SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-4117-1
IES UTILITIES INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0331370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IES Tower, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (319) 398-4411
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 30, 1995
Common Stock, $2.50 par value 13,370,788 shares
IES UTILITIES INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3 - 4
Consolidated Statements of Income -
Three and Twelve Months Ended
March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three and Twelve Months Ended
March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7 - 14
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition. 15 - 30
Part II. Other Information. 31 - 33
Signatures. 34
<PAGE>
PART 1. - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
March 31,
1995 December 31,
ASSETS (Unaudited) 1994
(in thousands)
Property, plant and equipment, at original cost:
Utility -
Plant in service -
Electric $ 1,809,917 $ 1,798,059
Gas 158,512 158,115
Other 86,382 86,005
2,054,811 2,042,179
Less - Accumulated depreciation 903,302 880,888
1,151,509 1,161,291
Leased nuclear fuel, net of amortization 48,292 49,731
Construction work in progress 87,847 73,339
1,287,648 1,284,361
Other 2,145 1,824
1,289,793 1,286,185
Current assets:
Cash and temporary cash investments 2,490 2,135
Accounts receivable -
Customer, less reserve 577 12,051
Other 11,111 9,763
Income tax refunds receivable 2,635 3,450
Production fuel, at average cost 14,132 13,988
Materials and supplies, at average cost 26,421 26,699
Adjustment clause balances 0 1,433
Regulatory assets 20,702 20,145
Prepayments and other 22,250 29,546
100,318 119,210
Investments:
Nuclear decommissioning trust funds 36,783 33,779
Cash surrender value of life insurance policies 3,049 2,915
Other 1,317 1,085
41,149 37,779
Other assets:
Regulatory assets 194,199 192,955
Deferred charges and other 8,175 9,239
202,374 202,194
$ 1,633,634 $ 1,645,368
CONSOLIDATED BALANCE SHEETS (CONTINUED)
March 31,
1995 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1994
(in thousands)
Capitalization:
Common stock - par value $2.50 per share -
authorized 24,000,000 shares; 13,370,788
shares outstanding $ 33,427 $ 33,427
Paid-in surplus 279,042 279,042
Retained earnings ($18,209,000 restricted
as to payment of cash dividends) 190,090 197,158
Total common equity 502,559 509,627
Cumulative preferred stock - par value $50
per share - authorized 466,406 shares;
366,406 shares outstanding 18,320 18,320
Long-term debt 430,454 380,404
951,333 908,351
Current liabilities:
Notes payable to associated companies 15,544 18,495
Short-term borrowings 28,000 37,000
Capital lease obligations 16,175 14,385
Maturities and sinking funds 50,140 100,140
Accounts payable 61,403 70,354
Accrued interest 10,876 9,438
Accrued taxes 52,590 47,188
Accumulated refueling outage provision 6,668 15,196
Adjustment clause balances 2,802 0
Provision for rate refund liability 8,000 0
Environmental liabilities 5,303 5,428
Other 20,320 18,324
277,821 335,948
Long-term liabilities:
Capital lease obligations 32,117 35,346
Environmental liabilities 37,265 37,853
Other 47,188 46,724
116,570 119,923
Deferred credits:
Accumulated deferred income taxes 248,782 241,345
Accumulated deferred investment tax credits 39,128 39,801
287,910 281,146
Commitments and contingencies (Note 5)
$ 1,633,634 $ 1,645,368
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1995 1994 1995 1994
(in thousands)
Operating revenues:
Electric $ 116,577 $ 123,918 $ 529,987 $ 547,812
Gas 53,175 65,134 127,074 155,117
Other 3,087 2,961 9,131 9,049
172,839 192,013 666,192 711,978
Operating expenses:
Fuel for production 19,443 22,344 83,051 85,506
Purchased power 16,314 13,602 71,506 84,944
Gas purchased for resale 38,133 49,116 84,356 110,010
Other operating expenses 34,411 30,982 135,711 126,409
Maintenance 11,679 10,895 50,326 46,735
Depreciation and amortization 20,589 19,160 76,744 71,045
Taxes other than income taxes 12,374 11,666 43,258 42,726
152,943 157,765 544,952 567,375
Operating income 19,896 34,248 121,240 144,603
Interest expense and other:
Interest expense 10,458 10,530 41,502 40,041
Allowance for funds used
during construction -1,115 -877 -4,148 -2,444
Miscellaneous, net 8 -268 -970 -678
9,351 9,385 36,384 36,919
Income before income taxes 10,545 24,863 84,856 107,684
Income taxes:
Current -1,985 9,673 26,717 28,380
Deferred 7,041 908 8,369 15,640
Amortization of investment
tax credits -672 -662 -2,657 -4,827
4,384 9,919 32,429 39,193
Net income 6,161 14,944 52,427 68,491
Preferred dividend requirements 229 229 914 914
Net income available for
common stock $ 5,932 $ 14,715 $ 51,513 $ 67,577
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
-5-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Twelve
Months Ended Months Ended
March 31 March 31
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,161 $ 14,944 $ 52,427 $ 68,491
Adjustments to reconcile net income to net cash
flows from operating activities -
Depreciation and amortization 20,589 19,160 76,744 71,045
Principal payments under capital lease obligations 2,556 4,427 14,375 12,439
Deferred taxes and investment tax credits 6,369 246 5,712 10,813
Refueling outage provision -8,528 3,137 871 -4,747
Allowance for equity funds used during construction -282 -540 -2,040 -1,250
Other 1,075 661 3,717 1,838
Other changes in assets and liabilities -
Accounts receivable 126 3,652 6,869 4,234
Production fuel, materials and supplies -52 2,774 -2,678 2,464
Accounts payable -4,239 -5,299 21,504 -2,869
Accrued taxes 6,217 2,544 10,730 -6,748
Provision for rate refunds 8,000 415 -1,085 -1,536
Adjustment clause balances 4,235 4,724 -7,071 -405
Gas in storage 7,375 10,090 -796 -4,199
Other 6,417 -434 10,919 3,851
Net cash flows from operating activities 56,019 60,501 190,198 153,421
Cash flows from financing activities:
Dividends declared on common stock -13,000 -7,000 -58,000 -28,300
Dividends declared on preferred stock -229 -229 -914 -914
Dividends payable 0 -5,000 0 0
Proceeds from issuance of long-term debt 50,000 0 50,000 119,400
Reductions in long-term debt and preferred stock -50,000 0 -50,224 -79,624
Net change in short-term borrowings -11,951 -24,000 43,544 -25,960
Principal payments under capital lease obligations -3,662 -3,720 -16,246 -11,429
Sale of utility accounts receivable 10,000 0 10,800 17,700
Net cash flows from financing activities -18,842 -39,949 -21,040 -9,127
Cash flows from investing activities:
Construction and acquisition expenditures -28,216 -18,992 -157,327 -115,328
Nuclear decommissioning trust funds -1,383 -1,383 -5,532 -5,532
Deferred energy efficiency costs -3,537 -3,399 -16,295 -11,961
Other -3,686 -2,351 -254 -359
Net cash flows from investing activities -36,822 -26,125 -179,408 -133,180
Net increase (decrease) in cash and temporary cash investments 355 -5,573 -10,250 11,114
Cash and temporary cash investments at beginning of period 2,135 18,313 12,740 1,626
Cash and temporary cash investments at end of period $ 2,490 $ 12,740 $ 2,490 $ 12,740
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 8,254 $ 7,979 $ 40,281 $ 36,514
Income taxes $ 2,850 $ -39 $ 37,368 $ 36,308
Noncash investing and financing activities -
Capital lease obligations incurred $ 1,116 $ 196 $ 15,217 $ 4,308
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
(1) GENERAL:
The interim Consolidated Financial Statements have been
prepared by IES Utilities Inc. (Utilities) and its
consolidated subsidiaries (collectively the Company), without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Utilities is a wholly-owned
subsidiary of IES Industries Inc. (Industries). Utilities'
wholly-owned subsidiary is IES Ventures Inc. (Ventures), which
is a holding company for unregulated investments. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of the
Company, the Consolidated Financial Statements include all
adjustments, which are normal and recurring in nature,
necessary for the fair presentation of the results of
operations and financial position. Certain prior period
amounts have been reclassified on a basis consistent with the
1995 presentation.
It is suggested that these Consolidated Financial
Statements be read in conjunction with the Consolidated
Financial Statements and the notes thereto included in the
Company's Form 10-K for the year ended December 31, 1994. The
accounting and financial policies relative to the following
items have been described in those notes and have been omitted
herein because they have not changed materially through the
date of this report:
Summary of significant accounting policies
Acquisition of Iowa service territory of Union Electric Company (UE)
Leases
Utility accounts receivable (other than discussed in Note 3)
Income taxes
Benefit plans
Preferred and preference stock
Debt (other than discussed in Note 4)
Estimated fair value of financial instruments
Commitments and contingencies (other than discussed in Note 5)
Jointly-owned electric utility plant
Segments of business
(2) RATE MATTERS:
(a) 1994 Electric Rate Case -
In 1994, Utilities applied to the Iowa Utilities Board
(IUB) for an increase in retail electric rates of
approximately $26 million annually, or 5.2%. Utilities'
proposal included approximately $12 million in annual revenue
requirement related to increased recovery levels of
depreciation expense and nuclear decommissioning expense at
the Duane Arnold Energy Center (DAEC), Utilities' nuclear
generating facility. To the extent these proposals are
approved by the IUB, corresponding increases in expense would
be recorded and there would be no effect on net income.
The Office of Consumer Advocate (OCA) filed a petition in
connection with this proceeding to reduce the rates for retail
electric service by approximately $27 million or 5.5%. The
primary differences between the amount of the increase
requested by Utilities and the decrease proposed by the OCA
are: 1) a 13.9% return on common equity requested by Utilities
compared to 11.1% proposed by the OCA; 2) OCA's objection to
Utilities' proposal to increase collections for
decommissioning the DAEC; 3) OCA's objection to Utilities'
proposal to increase depreciation rates; 4) OCA's proposal to
reject most of Utilities' request to recover an acquisition
adjustment associated with its acquisition of the Iowa service
territory of UE; and 5) an adjustment to test year sales
levels proposed by the OCA. Intervenors, which primarily
represent individual or groups of customers, also submitted
filings in October 1994, generally objecting to particular
elements of the price increase and Utilities' price design
proposals.
In April 1995, the IUB held a public agenda meeting to
discuss the issues in the proceeding. While minor movement
toward pricing consistency would result, the proposals to
increase recovery levels of depreciation expense and nuclear
decommissioning expense were apparently rejected. The Board's
agenda discussion also ruled against Utilities on issues such
as recovery for the full purchase prices of the UE Iowa
service territory and smaller, low-cost, used generating
plants, even though customers are currently benefiting from
the acquisitions.
The IUB's discussion apparently would require an annual
reduction in electric revenues of $15 million to $20 million.
