UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Name of Registrant, State of
Incorporation, IRS Employer
Commission Address of Principal Executive Offices and Identification
File Number Telephone Number Number
1-9894 INTERSTATE ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
0-4117-1 IES UTILITIES INC. 42-0331370
(an Iowa corporation)
Alliant Tower
Cedar Rapids, Iowa 52401
Telephone (319)398-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608)252-3311
WPL Holdings, Inc.
(Former name of Interstate Energy
Corporation)
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past (90) days.
Yes X No _____
This combined Form 10-Q is separately filed by Interstate Energy
Corporation, IES Utilities Inc. and Wisconsin Power and Light Company.
Information contained herein relating to any individual registrant is
filed by such registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrants.
Number of shares outstanding of each class of common stock as of July 31,
1998:
Interstate Energy Common stock, $.01 par value, 76,907,499
Corporation shares outstanding
IES Utilities Inc. Common stock, $2.50 par value, 13,370,788
shares outstanding (all of which are owned
beneficially and of record by Interstate
Energy Corporation)
Wisconsin Power and Light Common stock, $5 par value, 13,236,601
Company shares outstanding (all of which are owned
beneficially and of record by Interstate
Energy Corporation)
<PAGE>
CONTENTS
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements
Interstate Energy Corporation:
Consolidated Statements of Income for the
Three and Six Months Ended
June 30, 1998 and 1997 6
Consolidated Balance Sheets as of June
30, 1998 and December 31, 1997 7
Consolidated Statements of Cash Flows for
the Six Months Ended
June 30, 1998 and 1997 9
Notes to Consolidated Financial
Statements 10
IES Utilities Inc.:
Consolidated Statements of Income for the
Three and Six Months Ended
June 30, 1998 and 1997 13
Consolidated Balance Sheets as of June
30, 1998 and December 31, 1997 14
Consolidated Statements of Cash Flows for
the Six Months Ended
June 30, 1998 and 1997 16
Notes to Consolidated Financial
Statements 17
Wisconsin Power and Light Company:
Consolidated Statements of Income for the
Three and Six Months Ended
June 30, 1998 and 1997 19
Consolidated Balance Sheets as of June
30, 1998 and December 31, 1997 20
Consolidated Statements of Cash Flows for
the Six Months Ended
June 30, 1998 and 1997 22
Notes to Consolidated Financial
Statements 23
Item 2. Management's Discussion and Analysis of
Financial Condition and
Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 59
Part II. Other Information 59
Item 1. Legal Proceedings 59
Item 4. Submission of Matters to a Vote of
Security Holders 60
Item 5. Other Information 62
Item 6. Exhibits and Reports on Form 8-K 63
Signatures 72
<PAGE>
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this
combined Form 10-Q are defined below:
Abbreviation or Acronym Definition
AICPA American Institute of Certified Public
Accountants
Alliant Industries Alliant Industries, Inc.
Alliant Services Alliant Services Company
DAEC Duane Arnold Energy Center
Diversified IES Diversified Inc.
DOE U.S. Department of Energy
Dth Dekatherm
EAC Energy Adjustment Clause
EPA United States Environmental Protection
Agency
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
HDC Heartland Development Corporation
IDNR Iowa Department of Natural Resources
IEC Interstate Energy Corporation
IEPC Iowa Environmental Protection Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
IPC Interstate Power Company
ISO Independent System Operator
IUB Iowa Utilities Board
Kewaunee Kewaunee Nuclear Power Plant
LIBOR London Interbank Offer Rate
McLeod McLeodUSA Inc.
MD&A Management's Discussion and Analysis of
Financial Condition and Results of
Operations
MG&E Madison Gas and Electric Company
MGP Manufactured Gas Plants
Midwest ISO Midwest Independent System Operator
MPUC Minnesota Public Utilities Commission
MWH Megawatt-Hour
NOx Nitrogen Oxides
OCA Office of Consumer Advocate
PCB Polychlorinated Biphenyl
PGA Purchased Gas Adjustment
PSCW Public Service Commission of Wisconsin
PSD Prevention of Significant Deterioration
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SIP State Implementation Plan
SO2 Sulfur Dioxide
SOP Statement of Position
Whiting Whiting Petroleum Corporation
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
WPSC Wisconsin Public Service Corporation
<PAGE>
INTERSTATE ENERGY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $ 380,414 $ 351,399 $ 738,165 $ 711,394
Gas utility 45,267 58,217 175,313 235,815
Nonregulated and other 65,331 84,226 133,817 210,282
-------- -------- --------- ---------
491,012 493,842 1,047,295 1,157,491
-------- -------- --------- ---------
Operating expenses:
Electric and steam
production fuels 69,538 65,382 139,094 140,337
Purchased power 73,417 64,048 129,563 127,833
Cost of utility gas sold 23,907 35,148 101,186 156,711
Other operation 158,220 147,928 308,370 339,094
Maintenance 33,389 33,215 58,647 60,779
Depreciation and
amortization 73,589 63,468 144,153 126,338
Taxes other than income
taxes 26,598 26,333 53,575 52,664
-------- -------- --------- ---------
458,658 435,522 934,588 1,003,756
-------- -------- --------- ---------
Operating income 32,354 58,320 112,707 153,735
-------- -------- --------- ---------
Interest expense and other:
Interest expense 32,231 28,434 63,155 56,934
Allowance for funds used
during construction (1,638) (1,109) (3,141) (2,364)
Preferred dividend
requirements of
subsidiaries 1,675 1,673 3,349 3,346
Miscellaneous, net 11,035 (1,740) 7,159 (5,213)
-------- -------- --------- ---------
43,303 27,258 70,522 52,703
-------- -------- --------- ---------
Income (loss) before income
taxes (10,949) 31,062 42,185 101,032
-------- -------- --------- ---------
Income taxes (1,382) 10,203 19,124 37,316
-------- -------- --------- ---------
Net income (loss) $ (9,567) $ 20,859 $ 23,061 $ 63,716
======== ======== ========= =========
Average number of common
shares outstanding 76,800 76,133 76,689 76,032
======== ======== ========= ==========
Earnings per average common
share (basic and diluted) $ (0.12) $ 0.27 $ 0.30 $ 0.84
======== ======== ========= ==========
Dividends declared per
common share $ 0.50 $ 0.50 $ 1.00 $ 1.00
======== ======== ========= ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 4,771,760 $ 4,733,222
Gas 499,459 495,155
Other 373,197 366,395
---------- ----------
5,644,416 5,594,772
Less - Accumulated depreciation 2,751,605 2,631,582
---------- ----------
2,892,811 2,963,190
Construction work in progress 115,502 86,511
Nuclear fuel, net of amortization 48,804 55,777
---------- ----------
3,057,117 3,105,478
Other property, plant and equipment,
net of accumulated depreciation and
amortization of $138,792 and $122,058,
respectively 379,964 357,435
---------- ----------
3,437,081 3,462,913
---------- ----------
Current assets:
Cash and temporary cash investments 31,719 27,329
Accounts receivable:
Customer, less allowance for doubtful
accounts of $2,512 and $2,400,
respectively 103,700 123,545
Other, less allowance for doubtful
accounts of $287 and $224,
respectively 15,331 20,824
Notes receivable 17,014 23,410
Production fuel, at average cost 40,414 40,656
Materials and supplies, at average cost 50,782 49,845
Gas stored underground, at average cost 10,132 32,364
Regulatory assets 33,251 36,330
Prepayments and other 61,972 57,939
---------- ----------
364,315 412,242
---------- ----------
Investments:
Investment in McLeodUSA Inc. 398,995 328,022
Nuclear decommissioning trust funds 216,316 190,238
Investment in foreign entities 65,464 57,072
Other 48,742 49,319
---------- ----------
729,517 624,651
---------- ----------
Other assets:
Regulatory assets 326,635 352,365
Deferred charges and other 91,771 99,550
---------- ----------
418,406 451,915
---------- ----------
$ 4,949,319 $ 4,951,721
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED) (UNAUDITED)
<CAPTION>
June 30, December 31,
CAPITALIZATION AND LIABILITIES 1998 1997
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - $.01 par value -
authorized 200,000,000 shares;
outstanding 76,874,391 and
76,481,102 shares, respectively $ 769 $ 765
Additional paid-in
capital 881,734 868,903
Retained earnings 562,266 602,854
Accumulated other
comprehensive income 215,039 173,512
--------- ---------
Total common
equity 1,659,808 1,646,034
--------- ---------
Cumulative preferred stock of
subsidiaries:
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Redemption
$ 100 * 449,765 No 44,977 44,977
$ 25 * 599,460 No 14,986 14,986
$ 50 466,406 366,406 No 18,320 18,320
$ 50 ** 216,381 No 10,819 10,819
$ 50 ** 545,000 Yes *** 27,250 27,250
---------- ----------
116,352 116,352
Less: unamortized expenses (2,919) (2,983)
---------- ----------
Total cumulative preferred
stock of subsidiaries 113,433 113,369
---------- ----------
Long-term debt (excluding
current portion) 1,489,369 1,467,903
---------- ----------
3,262,610 3,227,306
---------- ----------
Current liabilities:
Current maturities and sinking
funds 68,985 18,329
Variable rate demand
bonds 56,975 56,975
Commercial paper 77,651 114,500
Notes payable 36,324 42,000
Capital lease obligations 13,211 13,197
Accounts payable 157,453 192,634
Accrued taxes 73,562 78,923
Other 115,473 133,233
---------- ----------
599,634 649,791
---------- ----------
Other long-term liabilities and
deferred credits:
Accumulated deferred income taxes 737,837 731,026
Accumulated deferred investment tax
credits 80,116 82,862
Environmental liabilities 54,625 62,021
Customer advances 34,924 36,619
Capital lease obligations 19,338 23,634
Other 160,235 138,462
---------- ----------
1,087,075 1,074,624
---------- ----------
$ 4,949,319 $ 4,951,721
========== ==========
* 3,750,000 authorized shares in total between
the two classes
** 2,000,000 authorized shares in total between
the two classes
*** $53.20 mandatory redemption
price
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
<TABLE>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,061 $ 63,716
Adjustments to reconcile net income
to net cash flows
from operating activities:
Depreciation and amortization 144,153 126,338
Amortization of nuclear fuel 8,555 7,370
Amortization of deferred energy
efficiency expenditures 14,443 3,956
Deferred taxes and investment tax
credits (10,847) (7,157)
Refueling outage provision (9,341) 4,190
Other 3,978 4,184
Other changes in assets and
liabilities:
Accounts receivable 25,338 41,959
Notes receivable 6,396 (14,764)
Production fuel 242 (2,024)
Materials and supplies (937) (2,144)
Gas stored underground 22,232 14,765
Accounts payable (35,181) (58,419)
Accrued taxes (5,361) (1,591)
Benefit obligations and other 31,480 15,571
----------- -----------
Net cash flows from operating
activities 218,211 195,950
----------- -----------
Cash flows from (used for) financing
activities:
Common stock dividends (79,455) (72,492)
Proceeds from issuance of common
stock 10,634 8,905
Net change in Alliant Industries,
Inc. credit facility 71,587 18,772
Proceeds from issuance of other
long-term debt 2,516 160,000
Reductions in other long-term debt (1,262) (90,965)
Net change in short-term
borrowings (42,525) (4,274)
Principal payments under capital
lease obligations (8,116) (5,665)
Other (36) (2,817)
---------- -----------
Net cash flows from (used for)
financing activities (46,657) 11,464
---------- -----------
Cash flows used for investing
activities:
Construction and acquisition
expenditures:
Utility (93,508) (119,715)
Other (64,845) (35,670)
Deferred energy efficiency
expenditures - (9,798)
Nuclear decommissioning trust
funds (15,863) (12,992)
Other 7,052 2,165
----------- ----------
Net cash flows used for
investing activities (167,164) (176,010)
----------- ----------
Net increase in cash and temporary
cash investments 4,390 31,404
----------- ----------
Cash and temporary cash investments at
beginning of period 27,329 22,817
----------- ----------
Cash and temporary cash investments at
end of period $ 31,719 $ 54,221
=========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 62,132 $ 58,133
=========== ==========
Income taxes $ 45,435 $ 48,264
=========== ==========
Noncash investing and financing
activities:
Capital lease obligations
incurred $ 1,271 $ 123
=========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
INTERSTATE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein have
been prepared by IEC, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although management believes that the
disclosures are adequate to make the information presented not
misleading. The consolidated financial statements include IEC and
its consolidated subsidiaries (WP&L, IESU, IPC, Alliant Industries and
Alliant Services). These statements are prepared on the basis of
accounting for the merger of WPLH, IES and IPC, which was effective
on April 21, 1998, as a pooling of interests. Certain adjustments
have been made to the prior period amounts as part of the restatement
to reflect the pooling of interests transaction. These financial
statements should be read in conjunction with the financial
statements and the notes thereto included in WPLH's, WP&L's, IES's,
IESU's and IPC's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended
June 30, 1998 and 1997, (b) the consolidated financial position at
June 30, 1998 and December 31, 1997, and (c) the consolidated
statement of cash flows for the six months ended June 30, 1998 and
1997, have been made. Because of the seasonal nature of IESU's,
WP&L's and IPC's operations, results for the three and six months
ended June 30, 1998 are not necessarily indicative of results that
may be expected for the year ending December 31, 1998. Certain prior
period amounts have been reclassified on a basis consistent with the
1998 presentation.
2. On January 1, 1998, IEC adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS 130 establishes standards for reporting of
comprehensive income and its components in a full set of general
purpose financial statements. SFAS 130 requires reporting a total
for comprehensive income which includes: (a) unrealized holding
gains/losses on securities classified as available-for-sale under
SFAS 115, (b) foreign currency translation adjustments accounted for
under SFAS 52, and (c) minimum pension liability adjustments made
pursuant to SFAS 87. Prior years have been restated to conform to
the SFAS 130 requirements. IESU and WP&L had no comprehensive income
in the periods presented.
IEC's comprehensive income (loss), and the components of other
comprehensive income (loss), net of taxes, were as follows (in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Net income (loss) $ (9,567) $ 20,859 $ 23,061 $ 63,716
Other comprehensive
income (loss), net
of tax:
Unrealized gain
(loss) on
securities
(Note 1) (20,358) - 41,471 -
Foreign currency
translation
adjustments 1 - 56 -
------- ------- -------- ------
Other
comprehensive
income (loss),
net of tax (20,357) - 41,527 -
------- ------- -------- -------
Comprehensive income
(loss) $ (29,924) $ 20,859 $ 64,588 $ 63,716
======== ======= ======== =======
Note 1: Adjustment to the estimated fair value each quarter of IEC's
investment in McLeod.
3. In accordance with an order from the PSCW, effective January 1, 1998,
off-system gas sales for WP&L are included in the Consolidated
Statements of Income as a reduction of the cost of gas sold rather
than as gas revenue. In 1997, off-system gas sales were included in
the Consolidated Statements of Income as gas revenue.
4. WPLH, as the surviving corporation in the merger, changed its name to
IEC. In connection with the merger, the number of authorized shares
of IEC common stock was increased to 200,000,000. See Item 2, "MD&A
- Merger" for additional information.
5. The provisions for income taxes are based on the estimated annual
effective tax rate, which differs from the federal statutory rate of
35% principally due to: state income taxes, tax credits, effects of
utility rate making and certain nondeductible expenses.
<PAGE>
IES UTILITIES INC.
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $ 147,640 $ 137,691 $ 288,290 $ 274,977
Gas utility 20,921 25,776 81,316 107,203
Steam and other 6,172 6,156 13,405 13,841
---------- ----------- ---------- -----------
174,733 169,623 383,011 396,021
---------- ----------- ---------- -----------
Operating expenses:
Electric and steam production
fuels 21,284 26,532 51,933 56,413
Purchased power 25,768 15,050 36,817 33,723
Cost of gas sold 10,782 15,788 48,439 76,579
Other operation 44,869 38,026 91,871 74,256
Maintenance 13,960 12,644 24,951 25,450
Depreciation and amortization 23,907 23,294 48,242 46,764
Taxes other than income taxes 12,407 11,715 24,713 23,607
---------- ----------- ---------- -----------
152,977 143,049 326,966 336,792
---------- ----------- ---------- -----------
Operating income 21,756 26,574 56,045 59,229
---------- ----------- ---------- -----------
Interest expense and other:
Interest expense 12,955 12,768 26,030 25,075
Allowance for funds used
during construction (801) (372) (1,566) (767)
Miscellaneous, net 4,167 1,883 4,446 1,530
---------- ----------- ----------- -----------
16,321 14,279 28,910 25,838
---------- ----------- ---------- -----------
Income before income taxes 5,435 12,295 27,135 33,391
---------- ----------- ---------- -----------
Income taxes 2,474 5,404 12,515 14,649
---------- ----------- ---------- -----------
Net income 2,961 6,891 14,620 18,742
---------- ----------- ---------- -----------
Preferred dividend requirements 229 229 457 457
---------- ----------- ---------- -----------
Earnings available for common
stock $ 2,732 $ 6,662 $ 14,163 $ 18,285
========== =========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
<TABLE>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30,
1998 December 31,
ASSETS (Unaudited) 1997
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 2,092,687 $ 2,072,866
Gas 189,821 187,098
Steam 55,374 55,374
Common 95,306 90,342
---------- ----------
2,433,188 2,405,680
Less - Accumulated depreciation 1,166,953 1,115,261
---------- ----------
1,266,235 1,290,419
Construction work in progress 53,414 38,923
Leased nuclear fuel, net of
amortization 32,454 36,731
---------- ----------
1,352,103 1,366,073
Other property, plant and equipment, net
of accumulated depreciation and
amortization of $1,839 and $1,709,
respectively 5,632 5,762
---------- ----------
1,357,735 1,371,835
---------- ----------
Current assets:
Cash and temporary cash investments 24,391 230
Temporary cash investments with
associated companies 13,343 -
Accounts receivable:
Customer, less allowance for doubtful
accounts of $946 and $630,
respectively 4,693 29,259
Associated companies 1,843 907
Other, less allowance for doubtful
accounts of $287 and $224,
respectively 6,744 9,235
Production fuel, at average cost 10,183 10,579
Materials and supplies, at average cost 23,151 22,976
Gas stored underground, at average cost 2,136 17,192
Regulatory assets 33,251 36,330
Prepayments and other 9,334 11,680
----------- ----------
129,069 138,388
----------- ----------
Investments:
Nuclear decommissioning trust funds 83,781 77,882
Other 5,572 5,167
----------- ----------
89,353 83,049
----------- ----------
Other assets:
Regulatory assets 146,261 163,264
Deferred charges and other 10,149 12,393
----------- -----------
156,410 175,657
----------- -----------
$ 1,732,567 $ 1,768,929
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
<PAGE>
<TABLE>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<CAPTION>
June 30,
1998 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1997
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - par value $2.50 per share -
authorized 24,000,000 shares; 13,370,788
shares outstanding $ 33,427 $ 33,427
Additional paid-in capital 279,042 279,042
Retained earnings 228,540 233,216
---------- ----------
Total common equity 541,009 545,685
Cumulative preferred stock, not
mandatorily redeemable - par value
$50 per share - authorized 466,406
shares; 366,406 shares outstanding 18,320 18,320
Long-term debt (excluding current portion) 601,842 651,848
----------- -----------
1,161,171 1,215,853
----------- -----------
Current liabilities:
Current maturities and sinking funds 50,140 140
Capital lease obligations 13,197 13,183
Accounts payable 24,130 60,546
Accounts payable to associated companies 28,964 2,736
Accrued payroll and vacations 7,556 7,615
Accrued interest 12,245 12,230
Accrued taxes 45,262 58,996
Accumulated refueling outage provision 1,265 10,606
Environmental liabilities 5,415 4,054
Other 17,643 11,533
----------- -----------
205,817 181,639
----------- -----------
Other long-term liabilities and deferred
credits:
Accumulated deferred income taxes 232,493 238,829
Accumulated deferred investment tax
credits 30,540 31,838
Environmental liabilities 34,819 38,256
Pension and other benefit obligations 26,361 17,334
Capital lease obligations 19,257 23,548
Other 22,109 21,632
---------- ----------
365,579 371,437
---------- ----------
$ 1,732,567 $ 1,768,929
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
<PAGE>
<TABLE>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,620 $ 18,742
Adjustments to reconcile net income to
net cash flows from operating
activities:
Depreciation and amortization 48,242 46,764
Amortization of nuclear fuel 5,549 7,109
Amortization of deferred energy
efficiency expenditures 10,103 2,944
Deferred taxes and investment tax
credits (4,040) (9,746)
Refueling outage provision (9,341) 4,190
Other 536 2,466
Other changes in assets and
liabilities:
Accounts receivable 26,121 12,243
Production fuel 396 (356)
Materials and supplies (175) (950)
Gas stored underground 15,056 8,218
Accounts payable (10,188) (29,936)
Accrued taxes (13,734) 2,309
Adjustment clause balances 2,157 15,067
Benefit obligations and other 20,223 (1,187)
---------- -----------
Net cash flows from operating
activities 105,525 77,877
---------- ----------
Cash flows used for financing activities:
Common stock dividends (14,000) (28,000)
Preferred stock dividends (457) (457)
Proceeds from issuance of long-term
debt - 55,000
Reductions in long-term debt (140) (63,140)
Net change in short-term borrowings - 15,000
Principal payments under capital
lease obligations (8,116) (5,665)
Other - (112)
---------- -----------
Net cash flows used for financing
activities (22,713) (27,374)
---------- -----------
Cash flows used for investing activities:
Construction expenditures (42,404) (48,258)
Deferred energy efficiency
expenditures - (7,530)
Nuclear decommissioning trust funds (3,004) (3,004)
Other 100 62
---------- -----------
Net cash flows used for investing
activities (45,308) (58,730)
---------- -----------
Net increase (decrease) in cash and
temporary cash investments 37,504 (8,227)
---------- -----------
Cash and temporary cash investments at
beginning of period 230 11,608
---------- -----------
Cash and temporary cash investments at
end of period $ 37,734 $ 3,381
========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 24,702 $ 24,142
========= ==========
Income taxes $ 33,468 $ 31,876
========= ==========
Noncash investing and financing
activities - Capital lease
obligations incurred $ 1,271 $ 123
========= ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the IEC Notes to Consolidated Financial
Statements are incorporated by reference insofar as they relate to
IESU. IEC Note 3 does not relate to IESU and, therefore, is not
incorporated by reference.
1. The interim consolidated financial statements included herein have
been prepared by IESU, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although management believes that the
disclosures are adequate to make the information presented not
misleading. The consolidated financial statements include IESU and
its consolidated wholly-owned subsidiary, IES Ventures Inc. IESU is
a subsidiary of IEC. These statements are prepared on the basis of
accounting for the merger of WPLH, IES and IPC, which was effective
on April 21, 1998, as a pooling of interests. Certain adjustments
have been made to the prior period amounts as part of the restatement
to reflect the pooling of interests transaction. These financial
statements should be read in conjunction with the financial
statements and the notes thereto included in IESU's latest Annual
Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended
June 30, 1998 and 1997, (b) the consolidated financial position at
June 30, 1998 and December 31, 1997, and (c) the consolidated
statement of cash flows for the six months ended June 30, 1998 and
1997, have been made. Because of the seasonal nature of IESU's
operations, results for the three and six months ended June 30, 1998
are not necessarily indicative of results that may be expected for
the year ending December 31, 1998. Certain prior period amounts have
been reclassified on a basis consistent with the 1998 presentation.
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
(in thousands)
<S> <C> <C> <C> <C>
Operating revenues:
Electric utility $ 154,314 $ 151,306 $ 305,624 $ 309,733
Gas utility 16,943 23,633 67,261 95,212
Water 1,252 1,126 2,428 2,125
---------- ----------- ---------- -----------
172,509 176,065 375,313 407,070
---------- ----------- ---------- -----------
Operating expenses:
Electric production fuels 29,471 28,329 58,368 58,403
Purchased power 30,238 33,679 58,839 67,070
Cost of gas sold 8,515 13,884 39,229 61,266
Other operation 39,894 30,880 73,897 65,277
Maintenance 14,479 14,882 24,447 25,161
Depreciation and amortization 31,580 25,539 60,838 50,376
Taxes other than income taxes 7,504 7,990 15,215 15,417
---------- ----------- ---------- -----------
161,681 155,183 330,833 342,970
---------- ----------- ---------- -----------
Operating income 10,828 20,882 44,480 64,100
---------- ----------- ---------- -----------
Interest expense and other:
Interest expense 8,984 5,877 17,367 13,882
Allowance for funds used
during construction (742) (680) (1,398) (1,521)
Miscellaneous, net 3,142 (2,448) 1,276 (4,818)
---------- ----------- ---------- -----------
11,384 2,749 17,245 7,543
---------- ----------- ---------- -----------
Income (loss) before income
taxes (556) 18,133 27,235 56,557
---------- ----------- ---------- -----------
Income taxes 677 7,089 10,870 22,162
---------- ----------- ---------- -----------
Net income (loss) (1,233) 11,044 16,365 34,395
---------- ----------- ---------- -----------
Preferred dividend requirements 828 828 1,656 1,656
---------- ----------- ---------- -----------
Earnings available for common
stock $ (2,061) $ 10,216 $ 14,709 $ 32,739
========== =========== ========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30,
1998 December 31,
ASSETS (Unaudited) 1997
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 1,802,936 $ 1,790,641
Gas 239,079 237,856
Water 25,881 24,864
Common 196,632 195,815
---------- ----------
2,264,528 2,249,176
Less - Accumulated depreciation 1,118,076 1,065,726
---------- ----------
1,146,452 1,183,450
Construction work in progress 51,961 42,312
Nuclear fuel, net of amortization 16,349 19,046
---------- ----------
1,214,762 1,244,808
Other property, plant and equipment,
net of accumulated depreciation and
amortization of $40 and $44,
respectively 787 684
---------- ----------
1,215,549 1,245,492
---------- ----------
Current assets:
Cash and temporary cash investments 1,928 2,492
Accounts receivable:
Customer 6,672 20,928
Associated companies 1,958 5,017
Other 8,587 11,589
Production fuel, at average cost 16,455 18,857
Materials and supplies, at average
cost 19,559 19,274
Gas stored underground, at average
cost 6,772 12,504
Prepayments and other 36,611 26,977
---------- ----------
98,542 117,638
---------- ----------
Investments:
Nuclear decommissioning trust funds 132,534 112,356
Other 14,499 14,877
---------- -----------
147,033 127,233
---------- -----------
Other assets:
Regulatory assets 117,183 120,826
Deferred charges and other 49,721 53,415
---------- ----------
166,904 174,241
---------- ----------
$ 1,628,028 $ 1,664,604
========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<CAPTION>
June 30,
1998 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1997
(in thousands, except share amounts)
<S> <C> <C>
Capitalization:
Common stock - par value $5 per
share - authorized
18,000,000 shares; 13,236,601
shares outstanding $ 66,183 $ 66,183
Additional paid-in capital 199,334 199,170
Retained earnings 305,925 320,386
---------- ----------
Total common equity 571,442 585,739
---------- ----------
Cumulative preferred stock, not
mandatorily redeemable -
without par value - authorized
3,750,000 shares, maximum
aggregate stated value
$150,000,000:
$100 stated value - 449,765
shares outstanding 44,977 44,977
$ 25 stated value - 599,460
shares outstanding 14,986 14,986
---------- ----------
Total cumulative preferred
stock 59,963 59,963
---------- ----------
Long-term debt (excluding current
portion) 354,586 354,540
---------- ----------
985,991 1,000,242
---------- ----------
Current liabilities:
Current maturities and sinking
funds 8,899 8,899
Variable rate demand bonds 56,975 56,975
Commercial paper - 81,000
Notes payable to associated
companies 57,303 -
Accounts payable 65,601 85,617
Accounts payable to associated
companies 20,170 -
Accrued payroll and vacations 11,557 12,221
Accrued interest 6,315 6,317
Other 23,231 25,162
---------- ----------
250,051 276,191
---------- ----------
Other long-term liabilities and
deferred credits:
Accumulated deferred income taxes 249,853 251,709
Accumulated deferred investment tax
credits 34,105 35,039
Customer advances 32,587 34,240
Environmental liabilities 8,943 9,238
Other 66,498 57,945
--------- ----------
391,986 388,171
--------- ----------
$ 1,628,028 $ 1,664,604
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,365 $ 34,395
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 60,838 50,376
Amortization of nuclear fuel 3,006 261
Deferred taxes and investment tax
credits (1,736) (361)
Other (971) (1,135)
Other changes in assets and liabilities:
Accounts receivable 20,317 15,254
Production fuel 2,402 (2,782)
Gas stored underground 5,732 4,923
Prepayments and other (9,634) (61)
Accounts payable 154 (7,730)
Benefit obligations and other 13,279 (841)
--------- ----------
Net cash flows from operating
activities 109,752 92,299
--------- ----------
Cash flows from (used for) financing
activities:
Common stock dividends (29,170) (41,480)
Preferred stock dividends (1,656) (1,656)
Proceeds from issuance of long-term debt - 105,000
Net change in short-term borrowings (23,697) (46,000)
Other - (2,622)
---------- -----------
Net cash flows from (used for)
financing activities (54,523) 13,242
---------- -----------
Cash flows used for investing activities:
Construction expenditures (38,980) (60,563)
Nuclear decommissioning trust funds (12,859) (9,988)
Other (3,954) (4,046)
---------- ----------
Net cash flows used for investing
activities (55,793) (74,597)
---------- ----------
Net increase (decrease) in cash and
temporary cash investments (564) 30,944
---------- ----------
Cash and temporary cash investments at
beginning of period 2,492 4,167
---------- ----------
Cash and temporary cash investments at end
of period $ 1,928 $ 35,111
========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 13,085 $ 14,646
========== ============
Income taxes $ 22,784 $ 17,748
========== ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the IEC Notes to Consolidated Financial
Statements are incorporated by reference insofar as they relate to
WP&L.
1. The interim consolidated financial statements included herein have
been prepared by WP&L, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although management believes that the
disclosures are adequate to make the information presented not
misleading. The consolidated financial statements include WP&L and
its consolidated subsidiary. WP&L is a subsidiary of IEC. These
financial statements should be read in conjunction with the financial
statements and the notes thereto included in WP&L's latest Annual
Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and six months ended
June 30, 1998 and 1997, (b) the consolidated financial position at
June 30, 1998 and December 31, 1997, and (c) the consolidated
statement of cash flows for the six months ended June 30, 1998 and
1997, have been made. Because of the seasonal nature of WP&L's
operations, results for the three and six months ended June 30, 1998
are not necessarily indicative of results that may be expected for
the year ending December 31, 1998. Certain prior period amounts have
been reclassified on a basis consistent with the 1998 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MERGER
In April 1998, IES, WPLH and IPC completed a three-way merger (Merger)
forming IEC. IEC is currently doing business as Alliant Corporation. In
connection with the Merger, IES was merged with and into WPLH forming IEC,
and IPC became a subsidiary of IEC. In addition, following the Merger,
the holding companies for the nonregulated businesses of the former WPLH
and IES (HDC and Diversified, respectively) were merged. The resulting
company from this merger is Alliant Industries. As a result of the
Merger, the first tier subsidiaries of IEC include: WP&L, IESU, IPC,
Alliant Industries and Alliant Services (the subsidiary formed to provide
administrative services as required under the Public Utility Holding
Company Act of 1935). Among various other regulatory constraints, IEC is
operating as a registered public utility holding company subject to the
limitations imposed by the Public Utility Holding Company Act of 1935.
Certain additional information regarding the Merger is included in the
Current Report on Form 8-K, dated April 21, 1998, filed by IEC with the
Securities and Exchange Commission.
As part of the approval process for the Merger, IEC agreed to various rate
freezes and rate caps implemented in certain jurisdictions for periods not
to exceed four years commencing on the effective date of the Merger (see
"Liquidity and Capital Resources - Rates and Regulatory Matters" for a
further discussion). Assuming capture of the anticipated merger-related
synergies and no significant legislative or regulatory changes affecting
IEC, IEC does not expect the merger-related electric and natural gas price
freezes to have a material adverse effect on its financial position or
results of operations.
This MD&A includes information relating to IEC, IESU, and WP&L (as well as
IPC and Alliant Industries). Where appropriate, information relating to a
specific entity has been segregated and labeled as such.
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q (including
MD&A) that are not of historical fact are forward-looking statements
intended to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. From time to time, IEC,
IESU or WP&L may make other forward-looking statements within the meaning
of the federal securities laws that involve judgments, assumptions and
other uncertainties beyond the control of such companies. These forward-
looking statements may include, among others, statements concerning
revenue and cost trends, cost recovery, cost reduction strategies and
anticipated outcomes, pricing strategies, changes in the utility industry,
planned capital expenditures, financing needs and availability, statements
of expectations, beliefs, future plans and strategies, anticipated events
or trends and similar comments concerning matters that are not historical
facts. Investors and other users of the forward-looking statements are
cautioned that such statements are not a guarantee of future performance
and that such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those expressed in, or implied by, such statements. Some, but not all, of
the risks and uncertainties include weather effects on sales and revenues,
competitive factors, general economic conditions in the relevant service
territory, federal and state regulatory or government actions,
unanticipated construction and acquisition expenditures, issues related to
stranded costs and the recovery thereof, the operations of IEC's nuclear
facilities, unanticipated issues or costs associated with achieving Year
2000 compliance, the ability of IEC to successfully integrate the
operations of the parties to the Merger and unanticipated costs associated
therewith, unanticipated costs associated with certain environmental
remediation efforts being undertaken by IEC, technological developments
and changes in the rate of inflation.
UTILITY INDUSTRY OUTLOOK
IEC competes in an ever-changing utility industry. Set forth below is an
overview of this evolving marketplace.
Electric energy generation, transmission and distribution are in a period
of fundamental change in the manner in which customers obtain, and energy
suppliers provide, energy services. As legislative, regulatory, economic
and technological changes occur, electric utilities are faced with
increasing pressure to become more competitive. Such competitive
pressures could result in loss of customers and an incurrence of stranded
costs (i.e., assets and other costs rendered unrecoverable as the result
of competitive pricing). To the extent stranded costs cannot be recovered
from customers, they would be borne by security holders.
Legislative action which would allow customers to choose their electric
energy supplier is not expected in Wisconsin, Iowa or Minnesota this year.
Nationwide, however, 18 states (including Illinois and Michigan) have
adopted legislative or regulatory plans to implement electric utility
competition. In March 1998, the Clinton Administration unveiled its
electric utility competition plan, proposing that states implement
customer choice by January 1, 2003.
IEC realized 54%, 41%, 3% and 2% of its electric utility revenues in the
six months ended June 30, 1998 in Iowa, Wisconsin, Minnesota and Illinois,
respectively. Approximately 86% of the electric revenues were regulated
by the respective state commissions while the other 14% were regulated by
the FERC. IEC realized 57%, 37%, 3% and 3% of its gas utility revenues in
Iowa, Wisconsin, Minnesota and Illinois, respectively, during the same
period.
IESU realized all of its electric and gas utility revenues in Iowa in the
first and second quarters of 1998. During the six months ended June 30,
1998, approximately 93% of the electric revenues were regulated by the IUB
while the other 7% were regulated by the FERC.
WP&L realized 98% of its electric utility revenues in the six months ended
June 30, 1998 in Wisconsin and 2% in Illinois. Approximately 77% of the
electric revenues in the first six months of 1998 were regulated by the
PSCW and the ICC while the other 23% were regulated by the FERC. WP&L
realized 96% of its gas utility revenues in the first six months of 1998
in Wisconsin and 4% in Illinois.
Federal Regulation
WP&L, IESU and IPC are subject to regulation by the FERC. The National
Energy Policy Act of 1992 addresses several matters designed to promote
competition in the electric wholesale power generation market. In 1996,
FERC issued final rules (FERC Orders 888 and 889) requiring electric
utilities to open their transmission lines to other wholesale buyers and
sellers of electricity. In March 1997, FERC issued orders on rehearing
for Orders 888 and 889 (Orders 888-A and 889-A). In response to FERC
Orders 888 and 888-A, Alliant Services, on behalf of WP&L, IESU and IPC,
filed an Open Access Transmission Tariff (Tariff) that complies with the
orders. The Tariff supersedes the transmission tariffs previously filed
by the three utilities. Upon receiving the final merger-related
regulatory order, a compliance tariff was filed by Alliant Services with
the FERC. This filing was made to comply with the FERC's merger order.
In response to FERC Orders 889 and 889-A, WP&L, IESU and IPC are
participating in a regional Open Access Same-Time Information System.
FERC Order 888 permits utilities to seek recovery of legitimate, prudent
and verifiable stranded costs associated with providing open access
transmission services. FERC does not have jurisdiction over retail
distribution and, consequently, the final FERC rules do not provide for
the recovery of stranded costs resulting from retail competition. The
various states retain jurisdiction over the question of whether to permit
retail competition, the terms of such retail competition, and the recovery
of any portion of stranded costs that are ultimately determined to have
resulted from retail competition.
The utility subsidiaries cannot predict the long-term consequences of
these rules on their results of operations or financial condition.
In April 1998, IEC submitted an application to join the Midwest ISO for
electric transmission and advised the FERC of its decision. The Midwest
ISO initially was filed with the FERC by nine energy companies in January
1998. It would establish independent operation and control of the
electric transmission system across a broad geographic area spanning from
West Virginia to Missouri. All buyers and sellers of electricity would
have open access to the transmission system governed by the Midwest ISO.
The FERC must review and approve the Midwest ISO proposal. As part of its
Merger proceedings, the FERC accepted IEC's offer to file an ISO proposal
in early 1998. IEC believes that its decision to join the Midwest ISO
satisfies FERC requirements. IEC also filed with the FERC a copy of a
Wisconsin-only ISO proposal developed by Wisconsin Public Power Inc. IEC
was ordered to include the Wisconsin Public Power Inc. proposal in its
FERC filing by the PSCW, which reviewed and commented upon IEC's ISO
filing with the FERC as a condition of Merger approval in Wisconsin.
IEC's decision to join the Midwest ISO also responds to electric-
reliability legislation that was enacted in Wisconsin.
In June 1998, the PSCW revised the ten ISO standards it developed in 1996
and consolidated them into four new principles. The PSCW commented that
the four new principles establish a reasonable and proper basis for
providing Wisconsin public utilities and others with guidance for
participating in an ISO under Wisconsin Statutes. Although the PSCW found
that the Midwest ISO does not meet its new principles, many industry
observers believe that the FERC will have final jurisdiction as to the
design and membership of ISOs.
State Regulation
Iowa
IESU and IPC are subject to regulation by the IUB. The IUB initiated a
Notice of Inquiry (Docket No. NOI-95-1) in early 1995 on the subject of
"Emerging Competition in the Electric Utility Industry" to address all
forms of competition in the electric utility industry and to gather
information and perspectives on electric competition from all persons or
entities with an interest or stake in the issues. The IUB staff's report
in this docket was accepted by the IUB, finding, in part, that there is no
compelling reason to move quickly into restructuring the electric utility
industry in Iowa, based upon the existing level of relative prices.
However, the IUB is continuing the analysis and debate on restructuring
and retail competition in Iowa.
On September 10, 1997, the IUB issued an order adopting an "Action
Plan to Develop a Competitive Model for the Electric Industry in Iowa."
The IUB states in this action plan that while "the IUB has not determined
retail competition in the electric industry is in the best interests of
Iowa's consumers...", the State of Iowa is likely to be affected by
federal or neighboring states' actions so there is a need for the IUB to
design a model that suits Iowa's needs. The priority concerns in the plan
are public interest issues (an Iowa-specific pilot project, customer
information and assessment, environmental impacts, public benefits and
transition costs/benefits) and transmission-related issues (transmission
and distribution system reliability and transmission system operations).
There is no timetable in the action plan. On October 2, 1997, the IUB
staff sent to the advisory group (of which IESU and IPC are members) for
written comment a set of proposed guidelines for an Iowa-specific electric
pilot project that would allow retail access to a "subset of all customer
classes." The IUB has also issued an order covering unbundling of natural
gas rates for all Iowa customers to be effective in 1999.
The Iowa legislature is planning to conduct interim legislative committee
meetings regarding restructuring in the fall of 1998.
Wisconsin
WP&L is subject to regulation by the PSCW. The PSCW's inquiries into the
future structure of the natural gas and electric utility industries are
ongoing. The stated goal of the PSCW in the natural gas docket is "to
accommodate competition but not create it." The PSCW has followed a
measured approach to restructuring the natural gas industry in Wisconsin.
The PSCW has determined that customer classes will be deregulated (i.e.,
the gas utility would no longer have an obligation to procure gas
commodity for customers, but would still have a delivery obligation) in a
step-wise manner, after each class has been demonstrated to have a
sufficient number of gas suppliers available. A number of working groups
have been established by the PSCW and these working groups are addressing
numerous subjects which need to be resolved before deregulation may
proceed.
The short-term goals of the electric restructuring process are to ensure
reliability of the state's electric system and development of a robust
wholesale electric market. The longer-term goal is to establish
prerequisite safeguards to protect customers prior to allowing retail
customer choice. The PSCW is following a timetable to make this latter
determination on allowing customer choice in 1999-2000.
The PSCW has issued an order outlining its policies and principles for
Public Benefits (low-income assistance, energy efficiency, renewable
generation and environmental research and development) including funding
levels, administration of the funds and how funds should be collected from
customers. The PSCW has proposed increasing funding levels primarily
through utility rates by $50 to $75 million statewide. Legislation to
implement this proposal is being developed and likely will be introduced
later this year.
In May 1998, the PSCW reactivated Docket No. 05-BU-101, with the objective
of examining the degree of separation which should be required as a matter
of policy between utility and non-utility activities involving the various
state utilities. This issue will be addressed in hearings in November
1998. A future phase of the docket will investigate the standards of
conduct that should govern relationships and transactions between the
utility and its affiliates.
In June 1998, the PSCW issued a revision to its ISO standards as
previously discussed under "Federal Regulation."
Minnesota
IPC is subject to regulation by the MPUC. The MPUC established an
Electric Competition Working Group in April 1995. On October 28, 1997,
the Working Group issued a report and recommendations on retail
competition. The MPUC reviewed the report and directed its staff to
develop an electric utility restructuring plan and timeline. The
Minnesota legislature had established a joint legislative task force on
electric utility restructuring in 1995. It appears the earliest
restructuring legislation could be introduced is in 1999.
Illinois
IPC and WP&L are subject to regulation by the Illinois Commerce
Commission. The State of Illinois has passed electric deregulation
legislation requiring customer choice of electric supplier for all
customers by May 1, 2002. The legislation also requires filing a plan for
the assignment of transmission assets in Illinois to an ISO by June 1998.
IEC believes it met this requirement by joining the Midwest ISO as
previously discussed under "Federal Regulation."
Summary
Each of the utilities complies with the provisions of SFAS 71, "Accounting
for the Effects of Certain Types of Regulation." SFAS 71 provides that
rate-regulated public utilities record certain costs and credits allowed
in the ratemaking process in different periods than for nonregulated
entities. These are deferred as regulatory assets or regulatory
liabilities and are recognized in the consolidated statements of income at
the time they are reflected in rates. If a portion of the utility
subsidiaries' operations becomes no longer subject to the provisions of
SFAS 71 as a result of competitive restructurings or otherwise, a write-
down of related regulatory assets and possibly other charges would be
required, unless some form of transition cost recovery is established by
the appropriate regulatory body that would meet the requirements under
generally accepted accounting principles for continued accounting as
regulatory assets during such recovery period. In addition, each utility
subsidiary would be required to determine any impairment of other assets
and write-down any impaired assets to their fair value. The utility
subsidiaries believe they currently meet the requirements of SFAS 71.
IEC and its subsidiaries cannot currently predict the long-term
consequences of the competitive and restructuring issues described above
on their results of operations or financial condition. The major
objective is to allow the utilities to better prepare for a competitive,
deregulated utility industry. The strategy for dealing with these
emerging issues includes seeking growth opportunities, continuing to offer
quality customer service, ongoing cost reductions and productivity
enhancements.
IEC RESULTS OF OPERATIONS -
THREE MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
IEC reported a second quarter 1998 net loss of $9.6 million, or $0.12 per
share, compared to net income of $20.9 million, or $0.27 per share, in the
second quarter of 1997. All references to earnings per share throughout
MD&A refer to both basic and diluted earnings per share.
The 1998 second quarter results included approximately $35 million (pre-
tax) of one-time merger-related expenses ($0.28 per share). Excluding
these one-time merger-related expenses, earnings would have been
approximately $0.16 per share in the second quarter of 1998. The merger-
related expenses were primarily for employee retirements and separations,
the services of IEC's advisors and other miscellaneous costs related to
the closing of the Merger. IEC estimates one-time merger-related expenses
will amount to $0.43 per share in 1998 ($0.35 per share for the six months
ended June 30, 1998, and an additional $0.08 per share in the second half
of 1998).
IEC's utility operations recorded a net loss of $3.0 million in the second
quarter of 1998 as compared to net income of $20.4 million for the same
period in 1997. Excluding the one-time merger-related expenses, the 1998
second quarter earnings would have been approximately $14.8 million.
IEC's utility earnings are typically lower in the second quarter, as
compared to other quarters, given the seasonal nature of the utility
business.
Contributing to the lower earnings was a decrease in IEC's natural gas
sales in the second quarter of 1998 due to milder weather conditions.
This was virtually offset by an increase in electric sales to ultimate
customers of 3% for the quarter. The increase was due largely to sales
growth as sales to industrial customers during the quarter increased 5%
reflecting continued growth in the IEC service territory. Warmer weather
conditions in the latter half of the second quarter of 1998 also resulted
in a slight increase in sales to residential customers.
The lower utility earnings in the second quarter of 1998 were also due to
higher depreciation expense, resulting from IEC's continued investment in
utility assets, and increased interest expense. The increase in interest
expense was largely due to unusually low interest expense in the second
quarter of 1997 resulting from an adjustment to decrease interest expense
relating to a tax audit settlement. In addition, the second quarter of
1998 reflects the impact of increasing the estimated 1998 effective tax
rate.
IEC's diversified (nonregulated) operations reported a net loss of $3.4
million in the second quarter of 1998 as compared to net income of $1.3
million in the comparable 1997 period. Excluding the one-time merger-
related expenses, the second quarter 1998 net loss would have been
approximately $2.3 million. The decrease in earnings was largely due to a
net loss of $1.9 million from IEC's electric-trading joint venture. The
trading loss stemmed from energy-supply constraints faced by the electric-
utility industry during a portion of June 1998 resulting from a
combination of very warm weather, generating plant outages and
transmission availability problems. Higher interest expense and start-up
expenses in international and domestic growth operations also contributed
to the decrease in earnings.
The 1998 second quarter results also reflect corporate expenses at the
parent of $3.1 million in the second quarter of 1998 as compared to $0.8
million in the comparable 1997 period. The increase was due to the
recording of certain merger-related expenses at the parent as well as
increased income tax expense.
Electric Operations
Electric margins and MWH sales for IEC for the three months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 120,708 $ 115,467 5% 1,525 1,506 1%
Commercial 74,762 70,777 6% 1,167 1,127 4%
Industrial 118,451 111,704 6% 3,150 3,013 5%
-------- -------- --------- ---------
Total from ultimate
customers 313,921 297,948 5% 5,842 5,646 3%
Sales for resale 56,957 45,962 24% 2,036 1,618 26%
Other 9,536 7,489 27% 37 38 (3%)
-------- -------- -------- ---------
Total 380,414 351,399 8% 7,915 7,302 8%
======== ========= ====
Electric production
fuels 66,387 62,006 7%
Purchased power 73,417 64,048 15%
-------- --------
Margin $ 240,610 $ 225,345 7%
======== ======== ====
</TABLE>
Electric margin increased $15.3 million, or 7%, during the second quarter
of 1998 compared with the same period in 1997 primarily due to the
recovery of concurrent and previously deferred expenditures for Iowa-
mandated energy efficiency programs. The recovery for energy efficiency
programs is in accordance with IUB orders (a portion of these recoveries
is also amortized to expense in other operation expenses). Electric
revenues included recoveries for energy efficiency program costs in Iowa
of $11.7 million and $2.2 million for the second quarters of 1998 and
1997, respectively.
Electric margin also improved $3.2 million due to the collection from WP&L
customers of a surcharge related to Kewaunee in April and May of 1998 (see
"Capital Requirements - Nuclear Facilities" for a further discussion).
The surcharge increased revenues and electric margin; however, a
corresponding amount was included in depreciation and amortization expense
resulting in no impact on earnings. Also contributing to the increase in
electric margin in the second quarter of 1998 was the reliance on more
costly purchased power at WP&L in the second quarter of 1997. WP&L
experienced higher levels of purchased power in 1997 due to numerous
outages including the shutdown of Kewaunee throughout most of the second
quarter of 1997 for steam generator tube repairs. Electric margin also
increased as a result of a sales increase, which was due largely to sales
growth in the IEC service territory with warmer weather conditions in the
latter half of the second quarter of 1998 also contributing slightly.
Partially offsetting the increase in electric margin were higher than
forecasted purchased power and transmission costs in Wisconsin and an
average retail rate decrease of 2.4% effective in April 1997. The higher
purchased power and transmission costs resulted in increased rates
beginning July 16, 1998 (see "Rates and Regulatory Matters - WP&L" for
additional information).
IESU's and IPC's electric tariffs include EAC's that are designed to
currently recover the costs of fuel and the energy portion of purchased
power billings.
Gas Operations
Gas margins and Dth sales for IEC for the three months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 25,999 $ 32,327 (20%) 3,779 5,358 (29%)
Commercial 11,936 15,127 (21%) 2,352 3,180 (26%)
Industrial 3,030 3,900 (22%) 820 1,105 (26%)
Transportation and
other 4,302 6,863 (37%) 11,953 12,736 (6%)
-------- -------- -------- ---------
Total 45,267 58,217 (22%) 18,904 22,379 (16%)
======== ========= =======
Cost of utility gas
sold 23,907 35,148 (32%)
-------- ---------
Margin $ 21,360 $ 23,069 (7%)
======== ========= ======
</TABLE>
Gas margin decreased $1.7 million, or 7%, during the second quarter of
1998 compared with the second quarter of 1997 primarily due to reduced
sales. Dth sales declined by 16% due to milder weather in the second
quarter of 1998 compared with the second quarter of 1997. Partially
offsetting the decline in margin were higher revenues from the recovery of
concurrent and previously deferred energy efficiency expenditures for
Iowa-mandated energy efficiency program costs in accordance with IUB
orders (a portion of these recoveries is also amortized to expense in
other operation expenses). Gas revenues included recoveries for energy
efficiency program costs in Iowa of $2.5 million and $0.7 million for the
second quarters of 1998 and 1997, respectively.
IESU's and IPC's gas tariffs include PGA clauses that are designed to
currently recover the cost of utility gas sold.
Nonregulated and Other Revenues
Nonregulated and other revenues for the three months ended June 30 were as
follows (in thousands):
1998 1997
Oil and gas production $17,477 $14,352
Environmental and engineering 16,687 19,235
services
Professional fees, rents and other 10,751 11,377
Nonregulated energy 9,682 27,930
Steam 6,381 7,088
Affordable housing 3,100 3,118
Water 1,253 1,126
------ ------
$65,331 $84,226
====== ======
The revenues for nonregulated energy declined significantly in the second
quarter of 1998 compared with the same period in 1997 primarily due to a
shift to higher margin, lower volume gas customers and the transfer of the
power marketing business to a joint venture in July 1997 with Cargill
Incorporated to market electricity and risk management services to
wholesale buyers. In addition, revenues declined in environmental and
engineering services due to a softening market. These decreases were
partially offset by increased oil and gas production revenues due to
increased 1998 acquisition and development activity.
Operating Expenses
Other operation expenses for the three months ended June 30 were as
follows (in thousands):
1998 1997
Utility-WP&L/IESU/IPC $113,193 $ 82,687
Nonregulated 44,615 65,183
Other 412 58
------- -------
$158,220 $147,928
======= =======
IEC's other operation expenses increased $10.3 million during the second
quarter of 1998 compared to the second quarter of 1997. The increase in
other operation expense at the utility subsidiaries was primarily due to
$20.1 million of merger-related expenses incurred in the second quarter of
1998, an increase of $11.0 million in energy efficiency expenses in Iowa
and higher administrative and general expenses at WP&L. The merger-
related expenses were primarily for employee retirements and separations.
The increase was partially offset by reduced nuclear operation expenses at
IESU.
Other operation expenses at the nonregulated businesses were lower in the
second quarter of 1998 compared with the second quarter of 1997 due to a
decrease in the cost of nonregulated energy sold of $18.0 million, a
softening market in the environmental and engineering services business
and the change in operating activities in the nonregulated energy business
described above. These reductions in operation expense were partially
offset by higher expenses in the oil and gas production business due to
increased activity and start-up expenses associated with international and
domestic growth opportunities.
Depreciation and amortization expense increased as a result of property
additions and the Kewaunee surcharge (which is recorded in depreciation
and amortization expense with a corresponding increase in revenues
resulting in no impact on earnings). (See "Capital Requirements - Nuclear
Facilities" for additional information).
Interest Expense and Other
Interest expense increased $3.8 million during the second quarter of 1998
compared with the second quarter of 1997 due to unusually low interest
expense in the second quarter of 1997, resulting from an adjustment to
decrease interest expense relating to a tax audit settlement. Interest
expense was also impacted by higher borrowings in the second quarter of
1998 as compared with the same period in 1997.
Miscellaneous, net expense increased $12.8 million primarily due to
merger-related expenses incurred in the second quarter of 1998 for the
services of IEC's advisors. Also contributing to the increase was a
second quarter 1998 pre-tax loss of $2.9 million from IEC's electric-
trading joint venture. Miscellaneous, net expense was impacted in the
second quarter of 1997 by a $2.5 million reserve for non-utility
investments.
Income Taxes
IEC's income tax expense decreased $11.6 million due to lower pre-tax
income which was partially offset by an increase in the overall effective
tax rate. The effective tax rate increased primarily due to reflecting
adjustments in the second quarter of 1998 for an increase in the estimated
1998 annual effective rate.
<PAGE>
IEC RESULTS OF OPERATIONS -
SIX MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
IEC reported net income for the six months ended June 30, 1998 of $23.1
million, or $0.30 per share, compared with $63.7 million, or $0.84 per
share, for the six months ended June 30, 1997.
The six months ended June 30, 1998 results included approximately $45
million (pre-tax) of one-time merger-related expenses ($0.35 per share).
Without these merger-related expenses, earnings would have been
approximately $0.65 per share for the six months ended June 30, 1998. The
merger-related expenses were primarily for employee retirements and
separations, the services of IEC's advisors and other miscellaneous
costs related to the closing of the Merger. IEC estimates one-time
merger-related expenses will amount to $0.43 per share in 1998 ($0.35 per
share for the six months ended June 30, 1998, and an additional $0.08 per
share in the second half of 1998).
IEC's utility operations recorded net income of $30.2 million for the six
months ended June 30, 1998 compared to net income of $63.2 million for the
same period in 1997. Excluding the one-time merger-related expenses,
earnings for the six months ended June 30, 1998 would have been
approximately $54 million. Contributing to the lower earnings was a
significant decrease in IEC's natural gas sales for the six months ended
June 30, 1998 due to milder weather conditions. Electric MWH sales
remained relatively unchanged with a 1% increase in sales to ultimate
customers. While sales to industrial customers increased 4% due to
continued growth in the IEC service territory, residential sales declined
3% due to milder weather.
The lower utility earnings for the six months ended June 30, 1998 were
also due to higher depreciation expense, resulting from IEC's continued
investment in utility assets, a higher effective income tax rate and
increased interest expense.
IEC's nonregulated operations reported a net loss of $3.6 million for the
six months ended June 30, 1998 compared with net income of $1.1 million
for the six months ended June 30, 1997. The decrease in earnings was
primarily related to merger-related expenses, losses incurred from IEC's
electric trading joint venture, start-up expenses in international and
domestic growth opportunities and lower oil and gas prices.
The six months ended June 30, 1998 results also reflect corporate expenses
at the parent of $3.5 million as compared to $0.6 million for the same
period in 1997. The increase was due to the recording of certain merger-
related expenses at the parent as well as increased income tax expense.
Electric Operations
Electric margins and MWH sales for IEC for the six months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C>
Residential $ 247,777 $ 246,469 1% 3,237 3,333 (3%)
Commercial 146,794 142,889 3% 2,352 2,317 2%
Industrial 224,854 214,224 5% 6,150 5,939 4%
-------- -------- -------- --------
Total from ultimate
customers 619,425 603,582 3% 11,739 11,589 1%
Sales for resale 99,769 91,264 9% 3,706 3,212 15%
Other 18,971 16,548 15% 80 85 (6%)
-------- -------- -------- --------
Total 738,165 711,394 4% 15,525 14,886 4%
======== ======== =====
Electric production
fuels 132,089 131,973 -
Purchased power 129,563 127,833 1%
-------- --------
Margin $ 476,513 $ 451,588 6%
======== ======== =====
</TABLE>
Electric margin increased $24.9 million, or 6%, during the six months
ended June 30, 1998 compared with the same period in 1997 primarily due to
the recovery of concurrent and previously deferred expenditures for Iowa-
mandated energy efficiency programs. The recovery for energy efficiency
programs is in accordance with IUB orders (a portion of these recoveries
is also amortized to expense in other operation expenses). Electric
revenues included recoveries for energy efficiency program costs in Iowa
of $24.0 million and $4.1 million for the six months ended June 30, 1998
and 1997, respectively.
Electric margin also improved $3.2 million due to the collection from WP&L
customers of a surcharge related to Kewaunee in April and May of 1998 (see
"Capital Requirements - Nuclear Facilities" for a further discussion). The
surcharge increased revenues and electric margin; however, a corresponding
amount was included in depreciation and amortization expense resulting in
no impact on earnings. Also contributing to the increase in electric
margin during the first six months of 1998 compared with the same period
in 1997 was the reliance on more costly purchased power at WP&L in the
first six months of 1997. WP&L experienced higher levels of purchased
power in 1997 due to numerous outages including the shutdown of Kewaunee
for steam generator tube repairs. A slight increase in sales to ultimate
customers and lower capacity costs at IESU also contributed to the
increase in margin.
