UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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, Address of
Commission Principal Executive IRS Employer
File Number Offices and Telephone Number Identification Number
- ----------- ---------------------------- ---------------------
1-9894 ALLIANT 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
Interstate Energy Corporation
(Former name of Alliant Energy Corporation)
Securities registered pursuant to Section 12 (b) of the Act:
<TABLE>
<CAPTION>
Name of Each
Title of Class Exchange on Which Registered
-------------- ----------------------------
<S> <C> <C>
Alliant Energy Corporation Common Stock, $.01 Par Value New York Stock Exchange
Alliant Energy Corporation Common Stock Purchase Rights New York Stock Exchange
IES Utilities Inc. 7-7/8% Quarterly Debt Capital Securities New York Stock Exchange
(Subordinated Deferrable Interest Debentures)
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class
--------------
IES Utilities Inc. 4.80% Cumulative Preferred Stock, Par Value
$50 per share
Wisconsin Power and Light Company Preferred Stock (Accumulation without Par
Value)
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
registrant was required to file such reports) and (2) have been subject to such
filing requirements for the past 90 days. Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
<PAGE>
This combined Form 10-K/A is separately filed by Alliant 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.
The aggregate market value of the voting and non-voting common equity held by
nonaffiliates as of January 31, 1999:
Alliant Energy Corporation $2.24 billion
IES Utilities Inc. $0
Wisconsin Power and Light Company $0
Number of shares outstanding of each class of common stock as of January 31,
1999:
Alliant Energy Corporation Common Stock, $.01 par value, 77,667,444
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 Company Common Stock, $5 par value, 13,236,601
shares outstanding (all of which are owned
beneficially and of record by Interstate
Energy Corporation)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statements relating to Alliant Energy Corporation's 1999
Annual Meeting of Shareowners and Wisconsin Power and Light Company's 1999
Annual Meeting of Shareowners are, or will upon filing with the Securities and
Exchange Commission, be incorporated by reference into Part III hereof.
2
<PAGE>
The undersigned registrants hereby amend Items 8 and 14 of their combined Annual
Report on Form 10-K for the year ended December 31, 1998 to provide in their
entirety as follows:
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Interstate Energy Corporation Page Number
Report of Management 5
Report of Independent Public Accountants 6
Consolidated Statements of Income for the Years Ended
December 31, 1998, 1997 and 1996 7
Consolidated Balance Sheets, December 31, 1998 and 1997 8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 10
Consolidated Statements of Capitalization, December 31,
1998 and 1997 11
Consolidated Statements of Changes in Common Equity for the
Years Ended December 31, 1998, 1997 and 1996 13
Notes to Consolidated Financial Statements 14
IES Utilities Inc.
Report of Independent Public Accountants 38
Consolidated Statements of Income and Retained Earnings
for the Years Ended December 31, 1998, 1997 and 1996 39
Consolidated Balance Sheets, December 31, 1998 and 1997 40
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 42
Consolidated Statements of Capitalization, December 31,
1998 and 1997 43
Notes to Consolidated Financial Statements 44
Wisconsin Power and Light Company
Report of Independent Public Accountants 52
Consolidated Statements of Income and Retained Earnings for
the Years Ended December 31, 1998, 1997 and 1996 53
Consolidated Balance Sheets, December 31, 1998 and 1997 54
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 56
Consolidated Statements of Capitalization, December 31, 1998
and 1997 57
Notes to Consolidated Financial Statements 58
Refer to Note 16 of IEC's, IESU's and WP&L's "Notes to Consolidated Financial
Statements" for the quarterly financial data required by this Item.
3
<PAGE>
INTERSTATE ENERGY CORPORATION
FINANCIAL SECTION
4
<PAGE>
INTERSTATE ENERGY CORPORATION REPORT ON THE FINANCIAL INFORMATION
Interstate Energy Corporation management is responsible for the information and
representations contained in the financial statements and in certain other
sections of this Annual Report. The consolidated financial statements that
follow have been prepared in accordance with generally accepted accounting
principles. In addition to selecting appropriate accounting principles,
management is responsible for the manner of presentation and for the reliability
of the financial information. In fulfilling that responsibility, it is necessary
for management to make estimates based on currently available information and
judgments of current conditions and circumstances.