The IUB's final decision in the proceeding is not expected
until mid-May and the IUB indicated the agenda meeting
discussion was non-binding and may change. As a result of the
IUB's agenda meeting discussion, Utilities recorded a pretax
reserve for refund of $8 million in the first quarter of 1995,
including $3.5 million related to revenues collected in the
fourth quarter of 1994. Any refund ultimately required would
be calculated from October 22, 1994, the date of the OCA
revenue reduction filing.
(b) 1994 Energy Efficiency Cost Recovery Filing -
The IUB has adopted rules that mandate Utilities to spend
2% of electric and 1.5% of gas gross retail operating revenues
for energy efficiency programs. Under provisions of the IUB
rules, Utilities applied in August 1994 to the IUB for
recovery of approximately $23 million and $13 million for the
electric and gas programs, respectively, related to costs
incurred through 1993 for such programs. The $36 million
total for the electric and gas programs is comprised of
$21 million of direct expenditures and carrying costs
(recorded as a "Regulatory asset" in the Consolidated Balance
Sheets, including $4.5 million as current), $7 million for a
return on the expenditures over the recovery period and
$8 million for a reward based on a sharing of the benefits of
such programs.
In April 1995, the IUB issued its Final Decision and
Order concerning Utilities' energy efficiency expenditures,
which allows Utilities to recover its direct expenditures,
carrying costs, and a return on its expenditures, as well as a
reward of approximately $4 million for a total allowed
recovery of approximately $32 million. Recovery will be over
a four-year period and will begin in the second quarter of
1995.
In May 1995, the OCA and an intervenor filed applications
for rehearing with the IUB concerning the amount of the reward
granted by the IUB. Since the identical issue is pending
before the court in another utility's proceeding, the OCA, the
intervenor and Utilities have agreed to be bound by the
ultimate decision in the other utility's court proceeding.
Utilities believes that the chances of the reward amount being
materially reduced are remote.
(3) UTILITY ACCOUNTS RECEIVABLE:
Utilities has entered into an agreement, which expires in
1999, with a financial institution to sell, with limited
recourse, an undivided fractional interest of up to
$65 million in its pool of utility accounts receivable. At
March 31, 1995, $64 million was sold under the agreement.
(4) DEBT:
(a) Long-Term Debt -
In March 1995, Utilities repaid at maturity $50 million
of Series W, 9.75% First Mortgage Bonds and, in a separate
transaction, issued $50 million of Collateral Trust Bonds,
7.65%, due 2000.
(b) Short-Term Debt -
At March 31, 1995, the Company had bank lines of credit
aggregating $87.7 million, of which $28 million was being used
to support commercial paper (weighted average interest rate of
6.20%) and $7.7 million to support certain pollution control
obligations. Commitment fees are paid to maintain these lines
and there are no conditions which restrict the unused lines of
credit. In addition to the above, Utilities has an
uncommitted credit facility with a financial institution
whereby it can borrow up to $40 million. Rates are set at the
time of borrowing and no fees are paid to maintain this
facility. At March 31, 1995, there were no borrowings under
this facility. Utilities also has a letter of credit in the
amount of $3.4 million supporting two of its variable rate
pollution control obligations.
(5) CONTINGENCIES:
(a) Environmental Liabilities -
The Company has recorded environmental liabilities of
approximately $43 million, including $5.3 million as current
liabilities, in its Consolidated Balance Sheets at March 31,
1995. The significant items are discussed below.
Former Manufactured Gas Plant (FMGP) Sites
Utilities has been named as a Potentially Responsible
Party (PRP) by various federal and state environmental
agencies for 28 FMGP sites. Utilities believes that it is not
responsible for two of the above sites and there are three
other sites for which it may be designated as a PRP in the
future. Utilities is working pursuant to the requirements of
the various agencies to investigate, mitigate, prevent and
remediate, where necessary, damage to property, including
damage to natural resources, at and around the sites in order
to protect public health and the environment. Utilities has
completed the remediation of three sites and is in various
stages of the investigation and/or remediation processes for
22 sites. Utilities expects to begin the investigation
process in 1995 or 1996 for the other sites.
Utilities has recorded environmental liabilities related
to the FMGP sites of approximately $31 million (including
$4.5 million as current liabilities) at March 31, 1995. These
amounts are based upon Utilities' best current estimate of the
amount to be incurred for investigation and remediation costs
for those sites where the investigation process has been or is
substantially completed, and the minimum of the estimated cost
range for those sites where the investigation is in its
earlier stages or has not started. It is possible that future
cost estimates will be greater than the current estimates as
the investigation process proceeds and as additional facts
become known. Utilities may be required to monitor these
sites for a number of years upon completion of remediation, as
is the case with the three sites for which remediation has
been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation, and monitoring costs from
its insurance carriers and is investigating the potential for
third party cost sharing for FMGP investigation and clean-up
costs. The amount of shared costs, if any, cannot be
reasonably determined and, accordingly, no potential sharing
has been recorded at March 31, 1995. Regulatory assets of
approximately $31 million, which reflect the future recovery
that is being provided through Utilities' rates, have been
recorded in the Consolidated Balance Sheets. Considering the
rate treatment allowed by the IUB, management believes that
the clean-up costs incurred by Utilities for these FMGP sites
will not have a material adverse effect on its financial
position or results of operations.
(b) Clean Air Act -
The Clean Air Act Amendments of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in
two phases with Phase I affecting two of Utilities' units
beginning in 1995 and Phase II affecting all units beginning
in the year 2000. Utilities is in the process of completing
the modifications necessary to meet the Phase I requirements
and has installed continuous emission monitors on all affected
units as required by the Act.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital
expenditures primarily related to fuel burning equipment and
boiler modifications. Utilities estimates capital
expenditures at approximately $22.5 million, including
$4.4 million in 1995, in order to meet the requirements of the
Act.
(c) Federal Energy Regulatory Commission (FERC) Order
No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992, which
substantially changed how Utilities manages its gas supply.
As a result of Order 636, Utilities has enhanced access to
competitively priced gas supply and more flexible
transportation services, however, Utilities is required to pay
certain transition costs incurred and billed by its pipeline
suppliers.
Utilities' three pipeline suppliers have made filings
with the FERC to collect their respective known transition
costs, and additional filings are expected. At March 31,
1995, Utilities has recorded a liability of $6.2 million for
those transition costs that have been incurred by the
pipelines to date, including $2.1 million expected to be
billed through March 1996. Utilities is currently recovering
the transition costs from its customers through its Purchased
Gas Adjustment Clauses as such costs are billed by the
pipelines. The ultimate level of costs to be billed to
Utilities depends on the pipelines' filings with the FERC and
other future events, including the market price of natural
gas, and could approximate $10 million more than the amount
recorded. However, Utilities believes any transition costs
billed by its pipeline suppliers would be recovered from its
customers, based upon regulatory treatment of these costs
currently and similar past costs by the IUB. Accordingly,
regulatory assets, in amounts corresponding to the recorded
liabilities, have been recorded to reflect the anticipated
recovery.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in
the components of net income and financial condition from the
prior periods for IES Utilities Inc. (Utilities) and its
consolidated subsidiaries (collectively the Company).
Utilities' wholly-owned subsidiary is IES Ventures Inc., which
is a holding company for unregulated investments.
RESULTS OF OPERATIONS
The Company's net income available for common stock
decreased $8.8 million and $16.1 million during the three and
twelve month periods, respectively, ended March 31, 1995. The
lower earnings are largely due to the recording of a pretax
reserve for rate refund of $8.0 million by Utilities in the
first quarter of 1995 and milder than normal weather in
Utilities' service territory.
The Company's operating income decreased $14.4 million
and $23.4 million during the three and twelve month periods,
respectively. Reasons for the changes in the results of
operations are explained further in the following discussion.
ELECTRIC REVENUES
Electric revenues and Kwh sales for Utilities increased
or (decreased) for the periods ended March 31, 1995, as
compared with the prior periods, as follows:
Three Twelve
Months Months
($ in millions)
Electric revenues $ (7.3) $ (17.8)
Electric sales (excluding
off-system sales):
Residential and Rural (5.5%) (3.6%)
Commercial 0.2 2.2
Industrial 3.3 8.0
Total (1.1%) 2.7%
The Kwh sales for both periods were adversely affected by
milder than normal weather. The largest effect of weather was
on sales to residential and rural customers. Under normal
weather conditions, total sales (excluding off-system sales)
would have increased 1.6% and 3.6% for the three and twelve
month periods, respectively. The growth in industrial sales
continues to reflect the underlying strength of the economy as
several major industrial expansions in Utilities' service
territory were announced during the twelve months ended March
31, 1995.
Utilities' electric tariffs include energy adjustment
clauses (EAC) that are designed to currently recover the costs
of fuel and the energy portion of purchased power billings to
customers.
The revenue decrease for both periods includes a pretax
reserve for rate refund of $8.0 million that was recorded by
Utilities in the first quarter of 1995 as a result of the
Company's interpretation of how the Iowa Utilities Board (IUB)
may decide Utilities' pending electric price case. See Note
2(a) of the Notes to Consolidated Financial Statements for a
further discussion.
The effect of the mix of sales between lower margin
industrial customers and higher margin residential and rural
customers, lower off-system sales and lower fuel costs
collected through the EAC also contributed to the decreased
revenues for the twelve month period. Such items were
partially offset by the increased total sales, excluding off-
system sales.
GAS REVENUES
Utilities' gas revenues decreased $12.0 million and
$28.0 million during the three and twelve month periods,
respectively. Utilities' gas sales in therms increased or
(decreased) for the periods ended March 31, 1995, as compared
with the prior periods, as follows:
Three Twelve
Months Months
Residential (9.1%) (10.8%)
Commercial (7.6) (9.1)
Industrial (24.1) (14.9)
Sales to consumers (9.9) (10.9)
Transported volumes 45.7 33.0
Total (3.0%) (2.5%)
The sales volumes for both periods were adversely
affected by milder than normal weather. Under normal weather
conditions, gas sales (including transported volumes) would
have increased 5.8% and 4.9% during the three and twelve month
periods, respectively.
Utilities' gas tariffs include purchased gas adjustment
clauses (PGA) that are designed to currently recover the cost
of gas sold. Utilities' gas revenues decreased in both
periods primarily because of lower gas costs recovered
through the PGA and, to a lesser extent, the effect of the
lower sales. The decreased gas cost recoveries are due to
lower gas prices as well as a shift in the sales mix between
industrial sales and transported volumes; Utilities does not
purchase the gas for the transported volumes.
OPERATING EXPENSES
Fuel for production decreased $2.9 million and
$2.5 million during the three and twelve month periods,
respectively. The three month decrease is primarily due to a
decrease in the amount of Kwh generation as the Duane Arnold
Energy Center (DAEC), Utilities' nuclear generating facility,
was down during March 1995 for a scheduled refueling outage.
