $ 2,000 $ 1,855 8.22%
FOR THE YEAR ENDED
DECEMBER 31, 1992
- ------------------------
Commercial paper (d).... $ -- -- % $75,000 $15,081 4.01%
Bank loans (e).......... $5,600 5.83% $ 5,600 $ 2,416 7.05%
FOR THE YEAR ENDED
DECEMBER 31, 1993
- ------------------------
Commercial paper (d).... $ -- -- % $ -- $ -- -- %
Bank loans (e).......... $5,950 5.83% $ 5,950 $ 5,727 5.83%
</TABLE>
Notes:
(a) Maximum amount outstanding at any month end during the year.
(b) Computed by dividing the sum of the daily ending balances by the number of
days in the year.
(c) Computed by dividing the interest expense for the year by the average
amount outstanding during the year.
(d) Unsecured promissory notes with terms of nine months or less.
(e) Unsecured promissory notes with various banks which mature within twelve
months and which can be renegotiated at maturity.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
35
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS
REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 28TH
DAY OF MARCH 1994.
COMMONWEALTH EDISON COMPANY
/s/ James J. O'Connor
By_____________________________
James J. O'Connor, Chairman
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF
OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON THE 28TH DAY OF
MARCH 1994.
SIGNATURE TITLE
- ---------------------------- ---------------------
/s/ James J. O'Connor
- ---------------------------- Chairman and Director
James J. O'Connor (principal executive
officer)
/s/ John C. Bukovski
- ---------------------------- Vice President (principal
John C. Bukovski financial officer)
/s/ Roger F. Kovack
- ---------------------------- Comptroller (principal
Roger F. Kovack accounting officer)
Jean Allard* Director
James W. Compton* Director
Sue L. Gin* Director
Donald P. Jacobs* Director
George E. Johnson* Director
Harvey Kapnick* Director
Byron Lee, Jr.* Director
Edward A. Mason* Director
Frank A. Olson* Director
Samuel K. Skinner* President and Director
Lando W. Zech, Jr.* Director
/s/ David A. Scholz
*By____________________________
David A. Scholz, Attorney-in-
fact
36
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith or incorporated herein by
reference. Documents indicated by an asterisk (*) are incorporated herein by
reference to the File No. indicated.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(3)-1 Restated Articles of Incorporation of the Company effective February 20,
1985 (File No. 1-1839, Form 10-K for the year ended December 31, 1985,
Exhibit (3)-1).
*(3)-2 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$9.30 Cumulative Pref-
erence Stock," dated December 10, 1985 (File No. 1-1839, Form 10-K for
the year ended December 31, 1992, Exhibit (3)-2).
*(3)-3 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$9.00 Cumulative Pref-
erence Stock," dated July 25, 1990 (File No. 1-1839, Form 10-K for the
year ended December 31, 1990, Exhibit (3)-2).
*(3)-4 Statement of Resolution Establishing Series, relating to the establishment
of a new series of preference stock known as the "$6.875 Cumulative Pref-
erence Stock," dated May 21, 1993 (File No. 1-1839, Form 8-K dated May
21, 1993, Exhibit (3)-1).
*(3)-5 By-Laws of the Company, effective September 2, 1988 (File No. 1-1839, Form
10-Q for the quarter ended September 30, 1988, Exhibit (3)).
*(3)-6 Amendment to By-Laws of the Company, effective July 1, 1989 (File No.
1-1839, Form 10-Q for the quarter ended June 30, 1989, Exhibit (3)).
*(3)-7 Amendment to By-Laws of the Company, effective February 1, 1991 (File No.
1-1839, Form 10-K for the year ended December 31, 1990, Exhibit (3)-4).
*(3)-8 Amendment to By-Laws of the Company, effective September 10, 1992 (File
No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (3)-
6).
*(4)-1 Mortgage of the Company to Illinois Merchants Trust Company, Trustee (Con-
tinental Illinois National Bank and Trust Company of Chicago, successor
Trustee), dated July 1, 1923, Supplemental Indenture thereto dated August
1, 1944, and amendments and supplements thereto dated, respectively, Au-
gust 1, 1946, April 1, 1953, April 1, 1966, November 1, 1966, December 1,
1966, March 31, 1967, April 1, 1967, February 1, 1968, July 1, 1968, Oc-
tober 1, 1968, February 28, 1969, May 29, 1970, January 1, 1971, June 1,
1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May
31, 1974, July 1, 1974, June 13, 1975, May 28, 1976, January 15, 1977,
June 1, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Exhibit 2-1).
*(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, December 1, 1977, May 17, 1978, August 31, 1978, June 18, 1979, June
20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984,
March 1, 1985 and April 15, 1985 (File No. 2-99665, Form S-3, Exhibit
(4)-3).
*(4)-3 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, April 15, 1986 and May 1, 1986 (File No. 33-6879, Form S-3, Exhibit
(4)-9).
*(4)-4 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 12,
1987 (File No. 33-13193, Form S-3, Exhibit (4)-6).
*(4)-5 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 30, 1989
(File No. 33-32929, Form S-3, Exhibit (4)-11).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(4)-6 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, February 15, 1990 and June 15, 1990 (File No. 33-38232, Form S-3, Ex-
hibits (4)-11 and (4)-12).
*(4)-7 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-
44018, Form S-3, Exhibits (4)-12, (4)-13 and (4)-14).
*(4)-8 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1,
1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1991,
Exhibit (4)-18).
*(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992
(File No. 33-48542, Form S-3, Exhibit (4)-14).
*(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, July 15, 1992, September 15, 1992 and October 1, 1992 (File No. 33-
53766, Form S-3, Exhibits (4)-13, (4)-14 and (4)-15).
*(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, February 1, 1993 and March 1, 1993 (File No. 1-1839, Form 10-K for
the year ended December 31, 1992, Exhibits (4)-14 and (4)-15).
*(4)-12 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Exhib-
its (4)-12 and (4)-13).
*(4)-13 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respective-
ly, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May
21, 1993, Exhibits (4)-1 and (4)-2).
*(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993
(File No. 1-1839, Form 10-Q for the quarter ended June 30, 1993, Exhibit
(4)-1).
(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15,
1994.
*(4)-16 Indentures of the Company to The First National Bank of Chicago, Trustee
(Harris Trust and Savings Bank, successor Trustee), dated April 1, 1949,
October 1, 1949, October 1, 1950, October 1, 1954, January 1, 1958, Janu-
ary 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year
ended December 31, 1982, Exhibit (4)-20).
*(4)-17 Indenture of the Company dated February 15, 1973 to The First National
Bank of Chicago, Trustee (LaSalle National Bank, successor Trustee), and
Supplemental Indenture thereto dated July 13, 1973 (File No. 2-66100,
Form S-16, Exhibit (b)-2).
*(4)-18 Indenture dated as of September 1, 1987 between the Company and Citibank,
N.A., Trustee relating to Notes (File No. 33-20619, Form S-3, Exhibit
(4)-13).
*(4)-19 Supplemental Indenture to Indenture dated September 1, 1987 dated Septem-
ber 15, 1987 (File No. 33-20619, Form S-3, Exhibit (4)-14).
*(4)-20 Supplemental Indenture to Indenture dated September 1, 1987 dated May 18,
1988 (File No. 33-23036, Form S-3, Exhibit (4)-14).
*(4)-21 Supplemental Indenture to Indenture dated September 1, 1987 dated July 14,
1989 (File No. 33-32929, Form S-3, Exhibit (4)-16).
*(4)-22 Supplemental Indenture to Indenture dated September 1, 1987 dated April 1,
1991 (File No. 33-44018, Form S-3, Exhibit (4)-21).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(4)-23 Supplemental Indenture to Indenture dated September 1, 1987 dated April
15, 1992 (File No. 33-48542, Form S-3, Exhibit (4)-22).
*(4)-24 Supplemental Indenture to Indenture dated September 1, 1987 dated July 15,
1992 (File No. 33-53766, Form S-3, Exhibit (4)-24).
*(4)-25 Supplemental Indenture to Indenture dated September 1, 1987 dated October
15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended September 30,
1993, Exhibit (4)-1).
*(4)-26 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison
Company, as borrower, the Banks named therein and the other Lenders from
time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991, Exhibit (4)-27).
*(4)-27 Credit Agreement dated as of October 1, 1991, among Commonwealth Edison
Company, as borrower, the Banks named therein and the other Lenders from
time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form
10-K for the year ended December 31, 1991, Exhibit (4)-28).
(4)-28 Letter Agreement dated as of October 4, 1993, among Commonwealth Edison
Company and certain of the Banks party to the Credit Agreement dated as
of October 1, 1991.
*(4)-29 Term Loan Agreement dated as of January 7, 1992, between Commonwealth Edi-
son Company, as borrower, and The First National Bank of Chicago, indi-
vidually and as agent (File No. 1-1839, Form 10-K for the year ended De-
cember 31, 1992, Exhibit (4)-28).
*(4)-30 Term Loan Agreement dated as of January 15, 1992, between Commonwealth Ed-
ison Company, as borrower, and Westpac Banking Corporation, Chicago
Branch, individually and as agent (File No. 1-1839, Form 10-K for the
year ended December 31, 1992, Exhibit (4)-29).
*(4)-31 Term Loan Agreement dated as of January 16, 1992, between Commonwealth Ed-
ison Company, as borrower, and The Bank of New York, individually and as
agent (File No. 1-1839, Form 10-K for the year ended December 31, 1992,
Exhibit (4)-29).
(10)-1 Nuclear Fuel Lease Agreement dated as of November 23, 1993, between CommEd
Fuel Company, Inc., as Lessor, and Commonwealth Edison Company, as Les-
see.
*(10)-2 1993 Long-Term Incentive Plan (File No. 1-1839, Proxy Statement dated
March 26, 1993, Exhibit A).
(10)-3 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1995 under the 1993 Long-Term Incentive Plan.
(10)-4 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1996 under the 1993 Long-Term Incentive Plan.
(10)-5 1994 Long-Term Performance Unit Award for Executive and Group Level Em-
ployes Payable in 1997 under the 1993 Long-Term Incentive Plan.
(10)-6 1994 Variable Compensation Award for Management Employes under the 1993
Long-Term Incentive Plan.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- --------------------------------------------------------------------------
<S> <C>
*(10)-7 Deferred Compensation Plan (included in Exhibit (3)-1 above).
*(10)-8 Management Incentive Compensation Plan, effective January 1, 1989 (File
No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)-4).
*(10)-9 Amendments to Management Incentive Compensation Plan, dated December 14,
1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended
December 31, 1989, Exhibit (10)-5).
*(10)-10 Amendment to Management Incentive Compensation Plan, dated March 21, 1991
(File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit
(10)-6).
*(10)-11 Retirement Plan for Directors, effective January 1, 1987 (File No. 1-1839,
Form 10-K for the year ended December 31, 1988, Exhibit (10)-5).
*(10)-12 Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the
year ended December 31, 1980, Exhibit (10)-3).
*(10)-13 Amendment to the Executive Group Life Insurance Plan (File No. 1-1839,
Form 10-K for the year ended December 31, 1981, Exhibit (10)-4).
*(10)-14 Amendment to the Executive Group Life Insurance Plan dated December 12,
1986 (File No. 1-1839, Form 10-K for the year ended December 31, 1986,
Exhibit (10)-6).
*(10)-15 Amendment of Executive Group Life Insurance Plan to implement program of
"split dollar life insurance" dated December 13, 1990 (File No. 1-1839,
Form 10-K for the year ended December 31, 1990, Exhibit (10)-10).
*(10)-16 Commonwealth Edison Company Supplemental Management Retirement Plan (File
No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit
(10)-6).
*(10)-17 Amendment of Executive Group Life Insurance Plan to stabilize the death
benefit applicable to participants dated July 22, 1992 (File No. 1-1839,
Form 10-K for the year ended December 31, 1992, Exhibit (10)-13).
*(10)-18 Letter Agreement dated December 16, 1992 between Commonwealth Edison Com-
pany and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended
December 31, 1992, Exhibit (10)-14).
(12) Statement re computation of ratios of earnings to fixed charges and ratios
of earnings to fixed charges and preferred and preference stock dividend
requirements.
(21) Subsidiaries of Commonwealth Edison Company.
(23) Consent of experts.
(24) Powers of attorney of Directors whose names are signed to this Form 10-K
pursuant to such powers.
(99) Commonwealth Edison Company's Current Report on Form 8-K/A-1 dated January
28, 1994.
</TABLE>
4
<PAGE>
Exhibit (4)-15
Commonwealth Edison Company
Form 10-K File No. 1-1839
================================================================================
SUPPLEMENTAL INDENTURE
__________
Dated January 15, 1994
__________
COMMONWEALTH EDISON COMPANY
TO
CONTINENTAL BANK, NATIONAL ASSOCIATION
AND
M. J. KRUGER
Trustees under Mortgage Dated July 1, 1923, and Certain
Indentures Supplemental Thereto
__________
Providing for Issuance of
FIRST MORTGAGE 5.30% BONDS, POLLUTION CONTROL SERIES 1994A,
FIRST MORTGAGE 5.70% BONDS, POLLUTION CONTROL SERIES 1994B
AND
FIRST MORTGAGE 5.85% BONDS, POLLUTION CONTROL SERIES 1994C
================================================================================
THIS INSTRUMENT PREPARED BY R. R. MIGELY, P.O. BOX 767, CHICAGO, IL 60690, ON
BEHALF OF COMMONWEALTH EDISON COMPANY
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated January 15, 1994, between
COMMONWEALTH EDISON COMPANY, a corporation organized and existing under the
laws of the State of Illinois (hereinafter called the "Company"), party of
the first part, and CONTINENTAL BANK, NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United
States of America, and M. J. KRUGER, of Chicago, Illinois, as Trustee and
Co-Trustee, respectively, under the Mortgage of the Company dated July 1,
1923, as amended and supplemented by Supplemental Indentures dated,
respectively, August 1, 1944, August 1, 1946, April 1, 1953, April 1, 1966,
November 1, 1966, December 1, 1966, March 31, 1967, April 1, 1967, February
1, 1968, July 1, 1968, October 1, 1968, February 28, 1969, May 29, 1970,
January 1, 1971, June 1, 1971, July 27, 1971, May 31, 1972, June 1, 1973,
June 15, 1973, October 15, 1973, May 31, 1974, July 1, 1974, March 1, 1975,
June 13, 1975, May 28, 1976, January 15, 1977, June 1, 1977, June 3, 1977,
December 1, 1977, May 17, 1978, August 31, 1978, October 15, 1978, June 18,
1979, June 20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April
13, 1984, March 1, 1985, April 15, 1985, April 15, 1986, May 1, 1986,
August 15, 1986, January 12, 1987, June 30, 1989, February 15, 1990, June
15, 1990, June 1, 1991, October 1, 1991, October 15, 1991, February 1,
1992, May 15, 1992, July 15, 1992, September 15, 1992, October 1, 1992,
February 1, 1993, March 1, 1993, April 1, 1993, April 15, 1993, June 15,
1993, July 1, 1993 and July 15, 1993, parties of the second part (said
Trustee being hereinafter called the "Trustee", the Trustee and said Co-
Trustee being hereinafter together called the "Trustees", and said Mortgage
dated July 1, 1923, as amended and supplemented by said Supplemental
Indenture dated August 1, 1944 and subsequent supplemental indentures,
being hereinafter called the "Mortgage"),
WITNESSETH:
WHEREAS, the Mortgage provides for the issuance from time to time
thereunder, in series, of bonds of the Company for the purposes and subject to
the limitations therein specified; and
WHEREAS, the Company desires, by this Supplemental Indenture, to create
additional series of bonds to be issuable under the Mortgage, such bonds to be
designated "First Mortgage 5.30% Bonds, Pollution Control Series 1994A"
(hereinafter called the "bonds of Series 1994A"), "First Mortgage 5.70% Bonds,
Pollution Control Series 1994B" (hereinafter called the "bonds of Series 1994B")
and "First Mortgage 5.85% Bonds, Pollution Control Series 1994C" (hereinafter
called the "bonds of Series 1994C") and the terms and provisions to be contained
in the bonds of Series 1994A, the bonds of Series 1994B and the bonds of Series
1994C or to be otherwise applicable thereto to be as set forth in this
Supplemental Indenture; and
WHEREAS, the bonds of Series 1994A and the Trustee's certificate to be
endorsed thereon, the bonds of Series 1994B and the Trustee's certificate to be
endorsed thereon and the bonds of Series 1994C and the Trustee's certificate to
be endorsed thereon shall be substantially in the form of the General Form of
Registered Bond Without Coupons and the
<PAGE>
form of the General Form of Trustee's Certificate set forth in Section 3.05 of
the Supplemental Indenture dated August 1, 1944, to the Mortgage with such
appropriate insertions, omissions and variations in order to express the
designation, date, maturity date, annual interest rate, record dates for, and
dates of, payment of interest, denominations, terms of redemption and redemption
prices, and other terms and characteristics authorized or permitted by the
Mortgage or not inconsistent therewith; and
WHEREAS, the Illinois Development Finance Authority (the "Authority")
proposes to issue $66,000,000 aggregate principal amount of its Pollution
Control Revenue Refunding Bonds, Series 1994 (Commonwealth Edison Company
Project) (collectively, the "Revenue Bonds"), pursuant to an Indenture of Trust
dated as of January 15, 1994 (the "Indenture"), under which The First National
Bank of Chicago is trustee (the "Indenture Trustee"), and to use the proceeds
received therefrom to purchase the bonds of Series 1994A, bonds of Series 1994B
and bonds of Series 1994C from the Company, pursuant to a Sale Agreement dated
as of January 15, 1994 (the "Sale Agreement"), between the Company and the
Authority, to assist the Company in refunding certain outstanding obligations
issued to finance a portion of the cost of certain wastewater treatment, air and
water pollution control and sewage and solid waste disposal facilities of the
Company; and the bonds of Series 1994A, bonds of Series 1994B and bonds of
Series 1994C are to be pledged and delivered by the Authority to the Indenture
Trustee to secure the repayment of the Revenue Bonds; and
WHEREAS, the Company is legally empowered and has been duly authorized by
the necessary corporate action and by orders of the Illinois Commerce Commission
to make, execute and deliver this Supplemental Indenture, and to create, as
additional series of bonds of the Company, the bonds of Series 1994A, bonds of
Series 1994B and bonds of Series 1994C, and all acts and things whatsoever
necessary to make this Supplemental Indenture, when executed and delivered by
the Company and the Trustees, a valid, binding and legal instrument, and to make
the bonds of Series 1994A, bonds of Series 1994B and bonds of Series 1994C, when
authenticated by the Trustee and issued as in the Mortgage and in this
Supplemental Indenture provided, the valid, binding and legal obligations of the
Company, entitled in all respects to the security of the Mortgage, as amended
and supplemented, have been done and performed;
NOW, THEREFORE, in consideration of the premises and of the sum of one
dollar duly paid by the Trustees to the Company, and for other good and valuable
considerations, the receipt of which is hereby acknowledged, the parties hereto
do hereby agree as follows:
SECTION 1. DESIGNATION AND ISSUANCE OF BONDS OF SERIES 1994A, BONDS OF
SERIES 1994B AND BONDS OF SERIES 1994C. The bonds of Series 1994A shall, as
hereinbefore recited, be designated as the Company's "First Mortgage 5.30%
Bonds, Pollution Control Series 1994A." The bonds of Series 1994B shall, as
hereinbefore recited, be designated as the Company's "First Mortgage 5.70%
Bonds, Pollution Control Series 1994B." The bonds of Series 1994C shall, as
hereinbefore recited, be designated as the Company's "First Mortgage 5.85%
Bonds, Pollution Control Series 1994C." Subject to the provisions of the
Mortgage, the bonds of Series 1994A, bonds of Series 1994B and bonds of Series
1994C shall be issuable without limitation as to the aggregate principal amount
thereof.
-2-
<PAGE>
SECTION 2. FORM, DATE, MATURITY DATE, INTEREST RATE AND INTEREST PAYMENT
DATES OF BONDS OF SERIES 1994A, BONDS OF SERIES 1994B AND BONDS OF SERIES 1994C.
The definitive bonds of Series 1994A, bonds of Series 1994B and bonds of Series
1994C shall be in engraved, lithographed or printed form and shall be registered
bonds without coupons; and such bonds and the Trustee's certificate to be
endorsed thereon shall be substantially in the form hereinbefore recited. The
bonds of Series 1994A, bonds of Series 1994B and bonds of Series 1994C shall be
dated as provided in Section 3.01 of the Mortgage, as amended by Supplemental
Indenture dated April 1, 1967. The bonds of Series 1994A shall mature on
January 15, 2004, and shall bear interest at the rate of 5.30% per annum until
the principal thereof shall be paid. The bonds of Series 1994B shall mature on
January 15, 2009, and shall bear interest at the rate of 5.70% per annum until
the principal thereof shall be paid. The bonds of Series 1994C shall mature on
January 15, 2014, and shall bear interest at the rate of 5.85% per annum until
the principal thereof shall be paid. Such interest shall be payable
semiannually on January 15 and July 15 in each year, commencing July 15, 1994.
January 1 and July 1 in each year are hereby established as record dates for the
payment of interest payable on the next succeeding interest payment dates,
respectively. The interest on each bond of Series 1994A, each bond of Series
1994B and each bond of Series 1994C so payable on any interest payment date
shall, subject to the exceptions provided in Section 3.01 of the Mortgage, as
amended by said Supplemental Indenture dated April 1, 1967, be paid to the
person in whose name such bond is registered at the close of business on January
1 and July 1, as the case may be, next preceding such interest payment date.
SECTION 3. EXECUTION OF BONDS OF SERIES 1994A, BONDS OF SERIES 1994B AND
BONDS OF SERIES 1994C. The bonds of Series 1994A, bonds of Series 1994B and
bonds of Series 1994C shall be executed on behalf of the Company by its
President or one of its Vice Presidents, manually or by facsimile signature, and
shall have its corporate seal affixed thereto or a facsimile of such seal
imprinted thereon, attested by its Secretary or one of its Assistant
Secretaries, manually or by facsimile signature, all as may be provided by
resolution of the Board of Directors of the Company. In case any officer or
officers whose signature or signatures, manual or facsimile, shall appear upon
any bond of Series 1994A, any bond of Series 1994B or any bond of Series 1994C
shall cease to be such officer or officers before such bond shall have been
actually authenticated and delivered, such bond nevertheless may be issued,
authenticated and delivered with the same force and effect as though the person
or persons whose signature or signatures, manual or facsimile, appear thereon
had not ceased to be such officer or officers of the Company.
SECTION 4. MEDIUM AND PLACES OF PAYMENT OF PRINCIPAL OF AND INTEREST ON
BONDS OF SERIES 1994A, BONDS OF SERIES 1994B AND BONDS OF SERIES 1994C;
TRANSFERABILITY AND EXCHANGEABILITY. Both the principal of and interest on the
bonds of Series 1994A, bonds of Series 1994B and bonds of Series 1994C shall be
payable in any coin or currency of the United States of America which at the
time of payment is legal tender for the payment of public and private debts, and
both such principal and interest shall be payable at the office or agency of the
Company in the City of Chicago, State of Illinois, or, at the option of the
registered owner, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, State of New York. There shall be credited
against amounts due from time to time on the
-3-
<PAGE>
bonds of Series 1994A, bonds of Series 1994B and bonds of Series 1994C any
amounts then on deposit in the Bond Fund created by Section 402 of the
Indenture. Bonds of Series 1994A, bonds of Series 1994B and bonds of Series
1994C shall not be transferable except to the Authority, the Indenture Trustee
or any successor trustee under the Indenture. Bonds of Series 1994A, bonds of
Series 1994B and bonds of Series 1994C shall be exchangeable for other bonds of
authorized denominations, in the manner provided in Sections 3.09 and 3.10 of
the Mortgage, at said office or agency. No charge shall be made by the Company
to the registered owner of any bond of Series 1994A, any bond of Series 1994B or
any bond of Series 1994C for the transfer of such bond or for the exchange
thereof for bonds of other authorized denominations, except, in the case of
transfer, a charge sufficient to reimburse the Company for any stamp or other
tax or governmental charge required to be paid by the Company or the Trustee.
SECTION 5. DENOMINATIONS AND NUMBERING OF BONDS OF SERIES 1994A, BONDS OF
SERIES 1994B AND BONDS OF SERIES 1994C. The bonds of Series 1994A, bonds of
Series 1994B and bonds of Series 1994C shall be issued in the denomination of
$5,000 and in such multiples of $5,000 as shall from time to time hereafter be
determined and authorized by the Board of Directors of the Company or by any
officer or officers of the Company authorized to make such determination, the
authorization of the denomination of any bond of Series 1994A, any bond of
Series 1994B or any bond of Series 1994C to be conclusively evidenced by the
execution thereof on behalf of the Company. Bonds of Series 1994A shall be
numbered R-1 and consecutively upwards, bonds of Series 1994B shall be numbered
R-1 and consecutively upwards and bonds of Series 1994C shall be numbered R-1
and consecutively upwards.
SECTION 6. TEMPORARY BONDS OF SERIES 1994A, BONDS OF SERIES 1994B AND
BONDS OF SERIES 1994C. Until definitive bonds of Series 1994A, bonds of Series
1994B or bonds of Series 1994C are ready for delivery, there may be
authenticated and issued in lieu of any thereof and subject to all of the
provisions, limitations and conditions set forth in Section 3.11 of the
Mortgage, temporary registered bonds without coupons of bonds of Series 1994A,
bonds of Series 1994B or bonds of Series 1994C.
SECTION 7. EXTRAORDINARY OPTIONAL REDEMPTION OF BONDS OF SERIES 1994A,
BONDS OF SERIES 1994B AND BONDS OF SERIES 1994C. Upon the notice and in the
manner provided in Section 301 of the Indenture, the bonds of Series 1994A,
bonds of Series 1994B and bonds of Series 1994C may be redeemed prior to
maturity at the option of the Company, in whole but not in part, at any time at
100% of the principal amount thereof plus accrued interest to the redemption
date, within 180 days after the occurrence of any change in the Constitution of
the State of Illinois or the Constitution of the United States of America or any
legislative or administrative action (whether local, state or federal) or any
final decree, judgment or order of any court or administrative body (whether
local, state or federal) which results in the Sale Agreement, the bonds of
Series 1994A, bonds of Series 1994B or bonds of Series 1994C becoming void or
unenforceable or impossible of performance in accordance with the intent and
purpose of the parties as expressed in the Sale Agreement, the bonds of Series
1994A, bonds of Series 1994B or bonds of Series 1994C, as the case may be.
-4-
<PAGE>
SECTION 8. EXTRAORDINARY MANDATORY REDEMPTION OF BONDS OF SERIES 1994A,
BONDS OF SERIES 1994B AND BONDS OF SERIES 1994C. Upon the notice and in the
manner provided in Section 301 of the Indenture, the bonds of Series 1994A,
bonds of Series 1994B and bonds of Series 1994C shall be redeemed by the Company
in whole, or as hereinafter provided in part, at 100% of the principal amount
thereof plus accrued interest to the redemption date, in the event of a final
determination by the Internal Revenue Service or by a court of competent
jurisdiction that, as a result of a failure by the Company to observe any
covenant, agreement, representation or warranty in the Sale Agreement or the Tax
Exemption Certificate and Agreement dated January 25, 1994, between the Company
and the Authority, the interest payable on the Revenue Bonds is includable in
the gross income for federal income tax purposes of the owners thereof (other
than an owner who is a "substantial user" of the Project (as defined in the
Indenture) or a "related person" within the meaning of Section 103(b)(13) of the
Internal Revenue Code of 1954, as amended (the "Code")). Such a determination
will not result from the inclusion of interest on any Revenue Bond in the
computation of minimum or indirect taxes. Any such determination shall not be
considered final for this purpose unless the Company has been given written
notice of any proceedings which might result in such determination and has been
afforded the opportunity to participate in any such proceedings (as a party or
otherwise) to the extent the Company deems sufficient, either directly or in the
name of any owner of a Revenue Bond, and until the conclusion of any appellate
review, if sought. Any such redemption shall occur within 180 days from the
date of such final determination. The bonds of Series 1994A, bonds of Series
1994B and bonds of Series 1994C shall be redeemed in whole upon any such final
determination unless, in the opinion of Bond Counsel (as defined in the
Indenture), the redemption of a portion of the outstanding Revenue Bonds would
have the result that interest payable on the Revenue Bonds remaining outstanding
after such redemption would not be includable in the gross income for federal
income tax purposes of any owner of such Revenue Bonds (other than an owner who
is a "substantial user" of the Project or a "related person" within the meaning
of Section 103(b)(13) of the Code), in which event bonds of Series 1994A, bonds
of Series 1994B and bonds of Series 1994C shall be redeemed in an amount equal
to the amount of Revenue Bonds required to be so redeemed. If any holder of
Revenue Bonds refuses to permit the Company to participate in any such
proceedings (as a party or otherwise) to the extent the Company deems sufficient
or if any holder of Revenue Bonds fails to notify the Company of the pendency
of any such proceedings, the bonds of Series 1994A, bonds of Series 1994B and
bonds of Series 1994C shall not, in the event of an adverse final determination,
be subject to the mandatory redemption provisions of this Section.
SECTION 9. DEFAULT MANDATORY REDEMPTION. The bonds of Series 1994A, bonds
of Series 1994B and bonds of Series 1994C shall be redeemed promptly, without
notice, by the Company in whole at 100% of the principal amount thereof plus
accrued interest to the date of redemption following receipt by the Trustee of
written notice from the Indenture Trustee stating that the principal of the
Revenue Bonds has been declared to be immediately due and payable as a result of
an event of default under the Indenture.
-5-
<PAGE>
SECTION 10. MISCELLANEOUS. The terms and conditions of this Supplemental
Indenture shall be deemed to be a part of the terms and conditions of the
Mortgage for any and all purposes. The Mortgage, as supplemented by said
indentures supplemental thereto dated subsequent to August 1, 1944 and referred
to in the first paragraph of this Supplemental Indenture, and as further
supplemented by this Supplemental Indenture, is in all respects hereby ratified
and confirmed.
This Supplemental Indenture shall bind and, subject to the provisions of
Article XIV of the Mortgage, inure to the benefit of the respective successors
and assigns of the parties hereto.
Although this Supplemental Indenture is dated January 15, 1994, it shall be
effective only from and after the actual time of its execution and delivery by
the Company and the Trustees on the date indicated by their respective
acknowledgments hereto annexed.
This Supplemental Indenture may be simultaneously executed in any number of
counterparts, and all such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, Commonwealth Edison Company has caused this
Supplemental Indenture to be executed in its name by one of its Vice Presidents,
and its seal to be hereunto affixed and attested by its Secretary, and
Continental Bank, National Association, as Trustee under the Mortgage, has
caused this Supplemental Indenture to be executed in its name by one of its Vice
Presidents, and its seal to be hereunto affixed and attested by one of its Trust
Officers, and M. J. Kruger, as Co-Trustee under the Mortgage, has hereunto
affixed his signature and seal, all as of the day and year first above written.
COMMONWEALTH EDISON COMPANY
By /s/ J. C. Bukovski
J. C. Bukovski
Vice President
(SEAL)
ATTEST:
/s/ David A. Scholz
David A. Scholz
Secretary
CONTINENTAL BANK, NATIONAL
ASSOCIATION
By /s/ Joanne M. Murphy
Joanne M. Murphy
Vice President
(SEAL)
ATTEST:
/s/ K L Clark
K. L. Clark
Trust Officer
/s/ M J Kruger
M. J. KRUGER
(SEAL)
-7-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, JOHN R. DIETZEL, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that J. C. BUKOVSKI, a Vice President of
Commonwealth Edison Company, an Illinois corporation, one of the parties
described in and which executed the foregoing instrument, and DAVID A. SCHOLZ,
the Secretary of said corporation, who are both personally known to me to be the
same persons whose names are subscribed to the foregoing instrument as such Vice
President and Secretary, respectively, and who are both personally known to me
to be a Vice President and the Secretary, respectively, of said corporation,
appeared before me this day in person and severally acknowledged that they
signed, sealed, executed and delivered said instrument as their free and
voluntary act as such Vice President and Secretary, respectively, of said
corporation, and as the free and voluntary act of said corporation, for the uses
and purposes therein set forth.
GIVEN under my hand and notarial seal this 17th day of January, A.D. 1994.
/s/ John R. Dietzel
John R. Dietzel
Notary Public
(SEAL)
My Commission expires March 10, 1997
-8-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, S. RHODEN, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JOANNE M. MURPHY, a Vice President of
Continental Bank, National Association, a national banking association, one of
the parties described in and which executed the foregoing instrument, and K. L.
CLARK, a Trust Officer of said banking association, who are both personally
known to me to be the same persons whose names are subscribed to the foregoing
instrument as such Vice President and Trust Officer, respectively, and who are
both personally known to me to be a Vice President and a Trust Officer,
respectively, of said banking association, appeared before me this day in person
and severally acknowledged that they signed, sealed, executed and delivered said
instrument as their free and voluntary act as such Vice President and Trust
Officer, respectively, of said banking association, and as the free and
voluntary act of said banking association, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 17th day of January, A.D. 1994.
/s/ S. Rhoden
S. Rhoden
Notary Public
(SEAL)
My Commission expires June 28, 1997.
-9-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, S. RHODEN, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that M. J. KRUGER, one of the parties described in
and which executed the foregoing instrument, who is personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person and acknowledged that he signed, sealed, executed
and delivered said instrument as his free and voluntary act for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 17th day of January, A.D. 1994.
/s/ S. Rhoden
S. Rhoden
Notary Public
(SEAL)
My Commission expires June 28, 1997.
COMMONWEALTH EDISON COMPANY
REAL ESTATE DEPT.
P. O. BOX 767
CHICAGO, ILLINOIS 60690
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<PAGE>
Exhibit (4)-28
Commonwealth Edison Company
Form 10-K File No. 1-1839
(Commonwealth Edison Logo)
Commonwealth Edison
One First National Plaza, Chicago, Illinois
Address Reply to: Post Office Box 767
Chicago, Illinois 60690-0767
As of October 4, 1993
To each of the Banks party to the
Credit Agreement referred to below
Ladies and Gentlemen:
We refer to the $200 million Credit Agreement dated as of October 1, 1991,
as amended (the "Credit Agreement"), among the undersigned, the Banks (including
you) named therein and the other Lenders from time to time parties thereto, and
Citibank, N.A., as Agent. Capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Credit Agreement.
We are writing to request that you extend the expiration date of your
Commitment under the Credit Agreement from October 4, 1993 until October 3,
1994. If you agree to this extension, all terms and conditions of the Credit
Agreement would continue in effect during the period of such extension, except
for the following amendments: (a) the date "October 3, 1994," would be inserted
in lieu of the date "October 4, 1993," in clause (i) of the definition of
"Termination Date" in Section 1.01 of the Credit Agreement, (b) the terms
"Banks" and "Lenders" shall mean each of the banks or other lending institutions
agreeing to extend the expiration date of its Commitment under the Credit
Agreement or, if not presently a party to the Credit Agreement, agreeing to
become a party thereto on or after October 4, 1993, and (c) no additional fees
would be payable under Section 2.04(b) of the Credit Agreement in respect of
such extension. Such extension would become effective as of October 4, 1993.
On and after the effective date of the extension requested herein and the
related amendments referred to above, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof", or words of like import referring to
the Credit Agreement, and each reference in the other Loan Documents to "the
Credit Agreement", "thereunder", "thereof", or words of like import
<PAGE>
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended by this letter.
If you agree to extend the expiration of your Commitment and to the related
amendments provided above, please evidence such agreement by executing and
returning at least two counterparts of this letter to the Agent at its address
at 399 Park Avenue, New York, New York 10043, Attention of Joseph W. Casson, no
later than September 7, 1993.
On October 4, 1993, (i) the Commitment of each Bank which fails to return
executed counterparts of this letter as provided above shall automatically
terminate as presently provided in the Credit Agreement, and (ii) all
outstanding Advances of such Bank, together with all accrued interest thereon
and other amounts payable under the Credit Agreement with respect thereto, shall
become due and payable.
Very truly yours,
COMMONWEALTH EDISON COMPANY
By: /s/ Dennis F. O'Brien
------------------------
Dennis F. O'Brien
Treasurer
Agreed as of the date
first above written:
*
- ------------------------------
(Name of Bank)
By: *
---------------------------
Title:
* Executed by Banks holding Commitments aggregating $175 million.
-2-
<PAGE>
Exhibit (10)-1
Commonwealth Edison Company
Form 10-K File No. 1-1839
================================================================================
NUCLEAR FUEL LEASE AGREEMENT
BETWEEN
COMMED FUEL COMPANY, INC.
AND
COMMONWEALTH EDISON COMPANY
DATED AS OF NOVEMBER 23, 1993
THIS NUCLEAR FUEL LEASE AGREEMENT HAS BEEN MANUALLY EXECUTED IN MULTIPLE
COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 UPWARDS. THE RIGHTS OF THE LESSOR
UNDER THIS FUEL LEASE AGREEMENT HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A
SECURITY INTEREST IN FAVOR OF, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
INDENTURE TRUSTEE, FOR THE RATABLE BENEFIT OF THE SECURED PARTIES NAMED IN THE
TRUST INDENTURE DATED AS OF NOVEMBER 23, 1993, BETWEEN THE LESSOR AND MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, AS INDENTURE TRUSTEE THEREUNDER. TO THE
EXTENT, IF ANY, THAT SUCH FUEL LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY
APPLICABLE JURISDICTION), NO SECURITY INTEREST MAY BE CREATED IN, OR ASSIGNMENT
EFFECTED OF, SUCH FUEL LEASE AGREEMENT THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OF SUCH FUEL LEASE AGREEMENT OTHER THAN THE ORIGINAL EXECUTED
COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING COUNTERPART
NO. 1 ON THE COVER, WHICH COUNTERPART NO. 1 CONTAINS A RECEIPT EXECUTED BY THE
INDENTURE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
Counterpart No.____
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. Defined Terms............................................ 1
2. Representations and Warranties of Lessee................. 2
3. Lease of Nuclear Fuel; Term.............................. 5
4. Title to Remain in the Lessor; Fuel Management;
Nuclear Fuel to be Personal Property and Used for
Generation; Location..................................... 5
5. Basic Rent and Additional Rent; Procedure for Payment.... 6
6. Payment of Costs by the Lessor........................... 9
7. Taxes.................................................... 11
8. Condition and Use of Nuclear Fuel; Quiet Enjoyment....... 11
9. Maintenance of the Nuclear Fuel.......................... 13
10. Removals, Purchase of Nuclear Fuel, Transfer to the
Lessee, Commingling, Substitution........................ 13
11. Indemnification by the Lessee............................ 17
12. Right to Inspect Nuclear Fuel............................ 19
13. Payment of Impositions; Further Assurances............... 19
14. Compliance with Legal and Insurance Requirements
and with Instruments..................................... 20
15. Liens.................................................... 20
16. Permitted Contests....................................... 21
17. Insurance................................................ 22
18. Damage................................................... 24
19. Condemnation or Eminent Domain........................... 26
20. Termination After Certain Events......................... 28
21. Conditions of Termination and Conveyance................. 34
22. Estoppel Certificates; Information....................... 35
23. Rights to Perform the Lessee's Covenants................. 35
</TABLE>
<PAGE>
<TABLE>
<S> <C>
24. Assignments.............................................. 36
25. Lease Events of Default and Remedies..................... 36
26. Surrender; Acceptance of Surrender....................... 42
27. No Merger................................................ 43
28. Notices.................................................. 43
29. Allocation of Amounts.................................... 44
30. Amendments............................................... 44
31. Severability............................................. 44
32. Taxes; Tax Benefits...................................... 45
33. Sale of Nuclear Fuel and Assignment of Rights under
Nuclear Fuel Contracts................................... 45
34. Miscellaneous............................................ 47
</TABLE>
<PAGE>
NUCLEAR FUEL LEASE AGREEMENT
THIS NUCLEAR FUEL LEASE AGREEMENT dated as of November 23, 1993 (as
the same may be amended, modified or supplemented from time to time, this "FUEL
LEASE"), between CommEd Fuel Company, Inc., a Delaware corporation ("LESSOR" or
the "COMPANY"), and Commonwealth Edison Company, an Illinois corporation
("LESSEE").
W I T N E S S E T H:
WHEREAS, Lessee is party to a Nuclear Fuel Lease Agreement dated as of
December 1, 1985, with CWE Fuel Company Inc. and a Nuclear Fuel Lease Agreement
dated as of March 22, 1984, with Commonwealth Fuel Company II (together with CWE
Fuel Company Inc., referred to herein as the "EXISTING FUEL COMPANIES", and
individually as an "EXISTING FUEL COMPANY"), in each case relating to the lease
by the respective lessor to Lessee of certain nuclear materials to be used in
the production of heat for the generation of electricity (collectively, the
"EXISTING LEASES"); and
WHEREAS, Lessee believes it is desirable to combine the Existing
Leases into a single lease, to have the Lessor acquire the nuclear fuel
currently leased by Lessee from the Existing Fuel Companies under the Existing
Leases and to provide for the lease by Lessor to Lessee of the nuclear fuel so
acquired as well as certain other nuclear fuel materials to be used from time to
time in the production of heat for the generation of electricity; and
WHEREAS, Lessor proposes to so acquire such nuclear fuel and to enter
into the Original Credit Agreement, the Original Note Purchase Agreements
relating to the issuance and sale of IT Notes, and the Trust Indenture (as such
terms are hereinafter defined);
NOW, THEREFORE, Lessor and Lessee hereby agree as follows:
SECTION 1. Defined Terms.
Except as otherwise specifically defined herein, the capitalized terms
used in this Fuel Lease which are defined in Appendix A to this Fuel Lease shall
have the respective meanings assigned in Appendix A.
<PAGE>
SECTION 2. Representations and Warranties of Lessee.
The Lessee represents and warrants to the Lessor:
(a) Corporate Matters. The Lessee is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois,
with full power and authority to own and operate its properties and conduct its
business as presently being conducted; and the Lessee is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction in which
its ownership or leasing of properties or the conduct of its business requires
such qualification. The execution, delivery and performance by the Lessee of
this Fuel Lease, the other Basic Documents to which it is a party and the
certificates, instruments and documents executed, or to be executed, on behalf
of the Lessee in connection with the transactions contemplated hereby and
thereby, and the performance by the Lessee of its obligations hereunder and
thereunder, are within the Lessee's corporate powers and have been duly
authorized on behalf of the Lessee by all necessary corporate action. The
execution, delivery and performance by each Existing Fuel Company of its
Original Bill of Sale and the certificates, instruments and documents executed,
or to be executed, on behalf of such Existing Fuel Company in connection with
the transactions contemplated thereby, and the performance by such Existing Fuel
Company of its obligations thereunder, are within such Existing Fuel Company's
corporate powers and have been duly authorized on behalf of such Existing Fuel
Company by all necessary corporate action.
(b) Validity, Enforceability. The Basic Documents to which Lessee is
a party, the Original Bills of Sale executed by the Existing Fuel Companies and
the certificates, instruments and documents executed, or to be executed, on
behalf of the Lessee or an Existing Fuel Company in connection with the
transactions contemplated by such Basic Documents or the Original Bills of Sale
constitute, or when executed and delivered will constitute, legal, valid and
binding obligations of the Lessee or such Existing Fuel Company (as the case may
be), enforceable against the Lessee or such Existing Fuel Company (as the case
may be) in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws of general applicability relating to or affecting the
enforceability of creditors' rights generally or by general principles of equity
and except as enforceability may be limited by the Atomic Energy Act and the
regulations thereunder.
(c) Financial Statements. The Lessee has furnished or will furnish as
soon as practicable to the Lessor copies of each of its Annual Reports on Form
10-K, each of its Quarterly Reports on Form 10-Q, and each of any other reports
and documents filed by the Lessee with the Securities and Exchange Commission
(other than registration statements on Forms S-3 and S-8 and registration
statements on Form S-4 relating to registered exchange offers by the Lessee for
its privately placed securities), all as so filed at
-2-
<PAGE>
any time on or after the date of the filing of its Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993. The financial statements contained in such
documents fairly represent, and the financial statements to be delivered
hereafter by the Lessee to the Lessor, any Assignee or any Secured Party will
fairly represent, the financial position, results of operations, and changes in
financial position of the Lessee as of the dates and for the periods indicated
therein and have been prepared, and will have been prepared, in accordance with
generally accepted accounting principles applied on a consistent basis (except
as otherwise indicated therein).
(d) Changes, etc. Since June 30, 1993, there has been no change in
the condition or business of the Lessee which in any way materially adversely
affects the ability of the Lessee to perform its obligations under the Basic
Documents to which it is a party except for the settlements described in
Lessee's Current Report on Form 8-K dated September 24, 1993 (which settlements
became final in November 1993).
(e) Litigation, etc. There is no action, suit, proceeding or
investigation at law or in equity or by or before any governmental
instrumentality or other agency now pending or, to the knowledge of the Lessee,
threatened against or affecting the Lessee or any property or rights of the
Lessee which questions the validity of the Basic Documents to which it is a
party or which Lessee reasonably believes would materially adversely affect the
ability of the Lessee to perform its obligations thereunder.
(f) Compliance with Other Instruments, etc. The execution, delivery
and performance of the Basic Documents to which the Lessee is a party and the
certificates, instruments and documents executed, or to be executed, on behalf
of the Lessee in connection with the transactions contemplated thereby will not
result in any violation of any term of the restated articles of incorporation or
the by-laws of the Lessee or of any agreement, indenture or similar instrument,
license, judgment, decree, order, law, statute, ordinance or governmental rule
or regulation applicable to the Lessee or its property.
(g) Consent, etc. There are no consents, licenses, orders,
authorizations or approvals of, or registrations with, any governmental or
public body or authority which presently are required in connection with the
valid execution, delivery and performance of the Basic Documents to which the
Lessee is a party, the valid execution, delivery and performance of the Original
Bills of Sale by the Existing Fuel Companies, and the certificates, instruments
and documents executed, or to be executed, on behalf of the Lessee or either of
the Existing Fuel Companies in connection with the transactions contemplated
thereby, that have not been obtained and any such consents, licenses, orders,
authorizations, approvals and registrations that have been obtained are in full
-3-
<PAGE>
force and effect. There are no material consents, licenses, permits,
certificates, orders, authorizations or approvals of, or registrations with, any
Person which presently are required in connection with the ownership by the
Lessee of its property and assets and for the conduct of its business as now
conducted, that have not been obtained or for which applications for renewal
have not been timely filed and are pending, and consents, licenses, permits,
certificates, orders, authorizations, approvals and registrations that have been
obtained are in full force and effect.
(h) Defaults. The Lessee is not in default under (i) any contract to
which it is a party with any manufacturer relating to the acquisition,
processing, enrichment or fabrication of nuclear fuel materials, and, to the
best of Lessee's knowledge, none of the other parties to such contracts are in
material default of their obligations to Lessee thereunder, or (ii) any
agreement, indenture or mortgage for borrowed money in excess of $20,000,000.
(i) ERISA. The provisions of each defined benefit plan, as defined in
Section 3(35) of ERISA, maintained by the Lessee or by any consolidated
subsidiary of the Lessee are in compliance in all material respects with
applicable requirements of ERISA and of the Code, and with all applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements.
(j) Title to Fuel; Liens. (1) Each Nuclear Fuel Contract assigned
under this Fuel Lease on the date hereof is in full force and effect, and Lessee
has delivered to Lessor a true and complete copy of such Nuclear Fuel Contract
as presently in effect; (2) prior to its sale to Lessor, Lessee or an Existing
Fuel Company, as the case may be, had good title to all of the Nuclear Fuel
transferred by it, free and clear of all Liens (except for Liens permitted by
Section 15(i), (ii), (iv) or (vi) of this Fuel Lease), and Lessee and the
Existing Fuel Companies have not previously sold, assigned, transferred or
created any Lien in, the Nuclear Fuel, any Nuclear Fuel Contract or any part
thereof (except for Liens of or granted by the Existing Fuel Companies which are
to be released contemporaneously with the purchase of such Nuclear Fuel from the
Existing Fuel Companies); (3) Lessee shall warrant and defend forever Lessor's
title to the Nuclear Fuel so transferred by Lessee or an Existing Fuel Company;
(4) neither Lessee nor either Existing Fuel Company, as applicable, has waived
performance by any other Person obligated under any assigned Nuclear Fuel
Contract of any material obligation of such Person thereunder; (5) neither
Lessee nor any other Person is in default in the payment, performance or
observance of any material term, covenant or agreement on its part to be
performed or observed under any assigned Nuclear Fuel Contract; and (6) no
financing statement (other than any which may have been filed on behalf of any
Assignee of Lessor) covering all or any part of the Nuclear Fuel or any Nuclear
Fuel Contract is on file in any public office (except for
-4-
<PAGE>
financing statements of the Existing Fuel Companies, which are to be released
contemporaneously with the purchase of Nuclear Fuel from such Existing Fuel
Companies).