Through a well-developed system of internal controls, management seeks to ensure
the integrity and objectivity of the financial information presented in this
report. This system of internal controls is designed to provide reasonable
assurance that the assets of the company are safeguarded and that the
transactions are executed according to management's authorizations and are
recorded in accordance with the appropriate accounting principles.
The Board of Directors participates in the financial information reporting
process through its Audit Committee.
Erroll B. Davis Jr.
President and Chief Executive Officer
Interstate Energy Corporation
Thomas M. Walker
Executive Vice President and Chief Financial Officer
Interstate Energy Corporation
John E. Ebright
Vice President - Controller
Interstate Energy Corporation
January 29, 1999
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Interstate Energy Corporation:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Interstate Energy Corporation (a Wisconsin Corporation) and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income, cash flows and changes in common equity for each of the
three years in the period ended December 31, 1998. These financial statements
and the supplemental schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and supplemental schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interstate Energy Corporation
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31,1998, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14(a)(2) is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 29, 1999
(except with respect to the matters discussed in
Notes 5c and 17, as to which the date is October 29, 1999)
6
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
<S> <C> <C> <C>
Electric utility $ 1,567,442 $ 1,515,753 $ 1,440,375
Gas utility 295,590 393,907 375,955
Nonregulated and other 267,842 390,967 416,510
----------------- ----------------- ----------------
2,130,874 2,300,627 2,232,840
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 297,685 280,558 256,609
Purchased power 255,332 256,306 231,014
Cost of utility gas sold 166,453 259,222 240,324
Other operation 620,234 681,977 696,596
Maintenance 122,737 123,121 111,657
Depreciation and amortization 279,505 259,663 232,363
Taxes other than income taxes 105,626 103,397 98,838
----------------- ----------------- ----------------
1,847,572 1,964,244 1,867,401
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Operating income 283,302 336,383 365,439
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 129,363 122,563 113,321
Allowance for funds used during construction (6,812) (5,274) (5,574)
Preferred dividend requirements of subsidiaries 6,699 6,693 6,687
Miscellaneous, net (736) (13,910) (11,843)
----------------- ----------------- ----------------
128,514 110,072 102,591
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 154,788 226,311 262,848
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Income taxes 58,113 81,733 105,760
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations 96,675 144,578 157,088
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Loss on disposal of subsidiary, net of applicable
tax benefit of $575 - - (1,297)
----------------- ----------------- ----------------
- --------------------------------------------------------------------------------------------------------------------
Net income $ 96,675 $ 144,578 $ 155,791
================= ================= ================
- --------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding 76,912 76,210 75,481
================= ================= ================
- --------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted):
Income from continuing operations $ 1.26 $ 1.90 $ 2.08
Discontinued operations - - (0.02)
----------------- ----------------- ----------------
Net income $ 1.26 $ 1.90 $ 2.06
================= ================= ================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1998 1997
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 4,866,152 $ 4,733,222
Gas 515,074 495,155
Other 409,711 366,395
----------------- -----------------
5,790,937 5,594,772
Less - Accumulated depreciation 2,852,605 2,631,582
----------------- -----------------
2,938,332 2,963,190
Construction work in progress 119,032 86,511
Nuclear fuel, net of amortization 44,316 55,777
----------------- -----------------
3,101,680 3,105,478
Other property, plant and equipment, net of accumulated
depreciation and amortization of $178,248 and $139,920, respectively 355,100 329,264
----------------- -----------------
3,456,780 3,434,742
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 31,827 27,329
Accounts receivable:
Customer, less allowance for doubtful accounts