Partially offsetting the increase in electric margin were higher than
forecasted purchased power and transmission costs at WP&L and rate
reductions implemented at WP&L and IPC in April 1997 and October 1997,
respectively. The higher purchased power and transmission costs resulted
in increased rates beginning July 16, 1998 (see "Rates and Regulatory
Matters - WP&L" for additional information).
IESU's and IPC's electric tariffs include EAC's that are designed to
currently recover the costs of fuel and the energy portion of purchased
power billings.
Gas Operations
Gas margins and Dth sales for IEC for the six months ended June 30 were as
follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 106,292 $ 138,783 (23%) 17,557 21,449 (18%)
Commercial 51,134 69,390 (26%) 10,466 12,606 (17%)
Industrial 10,158 14,020 (28%) 2,661 3,102 (14%)
Transportation and
other 7,729 13,622 (43%) 26,744 29,204 (8%)
-------- -------- -------- --------
Total 175,313 235,815 (26%) 57,428 66,361 (13%)
======== ======== ======
Cost of utility gas
sold 101,186 156,711 (35%)
-------- --------
Margin $ 74,127 $ 79,104 (6%)
======== ======== =====
</TABLE>
Gas margin decreased $5.0 million, or 6%, during the six months ended June
30, 1998 compared with the second quarter of 1997 primarily due to reduced
sales. Dth sales declined by 13% due to milder weather in the first six
months of 1998 compared with the same period in 1997. A rate reduction
implemented in April 1997 at WP&L also contributed to the decrease in
margin. Partially offsetting the margin decrease were higher revenues
from the recovery of concurrent and previously deferred energy efficiency
expenditures for Iowa-mandated energy efficiency program costs in
accordance with IUB orders (a portion of these recoveries is also
amortized to expense in other operation expenses). Gas revenues included
recoveries for energy efficiency program costs in Iowa of $9.6 million and
$2.4 million for the six months ended June 30, 1998 and 1997,
respectively.
IESU's and IPC's gas tariffs include PGA clauses that are designed to
currently recover the cost of utility gas sold.
Nonregulated and Other Revenues
Nonregulated and other revenues for the six months ended June 30 were as
follows (in thousands):
1998 1997
Oil and gas production $ 34,624 $ 30,683
Environmental and
engineering services 33,324 38,757
Professional fees, rents
and other 20,427 22,936
Nonregulated energy 23,127 93,650
Steam 13,826 15,910
Affordable housing 6,061 6,222
Water 2,428 2,124
------- -------
$133,817 $210,282
======= =======
The revenues for nonregulated energy declined significantly during the
first six months of 1998 compared with the same period in 1997 primarily
due to a shift to higher margin, lower volume gas customers and the
transfer of the power marketing business to a joint venture in July 1997
with Cargill Incorporated to market electricity and risk management
services to wholesale buyers. In addition, revenues declined in
environmental and engineering services due to a softening market. These
decreases were partially offset by increased oil and gas production
revenues due to increased 1998 acquisition and development activity. The
revenue increase from the higher oil and gas volumes sold was largely
offset by lower oil and gas prices, however.
Operating Expenses
Other operation expenses for the six months ended June 30 were as follows
(in thousands):
1998 1997
Utility- WP&L/IESU/IPC $215,940 $167,583
Nonregulated 91,597 171,507
Other 833 4
------- -------
$308,370 $339,094
======= =======
IEC's other operation expenses decreased $30.7 million during the six
months ended June 30, 1998 compared to the same period in 1997. Other
operation expense at the utility subsidiaries increased primarily due to
$29.8 million of merger-related expenses incurred in the first six months
of 1998, an increase of $23.5 million in energy efficiency expenses in
Iowa and higher administrative and general expenses at WP&L. The merger-
related expenses were primarily for employee retirements and separations.
The increase was partially offset by reduced nuclear operation expenses at
IESU.
Other operation expenses at the nonregulated businesses were lower in the
six month period ended June 30, 1998 compared with the same period in 1997
due to a decrease in the cost of nonregulated energy sold of $71.1
million, a softening market in the environmental and engineering services
business and the change in operating activities in the nonregulated energy
business described previously. These reductions in operation expenses
were partially offset by higher operation expenses in the oil and gas
production business due to increased activity as described above and
start-up expenses associated with international and domestic growth
opportunities.
Depreciation and amortization expense increased as a result of property
additions, the Kewaunee surcharge (which is recorded in depreciation and
amortization expense with a corresponding increase in revenues resulting
in no impact on earnings) and higher depletion expense at Whiting. (See
"Capital Requirements - Nuclear Facilities" for additional information).
Interest Expense and Other
Interest expense increased $6.2 million for the six months ended June
30,1998 compared with the same period in 1997 due to unusually low
interest expense in the second quarter of 1997, resulting from an
adjustment to decrease interest expense relating to a tax audit
settlement. Interest expense was also impacted by higher borrowings in
the first six months of 1998 as compared with the same period in 1997.
Miscellaneous, net expense increased $12.4 million primarily due to
merger-related expenses incurred during the first six months of 1998 for
the services of IEC's advisors. Also contributing to the increase was a
second quarter 1998 pre-tax loss of $3.2 million from IEC's electric-
trading joint venture. Miscellaneous, net expense was impacted in the
second quarter of 1997 by a $2.5 million reserve for non-utility
investments and higher interest income.
Income Taxes
IEC's income tax expense decreased $18.2 million due to lower pre-tax
income which was partially offset by an increase in the overall effective
tax rate. The effective tax rate increased primarily due to reflecting
adjustments in the second quarter of 1998 for an increase in the estimated
1998 annual effective rate.
<PAGE>
IESU RESULTS OF OPERATIONS -
THREE MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
IESU reported second quarter 1998 earnings available for common stock of
$2.7 million compared with $6.7 million for the same period in 1997. The
reduced earnings were primarily due to merger-related expenses and lower
weather-sensitive electric and gas sales due to milder weather conditions
in the second quarter of 1998. These items were partially offset by lower
other operation and maintenance expenses (other than merger-related and
energy efficiency expenses) and a $2.5 million reserve for non-utility
investments recorded in the second quarter of 1997.
Prior to August 1997, energy efficiency expenditures for state mandated
energy efficiency programs had been recorded as a regulatory asset and
recovered through rates over a four-year period. In August 1997, the IUB
allowed IESU to begin concurrent recovery of its prospective expenditures
(see "Rates and Regulatory Matters" for additional information).
Electric Operations
Electric margins and MWH sales for IESU for the three months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 50,269 $ 50,442 - 571 603 (5%)
Commercial 37,255 36,450 2% 564 558 1%
Industrial 44,498 42,936 4% 1,238 1,183 5%
-------- -------- ------- -------
Total from ultimate
customers 132,022 129,828 2% 2,373 2,344 1%
Sales for resale 13,251 5,296 150% 532 184 189%
Other 2,367 2,567 (8%) 10 11 (9%)
-------- -------- ------- --------
Total 147,640 137,691 7% 2,915 2,539 15%
======= ======== ======
Electric production
fuels 18,133 23,156 (22%)
Purchased power 25,768 15,050 71%
-------- ---------
Margin $ 103,739 $ 99,485 4%
======== ========= ======
</TABLE>
Electric margin increased $4.3 million, or 4%, during the second quarter
of 1998 compared with the same period in 1997 primarily due to the
recovery of concurrent and previously deferred expenditures for Iowa-
mandated energy efficiency programs. The recovery for energy efficiency
programs is in accordance with IUB orders (a portion of these recoveries
is also amortized to expense in other operation expenses). Electric
revenues included recoveries for energy efficiency program costs of $6.9
million and $1.0 million for the second quarters of 1998 and 1997,
respectively. A slight reduction in purchased power capacity costs also
contributed to the increase in margin. Industrial sales increased by 5%
as a result of continuing growth in IESU's service territory. Partially
offsetting the increase in margin was a sales decrease of 5% to higher
margin residential customers due to milder weather conditions in the
second quarter of 1998 as compared with the second quarter of 1997. Sales
for resale increased significantly as a result of the implementation of a
merger-related joint sales process during the second quarter of 1998 (off-
system sales revenues are passed through IESU's energy adjustment clause).
See "Rates and Regulatory Matters" for a further discussion.
IESU's electric tariffs include EAC's that are designed to currently
recover the costs of fuel and the energy portion of purchased power
billings.
Gas Operations
Gas margins and Dth sales for IESU for the three months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 12,994 $ 15,649 (17%) 1,793 2,478 (28%)
Commercial 5,513 7,244 (24%) 1,060 1,429 (26%)
Industrial 1,530 2,030 (25%) 431 599 (28%)
Transportation and other 884 853 4% 2,500 2,455 2%
-------- -------- ------- -------
Total 20,921 25,776 (19%) 5,784 6,961 (17%)
======= ======= ====
Cost of gas sold 10,782 15,788 (32%)
-------- -------- ----
Margin $ 10,139 $ 9,988 2%
======== ======== ====
</TABLE>
Gas margin increased $0.2 million, or 2%, during the second quarter of
1998 compared with the second quarter of 1997 primarily due to higher
revenues from the recovery of concurrent and previously deferred energy
efficiency expenditures for Iowa-mandated energy efficiency program costs
in accordance with IUB orders (a portion of these recoveries is also
amortized to expense in other operation expenses). Gas revenues included
recoveries for energy efficiency program costs of $1.7 million and $0.5
million for the second quarters of 1998 and 1997, respectively. Virtually
offsetting this was a decrease in Dth sales of 17% resulting from milder
weather.
IESU's gas tariffs include PGA clauses that are designed to currently
recover the cost of gas sold.
Operating Expenses
IESU's other operation expenses increased $6.8 million during the second
quarter of 1998 compared to the second quarter of 1997, primarily due to
$6.1 million of merger-related expenses and an increase of $6.1 million in
energy efficiency expense. The increase was partially offset by reduced
nuclear operation expenses. The merger-related expenses were primarily
for employee retirements and separations.
Maintenance expense increased $1.3 million primarily due to increased
nuclear plant maintenance costs and higher transmission and distribution
maintenance expenses. These expenses were partially offset by lower
fossil-fueled plant maintenance costs.
Interest Expense and Other
Miscellaneous, net expense increased $2.3 million during the second
quarter of 1998 compared with the second quarter of 1997 primarily due to
merger-related expenses for the services of the company's advisors.
Miscellaneous, net expense was impacted in the second quarter of 1997 by a
$2.5 million reserve for non-utility investments.
Income Taxes
IESU's income tax expense decreased $2.9 million due to lower pre-tax
income which was partially offset by a slight increase in the overall
effective tax rate.
<PAGE>
IESU RESULTS OF OPERATIONS -
SIX MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
IESU reported earnings available for common stock of $14.2 million for the
six months ended June 30, 1998 compared with $18.3 million for the same
period in 1997. The reduced earnings were primarily due to merger-related
expenses and lower gas sales due to milder weather conditions. Lower
other operation and maintenance expenses (other than merger-related and
energy efficiency expenses) partially offset these items.
Prior to August 1997, energy efficiency expenditures for state mandated
energy efficiency programs had been recorded as a regulatory asset and
recovered through rates over a four-year period. In August 1997, the IUB
allowed IESU to begin concurrent recovery of its prospective expenditures
(see "Rates and Regulatory Matters" for additional information).
Electric Operations
Electric margins and MWH sales for IESU for the six months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 104,838 $ 103,526 1% 1,234 1,296 (5%)
Commercial 74,866 73,262 2% 1,147 1,137 1%
Industrial 84,737 81,631 4% 2,401 2,330 3%
-------- -------- -------- --------
Total from ultimate
customers 264,441 258,419 2% 4,782 4,763 -
Sales for resale 18,963 11,493 65% 721 356 103%
Other 4,886 5,065 (4%) 21 23 (9%)
-------- -------- ------- --------
Total 288,290 274,977 5% 5,524 5,142 7%
======= ========
Electric production
fuels 44,928 48,049 (6%)
Purchased power 36,817 33,723 9%
---------- ---------
Margin $ 206,545 $ 193,205 7%
========== ========= =====
</TABLE>
Electric margin increased $13.3 million, or 7%, during the six months
ended June 30, 1998 compared with the same period in 1997 primarily due to
the recovery of concurrent and previously deferred expenditures for Iowa-
mandated energy efficiency programs and reduced purchased power capacity
costs. The recovery for energy efficiency programs is in accordance with
IUB orders (a portion of these recoveries is also amortized to expense in
other operation expenses). Electric revenues included recoveries for
energy efficiency program costs of $14.6 million and $2.3 million for the
six months ended June 30, 1998 and 1997, respectively. Partially
offsetting the increase in margin was a sales decrease of 5% to higher
margin residential customers due to milder weather conditions during the
six-month period ended June 30, 1998 compared with the same period in
1997. Sales for resale increased significantly as a result of the
implementation of a merger-related joint sales process during the second
quarter of 1998 (off-system sales revenues are passed through IESU's
energy adjustment clause). See "Rates and Regulatory Matters" for a
further discussion.
IESU's electric tariffs include EAC's that are designed to currently
recover the costs of fuel and the energy portion of purchased power
billings.
Gas Operations
Gas margins and Dth sales for IESU for the six months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C>
Residential $ 50,996 $ 66,235 (23%) 8,417 10,115 (17%)
Commercial 23,505 32,819 (28%) 4,936 5,762 (14%)
Industrial 4,692 6,270 (25%) 1,345 1,434 (6%)
Transportation and other 2,123 1,879 13% 5,736 5,220 10%
-------- -------- --------- ---------
Total 81,316 107,203 (24%) 20,434 22,531 (9%)
========= =========
Cost of gas sold 48,439 76,579 (37%)
--------- ---------
Margin $ 32,877 $ 30,624 7%
========= =========
</TABLE>
Gas margin increased $2.3 million, or 7%, during the six months ended June
30, 1998 compared with the same period in 1997 primarily due to higher
revenues from the recovery of concurrent and previously deferred energy
efficiency expenditures for Iowa-mandated energy efficiency program costs
in accordance with IUB orders (a portion of these recoveries is also
amortized to expense in other operation expenses). Gas revenues included
recoveries for energy efficiency program costs of $6.9 million and $2.1
million for the six months ended June 30, 1998 and 1997, respectively.
Partially offsetting this was a decrease in Dth sales of 9% resulting from
milder weather.
IESU's gas tariffs include PGA clauses that are designed to currently
recover the cost of gas sold.
Operating Expenses
IESU's other operation expenses increased $17.6 million during the six
months ended June 30, 1998 compared to the same period in 1997, primarily
due to an increase of $15.0 million in energy efficiency expenses and $7.9
million of merger-related expenses. The increase was partially offset by
reduced nuclear operation expenses. The merger-related expenses were
primarily for employee retirements and separations.
Depreciation and amortization expense increased $1.5 million for the six
months ended June 30, 1998 compared with the same period in 1997 primarily
because of increases in utility plant in service. Depreciation and
amortization expenses for all periods include a provision for
decommissioning the DAEC, which is collected through rates. The current
annual recovery level is $6.0 million.
Interest Expense and Other
Miscellaneous, net expense increased $2.9 million during the six months
ended June 30, 1998 compared with the same period in 1997 primarily due to
merger-related expenses for the services of the company's advisors and
lower returns on deferred energy efficiency expenditures (which are being
recovered concurrently effective August 1997). Miscellaneous, net expense
was impacted in the second quarter of 1997 by a $2.5 million reserve for
non-utility investments.
Income Taxes
IESU's income tax expense decreased $2.1 million due to lower pre-tax
income which was partially offset by an increase in the overall effective
tax rate.
<PAGE>
WP&L RESULTS OF OPERATIONS -
THREE MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
WP&L reported a loss for the second quarter of 1998 of $2.1 million as
compared with $10.2 million of consolidated earnings available for common
stock for the same period in 1997. The decline in earnings was primarily
due to merger-related expenses, higher other operation expenses and
increased interest expense. These increased expenses were partially offset
by higher electric margin due to economic strength in the service
territory, a surcharge related to the deferral of Kewaunee steam generator
repair costs (described below), warmer weather and less reliance on more
costly purchased power.
Electric Operations
Electric margins and MWH sales for WP&L for the three months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 47,950 $ 45,206 6% 698 653 7%
Commercial 27,764 25,738 8% 472 438 8%
Industrial 41,606 38,908 7% 1,112 1,049 6%
-------- -------- --------- --------
Total from
ultimate customers 117,320 109,852 7% 2,282 2,140 7%
Sales for resale 33,898 39,498 (14%) 1,105 1,406 (21%)
Other 3,096 1,956 58% 14 13 8%
-------- -------- --------- ---------
Total 154,314 151,306 2% 3,401 3,559 (4%)
========= =========
Electric production
fuels 29,471 28,329 4%
Purchased power 30,238 33,679 (10%)
--------- ---------
Margin $ 94,605 $ 89,298 6%
========= ========= ====
</TABLE>
Electric margin increased $5.3 million, or 6%, during the second quarter
of 1998 compared with the second quarter of 1997. The increase was due to
economic strength in the service territory, a $3.2 million surcharge
related to Kewaunee (see "Capital Requirements - Nuclear Facilities" for a
further discussion of the surcharge), warmer weather and the increased use
of less costly internal generation compared with the same period in 1997.
The Kewaunee surcharge increased revenues and electric margin; however, a
corresponding amount was included in depreciation and amortization expense
resulting in no impact on earnings. Residential sales increased 7% in the
second quarter of 1998 compared with the same period in 1997 primarily due
to warmer weather in May and June of 1998 compared with the same period in
1997.
Also contributing to the increase in electric margin in the second quarter
of 1998 was the reliance on more costly purchased power in the second
quarter of 1997. WP&L experienced higher levels of purchased power in
1997 due to numerous outages including the shutdown of Kewaunee throughout
most of the second quarter of 1997 for steam generator tube repairs.
Partially offsetting the increase in electric margin in the second quarter
of 1998 were higher than forecasted purchased power and transmission costs
and an average retail rate decrease of 2.4% effective in April 1997. The
higher purchased power and transmission costs resulted in increased rates
beginning July 16, 1998 (see "Rates and Regulatory Matters - WP&L" for
additional information).
Gas Operations
Gas margins and Dth sales for WP&L for the three months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 8,979 $ 11,774 (24%) 1,490 2,055 (27%)
Commercial 4,506 5,577 (19%) 998 1,272 (21%)
Industrial 784 1,002 (22%) 198 259 (24%)
Transportation and other 2,674 5,280 (49%) 2,643 3,825 (31%)
-------- --------- -------- --------
Total 16,943 23,633 (28%) 5,329 7,411 (28%)
========= ========= =======
Cost of gas sold 8,515 13,884 (39%)
-------- ---------
Margin $ 8,428 $ 9,749 (14%)
======== ========= ======
</TABLE>
Gas margin declined $1.3 million, or 14%, in the second quarter of 1998 as
compared with the second quarter of 1997 primarily due to a reduction in
Dth sales and an average retail rate reduction of 2.2% effective April 29,
1997. Sales declined 28% primarily as a result of milder weather in the
second quarter of 1998 compared with the second quarter of 1997. The
significant decline in transportation and other revenues resulted from
both reduced Dth sales and an accounting change for off-system sales as
required by the PSCW effective January 1, 1998. The accounting change
requires that beginning in 1998 off-system gas sales are reported as a
reduction of the cost of gas sold rather than as gas revenue. Off-system
gas sales were $1.0 million and $2.4 million in the second quarter of 1998
and 1997, respectively.
Effective January 1, 1995, the PSCW approved the replacement of the PGA
clause with an adjustment mechanism based on a prescribed commodity price
index. Prior to April 29, 1997, fluctuations in WP&L's commodity cost of
gas as compared with the price index were subject to a customer sharing
mechanism, with WP&L's gains or losses limited to $1.1 million. The gas
incentive mechanism was modified effective April 29, 1997 with Rate Order
UR-110 to include a revised sharing mechanism. Under the revised sharing
mechanism, 40% of all gains and losses relative to current commodity
prices as well as other benchmarks are recognized by WP&L rather than
refunded to or recovered from customers. WP&L realized unfavorable
contributions to gas margin of $0.7 million for the second quarter of 1998
and $0.5 million for the second quarter of 1997.
Operating Expenses
Other operation expense increased $9.0 million primarily due to merger-
related expenses for employee retirements and separations and higher
administrative and general expenses.
Depreciation and amortization expense increased $6.0 million primarily due
to the Kewaunee surcharge previously discussed, property additions and
higher depreciation and decommissioning expenses associated with Kewaunee
which were effective in May 1997 (see "Capital Requirements - Nuclear
Facilities" for additional information).
Interest Expense and Other
Interest expense and other increased $8.6 million in the second quarter of
1998 compared with the second quarter of 1997. Interest expense increased
$3.1 million in the second quarter of 1998 compared with the second
quarter of 1997 primarily due to unusually low interest expense in the
second quarter of 1997, resulting from an adjustment to decrease interest
expense relating to a tax audit settlement. Interest expense was also
impacted by increased borrowings in the second quarter of 1998 as compared
with the same period of 1997.
Miscellaneous, net expense increased $5.6 million in the second quarter of
1998 compared with the second quarter of 1997 largely due to merger-
related expenses for the services of the company's advisors.
Income Taxes
Income taxes decreased $6.4 million between quarters consistent with lower
taxable income partially offset by an adjustment recorded in the second
quarter of 1998 for an increase in the estimated 1998 annual effective tax
rate.
<PAGE>
WP&L RESULTS OF OPERATIONS -
SIX MONTHS ENDED JUNE 30, 1998 VS. JUNE 30, 1997
Overview
WP&L reported for the six months ended June 30, 1998 consolidated earnings
available for common stock of $14.7 million compared with $32.7 million
for the same period in 1997. The decrease in earnings was primarily due
to merger-related expenses, higher other operation expenses, increased
interest expense and a lower gas margin.
Electric Operations
Electric margins and MWH sales for WP&L for the six months ended June 30
were as follows:
<TABLE>
<CAPTION>
Revenues and Costs MWHs Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 97,704 $ 100,011 (2%) 1,456 1,464 (1%)
Commercial 53,368 52,538 2% 931 904 3%
Industrial 78,675 74,190 6% 2,153 2,045 5%
--------- --------- -------- ---------
Total from ultimate
customers 229,747 226,739 1% 4,540 4,413 3%
Sales for resale 69,302 77,463 (11%) 2,520 2,793 (10%)
Other 6,575 5,531 19% 31 33 (6%)
---------- --------- -------- ---------
Total 305,624 309,733 (1%) 7,091 7,239 (2%)
======== =========
Electric production
fuels 58,368 58,403 -
Purchased power 58,839 67,070 (12%)
--------- ---------
Margin $ 188,417 $ 184,260 2%
========= ========= =====
</TABLE>
Electric margin increased $4.2 million, or 2%, during the six months ended
June 30, 1998 compared with the same period in 1997. The margin increase
was largely due to economic strength in the service territory, the
surcharge related to Kewaunee previously discussed and the increased use
of less costly internal generation compared with the same period in 1997.
Partially offsetting the increase in electric margin were higher than
forecasted purchased power and transmission costs. The higher purchased
power and transmission costs resulted in increased rates beginning July
16, 1998 (see "Rates and Regulatory Matters - WP&L" for additional
information). Also offsetting the increase in electric margin were lower
residential sales, primarily due to less favorable weather from January
1998 through April 1998 compared with the same period in 1997, and an
average retail rate decrease of 2.4% effective in April 1997.
Gas Operations
Gas margins and Dth sales for WP&L for the six months ended June 30 were
as follows:
<TABLE>
<CAPTION>
Revenues and Costs Dths Sold
(in thousands) Change (in thousands) Change
1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Residential $ 39,989 $ 53,406 (25%) 6,717 8,108 (17%)
Commercial 19,743 26,616 (26%) 4,119 4,950 (17%)
Industrial 3,458 4,958 (30%) 800 989 (19%)
Transportation and
other 4,071 10,232 (60%) 6,473 10,003 (35%)
-------- --------- -------- --------
Total 67,261 95,212 (29%) 18,109 24,050 (25%)
======== ======== =======
Cost of gas sold 39,229 61,266 (36%)
--------- ---------
Margin $ 28,032 $ 33,946 (17%)
========= ========= ======
</TABLE>
Gas margin declined $5.9 million, or 17%, in the six months ended June 30,
1998 compared with the same period in 1997 primarily due to a reduction in
Dth sales and an average retail rate reduction of 2.2% effective in April
1997. Sales declined 25% primarily as a result of milder weather during
the first five months of 1998 compared with the same period in 1997. The
significant decline in transportation and other revenues resulted from
both reduced Dth sales and an accounting change for off-system sales as
required by the PSCW effective January 1, 1998. The accounting change
requires that beginning in 1998 off-system gas sales are reported as a
reduction of the cost of gas sold rather than as gas revenue. Off-system
gas sales were $7.9 million and $7.8 million during the first six months
of 1998 and 1997, respectively.
Effective January 1, 1995, the PSCW approved the replacement of the PGA
clause with an adjustment mechanism based on a prescribed commodity price
index. The gas incentive mechanism was modified effective April 29, 1997
with Rate Order UR-110 to include a revised sharing mechanism. Under the
revised sharing mechanism, 40% of all gains and losses relative to current
commodity prices as well as other benchmarks are recognized by WP&L rather
than refunded to or recovered from customers. WP&L realized unfavorable
contributions to gas margin of $0.5 million for the first six months of
1998 and favorable contributions of $0.4 million for the first six months
of 1997.
Operating Expenses
Other operation expense increased $8.6 million primarily due to merger-
related expenses for employee retirements and separations.
Depreciation and amortization expense increased $10.5 million due to the
Kewaunee surcharge previously discussed, property additions and higher
depreciation and decommissioning expenses associated with Kewaunee which
were effective in May 1997 (see "Capital Requirements - Nuclear
Facilities" for additional information).
Interest Expense and Other
Interest expense and other increased $9.7 million during the six months
ended June 30, 1998 compared with the same period in 1997. Interest
expense increased $3.5 million during this same period primarily due to
unusually low interest expense in the second quarter of 1997, resulting
from an adjustment to decrease interest expense relating to a tax audit
settlement. Interest expense was also impacted by increased borrowings in
1998 as compared with 1997.
Miscellaneous, net expense increased $6.1 million during the six months
ended June 30, 1998 compared with the same period in 1997 due to merger-
related expenses for the services of the company's advisors.
Income Taxes
Income taxes decreased $11.3 million between the six months ended June 30,
1998 and the same period in 1997 consistent with lower taxable income
which was partially offset by a slightly higher effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Historical IEC Analysis
Cash flows from operating activities at IEC increased to $218 million for
the six months ended June 30, 1998 compared with $196 million for the six
months ended June 30, 1997 primarily due to changes in working capital
partially offset by lower net income. Cash flows used for financing
activities were higher for the first six months of 1998 compared to the
first six months of 1997 due to the net change in short-term borrowings.
Cash flows used for investing activities were lower in the first six
months of 1998 compared with the first six months of 1997 due to the
concurrent recovery of energy efficiency expenditures in 1998. Times
interest earned before income taxes for IEC for the six months ended June
30, 1998 was 1.72 compared with 2.83 for the same time period in 1997.
Historical IESU Analysis
Cash flows generated from operating activities increased to $106 million
during the six months ended June 30, 1997 compared to $78 million for the
six months ended June 30, 1998 primarily due to changes in working
capital. Cash flows used for financing activities were lower in the first
six months of 1998 compared with the same period last year primarily due
to reduced common stock dividends partially offset by changes in debt
levels. Cash flows used for investing activities were lower during the
first six months of 1998 as compared with the first six months of 1997 due
to the concurrent recovery of energy efficiency expenditures in 1998 and
lower construction expenditures.
Historical WP&L Analysis
Cash flows generated from operations were $110 million for the six months
ended June 30, 1998 compared with $92 million for the six months ended
June 30, 1997. The increase was primarily due to higher depreciation
expense and changes in working capital, partially offset by lower net
income. Cash flows used for financing activities were higher in the first
six months of 1998 compared with the same period in 1997 primarily due to
changes in debt levels and lower common stock dividends. Cash flows used
for investing activities were lower in the first quarter of 1998 due to
reduced construction expenditures which were partially offset by higher
nuclear decommissioning funding levels.
Future Considerations
The capital requirements of IEC are primarily attributable to its utility
subsidiaries' construction and acquisition programs, its debt maturities
and business opportunities of Alliant Industries. It is anticipated that
future capital requirements of IEC 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 regulatory recovery of
utility costs. IEC's liquidity and capital resources will be affected by
costs associated with environmental and regulatory issues. Emerging
competition in the utility industry could also impact IEC's liquidity and
capital resources, as discussed previously in the "Utility Industry
Outlook" section.
IEC has interests in the international arena. At June 30, 1998, Alliant
Industries had approximately $65 million of investments in foreign
entities. At June 30, 1998, IESU, WP&L and IPC did not have any foreign
investments. It is expected that IEC will continue to explore additional
international investment opportunities. Such investments may carry a
higher level of risk than IEC's traditional domestic utility investments
or Alliant Industries' domestic investments. Such risks could include
foreign government actions, foreign economic and currency risks and
others.
IEC is expected to pursue various potential business development
opportunities, including international as well as domestic investments,
and is devoting resources to such efforts. It is anticipated that IEC
will strive to select investments where the international and other risks
are both understood and manageable.
At June 30, 1998, Alliant Industries and IPC had investments in the stock
of McLeod, a telecommunications company, valued at $397.3 million and $1.7
million (based on a June 30, 1998 closing price of $38.875 per share and
compared to a cost basis of $29.0 million and $0.1 million), respectively.
Pursuant to the applicable accounting rules, the carrying value of the
investments are adjusted to the estimated fair value each quarter based on
the closing price at the end of the quarter. The adjustments do not
impact net income as the unrealized gains or losses, net of taxes, are
recorded directly to the common equity section of the balance sheet. In
addition, any such gains or losses are reflected in current earnings only
at the time they are realized through a sale. Alliant Industries has
entered into an agreement with McLeod which restricts the sale or disposal
of their shares without the consent of the McLeod Board of Directors until
September 1998.
IEC had certain off-balance sheet financial guarantees and commitments
outstanding at June 30, 1998. They generally consist of third-party
borrowing arrangements and lending commitments as well as guarantees of
financial performance of syndicated affordable housing properties. Such
guarantees were generally issued to support third-party borrowing
arrangements and similar transactions. Management currently believes the
possibility of IEC having to make any material cash payments under these
agreements is remote.
Financing and Capital Structure
Access to the long-term and short-term capital and credit markets, and
costs of external financing, are dependent on creditworthiness. The debt
ratings of IEC and certain subsidiaries are as follows:
Standard &
Moody's Poor's
IESU - Secured long-term debt A2 A+
- Unsecured long-term debt A3 A
WP&L - Secured long-term debt Aa2 AA
- Unsecured long-term debt Aa3 A+
IPC - Secured long-term debt A1 A+
- Unsecured long-term debt A2 A
Alliant - Commercial paper P2 A1
Industries
IEC - Commercial paper (a) P1 A1
(a) IESU, WP&L and IPC participate in a utility money pool which is
funded, as needed, through the issuance of commercial paper by IEC.
This utility money pool replaced the commercial paper programs
previously in place at IESU, WP&L and IPC and they ceased issuing
their own commercial paper as of June 30, 1998.
Alliant Industries is a party to a 3-Year Credit Agreement with various
banking institutions. The agreement extends through October 2000, with
one-year extensions available upon agreement by the parties. Unused
borrowing availability under this agreement is also used to support
Alliant Industries' commercial paper program. A combined maximum of $450
million of borrowings under this agreement and the commercial paper
program may be outstanding at any one time. Interest rates and maturities
are set at the time of borrowing. The rates are based upon quoted market
prices and the maturities are less than one year. At June 30, 1998,
Alliant Industries had $254 million of borrowings outstanding under this
facility with interest rates ranging from 5.63%-6.25%. (Refer to the
"Other Matters - Financial Instruments" section for a discussion of
several interest rate swaps Alliant Industries has entered into relative
to $200 million of borrowings under this Agreement). Alliant Industries
intends to continue borrowing under the renewal options of this facility
and no conditions existed at June 30, 1998 that would prevent the issuance
of commercial paper or direct borrowings on its bank lines. Accordingly,
this debt is classified as long-term. In addition, Alliant Industries
also has in place a $150 million 364-Day Credit Agreement which is
described below.
Other than periodic sinking fund requirements, which will not require
additional cash expenditures, the following long-term debt (in millions)
will mature prior to December 31, 2002:
IESU $185.1
IPC 8.1
WP&L 10.8
Alliant Industries 282.8
------
IEC $486.8
======
Depending upon market conditions, it is currently anticipated that a
majority of the maturing debt will be refinanced with the issuance of
long-term securities.
IESU, WP&L and IPC currently have no authority from their applicable
federal/state regulatory commissions or the SEC to issue additional long-
term debt. The companies continually evaluate their future financing
needs and will make the necessary regulatory filings as needed. In July
1998, WP&L filed an application with the PSCW and a registration statement
with the SEC relating to the issuance of up to $60 million of unsecured
debt securities. It is currently anticipated that these securities will
be issued in the third quarter of 1998. The proceeds will be used to
reduce short term debt (short-term debt was also used to repay at maturity
$8.9 million of WP&L's Series L first mortgage bonds due August 1, 1998).
Also in July 1998, IESU filed an application with the FERC to issue up to
$200 million of debt securities. It is anticipated that the securities
will be issued during the next two years.
The various charter provisions of the entities identified below authorize
and limit the aggregate amount of additional shares of Cumulative
Preferred Stock and Cumulative Preference Stock that may be issued. At
June 30, 1998, the companies could have issued the following additional
shares of Cumulative Preferred or Preference Stock:
IESU WP&L IPC
Cumulative Preferred - 2,700,775 1,238,619
Cumulative Preference 700,000 - 2,000,000
The capitalization ratios of IEC, IESU, WP&L and IPC were as follows:
<TABLE>
<CAPTION>
IEC IEC IESU WP&L IPC
6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common equity 51% 51% 47% 45% 58% 59% 52% 52%
Preferred stock 3 3 1 1 6 6 8 8
Long-term debt 46 46 52 54 36 35 40 40
---- ---- ---- ---- ---- ---- ---- ----
100% 100% 100% 100% 100% 100% 100% 100%
</TABLE>
For interim financing, IESU, WP&L and IPC were authorized by the
applicable federal or state regulatory agency to issue short-term debt as
follows (in millions) at June 30, 1998:
IESU WP&L IPC
Regulatory authorization $200 $138 $75
Short-term debt outstanding - $ 57 $14
IEC also had an additional $105 million of short-term debt outstanding at
June 30, 1998. In addition to providing for ongoing working capital
needs, this availability of short-term financing provides the companies
flexibility in the issuance of long-term securities. The level of short-
term borrowing fluctuates based on seasonal corporate needs, the timing of
long-term financing, and capital market conditions. To maintain
flexibility in its capital structure and to take advantage of favorable
short-term rates, IESU and WP&L also use proceeds from the sale of
accounts receivable and unbilled revenues to finance a portion of their
long-term cash needs. IEC anticipates that short-term debt will continue
to be available at reasonable costs due to current ratings by independent
utility analysts and rating services.
Alliant Industries is also a party to a 364-Day Credit Agreement with
various banking institutions. The agreement extends through October 20,
1998, with 364 day extensions available upon agreement by the parties.
The unborrowed portion of this agreement is also used to support Alliant
Industries' commercial paper program. A combined maximum of $150 million
of borrowings under this agreement and the commercial paper program may be
outstanding at any one time. Interest rates and maturities are set at the
time of borrowing. The rates are based upon quoted market prices and the
maturities are less than one year. There were no borrowings under this
facility at June 30, 1998.
In addition to the aforementioned borrowing capability under Alliant
Industries Credit Agreements, IEC had $150 million of bank lines of
credit, of which none was utilized, at June 30, 1998 available for direct
borrowing or to support commercial paper. Commitment fees are paid to
maintain these lines and there are no conditions which restrict the unused
lines of credit.
From time to time, IEC may borrow from banks and other financial
institutions on "as-offered" credit lines in lieu of commercial paper, and
has agreements with several financial institutions for such borrowings.
There are no commitment fees associated with these agreements and there
were no borrowings outstanding under these agreements at June 30, 1998.
Given the above financing flexibility, including IEC's access to both the
debt and equity securities markets, management believes it has the
necessary financing capabilities in place to adequately finance its
capital requirements for the foreseeable future.
Capital Requirements
General
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 and business combination
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.
Construction and acquisition expenditures for IEC for the six months
ended June 30, 1998 were $158 million. IEC's anticipated construction and
acquisition expenditures for 1998 were forecasted to be approximately
$630 million, consisting of approximately $277 million in its utility
operations, $190 million for energy-related international investments and
$163 million for new business development initiatives at Alliant Industries.
The level of 1998 domestic and international investments could vary
significantly from the estimates noted here depending on actual
investment opportunities, timing of the opportunities and the receipt of
regulatory approvals to exceed limitations in place under the Wisconsin
Utility Holding Company Act (WUHCA) on the amount of IEC's non-utility
investments. It is expected that IEC will spend approximately $1.2 billion
on utility construction and acquisition expenditures during 1999-2002.
It is expected that Alliant Industries will invest in energy products and
services in domestic and international markets, industrial services
initiatives and other strategic initiatives.
IEC anticipates financing utility construction expenditures during 1998-
2002 through internally generated funds supplemented, when required, by
outside financing. Funding of a majority of the Alliant Industries
construction and acquisition expenditures is expected to be completed with
external financings.
IESU's construction and acquisition expenditures for the six months ended
June 30, 1998 were $42.4 million compared with $48.3 million for the six
months ended June 30, 1997. IESU's construction and acquisition program
anticipates expenditures of approximately $124 million for 1998, of which
46% represents expenditures for electric transmission and distribution
facilities, 17% represents electric generation expenditures, 12%
represents information technology expenditures and 7% represents gas
utility expenditures. The remaining 18% represents miscellaneous
electric, steam and general expenditures. IESU's levels of utility
construction and acquisition expenditures are projected to be $129 million
in 1999, $103 million in 2000, $98 million in 2001 and $99 million in
2002. IESU anticipates funding the large majority of its utility
construction and acquisition expenditures during 1998-2002 through
internally generated funds, supplemented by external financings as needed.
WP&L's construction and acquisition expenditures for the six months ended
June 30, 1998 were $39.0 million compared with $60.6 million for the six
months ended June 30, 1997. The decrease was due to significant
expenditures in 1997 for computer system development projects. WP&L's
levels of utility construction and acquisition expenditures are projected
to be $133 million in 1998, $136 million in 1999, $138 million in 2000,
$141 million in 2001 and $144 million in 2002. WP&L anticipates funding
the large majority of its utility construction and acquisition
expenditures during 1998-2002 through internally generated funds,
supplemented by external financings as needed.
Nuclear Facilities
IEC owns interests in two nuclear facilities, Kewaunee and the DAEC. Set
forth below is a discussion of certain matters impacting these facilities.
Kewaunee, a 532-megawatt pressurized water reactor plant, is operated by
WPSC and is jointly owned by WPSC (41.2%), WP&L (41.0%), and MG&E (17.8%).
The Kewaunee operating license expires in 2013.
In accordance with PSCW authorization, WP&L had deferred $3.1 million at
March 31, 1998, associated with Kewaunee steam generator repair costs. In
March 1998, the PSCW approved recovery of these costs through a customer
surcharge effective April 1, 1998 through May 31, 1998.
On April 7, 1998, the PSCW approved WPSC's application for replacement of
the two steam generators at Kewaunee. The total cost of replacing the
steam generators would be approximately $90.7 million with WP&L's share of
the cost being approximately $37.2 million. The replacement work is
tentatively planned for the spring of 2000 and will take approximately 60
days. On July 2, 1998, the PSCW approved an agreement between the owners
of Kewaunee which provides for WPSC to assume the 17.8% Kewaunee ownership
share currently held by MG&E prior to work beginning on the replacement of
steam generators. When the ownership change takes place, WPSC will own
59.0% of Kewaunee and WP&L's share will remain at 41%. WPSC and WP&L
are putting in place revisions to the joint power supply agreement which
will govern operations of the plant after the ownership change takes
place.
Also on July 2, 1998, WP&L received approval from the PSCW to defer all
costs associated with the repair of Kewaunee steam generator tubes during
the fall 1998 refueling outage. Recovery of the deferred costs will then
be requested in a future rate proceeding.
Prior to the July 2, 1998 PSCW decisions, the PSCW had directed the owners
of Kewaunee to develop depreciation and decommissioning cost levels based
on an expected plant end-of-life of 2002 versus a license end-of-life of
2013. This was prompted by the uncertainty regarding the expected useful
life of the plant without steam generator replacement. The revised end-of
life of 2002 resulted in higher depreciation and decommissioning expense
at WP&L beginning in May 1997, in accordance with the PSCW rate order UR-
110. This level of depreciation will remain in effect until the steam
generator replacement is completed at which time the entire plant will be
depreciated over 8.5 years. At June 30, 1998, the net carrying amount of
WP&L's investment in Kewaunee was approximately $44.4 million. The
current cost of WP&L's share of the estimated costs to decommission
Kewaunee is $189.5 million and exceeds the trust assets at June 30, 1998
by $57.0 million. WP&L's contribution to the decommissioning trust fund
is based on an annual inflation rate of 5.83%. WP&L's retail customers in
the Wisconsin jurisdiction are responsible for approximately 80% of WP&L's
share of Kewaunee costs.
WPSC is an intervenor defendant in Madison Gas and Electric Co. v. Public
Service Commission of Wisconsin, Dane County Circuit Court. The case
involves MG&E's appeal of the PSCW's order granting WPSC authority to
replace the steam generators at Kewaunee. MG&E opposes the steam generator
replacement project. WPSC and MG&E have entered into a letter of intent
to consummate certain transactions which would result in the settlement of
MG&E's opposition to the steam generator replacement project and the
dismissal of MG&E's appeal. WPSC and MG&E anticipate executing a
definitive settlement agreement in August 1998.
DAEC, a 535-megawatt boiling water reactor plant, is operated by IESU and
IESU has a 70% ownership interest in the plant. The DAEC operating
license expires in 2014. Pursuant to the most recent electric rate case
order, the IUB allows IESU to recover $6.0 million annually for the cost
to decommission the DAEC. The current recovery figures are based on an
assumed cost to decommission the DAEC of $252.8 million, which is IESU's
70% portion in 1993 dollars, based on the Nuclear Regulatory Commission
minimum formula (which exceeds the amount in the current site-specific
study completed in 1994). At June 30, 1998, IESU had $83.8 million
invested in external decommissioning trust funds and also had an internal
decommissioning reserve of $21.7 million recorded as accumulated
depreciation.
Refer to the "Other Matters - Environmental" section for a discussion of
various issues impacting IEC's future capital requirements.
Rates and Regulatory Matters
In November 1997, as part of its Merger approval, FERC accepted a proposal
by IESU, WP&L, and IPC, which provides for a four-year freeze on wholesale
electric prices beginning with the effective date of the Merger.
In association with the Merger, IES, WP&L and IPC entered into a System
Coordination and Operating Agreement (Agreement) which became effective
with the consummation of the Merger. The Agreement, which has been
approved by the FERC, provides a contractual basis for coordinated
planning, construction, operation and maintenance of the interconnected
electric generation and transmission systems of the three utility
companies. In addition, the Agreement allows the interconnected system to
be operated as a single control area with off-system capacity sales and
purchases made to market excess system capability or to meet system
capability deficiencies. Such sales and purchases are allocated among the
three utility companies based on procedures included in the Agreement, and
approved by both the FERC and all state regulatory bodies having
jurisdiction over these sales.
IESU
In September 1997, IESU agreed with the IUB to provide Iowa customers a
four-year retail electric and gas price freeze commencing on the effective
date of the Merger. The agreement excluded price changes due to
government-mandated programs (such as energy efficiency cost recovery),
the electric fuel adjustment clause and PGA clause and unforeseen dramatic
changes in operations. In addition, the price freeze does not preclude a
review by either the IUB or OCA into whether IESU is exceeding a
reasonable return on common equity.
Pursuant to the authority described in the prior paragraph, the OCA has
requested certain financial information related to both electric and gas
utility jurisdictions within the state of Iowa for IESU. The OCA
requested information on what pro forma adjustments IESU would make to its
most recent historical test year (1997) to be in compliance with the State
of Iowa Code, IUB rules and past rate case precedent. IESU completed the
data request in a timely manner and based upon that information management
believes no change that would reduce utility rates would be warranted.
While IESU cannot predict the outcome of this process, management believes
that the final outcome will not have a material adverse impact on IESU's
results of operations or financial position.
Under provisions of the IUB rules, IESU is currently recovering the costs
it has incurred for its energy efficiency programs. There have been
several cost recovery filings made with and approved by the IUB over the
course of the last few years. Generally, the costs incurred through July
1997 are being recovered over various four-year periods. The IUB
commenced a rulemaking in January 1997 to implement statutory changes
allowing concurrent recovery and a final order in this proceeding was
issued in April 1997. The new rules allowed IESU to begin concurrent
recovery of its prospective expenditures on August 1, 1997. The
implementation of these changes will gradually eliminate the regulatory
asset that was created under the prior rate making mechanism as these
costs are recovered.
IESU has the following amounts of energy efficiency costs included in
regulatory assets on its Consolidated Balance Sheets (in thousands):
Four-Year
Recovery June 30, December 31,
Beginning 1998 1997
Costs incurred through
1993 6/95 $ 5,257 $ 7,779
Costs incurred in
1994-1995 8/97 26,565 30,924
Costs incurred from
1/96 - 7/97 8/97 16,625 19,847
(Over) under collection
of concurrent recovery N/A (804) 850
------ ------
$ 47,643 $ 59,400
====== ======
WP&L
In connection with its approval of the Merger, the PSCW accepted a WP&L
proposal to freeze rates for four years following the date of the Merger.
A re-opening of an investigation into WP&L's rates during the rate freeze
period, for both cost increases and decreases, may occur only for single
events that are not merger-related and have a revenue requirement impact
of $4.5 million or more. In addition, the electric fuel adjustment clause
and PGA clause are not affected by the rate freezes.
In rate order UR-110, the PSCW approved new rates effective April 29,
1997. On average, WP&L's retail electric rates under the new rate order
declined by 2.4% and retail gas rates declined by 2.2%. Other items
included in the rate order were: authorization of a surcharge to collect
replacement power costs while Kewaunee remained out of service for the
period effective April 29, 1997 through July 1, 1997; authorization of an
increase in the return on equity to 11.7% from 11.5%; reinstatement of the
electric fuel adjustment clause; continuation of a modified gas
performance based ratemaking incentive mechanism; and a modified SO2
incentive. In addition, the PSCW ordered that it must approve the payment
of dividends by WP&L to its parent company that are in excess of the level
forecasted in the rate order ($58.3 million), if such dividends would
reduce WP&L's average common equity ratio below 52.00% of total
capitalization. Based on the PSCW method approved for calculating return
on average common equity, the common equity ratio at June 30, 1998 was
53.52%.
The retail electric rates are based in part on forecasted fuel and
purchased power costs. Under PSCW rules, Wisconsin utilities can seek
emergency rate increases if these costs are more than 3% higher than the
estimated costs used to establish rates. In March 1998, WP&L requested an
electric rate increase to cover purchased power and transmission costs
that have increased due to transmission constraints and electric
reliability concerns in the Midwest. On July 14, 1998, the PSCW granted
an electric rate increase of $14.8 million annually that was effective on
July 16, 1998.
The gas performance incentive was modified to eliminate the maximum gain
or loss to be recognized by WP&L. Previously, this incentive was limited
to a maximum of $1.1 million to WP&L. The incentive includes a sharing
mechanism, whereby 40% of all gains and losses relative to current
commodity prices as well as other benchmarks are recognized by WP&L rather
than refunded to or recovered from customers.
In April 1998, WP&L filed a request with the PSCW requesting deferral
treatment of all Year 2000 costs provided those costs exceed $4.5 million.
In May 1998, the PSCW approved the deferral of certain costs associated
with the Year 2000 issue and required WP&L to submit a request and support
for the rate recovery of costs deferred as well as estimated future Year
2000 costs by November 1, 1998.
Refer to "Nuclear Facilities" for a discussion of recent PSCW rulings
regarding Kewaunee.
IPC
In September 1997, IPC agreed with the IUB to provide Iowa customers a
four-year retail electric and gas price freeze commencing on the effective
date of the Merger. The agreement excluded price changes due to
government-mandated programs (such as energy efficiency cost recovery),
the electric fuel adjustment clause and PGA clause and unforeseen dramatic
changes in operations. In addition, the price freeze does not preclude a
review by either the IUB or OCA into whether IPC is exceeding a reasonable
return on common equity. IPC also agreed with the MPUC and Illinois
Commerce Commission to four-year and three-year rate freezes,
respectively, commencing on the effective date of the Merger.
Pursuant to the authority described in the prior paragraph, the OCA has
requested certain financial information related to both electric and gas
utility jurisdictions within the state of Iowa for IPC. The OCA requested
information on what pro forma adjustments IPC would make to their most
recent historical test year (1997) to be in compliance with the State of
Iowa Code, IUB rules and past rate case precedent. IPC completed the data
request in a timely manner and based upon that information management
believes no change that would reduce utility rates would be warranted.
While IPC cannot predict the outcome of this process, management believes
that the final outcome will not have a material adverse impact on IPC's
results of operations or financial position.
On September 30, 1997, the IUB approved a settlement between IPC and the
OCA which provided for an electric rate reduction of approximately $3.2
million annually. The reduction applied to all bills rendered on and
after October 7, 1997.
IPC is also recovering its energy efficiency costs in Iowa in a similar
manner as IESU and began its concurrent cost recovery in October 1997.
IPC has the following amounts of energy efficiency costs to be recovered
in Iowa included in regulatory assets on its Balance Sheets (in
thousands):
Four-Year
Recovery June 30, December 31,
Beginning 1998 1997
Costs incurred through
1992 10/94 $304 $912
Costs incurred in
1993 - 1995 5/97 14,150 16,576
Costs incurred from
1/96 - 9/97 10/97 8,490 9,796
------- ------
$22,944 $27,284
====== ======
In addition, IPC had $2.7 million at both June 30, 1998 and December 31,
1997, respectively, included in regulatory assets for energy efficiency
recoveries in Minnesota.
Assuming capture of the merger-related synergies and no significant
legislative or regulatory changes affecting its utility subsidiaries, IEC
does not expect the merger-related electric and gas price freezes to have
a material adverse effect on its financial position or results of
operations.
OTHER MATTERS
Year 2000
IEC utilizes software, embedded systems and related technologies
throughout its businesses that will be affected by the date change in the
Year 2000. An internal task force has been assembled to review and
develop the full scope, work plan and cost estimates to ensure that IEC's
systems continue to meet their internal and customer needs.
A review has been completed to determine the necessary software
modifications that will need to be made to IEC's financial and customer
systems. Software modifications are intended to be ninety percent
complete by the end of the first quarter of 1999. IEC currently estimates
that the remaining costs to be incurred on the software modifications will
be approximately $7 million to $12 million in the aggregate ($3 million to
$5 million for WP&L, $3 million to $5 million for IESU and $1 million to
$2 million for IPC and Alliant Industries combined).
In addition to software modifications, a review of IEC's embedded systems
that may be affected by the Year 2000 or other problematic dates is also
underway. The task force has essentially completed inventory of these
embedded systems. Inventoried devices and systems have been prioritized
into three categories based on the relative critical nature of their
business function: safety-related; critical-business-continuity-related;
and non-critical.
Testing safety-related and critical-business-continuity-related devices
and systems is underway in all business units. The task force is using
testing standards based on those developed in a national electric utility
industry effort led by the Electric Power Research Institute and IEC is
participating in that organization's Year 2000 project to share
information about test procedures, results and vendor information. The
task force is working with equipment vendors to ascertain Year 2000
compliance of systems and devices. Remediation efforts are now in
progress and all business units are on schedule to complete remediation by
the end of the first quarter of 1999.
IEC is currently unable to estimate the costs to be incurred on this phase
of the project but does believe that the costs will be significant.
Detailed cost estimates cannot be determined until after the testing work
is completed. An estimate of the expenses to be incurred on this phase is
expected to be available by the end of the third quarter of 1998.
In addition, a significant contingency planning effort is underway which
will also address each mission-critical device or system. This includes
not only written procedures but substantial personnel training, testing
and rehearsal of these procedures. Additionally, back-up equipment will
be installed as necessary.
IEC is heavily dependent on other utilities (including electric, gas,
telecommunications and water) and its suppliers. An effort is underway to
communicate with such parties to increase their awareness of Year 2000
issues and determine the extent of their Year 2000 readiness. As part of
an extensive awareness effort, IEC is also communicating with its utility
customers, regulatory agencies, elected government officials and industry
groups. IEC executives and account managers are also having discussions
with IEC's largest customers to review their initiatives for Year 2000
compliance.
The goal of IEC is to have all the material Year 2000 conversions made
sufficiently in advance of December 31, 1999 to allow for unanticipated
issues. At this time, management is unable to determine if the Year 2000
issue will have a material adverse effect on the financial position or
results of operations of IEC.
Refer to "Rates and Regulatory Matters" for a discussion of a Year 2000
cost recovery filing made by WP&L with the PSCW.
Labor Issues
The status of the collective bargaining agreements at each of the
utilities is as follows at June 30, 1998:
IESU WP&L IPC
Number of collective bargaining
agreements 6 1 3
Percentage of workforce covered
by agreements 61 92 81
Upon completion of the Merger, numerous employees of IESU, WP&L and IPC
became employees of Alliant Services. At this time, there are no
bargaining employees at Alliant Services. The percentage of workforce
covered by the agreements above is therefore higher than previously
reported. There are two agreements at IESU which were scheduled to expire
on July 1, 1998 but have been extended on a day to day basis. IESU is
actively negotiating these two contracts. The number of employees covered
under these agreements is relatively small. There are eight agreements
scheduled to expire in 1999.
Financial Instruments
IEC has historically had only limited involvement with derivative
financial instruments and has not used them for speculative purposes.
They have been used to manage well-defined interest rate and commodity
price risks. WP&L historically has entered into interest rate swap
agreements to reduce the impact of changes in interest rates on its
floating-rate long-term debt, short-term debt and the sales of its
accounts receivable. The total notional amount of interest rate swaps
outstanding was $30 million at June 30, 1998. IEC has historically used
swaps, futures and options to hedge the price risks associated with the
purchase and sale of stored gas at WP&L and with the purchases and sales
of gas and electric power at its energy marketing subsidiary.
On April 23, 1998 Alliant Industries successfully competitively bid $200
million of interest rate swaps. These interest rate swap agreements were
entered into to reduce the impact of changes in variable interest rates by
converting variable rate borrowings into fixed rate borrowings. Two
separate structures of $100 million each were put in place. The first
structure, a straight 2-year swap, was priced at 5.841%. Under this
structure, Alliant Industries pays a fixed rate of 5.841% and receives 3-
month LIBOR. Payments are made and LIBOR is reset quarterly. The second
structure, a 2-year swap with a 1-year extension option, was priced at
5.6891%. This structure is identical to the first structure except the
bank has the option to extend the swap an additional year at the end of
the second year. The LIBOR set for the current 3-month period is 5.6875%.
IESU and IPC had no derivatives outstanding at June 30, 1998.
Accounting Pronouncements
In February 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP
provides authoritative guidance for determining whether computer software
is in fact internal-use software, citing specific examples and situations
that answer that preliminary question. Further, it provides guidelines on
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public.
Additionally, SOP 98-1 addresses specifics of accounting by discussing
expensing versus capitalization of costs, accounting for the costs
incurred in the upgrading of the software and amortizing the capitalized
cost of software. This statement is effective for fiscal years beginning
after December 15, 1998. IEC will be adopting the requirements of this
statement in 1999 and does not anticipate any material impact on its
financial statements upon adoption.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." This SOP provides guidance on the financial
reporting of start-up costs and organization costs. Costs of start-up
activities and organization costs are required to be expensed as incurred.
The statement is effective for periods beginning after December 15, 1998.
IEC will be adopting the requirements of this statement in 1999 and does
not anticipate any material impact on its financial statements upon
adoption.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The Statement requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company must
formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 1999.
SFAS 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997.
IEC has not yet quantified the impacts of SFAS 133 on the financial
statements and has not determined the timing of or method of adoption of
SFAS 133. However, the Statement could increase volatility in earnings
and other comprehensive income.
Accounting for Obligations Associated with the Retirement of Long-Lived
Assets
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry, including IESU and WP&L,
regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in financial
statements of electric utilities. In response to these questions, the
FASB is reviewing the accounting for closure and removal costs, including
decommissioning of nuclear power plants. If current electric utility
industry accounting practices for nuclear power plant decommissioning are
changed, the annual provision for decommissioning could increase relative
to 1997, and the estimated cost for decommissioning could be recorded as a
liability (rather than as accumulated depreciation), with recognition of
an increase in the cost of the related nuclear power plant. Assuming no
significant change in regulatory treatment, IESU and WP&L do not believe
that such changes, if required, would have an adverse effect on their
financial position or results of operations due to their ability to
recover decommissioning costs through rates.
Inflation
IEC, IESU and WP&L do not expect the effects of inflation at current
levels to have a significant effect on their financial position or results
of operations.
Environmental
The pollution abatement programs of IESU, WP&L, IPC and Alliant Industries
are subject to continuing review and are revised from time to time due to
changes in environmental regulations, changes in construction plans and
escalation of construction costs. While management cannot precisely
forecast the effect of future environmental regulations on IEC's
operations, it has taken steps to anticipate the future while also meeting
the requirements of current environmental regulations.
IESU, WP&L and IPC all have current or previous ownership interests in
properties previously associated with the production of gas at MGP sites
for which they may be liable for investigation, remediation and monitoring
costs relating to the sites. A summary of information relating to the
sites is as follows:
IESU WP&L IPC
Number of known sites for which
liability may exist 34 14 9
Liability recorded at June 30,
1998 (millions) $31.2 $8.9 $5.8
Regulatory asset recorded at
June 30, 1998 (millions) $31.1 $15.5 $6.0
The companies are working pursuant to the requirements of various federal
and state agencies to investigate, mitigate, prevent and remediate, where
necessary, the environmental impacts to property, including natural
resources, at and around the sites in order to protect public health and
the environment. The companies each believe that they have completed the
remediation at various sites, although they are still in the process of
obtaining final approval from the applicable environmental agencies for
some of these sites.