SECTION 3. Lease of Nuclear Fuel; Term.
(a) The Lessor hereby leases to the Lessee, and the Lessee hereby
leases from the Lessor, the Nuclear Fuel for the term provided in this Fuel
Lease and subject to the terms and provisions hereof.
(b) The term of this Fuel Lease shall begin at 12:01 A.M., Chicago
time, on November 23, 1993, and, except as otherwise provided herein, shall
terminate on September 30, 2013.
SECTION 4. Title to Remain in the Lessor; Fuel Management; Nuclear
Fuel to be Personal Property and Used for Generation; Location.
(a) Title to and ownership of the Nuclear Fuel shall at all times
remain in the Lessor and at no time become vested in the Lessee except in
accordance with an express provision of this Fuel Lease. This agreement is a
lease only, and shall not give or grant to the Lessee any right, title or
interest in or to the Nuclear Fuel, or any portion thereof, except the rights of
a tenant in accordance with the provisions hereof.
(b) Except as otherwise expressly limited by the provisions of this
Fuel Lease, the Lessee shall have full right and lawful authority to engage in
Fuel Management. The Lessee is hereby designated the lawful representative of
the Lessor in all dealings with the Manufacturers and any regulatory agency
having jurisdiction over the ownership, possession or utilization of the Nuclear
Fuel.
(c) The Nuclear Fuel is personal property and the Lessee shall, at its
expense, take all such action as may be required to cause the Nuclear Fuel to
retain its character as personal property. The Nuclear Fuel shall not become
part of any real property on which it or any portion thereof may from time to
time be situated, notwithstanding the means by which it is installed or attached
thereto and notwithstanding any law or custom or the provisions of any lease,
mortgage or other instrument applicable to any such real property. The Lessee
agrees to indemnify the Lessor and each Assignee and each Secured Party against,
and to hold the Lessor and each Assignee and each Secured Party harmless from,
all losses, costs and expenses resulting from any of the Nuclear Fuel becoming
real property.
(d) The Lessee represents and warrants to the Lessor that the Nuclear
Fuel location will be limited to: (i) the Manufacturers' facilities, (ii) a
Generating Facility, (iii) a
-5-
<PAGE>
Storage Facility, (iv) a Reprocessing facility, or (v) transit between any of
such facilities, except as Lessee is otherwise instructed by Lessor pursuant to
Section 25(b)(ii) hereof and except as provided in Section 10(a) hereof.
SECTION 5. Basic Rent and Additional Rent; Procedure for Payment.
(a) The Lessee irrevocably and unconditionally covenants to pay to the
Lessor, or to such other person as the Lessor may direct, on each Basic Rent
Payment Date, at not later than 10:00 A.M., Chicago time, the respective amounts
of Basic Rent (net of any prepayments) shown on Annex I to the Rent Schedule
delivered to the Lessor in accordance with clause (i) of Section 5(b) hereof in
respect of such Basic Rent Payment Date. The Lessee may prepay Basic Rent at
any time by delivering such amount and a Rent Schedule appropriately completed.
The Lessee agrees to prepay Basic Rent if and to the extent required to enable
Lessor to pay interest or other amounts due under a Credit Agreement, the Note
Purchase Agreements, the IT Notes or any other Basic Documents.
(b) On or before each Basic Rent Payment Date, the Lessee shall:
(i) deliver to the Lessor a Rent Schedule and Annex
I duly completed with respect to the Basic Rent Period
ending on or immediately prior to such Basic Rent
Payment Date; and
(ii) pay to the Lessor, or to such other Person as
the Lessor may direct, the amount shown for Basic Rent
(net of any prepayments) in such Annex I.
Each such Rent Schedule shall be signed and delivered in triplicate.
(c) All sums payable by the Lessee to the Lessor shall be payable in
funds which are immediately available at the place of payment on the date when
due, and shall be paid to the Lessor at the Lessor's address for purposes of
notices hereunder or to such other person or at such other address as the Lessor
may from time to time designate.
(d) In addition to the Basic Rent, the Lessee will also pay, on
demand, from time to time, as additional rent (herein called "ADDITIONAL RENT")
to the Lessor or such other persons as the Lessor may direct from time to time,
(i) all Lessor's legal, accounting, administrative and other management and
operating expenses and taxes to the extent not paid as part of the Basic Rent,
(ii) all expenses and payments under Sections 4(c), 5(g) and 11 hereof, (iii)
interest at the rate incurred by the Lessor, as a result of any delay in payment
by the Lessee, to meet obligations that would have been satisfied out of prompt
payment by the Lessee,
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and (iv) any other amounts necessary to enable the Lessor to meet its
obligations under the Basic Documents. In the event of any failure by the
Lessee to pay Additional Rent, the Lessor shall have all the rights, powers and
remedies as in the case of failure to pay Basic Rent.
(e) The Lessee shall have reasonable access to the books and
accounting records, if any, relating to this Fuel Lease maintained by the Lessor
for purposes of auditing the computation of any and all payments made or accrued
under this Fuel Lease, and Lessor shall, upon reasonable notice and at Lessee's
expense, make such books and accounting records available on Lessor's premises
for such purpose or such other purposes as the Lessee deems appropriate.
(f) The Lessor shall have reasonable access to the books and
accounting records of the Lessee relating to the Nuclear Fuel and Nuclear Fuel
Contracts for purposes of auditing the computation of any and all payments made
or accrued under this Fuel Lease.
(g) If any lien, encumbrance or charge of any kind or any judgment,
decree or order of any court or other governmental authority (including, without
limitation, any tax lien affecting the Lessor), whether or not valid, shall be
asserted or entered which interferes with the due and timely payment of any sum
payable hereunder or the due and timely receipt and application thereof by
Lessor or any Secured Party of any sum payable by Lessor under or pursuant to a
Credit Agreement, any Additional Financing, the Note Purchase Agreements or the
IT Notes, Lessee shall, on receipt of notice to that effect from Lessor,
promptly take such legally permissible action as may be necessary to prevent or
terminate such interference. Lessee shall indemnify and hold harmless Lessor
and each Secured Party from and against any and all losses and damages caused by
any such interference.
(h) The obligation of Lessee to make all payments pursuant to this
Fuel Lease (including, without limitation, the payments to be made pursuant to
Section 20(b) hereof) shall be absolute and unconditional and shall not be
affected by any circumstances of any character. The obligation of Lessee to
make all payments due hereunder and to take any and all Nuclear Fuel during the
term of this Fuel Lease is without any warranty or representation as to any
matter whatsoever on the part of the Lessor or any Assignee or any Secured Party
and, as between Lessee and Lessor, any Assignee or any Secured Party, Lessee
assumes all risks and waives any and all defenses to such obligation to pay,
including, without limitation, any defense relating to: (a) the safety, title,
condition, intensity, quality, quantity, temperature, fitness for use,
merchantability or any other quality or characteristic of the Nuclear Fuel, or
whether or not any heat whatsoever is produced by the Nuclear Fuel or is taken
or utilized by Lessee, (b) any setoff, counterclaim, recoupment, defense or
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other right which Lessee may have against the Lessor, any holder of outstanding
Commercial Paper from time to time, any holder of outstanding IT Notes from time
to time, any Assignee, any Secured Party or anyone else for any reason
whatsoever, (c) any defect in title or ownership of the Nuclear Fuel or in the
condition, design, operation, merchantability or fitness for a particular
purpose of the Nuclear Fuel or any Generating Facility or any part of either
thereof, (d) any loss, theft or destruction of, or damage to, the Nuclear Fuel,
in whole or in part, or cessation of the use or possession of the Nuclear Fuel
by Lessee for any reason whatsoever and of whatever duration, or any
condemnation, confiscation, requisition, seizure, purchase, taking or forfeiture
of the Nuclear Fuel, in whole or in part, unless upon any of the foregoing
occurrences this Fuel Lease shall have terminated and the Nuclear Fuel shall
have been purchased by Lessee pursuant to Section 20(b) hereof, (e) any
inability or illegality with respect to the use or possession of the Nuclear
Fuel by Lessee or the ownership thereof by the Lessor, (f) any failure to
obtain, or expiration, suspension or other termination of, or interruption to,
any required governmental licenses, permits, consents, authorizations or
approvals, (g) the invalidity or unenforceability of this Fuel Lease or any
other Basic Document or any other infirmity therein or any lack of power or
authority of the Lessor or Lessee to enter into this Fuel Lease or any other
Basic Document, (h) any insolvency, bankruptcy, reorganization or similar
proceeding by or against Lessee, (i) whether, at any time in question, any
contractor shall have performed any of its duties and obligations under any
Nuclear Fuel Contract or any other agreement relating thereto, (j) any act,
failure to act, omission or breach on the part of Lessor, any Bank, any IT
Noteholder, or the Indenture Trustee under the Credit Agreement, the Note
Purchase Agreements, the Indenture or any Basic Document or other documents or
otherwise including, without limitation, the failure of any Bank, any IT
Noteholder, the Indenture Trustee or the Lessor to take any action or exercise
any right hereunder or under the Credit Agreement, the Note Purchase Agreements,
the Indenture, any Basic Document or any other document referred to herein or
therein or contemplated hereby or thereby, (k) any claim resulting from any
other dealing between Lessor, any Bank, any IT Noteholder or the Indenture
Trustee, and Lessee (it being understood that the foregoing shall not be deemed
a waiver of any rights which Lessee may have against any such party as a result
of any such act, failure to act, omission or breach), (l) any renewal,
extension, modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender, release, indulgence or other
act, or failure to act, or omission by any party in respect of the Credit
Agreement, the Note Purchase Agreements, any Basic Document, any of the IT
Notes, any Nuclear Fuel Contract or any security document or other document
referred to in or contemplated by any thereof, or with respect to any
indebtedness or obligation of Lessor, whether or not Lessee shall have assented
thereto or have had any notice or knowledge of any of the foregoing, (m) the
legality, validity, irregularity or
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enforceability of any Basic Document, the Credit Agreement, the Note Purchase
Agreements, any of the IT Notes, any Nuclear Fuel Contract or any other
agreement of Lessee, Lessor or any Bank, IT Noteholder or the Indenture Trustee
relating to the Nuclear Fuel or any Generating Facility or the financing,
construction, ownership, purchase or sale thereof, or (n) any other
circumstances or happening whatsoever, whether or not similar to any of the
foregoing which might otherwise serve as a defense or relieve Lessee of any of
its obligations and liabilities hereunder, any present or future law to the
contrary notwithstanding, it being the intent of the parties hereto that all
amounts payable by Lessee hereunder shall continue to be payable in all events,
in the manner and in the time herein provided and that the obligation to make
such payments shall not be discharged except by payment in full as herein
provided. Lessee hereby waives any and all rights which it may now have or which
at any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, revoke, cancel, quit, rescind or surrender this Fuel Lease or to any
abatement, suspension, deferment, diminution or redemption of any amounts
payable by Lessee hereunder except in accordance with the express terms hereof.
If for any reason whatsoever this Fuel Lease shall be terminated in whole or in
part by operation of law or otherwise, except as is specifically provided
herein, Lessee nonetheless agrees to pay to the Lessor an amount equal to each
payment set forth in Section 5 and Section 20(b) hereof at the time such payment
would have become due and payable in accordance with the terms hereof had this
Fuel Lease not been terminated in whole or in part. All payments made by Lessee
pursuant to this Fuel Lease shall be final and Lessee will not seek or have any
right to recover all or any part of such payment from the Lessor, any holder of
Commercial Paper, any holder of IT Notes, any Assignee, any Secured Party or any
other party to any of the Basic Documents or any of the other agreements
referred to herein, except in the case of overpayment by mistake.
SECTION 6. Payment of Costs by the Lessor.
So long as no Lease Event of Default has occurred and is then
continuing and no Termination Event has occurred, whenever the Lessee desires
the Lessor to acquire title to property which, upon such acquisition, shall
become a part of the Nuclear Fuel and to pay any Acquisition Costs relating
thereto, or the Lessee desires that payment to a Manufacturer or payment to the
Lessee be made of any Acquisition Costs or Capitalized Costs or both of any
portion of the Nuclear Fuel, including Nuclear Fuel acquired after the date of
this Fuel Lease either as additional Nuclear Fuel or as replacement Nuclear
Fuel, the Lessee may deliver to the Lessor a Fuel Schedule in substantially the
form of Schedule D hereto, dated as of the date of delivery and fully executed
by the Lessee, which shall (i) describe in Annex II thereto, in the same manner
as in Schedule A hereto, such portion of the Nuclear Fuel, (ii) set forth in
Annex I thereto, in the manner specified in Section 29 hereof,
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the Acquisition Costs and Capitalized Costs payable to such Manufacturer or
incurred by the Lessee or the Lessor as of the date of such Fuel Schedule with
respect to such portion of the Nuclear Fuel, and (iii) set forth in item 2
thereof that portion of such Acquisition Costs and Capitalized Costs which have
not previously been the basis of payment to such Manufacturer or payment to the
Lessee pursuant to this Section 6, and with respect to which the Lessee desires
payment. Each delivery of a Fuel Schedule by the Lessee shall constitute a
representation by the Lessee to the effect that since the date of its last Fuel
Schedule there has been no material change in the condition or business of the
Lessee which in any way materially adversely affects the ability of the Lessee
to perform its obligations under the Basic Documents to which it is a party,
except as may be set forth in Forms 10-K, 10-Q or 8-K or in Registration
Statements filed by the Lessee with the Securities and Exchange Commission since
such date, copies of which shall be attached to such Fuel Schedule.
At such time as a Nuclear Fuel Contract provides for transfer of title
to any portion of the Nuclear Fuel for which a Fuel Schedule has been or is
being submitted to the Lessor by the Lessee, the Lessee shall cause the relevant
Manufacturer to deliver to the Lessor a duly executed Bill of Sale (or shall
itself deliver a Bill of Sale to the Lessor if title is being transferred by
Lessee to Lessor) substantially in the form of Schedule C hereto describing any
portion of the Nuclear Fuel unless the Nuclear Fuel Contract provides for the
transfer of title to the Lessor without execution and delivery by the relevant
Manufacturer of a bill of sale; and at such time as a Fuel Schedule is
delivered, the Lessee shall deliver to the Lessor a duly executed Bill of Sale
substantially in the form of Schedule C hereto describing any portion of the
Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such
Bill or Bills of Sale. Not later than ten days after the Lessor shall have
received a Fuel Schedule hereunder, the Lessor shall pay to the Lessee the
amount of the requested payment in immediately available funds if so requested
and shall complete such Fuel Schedule so delivered by setting forth in Annex I
thereto the Investment in such portion of the Nuclear Fuel as of the date of
such payment, and shall execute such Fuel Schedule and deliver copies thereof to
the Lessee, provided, however, that the Lessor shall not be required to make any
payment pursuant to this Section 6 (i) if and to the extent that, at the time of
such payment by the Lessor, such payment exceeds the sum of (a) the amount of
credit then capable of being drawn by the Lessor under a Credit Agreement, all
Additional Financings and IT Notes in effect at the time of such proposed
payment plus (b) the amounts available to the Lessor for disbursement from the
Collateral Account or (ii) if such proposed payment relates to a Nuclear Fuel
Contract between the Lessee and a Manufacturer which has not theretofore been
duly assigned (in form and substance satisfactory to the Lessor) by the Lessee
to the Lessor as an Assigned Agreement or a Partially Assigned Agreement and as
to which assignment Lessor
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has not received evidence to establish that such Manufacturer has theretofore
consented to the extent reasonably practicable (in form and substance
satisfactory to the Lessor).
SECTION 7. Taxes.
The Lessee agrees that it will promptly pay or contest in good faith
all taxes, assessments and other governmental charges and fees levied or
assessed upon the interest of the Lessor in the Nuclear Fuel or any part thereof
during the term of this Fuel Lease and against the Lessor on account of the
transactions, including investments, contemplated by the Basic Documents and the
documents contemplated therein including, without limitation, any Federal, state
or local income or excess profits taxes or franchise taxes against the Lessor on
or measured by any moneys payable under the Basic Documents or the net income
therefrom or by the value of any Nuclear Fuel; provided that this Section 7
shall not be deemed to obligate the Lessee to pay any excise and use taxes, and
other governmental charges which may have been included in the Capitalized Cost
of any Nuclear Fuel. The Lessee further agrees at its expense, to do to the
extent permitted by law or applicable regulatory agencies, all things required
to be done by the Lessor in connection with the levy, assessment, billing or
payment of any such taxes and is hereby authorized by the Lessor to act for and
on behalf of the Lessor in any and all such respects, and to file, on behalf of
the Lessor, all required tax returns and reports concerning the Nuclear Fuel.
SECTION 8. Condition and Use of Nuclear Fuel; Quiet Enjoyment.
(a) Each assembly of the Nuclear Fuel is leased subject to the rights
of any parties in possession thereof and the state of the title thereto and the
rights of ownership therein whenever the same first becomes subject to this Fuel
Lease, and subject to the right of any secured party under any security
agreement, and to all applicable zoning regulations, restrictions, rules,
licenses and ordinances, building restrictions and other laws and regulations
now in effect or hereafter adopted by any governmental authority having
jurisdiction, and is leased in the state and condition thereof when the same
first becomes subject to this Fuel Lease, without representations or warranties
of any kind by the Lessor, any Assignee or Secured Party, or any person acting
on behalf of any of them. THE LESSEE ACKNOWLEDGES AND AGREES THAT THE TYPE AND
DESIGN OF THE NUCLEAR FUEL HAVE NOT BEEN SELECTED BY THE LESSOR, ANY ASSIGNEE OR
SECURED PARTY, THAT NEITHER THE LESSOR, NOR ANY ASSIGNEE NOR ANY SECURED PARTY
HAS SUPPLIED ANY SPECIFICATIONS WITH RESPECT TO THE MANUFACTURE OF ANY PORTION
THEREOF AND THAT NEITHER THE LESSOR, NOR ANY ASSIGNEE, NOR ANY SECURED PARTY NOR
ANY PERSON (EXCEPT THE LESSEE) ACTING ON BEHALF THEREOF (i) IS A MANUFACTURER
OF, OR DEALER IN, NUCLEAR MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR
POSSESS SUCH MATERIAL, (ii) HAS MADE ANY RECOMMENDATION,
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GIVEN ANY ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO (x) THE CHOICE OF ANY
MANUFACTURER, SUPPLIER, VENDOR, PROCESSOR, DESIGNER, FABRICATOR OR TRANSPORTER
OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, THE NUCLEAR FUEL OR ANY PORTION
THEREOF, OR (y) ANY ACTION TAKEN OR TO BE TAKEN WITH RESPECT TO THE NUCLEAR FUEL
OR ANY PORTION THEREOF AT ANY STAGE OF THE NUCLEAR FUEL CYCLE, (iii) HAS AT ANY
TIME HAD PHYSICAL POSSESSION OF ANY PORTION OF THE NUCLEAR FUEL OR MADE ANY
INSPECTION THEREOF OR (iv) HAS MADE ANY WARRANTY OR OTHER REPRESENTATION,
EXPRESS OR IMPLIED, THAT THE NUCLEAR FUEL (x) WILL NOT RESULT IN INJURY OR
DAMAGE TO PERSONS OR PROPERTY, (y) HAS BEEN PROPERLY DESIGNED OR FABRICATED OR
WILL ACCOMPLISH THE RESULTS WHICH THE LESSEE INTENDS THEREFOR, OR (z) IS SAFE IN
ANY MANNER OR RESPECT. NO WARRANTY HAS BEEN OR IS MADE BY THE LESSOR, ANY
ASSIGNEE, ANY SECURED PARTY OR ANY PERSON ACTING ON BEHALF THEREOF, EXPRESS OR
IMPLIED, RELATING TO THE NUCLEAR FUEL OR ANY PORTION THEREOF, WITH RESPECT TO
MERCHANTABILITY, FITNESS OR OTHERWISE, WHETHER ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW, OR OTHERWISE.
(b) The Lessor hereby assigns to Lessee any and all rights Lessor may
have under any Manufacturer's warranties or undertakings, express or implied,
and authorizes the Lessee at the Lessee's cost and expense, to assert all rights
and claims, and to bring suits, actions and proceedings, in its own name or in
the name of the Lessor, in respect of any Manufacturer's warranties or
undertakings, express or implied, relating to any portion of the Nuclear Fuel
and, in the absence of a Lease Event of Default hereunder, to retain the
proceeds of any such suits, actions and proceedings.
(c) The Lessee has investigated the state of the title to and rights
of ownership in the Nuclear Fuel subject to this Fuel Lease at the commencement
of the term hereof and has made a physical inspection of the Nuclear Fuel
subject to this Fuel Lease at the commencement of the term hereof or reasonably
prior thereto and is satisfied with and has approved the same for all purposes
hereof. The Lessee will from time to time after such commencement make a
similar investigation of title and rights of ownership of each portion of the
Nuclear Fuel as the same becomes subject to this Fuel Lease and will not permit
any such portion to become subject to this Fuel Lease unless the Lessee is
similarly satisfied with and has similarly approved the same for all purposes
hereof. The Lessee warrants that all Nuclear Fuel will be, at the time it
becomes subject to this Fuel Lease, free of liens, encumbrances and rights of
other persons, except as permitted by this Fuel Lease, and except as provided in
Section 8(b) hereof, the Lessee will not, without the prior written consent of
the Lessor, take any action which would affect or impair the Lessor's rights in
respect of Manufacturers' or other warranties or undertakings. No approval by
the Lessee pursuant to this Section 8(c) shall affect or impair any of the
Lessee's rights under Section 8(b) hereof or otherwise in respect of any
Manufacturers' or other warranties or undertakings.
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(d) So long as no Lease Event of Default shall have occurred and be
continuing, the Lessee shall have exclusive possession and use of the Nuclear
Fuel. The Lessee may use the Nuclear Fuel for the generation of electricity and
purposes incidental, supplemental or ancillary thereto, including storage or
holding of the Nuclear Fuel for ultimate usage thereof. The Lessee will not do
or permit any act or thing to be done (i) which might impair the value or
usefulness of the Nuclear Fuel or any part thereof (other than (w) any
impairment of Nuclear Fuel loaned pursuant to Section 10(e) hereof, (x) in the
normal usage thereof in the production of electric energy, (y) as may be
incidental to the Nuclear Fuel Cycle, or (z) as such value may be reduced by a
tax benefit transfer permitted by Section 32(b) hereof), (ii) which is contrary
to any Legal Requirement or Insurance Requirement, or (iii) which might impair
the security interest of any Assignee in the Nuclear Fuel or in Lessor's
interest in this Fuel Lease.
SECTION 9. Maintenance of the Nuclear Fuel.
The Lessee will (i) at its own expense (without limiting the Lessee's
right, if any, to request payment by the Lessor of such expense provided in
Section 6 hereof; provided that, if the Lessee has received payment by the
Lessor of such expense, any insurance proceeds received by the Lessee to
reimburse it for such expense will be paid by the Lessee to the Lessor) keep the
Nuclear Fuel in good condition and will promptly make or cause to be made all
necessary or appropriate repairs, replacements and renewals or Restoration
thereof, and (ii) at its own expense (without limiting the Lessee's right, if
any, to request payment by the Lessor of such expense provided in Section 6
hereof) arrange for proper Fuel Management. The Lessee shall use its best
efforts to see that all repairs, replacements and renewals or Restoration shall
be done in a workmanlike manner. The Lessee will be responsible for all actions
and expense necessary or appropriate for the proper acquisition, transportation,
utilization, preservation, storage, disposal and safety of the Nuclear Fuel.
Neither the Lessor nor any Assignee nor any Secured Party shall be required to
perform any construction, or to alter, repair, rebuild or replace the Nuclear
Fuel or any portion thereof, or to maintain, service or manage the Nuclear Fuel
or any portion thereof in any way or to engage in Fuel Management, and the
Lessee hereby expressly waives the right, if any, to perform any construction,
or to make such alterations or repairs or to effect any such Fuel Management at
the expense of the Lessor, any Assignee or any Secured Party which may be
provided for in any law now in effect or hereafter enacted.
SECTION 10. Removals, Purchase of Nuclear Fuel, Transfer
to the Lessee, Commingling, Substitution.
(a) If no Lease Event of Default under this Fuel Lease shall have
occurred and be continuing, the Lessee shall have the right at any time and from
time to time during the continuance of
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this Fuel Lease, at the Lessee's expense (without limiting the Lessee's right,
if any, to request payment by the Lessor of such expenses provided in Section 6
hereof) to move any assembly of the Nuclear Fuel to any location in accordance
with Section 4(d) hereof for the purpose of storage or having services performed
thereon in connection with any stage of the Nuclear Fuel Cycle other than the
Heat Production stage, provided that no such action shall materially reduce the
heat production capacity, Net Investment Value, or fair market value of such
assembly, provided, further, that Lessee shall give notice to the Indenture
Trustee and the Lessor if any such move requires the movement of such Nuclear
Fuel outside the State of Illinois, and provided, further, that unless such
assembly shall have been released from this Fuel Lease pursuant to Section 10(b)
hereof, (i) such assembly shall be and remain the property of the Lessor,
subject to this Fuel Lease and the Trust Indenture (except as permitted by
Section 10(c) hereof) and (ii) as a condition of such removal and relocation,
all necessary governmental approvals and licenses with respect thereto shall
have been procured and shall be in full force and effect, all necessary
recordings and filings shall have been duly made in the public offices in which
such recordings and filings must be made in order to publish notice or otherwise
protect the validity and effectiveness of this Fuel Lease and the valid first
security interest created therein or in the Nuclear Fuel by the Trust Indenture
with respect to such Nuclear Fuel (except as permitted by Section 10(c) hereof)
and with respect to this Fuel Lease and payments hereunder and with respect to
any Nuclear Fuel Contract, and all fees, taxes and charges payable in connection
with such recordings and filing shall have been paid in full by the Lessee and
the Lessee shall have complied in full with all applicable Legal Requirements
and Insurance Requirements. Any such removal shall constitute the agreement of
the Lessee that the Lessee will continue to be obligated in respect of such
assembly as provided in this Fuel Lease notwithstanding such removal, that the
Lessee will pay or cause to be paid (without limiting the Lessee's right, if
any, to request payment by the Lessor of such expense provided in Section 6
hereof) all taxes and expenses incurred or to be incurred by the Lessor, the
Lessee, any Assignee and any Secured Party by reason of such removal and
relocation, and that the indemnities by the Lessee contained in Section 11
hereof shall extend to the use, possession, conduct or management, or any work,
improvement, demolition or thing done in or about or in respect of such assembly
so removed to the same extent as if its place or relocation were a Generating
Facility. The provisions of this Section 10(a) shall be applicable to each
subsequent removal of any assembly of the Nuclear Fuel so removed from the place
of relocation to which it was removed after its initial removal from the
Generating Facility.
(b) So long as there is no Termination Event, at any time and from
time to time, the Lessee shall have the right to purchase all or any portion of
the Nuclear Fuel. Partial interests in the separate assemblies of the Nuclear
Fuel may be purchased by
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the Lessee. In the event that (i) Heat Production with respect to any Nuclear
Fuel, once commenced, for any reason (including but not limited to the
occurrence of any event described in Section 18(a) and 18(b) hereof) ceases for
a period of twenty-four consecutive months (subject, in the case of any event
described in Section 18(a) hereof, to Unavoidable Delays, but in no event later
than thirty months) or (ii) any Nuclear Fuel which was intended to have been
engaged in Heat Production at a Generating Facility or Facilities at which an
accident or incident referred to in Section 18(b) hereof has occurred cannot be
reassigned to another Generating Facility as contemplated by Section 18(b), the
Lessee shall, in the case of any Nuclear Fuel described in clause (i) hereof,
purchase such Nuclear Fuel within sixty days after the expiration of such
twenty-four month period notwithstanding any Unavoidable Delays (except as
provided in Section 18(a) hereof) and shall, in the case of any Nuclear Fuel
described in clause (ii) hereof, purchase such Nuclear Fuel as contemplated by
Section 18(b) hereof. In the event that Heat Production with respect to any
Nuclear Fuel has been completed, then Lessee shall purchase pursuant to this
Section 10(b) such Nuclear Fuel unless Reprocessing is available and Lessee
elects to have such Nuclear Fuel reprocessed and remain subject to this Fuel
Lease as provided in Section 10(c) hereof. In the event that any Nuclear Fuel
is found to be stolen or lost or any event shall occur which results in any
Nuclear Fuel (i) not being provided by a Manufacturer pursuant to the applicable
Nuclear Fuel Contract (ii) not being returned to the Company from a Manufacturer
pursuant to the applicable Nuclear Fuel Contract or (iii) being returned in a
form which results in a reduction in the Net Investment Value of said Nuclear
Fuel, then Lessee shall purchase such Nuclear Fuel or, in the case of clause
(iii) above, an amount of such Nuclear Fuel equal to such reduction in Net
Investment Value. In the event Lessee permanently shuts down any Generating
Facility for economic or other reasons, Lessee shall, with respect to Nuclear
Fuel allocated for use at or by such Generating Facility, either purchase or
reassign or relocate to another Generating Facility such Nuclear Fuel within six
months from the date of such shutdown. Whenever the Lessee desires or is
required to purchase any portion of the Nuclear Fuel, regardless of the then
present stage of its Nuclear Fuel Cycle, then the Lessee shall deliver to the
Lessor a certificate in the form of Schedule B hereto showing the Net Investment
Value of such portion of the Nuclear Fuel at the date of such certificate and
shall pay to the Lessor, in the manner provided by Section 5(c) hereof, an
amount equal to such Net Investment Value and at such time shall pay all
Additional Rent then due and payable to the Lessor. Thereupon, the Lessor shall
deliver to the Lessee or any other Person designated by the Lessee a Bill of
Sale in the form of Schedule E hereto transferring to the Lessee or such other
Person for no additional consideration all right, title, interest and claim of
the Lessor to such portion of the Nuclear Fuel. Thereupon such portion of the
Nuclear Fuel shall cease to be Nuclear Fuel and shall cease to be subject to any
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provision of this Fuel Lease. Upon delivery of such Bill of Sale, the Lessor
and the Lessee shall execute a Fuel Schedule eliminating the description of such
portion of the Nuclear Fuel from Schedule A to this Fuel Lease as theretofore
supplemented and amended.
(c) The Lessor and the Lessee recognize that during the processing
and reprocessing of Nuclear Fuel leased hereunder before and after utilization
in a Generating Facility, a Manufacturer performing service on such Nuclear Fuel
may require that title thereto be transferred to such Manufacturer and that such
Nuclear Fuel be commingled with other nuclear fuel, with an obligation on such
Manufacturer, upon completion of the services, to reconvey a specified amount of
nuclear fuel and clear and unencumbered title thereto. Accordingly, the Lessor
and the Lessee agree that (i) Nuclear Fuel, which is subject to a Nuclear Fuel
Contract, leased hereunder may become subject to such a contract notwithstanding
any provision of this Fuel Lease to the contrary, (ii) as between the Lessor and
the Lessee, such Nuclear Fuel shall be deemed to be and remain leased hereunder
while title thereto is in such Manufacturer and (iii) title to the Nuclear Fuel
so delivered by such Manufacturer upon completion of its services automatically
shall vest in the Lessor, and such Nuclear Fuel automatically shall be leased
hereunder and shall be subject to the Trust Indenture and any related security
agreement in substitution for the Nuclear Fuel originally delivered to such
Manufacturer. Upon such delivery to such Manufacturer and redelivery from such
Manufacturer, the Lessee shall deliver to the Lessor an appropriate Fuel
Schedule.
(d) After the utilization of the Nuclear Fuel leased hereunder in a
Generating Facility, the Lessor will, at the Lessee's request, transfer title to
Nuclear Fuel leased hereunder in accordance with Section 21 hereof to a third
party in exchange for the simultaneous transfer to the Lessor of clear and
unencumbered title to replacement Nuclear Fuel having a fair market value not
less than that of the Nuclear Fuel conveyed to such third party, which
replacement Nuclear Fuel shall for purposes of this Fuel Lease be deemed to have
a Net Investment Value not less than that of the transferred Nuclear Fuel,
subject to adjustment as set forth in the last sentence of this Section 10(d).
The Nuclear Fuel received by the Lessor pursuant to any such exchange shall be
automatically substituted for the Nuclear Fuel delivered by the Lessor and
deemed to be subject to this Fuel Lease, the Trust Indenture and any related
security agreement. Subject to the limitation on payment contained in Section 6
hereof, the Lessor shall pay any additional amounts required to effect such
exchange. Such payments shall increase the Acquisition Cost of the substituted
Nuclear Fuel and a new Fuel Schedule reflecting such increased Acquisition Cost
shall be executed and delivered by the Lessor and the Lessee.
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(e) Notwithstanding anything else in this Fuel Lease to the contrary,
Lessee may, upon prior written notice to Lessor, engage in one or more
transactions by which a portion of the Nuclear Fuel is loaned to any one or more
Nuclear Fuel Users ("PERMITTED FUEL LOAN"); provided that the Net Investment
Value of the Nuclear Fuel so loaned, together with the Net Investment Value of
Nuclear Fuel subject to all other Permitted Fuel Loans at that time outstanding,
shall not, in the aggregate, exceed five percent of the Net Investment Value of
all of the Nuclear Fuel as of the date of such transaction or transactions. Any
Nuclear Fuel loaned by means of a Permitted Fuel Loan shall be released from
this Fuel Lease upon the execution and delivery by Lessee to Lessor of three
copies of a Fuel Schedule and Annex III thereto upon which a notation shall
appear indicating that such Nuclear Fuel is to be released from this Fuel Lease.
Thereupon, such portion of the Nuclear Fuel shall cease to be Nuclear Fuel and
shall cease to be subject to any provision of this Fuel Lease or of any Trust
Indenture. At the time of entering into any such Permitted Fuel Loan, Lessee
shall assign to Lessor all rights of Lessee to receive nuclear fuel from such
Nuclear Fuel User in repayment of such Permitted Fuel Loan. Lessee will
nevertheless continue to be obligated in respect of such fuel as provided in
this Fuel Lease, will pay or cause to be paid all taxes and reasonable expenses
incurred by Lessor, Lessee, any Assignee or any Secured Party by reason of such
transaction, and the indemnities contained in this Fuel Lease (including without
limitation in Section 11 hereof) shall continue in full force and effect with
respect to such fuel. Upon the repayment by any Nuclear Fuel User of fuel so
loaned by delivery of the fuel comprising the repayment to Lessee, Lessee shall
execute and deliver to Lessor three copies of a Fuel Schedule and Annex II
thereto upon which a notation shall appear indicating that such fuel is to
become subject to this Fuel Lease. Upon such delivery, the fuel shall become
Nuclear Fuel and shall become subject to all provisions of this Fuel Lease and
of the Trust Indenture. Lessee shall provide Lessor with monthly reports of all
fuel loaned pursuant to a Permitted Fuel Loan.
SECTION 11. Indemnification by the Lessee.
The Lessee shall pay and indemnify and hold harmless the Lessor, each
Assignee, each Secured Party, each Dealer, each Placement Agent and their
respective officers, directors, incorporators, shareholders, partners,
employees, agents and servants from and against all liabilities (other than
liabilities arising out of the gross negligence or willful misconduct of such
Person), Impositions, taxes (excluding, however, taxes measured solely by the
net income of any Person indemnified or intended to be indemnified pursuant to
this Section 11, except as otherwise provided in Section 7 hereof), losses,
obligations, claims, damages, penalties, causes of action, suits, costs and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and expenses) and judgments of any nature arising
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from or in any way relating to any and all of the following during the term of
this Fuel Lease and thereafter: (a) any injury to or disease, sickness or death
of persons, or loss of or damage to property, occurring through or resulting
from any nuclear incident (as that term is defined in the Atomic Energy Act, 42
U.S.C. (Section)2011 et seq.) involving or connected in any way with the Nuclear
Fuel or any portion thereof, (b) the acquisition, ownership (including strict
liability of an owner or liability without fault), possession, disposition,
sale, use, nonuse, misuse, leasing, fabrication, design, cycling, recycling,
transportation, containerization, cooling, processing, reprocessing, storing,
condition, management, operation, construction, maintenance, repair or
rebuilding of the Nuclear Fuel or any portion thereof or resulting from the
condition of adjoining and underlying land, buildings, streets or ways, (c) any
use, nonuse or condition of, or any other matter of circumstance relating to, a
Generating Facility, any Storage Facility, any other property associated
therewith or any adjoining and underlying land, buildings, streets and ways, (d)
any violation or default, or alleged violation or default, of this Fuel Lease by
or on behalf of Lessee, or of any contracts or agreements to which the Lessee is
a party or by which it is bound, or any Legal Requirements, (e) performance of
any labor or services or the furnishing of any materials or other property in
respect of the Nuclear Fuel or any portion thereof, (f) any infringement or
alleged infringement of any patent, copyright, trade secret or other similar
right relating to the Nuclear Fuel or any portion thereof, (g) Lessor's
agreements or obligations contained in this Fuel Lease or its assignment of the
Fuel Lease to the Indenture Trustee as security for its borrowings, (h) any
claim arising out of loss or damage to the environment or (i) any claim arising
out of strict or absolute liability in tort. Lessee also indemnifies each
indemnitee, as aforesaid, from and against all other liabilities, taxes, losses,
obligations, claims, damages, penalties, causes of action, suits costs and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and expenses) and judgments of any nature which may be imposed on, incurred
by, or asserted at any time against any indemnitee in any way relating to or
arising out of the performance of this Fuel Lease or any other Basic Document to
which Lessee is a party, provided, except for claims of a nature contemplated by
clause (i) above, that the Lessee shall not be required to indemnify any
indemnitee with respect to any liability relating to or arising out of
indemnitee's gross negligence or willful misconduct and provided, further, that
the foregoing immunity shall not limit the terms of any indemnity that the
Lessee may grant separately to any indemnitee pursuant to any separate
agreement. In the event that any action, suit or proceeding is brought against
the Lessor or any other Person indemnified or intended to be indemnified
pursuant to this Section 11 by reason of any such occurrence, the Lessor or such
other Person or Persons shall promptly notify in writing the Lessee and
thereupon the Lessee shall, at the Lessee's expense, resist and defend such
action, suit or proceeding or cause the same
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to be resisted and defended by counsel designated by the Lessee and reasonably
acceptable to the Person or Persons indemnified or intended to be indemnified
under this Section 11 provided there is no conflict of interest with the Person
or Persons indemnified or intended to be indemnified under this Section 11. In
the event a conflict of interest contemplated by the proviso of the immediately
preceding sentence shall exist, then the Person or Persons as to which such
conflict exists may be defended by counsel of its or their choice at Lessee's
expense, provided Lessee's obligation for such expense shall be limited to one
firm for all such Persons as to which such a conflict exists. The obligations of
the Lessee under this Section 11 shall survive any termination of this Fuel
Lease, the Indenture, any Note Purchase Agreement or any Credit Agreement, in
whole or in part, and any payment, in whole or in part, of the Secured
Obligations.
SECTION 12. Right to Inspect Nuclear Fuel.
The Lessor, any Assignee and their authorized representatives may (i)
enter any of the Generating Facilities or Storage Facilities owned by the Lessee
at reasonable times, subject to applicable security regulations governing access
thereto, for the purposes of inspecting the Nuclear Fuel and the reactors in
which it may be loaded from time to time (subject to their availability for
inspection and any legal or regulatory restrictions with respect thereto) and
(ii) discuss their condition and performance with the responsible officers and
employees of the Lessee. The Lessee agrees subject to applicable state and
Federal laws and regulations to make the Nuclear Fuel and the reactors in which
it may be loaded from time to time available (to the extent practicable) for
such inspection and to provide customary protective procedures and devices in
connection therewith, and to make such officers and employees available for such
discussion promptly after receiving notice thereof. The Lessor shall not have
any duty to make any such inspection or conduct any such discussion and shall
not incur any liability or obligation for not making any such inspection or for
not conducting any such discussion.
SECTION 13. Payment of Impositions; Further Assurances.
(a) Subject to the provisions of Section 16 hereof, the Lessee will
pay all Impositions before any fine, penalty, interest or cost may be added for
nonpayment, and will furnish to the Lessor, upon request, copies of official
receipts or other satisfactory proof evidencing such payment.
(b) The Lessee, at its expense, shall execute, acknowledge and
deliver from time to time such further counterparts of this Fuel Lease or such
affidavits, certificates, Bills of Sale, financing and continuation statements,
consents and other instruments as may be reasonably requested by the Lessor in
order
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to evidence the respective interests of the Lessor, the Lessee, any Assignee or
any Secured Party in this Fuel Lease and the Nuclear Fuel or any portion thereof
and in order to establish the character of the Nuclear Fuel as personal property
and the perfected first security interest therein intended to be created by the
Trust Indenture, and shall, at its expense, cause to be made any filing,
recording or registration in such manner and at such time and in such places as
may be required by any present or future law in order to publish notice and
perfect the interests of the Lessor, any Assignee or any Secured Party in the
Nuclear Fuel, this Fuel Lease or any right or payment thereunder. The Lessee,
at its expense, shall take whatever further action, if any, shall be deemed
reasonably necessary by the Lessor to confirm the title of the Lessor to the
Nuclear Fuel.
SECTION 14. Compliance with Legal and Insurance Requirements
and with Instruments.
Subject to the provisions of Section 16 hereof, the Lessee at its
expense, will (i) comply with all Legal Requirements and Insurance Requirements,
whether or not compliance therewith shall require structural or basic mechanical
changes in any or all of the Generating Facilities or the Storage Facilities
owned by the Lessee or changes in the design or fabrication of the Nuclear Fuel
or any portion thereof, and whether or not such compliance will interfere with
the use and enjoyment of any Generating Facility, Storage Facility or Nuclear
Fuel or any portion thereof, (ii) procure, maintain and comply with all permits,
licenses and other authorizations required for the ownership of the Nuclear Fuel
or any portion thereof or any Nuclear Fuel Contract by the Lessor, or for any
operation or use of the Nuclear Fuel or any portion thereof then being made, and
for the proper maintenance thereof, and for the taking of all necessary and
proper steps in the management of the Nuclear Fuel through each stage of the
Nuclear Fuel Cycle, and (iii) comply with any other instruments of record or any
contract or agreement at the time in force affecting title to or ownership of
the Nuclear Fuel or any portion thereof, provided that any changes which are
made to comply with Legal Requirements or Insurance Requirements shall be made
in a manner to minimize any diminution in the value of the Nuclear Fuel, the
Generating Facilities or the Storage Facilities, as the case may be.
SECTION 15. Liens.
The Lessee will not directly or indirectly create or permit to be
created or to remain, and will at its expense promptly discharge, any mortgage,
lien, encumbrance or charge on, security interest in, or conditional sale or
other title retention agreement with respect to, the Nuclear Fuel or any portion
thereof, or any rights under any Nuclear Fuel Contract, or upon the Lessee's
leasehold interest therein or in any sublease thereof, other than (i) liens for
Impositions not yet payable, or payable without the
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addition of any fine, penalty, interest or cost for nonpayment, or being
contested as permitted by Section 16 hereof, (ii) liens, charges or encumbrances
resulting from acts of the Lessor or securing obligations of the Lessor which
the Lessee is not obligated to pay or discharge under the terms of this Fuel
Lease, (iii) liens of mechanics, laborers, materialmen, suppliers or vendors, or
rights thereto, incurred in the ordinary course of business for sums for money
which under the terms of the related contracts are not at the time due, provided
that such reserve or other appropriate provisions, if any, as shall be required
by generally accepted accounting principles shall have been made in respect
thereof, (iv) any lien or interest granted by virtue of any transaction or use
of Nuclear Fuel permitted by Sections 10(c) or 10(e) hereof, (v) liens created
or permitted under the Basic Documents or arising from transactions permitted
under this Fuel Lease or resulting from the acts of any Assignee or any Secured
Party and (vi) rights of the United States or any agency of the United States
under any statute or regulation arising from the enrichment of Nuclear Fuel.
SECTION 16. Permitted Contests.
The Lessee at its expense may contest after prior notice to the
Lessor, by appropriate legal proceedings conducted in good faith and with due
diligence, the amount, validity or application, in whole or in part, of any
Imposition or lien therefor, or any Legal Requirement, Insurance Requirement or
any other mortgage, lien, encumbrance, charge, security interest, conditional
sale or other contract or agreement referred to in Section 15 hereof; provided
that (i) in the case of an unpaid Imposition or lien therefor, such proceedings
shall suspend the collection thereof from the Lessor, any Assignee or any
Secured Party, (ii) neither the Nuclear Fuel nor any portion thereof or interest
therein nor any rights under any Nuclear Fuel Contract would be subject to being
sold, forfeited, confiscated, condemned or lost, (iii) neither the use of the
Nuclear Fuel or any portion thereof, nor the taking of any step necessary or
proper with respect thereto in the management thereof through any stage of the
Nuclear Fuel Cycle, nor the performance of any other act required to be
performed by the Lessee under this Fuel Lease would be subject to being
enjoined, prevented or otherwise interfered with, (iv) the Lessor or any
Assignee would not be subject to any additional civil liability (other than
interest which the Lessee agrees to pay), or any criminal liability, for or
caused by failure to pay any such Imposition or to comply with any such Legal
Requirement, Insurance Requirement or any such other mortgage, lien,
encumbrance, charge, contract or agreement, (v) the Lessee shall have set aside
on its books adequate reserves in accordance with generally accepted accounting
principles with respect thereto and shall furnish such security, if any, as may
be required in the proceedings, (vi) the exercise of any rights or remedies of
the Lessor or any Assignee or Secured Party would not be impaired, and (vii) the
insurance
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coverage required by Section 17 hereof shall not be diminished in any respect.
The Lessee will pay, without limiting its right to request payment by the Lessor
of such expenses as provided in Section 6 hereof, and save the Lessor, each
Assignee and each Secured Party harmless against, all losses, judgments, decrees
and costs, including reasonable attorneys' fees and expenses, in connection with
any such contest and will, promptly after the final determination of such
contest, pay and discharge the amounts which shall be levied, assessed or
imposed or determined to be payable therein, together with all penalties, fines,
interest, costs and expenses thereon or in connection therewith. If any tax
obligation shall be paid under protest and a refund is granted therefor and
delivered to the Lessor, the Lessor shall promptly remit to the Lessee the full
amount of the refund so received.
SECTION 17. Insurance.
(a) The Lessee shall, at its own cost and expense, obtain and, except
as provided in the following sentence, maintain in effect with respect to the
Nuclear Fuel and each Generating Facility and, to the extent available with
respect to facilities at the other locations permitted under Section 4(d) hereof
at which Nuclear Fuel is located, (i) an agreement or indemnification as
required by Section 170 of the Atomic Energy Act or any other law, rule or
regulation and (ii) nuclear liability insurance in such form and such amount as
will meet the financial protection requirements of the Nuclear Regulatory
Commission pursuant to Section 170 of the Atomic Energy Act. If the nuclear
liability protection system provided by Section 170 of the Atomic Energy Act is
repealed or modified or has expired, the Lessee will, without cost to Lessor,
maintain in effect liability protection through government indemnity, limitation
of liability or liability insurance in order to minimize impairment of
protection afforded Lessor, any Assignee and any Secured Party by Section 170 of
the Atomic Energy Act, as in effect on the date hereof, and by the provisions of
this Section, but Lessee will not be required to maintain such protection except
to the extent customarily maintained by nuclear plant owners. Further, Lessee
shall maintain Supplier's and Transporter's Form Nuclear Liability Insurance.
(b) The Lessee shall, at its own cost and expense, procure or cause
to be procured and maintain or cause to be maintained "all risk" property damage
insurance for the property at any Generating Facility (including Nuclear Fuel at
any Generating Facility) insuring the Lessor, Lessee, any Assignee and any
Secured Party against loss or damage to such insured property. Such insurance
shall be from one or more of Nuclear Mutual Limited (NML), American Nuclear
Insurers (ANI) and Mutual Atomic Energy Reinsurance Pool (MAERP), or Nuclear
Electric Insurance Limited (NEIL), whichever is selected by the Lessee from time
to time, and shall be for the benefit of all named insureds, the Lessee, the
Lessor, any Assignee, any Secured Party, any Dealer and any
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Placement Agent. The amounts of such insurance shall be not less than that
required by prudent practice in the utility industry, and in any event not less
than the amount necessary to comply with 110 CFR 50.54(w) (as such regulation
may be amended or replaced by any successor rule or regulations adopted by the
Nuclear Regulatory Commission governing the amount of insurance to be
maintained). Any such insurance may provide for such deductibles as are
available in nuclear property insurance covering property at any Generating
Facility (including Nuclear Fuel at any Generating Facility), may include the
standard coinsurance provisions contained in a nuclear property insurance policy
and may exclude the types of property and certain perils customarily excluded
from the standard nuclear property coverage in accordance with prudent practice
in the electric utility industry. Otherwise, the terms of the coverage shall be
at the discretion of the Lessee.