There was no such refueling outage in 1994. Lower fuel cost
recoveries through the EAC, which are included in fuel for
production, also contributed to the decrease. The twelve
month decrease is due to lower fuel cost recoveries through
the EAC, a lower average fuel cost during the period and
decreased generation at the DAEC. Increased generation at
Utilities' fossil-fueled generating stations partially offset
these items for both periods.
Purchased power increased $2.7 million during the three
month period and decreased $13.4 million during the twelve
month period. The three month increase is due to increased
energy purchases, resulting from the decrease in generation,
which were partially offset by lower capacity costs. The
twelve month decrease is primarily due to lower energy
purchases and lower capacity costs.
Gas purchased for resale decreased $11.0 million and
$25.7 million during the three and twelve month periods,
respectively, primarily due to lower sales to consumers at
Utilities and lower natural gas prices.
Other operating expenses increased $3.4 million and
$9.3 million during the three and twelve month periods,
respectively. Increases in labor and benefits costs, nuclear
operating costs, former manufactured gas plant (FMGP) clean-up
costs and information technology costs at Utilities
contributed to the increases.
Maintenance expenses increased $0.8 million and
$3.6 million during the three and twelve month periods,
respectively. The twelve month increase was due to increased
labor costs and higher maintenance costs at the DAEC.
Depreciation and amortization increased during both
periods primarily because of increases in utility plant in
service. Depreciation and amortization expenses for all
periods reflect an annual amount of $5.5 million for the DAEC
decommissioning provision, which is collected through rates.
The staff of the Securities and Exchange Commission (SEC)
has questioned certain of the current accounting practices of
the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for
nuclear generating stations in the financial statements of
electric utilities. In response to these questions, the
Financial Accounting Standards Board (FASB) has agreed 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. If such changes are
required, Utilities believes that there would not be an
adverse effect on its financial position or results of
operations based on current rate making practices; the Company
cannot predict future rate making practices.
INTEREST EXPENSE AND OTHER
Interest expense was constant for the three month period
and increased $1.5 million during the twelve month period.
The twelve month increase was primarily because of an increase
in the average amount of debt outstanding.
Income taxes decreased $5.5 million and $6.8 million
during the three and twelve month periods, respectively. A
decrease in taxable income contributed to the decreases for
both periods. The twelve month decrease is partially offset
by the effect of property related temporary differences for
which deferred taxes had not been provided that are now
becoming payable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily
attributable to Utilities' construction programs, debt
maturities and sinking fund requirements. The Company's
pretax ratio of earnings to fixed charges was 3.04 and 3.69
for the twelve months ended March 31, 1995 and March 31, 1994,
respectively. Cash flows from operating activities for the
twelve months ending March 31, 1995, were $190 million. These
funds were primarily used for construction and acquisition
expenditures and to pay dividends.
The Company anticipates that future capital requirements
will be met by cash generated from operations and external
financing. The level of cash generated from operations is
partially dependent upon economic conditions, legislative
activities, environmental matters and timely rate relief for
Utilities. (See Notes 2 and 5 of the Notes to Consolidated
Financial Statements).
Access to the long-term and short-term capital and credit
markets is necessary for obtaining funds externally.
Utilities' debt ratings are as follows:
Moody's Standard & Poor's
Long-term debt A1 A
Short-term debt P1 A1
As a result of the IUB's recent public agenda meeting to
discuss Utilities' electric price case, Utilities could
realize an annual revenue reduction of approximately
$15 million to $20 million. (See Note 2(a) of the Notes to
Consolidated Financial Statements for a further discussion).
In reaction to the IUB's agenda meeting, Moody's has placed
Utilities long-term debt rating on credit watch pending a
final decision by the IUB. Standard & Poor's has not reacted
to the IUB's agenda meeting.
The Company's liquidity and capital resources will be
affected by environmental and legislative issues, including
the ultimate disposition of remediation issues surrounding the
Company's environmental liabilities, the Clean Air Act as
amended and FERC Order 636, as discussed in Note 5 of the
Notes to Consolidated Financial Statements. Consistent with
rate making principles of the IUB, management believes that
the costs incurred for the above matters will not have a
material adverse effect on the financial position or results
of operations of the Company.
The IUB has adopted rules which require Utilities to
spend 2% of electric and 1.5% of gas gross retail operating
revenues annually for energy efficiency programs. Energy
efficiency costs in excess of the amount in the most recent
electric and gas rate cases are being recorded as regulatory
assets by Utilities. At March 31, 1995, Utilities had
$38 million of such costs recorded as regulatory assets.
Utilities will begin its recovery of a portion of these costs
in the second quarter of 1995. See Note 2(b) of the Notes to
Consolidated Financial Statements for a further discussion.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program
anticipates expenditures of approximately $163 million for
1995, of which approximately 32% represents expenditures for
electric transmission and distribution facilities, 23%
represents fossil-fueled generation expenditures, 15%
represents expenditures for steam distribution plant and 9%
represents nuclear generation expenditures. The remaining 21%
represents miscellaneous electric, gas and general
expenditures. In addition to the $163 million, Utilities
anticipates expenditures of $13 million in connection with
mandated energy efficiency programs. Substantial commitments
have been made in connection with all such expenditures. The
Company had construction and acquisition expenditures of
approximately $28 million for the three months ended March 31,
1995.
The Company's levels of construction and acquisition
expenditures are projected to be $167 million in 1996,
$146 million in 1997, $170 million in 1998 and $182 million in
1999. It is estimated that approximately 80% of construction
expenditures will be provided by cash from operating
activities (after payment of dividends) for the five-year
period 1995-1999.
Capital expenditure and investment and financing plans
are subject to continual review and change. The capital
expenditure and investment programs may be revised
significantly as a result of many considerations including
changes in economic conditions, variations in actual sales and
load growth compared to forecasts, requirements of
environmental, nuclear and other regulatory authorities,
acquisition opportunities, the availability of alternate
energy and purchased power sources, the ability to obtain
adequate and timely rate relief, escalations in construction
costs and conservation and energy efficiency programs.
LONG-TERM FINANCING
Other than Utilities' periodic sinking fund requirements,
which Utilities intends to meet by pledging additional
property, approximately $124 million of long-term debt will
mature prior to December 31, 1999. The Company intends to
refinance the majority of the debt maturities with long-term
securities.
In March 1995, Utilities repaid at maturity $50 million
of Series W, 9.75% First Mortgage Bonds and, in a separate
transaction, issued $50 million of Collateral Trust Bonds,
7.65%, due 2000.
Utilities has entered into an Indenture of Mortgage and
Deed of Trust dated September 1, 1993 (New Mortgage). The New
Mortgage provides for, among other things, the issuance of
Collateral Trust Bonds upon the basis of First Mortgage Bonds
being issued by Utilities. The lien of the New Mortgage is
subordinate to the lien of Utilities' first mortgages until
such time as all bonds issued under the first mortgages have
been retired and such mortgages satisfied. Accordingly, to the
extent that Utilities issues Collateral Trust Bonds on the
basis of First Mortgage Bonds, it must comply with the
requirements for the issuance of First Mortgage Bonds under
Utilities' first mortgages. Under the terms of the New
Mortgage, Utilities has covenanted not to issue any additional
First Mortgage Bonds under its first mortgages except to
provide the basis for issuance of Collateral Trust Bonds.
The Indentures pursuant to which Utilities issues First
Mortgage Bonds constitute direct first mortgage liens upon
substantially all tangible public utility property and contain
covenants which restrict the amount of additional bonds which
may be issued. At March 31, 1995, such restrictions would
have allowed Utilities to issue $323 million of additional
First Mortgage Bonds. Utilities has received authority from
the FERC to issue $250 million of long-term debt, of which
$50 million was used in March 1995 to issue Collateral Trust
Bonds. Utilities expects to replace First Mortgage Bonds
Series X that matures in September 1995 with other long-term
securities.
The Articles of Incorporation of Utilities authorize and
limit the aggregate amount of additional shares of Cumulative
Preferred Stock and Cumulative Preference Stock that may be
issued. At March 31, 1995, Utilities could have issued an
additional 700,000 shares of Cumulative Preference Stock but
no additional shares of Cumulative Preferred Stock.
The Company's capitalization ratios at March 31, were as
follows:
1995 1994
Long-term debt 48% 48%
Preferred stock 2 2
Common equity 50 50
100% 100%
The 1995 and 1994 ratios include
$50 million of long-term debt due in less than
one year because it was the Company's intention
to refinance the debt with long-term securities.
SHORT-TERM FINANCING
For interim financing, Utilities is authorized by the
FERC to issue, through 1996, up to $200 million of short-term
notes. In addition to providing for ongoing working capital
needs, this availability of short-term financing provides
Utilities flexibility in the issuance of long-term securities.
At March 31, 1995, Utilities had outstanding short-term
borrowings of $43.5 million, including $15.5 million of notes
payable to associated companies.
Utilities has an agreement, which expires in 1999, with a
financial institution to sell, with limited recourse, an
undivided fractional interest of up to $65 million in its pool
of utility accounts receivable. At March 31, 1995, Utilities
had sold $64 million under the agreement.
At March 31, 1995, the Company had bank lines of credit
aggregating $87.7 million, of which $28 million was being used
to support commercial paper (weighted average interest rate of
6.20%) and $7.7 million to support certain pollution control
obligations. Commitment fees are paid to maintain these lines
and there are no conditions which restrict the unused lines of
credit. In addition to the above, Utilities has an
uncommitted credit facility with a financial institution
whereby it can borrow up to $40 million. Rates are set at the
time of borrowing and no fees are paid to maintain this
facility. At March 31, 1995, there were no borrowings under
this facility. Utilities also has a letter of credit in the
amount of $3.4 million supporting two of its variable rate
pollution control obligations.
ENVIRONMENTAL MATTERS
Utilities has been named as a Potentially Responsible
Party (PRP) by various federal and state environmental
agencies for 28 FMGP sites. Utilities believes that it is not
responsible for two of the above sites and there are three
other sites for which it may be designated as a PRP in the
future. Utilities is working pursuant to the requirements of
the various agencies to investigate, mitigate, prevent and
remediate, where necessary, damage to property, including
damage to natural resources, at and around the sites in order
to protect public health and the environment. Utilities has
completed the remediation of three sites and is in various
stages of the investigation and/or remediation processes for
22 sites. Utilities expects to begin the investigation
process in 1995 or 1996 for the other sites.
Utilities has recorded environmental liabilities related
to the FMGP sites of approximately $31 million (including
$4.5 million as current liabilities) at March 31, 1995. These
amounts are based upon Utilities' best current estimate of the
amount to be incurred for investigation and remediation costs
for those sites where the investigation process has been or is
substantially completed, and the minimum of the estimated cost
range for those sites where the investigation is in its
earlier stages or has not started. It is possible that future
cost estimates will be greater than the current estimates as
the investigation process proceeds and as additional facts
become known. Utilities may be required to monitor these
sites for a number of years upon completion of remediation, as
is the case with the three sites for which remediation has
been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation and monitoring costs from
its insurance carriers and is investigating the potential for
third party cost sharing for FMGP investigation and clean-up
costs. The amount of shared costs, if any, cannot be
reasonably determined and, accordingly, no potential sharing
has been recorded at March 31, 1995. Regulatory assets of
approximately $31 million, which reflect the future recovery
that is being provided through Utilities' rates, have been
recorded in the Consolidated Balance Sheets. Considering the
rate treatment allowed by the IUB, management believes that
the clean-up costs incurred by Utilities for these FMGP sites
will not have a material adverse effect on its financial
position or results of operations.