Each company has recorded environmental liabilities related to the MGP
sites; such amounts are based on the best current estimate of the
remaining amount to be incurred for investigation, remediation and
monitoring 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.
Management currently estimates the range of remaining costs to be incurred
for the investigation, remediation and monitoring of all IEC sites to be
approximately $34 million to $81 million. IESU and WP&L currently
estimate their share of the remaining costs to be incurred to be
approximately $21 million to $49 million and $7 million to $12 million,
respectively. 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.
Under the current rate making treatment approved by the PSCW, the MGP
expenditures of WP&L, net of any insurance proceeds, are deferred and
collected from gas customers over a five-year period after new rates are
implemented. The MPUC also allows the deferral of MGP-related costs
applicable to the Minnesota sites and IPC has been successful in obtaining
approval to recover such costs in rates in Minnesota. While the IUB does
not allow for the deferral of MGP-related costs, it has permitted
utilities to recover prudently incurred costs. As a result, regulatory
assets have been recorded by each company which reflect the probable
future rate recovery, where applicable. Considering the current rate
treatment, and assuming no material change therein, each of IESU, WP&L and
IPC believes that the clean-up costs incurred for these MGP sites will not
have a material adverse effect on their respective financial positions or
results of operations.
In April 1996, IESU filed a lawsuit against certain of its insurance
carriers seeking reimbursement for its MGP-related costs. Settlement has
been reached with all twenty-one carriers. After the remaining settlement
payments have been received, IESU will dismiss its lawsuit, as all issues
will have been resolved. In 1994, IPC filed a lawsuit against certain of
its insurance carriers to recover its MGP-related costs. Settlements have
been reached with eight carriers. IPC is continuing its pursuit of
additional recoveries. Amounts received from insurance carriers are being
deferred by IESU and IPC pending a determination of the regulatory
treatment of such recoveries. WP&L has settled with twelve carriers and
is also continuing to pursue additional recoveries from other carriers.
IPC and WP&L are unable to predict the amount of any additional insurance
recoveries they may realize.
The Clean Air Act Amendments of 1990 (Act) require emission reductions of
SO2, NOx and other air pollutants to achieve reductions of atmospheric
chemicals believed to cause acid rain. IESU, WP&L and IPC have met the
provisions of Phase I of the Act and are in the process of meeting the
requirements of Phase II of the Act (effective in the year 2000). The Act
also governs SO2 allowances, which are defined as an authorization for an
owner to emit one ton of SO2 into the atmosphere. The companies are
reviewing their options to ensure they will have sufficient allowances to
offset their emissions in the future. The companies believe that the
potential costs of complying with these provisions of Title IV of the Act
will not have a material adverse impact on their financial position or
results of operations.
The Act and other federal laws also require the EPA to study and regulate,
if necessary, additional issues that potentially affect the electric
utility industry, including emissions relating to ozone transport, mercury
and particulate control as well as modifications to the PCB rules. In
July 1997, the EPA issued final rules that would tighten the National
Ambient Air Quality Standards for ozone and particulate matter emissions.
IESU, IPC and WP&L are currently reviewing the rules to determine what
impact they may have on their operations.
In October 1997, the EPA issued a proposed rule to require 22 states,
including Wisconsin, to modify their SIPs to address the ozone transport
issue. The proposed rule would require WP&L to reduce its NOx emissions
at all of its plants to .15 lbs/mmbtu. WP&L cannot presently predict the
final outcome of this proposal but believes that, under the terms of the
proposed rule, it would be required to make various capital investments
and/or modifications at its plants and that the costs related thereto
would be significant.
In 1995, the EPA published the Sulfur Dioxide Network Design Review for
Cedar Rapids, Iowa, which, based on the EPA's assumptions and worst-case
modeling method, suggested that the Cedar Rapids area could be classified
as "nonattainment" for the National Ambient Air Quality Standards
established for SO2. The worst-case modeling suggested that two of IESU's
generating facilities contributed to the modeled exceedences. As a result
of exceedences at a monitor near one of IESU's generating facilities, the
EPA issued a letter to the Iowa Governor's office directing the state to
develop a plan of action. In this regard, IESU entered into a consent
order with the IDNR in the third quarter of 1997 on this issue. IESU
agreed to limit the SO2 emissions from the two noted generating facilities
and to install a new stack (potential aggregate capital cost of up to $2.5
million over the next two years of which $1.5 million is included in the
anticipated 1998 capital requirements and $1.0 million is included in the
anticipated 1999 capital requirements) at one of the facilities. The
consent order is one piece of a revision to the SIP being proposed by the
IDNR. The public comment period on the SIP revision was May 28 through
June 26, 1998. IEPC approved the SIP revision on July 20, 1998. The SIP
revision transmittal letter from Iowa to the EPA is awaiting the signature
of the Governor of Iowa and then will be sent to the EPA Region VII for
review and approval.
Pursuant to a routine internal review of documents, IESU determined that
certain changes undertaken during previous years at one of its generating
facilities may have required a federal PSD permit. IESU initiated
discussions with its regulators on the matter, resulting in the submittal
of a PSD permit application in February 1997. IESU received the permit in
the second quarter of 1998. IESU may be subject to a penalty for not
having obtained the permit previously; however, IESU believes that any
likely actions resulting from this matter will not have a material adverse
effect on its financial position or results of operation.
Pursuant to a separate routine internal review of plant operations, IESU
determined that certain permit limits were exceeded in 1997 at one of its
generating facilities in Cedar Rapids, Iowa. IESU has initiated
discussions with its regulators on the matter and has proposed a
compliance plan which includes equipment modifications and contemplates
operational changes. In addition, IESU may be required to obtain a PSD
permit. On May 13, 1998, IESU received a citation from the Linn County
Health Department alleging violations at the facility. IESU has
negotiated a settlement agreement with the Linn County Health Department,
resolving the matter for $30,000. The settlement is scheduled for court
review and approval during the third quarter of 1998. Depending on the
outcome of communications with the IDNR, IESU may be subject to a penalty
for not having a PSD permit for this facility; however, management
believes that any likely actions resulting from this matter will not have
a material adverse effect on IESU's financial position or results of
operations.
In March 1998, IPC received a Notice of Intent to Sue from an
environmental group alleging certain violations of effluent limits,
established pursuant to the Clean Water Act, at IPC's generating facility
in Clinton, Iowa. On May 14, 1998, IPC received from the IDNR an
inspection report and notice of violation addressing the same and other
concerns as were raised by the environmental group. IPC responded to the
environmental group on May 19, 1998, providing an evaluation of the
alleged violations. IPC responded to the IDNR on June 26, 1998 with a
plan of action addressing the IDNR's concerns. While IPC believes that it
has satisfied IDNR's concerns, IPC notes that it may be subject to a
penalty for exceeding permit limits established for this facility,
however, management believes that any likely actions resulting from this
matter will not have a material adverse effect on IPC's financial position
or results of operations.
Pursuant to an internal review of operations, IPC discovered that Unit No.
6 at its generating facility in Dubuque, Iowa, may require a Clean Air Act
Acid Rain permit and continuous emissions monitoring system. IPC has
initiated discussions with its regulators, is continuing its internal
review of historical operations and communications on the matter, and has
discontinued operation of the unit, pending resolution of the issues.
Pursuant to its internal review, IPC also identified and disclosed to its
regulators a potentially similar situation at its Lansing, Iowa generating
facility. IPC may be subject to a penalty for not having installed the
continuous emissions monitoring system and for not having obtained the
permit previously. However, IPC believes that any likely actions
resulting from this matter will not have a material adverse effect on its
financial position or results of operations.
A global treaty has been negotiated that could require reductions of
greenhouse gas emissions from utility plants. Negotiators left
significant implementation and compliance questions open to resolution at
meetings to be held starting in November 1998. At this time, management
is unable to predict whether the United States Congress will ratify the
treaty. Given the uncertainty of the treaty ratification and the ultimate
terms of the final regulations, management cannot currently estimate the
impact the implementation of the treaty would have on IEC's operations.
The Nuclear Waste Policy Act of 1982 assigned responsibility to the 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. IESU
and WP&L entered into such contracts and have made the agreed payments to
the Nuclear Waste Fund held by the U.S. Treasury. The companies were
subsequently notified by the DOE that it was not able to begin acceptance
of spent nuclear fuel by the January 31, 1998 deadline. Furthermore, DOE
has experienced significant delays in its efforts and material acceptance
is now expected to occur no earlier than 2010 with the possibility of
further delay being likely. IESU and WP&L are evaluating and pursuing
multiple options, including litigation and legislation to protect their
customers and the contractual and statutory rights that are diminished by
delays in the DOE program.
The Nuclear Waste Policy Act of 1982 assigns responsibility for interim
storage of spent nuclear fuel to generators of such spent nuclear fuel,
such as IESU and WP&L. In accordance with this responsibility, IESU and
WP&L have been storing spent nuclear fuel on site at DAEC and Kewaunee,
respectively, since plant operations began. IESU will have to increase
its spent fuel storage capacity at DAEC to store all of the spent fuel
that will be produced before the current license expires in 2014. There
are several options available that will satisfy DAEC's storage needs.
IESU is currently reviewing its options to expand on-site storage
capability. To provide assurance that both the operating and post-
shutdown storage needs are satisfied, a combination of expanding the
capacity of the existing fuel pool and construction of a dry cask modular
facility are being contemplated. With minor modifications, Kewaunee would
have sufficient fuel storage capacity to store all of the fuel they will
generate through the end of the license life in 2013. Legislation is
being considered on the federal level to provide for the establishment of
an interim storage facility as early as 2002.
The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates
that each state must take responsibility for the storage of low-level
radioactive waste produced within its borders. The States of Iowa and
Wisconsin are members of the six-state Midwest Interstate Low-Level
Radioactive Waste Compact (Compact) which is responsible for development
of any new disposal capability within the Compact member states. In June
1997, the Compact commissioners voted to discontinue work on a proposed
waste disposal facility in the State of Ohio because the expected cost of
such a facility was comparably higher than other options currently
available. Dwindling waste volumes and continued access to existing
disposal facilities were also reasons cited for the decision. A disposal
facility located near Barnwell, South Carolina continues to accept the
low-level waste and IESU and WP&L currently ship the waste each produces
to such site, thereby minimizing the amount of low-level waste stored on-
site. In addition, given technological advances, waste compaction and the
reduction in the amount of waste generated, DAEC and Kewaunee each have
on-site storage capability sufficient to store low-level waste expected to
be generated over at least the next ten years, with continuing access to
the Barnwell disposal facility extending that on-site storage capability
indefinitely.
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. IESU is recovering the costs associated
with this assessment through its electric fuel adjustment clauses over the
period the costs are assessed. IESU's 70% share of the future assessment
at June 30, 1998 was $8.9 million and has been recorded as a liability
with a related regulatory asset for the unrecovered amount. WP&L is also
recovering these costs from its customers and at June 30, 1998 had a
regulatory asset and a liability of $5.9 million and $5.1 million
recorded, respectively.
Whiting, a wholly-owned subsidiary of Alliant Industries, is responsible
for certain dismantlement and abandonment costs related to various off-
shore oil and gas platforms (and related on-shore plants and equipment),
the most significant of which is located off the coast of California.
Whiting estimates the total costs for these properties to be approximately
$14 million and the expenditures are not expected to be incurred for
approximately five years. Whiting accrues these costs as reserves are
extracted, resulting in a recorded liability of $9.2 million at June 30,
1998.
Power Supply
The power supply concerns of 1997 have raised awareness of the electric
system reliability challenges facing Wisconsin and the Midwest region.
WP&L was among an 11-member group of Wisconsin energy suppliers that, on
October 1, 1997, recommended to the Governor of Wisconsin a series of
steps to improve electric reliability in the state. Wisconsin enacted
electric reliability legislation in April 1998 (Wisconsin Reliability
Act). The legislation has the goal of assuring reliable electric energy
for Wisconsin. The new law, effective May 12, 1998, requires
Wisconsin utilities to join a regional independent system operator for
transmission by the year 2000, allows the construction of merchant power
plants in the state and streamlines the regulatory approval process for
building new generation and transmission facilities. This legislation
also requires the PSCW to complete a regional transmission constraint
study by September 1, 1998. The PSCW is then authorized to order
construction of new transmission facilities, based on the findings of its
constraint study, through December 31, 2000.
On September 24, 1997, the PSCW ordered WP&L and two other Wisconsin
utilities to arrange for additional electric capacity to help maintain
reliable service for their customers. In response to this order, WP&L
issued a Request for Proposal for contracts to provide WP&L with an
additional 150 MW of electric capacity beginning as early as June 1, 1999.
WP&L evaluated applications on the basis of per-megawatt cost,
transmission capacity, environmental factors, experience in building and
operating similar generating facilities and the ability to meet a June
2000 in-service date. In July 1998, IEC and Polsky Energy Corp. (Polsky)
announced an agreement whereby Polsky would build, own and operate a power
plant in southeastern Wisconsin capable of producing up to 525 megawatts
of electricity. Under the agreement, IEC will purchase the capacity to
meet the electric needs of its utility customers, as outlined by the
Wisconsin Reliability Act. It is expected that this new generation will
be operational in June of 2000. This is the first plant to be announced
by the three Wisconsin utilities under the Wisconsin Reliability Act.
Polsky will be seeking the necessary approvals from the PSCW and Wisconsin
Department of Natural Resources.
Utility officials noted that it will take time for new transmission and
power plant projects to be approved and built. While utility officials
fully expect to meet customer demands in 1998 and 1999, problems still
could arise if there are unexpected power plant outages, transmission
system outages or extended periods of extremely hot weather.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
IEC
On April 29, 1998, a lawsuit was filed, Aliant Communications Inc. v.
Interstate Energy Corporation, in federal district court against IEC by
Aliant Communications Inc. alleging trademark infringement, dilution and
unfair competition in connection with the use by IEC of the name
"Alliant." The plaintiff ultimately is seeking a permanent injunction with
respect to such matters and damages equal to one-half of what plaintiff
has spent to advertise and promote its Aliant mark, trebled pursuant to
certain provisions of the Lanham Act, and related interest, costs, and
attorney's fees. A hearing was held on June 17, 1998 and the court issued
an order granting in part plaintiff's request for a preliminary
injunction. The court ordered IEC not to conduct a shareholder meeting
for the purpose of changing its corporate name to include the name
"Alliant" and not to use the "Alliant" mark in advertising before the
trial on the merits of this case is held (scheduled to begin on October 5,
1998). The court specifically stated that IEC is not precluded from using
the "Alliant" mark in customer communications and billing or from using
the stock symbol "LNT" however. Settlement discussions between the parties
are currently underway. IEC is unable to predict the outcome of this
matter but believes it will not have a material adverse effect on its
financial position or results of operations.
On April 17, 1998, MG&E and Citizens Utility Board appealed the decision
of the SEC approving the Merger, Madison Gas and Electric Company and
Citizens Utility Board v. Securities and Exchange Commission. On May 15,
1998, IEC moved to intervene in this appeal and the United States Court of
Appeals for the District of Columbia District granted the motion. Briefs
are due later this year and oral arguments are scheduled for January 13,
1999.
IESU
On April 30, 1996, IESU filed suit, IES Utilities Inc. v. Home Ins. Co.,
et al., No. 4-96-CV-10343 (S.D. Iowa filed Apr. 30, 1996), against various
insurers who had sold comprehensive general liability policies to Iowa
Southern Utilities Company (ISU) and Iowa Electric Light and Power Company
(IE) (IESU was formed as the result of a merger of ISU and IE). The suit
seeks judicial determination of the respective rights of the parties, a
judgment that each defendant is obligated under its respective insurance
policies to pay in full all sums that IESU has become or may become
obligated to pay in connection with its defense against allegations of
liability for property damage at and around MGP sites, and indemnification
for all sums that it has or may become obligated to pay for the
investigation, mitigation, prevention, remediation and monitoring of
environmental impacts to property, including natural resources like
groundwater, at and around the MGP sites. Settlement has been reached
with all twenty-one carriers. After the remaining settlement payments are
received, IESU will dismiss its lawsuit, as all issues will have been
resolved. Any amounts received from insurance carriers are being deferred
pending a determination of the regulatory treatment of such recoveries.
IESU is in discussions with the regulators regarding certain environmental
permit issues. For a discussion of these matters, see MD&A above, which
information is incorporated herein by reference.
IPC
In March 1998, IPC received a Notice of Intent to Sue from an
environmental group alleging certain violations of effluent limits,
established pursuant to the Clean Water Act, at IPC's generating facility
in Clinton, Iowa. On May 14, 1998, IPC received from the IDNR an
inspection report and notice of violation addressing the same and other
concerns as were raised by the environmental group. IPC responded to the
environmental group on May 19, 1998, providing an evaluation of the
alleged violations. IPC responded to the IDNR on June 26, 1998 with a
plan of action addressing the IDNR's concerns. While IPC believes that it
has satisfied the IDNR's concerns, IPC notes that it may be subject to a
penalty for exceeding permit limits established for this facility;
however, management believes that any likely actions resulting from this
matter will not have a material adverse effect on IPC's financial position
or results of operations.
IPC also is in discussions with the regulators regarding an environmental
permit and related issues at generating facilities in Dubuque, Iowa and
Lansing, Iowa. For a discussion of this matter, see "Other Matters -
Environmental", which information is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
IEC
At IEC's annual meeting of shareowners held on June 24, 1998, Alan B.
Arends, Robert D. Ray and Anthony R. Weiler were elected as directors of
IEC for terms expiring in 1999. The following sets forth certain
information with respect to the election of these directors at the annual
meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Alan B. Arends 56,169,298 1,232,964
Robert D. Ray 56,099,522 1,302,740
Anthony R. Weiler 56,162,154 1,240,108
At IEC's annual meeting of shareowners held on June 24, 1998, Lee Liu,
Robert W. Schlutz and Wayne H. Stoppelmoor were elected as directors of
IEC for terms expiring in 2000. The following sets forth certain
information with respect to the election of these directors at the annual
meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Lee Liu 56,118,205 1,284,057
Robert W. Schlutz 56,206,733 1,195,529
Wayne H. Stoppelmoor 56,214,221 1,188,041
At IEC's annual meeting of shareowners held on June 24, 1998, Joyce L.
Hanes, Arnold M. Nemirow, Jack R. Newman, Judith D. Pyle and David Q. Reed
were elected as directors of IEC for terms expiring in 2001. The
following sets forth certain information with respect to the election of
these directors at the annual meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Joyce L. Hanes 56,133,975 1,268,287
Arnold M. Nemirow 55,486,825 1,915,437
Jack R. Newman 56,138,175 1,264,087
Judith D. Pyle 56,163,283 1,238,979
David Q. Reed 56,123,134 1,279,128
The following table sets forth the other directors of IEC whose terms of
office continued after the 1998 annual meeting.
Name of Director Year in Which Term Expires
Rockne G. Flowers 1999
Katharine C. Lyall 1999
Erroll B. Davis, Jr. 2000
Milton E. Neshek 2000
WP&L
At WP&L's annual meeting of shareowners held on June 17, 1998, Alan B.
Arends, Robert D. Ray and Anthony R. Weiler were elected as directors of
WP&L for terms expiring in 1999. The following sets forth certain
information with respect to the election of these directors at the annual
meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Alan B. Arends 13,598,409 1,120
Robert D. Ray 13,598,303 1,226
Anthony R. Weiler 13,598,410 1,119
At WP&L's annual meeting of shareowners held on June 17, 1998, Lee Liu,
Robert W. Schlutz and Wayne H. Stoppelmoor were elected as directors of
WP&L for terms expiring in 2000. The following sets forth certain
information with respect to the election of these directors at the annual
meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Lee Liu 13,598,157 1,372
Robert W. Schlutz 13,598,359 1,170
Wayne H. Stoppelmoor 13,598,405 1,124
At WP&L's annual meeting of shareowners held on June 17, 1998, Joyce L.
Hanes, Arnold M. Nemirow, Jack R. Newman, Judith D. Pyle and David Q. Reed
were elected as directors of WP&L for terms expiring in 2001. The
following sets forth certain information with respect to the election of
these directors at the annual meeting.
Name of Nominee Shares Voted For Shares Against/Withheld
Joyce L. Hanes 13,598,015 1,514
Arnold M. Nemirow 13,598,257 1,272
Jack R. Newman 13,598,360 1,169
Judith D. Pyle 13,598,119 1,410
David Q. Reed 13,598,253 1,276
The following table sets forth the other directors of WP&L whose terms of
office continued after the 1998 annual meeting.
Year in Which Term
Name of Director Expires
Rockne G. Flowers 1999
Katharine C. Lyall 1999
Erroll B. Davis, Jr. 2000
Milton E. Neshek 2000
IESU
The following individuals were elected as directors of IESU for terms
expiring at the annual meeting in 2001:
Joyce L. Hanes
Arnold M. Nemirow
Jack R. Newman
Judith D. Pyle
David Q. Reed
Such persons were elected by a consent action executed by IEC as the
sole holder of capital stock of IESU entitled to vote with respect to
the election of directors. IEC voted all of the outstanding shares of
common stock of IESU (consisting of 13,370,788 shares) in favor of the
election of the aforementioned individuals.
The following tables sets forth the other directors of IESU whose term of
office continued.
Name of Director Year in Which Term Expires
Alan B. Arends 1999
Rockne G. Flowers 1999
Katharine C. Lyall 1999
Robert D. Ray 1999
Anthony R. Weiler 1999
Erroll B. Davis, Jr. 2000
Lee Liu 2000
Milton E. Neshek 2000
Robert W. Schlutz 2000
Wayne H. Stoppelmoor 2000
ITEM 5. OTHER INFORMATION
IEC
The deadline for submission of shareowner proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended, for inclusion in
IEC's proxy statement for its 1999 Annual Meeting of Shareowners is
January 21, 1999. Additionally, if IEC receives notice of a shareowner
proposal after April 7, 1999, the persons named in proxies solicited by
the Board of Directors of IEC for its 1999 Annual Meeting of Shareowners
may exercise discretionary voting power with respect to such proposal.
WP&L
The deadline for submission of shareowner proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended, for inclusion in
WP&L's proxy statement for its 1999 Annual Meeting of Shareowners is
January 27, 1999. Additionally, if WP&L receives notice of a shareowner
proposal after April 12, 1999, the persons named in proxies solicited by
the Board of Directors of WP&L for its 1999 Annual Meeting of Shareowners
may exercise discretionary voting power with respect to such proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by the Securities and Exchange Commission
Regulation S-K:
The following Exhibits are filed herewith or incorporated herein by
reference. Documents indicated by an asterisk (*) are incorporated
herein by reference.
2.1* Agreement and Plan of Merger, dated as of November 10, 1995,
by and among WPL Holdings, Inc., IES Industries Inc.,
Interstate Power Company and AMW Acquisition, Inc.
(incorporated by reference to Exhibit 2.1 to IEC's Current
Report on Form 8-K, dated November 10, 1995)
2.2* Amendment No. 1 to Agreement and Plan of Merger and Stock
Option Agreements, dated May 22, 1996, by and among WPL
Holdings, Inc., IES Industries Inc., Interstate Power Company,
a Delaware corporation, AMW Acquisition, Inc., WPLH
Acquisition Co. and Interstate Power Company, a Wisconsin
corporation (incorporated by reference to Exhibit 2.1 to IEC's
Current Report on Form 8-K, dated May 22, 1996)
2.3* Amendment No. 2 to Agreement and Plan of Merger, dated August
16, 1996, by and among WPL Holdings, Inc., IES Industries
Inc., Interstate Power Company, a Delaware corporation, WPLH
Acquisition Co. and Interstate Power Company, a Wisconsin
corporation (incorporated by reference to Exhibit 2.1 to IEC's
Current Report on Form 8-K, dated August 15, 1996)
3.1* Restated Articles of Incorporation of Interstate Energy
Corporation, as amended (incorporated by reference to Exhibit
3.2 to IEC's Current Report on Form 8-K, dated April 21, 1998)
3.2* Bylaws of Interstate Energy Corporation (incorporated by
reference to Exhibit 3.3 to IEC's Current Report on Form 8-K,
dated April 21, 1998)
3.3* Restated Articles of Incorporation of Wisconsin Power & Light
Company, as amended (incorporated by reference to Exhibit 3.1
to WP&L's Form 10-Q for the quarter ended June 30, 1994)
3.4 Bylaws of Wisconsin Power and Light Company
3.5 Amended and Restated Articles of Incorporation of IES
Utilities Inc.
3.6 Bylaws of IES Utilities Inc.
4.1* Indenture of Mortgage or Deed of Trust dated August 1, 1941,
between WP&L and First Wisconsin Trust Company and George B.
Luhman, as Trustees, filed as Exhibit 7(a) in File No. 2-6409,
and the indentures supplemental thereto dated, respectively,
January 1, 1948, September 1, 1948, June 1, 1950, April 1,
1951, April 1, 1952, September 1, 1953, October 1, 1954,
March 1, 1959, May 1, 1962, August 1, 1968, June 1, 1969,
October 1, 1970, July 1, 1971, April 1, 1974, December 1,
1975, May 1, 1976, May 15, 1978, August 1, 1980, January 15,
1981, August 1, 1984, January 15, 1986, June 1, 1986,
August 1, 1988, December 1, 1990, September 1, 1991,
October 1, 1991, March 1, 1992, May 1, 1992, June 1, 1992 and
July 1, 1992 (Second Amended Exhibit 7(b) in File No. 2-7361;
Amended Exhibit 7(c) in File No. 2-7628; Amended Exhibit 7.02
in File No. 2-8462; Amended Exhibit 7.02 in File No. 2-8882;
Second Amendment Exhibit 4.03 in File No. 2-9526; Amended
Exhibit 4.03 in File No. 2-10406; Amended Exhibit 2.02 in File
No. 2-11130; Amended Exhibit 2.02 in File No. 2-14816; Amended
Exhibit 2.02 in File No. 2-20372; Amended Exhibit 2.02 in File
No. 2-29738; Amended Exhibit 2.02 in File No. 2-32947; Amended
Exhibit 2.02 in File No. 2-38304; Amended Exhibit 2.02 in File
No. 2-40802; Amended Exhibit 2.02 in File No. 2-50308;
Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit 2.02 in
File No. 2-56036; Amended Exhibit 2.02 in File No. 2-61439;
Exhibit 4.02 in File No. 2-70534; Amended Exhibit 4.03 File
No. 2-70534; Exhibit 4.02 in File No. 33-2579; Amended
Exhibit 4.03 in File No. 33-2579; Amended Exhibit 4.02 in File
No. 33-4961; Exhibit 4B to WP&L's Form 10-K for the year ended
December 31, 1988, Exhibit 4.1 to WP&L's Form 8-K dated
December 10, 1990, Amended Exhibit 4.26 in File No. 33-45726,
Amended Exhibit 4.27 in File No.33-45726, Exhibit 4.1 to
WP&L's Form 8-K dated March 9, 1992, Exhibit 4.1 to WP&L's
Form 8-K dated May 12, 1992, Exhibit 4.1 to WP&L's Form 8-K
dated June 29, 1992 and Exhibit 4.1 to WP&L's Form 8-K dated
July 20, 1992)
4.2* Rights Agreement, dated February 22, 1989, between Interstate
Energy Corporation (formerly WPL Holdings, Inc.) and Morgan
Shareholder Services Trust Company (incorporated by reference
to Exhibit 4 to IEC's Current Report on Form 8-K, dated
February 27, 1989)
4.3* Indenture, dated as of June 20, 1997, between WP&L and Firstar
Trust Company, as Trustee, relating to debt securities
(incorporated by reference to Exhibit 4.33 to Amendment No. 2
to WP&L's Registration Statement on Form S-3 (Registration No.
33-60917))
4.4* Officers' Certificate, dated as of June 25, 1997, creating the
7% debentures due June 15, 2007 of WP&L (incorporated by
reference to Exhibit 4 to WP&L's Current Report on Form 8-K,
dated June 25, 1997)
4.5* Indenture of Mortgage and Deed of Trust, dated as of
September 1, 1993, between IES Utilities Inc. (formerly Iowa
Electric Light and Power Company (IE)) and The First National
Bank of Chicago, as Trustee (Mortgage) (incorporated by
reference to Exhibit 4(c) to IESU's Form 10-Q for the quarter
ended September 30, 1993)
4.6* Supplemental Indentures to the Mortgage:
IESU/IES
Number Dated as of File Reference Exhibit
First October 1, 1993 Form 10-Q, 11/12/93 4(d)
Second November 1, 1993 Form 10-Q, 11/12/93 4(e)
Third March 1, 1995 Form 10-Q, 5/12/95 4(b)
Fourth September 1, 1996 Form 8-K, 9/19/96 4(c)(i)
Fifth April 1, 1997 Form 10-Q, 5/14/97 4(a)
4.7* Indenture of Mortgage and Deed of Trust, dated as of August 1,
1940, between IES Utilities Inc. (formerly IE) and The First
National Bank of Chicago, Trustee (1940 Indenture)
(incorporated by reference to Exhibit 2(a) to IESU's
Registration Statement, File No. 2-25347)
4.8* Supplemental Indentures to the 1940 Indenture:
IESU
Number Dated as of File Reference Exhibit
First March 1, 1941 2-25347 2(a)
Second July 15, 1942 2-25347 2(a)
Third August 2, 1943 2-25347 2(a)
Fourth August 10, 1944 2-25347 2(a)
Fifth November 10, 1944 2-25347 2(a)
Sixth August 8, 1945 2-25347 2(a)
Seventh July 1, 1946 2-25347 2(a)
Eighth July 1, 1947 2-25347 2(a)
Ninth December 15, 1948 2-25347 2(a)
Tenth November 1, 1949 2-25347 2(a)
Eleventh November 10, 1950 2-25347 2(a)
Twelfth October 1, 1951 2-25347 2(a)
Thirteenth March 1, 1952 2-25347 2(a)
Fourteenth November 5, 1952 2-25347 2(a)
Fifteenth February 1, 1953 2-25347 2(a)
Sixteenth May 1, 1953 2-25347 2(a)
Seventeenth November 3, 1953 2-25347 2(a)
Eighteenth November 8, 1954 2-25347 2(a)
Nineteenth January 1, 1955 2-25347 2(a)
Twentieth November 1, 1955 2-25347 2(a)
Twenty-first November 9, 1956 2-25347 2(a)
Twenty-second November 6, 1957 2-25347 2(a)
Twenty-third November 4, 1958 2-25347 2(a)
Twenty-fourth November 3, 1959 2-25347 2(a)
Twenty-fifth November 1, 1960 2-25347 2(a)
Twenty-sixth January 1, 1961 2-25347 2(a)
Twenty-seventh November 7, 1961 2-25347 2(a)
Twenty-eighth November 6, 1962 2-25347 2(a)
Twenty-ninth November 5, 1963 2-25347 2(a)
Thirtieth November 4, 1964 2-25347 2(a)
Thirty-first November 2, 1965 2-25347 2(a)
Thirty-second September 1, 1966 Form 10-K, 1966 4.10
Thirty-third November 30, 1966 Form 10-K, 1966 4.10
Thirty-fourth November 7, 1967 Form 10-K, 1967 4.10
Thirty-fifth November 5, 1968 Form 10-K, 1968 4.10
Thirty-sixth November 1, 1969 Form 10-K, 1969 4.10
Thirty-seventh December 1, 1970 Form 8-K, 12/70 1
Thirty-eighth November 2, 1971 2-43131 2(g)
Thirty-ninth May 1, 1972 Form 8-K, 5/72 1
Fortieth November 7, 1972 2-56078 2(i)
Forty-first November 7, 1973 2-56078 2(j)
Forty-second September 10, 1974 2-56078 2(k)
Forty-third November 5, 1975 2-56078 2(l)
Forty-fourth July 1, 1976 Form 8-K, 7/76 1
Forty-fifth November 1, 1976 Form 8-K, 12/76 1
Forty-sixth December 1, 1977 2-60040 2(o)
Forty-seventh November 1, 1978 Form 10-Q, 6/30/79 1
Forty-eighth December 1, 1979 Form S-16, 2-65996 2(q)
Forty-ninth November 1, 1981 Form 10-Q, 3/31/82 2
Fiftieth December 1, 1980 Form 10-K, 1981 4(s)
Fifty-first December 1, 1982 Form 10-K, 1982 4(t)
Fifty-second December 1, 1983 Form 10-K, 1983 4(u)
Fifty-third December 1, 1984 Form 10-K, 1984 4(v)
Fifty-fourth March 1, 1985 Form 10-K, 1984 4(w)
Fifty-fifth March 1, 1988 Form 10-Q, 5/12/88 4(b)
Fifty-sixth October 1, 1988 Form 10-Q, 11/10/88 4(c)
Fifty-seventh May 1, 1991 Form 10-Q, 8/13/91 4(d)
Fifty-eighth March 1, 1992 Form 10-K, 1991 4(c)
Fifty-ninth October 1, 1993 Form 10-Q, 11/12/93 4(a)
Sixtieth November 1, 1993 Form 10-Q, 11/12/93 4(b)
Sixty-first March 1, 1995 Form 10-Q, 5/12/95 4(a)
Sixty-second September 1, 1996 Form 8-K, 9/19/96 4(f)
Sixty-third April 1, 1997 Form 10-Q, 5/14/97 4(b)
4.9* Indenture or Deed of Trust dated as of February 1, 1923,
between IES Utilities Inc. (successor to Iowa Southern
Utilities Company (IS) as result of merger of IS and IE) and
The Northern Trust Company (The First National Bank of
Chicago, successor) and Harold H. Rockwell (Richard D.
Manella, successor), as Trustees (1923 Indenture)
(incorporated by reference to Exhibit B-1 to File No. 2-1719)
4.10* Supplemental Indentures to the 1923 Indenture:
File
Dated as of Reference Exhibit
May 1, 1940 2-4921 B-1-k
May 2, 1940 2-4921 B-1-l
October 1, 1945 2-8053 7(m)
October 2, 1945 2-8053 7(n)
January 1, 1948 2-8053 7(o)
September 1, 1950 33-3995 4(e)
February 1, 1953 2-10543 4(b)
October 2, 1953 2-10543 4(q)
August 1, 1957 2-13496 2(b)
September 1, 1962 2-20667 2(b)
June 1, 1967 2-26478 2(b)
February 1, 1973 2-46530 2(b)
February 1, 1975 2-53860 2(aa)
July 1, 1975 2-54285 2(bb)
September 2, 1975 2-57510 2(bb)
March 10, 1976 2-57510 2(cc)
February 1, 1977 2-60276 2(ee)
January 1, 1978 0-849 2
March 1, 1979 0-849 2
March 1, 1980 0-849 2
May 31, 1986 33-3995 4(g)
July 1, 1991 0-849 4(h)
September 1, 1992 0-849 4(m)
December 1, 1994 0-4117-1 4(f)
4.11* Indenture (For Unsecured Subordinated Debt Securities), dated
as of December 1, 1995, between IES Utilities Inc. and The
First National Bank of Chicago, as Trustee (Subordinated
Indenture) (incorporated by reference to Exhibit 4(i) to
IESU's Amendment No. 1 to Registration Statement, File No. 33-
62259)
4.12* Indenture (For Senior Unsecured Debt Securities), dated as of
August 1, 1997, between IES Utilities Inc. and The First
National Bank of Chicago, as Trustee (incorporated by
reference to Exhibit 4(j) to IESU's Registration Statement,
File No. 333-32097)
4.13* The Original through the Nineteenth Supplemental Indentures of
Interstate Power Company to The Chase Manhattan Bank and Carl
E. Buckley and C. J. Heinzelmann, as Trustees, dated January
1, 1948 securing First Mortgage Bonds (incorporated by
reference to Exhibits 4(b) through 4(t) to IPC's Registration
Statement No. 33-59352 dated March 11, 1993)
4.14* Twentieth Supplemental Indenture of Interstate Power Company
to The Chase Manhattan Bank and C. J. Heinzelmann, as
Trustees, dated May 15, 1993 (incorporated by reference to
Exhibit 4(u) to IPC's Registration Statement No. 33-59352
dated March 11, 1993)
10.1 Service Agreement by and among Wisconsin Power & Light
Company, South Beloit Water, Gas and Electric Company, IES
Utilities Inc., Interstate Power Company, and Alliant
Services Company
10.2 Service Agreement by and among Alliant Industries, Inc.,
IPC Development Company, Inc. and Alliant Services Company
10.3 System Coordination and Operating Agreement dated April 11,
1997, among IES Utilities Inc., Interstate Power Company,
Wisconsin Power & Light Company and Alliant Services, Inc.
10.4* Joint Power Supply Agreement among Wisconsin Public Service
Corporation, Wisconsin Power and Light Company, and Madison
Gas and Electric Company, dated February 2, 1967 (incorporated
by reference to Exhibit 4.09 of Wisconsin Public Service
Corporation in File No. 2-27308)
10.5* Joint Power Supply Agreement among Wisconsin Public Service
Corporation, Wisconsin Power and Light Company, and Madison
Gas and Electric Company, dated July 26, 1973 (incorporated by
reference to Exhibit 5.04A of Wisconsin Public Service
Corporation in File No. 2-48781)
10.6* Basic Generating Agreement, Unit 4, Edgewater Generating
Station, dated June 5, 1967, between Wisconsin Power and Light
Company and Wisconsin Public Service Corporation (incorporated
by reference to Exhibit 4.10 of Wisconsin Public Service
Corporation in File No. 2-27308)
10.7* Agreement for Construction and Operation of Edgewater 5
Generating Unit, dated February 24, 1983, between Wisconsin
Power and Light Company, Wisconsin Electric Power Company and
Wisconsin Public Service Corporation (incorporated by
reference to Exhibit 10C-1 to Wisconsin Public Service
Corporation's Form 10-K for the year ended December 31, 1983
(File No. 1-3016))
10.7a* Amendment No. 1 to Agreement for Construction and Operation of
Edgewater 5 Generating Unit, dated December 1, 1988
(incorporated by reference to Exhibit 10C-2 to Wisconsin
Public Service Corporation's Form 10-K for the year ended
December 31, 1988 (File No. 1-3016))
10.8* Revised Agreement for Construction and Operation of Columbia
Generating Plant among Wisconsin Public Service Corporation,
Wisconsin Power and Light Company, and Madison Gas and
Electric Company, dated July 26, 1973 (incorporated by
reference to Exhibit 5.07 of Wisconsin Public Service
Corporation in File No. 2-48781)
10.9* Operating and Transmission Agreement between Central Iowa
Power Cooperative and IESU (incorporated by reference to
Exhibit 10(q) to IESU's Form 10-K for the year 1990)
10.10* Duane Arnold Energy Center Ownership Participation Agreement
dated June 1, 1970 between Central Iowa Power Cooperative,
Corn Belt Power Cooperative and IESU (incorporated by
reference to Exhibit 5(kk) to IESU's Registration Statement,
File No. 2-38674)
10.11* Duane Arnold Energy Center Operating Agreement dated June 1,
1970 between Central Iowa Power Cooperative, Corn Belt Power
Cooperative and IESU (incorporated by reference to Exhibit
5(ll) to IESU's Registration Statement, File No. 2-38674)
10.12* Duane Arnold Energy Center Agreement for Transmission,
Transformation, Switching, and Related Facilities dated June
1, 1970 between Central Iowa Power Cooperative, Corn Belt
Power Cooperative and IESU (incorporated by reference to
Exhibit 5(mm) to IESU's Registration Statement, File No.
2-38674)
10.13* Basic Generating Agreement dated April 16, 1975 between Iowa
Public Service Company, Iowa Power and Light Company, Iowa-
Illinois Gas and Electric Company and IESU for the joint
ownership of Ottumwa Generating Station-Unit 1 (OGS-1)
(incorporated by reference to Exhibit 1 to IESU's Form 10-K
for the year 1977)
10.13a* Addendum Agreement to the Basic Generating Agreement for OGS-1
dated December 7, 1977 between Iowa Public Service Company,
Iowa-Illinois Gas and Electric Company, Iowa Power and Light
Company and IESU for the purchase of 15% ownership in OGS-1
(incorporated by reference to Exhibit 3 to IESU's Form 10-K
for the year 1977)
10.14* Second Amended and Restated Credit Agreement dated as of
September 17, 1987 between Arnold Fuel, Inc. and the First
National Bank of Chicago and the Amended and Restated Consent
and Agreement dated as of September 17, 1987 by IESU
(incorporated by reference to Exhibit 10(j) to IESU's Form
10-K for the year 1987)
10.15# Form of Supplemental Retirement Agreement
10.16# Interstate Energy Corporation 1998 Officer Incentive
Compensation Plan
10.17# Interstate Energy Corporation Long-Term Incentive Program,
revised July 1, 1998
10.18# Alliant Services Company Key Employee Deferred Compensation
Plan
10.19#* Executive Tenure Compensation Plan as revised November 1992
(incorporated by reference to Exhibit 10A to IEC's Form 10-K
for the year ended December 31, 1992)
10.19a# Amendment to Executive Tenure Compensation Plan adopted
February 23, 1998
10.20#* Form of Supplemental Retirement Plan, as revised November 1992
(incorporated by reference to Exhibit 10B to IEC's Form 10-K
for the year ended December 31, 1992)
10.21#* Forms of Deferred Compensation Plans, as amended June, 1990
(incorporated by reference to Exhibit 10C to IEC's Form 10-K
for the year ended December 31, 1990)
10.21a#* Officer's Deferred Compensation Plan II, as adopted September
1992 (incorporated by reference to Exhibit 10C.1 to IEC's Form
10-K for the year ended December 31, 1992)
10.21b#* Officer's Deferred Compensation Plan III, as adopted January
1993 (incorporated by reference to Exhibit 10C.2 to IEC's Form
10-K for the year ended December 31, 1993)
10.22#* Pre-Retirement Survivor's Income Supplemental Plan, as revised
November 1992 (incorporated by reference to Exhibit 10F to
IEC's Form 10-K for the year ended December 31, 1992)
10.23#* Deferred Compensation Plan for Directors, as amended January
17, 1995 (incorporated by reference to Exhibit 10I to IEC's
Form 10-K for the year ended December 31, 1995)
10.24#* Interstate Energy Corporation Long-Term Equity Incentive Plan
(incorporated by reference to Exhibit 4.1 to IEC's Form 10-Q
for the quarter ended June 30, 1994)
10.25#* Key Executive Employment and Severance Agreement by and
between Interstate Energy Corporation and each of W.D. Harvey
and E.G. Protsch (incorporated by reference to Exhibit 4.3 to
IEC's Form 10-Q for the quarter ended June 30, 1994)
10.26#* Key Executive Employment and Severance Agreement by and
between Interstate Energy Corporation and each of E.M.
Gleason, B.J. Swan, D.A. Doyle, P.J. Wegner, C. Fulenwider and
K.K. Zuhlke (incorporated by reference to Exhibit 4.4 to
IEC's Form 10-Q for the quarter ended June 30, 1994)
10.27#* Severance Agreement by and between Interstate Energy
Corporation and Lance W. Ahearn (incorporated by reference to
Exhibit 10N to IEC's Form 10-K for the year ended December 31,
1997)
10.28# Severance Agreement by and between Interstate Energy
Corporation and Anthony J. Amato
10.29#* Employment Agreement, dated as of April 21, 1998, by and
between Interstate Energy Corporation and Erroll B. Davis, Jr.
(incorporated by reference to Exhibit 10.1 to IEC's Form 8-K
dated April 21, 1998)
10.30#* Employment Agreement, dated as of April 21, 1998, by and
between Interstate Energy Corporation and Lee Liu
(incorporated by reference to Exhibit 10.2 to IEC's Form 8-K
dated April 21, 1998)
10.31#* Employment Agreement, dated as of April 21, 1998, by and
between Interstate Power Company and Michael R. Chase
(incorporated by reference to Exhibit 10.3 to IEC's Form 8-K
dated April 21, 1998)
10.32#* Supplemental Retirement Plan (incorporated by reference to
Exhibit 10(l) to IES's Form 10-K for the year ended December
31, 1987)
10.33#* Key Employee Deferred Compensation Plan (incorporated by
reference to Exhibit 10(n) to IES's Form 10-K for the year
ended December 31, 1987)
10.34#* Executive Guaranty Plan (incorporated by reference to Exhibit
10(p) to IES's Form 10-K for the year ended December 31, 1987)
10.35#* Executive Change of Control Severance Agreement - CEO
(incorporated by reference to Exhibit 10(a) to IES's Form 10-Q
for the quarter ended September 30, 1996)
10.36#* Executive Change of Control Severance Agreement - Vice
Presidents (incorporated by reference to Exhibit 10(b) to
IES's Form 10-Q for the quarter ended September 30, 1996)
10.37#* Executive Change of Control Severance Agreement - Other
Officers (incorporated by reference to Exhibit 10(c) to IES's
Form 10-Q for the quarter ended September 30, 1996)
10.38#* Amendments to Key Employee Deferred Compensation Agreement for
Directors (incorporated by reference to Exhibit 10(u) to IES's
Form 10-Q for the quarter ended March 31, 1990)
10.39#* Amendments to Key Employee Deferred Compensation Agreement for
Key Employees (incorporated by reference to Exhibit 10(v) to
IES's Form 10-Q for the quarter ended March 31, 1990)
10.40#* IES Industries Inc. Grantor Trust for Director Retirement Plan
(incorporated by reference to Exhibit 10(c) to IES's Form 10-Q
for the quarter ended September 30, 1997)
10.41#* IES Industries Inc. Grantor Trust for Deferred Compensation
Agreements (incorporated by reference to Exhibit 10(d) to
IES's Form 10-Q for the quarter ended September 30, 1997)
10.42#* IES Industries Inc. Grantor Trust for Supplemental Retirement
Agreements (incorporated by reference to Exhibit 10(e) to
IES's Form 10-Q for the quarter ended September 30, 1997)
10.43#* IES Utilities Inc. Grantor Trust for Deferred Compensation
Agreements (incorporated by reference to Exhibit 10(f) to
IES's Form 10-Q for the quarter ended September 30, 1997)
10.44#* IES Utilities Inc. Grantor Trust for Supplemental Retirement
Agreements (incorporated by reference to Exhibit 10(g) to
IES's Form 10-Q for the quarter ended September 30, 1997)
10.45#* Interstate Power Company Irrevocable Trust Agreement dated
April 30, 1990 (incorporated by reference to Exhibit 99.f to
IPC's Form 10-K for the year ended December 31, 1993)
10.46#* Interstate Power Company Amended Deferred Compensation Plan as
amended through January 30, 1990 (incorporated by reference to
Exhibit 99.e to IPC's Form 10-K for the year ended December
31, 1993)
10.47#* Interstate Power Company Supplemental Retirement Plan as
amended and restated November 10, 1995 and December 9, 1997
(incorporated by reference to Exhibit 99.5 to IPC's Form 10-K
for the year ended December 31, 1997)
10.48#* Interstate Power Company Irrevocable Trust Agreement dated
December 1997 (incorporated by reference to Exhibit 99.7 to
IPC's Form 10-K for the year ended December 31, 1997)
27.1 Financial Data Schedule for Interstate Energy Corporation
27.2 Financial Data Schedule for Interstate Energy Corporation -
Restated June 30, 1997 Results
27.3 Financial Data Schedule for IES Utilities Inc.
27.4 Financial Data Schedule for IES Utilities Inc. - Restated
June 30, 1997 Results
27.5 Financial Data Schedule for Wisconsin Power and Light Company
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrant agrees
to furnish to the Securities and Exchange Commission, upon request, any
instrument defining the rights of holders of unregistered long-term debt
not filed as an exhibit to this Form 10-Q. No such instrument authorizes
securities in excess of 10% of the total assets of IEC, WP&L or IESU, as
the case may be.
Documents incorporated by reference to filings made by IEC under the
Securities Exchange Act of 1934, as amended, are under File No. 1-9894.
Documents incorporated by reference to filings made by WP&L under the
Securities Exchange Act of 1934, as amended, are under File No. 0-337.
Documents incorporated by reference to filings made by IES under the
Securities Exchange Act of 1934, as amended, are under File No. 1-9187.
Documents incorporated by reference to filings made by IESU under the
Securities Exchange Act of 1934, as amended, are under File No. 0-4117-1.
Documents incorporated by reference to filings made by IPC under the
Securities Exchange Act of 1934, as amended, are under File No. 1-3632.
# - A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
Interstate Energy Corporation filed a Current Report on Form 8-K, dated
April 21, 1998, reporting (under Items 2 and 7) the consummation of the
three-way business combination between WPL Holdings, Inc., IES Industries
Inc. and Interstate Power Company.
Interstate Energy Corporation filed a Current Report on Form 8-K, dated
May 18, 1998, reporting (under Item 5) post-merger information included in
the Interstate Energy Corporation (d/b/a Alliant Corporation) Annual
Report to Shareowners.
Interstate Energy Corporation filed a Current Report on Form 8-K, dated
June 10, 1998, reporting (under Item 5) the Kewaunee Nuclear Power Plant
steam generator replacement and transfer of ownership by Madison Gas and
Electric Company to Wisconsin Public Service Corporation.
IES Utilities Inc. filed a Current Report on Form 8-K, dated April 21,
1998, reporting (under Item 5) the consummation of the three-way business
combination between WPL Holdings, Inc., IES Industries Inc. and Interstate
Power Company.
Wisconsin Power and Light Company filed a Current Report on Form 8-K,
dated April 21, 1998, reporting (under Item 5) the consummation of the
three-way business combination between WPL Holdings, Inc., IES Industries
Inc. and Interstate Power Company.
Wisconsin Power and Light Company filed a Current Report on Form 8-K,
dated June 10, 1998, reporting (under Item 5) the Kewaunee Nuclear Power
Plant steam generator replacement and transfer of ownership by Madison Gas
and Electric Company to Wisconsin Public Service Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Interstate Energy Corporation, IES Utilities Inc. and Wisconsin Power and
Light Company have each duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized on the 13th day of August
1998.
INTERSTATE ENERGY CORPORATION
Registrant
By: /s/ Thomas M. Walker Executive Vice President and
Thomas M. Walker Chief Financial Officer (Principal
Financial Officer)
By: /s/ John E. Ebright Vice President-Controller (Principal
John E. Ebright Accounting Officer)
IES UTILITIES INC.
Registrant
By: /s/ Edward M. Gleason Vice President-Treasurer and
Edward M. Gleason Corporate Secretary (Principal
Financial Officer)
By: /s/ John E. Ebright Vice President-Controller (Principal
John E. Ebright Accounting Officer)
WISCONSIN POWER AND LIGHT COMPANY
Registrant
By: /s/ Edward M. Gleason Vice President-Treasurer and
Edward M. Gleason Corporate Secretary (Principal
Financial Officer)
By: /s/ John E. Ebright Vice President-Controller (Principal
John E. Ebright Accounting Officer)
Exhibit 3.4 As Executed
BYLAWS
OF
WISCONSIN POWER AND LIGHT COMPANY
(Effective as of April 21, 1998)
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL AND BUSINESS OFFICES. - The Corporation may
have such principal and other business offices, either within or without
the State of Wisconsin, as the Board of Directors may designate or as the
business of the Corporation may require from time to time.
Section 1.2 REGISTERED OFFICE. - The registered office of the
Corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the Corporation shall be identical to such registered
office.
ARTICLE II
SEAL
Section 2.1 CORPORATE SEAL. - The corporate seal shall have
inscribed thereon the name of the Corporation and the words "CORPORATE
SEAL, WISCONSIN." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced.
ARTICLE III
SHAREOWNERS
Section 3.1. ANNUAL MEETING. - The Annual Meeting of Shareowners
shall be held at such date and time as the Board of Directors may
determine. The Board of Directors may designate any place, either within
or without the State of Wisconsin, as the place for the Annual Meeting.
If no designation is made, the place of the Annual Meeting shall be the
principal office of the Corporation. The Annual Meeting shall be held for
the purposes of electing Directors and of transacting such other business
as may properly come before the meeting.
Section 3.2 SPECIAL MEETINGS. - Special Meetings of the Shareowners
may be called by the Board of Directors or the Chief Executive Officer.
The Corporation shall call a Special Meeting of Shareowners in the event
that the holders of at least ten percent (10%) of all of the votes
entitled to be cast on any issue request a special meeting be held.
Section 3.3 NOTICE OF MEETINGS - WAIVER. - Notice of the time and
place of each Annual or Special Meeting of Shareowners shall be sent by
mail to the recorded address of each shareowner not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, except
in cases where other special method of notice may be required by statute,
in which case the statutory method shall be followed. The notice of a
Special Meeting shall state the purpose of the meeting. If an Annual or
Special Meeting of shareowners is adjourned to a different date, time or
place, the Corporation shall not be required to give notice of the new
date, time or place if the new date, time or place is announced at the
meeting before adjournment; provided, however, that if a new record date
for an adjourned meeting is or must be fixed, the Corporation shall give
notice of the adjourned meeting to persons who are shareowners as of the
new record date. Notice of any meeting of the shareowners may be waived by
any shareowner.
Section 3.4 FIXING OF RECORD DATE. - For the purpose of determining
shareowners entitled to notice of, or to vote at, any meeting of
shareowners, or at any adjournment thereof, or shareowners entitled to
receive payment of any dividend, or in order to make a determination of
shareowners for any other lawful action, the Board of Directors may fix,
in advance, a record date for such determination of shareowners. Such
date in case of a meeting of shareowners or other lawful action shall not
be more than seventy (70) days prior to the date of such meeting or lawful
action. If no record date is fixed by the Board of Directors or by
statute for the determination of shareowners entitled to demand a special
meeting as contemplated in Section 3.2 hereof, the record date shall be
the date that the first shareowner signs the demand. When a determination
of shareowners entitled to vote at any meeting of shareowners has been
made as provided in this section, such determination shall apply to any
adjournment thereof unless the meeting is adjourned to a date more than
one hundred twenty (120) days after the date fixed for the original
meeting in which event the Board of Directors must fix a new record date.
Section 3.5 SHAREOWNER LIST. - The Corporation shall have available,
beginning two (2) days after the notice of the meeting is given for which
the list was prepared and continuing to the date of the meeting, a
complete record of each shareowner entitled to vote at such meeting, or
any adjournment thereof, showing the address of and number of shares held
by each shareowner. The shareowner list shall be available for inspection
by any shareowner during normal business hours at the Corporation's
principal office or at a place identified in the meeting notice in the
city where the meeting will be held. The Corporation shall make the
shareowners' list available at the meeting and any shareowner or his agent
or attorney may inspect the list at any time the meeting or any
adjournment thereof.
Section 3.6 QUORUM AND VOTING REQUIREMENTS. - Shares entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. A
majority of the outstanding shares entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for action on
that matter. If a quorum exists, except in the case of the election of
directors, action on a matter shall be approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the
Corporation's Articles of Incorporation, any Bylaw adopted under authority
granted in the Articles of Incorporation or statute requires a greater
number of affirmative votes. Directors shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors
at a meeting at which a quorum is present. Though less than a quorum of
the outstanding votes are represented at a meeting, a majority of the
votes so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 3.7 CONDUCT OF MEETING. - The Chairperson of the Board shall
preside at each meeting of shareowners. In the absence of the Chairperson
of the Board, such persons, in the following order, shall act as chair of
the meeting; the Vice Chairperson of the Board, the Chief Executive
Officer, the President, any Vice President, the Director in attendance
with the longest tenure in that office. The Secretary, or if absent, an
Assistant Secretary, of the Company shall act as Secretary of each
shareowner.
Section 3.8 PROXIES. - Any shareowner having the right to vote at a
meeting of shareowners may exercise such right by voting in person or by
proxy at such meeting. Such proxies shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 3.9 VOTING OF SHARES. - Except as provided in the Articles of
Incorporation or statute, each outstanding share entitled to vote shall be
entitled to one (1) vote upon each matter submitted to a vote at a meeting
of shareowners.
Section 3.10 VOTING OF SHARES BY CERTAIN HOLDERS. - Shares standing
in the name of another corporation may be voted by such officer, agent or
proxy as the Bylaws of such corporation may prescribe, or, in the absence
of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a
transfer of such shares into that person's name. Shares standing in the
name of a trustee may be voted by such trustee, either in person or by
proxy, without a transfer of such shares into the trustee's name. The
Corporation may request evidence of such fiduciary status with respect to
the vote, consent, waiver, or proxy appointment.
Shares standing in the name of a receiver or trustee in
bankruptcy may be voted by such receiver or trustee, and shares held by
or under the control of a receiver may be voted by such receiver
without the transfer of the shares into such person's name if
authority so to do is contained in an appropriate order of the court by
which such receiver was appointed.
A pledgee, beneficial owner, or attorney-in-fact of the shares held
in the name of a shareholder shall be entitled to vote such shares. The
Corporation may request evidence of such signatory's authority to sign for
the shareholder with respect to the vote, consent, waiver, or proxy
appointment.
Neither treasury shares nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of Directors of
such other corporation is held by the Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares
at any given time.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.1 GENERAL POWER. - The business and affairs of the
Corporation shall be managed by its Board of Directors.
Section 4.2 NUMBER. CLASSES & TERM. - The number of Directors of
the Corporation shall be fifteen (15). The Directors of the Corporation
shall be divided into three classes, hereinafter referred to as "Class I,"
"Class II," and "Class III" with each class having five (5) Directors.
The initial Class I Directors shall consist of two (2) directors selected
by each of IES Industries Inc. ("IES") and WPL Holdings Inc. ("WPLH") and
one (1) selected by Interstate Power Company ("IPC"); the initial Class II
Directors shall consist of two (2) directors selected by each of IES and
WPLH and one (1) selected by IPC; and the initial Class III Directors
shall consist of two (2) directors selected by each of IES and WPLH and
one (1) selected from IPC. The initial term of Class I Directors shall
expire at the first annual meeting of Shareowners of the Corporation, the
initial term of Class II Directors shall expire at the second annual
meeting of Shareowners of the Corporation and the initial term of Class
III Directors shall expire at the third annual meeting of Shareowners of
the Corporation.