of $2,518 and $2,400, respectively 102,966 123,545
Other, less allowance for doubtful accounts
of $490 and $224, respectively 26,054 20,824
Notes receivable 13,392 23,410
Production fuel, at average cost 54,140 40,656
Materials and supplies, at average cost 53,490 49,845
Gas stored underground, at average cost 26,013 32,364
Regulatory assets 27,089 36,330
Prepaid gross receipts tax 22,222 22,153
Other 30,767 35,786
----------------- -----------------
387,960 412,242
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Investments:
Investment in McLeodUSA Inc. 320,280 328,022
Nuclear decommissioning trust funds 225,803 190,238
Investment in foreign entities 68,882 57,072
Other 54,776 49,319
----------------- -----------------
669,741 624,651
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 341,684 352,365
Deferred charges and other 103,172 99,550
----------------- -----------------
444,856 451,915
----------------- -----------------
Total assets $ 4,959,337 $ 4,923,550
================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31,
CAPITALIZATION AND LIABILITIES 1998 1997
- -----------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
<S> <C> <C>
Common stock $ 776 $ 765
Additional paid-in capital 905,130 868,903
Retained earnings 537,372 581,376
Accumulated other comprehensive income 163,017 173,512
------------------ ------------------
Total common equity 1,606,295 1,624,556
------------------ ------------------
Cumulative preferred stock of subsidiaries, net 113,498 113,369
Long-term debt (excluding current portion) 1,543,131 1,467,903
------------------ ------------------
3,262,924 3,205,828
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 63,414 18,329
Variable rate demand bonds 56,975 56,975
Commercial paper 64,500 114,500
Notes payable 51,784 42,000
Capital lease obligations 11,978 13,197
Accounts payable 204,297 192,634
Accrued taxes 84,921 78,923
Other 111,685 133,233
------------------ ------------------
649,554 649,791
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 691,624 719,899
Accumulated deferred investment tax credits 77,313 82,862
Environmental liabilities 68,399 70,955
Customer advances 37,171 36,619
Capital lease obligations 13,755 23,634
Other 158,597 133,962
------------------ ------------------
1,046,859 1,067,931
------------------ ------------------
- -----------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 12)
- -----------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $ 4,959,337 $ 4,923,550
================== ==================
- -----------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 96,675 $ 144,578 $ 155,791
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 279,505 259,663 232,363
Amortization of nuclear fuel 17,869 18,308 21,336
Amortization of deferred energy efficiency expenditures 27,083 15,786 6,669
Deferred taxes and investment tax credits (27,720) (11,661) 14,715
Refueling outage provision (4,001) 9,290 (6,374)
Impairment of oil and gas properties 9,678 9,902 -
Impairment of regulatory assets 8,969 - -
Other (3,616) 5,468 (6,777)
Other changes in assets and liabilities:
Accounts receivable 15,349 18,638 (13,935)
Notes receivable 10,018 (3,621) 14,663
Production fuel (13,484) 2,814 271
Materials and supplies (3,645) (874) 5,615
Gas stored underground 6,351 (6,603) (4,170)
Accounts payable 11,663 (27,726) 33,505
Accrued taxes 5,998 13,375 (11,676)
Benefit obligations and other 31,070 16,152 9,280
--------------- -------------- --------------
Net cash flows from operating activities 467,762 463,489 451,276
--------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (140,679) (145,631) (143,344)
Dividends payable (15,458) 285 310
Proceeds from issuance of common stock 33,832 15,535 17,393
Net change in Alliant Energy Resources, Inc. credit
facility 70,492 9,908 47,860
Proceeds from issuance of other long-term debt 77,544 295,000 61,370
Reductions in other long-term debt (27,663) (146,590) (20,679)
Net change in short-term borrowings (40,216) (109,884) 16,654
Principal payments under capital lease obligations (13,250) (12,964) (19,108)
Other (2,333) (2,410) (2,336)
--------------- -------------- --------------
Net cash flows used for financing activities (57,731) (96,751) (41,880)
--------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------
Cashflows used for investing activities:
Construction and acquisition
expenditures:
Utility (269,133) (256,760) (297,196)
Other (102,925) (71,280) (115,078)
Deferred energy efficiency expenditures - (13,344) (24,792)
Nuclear decommissioning trust funds (20,305) (17,435) (15,994)
Proceeds from disposition of assets 16,677 15,993 69,838
Shared savings expenditures (27,780) (17,610) (5,196)
Other (2,067) (1,790) (18,026)