The Clean Air Act Amendments of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in
two phases with Phase I affecting two of Utilities' units
beginning in 1995 and Phase II affecting all units beginning
in the year 2000. Utilities is in the process of completing
the modifications necessary to meet the Phase I requirements
and has installed continuous emission monitors on all affected
units as required by the Act.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital
expenditures primarily related to fuel burning equipment and
boiler modifications. Utilities estimates capital
expenditures at approximately $22.5 million, including $4.4
million in 1995, in order to meet the requirements of the Act.
The National Energy Policy Act of 1992 requires owners of
nuclear power plants to pay a special assessment into a
"Uranium Enrichment Decontamination and Decommissioning Fund."
The assessment is based upon prior nuclear fuel purchases and,
for the DAEC, averages $1.4 million annually through 2007, of
which Utilities' 70% share is $1.0 million. Utilities is
recovering the costs associated with this assessment through
its electric fuel adjustment clauses over the period the costs
are assessed. Utilities' 70% share of the future assessment,
$12.0 million payable through 2007, has been recorded as a
liability in the Consolidated Balance Sheets, including
$0.8 million included in "Current liabilities - Environmental
liabilities," with a related regulatory asset for the
unrecovered amount.
The Nuclear Waste Policy Act of 1982 assigned
responsibility to the U.S. Department of Energy (DOE) to
establish a facility for the ultimate disposition of high
level waste and spent nuclear fuel and authorized the DOE to
enter into contracts with parties for the disposal of such
material beginning in January 1998. Utilities entered into
such a contract and has made the agreed payments to DOE. The
DOE, however, has experienced significant delays in its
efforts and material acceptance is now expected to occur no
earlier than 2010. Utilities has been storing spent nuclear
fuel on-site since plant operations began in 1974 and has
current on-site capability to store spent fuel until 2002.
Utilities is aggressively reviewing options for additional
spent nuclear fuel storage capability, including expanding on-
site storage, pursuing other off-site storage and supporting
legislation to resolve the lack of progress by the DOE.
The Low-Level Radioactive Waste Policy Amendments Act of
1985 mandated that each state must take responsibility for the
storage of low-level radioactive waste produced within its
borders. The State of Iowa has joined the Midwest Interstate
Low-Level Radioactive Waste Compact Commission (Compact),
which is planning a storage facility to be located in Ohio to
store waste generated by the Compact's six member states. At
March 31, 1995, Utilities has prepaid costs of approximately
$1 million to the Compact for the building of such a
facility. Currently, Utilities is storing its low-level
radioactive waste generated at the DAEC on-site until new
disposal arrangements are finalized among the Compact members.
A Compact disposal facility is anticipated to be in operation
in approximately ten years. On-site storage capability
currently exists for low-level radioactive waste expected to
be generated until the Compact facility is able to accept
waste materials.
The possibility that exposure to electric and magnetic
fields (EMF) emanating from power lines, household appliances
and other electric sources may result in adverse health
effects has been the subject of increased public,
governmental, industry and media attention. A considerable
amount of scientific research has been conducted on this topic
without definitive results. Research is continuing in order
to resolve scientific uncertainties.
OTHER MATTERS
The National Energy Policy Act of 1992 addresses several
matters designed to promote competition in the electric
wholesale power generation market, including mandated open
access to the electric transmission system and greater
encouragement of independent power production and
cogeneration. On March 29, 1995, the Federal Energy
Regulatory Commission (FERC) issued a Notice of Proposed
Rulemaking that makes specific recommendations related to non-
discriminatory pricing for open access transmission services
and would allow for recovery of certain stranded costs. These
are two of the most critical issues relating to the electric
utility industry's transition toward fully competitive
markets. The Company cannot predict the final regulations
that may be adopted.
The IUB recently initiated a Notice of Inquiry (Docket
No. NOI-95-1) on the subject of "Emerging Competition in the
Electric Utility Industry." A one-day roundtable discussion
was held to address all forms of competition in the electric
utility industry and to assist the IUB in gathering
information and perspectives on electric competition from all
persons or entities with an interest or stake in the issues.
Such discussions are not expected to produce any specific
action by the IUB at this time.
The Company cannot predict the long-term consequences of
these competitive issues on its results of operations or
financial condition. The Company's strategy for dealing with
these emerging issues includes seeking growth opportunities,
continuing to offer quality customer service, on-going cost
reductions and productivity enhancements. The Company
recently initiated a major project to review and redesign its
business processes with the primary goals being reduced
operating costs, increased efficiency and enhanced customer
service.
In March 1995, the FASB issued SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of. This Statement defines the criteria for
valuing regulatory assets. The Company does not expect the
amount of regulatory assets recorded in the Consolidated
Balance Sheets to be affected. The Company expects to adopt
this standard on January 1, 1996 and does not expect that
adoption will have a material impact on the financial position
or results of operations of the Company.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Notes 2 and 5 of the Notes to
Consolidated Financial Statements for a discussion of rate
matters and environmental matters, respectively.
Item 2. Changes in the Rights of the Company's Security
Holders.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Results of Votes of Security Holders.
None.
Item 5. Other Information.
The Company has calculated the ratio of earnings to fixed
charges pursuant to Item 503 of Regulation S-K of the
Securities and Exchange Commission as follows:
For the twelve months ended:
March 31, 1995 2.87
December 31, 1994 3.18
December 31, 1993 3.41
December 31, 1992 2.49
December 31, 1991 2.64
December 31, 1990 2.65
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
*4(a) Sixty-first Supplemental
Indenture, dated as of March 1, 1995,
supplementing Utilities' Indenture of Mortgage
and Deed of Trust, dated August 1, 1940.
*4(b) Third Supplemental Indenture,
dated as of March 1, 1995, supplementing
Utilities' Indenture of Mortgage and Deed of
Trust, dated September 1, 1993.
*12 Ratio of Earning to Fixed Charges.
*27 Financial Data Schedule.
* Exhibits designated by an asterisk are filed herewith.
(b) Reports on Form 8-K -
Items Financial Date of
Reported Statements Report
5, 7 None April 27, 1995
7 Note 1 March 15, 1995
Note 1: The Form 8-K provided the audited financial
statements of the Company.
SIGNATURES
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.
IES UTILITIES INC.
(Registrant)
Date May 12, 1995 By /s/ Dr. Robert J. Latham
(Signature)
Dr. Robert J. Latham
Senior Vice President, Finance
By /s/ Richard A. Gabbianelli
(Signature)
Richard A. Gabbianelli
Controller & Chief Accounting Officer
_______________________________________________________________
______________________________________________________________
Exhibit 4(a)
IES UTILITIES INC.
(formerly known as Iowa Electric Light and Power Company)
To
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
________________
Sixty-first Supplemental
Indenture
Dated as of March 1, 1995
________________
SUPPLEMENTAL TO
INDENTURE OF MORTGAGE AND DEED OF TRUST
DATED AS OF AUGUST 1, 1940
______________________________________________________________
THIS SIXTY-FIRST SUPPLEMENTAL INDENTURE, dated as of
March 1, 1995, between IES UTILITIES INC. (formerly known as
Iowa Electric Light and Power Company), a corporation
organized and existing under the laws of the State of Iowa
(hereinafter called the "Company"), party of the first part,
and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee, a national
banking association organized and existing under the laws of
the United States of America, party of the second part,
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and
delivered its Indenture of Mortgage and Deed of Trust, dated
as of August 1, 1940 (hereinafter called the "Original
Indenture"), to the Trustee to secure the first mortgage bonds
(herein sometimes referred to as "first mortgage bonds") of
the Company, issuable in series; and
WHEREAS, the Company thereafter executed and
delivered certain Supplemental Indentures, First through
Sixtieth, inclusive, for the various purposes of creating
additional series of first mortgage bonds, conveying and
confirming unto the Trustee certain additional property,
correcting the description of a certain parcel of land as set
forth in the Original Indenture and amending the Original
Indenture in certain respects (the Original Indenture and the
above referred to Supplemental Indentures together with this
Sixty-first Supplemental Indenture being herein sometimes
collectively referred to as the "Indenture"); and
WHEREAS, there have been issued and are now
outstanding under the Indenture the following described first
mortgage bonds:
First Mortgage Bonds Principal Amount
Series J, 6-1/4% due 1996 $15,000,000
Series L, 7-7/8% due 2000 15,000,000
Series M, 7-5/8% due 2002 30,000,000
Series P and Q, 6.70% due 2006 9,200,000
Series X, 9.42% due 1995 50,000,000
Series W, 9.75% due 1995 50,000,000
Series Y, 8-5/8% due 2001 60,000,000
Series Z, 7.60% due 1999 50,000,000
Collateral Series A due 2008 50,000,000
Collateral Series B due 2023 50,000,000
Pollution Control Collateral Series A,
due 2023 10,200,000
Pollution Control Collateral Series B,
due 2023 7,000,000
Pollution Control Collateral Series C,
due 2023 2,200,000
WHEREAS, the Original Indenture in Section 158
provides that the Company, when authorized by resolution of
the Board, and the Trustee, may at any time, subject to the
restrictions in the Original Indenture contained, enter into
such an indenture supplemental to the Original Indenture as
may or shall be by them deemed necessary or desirable for the
purpose of creating any new series of first mortgage bonds or
of adding to the covenants and agreements of the Company in
the Original Indenture contained, other covenants and
agreements thereafter to be observed by the Company and for
any other purpose not inconsistent with the terms of the
Original Indenture and which shall not impair the security of
the same; and
WHEREAS, the Company desires to execute and deliver
this Sixty-first Supplemental Indenture, in accordance with
the provisions of the Original Indenture, for the purpose of
providing for the creation of a new series of first mortgage
bonds to be designated "First Mortgage Bonds, Collateral
Series C, Due March 28, 2000" (hereinafter sometimes called
the "Bonds"), and for the purpose of adding to the covenants
and agreements of the Company in the Original Indenture
contained, other covenants and agreements hereafter to be
observed by the Company;
WHEREAS, the Bonds are to be issued to The First
National Bank of Chicago as trustee (the "New Mortgage
Trustee") under the Company's Indenture of Mortgage and Deed
of Trust dated as of September 1, 1993 (the "New Mortgage"),
and are to be owned and held by the New Mortgage Trustee as
"Class 'A' Bonds" (as defined in the New Mortgage) in
accordance with the terms of the New Mortgage; and
WHEREAS, all acts and proceedings required by law
and by the Articles of Incorporation of the Company, including
all action requisite on the part of its stockholders,
directors and officers, necessary to make the Bonds, when
executed by the Company, authenticated and delivered by the
Trustee and duly issued, the valid, binding and legal
obligations of the Company, and to constitute the Indenture a
valid and binding mortgage and deed of trust for the security
of the Bonds in accordance with the terms of the Indenture and
the terms of the Bonds, have been done and taken; and the
execution and delivery of this Sixty-first Supplemental
Indenture have been in all respects duly authorized.