At each annual shareowner meeting after the first annual shareowner
meeting, directors to replace those of a Class whose terms expire at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting and until their respective successors shall have been duly
qualified and elected. If the number of directors is hereafter changed,
any newly created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
Section 4.3 CHAIRPERSON OF THE BOARD. - The Chairperson of the Board
if not designated as the Chief Executive Officer of the Company shall
assist the Board in the formulation of policies and may make
recommendations therefore. Information as to the affairs of the Company
in addition to that contained in the regular reports shall be furnished to
him or her on request. He or she may make suggestions and recommendations
to the Chief Executive Officer regarding any matters relating to the
affairs of the Company and shall be available for consultation and advice.
Section 4.4 VICE CHAIRPERSON OF THE BOARD. - The Vice Chairperson of
the Board shall assist the Board in the formulation of policies and make
recommendations therefore. The Vice Chairperson shall have such other
powers and duties as may be prescribed for him or her by the Chairperson
of the Board or the Board of Directors. In the absence of or the
inability of the Chairperson of the Board to act as Chairperson of the
Board, the Vice Chairperson of the Board shall assume the powers and
duties of the Chairperson of the Board.
Section 4.5 QUALIFICATIONS AND REMOVAL. - No person who has attained
70 years of age shall be eligible for election or re-election to the Board
of Directors. Any Director who has attained seventy (70) years of age
shall resign from the Board of Directors effective as of the next annual
Meeting of Shareowners. For a period of five (5) years following the
formation of the Corporation, no person, except any of the initial
Directors selected pursuant to Section 4.2 hereof, who is an executive
officer or employee of the Corporation or any of its subsidiaries shall be
eligible to serve as a Director of the Corporation; provided, however,
that any individual serving as Chief Executive Officer of the Corporation
shall be eligible to serve as a Director of the Corporation. In the event
the Chief Executive Officer resigns or retires from his or her office or
employment with the Corporation, he or she shall simultaneously submit his
or her resignation from the Board of Directors. In the event that the
Chief Executive Officer is removed from his or her office by the Board of
Directors, or is involuntarily terminated from employment with the
Corporation, he or she shall simultaneously submit his or her resignation
from the Board of Directors. In the event that a Director experiences a
change in their principal occupation or primary business affiliation, the
Director must submit their resignation from the Board to the Nominating
and Governance Committee. The Nominating and Governance Committee shall
recommend to the Board of Directors whether the Board shall accept such
resignation. If the Nominating and Governance Committee recommends
acceptance of the resignation, an affirmative vote of two-thirds of the
remaining Directors holding office is required to affirm the Nominating
and Governance Committee's recommendation. A resignation may be tendered
by any Director at any meeting of the shareholders or of the Board of
Directors, who shall at such meeting accept the same.
Section 4.6 REGULAR MEETINGS. - Regular meetings of the Board of
Directors shall be held at such time and place as may be determined by the
Board of Directors, but in no event shall the Board meet less than once a
year.
Section 4.7 SPECIAL MEETINGS. - Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
the Vice Chairman of the Board, the Chief Executive Officer or any two (2)
Directors. The Chief Executive Officer or Secretary may fix any place,
either within or without the State of Wisconsin, whether in person or by
telecommunications, as the place for holding any special meeting.
Section 4.8 NOTICE; WAIVER. - Notice of any meeting of the Board of
Directors, unless otherwise provided pursuant to Section 4.6, shall be
given at least forty-eight (48) hours prior to the meeting by written
notice delivered personally or mailed to each Director at such address
designed by each Director, by telegram or other form of wire or wireless
communication. The notice need not describe the purpose of the meeting of
the Board of Directors or the business to be transacted at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, so addressed, with postage prepared. Any Director
may waive notice of any meeting. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where
a Director attends a meeting for the express purpose of objecting to the
transaction of business because the meeting is not lawfully called or
convened.
Section 4.9 QUORUM. - A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a
meeting, a majority of the Directors present may adjourn the meeting to
some other day without further notice.
Section 4.10 MEETING PARTICIPATION. - (a) Any or all members of
the Board of Directors, or any committee thereof, may participate in a
regular or special meeting by, or to conduct the meeting through, the use
of any means of communication by which any of the following occurs:
1) All participating directors may simultaneously hear each
other during the meeting.
2) All communication during the meeting is immediately
transmitted to each participating director, and each
participating director is able to immediately send messages
to all other participating directors.
(b) If a meeting is conducted by the means of communication
described herein, all participating directors shall be informed
that a meeting is taking place at which official business may be
transacted.
(c) A director participating in a meeting by means of such
communication is deemed to be present in person at the meeting.
Section 4.11 ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Directors of the Corporation
or of any committee of the Board may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by
all of the Directors or all of the members of the Committee of Directors,
as the case may be. Such consent shall have the same force and effect as
a unanimous vote at a meeting and shall be filed with the Secretary of the
Corporation to be included in the official records of the Corporation.
The action taken is effective when the last Director signs the consent
unless the consent specifies a different effective date.
Section 4.12 PRESUMPTION OF ASSENT. - A Director of the Corporation
who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless (a) the Director objects at the beginning of the
meeting or promptly upon arrival to the holding of or transacting business
at the meeting, (b) the Director's dissent or abstention shall be entered
in the minutes of the meeting, (c) the Director shall file a written
dissent or abstention to such action with the presiding officer of the
meeting before the adjournment thereof or shall forward such dissent or
abstention by registered or certified mail to the Secretary of the
Corporation immediately after the adjournment of the meeting, or (d) the
Director shall file a written notice to the Secretary of the Corporation
promptly after receiving the minutes of the meeting that the minutes
failed to show the Director's dissention or abstention from the action
taken. Such right to dissent or abstain shall not apply to a Director who
voted in favor of such action.
Section 4.13 VACANCIES. - Except as provided below, any vacancy
occurring in the Board of Directors or on any Committee of the Board of
Directors and any directorship to be filled by reason of an increase in
the number of Directors may be filled by the affirmative vote of a
majority of the Directors then in office, even if less than a quorum of
the Board of Directors. For a period of time commencing on formation of
Interstate Energy Corporation and expiring on the date of the third annual
meeting of shareowners of the Corporation, the initially appointed IES,
IPC and WPLH directors, each as a separate group, shall be entitled to
nominate those persons who will be eligible to be appointed, elected or
re-elected as IES, IPC and WPLH Directors. The Director or Directors so
chosen shall hold office until the next election of the Class for which
such Director or Directors shall have been chosen and until their
successors shall have been duly elected and qualified.
Section 4.14 COMPENSATION. - Compensation and expenses for
attendance at a regular or special meeting of the Board of Directors, or
at any committee meeting, shall be payable in such amounts as determined
from time to time by the Board of Directors. No such payment shall
preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor. Directors who are full time
employees or officers of the Corporation shall not receive any
compensation.
ARTICLE V
COMMITTEES
Section 5.1 COMMITTEES. - The Board of Directors may, by resolution
passed by a majority of the whole Board, designate from their number
various Committees from time to time as corporate needs may dictate. The
Committees may make their own rules of procedure and shall meet where and
as provided by such rules, or by resolution of the Board of Directors. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business. Each Committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required. The
Committee may be authorized by the Board of Directors to perform specified
functions, except that a committee may not do any of the following: (a)
authorize distributions; (b) approve or propose to shareowners action that
the Wisconsin Business Corporation Law requires to be approved by
shareowners; (c) fill vacancies on the Board of Directors, or, unless the
Board of Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the Corporation's Articles of
Incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of
merger not requiring shareowner approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Section 5.2 EXECUTIVE COMMITTEE. An Executive Committee is hereby
established and shall consist of at least three (3) members, including the
Chairman of the Board. The Executive Committee shall possess all the
powers and authority of the Board of Directors when said Board of
Directors is not in session, except for the powers and authorities set
forth in Section 5.1.
Section 5.3 AUDIT COMMITTEE. - An Audit Committee is hereby
established and shall consist of at least three (3) Directors, all of whom
shall be outside members of the Board of Directors. The members of the
Committee shall be elected annually by a majority vote of the members of
the Board of Directors. Said Committee shall meet at the call of any one
of its members, but in no event shall it meet less than once a year.
Subsequent to each such Committee meeting, a report of the actions taken
by such Committee shall be made to the Board of Directors.
Section 5.4 COMPENSATION AND PERSONNEL COMMITTEE - A Compensation
and Personnel Committee is hereby established and shall consist of at
least three (3) Directors who are not and never have been officers,
employees or legal counsel of the Company. The Chairperson and the
members of the Compensation and Personnel Committee shall be elected
annually by a majority vote of the members of the Board of Directors.
Said Committee shall meet at such times as it determines, but at least
twice each year, and shall meet at the request of the Chairman of the
Board, the Chief Executive Officer, or any Committee member. Subsequent
to each such Committee meeting, a report of the actions taken by such
Committee shall be made to the Board of Directors.
Section 5.5 NOMINATING AND GOVERNANCE COMMITTEE. - A Nominating and
Governance Committee shall be established and shall consist of at least
three (3) Directors, all of whom shall be outside members of the Board of
Directors. The Chairperson and the members of the Nominating and
Governance Committee shall be elected annually by a majority vote of the
members of the Board of Directors. Said Committee shall meet at the call
of any one of its members, but in no event shall it meet less than once a
year. Subsequent to each such Committee meeting, a report of the actions
taken by such Committee shall be made to the Board of Directors.
ARTICLE VI
OFFICERS
Section 6.1 OFFICERS. - The Board of Directors shall elect a Chief
Executive Officer, a President, such number of Vice Presidents with such
designations as the Board of Directors at the time may decide upon, a
Secretary, a Treasurer and a Controller. The Chief Executive Officer may
appoint such other officers and assistant officers as may be deemed
necessary. The same person may simultaneously hold more than one such
office.
Section 6.2 TERM OF OFFICERS. - All Officers, unless sooner removed,
shall hold their respective offices until their successors, willing to
serve, shall have been elected but any Officer may be removed from Office
at any time by the Board of Directors.
Section 6.3 REMOVAL OF OFFICERS. - Any officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer shall not of itself create contract
rights.
Section 6.4 CHIEF EXECUTIVE OFFICER. - Subject to the control of
the Board of Directors the Chief Executive Officer designated by the Board
of Directors shall have and be responsible for the general management and
direction of the business of the Corporation, shall establish the lines of
authority and supervision of the Officers and employees of the
Corporation, shall have the power to appoint and remove and discharge any
and all agents and employees of the Corporation not elected or appointed
directly by the Board of Directors, and shall assist the Board in the
formulation of policies of the Corporation. The Chairperson of the Board,
if Chief Executive Officer, may delegate any part of his or her duties to
the President, or to one or more of the Vice Presidents of the
Corporation.
Section 6.5 PRESIDENT. - The President, when he or she is not
designated as and does not have the powers of the Chief Executive Officer,
shall have such other powers and duties as may from time to time be
prescribed by the Board of Directors or be delegated to him or her by the
Chairperson of the Board or the Chief Executive Officer.
Section 6.6 VICE PRESIDENTS. - The Vice Presidents shall have such
powers and duties as may be prescribed for him or her by the Board of
Directors and the Chief Executive Officer. In the absence of or in the
event of the death of the Chief Executive Officer and the President, the
inability or refusal to act, or in the event for any reason it shall be
impracticable for the Chief Executive officer and the President to act
personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the Chief Executive Officer
and the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer and the
President. The execution of any instrument of the Corporation by any Vice
President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the Chief Executive Officer and the
President.
Section 6.7 SECRETARY. - The Secretary shall attend all meetings of
the Board of Directors, shall keep a true and faithful record thereof in
proper books to be provided for that purpose, and shall be responsible for
the custody and care of the corporate seal, corporate records and minute
books of the Corporation, and of all other books, documents and papers as
in the practical business operation of the Corporation shall naturally
belong in the office or custody of the Secretary, or shall be placed in
his or her custody by the Chief Executive Officer or by the Board of
Directors. He or she shall also act as Secretary of all shareowners'
meetings, and keep a record thereof. He or she shall, except as may be
otherwise required by statute or by these bylaws, sign, issue and publish
all notices required for meetings of shareowners and of the Board of
Directors. He or she shall be responsible for the custody of the stock
books of the Corporation and shall keep a suitable record of the addresses
of shareowners. He or she shall also be responsible for the collection,
custody and disbursement of the funds received for dividend reinvestment.
He or she shall sign stock certificates, bonds and mortgages, and all
other documents and papers to which his or her signature may be necessary
or appropriate, shall affix the seal of the Corporation to all instruments
requiring the seal, and shall have such other powers and duties as are
commonly incidental to the office of Secretary, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.8 TREASURER. - The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and disbursement of the
funds of the Corporation, and shall deposit its funds in the name of the
Corporation in such banks or trust companies as he or she shall designate
and shall keep a proper record of cash receipts and disbursements. He or
she shall be responsible for the custody of such books, receipted vouchers
and other books and papers as in the practical business operation of the
Corporation shall naturally belong in the office or custody of the
Treasurer, or shall be placed in his or her custody by the President, or
by the Board of Directors. He or she shall sign checks, drafts, and other
paper providing for the payment of money by the Corporation for operating
purposes in the usual course or business. He or she may, in the absence of
the Secretary and Assistant Secretaries sign stock certificates. The
Treasurer shall have such other powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him or
her by the President or by the Board of Directors.
Section 6.9 CONTROLLER. - The Controller shall be the principal
accounting Officer of the Corporation. He or she shall have general
supervision over the books of accounts of the Corporation. He or she
shall examine the accounts of all Officers and employees from time to time
and as often as practicable, and shall see that proper returns are made of
all receipts from all sources. All bills, properly made in detail and
certified, shall be submitted to him or her, and he or she shall audit and
approve the same if found satisfactory and correct, but he or she shall
not approve any voucher unless charges covered by the voucher have been
previously approved through work orders, requisition or otherwise by the
head of the department in which it originated, or unless he or she shall
be otherwise satisfied of its propriety and correctness. He or she shall
have full access to all minutes, contracts, correspondence and other
papers and records of the Corporation relating to its business matters,
and shall be responsible for the custody of such books and documents as
shall naturally belong in the custody of the Controller and as shall be
placed in his or her custody by the President or by the Board of
Directors. The Controller shall have such other powers and duties as are
commonly incidental to the office of Controller, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.10 ASSISTANT OFFICERS. - The Assistant Secretaries,
Assistant Treasurers, Assistant Controllers, and other Assistant Officers
shall respectively assist the Secretary, Treasurer, Controller, and other
Officers of the Corporation in the performance of the respective duties
assigned to such principal Officer, and in assisting his or her principal
Officer each assistant Officer shall to that extent and for such purpose
have the same powers as his or her principal Officer. The powers and
duties of any such principal Officer shall temporarily devolve upon an
assistant Officer in case of the absence, disability, death, resignation
or removal from office of such principal Officer.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7.1 CERTIFICATES FOR SHARES. - Each certificate representing
shares of the Corporation shall state upon the fact (a) that the
Corporation is organized under the laws of the State of Wisconsin, (b) the
name of the person to whom issued, (c) the number and class of shares, and
the designation of the series, if any, which such certificate represents,
and (d) the par value of each share, if any, and each such certificate
shall otherwise be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the
Board, or the Chief Executive Officer or the President and by the
Secretary or an Assistant Secretary and shall be sealed with the corporate
seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on
behalf of a transfer agent and registrar. In case any officer or other
authorized person who has signed or whose facsimile signature has been
placed upon such certificate for the Corporation shall have ceased to be
such officer or employee or agent before such certificate is issued, it
may be issued by the Corporation with the same effect as if such person
where an officer or employee or agent at the date of its issue. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
All certificates surrendered to the Corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity
to the Corporation as the Board of Directors may prescribe.
Section 7.2. TRANSFER OF SHARES. - Transfer of shares of the
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by such person's legal
representative, who shall furnish proper evidence of authority to
transfer, or authorized attorney, by power of attorney duly executed and
filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares.
Subject to the provisions of Section 3.10 of Article III of these
Bylaws, the person in whose name shares stand on the books of the
Corporation shall be treated by the Corporation as the owner thereof for
all purposes, including all rights deriving from such shares, and the
Corporation shall not be bound to recognize any equitable or other claim
to, or interest in, such shares or rights deriving from such shares, on
the part of any other person, including (without limitation) a purchaser,
assignee or transferee of such shares, or rights deriving from such
shares, unless and until such purchaser, assignee, transferee or other
person becomes the record holder of such shares, whether or not the
Corporation shall have either actual or constructive notice of the
interest of such purchaser, assignee, transferee or other person. Except
as provided in said Section 3.10 hereof, no such purchaser, assignee,
transferee or other person shall be entitled to receive notice of the
meetings of shareholders, to vote at such meetings, to examine the
complete record of the shareholders entitled to vote at meetings, or to
own, enjoy or exercise any other property or rights deriving from such
shares against the Corporation, until such purchaser, assignee, transferee
or other person has become the record holder of such shares.
Section 7.3 LOST, DESTROYED OR STOLEN CERTIFICATES. - When the owner
claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the Corporation has notice that such
shares have been acquired by a bona fide purchaser, (b) files with the
Corporation a sufficient indemnity bond if required by the Corporation and
(c) satisfies such other reasonable requirements as may be provided by the
Corporation.
Section 7.4 STOCK REGULATIONS. - The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the Corporation.
ARTICLE VIII
INDEMNIFICATION AND LIABILITY OF DIRECTOR AND OFFICERS
Section 8.1 INDEMNIFICATION. - The Corporation shall, to the fullest
extent permitted or required by Sections 180.0850 to 180.0859, inclusive,
of the Wisconsin Business Corporation Law, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the corporation to provide broader
indemnification rights than prior to such amendment), indemnify its
Directors, Officers, employees and agents against any and all Liabilities,
and advance any and all reasonable Expenses, incurred thereby in any
Proceeding to which any such Director, Officer, employee or agent is a
Party because he or she is or was a Director, Officer, employee or agent
of the Corporation. The rights to indemnification granted hereunder shall
not be deemed exclusive of any other rights to indemnification against
Liabilities or the advancement of Expenses which a Director, Officer,
employee or agent may be entitled under any written agreement, Board
resolution, vote of shareowners, the Wisconsin Business Corporation Law or
otherwise. The Corporation may, but shall not be required to, supplement
the foregoing rights to indemnification against Liabilities and
advancement of Expenses under this Section 8.1 by the purchase of
insurance on behalf of any one or more of such Directors, Officers,
employees or agents, whether or not the Corporation would be obligated to
indemnify or advance Expenses to such Director, Officer, employee or agent
under this Section 8.1. All capitalized terms used in this Article VIII
and not otherwise defined herein shall have the meaning set forth in
Section 180.0850 of the Wisconsin Business Corporation Law.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FISCAL YEAR. - The fiscal year of the Corporation shall
be the calendar year.
Section 9.2 DIVIDENDS. - Subject to the provisions of law or the
Articles of Incorporation, the Board of Directors may, at any regular or
special meeting, declare dividends upon the capital stock of the
Corporation payable out of surplus (whether earned or paid-in) or profits
as and when they deem expedient. Before declaring any dividend there may
be set apart out of surplus or profits such sum or sums as the directors
from time to time in their discretion deem proper for working capital or
as a reserve fund to meet contingencies or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.
Section 9.3 CONTRACTS, CHECKS, DRAFTS, DEEDS, LEASES AND OTHER
INSTRUMENTS. - All contracts, checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time
to time be determined by resolution of the Board of Directors. The Board
may authorize by resolution any officer or officers to enter into and
execute any contract or instrument of indebtedness in the name of the
Corporation, and such authority may be general or confined to specific
instances. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such banks
or other depositories as the Treasurer may authorize.
All contracts, deeds, mortgages, leases or instruments that require
the corporate seal of the Corporation to be affixed thereto shall be
signed by the President or a Vice President, and by the Secretary, or an
Assistant Secretary, or by such other officer or officers, or person or
persons, as the Board of Directors may be resolution prescribe.
Section 9.4 VOTING OF SHARES OWNED BY THE CORPORATION. - Subject
always to the specific directions of the Board of Directors, any share or
shares of stock issued by any other corporation and owned or controlled by
the Corporation may be voted at any shareholders' meeting of such other
corporation by the Chief Executive Officer of the Corporation, if present,
or if absent by any other officer of the Corporation who may be present.
Whenever, in the judgment of the Chief Executive Officer, or if absent, of
any officer, it is desirable for the Corporation to execute a proxy or
give a shareholders' consent in respect to any share or shares of stock
issued by any other corporation and owned by the Corporation, such proxy
or consent shall be executed in the name of the Corporation by the Chief
Executive Officer or one of the officers of the Corporation and shall be
attested by the Secretary or an Assistant Secretary of the Corporation
without necessity of any authorization by the Board of Directors. Any
person or persons designated in the manner above stated as the proxy or
proxies of the Corporation shall have full right, power and authority to
vote the share or shares of stock issued by such other corporation and
owned by the Corporation in the same manner as such share or shares might
be voted by the Corporation.
ARTICLE X
AMENDMENT OR REPEAL OF BYLAWS
Section 10.1 AMENDMENTS BY BOARD OF DIRECTORS. - Except as otherwise
provided by the Wisconsin Business Corporation Law or the Articles of
Incorporation, these Bylaws may be amended or repealed and new Bylaws may
be adopted by the Board of Directors by the affirmative vote of a majority
of the number of directors present at any meeting at which a quorum is in
attendance; provided, however, that the shareowners in adopting, amending
or repealing a particular bylaw may provide therein that the Board of
Directors may not amend, repeal or readopt that bylaw.
Section 10.2 IMPLIED AMENDMENT. - Any action taken or authorized by
the shareowners or by the Board of Directors which would be inconsistent
with the Bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the Bylaws so that the Bylaws would be
consistent with such action shall be given the same effect as though the
Bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.
Exhibit 3.5
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
IES UTILITIES INC.
ARTICLE I
The name of the corporation is IES UTILITIES INC.
ARTICLE II
The principal place of business of this Corporation shall be at Cedar
Rapids in the County of Linn and the State of Iowa.
ARTICLE III
The general nature of the business of the Corporation and the objects
or purposes to be transacted, provided for and carried on, for itself or
for other corporations, associations or individuals are to own, sell,
lease, construct, purchase, erect or otherwise acquire buildings wherein
business of the Corporation may be carried on; to own, sell dispose of,
lease, construct, purchase, or otherwise acquire, equip, maintain and
operate electric light plants, electric transmission lines, electric power
plants, gas plants, heating plants, and other public utilities not herein
referred to; to manufacture, buy, sell, accumulate, store, transmit,
furnish and distribute electrical energy for light, heat, power and other
purposes; to produce or in any manner acquire, sell, dispose of and
distribute gas, its by-products and residual products; to sell and furnish
the products of such public utilities as the Corporation may at any time
own, lease or operate; to deal in all apparatus and things required for,
or capable of being used in connection with, the generation, distribution,
supply, accumulation, use and employment of electrical energy, gas and
heat; to produce, create, develop and in any manner acquire water powers;
to improve and utilize such water powers; to sell in any manner, dispose
of and distribute such water powers in the generation of electrical
energy; to acquire, hold, use, dispose of and sell rights and franchises
of every kind, nature and class; to purchase, sell, assign, transfer,
mortgage, pledge or otherwise dispose of shares of capital stock, bonds,
debentures, evidences of indebtedness, and other securities of any
corporation or association, provided, however, except in the case of
securities of a corporation owning or operating railway properties, the
principal business of the issuers of such capital stock, bonds,
debentures, evidences of indebtedness or other securities so acquired by
the Corporation shall be one of the businesses in which this Corporation
is engaged at the time, and while this Corporation is the holder of any
such shares of stock to exercise all the rights, powers, and privileges of
ownership, including the right to vote thereon in the same manner as a
natural person might or could; to aid, facilitate and assist in the
construction, building, extension, improvement, equipment, maintenance and
operation of any electric generating plant, gas plant, heating plant and
other public utility; to aid any corporation, association or individual of
which any stock, bonds, evidences of indebtedness or any other securities
are held by the Corporation, provided the principal business of the issuer
is a business in which this Corporation is engaged at that time; to do any
acts or things designed to protect, preserve, improve or enhance the value
of stock, bonds or other evidences of indebtedness or other securities
owned by this Corporation; to borrow money and issue its obligations
therefor, and to secure the payment of its obligations by mortgage or
pledge of all or any part of its property now owned or hereafter
acquired, and the rents, income and profits thereof; to draw, make,
execute, accept, endorse, discount, transfer, and assign promissory notes,
bills of exchange, warrants, and other obligations; to acquire and hold
and to sell and transfer shares of its own capital stock, but no share of
stock of the Corporation while held, owned or controlled by it, directly
or indirectly, shall be voted at any meeting of the stockholders of the
Corporation.
This Corporation may conduct its business in the State of Iowa and in
other states, districts and territories of the United States, and may
hold, own, improve, sell, convey and otherwise dispose of real and
personal property of every class and description in any of the states,
districts and territories of the United States, subject to the respective
laws of such states, district and territories, and the Corporation shall
have the right to do and perform all acts necessary or pertaining to such
lines of business as it may lawfully engage in and for the successful
conduct thereof, and may exercise all of the powers, rights and privileges
conferred by the laws of Iowa upon corporations organized for pecuniary
profit, and all such rights, powers and privileges as may hereafter be
conferred by the laws of Iowa upon corporations organized for the purpose
of pecuniary profit. It is the intention that no object or purpose
specified in this article, except when otherwise expressed, shall be in
any wise limited or restricted by reference to or inference from any other
clause in these articles, but the several objects and purposes specified
in this article shall be regarded as independent objects and purposes.
ARTICLE IV
CAPITAL STOCK
Section 1. The authorized capital stock of the Corporation shall
consist of 25,166,406 shares, of which 146,406 shall be 4.80% Cumulative
Preferred Stock of the par value of $50 each, 120,000 shares shall be
4.30% Cumulative Preferred Stock of the par value of $50 each, 200,000
shares shall be Cumulative Preferred Stock of the par value of $50 each
issuable in series as hereinafter provided, 700,000 shares shall be
Cumulative Preference Stock of the par value of $100 each issuable in
series as hereinafter provided and 24,000,000 shares shall be Common Stock
of the par value of $2.50 each.
Section 2. The designations, rights, preferences and conditions of
the 4.80% Cumulative Preferred Stock and Common Stock of the Corporation
shall be as follows:
1. The 4.80% Cumulative Preferred Stock shall be entitled, in
preference to the Common Stock but pari passu with any additional class of
cumulative preferred stock which may be authorized pursuant to the
provisions of Paragraph 10 of Section 2 of Article IV hereof, to dividends
from surplus (whether earned or paid-in) or profits at the rate of four
and eight-tenths per cent (4.80%) of the par value thereof per annum,
payable quarterly on April 1, July 1, October 1 and January 1 of each
year, when and as declared by the Board of Directors. Such dividends with
respect to each share shall be cumulative from the first day of the
dividend period in which such share shall originally have been issued. No
share of the 4.80% Cumulative Preferred Stock shall be entitled to any
dividends in excess of the aforesaid dividends at the rate of four and
eight-tenths per cent (4.80%) of the par value thereof per annum.
2. In the event of involuntary dissolution or liquidation of the
Corporation, the holders of the 4.80% Cumulative Preferred Stocks shall be
entitled, in preference to the Common Stock, but pari passu with any
additional class of cumulative preferred stock which may be authorized
pursuant to the provisions of Paragraph 10 of Section 2 of Article IV
hereof, to receive Fifty Dollars ($50) per share, the par value of their
shares, plus an amount equal to the accrued and unpaid dividends on such
shares to the date of dissolution or liquidation. In the event of any
voluntary dissolution or liquidation, the holders of the 4.80% Cumulative
Preferred Stock shall be entitled, in preference to the Common Stock, but
pari passu with any additional class of cumulative preferred stock, which
may be authorized pursuant to the provisions of Paragraph 10 of Section 2
of Article IV hereof, to receive Fifty Dollars ($50) per share, plus an
amount equal to the accrued and unpaid dividends on such shares to the
date of dissolution or liquidation and plus a premium of $2.00 per share
if such dissolution or liquidation should occur on or prior to June 30,
1953; a premium of $1.50 per share if such dissolution or liquidation
should occur subsequent to June 30, 1953, but on or prior to June 30,
1956; a premium of $1.00 per share if such dissolution or liquidation
should occur subsequent to June 30, 1956, but on or prior to June 30,
1960; and a premium of 25 cents per share if such dissolution or
liquidation should occur at any time subsequent to June 30, 1960.
3. The 4.80% Cumulative Preferred Stock may be redeemed in whole or
in part at any time at the applicable redemption price for each share of
4.80% Cumulative Preferred Stock redeemed. The redemption price from time
to time shall be: $52.00 per share if redeemed on or before June 30,1953;
$51.50 per share if redeemed thereafter and on or before June 30, 1956;
$51.00 per share if redeemed thereafter and on or before June 30, 1960;
and $50.25 per share if redeemed thereafter; together, in each case, with
an amount equal to the accrued and unpaid dividends to and including the
date of redemption. If less than all of the shares of the 4.80%
Cumulative Preferred Stock are to be redeemed, they shall be selected in
such manner as the Board of Directors shall determine. Nothing herein
contained shall limit any right of the Corporation to purchase or
otherwise acquire any shares of the 4.80% Cumulative Preferred Stock.
Notice of the intention of the Corporation to redeem shares of 4.80%
Cumulative Preferred Stock or any thereof shall be mailed at least thirty
(30) days before the date of redemption to each holder of record of the
shares to be redeemed, at his last known post office address as shown by
the records of the Corporation. If the Corporation shall deposit on or
prior to any date fixed for redemption of 4.80% Cumulative Preferred
Stock, with any bank or trust company having a capital, surplus and
undivided profits aggregating at least $5,000,000, as a trust fund, a fund
sufficient to redeem the shares called for redemption, with irrevocable
instructions and authority to such bank or trust company to cause said
notice to be mailed if not already mailed and to pay on or after the date
of such deposit, to the respective holders of such shares, the redemption
price thereof upon the surrender of their share certificates, then from
and after the date of such deposit (although prior to the date fixed for
redemption) such shares so called shall be deemed to be redeemed and
dividends thereon shall cease to accrue after said date fixed for
redemption, and such deposit shall be deemed to constitute full payment of
said shares to the holders thereof and thereafter said shares shall no
longer be deemed to be outstanding, and the holders thereof shall cease to
be shareholders with respect to such shares, and shall have no rights with
respect thereto except only the right to receive from said bank or trust
company payment of the redemption price of such shares without interest,
upon surrender of their certificates therefor. Any moneys deposited by
the Corporation pursuant to this Paragraph 3 and unclaimed at the end of
six years from the date fixed for redemption shall be repaid to the
Corporation upon its request expressed in a resolution of its Board of
Directors, after which repayment such holders shall look only to the
Corporation for such payment of the redemption price. If at any time
dividends on any of the outstanding shares of 4.80% Cumulative Preferred
Stock, or on any shares of stock of any class ranking on a parity with the
4.80% Cumulative Preferred Stock, shall be in default, thereafter and
until all arrears in payment of quarterly dividends on the 4.80%
Cumulative Preferred Stock and dividends on any such shares of stock
ranking on a parity with the 4.80% Cumulative Preferred stock have been
paid the Corporation shall not redeem less than all of the 4.80%
Cumulative Preferred Stock at the time outstanding and shall not purchase
or otherwise acquire for value any 4.80% Cumulative Preferred Stock except
in accordance with an offer made to all holders of 4.80% Cumulative
Preferred Stock. Any shares of 4.80% Cumulative Preferred Stock which are
redeemed or retired shall be cancelled and shall not be reissued.
4. So long as any shares of the 4.80% Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least two-thirds of the outstanding shares
thereof, voting as a class: (a) authorize any stock ranking prior in any
respect to the 4.80% Cumulative Preferred Stock; or (b) make any change in
the terms or provisions of the 4.80% Cumulative Preferred Stock that would
adversely affect the rights and preferences of the holders thereof; or (c)
issue any shares of cumulative preferred stock theretofore authorized
pursuant to Paragraph 10 of Section 2 of Article IV hereof but unissued or
shares or any other class of stock pari passu with the 4.80% Cumulative
Preferred Stock, other than in exchange for, or for the purpose of
effecting the redemption or other retirement of, not less than an equal
aggregate par value of shares of 4.80% Cumulative Preferred Stock, or of
any stock pari passu therewith, at the time outstanding, unless the net
earnings of the Corporation available for dividends determined in
accordance with sound accounting practices, for a period of any twelve
consecutive months within the fifteen calendar months immediately
preceding the first day of the month in which such additional stock is
issued are at least one and one-half times the sum of (i) the interest
requirements for one year on the funded debt and notes payable of the
Corporation maturing twelve months or more after the respective dates of
issue thereof, and to be outstanding at, the date of issue of such
additional shares and (ii) the dividend requirements for one year on all
shares of the 4.80% Cumulative Preferred Stock and of cumulative preferred
stock that may be authorized pursuant to Paragraph 10 of Section 2 of
Article IV hereof and of all other classes of stock ranking pari passu
with or prior to the 4.80% Cumulative Preferred Stock in respect of
dividends or assets, to be outstanding immediately after such proposed
issue of additional shares.
5. So long as any of the shares of 4.80% Cumulative Preferred Stock
are outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least a majority of the outstanding shares
of 4.80% Cumulative Preferred Stock, voting as one class, merge or
consolidate with any other corporation or corporations or sell
substantially all of the property of the Corporation, provided the
provisions of this Paragraph 5 shall not apply to any mortgage of all or
substantially all of the property of the Corporation.
6. Except as otherwise required by law, and subject to the
provisions of Paragraphs 4 and 5 of Section 2 of Article IV hereof, no
holder of 4.80% Cumulative Preferred Stock shall have any right to vote
for the election of directors or for any other purpose; provided, however,
that if at the time of any annual meeting of stockholders, dividends
payable on the 4.80% Cumulative Preferred Stock shall be accrued and
unpaid in an amount equal to four quarterly dividends, the holders of the
4.80% Cumulative Preferred Stock and of other shares of preferred stock
ranking pari passu therewith, voting as a class, shall be entitled to
elect a majority of the total number of directors, and the holders of
Common Stock, voting separately as a class, shall be entitled to elect the
remaining directors. Whenever the right shall vest in the holders of the
4.80% Cumulative Preferred Stock and of other shares of preferred stock
ranking pari passu therewith to elect such directors, the Board of
Directors shall, at least fifteen days prior to such annual meeting at
which such dividends remain accrued and unpaid, cause to be mailed to each
stockholder, at his last known post office address as shown on the stock
records of the Corporation, a notice to this effect. At all meetings of
stockholders where the holders of the 4.80% Cumulative Preferred Stock and
of other preferred stock ranking pari passu therewith shall have such
right to elect such directors, the presence in person or by proxy of the
holders of a majority of the aggregate number of outstanding shares of
4.80% Cumulative Preferred Stock shall be required to constitute a quorum
for the election of such directors; further provided, however, that the
absence of a quorum of the holders of 4.80% Cumulative Preferred Stock
shall not prevent the election at any such meeting or adjournments thereof
of directors in the usual manner by the holders of Common Stock if the
necessary quorum of the holders of Common Stock is present in person or by
proxy at such meeting. When all dividends accrued and unpaid on the 4.80%
Cumulative Preferred Stock shall have been paid or declared and set apart
for payment, holders of 4.80% Cumulative Preferred stock and of other
preferred stock ranking pari passu therewith shall at the next annual
meeting be divested of their rights in respect of such election of a
majority of the directors, and the voting power of the holders of the
4.80% Cumulative Preferred Stock and of other preferred stock ranking pari
passu therewith and the holders of the Common Stock shall revert to the
status existing before the first dividend payment date on which dividends
on the 4.80% Cumulative Preferred Stock were not paid in full; but always
subject to the same provisions for vesting such special rights in the
holders of the 4.80% Cumulative Preferred Stock and of other preferred
stock ranking pari passu therewith in the event dividends on the 4.80%
Cumulative Preferred Stock shall again become accrued and unpaid in an
amount equal to four quarterly dividends. Vacancies among directors
elected by holders of 4.80% Cumulative Preferred Stock and of other
preferred stock ranking pari passu therewith during any period for which
directors shall have been so elected shall be filled until the next annual
or special meeting for the election of directors, by the vote of a
majority of the remaining directors elected by the 4.80% holders of
Cumulative Preferred Stock and of other preferred stock ranking pari passu
therewith. Vacancies among directors elected by the Common Stock shall be
filled by the vote of a majority of the remaining directors elected by the
holders of Common Stock until the next annual meeting for the election of
directors or special meeting in lieu thereof.
7. At any meeting of the stockholders each holder of shares of
capital stock entitled to vote upon the subject or subjects to be acted
upon, shall be entitled to one vote for each share of preferred stock
and/or common stock registered in his name on the stock books of the
Corporation ten (10) days prior to the date of the meeting.
8. So long as any shares of 4.80% Cumulative Preferred Stock shall
be outstanding, no dividend or other distribution (except in common stock
of the Corporation) shall be declared or paid on the Common Stock of the
Corporation, and the Corporation shall not directly or indirectly acquire
or redeem shares of the Common Stock, unless all dividends on the 4.80%
Cumulative Preferred Stock for all past quarterly dividend periods shall
have been paid or declared and set apart. The foregoing provisions of
this paragraph shall not, however, apply to the acquisition of any shares
of Common Stock in exchange for, or through application of the proceeds of
the sale of, any shares of Common Stock. After the payment of the limited
dividends and/or shares in distribution of assets or amounts payable upon
dissolution or liquidation to which the holders of 4.80% Cumulative
Preferred Stock are expressly entitled in preference to the Common Stock
in accordance with the provisions hereinabove set forth, the Common Stock
alone (subject to the rights of any class of stock hereafter authorized)
shall receive all other dividends, from surplus (whether earned or paid-
in) or profits, and shares in distribution.
9. No holder of 4.80% Cumulative Preferred Stock of Common Stock
shall be entitled, as such, as a matter of right, to subscribed for or
purchase any part of any new or additional issue of stock or securities of
the Corporation convertible into stock, of any class whatsoever, whether
now or hereafter authorized, and whether issued for cash, property,
services or otherwise.
10. Additional classes of cumulative preferred stock of the par
value of Fifty Dollars ($50) per share ranking pari passu or junior to the
4.80% Cumulative Preferred Stock may be authorized upon the vote of a
majority of all the directors of the Corporation and approved as an
amendment to the Articles of Incorporation by a majority of the holders of
Common Stock represented at a meeting called for such purpose pursuant to
notice at which not less than twenty-five percent (25%) of the outstanding
Common Stock shall be represented. No such class of cumulative preferred
stock shall rank prior to the 4.80% Cumulative Preferred Stock but
otherwise may contain such dividend rates, redemption and voluntary
liquidation prices, sinking fund provisions and provisions for conversion
into common stock as may be provided pursuant to action taken in
accordance with this Paragraph 10. The issuance of any stock so
authorized shall be subject to the provisions of clause (c) of Paragraph 4
of Section 2 of Article IV hereof.
The designations, rights, preferences and conditions of the 4.30%
Cumulative Preferred Stock of the Corporation shall be as follows:
A. The 4.30% Cumulative Preferred Stock shall be entitled, in
preference to the Common stock but pari passu with all other classes
of cumulative preferred stock heretofore authorized or which may
hereafter be authorized pursuant to the provisions of Paragraph 10 of
Section 2 of Article IV hereof, to dividends from surplus (whether
earned or paid-in) or profits at the rate of four and three-tenths
per cent (4.30%) of the par value thereof per annum, payable
quarterly on April 1, July 1, October 1 and January 1 of each year,
when and as declared by the Board of Directors. Such dividends with
respect to each share shall be cumulative from the first day of the
dividend period in which such share shall originally have been
issued. No share of the 4.30% Cumulative Preferred Stock shall be
entitled to any dividends in excess of the aforesaid dividends at the
rate of four and three-tenths per cent (4.30%) of the par value
thereof per annum.
B. In the event of involuntary dissolution or liquidation of
the Corporation, the holders of 4.30% Cumulative Preferred Stock
shall be entitled, in preference to the Common Stock, but pari passu
with all other classes of cumulative preferred stock heretofore
authorized or which may hereafter be authorized pursuant to the
provisions of Paragraph 10 of Section 2 of Article IV hereof, to
receive Fifty Dollars ($50) per share, the par value of their shares,
plus an amount equal to the accrued and unpaid dividends on such
shares to the date of dissolution or liquidation. In the event of
any voluntary dissolution or liquidation, the holders of the 4.30%
Cumulative Preferred Stock shall be entitled, in preference to the
Common Stock, but pari passu with all other classes of cumulative
preferred stock heretofore authorized or which may hereafter be
authorized pursuant to the provisions of Paragraph 10 of Section 2 of
Article IV hereof, to receive Fifty Dollars ($50) per share, plus an
amount equal to the accrued and unpaid dividends on such shares to
the date of dissolution or liquidation and plus a premium of $2.15
per share if such dissolution or liquidation should occur prior to
April 1, 1959; a premium of $1.65 per share if such dissolution or
liquidation should occur after March 31, 1959, but prior to April 1,
1964; and a premium of $1.00 per share if such dissolution or
liquidation should occur at any time after March 31, 1964.
C. The 4.30% Cumulative Preferred Stock may be redeemed in
whole or in part at any time at the applicable redemption price for
each share of 4.30% Cumulative Preferred Stock redeemed. The
redemption price from time to time shall be: $52.15 per share if
redeemed prior to April 1, 1959; $51.65 per share if redeemed after
March 31, 1959 and prior to April 1, 1964; and $51.00 per share if
redeemed at any time after March 31, 1964; together, in each case,
with an amount equal to the accrued and unpaid dividends to and
including the date of redemption. If less than all of the shares of
the 4.30% Cumulative Preferred Stock are to be redeemed, they shall
be selected in such manner as the Board of Directors shall determine.
Nothing herein contained shall limit any right of the Corporation to
purchase or otherwise acquire any shares of the 4.30% Cumulative
Preferred Stock. Notice of the intention of the Corporation to
redeem shares of 4.30% Cumulative Preferred Stock or any thereof
shall be mailed at least thirty (30) days before the date of
redemption to each holder of record of the shares to be redeemed, at
his last known post office address as shown by the records of the
Corporation. If the Corporation shall deposit on or prior to any
date fixed for redemption of 4.30% Cumulative Preferred Stock, with
any bank or trust company having a capital, surplus and undivided
profits aggregating at least $5,000,000, as a trust fund, a fund
sufficient to redeem the shares called for redemption, with
irrevocable instructions and authority to such bank or trust company
to cause said notice to be mailed if not already mailed and to pay on
and after the date of such deposit, to the respective holders of such
shares, the redemption price thereof upon the surrender of their
share certificates, then from and after the date of such deposit
(although price to the date fixed for redemption) such shares so
called shall be deemed to be redeemed and dividends thereon shall
case to accrue after said date fixed for redemption, and such deposit
shall be deemed to constitute full payment of said shares to the
holders thereof and thereafter said shares shall no longer be deemed
to be outstanding, and the holders thereof shall cease to be
shareholders with respect to such shares, and shall have no rights
with respect thereto except only the right to receive from said bank
or trust company payment of the redemption price of such shares
without interest, upon surrender of their certificates therefor. Any
moneys deposited by the Corporation pursuant to this paragraph C and
unclaimed at the end of six years from the date fixed for redemption
shall be repaid to the Corporation upon its request expressed in a
resolution of its Board of Directors, after which repayment such
holders shall look only to the Corporation for such payment of the
redemption price. If at any time dividends on any of the outstanding
shares of 4.30% Cumulative Preferred Stock, or on any shares of stock
of any class ranking on a parity with the 4.30% Cumulative Preferred
Stock, shall be in default, thereafter and until all arrears in
payment of quarterly dividends on the 4.30% Cumulative Preferred
Stock and dividends on any such shares of stock ranking on a parity
with the 4.30% Cumulative Preferred Stock have been paid the
Corporation shall not redeem less than all of the 4.30% Cumulative
Preferred Stock at the time outstanding and shall not purchase or
otherwise acquire for value any 4.30% Cumulative Preferred Stock
except in accordance with an offer made to all holders of 4.30%
Cumulative Preferred Stock. Any shares of 4.30% Cumulative Preferred
Stock which are redeemed or retired shall be cancelled and shall not
be reissued.
D. So long as any shares of the 4.30% Cumulative Preferred
Stock are outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least two-thirds of
the outstanding shares thereof, voting as a class: (a) authorize any
stock ranking prior in any respect to the 4.30% Cumulative Preferred
Stock; or (b) make any change in the terms or provisions of the 4.30%
Cumulative Preferred Stock that would adversely affect the rights and
preferences of the holders thereof; or (c) issue any shares of
cumulative preferred stock theretofore authorized pursuant to
Paragraph 10 of Section 2 of Article IV hereof but unissued or shares
of any other class of stock pari passu with the 4.30% Cumulative
Preferred Stock, other than in exchange for, or for the purpose of
effecting the redemption or other retirement of, not less than an
equal aggregate par value of shares of 4.30% Cumulative Preferred
Stock, or of any stock pari passu therewith, at the time outstanding,
unless the net earnings of the Corporation available for dividends
determined in accordance with sound accounting practices, for a
period of any twelve consecutive months within the fifteen calendar
months immediately preceding the first day of the month in which such
additional stock is issued are at least one and one-half times the
sum of (i) the interest requirements for one year on the funded debt
and notes payable of the Corporation maturing twelve months or more
after the respective dates of issue thereof, and to be outstanding
at, the date of issue of such additional shares and (ii) the dividend
requirements for one year on all shares of the 4.30% Cumulative
Preferred Stock and of cumulative preferred stock that may have been
heretofore authorized or may hereafter be authorized pursuant to
Paragraph 10 of Section 2 of Article IV hereof and of all other
classes of stock ranking pari passu with or prior to the 4.30%
Cumulative Preferred Stock in respect of dividends or assets, to be
outstanding immediately after such proposed issue of additional
shares.
E. So long as any of the shares of 4.30% Cumulative Preferred
Stock are outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least a majority of
the outstanding shares of 4.30% Cumulative Preferred Stock, voting as
one class, merge or consolidate with any other corporation or
corporations or sell substantially all of the property of the
Corporation, provided the provisions of this Paragraph E shall not
apply to any mortgage of all or substantially all of the property of
the Corporation.
F. Except as otherwise required by law, and subject to the
provisions of Paragraphs D and E of Section 2 of Article IV hereof,
no holder of 4.30% Cumulative Preferred Stock shall have any right to
vote for the election of directors or for any other purpose;
provided, however, that if at the time of any annual meeting of
stockholders, dividends payable on the 4.30% Cumulative Preferred
Stock shall be accrued and unpaid in an amount equal to four
quarterly dividends, the holders of the 4.30% Cumulative Preferred
Stock and of other shares of preferred stock ranking pari passu
therewith, voting as a class, shall be entitled to elect a majority
of the total number of directors, and the holders of Common Stock,
voting separately as a class shall be entitled to elect the remaining
directors. So long as any of the 4.30% Cumulative Preferred Stock
shall be outstanding all of the provisions of Paragraph 6 of Section
2 of Article IV hereof following the first sentence thereof shall
continue in effect and apply to election held because of defaults in
any payment of dividends on the 4.30% Cumulative Preferred Stock,
provided, however, in the event the 4.80% Cumulative Preferred Sock
shall have been retired, in the application of such provisions there
shall be substituted for the "4.80% Cumulative Preferred Stock"
appearing therein the "4.30% Cumulative Preferred Stock."
G. So long as any shares of 4.30% Cumulative Preferred Stock
shall be outstanding, no dividend or other distribution (except in
common stock of the Corporation) shall be declared or paid on the
Common Stock of the Corporation, and the Corporation shall not
directly or indirectly acquire or redeem shares of the Common Stock,
unless all dividends on the 4.30% Cumulative Preferred Stock for all
past quarterly dividend periods shall have been paid or declared and
set apart. The foregoing provisions of this paragraph shall not,
however, apply to the acquisition of any shares of Common Stock in
exchange for, or through application of the proceeds of the sale of,
any shares of Common Stock. After the payment of the limited
dividends and/or shares in distribution of assets or amounts payable
upon dissolution or liquidation to which the holders of 4.30%
Cumulative Preferred Stock are expressly entitled in preference to
the Common Stock in accordance with the provisions hereinabove set
forth, the Common Stock alone (subject to the rights of any class of
stock heretofore or hereafter authorized) shall receive all other
dividends from surplus (whether earned or paid-in) or profits, and
shares in distribution.
H. No holder of 4.30% Cumulative Preferred Stock shall be
entitled, as such, as a matter of right, to subscribe for or purchase
any part of any new or additional issue of stock or securities of the
Corporation convertible into stock, of any class whatsoever, whether
now or hereafter authorized, and whether issued for cash, property,
services or otherwise.
CUMULATIVE PREFERRED STOCK, PAR VALUE $50 PER SHARE
The designations, rights, preferences and conditions of the
Cumulative Preferred Stock of the Corporation, except as otherwise
provided by law or determined in accordance with the provisions
hereinafter set forth, shall be as follows:
I. Issuance in Series. The Cumulative Preferred Stock of the
par value of $50 per share shall be issued either in whole or in part
as one or more series as hereinafter provided or as shall be
determined from time to time by the Board of Directors.
To the extent that variations in the relative rights and
preferences as between series of the Cumulative Preferred Stock are
not established, fixed and determined herein, authority is hereby
expressly vested in the Board of Directors to fix and determine the
relative rights and preferences of the shares of any series of such
Cumulative Preferred Stock hereafter established, but all shares of
Cumulative Preferred Stock shall be identical except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(1) The rate of dividend;
(2) The price at and the terms and conditions on which the
shares may be redeemed;
(3) The amount payable upon shares in event of involuntary
liquidation;
(4) The amount payable upon shares in event of voluntary
liquidation;
(5) Sinking fund provisions for the redemption or purchase of
shares; and
(6) The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of
conversion.
All shares of Cumulative Preferred Stock shall be of equal rank
with each other, regardless of series, and shall be identical with
each other in all respects except as provided pursuant to this
Paragraph I; and the shares of Cumulative Preferred Stock of any one
series shall be identical with each other in all respects, except as
to the dates from and after which dividends thereon shall be
cumulative. As used herein, the term "of equal rank" means neither
enjoying nor being subject to any priority with respect either to
payment of dividends or to the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, and has no
reference to the rate or amount of such dividends or distributions or
to other terms of the shares.
The Cumulative Preferred Stock shall rank pari passu and on a
parity with the 4.80% Cumulative Preferred Stock, the 4.30%
Cumulative Preferred Sock and all other classes of preferred stock of
equal rank hereafter authorized (hereinafter called "preferred stock
of equal rank").
The shares of Cumulative Preferred Stock may be issued for such
consideration, not less than the par value thereof, as shall be fixed
from time to time by the Board of Directors.
II. Dividend Rights. The holders of the Cumulative Preferred
Stock of each series shall be entitled to receive, out of any funds
legally available for the purpose, when and as declared by the Board
of Directors, cumulative cash dividends thereon at such rate per
annum as shall be fixed by resolution of the Board of Directors in
the case of each such series, and no more. Dividends on the
Cumulative Preferred Stock of all series shall be payable quarterly
on the first day of the months of January, April, July and October in
each year. Dividends on Cumulative Preferred Stock of each series
shall be cumulative with respect to each share from the first day of
the dividend period in which such share shall originally have been
issued. Accumulations of dividends shall not bear interest.
Whenever there shall be paid on the Cumulative Preferred Stock of any
series the full amount or any part of the dividends payable thereon,
there shall also be paid at the same time upon the shares of each
other series of Cumulative Preferred Stock and of preferred stock of
equal rank then outstanding the full amount or the same proportionate
part, as the case may be, of the dividends payable thereon.
III. Preference upon Liquidation, Dissolution, or Winding
Up. In the event of any partial or complete liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, before any distribution shall be made to the holders of
any shares of Common Stock, the Cumulative Preferred Stock of each
series shall be entitled, pari passu with all preferred stock of
equal rank, to receive for each share thereof, out of any legally
available assets of the Corporation:
(a) if such liquidation, dissolution or winding up shall
be involuntary, a sum in cash equal to $50 per share; or
(b) if such liquidation, dissolution or winding up shall
be voluntary, a sum in cash equal to the redemption price that
would have been payable had the Corporation, instead, at its
option redeemed the same on the date when the first distribution
is made upon the shares of Cumulative Preferred Stock in
connection with such voluntary liquidation, dissolution or
winding up;
plus, in each case, an amount equal to all unpaid cumulative
dividends thereon, whether or not declared or earned, accrued to the
date when payment of such preferential amounts shall be made
available to the holders of the Cumulative Preferred Stock; and the
Cumulative Preferred Stock shall be entitled to no further
participation in such distribution.
If, upon any such liquidation, dissolution or winding up of the
affairs of the Corporation, the assets of the Corporation available
for distribution as aforesaid among the holders of the Cumulative
Preferred Stock of all series and of all preferred stock of equal
rank shall be insufficient to permit the payment to them of the full
preferential amounts aforesaid, then the entire assets of the
Corporation so to be distributed shall be distributed ratably among
the holders of the Cumulative Preferred Stock of all series and of
all preferred stock of equal rank in proportion to the full
preferential amounts to which they are respectively entitled.
A consolidation or merger of the Corporation, or a sale or
transfer of all or substantially all of its assets as an entirety
shall not be regarded as a "liquidation, dissolution or winding up of
the affairs of the Corporation" within the meaning of this Paragraph
III.
IV. Redemptions. (a) The Corporation may, unless otherwise
prohibited by any provisions of these Articles of Incorporation, as
amended, or any resolution adopted by the Board of Directors
providing for the issue of any series of Cumulative Preferred Stock
of which there are shares then outstanding, at its option, expressed
by resolution of its Board of Directors, at any time redeem the whole
or any part of the Cumulative Preferred Stock or of any series
thereof at the time outstanding, by the payment in cash for each
share of stock to be redeemed of the then applicable redemption price
or prices as shall be fixed by resolution of the Board of Directors
in the case of each such series, plus, in any such case, a sum of
money equivalent to all accrued and unpaid cumulative dividends,
whether or not declared or earned, thereon to the date fixed for
redemption.
Notice of any proposed redemption of shares of Cumulative
Preferred Stock shall be given by the Corporation by mailing a copy
of such notice at least 30 days prior to the date fixed for such
redemption to the holders of record of the shares of Cumulative
Preferred Stock to be redeemed, at their respective addresses
appearing on the books of the Corporation. Said notice shall specify
the shares called for redemption, the redemption price and the place
at which and the date on which the shares called for redemption will,
upon presentation and surrender of the certificates of stock
evidencing such shares, be redeemed and the redemption price therefor
paid.
If less than all of the shares of any series of Cumulative
Preferred Stock then outstanding are to be redeemed, the shares to be
redeemed shall be selected by such method, either by lot or pro rata,
as shall from time to time be determined by resolution of the Board
of Directors, subject to any limitation contained in resolutions of
the Board of Directors or in these Articles of Incorporation, as
amended, providing for any series of Cumulative Preferred Stock.
From and after the date fixed in any such notice as the date of
redemption, unless default shall be made by the Corporation in
providing moneys at the time and place specified for the payment of
the redemption price pursuant to said notice, all dividends on the
shares of Cumulative Preferred Stock thereby called for redemption
shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation except the right to receive the
redemption price, but without interest, shall cease and determine;
provided, however, the Corporation may, in the event of any such
redemption, and prior to the redemption date specified in the notice
thereof, deposit in trust, for the account of the holders of the
shares of Cumulative Preferred Stock to be redeemed, with any bank or
trust company having a capital, surplus and undivided profits
aggregating at least $5,000,000, all funds necessary for such
redemption, and thereupon all shares of the Cumulative Preferred
Stock with respect to which such deposit shall have been made shall
forthwith upon the making of such deposit no longer be deemed to be
outstanding and all rights of the holders thereof with respect to
such shares of Cumulative Preferred Stock shall thereupon cease and
terminate, except the right of such holders to receive from the funds
so deposited the amount payable upon the redemption thereof, but
without interest, or, if any right of conversion conferred upon such
shares shall not, by the terms thereof, previously have expired, to
exercise the right of conversion thereof on or before the redemption
date specified in such notice, unless such right of conversion by the
terms thereof expires at any earlier time, and then only on or before
such earlier time for the expiration of such right of conversion.
Any funds so set aside or deposited which, because of the exercise of
any right of conversion of shares called for redemption, shall not be
required for such redemption, shall be released or repaid forthwith
to the Corporation. Any funds so set aside or deposited, which shall
be unclaimed at the end of six years from such redemption date, shall
be released or repaid to the Corporation upon its request expressed
in a resolution of its Board of Directors, and any depositary thereof
shall thereby be relieved of all responsibility in respect thereof,
after which release or repayment the holders of shares so called for
redemption shall look only to the Corporation for payment of the
redemption price, but without interest. Any interest on funds so
deposited which may be allowed by any bank or trust company with
which such deposit was made shall belong to the Corporation.
(b) If and so long as any quarterly dividend on any series of
Cumulative Preferred Stock shall be in arrears, the Corporation shall
not redeem, purchase or otherwise acquire, by way of sinking fund
payments or otherwise, any Cumulative Preferred Stock or any
preferred stock of equal rank unless all outstanding shares of
Cumulative Preferred Stock are simultaneously redeemed.
(c) Whenever there shall be deposited or set aside the whole or
any part of the funds required to be deposited or set aside by the
Corporation as a sinking fund for any series of Cumulative Preferred
Stock there shall be also deposited or set aside at the same time the
full amount or the same proportionate part, as the case may be, of
the funds, if any, then due to be deposited or set aside as a sinking
fund for each other series of Cumulative Preferred Stock then
outstanding.
(d) All shares of Cumulative Preferred Stock which shall have
been redeemed, converted, purchased or otherwise acquired by the
Corporation shall be retired and cancelled and shall have the status
of authorized but unissued shares of Cumulative Preferred Stock.
V. Voting Rights. The holders of the outstanding shares of
Cumulative Preferred Stock shall have no right to vote for the
election of directors or for any other purpose, except as provided in
this Paragraph V or as otherwise required by law.