(c) All insurance described in this Section 17 shall (i) cover the
Lessee, the Lessor, any Assignee, any Secured Party, any Dealer and any
Placement Agent and (ii) indemnify each to the extent of its respective
interest. To the extent possible, the Lessor, any Assignee and any Secured
Party shall each, to the extent their respective interest may appear, be an
insured and, with respect to physical damage coverage, a named loss payee, in
all insurance policies maintained by the Lessee under this Section 17 provided
that, so long as no Lease Default or Lease Event of Default shall have occurred
and be then continuing, the Lessee shall control the adjustment of any losses
with the applicable insurer. If a Lease Default or Lease Event of Default shall
have occurred and be then continuing, such loss shall be adjusted by the Lessee
and an independent loss adjuster to be appointed by either (i) the Lessor or
(ii) any Assignee. Any loss proceeds and the draft payment thereof will be
delivered to the Lessee for transmittal to the Indenture Trustee. To the extent
possible, all such policies and, where obtainable, indemnification agreements,
shall provide for at least thirty (30) days' written notice to the Lessor, any
Assignee and any Secured Party, prior to any cancellation or material alteration
of such policies and agreements.
(d) Upon the request of the Lessor, the Lessee will provide the
Lessor with insurance certificates in respect of the insurance procured pursuant
to the provisions of Section 17(a) and Section 17(b) hereof and will advise the
Lessor of all expirations and renewals of policies, all notices issued by the
insurers thereunder having a materially adverse effect on coverage and all other
changes of the types referred to in Section 20(a)(ii) hereof. On the date
hereof and at yearly intervals thereafter during the term of this Fuel Lease,
the Lessee will furnish to the Lessor a detailed statement as to the insurance
coverage provided pursuant to Section 17(a) and Section 17(b) hereof and will
give prompt notice as to any changes in the nature of such coverage including
any changes which are materially adverse to the Secured Parties of
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which the Lessee has knowledge in the provisions of the Atomic Energy Act or the
regulations of the Nuclear Regulatory Commission with respect to liability
insurance and coverage.
SECTION 18. Damage.
(a) If an accident or incident resulting in any damage to,
destruction of or malfunction of any or all of the Nuclear Fuel should occur,
which damage or destruction is of such a nature as to prevent Heat Production by
any Nuclear Fuel, the Lessee will promptly give notice thereof to the Lessor,
generally describing such accident or incident and such damage, destruction or
malfunction and stating whether Restoration thereof can be completed within
twenty-four months after such incident. If such accident or incident affects
Nuclear Fuel having an aggregate Net Investment Value (as shown on the most
recently delivered Rent Schedule) in excess of eighty-five percent of the
aggregate Net Investment Value of all Nuclear Fuel (as shown on such Rent
Schedule) and such notice by the Lessee states that Restoration thereof cannot
be completed within twenty-four months, the Lessor or any Assignee shall have
the right to terminate this Fuel Lease by giving the notice provided for in
Section 20(a)(vii) hereof. If such accident or incident affects some Nuclear
Fuel but not an amount having an aggregate Net Investment Value (as shown on the
most recently delivered Rent Schedule) in excess of eighty-five percent of the
aggregate Net Investment Value of all Nuclear Fuel (as shown on such Rent
Schedule) and the Lessee's notice with respect thereto states that Restoration
thereof cannot be completed within such twenty-four months, the Lessee, if so
requested by the Lessor or any Assignee, shall, within ninety days after such
accident or incident, purchase and obtain the release pursuant to Section 10(b)
hereof of the Nuclear Fuel affected by such accident or incident. If Lessee
shall state in its notice that Restoration can be completed within twenty-four
months after such accident or incident, it shall, within ninety days after such
accident or incident, commence Restoration and shall complete the same no later
than twenty-four months after such accident or incident (subject to Unavoidable
Delays, but in no event later than thirty months after such accident or
incident), such Restoration to be at the Lessee's own expense and whether or not
the insurance proceeds, if any, on account of such damage or destruction shall
be sufficient for the purpose.
(b) If an accident or incident resulting in any damage to, destruction
of or malfunction of any or all of the Generating Facilities should occur, which
damage, destruction or malfunction is of such a nature as to prevent Heat
Production at such Generating Facility or Facilities, the Lessee will promptly
give notice thereof to the Lessor, generally describing such accident or
incident and such damage, destruction or malfunction and stating whether the
repair or reconstruction thereof can be completed within twenty-four months
after such accident or incident or, if
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such repair or reconstruction cannot be completed within twenty-four months,
whether (i) the Nuclear Fuel which was engaged in Heat Production at the
Generating Facility or Facilities where such accident or incident occurred can
be reassigned within eighteen months after such accident or incident to another
Generating Facility and engaged in Heat Production within twenty-four months
after the date of such accident or incident and whether (ii) the Nuclear Fuel
which was intended to have been engaged in Heat Production at the Generating
Facility or Facilities where such accident or incident occurred can be
reassigned within eighteen months after such accident or incident to another
Generating Facility. If such accident or incident affects ten or more out of
the twelve Generating Facilities and such notice by the Lessee states that none
of such repair or reconstruction or engagement or reassignment can be completed
within the applicable foregoing time periods, the Lessor or any Assignee shall
have the right to terminate this Fuel Lease by giving the notice provided for in
Section 20(a)(vii) hereof. If such accident or incident affects some but not
ten or more out of the twelve nuclear reactors at the Generating Facilities and
the Lessee's notice with respect thereto states that such repair or
reconstruction or engagement or reassignment cannot be completed within the
applicable foregoing time periods, the Lessee, if so requested by the Lessor or
any Assignee, shall, within ninety days after such accident or incident,
purchase and obtain the release pursuant to Section 10(b) hereof of the Nuclear
Fuel previously engaged in Heat Production at, and if no reassignment can be
made the Nuclear Fuel intended to have been engaged in Heat Production at, the
Generating Facility or Facilities where such accident or incident occurred. If
such accident or incident affects some but not ten or more out of the twelve
nuclear reactors at the Generating Facilities and such notice by Lessee states
that some of such repair or reconstruction or engagement or reassignment can be
completed within the foregoing time periods, the Lessee, if so requested by the
Lessor or any Assignee, shall, within ninety days after such accident or
incident, purchase and obtain the release pursuant to Section 10(b) hereof of
the Nuclear Fuel previously engaged in Heat Production at, or which was intended
to have been engaged in Heat Production at, the Generating Facilities, to the
extent that such Nuclear Fuel is not assigned, or cannot be reassigned, to a
Generating Facility where such repair or reconstruction can be completed within
the applicable foregoing time periods (and, in the case of Nuclear Fuel
previously in Heat Production, re-engaged in Heat Production within the
applicable foregoing time periods). If Lessee shall state in its notice that
repair or reconstruction or engagement or reassignment can be completed within
the applicable foregoing time periods after such accident or incident, it shall,
within ninety days after such accident or incident, commence such repair or
reconstruction or engagement or reassignment and shall complete the same no
later than the applicable foregoing time periods after such accident or incident
(subject to Unavoidable Delays, but in no event later than thirty months after
such accident or incident),
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such repair or reconstruction or engagement or reassignment to be at the
Lessee's own expense and whether or not the insurance proceeds, if any, on
account of such damage, destruction or malfunction shall be sufficient for the
purpose. Any such written notice that repair or reconstruction can be so
completed shall be deemed a representation by the Lessee to that effect. If at
any time during said twenty-four month period such representation could not be
reaffirmed (subject to Unavoidable Delays), the Lessee shall promptly so notify
the Lessor and each Assignee and upon such notification the Lessor or any
Assignee may (i) terminate this Fuel Lease in accordance with Section 20(a)(vii)
hereof if the accident or incident and the inability to repair or reconstruct
affects ten or more out of the twelve nuclear reactors at the Generating
Facilities or (ii) upon notice from the Lessor to the Lessee to that effect,
require the Lessee to purchase and obtain the release pursuant to Section 10(b)
hereof of the Nuclear Fuel previously engaged in Heat Production at, or intended
to be engaged in Heat Production within twenty-four months of the accident or
incident at, the Generating Facility or Facilities where such accident or
incident occurred, and not reassigned as contemplated by this section.
(c) All insurance proceeds receivable on account of any damage to or
destruction of Nuclear Fuel shall be paid to the Collateral Account. If,
notwithstanding the foregoing, any insurance proceeds are received by the Lessee
or the Lessor on account of any damage to or destruction of Nuclear Fuel, such
insurance proceeds, shall be paid over to the Collateral Account as soon as is
reasonably practicable. Such proceeds shall be disbursed from the Collateral
Account, in accordance with the provisions, and subject to the restrictions, of
the Trust Indenture, to the Lessee to reimburse it for any repair or restoration
costs it incurs in repairing and/or restoring any such damaged or destroyed
Nuclear fuel, provided that no Termination Event has occurred and no Lease
Default or Lease Event of Default has occurred and is continuing.
SECTION 19. Condemnation or Eminent Domain.
(a) In case of a Taking or the commencement of any proceedings or
negotiations which might result in any Taking, the Lessee will promptly give
notice thereof to the Lessor, generally describing the nature and extent of such
Taking or the nature of such proceedings or negotiations and the nature and
extent of the Taking which might result therefrom, as the case may be. The
Lessee hereby assigns to the Lessor any award or payment on account of any
Taking of the Nuclear Fuel or any portion thereof which is payable to the
Lessee, and any such award or payment shall be paid into the Collateral Account.
The Lessor and any Assignee shall have the right to participate fully in any
proceedings or negotiations in connection with any such Taking of the Nuclear
Fuel or any portion thereof, provided that Lessee shall be entitled to
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control such proceedings or negotiations so long as no Lease Default or Lease
Event of Default shall have occurred and be then continuing. If a Lease Default
or a Lease Event of Default shall have occurred and be then continuing, the
Indenture Trustee shall be entitled to control such proceedings or negotiations.
The Lessee will pay (without limiting its right, if any, to request payment by
the Lessor of such expenses as provided in Section 6 hereof if such expense is
of a capital nature) all costs, fees and expenses incurred by the Lessor or any
Assignee in connection with any Taking of the Nuclear Fuel or any portion
thereof and seeking and obtaining any award or payment on account thereof.
(b) In the case of any Taking, (i) the provisions of this Fuel Lease
shall remain in effect, except as expressly provided below in this Section 19,
without any abatement or reduction of Basic Rent, Additional Rent or any other
sum payable hereunder, (ii) if the Taking is of a Generating Facility, the
Lessee shall either purchase the Nuclear Fuel which is used or intended for use
in the Generating Facility or reassign it to another Generating Facility within
six months from the date of such Taking, and (iii) if the Taking is of Nuclear
Fuel, unless the Lessee shall have exercised within ninety days after the
happening of such Taking its right to purchase and obtain a release of Nuclear
Fuel or portion thereof pursuant to Section 10(b) hereof, the Lessee, whether or
not the awards or payments, if any, on account of such Taking shall be
sufficient for the purpose, at its cost and expense (without limiting the
Lessee's right, if any, to request payment by the Lessor of such expenses
provided in Section 6 hereof if such expenses are of a capital nature) will
promptly commence and complete (subject to Unavoidable Delays) Restoration of
the Nuclear Fuel or the portion, if any, thereof affected by such Taking, unless
the Lessee shall have delivered to the Lessor the certificate described in
Section 20(a)(i) hereof within ninety days after the happening of such Taking.
Upon completion of Restoration, the Lessee shall execute and deliver to the
Lessor a Fuel Schedule, shall cause the relevant Manufacturer of the replacement
Nuclear Fuel to execute and deliver to the Lessor a Bill of a Sale substantially
in the form of Schedule C hereto, unless the Nuclear Fuel Contract provides for
the transfer of title to the Lessor without execution and delivery by the
relevant Manufacturer of a bill of sale, and shall deliver to the Lessor a duly
executed Bill of Sale substantially in the form of Schedule C hereto describing
any portion of the Nuclear Fuel to which the Lessee has or receives title; and
the Lessor shall accept such Bill or Bills of Sale. As to any condemned or
requisitioned (or otherwise taken) Nuclear Fuel originally included on Schedule
A hereto, as amended, and replaced by such Restoration, the Lessor shall deliver
to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of
Schedule E hereto. If Restoration is not completed within thirty months after
such Taking, the Lessee shall, within 30 days thereafter, purchase and obtain a
release of such Nuclear Fuel pursuant to Section 10(b) hereof (the purchase
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price of any such Nuclear Fuel to be the price specified under said Section
10(b) less any award or payment paid in respect thereof to the Collateral
Account).
(c) All awards and payment received by the Lessor on account of any
Taking of the Nuclear Fuel or any portion thereof (less the actual costs, fees
and expenses incurred in the collection thereof, for which the Person incurring
the same shall be reimbursed from such awards or payments) shall be paid over to
the Collateral Account. Such awards or payment shall be disbursed from the
Collateral Account, in accordance with the provisions, and subject to the
restrictions, of the Trust Indenture, to the Lessee to reimburse it for any
repair or restoration costs it incurs, provided that no Termination Event has
occurred and no Lease Default or Lease Event of Default has occurred and is
continuing.
(d) For purposes of this Fuel Lease, all amounts paid pursuant to any
agreement with any condemning authority which has been made in connection with
any Taking shall be deemed to constitute an award on account of such Taking.
SECTION 20. Termination After Certain Events.
(a) This Fuel Lease shall terminate in the manner and with the effect
hereinafter set forth in Section 20(b) and Section 21(b) upon the happening of
any of the following events (referred to herein as "TERMINATION EVENTS"):
(i) The Lessee shall have given the Lessor five days' notice in the
form of a certificate signed by its President or any Vice President or its
Treasurer, stating that the Lessee desires to terminate this Fuel Lease,
provided at the time of termination, the Lessor has the right and available
funds to pay all Obligations (including any prepayment premium in
connection therewith);
(ii) The Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that it desires
that this Fuel Lease be terminated because of (A) changes made (whether by
legislative act or published administrative or judicial determination) in
the provisions of the Atomic Energy Act or any other applicable law, rule
or regulation with respect to liability insurance, limitation of liability,
or indemnification or the application, interpretation or enforcement
thereof, or (B) any material adverse change in the insurers, coverage, or
the terms or scope of any insurance policy or indemnity agreement required
to be obtained and maintained by the Lessee pursuant to Section 17 hereof;
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(iii) If, as a result of the transactions contemplated by this Fuel
Lease, the Lessor, any Assignee or any Secured Party becomes (or with the
passage of time would become), or is declared by the Securities and
Exchange Commission (or any successor governmental entity having
jurisdiction to make such declaration) to be, an "electric utility
company," a "gas utility company," a "public utility" or similar entity
under the Public Utility Holding Company Act of 1935, as amended, or its
respective officers, directors, shareholders, partners or employees shall
become subject to regulation under such Act, and, in any such event, the
Lessor, at the direction of the Indenture Trustee as directed by the
Designated Holders pursuant to the provisions of the Trust Indenture, shall
have given notice to the Lessee stating that it desires that this Fuel
Lease be terminated;
(iv) If, as a result of the transactions contemplated by this Fuel
Lease, the Lessor, any Assignee or any Secured Party becomes (or with the
passage of time would become), or is declared by the Secretary of Energy or
the Federal Energy Regulatory Commission or a successor entity to be, a
"public utility" or a similar entity under the Federal Power Act, as
amended, or its respective officers, directors, shareholders, partners or
employees shall become subject to regulation under such Act and, in any
such event, the Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that it desires
that this Fuel Lease be terminated;
(v) If, as a result of the transactions contemplated by this Fuel
Lease, the Lessor, any Assignee or any Secured Party becomes (or with the
passage of time would become), or is declared by any relevant regulatory
government body to be, a "public utility" or similar entity under the laws
of any State or its respective officers, directors, shareholders, partners
or employees shall become subject to regulation under any such laws, and,
in any such event, the Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that it desires
that this Fuel Lease be terminated;
(vi) Any law or regulation or interpretation of any law or regulation
shall be adopted and be enforceable by any governmental or regulatory
authority (including, without limitation, the Secretary of Energy, the
Federal Energy Regulatory Commission, the Illinois Commerce Commission, the
Securities and Exchange Commission, the
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Nuclear Regulatory Commission and the New York Stock Exchange), and as a
result of such adoption or enforcement, approval of the transactions
contemplated by this Fuel Lease shall be required and shall not have been
obtained within any grace period after such adoption or enforcement, or as
a result of which adoption or enforcement of this Fuel Lease or any
transaction contemplated hereby, including any payments to be made by the
Lessee or the ownership of the Nuclear Fuel by the Lessor, shall be or
become unlawful or unenforceable or the performance of this Fuel Lease
shall be rendered impracticable in any material way, and, in any such
event, the Lessor, at the direction of the Indenture Trustee as directed by
the Designated Holders pursuant to the provisions of the Trust Indenture,
shall have given notice to the Lessee stating that the Lessor desires that
this Fuel Lease be terminated;
(vii) If an accident or incident described in Section 18 hereof,
which prevents Heat Production, involving Nuclear Fuel having an aggregate
Net Investment Value (as shown on the most recently delivered Rent
Schedule) in excess of eighty-five percent of the aggregate Net Investment
Value of all Nuclear Fuel (as shown on such Rent Schedule) or involving ten
or more out of the twelve Generating Facilities, shall have occurred and
(A) Lessee shall have stated in its notice required under Section 18 with
respect thereto that repair or reconstruction or relocation and engagement
or reassignment or Restoration as provided therein cannot be completed
within twenty-four months after such accident or incident; or (B) such
repair or reconstruction or relocation and engagement or reassignment or
Restoration as provided in Section 18 hereof shall not have been completed
within twenty-four months after such accident or incident (subject to
Unavoidable Delays, but in no event later than thirty months after such
accident or incident) and, in either such event, the Lessor, at the
direction of the Indenture Trustee as directed by the Designated Holders
pursuant to the provisions of the Trust Indenture, shall have given notice
to the Lessee stating that the Lessor desires that this Fuel Lease be
terminated;
(viii) If any governmental licenses, approvals or consents with
respect to any Generating Facility, without which such Generating Facility
cannot continue to operate, shall have been revoked, withdrawn or withheld,
or an order, injunction or other directive shall be issued enjoining the
operation of any Generating Facility or materially impairing the use of
Nuclear Fuel or any Generating Facility as contemplated by this Lease, and
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(A) the Lessee does not, in good faith, within 180 days of such event,
either (i) represent in writing to the Lessor that the Lessee has made a
good faith determination that such Generating Facility will return to
operation within twenty-four months of such revocation, withdrawal,
withholding, order, injunction or directive (subject to Unavoidable Delays)
or (ii) purchase and obtain the release pursuant to Section 10(b) hereof of
all the Nuclear Fuel located in, or intended to be used at, such Generating
Facility other than that portion of such Nuclear Fuel which the Lessee in
good faith represents in writing to the Lessor will be reassigned to
another Generating Facility or Facilities, or (B) after the Lessee has
delivered the representation referred to in clause (A)(i) above, at any
time during such twenty-four month period (subject to Unavoidable Delays)
said representation could not be reaffirmed and Lessee does not, within 90
days of such inability to reaffirm, purchase and obtain the release
pursuant to Section 10(b) hereof of all the Nuclear Fuel then located in,
or intended to be used at, such Generating Facility, or (C) after Lessee
has delivered the representation referred to in clause (A)(i) above, within
such twenty-four month period (subject to Unavoidable Delays), such
Generating Facility is not, in fact, returned to operation and Lessee does
not, on or before the expiration of such period, purchase and obtain the
release pursuant to Section 10(b) hereof of all the Nuclear Fuel then
located in, or intended to be used at, such Generating Facility; and, in
such event, the Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that the Lessor
desires that this Fuel Lease be terminated;
(ix) If a nuclear incident (as that term is defined in the Atomic
Energy Act) involving or connected in any way with any of the Nuclear Fuel
or any of the Generating Facilities shall have occurred, and such nuclear
incident may reasonably be expected to give rise to liability of the Lessee
in an aggregate amount in excess of $20,000,000 above that covered by
insurance, and, in such event, the Lessor, at the direction of the
Indenture Trustee as directed by the Designated Holders pursuant to the
provisions of the Trust Indenture, shall have given notice to the Lessee
stating that the Lessor desires that this Fuel Lease be terminated;
(x) The Lessor, at the direction of the Indenture Trustee as directed
by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given
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notice to the Lessee stating that it desires that this Fuel Lease be
terminated because ten or more of the twelve nuclear reactors at the
Generating Facilities have been continuously out of operation for a period
of twenty-four months or more;
(xi) The Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that it desires
that this Fuel Lease be terminated because an event or condition not
mentioned above in this Section 20(a) or in Section 25(a) has occurred,
resulting in the inability of the Lessor to pay any Indebtedness; or
(xii) The Lessor, at the direction of the Indenture Trustee as
directed by the Designated Holders pursuant to the provisions of the Trust
Indenture, shall have given notice to the Lessee stating that it desires
that this Fuel Lease be terminated because any pension plan covered by
Title IV of ERISA maintained by the Lessee or any subsidiary of the Lessee
has been terminated, and the value of plan benefits guaranteeable under
Title IV of ERISA on the date of such termination exceeds the value of plan
assets allocable to such benefits on such date by more than $25,000,000.
(b) Upon the date of occurrence of any of the events listed in Section 20(a)
hereof (the first such date being herein called the "TERMINATION NOTICE DATE"),
this Fuel Lease shall cease and terminate, except with respect to obligations
and liabilities of the Lessee, actual or contingent, which arose under this Fuel
Lease on or prior to the Termination Notice Date and except for the Lessee's
obligations set forth in Section 5, 7, 9, 10(b), 13, 14 and 17 hereof, and in
this Section 20(b), all of which obligations will continue until the delivery of
documentation by the Lessor and the payment by the Lessee provided for below,
and except that Lessee's obligations under Section 11 hereof shall continue as
set forth therein, and forthwith also upon such termination, title to, and the
entire interest of the Lessor in the Nuclear Fuel shall automatically transfer
to and be vested in the Lessee, without the necessity of any action by either
the Lessor or the Lessee, but subject to any liens and security interests of any
Assignee or Secured Party under the Trust Indenture; provided, however, that
title to, and the entire interest of the Lessor in, the Nuclear Fuel shall,
forthwith upon such termination, automatically transfer to and be vested in any
Person designated by the Lessee, but subject to any liens and security interests
of any Assignee or Secured Party, rather than transferring to and being vested
in the Lessee as aforesaid, if but only if (i) such Person shall, upon such
termination, be lawfully entitled to accept and be vested with title to the
Nuclear Fuel, and (ii) prior to such termination, such
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Person shall have delivered an instrument to the Lessor, in form and substance
satisfactory to it, executed and acknowledged by such Person and by the Lessee,
pursuant to which such Person shall irrevocably (1) undertake to accept title
to, and the entire interest of the Lessor in, that Nuclear Fuel forthwith upon
such termination, (2) agree that the transfer to and the vesting in such Person
of such title and interest shall occur automatically upon such termination
without the necessity of any action by either the Lessor or the Lessee or such
person, and (3) undertake to execute, upon such termination, the instrument
referred to below in this Section 20(b) acknowledging, among other things, that
title to and ownership of the Nuclear Fuel has transferred to and vested in such
Person. As soon as possible after either the Lessor or the Lessee shall learn of
the happening of any of the events listed in Section 20(a) hereof, such party
shall give notice thereof to the other party hereto (and in the case of such
notice to the Lessor, signed also by such other Person in whom title to the
Nuclear Fuel shall have vested as aforesaid), which notice shall (x) acknowledge
that this Fuel Lease has terminated, subject to the continuing obligations of
the Lessee mentioned above and the rights of any secured party under any
security agreement, and that title to and ownership of the Nuclear Fuel has
transferred to and vested in the Lessee or such other Person, as the case may
be, subject as aforesaid, (y) state that on a settlement date determined by the
Lessee occurring not less than 30 or nor more than 270 days after the giving of
such notice, which settlement date shall be specified therein (such date being
herein called the "TERMINATION SETTLEMENT DATE"), the Lessee shall be obligated
as of the Termination Notice Date to pay to the Lessor as the purchase price of
the Nuclear Fuel, which payment obligation shall be unconditional as provided in
Section 5(h) hereof, and without regard to the voidability, validity, legality
or enforceability of the Lessor's obligations under the Basic Documents an
amount equal to the sum of (i) the Net Investment Value of the Nuclear Fuel as
of the Termination Settlement Date plus (ii) the Termination Rent on the
Termination Settlement Date, and (z) state that on the Termination Settlement
Date, the Lessor shall deliver to the Lessee both a confirmatory Bill of Sale
acknowledging the above-described transfer and vesting of title and ownership of
the Nuclear Fuel, and appropriate instruments duly executed by any Assignees or
Secured Parties (but only to the extent such documents are furnished by such
Assignees or Secured Parties), cancelling and discharging any liens and security
interests created thereunder upon the Nuclear Fuel. Should an obligation of the
Lessee which would have been includable in Termination Rent if it had been known
or the amount thereof determinable on the Termination Settlement Date become
known or determined subsequent to the Termination Settlement Date, the Lessee
agrees to pay, which payment obligation shall be unconditional as provided in
Section 5(h) hereof, such amount to the Lessor upon ten Business Days' notice
thereof as an additional item of Termination Rent. The Lessor and the Lessee
shall be unconditionally obligated as of the Termination Notice Date
to make
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the payments and to deliver the documentation referred to therein on such
Termination Settlement Date to the same extent as if each had acknowledged in
writing its obligation to do so, Lessee's obligation to make such payment shall
be unconditional as provided in Section 5(h) hereof, and unaffected by any event
or matter whatsoever including, without limitation, failure of Lessor to deliver
such confirmatory documentation on the Termination Settlement Date or the
quality, condition, existence, utility or title of or to the Nuclear Fuel or any
failure to have obtained or then have in effect authorizations of governmental
authorities on the part of the Lessee and without regard to the voidability,
validity, legality or enforceability of the Lessor's obligations under the Basic
Documents, and the Lessee's obligation to make such payment shall not be
discharged except by payment in full as herein provided. Any such payment made
by the Lessee shall not prejudice, or constitute a waiver of, any right, claim
or cause of action which the Lessee shall have against the Lessor. Such payment
and delivery of documentation shall be made in accordance with Section 21
hereof.
SECTION 21. Conditions of Termination and Conveyance.
(a) Upon the purchase by the Lessee pursuant to this Fuel Lease of
the Lessor's interest in the Nuclear Fuel or any portion thereof or of the
Lessor's interest in any insurance proceeds or condemnation awards (or the right
to receive the same) which the Lessee is entitled to receive in connection with
any such purchase by it or a transfer of title to the Nuclear Fuel to the Lessee
or any other Person designated by the Lessee pursuant to Section 20 hereof, the
Lessor will transfer all of Lessor's right, title and interest therein, and the
Lessee or such Person, as the case may be, shall accept the same subject to all
liens, encumbrances, charges, exceptions and restrictions thereon, and to all
applicable laws, regulations and ordinances and otherwise without representation
and warranty by or recourse to the Lessor.
(b) Upon the Termination Settlement Date specified in the notice
delivered by the Lessor or the Lessee pursuant to Section 20 hereof, the Lessee
shall pay to the Lessor at its address for purposes of notices hereunder or to
such other Person at such other place designated by the Lessor, in federal
funds, the purchase price specified herein for, and the Lessor shall deliver to
the Lessee a confirmatory Bill of Sale acknowledging the transfer and vesting of
ownership of, the Nuclear Fuel and use its best efforts to obtain an appropriate
instrument duly executed by any Assignee or Secured Party, cancelling and
discharging any security agreements entered into by the Lessor and any liens and
security interests created thereby upon the Nuclear Fuel. The Lessee shall pay
all expenses in connection with such transfer, including all escrow fees, search
and recording and filing fees, attorneys' fees and all applicable federal, state
and local sales, use and other taxes which may be incurred or imposed by reason
of
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the transfer then being made by the Lessor, or by reason of the delivery of said
instrument or instruments of transfer, cancellation and discharge.
(c) Notwithstanding any other provisions of this Fuel Lease, whenever
the Lessee has the right or obligation to purchase the Nuclear Fuel or any
portion thereof or any other property pursuant to any provision of this Fuel
Lease (other than Section 20(b)), the Lessee may cause such purchase to be
effected by, and the Lessor shall transfer title and ownership to the subject
matter of such purchase to, any other Person lawfully entitled to receive the
same, as specified by the Lessee in a notice to the Lessor given at least
fifteen days prior to the date of such purchase, provided, however, that nothing
specified in this subsection (c) shall in any way impair or affect the
obligations of the Lessee under this Fuel Lease in connection with such purchase
and provided, further, that, at the time of any such transfer to such other
Person, the Lessee shall deliver to the Lessor the undertaking of the Lessee
indemnifying and holding Lessor harmless from and against any loss or liability
incurred by the Lessor by reason of such transfer.
SECTION 22. Estoppel Certificates; Information.
The Lessee will from time to time deliver to the Lessor, promptly upon
reasonable request, (i) a statement, executed by any Vice-President or the
Treasurer of the Lessee, certifying the dates to which the Basic Rent,
Additional Rent and other sums payable hereunder have been paid, that this Fuel
Lease is unmodified and in full effect (or, if there have been modifications,
that this Fuel Lease is in full effect as modified, and identifying such
modifications) and that no Lease Default or Lease Event of Default has occurred
and is continuing (or, if any Lease Default or Lease Event of Default has
occurred and is continuing, specifying the nature and period of existence
thereof and what action the Lessee is taking or proposes to take with respect
thereto), and (ii) such information with respect to the Nuclear Fuel or any
portion thereof, including the amounts of Net Investment Value of the Nuclear
Fuel or portions thereof in accordance with the Lessee's records, as from time
to time may reasonable be requested, it being intended that any such statement
delivered pursuant to this Section 22 shall be deemed a representation and
warranty by Lessee and may be relied upon by the Lessor and any Assignee.
SECTION 23. Rights to Perform the Lessee's Covenants.
If the Lessee shall fail to make any payment or perform any act
required to be made or performed by it hereunder, the Lessor, without notice to
or demand upon the Lessee and without waiving or releasing any obligation or
default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee.
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All payments so made by the Lessor and all costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred in
connection therewith or in connection with the performance by the Lessor of any
such act shall constitute Additional Rent hereunder and the Lessee agrees to pay
the same as provided in Section 5 hereof.
SECTION 24. Assignments.
(a) The Lessor may, with the written consent of the Lessee, grant a
security interest in or an assignment of all or part of its right, title and
interest in this Fuel Lease to any Assignee or Assignees and grant a security
interest in the Nuclear Fuel pursuant to a Trust Indenture. No Assignee shall
have any liability hereunder or be obligated to perform any duty, covenant or
condition required to be performed by the Lessor under any of the terms hereof,
and the Lessee by its execution hereof acknowledges and agrees that
notwithstanding any such grant or assignment each and all such duties, covenants
or conditions required to be performed by the Lessor shall survive any such
assignment and any such grant of a security interest and shall be and remain the
sole liability of the Lessor. Upon any such assignment by the Lessor, such
Assignee or Assignees shall succeed to all of the rights, privileges and powers
of the Lessor provided in this Fuel Lease as to such right, title or interest so
assigned.
(b) The Lessee hereby consents to the security interest and other
rights and interests granted to the Indenture Trustee in the Trust Indenture,
dated as of the date first above written.
(c) Except as provided in Section 10(e) hereof, Lessee may not
sublease any of the Nuclear Fuel and may not assign any of its rights under this
Fuel Lease without, in either case, the prior written consent of the Lessor and
the Indenture Trustee.
(d) The Lessor hereby agrees that the Lessee may sell or transfer any
tax benefits related to the Nuclear Fuel to a third party; provided, however,
that no such sale or transfer shall limit or affect any of the Lessee's
obligations or the Lessor's rights hereunder (except for the Lessor's rights, if
any, in the tax benefits so transferred). The Lessor agrees to cooperate with
the Lessee, and to execute such documents and instruments as may be reasonably
required, in effectuating any such sale or transfer; provided, however, that the
Lessor shall not be required to take any action or give any consent which could
adversely affect its rights in the event of a Lease Event of Default.
SECTION 25. Lease Events of Default and Remedies.
(a) Any of the following events of default by the Lessee shall
constitute a "LEASE EVENT OF DEFAULT" and give rise to the
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rights on the part of the Lessor described in Section 25(b) hereof:
(i) default in the payment of Basic Rent, Additional Rent, payments
required by Section 10(b) hereof, payments required on the Termination
Settlement Date or the payment of other amounts hereunder when due and
payable, and continuance of such default to pay such other amounts for a
period of ten days; or
(ii) failure to perform or observe any of the obligations or covenants
of the Lessee under Sections 14, 17 and 20(b) hereof, or failure to
purchase and obtain the release of any Nuclear Fuel under Section 10(b)
hereof when required by Sections 10(b), 18(a), 18(b) or 19(b) hereof;
(iii) default in the performance, or the breach, of any covenant,
obligation or warranty of the Lessee in this Fuel Lease (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section 25 specifically dealt with) or in any other Basic
Document to which the Lessee is a party, and continuance of such default or
breach for a period of thirty days after there has been given, by
registered or certified mail, to the Lessee by the Lessor, a written notice
specifying such default or breach and requiring it to be remedied; or
(iv) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Lessee a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Lessee under the United States
Bankruptcy Code or any other applicable federal or state law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Lessee or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of forty-
five consecutive days; or
(v) the institution by the Lessee of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the
United States Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or
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other similar official) of the Lessee or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Lessee in furtherance of any such action; or
(vi) any representation or warranty made by the Lessee in this Fuel
Lease, the Consent and Agreement, any other Basic Document to which the
Lessee is a party or in any related instrument, or in any report,
certificate, financial statement or other instrument furnished in
connection with this Fuel Lease or any other Basic Document to which Lessee
is a party shall prove to be false or misleading in any material respect;
or
(vii) Lessee shall, without the consent of the Designated Holders,
merge with or into, or consolidate with or into, any other corporation or
entity, or sell, transfer or otherwise dispose of all or substantially all
of its assets, unless in each case, after giving effect to such merger,
consolidation, sale, transfer or disposition:
(1) no Credit Agreement Event of Default, Trust Indenture
Event of Default, Lease Event of Default or Termination Event, or
event that with notice or lapse of time or both would constitute a
Credit Agreement Event of Default, Trust Indenture Event of Default,
Lease Event of Default or Termination Event shall have occurred and be
continuing,
(2) such transaction does not materially and adversely
affect the Lessee's (or its successor's) ability to perform its
obligations under the Basic Documents, including this Fuel Lease,
(3) the successor or transferee is a domestic corporation,
substantially all of whose assets are located in the United States and
assumes the obligations of the Lessee under the Basic Documents in a
manner and pursuant to a written instrument satisfactory to the
Designated Holders in their sole discretion, and
(4) the net worth of such successor or transferee, after
giving effect to such transaction, is not less than the net worth of
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the Lessee immediately prior to such transaction;
provided, that the foregoing shall not prohibit the Lessee from forming
and, pursuant to a merger, consolidation or other transaction, becoming a
subsidiary of a holding company in accordance with all applicable laws, so
long as the aggregate amount of all assets (including subsidiary stock)
proposed to be transferred or disposed of by the Lessee in connection with
such transaction or any series of related transactions does not exceed 10%
of the Lessee's consolidated assets immediately prior to such transaction
or series of related transactions;
(viii) Lessee shall fail to pay any of its Indebtedness for Borrowed
Money which is outstanding in a principal amount of at least $20,000,000 in
the aggregate when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after
the applicable grace period, if any, specified in any agreement or
instrument relating to such indebtedness; or any other default under any
agreement or instrument relating to any such indebtedness, or any other
event or condition shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the
effect of such default or event is to accelerate or to permit the
acceleration of the maturity of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment) prior to the stated
maturity thereof;
(ix) occurrence of a Credit Agreement Event of Default or
a Trust Indenture Event of Default; or
(x) the failure of any Bank to honor a draft under its Letter of
Credit or to make any Loan which it is obligated to make under the Credit
Agreement.
(b) Upon the occurrence of any Lease Event of Default, the Lessor may
in its discretion do any one or more of the following:
(i) treat the Lease Event of Default as an event under Section 20(a)
hereof, entitling Lessor to the consequent benefits of Section 20(b) hereof
and in general proceed by appropriate judicial proceedings, either at law
or in equity, to enforce performance or observance by the Lessee of the
applicable provisions of
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this Fuel Lease, or to recover damages for the breach of any thereof; or
(ii) by notice to the Lessee terminate this Fuel Lease, provided,
however, that in the case of a Lease Event of Default under Section 25(iv)
or (v), this Fuel Lease shall automatically terminate without such notice.
Upon such termination of this Fuel Lease, the Lessee's interest and all
right of the Lessee and Persons claiming through or under the Lessee to the
use of the Nuclear Fuel shall forthwith terminate but the Lessee shall
remain liable for its obligations and liabilities, actual or contingent,
with respect to (i) the Lessee's obligations set forth under Section 11
hereof, (ii) obligations or liabilities which arose under this Fuel Lease
on or prior to the date of such termination, (iii) the Lessee's obligations
set forth in this Section 25(b)(ii), and (iv) until the earlier of (a)
Lessor's taking possession of the Nuclear Fuel or Lessee's delivering the
Nuclear Fuel as set forth below or (b) final and uncontested payment of the
amounts referred to in (A) and (B) below, the Lessee's obligations set
forth in Sections 7, 9, 13, 14 and 17; and upon such termination the Lessor
shall have the immediate right of possession of the Nuclear Fuel (to the
extent not prohibited by law) and the right, at the Lessor's election,
either to enter any Generating Facility or any other premises of the Lessee
where the Nuclear Fuel or any portion thereof is located and remove the
Nuclear Fuel or such portion thereof there located (to the extent not
prohibited by law) or cause the same to be done by any Person entitled by
law so to do, in which case the Lessor shall not be responsible for any
damage to any Generating Facility or such premises, except for damage
resulting from the Lessor's gross negligence or wilful misconduct (the
Lessee hereby agreeing to indemnify and hold the Lessor harmless from all
losses and liabilities in respect of any such damage to any Generating
Facility, such premises or the Nuclear Fuel or injury to the Lessor's, the
Lessee's or such other Person's employees sustained in the course of such
removal, except any such damage resulting from the Lessor's gross
negligence or willful misconduct, provided that the Lessee hereby further
agrees that the gross negligence or willful misconduct of any Assignee or
any Secured Party shall not be imputed to the Lessor), or to require the
Lessee, at the Lessee's expense, to assemble the Nuclear Fuel in
appropriate cooling or other Storage Facility and, whether or not such
storage is requested by Lessor, Lessor may also require the Lessee, at the
Lessee's expense, to deliver the Nuclear Fuel or any portion thereof,
properly containerized and insulated for
-40-
<PAGE>
shipping at any Generating Facility or Storage Facility and consigned to a
Person specified by the Lessor and licensed to receive such Nuclear Fuel,
in which case the risk of loss shall be upon the Lessee until such delivery
is made; and the Lessor may thenceforth hold, possess and enjoy the Nuclear
Fuel (to the extent not prohibited by law) and may sell the Lessor's
interest in the Nuclear Fuel or any portion thereof upon any terms deemed
satisfactory to the Lessor, free from any rights of the Lessee and any
Person claiming through or under the Lessee; but the Lessor shall,
nevertheless, have the right to recover forthwith from the Lessee:
(A) any and all Basic Rent, Additional Rent and all other
amounts payable by the Lessee hereunder which may be due and unpaid
immediately prior to such termination or which may then be accrued and
unpaid, which obligation to pay shall be unconditional as provided in
Section 5(h) hereof; and
(B) as liquidated damages for loss of the bargain and not
as a penalty, an amount equal to the excess of (x) the sum of (i) the
Net Investment Value of the Nuclear Fuel as of the date of such
termination of this Fuel Lease plus (ii) the Termination Rent, over
(y) the Net Investment Value of the Nuclear Fuel, if the Lessor
chooses to hold and not sell the Nuclear Fuel, or the amount, if any,
realized by the Lessor in a sale of the Nuclear Fuel (at which the
Lessor may be a purchaser), without set-off or reduction thereof other
than a deduction from the sale price of all the costs of such sale,
including legal fees, commissions, sales taxes and other customary
charges; provided, however, that it is understood that the Lessor, any
Assignee and any Secured Party shall have no obligation to conduct any
such sale, and that the Lessor may, in lieu of conducting such sale,
transfer and convey title to, and its entire ownership interest in,
the Nuclear Fuel to the Lessee or any trustee or liquidator therefor
upon the terms and conditions set forth in Section 21 hereof (in which
case the amount in clause (y) above shall be zero), but that, if the
Lessor conducts such sale, the Nuclear Fuel may be sold free and clear
of all rights of the Lessee; and
-41-
<PAGE>
(C) any and all other damages and expenses (including,
without limitation, reasonable attorneys' fees and expenses) without
set-off, reduction or counterclaim, which the Lessor shall have
sustained by reason of the breach of any provision of this Fuel Lease.
The Lessee hereby waives, to the full extent not prohibited by law,
any right it may now or hereafter have to require the sale, in mitigation of
damages, of the Nuclear Fuel or any portion thereof consequent to a Lease Event
of Default. Lessee hereby agrees that its obligations to make payments pursuant
to this Section 25(b) shall be absolute and unconditional as provided in Section
5(h) hereof.
(c) The remedies herein provided in favor of the Lessor, any Assignee
and any Secured Party in case of a Lease Event of Default as hereinabove set
forth shall not be deemed to be exclusive, but shall be cumulative and shall be
in addition to all other remedies in its favor existing at law, in equity or in
bankruptcy.
SECTION 26. Surrender; Acceptance of Surrender.
Subject always to the rights of the Lessee to obtain a release of any
portion of the Nuclear Fuel pursuant to Section 10(b) and acquire title thereto
and the right of the Lessee to acquire title to the Nuclear Fuel in the events
and on the terms and conditions set forth in Section 20, upon the expiration or
earlier termination of this Fuel Lease, the Lessee shall surrender the Nuclear
Fuel to the Lessor or its designee in the same condition in which the various
portions thereof existed on the respective dates when such portions first became
subject to this Fuel Lease, except as repaired, replaced or added to, as
permitted by any provisions of this Fuel Lease, and except for the loss or
reduction of heat production capacity and other changes caused by the Fuel
Management through the Nuclear Fuel Cycle. The Lessee shall, at its expense and
upon request of the Lessor, remove the Nuclear Fuel or any portion thereof so
requested from the lands upon which the same is situated at the expiration or
termination of the term hereof, and deliver the Nuclear Fuel or such portions
thereof so requested, properly containerized and insulated for shipping, at any
Generating Facility or Storage Facility where it is located and consigned to a
Person specified by the Lessor and licensed to receive such Nuclear Fuel. No
surrender of this Fuel Lease or of the Nuclear Fuel or any portion thereof or of
any interest therein shall be valid or effective unless agreed to and accepted
in writing by the Lessor, and no act by any representative or agent of the
Lessor, and no act by the Lessor, other than such agreement and acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
-42-
<PAGE>
SECTION 27. No Merger.
There shall be no merger of this Fuel Lease or of the leasehold
interest created by this Fuel Lease with the absolute ownership interest in the
Nuclear Fuel or any portion thereof by reason of the fact that the same person,
firm, corporation or other entity may acquire or own or hold, directly or
indirectly, (i) this Fuel Lease or the leasehold interest created by this Fuel
Lease or any interest in this Fuel Lease or in any such leasehold interest, and
(ii) the absolute ownership or other interest in the Nuclear Fuel or any portion
thereof, and no such merger shall occur unless and until all persons, firms,
corporations, and other entities, including any Assignee and Secured Party,
having any interest in (a) this Fuel Lease or the leasehold interest created by
this Fuel Lease or (b) the absolute ownership or other interest in the Nuclear
Fuel or any portion thereof shall join in an instrument effecting such merger.
SECTION 28. Notices.
Any notices provided for in this Fuel Lease shall be in writing and
shall be deemed to have been duly given when delivered personally or otherwise
actually received (whether by courier, telex or facsimile transmission) or five
days after the same have been deposited in the United States mail, registered
certified (or registered), postage prepaid, addressed as follows:
If to the Lessor: (with copies to each Assignee at its
address specified in the applicable Trust Indenture)
CommEd Fuel Company, Inc.
c/o Merrill Lynch Money Markets, Inc.
225 Liberty Street - 8th Floor
New York, New York 10080-6108
Attention: Mr. Gary Carlin
Vice President and Treasurer
Telecopier: (212) 236-7584
Confirmation: (212) 236-7200
If to the Lessee:
Commonwealth Edison Company
One First National Plaza, 37th Floor
Post Office Box 767
Chicago, Illinois 60690
Attention: Treasurer
Telecopier: (312) 394-3110
Confirmation: (312) 394-3117
and if to an Assignee, then at its address specified in the applicable Trust
Indenture, or at such other place as any of the
-43-
<PAGE>
parties may designate by notice duly given in accordance with this Section 28.
SECTION 29. Allocation of Amounts.
Whenever, under Section 1, 5, 6, 10, 18(a), 19(b) or 22, computations
are required to be made involving a cost, price, payment, charge, factor,
discount, or any other amount relating to a single assembly of the Nuclear Fuel,
such cost, price, payment, charge, factor, discount or any other amount shall be
determined in the sole judgment of the Lessee but subject to any applicable
regulatory requirements. Unless the Lessee shall have informed the Lessor
otherwise in writing or unless otherwise set forth in any of the schedules
attached hereto or furnished pursuant to this Fuel Lease, allocation shall be
made by dividing the aggregate of all such costs, prices, payments, charges,
discounts or any other amounts which are known to have been incurred, paid,
accrued or arisen, at approximately the same time and in the same general
transaction or computation, with respect to such assembly and several other
assemblies of the Nuclear Fuel, into as many equal parts as there are such
assemblies, and allocating one of the parts so divided to each such assembly.
In the event that any such cost, price, payment, charge, discount or any other
amount must be certified pursuant to this Fuel Lease, the person making such
certification shall be the sole judge of the propriety of making any such
allocation, and such person need only place the term "(allocated)" before or
after any cost, price, payment, charge, discount or any other amount so
certified in order to (i) establish the propriety of making such an allocation,
and (ii) give the warranty of such person as to the accuracy of the allocation
so certified and its compliance with the provisions of this Section 29.
SECTION 30. Amendments.
This Fuel Lease may not be amended, modified or terminated, nor may
any obligation hereunder be waived, orally, and no such amendment, modification,
termination or waiver shall be effective for any purpose unless it is in
writing, signed by the party against whom enforcement thereof is sought (except
that amendments of Schedule A hereto pursuant to Section 6, 10, 18(a) or 19(b)
hereof shall be made in accordance with the provisions of such Sections) and, if
this Fuel Lease has been assigned, consented to in writing by each Assignee for
whose benefit such assignment was made.
SECTION 31. Severability.
Any provision of this Fuel Lease which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions
-44-
<PAGE>
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the Lessor and the Lessee hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 32. Taxes; Tax Benefits.
(a) For federal, state and local tax purposes, Lessor and Lessee
intend that Lessee shall be treated as the owner of the Nuclear Fuel and that
this Fuel Lease shall constitute a financing (i.e., a lending by Lessor and a
borrowing by Lessee) and not a lease, and neither Lessor nor Lessee shall file
any tax returns or reports or take any similar action which, for such tax
purposes, would be inconsistent with such intention as to tax treatment;
provided, that such characterization for tax purposes shall not cause this Fuel
Lease to constitute such a lending and borrowing for any other purpose.
(b) To the extent that the Nuclear Fuel is or becomes eligible for
any tax benefits under the Code as in effect on the date first above written or
thereafter amended from time to time, and if the Internal Revenue Service shall
treat the Lessor as the owner of the Nuclear Fuel, Lessor at Lessee's request
shall elect to treat Lessee as the owner of the Nuclear Fuel and as having
acquired the Nuclear Fuel and shall provide Lessee with an appropriate benefit
election. Lessee shall provide Lessor with a report or statement with respect
to all Nuclear Fuel as to which such benefit election is applicable, and such
report or statement shall be in such form as may be required for Internal
Revenue Service reporting.