NOW, THEREFORE, THIS SIXTY-FIRST SUPPLEMENTAL
INDENTURE WITNESSETH, that, in order further to secure the
payment of the principal of, premium, if any, and interest, if
any, on all first mortgage bonds at any time issued and
outstanding under the Indenture, according to their tenor,
purport and effect, and to secure the performance and
observance of all the covenants and conditions in said first
mortgage bonds and in the Indenture contained (except any
covenant of the Company with respect to the refund or
reimbursement of taxes, assessments or other governmental
charges on account of the ownership of any first mortgage
bonds, or the income derived therefrom, for which the holders
of such first mortgage bonds shall look only to the Company
and not to the property mortgaged and pledged) and for and in
consideration of the premises and of the mutual covenants
herein contained and of the purchase and acceptance of the
Bonds by the holders thereof, and of the sum of $1.00 duly
paid to the Company by the Trustee at or before the ensealing
and delivery hereof, and for other valuable considerations,
the receipt whereof is hereby acknowledged, the Company has
executed and delivered this Sixty-first Supplemental
Indenture, and, by these presents does grant, bargain, sell,
release, convey, assign, transfer, mortgage, pledge, set over,
warrant and confirm unto the Trustee the properties of the
Company described and referred to in the Original Indenture
and all indentures supplemental thereto, as thereby conveyed
or intended so to be, and not heretofore specifically
released, together with all and singular the plants,
buildings, improvements, additions, tenements, hereditaments,
easements, rights, privileges, licenses and franchises and all
other appurtenances whatsoever belonging or in any wise
appertaining to any of the property hereby mortgaged or
pledged, or intended so to be, or any part thereof, now owned
or which may hereafter be owned or acquired by the Company,
and the reversion and reversions, remainder and remainders,
and the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and of every part and parcel
thereof, and all the estate, right, title, interest, property,
claim and demand of every nature whatsoever of the Company, at
law or in equity, or otherwise howsoever, in, of and to such
property and every part and parcel thereof:
[DESCRIBE PROPERTY]
TO HAVE AND TO HOLD all and singular the lands,
properties, estates, rights, franchises, privileges and
appurtenances mortgaged, conveyed, pledged or assigned as
aforesaid, or intended so to be, together with all the
appurtenances thereunto appertaining, unto the Trustee and its
successors and assigns forever, upon the trusts, for the uses
and purposes and under the terms and conditions and with the
rights, privileges and duties as in the Indenture set forth;
Subject, however, to the reservations, exceptions,
limitations and restrictions contained in the several deeds,
leases, servitudes, contracts or other instruments through
which the Company acquired and/or claims title to and/or
enjoys the use of the aforesaid properties; and subject also
to Permitted Encumbrances (as defined in Section 24 of the
Original Indenture) and, as to any property acquired by the
Company since the execution and delivery of the Original
Indenture, to any liens thereon existing, and to any liens for
unpaid portions of the purchase money placed thereon, at the
time of such acquisition, but only to the extent that such
liens are permitted by Sections 72 and 83 of the Original
Indenture, as amended, and Section 6 of this Sixty-first
Supplemental Indenture;
BUT IN TRUST, NEVERTHELESS, for the equal and
proportionate use, benefit, security and protection of those
who from time to time shall hold the first mortgage bonds and
coupons authenticated and delivered under the Indenture and
duly issued by the Company, without any discrimination,
preference or priority of any one first mortgage bond or
coupon over any other by reason of priority in the time of
issue, sale or negotiation thereof or otherwise, except as
provided in Section 69 of the Original Indenture, so that,
subject to said provisions, each and all of said first
mortgage bonds and coupons shall have the same right, lien and
privilege under the Indenture and shall be equally and ratably
secured thereby (except as any sinking, amortization,
improvement, renewal or other fund, or any other covenants or
agreements established in accordance with the provisions of
the Original Indenture, may afford additional security for the
first mortgage bonds of any particular series), and shall have
the same proportionate interest and share in the Trust Estate
(as defined in the Original Indenture), with the same effect
as if all of the first mortgage bonds and coupons had been
issued, sold and negotiated simultaneously on the date of the
delivery of the Original Indenture; and in trust for enforcing
payment of the principal of the first mortgage bonds and of
the interest and premium, if any, thereon, according to the
tenor, purport and effect of the first mortgage bonds and
coupons and of the Indenture, and for enforcing the terms,
provisions, covenants and stipulations therein and in the
first mortgage bonds set forth, and upon the trusts, uses and
purposes and subject to the covenants, agreements and
conditions set forth and declared in the Indenture;
AND THIS SIXTY-FIRST SUPPLEMENTAL INDENTURE FURTHER
WITNESSETH, that the Company hereby covenants and agrees to
and with the Trustee and its successors and assigns forever as
follows:
1. There shall be, and is hereby created, a new
series of first mortgage bonds, known as and entitled "First
Mortgage Bonds, Collateral Series C, Due March 28, 2000," and
the form thereof shall be substantially as hereinafter set
forth.
The Bonds shall be issued and delivered to the New
Mortgage Trustee under the New Mortgage as the basis for the
authentication and delivery under the New Mortgage of a series
of securities ("Collateral Trust Securities"). As provided in
the New Mortgage, the Bonds will be registered in the name of
the New Mortgage Trustee or its nominee and will be owned and
held by the New Mortgage Trustee, subject to the provisions of
the New Mortgage, for the benefit of the holders of all
securities from time to time outstanding under the New
Mortgage, and the Company shall have no interest therein.
Any payment by the Company under the New Mortgage of
the principal of or interest, if any, on the Collateral Trust
Securities (other than by the application of the proceeds of a
payment in respect of Bonds) shall, to the extent thereof, be
deemed to satisfy and discharge the obligation of the Company,
if any, to make a payment of principal of or interest on such
Bonds, as the case may be, which is then due.
The principal amount of the Bonds shall be limited
to $50,000,000, except in case of the issuance of bonds as
provided in Section 14 of the Original Indenture on account of
mutilated, lost, stolen, or destroyed bonds. The Bonds shall
be registered bonds only without coupons of the denomination
of $1,000 and any multiple of $1,000, and of such respective
amounts of each of said denominations as may be executed by
the Company and delivered to the Trustee for authentication
and delivery. Notwithstanding the provisions of Section 7 of
the Original Indenture to the contrary, no reservation of
unissued coupon bonds shall be required with respect to the
Bonds. All Bonds shall mature March 28, 2000 and shall not
bear interest except that if the Company should default in the
payment of principal on a Bond, such Bond shall bear interest
on such defaulted principal at the rate of six percent per
annum (to the extent that payment of such interest is
enforceable under applicable law) until the Company's
obligation with respect to the payment of such principal shall
be discharged. The principal, premium, if any, and the
interest, if any, on the Bonds shall be payable at the agency
of the Company in the City of Chicago, Illinois, or, at the
option of the Company in The City of New York, in any coin or
currency of the United States of America which at the time of
payment shall be legal tender for public and private debts.
The Bonds will be redeemable, at the option of the
Company, in whole at any time or in part from time to time,
upon at least 30 days' notice, at a redemption price equal to
100% of the principal amount thereof together with accrued
interest, if any, thereon to the date fixed for redemption.
The Bonds shall be redeemed no later than the redemption of
the Collateral Trust Securities, in a principal amount equal
to the principal amount of Collateral Trust Securities then
being redeemed, and at a redemption price equal to the
redemption price (excluding interest other than interest on
defaulted principal, if any) applicable to such redemption of
Collateral Trust Securities.
Notwithstanding Section 11 of the Original
Indenture, the Company may execute, and the Trustee shall
authenticate and deliver, definitive Bonds in typewritten
form.
Subject to the provisions of Section 8 of the
Original Indenture, all definitive Bonds shall be
interchangeable for other Bonds of a different authorized
denomination or denominations, as requested by the holder
surrendering the same, upon surrender to the agency of the
Company in the City of Chicago, Illinois, or, at the option of
the holder, at the agency of the Company in The City of New
York. Anything contained in Section 13 of the Original
Indenture notwithstanding, upon such interchange of Bonds, no
charge may be made by the Company except the payment of a sum
sufficient to reimburse the Company for any stamp tax or other
governmental charge incident thereto.
The Trustee is hereby appointed Registrar of the
Bonds for the purpose of registering and transferring Bonds as
in Section 12 of the Original Indenture provided. Bonds may
also be so registered and transferred at the principal
corporate trust office of First Chicago Trust Company of New
York in the Borough of Manhattan in The City of New York,
which company is hereby authorized to act as co-Registrar of
Bonds in The City of New York. In case any Bonds shall be
redeemed in part only, any delivery pursuant to Section 97 of
the Original Indenture of a new Bond or Bonds of an aggregate
principal amount equal to the unredeemed portion of such Bond
shall, at the option of the registered owner, be made by the
co-Registrar. For all purposes of Articles Eleven and
Eighteen of the Original Indenture, First Chicago Trust
Company of New York in The City of New York, as the New York
Paying Agent for Bonds, shall be deemed to be the agent of the
Trustee for the purpose of receiving all or any part, as may
be directed by the Trustee, of any deposit for the purpose of
redeeming, or of paying at maturity, any Bonds, and any money
so deposited with First Chicago Trust Company of New York in
The City of New York, upon the direction of the Trustee, in
trust for the purpose of paying the redemption price of, or of
paying at maturity, any Bonds, shall be deemed to constitute a
deposit in trust with, and to be held in trust by, the Trustee
in accordance with the provisions of Article Eleven or
Eighteen of the Original Indenture.
So long as any Bonds shall be outstanding, in
addition to the offices or agencies required to be maintained
by the provisions of the Original Indenture, the Company shall
keep or cause to be kept at an office or agency to be
maintained by the Company in the Borough of Manhattan, The
City of New York, books for the registration and transfer of
Bonds pursuant to the foregoing provisions of this Section and
to the provisions of the Original Indenture.
2. The Bonds and the certificate of
authentication to be borne by such Bonds shall be
substantially in the following forms, respectively:
[FORM OF FACE OF BOND]
This bond is not transferable except to a successor
trustee under the Indenture of Mortgage and Deed of Trust,
dated as of September 1, 1993, between IES Utilities Inc. and
The First National Bank of Chicago, Trustee.
No. $
IES UTILITIES INC.