So long as any shares of the Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least two-thirds of the outstanding
shares thereof, voting as a class: (a) authorize any stock ranking
prior in any respect to the Cumulative Preferred Stock; or (b) make
any change in the terms or provisions of the Cumulative Preferred
Stock that would adversely affect the rights and preferences of the
holders thereof; or (c) issue any shares of cumulative preferred
stock theretofore authorized pursuant to Paragraph 10 of Section 2 of
Article IV hereof but unissued or shares of any other class of stock
pari passu with the Cumulative Preferred Stock, other than in
exchange for, or for the purpose of effecting the redemption or other
retirement of, not less than an equal aggregate par value of shares
of Cumulative Preferred Stock, or of any stock pari passu therewith,
at the time outstanding, unless the net earnings of the Corporation
available for dividends determined in accordance with sound
accounting practices, for a period of any twelve consecutive months
within the fifteen calendar months immediately preceding the first
day of the month in which such additional stock is issued are at
least one and one-half times the sum of (i) the interest requirements
for one year on the funded debt and notes payable of the Corporation
maturing twelve months or more after the respective dates of issue
thereof, and to be outstanding at, the date of issue of such
additional shares and (ii) the dividend requirements for one year on
all shares of the Cumulative Preferred Stock and of cumulative
preferred stock that may have been heretofore authorized or may
hereafter be authorized pursuant to Paragraph 10 of Section 2 of
Article IV hereof and of all other classes of stock ranking pari
passu with or prior to the Cumulative Preferred Stock in respect of
dividends or assets, to be outstanding immediately after such
proposed issue of additional shares.
So long as any of the shares of Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote
or consent of the holders of at least a majority of the outstanding
shares of Cumulative Preferred Stock, voting as one class, merge or
consolidate with any other corporation or corporations or sell
substantially all of the property of the Corporation, provided the
provisions of this subparagraph shall not apply to any mortgage of
all or substantially all of the property of the Corporation.
If at the time of any annual meeting of stockholders, dividends
payable on the Cumulative Preferred Stock shall be accrued and unpaid
in an amount equal to four quarterly dividends, the holders of the
Cumulative Preferred Stock and of other shares of preferred stock
ranking pari passu therewith, voting as a class, shall be entitled to
elect a majority of the total number of directors, and the holders of
Common Stock, voting separately as a class shall be entitled to elect
the remaining directors. So long as any of the Cumulative Preferred
Stock shall be outstanding all of the provisions of Paragraph 6 of
Section 2 of Article IV hereof following the first sentence thereof
shall continue in effect and apply to election held because of
defaults in any payment of dividends on the Cumulative Preferred
Stock, provided, however, in the event the 4.80% Cumulative Preferred
Stock shall have been retired, in the application of such provisions
there shall be substituted for the "4.80% Cumulative Preferred Stock"
appearing therein the "Cumulative Preferred Stock."
VI. Restrictions on Common Stock Dividends and
Distributions. So long as any shares of any series of the Cumulative
Preferred Stock shall remain outstanding, no dividend (other than a
dividend payable in shares of Common Stock) shall be paid or
declared, nor shall any distribution be made on Common Stock and no
Common Stock shall be redeemed, purchased, retired or otherwise
acquired either directly or indirectly, unless
(a) all dividends on the Cumulative Preferred Stock of all
series then outstanding for all past quarterly dividend periods
and for the current quarterly dividend period shall have been
paid or declared and a sum sufficient for the payment thereof
set apart; and
(b) all sinking fund payments and all purchase fund
payments or other obligations of the Corporation for the
periodic retirement of shares of Cumulative Preferred Stock of
all series then outstanding required to have been made or
performed by the Corporation shall have been made or performed.
---------------
6.10% SERIES CUMULATIVE PREFERRED STOCK
The designations, rights, preferences and conditions of the
Cumulative Preferred Stock of the par value of $50 each, consisting of
100,000 shares, to the extent not set forth above, shall be as follows:
(1) Designation of series: The series of Cumulative Preferred
Stock hereby established shall be designated as "6.10% Series
Cumulative Preferred Stock" and shall consist of 100,000 shares.
(2) The rate of dividend: The rate of dividend payable on the
shares of 6.10% Series Cumulative Preferred Stock shall be 6.10% of
the par value thereof per annum.
(3) The price at and the terms and conditions on which the
shares may be redeemed: The 6.10% Series Cumulative Preferred Stock
shall be subject to redemption at any time and from time to time in
the manner provided in Paragraph IV above of Section 2 of Article IV
hereof at the redemption price per share of $56.25 if redeemed on or
before August 31, 1972, $52.50 if redeemed thereafter and on or
before August 31, 1977, and $51.00 if redeemed thereafter. If less
than all of the shares of 6.10% Series Cumulative Preferred Stock are
to be redeemed, the shares to be redeemed shall be apportioned on a
pro rata basis between the registered holders of 2.5% or more of the
then outstanding shares of 6.10% Series Cumulative Preferred Stock as
a group and the registered holders of less than 2.5% of the then
outstanding shares of 6.10% Series Cumulative Preferred Stock as a
group. The portion of such shares to be redeemed from within such
group of registered holders of 2.5% or more shall be apportioned on a
pro rata basis between or among such holders. The portion of such
shares to be redeemed from within such group of registered holders of
less than 2.5% shall be apportioned by lot or pro rata as shall from
time to time be determined by resolution of the Board of Directors.
In a pro rata apportionment of shares of 6.10% Series Cumulative
Preferred Stock in a partial redemption, the Corporation need not
issue any fractional shares.
(4) The amount payable upon shares in event of involuntary
liquidation: The 6.10% Series Cumulative Preferred Stock shall be
entitled to receive the amount provided in Paragraph III(a) above of
Section 2 of Article IV hereof in the event of involuntary
liquidation.
(5) The amount payable upon shares in event of voluntary
liquidation: The 6.10% Series Cumulative Preferred Stock shall be
entitled to receive the amount provided in Paragraph III(b) above of
Section 2 of Article IV hereof in the event of voluntary liquidation.
(6) Sinking fund provisions for the redemption or purchase of
shares: There are no sinking funds provisions for the redemption or
purchase of shares of 6.10% Series Cumulative Preferred Stock.
(7) Pre-emptive rights: So long as any shares of 6.10% Series
Cumulative Preferred Stock shall be outstanding, no holder of any
shares of any series of the aforementioned Cumulative Preferred Stock
shall be entitled, as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock or
securities of the Corporation convertible into stock, of any class
whatsoever, whether now or hereafter authorized, and whether issued
for cash, property, services or otherwise.
---------------
CUMULATIVE PREFERENCE STOCK, PAR VALUE $100 PER SHARE
The designations, rights, preferences and conditions of the
Cumulative Preference Stock of the Corporation, except as otherwise
provided by law or determined in accordance with the provisions
hereinafter set forth shall be as follows:
I. Issuance in Series. The Cumulative Preference Stock of the
par value of $100 per share shall be issued in whole or in part as
one or more series as hereinafter provided or as shall be determined
from time to time by the Board of Directors.
To the extent that variations in the relative rights and
preferences as between series of the Cumulative Preference Stock are
not established, fixed and determined herein, authority is hereby
expressly vested in the Board of Directors to fix and determine the
relative rights and preferences of the shares of any series of such
Cumulative Preference Stock hereafter established, but all shares of
Cumulative Preference Stock shall be identical except as to the
following relative rights and preferences, as to which there may be
variations between different series:
(1) The rate of dividend;
(2) The price at and the terms and conditions on which the
shares may be redeemed;
(3) The amount payable upon shares in event of involuntary
liquidation;
(4) The amount payable upon shares in event of voluntary
liquidation;
(5) Sinking fund provisions for the redemption or purchase
of shares; and
(6) The terms and conditions on which shares may be
converted, if the shares of any series are issued with the
privilege of conversion.
All shares of Cumulative Preference Stock shall be of equal rank
with each other, regardless of series, and shall be identical with
each other in all respects except as provided pursuant to this
Paragraph I; and the shares of Cumulative Preference Stock of anyone
series shall be identical with each other in all respects, except as
to the dates from and after which dividends thereon shall be
cumulative. As used herein, the term "of equal rank" means neither
enjoying nor being subject to any priority with respect either to
payment of dividends or to the distribution of assets upon the
liquidation, dissolution or winding up of the Corporation, and has no
reference to the rate or amount of such dividends or distributions or
to other terms of the shares.
The Cumulative Preference Stock is subject to the prior rights
and preferences of the 4.80% Cumulative Preferred Stock, the 4.30%
Cumulative Preferred Stock, the Cumulative Preferred Stock and all
other classes of preferred stock of equal rank therewith now or
hereafter authorized (hereinafter referred to collectively as the
"Cumulative Preferred Stock").
The shares of Cumulative Preference Stock may be issued for such
consideration, not less than the par value thereof, as shall be fixed
from time to time by the Board of Directors; provided, however, that
no additional shares of Preference Stock may be issued if, after
giving effect to such issuance on a pro forma basis, the amount of
the capitalization of the Corporation on a pro forma basis (as
determined in accordance with generally accepted accounting practice)
represented by Cumulative Preferred Stock and Cumulative Preference
Stock, plus the premium, if any, on preferred and preference stock
outstanding, would exceed 20% of the Total Capitalization of the
Corporation.
The term "Total Capitalization of the Corporation" shall mean,
at any date as of which the amount thereof is to be determined, the
aggregate of: (a) Shareholders' Equity of the Corporation, and (b)
the aggregate principal amount of all debt of the Corporation
maturing by its term more than one year after the date of creation
thereof of the Corporation outstanding on such date.
II. Dividend Rights. Subject to the prior rights and
preferences of the Cumulative Preferred Stock, the holders of
Cumulative Preference Stock of each series shall be entitled to
receive, out of any funds legally available for the purpose, when and
as declared by the Board of Directors, cumulative cash dividends
thereon at such rate per annum as shall be fixed by resolution of the
Board of Directors in the case of each such series, and no more.
Dividends on the Cumulative Preference Stock of all series shall be
payable quarterly on the first day of the months of January, April,
July and October in each year. Dividends on Cumulative Preference
Stock of each series shall be cumulative with respect to each share
from such date, if any, as may be fixed by resolution of the Board of
Directors prior to the issue thereof or, if no such date is
established, from the first day of the dividend period in which such
share shall originally have been issued. Accumulations of dividends
shall not bear interest. Whenever there shall be paid on the
Cumulative Preference Stock of any series the full amount or any part
of the dividends payable thereon, there shall also be paid at the
same time upon the shares of each other series of Cumulative
Preference Stock and of shares of stock of equal rank thereto then
outstanding the full amount or the same proportionate part, as the
case may be, of the dividends payable thereon.
III. Preference upon Liquidation, Dissolution, or Winding
Up. In the event of any partial or complete liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, before any distribution shall be made to the holders of
any shares of Common Stock, but subject to the prior rights and
preferences of the Cumulative Preferred Stock, the Cumulative
Preference Stock of each series shall be entitled, pari passu with
all stock of equal rank, to receive for each share thereof, out of
any legally available assets of the Corporation:
(a) if such liquidation, dissolution or winding up shall
be involuntary, a sum in cash equal to $100 per share; or
(b) if such liquidation, dissolution or winding up shall
be voluntary, a sum in cash equal to the redemption price that
would have been payable had the Corporation, instead, at its
option redeemed the same on the date when the first distribution
is made upon the shares of Cumulative Preference Stock in
connection with such voluntary liquidation, dissolution or
winding up;
plus, in each case, an amount equal to all unpaid cumulative
dividends thereon, whether or not declared or earned, accrued to the
date when payment of such preferential amounts shall be made
available to the holders of the Cumulative Preference Stock; and the
Cumulative Preference Stock shall be entitled to no further
participation in such distribution.
If, upon any such liquidation, dissolution or winding up of the
affairs of the Corporation, the assets of the Corporation available
for distribution as aforesaid among the holders of the Cumulative
Preference Stock of all series and of all stock of equal rank shall
be insufficient to permit the payment to them of the full
preferential amounts aforesaid, then the entire assets of the
Corporation so to be distributed shall be distributed ratably among
the holders of the Cumulative Preference Stock of all series and of
all stock of equal rank in proportion to the full preferential
amounts to which they are respectively entitled.
A consolidation or merger of the Corporation, or a sale or
transfer of all or substantially all of its assets as an entirety
shall not be regarded as a "liquidation, dissolution or winding up
of the affairs of the Corporation" within the meaning of this
Paragraph III.
IV. Redemptions. (a) The Corporation may, unless otherwise
prohibited by any provisions of these Articles of Incorporation, as
amended, or any resolution adopted by the Board of Directors
providing for the issue of any series of Cumulative Preference Stock
of which there are shares then outstanding, at its option, expressed
by resolution of its Board of Directors, at any time redeem the whole
or any part of the Cumulative Preference Stock or of any series
thereof at the time outstanding, by the payment in cash for each
share of stock to be redeemed of the then applicable redemption price
or prices as shall be fixed by resolution of the Board of Directors
in the case of each such series, plus, in any such case, a sum of
money equivalent to all accrued and unpaid cumulative dividends,
whether or not declared or earned, thereon to the date fixed for
redemption.
Notice of any proposed redemption of shares of Cumulative
Preference stock shall be given by the Corporation by mailing a copy
of such notice at least 30 days prior to the date fixed for such
redemption to the holders of record of the shares of Cumulative
Preference Stock to be redeemed, at their respective addresses
appearing on the books of the Corporation. Said notice shall specify
the shares called for redemption, the redemption price and the place
at which and the date on which the shares called for redemption will,
upon presentation and surrender of the certificates of stock
evidencing such shares, be redeemed and the redemption price therefor
paid.
If less than all of the shares of any series of Cumulative
Preference Stock then outstanding are to be redeemed, the shares to
be redeemed shall be selected by such method, either by lot or pro
rata, as shall from time to time be determined by resolution of the
Board of Directors, subject to any limitation contained in
resolutions of the Board of Directors or in these Articles of
Incorporation, as amended, providing for any series of Cumulative
Preferred Stock or Cumulative Preference Stock.
From and after the date fixed in any such notice as the date of
redemption, unless default shall be made by the Corporation in
providing moneys at the time and place specified for the payment of
the redemption price pursuant to said notice, all dividends on the
shares of Cumulative Preference Stock thereby called for redemption
shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation except the right to receive the
redemption price, but without interest shall cease and determine;
provided, however, the Corporation may, in the event of any such
redemption, and prior to the redemption date specified in the notice
thereof, deposit in trust, for the account of the holders of the
shares of Cumulative Preference Stock to be redeemed, with any bank
or trust company having a capital, surplus and undivided profits
aggregating at least $5,000,000, all funds necessary for such
redemption, and thereupon all shares of the Cumulative Preference
Stock with respect to which such deposit shall have been made shall
forthwith upon the making of such deposit no longer be deemed to be
outstanding and all rights of the holders thereof with respect to
such shares of Cumulative Preference Stock shall thereupon cease and
terminate, except the right of such holders to receive from the funds
so deposited the amount payable upon the redemption thereof, but
without interest, or, if any right of conversion conferred upon such
shares shall not, by the terms thereof, previously have expired, to
exercise the right of conversion thereof on or before the redemption
date specified in such notice, unless such right of conversion by the
terms thereof expires at an earlier time, and then only on or before
such earlier time for the expiration of such right of conversion.
Any funds so set aside or deposited which, because of the exercise of
any right of conversion of shares called for redemption, shall not be
required for such redemption, shall be released or repaid forthwith
to the Corporation. Any funds so set aside or deposited, which shall
be unclaimed at the end of six years from such redemption date, shall
be released or repaid to the Corporation upon its request expressed
in a resolution of its Board of Directors, and any depositary thereof
shall thereby be relieved of all responsibility in respect thereof,
after which release or repayment of the holders of shares so called
for redemption shall look only to the Corporation for payment of the
redemption price, but without interest. Any interest on funds so
deposited which may be allowed by any bank or trust company with
which such deposit was made shall belong to the Corporation.
(b) If and so long as any quarterly dividend on any series of
Cumulative Preferred Stock or Cumulative Preference Stock shall be in
arrears, the Corporation shall not redeem, purchase or otherwise
acquire, by way of sinking fund payment or otherwise, any Cumulative
Preference Stock or any stock of equal rank unless all outstanding
shares of Cumulative Preference Stock are simultaneously redeemed.
(c) Whenever there shall be deposited or set aside the whole or
any part of the funds required to be deposited or set aside by the
Corporation as a sinking fund for any series of Cumulative Preference
Stock there shall be also deposited or set aside at the same time the
full amount or the same proportionate part, as the case may be, of
the funds, if any, then due to be deposited or set aside as a sinking
fund for each other series of Cumulative Preference Stock then
outstanding.
(d) All shares of the Cumulative Preference Stock which shall
have been redeemed, converted, purchased or otherwise acquired but
the Corporation shall be retired and cancelled and shall have the
status of authorized by unissued shares of Cumulative Preference
Stock.
V. Voting Rights. The holders of shares of Cumulative
Preference Stock shall have no right to vote for the election of
directors or for any other purpose, except as provided or required by
law.
VI. Restrictions on Common Stock Dividends and
Distributions. So long as any shares of any series of the Cumulative
Preference Stock shall remain outstanding, no dividend (other than a
dividend payable in shares of Common Stock) shall be paid or
declared, nor shall any distribution be made on Common Stock and no
Common Stock shall be redeemed, purchased, retired or otherwise
acquired either directly or indirectly, unless:
(a) All dividends on the Cumulative Preference Stock of all
series then outstanding for all past quarterly dividend periods and
for the current quarterly dividend period shall have been paid or
declared and a sum sufficient for the payment thereof set apart; and
(b) All sinking fund payments and all purchase fund payments or
other obligations of the Corporation for the periodic retirement of
shares of Cumulative Preference Stock of all series then outstanding
required to have been made or performed by the Corporation shall have
been made or performed.
VII. Pre-emptive Rights. No holder of shares of Cumulative
Preference Stock shall be entitled, as such, as a matter of right, to
subscribe for or purchase any part of any new or additional issue of
stock or securities of the Corporation convertible into stock, of any
class whatsoever, whether now or hereafter authorized, and whether
issued for cash, property, services or otherwise.
Section 3. Subject to the provisions of this Article IV and
compliance with the laws of the State of Iowa, the Board of Directors of
the Corporation shall have full power to issue, to sell at prices to be
fixed by the Board of Directors of the Corporation, or to exchange for
property or outstanding stock of the Corporation, any shares of any class
of stock of the Corporation authorized to be issued, at such times as may
be fixed by the Board of Directors of the Corporation; provided, however,
no stock shall be issued or sold for a consideration less than the par
value thereof.
Section 4. Shares of stock of the Corporation shall be transferable
only upon the books of the Corporation in person or by attorney, duly
authorized in writing.
Certificates for shares of capital stock of the Corporation shall be
in such form as shall be approved by the Board of Directors; provided,
however, such certificates shall comply with all of the existing
requirements of the laws of the State of Iowa with respect thereto. The
Board of Directors shall be authorized to appoint registrars and/or
transfer agents to act as agents of the Corporation in recording transfers
and registering ownership of capital stock of the Corporation. In the
event of the appointment of a registrar and/or transfer agent and the
signature of a registrar or the signature or counter signature of a
transfer agent on stock certificates issued by the Corporation the
signatures of officers of the Corporation signing stock certificates may
be a facsimile thereof in lieu of the actual signature of such officer or
officers, and may be either engraved or printed on the stock certificates.
The fact that at the time of the actual issue or delivery of a stock
certificate, the officer whose signature either actual or facsimile,
appears on such stock certificate shall prior thereto have ceased to be
such officer, shall not invalidate the signature, nor such certificate.
Section 5. Subject to the provisions of Article IV of these Articles
the Board of Directors shall have power to close the stock transfer books
of the Corporation for a period not exceeding forty days preceding the
date of any meeting of stockholders or the date for payment of any
dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect;
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
forty days preceding the date of any meeting of stockholders or the date
for the payment of any dividend or the date for the allotment of rights or
the date when any change or conversion or exchange of capital stock shall
go into effect, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting, or entitled to
receive payment of any such dividends or to any such allotment of rights
or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and in such case such stockholders only as
shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at such meeting, or to receive payment of such
dividend or to receive such allotment of rights or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation after any such record date fixed as
aforesaid.
Section 6. At any meeting of the stockholders each holder of a share
of capital stock entitled to vote upon the subject or subjects to be acted
upon shall be entitled to one vote for each share of Preferred Stock
and/or Common Stock registered in his name on the stock books of the
Corporation ten (10) days prior to the date of meeting, subject, however,
to the right of the Board of Directors to fix a record date for
determination of stockholders entitled to vote as provided in Section 5
of this Article IV. If so provided in the Bylaws of the Corporation such
voting may be by proxy subject to such restrictions as may be provided in
the Bylaws.
Section 7. All of the issued and outstanding shares of Common Stock
of the Corporation, except for those shares held by IES Industries Inc.,
shall be cancelled; and the shares of Common Stock of the Corporation held
by IES Industries Inc. shall be split into and become an equal number of
shares of Common Stock of the Corporation that was outstanding at the
close of business on May 19, 1986; all without affecting the authorized
Capital Stock of the Corporation as described in this Article.
ARTICLE V
Subject to the provisions of Article IV of these Articles of
Incorporation, any provisions of these Articles of Incorporation may be
amended, altered or repealed at an annual or special meeting of the
stockholders of the Corporation upon the affirmative vote of the holders
of a majority of the Common Stock of the Corporation at the time issued
and outstanding.
The notice of any meeting whereat it is proposed to amend, alter or
repeal any article or articles or provision or provisions of these
Articles of Incorporation shall set forth in full the article or articles
or provision or provisions so to be amended, altered or repealed, and the
changes proposed to be made in the same.
ARTICLE VI
The property and business of the Corporation shall be under the
general management and control of the Board of Directors consisting of the
number of persons fixed by the Bylaws of the Corporation. In addition to
the powers and authority expressly conferred upon the said Board of
Directors by these Articles of Incorporation and by the laws of the State
of Iowa, such Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute
or by these Articles of Incorporation directed or required to be exercised
or done by the stockholders.
The Board of Directors shall elect a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such other officers as such
Board of Directors may deem advisable or as may be provided for by the
Bylaws of the Corporation. Any two offices may be filled by one and the
same person, subject, however, to any specific restrictions which may be
provided for in the Bylaws of the Corporation.
ARTICLE VII
Section 1. Meetings of Stockholders. The annual meeting of
stockholders shall be held, in each year, at such place or places within
or without the State of Iowa and on such date and at such time as shall be
fixed by the directors and stated in the notice of meeting.
Section 2. Election of Directors. The number of directors
constituting the Board of Directors shall be as fixed from time to time by
the Bylaws of the Corporation, but the number so fixed shall not be less
than five (5). The directors of the Corporation shall be divided into
three classes as nearly equal in number as possible, to serve for
staggered three-year terms or until their respective successors are duly
elected and qualified as provided for in the Bylaws of the Corporation.
If, at any annual meeting of the stockholders, directors of more than one
class are to be elected, each class of directors to be elected at such
meeting shall be nominated and voted for in a separate election.
Section 3. Bylaws. The Bylaws of the Corporation shall be adopted
by the Board of Directors of the Corporation. The power to alter, amend,
or repeal the Bylaws, or to adopt new Bylaws, shall be vested in the Board
of Directors. The Bylaws may contain any provisions for the regulation
and management of the affairs of the Corporation not inconsistent with the
laws of the State of Iowa, or these Articles of Incorporation.
Section 4. Executive Committee. If the Bylaws so provide, the Board
of Directors, by resolution adopted by a majority of the number of
directors, may designate two or more directors to constitute an Executive
Committee, which Committee, to the extent provided in such resolution or
the Bylaws, shall have and may exercise all of the authority of the Board
of Directors in the management of the Corporation; but the designation of
such Executive Committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon the Board of Directors or any member thereof
by law.
ARTICLE VIII
The private property of the stockholders of the Corporation shall be
exempt from the debts of the Corporation.
ARTICLE IX
The Corporation shall commence business upon the date its certificate
of incorporation is issued to it by the Secretary of the State of Iowa,
and shall continue in perpetuity.
ARTICLE X
The Corporation may be liquidated or dissolved or, subject to the
provisions of Article IV of these Articles of Incorporation, all of the
property of the Corporation may be sold, by the affirmative vote in favor
thereof of a majority of the Common Stock of the Corporation at the time
issued and outstanding.
ARTICLE XI
Section 1. Liability. A director of this Corporation shall not be
personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or knowing violation of the law, (iii) for
any transaction from which the director derived an improper personal
benefit, or (iv) under Section 490.833 of the Iowa Business Corporation
Act. If, after approval by the stockholders of this section, the Iowa
Business Corporation Act is amended to permit the further elimination or
limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Iowa Business Corporation Act, as so amended. Any
repeal of this section by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
in respect of any act or omission occurring prior to the time of repeal or
modification.
Section 2. Indemnification. The Corporation shall indemnify its
directors, officers, employees and agents to the full extent permitted by
the Iowa Business Corporation Act, as amended from time to time. The
Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against
and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the Corporation would have the
power to indemnify such person against such liability under the provisions
of this section.
Exhibit 3.6 As Executed
BYLAWS
OF
IES UTILITIES INC.
(Effective as of April 21, 1998)
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL AND BUSINESS OFFICES. - The principal office
shall be in the City of Cedar Rapids, County of Linn, State of Iowa. The
Corporation may have other offices, either within or without the State of
Iowa, at such place or places as the Board of Directors may from time to
time appoint or the business of the Corporation may require.
Section 1.2 REGISTERED OFFICE. - The registered office of the
Corporation required by the Iowa Business Corporation Act to be maintained
in the State of Iowa may be, but need not be identical with the principal
office in the State of Iowa, and the address of the registered office may
be changed from time to time by the Board of Directors
ARTICLE II
SEAL
Section 2.1 CORPORATE SEAL. - The corporate seal shall have
inscribed thereon the name of the Corporation and the words "CORPORATE
SEAL, IOWA." Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced.
ARTICLE III
SHAREOWNERS
Section 3.1. ANNUAL MEETING. - The Annual Meeting of Shareowners
shall be held at such date and time as the Board of Directors may
determine. The Board of Directors may designate any place for the Annual
Meeting. If no designation is made, the place of the Annual Meeting shall
be the principal office of the Corporation. The Annual Meeting shall be
held for the purposes of electing Directors and of transacting such other
business as may properly come before the meeting.
Section 3.2 SPECIAL MEETINGS. - Special Meetings of the Shareowners
may be called by the Board of Directors or the Chief Executive Officer.
The Corporation shall call a Special Meeting of Shareowners in the event
that the holders of at least ten percent (10%) of all of the votes
entitled to be cast on any issue request a special meeting be held.
Section 3.3 NOTICE OF MEETINGS - WAIVER. - Notice of the time and
place of each Annual or Special Meeting of Shareowners shall be sent by
mail to the recorded address of each shareowner not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, except
in cases where other special method of notice may be required by statute,
in which case the statutory method shall be followed. The notice of a
Special Meeting shall state the purpose of the meeting. If an Annual or
Special Meeting of shareowners is adjourned to a different date, time or
place, the Corporation shall not be required to give notice of the new
date, time or place if the new date, time or place is announced at the
meeting before adjournment; provided, however, that if a new record date
for an adjourned meeting is or must be fixed, the Corporation shall give
notice of the adjourned meeting to persons who are shareowners as of the
new record date. Notice of any meeting of the shareowners may be waived by
any shareowner.
Section 3.4 FIXING OF RECORD DATE. - For the purpose of determining
shareowners entitled to notice of, or to vote at, any meeting of
shareowners, or at any adjournment thereof, or shareowners entitled to
receive payment of any dividend, or in order to make a determination of
shareowners for any other lawful action, the Board of Directors may fix,
in advance, a record date for such determination of shareowners. Such
date in case of a meeting of shareowners or other lawful action shall not
be less than ten (10) days nor more than seventy (70) days prior to the
date of such meeting or lawful action. If no record date is fixed by the
Board of Directors or by statute for the determination of shareowners
entitled to demand a special meeting as contemplated in Section 3.2
hereof, the record date shall be the date that the first shareowner signs
the demand. When a determination of shareowners entitled to vote at any
meeting of shareowners has been made as provided in this section, such
determination shall apply to any adjournment thereof unless the meeting is
adjourned to a date more than one hundred twenty (120) days after the date
fixed for the original meeting in which event the Board of Directors must
fix a new record date.
Section 3.5 SHAREOWNER LIST. - The Corporation shall have available,
beginning two (2) days after the notice of the meeting is given for which
the list was prepared and continuing to the date of the meeting, a
complete record of each shareowner entitled to vote at such meeting, or
any adjournment thereof, showing the address of and number of shares held
by each shareowner. The shareowner list shall be available for inspection
by any shareowner during normal business hours at the Corporation's
principal office or at a place identified in the meeting notice in the
city where the meeting will be held. The Corporation shall make the
shareowners' list available at the meeting and any shareowner or his/her
agent or attorney may inspect the list at any time the meeting or any
adjournment thereof.
Section 3.6 QUORUM AND VOTING REQUIREMENTS. - Shares entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter. A
majority of the outstanding shares entitled to vote on a matter,
represented in person or by proxy, shall constitute a quorum for action on
that matter. If a quorum exists, except in the case of the election of
Directors, action on a matter shall be approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the
Corporation's Articles of Incorporation, any Bylaw adopted under authority
granted in the Articles of Incorporation or statute requires a greater
number of affirmative votes. Directors shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors
at a meeting at which a quorum is present. Though less than a quorum of
the outstanding votes are represented at a meeting, a majority of the
votes so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 3.7 CONDUCT OF MEETING. - The Chairperson of the Board shall
preside at each meeting of shareowners. In the absence of the Chairperson
of the Board, such persons, in the following order, shall act as chair of
the meeting; the Vice Chairperson of the Board, the Chief Executive
Officer, the President, any Vice President, the Director in attendance
with the longest tenure in that office. The Secretary, or if absent, an
Assistant Secretary, of the company shall act as Secretary of each
shareowner meeting.
Section 3.8 PROXIES. - Any shareowner having the right to vote at a
meeting of shareowners may exercise such right by voting in person or by
proxy at such meeting. Such proxies shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 3.9 VOTING OF SHARES. - Except as provided in the Articles of
Incorporation or statute, each outstanding share entitled to vote shall be
entitled to one (1) vote upon each matter submitted to a vote at a meeting
of shareowners.
Section 3.10 VOTING OF SHARES BY CERTAIN HOLDERS. - Shares standing
in the name of another corporation may be voted by such officer, agent or
proxy as the Bylaws of such corporation may prescribe, or, in the absence
of such provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a
transfer of such shares into that person's name. Shares standing in the
name of a trustee may be voted by such trustee, either in person or by
proxy, without a transfer of such shares into the trustee's name. The
Corporation may request evidence of such fiduciary status with respect to
the vote, consent, waiver, or proxy appointment.
Shares standing in the name of a receiver or trustee in
bankruptcy may be voted by such receiver or trustee, and shares held by
or under the control of a receiver may be voted by such receiver
without the transfer of the shares into such person's name if
authority so to do is contained in an appropriate order of the court by
which such receiver was appointed.
A pledgee, beneficial owner, or attorney-in-fact of the shares held
in the name of a shareholder shall be entitled to vote such shares. The
Corporation may request evidence of such signatory's authority to sign for
the shareholder with respect to the vote, consent, waiver, or proxy
appointment.
Neither treasury shares nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of Directors of
such other corporation is held by the Corporation, shall be voted at any
meeting or counted in determining the total number of outstanding shares
at any given time.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.1 GENERAL POWER. - The business and affairs of the
Corporation shall be managed by its Board of Directors.
Section 4.2 NUMBER. CLASSES & TERM. - The number of Directors of
the Corporation shall be fifteen (15). The Directors of the Corporation
shall be divided into three classes, hereinafter referred to as "Class I,"
"Class II," and "Class III" with each class having five (5) Directors.
The initial Class I Directors shall consist of two (2) directors selected
by each of IES Industries Inc. ("IES") and WPL Holdings Inc. ("WPLH") and
one (1) selected by Interstate Power Company ("IPC"); the initial Class II
Directors shall consist of two (2) directors selected by each of IES and
WPLH and one (1) selected by IPC; and the initial Class III Directors
shall consist of two (2) directors selected by each of IES and WPLH and
one (1) selected from IPC. The initial term of Class I Directors shall
expire at the first annual meeting of Shareowners of the Corporation, the
initial term of Class II Directors shall expire at the second annual
meeting of Shareowners of the Corporation and the initial term of Class
III Directors shall expire at the third annual meeting of Shareowners of
the Corporation.
At each annual shareowner meeting after the first annual shareowner
meeting, directors to replace those of a Class whose terms expire at such
annual meeting shall be elected to hold office until the third succeeding
annual meeting and until their respective successors shall have been duly
qualified and elected. If the number of directors is hereafter changed,
any newly created directorships or decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
Section 4.3 CHAIRPERSON OF THE BOARD. - The Chairperson of the Board
if not designated as the Chief Executive Officer of the Company shall
assist the Board in the formulation of policies and may make
recommendations therefore. Information as to the affairs of the Company
in addition to that contained in the regular reports shall be furnished to
him or her on request. He or she may make suggestions and recommendations
to the Chief Executive Officer regarding any matters relating to the
affairs of the Company and shall be available for consultation and advice.
Section 4.4 VICE CHAIRPERSON OF THE BOARD. - The Vice Chairperson of
the Board shall assist the Board in the formulation of policies and make
recommendations therefore. The Vice Chairperson shall have such other
powers and duties as may be prescribed for him or her by the Chairperson
of the Board or the Board of Directors. In the absence of or the
inability of the Chairperson of the Board to act as Chairperson of the
Board, the Vice Chairperson of the Board shall assume the powers and
duties of the Chairperson of the Board.
Section 4.5 QUALIFICATIONS AND REMOVAL. - No person who has attained
70 years of age shall be eligible for election or re-election to the Board
of Directors. Any Director who has attained seventy (70) years of age
shall resign from the Board of Directors effective as of the next annual
Meeting of Shareowners. For a period of five (5) years following the
formation of the Corporation, no person, except any of the initial
Directors selected pursuant to Section 4.2 hereof, who is an executive
officer or employee of the Corporation or any of its subsidiaries shall be
eligible to serve as a Director of the Corporation; provided, however,
that any individual serving as Chief Executive Officer of the Corporation
shall be eligible to serve as a Director of the Corporation. In the event
the Chief Executive Officer resigns or retires from his or her office or
employment with the Corporation, he or she shall simultaneously submit his
or her resignation from the Board of Directors. In the event that the
Chief Executive Officer is removed from his or her office by the Board of
Directors, or is involuntarily terminated from employment with the
Corporation, he or she shall simultaneously submit his or her resignation
from the Board of Directors. In the event that a Director experiences a
change in their principal occupation or primary business affiliation, the
Director must submit their resignation from the Board to the Nominating
and Governance Committee. The Nominating and Governance Committee shall
recommend to the Board of Directors whether the Board should accept such
resignation. If the Nominating and Governance Committee recommends
acceptance of the resignation, an affirmative vote of two-thirds of the
remaining Directors holding office is required to affirm the Nominating
and Governance Committee's recommendation. A resignation may be tendered
by any Director at any meeting of the shareholders or of the Board of
Directors, who shall at such meeting accept the same.
Section 4.6 REGULAR MEETINGS. - Regular meetings of the Board of
Directors shall be held at such time and place as may be determined by the
Board of Directors, but in no event shall the Board meet less than once a
year.
Section 4.7 SPECIAL MEETINGS. - Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
the Vice Chairman of the Board, the Chief Executive Officer or any two (2)
Directors. The Chief Executive Officer or Secretary may fix any place,
either within or without the State of Iowa, whether in person or by
telecommunications, as the place for holding any special meeting.
Section 4.8 NOTICE; WAIVER. - Notice of any meeting of the Board of
Directors, unless otherwise provided pursuant to Section 4.6, shall be
given at least forty-eight (48) hours prior to the meeting by written
notice delivered personally or mailed to each Director at such address
designed by each Director, by telegram or other form of wire or wireless
communication. The notice need not describe the purpose of the meeting of
the Board of Directors or the business to be transacted at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, so addressed, with postage prepared. Any Director
may waive notice of any meeting. The attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except where
a Director attends a meeting for the express purpose of objecting to the
transaction of business because the meeting is not lawfully called or
convened.
Section 4.9 QUORUM. - A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a
meeting, a majority of the Directors present may adjourn the meeting to
some other day without further notice.
Section 4.10 MEETING PARTICIPATION. - (a) Any or all members of
the Board of Directors, or any committee thereof, may participate in a
regular or special meeting by, or to conduct the meeting through, the use
of any means of communication by which any of the following occurs:
1) All participating directors may simultaneously hear each
other during the meeting.
2) All communication during the meeting is immediately
transmitted to each participating director, and each
participating director is able to immediately send messages
to all other participating directors.
(b) If a meeting is conducted by the means of communication
described herein, all participating directors shall be informed
that a meeting is taking place at which official business may be
transacted.
(c) A director participating in a meeting by means of such
communication is deemed to be present in person at the meeting.
Section 4.11 ACTION WITHOUT MEETING. - Any action required or
permitted to be taken at any meeting of the Directors of the Corporation
or of any committee of the Board may be taken without a meeting if a
consent in writing setting forth the action so taken shall be signed by
all of the Directors or all of the members of the Committee of Directors,
as the case may be. Such consent shall have the same force and effect as
a unanimous vote at a meeting and shall be filed with the Secretary of the
Corporation to be included in the official records of the Corporation.
The action taken is effective when the last Director signs the consent
unless the consent specifies a different effective date.
Section 4.12 PRESUMPTION OF ASSENT. - A Director of the Corporation
who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless (a) the Director objects at the beginning of the
meeting or promptly upon arrival to the holding of or transacting business
at the meeting, (b) the Director's dissent or abstention shall be entered
in the minutes of the meeting, (c) the Director shall file a written
dissent or abstention to such action with the presiding officer of the
meeting before the adjournment thereof or shall forward such dissent or
abstention by registered or certified mail to the Secretary of the
Corporation immediately after the adjournment of the meeting, or (d) the
Director shall file a written notice to the Secretary of the Corporation
promptly after receiving the minutes of the meeting that the minutes
failed to show the Director's dissention or abstention from the action
taken. Such right to dissent or abstain shall not apply to a Director who
voted in favor of such action.
Section 4.13 VACANCIES. - Except as provided below, any vacancy
occurring in the Board of Directors or on any Committee of the Board of
Directors and any directorship to be filled by reason of an increase in
the number of Directors may be filled by the affirmative vote of a
majority of the Directors then in office, even if less than a quorum of
the Board of Directors. For a period of time commencing on formation of
Interstate Energy Corporation and expiring on the date of the third annual
meeting of shareowners of the Corporation, the initially appointed IES,
IPC and WPLH directors, each as a separate group, shall be entitled to
nominate those persons who will be eligible to be appointed, elected or
re-elected as IES, IPC and WPLH Directors. The Director or Directors so
chosen shall hold office until the next election of the Class for which
such Director or Directors shall have been chosen and until their
successors shall have been duly elected and qualified.
Section 4.14 COMPENSATION. - Compensation and expenses for
attendance at a regular or special meeting of the Board of Directors, or
at any committee meeting, shall be payable in such amounts as determined
from time to time by the Board of Directors. No such payment shall
preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor. Directors who are full time
employees or officers of the Corporation shall not receive any
compensation.
ARTICLE V
COMMITTEES
Section 5.1 COMMITTEES. - The Board of Directors may, by resolution
passed by a majority of the whole Board, designate from their number
various Committees from time to time as corporate needs may dictate. The
Committees may make their own rules of procedure and shall meet where and
as provided by such rules, or by resolution of the Board of Directors. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business. Each Committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required. The
Committee may be authorized by the Board of Directors to perform specified
functions, except that a committee may not do any of the following: (a)
authorize distributions; (b) approve or propose to shareowners action that
the Iowa Business Corporation Act requires to be approved by shareowners;
(c) fill vacancies on the Board of Directors, or, unless the Board of
Directors provides by resolution that vacancies on a committee shall be
filled by the affirmative vote of the remaining committee members, on any
Board committee; (d) amend the Corporation's Articles of Incorporation;
(e) adopt, amend or repeal bylaws; (f) approve a plan of merger not
requiring shareowner approval; (g) authorize or approve reacquisition of
shares, except according to a formula or method prescribed by the Board of
Directors; and (h) authorize or approve the issuance or sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that
the Board of Directors may authorize a committee to do so within limits
prescribed by the Board of Directors.
Section 5.2 EXECUTIVE COMMITTEE. An Executive Committee is hereby
established and shall consist of at least three (3) members, including the
Chairman of the Board. The Executive Committee shall possess all the
powers and authority of the Board of Directors when said Board of
Directors is not in session, except for the powers and authorities set
forth in Section 5.1.
Section 5.3 AUDIT COMMITTEE. - An Audit Committee is hereby
established and shall consist of at least three (3) Directors, all of whom
shall be outside members of the Board of Directors. The members of the
Committee shall be elected annually by a majority vote of the members of
the Board of Directors. Said Committee shall meet at the call of any one
of its members, but in no event shall it meet less than once a year.
Subsequent to each such Committee meeting, a report of the actions taken
by such Committee shall be made to the Board of Directors.
Section 5.4 COMPENSATION AND PERSONNEL COMMITTEE - A Compensation
and Personnel Committee is hereby established and shall consist of at
least three (3) Directors who are not and never have been officers,
employees or legal counsel of the Company. The Chairperson and the
members of the Compensation and Personnel Committee shall be elected
annually by a majority vote of the members of the Board of Directors.
Said Committee shall meet at such times as it determines, but at least
twice each year, and shall meet at the request of the Chairman of the
Board, the Chief Executive Officer, or any Committee member. Subsequent
to each such Committee meeting, a report of the actions taken by such
Committee shall be made to the Board of Directors.
Section 5.5 NOMINATING AND GOVERNANCE COMMITTEE. - A Nominating and
Governance Committee shall be established and shall consist of at least
three (3) Directors, all of whom shall be outside members of the Board of
Directors. The Chairperson and the members of the Nominating and
Governance Committee shall be elected annually by a majority vote of the
members of the Board of Directors. Said Committee shall meet at the call
of any one of its members, but in no event shall it meet less than once a
year. Subsequent to each such Committee meeting, a report of the actions
taken by such Committee shall be made to the Board of Directors.
ARTICLE VI
OFFICERS
Section 6.1 OFFICERS. - The Board of Directors shall elect a Chief
Executive Officer, a President, such number of Vice Presidents with such
designations as the Board of Directors at the time may decide upon, a
Secretary, a Treasurer and a Controller. The Chief Executive Officer may
appoint such other officers and assistant officers as may be deemed
necessary. The same person may simultaneously hold more than one such
office.
Section 6.2 TERM OF OFFICERS. - All officers, unless sooner removed,
shall hold their respective offices until their successors, willing to
serve, shall have been elected but any officer may be removed from Office
at any time by the Board of Directors.
Section 6.3 REMOVAL OF OFFICERS. - Any officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer shall not of itself create contract
rights.
Section 6.4 CHIEF EXECUTIVE OFFICER. - Subject to the control of
the Board of Directors the Chief Executive Officer designated by the Board
of Directors shall have and be responsible for the general management and
direction of the business of the Corporation, shall establish the lines of
authority and supervision of the Officers and employees of the
Corporation, shall have the power to appoint and remove and discharge any
and all agents and employees of the Corporation not elected or appointed
directly by the Board of Directors, and shall assist the Board in the
formulation of policies of the Corporation. The Chairperson of the Board,
if Chief Executive Officer, may delegate any part of his or her duties to
the President, or to one or more of the Vice Presidents of the
Corporation.
Section 6.5 PRESIDENT. - The President, when he or she is not
designated as and does not have the powers of the Chief Executive Officer,
shall have such other powers and duties may from time to time be
prescribed by the Board of Directors or be delegated to him or her by the
Chairperson of the Board or the Chief Executive Officer.
Section 6.6 VICE PRESIDENTS. - The Vice Presidents shall have such
powers and duties as may be prescribed for him or her by the Board of
Directors and the Chief Executive Officer. In the absence of or in the
event of the death of the Chief Executive officer and the President, the ,
inability or refusal to act, or in the event for any reason it shall be
impracticable for the Chief Executive Officer and the President to act
personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board
of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the Chief Executive Officer
and the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer and the
President. The execution of any instrument of the Corporation by any Vice
President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the Chief Executive Officer and the
President.
Section 6.7 SECRETARY. - The Secretary shall attend all meetings of
the Board of Directors, shall keep a true and faithful record thereof in
proper books to be provided for that purpose, and shall be responsible for
the custody and care of the corporate seal, corporate records and minute
books of the Corporation, and of all other books, documents and papers as
in the practical business operation of the Corporation shall naturally
belong in the office or custody of the Secretary, or shall be placed in
his or her custody by the Chief Executive Officer or by the Board of
Directors. He or she shall also act as Secretary of all shareowners'
meetings, and keep a record thereof. He or she shall, except as may be
otherwise required by statute or by these Bylaws, sign, issue and publish
all notices required for meetings of shareowners and of the Board of
Directors. He or she shall be responsible for the custody of the stock
books of the Corporation and shall keep a suitable record of the addresses
of shareowners. He or she shall also be responsible for the collection,
custody and disbursement of the funds received for dividend reinvestment.
He or she shall sign stock certificates, bonds and mortgages, and all
other documents and papers to which his or her signature may be necessary
or appropriate, shall affix the seal of the Corporation to all instruments
requiring the seal, and shall have such other powers and duties as are
commonly incidental to the office of Secretary, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.8 TREASURER. - The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and disbursement of the
funds of the Corporation, and shall deposit its funds in the name of the
Corporation in such banks or trust companies as he or she shall designate
and shall keep a proper record of cash receipts and disbursements. He or
she shall be responsible for the custody of such books, receipted vouchers
and other books and papers as in the practical business operation of the
Corporation shall naturally belong in the office or custody of the
Treasurer, or shall be placed in his or her custody by the President, or
by the Board of Directors. He or she shall sign checks, drafts, and other
paper providing for the payment of money by the Corporation for operating
purposes in the usual course or business. He or she may, in the absence of
the Secretary and Assistant Secretaries sign stock certificates. The
Treasurer shall have such other powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him or
her by the President or by the Board of Directors.
Section 6.9 CONTROLLER. - The Controller shall be the principal
accounting Officer of the Corporation. He or she shall have general
supervision over the books of accounts of the Corporation. He or she
shall examine the accounts of all Officers and employees from time to time
and as often as practicable, and shall see that proper returns are made of
all receipts from all sources. All bills, properly made in detail and
certified, shall be submitted to him or her, and he or she shall audit and
approve the same if found satisfactory and correct, but he or she shall
not approve any voucher unless charges covered by the voucher have been
previously approved through work orders, requisition or otherwise by the
head of the department in which it originated, or unless he or she shall
be otherwise satisfied of its propriety and correctness. He or she shall
have full access to all minutes, contracts, correspondence and other
papers and records of the Corporation relating to its business matters,
and shall be responsible for the custody of such books and documents as
shall naturally belong in the custody of the Controller and as shall be
placed in his or her custody by the President or by the Board of
Directors. The Controller shall have such other powers and duties as are
commonly incidental to the office of Controller, or as may be prescribed
for him or her by the President or by the Board of Directors.
Section 6.10 ASSISTANT OFFICERS. - The Assistant Secretaries,
Assistant Treasurers, Assistant Controllers, and other Assistant Officers
shall respectively assist the Secretary, Treasurer, Controller, and other
Officers of the Corporation in the performance of the respective duties
assigned to such principal Officer, and in assisting his or her principal
Officer each assistant Officer shall to that extent and for such purpose
have the same powers as his or her principal Officer. The powers and
duties of any such principal Officer shall temporarily devolve upon an
assistant Officer in case of the absence, disability, death, resignation
or removal from office of such principal Officer.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 7.1 CERTIFICATES FOR SHARES. - Each certificate representing
shares of the Corporation shall state upon the fact (a) that the
Corporation is organized under the laws of the State of Iowa, (b) the name
of the person to whom issued, (c) the number and class of shares, and the
designation of the series, if any, which such certificate represents, and
(d) the par value of each share, if any, and each such certificate shall
otherwise be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the
Board, or the Chief Executive Officer or the President and by the
Secretary or an Assistant Secretary and shall be sealed with the corporate
seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on
behalf of a transfer agent and registrar. In case any officer or other
authorized person who has signed or whose facsimile signature has been
placed upon such certificate for the Corporation shall have ceased to be
such officer or employee or agent before such certificate is issued, it
may be issued by the Corporation with the same effect as if such person
where an officer or employee or agent at the date of its issue. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
All certificates surrendered to the Corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity
to the Corporation as the Board of Directors may prescribe.
Section 7.2. TRANSFER OF SHARES. - Transfer of shares of the
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by such person's legal
representative, who shall furnish proper evidence of authority to
transfer, or authorized attorney, by power of attorney duly executed and
filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares.
Subject to the provisions of Section 3.10 of Article III of these
Bylaws, the person in whose name shares stand on the books of the
Corporation shall be treated by the Corporation as the owner thereof for
all purposes, including all rights deriving from such shares, and the
Corporation shall not be bound to recognize any equitable or other claim
to, or interest in, such shares or rights deriving from such shares, on
the part of any other person, including (without limitation) a purchaser,
assignee or transferee of such shares, or rights deriving from such
shares, unless and until such purchaser, assignee, transferee or other
person becomes the record holder of such shares, whether or not the
Corporation shall have either actual or constructive notice of the
interest of such purchaser, assignee, transferee or other person. Except
as provided in said Section 3.10 hereof, no such purchaser, assignee,
transferee or other person shall be entitled to receive notice of the
meetings of shareholders, to vote at such meetings, to examine the
complete record of the shareholders entitled to vote at meetings, or to
own, enjoy or exercise any other property or rights deriving from such
shares against the Corporation, until such purchaser, assignee, transferee
or other person has become the record holder of such shares.
Section 7.3 LOST, DESTROYED OR STOLEN CERTIFICATES. - When the owner
claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the Corporation has notice that such
shares have been acquired by a bona fide purchaser, (b) files with the
Corporation a sufficient indemnity bond if required by the Corporation and
(c) satisfies such other reasonable requirements as may be provided by the
Corporation.
Section 7.4 STOCK REGULATIONS. - The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the Corporation.
ARTICLE VIII
INDEMNIFICATION AND LIABILITY OF DIRECTOR AND OFFICERS
Section 8.1 INDEMNIFICATION. - The Corporation shall, to the fullest
extent permitted or required by the Iowa Business Corporation Act,
including any amendments thereto (but in the case of any such amendment,
only to the extent such amendment permits or requires the corporation to
provide broader indemnification rights than prior to such amendment),
indemnify its Directors, Officers, employees and agents against any and
all Liabilities, and advance any and all reasonable Expenses, incurred
thereby in any Proceeding to which any such Director, Officer, employee or
agent is a Party because he or she is or was a Director, Officer, employee
or agent of the Corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to
indemnification against Liabilities or the advancement of Expenses which a
Director, Officer, employee or agent may be entitled under any written
agreement, Board resolution, vote of shareowners, the Iowa Business
Corporation Act or otherwise. The Corporation may, but shall not be
required to, supplement the foregoing rights to indemnification against
Liabilities and advancement of Expenses under this Section 8.1 by the
purchase of insurance on behalf of any one or more of such Directors,
Officers, employees or agents, whether or not the Corporation would be
obligated to indemnify or advance Expenses to such Director, Officer,
employee or agent under this Section 8.1.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FISCAL YEAR. - The fiscal year of the Corporation shall
be the calendar year.
Section 9.2 DIVIDENDS. - Subject to the provisions of law or the
Articles of Incorporation, the Board of Directors may, at any regular or
special meeting, declare dividends upon the capital stock of the
Corporation payable out of surplus (whether earned or paid-in) or profits
as and when they deem expedient. Before declaring any dividend there may
be set apart out of surplus or profits such sum or sums as the directors
from time to time in their discretion deem proper for working capital or
as a reserve fund to meet contingencies or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.
Section 9.3 CONTRACTS, CHECKS, DRAFTS, DEEDS, LEASES AND OTHER
INSTRUMENTS. - All contracts, checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time
to time be determined by resolution of the Board of Directors. The Board
may authorize by resolution any officer or officers to enter into and
execute any contract or instrument of indebtedness in the name of the
Corporation, and such authority may be general or confined to specific
instances. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such banks
or other depositories as the Treasurer may authorize.
All contracts, deeds, mortgages, leases or instruments that require
the corporate seal of the Corporation to be affixed thereto shall be
signed by the President or a Vice President, and by the Secretary, or an
Assistant Secretary, or by such other officer or officers, or person or
persons, as the Board of Directors may by resolution prescribe.
Section 9.4 VOTING OF SHARES OWNED BY THE CORPORATION. - Subject
always to the specific directions of the Board of Directors, any share or
shares of stock issued by any other corporation and owned or controlled by
the Corporation may be voted at any shareholders' meeting of such other
corporation by the Chief Executive Officer of the Corporation, if present,
or if absent by any other officer of the Corporation who may be present.
Whenever, in the judgment of the Chief Executive Officer, or if absent, of
any officer, it is desirable for the Corporation to execute a proxy or
give a shareholders' consent in respect to any share or shares of stock
issued by any other corporation and owned by the Corporation, such proxy
or consent shall be executed in the name of the Corporation by the Chief
Executive Officer or one of the officers of the Corporation and shall be
attested by the Secretary or an Assistant Secretary of the Corporation
without necessity of any authorization by the Board of Directors. Any
person or persons designated in the manner above stated as the proxy or
proxies of the Corporation shall have full right, power and authority to
vote the share or shares of stock issued by such other corporation and
owned by the Corporation in the same manner as such share or shares might
be voted by the Corporation.
ARTICLE X
AMENDMENT OR REPEAL OF BYLAWS
Section 10.1 AMENDMENTS BY BOARD OF DIRECTORS. - Except as otherwise
provided by the Iowa Business Corporation Law or the Articles of
Incorporation, these Bylaws may be amended or repealed and new Bylaws may
be adopted by the Board of Directors by the affirmative vote of a majority
of the number of directors present at any meeting at which a quorum is in
attendance; provided, however, that the shareowners in adopting, amending
or repealing a particular bylaw may provide therein that the Board of
Directors may not amend, repeal or readopt that bylaw.
Section 10.2 IMPLIED AMENDMENT. - Any action taken or authorized by
the shareowners or by the Board of Directors which would be inconsistent
with the Bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the Bylaws so that the Bylaws would be
consistent with such action shall be given the same effect as though the
Bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.
Exhibit 10.1 As Executed
SERVICE AGREEMENT
(Public Utility Companies)
This Service Agreement is made and entered into as of the 22nd
day of May, 1998 by and among WISCONSIN POWER & LIGHT COMPANY, SOUTH
BELOIT WATER, GAS AND ELECTRIC COMPANY, IES UTILITIES INC. and INTERSTATE
POWER COMPANY (individually, a "Client Company" and collectively, the
"Client Companies"), and ALLIANT SERVICES COMPANY (the "Service Company"),
a service company subsidiary of Interstate Energy Corporation.
WITNESSETH
WHEREAS, the Securities and Exchange Commission (hereinafter
referred to as the "SEC") has approved and authorized as meeting the
requirements of Section 13(b) of the Public Utility Holding Company Act of
1935 (hereinafter referred to as the "Act"), the organization and conduct
of the business of the Service Company in accordance herewith, as a wholly
owned subsidiary service company of Interstate Energy Corporation; and
WHEREAS, the Service Company and the Client Companies desire to
enter into this Service Agreement whereby the Service Company agrees to
provide and the Client Companies agree to accept and pay for various
services as provided herein at cost, determined in accordance with
applicable rules and regulations under the Act, which require the Service
Company to fairly and equitably allocate costs among all associate
companies to which it renders services, including the Client Companies and
other associate companies which are not a party to this Service Agreement;
and
WHEREAS, any services provided to an associate company that
qualifies as a foreign utility company ("FUCO") under section 33 of the
Act will be charged at not less than the cost of providing such services
such that there will be no subsidization of the FUCO associate company
through the Service Company by the Client Companies; and
WHEREAS, economies and efficiencies benefiting the Client
Companies will result from the performance by Service Company of services
as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties to this Service Agreement
covenant and agree as follows:
ARTICLE I - SERVICES
Section 1.1 The Service Company shall furnish to the Client
Companies, upon the terms and conditions hereinafter set forth, such of
the services described in Appendix A hereto, at such times, for such
periods and in such manner as the Client Companies may from time to time
request and which the Service Company concludes it is able to perform.
The Service Company shall also provide each Client Company with such
special services, in addition to those services described in Appendix A
hereto, as may be requested by such Client Company and which the Service
Company concludes it is able to perform. In supplying such services, the
Service Company may arrange, where it deems appropriate, for the services
of such experts, consultants, advisers and other persons with necessary
qualifications as are required for or pertinent to the performance of such
services.
Section 1.2 Each Client Company shall take from the Service
Company such of the services described in Section 1.1, and such additional
general or special services, whether or not now contemplated, as are
requested from time to time by such Client Company and which the Service
Company concludes it is able to perform.
Section 1.3 The services described herein shall be directly
assigned or allocated by activity, project, program, work order or other
appropriate basis. A Client Company shall have the right from time to
time to amend, alter or rescind any activity, project, program or work
order provided that (i) any such amendment or alteration which results in
a material change in the scope of the services to be performed or
equipment to be provided is agreed to by the Services Company, (ii) the
cost for the services covered by the activity, project, program or work
order shall include any expense incurred by the Service Company as a
direct result of such amendment, alteration or rescission of the activity,
project, program or work order, and (iii) no amendment, alteration or
rescission of an activity, project, program or work order shall release a
Client Company from liability for all costs already incurred by or
contracted for by the Service Company pursuant to the activity, project,
program or work order, regardless of whether the services associated
with such costs have been completed.
Section 1.4 A Client Company shall have the right to purchase
the services described in Appendix A from a company other than the Service
Company (a "Non-Service Company") if a Non-Service Company offers fully
comparable quality services at a price that is lower than the price
charged by the Service Company.