SECTION 33. Sale of Nuclear Fuel and Assignment of
Rights under Nuclear Fuel Contracts.
(a) Lessee shall, from time to time, convey, transfer, sell, assign
and set over to Lessor, all or any part of Lessee's right, title and interest,
whether now or hereafter existing or acquired (other than the right, title and
interest of Lessee under this Fuel Lease), in and to Nuclear Fuel and Nuclear
Fuel Contracts. All such conveyances, transfers, sales and assignments shall be
made (i) pursuant to a Bill of Sale substantially in the form of Schedule C
hereto or (ii) pursuant to an Assignment Agreement substantially in the form of
Schedule F hereto, which have been executed and delivered by Lessee or a
Manufacturer, as the case may be, prior to the time that Lessor is required to
make any payment with respect thereto pursuant to Section 6 hereof.
(b) Neither any assignment contemplated by this Fuel Lease, nor any
action or inaction on the part of Lessor under this Fuel Lease or otherwise,
shall (i) release Lessee from any of its
-45-
<PAGE>
obligations and agreements under any Nuclear Fuel Contract, (ii) constitute an
assumption of any such obligations or agreements on the part of the Lessor or
any Assignee or Secured Party or (iii) impose any obligation or liability
whatsoever on Lessor or any Assignee or Secured Party. No action or failure to
act on the part of Lessee shall adversely affect or limit in any way the rights
of Lessor under this Fuel Lease or under any Nuclear Fuel Contract.
(c) Lessee at its expense will perform and comply with all the terms
and provisions of each Nuclear Fuel Contract to be performed or complied with by
it; will maintain each Nuclear Fuel Contract in full force and effect; and will
enforce each of the Nuclear Fuel Contracts in accordance with their respective
terms and will take all such action to that end as from time to time may be
reasonably requested by Lessor.
(d) Without the prior written consent of Lessor (which consent shall
not be unreasonably withheld) and, if this Fuel Lease has been assigned, the
prior written consent of each Assignee for whose benefit such assignment was
made, Lessee will not (i) cancel or terminate any Nuclear Fuel Contract or
consent to or accept any cancellation or termination thereof, (ii) waive any
default under or breach of any Nuclear Fuel Contract, or (iii) take any other
action in connection with any Nuclear Fuel Contract which would impair the
interests or rights (or value thereof) of Lessee thereunder or of Lessor in
connection therewith.
(e) Lessee will promptly deliver to Lessor copies of all notices,
requests, agreements and other documents received or delivered by Lessee under
or with respect to any Nuclear Fuel Contract which are material to the interests
or rights (or value thereof) of Lessee thereunder or of Lessor in connection
therewith. Lessee will from time to time, upon request of Lessor, furnish
Lessor such information concerning the Nuclear Fuel, any Nuclear Fuel Contract
or any Generating Facility as Lessor may reasonably request. Lessor shall
preserve the confidentiality of any information which, under the terms of the
relevant Nuclear Fuel Contract, is required to be kept confidential.
(f) Lessee will not change its principal place of business or remove
therefrom its records concerning the Nuclear Fuel Contracts unless it gives
Lessor at least thirty days' prior written notice thereof.
(g) Lessee hereby represents and warrants and agrees that: (i) each
Nuclear Fuel Contract is in full force and effect and Lessee has delivered to
Lessor a true and complete copy of each such Nuclear Fuel Contract as presently
in effect; (ii) Lessee has not previously sold, assigned or transferred, or
created any security interest in, the Nuclear Fuel, any Nuclear Fuel Contract or
any part thereof (except for (a) such portions of Partially Assigned Agreements
which are not assigned to Lessor and (b)
-46-
<PAGE>
assignments or transfers relating to other nuclear fuel transactions all of
which have been fully discharged); (iii) Lessee has not agreed to any amendment,
modification or supplement which would constitute part of any Nuclear Fuel
Contract (other than as disclosed in connection with clause (i) of this Section
33(g), or waived performance by any other Person obligated under any Nuclear
Fuel Contract of any obligation of such Person thereunder; (iv) neither Lessee
nor any other Person is in default in the payment, performance or observance of
any term, covenant or agreement on its part to be performed or observed under
any Nuclear Fuel Contract; (v) the Nuclear Fuel will be kept at the locations
designated by Lessee in Fuel Schedules to be submitted from time to time
hereunder; and (vi) other than financing statements filed in other nuclear fuel
transactions, the underlying obligations of which have been fully discharged, no
financing statement (other than any which may have been filed on behalf of an
Assignee or Lessor and other than any which relate to such portions of Partially
Assigned Agreements which are not assigned to Lessor) covering all or any part
of the Nuclear Fuel or any Nuclear Fuel Contract is on file in any public
office.
SECTION 34. Miscellaneous.
The Lessor agrees that (i) the Lessor will not amend or modify or
consent to any amendment or modification of, or seek any waiver adverse to the
Lessee with respect to, any of the Basic Documents without the prior written
consent of the Lessee, (ii) the Lessor will at all times use its best efforts to
comply with, observe and perform all of the covenants and agreements required to
be complied with, observed or performed by the Lessor under any of the Basic
Documents to which it is a party, (iii) Lessor will exercise its rights under
any Credit Agreement only with the consent of Lessee (but Lessee agrees, for the
benefit of the parties to a Credit Agreement that no such failure to obtain the
consent of Lessee shall reduce Lessee's obligations, or adversely impair such
parties' rights, under any of the Basic Documents), and (iv) Lessor will
promptly furnish to Lessee copies of all notices, requests, agreements and other
documents received or delivered by Lessor under or with respect to any of the
Basic Documents, to the extent that the same shall not have been delivered to
Lessee pursuant thereto. The obligations of the Lessee under the Fuel Lease are
unconditional, as provided in Section 5(h), notwithstanding the performance or
nonperformance of Lessor of its obligations under this paragraph.
The Lessee agrees to furnish such documents and certificates as may be
necessary for the Lessor to comply with, observe and perform such covenants and
agreements.
The terms and provisions of this Fuel Lease supersede all prior
negotiations and oral understandings, if any, between the
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<PAGE>
Lessor and the Lessee with respect to the transactions contemplated hereby.
The obligations of the Lessor under this Fuel Lease and each document
or instrument delivered by the Lessor hereunder or in connection herewith are
solely the corporate obligations of the Lessor. No recourse shall be had for
the payment of any amount owing hereunder or any other obligation or claim
arising out of or based upon this Fuel Lease or any other document or instrument
delivered by the Lessor hereunder or in connection herewith against Merrill or
against any stockholder, employee, officer, director, incorporator or agent of
the Lessor. For purposes of this Section 34, the term "MERRILL" shall mean and
include Merrill and all affiliates thereof and any employee, officer, director,
incorporator, shareholder or beneficial owner of any of them; provided, however,
that the Lessor shall not be considered to be an affiliate of Merrill for
purposes of this Section 34.
The Lessor shall be entitled to assume that no Termination Event or
Lease Event of Default shall have occurred and be continuing hereunder, unless
an officer or a director of the Lessor has actual knowledge thereof or the
Lessor has received notice from any Assignee or Secured Party that such Assignee
or Secured Party considers that such a Termination Event or Lease Event of
Default has occurred and is continuing.
The captions in this Fuel Lease are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof. This Fuel
Lease shall in all respects be governed by, and construed in accordance with,
the laws of State of Illinois applicable to contracts made and performed within
the State of Illinois.
The indemnification provisions of Section 11 hereof are for the
benefit of the parties hereto and of the indemnitees named therein and Lessee
hereby expressly agrees that any such indemnitee shall be entitled to sue
thereon as though he, she or it were a party hereto.
-48-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fuel Lease to
be executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
LESSOR:
COMMED FUEL COMPANY, INC.
By: /s/ Thomas W. Widener
---------------------
Thomas W. Widener
Vice President
LESSEE:
COMMONWEALTH EDISON COMPANY
By: /s/ Dennis F. O'Brien
---------------------
Dennis F. O'Brien
Treasurer
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 23rd day of
November, 1993, by Thomas W. Widener, a Vice President of CommEd Fuel Company,
Inc., a Delaware corporation, on behalf of such corporation.
/s/ Peter J. Daane
------------------
Notary Public
(Notarial Seal)
My Commission Expires: Feb. 7, 1994
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing instrument was acknowledged before me this 23rd day of
November, 1993, by Dennis F. O'Brien, the Treasurer of Commonwealth Edison
Company, an Illinois corporation, on behalf of such corporation.
/s/ Peter J. Daane
------------------
Notary Public
(Notarial Seal)
My Commission Expires: Feb. 7, 1994
<PAGE>
SCHEDULE A
SCHEDULE OF NUCLEAR FUEL
Date:___________
<TABLE>
<CAPTION>
Assembly Allocated Allocated
Serial Acquisition Capitalized Allocated
No. Cost Cost Investment
- -------- ----------- ----------- ----------
<S> <C> <C> <C>
</TABLE>
A-1
<PAGE>
SCHEDULE B
FORM OF RENT SCHEDULE
NET INVESTMENT VALUE CONFIRMATION
QUARTER ENDED _______________
<TABLE>
<CAPTION>
===============================================================================================================================
1 2 3 4 5 6 7 8
- -------------------------------------------------------------------------------------------------------------------------------
For Information Purposes Only
-----------------------------
Assigned Allocated Allocated N.I.V as of Capitalized Other N.I.V at
Assembly Acquisition Capitalized the End of Monthly Lease Burn-Up N.I.V. the end of
Location Cost Cost Prior Quarter Charges Charges Additions this Quarter
- -------- ----------- ----------- ------------- ------------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
CommEd Fuel Company, Inc. Commonwealth Edison Company
(Lessor) (Lessee)
By: By:
-------------------------------- --------------------------------
Title Treasurer
(acknowledging acceptance) (acknowledging acceptance)
Note:
Columns 2 and 3 represent the Allocated Investment prior to the initial
commencement of Heat Production.
Column 5 represents that portion of Monthly Lease Charges attributable
to the period during the quarter when the Nuclear Fuel was not in
Heat Production.
Column 7 used only when Nuclear Fuel is added or removed or Capitalized
Costs (other than Monthly Lease Charges) are allocated to Nuclear Fuel
prior to the initial commencement of Heat Production.
Column 8 equals Column 4 plus Column 5 less Column 6 plus Column 7.
Annexes I and II are a part hereof.
Any allocation shall be made in sole judgment of Lessee.
B-1
<PAGE>
ANNEX I
CALCULATION OF BURN-UP CHARGES AND BASIC RENT
<TABLE>
<CAPTION>
=========================================================================================
1 2 3 4 5 6
- -----------------------------------------------------------------------------------------
Est. Design
Assembly Allocated MWD Output MWD MWD Burn-up Charge
Serial No. N.I.V Remaining Factor Output (Col. 4 x Col. 5)
- ---------- --------- ----------- ------ ------ -----------------
<S> <C> <C> <C> <C> <C>
</TABLE>
See Attachments I, II and III for calculation of Basic Rent.
Total Burn-up Charge =
Basic Rent Calculation:
1. Total Burn-Up Charge (from above) ...................
2. A. Quarterly Lease Charge (Annex II(a)
plus Annex II(b)) ..............................
B. Less: Capitalized Lease Charge (see Column 5
of Rent Schedule) ......................
Lease charges for quarter ......................
3. Additional Rent .....................................
Amount Due Lessor ..............................
- ------------------------------
Capitalized Lease Charge equals the Quarterly Lease Charge allocable to Nuclear
Fuel prior to initial commencement of Heat Production during the quarter.
Additional Rent excludes Capitalized Costs allocated to Nuclear Fuel prior to
the initial commencement of Heat Production.
B-2
<PAGE>
ANNEX II(a)
MONTHLY LEASE CHARGES
NUCLEAR FUEL PRIOR TO THE INITIAL COMMENCEMENT OF HEAT PRODUCTION
<TABLE>
<CAPTION>
====================================================================================================================================
1 2 3 4 5 6 7 8 9 10 11 12
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Charges
--------------------------------------------------------
Amortization of Discount on Depositary, Lessor Income on Total
--------------------------- Subor- Fees for Fees on CP Dealer, Manage- Invested Monthly
Commercial IT dinated Letters Commit- Placement ment Excess Lease
Month Paper Notes Loans IT Notes Notes of Credit ments Charges Charges Proceeds Charges
- ----- ------------ ----------- ----- -------- ------- --------- ------- ----------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Quarterly Lease Charge .......
(Capitalized)
For Information Purposes:
Unamortized discount on Commercial
Paper as of end of Quarter .........
Unamortized discount on IT Notes
as of end of Quarter ...............
* Note: Monthly Lease Charge equals the sum of Columns 2 through 10 less the
Income on Invested Excess Proceeds (Column 11).
B-3
<PAGE>
ANNEX II(b)
MONTHLY LEASE CHARGES
NUCLEAR FUEL AFTER THE INITIAL COMMENCEMENT OF HEAT PRODUCTION
<TABLE>
<CAPTION>
====================================================================================================================================
1 2 3 4 5 6 7 8 9 10 11 12
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Charges
--------------------------------------------------------
Amortization of Discount on Depositary, Lessor Income on Total
--------------------------- Subor- Fees for Fees on CP Dealer, Manage- Invested Monthly
Commercial IT dinated Letters Commit- Placement ment Excess Lease
Month Paper Notes Loans IT Notes Notes of Credit ments Charges Charges Proceeds Charges
- ----- ------------ ----------- ----- -------- ------- --------- ------- ----------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Quarterly Lease Charge ............
* Note: Monthly Lease Charge equals the sum of Columns 2 through 10 less the
Income on Invested Excess Proceeds (Column 11).
B-4
<PAGE>
SCHEDULE C
BILL OF SALE
TO
COMMED FUEL COMPANY, INC.
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned,
, a corporation (the "VENDOR")
- -------------------------------- ---------------
whose post office address is , for and in
-------------------------------------
consideration of the sum of $ paid to the Vendor upon or before the
-----------
execution and delivery of this Bill of Sale to CommEd Fuel Company, Inc.,
a Delaware corporation (the "PURCHASER") whose post office address is
, and of other good and valuable
- -------------------------------------------
considerations, the receipt and adequacy of which are hereby acknowledged by the
Vendor, hereby conveys, transfers, sells and sets over all of the personal
property consisting of the assemblies of nuclear fuel or components thereof or
other nuclear material or interests therein described in Annex I hereto (the
"NUCLEAR FUEL"), and by this Bill of sale does hereby grant, bargain, sell,
transfer and deliver the Nuclear Fuel unto the Purchaser, to have and to hold
the Nuclear Fuel, itself, its successors and assigns, forever.
The Vendor hereby warrants itself to be the true and lawful owner of the
Nuclear Fuel and to have full power, good right and lawful authority to dispose
of the same in the aforesaid manner and that the Nuclear Fuel is free and clear
of all claims, liens, security interests, and other encumbrances whatsoever; and
the Vendor, for itself, its successors and assigns does hereby covenant and
agree with the Purchaser, its successors and assigns, to warrant and defend the
true ownership of the Nuclear Fuel by the Purchaser against the claims and
demands of all and every person and persons.
The Vendor and the Purchaser hereby acknowledge that, notwithstanding the sale
of the Nuclear Fuel by the Vendor to the Purchaser hereunder, the Nuclear Fuel
will be in the possession of Commonwealth Edison Company, an Illinois
corporation, or in the possession of a Manufacturer (as defined in the Nuclear
Fuel Lease Agreement dated as of November 23, 1993, between the Purchaser, as
lessor, and Commonwealth Edison Company, as lessee) processing, storing or
reprocessing the Nuclear Fuel for the account of Commonwealth Edison Company,
pursuant to such Nuclear Fuel Lease Agreement. On the date hereof, the Purchaser
is licensed to own, but not to possess, the Nuclear Fuel, and under no
circumstances shall a transfer of possession of the Nuclear Fuel to the
Purchaser
C-1
<PAGE>
be necessary for the transfer of ownership effected and intended to be effected
by this Bill of Sale.
IN WITNESS WHEREOF, the Vendor has caused this Bill of Sale to be executed
in its corporate name, by one of its authorized officers and to be dated
, .
- --------------- ------
[Vendor]
By
--------------------------------------
Authorized Officer
ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above
written.
COMMED FUEL COMPANY, INC.
By
--------------------------------------
C-2
<PAGE>
ANNEX I
Description of the Nuclear Fuel
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<PAGE>
SCHEDULE D
FORM OF FUEL SCHEDULE
FUEL SCHEDULE NO. , dated as of , 19 , between
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CommEd Fuel Company, Inc., a Delaware corporation ("LESSOR"), whose post office
address is and Commonwealth Edison Company, an
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Illinois corporation ("LESSEE"), whose post office address is Post Office Box
767, One First National Plaza, Chicago, Illinois 60690.
W I T N E S S E T H:
WHEREAS, the Lessor and the Lessee have heretofore entered into that certain
Nuclear Fuel Lease Agreement dated as of November 23, 1993 (the "FUEL LEASE")
(defined terms therein being used herein with the same meanings as provided in
said Fuel Lease); and
WHEREAS, the Fuel Lease provides in Sections 6, 10, 18 and 19 thereof for
Fuel Schedules, amending Schedule A to the Fuel Lease, to be executed and
delivered from time to time;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration and in compliance with the requirements of the Fuel
Lease, the Lessor and the Lessee hereby agree as follows:
1. The Lessee certifies that the amounts set forth in Annex I hereto as
Acquisition Costs, Capitalized Costs and Investment, respectively, are true and
correct and have been computed in accordance with the provisions of the Fuel
Lease.
2. The Lessee requests the Lessor to accept this Fuel Schedule for the
purpose indicated:
[_] (a) Payment to the Manufacturers named in Annex I, if any, of the
amounts specified in Annex I and/or payment to the Lessee in an
amount equal to $ for costs previously incurred by the
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Lessee or paid by the Lessee directly to the Manufacturers. All of the
amounts for which payment is hereby requested are included in Acquisition
Costs and Capitalized Costs certified in paragraph 1 above and none of
said amounts has been previously paid by the Lessor pursuant to Section 6
of the Fuel Lease.
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<PAGE>
[_] (b) Release from the Fuel Lease--Annex III (pursuant to Fuel Lease
Section 10(b)).
[_] (c) Transfer of title--Annex II and/or Annex III (pursuant to Fuel
Lease Section 10(c)).
[_] (d) Movement of Nuclear Fuel--Annex II and/or Annex III (pursuant to
Fuel Lease Section 10(d)).
(e) Permitted Fuel Loan--Annex II and/or Annex III (pursuant to Fuel
Lease Section 10(e)).
3. (a) Schedule A to the Fuel Lease is hereby supplemented and amended so
as to include those assemblies of Nuclear Fuel or the component parts thereof or
interests therein described in Annex II hereto (the "ADDITIONAL NUCLEAR FUEL")
and to subject such Additional Nuclear Fuel to the Fuel Lease (and if any
Nuclear Fuel is simultaneously being removed, to eliminate from Schedule A, as
theretofore supplemented and amended, the description of assemblies listed on
Annex III hereto). The Additional Nuclear Fuel complies with all requirements of
the Fuel Lease and of the law, and all necessary recordings and filings
(including Uniform Commercial Code financing and continuation statements) have
been duly made in the public offices in which such recordings and filings must
be made to subject, and publish notice of the subjection of, such Additional
Nuclear Fuel to the Fuel Lease and to perfect a valid first security interest
therein on behalf of the Indenture Trustee, and all fees, taxes and charges
payable in connection with such recordings and filings have been paid in full by
the Lessee.
(b) The Lessee hereby covenants and agrees with the Lessor to warrant
and defend the true ownership by the Lessor of the Additional Nuclear Fuel
against the claims and demands of every person. The Lessee further warrants
that such property is, and is intended to be and remain, personal property, is
not and has not been affixed to any land and is free and clear of all claims,
liens, security interests and other encumbrances whatsoever, except as permitted
by the Fuel Lease.
4. Except as hereinbefore expressly modified and amended, the Fuel Lease is
ratified and confirmed in all respects, including, without limitation, the
obligation of the Lessee to pay all installments of Basic Rent and Additional
Rent and other amounts to be paid by the Lessee under the Fuel Lease.
5. Delivery of this Fuel Schedule No. constitutes a representation by
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the Lessee that since the date of the Fuel Lease, there has been no material
change in the condition or business of the Lessee which in any way materially
adversely affects the ability of the Lessee to perform its obligations under
the Fuel
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<PAGE>
Lease except as set forth in documents which have been filed with the Securities
and Exchange Commission and heretofore furnished to Lessor, or which are
attached as part of this Fuel Schedule No. . No event or condition has
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occurred which has resulted or is likely to result in the inability of the
Lessor to pay any Indebtedness.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Fuel
Schedule to be duly executed as of the date first above written.
COMMED FUEL COMPANY, INC.
By:
-------------------------------------
COMMONWEALTH EDISON COMPANY
By:
-------------------------------------
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<PAGE>
ANNEX I TO SCHEDULE D
<TABLE>
<CAPTION>
Allocated Allocated
Manufacturer and Acquisition Capitalized Allocated
Description of Service Cost Cost Investment
- ----------------------- ----------- ----------- ----------
<S> <C> <C> <C>
</TABLE>
D-4
<PAGE>
ANNEX II TO SCHEDULE D
DESCRIPTION OF NUCLEAR FUEL
TO BE INCLUDED WITH SCHEDULE A
<TABLE>
<CAPTION>
Net
Assembly Investment
Serial No. Value
- ---------- ----------
<S> <C>
$
</TABLE>
D-5
<PAGE>
ANNEX III TO SCHEDULE D
DESCRIPTION OF NUCLEAR FUEL TO BE RELEASED
FROM SCHEDULE A
<TABLE>
<CAPTION>
Net
Assembly Investment
Serial No. Value
- ---------- ----------
<S> <C>
$
</TABLE>
D-6
<PAGE>
SCHEDULE E
FORM OF BILL OF SALE
FROM
COMMED FUEL COMPANY, INC.*
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, COMMED FUEL
COMPANY, INC., a Delaware corporation (the "FUEL COMPANY"), whose post office
address is _______________________________________________, for and in
consideration of the sum of $___________ paid to the Fuel Company upon or before
the execution and delivery of this Bill of Sale by Commonwealth Edison Company,
an Illinois corporation (the "PURCHASER"), whose post office address is P.O. Box
767, Chicago, Illinois 60697-0767, hereby conveys, transfers, sells and sets
over to the Purchaser, its successors and assigns, all right, title, interest
and claim of the Fuel Company in and to the personal property consisting of the
assemblies of nuclear fuel or components thereof or other nuclear material
described in Annex III to Fuel Schedule No. ____, a copy of which is attached
hereto and made a part hereof (the "NUCLEAR FUEL"), and by this Bill of Sale
does hereby grant, bargain, sell, transfer and deliver the Nuclear Fuel unto the
Purchaser, to have and to hold the Nuclear Fuel unto the Purchaser, and its
successors and assigns, forever. THE NUCLEAR FUEL IS TRANSFERRED AND CONVEYED
BY THE FUEL COMPANY ON AN "AS-IS," "WHERE-IS" BASIS, WITHOUT RECOURSE AGAINST OR
REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) OF ANY KIND WHATSOEVER,
INCLUDING ANY WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR MERCHANTABILITY, ON
THE PART OF THE FUEL COMPANY, EXCEPT THAT THE FUEL COMPANY REPRESENTS AND
WARRANTS THAT IT HAS NOT VOLUNTARILY GRANTED OR CREATED ANY LIEN ON THE NUCLEAR
FUEL OTHER THAN THOSE PERMITTED BY SECTION 15 OF THE FUEL LEASE. The Nuclear
Fuel shall be delivered to the Purchaser, as a necessary incident of this Bill
of Sale, at any of the generating facilities of the Purchaser in the State of
Illinois or at facilities of a Manufacturer (designated by the Purchaser) by the
Fuel Company, its agents or a common carrier consigned to the Purchaser. The
Fuel Company hereby represents
______________________
* This document may be appropriately modified to include all Assignees having
a security interest in the relevant Nuclear Fuel and/or to substitute
another Person for Purchaser, if Purchaser has designed such other Person
in accordance with the Fuel Lease.
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<PAGE>
and warrants that it has not voluntarily granted or created any lien, exception
or restriction to attach to the Nuclear Fuel except as follows:
[Insert any liens, exceptions or restrictions permitted by Section 15 of the
Fuel Lease at time of transfer.]
IN WITNESS WHEREOF, the Fuel Company has caused this Bill of Sale to
be executed and attested by one of its duly authorized officers, and to be dated
as of _____________________, 19__.
COMMED FUEL COMPANY, INC.
By:_______________________
Title:
ATTEST:
_____________________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Indenture Trustee under
the Trust Indenture dated as of November 23, 1993, as amended, made by the Fuel
Company in the favor of Morgan Guaranty Trust Company of New York as trustee for
the benefit of the secured parties specified therein, does hereby release the
property described in Annex III to Fuel Schedule No. _____ from the lien and
security interest of said Trust Indenture. NO WARRANTY, EITHER EXPRESS OR
IMPLIED, AS TO TITLE, MERCHANTABILITY, FITNESS, SAFETY OR ANY OTHER MATTER
WHATSOEVER, IS MADE BY, OR SHALL BE DEEMED TO BE MADE BY, AND NO RECOURSE MAY BE
HAD FOR ANY REASON AGAINST, THE UNDERSIGNED OR ANY OF SUCH SECURED PARTIES.
By:__________________________________
Title:
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<PAGE>
ACCEPTANCE
This BILL OF SALE is accepted by the undersigned as of the date last
written above.
COMMONWEALTH EDISON COMPANY
By:________________________________
Title:
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<PAGE>
SCHEDULE F
FORM OF ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
COMMONWEALTH EDISON COMPANY, an Illinois corporation (the "ASSIGNOR"),
in consideration of one dollar and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, hereby sells, grants,
bargains, conveys and assigns to COMMED FUEL COMPANY, INC., a Delaware
corporation (the "ASSIGNEE"), all right, title and interest of the Assignor in,
to and under all the property described in Exhibit 1 attached hereto (all of
such property being herein collectively called the "PROPERTY").
TO HAVE AND TO HOLD the Property unto the Assignee, its successors
and assigns, for its and their own use forever.
1. The interest of the Assignor in the Property, and the interest
transferred by this Assignment, is that of absolute ownership.
2. The Assignor hereby warrants that it is the lawful owner of the
rights and interests conveyed by this Assignment and that its title to such
rights and interests is hereby conveyed to the Assignee free and clear of all
liens, charges, claims and encumbrances of every kind whatsoever, other than (i)
the amounts, if any, owing under the Contract (as such term is defined in
Exhibit 1 attached hereto), (ii) other claims, if any, of the Assignor and the
Contractor (as such term is defined in Exhibit 1 attached hereto) which may
exist as between themselves and (iii) other liens, charges, claims and
encumbrances permitted by the Fuel Lease (as hereinafter defined); and that the
Assignor will warrant and defend such title forever against all claims and
demands whatsoever.
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<PAGE>
3. In order that the Contractor may transfer to the Assignee clear
title to the Nuclear Fuel (as such term is defined in Exhibit 1 attached here)
on its delivery date, the Assignor hereby releases and transfers to the Assignee
any right, title or interest in the Nuclear Fuel which may have been acquired by
the Assignor under the Contract prior to its delivery date.
4. This Assignment is made in accordance with a Nuclear Fuel Lease
Agreement dated as of November 23, 1993, between the Assignor and the Assignee
(said Fuel Lease, as the same may from time to time be amended, modified or
supplemented, being herein called the "FUEL LEASE"). Pursuant to a Trust
Indenture dated as of November 23, 1993 (said Trust Indenture, as the same may
from time to time be amended, modified or supplemented, being herein called the
"TRUST INDENTURE"), made by Assignee in favor of Morgan Guaranty Trust Company
of New York as Indenture Trustee (the "INDENTURE TRUSTEE"), the Assignee is
assigning and granting a security interest in the Property and this Assignment
to the Indenture Trustee, for the ratable benefit of the secured parties named
in the Trust Indenture, as collateral security for all of the Secured
Obligations (as that term is defined in the Trust Indenture).
5. It is expressly agreed that, anything contained herein to the
contrary notwithstanding, (a) the Assignor shall at all times remain liable to
the Contractor to observe and perform all of its duties and obligations under
the Contract to the same extent as if this Assignment and the Trust Indenture
had not been executed, (b) the exercise by the Assignee or the Indenture Trustee
of any of the rights assigned hereunder or under the Trust Indenture as the case
may be, shall not release the Assignor from any of its duties or obligations to
the Contractor under the Contract, and (c) neither the Assignee nor the
Indenture Trustee, nor any of the other secured parties under the Trust
Indenture, shall have any obligation or liability under the Contract by reason
of or arising out of this Assignment, the Fuel Lease or the Trust Indenture, or
be obligated to perform or fulfill any of the duties or obligations of the
Assignor under the Contract, or to make any payment thereunder, or to present or
file any claim, or to take any action to collect or enforce the payment of any
amounts or the delivery of any property which may have been assigned to it or to
which it may be entitled at any time or times; provided, however, the Assignee
agrees, solely for the benefit of the Assignor, and subject to the terms and
conditions of the Fuel Lease, (i) to purchase the Nuclear Fuel from the
Contractor pursuant to the Contract and (ii) to pay to the Contractor and/or to
the Assignor or their order the respective amounts specified in the Fuel Lease
with respect to such Nuclear Fuel.
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<PAGE>
6. Notwithstanding anything contained herein to the contrary,
subject to the terms and conditions of the Fuel Lease, the Assignor may continue
to engage in Fuel Management (as such term is defined in the Fuel Lease) with
respect to the Property, including, without limitation, all dealings with the
Contractor.
7. The Assignor agrees that at any time and from time to time, upon
the request of the Assignee or the Indenture Trustee and at the sole expense of
the Assignor, the Assignor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Assignee or the Indenture Trustee may reasonably request in order to obtain the
full benefits of this Agreement and the Trust Indenture and of the rights,
powers and interests herein and therein granted, including, without limitation,
the filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the transfer of
Assignor's right, title and interest in the Property provided for hereby and the
security interest granted by the Trust Indenture and the appearance in and
prosecution or defense of any lawsuit with respect to the rights, powers and
interests herein or therein granted (or with respect to the grant herein of such
rights, powers and interests) where such appearance, prosecution or defense by
the Assignor is necessary to allow Assignee or the Indenture Trustee to obtain
the full benefits of this Agreement and the Trust Indenture. The Assignor
hereby also authorizes the Assignee and the Indenture Trustee to file any such
financing or continuation statements without the signature of the Assignor to
the extent permitted by applicable law. The Assignor will mark its books and
records pertaining to the Contract to evidence this Assignment and the transfer
of Assignor's right, title and interest in the Property provided for hereby.
8. In any suit, proceeding or action by the Assignee under the
Contract to enforce any provisions thereof, the Assignor will save, indemnify
and keep the Assignee harmless from and against all expenses, loss or damage
suffered by reason of any defense, set-off, counter-claim, recoupment or
reduction of liability whatsoever of the Contractor, arising out of a breach by
the Assignor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of the Contractor or
its successors from the Assignor, and all such obligations of the Assignor shall
be and remain enforceable against and only against the Assignor and shall not be
enforceable against the Assignee.
9. The Assignor hereby agrees that, except as permitted by Section
33 of the Fuel Lease, it will not enter into or consent to or permit any
cancellation, termination, amendment, supplement or modification of or waiver
with respect to the Contract so far as it relates to the Nuclear Fuel, nor will
the Assignor sell, assign, grant any security interest in or
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<PAGE>
otherwise transfer its rights or other interests in the Property or any part
thereof, except as permitted by the Fuel Lease.
10. The Assignor hereby represents and warrants that the Contract is
in full force and effect and represents the only agreement between the Assignor
and the Contractor with respect to the Nuclear Fuel.
11. The Assignor hereby agrees to send the Contractor a copy of this
Assignment.
12. This Assignment shall be governed by and construed in accordance
with the laws of the State of Illinois.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed and delivered as of the __ day of _________, ____.
COMMONWEALTH EDISON COMPANY
By:________________________________
Title:
The foregoing Assignment is hereby accepted:
COMMED FUEL COMPANY, INC.
By:________________________________
Title:
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<PAGE>
EXHIBIT 1 to
Assignment Agreement
--------------------
DESCRIPTION OF PROPERTY
(a) The Agreement [description of Contract between the Assignor and
[Name of Contractor] (the "CONTRACTOR") (said Agreement, as the same may from
time to time be amended, modified or supplemented being herein called the
"CONTRACT"), insofar as, and only to the extent that, the Contract relates to
[description of nuclear fuel and service to be performed] presently scheduled to
be delivered during __________, 19__ (the "NUCLEAR FUEL"); provided, however,
that all other [nuclear fuel] under the Contract shall not be deemed to be
Nuclear Fuel for purposes of this Assignment, and such nuclear fuel and the
rights relating thereto under the Contract are not assigned hereby and shall not
constitute Property; and
(b) The Property shall include, without limitation, (i) any and all
amendments and supplements to the Contract from time to time executed and
delivered, to the extent that any such amendment or supplement relates to the
Nuclear Fuel, (ii) the Nuclear Fuel, including the right to receive title
thereto, (iii) all rights, claims and proceeds, now or hereafter existing, under
any insurance, indemnities, warranties and guaranties provided for in or arising
out of the Contract, to the extent that such rights or claims relate to the
Nuclear Fuel, (iv) any claim for damages arising out of or for breach or default
by the Contractor under or in connection with the Contract insofar as it relates
to the Nuclear Fuel, (v) any other amount, whether resulting from refunds or
otherwise, from time to time paid or payable by the Contractor under or in
connection with the Contract insofar as it relates to the Nuclear Fuel and (vi)
the right of the Assignor to terminate the Contract or to perform or to exercise
or enforce any and all covenants, remedies, powers and privileges thereunder,
insofar as it or they relate to the Nuclear Fuel.
<PAGE>
CONSENT AND AGREEMENT
The undersigned________________________(the "CONTRACTOR"), has entered
into an agreement dated _________, ____, with COMMONWEALTH EDISON COMPANY, an
Illinois corporation (the "ASSIGNOR") (said agreement, as the same may be from
time to time amended, modified or supplemented, being herein called the
"CONTRACT").
The Contractor hereby acknowledges notice that (i) in accordance with
the terms of a Nuclear Fuel Lease Agreement dated as of November 23, 1993 (the
"FUEL LEASE"), between the Assignor and COMMED FUEL COMPANY, INC., a Delaware
corporation (the "ASSIGNEE"), the Assignor has assigned to the Assignee a part
of the Assignor's rights under the Contract and may hereafter assign to the
Assignee more or all of the Assignor's rights under the Contract, each such
assignment of all or part of the Contract to be effected by the execution and
delivery by the Assignor to the Assignee of an Assignment Agreement
substantially in the form of Annex A hereto (such Assignments, as any of the
same may from time to time be amended, modified or supplemented, being herein
collectively called the "ASSIGNMENTS"), and (ii) pursuant to a Trust Indenture
dated as of November 23, 1993 (said Trust Indenture, as the same may from time
to time be amended, modified or supplemented, being herein called the "TRUST
INDENTURE"), made by the Assignee in favor of Morgan Guaranty Trust Company of
New York (the "INDENTURE TRUSTEE"), for the ratable benefit of the secured
parties named in the Trust Indenture, the Assignee has assigned and granted a
security interest in all rights under the Contract from time to time assigned to
it by Assignor, as collateral security for all of the Secured Obligations (as
that term is defined in the Trust Indenture), as such obligations are described
in the Trust Indenture. The Contractor also acknowledges receipt of a copy of
the Fuel Lease and the Trust Indenture.
The Contractor hereby consents to (i) the assignment by the Assignor
to the Assignee at any time of all, and from time to time of any part, of the
Assignor's right, title and interest in, to and under the Contract and the other
property described in the Assignments, pursuant to one or more Assignments, and
(ii) the assignment and security interest in favor of the Indenture Trustee as
described above. The Contractor further consents to all of the terms and
provisions of the Trust Indenture.
The Contractor agrees that, if requested by either the Assignor or the
Assignee, it will acknowledge in writing each Assignment delivered by the
Assignor to the Assignee; provided,
<PAGE>
however, that, neither the lack of notice to nor acknowledgement by the
Contractor of any Assignment shall limit or otherwise affect the validity or
effectiveness of this consent to any and all such Assignments.
The Contractor hereby confirms to the Assignee and the Indenture
Trustee that
(a) all representations, warranties and agreements of the Contractor
under the Contract which relate to the Nuclear Fuel described in
the Assignments shall inure to the benefit of, and shall be
enforceable by, the Assignee or the Indenture Trustee to the same
extent as if originally named in the Contract as the purchaser of
such Nuclear Fuel.
(b) the Contractor understands that pursuant to the Fuel Lease the
Assignee has agreed to lease the Nuclear Fuel described in the
Assignments to the Assignor, and consents to the assignment to the
Assignor, for so long as the Fuel Lease shall be in effect or
until otherwise notified by the Assignee, of the Assignee's rights
under any warranty or agreement made by the Contractor in the
Contract with respect to such Nuclear Fuel, and
(c) [the Contractor is in the business of selling nuclear fuel of the
kind described in the Assignments, and the proposed sale of such
nuclear fuel under the Contract will be in the ordinary course of
business of the Contractor.]/1/
(d) Notwithstanding any provision to the contrary contained in the
Contract, the Contractor agrees that title to any Nuclear Fuel
covered by an Assignment shall pass directly to the Assignee under
the Contract and shall not pass to the Assignor; provided,
however, that the foregoing shall not apply to any Nuclear Fuel
for which title has already passed to Assignor prior to the
execution and delivery of an Assignment.
It is understood that neither the Assignments, the Trust Indenture nor
this Consent and Agreement shall in any way
- ---------------
/1/Bracketed language to be included in respect of Contracts pursuant to
which Lessor first acquires title to Nuclear Fuel (other than any enrichment
agreement). The following language may be used in lieu of the bracketed
language in the case of contracts involving the sale of uranium concentrates:
"The Contractor is in the business of selling concentrates which contain
uranium oxide (U\\3\\O\\g\\), and the proposed sale of such concentrates
under the Contract will be in the ordinary course of business of
the Contractor."
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<PAGE>
add to the obligations of the Contractor or the Assignor under the Contract.
This Consent and Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the undersigned has caused this Consent and
Agreement to be duly executed and delivered by its duly authorized officer as of
the ___day of____________, ____.
[Name of Contractor]
By:_____________________
Title:
COMMED FUEL COMPANY, INC.
By:______________________________
Title:
COMMONWEALTH EDISON COMPANY
By:________________________________
Title:
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<PAGE>
APPENDIX A
DEFINITIONS
As used in the Basic Documents (as defined below), the following terms
shall have the following meanings (such definitions to be applicable to both
singular and plural forms of the terms defined), except as otherwise
specifically defined therein:
"ACQUISITION COST" shall mean the purchase price of any Nuclear Fuel
owned by the Lessor at the date of the Fuel Lease and leased thereby as
described in Schedule A thereto, and the purchase price paid by the Lessor
pursuant to Section 6 of the Fuel Lease in order to acquire any portion of the
Nuclear Fuel including progress payments, if any, made by Lessor in respect of
Nuclear Fuel, together with costs of mining, milling, conversion, enrichment,
design, fabrication, installation, delivery, redelivery, containerization,
transportation, insuring, processing and any other direct costs with respect to
acquiring, recovering or preparing such portion of the Nuclear Fuel for use or
for management thereof through the Heat Production stage of its Nuclear Fuel
Cycle, and costs with respect to repairs, replacements and renewals or
Restoration of any portion of the Nuclear Fuel but excluding therefrom all
Capitalized Cost of the Lessor with respect thereto. At the option of Lessee,
Acquisition Cost shall also include costs related to storage, Cooling,
Reprocessing and Recycling of the Nuclear Fuel to the extent that storage,
Cooling, Reprocessing and Recycling is available and Lessee elects to have such
Nuclear Fuel reprocessed and remain subject to the Fuel Lease as provided in
Section 10(c) thereof. The purchase price for any part of the Nuclear Fuel
acquired by the Lessor from the Lessee shall include, at Lessee's option, all
payments made by the Lessee to the Manufacturers for such Nuclear Fuel plus all
costs, expenses, and allowances (including allowances for borrowed and other
funds used during construction) which have been incurred, accrued, or made by
Lessee in connection with such Nuclear Fuel and which are properly includible as
a cost of such Nuclear Fuel in Lessee's books of account in accordance with
Lessee's normal accounting practice and applicable regulatory requirements.
"ACT" has the meaning set forth in Section 1.3 of the Trust Indenture.
"ACTIONABLE EVENT" means a Trust Indenture Event of Default, a Credit
Agreement Event of Default or a Lease Event of Default.
"ADDITIONAL CP" means the promissory notes of the Company issued and
sold in the commercial paper market other than the Commercial Paper.
"ADDITIONAL FINANCING" means financing obtained by the Company other
than through the issuance of the Series A Notes, Commercial Paper, the
incurrence of loans under the Original
<PAGE>
Credit Agreement or a borrowing from the Lessee evidenced by a Subordinated
Note.
"ADDITIONAL IT NOTES" means the IT Notes issued from time to time
under Section 12.2 of the Trust Indenture.
"ADDITIONAL RENT" is defined in Section 5(d) of the Fuel Lease.
"AFFILIATE" of any Person means any other Person (1) which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person, (2) which owns 5% or more of the Voting Stock of such Person or (3) 5%
or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is owned by such Person
or a subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
"AFFILIATED IT NOTEHOLDERS" means the registered holders of the IT
Notes which are, or which hold for the benefit of, as nominee or otherwise, (i)
the Company, (ii) the Lessee, (iii) an Affiliate of the Company or (iv) an
Affiliate of the Lessee. The Indenture Trustee shall be entitled to rely
conclusively, and shall be fully protected in relying, on the representation of
any registered holder of the IT Notes as to such holder's status as a Non-
Affiliated Noteholder.
"AGENT" means The First National Bank of Chicago and each successor
Administrative Agent (as defined therein) under the Original Credit Agreement,
and each other banking institution which shall act as agent for the Banks which
are parties to a Credit Agreement.
"ASSIGNED AGREEMENT" means a Nuclear Fuel Contract which has been
assigned to the Company in the manner specified in Section 33 of the Fuel Lease
pursuant to a duly executed and delivered Assignment Agreement. The term
Assigned Agreement shall include a Partially Assigned Agreement.
"ASSIGNEE" means each Person to which any part of the Company's rights
or interest under the Fuel Lease shall at the time be assigned, conditionally or
otherwise, by the Company, as contemplated by Section 24 of the Fuel Lease
(including, without limitation, the Indenture Trustee).
"ASSIGNMENT AGREEMENT" means an assignment agreement substantially in
the form of Schedule F to the Fuel Lease.
"ATOMIC ENERGY ACT" shall mean the Atomic Energy Act of 1954, as
amended from time to time.
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<PAGE>
"BANK" means each of the "Banks" and "Participants" which is or
becomes a party to the Original Credit Agreement and includes all banking
institutions which shall enter into a Credit Agreement in substitution for or in
addition to the Original Credit Agreement.
"BANK NOTE" has the meaning specified in Section 1.02 of the Original
Credit Agreement.
"BANK OBLIGATIONS" means all present and future obligations and
indebtedness of the Company owing to the Banks under a Credit Agreement,
including the obligation to pay principal of and interest on the loans made
thereunder, the obligation to reimburse any of the Banks for payments made by
the Banks under a Letter of Credit, and the obligation to pay commitment and
Letter of Credit fees, costs, expenses and other charges and amounts from time
to time owed under a Credit Agreement.
"BANKRUPTCY EVENT OF DEFAULT" means (i) an event or occurrence
involving the Company of the nature defined as a Trust Indenture Event of
Default under Section 9.1.9 of the Trust Indenture or as a Credit Agreement
Event of Default under Sections 11.01(e) or (f) of the Original Credit Agreement
or (ii) an event or occurrence involving the Lessee of the nature defined as a
Lease Event of Default under Sections 25(a)(iv) or (v) of the Fuel Lease.
"BASIC DOCUMENTS" means the Fuel Lease, the Note Purchase Agreements,
the Trust Indenture, the Series A Notes, the Original Credit Agreement, any
other Credit Agreement, the Commercial Paper, the Original Letters of Credit,
the Bank Notes, the Depositary Agreement, the Consent and Agreement, the
Lessee's Letter Agreements, the Assigned Agreements, the Assignment Agreements,
the Subordination Agreement, the Subordinated Notes, each Bill of Sale, each
Fuel Schedule, the Dealer Agreement, the DTC letters of representation, the
rating agency letter agreements, the Management Agreement and other agreements
related or incidental thereto, as each of the above may from time to time be in
effect. The Basic Documents shall also include all Additional IT Notes, if any,
issued under and in accordance with the Trust Indenture, the Note Purchase
Agreements relating to such Additional IT Notes, and all notes and instruments
evidencing, and all revolving and other credit agreements relating to, any
Additional Financing, which is incurred by the Company in compliance with the
provisions of Section 6.13(b) of the Trust Indenture.
"BASIC RENT", with respect to a Basic Rent Period, shall mean the sum
of the Quarterly Lease Charge, less Capitalized Monthly Lease Charges, plus the
Burn-up Charge, as shown on a Rent Schedule for such Basic Rent Period.
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"BASIC RENT PAYMENT DATE" means, for any Basic Rent Period, the last
day of the calendar month following such Basic Rent Period, except that, if such
Basic Rent Period terminates on the Termination Settlement Date, the Basic Rent
Payment Date for such Basic Rent Period shall be such Termination Settlement
Date.
"BASIC RENT PERIOD" means each of the periods (a) commencing on, in
the case of the first such period, the Effective Date and, in the case of each
succeeding period, the first day following the immediately preceding Basic Rent
Period and (b) ending on the earliest of (i) the last day of January, April,
July and October or (ii) the Termination Settlement Date.
"BILL OF SALE" means a bill of sale substantially in the form of
either Schedule C or E to the Fuel Lease, pursuant to which title to all or any
portion of the Nuclear Fuel is transferred to the Company or to the Lessee.
"BURN-UP CHARGE" shall mean the amount shown as "Total Burn-up Charge"
on Annex I to the Rent Schedule delivered to the Lessor pursuant to Section 5(b)
of the Fuel Lease in respect of the applicable Basic Rent Payment Date.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banks are authorized by law to close in Chicago, Illinois or New
York, New York.
"CALENDAR QUARTER" means a three month period ending on the last day
of any March, June, September or December.
"CAPITALIZED COST" shall mean the sum of (i) all sales, excise, use
and personal property taxes, (ii) all legal, accounting, auditing, engineering,
insurance, financing, printing, reproduction, closing and other normally
capitalizable administrative fees and expenses actually paid or accrued by the
Lessor in connection with any acquisition or ownership of or administration
associated with the Nuclear Fuel or in connection with the transactions
contemplated by the Basic Documents and (iii) Monthly Lease Charges accrued
pursuant to the Fuel Lease which, in the Lessee's sole judgment, are allocable
to the Nuclear Fuel (x) during any stage of its Nuclear Fuel Cycle other than
after initial commencement of Heat Production or (y) during the period beginning
on the Termination Notice Date and ending on the Termination Settlement Date (in
each case as defined in Section 20(b) of the Fuel Lease) if and to the extent
that the Lessee elects to capitalize any such Monthly Lease Charges; provided,
however, that Monthly Lease Charges may be allocated to and included in
Capitalized Cost by the Lessee as set forth above only in an amount not
exceeding the sum of (i) the amount of the credit then capable of being drawn by
the Lessor under a Credit Agreement, all Additional Financings and IT Notes in
effect at the time plus (ii) the amounts available to the Lessor for
disbursement from the Collateral Account.
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"CAPITALIZED LEASE" means any and all lease obligations which are or
should be capitalized on the balance sheet of the Person in question in
accordance with generally accepted accounting principles and Statement No. 13 of
the Financial Accounting Standards Board or any successor to such pronouncement
regarding lease accounting without regard for the accounting treatment permitted
or required under any applicable state or federal public utility regulatory
accounting system unless such treatment controls the determination of the
generally accepted accounting principles applicable to such Person.