--------------- -------------- --------------
Net cash flows used for investing activities (405,533) (362,226) (406,444)
--------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 4,498 4,512 2,952
--------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 27,329 22,817 19,865
--------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 31,827 $ 27,329 $ 22,817
=============== ============== ==============
- --------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 126,376 $ 117,255 $ 107,970
=============== ============== ==============
Income taxes $ 84,916 $ 69,272 $ 111,006
=============== ============== ==============
Noncash investing and financing activities:
Capital lease obligations incurred $ 1,426 $ 16,781 $ 14,281
=============== ============== ==============
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Common equity:
Common stock - $.01 par value - authorized 200,000,000 shares;
outstanding 77,630,043 and 76,481,102 shares, respectively $ 776 $ 765
Additional paid-in capital 905,130 868,903
Retained earnings 537,372 581,376
Accumulated other comprehensive income 163,017 173,512
---------------- ----------------
1,606,295 1,624,556
---------------- ----------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries:
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
<S> <C> <C> <C> <C> <C> <C>
$ 100 * 449,765 4.40% - 6.20% No 44,977 44,977
$ 25 * 599,460 6.50% No 14,986 14,986
$ 50 466,406 366,406 4.30% - 6.10% No 18,320 18,320
$ 50 ** 216,381 4.36% - 7.76% No 10,819 10,819
$ 50 ** 545,000 6.40% Yes *** 27,250 27,250
---------------- ----------------
116,352 116,352
Less: unamortized expenses (2,854) (2,983)
---------------- ----------------
113,498 113,369
---------------- ----------------
* 3,750,000 authorized shares in total
** 2,000,000 authorized shares in total
*** $53.20 mandatory redemption price
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Long-term debt:
IES Utilities Inc. -
Collateral Trust Bonds:
<S> <C> <C>
7.65% series, due 2000 50,000 50,000
7.25% series, due 2006 60,000 60,000
6-7/8% series, due 2007 55,000 55,000
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
---------------- ----------------
284,400 284,400
First Mortgage Bonds:
Series Y, 8-5/8%, due 2001 60,000 60,000
Series Z, 7.6%, due 1999 50,000 50,000
9-1/8% series, due 2001 21,000 21,000
7-1/4% series, due 2007 30,000 30,000
---------------- ----------------
161,000 161,000
Pollution control obligations:
5.75%, due serially 1999 to 2003 3,136 3,276
5.95%, retired in 1998 - 10,000
Variable rate (4.20% at December 31, 1998), due 2000 to 2010 11,100 11,100
Variable/fixed rate series 1998 (4.25% through 2003), due 2023 10,000 -
---------------- ----------------
24,236 24,376
Subordinated Deferrable Interest Debentures, 7-7/8%, due 2025 50,000 50,000
Senior Debentures, 6-5/8%, due 2009 135,000 135,000
---------------- ----------------
Total IES Utilities Inc. 654,636 654,776
---------------- ----------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CAPITALIZATION (Continued)
December 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Wisconsin Power and Light Company -
First Mortgage Bonds:
<S> <C> <C>
Series L, 6.25%, retired in 1998 $ - $ 8,899
1984 Series A, variable rate (3.85% at December 31, 1998), due 2014 8,500 8,500
1988 Series A, variable rate (4.20% at December 31, 1998), due 2015 14,600 14,600
1990 Series V, 9.3%, due 2025 27,000 27,000
1991 Series A-D, variable rate (5.15% at December 31, 1998),
due 2000 to 2015 33,875 33,875
1992 Series W, 8.6%, due 2027 90,000 90,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
---------------- ----------------
307,975 316,874
Unsecured Debt:
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 -
---------------- ----------------
Total Wisconsin Power and Light Company 472,975 421,874
---------------- ----------------
Interstate Power Company -
First Mortgage Bonds:
8% series, due 2007 25,000 25,000
8-5/8% series, due 2021 25,000 25,000
7-5/8% series, due 2023 94,000 94,000
---------------- ----------------
144,000 144,000
Pollution Control Revenue Bonds:
5.95%, retired in 1998 - 5,850
6-3/8%, due serially 1999 to 2007 10,950 11,400
5.75%, due 2003 1,000 1,000
6.25%, due 2009 1,000 1,000
6.30%, due 2010 5,600 5,600
6.35%, due 2012 5,650 5,650
Variable/fixed rate series 1998 (4.30% through 2003),
due 2005 to 2008 4,950 -
---------------- ----------------
29,150 30,500
---------------- ----------------
Total Interstate Power Company 173,150 174,500
---------------- ----------------
Alliant Energy Resources, Inc. -
Credit facility (5.15% - 5.85% at December 31, 1998) 252,505 182,013
Multifamily Housing Revenue Bonds issued by various housing and
community development authorities, 4.20% - 7.55%, due 2004 to 2024 35,494 36,503