ARTICLE II - COMPENSATION
Section 2.1 As compensation for the services to be rendered
hereunder, each Client Company shall pay to the Service Company all costs
which reasonably can be identified and related to particular services
performed by the Service Company for or on behalf of such Client Company.
Where more than one Client Company is involved in or has received benefits
from a service performed, the costs of such service will be directly
assigned or allocated, as set forth in Appendix A hereto, between or among
such Client Companies on a basis reasonably related to the service
performed to the extent reasonably practicable.
Section 2.2 It is the intent of this Agreement that charges for
services shall be distributed among the Client Companies, to the extent
possible, based upon direct assignment. The amounts remaining after
direct assignment shall be allocated among the Client Companies (and other
affiliate companies of Interstate Energy Corporation for which services
are rendered by the Service Company, where applicable) using the method
identified in Appendix A. The method of assignment or allocation of costs
shall be subject to review annually, or more frequently if appropriate.
Such method of assignment or allocation of costs may be modified or
changed by the Service Company without the necessity of an amendment to
this Service Agreement; provided that, in each instance, all services
rendered hereunder shall be at actual cost thereof, fairly and equitably
assigned or allocated, all in accordance with the requirements of the Act
and any orders promulgated thereunder. The Service Company shall review
with the Client Companies any proposed material change in the method of
assignment or allocation of costs hereunder and the parties must both
agree to any such changes before they are implemented. In addition, no
such agreed upon material change shall be made unless and until the
Service Company shall have first given written notice to the Illinois
Commerce Commission, the Minnesota Public Utilities Commission, the Public
Service Commission of Wisconsin, the Iowa Utilities Board (collectively,
the "State Commissions") and the SEC not less than 60 days prior to the
proposed effective date thereof.
Section 2.3 The Service Company shall render a monthly bill to
each Client Company which shall reflect the billing information necessary
to identify the costs charged for the preceding month.
Section 2.4 It is the intent of this Service Agreement that the
payment for services rendered by the Service Company to the Client
Companies under this Service Agreement shall cover all the costs of its
doing business (less the cost of services provided to affiliated companies
not a party to this Service Agreement and to other non-affiliated
companies, and credits for miscellaneous income items), including, but not
limited to, salaries and wages, office supplies and expenses, outside
services employed, property insurance, injuries and damages, employee
pensions and benefits, miscellaneous general expenses, rents, maintenance
of structures and equipment, depreciation and amortization, and
compensation for use of capital as permitted by Rule 91 of the SEC under
the Act.
ARTICLE III - TERM
Section 3.1 This Service Agreement shall become effective on
the date hereof, subject to the receipt of required regulatory approvals,
and shall continue in force with respect to a Client Company until
terminated by the Service Company with respect to such Client Company, or
until terminated by unanimous agreement of all Client Companies, in each
case upon not less than one year's prior written notice to all other
parties unless otherwise mutually agreed. This Service Agreement may also
be subject to termination or modification at any time, without notice, if
and to the extent performance under this Service Agreement may conflict
with the Act or with any rule, regulation or order of the SEC adopted
before or after the date of this Service Agreement.
ARTICLE IV - MISCELLANEOUS
Section 4.1 All accounts and records of the Service Company
shall be kept in accordance with the General Rules and Regulations
promulgated by the SEC pursuant to the Act, in particular, the Uniform
System of Accounts for Mutual Service Companies and Subsidiary Services
Companies in effect from and after the date hereof.
Section 4.2 Each Client Company shall cause each of its direct
or indirect domestic utility subsidiaries which may come into existence
after the effective date of this Service Agreement to become an additional
Client Company (collectively, the "New Client Companies") subject to this
Service Agreement. In addition, the parties hereto shall make such
changes in the scope and character of the services to be rendered and the
method of assigning or allocating costs of such services among the Client
Companies and the New Client Companies under this Service Agreement as may
become necessary or appropriate.
Section 4.3 The Service Company shall permit each Client
Company's state regulatory commission, and others as required under
applicable rule or regulation, such reasonable access to its accounts and
records, including the basis and computation of allocations, as shall be
necessary for such persons to review such Client Company's operating
results.
Section 4.4 This Service Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin,
may be executed in any number of counterparts with the same effect as if
the signatures thereto and hereto were on the same instrument, and may not
be amended except by written instrument executed by all parties hereto.
ARTICLE V - AMENDMENTS
Section 5.1. Prior to filing any amendment to this Service
Agreement with the SEC, the parties will file with the applicable State
Commissions, as provided by law or stipulation, a copy of such amendment.
In the event that a State Commission, within forty-five days of filing
with such State Commission, does not object to an amendment, or issue a
letter requiring that the amendment be held in abeyance until such State
Commission completes its review, the parties may file the proposed
amendment with the SEC.
Section 5.2. In the event that an amendment is finally
rejected or disapproved or found to be unreasonable by one or more of the
State Commissions prior to filing with the SEC, the amendment will not
become effective and the parties will not request SEC approval of the
amendment.
Section 5.3. In the event that an amendment is rejected or
disapproved or found to be unreasonable by one or more of the State
Commissions after it has been filed with the SEC but before it as been
approved by the SEC, the amendment will be terminated and the parties
agree to request withdrawal of the filing.
Section 5.4. In the event that an amendment is rejected,
disapproved or found to be unreasonable by one or more of the State
Commissions before it has been approved by the SEC, the parties shall have
the right to request further revisions of the amendment in order to cure
or remove the cause of the State Commission's rejection, disapproval or
finding of unreasonableness. Upon request by a party, the other parties
agree promptly to negotiate in good faith to revise the amendment, and
thereafter to file for any necessary regulatory authorization of the
renegotiated amendment. If the parties are unable to reach agreement
satisfactory to each of them and to each affected State Commission after
good faith negotiations, then Section 5.2 or 5.3 above, as applicable,
will apply.
Section 5.5. In the event that all the State Commissions have
previously approved an amendment prior to SEC approval, Section 5.6 below
shall not apply.
Section 5.6. In the event that an amendment has become
effective and is subsequently rejected, disapproved or found to be
unreasonable by one or more of the State Commissions, the parties will
make a good faith effort to terminate, amend or modify the amendment in a
manner which remedies the State Commission's adverse findings without
adverse impact on any of the parties. The parties will request to meet
with representatives of the State Commissions and make a good faith
attempt to resolve any differences in the affected states regarding the
subject amendment. If agreement can be reached to terminate, amend or
modify the amendment in a manner satisfactory to the contracting parties
and to the representatives of each State Commission, the parties shall
file such amended contract with the appropriate state and federal
regulatory agencies, seeking all necessary regulatory authorizations. If
the parties are unable to reach agreement satisfactory to each of them and
to each affected State Commission, after good faith negotiations, then
they shall be under no obligation to further amend the amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Service
Agreement to be executed as of the date and year first above written.
ALLIANT SERVICES COMPANY
By:___________________________
Title:
WISCONSIN POWER & LIGHT COMPANY
By:___________________________
Title:
SOUTH BELOIT WATER, GAS AND ELECTRIC COMPANY
By:___________________________
Title:
INTERSTATE POWER COMPANY
By:___________________________
Title:
IES UTILITIES INC.
By:___________________________
Title:
<PAGE>
Appendix A
Description of Services and Determination
of Charges for Services
I. The Service Company will maintain an accounting system for
accumulating all costs on an activity, project, program, work order,
or other appropriate basis. To the extent practicable, time records
of hours worked by Service Company employees will be kept by
activity, project, program or work order. Charges for salaries will
be determined from such time records and will be computed on the
basis of employees, effective hourly rates, including the cost of
fringe benefits and payroll taxes. Records of employee-related
expenses and other costs will be maintained for each functional group
within the Service Company (hereinafter referred to as "Function").
Where identifiable to a particular activity, project, program or work
order, such costs will be directly assigned to such activity,
project, program or work order. Any costs not directly assigned by
the Service Company will be allocated monthly in accordance with this
Appendix A.
The Service Company will develop and maintain written guidelines to
govern the methods and procedures for charging and allocating costs
among the affiliated companies of the Service Company and among
Functions within the Service Company. The Service Company will
subject the affiliate transactions to internal auditing procedures on
a periodic basis for compliance with the Service Agreement, written
guidelines and orders and rules of regulatory agencies.
II. Service Company costs accumulated for each activity, project, program
or work order will be directly assigned where possible. The amounts
that cannot be directly assigned shall be allocated to the Client
Companies or other Functions within the Service Company as described
in this Appendix A. To the extent possible, such allocations shall
be based on cost-causal relationships. The overall process of
determining responsibility for Service Company costs shall be as
follows:
1. Direct assignment. Costs accumulated in an activity, project,
program, or work order for services performed specifically for a
single Client Company or Function will be directly assigned and
charged to such Client Company or Function.
2. Allocation based on cost-causal relationship. Costs accumulated
in an activity, project, program or work order for services
performed specifically for two or more (but not all) Client
Companies or Functions and which cannot be directly assigned
will be allocated among and charged to such Client Companies or
Functions by application of one or more of the allocation ratios
described in paragraphs III and IV of this Appendix A; provided
that the denominator used in determining each such ratio shall
include only the Client Companies or Functions for which the
services are specifically performed.
3. Allocation for services of a general nature. Costs accumulated
in an activity, project, program, or work order for services of
a general nature which are applicable to all Client Companies or
Functions or to a class or classes of Client Companies or
Functions will be allocated among and charged to such Client
Companies or Functions by application of one or more of the
allocation ratios described in paragraphs III and IV of this
Appendix A.
III. The following ratios will be applied, as specified in paragraph IV of
this Appendix A, to allocate costs (a) for services of a general
nature and (b) subject to modification of the denominator as
described in paragraph II, number 2 above, for services performed
specifically for two or more (but not all) Client Companies or
Functions. These ratios will be determined annually, or at such
other time as may be required due to a significant change.
1. Units Sold or Transported Ratio
A ratio, based on appropriate Client Company electric, gas,
steam or water units of sale and/or transport, excluding intra-
system sales, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies (and
Interstate Energy Corporation's non-utility and foreign utility
company affiliates for which the Service Company provides
energy-related services, where applicable). The product-
specific units of sales are domestic kilowatt-hour electric
sales, dekatherms of gas sold or transported, units of water, or
units of steam. A separate ratio will be calculated and used
for each utility type (electric, gas, water and steam).
2. Electric Peak Load Ratio
A ratio, based on the sum of the monthly domestic firm electric
maximum system demands, including or excluding interruptible
loads, as appropriate, for the immediately preceding twelve
consecutive calendar months, the numerator of which is for a
Client Company and the denominator of which is for all Client
Companies.
3. Number of Customers Ratio
A ratio, based on the sum of the firm domestic electric
customers (and/or gas customers, where applicable) at the end of
each month for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
4. Number of Employees Ratio
A ratio, based on the sum of the number of employees at the end
of each month for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
or Service Company Function and the denominator of which is for
all Client Companies (and Interstate Energy Corporation's non-
utility and non-domestic utility affiliates for which the
Service Company provides services, where applicable) and/or the
Service Company.
5. Construction Expenditures Ratio
A ratio, based on construction expenditures for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company and the denominator of which is
for all Client Companies. To the extent possible, costs will be
segregated by utility type (i.e., electric, gas, water, steam
etc.) as well as by function (i.e., production, transmission,
distribution and general). If any remaining construction-
related costs are common to all utility types, such common costs
will be allocated between utility types and functions based on
the total of all construction expenditures.
6. Circuit Miles of Electric Distribution Lines Ratio
A ratio, based on installed circuit miles of domestic electric
distribution lines at the end of the immediately preceding
calendar year, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
7. Number of Meters Ratio
A ratio, based on the sum of the number of installed electric
meters (and/or gas, water or steam meters, where applicable) at
the end of each month for the immediately preceding twelve
consecutive calendar months, the numerator of which is for a
Client Company and the denominator of which is for all Client
Companies. A separate ratio will be calculated and used for
each utility type (i.e. electric, gas, water, steam etc.).
8. Total Assets Ratio
A ratio, based on the sum of the total assets at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable).
9. Circuit Miles of Electric Transmission Lines Ratio
A ratio, based on installed circuit miles of electric
transmission lines at the end of the immediately preceding
calendar year, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
10. Number of Central Processing Unit Seconds Ratio
A ratio, based on the number of central processing unit seconds
expended to execute mainframe computer software applications for
the immediately preceding twelve consecutive calendar months,
the numerator of which is for a Client Company or Service
Company Function, and the denominator of which is for all Client
Companies (and Interstate Energy Corporation's non-utility and
non-domestic utility affiliates, where applicable) and/or the
Service Company.
11. Gross Plant Ratio
A ratio, based on the sum of direct plant at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates, where applicable).
12. Materials, Supplies and Services Ratio
A ratio, based on the sum of materials, supplies and services,
either issued from inventory or directly purchased, for the
immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company or Function and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable) and/or the Service Company.
13. Tons of Coal Burned Ratio
A ratio, based on the tons of coal burned for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company and the denominator of which is
for all Client Companies.
14. Gallons of Oil Burned Ratio
A ratio, based on the gallons of oil burned for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company and the denominator of which is
for all Client Companies.
15. Dekatherms of Gas Ratio
A ratio, based on the dekatherms of gas purchased for the
immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company and the denominator
of which is for all Client Companies.
16. MCF Peak Load Ratio
A ratio, based on the sum of the monthly gas maximum system
demands, including or excluding interruptible loads, as
appropriate, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
17. Feet of Gas Line Ratio
A ratio, based on installed footage of gas lines at the end of
the immediately preceding calendar year, the numerator of which
is for a Client Company and the denominator of which is for all
Client Companies.
18. Feet of Steam Distribution Lines Ratio
A ratio, based on installed footage of steam lines at the end of
the immediately preceding calendar year, the numerator of which
is for a Client Company and the denominator of which is for all
Client Companies.
19. Steam Peak Load Ratio
A ratio, based on the sum of the monthly steam maximum system
demands, including or excluding interruptible loads, as
appropriate, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
20. Feet of Water Distribution Lines Ratio
A ratio, based on installed footage of water lines at the end of
the immediately preceding calendar year, the numerator of which
is for a Client Company and the denominator of which is for all
Client Companies.
21. Water Peak Load Ratio
A ratio, based on the sum of the monthly water maximum system
demands, including or excluding interruptible loads, as
appropriate, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies.
22. Number of Bills Ratio
A ratio, based on the sum of the number of monthly bills issued,
for the immediately preceding twelve calendar months, the
numerator of which is for a Client Company and the denominator
of which is for all Client Companies.
23. General Ratio
A ratio, based on the sum of all Service Company expenses
directly assigned or allocated, based on allocators other than
this "General Ratio," to Client Companies (excluding fuel, gas,
purchased power and the cost of goods sold) for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company or Function and the denominator of
which is for all Client Companies (and Interstate Energy
Corporation's non-utility and non-domestic utility affiliates,
where applicable) and/or the Service Company. As used herein,
"cost of goods sold" represents materials that are resold to the
ultimate consumer.
IV. A description of each Function's activities, which may be modified
from time to time by the Service Company, is set forth below. As
described in paragraph II, number 1 of this Appendix A, where
identifiable, costs will be directly assigned to the Client Companies
or to other Functions of the Service Company. For costs accumulated
in activities, projects, programs, or work orders which are for
services of a general nature or for services performed specifically
for two or more (but not all) Client Companies or Functions which
cannot be directly assigned, as described in paragraph II, numbers 2
and 3 of this Appendix A, the method or methods of allocation will be
based upon the applicable allocation ratios (modified as described in
paragraph II, number 2, if applicable) set forth below in brackets
"[Allocator]" for each Function.
1. Information Systems
Provides communications and electronic data processing services
such as:
(1) Development and support of mainframe computer software
applications. [Number of Central Processing Unit Seconds
Ratio, #10]
(2) Procurement and support of personal computers and related
network and software applications. [Number of Employees
Ratio, #4]
(3) Operation of data center. [Number of Central Processing
Unit Seconds Ratio, #10]
(4) Installation and operation of communications systems.
[Number of Employees Ratio, #4]
2. Meters
Procures and maintains meters. [Number of Meters Ratio, #7]
3. Transportation
Procures and maintains transportation vehicles and equipment.
[Number of Employees Ratio, #4]
4. Electric System Maintenance
Coordinates maintenance of electric transmission and
distribution systems.
1. Transmission systems. [Circuit Miles of Electric
Transmission Lines Ratio, #9]
2. Distribution systems. [Circuit Miles of Electric
Distribution Lines Ratio, #6]
5. Marketing and Customer Relations
Advises the Client Companies on relations with domestic utility
customers. The activities of the Function include:
(1) Design and administration of sales and demand-side
management programs. [Electric Peak Load Ratio, #2, or MCF
Peak Load Ratio, #16, or Steam Peak Load Ratio, #19, or
Water Peak Load Ratio, #21, or Units Sold or Transported
Ratio, #1]
(2) Customer billing and payment processing. [Number of Bills
Ratio, #22]
(3) Operation of call center. [Number of Customers Ratio, #3]
(4) Customer Market Research and Product Development and
Testing. [Number of Customers Ratio, #3]
6. Electric Transmission and Distribution Engineering and
Construction.
Designs and monitors construction of electric transmission and
distribution lines and substations. Prepares costs and schedule
estimates, visits construction sites to ensure that construction
activities coincide with plans, and administers construction
contracts. [Construction Expenditures Ratio, #5]
7. Power Engineering and Construction
Prepares specifications and administers contracts for
construction of new electric generating units. Prepares costs
and schedule estimates and visits construction sites to ensure
that construction activities coincide with plans. [Construction
Expenditures Ratio, #5]
8. Human Resources
Establishes and administers policies and supervises compliance
with legal requirements in the areas of employment,
compensation, benefits and employee health and safety.
Processes payroll and employee benefit payments. Supervises
contract negotiations and relations with labor unions. [Number
of Employees Ratio, #4]
9. Materials Management
Provides services in connection with the procurement of
materials and contract services and management of material and
supplies inventories. [Material, Supplies and Services Ratio,
#12]
10. Facilities
Operates and maintains office and service buildings. Provides
security and housekeeping services for such buildings and
procures office furniture and equipment. [Gross Plant Ratio,
#11]
11. Accounting
Maintains corporate books and records, prepares financial and
statistical reports, processes payments to vendors, prepares tax
filings and supervises compliance with tax laws and regulations.
[General Ratio, #23]
12. Power Planning
Coordinates the planning and operation of Client Companies'
electric power systems. The activities of the Function include:
(1) System Planning - planning of additions to Client
Companies' electric generation, transmission and
distribution systems. [Electric Peak Load Ratio, #2]
(2) System Control Center - coordination of the operation of
Client Companies' electric generating units and
transmission systems. [Units Sold or Transported Ratio,
#1]
(3) Distribution Control Centers - coordination of Client
Companies' electric distribution systems. [Units Sold or
Transported Ratio, #1]
13. Public Affairs
Prepares and disseminates information to employees, customers,
government officials, communities and the media. Provides
graphics, reproduction lithography, photography and video
services. [General Ratio, #23]
14. Legal
Renders services relating to labor and employment law,
litigation, contracts, rates and regulatory affairs,
environmental matters, financing, financial reporting, real
estate and other legal matters. [General Ratio, #23]
15. Rates
Determines the Client Companies' revenue requirements and rates
to electric and gas customers. Administers interconnection and
joint ownership agreements. Researches and forecasts customers'
usage. [Number of Customers Ratio, #3]
16. Finance
Renders services to Client Companies with respect to
investments, financing, cash management, risk management, claims
and fire prevention. Prepares reports to the SEC, budgets,
financial forecast and economic analyses. [General Ratio, #23]
17. Land and Right of Way
Purchases, surveys, records, and sells real estate interests for
Client Companies. [Gross Plant Ratio, #11]
18. Internal Auditing
Reviews internal controls and procedures to ensure that assets
are safeguarded and that transactions are properly authorized
and recorded. [General Ratio, #23]
19. Environmental Affairs
Establishes policies and procedures for compliance with
environmental laws and regulations. Studies emerging
environmental issues, monitors compliance with environmental
requirements and provides training to the Client Companies'
personnel. [Units Sold or Transported Ratio, #1]
20. Fuels
Procures coal, gas and oil for the Client Companies. Ensures
compliance with price and quality provisions of fuel contracts
and arranges for transportation of the fuel to the generating
stations. [Tons of Coal Burned Ratio, #13; or Gallons of Oil
Burned Ratio, #14; or Dekatherms of Gas Ratio, #15; or MCF Peak
Load Ratio, #16]
21. Investor Relations
Provides communications to investors and the financial
community, performs transfer agent and shareholder record
keeping functions, administers stock plans and performs stock-
related regulatory reporting. [Total Assets Ratio, #8]
22. Planning
Facilitates preparation of strategic and operating plans,
monitors trends and evaluates business opportunities. [General
Ratio, #23]
23. Executive
Provides general administrative and executive management
services. [General Ratio, #23]
24. Gas System Maintenance
Coordinates maintenance of Client Companies' gas transmission
and distribution systems. [Feet of Gas Lines Ratio, #17]
25. Gas Transmission and Distribution Engineering and Construction
Designs and monitors construction of gas transmission and
distribution plant. Prepares costs and schedule estimates,
visits construction sites to ensure that construction activities
coincide with plans, and administers construction contracts.
[Construction Expenditures Ratio, #5]
26. Gas Acquisition and Dispatch
Coordinates the planning and operation of Client Companies' gas
systems. The activities of the Function include:
(1) System Planning - planning of additions to Client
Companies, gas production, transmission, and distribution
systems. [Units Sold or Transported Ratio, #1; or MCF Peak
Load Ratio, #16; or Dekatherms of Gas Ratio, #15]
(2) Distribution Control Centers - coordination of Client
Companies, gas distribution systems. [Units Sold or
Transported Ratio, #1; or MCF Peak Load Ratio, #16]
27. Gas Production Engineering & Construction
Prepares specifications and administers contracts for
construction of new gas production and/or storage units.
Prepares specifications and administers contracts for
improvements to existing units. Prepares costs and schedule
estimates and visits construction sites to ensure that
construction activities coincide with plans. [Construction
Expenditures Ratio, #5]
28. Steam System Maintenance
Coordinates maintenance of Client Companies' steam distribution
systems. [Feet of Steam Distribution Lines Ratio, #18]
29. Steam Distribution Engineering & Construction
Designs and monitors construction of steam distribution systems.
Prepares costs and schedule estimates, visits construction sites
to ensure that construction activities coincide with plans, and
administers construction contracts. [Construction Expenditures
Ratio, #5]
30. Steam Supply Engineering & Construction
Prepares specifications and administers contracts for
construction of new steam supply units or improvements to
existing steam supply units. Prepares costs and schedule
estimates and visits construction sites to ensure that
construction activities coincide with plans. [Construction
Expenditures Ratio, #5; or Steam Peak Load Ratio, #19]
31. Steam Planning
Coordinates the planning and operation of Client Companies'
steam systems. The activities of the Function include:
(1) System Planning - planning of additions to Client
Companies' steam supply units and distribution systems.
[Units Sold or Transported Ratio, #1; or Steam Peak Load
Ratio, #19]
(2) Distribution Control Centers - coordination of Client
Companies' steam distribution systems. [Units Sold or
Transported Ratio, #1; or Steam Peak Load Ratio, #19]
32. Water System Maintenance
Coordinates maintenance of Client Companies' water distribution
systems. [Feet of Water Distribution Lines Ratio, #20]
33. Water Distribution Engineering & Construction
Designs and monitors construction of water distribution systems.
Prepares costs and schedule estimates, visits construction sites
to ensure that construction activities coincide with plans, and
administers construction contracts. [Construction Expenditures
Ratio, #5]
34. Water Supply Engineering & Construction
Prepares specifications and administers contracts for
construction of new water supply units or improvements to
existing water supply units. Prepares costs and schedule
estimates and visits construction sites to ensure that
construction activities coincide with plans. [Construction
Expenditures Ratio, #5]
35. Water Planning
Coordinates the planning and operation of Client Companies'
water systems. The activities of the Function include:
(1) System Planning - planning of additions to Client
Companies' water supply units and distribution systems.
[Units Sold or Transported Ratio, #1; or Water Peak Load
Ratio, #21]
(2) Distribution Control Centers - coordination of Client
Companies' water distribution systems. [Units Sold or
Transported Ratio, #1; or Water Peak Load Ratio, #21]
EXHIBIT 10.2 As Executed
SERVICE AGREEMENT
(Non-Utility Companies)
This Service Agreement is made and entered into as of the 22nd
day of May, 1998 by and among ALLIANT INDUSTRIES, INC., IPC DEVELOPMENT
COMPANY, INC. (individually, a "Client Company" and collectively, the
"Client Companies") and ALLIANT SERVICES COMPANY (the "Service Company"),
a service company subsidiary of Interstate Energy Corporation.
WITNESSETH
WHEREAS, the Securities and Exchange Commission (hereinafter
referred to as the "SEC") has approved and authorized as meeting the
requirements of Section 13(b) of the Public Utility Holding Company Act of
1935 (hereinafter referred to as the "Act"), the organization and conduct
of the business of the Service Company in accordance herewith, as a wholly
owned subsidiary service company of Interstate Energy Corporation; and
WHEREAS, the Service Company and the Client Companies desire to
enter into this Service Agreement whereby the Service Company agrees to
provide, and the Client Companies agree to accept and pay for, various
services as provided herein in accordance with applicable rules and
regulations under the Act, which require the Service Company to fairly and
equitably allocate costs among all associate companies to which it renders
services, including the Client Companies and other associate companies
which are not a party to this Service Agreement; and
WHEREAS, economies and efficiencies benefiting the Client
Companies will result from the performance by the Service Company of
services as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties to this Service Agreement
covenant and agree as follows:
ARTICLE I - SERVICES
Section 1.1 The Service Company shall furnish to a Client
Company, if requested by such Client Company, upon the terms and
conditions hereinafter set forth, such of the services described in
Appendix A hereto, at such times, for such periods and in such manner as
the Client Company may from time to time request and which the Service
Company concludes it is able to perform. The Service Company shall also
provide a Client Company with such special services, in addition to those
services described in Appendix A hereto, as may be requested by such
Client Company and which the Service Company concludes it is able to
perform. In supplying such services, the Service Company may arrange,
where it deems appropriate, for the services of such experts, consultants,
advisers and other persons with necessary qualifications as are required
for or pertinent to the performance of such services.
Section 1.2 Each Client Company shall take from the
Service Company such of the services described in Section 1.1, and such
additional general or special services, whether or not now contemplated,
as are requested from time to time by such Client Company and which the
Service Company concludes it is able to perform.
Section 1.3 The services described herein shall be
directly assigned or allocated by activity, project, program, work order
or other appropriate basis. A Client Company shall have the right from
time to time to amend, alter or rescind any activity, project, program or
work order provided that (i) any such amendment or alteration which
results in a material change in the scope of the services to be performed
or equipment to be provided is agreed to by the Services Company, (ii) the
cost for the services covered by the activity, project, program or work
order shall include any expense incurred by the Service Company as a
direct result of such amendment, alteration or rescission of the activity,
project, program or work order, and (iii) no amendment, alteration or
rescission of an activity, project, program or work order shall release
a Client Company from liability for all costs already incurred by or
contracted for by the Service Company pursuant to the activity, project,
program or work order, regardless of whether the services associated
with such costs have been completed.
ARTICLE II - COMPENSATION
Section 2.1 As compensation for the services to be
rendered hereunder, each Client Company shall pay to the Service Company
all costs which reasonably can be identified and related to particular
services performed by the Service Company for or on behalf of such Client
Company; provided that in respect to services performed for an associate
company which is a foreign utility company ("FUCO") that qualifies for
exemption under section 33 of the Act, such FUCO shall pay the fair market
value of such services, but in any event no less than the cost thereof.
Where more than one Client Company is involved in or has received benefits
from a service performed, the costs of such service will be directly
assigned or allocated, as set forth in Appendix A hereto, between or among
such Client Companies on a basis reasonably related to the service
performed to the extent reasonably practicable.
Section 2.2 It is the intent of this Agreement that charges for
services shall be distributed among the Client Companies, to the extent
possible, based upon direct assignment. The amounts remaining after
direct assignment shall be allocated among the Client Companies (and other
affiliates of Interstate Energy Corporation for which services are
rendered by the Service Company, where applicable) using the method
identified in Appendix A. The method of assignment or allocation of costs
shall be subject to review annually, or more frequently if appropriate.
Such method of assignment or allocation of costs may be modified or
changed by the Service Company without the necessity of an amendment to
this Service Agreement; provided that, in each instance, all services
rendered hereunder shall be at actual cost thereof, fairly and equitably
assigned or allocated, all in accordance with the requirements of the Act
and any orders promulgated thereunder; provided further that services
rendered to foreign affiliates which qualify for exemption under Rule
83(a) under the Act may be furnished by the Service Company at the fair
market value thereof (but not less than the cost thereof). The Service
Company shall review with the Client Companies any proposed material
change in the method of assignment or allocation of costs hereunder and
the parties must both agree to any changes before they are implemented.
In addition, no such agreed upon material change shall be made unless and
until the Service Company shall have first given written notice to the
Illinois Commerce Commission, the Minnesota Public Utilities Commission,
the Public Service Commission of Wisconsin, the Iowa Utilities Board
(collectively, the "State Commissions") and the SEC not less than 60 days
prior to the proposed effective date thereof.
Section 2.3 The Service Company shall render a monthly bill to
each Client Company which shall reflect the billing information necessary
to identify the costs charged for the preceding month.
Section 2.4 It is the intent of this Service Agreement that the
payment for services rendered by the Service Company to the Client
Companies under this Service Agreement shall cover all of the costs of its
doing business (less the costs of services provided to affiliated
companies not a party to this Service Agreement and to other
non-affiliated companies, and credits for miscellaneous income items),
including, but not limited to, salaries and wages, office supplies and
expenses, outside services employed, property insurance, injuries and
damages, employee pensions and benefits, miscellaneous general expenses,
rents, maintenance of structures and equipment, depreciation and
amortization, and compensation for use of capital as permitted by Rule 91
of the SEC under the Act.
ARTICLE III - TERM
Section 3.1 This Service Agreement shall become effective on
the date hereof, subject to the receipt of required regulatory approvals,
and shall continue in force with respect to a Client Company until
terminated by the Client Company, or by the Service Company with respect
to such Client Company, or until terminated by unanimous agreement of all
Client Companies, in each case upon not less than one year's prior written
notice to all other parties unless otherwise mutually agreed. This
Service Agreement may also be subject to termination or modification at
any time, without notice, if and to the extent performance under this
Service Agreement may conflict with the Act or with any rule, regulation
or order of the SEC adopted before or after the date of this Service
Agreement.
ARTICLE IV - MISCELLANEOUS
Section 4.1 All accounts and records of the Service Company
shall be kept in accordance with the General Rules and Regulations
promulgated by the SEC pursuant to the Act, in particular, the Uniform
System of Accounts for Mutual Service Companies and Subsidiary Services
Companies in effect from and after the date hereof.
Section 4.2 Each client company shall cause each of its direct
or indirect non-utility subsidiaries which may come into existence after
the effective date of this Service Agreement to become an additional
Client Company (collectively, the "New Client Companies") subject to this
Service Agreement. In addition, the parties hereto shall make such
changes in the scope and character of the services to be rendered and the
method of assigning or allocating costs of such services among the Client
Companies and the New Client Companies under this Service Agreement as may
become necessary or appropriate.
Section 4.3 The Service Company shall permit each Client
Company, and others as required under applicable rule or regulation, such
reasonable access to its accounts and records, including the basis and
computation of allocations, as shall be necessary for such persons to
review such Client Company's operating results.
Section 4.4 This Service Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin,
may be executed in any number of counterparts with the same effect as if
the signatures thereto and hereto were on the same instrument, and may not
be amended except by written instrument executed by all parties hereto.
ARTICLE V - AMENDMENTS
Section 5.1. Prior to filing any amendment to this Service
Agreement with the SEC, the parties will file with the applicable State
Commissions, as provided by law or stipulation, a copy of such amendment.
In the event that a State Commission, within forty-five days of filing
with such State Commission, does not object to an amendment, or issue a
letter requiring that the amendment be held in abeyance until such State
Commission completes its review, the parties may file the proposed
amendment with the SEC.
Section 5.2. In the event that an amendment is finally
rejected or disapproved or found to be unreasonable by one or more of the
State Commissions prior to filing with the SEC, the amendment will not
become effective and the parties will not request SEC approval of the
amendment.
Section 5.3. In the event that an amendment is rejected or
disapproved or found to be unreasonable by one or more of the State
Commissions after it has been filed with the SEC but before it as been
approved by the SEC, the amendment will be terminated and the parties
agree to request withdrawal of the filing.
Section 5.4. In the event that an amendment is rejected,
disapproved or found to be unreasonable by one or more of the State
Commissions before it has been approved by the SEC, the parties shall have
the right to request further revisions of the amendment in order to cure
or remove the cause of the State Commission's rejection, disapproval or
finding of unreasonableness. Upon request by a party, the other parties
agree promptly to negotiate in good faith to revise the amendment, and
thereafter to file for any necessary regulatory authorization of the
renegotiated amendment. If the parties are unable to reach agreement
satisfactory to each of them and to each affected State Commission after
good faith negotiations, then Section 5.2 or 5.3 above, as applicable,
will apply.
Section 5.5. In the event that all the State Commissions have
previously approved an amendment prior to SEC approval, Section 5.6 below
shall not apply.
Section 5.6. In the event that an amendment has become
effective and is subsequently rejected, disapproved or found to be
unreasonable by one or more of the State Commissions, the parties will
make a good faith effort to terminate, amend or modify the amendment in a
manner which remedies the State Commission's adverse findings without
adverse impact on any of the parties. The parties will request to meet
with representatives of the State Commissions and make a good faith
attempt to resolve any differences in the affected states regarding the
subject amendment. If agreement can be reached to terminate, amend or
modify the amendment in a manner satisfactory to the contracting parties
and to the representatives of each State Commission, the parties shall
file such amended contract with the appropriate state and federal
regulatory agencies, seeking all necessary regulatory authorizations. If
the parties are unable to reach agreement satisfactory to each of them and
to each affected State Commission, after good faith negotiations, then
they shall be under no obligation to further amend the amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Service
Agreement to be executed as of the date and year first above written.
ALLIANT SERVICES COMPANY
By:___________________________
Title:
ALLIANT INDUSTRIES INC.
By:____________________________
Title:
IPC DEVELOPMENT COMPANY, INC.
By:____________________________
Title:
<PAGE>
Appendix A
Description of Services and Determination
of Charges for Services
I. The Service Company will maintain an accounting system for
accumulating all costs on an activity, project, program, work order,
or other appropriate basis. To the extent practicable, time records
of hours worked by Service Company employees will be kept by
activity, project, program or work order. Charges for salaries will
be determined from such time records and will be computed on the
basis of employees, effective hourly rates, including the cost of
fringe benefits and payroll taxes. Records of employee-related
expenses and other costs will be maintained for each functional group
within the Service Company (hereinafter referred to as "Function").
Where identifiable to a particular activity, project, program or work
order, such costs will be directly assigned to such activity,
project, program or work order. Any costs not directly assigned by
the Service Company will be allocated monthly in accordance with this
Appendix A.
The Service Company will develop and maintain written guidelines to
govern the methods and procedures for charging and allocating costs
among the affiliated companies of the Service Company and among
Functions within the Service Company. The Service Company will
subject the affiliate transactions to internal auditing procedures on
a periodic basis for compliance with the Service Agreement, written
guidelines and orders and rules of regulatory agencies.
II. Service Company costs accumulated for each activity, project, program
or work order will be directly assigned where possible. The amounts
that cannot be directly assigned shall be allocated to the Client
Companies or other Functions within the Service Company as described
in this Appendix A. To the extent possible, such allocations shall
be based on cost-causal relationships. The overall process of
determining responsibility for Service Company costs shall be as
follows:
1. Direct assignment. Costs accumulated in an activity, project,
program, or work order for services performed specifically for a
single Client Company or Function will be directly assigned and
charged to such Client Company or Function.
2. Allocation based on cost-causal relationship. Costs accumulated
in an activity, project, program or work order for services
performed specifically for two or more (but not all) Client
Companies or Functions and which cannot be directly assigned
will be allocated among and charged to such Client Companies or
Functions by application of one or more of the allocation ratios
described in paragraphs III and IV of this Appendix A; provided
that the denominator used in determining each such ratio shall
include only the Client Companies or Functions for which the
services are specifically performed.
3. Allocation for services of a general nature. Costs accumulated
in an activity, project, program, or work order for services of
a general nature which are applicable to all Client Companies or
Functions or to a class or classes of Client Companies or
Functions will be allocated among and charged to such Client
Companies or Functions by application of one or more of the
allocation ratios described in paragraphs III and IV of this
Appendix A.
III. The following ratios will be applied, as specified in paragraph IV of
this Appendix A, to allocate costs (a) for services of a general
nature and (b) subject to modification of the denominator as
described in paragraph II, number 2 above, for services performed
specifically for two or more (but not all) Client Companies or
Functions. These ratios will be determined annually, or at such
other time as may be required due to a significant change.
1. Materials, Supplies and Services Ratio
A ratio, based on the sum of materials, supplies and services,
either issued from inventory or directly purchased, for the
immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company or Function and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable) and/or the Service Company.
2. Number of Employees Ratio
A ratio, based on the sum of the number of employees at the end
of each month for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
or Service Company Function and the denominator of which is for
all Client Companies (and Interstate Energy Corporation's non-
utility and non-domestic utility affiliates for which the
Service Company provides services, where applicable) and/or the
Service Company.
3. Total Assets Ratio
A ratio, based on the sum of the total assets at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable).
4. Number of Central Processing Unit Seconds Ratio
A ratio, based on the number of central processing unit seconds
expended to execute mainframe computer software applications for
the immediately preceding twelve consecutive calendar months,
the numerator of which is for a Client Company or Service
Company Function, and the denominator of which is for all Client
Companies (and Interstate Energy Corporation's non-utility and
non-domestic utility affiliates, where applicable) and/or the
Service Company.
5. Gross Plant Ratio
A ratio, based on the sum of direct plant at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates, where applicable).
6. General Ratio
A ratio, based on the sum of all Service Company expenses
directly assigned or allocated, based on allocators other than
this "General Ratio," to Client Companies (excluding fuel, gas,
purchased power and the cost of goods sold) for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company or Function and the denominator of
which is for all Client Companies (and Interstate Energy
Corporation's non-utility and non-domestic utility affiliates,
where applicable) and/or the Service Company. As used herein,
cost of goods sold represents materials that are resold to the
ultimate consumer.
7. Units Sold or Transported Ratio
A ratio, based on appropriate Client Company electric, gas,
steam or water units of sale and/or transport, excluding intra-
system sales, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies (and
Interstate Energy Corporation's non-utility and foreign utility
companies for which the Service Company provides energy-related
services, where applicable). The product-specific units of
sales are domestic kilowatt-hour electric sales, dekatherms of
gas sold or transported, units of water, or units of steam. A
separate ratio will be calculated and used for each utility type
(electric, gas, water and steam).
IV. A description of each Function's activities, which may be modified
from time to time by the Service Company, is set forth below. As
described in paragraph II, number 1 of this Appendix A, where
identifiable, costs will be directly assigned to the Client Companies
or to other Functions of the Service Company. For costs accumulated
in activities, projects, programs, or work orders which are for
services of a general nature or for services performed specifically
for two or more (but not all) Client Companies or Functions which
cannot be directly assigned, as described in paragraph II, numbers 2
and 3 of this Appendix A, the method or methods of allocation will be
based upon the applicable allocation ratios (modified as described in
paragraph II, number 2, if applicable) set forth below in brackets
[Allocator] for each Function.
1. Information Systems
Provides communications and electronic data processing services
such as:
(1) Development and support of mainframe computer software
applications. [Number of Central Processing Unit Seconds
Ratio, #4]
(2) Procurement and support of personal computers and related
network and software applications. [Number of Employees
Ratio, #2]
(3) Operation of data center. [Number of Central Processing
Unit Seconds Ratio, #4]
(4) Installation and operation of communications systems.
[Number of Employees Ratio, #2]
2. Transportation
Procures and maintains transportation vehicles and equipment.
[Number of Employees Ratio, #2]
3. Human Resources
Establishes and administers policies and supervises compliance
with legal requirements in the areas of employment,
compensation, benefits and employee health and safety.
Processes payroll and employee benefit payments. Supervises
contract negotiations and relations with labor unions. [Number
of Employees Ratio, #2]
4. Materials Management
Provides services in connection with the procurement of
materials and contract services and management of material and
supplies inventories. [Material, Supplies and Services Ratio,
#1]
5. Facilities
Operates and maintains office and service buildings. Provides
security and housekeeping services for such buildings and
procures office furniture and equipment. [Gross Plant Ratio,
#5]
6. Accounting
Maintains corporate books and records, prepares financial and
statistical reports, processes payments to vendors, prepares tax
filings and supervises compliance with tax laws and regulations.
[General Ratio, #6]
7. Environmental Affairs
Establishes policies and procedures for compliance with
environmental laws and regulations. Studies emerging
environmental issues, monitors compliance with environmental
requirements and provides training to the Client Companies'
personnel. [Units Sold or Transported Ratio, #7]
8. Public Affairs
Prepares and disseminates information to employees, customers,
government officials, communities and the media. Provides
graphics, reproduction lithography, photography and video
services. [General Ratio, #8]
9. Legal
Renders services relating to labor and employment law,
litigation, contracts, rates and regulatory affairs,
environmental matters, financing, financial reporting, real
estate and other legal matters. [General Ratio, #8]
10. Finance
Renders services to Client Companies with respect to
investments, financing, cash management, risk management, claims
and fire prevention. Prepares reports to the SEC, budgets,
financial forecast and economic analyses. [General Ratio, #8]
11. Land and Right of Way
Purchases, surveys, records, and sells real estate interests for
Client Companies. [Gross Plant Ratio, #5]
12. Internal Auditing
Reviews internal controls and procedures to ensure that assets
are safeguarded and that transactions are properly authorized
and recorded. [General Ratio, #8]
13. Investor Relations
Provides communications to investors and the financial
community, performs transfer agent and shareholder record
keeping functions, administers stock plans and performs stock-
related regulatory reporting. [Total Assets Ratio, #3]
14. Planning
Facilitates preparation of strategic and operating plans,
monitors trends and evaluates business opportunities. [General
Ratio, #8]
15. Executive
Provides general administrative and executive management
services. [General Ratio, #8]
Exhibit 10.3 As Executed
SYSTEM COORDINATION
AND
OPERATING AGREEMENT
Among
IES Utilities Inc.
Interstate Power Company
Wisconsin Power & Light Company
Alliant Services, Inc.
-April 11, 1997-
<PAGE>
SYSTEM COORDINATION AND
OPERATING AGREEMENT
TABLE OF CONTENTS
Article I
Term of Agreement
Article II
Definitions
2.01 Agent
2.02 Agreement
2.03 Capacity Commitments
2.04 Capacity Commitment Charge
2.05 Central Control Center
2.06 Chief Executive Office (CEO)
2.07 Company and Companies
2.08 Company Capability
2.09 Company Demand
2.10 Company Hour Capability
2.11 Company Load Responsibility
2.12 Company Operating Capability
2.13 Company Operating Reserve
2.14 Company Peak Demand
2.15 Day
2.16 Economic Dispatch
2.17 Energy
2.18 Entitlement
2.19 Generating Unit
2.20 Hour
2.21 Intertransmission Facilities
2.22 Joint Facilities Plan
2.23 Joint Unit
2.24 Margin
2.25 Month
2.26 Net Plant Capability
2.27 Open Access Transmission Tariff
2.28 Operating Committee
2.29 Own Load
2.30 Parent Company
2.31 Planning Reserve Level
2.32 Pool Energy
2.33 Power
2.34 Prorated Reserve Level
2.35 Reserve Capacity (Company or System)
2.36 Seller's Incremental Energy Cost
2.37 System
2.38 System Capability
2.39 System Demand
2.40 System Load Responsibility
2.41 System Operating Capability
2.42 System Operating Reserve
2.43 System Peak Demand
2.44 Total Energy Cost
2.45 Transmission Services Organization
2.46 Variable Energy Cost
2.47 Year
Article III
Objectives
3.01 Purpose
Article IV
Agent
4.01 Responsibility of the Agent
4.02 Delegation and Acceptance of Authority
4.03 Reporting
4.04 Delegation to the Transmission Services Organization
4.05 Delegation to Services
Article V
Operating Committee
5.01 Operating Committee
Article VI
Operations
6.01 Planning and Authorization of Production Facilities
6.02 Planning Reserve Levels
6.03 Provision to Achieve Planning
6.04 Capacity Sales and Purchases and Reserve Shortfalls
6.05 Energy Exchanges Among Companies
6.06 Energy Exchange Pricing
6.07 Energy Exchanges with Non-Affiliated Utilities
Article VII
Transmission
7.01 Availability of Intertransmission Facilities
7.02 Availability of Direct Assignment Facilities
7.03 Transmission Service Revenue
7.04 Communications
7.05 Network Transmission Service Reservation
7.06 Point-to-Point Transmission Services
7.07 Ancillary Services
7.08 Intertransmission Facilities
7.09 Transmission Losses
Article VIII
Central Control Center
8.01 Central Control Center
8.02 Expenses
8.03 Communication and Other Facilities
Article IX
General
9.01 Regulatory Authorization
9.02 Effect on Other Agreements
9.03 Schedules
9.04 Measurements
9.05 Billings
9.06 Waivers
9.07 Successors and Assigns; No Third Party Beneficiary
9.08 Independent Contractors
9.09 Responsibility and Liability
9.10 Affiliate Transaction Pricing
Schedules
A Joint Unit
B Company Units
C Capacity Commitment Charge
D Payments and Receipts for Pool Energy
Exchanges Among the Companies
E Distribution of Margin for Off-System Energy Purchases
and Sales
F Distribution of Operating Expenses of the Central Control
Center
G Transmission Revenue Allocation
<PAGE>
SYSTEM COORDINATION
AND
OPERATING AGREEMENT
Among
IES Utilities, Inc.
Interstate Power Company
Wisconsin Power & Light Company
Alliant Services, Inc.
THIS AGREEMENT is made and entered into this 11th day of
April 1998, by and among IES Utilities, Inc., hereinafter called
IES; Interstate Power Company, hereinafter called IPC; Wisconsin Power &
Light Company, hereinafter called WPL; and Alliant Services, Inc.,
hereinafter called Services; all of whose common stock is to be owned by
Interstate Energy Corporation d/b/a Alliant Corporation.
WHEREAS, IES, IPC, and WPL are the owners and operators of electric
generation, transmission, and distribution facilities with which they are
engaged in the business of generating, transmitting, and selling electric
Energy to the general public and to other electric utilities; and
WHEREAS, upon consummation of the merger transactions that will
establish them as subsidiaries of Interstate Energy Corporation; the
Companies can achieve a greater realization of economic benefits for their
customers through operation as a single integrated and centrally
dispatched system, and through a greater level of coordinated planning,
construction, operation and maintenance of their electric supply
facilities; and
WHEREAS, the foregoing benefits will be more economically achieved
and their attainment will be facilitated by having certain services
performed by an agent for the Companies; and
WHEREAS, the Companies believe that Services is qualified to perform
such services for them, as Agent.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein, the parties hereto mutually agree as
follows:
ARTICLE I
TERM OF AGREEMENT
1.01 This Agreement shall become effective upon the
consummation of the merger transactions described in the Agreement and
Plan of Merger by and among WPL Holdings, Inc., IES Industries, Inc., and
Interstate Power Company, or such later date as may be fixed by any
requisite regulatory approval or acceptance for filing. This Agreement
shall continue in force and effect for a period of 5 Years from the
effective date herein above described, and continue from Year to Year
thereafter until terminated by one or more of the parties upon 5 Years
written notice to the other parties.
1.02 This Agreement will be reviewed periodically by the
Operating Committee to determine whether revisions are necessary to meet
changing conditions. In the event that revisions are made by the parties
hereto, and after requisite approval or acceptance for filing by the
appropriate regulatory authorities, the Operating Committee will
thereafter, for the purpose of ready reference to a single document,
prepare for distribution to the Companies an amended document reflecting
all changes in and additions to this Agreement with notations thereon of
the date amended.
ARTICLE II
DEFINITIONS
For the purpose of this Agreement and of the Service Schedules which
are attached hereto and made a part hereof, the following definitions
shall apply:
2.01 Agent for the Companies shall be Services.
2.02 Agreement shall be this Agreement with all attachments and
schedules applying hereto and any amendments made hereafter.
2.03 Capacity Commitment shall be generating capacity committed by a
Company to provide capability for other Companies to attain their Planning
or Prorated Reserve Levels, whichever shall be lower.
2.04 Capacity Commitment Charge shall be the charge made by a Company
supplying a Capacity Commitment to the Company receiving the Capacity
Commitment.
2.05 Central Control Center shall be a center operated by the Agent
for the optimal utilization of System resources for the supply of Power
and Energy.
2.06 Chief Executive Officer (CEO) shall be the Chief Executive
Officer of Interstate Energy Corporation.
2.07 Company shall be one of the Interstate Energy Corporation
operating companies and Companies shall be the Interstate Energy
Corporation operating companies collectively.
2.08 Company Capability shall be:
(a) The sum of the Company net plant capability in megawatts, plus
(b) The megawatt amount of purchases and exchanges without reserves,
under contract from other systems; less
(c) The megawatt amount of sales and exchanges without reserves,
under contract to other systems.
2.09 Company Demand shall be the demand in megawatts of all retail
and wholesale power customers on whose behalf the Company, by statute,
franchise, regulatory requirement, or contract, has undertaken an
obligation to construct and operate its system to meet the reliable
electric needs of such customers, integrated over a period of one hour,
plus the losses incidental to that service.
2.10 Company Hourly Capability for a Company shall be:
(a) The megawatt amount of dependable capability of the Company's
generating units on line, including its shares of Joint Units with
associated Companies and its shares of joint units with non-associated
companies, during the Hour; plus
(b) The megawatt amount of capability available to the Company under
contract from non-associated companies during the Hour; plus
(c) The megawatt amount of capability available from other Companies
in the form of Capacity Commitments during the Hour; less
(d) The megawatt amount of capability available from the Company to
non-associated companies under contract during the Hour; less
(e) The megawatt amount of capability available from the Company to
other Companies in the form of Capacity Commitments during the Hour.
2.11 Company Load Responsibility shall be as follows:
(a) Company Peak Demand; less
(b) Interruptible load including direct load control included in (a)
above; plus
(c) The contractual amount of sales and exchanges including
applicable reserves during the period to other systems; less
(d) The contractual amount of purchases and exchanges including
applicable reserves during the period from other systems.
2.12 Company Operating Capability shall be the dependable net
capability in megawatts of Generating Units of a Company carrying load or
ready to take load.
2.13 Company Operating Reserve shall be the excess of Company
Operating Capability over Company Load Responsibility expressed in
megawatts.
2.14 Company Peak Demand for a period shall be the highest Company
Demand for any hour during the period.
2.15 Day shall be a continuous 24-Hour period beginning at
midnight (0000). NORMALLY CALLED MIDNIGHT AS MEASURED IN CENTRAL
PREVAILING TIME.
2.16 Economic Dispatch shall be the distribution of total
generation requirements among alternative sources for system economy with
due consideration of incremental generating costs, incremental
transmission losses, and system reliability.
2.17 Energy shall be a measure of work expressed in megawatt-hours
(MWH).
2.18 Entitlement Energy shall be the Energy from a Joint Unit to
which a Company is entitled by reason of its ownership position in that
unit, expressed in megawatt-hours.
2.19 Generating Unit shall be an electric generator, together with
its prime mover and all auxiliary and appurtenant devices and equipment
designed to be operated as a unit for the production of electric Power and
Energy. The above is to include equipment necessary for connection to the
transmission system. The high side of the step-up transformer is the
intended point of connection to the transmission system.
2.20 Hour shall be a clock-hour.
2.21 Intertransmission Facilities shall be those transmission
facilities which are required for the effective utilization of System
resources in the economic exchange of capacity and Energy among the
Companies and with other systems.
2.22 Joint Facilities Plan shall be the formal documented plan
developed from time to time for all future Generating Units of the
Companies and other resources and all additional Intertransmission
Facilities.
2.23 Joint Unit shall be any Generating Unit and its outlet
transmission that is jointly owned by two or more of the Companies.
2.24 (a) Margin on Sales shall be the difference between: (1) the
revenue from non-firm off-System Energy sales and (2) the Seller's
Incremental Energy Cost incurred in making such sales.
(b) Margin on Purchases shall be the difference between (1) the
Buyer's Decremental Energy Value avoided as a result of non-firm off-
System Energy purchases and (2) payments for non-firm off-System Energy
purchases.
(c) Margin for a given period shall be the sum of the amounts
developed under 2.24 (a) and 2.24 (b).
2.25 Month shall be a calendar Month consisting of the applicable
24-hour periods as measured by Central Prevailing Time as required by the
appropriate reliability region.
2.26 Net Plant Capability shall be the capability measured in
megawatts (MW) as tested by procedures agreed upon by the Operating
Committee, and as required by the reliability region.
2.27 Open Access Transmission Tariff (OATT) shall be the Open
Access Transmission Tariff filed with the Federal Energy Regulatory
Commission by Services on behalf of the Companies.
2.28 Operating Committee shall be the organization established
pursuant to Section 5.01 and whose duties are more fully set forth
therein.
2.29 Own Load shall be Energy required to meet Company Demand plus
any off-System firm Energy served by the Company under contract existing
as of the effective date of this agreement.
2.30 Parent Company shall be Interstate Energy Corporation d/b/a
Alliant Corporation.
2.31 Planning Reserve Level shall be the megawatt amount of
required Reserve Capacity for a Company, expressed as a percentage of its
forecasted Company Load Responsibility.
2.32 Pool Energy shall be the Energy supplied and sold by one
Company to another Company to enable the purchasing Company to meet that
portion of its Own Load that could not be served by the purchasing
Company's other resources.
2.33 Power shall be the rate of doing work and shall be expressed
in megawatts (MW).
2.34 Prorated Reserve Level shall be a percentage reserve level
for each Company that when divided by that Company's Planning Reserve
Level gives the same quotient as that for all other Companies.
2.35 Reserve Capacity (Company or System) shall be that amount in
megawatts by which Company or System Capability exceeds Company or System
Load Responsibility.
2.36 Seller's Incremental Energy Cost shall be the Variable Energy
Cost or purchased Energy cost which a selling Company incurs in order to
supply energy for resale.
2.37 System shall be the interconnected coordinated electric
generation and transmission systems of the Companies.
2.38 System Capability shall be the arithmetical sum in megawatts
of the individual Company Capabilities.
2.39 System Demand shall be the arithmetical sum in megawatts of
the individual Companies' clock-hour demand.
2.40 System Load Responsibility shall be as follows:
(a) System Peak Demand; less
(b) Interruptible load including direct
load control included in (a) above; plus
(c) The arithmetic sum of all of the Companies' contractual amount
of sales and exchanges with applicable reserves during the period to other
systems; less
(d) The arithmetic sum of all of the Companies' contractual amount
of purchases and exchanges with applicable reserves during the period from
other systems.
2.41 System Operating Capability shall be the arithmetical sum in
megawatts of the individual Company Operating Capabilities.
2.42 System Operating Reserve shall be the arithmetical sum of the
individual Company Operating Reserves, expressed in megawatts.
2.43 System Peak Demand for a period shall be the highest System
Demand for any hour during the period.
2.44 Total Energy Cost shall be the total cost of all fuel
consumed by the unit in such month divided by the net kilowatt hours that
month plus an amount established by the Operating Committee to cover (1)
the average production cost other than fuel and (2) the incremental
transmission losses incurred in supplying the participant's on any other
system.
2.45 Transmission Services Organization shall be an organization
within Services which is the Designated Agent for the Companies as
Transmission Providers under the OATT.
2.46 Variable Energy Cost shall be the incremental delivered fuel
cost for the last generated MW, variable O&M cost, any associated start up
cost, incremental losses and relevant emissions cost.
2.47 Year shall be a calendar Year.
ARTICLE III
OBJECTIVES
3.01 Purpose
The purpose of this Agreement is to provide the contractual basis for
coordinated planning, construction, operation and maintenance of the
System to achieve optimal economies, consistent with reliable electric
service, reasonable utilization of natural resources, and environmental
requirements.
ARTICLE IV
AGENT
4.01 Responsibility of the Agent
The Companies hereby designate Services as their Agent for the
purpose of:
(a) coordinating the planning, operating and maintaining of the
Generating Units and Intertransmission Facilities of the Companies;
(b) design and construction of the Joint Units; and
(c) design, construction, operation and maintenance of the Central
Control Center.
4.02 Delegation and Acceptance of Authority
The Companies hereby delegate to the Agent and the Agent hereby
accepts responsibility and authority for the duties listed in Section 4.01
and elsewhere in this Agreement. The Agent shall perform each of those
duties in consultation with the Operating Committee except as herein
expressly established otherwise.
4.03 Reporting
The Agent shall provide periodic summary reports of its activities
under this Agreement to the Companies and shall keep the Companies and the
Operating Committee currently informed of situations or problems which may
adversely affect the planning, construction, operation or maintenance of
the System. The Agent shall report to the Companies or to the Operating
Committee in such additional detail as is requested on specific issues or
projects under its supervision as Agent.
4.04 Delegation to the Transmission Services Organization
Services shall delegate to the Transmission Services Organization the
responsibility and authority to act as Transmission Provider on behalf of
the Companies for all of the requirements and purposes of the Open Access
Transmission Tariff.
4.05 Delegation to Services
The Companies shall delegate to Services the responsibility and
authority to act as Customer on behalf of the Companies for all of the
requirements and purposes of the Open Access Transmission Tariff.
ARTICLE V
OPERATING COMMITTEE
5.01 Operating Committee
The Operating Committee is the organization established to ensure the
coordinated operation of the System by making recommendations to the CEO
regarding operations under this Agreement, thereby providing the basis for
the CEO's direction of the Agent in the performance of the Agent's duties
under this Agreement. The Operating Committee members will be designated
by the CEO and shall consist of a chairperson, plus one representative
from each Company plus one representative from the Agent. Operating
Committee decisions shall be by a majority vote of those present and shall
be in the form of recommendations to the CEO. However, any member not
present may vest his vote with a proxy. In any non-unanimous decision the
principles of the difference shall be reported to the CEO. The
chairperson shall vote only in case of a tie.