FIRST MORTGAGE BOND, COLLATERAL SERIES C
Due March 28, 2000
IES UTILITIES INC. (formerly known as Iowa Electric
Light and Power Company) (hereinafter called the "Company"), a
corporation of the State of Iowa, for value received, hereby
promises to pay to ________________, as trustee under the
Indenture of Mortgage and Deed of Trust, dated as of September
1, 1993, between the Company and such trustee, or registered
assigns, on the twenty-eighth day of March, 2000, the sum of
$____________ in any coin or currency of the United States of
America which at the time of payment shall be legal tender for
public and private debts. This bond shall not bear interest
except that, if the Company should default in the payment of
principal hereof, this bond shall bear interest on such
defaulted principal at the rate of six percent per annum (to
the extent that payment of such interest is enforceable under
applicable law) until the Company's obligation with respect to
the payment of such principal shall be discharged as provided
in the Indenture hereinafter mentioned. Principal of and
interest, if any, on this bond shall be payable at the agency
of the Company in the City of Chicago, Illinois, or, at the
option of the holder, at the agency of the Company in The City
of New York.
Reference is made to the further provisions of this
bond set forth on the reverse hereof. Such further provisions
shall for all purposes have the same effect as though fully
set forth at this place.
This bond shall not be valid or become obligatory
for any purpose until the certificate of authentication hereon
shall have been signed by The First National Bank of Chicago,
or its successor, as Trustee under the Indenture.
IN WITNESS WHEREOF, the Company has caused this bond
to be signed in its name, manually or in facsimile, by its
President or one of its Vice Presidents and its corporate seal
to be impressed or imprinted hereon and attested, manually or
in facsimile, by its Secretary or one of its Assistant
Secretaries.
Dated:
IES UTILITIES INC.
By_____________________________
Senior Vice President, Finance
ATTEST:
______________________
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the first mortgage bonds described in
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By_________________________________
Authorized Officer
[FORM OF REVERSE OF BOND]
IES UTILITIES INC.
FIRST MORTGAGE BOND, COLLATERAL SERIES C
Due March 28, 2000
This bond is one of an authorized issue of bonds of
the Company known as its "first mortgage bonds", issued and to
be issued in series under, and all equally and ratably secured
(except as any sinking, amortization, improvement, renewal or
other fund, or any other covenants or agreements, established
in accordance with the provisions of the Indenture hereinafter
mentioned, may afford additional security for the first
mortgage bonds of any particular series) by an Indenture of
Mortgage and Deed of Trust dated as of August 1, 1940,
executed by the Company to The First National Bank of Chicago,
as Trustee, as supplemented by sixty-one Supplemental
Indentures (including a Seventh Supplemental Indenture dated
as of July 1, 1946, a Thirty-second Supplemental Indenture
dated as of September 1, 1966, a Forty-fifth Supplemental
Indenture dated as of November 1, 1976, a Fifty-fifth
Supplemental Indenture dated as of March 1, 1988, a Fifty-
sixth Supplemental Indenture dated as of October 1, 1988, a
Fifty-ninth Supplemental Indenture dated as of October 1,
1993, a Sixtieth Supplemental Indenture dated as of November
1, 1993 and a Sixty-first Supplemental Indenture dated as of
March 1, 1995) each duly executed by the Company to said
Trustee (said Indenture, as so supplemented, being herein
sometimes referred to as the "Indenture"), to which Indenture
and all indentures supplemental thereto reference is hereby
made for a description of the properties mortgaged and
pledged, the nature and extent of the security, the rights of
the holders of said first mortgage bonds, and of the Trustee
and of the Company in respect of such security, and the terms
and conditions upon which said first mortgage bonds are and
are to be issued and secured. As provided in, and to the
extent permitted by, the Indenture, the rights and obligations
of the Company and of the holders of said first mortgage bonds
may be changed and modified with the consent of the Company by
the affirmative vote of the holders of at least 75% in
principal amount of the first mortgage bonds then outstanding
affected by such change or modification (excluding first
mortgage bonds disqualified from voting by reason of the
Company's interest therein as provided in the Indenture);
provided, however, that without the consent of the registered
owner hereof no such change or modification shall permit the
reduction of the principal or the extension of the maturity of
the principal of this bond or the reduction of the rate of
interest, if any, hereon or any other modification of the
terms of payment of such principal or interest. As provided
in the Indenture, said first mortgage bonds are issuable in
series which may vary as in the Indenture provided or
permitted. This bond is one of a series of first mortgage
bonds entitled "First Mortgage Bonds, Collateral Series C, Due
March 28, 2000".
Any payment by the Company of the principal of or
interest, if any, on the Collateral Trust Securities (as
defined in the Sixty-first Supplemental Indenture) (other than
by the application of the proceeds of a payment in respect of
this bond) shall, to the extent thereof, be deemed to satisfy
and discharge the obligation of the Company, if any, to make a
payment of principal of or interest on this bond which is then
due.
This bond is redeemable, at the option of the
Company, in whole at any time or in part from time to time,
upon at least 30 days' notice, given as aforesaid, at a
redemption price equal to 100% of the principal amount thereof
together with accrued interest, if any, to the date fixed for
redemption. In addition, the Bonds shall be redeemed by the
Company no later than the redemption of the Collateral Trust
Securities in a principal amount equal to the principal amount
of Collateral Trust Securities then being redeemed, and at a
redemption price equal to the redemption price (excluding
interest other than interest on defaulted principal, if any)
applicable to such redemption of Collateral Trust Securities.
If an event of default, as defined in the Indenture,
shall occur, the principal of this bond may become or be
declared due and payable, in the manner and with the effect
provided in the Indenture.
This bond is transferable by the registered owner
hereof in person or by attorney authorized in writing at the
agency of the Company in the City of Chicago, Illinois, or, at
the option of the holder, at the agency of the Company in The
City of New York, upon surrender and cancellation of this bond
and upon any such transfer a new first mortgage bond of the
same series, for the same aggregate principal amount, will be
issued to the transferee in exchange herefore. The Company
and the Trustee may deem and treat the person in whose name
this bond is registered as the absolute owner hereof, for the
purpose of receiving payment and for all other purposes.
This bond, alone or with other first mortgage bonds
of the same series, may be exchanged upon surrender thereof to
the Trustee at the agency of the Company in the City of
Chicago, Illinois, or, at the option of the holder, at the
agency of the Company in The City of New York, for one or more
other first mortgage bonds of the same series and of the same
aggregate principal amount but of a different authorized
denomination or denominations, upon payment of a sum
sufficient to reimburse the Company for any stamp tax or other
governmental charge incident thereto, and subject to the terms
and conditions set forth in the Indenture.
No recourse shall be had for the payment of the
principal of or the interest on this bond, or for any claim
based hereon or otherwise in respect hereof or of the
Indenture or of any indenture supplemental thereto, against
any incorporator, stockholder, director, or officer, as such,
past, present or future, of the Company or of any predecessor
or successor corporation, either directly or through the
Company or any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or by any legal
or equitable proceeding or otherwise howsoever; all such
liability being, by the acceptance hereof and as a part of the
consideration for the issuance hereof, expressly waived and
released by every registered owner hereof, as more fully
provided in the Indenture; provided, however, that nothing
herein or in the Indenture contained shall be taken to prevent
recourse to and the enforcement of the liability, if any, of
any shareholder or any stockholder or subscriber to capital
stock upon or in respect of shares of capital stock not fully
paid up.
[END OF BOND FORM]
SECTION 3. Anything contained in Sections 97 and 98
of the Indenture to the contrary notwithstanding, if less than
all of the outstanding Bonds are to be called for redemption,
the Bonds to be redeemed in whole or in part shall be
designated by the Trustee (within 10 days after receipt from
the Company of notice of its intention to redeem Bonds) by lot
according to such method as the Trustee shall deem proper in
its discretion. For the purpose of any drawing, the Trustee
shall assign a number for each $1,000 principal amount of each
outstanding Bond.
The provisions of Section 97 of the Indenture
relating to notations of partial redemption shall not apply to
the Bonds.
SECTION 4. The recitals contained in this
Supplemental Indenture are made by the Company and not by the
Trustee; and all of the provisions contained in the Original
Indenture, as heretofore supplemented, in respect of the
rights, privileges, immunities, powers, and duties of the
Trustee shall, except as hereinabove modified, be applicable
in respect hereof as fully and with like effect as if set
forth herein in full.
SECTION 5. All the covenants, stipulations,
promises and agreements in this Supplemental Indenture
contained, by or on behalf of the Company, shall bind and
inure to the benefit of its successors and assigns, whether so
expressed or not.
SECTION 6. Nothing in this Supplemental Indenture
expressed or implied is intended or shall be construed to give
to any person other than the Company, the Trustee, and the
holders of the first mortgage bonds any legal or equitable
right, remedy or claim under or in respect of the Indenture or
any covenant, condition or provision therein or in the first
mortgage bonds contained, and all such covenants, conditions,
and provisions are and shall be held to be for the sole and
exclusive benefit of the Company, the Trustee and the holders
of the first mortgage bonds issued under the Indenture.
SECTION 7. All references in the Original Indenture
to the various Sections and Articles thereof shall be deemed
to refer to said Sections and Articles as heretofore amended,
and the Original Indenture shall hereafter be construed and
applied as heretofore amended and supplemented.
SECTION 8. This Supplemental Indenture may be
executed in any number of counterparts, and each of such
counterparts shall for all purposes be deemed to be an
original, and all such counterparts, or as many of them as the
Company and the Trustee shall preserve undestroyed, shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, IES UTILITIES INC. has caused
this Sixty-first Supplemental Indenture to be signed in its
corporate name by its President or a Vice President and its
corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary, and THE FIRST NATIONAL
BANK OF CHICAGO, in token of its acceptance of the trusts
created hereunder, has caused this Sixty-first Supplemental
Indenture to be signed in its corporate name by one of its
Vice Presidents or Assistant Vice Presidents and its corporate
seal to be hereunto affixed and attested by one of its Trust
Officers, all as of the day and year first above written.
IES UTILITIES INC.
By:______________________________
Senior Vice President, Finance
(CORPORATE SEAL)
ATTEST:
_____________________________
Secretary
THE FIRST NATIONAL BANK OF
CHICAGO, Trustee
By:________________________
Assistant Vice President
(CORPORATE SEAL)
ATTEST:
____________________________
Authorized Officer
STATE OF IOWA )
) ss:
COUNTY OF LINN )
On this ______ day of March, 1995, before me,
____________, a Notary Public in and for the said County in
the state aforesaid, personally appeared Robert J. Latham and
Stephen W. Southwick, to me personally known, and to me known
to be Senior Vice President, Finance and Secretary,
respectively, of IES UTILITIES INC., one of the corporations
described in and which executed the within and foregoing
instrument, and who, being by me severally duly sworn, each
did say that he the said Robert J. Latham is Senior Vice
President, Finance, and that he the said Stephen W. Southwick
is Secretary of the said IES UTILITIES INC., a corporation;
that the seal affixed to the within and foregoing instrument
is the corporate seal of the said corporation, and that the
said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors; and the
said Robert J. Latham and Stephen W. Southwick each
acknowledged the execution of said instrument to be the
voluntary act and deed of said corporation by it voluntarily
executed.