"CAPITALIZED MONTHLY LEASE CHARGES" shall mean Monthly Lease Charges
included in the Capitalized Cost of the Nuclear Fuel.
"CLOSING" means the date upon which the Assignment Agreements (if
any), the Lessee's Letter Agreement, the Consent and Agreement, the Fuel Lease,
the Trust Indenture, the Original Credit Agreement, the Note Purchase
Agreements, the Series A Notes and the Trust Agreement shall be executed and
delivered and the transactions contemplated therein consummated.
"CODE" shall mean the Internal Revenue Code of 1986, as from time to
time amended.
"COLLATERAL" has the meaning set forth in the granting clauses of the
Trust Indenture and includes all property of the Company described in any
Collateral Agreement as comprising part of the Collateral.
"COLLATERAL ACCOUNT" has the meaning set forth in Section 4.1 of the
Trust Indenture.
"COLLATERAL AGREEMENTS" means, collectively, the Trust Indenture, the
Fuel Lease, all Assignment Agreements, and any other assignment, security
agreement or instrument executed and delivered to the Indenture Trustee
hereafter relating to property of the Company which is security for the Secured
Obligations.
"COMMERCIAL PAPER" means the promissory notes of the Company issued
and sold in the commercial paper market which are entitled to the benefit of an
Original Letter of Credit issued pursuant to the Original Credit Agreement.
"COMMERCIAL PAPER ACCOUNT" means the special account maintained by the
Company with the Depositary for the purpose of reimbursing a Bank for LOC
Payments and repaying loans made under a Credit Agreement and includes all sub-
accounts created thereunder.
"COMPANY" means CommEd Fuel Company, Inc., a Delaware corporation.
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"COMPANY REPRESENTATIVE" means any person at the time designated to
act on behalf of the Company by written certificate furnished to the Lessee and
the Indenture Trustee containing the specimen signatures of such persons and
signed on behalf of the Company by its President or any Vice President. Such
certificate may designate an alternate or alternates.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by two Company Representatives and delivered
to a Responsible Officer of the Indenture Trustee.
"CONSENT AND AGREEMENT" means the Consent and Agreement of the Lessee,
dated as of November 23, 1993, as the same may from time to time be amended,
modified or supplemented.
"COOLING" shall mean the stage of the Nuclear Fuel Cycle pursuant to
which Nuclear Fuel is placed in storage following the Heat Production stage of
the Nuclear Fuel Cycle.
"CREDIT" has the meaning specified in Section 1.02 of the Original
Credit Agreement.
"CREDIT AGREEMENT" means (i) the Original Credit Agreement, and (ii)
any credit agreement entered into by the Company in substitution for or in
addition to the Original Credit Agreement which provides for the issuance of
Letters of Credit to support the issuance of Additional CP by the Company and/or
the extension of loans to the Company, as the same is from time to time in
effect, and which comprises an Additional Financing which is incurred in
compliance with the provisions of Sections 6.13(b) and 6.14 of the Trust
Indenture.
"CREDIT AGREEMENT EVENT OF DEFAULT" means any one or more of the
events specified in Section 11.01 of the Original Credit Agreement or a similar
event or events under any other Credit Agreement.
"CREDIT AGREEMENT OUTSTANDINGS" or "OUTSTANDINGS" as of any date means
the sum of (x) the principal amount of the loans outstanding on such date under
the Credit Agreements, (y) the Face Amount of all Commercial Paper and
Additional CP outstanding on such date less the Face Amount of Commercial Paper
and Additional CP which have matured for the payment of which funds are on
deposit in the Note Redemption Account and (z) the amount on such date of all
unreimbursed LOC Payments and Deferred Reimbursements. For purposes of this
definition, "FACE AMOUNT" means the principal amount thereof plus, in the case
of Commercial Paper or Additional CP issued on an interest-bearing basis, all
interest payable thereon to its stated maturity date.
"CREDIT EVENT" has the meaning specified therefor in Section 1.02 of
the Original Credit Agreement.
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"CREDIT EXPOSURE" means (i) with respect to IT Noteholders, the
aggregate principal amount of the IT Notes Outstanding, other than IT Notes
which are held by Affiliated IT Noteholders, and (ii) with respect to the Banks,
the aggregate of their Credit Amounts (as defined in the Credit Agreement).
"DEALER" means Merrill Lynch Money Markets Inc. and/or such other
entity with whom the Company enters into any Dealer Agreement.
"DEALER AGREEMENT" means the Commercial Paper Dealer Agreement dated
as of November 23, 1993, between the Company and Merrill Lynch Money Markets
Inc., and/or such other or further agreements for the distribution and placement
of Commercial Paper or Additional CP as may be entered into by the Company, in
each case as the same may be modified, supplemented or amended from time to
time.
"DEFERRED REIMBURSEMENTS" has the meaning specified in Section 1.02 of
the Original Credit Agreement.
"DEPOSITARY" means the Person which has been appointed by the Company
to act as depositary, issuing agent and paying agent for the Commercial Paper or
Additional CP, and which has entered into a Depositary Agreement with the
Company.
"DEPOSITARY AGREEMENT" means the agreement among the Company and the
Person acting as the Depositary, pursuant to which such Person acts as
depositary, issuing agent and paying agent for the Commercial Paper or
Additional CP.
"DESIGNATED HOLDERS" means, at any time when any action is taken or is
required to be taken by any Secured Party acting as provided in Section 1.3 of
the Trust Indenture, the holders of (i) at least 66-2/3% in principal amount of
all Secured Obligations at the time outstanding, (ii) at least 66-2/3% of the
Credit Agreement Outstandings under each Credit Agreement, (iii) at least
66-2/3% of the Outstanding Series A Notes, and (iv) at least 66-2/3% of the
Outstanding Additional IT Notes, provided, however, that in any determination
pursuant to clause (ii) with respect to any Credit Agreement, the percentage of
Credit Agreement Outstandings, lender commitments or combination thereof
required by the terms of such Credit Agreement for the Banks thereunder to
direct the Agent thereunder to take (or instruct the Indenture Trustee to take)
the action for which a determination of Designated Holders is being made shall
be controlling, so long as such percentage is at least 66-2/3%, and, provided
further, that in any determination pursuant to clause (iii) and clause (iv), IT
Notes that are held by Affiliated IT Noteholders shall be excluded in
determining the percentage of Outstanding IT Notes.
"DISCLOSURE DOCUMENTS" has the meaning specified in Section 10.1 of
the Original Note Purchase Agreements.
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"DISCOUNTED VALUE" means, with respect to any principal amount of any
Series A Note which is to be redeemed or is subject to acceleration, the amount
obtained by discounting all Remaining Scheduled Payments with respect to such
principal amount from their respective scheduled due dates to the date of any
prepayment of such principal amount, in accordance with accepted financial
practice and at a discount factor (applied on a semiannual basis) equal to the
Reinvestment Yield with respect to such principal amount.
"EFFECTIVE DATE" means November 23, 1993.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
"ESTIMATED RESIDUAL VALUE" shall mean the salvage value (stated in
dollars) with respect to any portion of Nuclear Fuel after it shall have fully
completed Heat Production. The estimate of residual value shall not affect the
Lessee's obligations with respect to Fuel Management pursuant to Section 9 of
the Fuel Lease.
"EXISTING FUEL COMPANY" shall mean individually CWE Fuel Company
Inc., a Delaware corporation, or Commonwealth Fuel Company II, a Delaware
corporation, and collectively, such companies shall be referred to as the
"EXISTING FUEL COMPANIES."
"FAIR MARKET VALUE" shall be determined by the Lessee in good faith
and in accordance with applicable engineering and accounting standards, if any,
such determination to be evidenced, if and when requested by Lessor, by a
certificate executed by the President or a Vice President or the Treasurer or an
Assistant Treasurer of the Lessee.
"FUEL LEASE" means the Nuclear Fuel Lease Agreement dated as of
November 23, 1993, between the Company, as Lessor, and Commonwealth Edison
Company, as Lessee, as the same may from time to time be amended, modified or
supplemented in accordance with the provisions thereof and of the Trust
Indenture.
"FUEL MANAGEMENT" shall mean the design of, contracting for,
determining the price and terms of acquisition of, management, movement,
removal, disengagement, use, storage and other activities in connection with the
acquisition, utilization, storage and disposal of the Nuclear Fuel, and
sometimes is referred to in the Fuel Lease as "management".
"FUEL SCHEDULE" shall mean an instrument in substantially the form of
Schedule D to the Fuel Lease, pursuant to which Schedule A to the Fuel Lease is
amended in connection with a request by the Lessee for payment with respect to
Nuclear Fuel pursuant to Section 6 of the Fuel Lease or in connection with a
removal or a replacement of Nuclear Fuel pursuant to Sections 10, 18(a) or 19(b)
thereof.
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"GENERATING FACILITY" means any nuclear reactor (except the nuclear
reactor designated as "Dresden Unit 1") located in the State of Illinois in
which Lessee has a majority ownership interest.
"GRANTING CLAUSES" means the portion of the Trust Indenture prior to
Section 1, beginning with the statement of consideration.
"HEAT PRODUCTION" shall mean that stage of the Nuclear Fuel Cycle when
the Nuclear Fuel is loaded into the reactor core of any Generating Facility and
is being consumed to produce heat, pursuant to the process of nuclear fission,
in the production of electric energy.
"HEREOF", "HEREIN", "HEREUNDER" and words of similar import when used
in a Basic Document refer to such Basic Document as a whole and not to any
particular section or provision thereof.
"IMPOSITIONS" means all payments required by public or governmental
authority in respect of any property subject to the Fuel Lease or any
transaction pursuant to the Fuel Lease or any right or interest held by virtue
of the Fuel Lease.
"INDEBTEDNESS" means, with respect to the Company, (i) all items
(including, without limitation, Capitalized Leases but excluding shareholders'
equity and minority interests) which in accordance with generally accepted
accounting principles should be reflected on the liability side of a balance
sheet as at the date as of which Indebtedness is to be determined; (ii) all
obligations and liabilities (whether or not reflected upon such balance sheet)
secured by any Lien existing on the property held subject to such Lien, whether
or not the obligation or liability secured thereby shall have been assumed; and
(iii) all guarantees, endorsements (other than for collection in the ordinary
course of business) and contingent obligations in respect of any liabilities of
the type described in clauses (i) and (ii) of this definition (whether or not
reflected on such balance sheet); provided, however, that the term
"INDEBTEDNESS" shall not include deferred taxes.
"INDEBTEDNESS FOR BORROWED MONEY" means all Indebtedness in respect of
borrowed money or the deferred purchase price of property or services.
"INDENTURE TRUSTEE" means the institution designated as such in the
Trust Indenture and its permitted successors.
"INSTITUTIONAL INVESTOR" shall mean any Person that is a "qualified
institutional buyer" as defined in Rule 144A promulgated under the Securities
Act of 1933.
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"INSURANCE REQUIREMENTS" means all terms of any insurance policy or
indemnification agreement covering or applicable to any Nuclear Fuel or
Generating Facilities and all requirements of the issuer of any such policy or
agreement necessary to keep such insurance or agreements in force, and all
orders, rules, regulations and other requirements of the Federal Energy
Regulatory Commission, the Nuclear Regulatory Commission, the National Board of
Fire Underwriters or any other body at any time exercising similar functions
with respect to electric utility properties, which are applicable to or affect
any of the Generating Facilities, any of the Nuclear Fuel or any operation, use
or condition of any thereof.
"INTEREST PAYMENT DATE" means, with respect to the IT Notes, the dates
specified for the payment of interest on the respective IT Notes.
"INVESTMENT" shall mean, with respect to any portion of the Nuclear
Fuel, the sum of (i) the Acquisition Cost for such portion, plus (ii) the
Capitalized Cost for such portion, which has been paid or accrued by the Lessor,
including payments by the Lessor to the Lessee.
"IT NOTEHOLDER" or "HOLDER OF ANY IT NOTE" means any Person in whose
name an IT Note is registered.
"IT NOTES" means the promissory notes issued by the Company from time
to time under and in accordance with the terms, provisions and limitations of
the Trust Indenture, and shall include the Series A Notes and any Additional IT
Notes.
"LEASE DEFAULT" means any of the events specified in Section 25(a) of
the Fuel Lease, whether or not any requirement for notice or lapse of time or
other condition has been satisfied.
"LEASE EVENT OF DEFAULT" has the meaning specified therefor in Section
25(a) of the Fuel Lease.
"LEGAL REQUIREMENTS" means all requirements having the force of law
applicable at any time to any or all of the Generating Facilities, or to the
Lessee as a licensee thereof, any of the Nuclear Fuel, any transaction pursuant
to the Fuel Lease or any right or interest held by the Company or the Lessee
pursuant to the Fuel Lease.
"LESSEE" shall mean Commonwealth Edison Company, an Illinois
corporation, or any successor or successors to its rights and obligations as
Lessee under the Fuel Lease.
"LESSEE REPRESENTATIVE" means any person at the time designated to act
on behalf of the Lessee by a written certificate furnished to the Company and
the Indenture Trustee containing the specimen signatures of such persons and
signed on behalf of the Lessee by any of its officers. Such certificate
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may designate an alternate or alternates. A Lessee Representative may be an
employee or representative of the Lessee.
"LESSEE'S LETTER AGREEMENT" means any letter agreement furnished by
the Lessee in connection with the issuance of any IT Notes by the Company or in
connection with any Credit Agreement, and shall include the "Lessee's Letter
Agreements" referred to in Section 5.2(f) of the Note Purchase Agreements
relating to the Series A Notes and the "Lessee's Letter Agreement to Banks"
delivered in connection with the Original Credit Agreement.
"LESSOR" shall mean CommEd Fuel Company, Inc., a Delaware corporation,
or any successor or successors to its rights and obligations as Lessor under the
Fuel Lease.
"LESSOR'S BILL OF SALE" means an instrument substantially in the form
of Schedule E to the Fuel Lease.
"LETTER OF CREDIT" means (a) an Original Letter of Credit and (b) one
or more letters of credit issued pursuant to any other Credit Agreement which
provide credit support for Additional CP issued by the Company.
"LIEN" means any mortgage, pledge, lien, security interest, title
retention, charge or other encumbrance of any nature whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to execute and deliver any financing
statement under the Uniform Commercial Code of any jurisdiction).
"LOAN" means any Base Rate Loan, CD Rate Loan or Libor Rate Loan made
by the Banks (or any Bank) to the Company pursuant to Article II of the Original
Credit Agreement.
"LOC PAYMENT" means any payment made by a Bank under a Letter of
Credit.
"MANUFACTURER" means (a) any Person which supplies any component of,
or goods or services (including without limitation, enrichment, fabrication,
financing, transportation, storage and processing) in connection with, Nuclear
Fuel at any stage of the Nuclear Fuel Cycle, or any agent or licensee of any
such supplier, (b) any regulated electric company, and (c) any Person with
authority to convey title to nuclear fuel to any regulated electric company.
"MANAGEMENT AGREEMENT" means the Management Agreement dated as of
November 23, 1993 between the Company and Merrill Lynch Money Markets Inc., as
the same may be from time to time be amended, modified, or supplemented.
"MANAGEMENT FEE" means the amount of $50,000 per annum.
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"MAXIMUM OUTSTANDING IT NOTES LIMIT" has the meaning specified
therefor in Section 12.3(B)(ii) of the Trust Indenture.
"MONTHLY LEASE CHARGE" shall mean for any
calendar month during the term of the Fuel Lease:
(i) an accrual for such month of (1) all interest expense and all
amortization of debt discount of the Lessor (whether or not paid),
with respect to all outstanding Commercial Paper, IT Notes and other
Indebtedness or liability incurred or owed by the Lessor pursuant to
the Basic Documents and (2) all commitment, standby letter of credit
facility and other fees, costs and expenses (whether or not paid), if
any, incurred or owed by the Lessor pursuant to the Basic Documents;
plus
(ii) an accrual for such month with respect to all amounts paid or
due and payable by the Lessor with respect to the transactions
contemplated by the Basic Documents for fees and expenses for
depositaries or issuing agents' expenses, Dealers for the Commercial
Paper and/or Additional CP, and Placement Agents for the IT Notes;
plus
(iii) an accrual for such month of a management charge composed of
the cost recovery for all administrative, accounting and all other
management services including the Management Fee (other than fees,
expenses and costs referred to in the foregoing clauses (i) and (ii),
charges for auditing by an independent certified public accounting
firm and other professional fees and legal fees and expenses) for the
twelve-month period as projected by the Lessor and provided to and
reviewed by the Lessee beginning each January 1, adjusted annually for
the difference between the Lessor's projected management fee and the
amount of such costs actually incurred for the preceding twelve-month
period, divided by twelve; and minus
(iv) Lessor's cash income for such month on investment of moneys
received in connection with the transactions contemplated by the Basic
Documents, other than moneys received pursuant to (iii) above.
Any figure used in the computation of any component of the Monthly Lease Charge
shall be stated with sufficient accuracy to enable calculation of the Monthly
Lease Charge to the nearest penny. No accrual, charge or other item which would
constitute a part of the Acquisition Cost shall be included in the computation
of the Monthly Lease Charge.
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"MORTGAGE" shall mean that certain Mortgage of the Lessee to
Continental Bank, National Association, and M.J. Kruger, as trustees, dated as
of July 1, 1923, as the same has been and may from time to time be amended or
supplemented and in effect.
"MWD FACTOR" shall mean a factor determined by dividing (i) the Net
Investment Value for an assembly of Nuclear Fuel by (ii) the estimated amount of
heat remaining, measured in thermal megawatt days, that such assembly will
produce during Heat Production. The MWD Factor shall be carried to such accuracy
as needed to calculate the Basic Rent to the nearest penny.
"MWD OUTPUT" means the amount of heat, measured in thermal megawatt
days, that an assembly produced during the period in question. .
"NET INVESTMENT VALUE" or "N.I.V." shall mean, with respect to any
portion of the Nuclear Fuel (excluding any portion of the Nuclear Fuel loaned)
at any time leased under the Fuel Lease, the excess of the amount of the
Investment in such portion over the aggregate amount of Burn-up Charges
theretofore paid by the Lessee to the Lessor in respect of such portion.
"NON-AFFILIATED IT NOTEHOLDER" means the registered holders of the IT
Notes, other than any holder which is an Affiliated IT Noteholder.
"NOTE PURCHASE AGREEMENTS" means (i) the several but identical (except
for the name of the purchaser) Note Purchase Agreements, each dated as of
November 23, 1993, relating to the issue and sale by the Company of the Series A
Notes, as from time to time in effect (the "ORIGINAL NOTE PURCHASE AGREEMENTS"),
and (ii) any similar agreements hereafter entered into by the Company relating
to the purchase and sale of Additional IT Notes pursuant to the Trust Indenture
or a supplemental indenture thereto.
"NOTE PURCHASE AGREEMENT OBLIGATIONS" means the principal of, premium,
if any, and interest on the Outstanding IT Notes and all other costs, fees and
expenses and amounts required to be paid by the Lessor on or with respect to the
Outstanding IT Notes or under the Note Purchase Agreements relating thereto.
"NOTE REDEMPTION ACCOUNT" means the special account maintained by the
Depositary for the purpose of effecting payment of Commercial Paper or
Additional CP under the Depositary Agreement and includes all sub-accounts
created thereunder.
"NOTICE OF AN ACTIONABLE EVENT" means (i) a certificate of any of the
IT Noteholders that an Actionable Event has occurred, (ii) a certificate of the
Agent that an Actionable Event has occurred, or (iii) whether or not any
certificate or notice thereof shall have been delivered to the Indenture
Trustee, a Bankruptcy Event of Default. A Notice of an
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Actionable Event has been "GIVEN" (a) in the case of a Bankruptcy Event of
Default, when such Bankruptcy Event of Default occurs or (b) in the case of any
other Notice of an Actionable Event, when the certificate referred to in either
clause (i) or clause (ii) of the immediately preceding sentence has actually
been received by a Responsible Officer of the Indenture Trustee. A Notice of an
Actionable Event has been "RESCINDED" when, after a Notice of an Actionable
Event (other than a Bankruptcy Event of Default) has been given, the Person
giving such Notice has subsequently delivered to a Responsible Officer of the
Indenture Trustee a certificate stating that there exists no Actionable Event or
when, after a Bankruptcy Event of Default, such Bankruptcy Event of Default is
no longer continuing and a Responsible Officer of the Indenture Trustee has
received a certificate to that effect from the Designated Holders. A Notice of
an Actionable Event is "OUTSTANDING" at all times after such Notice of an
Actionable Event has been given until such time, if any, as such Notice of an
Actionable Event has been rescinded.
"NUCLEAR FUEL" means the separate assemblies of nuclear fuel and
materials and components thereof or portions of separate assemblies more
particularly described in Schedule A to the Fuel Lease, as amended from time to
time by means of a Fuel Schedule, in the respective forms or interests
(including undivided or partial ownership interests) therein in which such
assemblies and components exist at each stage of the Nuclear Fuel Cycle,
consisting of substances (excluding unmined ores) and equipment which, when
loaded into a nuclear reactor, are intended to produce heat through the fission
process, together with all attachments, accessories, parts and additions and all
improvements and repairs thereto, and all replacements thereof, substitutions
therefor and additions thereto; provided, however, that the term Nuclear Fuel
shall not include any assemblies, components or other items purchased and paid
for by the Lessee pursuant to the provisions of Section 10(b) of the Fuel Lease
or loaned to any one or more Nuclear Fuel Users pursuant to the provisions of
Section 10(e) of the Fuel Lease.
"NUCLEAR FUEL CONTRACT" means any contract, as from time to time
amended, modified or supplemented, entered into by the Lessee with one or more
Manufacturers relating to the acquisition of Nuclear Fuel or any service in
connection with the Nuclear Fuel and assigned to the Company pursuant to the
Fuel Lease as an Assigned Agreement.
"NUCLEAR FUEL CYCLE" shall mean the various stages herein defined in
the process, whether physical or chemical, by which the component parts of the
Nuclear Fuel are mined, milled, converted, processed, enriched, designed,
fabricated into assemblies utilizable for Heat Production, loaded or installed
into a reactor core, utilized, disengaged, cooled, stored and/or reprocessed,
together with all incidental processes and engineering with respect to the
Nuclear Fuel at any stage of such Nuclear Fuel Cycle.
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"NUCLEAR FUEL USER" means any public utility company; any financing
vehicle of any public utility; any Manufacturer; or any Person in the business
of brokering Nuclear Fuel.
"NUCLEAR REGULATORY COMMISSION" means the independent regulatory
commission of the United States Government existing under the authority of the
Energy Reorganization Act of 1974, as amended, or any successor organization or
organizations performing any identical or substantially identical licensing and
related regulatory functions.
"OBLIGATIONS" has the same meaning as the term Secured Obligations.
"OFFICER'S CERTIFICATE" means, with respect to any corporation, a
certificate signed by the President, any Vice President, the Treasurer or any
Assistant Treasurer of such corporation, and with respect to any other entity, a
certificate signed by an individual generally authorized to execute and deliver
contracts on behalf of such entity.
"OPINION OF COUNSEL" means a written opinion of counsel who is
acceptable to the Indenture Trustee, or where it is stated as being an opinion
of counsel of a particular party, who is acceptable to such party. The counsel
may be counsel to the Company, the Indenture Trustee or the Lessee.
"ORIGINAL BILLS OF SALE" shall mean the bills of sale, dated as of the
date of the Closing, for nuclear fuel transferred from CWE Fuel Company Inc. and
Commonwealth Fuel Company II to the Lessor.
"ORIGINAL CREDIT AGREEMENT" shall mean the Credit Agreement dated as
of November 23, 1993, among the Lessor, The First National Bank of Chicago,
Canadian Imperial Bank of Commerce, New York Agency and Credit Suisse, New York
Branch, and the other Banks which are, or become, parties thereto, as the same
may be modified, supplemented or amended from time to time.
"ORIGINAL LETTER OF CREDIT" shall mean each letter of credit,
substantially in the form of Exhibit C to the Original Credit Agreement, issued
by a Bank under the Original Credit Agreement or any letter of credit issued
thereunder in substitution therefor.
"OUTSTANDING", when used with reference to IT Notes, or "IT NOTES
OUTSTANDING," shall mean all IT Notes which have been authenticated and
delivered by the Indenture Trustee under the Trust Indenture excluding (i) each
of the following:
(a) IT Notes cancelled or purchased by the Lessor or delivered
to the Indenture Trustee for cancellation;
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(b) IT Notes that have become due (at maturity or on redemption,
acceleration or otherwise) and for the payment, including premium, if
any, and interest accrued to the due date, of which sufficient moneys
are held by the Indenture Trustee; and
(c) IT Notes in lieu of which others have been authenticated under
Section 2.5 of the Trust Indenture (relating to registration and
exchange of IT Notes) or Section 2.6 of the Trust Indenture (relating
to mutilated, lost, stolen, or destroyed IT Notes);
and (ii) in connection with any distribution of proceeds or payments in respect
of any sale or other disposition of any Collateral under any of the Collateral
Agreements or upon enforcement of any of the remedies provided by the Collateral
Agreements, IT Notes held by Affiliated IT Noteholders, except after the prior
payment in full of all IT Notes not held by Affiliated IT Noteholders.
"OUTSTANDING IT NOTE INDEBTEDNESS" means, at any particular time, the
aggregate principal balance remaining unpaid on the IT Notes then issued and
Outstanding.
"PARTIALLY ASSIGNED AGREEMENT" means a Nuclear Fuel Contract which has
been assigned, in part but not in full, to the Company in the manner specified
in Section 33 of the Fuel Lease, pursuant to a duly executed and delivered
Assignment Agreement.
"PARTICIPANT" shall have the meaning set forth in Section 1.02 of
the Original Credit Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, created by
Section 4002(a) of ERISA and any successor thereto.
"PERMITTED FUEL LOAN" has the meaning specified in Section 10(e)
of the Fuel Lease.
"PERMITTED LIENS" means the Liens permitted by Section 15 of the Fuel
Lease, except that as used in the Indenture, the Note Purchase Agreements or any
other Basic Documents (other than the Fuel Lease), Permitted Liens do not
include any Lien created by the Lessor other than the Lien of the Indenture and
the Collateral Agreements.
"PERSON" means any individual, partnership, joint venture, limited
liability company, corporation, trust, unincorporated organization or other
business entity or any government or any political subdivision or agency
thereof.
"PLACEMENT AGENT" means Merrill Lynch & Co., Inc., as Placement Agent
for the Series A Notes, and any other person or entity subsequently acting as
Placement Agent for any Additional IT Notes issued as provided in the Trust
Indenture.
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<PAGE>
"PLAN" means, with respect to any Person, any plan of a type described
in Section 4021(a) of ERISA in respect of which such Person is an "employer" or
a "substantial employer" as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively.
"PRINCIPAL PAYMENT DATE" means such dates, if any, as are specified in
any IT Note and dates specified in any Note Purchase Agreement or the Trust
Indenture, as dates prior to maturity upon which principal payments shall be
made.
"PUBLIC UTILITY HOLDING COMPANY ACT" means the Public Utility Holding
Company Act of 1935, as from time to time amended.
"QUALIFIED INSTITUTION" means either a commercial bank organized under
the laws of, and doing business in, the United States of America or in any State
thereof, which has a combined capital, surplus and undivided profits of at least
$300,000,000 having trust powers.
"QUARTERLY LEASE CHARGE" shall mean the sum, for any Basic Rent
Period, of the aggregate of the Monthly Lease Charges incurred with respect to
all portions of the Nuclear Fuel subject to the Fuel Lease at any time during
such period.
"RECYCLING" shall mean the use of uranium and/or plutonium or any
other material recovered from Nuclear Fuel in the preparation of new Nuclear
Fuel.
"REINVESTMENT YIELD" means, with respect to any principal amount of
any Series A Note which is to be redeemed or is subject to acceleration, the sum
of 50 basis points plus the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the Business Day next
preceding the date of any prepayment of such principal amount, on the display
designated as "Page 678" on the Telerate Service (or such other display as may
replace Page 678 on the Telerate Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of such
principal amount as of the date of any prepayment of such principal amount, or
(ii) if such yields shall not be reported as of such time or the yields reported
as of such time shall not be ascertainable, the Treasury Constant Maturity
Series yields reported, for the latest day for which such yields shall have been
so reported as of the Business Day next preceding the date of prepayment with
respect to such principal amount, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such principal amount as of the date of prepayment of such principal
amount. Such implied yield shall be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between reported
yields.
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<PAGE>
"RELATED PERSON" means, with respect to any Person, any trade or
business, (whether or not incorporated) which, together with such Person, is
under common control as described in Section 414(c) of the Code.
"REMAINING AVERAGE LIFE" means, with respect to any principal amount
of any Series A Note which is to be redeemed or is subject to acceleration, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such principal amount into (ii) the sum of the products obtained by
multiplying (a) each Remaining Scheduled Payment of such principal amount (but
not of interest thereon) by (b) the number of years (calculated to the nearest
one-twelfth year) which will elapse between the date of any prepayment with
respect to such principal amount and the scheduled due date of such Remaining
Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to any principal
amount of any Series A Note which is to be redeemed or is subject to
acceleration, all payments of such principal amount and interest thereon that
would be due on or after any prepayment with respect to such principal amount if
no payment of such principal amount were made prior to its scheduled due date.
"RENT SCHEDULE" shall mean an instrument in substantially the form of
Schedule B to the Fuel Lease, used for the purpose of setting forth the N.I.V.,
Burn-up Charges and Monthly Lease Charges for the Nuclear Fuel.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"REPROCESSING" shall mean the stage of the Nuclear Fuel Cycle in which
the Nuclear Fuel, after it has completed Heat Production and Cooling, is
separated into recovered forms of uranium, plutonium and other radioactive
materials, or any process or processes used in place thereof.
"RESPONSIBLE OFFICER" means a duly elected or appointed, authorized,
and acting officer, agent or representative of the Person acting. "RESPONSIBLE
OFFICER," when used with respect to the Indenture Trustee, means any officer of
the Indenture Trustee assigned by it to administer its corporate trust matters.
"RESTORATION" shall mean the repair, reconstruction or replacement of
all or any portion of the Nuclear Fuel which has been damaged, destroyed, lost,
stolen or rendered unusable or which has been affected by a Taking, as nearly as
possible to the value, condition and character of such portion, and in its
location, immediately prior to such damage, destruction, loss, theft or Taking,
or the replacement of any assembly of the Nuclear Fuel so damaged, lost, stolen,
destroyed or affected by a Taking with Nuclear Fuel having an equivalent value
and Heat
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<PAGE>
Production capacity, in any case with only such alterations and additions as may
be made at the Lessee's election and as will not diminish the fair market value
or usefulness of the Nuclear Fuel so repaired, reconstructed or replaced.
"SECURED OBLIGATIONS" means:
(a) all Note Purchase Agreement Obligations,
(b) all Bank Obligations, and
(c) all obligations of the Company in respect of any Additional
Financing which is incurred in compliance with the provisions of
Section 6.13(b) of the Trust Indenture.
"SECURED PARTIES" means (i) the holders from time to time of the Bank
Obligations, (ii) the holders from time to time of the Note Purchase Agreement
Obligations, and (iii) the lenders under any Additional Financing which is
incurred in compliance with the provisions of Section 6.13(b) of the Trust
Indenture.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as from time to
time amended.
"SERIES A NOTEHOLDER" means any Person in whose name a Series A Note
is registered.
"SERIES A NOTE PURCHASER" means the Purchasers as defined in Section
2.1 of the Original Note Purchase Agreements.
"SERIES A NOTES" means the Notes issued pursuant to and referred to as
such in Sections 2.1 and 12.1 of the Trust Indenture.
"STORAGE FACILITY" shall mean any facility which is used for the
purpose of storing the Nuclear Fuel during any stage of the Nuclear Fuel Cycle.
"SUBORDINATED NOTE" means a promissory note of the Company to the
Lessee issued pursuant to and containing the legend and provisions required by
the Subordination Agreement.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated as
of November 23, 1993 among the Company, the Lessee and the Indenture Trustee.
"TAKING" means a loss of the title to, ownership of, or use and/or
possession of Nuclear Fuel or any Generating Facility, or any interest therein
or right accruing thereto, as the result of or in lieu or in anticipation of the
exercise of the rights of
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<PAGE>
condemnation or eminent domain pursuant to any law, general or special, or by
reason of the temporary requisition of the use of Nuclear Fuel or any Generating
Facility by any governmental authority, civil or military.
"TERMINATION EVENT" has the meaning specified in Section 20(a) of the
Fuel Lease.
"TERMINATION NOTICE DATE" is defined in Section 20(b) of the Fuel
Lease.
"TERMINATION RENT" shall mean an amount which when added to the Net
Investment Value then payable by the Lessee pursuant to Section 20(b) or Section
25(b) of the Fuel Lease, as the case may be, together with funds available to
the Lessor from the Collateral Account, will be sufficient to enable the Lessor
(i) to retire, pursuant to the terms of the Basic Documents, all of the Lessor's
then outstanding obligations under (A) all Note Purchase Agreements, including
all IT Notes issued pursuant thereto, (B) each Credit Agreement, including all
Commercial Paper and Bank Notes issued pursuant thereto, (C) all Additional CP,
and (D) all Additional Financings, (ii) to pay all charges, premiums and fees
owed to all holders of IT Notes under the Note Purchase Agreements applicable
thereto and the Banks under a Credit Agreement and to any Assignees thereof and
(iii) to pay all other obligations of the Company incurred in connection with
the implementation of the transactions contemplated by the Basic Documents.
"TERMINATION SETTLEMENT DATE" has the meaning specified in Section
20(b) of the Fuel Lease.
"TRUST INDENTURE" or "INDENTURE" means the Trust Indenture dated as of
November 23, 1993, between the Lessor and the Indenture Trustee, as the same may
from time to time be amended, modified or supplemented by one or more
supplemental indentures or other written instruments entered into by the Company
and the Indenture Trustee pursuant to the terms of Section 8, 11 or 16 of the
Trust Indenture.
"TRUST INDENTURE DEFAULT" means any of the events specified in Section
9.1 of the Trust Indenture, whether or not any requirement for notice or lapse
of time or other condition has been satisfied.
"TRUST INDENTURE EVENT OF DEFAULT" has the meaning specified in
Section 9.1 of the Trust Indenture.
"UNAVOIDABLE DELAYS" shall mean delays due to causes not reasonably
within the Lessee's control, including but not limited to, acts of civil or
military authority (including courts), acts of God, war, riot, insurrection or
sit-ins, any act, delay or failure to act on the part of any governmental
authority (federal, state or local), blockages, embargoes,
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<PAGE>
sabotage, epidemics, fires, floods, storms, strikes, work stoppages, or other
labor difficulties, railroad car, barge or truck shortages, wrecks, delays in
transportation, breakdowns in equipment or machinery including any component of
Lessee's transmission or generating system or any other failure or delay beyond
Lessee's reasonable control provided that none of the foregoing causes shall be
deemed beyond its reasonable control of the Lessee unless Lessee shall have made
reasonable efforts and exercised due diligence to remove such cause, and
provided further that lack of funds shall not be deemed a cause beyond the
reasonable control of Lessee.
"VOTING STOCK" shall means Securities, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect the corporate
directors (or Persons performing similar functions).
"YIELD-MAINTENANCE PREMIUM" means, with respect to any Series A Note,
a premium equal to the excess, if any, of the Discounted Value of such principal
amount of such Series A Note over the sum of (i) such principal amount plus (ii)
interest accrued thereon to any prepayment with respect to such principal
amount. The Yield-Maintenance Premium shall in no event be less than zero.
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<PAGE>
Exhibit (10)-3
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
1994 LONG-TERM PERFORMANCE UNIT AWARD
FOR EXECUTIVE AND GROUP LEVEL EMPLOYES
PAYABLE IN 1995
UNDER THE
1993 LONG-TERM INCENTIVE PLAN
Commonwealth Edison Company, an Illinois corporation (the "Company"),
hereby grants to each employe described in Section 1 hereof (each, an "Employe")
as of January 25, 1994 (the "Grant Date"), in accordance with the provisions of
the Commonwealth Edison Company 1993 Long-Term Incentive Plan (the "Plan"), a
performance unit award (each, an "Award") expressed as a number (the "Base
Unit") of performance units, in the amount and upon and subject to the
restrictions, terms and conditions set forth below. Capitalized terms not
defined herein shall have the meanings specified in the Plan.
1. Recipients of Awards. Recipients of Awards hereunder shall consist of
the following employes of the Company and of Commonwealth Edison Company of
Indiana, Inc.: (i) each Group Level employe, (ii) each Executive and (iii) each
Officer, including, without limitation, the Chairman of the Company, the
President of the Company and each Senior Vice President of the Company.
2. Base Unit. The Base Unit for each Award shall be a number (rounded to
the nearest whole number) equal to (a) the product of multiplying (i) the Salary
(as defined herein) of the Employe receiving such Award by (ii) the applicable
percentage set forth below, divided by (b) $27:
Chairman: 25%
President: 25%
Senior Vice Presidents: 20%
Officers, other than as listed above: 15%
Executives, other than as listed above: 10%
Group Level employes, other than as listed above: 10%
For the purposes of calculating the Base Unit, an Employe's Salary shall be such
Employe's monthly scheduled rate of pay as of the Grant Date multiplied by 12
together with the income from such Employe's Deferred Compensation Units.
3. Performance Period. The Performance Period shall commence on January
25, 1994 and end on December 31, 1994.
4. Payment Amount/Stockholder Protection. The amount payable in
connection with an Award (a "Payment Amount") shall be a dollar amount based on
the Base Unit and on the Company's percentile rank, with the percentile rank
corresponding to the highest performance in the performance group being 100 and
the
<PAGE>
percentile rank corresponding to the lowest performance in the performance group
being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for the
Performance Period, and calculated as follows:
Below Threshold Level. If the Company Rank is lower than the 25th
percentile in the Ranking, then the Payment Amount shall be zero.
Between Threshold Level and Target Level. If the Company Rank is no
lower than the 25th percentile in the Ranking and no higher than the 49th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2 and the denominator of which is 100.
Between Target Level and Maximum Level. If the Company Rank is no
lower than the 50th percentile in the Ranking and no higher than the 90th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2.5 minus 25 and the denominator of which is 100.
Above Maximum Level. If the Company Rank is above the 90th percentile
in the Ranking, then the Payment Amount shall be the Base Value multiplied
by 2.
Notwithstanding the foregoing, if the Company (or, if the Company becomes a
majority owned subsidiary of another corporation, then such parent corporation)
fails to maintain regular quarterly cash dividends of at least $.40 per share of
Common Stock during the Performance Period (adjusted for any stock-split, stock
dividend or other similar event) then the Payment Amount shall be zero.
For purposes of the foregoing, the term "Ranking" shall mean a ranking
determined based upon the Cumulative Total Shareholder Return (as hereinafter
defined) for such Performance Period on the Company's (or, if the Company
becomes a majority owned subsidiary of another corporation, then such parent
corporation's) Common Stock as compared to the Cumulative Total Shareholder
Return for such Performance Period on the common stock of each corporation
comprising the Dow Jones Utility Index (or any successor index); the term
"Cumulative Total Shareholder Return" for a period shall mean the result
obtained by dividing (i) the sum of (a) the cumulative amount of dividends on
the common stock in question for such period, assuming reinvestment of said
dividends in said common stock, and (b) the difference between the price per
share of said common stock at the end and the beginning of such period, by (ii)
the price per share of said common stock at the beginning of such period; and
the term "Base Value" shall mean the result obtained by multiplying the Base
Unit by the value of a share of Common Stock (as determined under Section 5
hereof).
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<PAGE>
5. Settlement of Awards. The Payment Amount shall become payable upon the
completion of the Performance Period and shall be paid by the Company within 90
days after the completion of the Performance Period. The Payment Amount shall
be paid 50% in cash and 50% in shares of Common Stock. Fractional shares of
Common Stock that may become payable hereunder shall be paid in cash. For the
purposes of determining the number of shares of Common Stock payable pursuant to
this Section, a share of Common Stock shall be valued at the average of the
closing prices of a share of Common Stock as reported in The Wall Street Journal
as New York Stock Exchange Composite Transactions during the calendar quarter
ending on the last day of the Performance Period (appropriately adjusted for any
stock-split, stock dividend or other similar event).
6. Termination of Employment. If an Employe voluntarily terminates
employment with the Company prior to the completion of the Performance Period or
Employe's employment with the Company is terminated by the Company for cause
(including, without limitation, a termination due to Employe's gross
misconduct), then no amount shall be payable hereunder. Except as set forth in
the immediately preceding sentence, if an Employe's employment with the Company
is terminated prior to the completion of the Performance Period and at least six
months after the commencement of the Performance Period, then the Employe shall
be entitled to a Payment Amount calculated in accordance with Section 5 hereof,
except that the calculation of the Payment Amount shall be made as of the date
of such termination, multiplied by a fraction the numerator of which is the
number of days in the Performance Period that have elapsed between the
commencement of the Performance Period and the date of such termination and the
denominator of which is the number of days in the Performance Period. The
Payment Amount calculated in accordance with the immediately preceding sentence
shall be paid within 90 days after the date of such termination; provided,
however, that if the Ranking under Section 5 cannot be calculated as though the
Performance Period ended on the date of such termination, then such Ranking
shall be calculated as though the Performance Period ended on the most recent
date prior to the date of such termination for which such Ranking can be
calculated. As used in this Section 6, employment by the Company shall include
employment by a corporation which is a "subsidiary corporation" of the Company,
as such term is defined in section 424 (and any successor section) of the
Internal Revenue Code of 1986, as amended, or any successor internal revenue
law.
7. Rights as a Stockholder. No Employe shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares have been issued to such
Employe or otherwise credited to an account for the benefit of such Employe.
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<PAGE>
8. Additional Terms and Conditions of Award.
8.1. Nontransferability of Award. In accordance with Section 13.5 of the
Plan, no Award or other related benefit may, except as otherwise specifically
provided by the Plan or by law, be transferable in any manner other than by will
or the laws of descent and distribution, and any attempt to transfer any such
Award or other benefit shall be void; provided, however, that the foregoing
shall not restrict the ability of any Employe to transfer any cash or Common
Stock received as part of the Payment Amount. In accordance with Section 13.5
of the Plan, Awards or other benefits payable under Awards shall not in any
manner be subject to the debts, contracts, liabilities, engagements or torts of
any person who shall be entitled to such Award or benefits, nor shall they be
subject to attachment or legal process for or against such person.
8.2. Withholding Taxes. As a condition precedent to the delivery to the
Employe of cash or Common Stock hereunder and in accordance with Section 13.4 of
the Plan, the Company may deduct from any amount (including any Payment Amount)
payable then or thereafter payable by the Company to the Employe, or may request
the Employe to pay to the Company in cash, such amount as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over with respect to the Award.
8.3. Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
8.4. Award Subject to the Plan. This Award is subject to the provisions
of the Plan, and shall be interpreted in accordance therewith.
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<PAGE>
Exhibit (10)-4
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
1994 LONG-TERM PERFORMANCE UNIT AWARD
FOR EXECUTIVE AND GROUP LEVEL EMPLOYES
PAYABLE IN 1996
UNDER THE
1993 LONG-TERM INCENTIVE PLAN
Commonwealth Edison Company, an Illinois corporation (the "Company"),
hereby grants to each employe described in Section 1 hereof (each, an "Employe")
as of January 25, 1994 (the "Grant Date"), in accordance with the provisions of
the Commonwealth Edison Company 1993 Long-Term Incentive Plan (the "Plan"), a
performance unit award (each, an "Award") expressed as a number (the "Base
Unit") of performance units, in the amount and upon and subject to the
restrictions, terms and conditions set forth below. Capitalized terms not
defined herein shall have the meanings specified in the Plan.
1. Recipients of Awards. Recipients of Awards hereunder shall consist of
the following employes of the Company and of Commonwealth Edison Company of
Indiana, Inc.: (i) each Group Level employe, (ii) each Executive and (iii) each
Officer, including, without limitation, the Chairman of the Company, the
President of the Company and each Senior Vice President of the Company.
2. Base Unit. The Base Unit for each Award shall be a number (rounded to
the nearest whole number) equal to (a) the product of multiplying (i) the Salary
(as defined herein) of the Employe receiving such Award by (ii) the applicable
percentage set forth below, divided by (b) $27:
Chairman: 25%
President: 25%
Senior Vice Presidents: 20%
Officers, other than as listed above: 15%
Executives, other than as listed above: 10%
Group Level employes, other than as listed above: 10%
For the purposes of calculating the Base Unit, an Employe's Salary shall be such
Employe's monthly scheduled rate of pay as of the Grant Date multiplied by 12
together with the income from such Employe's Deferred Compensation Units.
3. Performance Period. The Performance Period shall commence on January
25, 1994 and end on December 31, 1995.
4. Payment Amount/Stockholder Protection. The amount payable in
connection with an Award (a "Payment Amount") shall be a dollar amount based on
the Base Unit and on the Company's percentile rank, with the percentile rank
corresponding to the highest performance in the performance group being 100 and
the
<PAGE>
percentile rank corresponding to the lowest performance in the performance group
being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for the
Performance Period, and calculated as follows:
Below Threshold Level. If the Company Rank is lower than the 25th
percentile in the Ranking, then the Payment Amount shall be zero.
Between Threshold Level and Target Level. If the Company Rank is no
lower than the 25th percentile in the Ranking and no higher than the 49th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2 and the denominator of which is 100.
Between Target Level and Maximum Level. If the Company Rank is no
lower than the 50th percentile in the Ranking and no higher than the 90th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2.5 minus 25 and the denominator of which is 100.
Above Maximum Level. If the Company Rank is above the 90th percentile
in the Ranking, then the Payment Amount shall be the Base Value multiplied
by 2.
Notwithstanding the foregoing, if the Company (or, if the Company becomes a
majority owned subsidiary of another corporation, then such parent corporation)
fails to maintain regular quarterly cash dividends of at least $.40 per share of
Common Stock during the Performance Period (adjusted for any stock-split, stock
dividend or other similar event) then the Payment Amount shall be zero.
For purposes of the foregoing, the term "Ranking" shall mean a ranking
determined based upon the Cumulative Total Shareholder Return (as hereinafter
defined) for such Performance Period on the Company's (or, if the Company
becomes a majority owned subsidiary of another corporation, then such parent
corporation's) Common Stock as compared to the Cumulative Total Shareholder
Return for such Performance Period on the common stock of each corporation
comprising the Dow Jones Utility Index (or any successor index); the term
"Cumulative Total Shareholder Return" for a period shall mean the result
obtained by dividing (i) the sum of (a) the cumulative amount of dividends on
the common stock in question for such period, assuming reinvestment of said
dividends in said common stock, and (b) the difference between the price per
share of said common stock at the end and the beginning of such period, by (ii)
the price per share of said common stock at the beginning of such period; and
the term "Base Value" shall mean the result obtained by multiplying the Base
Unit by the value of a share of Common Stock (as determined under Section 5
hereof).
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<PAGE>
5. Settlement of Awards. The Payment Amount shall become payable upon the
completion of the Performance Period and shall be paid by the Company within 90
days after the completion of the Performance Period. The Payment Amount shall
be paid 50% in cash and 50% in shares of Common Stock. Fractional shares of
Common Stock that may become payable hereunder shall be paid in cash. For the
purposes of determining the number of shares of Common Stock payable pursuant to
this Section, a share of Common Stock shall be valued at the average of the
closing prices of a share of Common Stock as reported in The Wall Street Journal
as New York Stock Exchange Composite Transactions during the calendar quarter
ending on the last day of the Performance Period (appropriately adjusted for any
stock-split, stock dividend or other similar event).
6. Termination of Employment. If an Employe voluntarily terminates
employment with the Company prior to the completion of the Performance Period or
Employe's employment with the Company is terminated by the Company for cause
(including, without limitation, a termination due to Employe's gross
misconduct), then no amount shall be payable hereunder. Except as set forth in
the immediately preceding sentence, if an Employe's employment with the Company
is terminated prior to the completion of the Performance Period and at least six
months after the commencement of the Performance Period, then the Employe shall
be entitled to a Payment Amount calculated in accordance with Section 5 hereof,
except that the calculation of the Payment Amount shall be made as of the date
of such termination, multiplied by a fraction the numerator of which is the
number of days in the Performance Period that have elapsed between the
commencement of the Performance Period and the date of such termination and the
denominator of which is the number of days in the Performance Period. The
Payment Amount calculated in accordance with the immediately preceding sentence
shall be paid within 90 days after the date of such termination; provided,
however, that if the Ranking under Section 5 cannot be calculated as though the
Performance Period ended on the date of such termination, then such Ranking
shall be calculated as though the Performance Period ended on the most recent
date prior to the date of such termination for which such Ranking can be
calculated. As used in this Section 6, employment by the Company shall include
employment by a corporation which is a "subsidiary corporation" of the Company,
as such term is defined in section 424 (and any successor section) of the
Internal Revenue Code of 1986, as amended, or any successor internal revenue
law.