ARTICLE VI
OPERATIONS
6.01 Planning and Authorization of Production Facilities
(a) Each Company shall forecast the generation requirements to meet
its Load Responsibility and its Planning Reserve Level.
(b) A current Joint Facilities Plan will be maintained that will
provide for the current forecasted System Load Responsibility including
the Planning Reserve Level. The Generating Units and purchases identified
in Schedule B shall be integrated into the plan.
(c) All Generating Units committed to and placed in service after
the effective date of this Agreement and all outside capacity purchases
contracted after the effective date of this agreement shall be in
accordance with the then current Joint Facilities Plan. Joint Units shall
be authorized by the Board of Directors of the Parent Company prior to the
commencement of detailed engineering of the units.
(d) For the purpose of this Agreement the Generating Units listed in
Schedule B are not Joint Units.
(e) The Company designated by the CEO shall be responsible for the
staffing, operation and maintenance of each authorized Joint Generating
Unit.
6.02 Planning Reserve Levels
The Operating Committee shall periodically review the Planning
Reserve Level for each Company and recommend any modifications of such to
the CEO.
6.03 Provision to Achieve Planning Reserve Levels
(a) Each Company shall own, or have available to it under contract,
such generating capability and other facilities as are necessary to supply
its Company Load Responsibility plus its Planning Reserve Level.
(b) The Joint Facilities Plan shall be periodically reviewed and
adjusted to provide the Companies their required Planning Reserve Levels.
Any Company with Reserve Capacity in excess of its Planning Reserve Level
for a future Year shall offer to commit such excess capacity to Companies
with insufficient Reserve Capacity to meet their Planning Reserve Level
during that Year. The deficit Companies if they choose to purchase such
capacity shall make payments to the excess Companies each Month of the
Year the commitment applies in the amount of the Capacity Commitment
Charge in accordance with Schedule C. In the event that the System
Capability, including outside capacity purchases, is insufficient to meet
such Planning Reserve Levels, the companies with excess capability shall
commit only that excess capability to the companies with insufficient
reserve capacity.
(c) The Ownership percentages in future Generating Units are
established in accordance with Schedule A, but may be reallocated in the
Joint Facilities Plan by recommendation of the Operating Committee and
authorization by the CEO.
6.04 Capacity Sales and Purchases and Reserve Shortfalls
(a) The Agent is hereby authorized to operate the system as a single
control area and shall coordinate and assist the Companies in off-System
capacity sales and purchases as may be required by the System to market
excess System Capability or meet System Capability deficiencies.
(b) All capacity purchases and sales effective beyond the effective
date of this Agreement shall be coordinated by the Agent, recommended by
the Operating Committee, and approved by the CEO.
(c) The System Reserve Capacity shall be at the disposal of any
Company requiring such capacity. Should the System be short of capacity
as a result of an emergency and be unable to purchase the deficit, each
Company shall take such actions as are necessary to bring system load and
generation into balance.
6.05 Energy Exchange Among the Companies
The Agent shall schedule System Energy output to obtain the lowest
cost of Energy for serving System Demand consistent with each Company's
operating and security constraints, including voltage control, stability,
loading of facilities, operating guides as recommended by the Operating
Committee and approved by the CEO, environmental requirements and
continuity of service to customers.
6.06 Energy Exchange Pricing
For the purpose of pricing Energy exchange among the Companies,
System resources shall be utilized to serve System requirements in the
following order:
(a) Those Generating Units which are designated not to be operated
in the order of lowest to highest Variable Cost but are required due to
Company operating constraints shall be allocated to the Company requiring
the Generating Unit.
(b) The lowest Variable Cost generation of each Company's capability
shall first be allocated to serve its Own Load.
(c) The next lowest Variable Cost portion of each Company's
remaining capability shall be allocated to serve Pool Energy requirements
of Companies under System Economic Dispatch. Pool Energy shall be priced
in accordance with Schedule D.
6.07 Energy Exchanges With Non-Affiliated Utilities The Agent
shall coordinate and direct off-System purchases of Energy necessary to
meet System requirements or improve System economies. The Agent shall
coordinate and direct off-System sales of Energy available after meeting
all of the requirements of the System including the energy associated with
contractual requirements for off-System capacity sales. Any off-System
economy Energy purchases or sales shall be implemented by decremental or
incremental System Economic Dispatch as appropriate. Any Margin on Energy
purchases from off-System utilities or Margin on Energy sales to off-
System utilities shall be distributed to the Companies in accordance with
Schedule E.
ARTICLE VII
TRANSMISSION
7.01 Availability of Intertransmission Facilities
Each Company shall make its Intertransmission Facilities available to
the Transmission System Operator.
7.02 Availability of Direct Assignment Facilities
Each Company shall make Direct Assignment Facilities available to the
Transmission System Operator as may be required to provide transmission
service to Non-Affiliated Utilities.
7.03 Transmission Service Revenues
(a) The Companies shall share all transmission service revenues
obtained from the use of the intertransmission facilities that comprise
the IEC transmission system in proportion to their respective Company
Transmission Revenue Requirements as shown on Schedule G. The Schedule G
Annual Transmission Revenue Requirements shall be revised whenever there
is a change to the Annual Transmission Revenue Requirements in Attachment
H to the IEC Open Access Transmission Tariff.
(b) Revenues received for third-party use of Direct Assignment
Facilities shall be distributed to the Companies owning such facilities.
(c) The distribution to the Companies of revenues received for
stranded costs received from third-party customers under the OATT shall be
determined on a case-by-case basis.
(d) The distribution to the Companies of revenues received for new
facilities and redispatch costs received from third-party customers under
the OATT shall be determined on a case-by-case basis.
7.04 Communications
All communications by the Companies with the Transmission Services
Organization concerning the use of the transmission system shall be
through the Open Access Same Time Information System. This restriction
does not apply to communications concerning (1) system operating problems;
(2) emergency conditions; (3) the Network Operating Agreement and the
status of a Company=s particular contracted for transaction; and (4)
confidential or proprietary information.
7.05 Network Transmission Service Reservation
(a) Each Company shall join in a single reservation for Network
Integration Transmission Service, to be submitted by Services to the TSO.
(b) Each Company=s Network Loads shall be the Company Demand as
defined in Section 2.09.
(c) Each Company=s Network Resources shall be the Generating Units
and Purchased Power Contracts as permitted by Section 30.1 of the Open
Access Transmission Tariff, as reflected in Schedule B.
(d) Services shall act as Customer Agent for the Companies for all
transmission and ancillary service-related actions under the OATT.
(e) Services shall bill each of the Companies on a Load Ratio Share
basis for the amount due to the TSO in each month for Network Services.
Payment for other services under the OATT may be directly assigned to a
specific Company.
7.06 Point-to-Point Transmission Services
(a) Each Company shall enter into PTP Capacity Reservations, with
Services acting as Agent, for all Load Responsibility that is not included
in Company Peak Demand.
(1) The cost of Transmission on the IEC
System for off-System capacity sales by a Company shall be borne by the
selling Company.
(2) The cost of third-party PTP
Transmission for off-System capacity sales by a Company shall be borne by
the selling Company.
(b) Services shall enter into firm and non-firm transmission service
reservations with the TSO and third parties as may be required to enter
into Energy Exchanges with Non-Affiliated Utilities. The costs incurred
for such transmission services shall be distributed to the Companies on
the same bases as any Margin on Energy purchases or sales, in accordance
with Schedule E.
7.07 Ancillary Services
(a) Each Company shall make Regulating, Spinning and Supplemental
Reserve generating capacity available to the TSO to meet:
(1) each Company=s proportionate share of
the Reserve Margin Requirements associated with the IEC Companies= Network
Integration Transmission Service reservation, and
(2) such additional quantities of
Regulating, Spinning and Supplemental Reserve generating capacity as may
be requested by the TSO to meet the Minimum Operating Reserve Requirements
of third-party Transmission Customers, and
(3) such additional quantities of
Regulating, Spinning and Supplemental Reserve generating capacity as may
be determined by the Company, TSO or by Services to be reasonable, prudent
and necessary to accomplish the purposes of this Agreement, the OATT, and
Regional Reliability Council rules, guidelines and agreements.
(b) Where revenues are received from Non-Affiliated Utilities for
the provision of Operating Reserves, revenues for each type of service
shall be distributed by the TSO on a Network Load Ratio basis unless a
single Company is designated as the supplier in which case the revenues
will be directly assigned to the supplying Company.
(c) Revenues received for the provision of Scheduling and Reactive
Power from Generation Sources Services shall be distributed by the TSO to
the Companies on a Network Load Ratio basis unless and until a more
appropriate cost allocation method is identified.
(d) Revenues received from the TSO by Services for the provision of
Energy Imbalance Service shall be distributed to the Companies in
accordance with Schedule E, as Energy Exchanges With Non-Affiliated
Utilities, after Services has first directly assigned revenues to each
Company equal to the incremental costs incurred to provide this service.
7.08 Intertransmission Facilities
(a) The ownership of Intertransmission Facilities existing as of the
effective date of this agreement shall be in accordance with ownership
prior to this agreement.
(b) The Agent shall make periodic studies of bulk Power supply
transmission facilities and shall report to the Operating Committee the
results of such studies including any additional Intertransmission
Facilities identified as necessary.
7.09 Transmission Losses
Transmission losses occasioned by the transfer of Power and Energy
among and between the Companies when recommended by the Operating
Committee shall be determined and accounted for in accordance with the IEC
Transmission Tariff and procedures developed by the Agent, recommended by
the Operating Committee, and approved by the CEO.
ARTICLE VIII
CENTRAL CONTROL CENTER
8.01 Central Control Center
The Agent shall provide and operate a Central Control Center
adequately equipped and staffed to meet the requirements of the Companies
for efficient, economical and reliable operation as contemplated by this
Agreement.
8.02 Expenses
All expenses for operation of the Central Control Center shall be
paid by the Agent and billed monthly to each Company, in accordance with
Schedule F.
8.03 Communications and Other Facilities
The Companies shall provide communications and other facilities
necessary for:
(a) The metering and control of the generating and transmission
facilities;
(b) The dispatch of electric Power and Energy; and
(c) For such other purposes as may be necessary for optimum
operation of the System.
ARTICLE IX
GENERAL
9.01 Regulatory Authorization
This Agreement is subject to certain regulatory approvals and each
Company and the Agent shall diligently seek all necessary regulatory
authorization for this Agreement.
9.02 Effect on Other Agreements
This Agreement shall not modify the obligations of any Company under
any agreement between the Company and others not parties to this Agreement
in effect at the date of this Agreement.
9.03 Schedules
The basis of compensation for the use of facilities and for the Power
and Energy provided or supplied by a Company to another Company or
Companies under this Agreement shall be in accordance with arrangements
agreed upon from time to time among the Companies. Such arrangements
shall be in the form of Schedules, each of which, when signed by the
parties thereto and approved or accepted by appropriate regulatory
authority, shall become a part of this Agreement.
9.04 Measurements
All quantities of Power and Energy exchanged or flowing between the
systems of the Companies, shall be determined by meters installed at each
interconnection, unless otherwise agreed to by the Companies involved.
9.05 Billings
Bills for services rendered hereunder shall be calculated in
accordance with applicable Schedules, and shall be issued on a monthly
basis for services performed during the preceding month.
9.06 Waivers
Any waiver at any time by a Company of its rights with respect to a
default by any other Company under this Agreement shall not be deemed a
waiver with respect to any subsequent default of similar or different
nature, nor shall it prejudice its right to deny waiver of similar default
to a different Company.
9.07 Successors and Assigns; No Third Party Beneficiary
This Agreement shall inure to and be binding upon the successors and
assigns of the respective parties hereto, but shall not be assignable by
any party without the written consent of the other parties, except upon
foreclosure of a mortgage or deed of trust. Nothing expressed or
mentioned or to which reference is made in this Agreement is intended or
shall be construed to give any person or corporation other than the
parties hereto any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained, expressly or
by reference, or any Schedule hereto, this Agreement, any such Schedule
and any and all conditions and provisions hereof and thereof being
intended to be and being for the sole exclusive benefit of the parties
hereto, and for the benefit of not other person or corporation.
It is contemplated by the parties that it may be appropriate from
time to time to change, amend, modify or supplement this Agreement of the
Schedules which are attached to this Agreement to reflect changes in
operating practices or costs of operations or for other reasons. This
Agreement may be changed, amended, modified or supplemented by an
instrument in writing executed by all of the parties after requisite
approval on acceptance for filing by the appropriate regulatory
authorities.
9.08 Independent Contractors
It is agreed among the Companies that by entering into this Agreement
the Companies shall not become partners, but as to each other and to third
persons, the Companies shall remain independent contractors in all matters
relating to this Agreement.
9.09 Responsibility and Liability
The liability of the parties shall be several, not joint or
collective. Each party shall be responsible only for its obligations, and
shall be liable only for its proportionate share of the costs and expenses
as provided in this Agreement, and any liability resulting here from.
Each party hereto will defend, indemnify, and save harmless the other
parties hereto from and against any and all liability, loss, costs,
damages, and expenses, including reasonable attorney's fees, caused by or
growing out of the gross negligence, willful misconduct, or breach of this
Agreement by such indemnifying party.
9.10 Affiliate Transaction Pricing
The Companies and Services, having made certain commitments to the
Federal Energy Regulatory Commission concerning transfer pricing among
affiliates, agree as follows with respect to non-power goods and services:
(1) the affiliates or associates of the public utility subsidiaries will
not sell non-power goods or services to the public utility subsidiaries at
a price above market price; and (2) sales of non-power goods or services
by the public utility subsidiaries to their affiliates or associates will
be at the public utility=s cost for such goods and services or the market
value for such goods and services, whichever is higher.
In witness whereof, each of the Companies has caused this Agreement
to be signed in its name and on its behalf by its President attested by
its Secretary, both being duly authorized.
IES UTILITIES, INC.
Attest
__________________________________ By_______________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
__________________________________ By_______________________________
Secretary President
WISCONSIN POWER & LIGHT COMPANY
Attest
__________________________________ By_______________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
__________________________________ By_______________________________
Secretary President
<PAGE>
A-1
SCHEDULE A
JOINT UNIT
10.01 Purpose
The purpose of this Schedule is to provide the basis for the
Companies' participation in Joint Units.
10.02 Ownership (a) Every Joint Unit shall be owned by the
Companies participating in the Joint Unit as tenants in common. Ownership
shares in each Joint Unit shall be allocated insofar as practical to
achieve a Prorated Reserve level for all Companies participating in the
unit. The allocation shall be recommended by the Operating Committee and
approved by the CEO prior to the time the unit is authorized by the Board
of Directors of the Parent Company. However, each Company participating
shall own at least 25 megawatts of each Joint Unit unless otherwise
agreed to by the Operating Committee. Each Company shall be responsible
for its prorata share of the costs of construction of the unit and shall
contribute such funds to the Agent as billed.
(b) When a new Joint Unit is installed at a site already occupied by
one or more existing Generating Units the Agent, in consultation with the
Operating Committee, shall identify any existing facilities that will be
common to the new Joint Unit and the portion of the common facilities to
be allocated to the new Joint Unit. The owners of the new joint Unit
shall compensate the owners of the existing common facilities for the use
of those common facilities.
<PAGE>
A-2
10.03 Contracts
The Companies shall execute a joint ownership construction and
operation and maintenance agreement for each Joint Unit, such agreement to
set out all of the rights and obligations of the parties relating to the
specific Joint Unit, including the allocation of fuel costs, the
allocation of other operation costs and the allocation of maintenance
costs among the owners.
IES UTILITIES, INC.
Attest
__________________________________ By______________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
__________________________________ By_______________________________
Secretary President
WISCONSIN POWER & LIGHT COMPANY
Attest
__________________________________ By_______________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
__________________________________ By_______________________________
Secretary President
<PAGE>
B-1
SCHEDULE B
IES UTILITIES
EXISTING GENERATING UNITS
Station Unit Station Unit
Burlington 1 Grinnell CT 1
Grinnell CT 2
Prairie Creek 1*
Prairie Creek 2 Marshalltown CT 1
Prairie Creek 3 Marshalltown CT 2
Prairie Creek 4 Marshalltown CT 3
Sutherland Station 1 Red Cedar Cogen 1**
Sutherland Station 2
Sutherland Station 3 Ames Diesel 1
Ames Diesel 2
Sixth Street Station 2
Sixth Street Station 4 Centerville Diesel 1
Sixth Street Station 7 Centerville Diesel 2
Sixth Street Station 8 Centerville Diesel 3
Burlington CT 1 Marshalltown Diesel 1
Burlington CT 2 Marshalltown Diesel 2
Burlington CT 3
Burlington CT 4 Lakehurst Dam 1
Lakehurst Dam 2
Centerville CT 1
Centerville CT 2 Anamosa Hydro 1
Agency Street CT 1 Iowa Falls Hydro 1
Agency Street CT 2
Agency Street CT 3
Agency Street CT 4
* Retired in October 1995; will be replaced during 1997
** Operational during the 2nd quarter of 1996
<PAGE>
B-2
SCHEDULE B
IES UTILITIES
EXISTING GENERATING UNITS
JOINTLY OWNED
Station Unit
Duane Arnold Energy Center 1 Note: Jointly owned with Central
Power Cooperative and Corn Belt
Power Cooperative
Ottumwa 1 Note: Jointly owned with
MidAmerican Energy
Neal 3 Note: Jointly owned with
MidAmerican Energy; operated by
MidAmerican Energy
<PAGE>
B-3
SCHEDULE B
IES UTILITIES
EXISTING PURCHASE POWER CONTRACTS
Year Company MW Type
1996 Ottumwa Hydro 1 System Firm
1996 Union Electric 80 System Firm
1996 Basin Electric 50 Unit Participation
1997 Ottumwa Hydro 1 System Firm
1997 Union Electric 60 System Firm
1997 Basin Electric 75 Unit Participation
1998 Ottumwa Hydro 1 System Firm
1998 Basin Electric 100 Unit Participation
<PAGE>
B-4
SCHEDULE B
INTERSTATE POWER COMPANY
EXISTING GENERATING UNITS
Station Unit
Lansing 1
Lansing 2
Lansing 3
Lansing 4
ML Kapp 1
ML Kapp 2
Dubuque 1
Dubuque 2
Dubuque 3
Fox Lake 1
Fox Lake 2
Fox Lake 3
Lime Creek CT 1
Lime Creek CT 2
Montgomery CT 1
Fox Lake CT 4
Dubuque Diesel 1
Dubuque Diesel 2
Lansing Diesel 1
Lansing Diesel 2
Hills Diesel 1
Rushford Diesel 1
New Albin Diesel 1
<PAGE>
B-5
SCHEDULE B
INTERSTATE POWER COMPANY
EXISTING GENERATING UNITS
JOINTLY OWNED
Station Unit
Neal 4 Note: Jointly owned with MidAmerican Energy,
Cornbelt Power Coop, Algona Municipal,
Cedar Falls Municipal, North Iowa
Municipal Electric Coop Assoc., Northwest
Iowa Power Coop, and Northwestern Public
Service Company; operated by MidAmerican
Energy.
Louisa 1 Note: Jointly owned with MidAmerican Energy,
Central Iowa Power Cooperative, and the
Municipals of: Waverly, Geneseo,
Eldridge, Tipton and Harlan; operated by
MidAmerican Energy.
<PAGE>
B-6
SCHEDULE B
INTERSTATE POWER COMPANY
EXISTING PURCHASE POWER CONTRACTS
Year Company MW Type
1996 Northwest Iowa Power Coop 25 Unit Participation
1996 Windom 3 Unit Participation
1996 United Power Association 100 Unit Participation
1996 Minnesota Power 55 Unit Participation
1996 MidAmerican Energy 100 Unit Participation
1997 Northwest Iowa Power Coop 25 Unit Participation
1997 Windom 3 Unit Participation
1997 United Power Assoc. 100 Unit Participation
1997 Minnesota Power 55 Unit Participation
1997 MidAmerican Energy 100 Unit Participation
1998 Northwest Iowa Power Coop 25 Unit Participation
1998 Windom 3 Unit Participation
1998 United Power Assoc. 100 Unit Participation
1998 Minnesota Power 55 Unit Participation
1998 MidAmerican Energy 100 Unit Participation
<PAGE>
B-7
SCHEDULE B
WISCONSIN POWER & LIGHT COMPANY
EXISTING GENERATING UNITS
Station Unit
Edgewater 3
Nelson Dewey 1
Nelson Dewey 2
Rock River 1
Rock River 2
Blackhawk 3
Blackhawk 4
Rock River CT 3
Rock River CT 4
Rock River CT 5
Rock River CT 6
Sheepskin CT 1
South Fond du Lac CT 2
South Fond du Lac CT 3
Prairie du Sac Hydro 1-8
Kilbourn Hydro 1-4
Janesville Hydro 1
Rockton Hydro 1
Beloit Blackhawk Hydro 1
Shawano Hydro 1
<PAGE>
B-8
SCHEDULE B
WISCONSIN POWER & LIGHT COMPANY
EXISTING GENERATING UNITS
JOINTLY OWNED
Kewaunee 1 Note: Jointly owned with Wisconsin Public
Service Corporation (WPS) and Madison Gas
& Electric (MGE); operated by WPS.
Columbia 1 Note: Jointly owned with WPS and MGE.
Columbia 2 Note: Jointly owned with WPS and MGE.
Edgewater 4 Note: Jointly owned with WPS.
Edgewater 5 Note: Jointly owned with Wisconsin Electric
Power Company (WEP).
South Fond
du Lac CT 1 Note: Owned by Wisconsin Public Power
Inc. (WPPI); operated by WPL.
Petenwell Hydro 1 Note: Jointly owned by WPL, WPS and
Consolidated Paper Company; operated by
Wisconsin River Power Company.
Castle Rock Hydro 1 Note: Jointly owned by WPL, WPS and
Consolidated Paper Company; operated by
Wisconsin River Power Company.
<PAGE>
B-9
SCHEDULE B
WISCONSIN POWER & LIGHT COMPANY
EXISTING PURCHASE POWER CONTRACTS
Year Company MW Type
1996 Minnesota Power 30 System Firm
1996 Commonwealth Edison 50 System Firm
1996 Basic Electric 140 System Firm
1997 Minnesota Power 30 System Firm
1997 Commonwealth Edison 75 System Firm
1998 Minnesota Power 75 System Firm
1998 Commonwealth Edison 90 System Firm
<PAGE>
C-1
SCHEDULE C
CAPACITY COMMITMENT CHARGE
11.01 Purpose
The purpose of this Schedule is to establish the basis for Capacity
Commitments between the Companies and the rates for the Capacity
Commitment Charge and associated energy.
11.02 Basis for Capacity Commitment
Prior to January 1 of each year (or more frequently if mutually
agreed to by the companies) companies will review their capacity
requirements for the coming year to determine whether they have excess
system capacity available (AExcess Companies@) or whether they are in a
deficit system capacity condition (ADeficit Companies@). Excess Companies
will reserve such system capacity for use by Deficit Companies for a
period of 30 days. If a Deficit Company wishes to purchase system
capacity from an Excess Company it shall so notify the Excess Company to
negotiate an agreement for purchase of the excess system capacity. If an
Excess Company has not received a request to purchase the excess capacity
from a Deficit Company within 30 days, the Excess Company shall have the
right to sell its excess capacity to any interested third party.
11.03 Provisions for Capacity Commitment Charge
The monthly Capacity Commitment Charge shall be at a rate no higher
than the prevailing market price for equivalent capacity delivered to the
IEC System, but in no case more than the embedded cost price cap for
capacity supplied by the Excess Company. The embedded cost price cap will
be determined by applying the following formula:
C-2
A = (1/12) [(BxC) + E] (F/D)
Where:
A = Monthly Capacity Commitment Charge for the company
providing capacity
B = Levelized fixed charge rate for the committing Company
providing capacity including:
a. Current cost of capital
b. Sinking fund depreciation
c. Property taxes
d. Property insurance
e. Income taxes and
f. Applicable state gross receipts taxes
C = Total Plant Fixed cost of capacity provided as of December
31 of the year prior to the year of the Capacity
Commitment.
D = Rated net dependable capability of capacity provided in
megawatts.
E = Annual Plant Fixed O&M Cost (to be determined by the
Operating Committee).
F = Megawatts of capacity provided.
The capacity used to determine the Monthly Capacity Commitment charge
will be a weighted mix of the non nuclear generation units.
11.04 Contracts
The Companies shall execute an agreement for each such commitment of
capacity, where such agreement will set out all of the pertinent costs,
rights, and obligations of the parties relating to this transaction and
file such contract with the Federal Energy Regulatory Commission as a
supplement to this Agreement.
C-3
IES UTILITIES, INC.
Attest
_____________________________ By_______________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
_____________________________ By_______________________________
Secretary President
WISCONSIN POWER & LIGHT COMPANY
Attest
_____________________________ By_______________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
_____________________________ By_______________________________
Secretary President
<PAGE>
D-1
SCHEDULE D
PAYMENTS AND RECEIPTS FOR POOL ENERGY EXCHANGES
AMONG THE COMPANIES
13.01 Purpose
The purpose of this Schedule is to provide the basis for determining
payments and receipts among the Companies for Pool Energy exchanges.
13.02 Hourly Calculations
The payments and receipts of Section 13.03 are calculated Hourly, but
are accumulated and billed Monthly among the Companies.
13.03 Receipts and Payments
A selling Company shall receive from a purchasing Company the
Seller's Variable Energy Cost for Pool Energy sold. Where Pool Energy is
purchased simultaneously by more than one Company these charges shall be
prorated in proportion to the megawatt-hours of Pool Energy purchased by
each buyer.
IES UTILITIES, INC.
Attest
_____________________________ By__________________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
_____________________________ By__________________________________
Secretary President
D-2
WISCONSIN POWER & LIGHT COMPANY
Attest
_____________________________ By__________________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
_____________________________ By__________________________________
Secretary President
<PAGE>
E-1
SCHEDULE E
DISTRIBUTION OF MARGIN FOR OFF-SYSTEM
ENERGY PURCHASES AND SALES
14.01 Purposes
The purpose of this Schedule is to establish the basis for
distributing among the Companies the Margin on off-System Energy purchases
and sales.
14.02 Off-System Energy Purchases
Any Margin on off-System Energy purchases during an hour shall be
distributed to the Companies in proportion to the megawatt-hours of
generation reduced by each Company during the Hour as a result of the
purchases.
14.03 Off-System Energy Sales
Any Margin on off-System Energy sales during an hour shall be
distributed to the Companies in proportion to the energy generated by each
Company for the sales.
IES UTILITIES, INC.
Attest
_____________________________ By__________________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
_____________________________ By___________________________________
Secretary President
E-2
WISCONSIN POWER & LIGHT COMPANY
Attest
_____________________________ By____________________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
_____________________________ By____________________________________
Secretary President
<PAGE>
F-1
SCHEDULE F
DISTRIBUTION OF OPERATING EXPENSES
OF THE CENTRAL CONTROL CENTER
15.01 Purpose
The purpose of this Schedule is to provide a basis for the
distribution among the Companies of the costs incurred by the Agent in
operating the Central Control Center.
15.02 Costs
Costs for the purpose of this Schedule shall include all costs
incurred in maintaining and operating the Central Control Center
including, among others, such items as salaries, wages, rentals, the cost
of materials and supplies, interest, taxes, depreciation, transportation,
travel expenses, consulting, and other professional services.
15.03 Distribution of Costs
All costs shall be billed by Agent to the Companies in proportion to
the firm kilowatt hour electric sales for the preceding calendar year with
the following exception. In the event the Central Control Center makes a
study or performs a special service in which all Companies are not thus
proportionately interested, any resulting cost shall be distributed to the
interested parties in accordance with the standard procedures of Agent
authorized by the United States Securities and Exchange Commission,
subject to the Commitments made by the Companies to the Federal Energy
Regulatory Commission set forth in Section 9.10.
F-2
(b) Costs incurred by Services and the Transmission Services
Organization shall be distributed to the Companies in proportion to their
respective Company Transmission Revenue Requirements as shown on
Schedule G.
IES UTILITIES, INC.
Attest
______________________________ By________________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
______________________________ By_________________________________
Secretary President
WISCONSIN POWER & LIGHT COMPANY
Attest
______________________________ By_________________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
______________________________ By__________________________________
Secretary President
<PAGE>
G-1
SCHEDULE G
TRANSMISSION REVENUE ALLOCATION
16.01 Purpose
The purpose of this section is to provide a basis for the allocation
of transmission revenues among the Companies in proportion to the costs
included by each Company in the Annual Transmission Revenue Requirement
shown on Attachment H to the IEC Open Access Transmission Tariff.
16.02 Company Transmission Revenue Requirements
Until modified by the Companies, the Annual Transmission Revenue
Requirement of each Company shall be:
IES Utilities Inc.: $ 33,700,000
Interstate Power Company: $ 20,900,000
Wisconsin Power & Light Company: $ 27,600,000
Total IEC Companies: $ 82,200,000
16.03 Modification of Revenue Requirements
Services shall modify the Company and Total IEC Transmission Revenue
Requirements from time to time, but no less frequently than whenever the
Annual Transmission Revenue Requirement shown on Attachment H to the IEC
Open Access Transmission Tariff is modified.
G-2
IES UTILITIES, INC.
Attest
_______________________________ By_______________________________
Secretary President
INTERSTATE POWER COMPANY
Attest
_______________________________ By________________________________
Secretary President
WISCONSIN POWER & LIGHT COMPANY
Attest
_______________________________ By________________________________
Secretary President
ALLIANT SERVICES, INC.
Attest
_______________________________ By________________________________
Secretary President
Exhibit 10.15
SUPPLEMENTAL RETIREMENT AGREEMENT
This Supplemental Retirement Agreement is made this ____ day of
____________, 1997, by and between [OFFICER] (the "Officer") and [COMPANY]
(the "Company").
W I T N E S S E T H:
WHEREAS, __________________ and the Officer have heretofore entered
into one or more agreements (the "Prior Agreements") providing
supplemental retirement, deferred compensation or similar benefits, which
Prior Agreements are identified in Appendix A hereto; and
WHEREAS, the Company and the Officer wish to enter into this
Agreement, which shall amend, restate, supersede and replace the Prior
Agreements;
NOW, THEREFORE, the parties agree that the Prior Agreements are
hereby amended and restated as follows:
ARTICLE I
SCOPE OF AGREEMENT
1.1 Effect on Prior Agreements. This Agreement shall supersede and
replace the Prior Agreements, effective as of the date of this Agreement,
and the parties shall thereafter have no further rights or obligations
under the Prior Agreements.
1.2 Effect on Change of Control Agreements. If the Officer is a
party to an agreement which is binding on the Company (or on Interstate
Energy Corporation, which is the Company's parent corporation) and which
takes effect in the event of a change in control, such agreement shall
supersede and control over the provisions of this Agreement in the event
of any conflict between the two.
1.3 No Contract of Employment. This Agreement does not constitute
an employment agreement between the Officer and the Company. Nothing in
this Agreement shall affect the Company's right to terminate the Officer's
employment or position as an officer at any time, with or without cause.
1.4 Effect on Other Benefits. Nothing in this Agreement shall
modify, impair or otherwise affect the rights of the Officer to
participate in or receive benefits under any other employee benefit plan
of the Company, it being understood that the rights of the Officer to
participate in or receive benefits under any such plan shall be determined
in accordance with the provisions of such plan and shall not be affected
by the provisions of this Agreement.
ARTICLE II
DEFINITIONS
2.1 Board of Directors means the Board of Directors of Interstate
Energy Corporation or any committee of the Board which is designated by
the Board of Directors, or permitted by the Bylaws of the Interstate
Energy Corporation, to act on behalf of the Board of Directors.
2.2 Continuous Employment means the Officer's last continuous period
of employment with the Company immediately preceding the Officer's
retirement. If the Officer has been continuously employed by the Company
since the merger of IES Industries Inc., WPL Holdings, Inc. and Interstate
Power Company, the Officer's Continuous Employment shall also include his
or her last continuous period of employment with IES Industries Inc., WPL
Holdings, Inc. or Interstate Power Company, and their respective
subsidiaries, immediately preceding the date of such merger. If the
Officer's Supplemental Benefit is computed by using the Officer's Prior
Employer Benefit as set forth in Paragraph 3.1, the Officer's service with
such prior employers shall also be treated as Continuous Employment.
2.3 Dependent Child or Children means any child of the Officer who,
on the date of any payment under this Agreement, is 18 years of age or
under, is 24 years of age or under and is a "student" as defined in
Section 151(c)(4) of the Internal Revenue Code, or is a "substantially
handicapped person" as that term is defined in Chapter 161-8.26 of the
Iowa Administrative Code, as amended. The term "child" includes any
naturally born or legally adopted child; provided, in the case of an
adopted child, that the adoption became final prior to such child's 18th
birthday.
2.4 Disabled means the Officer has satisfied (and continues to
satisfy) the requirements for receiving disability benefits under the
terms of the Company's long-term disability plan.
2.5 Earnings means the Officer's base salary, bonus and/or annual
incentive pay for personal services rendered to the Company. The
Officer's base salary shall be treated as Earnings in the calendar year in
which it is paid, regardless of when it is earned. The Officer's bonus
and/or annual incentive pay shall be treated as Earnings in the calendar
year in which it is earned, regardless of when it is paid.
2.6 Final Average Earnings means the Officer's average monthly
Earnings for the three consecutive calendar years out of the Officer's
last ten calendar years of employment with the Company that yields the
highest average. If the Officer has been employed by the Company for
fewer than three calendar years, the Officer's Final Average Earnings
shall be the Officer's average monthly Earnings for all of his or her
completed calendar years of employment with the Company.
2.7 Internal Revenue Code means the Internal Revenue Code of 1986,
as amended.
2.8 Normal Retirement Date means the later of the Officer's 65th
birthday or the date on which the Officer completes 10 years of Continuous
Employment.
2.9 Pension Plan means any defined benefit pension plan of the
Company, Interstate Energy Corporation, or their respective subsidiaries
which is qualified under Section 401(a) of the Internal Revenue Code and
from which the Officer is entitled to a benefit.
2.10 Prior Employer Benefit means the monthly amounts payable to the
Officer or the Officer's Surviving Spouse from any of the Officer's prior
employers' qualified or non-qualified defined benefit pension or similar
type of plans, which are attributable to the prior employers'
contributions to such plans.
2.11 Supplemental Benefit means the benefit described in Paragraph
3.1 and payable to the Officer pursuant to Articles III, IV or V.
2.12 Surviving Spouse means the individual, if any, who is legally
married to the Officer at the time of the Officer's death.
ARTICLE III
NORMAL RETIREMENT BENEFIT
3.1 Supplemental Benefit.
Subject to the following provisions of this Article III, if the Officer
remains a full-time employee and an eligible officer of the Company until
his or her Normal Retirement Date, the Officer shall receive a
Supplemental Benefit equal to 60% of the Officer's Final Average Earnings,
reduced by the sum of:
(i) the monthly benefit payable to the Officer from the
Pension Plan; plus
(ii) the monthly amount of the Officer's Prior Employer
Benefit.
The Supplemental Benefit shall be paid in equal monthly installments,
commencing on the first day of the month following the Officer's
retirement from the Company as both an officer and an employee and ending
when 216 monthly payments have been made to the Officer.
(a) For the purposes of Subparagraph (a), the amount of the
Officer's monthly benefit from the Pension Plan shall be determined as
follows:
(i) If the Officer receives a joint and survivor annuity
from the Pension Plan and the Officer's Surviving Spouse is the
joint annuitant, the Officer's monthly benefit from the Pension
Plan shall be the monthly amount payable to the Officer under
such joint and survivor annuity.
(ii) If the Officer receives a single life annuity from the
Pension Plan, the Officer's monthly benefit from the Pension
Plan shall be the monthly amount payable to the Officer under
such single life annuity.
(iii) If the Officer receives any other form of payment
from the Pension Plan, such other form of payment shall be
converted to an actuarially equivalent single life annuity,
using the actuarial assumptions then in use for such purpose
under the Pension Plan, and the Officer's monthly benefit from
the Pension Plan shall be the monthly amount that would be
payable to the Officer under such single life annuity.
(iv) If a portion of the Officer's benefits under the
Pension Plan have been awarded to an Alternate Payee pursuant to
a qualified domestic relations order, as defined in Section
414(p) of the Internal Revenue Code, the Officer's monthly
benefit from the Pension Plan shall be deemed to be the amount
that would have been payable to the Officer if no such order had
been entered.
(v) The Officer's monthly benefit from the Pension Plan
shall be determined as though it had commenced on the same date
as the Officer's Supplemental Benefit, regardless of when the
Officer's Pension Plan benefit actually commences.
(vi) Any increase in the monthly amount of the Officer's
Pension Plan benefit shall correspondingly reduce the monthly
amount of the Officer's Supplemental Benefit unless the Board of
Directors provides by resolution that the Supplemental Benefit
shall not be so reduced.
(b) For the purposes of Subparagraph (a), the monthly amount of
the Officer's Prior Employer Benefit shall be determined, and shall be
included in the computation of the Supplemental Benefit, in the sole and
absolute discretion of the Board of Directors.
3.2 Officer's Death After Receiving Twelve Years of Benefit
Payments. If the Officer dies after receiving at least 144 monthly
Supplemental Benefit payments, the Officer's Supplemental Benefit shall
terminate upon the Officer's death (with the full monthly payment being
made for the month in which such death occurs), and the Company shall have
no further obligation to make any payments under this Article.
3.3 Officer's Death Prior to Receiving Twelve Years of Benefit
Payments.
(a) If the Officer dies after the commencement of Supplemental
Benefit payments but prior to receiving 144 monthly payments, the
Officer's Surviving Spouse (if any) shall continue to receive the monthly
payments determined under Paragraph 3.1 until the date on which the
Officer and such Surviving Spouse have received a total of 144 monthly
payments. If both the Officer and the Officer's Surviving Spouse die
before they have received a total of 144 monthly payments, the monthly
payments determined under Paragraph 3.1 shall continue to be paid to the
Officer's Dependent Children until a total of 144 monthly Supplemental
Benefit payments have been made to the Officer, the Officer's Surviving
Spouse, and the Officer's Dependent Children.
(b) Payments under this Paragraph 3.3 shall be made only to the
Officer's Surviving Spouse and Dependent Children, and in no event shall
such payments be made to the estate or heirs of the Officer, to the
estates or heirs of the Officer's Surviving Spouse or Dependent Children,
or to any persons other than the Officer's Surviving Spouse or Dependent
Children. If a payment to Dependent Children is due on a date when there
is more than one Dependent Child, such payment shall be equally divided
among those persons who qualify as Dependent Children on the date the
payment is due. If the Officer is deceased and there are no individuals
who qualify as the Officer's Surviving Spouse or Dependent Children on the
date a payment is due, the Company shall have no further obligation to
make payments under this Article.
ARTICLE IV
EARLY RETIREMENT BENEFIT
4.1 Supplemental Benefit. If the Officer retires at or after age 55
but prior to his or her Normal Retirement Date with 10 or more years of
Continuous Employment, the Officer shall receive the Supplemental Benefit
described in Article III commencing on the first day of the month
following the Officer's retirement from the Company as both an Officer and
an employee. If the Officer's Supplemental Benefit begins prior to age
62, the monthly amount shall be reduced by one quarter of one percent
(.25%) for each month by which the date on which the Officer retires
precedes his or her Normal Retirement Date.
4.2 Payment of Benefit. The amount payable under this Article IV
shall be calculated and paid in the same manner, and shall be subject to
the same conditions and limitations, as the benefit described in Article
III.
ARTICLE V
DISABILITY BENEFIT
5.1 Supplemental Benefit. If the Officer becomes Disabled prior to
his or her termination of employment with the Company, and continues to be
Disabled until he or she would have been entitled to a Supplemental
Benefit under Articles III or IV, the Officer shall be eligible to receive
a Supplemental Benefit commencing on the first day of the month following
the date on which the Officer ceases to be entitled to disability benefits
under the Company's long-term disability plan. The amount payable under
this Article V shall be calculated and paid in the same manner, and shall
be subject to the same conditions and limitations, as the benefit
described in Article III (if the Officer ceases to be entitled to
disability benefits at or after his or her Normal Retirement Date) or in
Article IV (if the Officer ceases to be entitled to disability benefits
prior to his or her Normal Retirement Date but after becoming entitled to
a Supplemental Benefit under Article IV).
5.2 Cessation of Disability. If the Officer becomes Disabled while
employed as an eligible officer the Company, but ceases to be Disabled
prior to the date on which he or she would have been entitled to a
Supplemental Benefit under Section 5.1, the period during which the
Officer was Disabled shall be included in the Officer's period of
Continuous Employment if (and only if):
(a) the Officer resumes full-time employment with the Company
as an eligible officer within 30 days after he or she ceased to be
Disabled; and
(b) the Officer continues in such employment until he or she
becomes entitled to a Supplemental Benefit under Articles III or IV.
ARTICLE VI
PRERETIREMENT DEATH BENEFIT
6.1 Death Benefit.
(a) If the Officer dies prior to termination of his or her
employment with the Company, the Officer's Surviving Spouse (if any) shall
receive a death benefit equal to 60% of the Officer's Final Average
Earnings, reduced by the sum of:
(i) the monthly benefit payable to the Officer's Surviving
Spouse under the Pension Plan; plus
(ii) the monthly amount of Officer's Prior Employer
Benefit.
The death benefit payable under this Article VI shall be paid in equal
monthly installments, commencing within 30 days after the Officer's death
and ending when 144 monthly payments have been made to the Officer's
Surviving Spouse.
(b) For the purposes of Subparagraph (a), the amount of the
Surviving Spouse's monthly benefit from the Pension Plan shall be
determined as follows:
(i) The Surviving Spouse's monthly benefit from the
Pension Plan shall be the monthly amount payable to the
Surviving Spouse in the form of a single life annuity. If the
Surviving Spouse receives any other form of payment under the
Pension Plan, such other form of payment shall be converted to
an actuarially equivalent single life annuity, using the
actuarial assumptions then in use for such purpose under the
Pension Plan, and the Surviving Spouse's monthly benefit from
the Pension Plan shall be the monthly amount that would be
payable to the Surviving Spouse under such single life annuity.
(ii) If a portion of the Officer's or the Surviving
Spouse's Pension Plan benefit has been awarded to an Alternate
Payee pursuant to a qualified domestic relations order, as
defined in Section 414(p) of the Internal Revenue Code, the
Surviving Spouse's monthly benefit from the Pension Plan shall
be deemed to be the amounts that would have been payable to the
Surviving Spouse if no such order had been entered.
(iii) The Surviving Spouse's monthly benefit from the
Pension Plan shall be determined as though it had commenced on
the same date as the Surviving Spouse's death benefit,
regardless of when such benefit payments actually begin.
(iv) Any increase in the monthly amount of the Surviving
Spouse's Pension Plan benefit shall correspondingly reduce the
monthly amount of the Surviving Spouse's death benefit unless
the Board of Directors provides by resolution that the death
benefit shall not be so reduced.
(c) For the purposes of Subparagraph (a), the monthly amount of
the Officer's Prior Employer Benefit shall be determined, and shall be
included in the computation of the Surviving Spouse's death benefit, in
the sole and absolute discretion of the Board of Directors.
6.2 Surviving Spouse's Death Prior to Receiving Twelve Years of
Benefit Payments.
(a) If there is no Surviving Spouse when the Officer dies, or
if the Officer's Surviving Spouse dies prior to the receipt of 144 monthly
payments, the monthly payments described in Paragraph 6.1 shall be paid
(or continue to be paid) to the Officer's Dependent Children until a total
of 144 monthly Supplemental Benefit payments have been made to the
Officer's Surviving Spouse and Dependent Children.
(b) Payments under this Article VI shall be made only to the
Officer's Surviving Spouse and Dependent Children, and in no event shall
such payments be made to the estate or heirs of the Officer's Surviving
Spouse and Dependent Children or to any persons other than the Officer's
Surviving Spouse and Dependent Children. If a payment to Dependent
Children is due on a date when there is more than one Dependent Child,
such payment shall be equally divided among those persons who qualify as
Dependent Children on the date the payment is due. If there are no
individuals who qualify as the Officer's Surviving Spouse and Dependent
Children on the date a payment is due, the Company shall have no further
obligation to make payments under this Article.
ARTICLE VII
POSTRETIREMENT DEATH BENEFIT
7.1 Death Benefit. If the Officer dies subsequent to the
commencement of Supplemental Benefit payments under Articles III, IV or V,
the Company shall pay a death benefit to the Officer's beneficiary. Such
benefit shall be in addition to the benefits paid to the Officer and the
Officer's Surviving Spouse or Dependent Children under Articles III, IV or
V; however, no death benefit shall be payable under this Article VII if
the Officer's death causes a beneficiary or the estate of the Officer to
receive a death benefit under the disability premium waiver provision of
the Company's group life insurance plan, or if the Officer dies before
retirement.
7.2 Amount of Death Benefit. The death benefit payable pursuant to
Paragraph 7.1 shall be an amount equal to 100% of the Officer's Final
Average Earnings, as determined for the purpose of calculating the amount
of the Officer's benefits under Article III, IV, or V, whichever is
applicable.
7.3 Payment of Death Benefit. The Postretirement Death Benefit
shall be paid to the beneficiary or beneficiaries designated in writing by
the Officer or, in default of such designation or the failure of the
designated beneficiaries to survive the Officer, to the Officer's estate.
The death benefit payable under this Article shall be paid in a single
sum, within 30 days after the date the proper beneficiary has been
identified.
ARTICLE VIII
TERMINATION OF EMPLOYMENT OR LOSS OF POSITION
8.1 Termination of Employment. If the Officer is discharged by the
Company for any reason, or if the Officer's employment with the Company
terminates prior to the date the Officer becomes entitled to a
Supplemental Benefit under Articles III or IV for any reason other than
the Officer's death or disability, the Officer (and his or her Surviving
Spouse, Dependent Children, or other beneficiaries) shall forfeit any and
all rights to receive benefits under this Agreement.
8.2 Loss of Position as Officer. The Officer shall be eligible for
benefits under this Agreement only while holding the position of Vice
President or a higher senior office in the Company. Except as otherwise
provided in Article V (relating to Disability), if the Officer ceases to
hold such a position prior to the Officer's termination of employment, the
Officer (and his or her Surviving Spouse, Dependent Children, or other
beneficiaries) shall forfeit any and all rights to receive benefits under
this Agreement unless the Officer retires with a right to an immediate
benefit under Article III or IV within 30 days after the loss of such
position.
ARTICLE IX
FUNDING
9.1 Unsecured Obligation. The Company's obligations under this
Agreement are an unsecured promise to make benefit payments in the future,
and nothing herein shall be construed as giving the Officer or his or her
beneficiaries any right, title, interest or claim in or to any specific
asset, fund, reserve, account or property owned by the Company, or in
which the Company has any right, title or interest, either now or in the
future. The rights of the Officer and his or her beneficiaries to receive
payments under this Agreement shall be solely those of unsecured general
creditors of the Company.
9.2 "Rabbi" Trust. This Agreement is intended to be unfunded for
the purposes of the Internal Revenue Code and the Employee Retirement
Income Security Act of 1974, as amended. However, nothing in this
Agreement shall preclude the Company from establishing a trust (of the
type commonly known as a "rabbi trust") to assist it in meeting its
obligations under this Agreement. If a rabbi trust was established with
respect to the Officer's Prior Agreements, this Agreement shall be
substituted for the Prior Agreements for all purposes of such trust, and
any reference in such trust to the Prior Agreements shall be deemed to be
a reference to this Agreement.
ARTICLE X
ADMINISTRATION
10.1 Administration and Interpretation. The Board of Directors has
sole and exclusive discretion to interpret the provisions of this
Agreement, and any such interpretation shall be final and binding upon the
Officer unless it is found by a court of competent jurisdiction to have
been arbitrary and capricious. The Board of Directors may adopt such
rules and regulations relating to the administration of this Agreement as
it may deem necessary or advisable.
10.2 Claims Procedure. If the Officer or the Officer's beneficiary
(hereinafter referred to as a "Claimant") is denied any benefit under this
Agreement, he or she may file a claim with the Board of Directors. The
Board of Directors shall notify the Claimant within 90 days of its
allowance or denial of the claim, unless the Claimant receives written
notice from the Board of Directors prior to the end of such 90 day period
that special circumstances require an extension of the time for decision,
which extension shall not exceed an additional 90 days. The notice of the
Board of Directors' decision shall be in writing sent by mail to
Claimant's last known address and, if a denial of the claim, and shall
contain:
(a) the specific reasons for the denial;
(b) specific references to pertinent provisions of this
Agreement on which the denial is based; and
(c) if applicable, a description of any additional information
or material necessary to perfect the claim, an explanation of why
such information or material is necessary and an explanation of the
claim review procedure.
10.3 Review Procedure.
(a) A Claimant is entitled to request a review of any denial of
his or her claim for a benefit. The request for review must be submitted
to the Board of Directors in writing within 60 days of mailing of the
notice of the denial. Absent a request for review within the 60 day
period, the claim will be deemed to have been conclusively denied.
(b) The review shall be conducted by the Board of Directors,
which shall afford the Claimant a hearing and the opportunity to review
all pertinent documents and submit issues and comments orally and in
writing. The Board of Directors shall render a decision within 60 days
after receipt of a request for a review; provided, that in special
circumstances (such as the necessity of holding a hearing) the Board of
Directors may extend the time for decision by not more than 60 days upon
written notice to the Claimant. The Claimant shall receive written notice
of the Board of Directors' decision, together with specific reasons for
the decision and references to the pertinent provisions of this Agreement
which form the basis for the decision.
ARTICLE XI
AMENDMENT AND TERMINATION
11.1 By the Parties. Except as provided in Paragraph 11.2, this
Agreement may not be amended or terminated except by a written instrument
signed by both parties.
11.2 By the Company. At any time prior to the Officer's termination
of employment with a right to receive benefit payments under this
Agreement, this Agreement may be terminated or amended by action of the
Board of Directors in its sole and absolute discretion, without any notice
to or the consent or approval of the Officer; provided, that:
(a) this Agreement may not be amended or terminated by the
Board of Directors unless a similar amendment or termination is made
with respect to all similar agreements between the Company and its
eligible Officers; and
(b) this Agreement may not be amended or terminated in a manner
that would reduce or impair the Officer's right to receive payment of
his or her Accrued Benefit if the Officer subsequently retires under
circumstances that would have entitled the Officer to a benefit if
this Agreement had not been amended or terminated. For the purposes
of this Subparagraph (b), the Officer's "Accrued Benefit" is an
amount equal one-fifteenth of the Supplemental Benefit the Officer
would have been be entitled to receive at retirement if this
Agreement had not been amended or terminated, multiplied by the
Officer's years of Continuous Employment (up to a maximum of 15
years) on the date the Agreement is amended or terminated.
Subject to the foregoing, the right of the Board of Directors to amend or
terminate this Agreement shall include the absolute discretion to make any
amendment prospective or retroactive in application.
ARTICLE XII
RESTRICTIVE COVENANT
12.1 Covenant Not to Compete. Notwithstanding anything in this
Agreement to the contrary, it is expressly agreed that all payments under
this Agreement shall terminate, and that the Company shall have no further
obligation under this Agreement, upon any violation of the provisions of
Paragraph 12.2. Payments pursuant to this Agreement are intended to serve
as consideration for this covenant not to compete.
12.2 Scope of Covenant. If, during the period set forth herein and
within the service area in which the Company or any of its affiliated
companies provides utility services (or in the case of any non-utility
business, within the geographic area served by such business), the Officer
accepts employment with or becomes a consultant to, or the Officer or his
or her Surviving Spouse becomes a partner or shareholder in, any business
that is in competition with the business of the Company or any of its
affiliated companies, and the Officer or his or her Surviving Spouse fails
to terminate such position within 30 days after notice from the Board of
Directors of the violation of this covenant not to compete, the Officer
and the Officer's beneficiaries shall forfeit all rights to future
payments under this Agreement. However, the Officer and his or her
Surviving Spouse may hold up to a five percent interest in any company
that is traded on the New York Stock Exchange, American Stock Exchange or
other national or over-the-counter exchange without violating the
provisions of this Paragraph 12.2. Any violation of the provisions set
forth above during the period commencing on the date of the Officer's
termination of employment with the Company and ending on the third
anniversary of such date shall constitute a violation of this Article and
shall result in the termination of all future payments under this
Agreement. The determination of the Board of Directors as to whether a
business is in competition with the Company and whether the competition is
occurring in the geographic area designated above shall be controlling for
purposes of this Agreement.
12.3 Reasonableness of Restrictions. The Officer agrees that the
restrictions set forth in this Article XII including, but not limited to,
the time period and the geographical area of such restrictions are fair
and reasonable and are reasonably required for the protection of the
interests of the Company and its affiliated companies. In the event that,
notwithstanding the foregoing, any of the provisions of this Article XII
shall be held to be invalid or unenforceable, the remaining provisions
thereof shall nevertheless continue to be valid and enforceable as though
the invalid or unenforceable parts had not been included. In the event
that any provision of this Article XII relating to the time period and/or
the areas of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum time period or areas such court deems
reasonable and enforceable, the time period and/or areas of restriction
deemed reasonable and enforceable by said court shall become and
thereafter be the maximum time period and/or areas.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Assignability of Benefits. Neither the Officer nor his or her
beneficiaries shall have the power to transfer, assign, anticipate,
mortgage or otherwise encumber any right to receive a payment in advance
of such payment, and any attempted transfer, assignment, anticipation,
mortgage or encumbrance shall be void. No payment shall be subject to
seizure for payment of public or private debts, judgments, alimony or
separate maintenance, or be transferable by operation of law in the event
of bankruptcy, insolvency or otherwise.
13.2 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Iowa, except to the
extent the same are superseded by applicable federal law.
13.3 Tax Withholding. The Company shall withhold all applicable
income and other taxes required on all payments under this Agreement.
13.4 Counterparts. This Agreement may be signed in counterparts,
which together shall constitute written evidence of the complete agreement
of the parties.
13.5 Headings. The headings in this Agreement are for convenience
only and shall not be used to interpret or construe its provisions.
IN WITNESS WHEREOF, the parties have hereto set their respective
hands on the day and year first above written.
------------------------------------
"OFFICER"
[COMPANY]
By__________________________________
"COMPANY"
Exhibit 10.16
INTERSTATE ENERGY CORPORATION
1998 OFFICER INCENTIVE COMPENSATION PLAN
Effective January 1, 1998
<PAGE>
INTERSTATE ENERGY CORPORATION
1998 OFFICER INCENTIVE COMPENSATION PLAN
=========================================================================
I. Purpose
The Officer Incentive Compensation Plan (OICP) is based on short-term
goals that support Interstate Energy Corporation's (IEC) short- and long-
range plans, focus officers on building the value of the Company and
ensuring future superior returns to shareholders, reducing costs to
customers, and supporting an atmosphere of teamwork. Awards for plan
participants will be determined by Corporate and Business Unit
performance. The CEO reserves the right to modify payouts under the plan.
II. Administration
A) The OICP shall be administered by the Compensation and Personnel
Committee ("the Committee") of the Board of Directors of the
Company. The Committee may from time to time amend, suspend,
terminate or reinstate any or all of the provisions of the Plan
as may seem necessary or advisable in the administration of the
Plan.
B) The Committee shall subject to express provisions of the Plan,
have the power to construe the Plan, to prescribe rules and
regulations relating to the Plan and to make all other
determinations necessary or advisable in the administration of
the Plan. The Committee may correct any defect or supple any
omission or reconcile any inconsistency in the manner and to the
extent it shall deem expedient to carry it into effect.
C) All expenses and costs incurred in connection with the
administration and operation of the Plan shall be borne by the
Company.
II. Plan Eligibility
A) All Interstate Energy Corporation (IEC) officers will be
eligible for the 1998 OICP. IEC's officers will be divided into
one of four designated tiers for participation in the plan.
These tiers reflect individual duties and responsibilities in
the new organization and are shown, along with the projected
number of participants in each tier, in the table below:
Participant Group Projected Number of
Interstate Energy
Corporation Incumbents
Chairman of the Board, Vice-Chairman of the 3
Board, and President and CEO
Executive Vice Presidents 5
Sr. Vice President & Vice Presidents 12
Assistant Vice Presidents 2
Total Participants 22
B) Prior to the start of each calendar year, or as soon as
practical thereafter, the CEO shall recommend to the Committee
those eligible employees who shall participate in the Plan.
Designation as a Participant for any particular calendar year
shall not entitle an individual to participate or share in
award, with respect to any other calendar year.
C) Changes to the participant list: Following the start of the
calendar year, the list of the participants and awards for a
Plan year may be revised upon authorization of the CEO as
follows:
1) Employment: If an eligible employee participating in the
Plan terminates from the Company during the Plan year, the
replacement employee of said employee will automatically be
eligible to participate in the Plan for the remainder of
the year.
2) Cessation of Employment: If an employee terminates
employment with the Company during the calendar year, other
than on account of death or retirement, the employee may,
at the discretion of the CEO, receive a prorated award.
3) Proration of Payout: Any participant selected or deleted
after the start of the calendar y ear shall participate on
a prorata basis, determined by multiplying the maximum
incentive opportunity by a fraction, the numerator of which
shall be the number of full months of his/her participation
in the calendar year and the denominator of which shall be
twelve.
III. Payment of Incentive Award Earned
A) Payouts for all plan participants shall be at the discretion of
the CEO.
B) The amount of the incentive payout awarded for the calendar year
shall be paid to each eligible employee after the Company's
audited financial results are available, but no later than March
31 of the following year.
C) Following the end of the calendar year the CEO will report to
the Committee the results of the Plan. At the discretion of the
CEO and Committee, the award will be paid in cash, discounted
Company stock or a combination of both.
D) Participants may elect to defer a percentage amount of the
incentive award pursuant to the provisions of the Company's
Deferred Compensation Plan. All deferral elections are
irrevocable, and a written deferral notice must be filed by the
participant with the Company prior to December 31 of the year
preceding the Plan year for which the deferral is effective.