WITNESS my hand and notarial seal this _______ day
of March, 1995.
___________________________
Notary Public
My Commission expires: ________ __, ____
(NOTARIAL SEAL)
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this ___ day of March, 1995, before me,
_____________, a Notary Public in and for said County in the
State aforesaid, personally appeared __________ and _________,
to me personally known, and to me known to be an
and an , respectively, of THE
FIRST NATIONAL BANK OF CHICAGO, one of the corporations
described in and which executed the within and foregoing
instrument, and who, being by me severally duly sworn, each
did say that he the said ________ is an
and that the said _____________________ is an
___________________ of the said THE FIRST NATIONAL BANK OF
CHICAGO, a corporation; that the seal affixed to the within
and foregoing instrument is the corporate seal of the said
corporation, and that the said instrument was signed and
sealed on behalf of said corporation by authority of its By-
Laws; and the said ________________________ and
______________________ each acknowledged the execution of said
instrument to be the voluntary act and deed of said
corporation by it voluntarily executed.
WITNESS my hand and notarial seal this ___ day of
March, 1995.
_____________________________
Notary Public
My Commission expires: _____________ __, ____
(NOTARIAL SEAL)
Exhibit 4(b)
______________________________________________________________
IES UTILITIES INC.
(formerly known as Iowa Electric Light and Power Company)
TO
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
______________
Third Supplemental Indenture
Dated as of March 1, 1995
TO
INDENTURE OF MORTGAGE and DEED OF TRUST
Dated as of September 1, 1993
______________________________________________________________
THIRD SUPPLEMENTAL INDENTURE, dated as of March 1,
1995 (the "Third Supplemental Indenture"), made by and between
IES UTILITIES INC. (formerly known as Iowa Electric Light and
Power Company), a corporation organized and existing under the laws
of the State of Iowa (the "Company"), and THE FIRST NATIONAL BANK
OF CHICAGO, a national banking association organized and
existing under the laws of the United States of America (the
"Trustee"), as Trustee under the Indenture of Mortgage and Deed of
Trust dated as of September 1, 1993, hereinafter mentioned.
WHEREAS, the Company has heretofore executed
and delivered its Indenture of Mortgage and Deed of Trust dated as
of September 1, 1993, to the Trustee, for the security of
the securities of the Company to be issued thereunder and the
said Indenture has been supplemented by two supplemental
indentures, dated as of October 1, 1993 and as of November 1, 1993,
which Indenture as so supplemented and to be hereby supplemented
is hereinafter referred to as the "Indenture"; and
WHEREAS, the Company desires to create a series
of Collateral Trust Bonds to be issued under the Indenture, to
be known as Collateral Trust Bonds, 7.65% Series Due March 28,
2000; and
WHEREAS, the Company, in the exercise of the powers
and authority conferred upon and reserved to it under the
provisions of the Indenture, has duly resolved and determined to
make, execute and deliver to the Trustee a Third Supplemental
Indenture in the form hereof for the purposes herein provided; and
WHEREAS, pursuant to Section 1401 of the Indenture,
the Company may from time to time execute one or more
supplemental indentures in order better to assure, convey and confirm unto
the Trustee any property subject to the Lien of the Indenture; and
WHEREAS, the Company desires to so assure, convey
and confirm property described on Exhibit A to this
Supplemental Indenture; and
WHEREAS, all conditions and requirements necessary
to make this Third Supplemental Indenture a valid, binding and
legal instrument have been done, performed and fulfilled, and
the execution and delivery hereof have been in all respects
duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
THAT IES UTILITIES INC., in consideration of
the purchase and ownership from time to time of the Collateral
Trust Bonds created in the Third Supplemental Indenture and the
service by the Trustee, and its successors, under the Indenture and
of One Dollar to it duly paid by the Trustee at or before
the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, hereby covenants and agrees to and with
the Trustee and its successors in the trust under the Indenture,
for the benefit of those who shall hold such Collateral Trust
Bonds as follows:
ARTICLE I
DESCRIPTION OF COLLATERAL TRUST BONDS OF THE 7.65% SERIES
SECTION 1. The Company hereby creates a new
series of Collateral Trust Bonds to be known as "Collateral Trust
Bonds, 7.65% Series Due March 28, 2000 (referred to herein
as "Collateral Trust Bonds of the 7.65% Series"). The
Collateral Trust Bonds of the 7.65% Series shall be executed,
authenticated and delivered in accordance with the provisions of, and shall
in all respects be subject to, all of the terms, conditions
and covenants of the Indenture, as supplemented and modified.
The commencement of the first interest period shall
be March 28, 1995. The Collateral Trust Bonds of the 7.65%
Series shall mature March 28, 2000, and shall bear interest at the
rate of 7.65% per annum, payable semi-annually on the 28th day
of March and the 28th day of September in each year, commencing
on September 28, 1995. The person in whose name any of
the Collateral Trust Bonds of the 7.65% Series is registered at
the close of business on any record date (as hereinafter
defined) with respect to any interest payment date shall be entitled
to receive the interest payable on such interest payment
date notwithstanding the cancellation of such Collateral Trust
Bonds of the 7.65% Series upon any transfer or exchange subsequent
to the record date and prior to such interest payment
date; provided, however, that if and to the extent the Company
shall default in the payment of the interest due on such
interest payment date, such defaulted interest shall be paid as
provided in Section 307 of the Indenture.
The term "record date" as used in this Section
with respect to any interest payment date shall mean the March 15
or September 15, as the case may be, next preceding the semi-
annual interest payment date, or, if such March 15 or September
15 shall be a legal holiday or a day on which banking
institutions in the Borough of Manhattan, The City of New York, State of
New York or in the City of Chicago, State of Illinois, are
authorized by law to close, then the next preceding day which shall not
be a legal holiday or a day on which such institutions are
so authorized to close.
SECTION 2. The Collateral Trust Bonds of the
7.65% Series shall be issued only as registered Collateral Trust
Bonds without coupons of the denomination of $1,000, or any
integral multiple of $1,000, appropriately numbered. Subject to the
terms and conditions set forth in the Indenture, the Collateral
Trust Bonds of the 7.65% Series may be exchanged for one or more
new Collateral Trust Bonds of the 7.65% Series of other
authorized denominations, for the same aggregate principal amount,
upon surrender thereof to the agency of the Company in the City
of Chicago, Illinois, or, at the option of the holder, at the
agency of the Company in the City of New York.
Collateral Trust Bonds of the 7.65% Series may
be exchanged or transferred without expense to the registered
owner thereof except that any taxes or other governmental charges
that may be imposed in connection with such transfer or exchange
shall be paid by the registered owner requesting such transfer
or exchange as a condition precedent to the exercise of
such privilege.
SECTION 3. The Collateral Trust Bonds of the 7.65%
Series and the Trustee's Certificate of Authentication shall
be substantially in the following forms respectively:
[FORM OF FACE OF COLLATERAL TRUST BOND]
IES UTILITIES INC.
COLLATERAL TRUST BOND, 7.65% SERIES DUE MARCH 28, 2000
No. ________ $_________
IES UTILITIES INC., a corporation organized
and existing under the laws of the State of Iowa (the
"Company," which term shall include any successor corporation as defined
in the Indenture hereinafter referred to), for value
received, hereby promises to pay to ______________ or registered
assigns, the sum of _____________ dollars on the 28th day of March,
2000, in any coin or currency of the United States of America which
at the time of payment is legal tender for public and private
debts, and to pay interest thereon in like coin or currency from
March 28, 1995, payable semi-annually, on the 28th day of March
and September in each year, at the rate of 7.65% per annum, until
the Company's obligation with respect to the payment of
such principal shall be discharged as provided in the
Indenture hereinafter mentioned. The interest so payable on any 28th
day of March or September will, subject to certain
exceptions provided in the Third Supplemental Indenture dated as of March
1, 1995, be paid to the person in whose name this Collateral
Trust Bond is registered at the close of business on the
immediately preceding March 15 or September 15, as the case may be.
Except as otherwise provided in the Indenture, any such interest not
so paid or duly provided for shall forthwith cease to be payable
to such person, and shall either be paid to the person in whose
name this Collateral Trust Bond is registered at the close of
business on a Special Record Date for the payment of such interest to
be fixed by the Trustee, notice of which shall be given to
holders of Collateral Trust Bonds of this Series not less than 10
days prior to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Collateral Trust Bonds of
this Series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided for in said
Indenture. Both principal of, and interest on, this Collateral Trust
Bond are payable at the agency of the Company in the City of
Chicago, Illinois, or, at the option of the holder, at the agency of
the Company in The City of New York.
This Collateral Trust Bond shall not be entitled to
any benefit under the Indenture or any indenture
supplemental thereto, or become valid or obligatory for any purpose, until
the form of certificate endorsed hereon shall have been signed by
or on behalf of The First National Bank of Chicago, the
Trustee under the Indenture, or a successor trustee thereto under
the Indenture, or by an authenticating agent duly appointed by
the Trustee in accordance with the terms of the Indenture.
The provisions of this Collateral Trust Bond
are continued on the reverse hereof and such continued
provisions shall for all purposes have the same effect as though fully
set forth at this place.
IN WITNESS WHEREOF, IES Utilities Inc. has caused
this Collateral Trust Bond to be signed (manually or by
facsimile signature) in its name by an Authorized Executive Officer,
as defined in this Indenture, and its corporate seal (or a
facsimile thereof) to be hereto affixed and attested (manually or
by facsimile signature) by an Authorized Executive Officer,
as defined in this Indenture.
Dated ________________ IES UTILITIES INC.
By____________________________
Authorized Executive Officer
ATTEST:
____________________________
Authorized Executive Officer
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Collateral Trust Bonds of the
series designated therein referred to in the within-mentioned
Indenture and Third Supplemental Indenture dated as of March 1, 1995.
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
By____________________________
Authorized Officer
[FORM OF REVERSE OF COLLATERAL TRUST BOND]
This Collateral Trust Bond is one of a duly
authorized issue of Collateral Trust Bonds of the Company in an
aggregate principal amount of up to $50,000,000, of the series
hereinafter specified, all issued and to be issued under and equally
secured by an Indenture of Mortgage and Deed of Trust (the
"Indenture"), dated as of September 1, 1993, executed by the Company to
The First National Bank of Chicago, as Trustee (the "Trustee"),
as supplemented by three supplemental indentures (including a
Third Supplemental Indenture dated as of March 1, 1995) each
executed by the Company to said Trustee (said Indenture, as
so supplemented, being herein sometimes referred to as
the "Indenture"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of
the properties mortgaged and pledged, the nature and extent of
the security, the rights of registered owners of the Collateral
Trust Bonds and of the Trustee in respect thereof, and the terms
and conditions upon which the Collateral Trust Bonds are, and are
to be, secured. The Collateral Trust Bonds may be issued in
series, for various principal sums, may mature at different times,
may bear interest at different rates and may otherwise vary
as provided in the Indenture. This Collateral Trust Bond is one
of a series designated as the "Collateral Trust Bonds, 7.65%
Series Due March 28, 2000" (the "Collateral Trust Bonds of the
7.65% Series") of the Company, in an aggregate principal amount of
up to $50,000,000, issued under and secured by the Indenture
and described in the Third Supplemental Indenture thereto dated as
of March 1, 1995 (the "Third Supplemental Indenture") between
the Company and the Trustee.