7. Rights as a Stockholder. No Employe shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares have been issued to such
Employe or otherwise credited to an account for the benefit of such Employe.
-3-
<PAGE>
8. Additional Terms and Conditions of Award.
8.1. Nontransferability of Award. In accordance with Section 13.5 of the
Plan, no Award or other related benefit may, except as otherwise specifically
provided by the Plan or by law, be transferable in any manner other than by will
or the laws of descent and distribution, and any attempt to transfer any such
Award or other benefit shall be void; provided, however, that the foregoing
shall not restrict the ability of any Employe to transfer any cash or Common
Stock received as part of the Payment Amount. In accordance with Section 13.5
of the Plan, Awards or other benefits payable under Awards shall not in any
manner be subject to the debts, contracts, liabilities, engagements or torts of
any person who shall be entitled to such Award or benefits, nor shall they be
subject to attachment or legal process for or against such person.
8.2. Withholding Taxes. As a condition precedent to the delivery to the
Employe of cash or Common Stock hereunder and in accordance with Section 13.4 of
the Plan, the Company may deduct from any amount (including any Payment Amount)
payable then or thereafter payable by the Company to the Employe, or may request
the Employe to pay to the Company in cash, such amount as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over with respect to the Award.
8.3. Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
8.4. Award Subject to the Plan. This Award is subject to the provisions
of the Plan, and shall be interpreted in accordance therewith.
-4-
<PAGE>
Exhibit (10)-5
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
1994 LONG-TERM PERFORMANCE UNIT AWARD
FOR EXECUTIVE AND GROUP LEVEL EMPLOYES
PAYABLE IN 1997
UNDER THE
1993 LONG-TERM INCENTIVE PLAN
Commonwealth Edison Company, an Illinois corporation (the "Company"),
hereby grants to each employe described in Section 1 hereof (each, an "Employe")
as of January 25, 1994 (the "Grant Date"), in accordance with the provisions of
the Commonwealth Edison Company 1993 Long-Term Incentive Plan (the "Plan"), a
performance unit award (each, an "Award") expressed as a number (the "Base
Unit") of performance units, in the amount and upon and subject to the
restrictions, terms and conditions set forth below. Capitalized terms not
defined herein shall have the meanings specified in the Plan.
1. Recipients of Awards. Recipients of Awards hereunder shall consist of
the following employes of the Company and of Commonwealth Edison Company of
Indiana, Inc.: (i) each Group Level employe, (ii) each Executive and (iii) each
Officer, including, without limitation, the Chairman of the Company, the
President of the Company and each Senior Vice President of the Company.
2. Base Unit. The Base Unit for each Award shall be a number (rounded to
the nearest whole number) equal to (a) the product of multiplying (i) the Salary
(as defined herein) of the Employe receiving such Award by (ii) the applicable
percentage set forth below, divided by (b) $27:
Chairman: 50%
President: 50%
Senior Vice Presidents: 40%
Officers, other than as listed above: 30%
Executives, other than as listed above: 20%
Group Level employes, other than as listed above: 20%
For the purposes of calculating the Base Unit, an Employe's Salary shall be such
Employe's monthly scheduled rate of pay as of the Grant Date multiplied by 12
together with the income from such Employe's Deferred Compensation Units.
3. Performance Period. The Performance Period shall commence on January
25, 1994 and end on December 31, 1996.
4. Payment Amount/Stockholder Protection. The amount payable in
connection with an Award (a "Payment Amount") shall be a dollar amount based on
the Base Unit and on the Company's percentile rank, with the percentile rank
corresponding to the highest performance in the performance group being 100 and
the
<PAGE>
percentile rank corresponding to the lowest performance in the performance group
being 1 (the "Company Rank"), in the Ranking (as hereinafter defined) for the
Performance Period, and calculated as follows:
Below Threshold Level. If the Company Rank is lower than the 25th
percentile in the Ranking, then the Payment Amount shall be zero.
Between Threshold Level and Target Level. If the Company Rank is no
lower than the 25th percentile in the Ranking and no higher than the 49th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2 and the denominator of which is 100.
Between Target Level and Maximum Level. If the Company Rank is no
lower than the 50th percentile in the Ranking and no higher than the 90th
percentile in the Ranking, then the Payment Amount shall be the Base Value
multiplied by a fraction the numerator of which is the Company Rank
multiplied by 2.5 minus 25 and the denominator of which is 100.
Above Maximum Level. If the Company Rank is above the 90th percentile
in the Ranking, then the Payment Amount shall be the Base Value multiplied
by 2.
Notwithstanding the foregoing, if the Company (or, if the Company becomes a
majority owned subsidiary of another corporation, then such parent corporation)
fails to maintain regular quarterly cash dividends of at least $.40 per share of
Common Stock during the Performance Period (adjusted for any stock-split, stock
dividend or other similar event) then the Payment Amount shall be zero.
For purposes of the foregoing, the term "Ranking" shall mean a ranking
determined based upon the Cumulative Total Shareholder Return (as hereinafter
defined) for such Performance Period on the Company's (or, if the Company
becomes a majority owned subsidiary of another corporation, then such parent
corporation's) Common Stock as compared to the Cumulative Total Shareholder
Return for such Performance Period on the common stock of each corporation
comprising the Dow Jones Utility Index (or any successor index); the term
"Cumulative Total Shareholder Return" for a period shall mean the result
obtained by dividing (i) the sum of (a) the cumulative amount of dividends on
the common stock in question for such period, assuming reinvestment of said
dividends in said common stock, and (b) the difference between the price per
share of said common stock at the end and the beginning of such period, by (ii)
the price per share of said common stock at the beginning of such period; and
the term "Base Value" shall mean the result obtained by multiplying the Base
Unit by the value of a share of Common Stock (as determined under Section 5
hereof).
-2-
<PAGE>
5. Settlement of Awards. The Payment Amount shall become payable upon the
completion of the Performance Period and shall be paid by the Company within 90
days after the completion of the Performance Period. The Payment Amount shall
be paid 50% in cash and 50% in shares of Common Stock. Fractional shares of
Common Stock that may become payable hereunder shall be paid in cash. For the
purposes of determining the number of shares of Common Stock payable pursuant to
this Section, a share of Common Stock shall be valued at the average of the
closing prices of a share of Common Stock as reported in The Wall Street Journal
as New York Stock Exchange Composite Transactions during the calendar quarter
ending on the last day of the Performance Period (appropriately adjusted for any
stock-split, stock dividend or other similar event).
6. Termination of Employment. If an Employe voluntarily terminates
employment with the Company prior to the completion of the Performance Period or
Employe's employment with the Company is terminated by the Company for cause
(including, without limitation, a termination due to Employe's gross
misconduct), then no amount shall be payable hereunder. Except as set forth in
the immediately preceding sentence, if an Employe's employment with the Company
is terminated prior to the completion of the Performance Period and at least six
months after the commencement of the Performance Period, then the Employe shall
be entitled to a Payment Amount calculated in accordance with Section 5 hereof,
except that the calculation of the Payment Amount shall be made as of the date
of such termination, multiplied by a fraction the numerator of which is the
number of days in the Performance Period that have elapsed between the
commencement of the Performance Period and the date of such termination and the
denominator of which is the number of days in the Performance Period. The
Payment Amount calculated in accordance with the immediately preceding sentence
shall be paid within 90 days after the date of such termination; provided,
however, that if the Ranking under Section 5 cannot be calculated as though the
Performance Period ended on the date of such termination, then such Ranking
shall be calculated as though the Performance Period ended on the most recent
date prior to the date of such termination for which such Ranking can be
calculated. As used in this Section 6, employment by the Company shall include
employment by a corporation which is a "subsidiary corporation" of the Company,
as such term is defined in section 424 (and any successor section) of the
Internal Revenue Code of 1986, as amended, or any successor internal revenue
law.
7. Rights as a Stockholder. No Employe shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares have been issued to such
Employe or otherwise credited to an account for the benefit of such Employe.
-3-
<PAGE>
8. Additional Terms and Conditions of Award.
8.1. Nontransferability of Award. In accordance with Section 13.5 of the
Plan, no Award or other related benefit may, except as otherwise specifically
provided by the Plan or by law, be transferable in any manner other than by will
or the laws of descent and distribution, and any attempt to transfer any such
Award or other benefit shall be void; provided, however, that the foregoing
shall not restrict the ability of any Employe to transfer any cash or Common
Stock received as part of the Payment Amount. In accordance with Section 13.5
of the Plan, Awards or other benefits payable under Awards shall not in any
manner be subject to the debts, contracts, liabilities, engagements or torts of
any person who shall be entitled to such Award or benefits, nor shall they be
subject to attachment or legal process for or against such person.
8.2. Withholding Taxes. As a condition precedent to the delivery to the
Employe of cash or Common Stock hereunder and in accordance with Section 13.4 of
the Plan, the Company may deduct from any amount (including any Payment Amount)
payable then or thereafter payable by the Company to the Employe, or may request
the Employe to pay to the Company in cash, such amount as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over with respect to the Award.
8.3. Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
8.4. Award Subject to the Plan. This Award is subject to the provisions
of the Plan, and shall be interpreted in accordance therewith.
-4-
<PAGE>
Exhibit (10)-6
Commonwealth Edison Company
Form 10-K File No. 1-1839
COMMONWEALTH EDISON COMPANY
1994 VARIABLE COMPENSATION AWARD FOR MANAGEMENT EMPLOYES
UNDER THE 1993 LONG-TERM INCENTIVE PLAN
Commonwealth Edison Company, an Illinois corporation (the "Company"),
hereby grants to each employe described in Section 1 hereof (each, an
"Employe"), as of January 1, 1994 (the "Grant Date"), in accordance with the
provisions of the Commonwealth Edison Company 1993 Long-Term Incentive Plan (the
"Plan"), a performance unit award (each, an "Award"), expressed as a number of
performance units, in the amount and upon and subject to the restrictions, terms
and conditions set forth below and in Appendix A attached hereto. Capitalized
terms not defined herein shall have the meanings specified in the Plan.
1. Recipients of Awards. Subject in all respects to the provisions
hereof, recipients of Awards hereunder shall consist of each employe of the
Company (other than the Chairman and the President) and of Commonwealth Edison
Company of Indiana, Inc. (collectively, the "Employers") who is on the
management or executive payroll during calendar year 1994; provided, however,
that no employe shall be the recipient of an Award if such employe participates
in, or is eligible to participate in, any of the following incentive plans:
The Nuclear Site-Vice President Incentive Plan
The Procurement Effectiveness Re-engineering Team Plan
The Pension Fund Management Incentive Pay Plan
The Fuel Department Incentive Plan
2. Base Unit. The Base Unit for each Award shall be the number which is
equal to the number of dollars determined by multiplying the Base Pay (as
defined herein) of the Employe receiving the Award by the conversion factor of
1.25% and rounding up to the nearest whole dollar. For purposes of calculating
the Base Unit, Base Pay shall mean an Employe's monthly scheduled rate of pay,
determined as of the Grant Date, multiplied by 12 together with the income from
such Employe's Deferred Compensation Units if such Employe is Grade 12 or above.
3. Payment Amount. The total amount payable in connection with an Award
(the "Payment Amount") may consist solely of a cash payment (the "Cash Payment
Amount") or may consist of a Cash Payment Amount and a payment of Common Stock
(the "Stock Payment Amount"), as determined below.
<PAGE>
a. Cash Payment Amount. The Cash Payment Amount shall be the dollar
amount computed by multiplying the Employe's Base Unit by the applicable
performance unit set forth below under the column titled "Cash" that corresponds
to the Employe's category of employment and the level of performance goals
achieved as set forth in Appendix A attached hereto that are applicable to the
Employe.
b. Stock Payment Amount. The Stock Payment Amount shall be the dollar
amount computed by multiplying the Employe's Base Unit by the applicable
performance unit set forth below under the column titled "Stock" that
corresponds to the Employe's category of employment and the level of performance
goals achieved as set forth in Appendix A attached hereto that are applicable to
the Employe.
PERFORMANCE UNITS
-----------------
<TABLE>
<CAPTION>
THRESHOLD TARGET DISTINGUISHED
--------- ------ -------------
CATEGORY CASH STOCK CASH STOCK CASH STOCK
<S> <C> <C> <C> <C> <C> <C>
RATED 2 0 6 0 10 2
GROUP 2 0 7 5 7 18
EXECUTIVE 2 0 6 12 6 34
</TABLE>
4. Reduction of Payment Amount for Less than a Full Year of Employment.
In the event that an Employe either (i) is first placed on the management or
executive payroll after January 1, 1994, or (ii) is on a leave of absence during
1994, including an extended medical leave, each of the Cash Payment Amount and
the Stock Payment Amount will be a reduced amount equal to each of the amounts
determined above multiplied by a fraction, the numerator of which is the number
of full months the Employe worked during 1994 and the denominator of which is
twelve months. For an Employe who is a part-time Employe described in clause
(i) or (ii) of the preceding sentence, the reduction provided in this Section
shall be made after the reduction set forth in Section 5 is made.
5. Reduction of Payment Amount for Part-Time Employes. For an Employe who
is a part-time Employe, each of the Payment Amount and the Stock Payment Amount
will be a reduced amount equal to the amount determined above multiplied by a
fraction, the numerator of which is the number of hours the Employe was
scheduled to work during 1994 and the denominator of which is 2080 hours.
6. Stockholder Protection. Notwithstanding anything herein to the
contrary, no amount shall be paid hereunder unless the following two conditions
are satisfied:
a. The Company (or, if the Company becomes a majority owned subsidiary of
another corporation, then such parent corporation) maintains regular quarterly
cash dividends of at least $.40 per share of Common Stock during the calendar
year
-2-
<PAGE>
1994 (adjusted for any stock-split, stock dividend or other similar event).
b. The sum of the amounts actually incurred by the Company for operations
and maintenance and for capital expenditures for the calendar year 1994 is at
least $90 million less than the sum of the amounts budgeted therefor by the
Company for the calendar year 1994; provided that at least 50% of the
reduction is attributable to reduced expenses for operations and maintenance.
7. Failure to Achieve "Meeting All Expectations" Rating. An Employe who
fails to receive at least a "meeting all expectations" rating under the
Performance Evaluation, Career Development and/or Succession Planning (or the
equivalent thereof) with respect to performance in 1994 shall not receive any
amount hereunder.
8. Settlement of Awards. The Payment Amount, if any, will be paid to an
Employe as soon as practicable after the Company's audited financial results are
available for the calendar year 1994. The number of shares of Common Stock
payable to an Employe with respect to an Award shall be computed by dividing the
Stock Payment Amount by the value of one share of Common Stock. Fractional
shares of Common Stock that may become payable hereunder shall be paid in cash.
For purposes of this Section, the value of a share of Common Stock shall be the
average of the closing prices of a share of Common Stock as reported in The Wall
Street Journal as New York Stock Exchange Composite Transactions during the last
calendar quarter of 1994 (appropriately adjusted for any stock-split, stock
dividend or other similar event).
9. Termination of Employment. An Employe whose employment with the
Employers is terminated prior to December 31, 1994 for any reason other than
death or retirement under the pension plan of any one of the Employers shall not
be entitled to any payment under the Plan.
10. Rights as a Stockholder. No Employe shall have any rights as a
stockholder of the Company with respect to any shares of Common Stock that may
be payable hereunder unless and until such shares shall have been issued to such
Employe or otherwise credited to an account for the benefit of such Employe.
11. Additional Terms and Conditions of Award.
11.1 Nontransferability of Award. In accordance with Section 13.5 of the
Plan, no Award or other related benefit may, except as otherwise specifically
provided by the Plan or by law, be transferable in any manner other than by will
or the laws of descent and distribution, and any attempt to transfer any such
Award or other benefit shall be void; provided, however, that the foregoing
shall not restrict the ability of any Employe to transfer any cash or Common
Stock received as part of the Payment Amount.
-3-
<PAGE>
In accordance with Section 13.5 of the Plan, Awards or other benefits payable
under Awards shall not in any manner be subject to the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
Award or benefits, nor shall they be subject to attachment or legal process for
or against such person.
11.2. Withholding Taxes. As a condition precedent to the delivery to the
Employe of cash or Common Stock hereunder and in accordance with Section 13.4 of
the Plan, the Company may deduct from any amount (including any Payment Amount)
payable then or thereafter payable by the Company to the Employe, or may request
the Employe to pay to the Company in cash, such amount as the Company may be
required, under all applicable federal, state, local or other laws or
regulations, to withhold and pay over with respect to the Award.
11.3 Compliance with Applicable Law. Each Award is subject to the
condition that if the listing, registration or qualification of the shares of
Common Stock subject to the Award upon any securities exchange or under any law,
or the consent or approval of any governmental body, or the taking of any other
action is necessary or desirable as a condition of, or in connection with, the
vesting or delivery of such shares hereunder, such shares may not be delivered,
in whole or in part, unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
11.4. Award Subject to the Plan. This Award is subject to the provisions
of the Plan, and shall be interpreted in accordance therewith.
-4-
<PAGE>
Exhibit (12)
Commonwealth Edison Company
Form 10-K File No. 1-1839
Commonwealth Edison Company and Subsidiary Companies Consolidated
-----------------------------------------------------------------
Computation of Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Fixed Charges and
Preferred and Preference Stock Dividend Requirements
--------------------------------------------------------
- Thousands of Dollars -
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------------
Line December 31, December 31,
No. 1992 1993
- ---- ------------ ------------
<S> <C> <C>
1 Net income $ 513,981 $112,440
---------- --------
2 Net provisions for income taxes and investment
3 tax credits deferred charged to-
4 Operations $ 272,547 $ 65,827
5 Cumulative effect of change in accounting for income taxes - (9,738)
6 Other income (6,549) (30,753)
---------- --------
7 $ 265,998 $ 25,336
---------- --------
8 Fixed charges-
9 Interest on debt $ 661,348 $651,639
10 Estimated interest component of nuclear fuel and
11 other lease payments, rentals and other interest 53,348 49,021
12 Amortization of debt discount, premium and expense 20,178 20,966
---------- --------
13 $ 734,874 $721,626
---------- --------
14 Preferred and preference stock dividend requirements-
15 Provisions for preferred and preference stock dividends $ 70,539 $ 66,052
16 Taxes on income required to meet provisions for
17 preferred and preference stock dividends 44,646 43,596
---------- --------
18 $ 115,185 $109,648
---------- --------
19 Fixed charges and preferred and preference stock
20 dividend requirements $ 850,059 $831,274
---------- --------
21 Earned for fixed charges and preferred and preference stock
22 dividend requirements $1,514,853 $859,402
---------- --------
23 Ratios of earnings to fixed charges (line 22 divided by line 13) 2.06 1.19
==== ====
24 Ratios of earnings to fixed charges and preferred
25 and preference stock dividend requirements (line 22 divided by line 20) 1.78 1.03
==== ====
</TABLE>
<PAGE>
Exhibit (21)
Commonwealth Edison Company
Form 10-K File No. 1-1839
Commonwealth Edison Company
Subsidiaries of the Company
----------------------------------
<TABLE>
<CAPTION>
State or
Jurisdiction
in Which
Name Incorporated
- ---------------------------------------------- ------------
<S> <C>
Commonwealth Edison Company of Indiana, Inc. * Indiana
CECo Enterprises Inc. * Illinois
Northwind Inc.* Illinois
CECo Holding Company Illinois
CECo Merging Corporation Illinois
Edison Development Company Delaware
Cotter Corporation New Mexico
Commonwealth Research Corporation Illinois
Concomber, Ltd. Bermuda
Edison Development Canada Inc. Canada
</TABLE>
* Included in the consolidated financial statements.
<PAGE>
Exhibit (23)
Commonwealth Edison Company
Form 10-K File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K of our report dated March 18, 1994, on the
consolidated financial statements of Commonwealth Edison Company and subsidiary
companies (Company) as of and for the year ended December 31, 1993 (Report),
included in the Company's Current Report on Form 8-K/A-1 dated January 28, 1994,
to the inclusion in this Form 10-K of our report dated March 18, 1994, on the
supplemental schedules of the Company as of and for the year ended December 31,
1993, and to the incorporation of such reports into the Company's previously
filed prospectuses as follows: (1) prospectus dated June 1, 1988, constituting
part of Form S-8 Registration Statement File No. 2-76921 (relating to the
Company's Employe Stock Purchase Plan); (2) prospectus dated August 1, 1992,
constituting part of Form S-8 Registration Statement File Nos. 2-81592 and 33-
5061, as amended (relating to the Company's Employe Savings and Investment
Plan); (3) prospectus dated August 21, 1986, constituting part of Form S-3
Registration Statement File No. 33-6879, as amended (relating to the Company's
Debt Securities and Common Stock); (4) prospectus dated February 14, 1991,
constituting part of Form S-3 Registration Statement File No. 33-38233 (relating
to the Company's Debt Securities and Cumulative Preference Stock); (5)
prospectus dated January 7, 1994, constituting part of Form S-3 Registration
Statement File No. 33-51379 (relating to the Company's Debt Securities and
Cumulative Preference Stock); and (6) prospectus dated March 18, 1994,
constituting part of Form S-4 Registration Statement File No. 33-52109, as
amended (relating to Common Stock of CECo Holding Company). We also consent to
the application of our Report, incorporated by reference in this Form 10-K, to
the ratios of earnings to fixed charges and the ratios of earnings to fixed
charges and preferred and preference stock dividend requirements for each of the
three years ended December 31, 1993, 1992 and 1991 appearing on page 22 of the
Current Report on Form 8-K/A-1 dated January 28, 1994.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 28, 1994
<PAGE>
Exhibit (24)
Commonwealth Edison Company
Form 10-K File No. 1-1839
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ Jean Allard
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JEAN ALLARD, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
March, 1994.
/s/ James W. Compton
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that JAMES W. COMPTON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth .
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, her true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ Sue L. Gin
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SUE L. GIN, personally known to me to be the
same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that she signed and delivered
said instrument as her free and voluntary act, for the uses and purposes therein
set forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ Donald P. Jacobs
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that DONALD P. JACOBS, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ George E. Johnson
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that GEORGE E. JOHNSON, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ Harvey Kapnick
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that HARVEY KAPNICK, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
March, 1994.
/s/ Byron Lee Jr.
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that BYRON LEE, JR., personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day
of March, 1994.
/s/ Edward A. Mason
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that EDWARD A. MASON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
March, 1994.
/s/ F. A. Olson
------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that FRANK A. OLSON, personally known to me to be
the same person whose name is subscribed to the foregoing instrument, appeared
before me this day in person, and acknowledged that he signed and delivered said
instrument as his free and voluntary act, for the uses and purposes therein set
forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director and Officer of Commonwealth Edison
Company, an Illinois corporation, does hereby constitute and appoint JAMES J.
O'CONNOR and DAVID A. SCHOLZ and each of them, his true and lawful attorneys and
agents, each with full power and authority (acting alone and without the others)
to execute in the name and on behalf of the undersigned as such Director and
Officer, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10 day of
March, 1994.
/s/ Samuel K. Skinner
-------------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that SAMUEL K. SKINNER, personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, a Director of Commonwealth Edison Company, an
Illinois corporation, does hereby constitute and appoint JAMES J. O'CONNOR,
SAMUEL K. SKINNER and DAVID A. SCHOLZ, and each of them, his true and lawful
attorneys and agents, each with full power and authority (acting alone and
without the others) to execute in the name and on behalf of the undersigned as
such Director, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended; hereby granting to such attorneys and agents, and each of them, full
power of substitution and revocation in the premises; and hereby ratifying and
confirming all that such attorneys and agents, or any of them, may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of
March, 1994.
/s/ Lando W. Zech Jr.
-----------------------------
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
I, Mary T. Snyder, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that LANDO W. ZECH, JR., personally known to me to
be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person, and acknowledged that he signed and
delivered said instrument as his free and voluntary act, for the uses and
purposes therein set forth.
GIVEN under my hand and notarial seal this 10 day of March, 1994.
/s/ Mary T. Snyder
-------------------------
Notary Public
(SEAL)
<PAGE>
Exhibit (99)
Commonwealth Edison Company
Form 10-K File No. 1-1839
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A-1
CURRENT REPORT
Pursuant to Section l3 or l5(d) of
the Securities Exchange Act of l934
Date of Report (Date of
earliest event reported): January 28, 1994
Commonwealth Edison Company
(Exact name of registrant as specified in its charter)
Illinois 1-1839 36-0938600
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
37th Floor, One First National Plaza,
Post Office Box 767, Chicago, Illinois 60690-0767
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (312) 394-4321
<PAGE>
The purpose of this Amendment No. 1 is to amend the exhibits to the
Registrant's (Commonwealth Edison Company) Current Report on Form 8-K dated
January 28, 1994, by refiling those exhibits in their entirety.
Item 7. Financial Statements, Pro Forma Financial
- ------- Information and Exhibits
-----------------------------------------
(c) Exhibits
--------
(23) Consent of Independent Public Accountants
(99) Commonwealth Edison Company and Subsidiary Companies -
Certain Financial Information as of and for the Year
Ended December 31, 1993:
--Management's Discussion and Analysis of Financial
Condition and Results of Operations
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Cash Flows
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Premium on Common Stock
and Other Paid-in Capital
--Notes to Financial Statements
--Report of Independent Public Accountants
-2-
<PAGE>
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.
COMMONWEALTH EDISON COMPANY
(Registrant)
By: /s/ John C. Bukovski
--------------------------
John C. Bukovski
Vice President
Date: March 18, 1994
-3-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
23 Consent of Independent Public Accountants
99 Commonwealth Edison Company and Subsidiary
Companies - Certain Financial Information as of
and for the Year Ended December 31, 1993:
--Management's Discussion and Analysis of
Financial Condition and Results of Operations
--Statements of Consolidated Income
--Consolidated Balance Sheets
--Statements of Consolidated Capitalization
--Statements of Consolidated Cash Flows
--Statements of Consolidated Retained Earnings
--Statements of Consolidated Premium on Common
Stock and Other Paid-in Capital
--Notes to Financial Statements
--Report of Independent Public Accountants
<PAGE>
Exhibit (23)
Commonwealth Edison Company
Form 8-K/A-1 File No. 1-1839
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated March 18, 1994, on Commonwealth Edison Company and
subsidiary companies' consolidated financial statements as of and for the year
ended December 31, 1993, included as an Exhibit to this Form 8-K/A-1 Current
Report of Commonwealth Edison Company dated January 28, 1994, into Commonwealth
Edison Company's previously filed prospectuses as follows: (1) prospectus dated
June 1, 1988, constituting part of Form S-8 Registration Statement File No. 2-
76921 (relating to the Company's Employe Stock Purchase Plan); (2) prospectus
dated August 1, 1992, constituting part of Form S-8 Registration Statement File
Nos. 2-81592 and 33-5061, as amended (relating to the Company's Employe Savings
and Investment Plan); (3) prospectus dated August 21, 1986, constituting part of
Form S-3 Registration Statement File No. 33-6879, as amended (relating to the
Company's Debt Securities and Common Stock); (4) prospectus dated February 14,
1991, constituting part of Form S-3 Registration Statement File No. 33-38233
(relating to the Company's Debt Securities and Cumulative Preference Stock); (5)
prospectus dated January 7, 1994, constituting part of Form S-3 Registration
Statement File No. 33-51379 (relating to the Company's Debt Securities and
Cumulative Preference Stock); and (6) prospectus constituting part of Form S-4
Registration Statement File No. 33-52109, as amended (relating to Common Stock
of CECo Holding Company). We also consent to the application of our report to
the ratios of earnings to fixed charges and the ratios of earnings to fixed
charges and preferred and preference stock dividend requirements for each of the
years ended December 31, 1993, 1992 and 1991 appearing on page 22 of Exhibit 99
of this Form 8-K/A-1.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 18, 1994
<PAGE>
Exhibit (99)
Commonwealth Edison Company
Form 8-K File No. 1-1839
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- ---------------------
Liquidity and Capital Resources
Capital Budgets. Commonwealth Edison Company (Company) and its
electric utility subsidiary, Commonwealth Edison Company of Indiana,
Inc. (collectively, companies), have a construction program for the
three-year period 1994-96 which consists principally of improvements
to the companies' existing nuclear and other electric production,
transmission and distribution facilities. It does not include funds
(other than for planning) to add new generating capacity to the
Company's system. The program, as approved by the Company in January
1994, calls for electric plant and equipment expenditures of
approximately $2,450 million (excluding nuclear fuel expenditures of
approximately $780 million). This amount reflects a decrease of
approximately $200 million compared with the common years (1994-95) of
the previously approved construction program. In part, the decrease
reflects a reduction in capital spending announced by the Company in
July 1992 due to adverse financial circumstances. For additional
information concerning the cost reduction plan, see "Rates and
Financial Condition" below. It is estimated that such construction
expenditures, with cost escalation computed at 4% annually, will be as
follows:
<TABLE>
<CAPTION>
Three-Year
(millions of dollars) 1994 1995 1996 Total
----------------------------- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Production $295 $310 $250 $ 855
Transmission and Distribution 340 445 505 1,290
General 115 95 95 305
---------------------------------------------------------
Total $750 $850 $850 $2,450
---------------------------------------------------------
</TABLE>
The Company's forecasts of peak load indicate a need for additional
resources to meet demand, either through generating capacity or
through equivalent purchased power or demand-side management
resources, in 1997 and each year thereafter through the year 2000. The
projected resource needs reflect the current planning reserve margin
recommendations of the Mid-America Interconnected Network (MAIN), the
reliability council of which the Company is a member. The Company's
forecasts indicate that the additional resource need during this
period would exist only during the summer months. The Company does not
expect to make expenditures for additional capacity to the extent the
need for capacity can be met through cost-effective demand-side
management resources, non-utility generation or other power purchases.
To assess the market potential to provide such cost-effective
resources, the Company solicited proposals to supply it with cost-
effective demand-side management resources, non-utility generation
resources and other-utility power purchases sufficient to meet
forecasted requirements through the year 2000. The responses to the
solicitation suggest that adequate resources to meet the Company's
needs could be obtained from those sources but the Company has not yet
determined whether those sources represent the most economical
alternative. If the Company were to build additional capacity to meet
its needs, it would need to make additional expenditures during the
1994-96 period.
The Company has not budgeted for a number of projects, particularly
at generating stations, which could be required, but which the Company
does not expect to be required during the budget period. In
particular, the Company has not budgeted for the construction of
scrubbers at its Kincaid generating station, for the replacement of
major amounts of piping at its boiling water reactor nuclear stations
or for the replacement of steam generators at its pressurized water
reactor nuclear stations.
10
<PAGE>
- ------------------------------
Purchase commitments, principally related to construction and
nuclear fuel, approximated $1,187 million at December 31, 1993. In
addition, the Company has substantial commitments for the purchase of
coal under long-term contracts as indicated in the following table.
<TABLE>
<CAPTION>
Contract Period Commitment (1)
----------------------------------------------- --------- --------------
<S> <C> <C>
Black Butte Coal Co. 1994-2007 $1,212
Decker Coal Co. 1994-2015 $ 862
Peabody Coal Co. 1994 $ 34
Big Horn Coal Co. 1998 $ 21
-------------------------------------------------------------------------
</TABLE>
(1) Estimated costs in millions of dollars FOB mine. No estimate of
future cost escalation has been made.
For additional information concerning these coal contracts and the
Company's fuel supply, see "Results of Operations" below and Notes 3,
17 and 19 of Notes to Financial Statements.
The construction program will be reviewed and modified as necessary
to adapt to changing economic conditions, rate levels and other
relevant factors including changing business and legal needs and
requirements. The Company cannot anticipate all such possible needs
and requirements. While regulatory needs in particular are more
likely, on balance, to require increases in construction expenditures
than decreases, the Company's financial condition may require
compensating or greater reductions in other construction expenditures.
See "Rates and Financial Condition" below for additional information
concerning the construction program.
Capital Resources. The Company has forecast that internal sources will
provide approximately one-half of the funds required for its
construction program and other capital requirements, including nuclear
fuel expenditures, contributions to nuclear decommissioning trusts,
sinking fund obligations and refinancing of scheduled debt maturities
(the annual sinking fund requirements for preference stock and
long-term debt are summarized in Notes 7 and 8
of Notes to Financial Statements). The
forecast takes into account the rate reduction
The construction program reflected in the Rate Matters Settlement
budget for 1994-96 (described below), and reflects the payments
reflects a decrease of required to be made to customers under the
approximately $200 Rate Matters Settlement and the Fuel Matters
million compared with the Settlement (described below).
common years 1994-95 of The type and amount of external financing
the previous construction will depend on financial market conditions and
budget. the needs and capital structure of the Company
at the time of such financing. Although the
Company's new money financing requirements
decreased significantly with the completion of
its nuclear generating capacity construction
program, they have subsequently increased due to higher expenditures and
lower operating cash flows resulting from reduced revenues due to customer
refunds and rate level adjustments ordered in various proceedings related
to the level of the Company's rates and the effect of the Rate Matters
Settlement and the Fuel Matters Settlement. See "Rates and Financial
Condition" below for information related to the Company's reductions to
operation and maintenance expenses and its construction program in
response to adverse regulatory and judicial decisions. A portion of the
Company's financing is expected to be provided through the continued sale
and leaseback of nuclear fuel. The Company has unused bank lines of credit
which may be borrowed at various interest rates and which may be secured
or unsecured. The interest rate is set at the time of a borrowing and is
based on several floating rate bank indices plus a spread which is
dependent upon the Company's credit ratings, or on a prime interest rate.
Collateral, if required for the borrowings, would consist of first
11
<PAGE>
- ------------------------------
mortgage bonds issued under and in accordance with the provisions of
the Company's mortgage. See Note 9 of Notes to Financial Statements
for information concerning lines of credit. See the Statements of
Consolidated Cash Flows for the construction expenditures and cash
flow from operating activities for the years 1993, 1992 and 1991.
During 1993, the Company issued an aggregate of 421,994 shares of
common stock for approximately $11,462,000 under its employe stock
plans; issued and sold 700,000 shares of $6.875 Cumulative Preference
Stock for approximately $69 million; sold and leased back an aggregate
of approximately $204,254,000 of nuclear fuel; issued $1,715 million
aggregate principal amount of first mortgage bonds; and issued $235
million of other long-term debt. On January 25, 1994, the Company
announced the closing of the sale of $66 million of Pollution Control
Revenue Refunding Bonds issued through the Illinois Development
Finance Authority. The proceeds of the first mortgage bonds issued
during 1993 were or will be used primarily to discharge or refund
outstanding debt securities.
The Company has an effective "shelf" registration statement with
the Securities and Exchange Commission for the future sale of up to an
additional $1,030 million of debt securities and cumulative preference
stock for general corporate purposes of the Company, including the
discharge or refund of other outstanding securities.
Rates and Financial Condition. The Company's financial condition is
dependent upon its ability to generate revenues to cover its costs. To
maintain a satisfactory financial condition, the Company must recover
the costs of and a return on completed construction projects,
including its three most recently completed generating units, and
maintain adequate debt and preferred and preference stock coverages
and common stock equity earnings. The Company has no significant
revenues other than from the sale of electricity. Under the economic
and political conditions prevailing in Illinois, the Company's
management recognizes that competitive and
regulatory circumstances may limit the
Workforce reductions Company's ability to raise its prices.
already implemented, Therefore, the Company's financial condition
combined with other will depend in large measure on the Company's
actions, are estimated to levels of sales, expenses and capital
have saved approximately expenditures. See "Business and Competition"
$130 million in operation below.
and maintenance expenses In response to the adverse regulatory and
during 1993. judicial decisions in the proceedings relating
to the level of the Company's rates, the
Company implemented a cost reduction plan in
1992 involving various management workforce
reductions through early retirement and
voluntary and involuntary separations. Such
reductions, when combined with other actions, are estimated by the Company
to have saved approximately $130 million in operation and maintenance
expenses during 1993. The management workforce reduction resulted in a
charge to income of approximately $23 million (net of income tax effects)
in 1992. In addition, the Company reached agreement in August 1993 with
its unions regarding certain cost reduction actions. The agreement
provides for a wage freeze until April 1, 1994, changes to reduce health
care plan cost, increased use of part-time employment and changes in
holiday provisions. The agreement also includes a continuation of
negotiations relative to other issues. Further, the Company has reduced
planned construction program expenditures by approximately $200 million
compared with the common years (1994-95) of the previously approved
construction program. See "Rate Proceedings" below and Note 12 of Notes to
Financial Statements.
In addition, the quarterly common stock dividends, payable on and
since November 1, 1992, were reduced by 47% from the seventy-five
cents per share amount paid quarterly since 1982 to forty cents
12
<PAGE>
per share. Dividends have been declared on the outstanding shares of the
Company's preferred and preference stocks at their regular quarterly rates. The
Company's Board of Directors will continue to review quarterly the payment of
dividends.
The current ratings of the Company's securities by three principal securities
rating agencies are as follows:
----------------------------------------------------------------------
Standard Duff &
Moody's & Poor's Phelps
------- -------- ------
First mortgage and secured pollution control
bonds Baa2 BBB BBB
Publicly-held debentures and unsecured
pollution control obligations Baa3 BBB- BBB-
Convertible preferred stock baa3 BBB- BB+
Preference stock baa3 BBB- BB+
Commercial paper P2 A-2 Duff 2
----------------------------------------------------------------------
The foregoing ratings reflect downgradings during 1992 and in January 1993 as
a result of developments in the proceedings leading to, and the issuance of,
the Illinois Commerce Commission (ICC) rate order issued on January 6, 1993 (as
subsequently modified, the Remand Order). In December 1993, Standard & Poor's
affirmed its ratings of the Company's debt, although on October 27, 1993, it
changed its "outlook" on the Company's ratings from stable to negative as part
of its larger assessment of the electric utility industry. In September 1993,
Moody's and Duff & Phelps affirmed their ratings of the Company's securities,
and in October 1993, Moody's rating outlook on the Company remained stable.
Business and Competition. The electric utility business has historically been
characterized by retail service monopolies in state or locally franchised
service territories. Investor-owned electric utilities have tended to be
vertically integrated with all aspects of their business subject to pervasive
regulation. Although customers have normally been free to supply their electric
power needs through self-generation, they have not had a choice of electric
suppliers and self-generation has not generally been economical.
The market in which electric utilities like the Company operate has become
more competitive and many observers believe competition will intensify. Self-
generation can be economical for certain customers, depending on how and when
they use electricity and other customer-specific considerations. A number of
competitors are currently seeking to identify and do business with those
customers. In addition, suppliers of other forms of energy are increasingly
competing to supply energy needs which historically were supplied primarily or
exclusively by electricity.
The Energy Policy Act of 1992 will likely have a significant effect on
companies engaged in the generation, transmission, distribution, purchase and
sale of electricity. This Act, among other things, expands the authority of the
Federal Energy Regulatory Commission to order electric utilities to transmit or
"wheel" wholesale power for others, and facilitates the creation of non-utility
electric generating companies. Although the Company cannot now predict the full
impact of this Act, it will likely create and increase competition affecting
the Company.
The Company is facing increased competition from several non-utility
businesses which seek to provide energy services to users of electricity,
especially larger customers such as industrial, commercial and wholesale
customers. Such suppliers include independent power producers and unregulated
energy services companies. In this regard, natural gas utilities operating in
the Company's service area have established subsidiary ventures to provide
heating, ventilating and air conditioning services, attempting to attract the
Company's customers. Also, several utilities in the United States have
established unregulated energy services subsidiaries which pursue business
opportunities wherever they exist. In
13
<PAGE>
addition, cogeneration and energy services companies have begun
soliciting the Company's customers to provide alternatives to using
the Company's electricity.
On July 13, 1993, legislation became effective in Illinois which
permits the Company to create certain unregulated subsidiaries, and to
form a holding company, without being required to obtain the approval
of the ICC. The legislation gives the Company and its affiliates
flexibility to compete with unregulated competitors to provide energy
services. The Company has created an unregulated subsidiary to engage
in energy service activities and is preparing to obtain necessary
shareholder and Federal regulatory approvals to form a holding
company.
Regulation. The companies are subject to state and federal regulation
in the conduct of their operations. Such regulation includes rates,
securities issuance, nuclear operations, environmental and other
matters. Particularly in the cases of nuclear operations and
environmental matters, such regulation can and does affect the
companies' operational and capital expenditures.
During the past several years, the Nuclear Regulatory Commission
(NRC) has placed two of the Company's nuclear generating stations,
Zion station and Dresden station, on its list of plants to be
monitored closely. Generally, such status can be expected to result,
and has resulted, in increased expenditures to address deficiencies in
station management and/or operations. The Company has restructured its
management of its nuclear stations and committed additional resources
to their operations. The Zion station was removed from the list of
plants to be monitored closely in February 1993; however, the Dresden
station remains on that list. On January 27, 1994, the NRC noted
adverse performance trends at Quad-Cities station as well as at
LaSalle County station. The Company had already identified and was
working to correct most of the problems cited. In addition, the
Company anticipates that it will need to make significant capital
expenditures in future years in connection with certain of its nuclear
generating units.
The Company estimates that it will expend approximately $15 billion for
decommissioning costs primarily during the period from 2007 through 2032.
Such costs, which are estimated to aggregate approximately $4.06 billion,
in current-year (1993) dollars, are expected to be funded by the external
decommissioning trust funds which the Company established in compliance
with Illinois law and into which the Company has been making annual
contributions. See Note 1 of Notes to Financial Statements under
"Depreciation" for additional information regarding decommissioning
costs.
The Clean Air Act Amendments of 1990 (Amendments) will require
reductions in sulfur dioxide emissions from the Company's Kincaid
station. The Amendments also bar future utility sulfur dioxide
emissions except to the extent utilities hold allowances for their
emissions. Allowances which authorize their holder to emit sulfur
dioxide will be issued by the United States Environmental Protection
Agency based largely on historical levels of sulfur dioxide emissions.
These allowances will be transferable and marketable. The Company's
ability to increase generation in the future to meet expected
increased demand for electricity will depend in part on the Company's
ability to acquire additional allowances or to reduce emissions below
otherwise allowable levels from its existing generating plants. In
addition, the Amendments require studies to determine what controls,
if any, should be imposed on utilities to control air toxic emissions,
including mercury. The Company's Clean Air Compliance Plan for Kincaid
station was approved by the ICC on July 8, 1993. In late 1993,
however, a federal court declared the Illinois law under which the
approval was received to be unconstitutional and compliance plans
prepared and approved in reliance on the law to be void. Under the
Plan approved by the ICC, the Company would have been allowed to burn
low sulfur Illinois coal at Kincaid station without the installation
of pollution control equipment for the years 1995 through 1999, and to
purchase any necessary emission allowances that are expected to be
available under the Amendments during this period. Also, under the
Plan, the Company expected to install pollution control equipment for
Kincaid station by the year 2000. When the final outcome of the
federal litigation is known, the Company will determine whether any
changes are required.
The Amendments also will require reductions in nitrogen oxide
emissions from the Company's fossil fuel generating units. The
Illinois Environmental Protection Agency has proposed rules with
respect to such emissions which would require modifications to certain
of the Company's boilers. The Company's construction program for the
three-year period 1994-96 includes $25 million for such modifications.
14
<PAGE>
- ------------------------------
Capital Structure. The Company's ratio of long-term debt to total
capitalization has increased to 55.0% at December 31, 1993 from 54.0%
at December 31, 1992. This increase is related primarily to the
decrease in retained earnings resulting principally from the recording
in 1993 of the settlements discussed in "Rate Proceedings" below.
- ------------
Rate Proceedings
The Company's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings.
During the periods presented in the financial statements, the Company
was involved in proceedings concerning its October 1985 ICC rate order
(which related principally to the recovery of costs associated with
its Byron Unit 1 nuclear generating unit), proceedings concerning its
March 1991 ICC rate order (which related principally to the recovery
of costs associated with its Byron Unit 2 and Braidwood Units 1 and 2
nuclear generating units (Units)), proceedings concerning the
reduction in the difference between the Company's summer and non-
summer residential rates that was effected in the summer of 1988, and
ICC fuel reconciliation proceedings principally concerning the
recoverability of the costs of the Company's western coal. In
addition, there were outstanding issues related to the appropriate
interest rate and rate design to be applied to a refund that was made
in 1990 following the reversal of a December 1988 ICC rate order and a
rider to the Company's rates that the Company was required to file as
a result of the change in the federal corporate income tax rate made
by the Tax Reform Act of 1986. The uncertainties associated
with such proceedings and issues, among other things, led to the Rate
Matters Settlement and the Fuel Matters Settlement (which are
discussed below).
The effects of the aforementioned rate proceedings during the
periods presented are discussed below under "Results of Operations."
For additional information regarding such proceedings, see Notes
2 and 3 of Notes to Financial Statements in
the Company's Quarterly Report on Form 10-Q
The Company has for the quarterly period ended June 30, 1993.
restructured its
management of its nuclear Settlements Relating to Certain Rate Matters.
stations and committed On September 24, 1993, the Company's Board of
additional resources to Directors approved two proposed settlements
their operations. which the Company's management had reached
with parties involved in several of the
proceedings and matters relating to the level
of the Company's rates for electric service.
One of the proposed settlements (Rate Matters
Settlement) concerns the proceedings relating
to the Company's 1985 and 1991 ICC rate orders,
the proceedings relating to the reduction in the difference between the
Company's summer and non- summer residential rates, the outstanding
interest rate and rate design issues, and a rider related to the change in
the federal corporate income tax rate made by the Tax Reform Act of 1986.
The other proposed settlement (Fuel Matters Settlement) relates to the ICC
fuel reconciliation proceedings involving the Company for the period from
1985 through 1988 and to future challenges by the settling parties to the
prudency of the Company's western coal costs for the period from 1989
through 1992. Each of these settlements was subject to appropriate action
by the ICC or the courts having jurisdiction over the proceedings.
As a result of subsequent ICC and judicial actions, the Rate Matters
Settlement became final on November 4, 1993. Under the Rate Matters
Settlement, effective as of November 4, 1993, the Company reduced its
rates by approximately $339 million annually and commenced refunding
approximately $1.26 billion (including revenue taxes), plus interest
at five percent on the unpaid
15
<PAGE>
- -----------------------------
balance, through temporarily reduced rates over an initial refund
period scheduled to be twelve months (to be followed by a
reconciliation period of no more than five months). The Company had
previously deferred the recognition of revenues during 1993 as a
result of developments in the proceedings related to the March 1991
ICC rate order, which resulted in a reduction to 1993 net income of
approximately $160 million. The recording of the effects of the Rate
Matters Settlement in October 1993 reduced the Company's 1993 net
income and retained earnings by approximately $292 million or $1.37
per common share, in addition to the effect of the deferred
recognition of revenues and after the partially offsetting effect of
recording approximately $269 million (or $1.26 per common share) in
deferred carrying charges, net of income taxes, authorized in the
Remand Order. In January 1994, a purported class action was filed in
the Circuit Court of Cook County, Illinois challenging the method in
which the refunds are being made to residential customers in the Rate
Matters Settlement. The Company does not believe that the complaint
has any merit.
In the Remand Order, the rate determination was based upon, among
other things, findings by the ICC with respect to the extent to which
the Units were "used and useful" during the 1991 test year period of
the rate order. With respect to the "used and useful" issue, the ICC
applied a needs and economic benefits methodology, using a twenty
percent reserve margin and forecasted peak demand, and found Byron
Unit 2 and Braidwood Units 1 and 2 to be 93%, 21% and 0%,
respectively, "used and useful." The Company has not recorded any
disallowances related to the "used and useful" issue.
The Company considers the "used and useful"
disallowance in the Remand Order to be
temporary. The ICC concluded in the Remand
Order that the forecasts in the record in that
Kilowatthour sales to proceeding indicate that Braidwood Units 1 and
ultimate consumers 2 will be fully "used and useful" within the
increased 4.6% in 1993, reasonably foreseeable future.
the result of increased As a result of subsequent ICC actions, the
sales to all major Fuel Matters Settlement became final on
classes of customers. November 15, 1993. Under the Fuel Matters
Settlement, effective as of December 2, 1993,
the Company commenced paying approximately
$108 million (including revenue taxes) to its
customers through
temporarily reduced collections under its fuel adjustment clause over
a twelve-month period. The Company recorded the effects of the Fuel
Matters Settlement in October 1993, which effects reduced the
Company's net income and retained earnings by approximately $62
million or $0.29 per common share.