E) The committee may, following release of the Company's audited
financial statements, increase, decrease or eliminate awards if
the Committee decides that the amount of the award is
unreasonable in view of any unique circumstances or the
Company's financial performance. Any decision shall apply to
all Participants equally.
F) OICP payments will be included in 401(k) plan deferrals and
earnings used to determine retirement benefits.
IV. Effective Date
The plan effective January 1, 1998 shall continue in effect and
subsequently be amended from time to time, until terminated by the Board
of Directors.
V. Amendment or Termination of Plan
The Board shall have the right to amend or terminate the Plan at any
time.
VI. Non-Exclusivity of Incentive Compensation
The Plan shall not be deemed an exclusive method of providing
incentive compensation to eligible employees; nor shall it preclude the
Board from authorizing or approving other forms of incentive compensation.
VII. Rights of Participants and Forfeiture
A) Nothing contained in this Plan shall:
1) confer upon any employee any right with respect to
continuation of employment with the Company.
2) interfere in any way with the right of the Company to
terminate his or her employment at any time, or
3) confer upon any employee or any other person any claim or
right to any distribution under the Plan except in
accordance with its terms.
B) No right or interest of any Participation in the Plan shall,
prior to actual payment or distribution to such Participant, be
assignable or transferable in whole or in part, either
voluntarily or by operations of law or otherwise, or be subject
to payment of debts of any Participant by execution, levy,
garnishment, attachment, pledge, bankruptcy, or in any other
manner.
VIII. Distribution of Award Upon Death of Participant
Should a participant die during a calendar year for which an award is
made, the amount of such Participant's award shall be determined on a
prorata basis according to Section II, paragraph C3, and such total shall
be distributed in a lump sum to the participant's estate in the year
following the calendar year of the Plan.
IX. Incentive Targets by Participant Tier
Incentive award levels are based on IEC's current executive
compensation strategy of setting pay levels at the median of equally
weighted utility industry and general industry data. The table below
lists each of the designated tiers and their respective incentive targets.
PARTICIPANT GROUP TARGET MAXIMUM
INCENTIVE LEVEL INCENTIVE LEVEL
Chairman of the Board, Vice-Chairman 50% 100%
of the Board, and President and CEO
Executive Vice Presidents 35% 70%
Sr. Vice President & Vice Presidents 25% 50%
Assistant Vice Presidents 20% 40%
For all tiers of participants, actual awards under the plan may be as
great as 200% of the target award for exceptional performance. No payout
will occur if performance is significantly below target.
Total award payouts under the plan may be larger or smaller than the
sum of all target incentive awards.
X. Weighting of Performance Measures
Each performance measure will be weighted according to the relative
impact an officer has on Company performance and business unit
performance.
GROUP Corporate Business Unit/
Strategic Goals
Chairman and Vice-Chairman of the Board 100%
President and CEO 75% 25%
Executive Vice Presidents 50% 50%
Sr. Vice President & Vice Presidents 50% 50%
Assistant Vice Presidents 50% 50%
XI. Performance Measures and Methodology
1. Corporate Measure - At the beginning of each year, a company-wide
earnings per share (EPS) target will be established. The EPS target will
have a performance threshold that, if not met, will result in no company
measure payouts being awarded. EPS of less than $2.00 will result in no
officer incentives or other employee incentive program payments. Note:
EPS numbers will be weather normalized and may be adjusted to reflect
extraordinary events. See Appendix A for examples of calculations.
EPS % OF
INCENTIVE
AWARD
Maximum $2.40 or more 200%
$2.33-$2.39 130%
Target $2.30-$2.32 100%
$2.25-$2.29 80%
Minimum $2.10-$2.24 25%
$2.00-$2.09 0%*
Less than $2.10 No Payout
* business unit payouts may still be made.
2. Business Unit Measure - Each Business Unit will have between 3
and 5 goals that are reviewed and approved by the CEO and Senior Executive
Group (see Appendix A). If a Business Unit does not meet its goal,
employees are still eligible for the Corporate portion of the award.
VI. Individual Participation
The participation level for each officer is expected to be 100% of
the award opportunity, as determined by company and business unit
performance results. Satisfactory performance on the part of an officer
will result in full OICP participation. Based on less than satisfactory
individual performance, the CEO may reduce an individual's participation
level by as much as 20%. In the case of well documented extraordinary
performance, the CEO may increase an individual's participation level by
as much as 20%.
<PAGE>
APPENDIX A
EXAMPLE CALCULATION
- Participant Tier: Vice Presidents
- Positions in Tier: Sr. Vice Presidents & Vice Presidents
- Number of Plan Participants 14
- Target Bonus Level: 25% of Salary
- Performance Measure Weighting:
Measure Weighting
Corporate 50%
Business Unit 50%
Hypothetical Performance Results
Example: Title: Vice President
Salary: $150,000
Employee Incentive Target
(See Section IX. Incentive Targets) A. 25%
1. Company Measure (50% of A) B. 12.5%
Assuming $2.33 per share: 12.5% (B.) times 130%
(see section XI) = 16.3%
Subtotal of Company Measure C. 16.3%
2. Business Unit Measure (50% of A) D. 12.5%
Assuming business unit measures were met.
Business Unit Measure portion (Therefore,
eligible for the whole 12.5%) E. 12.5%
3. Individual Participation Level: Satisfactory.
Therefore eligible for payout.
4. Total Amount of Award Employee is
Eligible for (Sum of C + E ) F. 28.8%
Individual Award Calculation
Base Salary x Percent Earned (F Above) = Incentive Award
$150,000 x 28.8% = $43,200
Exhibit 10.17
Interstate Energy Corporation (d/b/a Alliant)
Long-Term Incentive Program
Revised 7/1/98
ESTABLISHMENT OF PROGRAM SPECIFICATIONS:
These specifications have been established to govern the Long-Term
Incentive Program for eligible employees of Interstate Energy
Corporation (d/b/a Alliant). These specifications work in conjunction
with the WPL Holdings, Inc. Long-Term Equity Incentive Plan adopted on
January 23, 1994. If there are any differences between these
specifications and the plan document, the plan document will be
followed in determining employee benefits.
PURPOSE OF THE PROGRAM:
The purpose of the Program is to promote the success and enhance the
value of the company by linking the personal interests of participants
to those of company shareowners, and by providing participants with an
incentive for outstanding performance. The Program is further intended
to provide flexibility to the company in its ability to motivate,
attract, and retain the services of participants upon whose judgment,
interest, and special effort the successful conduct of its operation
largely is dependent.
PROGRAM STRUCTURE:
The Program will consist of a combination of stock options and
performance shares.
ELIGIBILITY AND PARTICIPATION:
Persons eligible to participate in this Program include all active
executive employees of Interstate Energy Corporation as determined by
the Compensation and Personnel Committee. Subject to the provisions of
the Plan, the committee may, from time to time, select from all
eligible executive employees, those to whom awards shall be granted and
shall determine the amount of each award.
GRANT FREQUENCY:
It is anticipated that stock option grants will be made annually for
Directors and General Managers. Assistant Vice Presidents on up will
receive three years worth of grants up front.
It is anticipated that performance share grants will be made annually.
Initial grants will be made on July 1, 1998.
TYPE AND PRICE:
Stock Options: Option grants will be nonqualified stock options. The
price of each option will be set at the fair market value on the date
of the grant.
Performance Shares: Each grant of stock will be based on Company=s Total
Shareholder Return (TSR) performance. TSR performance represents stock
price appreciation plus dividends reinvested. A performance cycle
shall begin effective July 1, 1998 and have a cycle length of two and
one-half years, running until January 2, 2001. Subsequent performance
cycles begin on January 1 and are three years long. Performance shares
will be paid out in Interstate Energy Corporation shares, but will be
modified by a performance multiplier which ranges from 0 to 2.00 (see
scale below) based on the three-year average of Alliant TSR relative to
an investor-owned utility peer group.
Stock options and performance shares are freestanding; the exercise of
stock options would not affect the payout of performance shares and
vice versa.
Performance Multiplier:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3-yr Total Shareholder Below 40th 40th 45th 50th 60th 70th 80th 90th
Return - Percentile percentile percentile percentile percentile percentile percentile percentile percentile
Relative to Peer Group*
% of Target Value Paid Out 0% 50% 75% 100% 125% 150% 175% 200%
* Peer Group consists of Investor-Owned Utilities.
</TABLE>
AWARD SIZE:
Award sizes will be determined by the Compensation and Personnel
Committee of the Board of Directors. The number of options granted to
each participant under the Program will be based on maintaining a
competitive total of compensation level. Recommendations of award size
within the stated range will be made by the Chief Executive Officer
based on individual participant performance.
The grants will be based on the following:
<TABLE>
<CAPTION>
Participant Group Total LTIP Target Awards Performance Share Stock Stock Options Target
(as % of salary) (as % of salary) (as % of salary)
<S> <C> <C> <C>
President & CEO, Chairman of the Board & 80% 60% 20%
Vice-Chairman of the Board
Executive Vice Presidents 50% 35% 15%
Senior Vice Presidents & Vice Presidents 35% 25% 10%
Assistant Vice Presidents 30% 20% 10%
Directors & General Managers 20% 0% 20%
</TABLE>
To calculate Performance Share Award:
Base Salary x (Peer Group Target x Performance Share Target) = Number of
Market Share Price Shares Granted
To calculate Stock Option Award:
Base Salary x Stock Option Target = Number of Stock Options Granted
Black-Scholes Ratio (10%) x Market Share Price
VESTING:
Stock options granted on July 1, 1998 will have a two and one-half year
vesting schedule rather than the normal three year vesting schedule
with one-third of the stock options granted vesting on January 2, 1999,
one-third vesting on January 2, 2000 and the final one-third vesting on
January 2, 2001. Stock options granted on or after January 2, 1999
will have the normal three-year vesting schedule, with one-third
vesting each year. These stock options will vest 100 percent three
years after the date of the grant.
EXERCISE PERIOD:
All unexercised options will expire ten years after the date of grant.
PAYMENT OF AWARDS:
- Stock options are exercisable up to ten years after the grant date
following the vesting period.
- Employee can:
- exercise options with cash
- exercise options via a stock-for-stock swap
- use broker loans for cashless exercises, or
- elect share withholding (similar to share appreciation program).
- Performance shares will be paid in Interstate Energy Corporation shares
as soon as practicable at the end of each performance cycle, but not
later than seventy-five days following the end of the performance
cycle.
TERMINATION IN THE CASE OF DEATH, DISABILITY OR RETIREMENT:
All outstanding options granted to the participant shall immediately
vest one hundred percent, and shall remain exercisable at any time
prior to their expiration date, or for one year after the date of death
or disability or for three years after retirement, whichever period is
shorter.
For all performance shares, the participant shall receive a prorated
payout of the performance shares. The prorated payout shall be
determined by the committee, in its sole discretion, and shall be based
upon the length of time that the participant held the performance
shares during the performance period, and shall further be adjusted
based on the achievement of the pre-established performance goals.
TERMINATION OF EMPLOYMENT FOR OTHER REASONS:
If the employment of a participant shall terminate for any reason other
than the reasons set forth (and other than for cause), all options held
by the participant which are not vested as of the effective date of
employment termination immediately shall be forfeited to the company.
However, the committee, in its sole discretion, shall have the right to
immediately vest all or any portion of such options, subject to such
terms as the committee, in its sole discretion, deems appropriate. All
performance shares not paid shall be forfeited by the participant to
the company.
Options which are vested as of the effective date of employment
termination may be exercised by the participant within the period
beginning on the effective date of employment termination, and ending
three (3) months after such date.
If the employment of a participant shall be terminated by the company
for cause, all outstanding options held by the participant shall be
forfeited to the company and no additional exercise period shall be
allowed, regardless of the vested status of the options.
INCOME AND TAX CONSIDERATIONS:
Employee: At exercise, the excess of the stock's fair market value over
the option price is taxed as ordinary income and is subject to
withholding. At payment, performance shares are taxed as ordinary
income.
At sale, any appreciation occurring after calculation of the exercise
tax obligation is taxed as either:
- a long-term capital gain if the stock is held for more than 18
months, or
- as a short-term capital gain for stock held for less than 18 months.
Company: At exercise, deduction allowed for the amount the executive
recognizes as taxable income in the year executive is taxed if
withholding requirements are met.
Exhibit 10.18
ALLIANT SERVICES COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
<PAGE>
Table of Contents
Page
ARTICLE 1 BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Account . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Beneficiary . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Code . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Company . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 Compensation . . . . . . . . . . . . . . . . . . . . . . 1
2.7 Deferred Compensation . . . . . . . . . . . . . . . . . 1
2.8 Disability . . . . . . . . . . . . . . . . . . . . . . . 1
2.9 Effective Date . . . . . . . . . . . . . . . . . . . . . 1
2.10 Eligible Employee . . . . . . . . . . . . . . . . . . . 1
2.11 Employer . . . . . . . . . . . . . . . . . . . . . . . . 2
2.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.13 Participant . . . . . . . . . . . . . . . . . . . . . . 2
2.14 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.15 Plan Year . . . . . . . . . . . . . . . . . . . . . . . 2
2.16 Plan Administrator . . . . . . . . . . . . . . . . . . . 2
2.17 Retirement . . . . . . . . . . . . . . . . . . . . . . . 2
2.18 Savings Plan . . . . . . . . . . . . . . . . . . . . . . 2
2.19 Termination of Employment . . . . . . . . . . . . . . . 2
2.20 Unforeseeable Emergency . . . . . . . . . . . . . . . . 2
ARTICLE 3 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . 2
3.1 Powers and Duties . . . . . . . . . . . . . . . . . . . 2
3.2 Delegation . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4 DEFERRED COMPENSATION . . . . . . . . . . . . . . . . . 3
4.1 Participant Deferrals . . . . . . . . . . . . . . . . . 3
4.2 Employer Contributions . . . . . . . . . . . . . . . . . 3
4.3 Deferred Compensation Accounts . . . . . . . . . . . . . 4
ARTICLE 5 PAYMENT OF DEFERRED COMPENSATION . . . . . . . . . . . . 5
5.1 Payment of Deferred Compensation . . . . . . . . . . . . 5
5.2 Time of Payment . . . . . . . . . . . . . . . . . . . . 5
5.3 Form of Payment . . . . . . . . . . . . . . . . . . . . 5
5.4 Amount of Payments . . . . . . . . . . . . . . . . . . . 5
5.5 Participant Elections . . . . . . . . . . . . . . . . . 5
5.6 Emergency Payments . . . . . . . . . . . . . . . . . . . 6
5.7 Tax Payments . . . . . . . . . . . . . . . . . . . . . . 6
5.8 Facility of Payment . . . . . . . . . . . . . . . . . . 7
ARTICLE 6 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . 7
6.1 Decisions on Claims . . . . . . . . . . . . . . . . . . 7
6.2 Review of Denied Claims . . . . . . . . . . . . . . . . 7
ARTICLE 7 FUNDING . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 8 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . 8
ARTICLE 9 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 8
9.1 Status of Participants . . . . . . . . . . . . . . . . . 8
9.2 No Guaranty of Employment . . . . . . . . . . . . . . . 8
9.3 Delegation of Authority . . . . . . . . . . . . . . . . 8
9.4 Legal Actions . . . . . . . . . . . . . . . . . . . . . 8
9.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . 9
9.6 Rules of Construction . . . . . . . . . . . . . . . . . 9
9.7 Expenses of Administration . . . . . . . . . . . . . . . 9
9.8 Indemnification . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
ARTICLE 1
BACKGROUND
Alliant Services Company wishes to adopt a plan to allow certain of its
key employees to defer payment of part or all of their current
compensation. To accomplish this purpose, it has adopted the Alliant
Services Company Key Employee Deferred Compensation Plan as hereinafter
set forth.
ARTICLE 2
DEFINITIONS
When the following words or phrases are used in this Agreement, they
shall have the meanings set forth below unless otherwise specifically
provided:
2.1 Account. An account which has been established for a
Participant pursuant to Section 4.3.
2.2 Affiliate. A business organization that is under common control
with the Company, as determined under Section 414(c) of the Code.
2.3 Beneficiary. The person or persons (including a trustee or
trustees) designated as a Participant's Beneficiary in the last written
instrument signed by the Participant for the purposes of this Plan and
received by the Plan Administrator prior to the Participant's death. If
no such person has been designated, the Participant's Beneficiary shall be
the person or persons who constitute the Participant's beneficiary for the
purposes of the Savings Plan.
2.4 Code. The Internal Revenue Code of 1986, as from time to time
amended.
2.5 Company. Alliant Services Company, and any successor or
successors thereto.
2.6 Compensation. A Participant's base salary and any incentive
compensation earned by a Participant under a plan adopted by the
Participant's Employer on or after the Effective Date.
2.7 Deferred Compensation. The balance from time to time credited
to a Participant's Account.
2.8 Disability. A Participant's eligibility for immediate benefits
under his or her Employer's long-term disability plan.
2.9 Effective Date. The later of January 1, 1998 or the effective
date of the Company's incorporation.
2.10 Eligible Employee. An employee of an Employer who is a member
of a select group of management or highly compensated employees within the
meaning of Section 201(2) of ERISA, and who has been designated by the
Chief Executive Officer of the Company as being eligible to participate in
the Plan.
2.11 Employer. The Company, and each Affiliate of the Company whose
employees have been designated as being eligible to participate in the
Plan.
2.12 ERISA. The Employee Retirement Income Security Act of 1974, as
from time to time amended.
2.13 Participant. An Eligible Employee for whom an Account has been
established pursuant to Section 4.3.
2.14 Plan. The Alliant Services Company Key Employee Deferred
Compensation Plan, as set forth herein, and as from time to time amended.
2.15 Plan Year. The 12 consecutive month period ending on each
December 31.
2.16 Plan Administrator. The Compensation and Personnel Committee of
the Board of Directors of Interstate Energy Corporation.
2.17 Retirement. Termination of Employment at or after age 55 or by
reason of Disability.
2.18 Savings Plan. The Alliant Services Company Retirement Savings
401(k) Plan.
2.19 Termination of Employment. Severance of a Participant's
employment relationship with all of the Employers and their Affiliates. A
transfer of employment among Employers or their Affiliates will not
constitute a Termination of Employment.
2.20 Unforeseeable Emergency. A severe financial hardship to a
Participant resulting from a sudden and unexpected illness or accident of
the Participant or a dependent (as defined in Section 152(a) of the Code)
of the Participant, loss of the Participant's property due to casualty, or
a similar extraordinary and unforeseeable circumstance arising as a result
of events beyond the control of the Participant.
ARTICLE 3
ADMINISTRATION
3.1 Powers and Duties. Full power and authority to construe,
interpret, and administer this Plan is vested in the Plan Administrator.
In particular, the Plan Administrator shall make each determination
provided for in this Plan and may adopt such rules, regulations, and
procedures, as it deems necessary or desirable to the efficient
administration of the Plan. The Plan Administrator's determinations need
not be uniform, and may be made by it selectively among persons who may be
eligible to participate in the Plan. The Plan Administrator shall have
sole and exclusive discretion in the exercise of its powers and duties
hereunder, and all determinations made by the Plan Administrator shall be
final, conclusive, and binding unless they are found by a court of
competent jurisdiction to have been arbitrary and capricious.
3.2 Delegation. The Plan Administrator may delegate part or all of
is duties to any person or persons, and may from time to time revoke such
authority and delegate it to another person or persons. Each such
delegation to a person who is not an employee of the Company or an
Affiliate will be in writing, and a copy will be furnished to the person
to whom the duty is delegated, who will file a written acceptance with the
Plan Administrator. Any delegate's duty will terminate upon revocation of
such authority by the Plan Administrator, upon withdrawal of such person's
acceptance or, in the case of a delegate who is an employee of the Company
or an Affiliate, upon the termination of such employment. Any person to
whom administrative duties are delegated may, unless the delegation
provides otherwise, similarly delegate part or all of such duties to
another person.
ARTICLE 4
DEFERRED COMPENSATION
4.1 Participant Deferrals. An Eligible Employee may elect to defer
up to 100% of his or her Compensation for any Plan Year. An election to
defer Compensation shall be made in writing prior to the first day of the
Plan Year to which it will apply or, if later, within 30 days after the
Eligible Employee is first notified by the Plan Administrator of his or
her eligibility to participate in the Plan, and it shall be subject to the
following requirements:
(a) The election may defer a percentage of the Participant's
base salary, and/or a percentage of the Participant's incentive
compensation. Amounts deferred from a Participant's base salary
shall reduce the Participant's base salary in equal installments for
each pay period during the Plan Year (or portion thereof) to which
the election applies. Amounts deferred from a Participant's
incentive compensation shall reduce the Participant's incentive
compensation for the Plan Year on the date such incentive
compensation would otherwise be paid to the Participant.
(b) The election shall be irrevocable with respect to all
Compensation payable for services performed by the Participant during
the Plan Year following the date on which the election is received by
the Plan Administrator, except that a Participant may terminate an
election to defer Compensation if the Plan Administrator determines
that the termination is necessary as a result of an Unforeseeable
Emergency.
4.2 Employer Contributions. Each Employer shall credit to the
Account of each Participant who is employed by that Employer an "Employer
Contribution" in an amount equal to 50% of (a) minus (b), where:
(a) is the lesser of:
(i) the sum of the amounts (if any) contributed by the
Participant to the Savings Plan during a Plan Year which were
eligible for matching contributions under the Savings Plan, plus
the amounts deferred by the Participant during the Plan Year
pursuant to Section 4.1; or
(ii) 6% of the Participant's base salary for the Plan Year;
and
(b) is the amount of any matching contributions that were made
to the Savings Plan on behalf of the Participant for the Plan Year.
Notwithstanding the foregoing, a Participant shall not receive an Employer
Contribution for any Plan Year unless: (A) the Participant is employed by
an Employer or an Affiliate on the last day of the Plan Year; or (B) the
Participant's employment terminated during the Plan Year by reason of the
Participant's Retirement or death.
4.3 Deferred Compensation Accounts. The Plan Administrator shall
establish an Account in the name of each Participant to record the
Deferred Compensation payable to the Participant. Such Account shall be
for bookkeeping purposes only, and shall not be deemed to create a fund or
trust for the benefit of the Participant. Each Participant's Account
shall periodically be adjusted as follows:
(a) The Plan Administrator shall credit the following amounts
to a Participant's Account:
(i) Amounts deferred by a Participant pursuant to Section
4.1 shall be credited to the Participant's Account as of the
dates on which they are applied to reduce the Participant's
current Compensation.
(ii) Amounts contributed on behalf of a Participant by the
Participant's Employer pursuant to Section 4.2 shall be credited
to the Participant's Account as of July 1 of the Plan Year for
which such amounts are contributed.
(iii) All deferred amounts credited to a Participant's
Account shall be credited interest on December 31 at a rate
equivalent to the A-Utility Bond yield (as reported in the
Federal Reserve statistical release H.15), or the Wall Street
Journal prime interest rate, (whichever is greater), using the
average of the rates reported for the last Friday of each month
for the preceding year. Interest shall continue to be credited
and compounded in this manner until the final payment shall have
been made from the Participant's Account.
Partial year interest accruals for Participants who because of
financial hardship, retirement, termination or death during the Plan
Year will also be computed (in the manner prescribed above) using the
average rates from the January 1 preceding the Participant's
retirement/termination date through the fourth Friday of the month
preceding the Participant's retirement or termination date. Interest
payments will apply to amounts deferred up to the date the plan
distribution is made.
(b) The Plan Administrator shall charge to the Participant's
Account the amount of any payments made to or on behalf of the
Participant, and the amount of any penalty imposed on the Participant
pursuant to Section 5.5(c), as of the dates on which such payments
are made or such penalty is imposed.
ARTICLE 5
PAYMENT OF DEFERRED COMPENSATION
5.1 Payment of Deferred Compensation. In the event of a
Participant's Termination of Employment for reasons other than the
Participant's death, the balance credited to the Participant's Account
shall be paid to the Participant. In the event of a Participant's death,
the balance credited to the Participant's Account shall be paid to the
Participant's Beneficiary.
5.2 Time of Payment. Payment of a Participant's Deferred
Compensation shall commence as follows:
(a) Retirement. In the case of a Participant's Retirement,
payment shall commence within 60 days after the date of the
Participant's Termination of Employment or within 60 days after the
last day of the Plan Year in which the Participant retires, as
elected by the Participant pursuant to Section 5.5. If payment is
made in annual installments, each installment after the first shall
be paid within 31 days after the last day of the Plan Year in which
the first installment was paid.
(b) Death. In the case of a Participant' death, payment shall
commence within 60 days after the date the Participant's Beneficiary
has been identified.
(c) Other Termination of Employment. In the case of a
Participant's Termination of Employment for reasons other than the
Participant's death or Retirement, payment shall commence within 60
days after the date of the Participant's Termination of Employment.
5.3 Form of Payment. Payments due by reason of a Participant's
death or Retirement shall be made in a lump sum or in up to ten annual
installments, as elected by the Participant pursuant to Section 5.5.
Payments due by reason of a Participant's Termination of Employment for
reasons other than a Participant's death or Retirement shall be made in a
lump sum.
5.4 Amount of Payments. The amount of a lump sum payment shall be
equal to the balance credited to the Participant's Account as of a date
selected by the Plan Administrator, which date shall not be more than 30
days prior to the date the lump sum is paid. The amount of an installment
payment shall be equal to the balance credited to the Participant's
Account as of a date selected by the Plan Administrator (which shall not
be more than 30 days prior to the date the installment is paid), divided
by the number of installments (including the current installment)
remaining to be paid.
5.5 Participant Elections. A Participant's elections concerning the
time and form of payment of Deferred Compensation shall be made in writing
on forms provided by and filed with the Plan Administrator, and shall be
subject to the following requirements:
(a) An election concerning the time at which payments of
Deferred Compensation will begin must be received by the Plan
Administrator with the Participant's first election to defer
Compensation pursuant to this Plan. Such an election shall apply to
all of the Participant's Deferred Compensation, and it may not be
changed or revoked after it has been received by the Plan
Administrator except as provided in paragraph (c). In the absence of
a valid election, payment of a Participant's Deferred Compensation
shall begin within 60 days after the Participant's Termination of
Employment.
(b) A Participant's election concerning the form in which his
or her Deferred Compensation will be paid must be received by the
Plan Administrator with the Participant's first election to defer
Compensation pursuant to this Plan. Such an election shall apply to
all of the Participant's Deferred Compensation, and it may not be
changed or revoked after it has been received by the Plan
Administrator except as provided in paragraph (c). In the absence of
a valid election, a Participant's Deferred Compensation shall be paid
in a lump sum.
(c) A Participant may change an election as to the time and/or
form of payment of his or her Deferred Compensation at any time by
giving prior written notice to the Plan Administrator. Any change in
a Participant's elections shall result in a penalty in the amount of
10% of the Participant's Deferred Compensation as of the date on
which notice of the change is received by the Plan Administrator,
which amount shall be forfeited to the Participant's Employer.
5.6 Emergency Payments. In the event of an Unforeseeable Emergency,
the Plan Administrator may direct a Participant's Employer to pay any part
or all of a Participant's Deferred Compensation to the Participant prior
to the time provided in Section 5.2, to the extent necessary to prevent
severe financial hardship. Such action shall be taken only if the
Participant submits a written application describing the circumstances
which are deemed to justify the payment and the amount necessary to
prevent severe financial hardship, together with such supporting evidence
as the Plan Administrator may reasonably require. Payments shall not be
made under this section to the extent the Participant's hardship is or may
be relieved:
(a) through reimbursement or compensation by insurance or
otherwise;
(b) by liquidation of the Participant's assets, to the extent
this would not in itself cause severe financial hardship; or
(c) by the termination of the Participant's election to defer
Employer Compensation.
5.7 Tax Payments. If there is a final determination that a
Participant or Beneficiary should be taxed on part or all of the
Participant's Deferred Compensation before it is actually paid, the
Participant's Employer shall pay to the Participant or Beneficiary the
portion of the Participant's Deferred Compensation that has been
determined to be currently taxable. For the purposes of this section, a
"final determination" means a determination by the Internal Revenue
Service or a court of competent jurisdiction from which no further appeal
may be taken, either because there is no further appeal available or
because the time to take such appeal has expired.
5.8 Facility of Payment. An Employer may make payments due to a
legally incompetent person in such of the following ways as the Plan
Administrator shall determine:
(a) directly to such person;
(b) to the legal representative of such person; or
(c) to a near relative of such person to be used for the
person's benefit.
Any payment made in accordance with the provisions of this section shall
be a complete discharge of the Employer's liability for the making of such
payment.
ARTICLE 6
CLAIMS PROCEDURE
6.1 Decisions on Claims. If a claim for benefits is denied, the
Plan Administrator shall furnish to the claimant within 90 days after its
receipt of the claim (or within 180 days after such receipt if special
circumstances require an extension of time) a written notice which:
(a) specifies the reasons for the denial;
(b) refers to the pertinent provisions of the Plan on which the
denial is based;
(c) describes any additional material or information necessary
for the perfection of the claim and explains why such material or
information is necessary; and
(d) explains the claim review procedures.
6.2 Review of Denied Claims. Upon the written request of the
claimant submitted within 60 days after his or her receipt of such written
notice, the Plan Administrator shall afford the claimant a full and fair
review of the decision denying the claim and, if so requested, permit the
claimant to review any documents which are pertinent to the claim, permit
the claimant to submit issues and comments in writing, and afford the
claimant an opportunity to meet with appropriate representatives of the
Plan Administrator as a part of the review procedure. Within 60 days
after its receipt of a request for review (or within 120 days after such
receipt if special circumstances, such as the need to hold a hearing,
require an extension of time) the Plan Administrator shall notify the
claimant in writing of its decision and the reasons for its decision and
shall refer the claimant to the provisions of the Plan which form the
basis for its decision.
ARTICLE 7
FUNDING
This Plan is intended to be "unfunded" for the purposes of the Code and
Title I of ERISA; however, nothing herein shall prevent an Employer, in
its sole discretion, from establishing a trust of the type commonly known
as a "rabbi trust" to assist it in meeting its obligations under the Plan.
ARTICLE 8
AMENDMENT AND TERMINATION
The Plan Administrator may amend or terminate this Plan at any time and
for any reason; provided, that no amendment or termination of the Plan
shall alter a Participant's right to receive payment of amounts previously
credited to the Participant's Account.
ARTICLE 9
GENERAL PROVISIONS
9.1 Status of Participants. Each Participant shall be a general
unsecured creditors of his or her Employer with respect to amounts payable
hereunder, this Plan constituting a mere promise by the Employers to make
benefit payments in the future. A Participant's right to receive payments
under the Plan are not subject in any manner to anticipation, alienation,
sale, assignment, pledge, encumbrance, attachment, or garnishment by the
creditors of the Participant or the Participant's Beneficiaries.
9.2 No Guaranty of Employment. The establishment of this Plan shall
not give a Participant any legal or equitable right to be continued in the
employ of an Employer, nor shall it interfere with an Employer's right to
terminate the employment of any of its employees, with or without cause.
9.3 Delegation of Authority. Whenever, under the terms of this
Plan, an Employer is permitted or required to do or perform any act, it
shall be done or performed by the Board of Directors of the Employer, by
any duly authorized committee thereof, or by any officer of the Employer
duly authorized by the articles of incorporation, bylaws, or Board of
Directors of the Employer.
9.4 Legal Actions. No Participant, Beneficiary, or other person
having or claiming to have an interest in this Plan shall be a necessary
party to any action or proceeding involving the Plan, and no such person
shall be entitled to any notice or process, except to the extent required
by applicable law. Any final judgment which is not appealed or appealable
that may be entered in any such action or proceeding shall be binding and
conclusive on all persons having or claiming to have any interest in this
Plan.
9.5 Applicable Law. This Plan shall be construed and interpreted in
accordance with the laws of the State of Iowa, except to the extent the
same are preempted by ERISA or other federal law.
9.6 Rules of Construction. Wherever any words are used herein in
the masculine gender, they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form they shall be
construed as though they were also used in the plural form in all cases
where they would so apply. Headings of sections and subsections of this
Plan are inserted for convenience of reference, are not a part of this
Plan, and are not to be considered in the construction hereof. The words
"hereof," "herein," "hereunder," and other similar compounds of the word
"here" shall mean and refer to the entire Plan, and not to any particular
provision or section.
9.7 Expenses of Administration. All expenses and costs incurred in
connection with the administration or operation of the Plan shall be paid
by the Employers and/or any trust of the type described in Article 7.
9.8 Indemnification. Each Employer shall, to the extent permitted
by its articles of incorporation and bylaws, and by the laws of the state
in which it is incorporated, indemnify any employee or director of an
Employer or an Affiliate providing services to the Plan against any and
all liabilities arising by reason of any act or omission, made in good
faith pursuant to the provisions of the Plan, including expenses
reasonably incurred in the defense of any claim relating thereto.
To record the adoption of the Plan as set forth above, the undersigned has
executed this document this ___ day of ________________, 1997, for and on
behalf of the Company.
ALLIANT SERVICES COMPANY
By_____________________________
As its__________________________
ATTEST:
__________________________________
As its____________________________
Exhibit 10.19a As Executed
CONSENT ACTION
OF THE BOARD OF DIRECTORS
OF WISCONSIN POWER AND LIGHT COMPANY
Pursuant to Section 180.0821 of the Wisconsin Business
Corporation Law, the undersigned, being all of the members of the Board of
Directors of Wisconsin Power and Light Company, a Wisconsin corporation
(the "Company"), hereby consent to and adopt the following resolutions:
WHEREAS, the Board of Directors deems it appropriate to amend
the Company's Executive Tenure Compensation Plan (the "Plan") in light of
the transactions contemplated by that certain Agreement and Plan of
Merger, as amended, dated as of November 10, 1995, by and among WPL
Holdings, Inc., IES Industries Inc., Interstate Power Company, a Delaware
corporation, WPLH Acquisition Co. and Interstate Power Company, a
Wisconsin corporation (the "Merger Agreement").
NOW, THEREFORE, BE IT RESOLVED, that, effective immediately
following the consummation of the transactions contemplated by the Merger
Agreement, Section 3 of the Plan be amended to provide as follows:
3. Payments Upon Retirement. Upon the retirement of a participant
other than the Chief Executive Officer either:
a. at or after age 65, or
b. prior to age 65 subject to approval by the Chief Executive
Officer and the Board of Directors of the Company
or, in the case of retirement of the Chief Executive Officer:
a. at or after age 65, or
b. prior to age 65 subject to the approval of the Board of
Directors of the Company
such participant shall be entitled to receive monthly payments
continuing until his death or until 120 such payments have been made,
whichever comes first, equal to 25% of the combined average monthly
salary received by such participant from the Company during whichever
period of 36 consecutive months produces the highest average monthly
salary. Notwithstanding the foregoing, and in the case of the Chief
Executive Officer only, in the event that the Chief Executive Officer
(1) is terminated under the Employment Agreement (as herein defined)
other than for Cause, Death or Disability (as such terms are defined
in the Employment Agreement), (2) terminates his employment under the
Employment Agreement for Good Reason (as such term is defined in the
Employment Agreement) or (3) is terminated as a result of a failure
of the Employment Agreement to be renewed automatically pursuant to
its terms (regardless of the reason for such nonrenewal), then for
purposes of the Plan the Chief Executive Officer shall be deemed to
have retired at age 65 and shall be entitled to benefits as such a
retiree hereunder. As used herein, the term "Employment Agreement"
shall mean the Employment Agreement between Erroll B. Davis, Jr. and
Interstate Energy Corporation entered into in connection with the
consummation of the transactions contemplated by that certain
Agreement and Plan of Merger, as amended, dated as of November 10,
1995, by and among WPL Holdings, Inc., IES Industries Inc.,
Interstate Power Company and related parties. As used herein, average
monthly salary shall mean the gross compensation of an executive for
personal services performed for the Company, including the amount of
income deferred by the participant pursuant to a salary reduction
agreement under an unqualified deferred compensation plan, as well as
the amounts of contributions paid on behalf of the participant by the
Company pursuant to any qualified plan meeting the requirements of
Section 401(k) of the Code and under any cafeteria plan under section
125 of the Code; but excluding: worker's compensation payments for
work time lost; travel allowances and reimbursements; moving expense
reimbursements; disability payments paid pursuant to a company's
disability plan; imputed income under the Code with respect to life
insurance benefits; and other special payments designated by the
Board of Directors of the Company.
FURTHER RESOLVED, that the appropriate officers of the Company
be and they hereby are authorized to take or cause to be taken all such
action and to execute or cause to be executed such documents as may be
deemed by them necessary or desirable to carry out the provisions of the
foregoing resolution; the taking of any such action shall constitute
conclusive evidence of the authority of the appropriate officer or
officers hereunder.
FURTHER RESOLVED, that any and all actions heretofore taken or
caused to be taken by the officers of the Company, consistent with the
tenor and purport of the foregoing resolutions, are hereby ratified,
confirmed and approved in all respects.
FURTHER RESOLVED, that this Consent Action may be executed in
counterparts which shall together constitute one and the same document.
Dated and effective as of this 23rd day of February, 1998.
/s/ /s/
L. David Carley Arnold M. Nemirow
/s/ /s/
Erroll B. Davis, Jr. Milton E. Neshek
/s/ /s/
Rockne G. Flowers Henry C. Prange
/s/ /s/
Donald R. Haldeman Judith D. Pyle
/s/ /s/
Katharine C. Lyall Carol T. Toussaint
--------------------------------------------------------------------
I, Edward M. Gleason do hereby certify that I am the duly elected
and acting Corporate Secretary of Wisconsin Power and Light Company, a
Wisconsin corporation, organized under the laws of the State, and that I
have access to the corporate records of said Company, and as such officer,
I do further certify that the foregoing Resolution was duly adopted by
unanimous written consent effective February 23, 1998.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said Company this 23rd day of February, 1998.
/s/ Edward M. Gleason
Exhibit 10.28
As Executed
SEVERANCE AGREEMENT BY AND BETWEEN WPL HOLDINGS, INC. AND ANTHONY J. AMATO
April 20, 1998
Mr. Anthony J. Amato
7645 Farmington Way
Madison, WI 53717
Dear Nino:
This letter agreement confirms our mutual understanding regarding the
benefits you will be entitled to receive under the Key Executive
Employment and Severance Agreement between you and WPL Holdings, Inc. (the
"Company"), dated as of June 25, 1994 (the "KEESA"), following
consummation of the transactions (the "Merger") contemplated by that
certain Agreement and Plan of Merger, dated as of November 10, 1995, as
amended, by and between the Company, IES Industries Inc., Interstate Power
Company, and certain other parties, and the termination of your employment
with the Company and its affiliates. The terms of our understanding are
set forth below:
1. Termination of Employment. Your employment as an officer and/or
employee of the Company and its affiliates (including, without limitation,
Wisconsin Power & Light Company) will be terminated effective as of the
day following the date on which the Merger is consummated (your
"Termination Date"). You agree that as of your Termination Date, your
signature below accepting this letter agreement will also constitute your
resignation from each of the other positions listed on Schedule A attached
to and made a part of this letter. Assuming that the Merger is
consummated, the Company and you agree that the termination of your
employment shall be treated as a Covered Termination by the Company
entitling you to the payment of Accrued Benefits and the Termination
Benefit as provided in Sections 8 and 9 of the KEESA and as specified in
Section 2 hereof, without the necessity to comply with the procedures set
forth in Section 13 of the KEESA. You agree that your Termination Date
under this letter agreement will also constitute your "Termination Date"
for purposes of the KEESA.
2. Scope of Benefits.
(a) You agree that during 1998 the total value of benefits that
may be paid to you under the KEESA (as reduced by the provisions of
Section 9(b) thereof) is $614,771. This amount is one dollar less than
the product obtained by multiplying (i) the average of the compensation
paid to you by the Company and its affiliates (as reflected in Box 1 of
your Form W-2s) for the five calendar years ended December 31, 1997, by
(ii) three (3).
(b) Following consummation of the Merger and your termination,
the benefits under your KEESA will be paid as follows:
(i) $593,771 in cash or cash equivalent within ten (10)
business days after your Termination Date; and
(ii) $21,000 (the "Benefits Amount") will be credited to a
bookkeeping account to be maintained by the Company to provide you,
for a period of up to five (5) years commencing on your Termination
Date, with (a) medical coverage as a single adult under The Medical
Plus Plan sponsored by Wisconsin Power and Light Company, (b) dental
coverage as a single adult under The Dental Plus Plan sponsored by
Wisconsin Power and Light Company, (c) Basic Term Life Insurance in
the amount of $254,000 and Supplemental Group Term Life Insurance in
the amount of $169,000 under the life insurance programs sponsored by
Wisconsin Power and Light Company. The Benefits Amount reflects the
estimated cost of providing the above-described benefits to you for a
five-year period. The outstanding balance of the Benefits Amount
(i.e., the Benefits Amount net of funds expended to provide you
benefits hereunder) shall bear interest at the mid-term Applicable
Federal Rate as specified for the month in which the Merger is
consummated, compounded annually. Interest credited as set forth
above will be added to the Benefits Amount. You agree that, in the
event the costs incurred by the Company or its affiliates in
providing the above-described benefits (or family or employee plus
one medical or dental benefits to which you will have access on your
request to the Company in writing on the same terms and conditions as
apply to active employees at any time during the five-year period) to
you exceeds the Benefits Amount, you will reimburse the Company for
the excess amount. Conversely, in the event that the cost of such
benefits for the five-year period is less than the Benefits Amount or
in the event you elect in a writing delivered to the Company not to
receive such benefits for the entire five-year period, you will be
entitled to a refund from the Company equal to the difference between
the Benefits Amount and the actual costs incurred by the Company and
its affiliates in providing the benefits you did receive. Any
payments due under the preceding two sentences to the Company or to
you, as the case may be, shall be paid in cash or cash equivalent
within thirty (30) days of written notice thereof. Your failure to
provide such payment to the Company, if you are so obligated, on a
timely basis will result in a loss of benefits hereunder. You agree
that the benefits offered to you hereunder shall be governed by the
specific terms of the plans pursuant to which they are provided. You
further agree that, pursuant to Section 8(b)(ii) of the KEESA, if you
obtain new employment and are covered by benefits which are in the
aggregate at least equal in value to the benefits described above,
you will provide prompt written notice to the Company of your intent
to terminate your benefits coverage as provided herein.
3. Payment of Legal Fees. Upon payment of the amount specified in
Section 2(b)(i) hereof and upon presentation by you or your legal counsel
to the Company of a copy of any bills you have received from your legal
counsel in connection with the payment of any amount under the KEESA, the
Company will also either pay directly or reimburse to you up to $10,000
against such legal fees and related expenses.
4. No Other Benefits. Except as contemplated by Sections 2 and 3
hereof and except for the payment of Accrued Benefits, which include your
vested stock options, you waive the right to any other payments or
benefits that you might otherwise be entitled to under the KEESA and
further agree that receipt of the payment specified in Section 2(b)(i)
hereof shall constitute your release of any rights you might have to any
other severance payments under any severance policy, practice or agreement
of the Company or any of its affiliates. You also agree that, other than
under the KEESA, you have no other payments or benefits that automatically
accelerate, vest or become payable as a result of the consummation of the
Merger.
5. No Amendment of KEESA. Except for specifying your Termination
Date under the KEESA, dispensing with the necessity to comply with the
procedures set forth in Section 13 of the KEESA and modifying the
provisions of Section 9(b)(ii) of the KEESA regarding the procedure for
calculating the Total Payments (as defined in the KEESA) to be made to you
thereunder, this letter agreement is not intended to modify the KEESA in
any respect, and the KEESA shall remain in full force and effect.
6. Release.
(a) Except as expressly provided herein, in consideration of
the payments provided by the Company hereunder and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged,
you, on behalf of yourself, your spouse, heirs, executors, administrators,
agents, successors, assigns and representatives of any kind (hereinafter
collectively referred to as the "Releasors") confirm that Releasors have
released the Company, and each of its subsidiaries (including, without
limitation, Wisconsin Power and Light Company), affiliates, their
employees, successors, assigns, executors, trustees, directors, advisors,
agents and representatives, and all their respective predecessors and
successors (hereinafter collectively referred to as the "Releasees"), from
any and all actions, causes of action, charges, debts, liabilities,
accounts, demands, damages and claims of any kind whatsoever including,
but not limited to, those arising out of the changes in the terms and
conditions of your relationship with the Company described in this letter
agreement and those arising under any labor, employment discrimination
(including, without limitation, the Age Discrimination in Employment Act
of 1967, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Wisconsin Fair Employment Act, as amended), contract or tort
laws, equity or public policy, or negligence standard, whether known or
unknown, certain or speculative, which against any of the Releasees, any
of the Releasors ever had, now has, or hereafter shall have or can have.
You further covenant that you will not initiate any action, claim or
proceeding against any of the Releasees for any of the foregoing, nor will
you participate, assist, or cooperate in any such action, claim, or
proceeding unless required to do so by law. Notwithstanding the
foregoing, this release does not cover any matter which arises after the
Termination Date.
(b) Except as expressly provided herein, the Company, on behalf
of its affiliates, agents, successors, assigns and representatives (the
"Company Releasors"), hereby release you from any and all causes of
action, liabilities, damages and claims of any kind whatsoever including,
but not limited to, those arising out of your employment relationship with
the Company prior to the Termination Date, whether known or unknown,
certain or speculative, which any of the Company Releasors ever had, now
has, or hereafter shall or can have; provided, however, that the foregoing
shall not release you from any causes of action, liabilities, damages or
claims relating to (i) a willful failure to deal fairly with the Company,
its shareowners, or any other Company Releasor in connection with a matter
in which you had a material conflict of interest, (ii) a violation of the
criminal law, unless you had reasonable cause to believe that your conduct
was lawful or reasonable cause to believe that your conduct was not
unlawful, (iii) a transaction from which you derived an improper personal
profit or (iv) willful misconduct. The Company Releasors further covenant
they will not initiate any action, claim or proceeding against you for any
of the foregoing claims for which you have been released from liability.
Notwithstanding the foregoing, this release does not cover any matter
which arises after the Termination Date.
(c) Notwithstanding the foregoing, this letter agreement does
not waive rights, if any, you or your successors and assigns may have
under or pursuant to, or release any member of Releasees from obligations,
if any, it may have to you or to your successors and assigns on claims
arising out of, related to or asserted under or pursuant to, this letter
agreement or any indemnity agreement or obligation contained in or adopted
or acquired pursuant to any provision of the charter or by-laws of the
Company or its subsidiaries or affiliates or in any applicable insurance
policy carried by the Company or its affiliates for any matter which
arises or may arise in the future in connection with your employment with
the Company.
(d) You hereby acknowledge that you have at least twenty-one
(21) days to review this letter agreement from the date you first receive
it and you have been advised to review it with an attorney of your choice.
You further understand that the twenty-one (21) day review period ends
when you sign this letter agreement. You also have seven (7) days after
your signing of this letter agreement to revoke by so notifying the
Company in writing and repaying any amount paid to you hereunder. You
further acknowledge that you have carefully read this letter agreement,
know and understand the contents thereof and its binding legal effect.
You sign the same of your own free will and act, and it is your intention
that you be legally bound thereby.
7. Timing of the Merger. In the event the Merger is not
consummated by May 10, 1998, this letter agreement shall terminate and be
of no further force and effect.
If you find that the foregoing satisfactorily states our mutual
understanding, please sign and date the enclosed copy of this letter
agreement in the spaces provided below and return it to me.
Sincerely yours,
WPL HOLDINGS, INC.
By: /s/ Barbara J. Swan
Barbara J. Swan
Agreed to and Accepted this 20th day of April 1, 1998.
By: /s/ A.J. Amato
A. J. Amato
<PAGE>
SCHEDULE A
To Letter Agreement Between
Anthony J. Amato and WPL Holdings, Inc.
Dated April 20, 1998
Per Section 1 of the above letter agreement, the positions from which
Mr. Amato has resigned as of his Termination Date are as follows:
(Foundation - President)
(Land Trust - President)
(South Beloit Water, Gas and Electric Company - Vice President)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1998 FINANCIAL STATEMENTS INCLUDED IN INTERSTATE ENERGY CORPORATION'S FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000352541
<NAME> INTERSTATE ENERGY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,057,117
<OTHER-PROPERTY-AND-INVEST> 1,109,481
<TOTAL-CURRENT-ASSETS> 364,315
<TOTAL-DEFERRED-CHARGES> 91,771
<OTHER-ASSETS> 326,635
<TOTAL-ASSETS> 4,949,319
<COMMON> 769
<CAPITAL-SURPLUS-PAID-IN> 881,734
<RETAINED-EARNINGS> 777,305<F1>
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,659,808
24,331
89,102
<LONG-TERM-DEBT-NET> 1,489,369
<SHORT-TERM-NOTES> 35,324
<LONG-TERM-NOTES-PAYABLE> 56,975
<COMMERCIAL-PAPER-OBLIGATIONS> 77,651
<LONG-TERM-DEBT-CURRENT-PORT> 68,985
0
<CAPITAL-LEASE-OBLIGATIONS> 19,338
<LEASES-CURRENT> 13,211
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,414,225
<TOT-CAPITALIZATION-AND-LIAB> 4,949,319
<GROSS-OPERATING-REVENUE> 1,047,295
<INCOME-TAX-EXPENSE> 19,124<F2>
<OTHER-OPERATING-EXPENSES> 934,588
<TOTAL-OPERATING-EXPENSES> 934,588<F2>
<OPERATING-INCOME-LOSS> 112,707
<OTHER-INCOME-NET> (4,018)
<INCOME-BEFORE-INTEREST-EXPEN> 108,689
<TOTAL-INTEREST-EXPENSE> 63,155
<NET-INCOME> 26,410
3,349
<EARNINGS-AVAILABLE-FOR-COMM> 23,061
<COMMON-STOCK-DIVIDENDS> 79,455
<TOTAL-INTEREST-ON-BONDS> 92,333
<CASH-FLOW-OPERATIONS> 218,211
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
<FN>
<F1>Includes $215,039 of accumulated other comprehensive income.
<F2>Income tax expense is not included in Operating Expenses in the Consolidated
Statements of Income.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 FINANCIAL STATEMENTS INCLUDED IN INTERSTATE ENERGY CORPORATION'S FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. CERTAIN
ADJUSTMENTS HAVE BEEN MADE TO THE PRIOR PERIOD AMOUNTS AS PART OF THE RESTATEMENT
TO REFLECT THE POOLING OF INTERESTS TRANSACTION.
</LEGEND>
<RESTATED>
<CIK> 0000352541
<NAME> INTERSTATE ENERGY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,086,472
<OTHER-PROPERTY-AND-INVEST> 648,909
<TOTAL-CURRENT-ASSETS> 420,725
<TOTAL-DEFERRED-CHARGES> 159,384
<OTHER-ASSETS> 378,050
<TOTAL-ASSETS> 4,693,540
<COMMON> 762
<CAPITAL-SURPLUS-PAID-IN> 861,265
<RETAINED-EARNINGS> 584,453
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,446,480
24,205
89,102
<LONG-TERM-DEBT-NET> 1,358,897
<SHORT-TERM-NOTES> 55,005
<LONG-TERM-NOTES-PAYABLE> 56,975
<COMMERCIAL-PAPER-OBLIGATIONS> 207,200
<LONG-TERM-DEBT-CURRENT-PORT> 74,470
0
<CAPITAL-LEASE-OBLIGATIONS> 13,816
<LEASES-CURRENT> 13,937
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,353,453
<TOT-CAPITALIZATION-AND-LIAB> 4,693,540
<GROSS-OPERATING-REVENUE> 1,157,491
<INCOME-TAX-EXPENSE> 37,316<F1>
<OTHER-OPERATING-EXPENSES> 1,003,756
<TOTAL-OPERATING-EXPENSES> 1,003,756<F1>
<OPERATING-INCOME-LOSS> 153,735
<OTHER-INCOME-NET> 7,577
<INCOME-BEFORE-INTEREST-EXPEN> 161,312
<TOTAL-INTEREST-EXPENSE> 56,934
<NET-INCOME> 67,062
3,346
<EARNINGS-AVAILABLE-FOR-COMM> 63,716
<COMMON-STOCK-DIVIDENDS> 72,492
<TOTAL-INTEREST-ON-BONDS> 88,295
<CASH-FLOW-OPERATIONS> 195,950
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
<FN>
<F1> Income tax expense is not included in Operating Expenses in the Consolidated
Statements of Income.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1998 FINANCIAL STATEMENTS INCLUDED IN IES UTILITIES INC.'S FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000052485
<NAME> IES UTILITIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,352,103
<OTHER-PROPERTY-AND-INVEST> 94,985
<TOTAL-CURRENT-ASSETS> 129,069
<TOTAL-DEFERRED-CHARGES> 10,149
<OTHER-ASSETS> 146,261
<TOTAL-ASSETS> 1,732,567
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 228,540
<TOTAL-COMMON-STOCKHOLDERS-EQ> 541,009
0
18,320
<LONG-TERM-DEBT-NET> 601,842
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 50,140
0
<CAPITAL-LEASE-OBLIGATIONS> 19,257
<LEASES-CURRENT> 13,197
<OTHER-ITEMS-CAPITAL-AND-LIAB> 488,802
<TOT-CAPITALIZATION-AND-LIAB> 1,732,567
<GROSS-OPERATING-REVENUE> 383,011
<INCOME-TAX-EXPENSE> 12,515<F1>
<OTHER-OPERATING-EXPENSES> 326,966
<TOTAL-OPERATING-EXPENSES> 326,966<F1>
<OPERATING-INCOME-LOSS> 56,045
<OTHER-INCOME-NET> (2,880)
<INCOME-BEFORE-INTEREST-EXPEN> 53,165
<TOTAL-INTEREST-EXPENSE> 26,030
<NET-INCOME> 14,620
457
<EARNINGS-AVAILABLE-FOR-COMM> 14,163
<COMMON-STOCK-DIVIDENDS> 14,000
<TOTAL-INTEREST-ON-BONDS> 46,650
<CASH-FLOW-OPERATIONS> 105,525
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1> Income tax expense is not included in Operating Expenses in the Consolidated
Statements of Income.
<F2> Earnings per share of common stock is not reflected because all common shares are
held by Interstate Energy Corporation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 FINANCIAL STATEMENTS INCLUDED IN IES UTILITIES INC.'S FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. CERTAIN
ADJUSTMENTS HAVE BEEN MADE TO THE PRIOR PERIOD AMOUNTS AS PART OF THE RESTATEMENT
TO REFLECT THE POOLING OF INTERESTS TRANSACTION.
</LEGEND>
<RESTATED>
<CIK> 0000052485
<NAME> IES UTILITIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,344,001
<OTHER-PROPERTY-AND-INVEST> 79,954
<TOTAL-CURRENT-ASSETS> 102,088
<TOTAL-DEFERRED-CHARGES> 10,273
<OTHER-ASSETS> 195,717
<TOTAL-ASSETS> 1,732,033
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 221,622
<TOTAL-COMMON-STOCKHOLDERS-EQ> 534,091
0
18,320
<LONG-TERM-DEBT-NET> 517,265
<SHORT-TERM-NOTES> 5,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 145,000
<LONG-TERM-DEBT-CURRENT-PORT> 140
0
<CAPITAL-LEASE-OBLIGATIONS> 13,816
<LEASES-CURRENT> 13,923
<OTHER-ITEMS-CAPITAL-AND-LIAB> 484,478
<TOT-CAPITALIZATION-AND-LIAB> 1,732,033
<GROSS-OPERATING-REVENUE> 396,021
<INCOME-TAX-EXPENSE> 14,649<F1>
<OTHER-OPERATING-EXPENSES> 336,792
<TOTAL-OPERATING-EXPENSES> 336,792<F1>
<OPERATING-INCOME-LOSS> 59,229
<OTHER-INCOME-NET> (763)
<INCOME-BEFORE-INTEREST-EXPEN> 58,466
<TOTAL-INTEREST-EXPENSE> 25,075
<NET-INCOME> 18,742
457
<EARNINGS-AVAILABLE-FOR-COMM> 18,285
<COMMON-STOCK-DIVIDENDS> 28,000
<TOTAL-INTEREST-ON-BONDS> 37,780
<CASH-FLOW-OPERATIONS> 77,877
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1> Income tax expense is not included in Operating Expenses in the Consolidated
Statements of Income.
<F2> Earnings per share of common stock is not reflected because all common shares
are held by Interstate Energy Corporation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1998 FINANCIAL STATEMENTS INCLUDED IN WISCONSIN POWER AND LIGHT COMPANY'S FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000107832
<NAME> WISCONSIN POWER AND LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,214,762
<OTHER-PROPERTY-AND-INVEST> 147,820
<TOTAL-CURRENT-ASSETS> 98,542
<TOTAL-DEFERRED-CHARGES> 49,721
<OTHER-ASSETS> 117,183
<TOTAL-ASSETS> 1,628,028
<COMMON> 66,183
<CAPITAL-SURPLUS-PAID-IN> 199,334
<RETAINED-EARNINGS> 305,925
<TOTAL-COMMON-STOCKHOLDERS-EQ> 571,442
0
59,963
<LONG-TERM-DEBT-NET> 354,586
<SHORT-TERM-NOTES> 57,303
<LONG-TERM-NOTES-PAYABLE> 56,975
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,899
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 518,860
<TOT-CAPITALIZATION-AND-LIAB> 1,628,028
<GROSS-OPERATING-REVENUE> 375,313
<INCOME-TAX-EXPENSE> 10,870<F1>
<OTHER-OPERATING-EXPENSES> 330,833
<TOTAL-OPERATING-EXPENSES> 330,833<F1>
<OPERATING-INCOME-LOSS> 44,480
<OTHER-INCOME-NET> 122
<INCOME-BEFORE-INTEREST-EXPEN> 44,602
<TOTAL-INTEREST-EXPENSE> 17,367
<NET-INCOME> 16,365
1,656
<EARNINGS-AVAILABLE-FOR-COMM> 14,709
<COMMON-STOCK-DIVIDENDS> 29,170
<TOTAL-INTEREST-ON-BONDS> 30,569
<CASH-FLOW-OPERATIONS> 109,752
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1> Income tax expense is not included in Operating Expenses in the Consolidated
Statements of Income.
<F2> Earnings per share of common stock is not reflected because all common shares are
held by Interstate Energy Corporation (formerly WPL Holdings, inc.).
</FN>
</TABLE>