The Collateral Trust Bonds of the 7.65% Series will
not be redeemable prior to their maturity; provided, however,
that such Bonds may be redeemed in whole at any time or in part
from time to time, upon at least 30 days' notice, at the
redemption price equal to 100% of the principal amount thereof, plus
accrued interest to the date of redemption, through the application
of cash received by the Trustee as a result of properties of
the Company being taken by eminent domain or being sold to an
entity possessing the power of eminent domain.
In case an Event of Default, as defined in
the Indenture, shall occur, the principal of all the Collateral
Trust Bonds of the 7.65% Series at any such time outstanding under
the Indenture may be declared or may become due and payable, upon
the conditions and in the manner and with the effect provided in
the Indenture. The Indenture provides that such declaration may
be rescinded under certain circumstances.
No reference herein to the Indenture and no
provision of this Collateral Trust Bond or of the Indenture shall alter
or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and premium, if any,
and interest on this Collateral Trust Bond at the times, place
and rate, in the coin or currency, and in the manner,
herein prescribed.
This Collateral Trust Bond may be exchanged
or transferred without expense to the registered owner hereof
except that any taxes or other governmental charges that may be
imposed in connection with such transfer or exchange shall be paid by
the registered owner requesting such transfer or exchange as
a condition precedent to the exercise of such privilege.
Prior to due presentment of this Collateral Trust
Bond for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in
whose name this Collateral Trust Bond is registered as the
absolute owner hereof for all purposes, whether or not this
Collateral Trust Bond be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
As provided in the Indenture, no recourse shall be
had for the payment of the principal of or premium, if any,
or interest on any Collateral Trust Bonds or any part thereof,
or for any claim based thereon or otherwise in respect thereof,
or of the indebtedness represented thereby, or upon any
obligation, covenant or agreement under the Indenture, against, and
no personal liability whatsoever shall attach to, or be incurred
by, any incorporator, stockholder, officer or director, as
such, past, present or future of the Company or of any predecessor
or successor corporation (either directly or through the Company
or a predecessor or successor corporation), whether by virtue of
any constitutional provision, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise; it
being expressly agreed and understood that the Indenture and all
the Collateral Trust Bonds are solely corporate obligations and
that any such personal liability is hereby expressly waived
and released as a condition of, and as part of the consideration
for, the execution of the Indenture and the issuance of the
Collateral Trust Bonds.
[END OF COLLATERAL TRUST BOND FORM]
ARTICLE II.
ISSUE OF COLLATERAL TRUST BONDS.
SECTION 1. Pursuant to the terms of Section 401 of
the Indenture, the Company hereby exercises the right to obtain
the authentication of $50,000,000 principal amount of
Collateral Trust Bonds of the 7.65% Series.
SECTION II. Such Collateral Trust Bonds may
be authenticated and delivered prior to the filing for
recordation of this Third Supplemental Indenture.
ARTICLE III.
REDEMPTION.
The Collateral Trust Bonds of the 7.65% Series will not
be redeemable prior to their maturity; provided, however, that
such Bonds may be redeemed in whole at any time or in part from
time to time, upon at least 30 days' notice, at a redemption
price equal to 100% of the principal amount thereof, plus
accrued interest to the date of redemption, through the application
of cash received by the Trustee as a result of properties of
the Company being taken by eminent domain or being sold to an
entity possessing the power of eminent domain.
ARTICLE IV.
DESCRIPTION OF PROPERTY.
To secure the payment of the principal of, premium,
if any, and interest, if any, on all Collateral Trust Bonds
issued under the Indenture and Outstanding (as defined in
the Indenture), when payable in accordance with the
provisions thereof, and to secure the performance by the Company of, and
its compliance with, the covenants and conditions of the
Indenture, the Company hereby grants, bargains, sells, conveys,
assigns, transfers, mortgages, pledges, sets over and confirms to
the Trustee a security interest in, all right, title and interest
of the Company in and to the property described in Exhibit A to
this Third Supplemental Indenture.
TO HAVE AND TO HOLD all said property hereby
granted, bargained, sold, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed, or in which a security
interest has been granted by the Company in this Third
Supplemental Indenture, unto the Trustee and its successors and
assigns forever, but in trust nevertheless upon the trusts, for
the purposes, and subject to all the exceptions and
reservations, terms, conditions, provisions and restrictions of the
Indenture, and for the equal and proportionate benefit and security of
all present and future holders of the Collateral Trust Bonds,
without any preference, priority or distinction of any one
Collateral Trust Bond over any other Collateral Trust Bond by reason
of priority in the issue or negotiation thereof or otherwise,
except as may otherwise be expressly provided in the Indenture,
but subject, however, to all the conditions, agreements,
covenants, exceptions, limitations, restrictions and reservations
expressed or provided in the deeds or other instruments of record
affecting the property, or any part or portion thereof, insofar as the
same are at the time of execution hereof in force and effect
and permitted by law.
ARTICLE V.
THE TRUSTEE.
The Trustee hereby accepts the trusts hereby
declared and provided, and agrees to perform the same upon the terms
and conditions in the Indenture set forth and upon the
following terms and conditions:
The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or
sufficiency this Third Supplemental Indenture or the due
execution hereof by the Company or for or in respect of the
recitals contained herein, all of which recitals are made by
the Company solely. In general, each and every term
and condition contained in Article Eleven of the Indenture
shall apply to this Third Supplemental Indenture with the
same force and effect as if the same were herein set forth
in full, with such omissions, variations and
modifications thereof as may be appropriate to make the
same conform to this Third Supplemental Indenture.
ARTICLE VI.
MISCELLANEOUS PROVISIONS.
This Third Supplemental Indenture may be
simultaneously executed in any number of counterparts, each of which when
so executed shall be deemed to be an original; but such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Third Supplemental Indenture to be duly executed, and
their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
IES UTILITIES INC.
By____________________________
Senior Vice President, Finance
ATTEST:
____________________________
Secretary
THE FIRST NATIONAL BANK OF CHICAGO,
Trustee
By____________________________
ATTEST:
____________________________
STATE OF IOWA )
) ss:
COUNTY OF LINN )
On the _____ day of March, 1995, before me
personally came Robert J. Latham, to me known, who, being by me duly
sworn, did depose and say that he is the Senior Vice President,
Finance of IES UTILITIES INC., the corporation described in and
which executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his
name thereto by like authority, acknowledging the instrument to be
the free act and deed of said corporation.
______________________________
Notary Public,
[Notarial Seal]
STATE OF ILLINOIS )
) ss:
COUNTY OF COOK )
On the _____ day of March, 1995, before me
personally came ________________________, to me known, who, being by me
duly sworn, did depose and say that he is a
________________________ of THE FIRST NATIONAL BANK OF CHICAGO, the
national banking association described in and which executed the
foregoing instrument; that he knows the seal of said national
banking association; that the seal affixed to said instrument is the
seal of said national banking association; that it was so affixed
by authority of the Board of Directors of said national
banking association, and that he signed his name thereto by
like authority, acknowledging the instrument to be the free act
and deed of said national banking association.
______________________________
Notary Public,
[Notarial Seal]
EXHIBIT A
DESCRIPTION OF PROPERTY
[To be supplied by the Company]
<TABLE>
EXHIBIT 12
IES UTILITIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Twelve Months
Year Ended December 31, Ended
1990 1991 1992 1993 1994 March 31, 1995
(in thousands, except ratio of earnings to fixed charges)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 45,969 $ 47,563 $ 45,291 $ 67,970 $ 61,210 $ 52,427
Federal and state
income taxes 22,364 23,494 20,723 37,963 37,966 32,429
Net income before
income taxes 68,333 71,057 66,014 105,933 99,176 84,856
Interest on long-term debt 28,853 31,171 35,689 34,926 37,942 37,772
Other interest 4,704 5,595 3,939 5,243 3,630 3,730
Estimated interest
component of rents 7,936 6,594 4,567 3,729 3,970 3,773
Fixed charges as defined 41,493 43,360 44,195 43,898 45,542 45,275
Earnings as defined $ 109,826 $ 114,417 $ 110,209 $ 149,831 $ 144,718 $ 130,131
Ratio of earnings to fixed
charges (unaudited) 2.65 2.64 2.49 3.41 3.18 2.87
For the purposes of computation of these ratios (a) earnings have been
calculated by adding fixed charges and federal and state
income taxes to net income; (b) fixed charges consist of interest
(including amortization of debt expense, premium and discount) on
long-term and other debt and the estimated interest component of rents.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1995 and the Consolidated Statement
of Income and the Consolidated Statement of Cash Flows for the three months
ended March 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,287,648
<OTHER-PROPERTY-AND-INVEST> 43,294
<TOTAL-CURRENT-ASSETS> 100,318
<TOTAL-DEFERRED-CHARGES> 8,175
<OTHER-ASSETS> 194,199
<TOTAL-ASSETS> 1,633,634
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 190,090
<TOTAL-COMMON-STOCKHOLDERS-EQ> 502,559
0
18,320
<LONG-TERM-DEBT-NET> 430,454
<SHORT-TERM-NOTES> 15,544
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 28,000
<LONG-TERM-DEBT-CURRENT-PORT> 50,140
0
<CAPITAL-LEASE-OBLIGATIONS> 32,117
<LEASES-CURRENT> 16,175
<OTHER-ITEMS-CAPITAL-AND-LIAB> 540,325
<TOT-CAPITALIZATION-AND-LIAB> 1,633,634
<GROSS-OPERATING-REVENUE> 172,839
<INCOME-TAX-EXPENSE> 4,384<F1>
<OTHER-OPERATING-EXPENSES> 152,943
<TOTAL-OPERATING-EXPENSES> 152,943<F1>
<OPERATING-INCOME-LOSS> 19,896
<OTHER-INCOME-NET> 1,107
<INCOME-BEFORE-INTEREST-EXPEN> 21,003
<TOTAL-INTEREST-EXPENSE> 10,458
<NET-INCOME> 6,161
229
<EARNINGS-AVAILABLE-FOR-COMM> 5,932
<COMMON-STOCK-DIVIDENDS> 13,000
<TOTAL-INTEREST-ON-BONDS> 36,070
<CASH-FLOW-OPERATIONS> 56,019
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income for IES Utilities Inc.
</FN>
</TABLE>