- ---------------
Results of Operations
Earnings Per Common Share. The Company's earnings per common share
were $0.22 in 1993, $2.08 in 1992 and $0.08 in 1991. The 1993 results
were significantly affected by the recording of the effects of the
Rate Matters Settlement and the Fuel Matters Settlement, which reduced
net income by approximately $354 million or $1.66 per common share, in
addition to the effect of the deferred recognition of revenues which
the Company had recorded during 1993, and after the partially
offsetting effect of recording approximately $269 million or $1.26 per
common share in deferred carrying charges, net of income taxes, as
authorized in the Remand Order. The 1993 earnings also reflect the
favorable cumulative effect ($9.7 million or $0.05 per common share)
of the Company's adoption of Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, in January
1993. The effect of the non-recurring items was partially offset by a
higher level of kilowatthour sales and
16
<PAGE>
lower operation and maintenance expenses. Excluding non-recurring items,
earnings in 1993 would have been $1.83 per common share.
The 1992 results were significantly affected by the decreased level of
kilowatthour sales due to a cooler than normal summer, higher operation and
maintenance expenses, higher revenues resulting from the full effect of the
rate increase which became effective on March 20, 1991, lower fuel and
purchased power costs and the 1992 reduction to net income of $50 million or
$0.24 per common share to reflect a provision for additional refunds and
interest related to the 1985 ICC rate order. Excluding non-recurring items,
earnings in 1992 would have been $2.32 per common share.
The 1991 results were significantly affected by the recording of the effects
of the unreasonable plant cost disallowance applicable to the Units included in
the ICC's March 1991 rate order, which reduced net income by approximately $734
million or $2.59 per common share. The rate increase authorized by the March
1991 ICC order, which became effective on March 20, 1991, partially offset
these reductions. Excluding the non-recurring adjustments, earnings in 1991
would have been $2.67 per common share.
See "Rate Proceedings" above for information relating to various rate
proceedings which have affected the Company's earnings per common share.
Kilowatthour Sales. Kilowatthour sales to ultimate consumers increased 4.6% in
1993, the result of increased sales to all classes of customers (except
railroads, which decreased), due primarily to more normal summer weather in
1993 as compared to 1992. Kilowatthour sales to ultimate consumers decreased
4.6% in 1992 principally reflecting lower kilowatthour sales to residential
consumers as a result of a cooler than normal summer. Kilowatthour sales to
ultimate consumers increased 5.2% in 1991, the result of increased sales to all
classes of customers and a warmer summer in 1991 than 1990. Kilowatthour sales
including sales for resale increased 16.0% in 1993, decreased 3.7% in 1992 and
increased 1.2% in 1991.
Electric Operating Revenues. Operating revenues decreased $766 million in 1993
principally reflecting the recording of the effects of the Rate Matters
Settlement and the Fuel Matters Settlement, which reduced 1993 electric
operating revenues by $1,282 million. This reduction was partially offset by a
higher level of kilowatthour sales and an increase in the recovery of energy
costs under the fuel adjustment provision in the Company's rates. See "Rate
Proceedings" above and "Earnings per Common Share" herein and Note 2 of Notes
to Financial Statements for additional information.
Operating revenues decreased $249 million in 1992 principally reflecting a
lower level of kilowatthour sales due to a cooler than normal summer, a
decrease in the recovery of energy costs
under the fuel adjustment provision in the Company's rates and a provision for
revenue refunds of approximately $18 million related to the 1985 ICC rate
order. The decrease more than offset the full effect of the rate increase
authorized in the March 1991 ICC order, which became effective March 20, 1991.
See "Rate Proceedings" above for additional information.
Operating revenues increased $965 million in 1991 due to the rate increase
which became effective on March 20, 1991, higher kilowatthour sales in 1991 and
the favorable comparison to 1990 in which rates were rolled back as a result of
the reversal of a December 1988 ICC rate order and provisions for revenue
refunds which were made as a result of developments in the proceedings related
to the 1985 ICC rate order and the reversal of the December 1988 ICC rate
order. See "Rate Proceedings" above for additional information.
Operating revenues for 1994 will be affected by the Rate Matters Settlement
(discussed above), which lowered the level of the Company's rates.
17
<PAGE>
Fuel Costs. Changes in fuel expense for 1993, 1992 and 1991 primarily
result from changes in the average cost of fuel consumed, changes in
the mix of fuel sources of electric energy generated and changes in
net generation of electric energy. Fuel mix is determined primarily by
system load, the costs of fuel consumed and the availability of
nuclear generating units. The cost of fuel consumed, net generation of
electric energy and fuel sources of kilowatthour generation were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Cost of fuel consumed (per million Btu):
Nuclear $0.52 $0.52 $0.49
Coal $2.89 $2.96 $2.84
Oil $3.03 $3.02 $3.37
Natural gas $2.70 $2.36 $2.48
Average all fuels $1.15 $0.97 $1.07
Net generation of electric energy (millions of
kilowatthours) 94,266 79,889 82,046
Fuel sources of kilowatthour generation:
Nuclear 75% 83% 77%
Coal 23 15 21
Oil 1 1 1
Natural gas 1 1 1
------------------------------------------------------------------------
100% 100% 100%
------------------------------------------------------------------------
</TABLE>
The cost of nuclear fuel consumed in 1991 reflects an accrual for a
$46 million court ordered refund from the Department of Energy (DOE)
relating to spent nuclear fuel disposal costs. An offsetting amount was
included in deferred under or overrecovered energy costs in December 1991
and was refunded to the Company's ratepayers through the fuel adjustment
clause in February 1992. In connection with the Energy Policy Act of 1992,
investor-owned electric utilities that have purchased enrichment services
from the DOE will be assessed annually for a fifteen-year period amounts
to fund a portion of the cost for the decontamination and decommissioning
of three nuclear enrichment facilities previously operated by the DOE. The
Company's portion of such assessments is estimated to be approximately $15
million per year (to be adjusted annually for inflation). The Act provides
that such assessments are to be treated as a cost of fuel. See Note 1 of
Notes to Financial Statements for information related to the accounting
for such costs.
Fuel Supply. Compared to other utilities, the Company has relatively
low average fuel costs. This results from the Company's reliance
predominantly on lower cost nuclear generation. The Company's coal
costs, however, are high compared to those of other utilities. The
Company's western coal contracts and its rail contracts for delivery
of the western coal were renegotiated during 1992 effective as of
January 1, 1993, to provide, among other things, for significant
reductions in the delivered price of the coal over the duration of the
contracts. However, the renegotiated contracts provide for the
purchase of certain coal at prices substantially above currently
prevailing market prices and the Company has significant purchase
commitments under its contracts. Coal and fuel oil, at average cost,
included in the Consolidated Balance Sheets, decreased approximately
$215 million in 1993 as compared to 1992, primarily due to lower
inventory levels at year-end, reflecting the Company's present policy
of maintaining coal inventories equal to 30 days of high utilization.
Lower average costs per ton of coal due to renegotiated coal and rail
contracts, which became effective January 1, 1993, also contributed to
the decrease in 1993. For additional information concerning the
Company's coal purchase commitments, fuel reconciliation proceedings
and coal reserves, see "Liquidity and Capital Resources" above and
Notes 2, 3, 17 and 19 of Notes to Financial Statements.
18
<PAGE>
- ------------------------------
Purchased Power. Amounts of purchased power are primarily affected by
system load, the availability of the Company's generating units and
the availability and cost of power from other utilities.
The number and average cost of kilowatthours purchased were as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------- ---- ----- -----
<S> <C> <C> <C>
Kilowatthours (millions) 644 2,555 3,374
Cost per kilowatthour 1.91c 1.78c 2.16c
------------------------------------------------
</TABLE>
Deferred Under or Overrecovered Energy Costs--Net. Electric operating
expenses for the years 1993, 1992 and 1991 reflect the net change in
under or overrecovered allowable energy costs. See "Fuel Costs" and
"Fuel Supply" above and Notes 1 and 3 of Notes to Financial
Statements.
Operation and Maintenance Expenses. Total operation and maintenance
expenses decreased approximately 4% during 1993 and increased
approximately 9% and 18% during 1992 and 1991, respectively. The
decrease in 1993 primarily reflects a decrease in operation and
maintenance expenses associated with nuclear generating stations,
lower costs of pension benefits, lower expenses related to fossil
generating station and customer-related activities, a decrease in the
number of employes and lower research costs, partially offset by
higher costs of other employe benefits, including postretirement
health care benefits, and the cost related to a special incentive plan
for employes. The increases in 1992 and 1991 primarily reflect an
increase in operation and maintenance expenses associated with nuclear
generating stations, cost of pension and other employe benefits,
including postretirement health care benefits, and an increased number
of employes. The increase in 1991 also reflects an increase related to
transmission and distribution activities. Wage increases, the effects
of which are reflected in the increases and decreases discussed below,
have increased operation and maintenance expenses during 1992 and
1991. Wages in 1993 were not increased over 1992 levels. The effects
of inflation, which are also reflected in the increases and decreases
discussed below, have increased operation and
maintenance expenses during the periods. The
Compared to other cost of pension benefits (net of amounts
utilities, the Company charged to construction) decreased $16 million
has relatively low in 1993 and increased $21 million and $31
average fuel costs. This million in 1992 and 1991, respectively. The
results from the 1992 pension increase reflects the effect of
Company's reliance the Company's workforce reduction program in
predominantly on lower which a charge to income of $26 million was
cost nuclear generation. recorded in 1992 (see Note 12 of Notes to
Financial Statements for additional
information). Additional costs associated with
the Company's management workforce reduction
program of approximately $11 million were
recorded in 1992, which adversely impacted operation and maintenance
expenses for 1992. The cost of postretirement health care benefits (net of
amounts charged to construction) increased $14 million, $29 million and
$19 million in 1993, 1992 and 1991, respectively. The $14 million increase
for 1993 reflects an increase in the cost of postretirement health care
benefits of $17 million as a result of the Company adopting on January 1,
1993, SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions (see Note 13 of Notes to Financial Statements for
additional information). Nuclear operation and maintenance expenses
decreased approximately $74 million in 1993 and increased $105 million and
$79 million in 1992 and 1991, respectively. The decrease at the nuclear
generating stations in 1993 includes the effects of the Company's cost
reduction efforts. Operation and maintenance expenses associated with
nuclear generating stations in future years may be significantly affected
by regulatory, operational and other requirements. Operation and
maintenance expenses associated with the Company's transmission and
19
<PAGE>
- ------------------------------
distribution system which increased $41 million in 1991, and remained
stable in 1992 and 1993, may increase in future years due, in part, to
the effect of increased customer expectations regarding reliability.
Operation and maintenance expenses associated with the fossil
generating stations in 1993 decreased $13 million and research costs
decreased $10 million from the prior period due primarily to the
effects in 1993 of the Company's cost reduction efforts. Costs of
customer-related activities in 1993 decreased $13 million. Operation
and maintenance expenses in 1993 also reflect a $36 million special
incentive plan cost for employes related to a sharing of operation and
maintenance savings below budgeted levels. In 1993, the Company
recorded a provision of $5 million which reflects the low end of the
range of its estimate of the liability associated with cleanup costs
of remediation sites other than former manufactured gas plant (MGP)
sites. In 1991, the Company recorded a provision of $25 million which
reflects the low end of the range of its estimate of the liability
associated with former MGPs. See Note 19 of Notes to Financial
Statements for additional information concerning cleanup costs of
remediation sites and former MGPs. For further information regarding
the cost reduction plan and its effect on future operation and
maintenance expenses, see "Liquidity and Capital Resources,"
subcaption "Rates and Financial Condition" above.
Depreciation. Depreciation expense increased in 1993 as a result of
additions to plant in service. Depreciation expense increased in 1992
as a result of reflecting in expense a full year's effect of increased
decommissioning costs allowed by the March 1991 ICC rate order, which
became effective March 20, 1991. Depreciation expense in 1991
decreased compared to 1990 due primarily to lower average
annual composite depreciation rates as well as
Average interest rate on the reduction to depreciable plant facilities in
long-term debt 1991 reflecting the effects of recording
outstanding has been disallowed plant costs, partially offset by the
significantly reduced, increase in decommissioning expense resulting
primarily through from the March 1991 ICC rate order. As discussed
refinancings at generally in Note 1 of Notes to Financial Statements,
lower rates of interest. the Company has revised its estimate of
decommissioning costs to aggregate
approximately $4.06 billion, in current-year (1993) dollars, from the
approximate $2.32 billion estimate of decommissioning costs, in current-year
(1993) dollars, reflected in its current rates. The current accrual of
approximately $127 million reflected in the Company's rates coupled with
accumulated earnings on the tax-qualified and nontax-qualified trust funds
based on after-tax earnings assumptions of 7.30% and 6.26%, respectively, is
expected to provide sufficient funds to pay estimated decommissioning costs
assuming a 4.5% escalation rate. Should the expected trust fund and trust fund
earnings be less than the current forecast, the Company believes that it is
probable that decommissioning costs not funded by the trust fund, including
trust fund earnings, would ultimately be recoverable through rates. See Note 1
of Notes to Financial Statements for information concerning depreciation rates
and decommissioning costs.
Interest on Debt. Changes in interest on long-term debt and notes payable for
the years 1993, 1992 and 1991 were due to changes in average interest rates and
in the amounts of long-term debt and notes payable outstanding. Changes in
interest on long-term debt reflect new issues of debt and the retirement and
redemption of issues which were refinanced at generally lower rates of interest.
The average amounts of long-term debt and notes payable outstanding and average
interest rates thereon were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Long-term debt outstanding:
Average amount (millions) $8,105.1 $7,699.9 $7,314.3
Average interest rate 8.03% 8.58% 9.09%
Notes payable outstanding:
Average amount (millions) $5.7 $17.5 $1.9
Average interest rate 5.83% 4.43% 8.22%
-----------------------------------------------------------------------
</TABLE>
Recovery/(Deferral) of Regulatory Assets--Net. In the March 1991 ICC
rate order, the ICC provided that, for ratemaking purposes, certain
rate case and consultant costs associated with the prudency audits for
the Units could be deferred and amortized. Approximately $43 million
of such costs were capitalized and resulted in an increase to net
income in 1991 of approximately $24 million or $0.11 per common share.
20
<PAGE>
In the Remand Order, the ICC provided that, for ratemaking purposes,
deferred carrying charges on the reasonable and "used and useful"
plant costs of the Units for the period April 1, 1989 until
approximately March 20, 1991, the date the Units were reflected in
rates, could be deferred and amortized. Approximately $438 million of
such costs were capitalized in October 1993 and resulted in an
increase to net income of approximately $269 million or $1.26 per
common share.
Taxes. In the third quarter of 1993, the President of the United
States signed into law a deficit-reduction plan that includes, among
other things, an increase in the federal statutory corporate income
tax rate from 34% to 35%, effective January 1, 1993. The estimated
effect of the higher rate would be to increase the Company's costs by
approximately $12 million per year. The Company began recording the
effects of the increased taxes in the third quarter of 1993. In
addition to the effects on income discussed above, the Company
recorded in the third quarter of 1993 a net increase in the deferred
income tax liability which was primarily offset by regulatory assets
net of regulatory liabilities, reflecting the increase in taxes
recoverable in rates to settle net income tax liabilities recorded in
prior years.
Further, the Company recorded in the third quarter of 1993 the
effects of the elimination of a scheduled reduction in a component of
the statutory Illinois income tax rate which was to have declined to
4.4% from 4.8%, effective July 1, 1993.
In 1993, the Company recorded a loss for income tax purposes. Income
tax overpayments made prior to the determination of such loss of
approximately $185 million are included in the Consolidated Balance
Sheet in receivables.
See Note 14 of Notes to Financial Statements for information
concerning the accounting standard adopted by the Company in January
1993 which requires the Company to use an asset and liability approach
for financial accounting and reporting for income taxes rather than
the deferred method.
Decommissioning. The staff of the SEC has questioned certain of the
current accounting practices of the electric utility industry, including
the Company, regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in financial
statements of electric utilities. In response to these questions the
electric utility industry has requested the Financial Accounting Standards
Board to review the accounting for removal costs, including
decommissioning. If current electric utility industry accounting practices
for such decommissioning are changed: (1) annual provisions for
decommissioning could increase; (2) the estimated cost for decommissioning
could be recorded as a liability rather than as accumulated depreciation;
and (3) trust fund income from the external decommissioning trusts could
be reported as investment income rather than as a reduction to
decommissioning expense. The Company does not believe that such changes,
if required, would have an adverse effect on results of operations due to
its current and future ability to recover decommissioning costs through
rates.
Regulatory Assets and Liabilities. The balance of Regulatory Assets
increased from December 31, 1992 to December 31, 1993 by approximately
$2,220 million. The increase is due primarily to the Company's
adoption of SFAS No. 109 effective January 1, 1993. The effect of the
implementation entry was to record regulatory assets of approximately
$1,546 million. Further, as discussed under the subcaption "Taxes"
above, in the third quarter of 1993, the Company began recording the
effects of the increased federal statutory corporate income tax rate
effective January 1, 1993, in addition to recording the effects of the
elimination of a scheduled reduction in a component of the statutory
Illinois income tax rate, effective July 1, 1993, which in total
resulted in an increase to regulatory assets of approximately $224
million. Approximately $436 million of the increase in regulatory assets
reflects the unamortized balance of deferred carrying charges recorded by
the Company in 1993 on the Units, as discussed under the subcaption
"Recovery/(Deferral) of Regulatory Assets--Net" above. The remaining
increase is related primarily to losses from reacquisition in 1993 of
first mortgage bonds prior to their scheduled maturity dates, which were
deferred consistent with regulatory treatment. A regulatory liability was
also recorded in compliance with SFAS No. 109. See Notes 1 and 14 of Notes
to Financial Statements for additional information.
Other Items. The amounts of allowance for funds used during
construction (AFUDC) reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual rates as
discussed in Note 1 of Notes to Financial Statements. AFUDC does not
contribute to the current cash flow of the Company.
The approximate $720 million increase in other cash investments, at
cost, and temporary cash investments, at cost, in 1993 as compared to
1992, reflects additional cash flow from higher operating revenues
collected prior to the finalization of the Rate Matters Settlement as
well as a reduction in
21
<PAGE>
operation and maintenance expenses, construction expenditures and dividends
paid on capital stock. Although the Company recorded the provisions for revenue
refunds in 1993, the majority of the refunds to its customers will be made in
1994.
The ratios of earnings to fixed charges for the years 1993, 1992 and 1991
were 1.19, 2.06 and 1.59, respectively. The ratios of earnings to fixed charges
and preferred and preference stock dividend requirements for the years 1993,
1992 and 1991 were 1.03, 1.78 and 1.36, respectively.
Business corporations in general have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate to
replace, at increased costs, the productive assets consumed. Electric utilities
in particular have been especially affected as a result of their capital
intensive nature and regulation which limits capital recovery and prescribes
installation or modification of facilities to comply with increasingly
stringent safety and environmental requirements. Because the regulatory process
limits the amount of depreciation expense included in the Company's revenue
allowance to the original cost of utility plant investment, the resulting cash
flows are inadequate to provide for replacement of that investment in future
years or preserve the purchasing power of common equity capital previously
invested.
22
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Commonwealth Edison Company:
We have audited the accompanying consolidated balance sheets and
statements of consolidated capitalization of Commonwealth Edison
Company (an Illinois corporation) and subsidiary companies as of
December 31, 1993 and 1992, and the related statements of consolidated
income, retained earnings, premium on common stock and other paid-in
capital, and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Commonwealth Edison Company and subsidiary companies as of December
31, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
As discussed in Notes 13 and 14, effective January 1, 1993, the
Company changed its method of accounting for postretirement health
care benefits and income taxes, respectively.
[LOGO-Sig. of Arthur Andersen & Co.]
Chicago, Illinois
March 18, 1994
25
<PAGE>
Summary of Selected Consolidated Financial Data
<TABLE>
<CAPTION>
(millions of dollars except per share data) 1993 1992 1991 1990 1989
------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Electric operating revenues $ 5,260 $ 6,026 $ 6,276 $ 5,311 $ 5,819
Net income $ 112 $ 514 $ 95 $ 128 $ 694
Earnings per common share $ 0.22 $ 2.08 $ 0.08 $ 0.22 $ 2.83
Cash dividends declared per common share $ 1.60 $ 2.30 $ 3.00 $ 3.00 $ 3.00
Total assets (at end of year) $23,963 $20,993(1) $17,365 $17,889 $17,948
Long-term obligations at end of year
excluding current portion:
Long-term debt and preference stock
subject to mandatory redemption
requirements $ 7,861 $ 7,913 $ 7,081 $ 7,341 $ 7,002
Accrued spent nuclear fuel disposal
fee and related interest $ 567 $ 549 $ 530 $ 500 $ 462
Capital lease obligations $ 321 $ 347 $ 396 $ 387 $ 413
Other long-term obligations $ 1,303 $ 666 $ 341 $ 225 $ 214
-----------------------------------------------------------------------------------------
</TABLE>
(1)SEE NOTE 14 OF NOTES TO FINANCIAL STATEMENTS FOR ADDITIONAL INFORMATION.
Price Range* and Dividends Paid Per Share of Common Stock
1993 (by quarters) 1992 (by quarters)
--------------------------- ---------------------------
Fourth Third Second First Fourth Third Second First
------ ------ ------ ------ ------ ------ ------ ------
Price Range:
High 30 5/8 31 5/8 29 7/8 28 1/4 26 27 5/8 34 1/4 40 1/8
Low 27 3/8 27 3/8 25 5/8 22 7/8 21 3/4 22 7/8 26 5/8 33 3/4
Dividends Paid 40c 40c 40c 40c 40c 75c 75c 75c
*As reported as NYSE Composite Transactions.
------------------------------------------------------------------------
The Company's common stock is traded on the New York, Chicago and Pacific stock
exchanges, with the ticker symbol CWE. At December 31, 1993, there were
approximately 196,000 holders of record of the Company's common stock.
1993 Revenues and Sales
<TABLE>
<CAPTION>
Electric
Operating Increase/ Kilowatthour Increase/ Increase/
Revenues(1) (Decrease) Sales (Decrease) (Decrease)
(thousands) Over 1992 (millions) Over 1992 Customers Over 1992
----------- ---------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Residential $2,341,155 9.1 % 20,818 8.0 % 3,009,508 1.0 %
Small commercial and
industrial 1,962,662 4.7 % 23,463 3.5 % 283,764 0.6 %
Large commercial and
industrial 1,437,680 4.6 % 22,917 3.4 % 1,503 (1.6)%
Public authorities 474,034 4.8 % 6,741 2.7 % 12,023 1.2 %
Electric railroads 27,593 (0.1)% 405 (1.4)% 2 -- %
---------------------------------------------------------------------------------------------
Ultimate
consumers--total $6,243,124 6.3 % 74,344 4.6 % 3,306,800 0.9 %
Provisions for
revenue refunds--
ultimate consumers (1,281,788) -- --
---------------------------------------------------------------------------------------------
Ultimate
consumers--net $4,961,336 74,344 3,306,800
---------------------------------------------------------------------------------------------
Sales for resale $ 242,550
Provisions for revenue
refunds--sales for
resale (4,977)
---------------------------------------------------------------------------------------------
Sales for resale--net $ 237,573 13,417 17
Other revenues 61,531 -- --
---------------------------------------------------------------------------------------------
$5,260,440 (12.7)% 87,761 16.0 % 3,306,817 0.9 %
---------------------------------------------------------------------------------------------
</TABLE>
(1) See Note 2 of Notes to Financial Statements and the Statements of
Consolidated Income for information related to revenue refunds.
26
<PAGE>
Statements of Consolidated Income
Commonwealth Edison Company and Subsidiary Companies
<TABLE>
<CAPTION>
(thousands except per share data) 1993 1992 1991
---------------------------------- ---------- ---------- -----------
<S> <C> <C> <C>
Electric operating revenues
(Notes 2 and 3):
Operating revenues $6,547,205 $6,044,693 $ 6,276,384
Provisions for revenue refunds (1,286,765) (18,372) (851)
-------------------------------------------------------------------------
$5,260,440 $6,026,321 $ 6,275,533
- -------------------------------------------------------------------------------
Electric operating expenses and taxes:
Fuel (Notes 1, 2, 3, 10 and 19) $1,170,935 $ 841,321 $ 968,176
Purchased power 12,303 45,579 72,980
Deferred (under)/overrecovered
energy costs--net
(Notes 1 and 3) (1,757) (30,254) 31,204
Operation 1,457,689 1,529,849 1,412,366
Maintenance 581,714 587,778 527,489
Depreciation (Note 1) 862,766 836,129 825,837
Recovery/(deferral) of regulatory
assets--net 5,235 3,330 (39,704)
Taxes (except income) (Note 15) 701,913 743,909 742,570
Income taxes (Notes 1 and 14)--
Current --Federal (19,930) 139,857 236,369
--State (7,623) 21,531 53,068
Deferred --Federal--net 88,052 97,066 123,479
--State--net 34,752 45,829 38,558
Investment tax credits deferred--
net (Notes 1 and 14) (29,424) (32,506) (32,054)
-------------------------------------------------------------------------
$4,856,625 $4,829,418 $ 4,960,338
- -------------------------------------------------------------------------------
Electric operating income $ 403,815 $1,196,903 $ 1,315,195
- -------------------------------------------------------------------------------
Other income and (deductions):
Interest on long-term debt $ (651,181) $ (660,429) $ (664,946)
Interest on notes payable (334) (775) (152)
Allowance for funds used during
construction (Note 1)--
Borrowed funds 16,930 17,213 13,500
Equity funds 20,618 19,960 18,272
Income taxes applicable to
nonoperating activities (Notes 1
and 14) 29,913 6,275 (10,842)
Disallowed plant costs (Note 3) -- -- (644,862)
Income tax reduction for
disallowed plant costs (Note 3) 791 -- 76,579
Deferred carrying charges (Note 2) 438,183 -- --
Interest and other costs for 1993
Settlements (Note 2) (98,674) -- --
Miscellaneous--net (57,359) (65,166) (7,857)
-------------------------------------------------------------------------
$ (301,113) $ (682,922) $(1,220,308)
- -------------------------------------------------------------------------------
Net income before cumulative effect of
change in accounting for income taxes $ 102,702 $ 513,981 $ 94,887
Cumulative effect of change in accounting
for income taxes 9,738 -- --
- -------------------------------------------------------------------------------
Net income $ 112,440 $ 513,981 $ 94,887
Provision for dividends on preferred and
preference stocks 66,052 70,539 78,288
- -------------------------------------------------------------------------------
Net income on common stock $ 46,388 $ 443,442 $ 16,599
- -------------------------------------------------------------------------------
Average number of common shares outstanding 213,508 212,929 212,452
Earnings per common share before cumulative
effect of change in accounting for
income taxes $0.17 $2.08 $0.08
Cumulative effect of change in accounting
for income taxes 0.05 -- --
- -------------------------------------------------------------------------------
Earnings per common share $0.22 $2.08 $0.08
- -------------------------------------------------------------------------------
Cash dividends declared per common share $1.60 $2.30 $3.00
- -------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Financial Statements are an integral part of the
above statements.
27
<PAGE>
Consolidated Balance Sheets
(thousands of dollars) December 31, 1993 1992
--------------------------------------------- ----------- -----------
ASSETS
Utility plant
(Notes 1, 3, 8, 16, 17 and 18):
Plant and equipment, at original cost
(includes construction work in progress of
$1,040 million and $1,165 million,
respectively) $26,097,934 $25,400,822
Less--Accumulated provision for depreciation 8,868,024 8,146,445
-------------------------------------------------------------------------
$17,229,910 $17,254,377
Nuclear fuel, at amortized cost 662,562 665,964
-------------------------------------------------------------------------
$17,892,472 $17,920,341
- -------------------------------------------------------------------------------
Investments:
Nuclear decommissioning funds, at cost (Notes
1 and 11) $ 706,841 $ 533,463
Subsidiary companies (Notes 1 and 17) 122,332 112,900
Other investments, at cost (Note 17) 72,379 123,324
-------------------------------------------------------------------------
$ 901,552 $ 769,687
- -------------------------------------------------------------------------------
Current assets:
Cash $ 743 $ --
Temporary cash investments, at cost which
approximates market 247,119 145,749
Other cash investments, at cost which
approximates market 641,575 22,226
Special deposits, at cost which approximates
market (Note 11) 32,635 260,899
Receivables (Note 1)--
Customers 427,613 445,676
Income taxes 186,687 5,159
Other 66,963 75,089
Provisions for uncollectible accounts (10,910) (12,976)
Coal and fuel oil, at average cost 111,752 327,134
Materials and supplies, at average cost 402,714 404,548
Deferred underrecovered energy costs (Notes 1
and 3) 4,728 2,971
Deferred income taxes related to current
assets and liabilities (Note 14)--
Loss carryforward 175,197 --
Other 166,102 115,137
Prepayments and other 42,190 37,659
-------------------------------------------------------------------------
$ 2,495,108 $ 1,829,271
- -------------------------------------------------------------------------------
Deferred charges:
Regulatory assets (Notes 1 and 14) $ 2,619,442 $ 399,453
Other 54,078 74,591
-------------------------------------------------------------------------
$ 2,673,520 $ 474,044
-------------------------------------------------------------------------
$23,962,652 $20,993,343
- -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of the
above statements.
28
<PAGE>
Commonwealth Edison Company and Subsidiary Companies
(thousands of dollars) December 31, 1993 1992
------------------------------------------------ ----------- -----------
LIABILITIES
Capitalization
(see accompanying statements):
Common stock equity $ 5,421,893 $ 5,707,832
Preferred and preference stocks without
mandatory redemption requirements 441,445 442,142
Preference stock subject to mandatory redemption
requirements 309,964 312,789
Long-term debt 7,550,762 7,600,692
--------------------------------------------------------------------------
$13,724,064 $14,063,455
- --------------------------------------------------------------------------------
Current liabilities:
Notes payable--bank loans (Note 9) $ 5,950 $ 5,600
Current portion of long-term debt, redeemable
preference stock and capitalized lease
obligations (Note 11) 630,050 564,538
Accounts payable 489,080 457,918
Accrued interest 186,825 192,658
Accrued taxes 132,362 165,763
Dividends payable 101,047 101,961
Estimated revenue refunds and related interest 1,166,308 2,833
Customer deposits 45,757 47,578
Other 98,519 83,580
--------------------------------------------------------------------------
$ 2,855,898 $ 1,622,429
- --------------------------------------------------------------------------------
Deferred credits and other noncurrent liabilities:
Deferred income taxes (Note 14) $ 4,445,173 $ 2,968,899
Accumulated deferred investment tax credits
(Notes 1 and 14) 746,508 775,932
Accrued spent nuclear fuel disposal fee and
related interest
(Note 10) 566,527 549,422
Obligations under capital leases (Note 16) 321,393 347,413
Regulatory liability (Notes 1 and 14) 592,770 --
Other (Notes 1, 12 and 13) 710,319 665,793
--------------------------------------------------------------------------
$ 7,382,690 $ 5,307,459
- --------------------------------------------------------------------------------
Commitments and contingent liabilities (Note 19)
- --------------------------------------------------------------------------------
$23,962,652 $20,993,343
- --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of the
above statements.
29
<PAGE>
Statements of Consolidated Capitalization
Commonwealth Edison Company and Subsidiary Companies
(thousands of dollars) December 31, 1993 1992
---------------------------------------------- ----------- -----------
Common stock equity
(Notes 4, 5 and 19):
Common stock, $12.50 par value per share--
Outstanding--213,751,147 shares and
213,305,404 shares, respectively $ 2,671,889 $ 2,666,318
Premium on common stock and other paid-in
capital 2,217,110 2,210,524
Capital stock and warrant expense (16,258) (16,196)
Retained earnings (Note 2) 549,152 847,186
--------------------------------------------------------------------------
$ 5,421,893 $ 5,707,832
- --------------------------------------------------------------------------------
Preferred and preference stocks without mandatory redemption requirements
(Notes 4, 6 and 11):
Preference stock, cumulative, without par
value--
Outstanding--10,499,549 shares $ 432,320 $ 432,320
$1.425 convertible preferred stock,
cumulative, without par value--
Outstanding--286,949 shares and 308,891
shares, respectively 9,125 9,822
Prior preferred stock, cumulative, $100 par
value per share--
No shares outstanding -- --
--------------------------------------------------------------------------
$ 441,445 $ 442,142
- --------------------------------------------------------------------------------
Preference stock subject to mandatory redemption requirements
(Notes 4, 7 and 11):
Preference stock, cumulative, without par
value--
Outstanding--3,290,290 shares and 4,425,445
shares, respectively $ 327,653 $ 348,442
Current redemption requirements for preference
stock included in current liabilities (17,689) (35,653)
--------------------------------------------------------------------------
$ 309,964 $ 312,789
- --------------------------------------------------------------------------------
Long-term debt
(Notes 8, 11 and 20):
First mortgage bonds:
Maturing 1993 through 1998--5 1/4% to 10 1/8% $ 818,000 $ 1,013,000
Maturing 1999 through 2008--6 3/8% to 10 3/8% 2,204,600 2,149,655
Maturing 2009 through 2018--7 1/4% to 12% 956,000 1,311,000
Maturing 2019 through 2023--7 3/4% to 9 7/8% 2,020,000 1,460,000
--------------------------------------------------------------------------
$ 5,998,600 $ 5,933,655
Sinking fund debentures, due 1999 through
2011--2 3/4% to 7 5/8% 120,185 121,093
Pollution control obligations, due 2004
through 2014--5 7/8% to 11 3/8% 353,200 353,200
Other long-term debt 1,598,625 1,613,246
Current maturities of long-term debt included
in current liabilities (446,724) (351,124)
Unamortized net debt discount and premium
(Note 1) (73,124) (69,378)
--------------------------------------------------------------------------
$ 7,550,762 $ 7,600,692
- --------------------------------------------------------------------------------
$13,724,064 $14,063,455
- --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of the
above statements.
30
<PAGE>
Statements of Consolidated Cash Flows
Commonwealth Edison Company and Subsidiary Companies
(thousands of dollars) 1993 1992 1991
------------------------------- ----------- ----------- ----------
Cash flow from operating activities:
Net income $ 112,440 $ 513,981 $ 94,887
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 911,136 874,156 874,660
Deferred income taxes and
investment tax credits--net 85,079 109,850 65,154
Cumulative effect of change in
accounting for income taxes (9,738) -- --
Equity component of allowance
for funds used
during construction (20,618) (19,960) (18,272)
Provisions for revenue refunds
and related interest 1,354,197 73,370 12,584
Revenue refunds and related
interest (190,723) (248,360) (90,332)
Disallowed plant costs -- -- 644,862
Recovery/(deferral) of
regulatory assets/deferred
carrying charges--net (432,948) 3,330 (39,704)
Provisions/(payments) for
liability for early
retirement and separation
costs--net (1,816) 27,814 --
Provisions/(payments) for
liabilities associated with
remediation costs and
manufactured gas plants--net 5,000 (478) 25,000
Net effect on cash flows of
changes in:
Receivables (157,405) 70,776 (196,558)
Coal and fuel oil 215,382 (111,333) 95,779
Materials and supplies 1,834 1,990 (36,496)
Accounts payable adjusted for
nuclear fuel lease principal
payments and
provisions/(payments) for
liability for early
retirement and separation
costs--net 278,946 315,822 280,131
Accrued interest and taxes (39,234) (85,633) 101,259
Other changes in certain
current assets and
liabilities (6,637) (9,031) 40,891
Other--net 144,318 61,328 83,452
------------------------------------------------------------------------
$ 2,249,213 $ 1,577,622 $1,937,297
- ------------------------------------------------------------------------------
Cash flow from investing activities:
Construction expenditures $ (841,525) $ (995,881) $ (961,168)
Nuclear fuel expenditures (261,370) (220,347) (250,559)
Equity component of allowance
for funds used during
construction 20,618 19,960 18,272
Investment in nuclear
decommissioning funds (173,378) (156,017) (117,294)
Investment in coal reserves (43) (79,961) (78,678)
Investment in subsidiary
companies -- (268) --
Other cash investments (619,349) 23,853 416,144
------------------------------------------------------------------------
$(1,875,047) $(1,408,661) $ (973,283)
- ------------------------------------------------------------------------------
Cash flow from financing activities:
Issuance of securities--
Long-term debt $ 1,927,296 $ 1,962,737 $ 736,281
Capital stock 80,585 15,568 13,334
Retirement and redemption of
securities--
Long-term debt (1,900,540) (1,214,730) (795,236)
Capital stock (93,081) (50,069) (75,546)
Deposits and securities held
for retirement and redemption
of securities 241,731 (245,028) 4,043
Premium paid on early
redemption of long-term debt (78,395) (10,809) (25,855)
Cash dividends paid on capital
stock (408,285) (635,370) (716,849)
Proceeds from sale/leaseback of
nuclear fuel 204,254 190,830 240,263
Nuclear fuel lease principal
payments (245,968) (245,877) (231,150)
Increase in short-term
borrowings 350 3,600 250
------------------------------------------------------------------------
$ (272,053) $ (229,148) $ (850,465)
- ------------------------------------------------------------------------------
Increase (Decrease) in cash and
temporary cash investments $ 102,113 $ (60,187) $ 113,549
Cash and temporary cash
investments at beginning of
year 145,749 205,936 92,387
- ------------------------------------------------------------------------------
Cash and temporary cash
investments at end of year $ 247,862 $ 145,749 $ 205,936
- ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of the
above statements.
31
<PAGE>
Statements of Consolidated Retained Earnings
Commonwealth Edison Company and Subsidiary Companies
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
----------------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Balance Beginning of year $847,186 $ 893,702 $1,513,894
Add
Net income 112,440 513,981 94,887
--------------------------------------------------------------------
$959,626 $1,407,683 $1,608,781
- --------------------------------------------------------------------------
Deduct
Cash dividends declared on--
Common stock $341,683 $ 489,768 $ 637,480
Preferred and preference stocks 65,688 70,101 77,599
Loss on reacquired preference stock 3,103 628 --
--------------------------------------------------------------------
$410,474 $ 560,497 $ 715,079
- --------------------------------------------------------------------------
Balance
End of year $549,152 $ 847,186 $ 893,702
- --------------------------------------------------------------------------
</TABLE>
Statements of Consolidated Premium on Common Stock and Other Paid-In Capital
Commonwealth Edison Company and Subsidiary Companies
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
----------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Balance Beginning of year $2,210,524 $2,202,496 $2,194,314
Add
Premium on issuance of common stock
and gain on reacquired preference
stock 6,586 8,028 8,182
- ----------------------------------------------------------------------------
Balance
End of year $2,217,110 $2,210,524 $2,202,496
</TABLE>
- --------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of the
above statements.
32
<PAGE>
Notes to Financial Statements
Commonwealth Edison Company and Subsidiary Companies
- --------------------------------
1 Summary of Significant Accounting Policies
Regulation. Commonwealth Edison Company (Company) is subject to the
regulation of the Illinois Commerce Commission (ICC) and Federal
Energy Regulatory Commission (FERC). The Company's accounting policies
and the accompanying consolidated financial statements conform to
generally accepted accounting principles applicable to rate-regulated
enterprises and reflect the effects of the ratemaking process. Such
effects concern mainly the time at which various items enter into the
determination of net income in order to follow the principle of
matching costs and revenues. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," subcaption
"Liquidity and Capital Resources," for information related to the
Company's rates and financial condition.
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary,
Commonwealth Edison Company of Indiana, Inc. (collectively,
companies), the only subsidiary engaged in the electric utility
business. The consolidated financial statements also include the
accounts of the Company's wholly-owned subsidiary, CECo Enterprises
Inc., an unregulated subsidiary engaged in energy service activities.
All significant intercompany transactions have been eliminated. The
investments in other subsidiary companies, which are not material in
relation to the Company's financial position and results of
operations, are accounted for in accordance with the equity method of
accounting.
Customer Receivables and Revenues. The Company is engaged principally
in the production, purchase, transmission, distribution and sale of
electricity to a diverse base of residential, commercial and
industrial customers. The Company's electric service territory has an
area of approximately 11,540 square miles and an estimated population
of approximately 8.1 million as of December 31, 1993, approximately
8.2 million as of December 31, 1992 and approximately 8.1 million as
of December 31, 1991. It includes the city of Chicago, an area of
about 225 square miles with an estimated population of three million
from which the Company derived approximately one-third of its ultimate
consumer revenues in 1993. The Company had approximately 3.3 million
electric customers at December 31, 1993.
Depreciation. Depreciation is provided on the straight-line basis by
amortizing the cost of depreciable plant and equipment over estimated
composite service lives. Such provisions for depreciation were at
average annual rates of 3.12%, 3.12% and 3.22% of average depreciable
utility plant and equipment for the years 1993, 1992 and 1991,
respectively. The ICC's March 8, 1991 rate order directs the Company
to depreciate non-nuclear plant and equipment at annual rates
developed for each class of plant based on their composite service
lives. The annual rate for nuclear plant and equipment is 2.88% which
excludes decommissioning costs. The provisions for chemical cleaning
are reflected in the Statements of Consolidated Income in maintenance
expense and in the Consolidated Balance Sheets in other noncurrent
liabilities.
Nuclear plant decommissioning costs are accrued over the expected
service life of the related nuclear generating stations. The accrual is
based on an annual levelized cost of the unrecovered portion of
decommissioning costs which are escalated for expected inflation to the
expected time of decommissioning and are net of expected earnings on the
trust fund. See "Decommissioning" under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," subcaption
"Results of Operations," for a discussion of questions raised by the staff
of the Securities and Exchange Commission regarding the electric utility
industry accounting for decommissioning costs. Decommissioning is expected
to occur relatively soon after the end of the useful life of each related
generating station using a prompt removal method authorized by the Nuclear
Regulatory Commission (NRC) guidelines. The Company's twelve operating
units have estimated remaining service lives ranging from 13 to 34 years.
The Company's first nuclear unit is retired and will be decommissioned
with the operating units at that station, which is consistent with the
regulatory treatment for the related decommissioning costs.
The Company has recently completed a study which determined that
decommissioning costs, including the costs of decontamination, dismantling
and site restoration are estimated to aggregate $4.06 billion, in current-
year (1993) dollars. This compares to the estimate for decommissioning
costs of $2.32 billion, in current-year (1993) dollars, reflected in the
Company's last rate order of March 8, 1991. The $4.06 billion estimate is
based on plant location and cost characteristics for the Company's nuclear
plants. The estimate includes additional low level waste burial costs,
higher labor costs due to expected reduced NRC annual dose limit
requirements and higher costs resulting from an additional five year
period in the decommissioning process to allow sufficient cooling of on-
site spent nuclear fuel before it is removed from the fuel pool.
On February 10, 1994, the Company filed a rate increase request with the
ICC. As part of that request, the Company proposed to increase its annual
accrual of decommissioning costs to approximately $170 million from the
current level of $127 million approved in the March 8, 1991 rate order.
The assumptions used to calculate the $43 million proposed increase in the
annual accrual of decommissioning costs (such as the current
decommissioning costs estimate of $4.06 billion, after-tax earnings on the
tax-qualified and nontax-qualified decommissioning funds of 7.30% and
6.26%, respectively, as well as a future escalation rate of 5.3% in
decommissioning costs) reflect some uncertainty. The rate filing is
designed to provide greater assurance than current rate levels that
sufficient funds will be available in the external decommissioning trusts
for decommissioning expenditures when the nuclear plants are retired. The
current accrual of $127 million, coupled with accumulated earnings on the
trust fund assets, would provide approximately the same amount of funds to
pay estimated decommissioning costs if a 4.5% escalation rate is assumed.
Decommissioning costs are recorded as portions of depreciation expense
and accumulated provision for depreciation on the Statements of
Consolidated Income and the Consolidated Balance Sheets. As of December
31, 1993, the total decommissioning costs included in the accumulated
provision for depreciation was approximately $914 million. Illinois law
requires the Company to establish external trusts, and the ICC has
approved the Company's funding plan and requires annual contributions of
current accruals and ratable contributions of past accruals over the
remaining service lives of the nuclear plants. The book value of funds
accumulated in the external trusts at December 31, 1993 was approximately
$707 million. The earnings on the external trusts accumulate in the fund
balance and in the accumulated provision for depreciation. Such earnings
on the external trust funds for the years 1993, 1992, and 1991, which have
been recorded as a component of depreciation expense in the Company's
Statements of Consolidated Income, were $40,829,000, $32,443,000 and
$24,231,000, respectively.
33
<PAGE>
Amortization of Nuclear Fuel. The cost of nuclear fuel is amortized to
fuel expense based on the quantity of heat produced using the unit of
production method. As authorized by the ICC, provisions for spent
nuclear fuel disposal costs have been recorded at a level required to
recover the fee payable on current nuclear-generated and sold
electricity and the current interest accrual on the one-time fee
payable to the Department of Energy (DOE) for nuclear generation prior
to April 7, 1983. The one-time fee and interest thereon have been
recovered and the current fee and current interest on the one-time fee
are currently being recovered through the fuel adjustment clause. See
Note 10 for further information concerning the disposal of spent
nuclear fuel, the one-time fee and the current interest accrual on the
one-time fee. Nuclear fuel expenses, including leased fuel costs and
provisions for spent nuclear fuel disposal costs, for the years 1993,
1992 and 1991 were $385,894,000, $366,821,000 and $331,913,000,
respectively.
In connection with the Energy Policy Act of 1992, investor-owned
electric utilities that have purchased enrichment services from the
DOE will be assessed annually for a fifteen-year period amounts to
fund a portion of the cost for the decontamination and decommissioning
of three nuclear enrichment facilities previously operated by the DOE.
The Company's portion of such assessments is estimated to be
approximately $15 million per year (to be adjusted annually for
inflation). The Act provides that such assessments are to be treated
as a cost of fuel. At December 31, 1993, the Company had recorded a
liability of approximately $177 million in other noncurrent
liabilities and approximately $29 million in other current
liabilities. The related asset was recorded in regulatory assets.
Approximately $15 million and $4 million associated with such
assessments were amortized to fuel expense in 1993 and 1992,
respectively, and were reflected in the fuel adjustment clause.
Income Taxes. Deferred income taxes are provided for income and
expense items recognized for financial accounting purposes in periods
that differ from those for income tax purposes. Income taxes deferred
in prior years are charged or credited to income as the book/tax
timing differences reverse. Prior years' deferred investment tax
credits are amortized through credits to income generally over the
lives of the related property. Income tax credits resulting from
interest charges applicable to nonoperating activities, principally
construction, are classified as other income.
For additional information relating to income taxes, including
information related to the Company's adoption in January 1993 of
Statement of Financial Accounting Standards (SFAS) No. 109, which
requires an asset and liability approach to accounting for income
taxes, see Note 14. In addition, see "Taxes" under the subcaption
"Results of Operations," in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Allowance for Funds Used During Construction (AFUDC). In accordance
with uniform systems of accounts prescribed by regulatory authorities,
the Company capitalizes AFUDC, compounded semiannually, which
represents the estimated cost of funds used to finance its
construction program. The equity component of AFUDC is recorded on an
after-tax basis and the borrowed funds component of AFUDC is recorded
on a pre-tax basis. The average annual capitalization rates for the
years 1993, 1992 and 1991 were 10.05%, 10.31% and 11.07%,
respectively.
34
<PAGE>
For additional information regarding AFUDC, see Note 14 and "Other
Items," under the subcaption "Results of Operations," in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Interest. Total interest costs incurred on debt, leases and other
obligations for the years 1993, 1992 and 1991 were $778,639,000,
$777,122,000 and $767,860,000, respectively.
Debt Discount, Premium and Expense. Discount, premium and expense on
long-term debt are being amortized over the lives of the respective
issues.
Loss on Reacquired Debt. Consistent with regulatory treatment, the net
loss from reacquisition of first mortgage bonds, debentures and
pollution control obligations prior to their scheduled maturity date
is deferred and amortized over the lives of the long-term debt or
notes issued to finance the reacquisition.
Deferred Recovery of Energy Costs. The uniform fuel adjustment clause
adopted by the ICC provides for the recovery of changes in fossil and
nuclear fuel costs and the energy portion of purchased power costs as
compared to the fuel and purchased energy costs included in base
rates. As authorized by the ICC, the Company has recorded under or
overrecoveries of allowable fuel and energy costs which, under the
clause, are recoverable or refundable in subsequent months. For
information relating to the annual reconciliation proceedings held by
the ICC with respect to the Company's fuel and power purchases, see
Note 3.
Regulatory Assets and Liabilities. Regulatory assets include the
unamortized portions of certain rate case and consultant costs
associated with the prudency audits of Byron and Braidwood stations
which the ICC allowed to be deferred and amortized for ratemaking
purposes, unamortized deferred depreciation related to Byron Unit 1
which the ICC allowed to be deferred and amortized over the remaining
life of the unit, unamortized losses on reacquired debt, unamortized
deferred carrying charges associated with the Byron and Braidwood
stations which the ICC allowed to be deferred and amortized for
ratemaking purposes, a regulatory asset for the Company's unamortized
balance of a fifteen-year assessment by the DOE for the
decontamination and decommissioning of certain enrichment facilities
and a regulatory asset recorded in compliance with SFAS No. 109, which
the Company adopted in January 1993. A regulatory liability was also
recorded in compliance with SFAS No. 109.
For additional information relating to rate case and consultant
costs and deferred carrying charges, see "Recovery/(Deferral) of
Regulatory Assets--Net," under the subcaption "Results of Operations,"
in "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
35
<PAGE>
Statements of Cash Flows. For purposes of the statements of
consolidated cash flows, temporary cash investments, generally
investments maturing in three months or less at the time of purchase,
are considered to be cash equivalents. Supplemental information
required by SFAS No. 95 for the years 1993, 1992 and 1991 is as
follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $677,669 $652,501 $700,876
Income taxes $103,014 $238,052 $210,714
Supplemental schedule of non-cash investing
and
financing activities:
Capital lease obligations incurred $213,758 $193,677 $244,030
------------------------------------------------------------------------
</TABLE>
- ---------------------------------
2 Settlements Relating to Certain Rate Matters
On September 24, 1993, the Company's Board of Directors approved two
proposed settlements which the Company's management had reached with
parties involved in several of the proceedings and matters relating to
the level of the Company's rates for electric service. One of the
proposed settlements (Rate Matters Settlement) concerns the
proceedings relating to the Company's 1985 and 1991 ICC rate orders
(which orders relate to, among other things, the recovery of costs
associated with the Company's four most recently completed nuclear
generating plants, Byron Units 1 and 2 and Braidwood Units 1 and 2),
the proceedings relating to the reduction in the difference between
the Company's summer and non-summer residential rates that was
effected in the summer of 1988, outstanding issues relating to the
appropriate interest rate and rate design to be applied to a refund
made by the Company during 1990 relating to a December 1988 ICC rate
order, and matters related to a rider to the Company's rates that the
Company was required to file as a result of the change in the federal
corporate income tax rate made by the Tax Reform Act of 1986. The
other proposed settlement (Fuel Matters Settlement) relates to the ICC
fuel reconciliation proceedings involving the Company for the period
from 1985 through 1988 and to future challenges by the settling
parties to the prudency of the Company's western coal costs for the
period from 1989 through 1992. Each of these settlements was subject
to appropriate action by the ICC or the courts having jurisdiction
over the proceedings.
As a result of subsequent ICC and judicial actions, the Rate Matters
Settlement became final on November 4, 1993. Under the Rate Matters
Settlement, effective as of November 4, 1993, the Company reduced its
rates by approximately $339 million annually and commenced refunding
approximately $1.26 billion (including revenue taxes), plus interest
at five percent on the unpaid balance, through temporarily reduced
rates over an initial refund period scheduled to be twelve months (to
be followed by a reconciliation period of no more than five months).
The Company had previously deferred the recognition of revenues during
1993 as a result of developments in the proceedings related to the
March 1991 ICC rate order, which resulted in a reduction to 1993 net
income of approximately $160 million. The recording of the effects of
the Rate Matters Settlement in October 1993 reduced the Company's 1993
net income and retained earnings by approximately $292 million or
$1.37 per common share, in addition to the effect of the deferred
recognition of revenues and after the partially offsetting effect of
recording approximately $269 million (or $1.26 per common share) in
deferred carrying charges, net of income taxes, authorized in the ICC
rate order issued on January 6, 1993 (as subsequently modified, the
Remand Order). In January 1994, a purported class action was filed in
the Circuit Court of Cook County, Illinois (Circuit Court) challenging
the method in which the refunds are being made to residential
customers in the Rate Matters Settlement. The Company does not believe
that the complaint has any merit.
36
<PAGE>
In the Remand Order, the rate determination was based upon, among
other things, findings by the ICC with respect to the extent to which
Byron Unit 2 and Braidwood Units 1 and 2 (Units) were "used and
useful" during the 1991 test year period of the rate order. With
respect to the "used and useful" issue, the ICC applied a needs and
economic benefits methodology, using a twenty percent reserve margin
and forecasted peak demand, and found Byron Unit 2 and Braidwood Units
1 and 2 to be 93%, 21% and 0%, respectively, "used and useful." The
Company has not recorded any disallowances related to the "used and
useful" issue. The Company considers the "used and useful"
disallowance in the Remand Order to be temporary. The ICC concluded in
the Remand Order that the forecasts in the record in that proceeding
indicate that Braidwood Units 1 and 2 will be fully "used and useful"
within the reasonably foreseeable future.
As a result of subsequent ICC actions, the Fuel Matters Settlement
became final on November 15, 1993. Under the Fuel Matters Settlement,
effective as of December 2, 1993, the Company commenced paying
approximately $108 million (including revenue taxes) to its customers
through temporarily reduced collections under its fuel adjustment
clause over a twelve-month period. The Company recorded the effects of
the Fuel Matters Settlement in October 1993, which effects reduced the
Company's net income and retained earnings by approximately $62
million or $0.29 per common share.
For additional information regarding the proceedings and matters
settled, see Notes 3, 17 and 19.
- -----------
3 Rate Matters
The Company's revenues, net income, cash flows and plant carrying
costs have been affected directly by various rate-related proceedings.
During the periods presented in the financial statements, the Company
was involved in proceedings concerning its October 1985 ICC rate order
(which related principally to the recovery of costs associated with
its Byron Unit 1 nuclear generating unit), proceedings concerning its
March 1991 ICC rate order (which related principally to the recovery
of costs associated with the Units), proceedings concerning the
reduction in the difference between the Company's summer and non-
summer residential rates that was effected in the summer of 1988, and
ICC fuel reconciliation proceedings principally concerning the
recoverability of the costs of the Company's western coal. In
addition, there were outstanding issues related to the appropriate
interest rate and rate design to be applied to a refund that was made
in 1990 following the reversal of a December 1988 ICC rate order and a
rider to the Company's rates that the Company was required to file as
a result of the change in the federal corporate income tax rate made
by the Tax Reform Act of 1986. The uncertainties associated with such
proceedings and issues, among other things, led to the Rate Matters
Settlement and the Fuel Matters Settlement. See Note 2 for additional
information.
For additional information regarding the foregoing proceedings, see
Notes 2 and 3 of Notes to Financial Statements in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1993.
- --------------------------------------
4 Authorized Shares and Voting Rights of Capital Stock
At December 31, 1993, the authorized shares of capital stock were:
common stock--250,000,000 shares; preference stock--23,600,290 shares;
$1.425 convertible preferred stock--286,949 shares; and prior
preferred stock--850,000 shares. The prior preferred and preference
stocks are issuable in series and may be issued with or without
mandatory redemption requirements. Holders of shares at any time
outstanding, regardless of class, are entitled to one vote for each
share held on each matter submitted to a vote at a meeting of
shareholders, with the right to cumulate votes in all elections for
directors.
37
<PAGE>
- -------------
5 Common Stock
At December 31, 1993, shares of common stock were reserved for the
following purposes:
<TABLE>
<CAPTION>
Common stock reserved
-----------------------------------------------------------
<S> <C>
1993 Stock Incentive Plan 4,000,000
Employe Stock Purchase Plan 1,422,368
Employe Savings and Investment Plan 565,803
Conversion of $1.425 convertible preferred stock 292,687
Conversion of warrants 42,899
------------------------------------------------------------
6,323,757
------------------------------------------------------------
</TABLE>
Shares of common stock for the years 1993, 1992 and 1991 were issued
as follows:
<TABLE>
<CAPTION>
Common stock issued 1993 1992 1991
---------------------- ------- ------- -------
<S> <C> <C> <C>
Employe Stock Purchase
Plan 268,594 374,815 228,738
Employe Savings and
Investment Plan 153,400 235,900 132,140
Conversion of $1.425
convertible preferred
stock 22,375 16,221 28,146
Conversion of warrants 1,374 1,300 2,773
------------------------------------------------
445,743 628,236 391,797
------------------------------------------------
</TABLE>
At December 31, 1993 and 1992, 128,699 and 133,003 common stock
purchase warrants, respectively, were outstanding. The warrants
entitle the holders to convert such warrants into common stock at a
conversion rate of one share of common stock for three warrants.
- -------------------------------------------------------
6 Preferred and Preference Stocks Without Mandatory Redemption Requirements
No shares of preferred or preference stocks without mandatory
redemption requirements were issued or redeemed by the Company during
1993, 1992 and 1991. The series of preference stock without mandatory
redemption requirements outstanding at December 31, 1993 are
summarized as follows:
<TABLE>
<CAPTION>
Aggregate
Stated Value Involuntary
Shares (thousands Redemption Liquidation
Series Outstanding of dollars) Price(a) Price(a)
------ ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
$1.90 4,249,549 $106,239 $ 25.25 $25.00
$2.00 2,000,000 51,560 $ 26.04 $25.00
$1.96 2,000,000 52,440 $ 27.11 $25.00
$7.24 750,000 74,340 $101.00 $99.12
$8.40 750,000 74,175 $101.00 $98.90
$8.38 750,000 73,566 $100.16 $98.09
------------------------------------------------------------------------------
10,499,549 $432,320
------------------------------------------------------------------------------
</TABLE>
(a) Per share plus accrued and unpaid dividends, if any.
The outstanding shares of the $1.425 convertible preferred stock are
convertible at the option of the holders thereof, at any time, into
common stock at the rate of 1.02 shares of common stock for each share
of convertible preferred stock, subject to future adjustment. The
convertible preferred stock may be redeemed by the Company at $42 per
share, plus accrued and unpaid dividends, if any. The involuntary
liquidation price of the $1.425 convertible preferred stock is $31.80
per share, plus accrued and unpaid dividends, if any. During 1993,
1992 and 1991, 21,942 shares, 15,911 shares and 27,606 shares,
respectively, of the convertible preferred stock were converted into
common stock.
38
<PAGE>
- ----------------------------------------------
7 Preference Stock Subject to Mandatory Redemption Requirements
During 1993, 700,000 shares of preference stock subject to mandatory
redemption requirements were issued. During 1992 and 1991, no shares
of preference stock subject to mandatory redemption requirements were
issued. The series of preference stock subject to mandatory redemption
requirements outstanding at December 31, 1993 are summarized as
follows:
<TABLE>
<CAPTION>
Aggregate
Stated
Value
(thousands
Shares of
Series Outstanding dollars) Optional Redemption Price(a)
-------------- ----------- ---------- ---------------------------------------
<S> <C> <C> <C>
$8.20 321,420 $ 32,142 $103 through October 31, 1997; and $101
thereafter
$8.40 Series B 418,870 41,605 $101
$8.85 375,000 37,500 $103 through July 31, 1998; and $101
thereafter
$9.25 825,000 82,500 $105 through July 31, 1994; $103
through July 31, 1999; and $101
thereafter
$9.00 650,000 64,431 Non-callable
$6.875 700,000 69,475 Non-callable
-------------------------------------------------------------------------------
3,290,290 $327,653
-------------------------------------------------------------------------------
</TABLE>
(a) Per share plus accrued and unpaid dividends, if any.
The annual sinking fund requirements and sinking fund and
involuntary liquidation prices per share of the outstanding series of
preference stock subject to mandatory redemption requirements are
summarized as follows:
<TABLE>
<CAPTION>
Sinking Fund Involuntary
Series Annual Sinking Fund Requirement Price(a) Liquidation Price(a)
-------------- ----------------------------------- ------------ --------------------
<S> <C> <C> <C>
$8.20 35,715 shares $100 $100.00
$8.40 Series B 30,000 shares(b) $100 $ 99.326
$8.85 37,500 shares $100 $100.00
$9.25 75,000 shares $100 $100.00
$9.00 130,000 shares beginning in 1996(b) $100 $ 99.125
$6.875 (c) $100 $ 99.25
--------------------------------------------------------------------------------------
</TABLE>
(a) Per share plus accrued and unpaid dividends, if any.
(b) The Company has a non-cumulative option to increase the annual
sinking fund payment on each sinking fund redemption date to
retire an additional number of shares, not in excess of the
sinking fund requirement, at the applicable redemption price.
(c) All shares are required to be redeemed on May 1, 2000.
Annual remaining sinking fund requirements through 1998 on
preference stock outstanding at December 31, 1993 will aggregate
$17,709,000 in 1994, $17,822,000 in 1995, $30,822,000 in 1996,
$30,822,000 in 1997 and $30,822,000 in 1998. During 1993, 1992 and
1991, 1,835,155 shares, 793,132 shares and 1,093,038 shares,
respectively, of preference stock subject to mandatory redemption
requirements were reacquired to meet sinking fund requirements.
Sinking fund requirements due within one year are included in
current liabilities.
On November 1, 1991, the Company redeemed 80,000 shares of its
$11.125 Series of preference stock at the sinking fund redemption
price of $100 per share, plus accrued and unpaid dividends and
redeemed all of the remaining 80,000 shares at the optional redemption
price of $100 per share, plus accrued and unpaid dividends.
On November 1, 1992, the Company redeemed 300,000 shares of its
$2.875 Series of preference stock at the optional redemption price of
$25 per share and 75,000 shares of its $11.70 Series of preference
stock at the optional redemption price of $100 per share, plus accrued
and unpaid dividends.
39
<PAGE>
On June 28, 1993, the Company redeemed all 170,810 shares of its
$2.875 Series of preference stock and all 1,050,000 shares of its
$2.375 Series of preference stock, both at the optional redemption
price of $25.25 per share, plus accrued and unpaid dividends.
On November 1, 1993, the Company redeemed the remaining 75,000
shares of its $11.70 Series of preference stock (150,000 shares had
been redeemed on August 1, 1993 at the optional redemption price of
$105 per share, plus accrued and unpaid dividends). Of the remaining
75,000 shares, 37,500 shares were redeemed to meet the November 1,
1993 mandatory sinking fund requirement and 37,500 shares were
redeemed as a permitted optional sinking fund payment, both at the
sinking fund redemption price of $100 per share, plus accrued and
unpaid dividends.
On November 1, 1993, the Company redeemed all 210,000 shares of its
$9.30 Series of preference stock, of which 70,000 shares were redeemed
at the optional redemption price of $101.03 per share, plus accrued
and unpaid dividends, 70,000 shares were redeemed to meet the November
1, 1993 mandatory sinking fund requirement and 70,000 shares were
redeemed as a permitted optional sinking fund payment, the latter two
at the sinking fund redemption price of $100 per share, plus accrued
and unpaid dividends.
- -------------
8 Long-Term Debt
Sinking fund requirements and scheduled maturities remaining through
1998 for first mortgage bonds, debentures and other long-term debt
outstanding at December 31, 1993, after deducting debentures and first
mortgage bonds reacquired for satisfaction of future sinking fund
requirements, are summarized as follows: 1994 -- $446,724,000; 1995 --
$496,027,000; 1996 -- $233,449,000; 1997 -- $395,038,000; and 1998 --
$350,027,000.
At December 31, 1993, the Company had outstanding first mortgage
bonds maturing 1994 through 1998 as follows:
<TABLE>
<CAPTION>
Principal Amount
Series (thousands of dollars)
--------------------------- ----------------------
<S> <C>
6 1/8% due May 15, 1995 $103,000
5 1/4% due April 1, 1996 50,000
5 3/4% due November 1, 1996 50,000
5 3/4% due December 1, 1996 50,000
7% due February 1, 1997 150,000
5 3/8% due April 1, 1997 50,000
6 1/4% due October 1, 1997 60,000
6 1/4% due February 1, 1998 50,000
6% due March 15, 1998 130,000
6 3/4% due July 1, 1998 50,000
6 3/8% due October 1, 1998 75,000
----------------------------------------------------
$818,000
----------------------------------------------------
</TABLE>
40
<PAGE>
Other long-term debt outstanding at December 31, 1993 is summarized
as follows:
<TABLE>
<CAPTION>
Principal Amount
Debt Security (thousands of dollars) Interest Rate Provisions
-------------------------------- ---------------------- ---------------------------------------------
<S> <C> <C>
Notes
Medium Term Notes, Series 1N $ 82,500 Interest rates ranging from 9.27% to
due various dates through 10.48%
April 1, 1998
Medium Term Notes, Series 2N 56,300 Interest rates ranging from 9.57% to
due various dates through 9.874%
July 1, 1996
Medium Term Notes, Series 3N 399,000 Interest rates ranging from 8.77% to
due various dates through 9.20%
October 15, 2004
Medium Term Notes, Series 4N 195,000 Interest rates ranging from 7.90% to
due various dates through 8.875%
May 15, 1997
Notes due April 15, 1994 180,000 Fixed interest rate of 5.75%
Notes due July 15, 1995 100,000 Fixed interest rate of 5.50%
Notes due July 15, 1997 100,000 Fixed interest rate of 6.50%
Notes due October 15, 2005 235,000 Fixed interest rate of 6.40%
-------------------------------------------------------------------------------------------------------
$1,347,800
-------------------------------------------------------------------------------------------------------
Long-Term Notes Payable to Banks
Note due January 9, 1995 $ 100,000 Prevailing interest rate of 4.00% at
December 31, 1993
Notes due July 31, 1995 150,000 Prevailing interest rates averaging 3.875% at
December 31, 1993
-------------------------------------------------------------------------------------------------------
$ 250,000
-------------------------------------------------------------------------------------------------------
Purchase Contract Obligations
Woodstock due January 2, 1997 $ 273 Fixed interest rate of 4.50%
Hinsdale due April 30, 2005 552 Fixed interest rate of 3.00%
-------------------------------------------------------------------------------------------------------
$ 825
-------------------------------------------------------------------------------------------------------
$1,598,625
-------------------------------------------------------------------------------------------------------
</TABLE>
Long-term debt maturing within one year has been included in current
liabilities.
The Company's outstanding first mortgage bonds are secured by a lien
on substantially all property and franchises, other than expressly
excepted property, owned by the Company.
- ------------
9 Lines of Credit
The Company had total bank lines of credit of approximately $981
million and unused bank lines of credit of approximately $975 million
at December 31, 1993. Of that amount, $975 million (of which $175
million expires October 3, 1994, $40 million expires in equal
quarterly installments commencing on December 31, 1994 and ending on
September 30, 1996, $188 million expires in equal quarterly
installments commencing on December 31, 1995 and ending on September
30, 1997 and $572 million expires in equal quarterly installments
commencing on December 31, 1996 and ending on September 30, 1998) may
be borrowed on secured or unsecured notes of the Company at various
interest rates. The interest rate is set at the time of a borrowing
and is based on several floating rate bank indices plus a spread which
is dependent upon the Company's credit ratings, or on a prime interest
rate. Amounts under the remaining lines of credit may be borrowed at
prevailing prime interest rates on
41
<PAGE>
unsecured notes of the Company. Collateral, if required for the
borrowings, would consist of first mortgage bonds issued under and in
accordance with the provisions of the Company's mortgage. The Company
is obligated to pay commitment fees with respect to $975 million of
such lines of credit.
- -----------------------
10 Disposal of Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for
the selection and development of repositories for, and the disposal
of, spent nuclear fuel and high-level radioactive waste. The Company,
as required by that Act, has signed a contract with the DOE to provide
for the disposal of spent nuclear fuel and high-level radioactive
waste from the Company's nuclear generating stations beginning not
later than January 1998. The contract with the DOE requires the
Company to pay the DOE a one-time fee applicable to nuclear generation
through April 6, 1983 of approximately $277 million, with interest to
date of payment, and a fee payable quarterly equal to one mill per
kilowatthour of nuclear-generated and sold electricity after April 6,
1983. The Company has elected to pay the one-time fee, with interest,
just prior to the first scheduled delivery of spent nuclear fuel to
the DOE, which is scheduled to occur not later than January 1998;
however, this delivery schedule is expected to be delayed
significantly. The Company has recorded the liability for the one-time
fee and the related interest.
- ---------------------------
11 Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of financial instruments held by or issued and outstanding by
the companies. The disclosure of such information does not purport to
be a market valuation of the Company as a whole. The impact of any
realized or unrealized gains or losses related to such financial
instruments on the Company's financial position or results of
operations is dependent on the treatment authorized under future
ratemaking proceedings.
Investments. The estimated fair value of the Nuclear Decommissioning
Funds, as determined by the trustee for those funds, is based on
published market data. Financial instruments included in Other
Investments at a cost of approximately $4 million at December 31, 1993
and 1992, are not material in relation to other financial instruments
of the Company; therefore, an estimate of the fair value of these
instruments has not been made.
Current Assets. The carrying value of Cash, Temporary Cash Investments
and Other Cash Investments, which includes U.S. Government Obligations
and other short-term marketable securities, and Special Deposits,
which primarily includes cash deposited for the redemption, refund or
discharge of debt securities, approximates their fair value because of
the short maturity of these instruments.
Capitalization. The estimated fair value of Preferred and Preference
Stocks (Without and Subject to Mandatory Redemption Requirements) and
Long-Term Debt, including the current portion thereof, has been
obtained from an independent consultant. Estimated fair values exclude
accrued interest and preferred and preference dividends. Purchase
contract obligations included in Long-Term Debt at a cost of
approximately $1 million at December 31, 1993 and 1992, are not
material in relation to other financial instruments of the Company;
therefore, an estimate of the fair value of these instruments has not
been made. Long-Term Notes Payable to Banks in the amount of $250
million at December 31, 1993 and 1992, for which interest is paid at
prevailing rates are included in the financial statements at cost,
which approximates their fair value.
42
<PAGE>
Current Liabilities. The carrying value of Notes Payable, which
consists of commercial paper and/or bank loans having a maturity of
less than one year, approximates their fair value because of the short
maturity of these instruments. See "Capitalization" above for a
discussion of the fair value of the current portion of long-term debt
and redeemable preference stock.
Other Noncurrent Liabilities. The carrying value of Accrued Spent
Nuclear Fuel Disposal Fee and Related Interest represents the
settlement value as of December 31, 1993 and 1992; therefore, the
carrying value is equal to the fair value.
The estimated fair values of the Company's financial instruments
other than those instruments reflected in the financial statements at
cost which approximates market, as of December 31, 1993 and 1992, are
as follows:
<TABLE>
<CAPTION>
(thousands of dollars) December 31, 1993 December 31, 1992
------------------------- --------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Nuclear Decommissioning
Funds $ 706,841 $ 768,823 $ 533,463 $ 564,476
Capitalization (including
current portion):
Preferred and Preference
Stocks (without and
subject to mandatory
redemption
requirements) $ 769,098 $ 776,113 $ 790,584 $ 828,913
Long-Term Debt $7,819,785 $8,158,975 $7,770,248 $8,025,191
-----------------------------------------------------------------------
</TABLE>
- --------------
12 Pension Benefits
The companies have non-contributory defined benefit pension plans
which cover all regular employes. Benefits under these plans reflect
each employe's compensation, years of service and age at retirement.
Funding is based upon actuarially determined contributions that take
into account the amount deductible for income tax purposes and the
minimum contribution required under the Employee Retirement Income
Security Act of 1974, as amended. Actuarial valuations were determined
as of January 1, 1993 and 1992.
During 1992, the companies implemented a workforce reduction program
designed to reduce the management workforce. This program included an
early retirement program and voluntary and involuntary separation
plans. The early retirement program resulted in the recognition for
the year 1992 of an additional $26 million of pension cost and the
disclosure of an additional $39 million of unrecognized net loss at
December 31, 1992 as reflected in the following table. The companies
also recognized in 1992 a charge to expense of $11 million primarily
related to the cost of the separation plans. The total charge to
income of $37 million in 1992 is approximately $23 million after
reflecting income tax effects.
43
<PAGE>
The funded status of these plans at December 31, 1993 and 1992 was
as follows:
<TABLE>
<CAPTION>
(thousands of dollars) December 31, 1993 1992
--------------------------------------------- ----------- -----------
<S> <C> <C>
Actuarial present value of accumulated
pension plan benefits:
Vested benefit obligation $(2,350,000) $(2,232,000)
Nonvested benefit obligation (118,000) (112,000)
-------------------------------------------------------------------------
Accumulated benefit obligation $(2,468,000) $(2,344,000)
Effect of projected future compensation
levels (477,000) (454,000)
-------------------------------------------------------------------------
Projected benefit obligation $(2,945,000) $(2,798,000)
Fair value of plan assets, invested primarily
in equity index funds, other managed equity
and fixed income investments, U.S.
Government, government-sponsored corporation
and agency securities and listed corporate
obligations 2,741,000 2,577,000
-------------------------------------------------------------------------
Plan assets less than projected benefit
obligation $ (204,000) $ (221,000)
Unrecognized prior service cost 24,000 25,000
Unrecognized transition asset (168,000) (181,000)
Unrecognized net loss 131,000 211,000
-------------------------------------------------------------------------
Accrued pension liability $ (217,000) $ (166,000)
-------------------------------------------------------------------------
</TABLE>
The assumed discount rate was 7.5% and the assumed annual rate of
increase in future compensation levels was 4.0% at December 31, 1993
and 1992. These rates were used in determining the projected benefit
obligations, the accumulated benefit obligations and the vested
benefit obligations.
Pension costs were determined under the rules prescribed by SFAS No.
87, including the use of the projected unit credit actuarial cost
method and the following actuarial assumptions for periods during
1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Annual discount rate 7.50% 7.50% 8.50%
Annual rate of increase in future compensation levels 4.00% 4.00% 5.00%
Annual long-term rate of return on plan assets 9.50% 9.50% 9.50%
-------------------------------------------------------------------------
</TABLE>
The components of pension costs, portions of which were recorded as
components of construction costs, for the years 1993, 1992 and 1991
were as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
---------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Service cost $ 96,000 $ 98,000 $ 81,000
Interest cost on projected benefit
obligation 204,000 189,000 174,000
Actual return on plan assets (310,000) (179,000) (495,000)
Early retirement program cost -- 26,000 --
Net amortization and deferral 61,000 (67,000) 286,000
---------------------------------------------------------------------
$ 51,000 $ 67,000 $ 46,000
---------------------------------------------------------------------
</TABLE>
In addition, the companies provide an employe savings and investment
plan available to all regular employes who have completed three months
of service. Each participating employe may contribute up to 20% of
such employe's base pay and the companies match such contribution
equal to 70% of up to the first 5% of contributed base salary. During
1993, 1992 and 1991, the Company contributed $21,948,000, $20,023,000
and $14,643,000, respectively.
44
<PAGE>
- ----------------------------
13 Postretirement Health Care Benefits
The companies provide certain postretirement health care benefits for
retirees and their dependents and for the surviving dependents of
eligible employes and retirees. Substantially all of the companies'
employes become eligible for postretirement health care benefits when
they reach retirement age while working for the companies. In 1980,
the companies began funding the liability for postretirement health
care benefits through a trust fund, and the estimated cost of
postretirement health care benefits has been accrued and funded over
the working lives of the employes. Funding is based upon actuarially
determined contributions that take into account the amount deductible
for income tax purposes.
For the years 1980 through 1992, the liability for postretirement
health care benefits and the related provisions for postretirement
health care were equivalent to actuarial normal costs attributed over
participants' employment periods from date of hire to the expected
retirement date based on the aggregate cost method. On January 1,
1993, the companies adopted SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, which requires that
postretirement benefits be determined based on the projected unit
credit actuarial cost method and attributed over employment periods of
plan participants to the date of eligibility for postretirement
benefits rather than over the entire employment period. By adopting
the new standard, the companies estimate that for the year ended
December 31, 1993, postretirement costs increased $20 million
resulting in a decrease in net income of $10 million or $0.05 per
common share, net of income taxes and the portion of the costs charged
to construction. The transition obligation of $588 million shown in
the following schedule is being amortized over 20.6 years. The
ultimate effects on income are dependent on the treatment authorized
in future ratemaking proceedings. As indicated in the previous
paragraph, the companies have accounted for postretirement health care
benefits on an accrual basis since 1980 and accrual basis costs have
been reflected in rates in ratemaking proceedings.
Actuarial valuations were determined as of January 1, 1993. The
funded status of the plan at January 1, 1993 and December 31, 1993 was
as follows:
<TABLE>
<CAPTION>
(thousands of dollars) January 1, 1993 December 31, 1993
----------------------------------- --------------- -----------------
<S> <C> <C>
Actuarial present value of
accumulated postretirement health
care obligation:
Retirees $ (407,000) $ (444,000)
Active fully eligible participants (60,000) (65,000)
Other participants (538,000) (586,000)
-------------------------------------------------------------------------
Accumulated benefit obligation $(1,005,000) $(1,095,000)
Fair value of plan assets, invested
primarily in S&P 500 common
stocks, equity and fixed income
mutual funds, and U.S. Government
and listed corporate obligations 365,000 458,000
-------------------------------------------------------------------------
Plan assets less than accumulated
postretirement health care
obligation $ (640,000) $ (637,000)
Unrecognized transition obligation 588,000 559,000
Unrecognized net gain -- (9,000)
-------------------------------------------------------------------------
Accrued liability for
postretirement health care $ (52,000) $ (87,000)
-------------------------------------------------------------------------
</TABLE>
For 1993, different health care cost trends are used for pre-
Medicare and post-Medicare expenses. Pre-Medicare trend rates are
14.5% for 1993 grading down in 0.5% annual increments to 5%. Post-
Medicare trend rates are 12% for 1993 grading down in 0.5% annual
increments to 5%. The effect of a 1% increase in the assumed health
care cost trend rates for each future year would increase the
45
<PAGE>
accumulated postretirement health care obligation at January 1, 1993
by approximately $184 million and increase the aggregate of the
service and interest cost components of plan costs by approximately
$27 million for the year ended December 31, 1993. The annual discount
rate used was 7.5% and the annual long-term rate of return on plan
assets was 9.5%, or 9.1% after including income tax effects.
The components of postretirement health care costs, portions of
which were recorded as components of construction costs, for 1993 were
as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1993
----------------------------------------------- --------
<S> <C>
Service cost $ 45,000
Interest cost on accumulated benefit obligation 74,000
Actual return on plan assets (42,000)
Amortization of transition obligation 29,000
Other net deferral 10,000
-----------------------------------------------------------
$116,000
-----------------------------------------------------------
</TABLE>
- ------------
14 Income Taxes
The components of the net deferred income tax liability at January 1,
1993 and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
January 1, December 31,
(thousands of dollars) 1993 1993
--------------------------------------------- ---------- ------------
<S> <C> <C>
Deferred tax liabilities:
Accelerated cost recovery and liberalized
depreciation, net of removal costs $2,831,103 $3,095,855
Overheads capitalized 145,951 286,287
Repair allowance 231,647 210,302
Regulatory assets recoverable through future
rates 1,545,643 1,729,890
Deferred tax assets:
Postretirement benefits (101,086) (134,590)
Unbilled revenues (91,410) (98,164)
Loss carryforward -- (175,197)
Alternative minimum tax (111,961) (137,328)
Unamortized investment tax credits to be
settled through future rates (487,184) (490,047)
Other regulatory liabilities to be settled
through future rates (89,490) (102,383)
Other--net (51,753) (80,751)
-------------------------------------------------------------------------
Net deferred income tax liability $3,821,460 $4,103,874
-------------------------------------------------------------------------
</TABLE>
The $282 million increase in the net deferred income tax liability
from January 1, 1993 to December 31, 1993 is comprised of $114 million
deferred income tax expense and a $168 million increase in regulatory
assets net of regulatory liabilities pertaining to income taxes for
the period.
For the $282 million increase in the net deferred income tax
liability from January 1, 1993 to December 31, 1993, approximately
$185 million resulted from an increase in the federal statutory
corporate income tax rate from 34% to 35% effective January 1, 1993,
and from the elimination of a scheduled reduction in a component of
the statutory Illinois income tax rate which was to have declined to
4.4% from 4.8%, effective July 1, 1993. The $185 million net increase
resulted from recording an increase to regulatory assets of
approximately $224 million and an increase to regulatory liabilities
of approximately $39 million. See "Taxes" and "Regulatory Assets"
under the subcaption "Results of Operations," in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
46
<PAGE>
The components of net income tax expense charged to continuing
operations are as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
-------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Electric operating income:
Current income taxes $(27,553) $161,388 $289,437
Deferred income taxes 122,804 142,895 162,037
Investment tax credits deferred--net (29,424) (32,506) (32,054)
Other (income) and deductions (30,753) (6,214) (65,274)
----------------------------------------------------------------------
Net income taxes charged to continuing
operations $ 35,074 $265,563 $354,146
----------------------------------------------------------------------
</TABLE>
Provisions for current and deferred federal and state income taxes
and amortization of investment tax credits resulted in the following
effective income tax rates for the years 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------- -------- -------- --------
<S> <C> <C> <C>
Pre-tax book income (in thousands) $137,776 $779,544 $449,033
Effective income tax rate 25.5% 34.1% 78.9%
------------------------------------------------------------------
</TABLE>
The principal differences between these rates and the federal
statutory corporate income tax rate of 35% for 1993 and 34% for 1992
and 1991 were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------------------------- ----- ---- ----
<S> <C> <C> <C>
Federal statutory corporate income tax rate 35.0% 34.0% 34.0%
Equity component of AFUDC which was excluded from
taxable income (5.2) (0.9) (1.4)
Amortization of investment tax credits (21.4) (3.4) (7.2)
State income tax, net of federal income tax 9.5 5.6 11.7
Disallowed plant costs -- -- 34.3
Differences between book and tax accounting
primarily for property related deductions 1.5 -- 5.5
Other--net 6.1 (1.2) 2.0
----------------------------------------------------------------------
Effective income tax rate 25.5% 34.1% 78.9%
----------------------------------------------------------------------
</TABLE>
The Company has recorded current federal income tax liabilities that
include excess amounts of alternative minimum tax (AMT) over the
regular federal income tax, which amounts were also recorded as
decreases to deferred federal income taxes. As shown in the first
table, the cumulative excess amounts of AMT so recorded in the amount
of approximately $137 million as of December 31, 1993 can be carried
forward indefinitely as a credit against future years' regular federal
income tax liabilities. In 1993, the Company recorded a loss for
income tax purposes which may be carried forward through 2008. It is
currently expected that the income tax effect of the loss carryforward
in the amount of $175 million, as shown in the first table, will be
utilized by the expiration date.
The Company adopted SFAS No. 109, effective January 1, 1993. SFAS
No. 109 requires an asset and liability approach to accounting for
income taxes which replaces the deferred method formerly used. Under
the asset and liability approach, the deferred income tax liability
represents the income tax effect of temporary differences between
financial accounting and income tax bases of assets and liabilities
and is determined at the presently enacted income tax rates. The SFAS
No. 109 adjustments to the Company's deferred income tax liability
related to utility operations represents income taxes recoverable or
returnable through future rates and have been recorded as regulatory
assets and regulatory liabilities on the balance sheet. The cumulative
effect of the change in the method of accounting for income taxes
resulted in an increase to net income of $9.7 million or $0.05 per
common share, due primarily to the reduction of deferred income taxes
on nonregulated activities (primarily nonconsolidated subsidiaries)
accrued in prior years at income tax rates in excess of the presently
enacted income tax rates. The effect
47
<PAGE>
of the implementation entry on regulated activities was to record
regulatory assets of $1,546 million primarily related to the equity
component of AFUDC which was previously recorded on an after-tax
basis, the borrowed funds component of AFUDC which was previously
recorded net of tax and other temporary differences for which the
related tax effects were not previously recorded; regulatory
liabilities of $577 million primarily related to recognition of the
deferred income tax effects of unamortized investment tax credits and
to the changes in prior years' income tax rates; and a net increase to
the deferred income tax liability of $969 million.
For comparability purposes in presentation, Deferred Income Taxes
shown on the Consolidated Balance Sheets as of December 31, 1992 were
reclassified from a valuation reserve deducted from Utility Plant to
Current Assets and to Deferred Credits and Other Noncurrent
Liabilities, consistent with the presentation as of December 31, 1993
required by the new accounting standard.
- ---------------------
15 Taxes, Except Income Taxes
Provisions for taxes, except income taxes, for the years 1993, 1992
and 1991 were as follows:
<TABLE>
<CAPTION>
(thousands of dollars) 1993 1992 1991
-------------------------------- -------- -------- --------
<S> <C> <C> <C>
Illinois public utility revenue $199,498 $204,004 $218,137
Illinois invested capital 111,126 107,207 111,872
Municipal utility gross receipts 107,232 129,250 128,302
Real estate 162,560 162,151 148,356
Municipal compensation 56,878 73,323 74,218
Other--net 64,619 67,974 61,685
-------------------------------------------------------------
$701,913 $743,909 $742,570
-------------------------------------------------------------
</TABLE>
- ---------------
16 Lease Obligations
On November 23, 1993, the Company consolidated its nuclear fuel lease
arrangements into a new arrangement. Under the new arrangement, the
Company may sell and lease back nuclear fuel from a lessor who may
borrow an aggregate of $700 million (consisting of $300 million of
commercial paper or bank borrowings and $400 million of intermediate
term notes) to finance the transactions. The commercial paper/bank
borrowing portion currently will expire on November 23, 1996, but the
Company plans to ask for an extension of the expiration date. At
December 31, 1993, the Company's obligation to the lessor for leased
nuclear fuel amounted to $516 million. The Company has agreed to make
lease payments which cover the amortization of the nuclear fuel used
in the Company's reactors plus the lessor's related financing costs.
The Company has an obligation for spent nuclear fuel disposal costs of
leased nuclear fuel.
Future minimum rental payments, net of executory costs, at December
31, 1993 for capital leases, are estimated to aggregate $574 million,
including $224 million in 1994, $146 million in 1995, $97 million in
1996, $61 million in 1997, $31 million in 1998 and $15 million in
1999-2000. The estimated interest component of such rental payments
aggregates $53 million. The estimated portions of obligations due
within one year under capital leases are included in current
liabilities and approximated $166 million and $178 million at December
31, 1993 and 1992, respectively.
The Company has entered into an operating lease for new aluminum
coalporter rail cars. The lease covers only the cost of the rail cars,
thereby not including any operating, maintenance or other related
costs. Future minimum rental payments at December 31, 1993 for this
operating lease are estimated to aggregate $108 million, including $2
million in 1994, $5 million in 1995, $5 million in 1996, $5 million in
1997, $5 million in 1998 and $86 million in 1999-2013.
48
<PAGE>
- --------------------------------------
17 Investments in Uranium- and Coal-Related Properties
At December 31, 1993, the Company and its subsidiaries had investments
of approximately $134 million in uranium-related properties, equipment
and activities and approximately $517 million in coal reserves.
Production of uranium from all of the uranium properties has been
deferred due to depressed market prices for uranium. The Company
currently expects ultimately to recover the cost of the uranium
properties in all material respects in relation to the Company's
financial position and its results of operations, but doing so depends
on substantially improved market conditions. However, the Company
continues to evaluate its ability ultimately to recover the cost of
its uranium properties. In prior years, the Company's commitments for
the purchase of coal under long-term contracts exceeded its
requirements. Rather than take all the coal it was required to take,
the Company agreed to purchase the coal in place in the form of coal
reserves. The Company has been allowed to recover from its customers
the costs of the coal reserves through its fuel adjustment clause as
the coal is used for the generation of electricity. However, the
Company is not earning a return on the expenditures for coal reserves
prior to the coal reserves being used for the generation of
electricity by including the coal reserves in rate base. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaptions "Liquidity and Capital Resources"
and "Results of Operations," for information concerning coal
commitments and the Company's fuel supply, respectively. See Note 19
for additional information concerning the Company's coal commitments.
During 1989 and 1991, actions were brought in federal and state
courts in Colorado against the Company and its subsidiary, Cotter
Corporation (Cotter), alleging that Cotter has permitted radioactive
and other hazardous material to be released from its mill into areas
owned or occupied by the plaintiffs resulting in property damage and
potential adverse health effects. The plaintiffs seek from Cotter and
the Company unspecified compensatory, exemplary and medical monitoring
fund damages, unspecified response costs under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, and
temporary and permanent injunctive relief. Although the cases will
necessarily involve the resolution of numerous contested issues of
fact and law, the Company's determination is that these actions will
not have a material adverse impact on the Company's financial
statements.
- ------------------
18 Joint Plant Ownership
The Company has a 75% undivided ownership interest in the Quad-Cities
nuclear generating station. Further, the Company is responsible for
75% of all costs which are charged to appropriate investment,
operation or maintenance accounts and provides its own financing. At
December 31, 1993, for its share of ownership in the station, the
Company had an investment of $533 million in production and
transmission plant in service (before reduction of $159 million for
the related accumulated provision for depreciation) and $53 million in
construction work in progress.
- -------------------------------------------------
19 Commitments, Contingent Liabilities and the Construction Program
Purchase commitments, principally related to construction and nuclear
fuel, approximated $1,187 million at December 31, 1993. In addition,
the Company has substantial commitments for the purchase of coal under
long-term contracts. The Company's coal costs are high compared to
those of other utilities. The Company's western coal contracts and its
rail contracts for delivery of the western coal were renegotiated
during 1992 effective as of January 1, 1993, to provide, among other
things, for significant reductions in the delivered price of the coal
over the duration of the contracts. However, the
49
<PAGE>
renegotiated contracts provide for the purchase of certain coal at
prices substantially above currently prevailing market prices and the
Company has significant purchase commitments under its contracts. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Liquidity and Capital Resources,"
for additional information regarding the Company's purchase
commitments.
The Company is a member of Nuclear Mutual Limited (NML), established
to provide insurance coverage against property damage to members'
nuclear generating facilities. The members are subject to a
retrospective premium adjustment in the event losses exceed
accumulated reserve funds. Capital has been accumulated in the reserve
funds of NML to the extent that the Company would have no exposure in
the event of a single incident. However, the Company could be subject
to a maximum assessment of approximately $70 million in any policy
year, in the event losses exceed accumulated reserve funds.
If the Company had terminated its insurance coverages with NML
as of December 31, 1993, it would have a contingent right to receive
approximately $120 million, payable over a twenty-year period
commencing in 1996. Any unpaid amounts, however, are subject to
forfeiture in the event that NML's aggregate losses in any
subsequent two year period exceed $300 million or fifty percent
of its surplus. If any such asset were to be recorded, the Company
expects that a corresponding regulatory liability would also be
recorded.
The Company also is a member of Nuclear Electric Insurance Limited
(NEIL), which provides insurance coverage against the cost of
replacement power obtained during certain prolonged accidental outages
of nuclear generating units and coverage for property losses in excess
of $500 million occurring at nuclear stations. All companies insured
with NEIL are subject to retrospective premium adjustments if losses
exceed accumulated reserve funds. Capital has been accumulated in the
reserve funds of NEIL to the extent that the Company would have no
exposure in the event of a single incident under the replacement power
coverage and the property damage coverage. However, the Company could
be subject to maximum assessments, in any policy year, of
approximately $27 million and $87 million in the event losses exceed
accumulated reserve funds under the replacement power and property
damage coverages, respectively.
The NRC's indemnity for public liability coverage under the Price-
Anderson Act is supported by a mandatory industry-wide program under
which owners of nuclear generating facilities could be assessed in the
event of nuclear incidents. Based on the number of nuclear reactors
with operating licenses, the Company would currently be subject to a
maximum assessment of $991 million in the event of an incident,
limited to a maximum of $125 million in any calendar year. The current
maximum assessment was effective August 20, 1993 and represents an
increase of $164 million over the previous maximum assessment of $827
million. The Act requires that the assessment program be adjusted for
inflation every five years, and 1993 was an adjustment year.
In addition, the Company participates in the American Nuclear
Insurers and Mutual Atomic Energy Liability Underwriters Master Worker
Program which provides coverage for worker tort claims filed for
bodily injury caused by the nuclear energy hazard. The coverage
applies to workers whose "nuclear related employment" began after
January 1, 1988. The Company would currently be subject to a maximum
assessment of approximately $37 million in the event losses exceed
accumulated reserve funds.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Liquidity and Capital Resources,"
for information relating to the Company's construction program and
rates and financial condition.
Shareholder derivative lawsuits were filed on October 1, 1992 and on
April 14, 1993 in the Circuit Court against current and former
directors of the Company alleging that they breached their fiduciary
duty and duty of care to the Company in connection with the management
of the activities associated with the construction of the Company's
four most recently completed nuclear generating units. The lawsuits
sought restitution to the Company by the defendants for unquantified
and undefined losses and costs alleged to have been incurred by the
Company. Both lawsuits were dismissed by the Circuit Court; however,
appeals are pending before the Illinois Appellate Court.
50
<PAGE>
The Company is involved in administrative and legal proceedings
concerning air quality, water quality and other matters. The outcome
of these proceedings may require increases in the Company's future
construction expenditures and operating expenses. The Company and its
subsidiaries are or are likely to become parties to proceedings
initiated by the United States Environmental Protection Agency, state
agencies and/or other responsible parties under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(CERCLA) with respect to a number of sites, including manufactured gas
plant (MGP) sites, or may voluntarily undertake to investigate and
remediate sites for which they may be liable under CERCLA. While there
is a possibility that in the aggregate the cost of MGP site
investigation and remediation will be substantial over time, the
Company is not able to determine the most probable liability for MGPs.
In accordance with accounting standards, the Company recorded a
provision of $25 million in 1991 which reflects the low end of the
range of its estimate of the liability associated with former MGPs. In
1993, the Company recorded a provision of $5 million which reflects
the low end of the range of its estimate of the liability associated
with cleanup costs of remediation sites other than former MGP sites.
The Company presently estimates that its costs of investigating and
remediating these other sites pursuant to CERCLA and state
environmental laws will not in the aggregate be material to the
business or operations of the Company. These cost estimates are based
on currently available information regarding the responsible parties
likely to share in the costs of responding to site contamination, the
extent of contamination at sites for which the investigation has not
yet been completed and the cleanup levels to which sites are expected
to have to be remediated.
- ---------------
20 Subsequent Events
On January 25, 1994, the Company announced the closing of the sale of
$66 million of Pollution Control Revenue Refunding Bonds issued
through the Illinois Development Finance Authority.
On January 25, 1994, the Company announced that the following
Illinois Environmental Facilities Financing Authority Pollution
Control Revenue Bonds will be redeemed: on March 11, 1994, all $50
million of the outstanding Series 1979 Bonds (consisting of $10
million of 8 3/8% bonds due November 1, 2004 and $40 million of 8 1/2%
bonds due November 1, 2009), and on April 1, 1994, all of the
outstanding Series 1983 Bonds, consisting of $16 million of 9 3/4%
bonds due April 1, 2013.
- -------------------------
21 Quarterly Financial Information
<TABLE>
<CAPTION>
Net Average Earnings
Electric Income Number of (Loss)
Electric Operating Net (Loss) on Common Per
Operating Income Income Common Shares Common
Three Months Ended Revenues (Loss) (Loss) Stock Outstanding Share
------------------- ---------- --------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
(thousands except
per share data)
March 31, 1992 $1,422,557 $ 265,806 $ 67,254 $ 49,303(a) 212,713 $ 0.23
June 30, 1992 $1,431,749 $ 271,705 $ 105,825 $ 87,919(a) 212,860 $ 0.41
September 30, 1992 $1,708,880 $ 398,869 $ 235,865 $ 218,151 212,973 $ 1.02
December 31, 1992 $1,463,135 $ 260,523 $ 105,037 $ 88,069 213,170 $ 0.41
March 31, 1993 $1,483,385 $ 240,840 $ 77,212 $ 60,575 213,337 $ 0.28
June 30, 1993 $1,430,547 $ 237,223 $ 75,094 $ 58,051 213,466 $ 0.27
September 30, 1993 $1,872,448 $ 456,227 $ 287,123 $ 270,558 213,550 $ 1.27
December 31, 1993 $ 474,060 $(530,475) $(326,989) $(342,796)(b) 213,680 $(1.60)
------------------------------------------------------------------------------------------
</TABLE>
(a) See "Earnings per Common Share" under the subcaption "Results of
Operations," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for information concerning
the reduction to net income recorded in 1992 which reflected a
provision for additional refunds and interest related to the 1985
ICC rate order.
(b) See Note 2 for information concerning the Rate Matters Settlement,
which lowered the level of the Company's rates and provides for
substantial customer refunds, and the Fuel Matters Settlement,
which provides for payments to customers.
51