Other subsidiaries' debt, 0% - 10.75%, due 1999 to 2042 57,579 56,795
---------------- ----------------
Total Alliant Energy Resources, Inc. 345,578 275,311
---------------- ----------------
Interstate Energy Corporation -
8.59% Senior notes, due 2004 24,000 24,000
---------------- ----------------
1,670,339 1,550,461
---------------- ----------------
Less:
Current maturities (63,414) (18,329)
Variable rate demand bonds (56,975) (56,975)
Unamortized debt premium and (discount), net (6,819) (7,254)
---------------- ----------------
Total long-term debt 1,543,131 1,467,903
---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------
Total capitalization $ 3,262,924 $ 3,205,828
================ ================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Income (Loss) Equity
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1996:
<S> <C> <C> <C> <C> <C>
Beginning balance $ 750 $ 832,670 $ 569,982 $ - $ 1,403,402
Comprehensive income:
Net income 155,791 155,791
Other comprehensive loss net of tax:
Minimum pension liability adjustment (a) (809) (809)
-------------
Total comprehensive income 154,982
Common stock dividends (143,344) (143,344)
Common stock issued 8 18,447 18,455
Treasury stock (269) (269)
-------------- ------------- -------------- --------------- -------------
Ending balance 758 850,848 582,429 (809) 1,433,226
1997: Comprehensive income:
Net income 144,578 144,578
Other comprehensive income (loss):
Unrealized gain on securities, net of tax (b) 174,688 174,688
Foreign currency translation adjustment (20) (20)
Minimum pension liability adjustment, net of tax (a) (347) (347)
-------------
Total comprehensive income 318,899
Common stock dividends (145,631) (145,631)
Common stock issued 7 18,138 18,145
Treasury stock (83) (83)
-------------- ------------- -------------- --------------- -------------
Ending balance 765 868,903 581,376 173,512 1,624,556
1998: Comprehensive income:
Net income 96,675 96,675
Other comprehensive income (loss):
Unrealized loss on securities, net of tax (b) (4,589) (4,589)
Foreign currency translation adjustment (7,062) (7,062)
Minimum pension liability adjustment, net of tax (a) 1,156 1,156
-------------
Total comprehensive income 86,180
Common stock dividends (140,679) (140,679)
Common stock issued 11 36,263 36,274
Treasury stock (36) (36)
-------------- ------------- -------------- --------------- -------------
Ending balance $ 776 $ 905,130 $ 537,372 $ 163,017 $ 1,606,295
============== ============= ============== =============== =============
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Net of tax expense (benefit) of $(565), $(243) and $808 in 1996, 1997 and
1998, respectively.
(b) Net of tax expense (benefit) of $124,271 and $(3,218) in 1997 and 1998,
respectively.
The accompanying Notes to Condolidated Financial Statements are an intergral
part of these statements.
</TABLE>
13
<PAGE>
INTERSTATE ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) General -
The Consolidated Financial Statements include the accounts of Interstate Energy
Corporation (IEC) and its consolidated subsidiaries. IEC resulted from the April
1998 merger between WPL Holdings, Inc. (WPLH), IES Industries Inc. (IES) and
Interstate Power Company (IPC) (refer to Note 2 for a discussion of the merger).
IEC is an investor-owned holding company currently doing business as Alliant
Energy Corporation whose subsidiaries are IES Utilities Inc. (IESU), Wisconsin
Power and Light Company (WP&L), IPC, Alliant Energy Resources, Inc. (Alliant
Energy Resources) and Alliant Energy Corporate Services, Inc. (Alliant Energy
Corporate Services). IESU, WP&L and IPC are engaged principally in the
generation, transmission, distribution and sale of electric energy; the
purchase, distribution, transportation and sale of natural gas; and water and
steam services in selective markets. The principal markets of IESU, WP&L and IPC
are located in Iowa, Wisconsin, Minnesota and Illinois. Alliant Energy Resources
(through its numerous direct and indirect subsidiaries) provides energy products
and services to domestic and international markets; provides industrial services
including environmental, engineering and transportation services; invests in
affordable housing initiatives; and invests in various other strategic
initiatives. Alliant Energy Corporate Services is the subsidiary formed to
provide administrative services to IEC and its subsidiaries as required under
the Public Utility Holding Company Act of 1935 (PUHCA).
The consolidated financial statements reflect investments in controlled
subsidiaries on a consolidated basis. All significant intercompany balances and
transactions, other than certain energy-related transactions affecting IESU,
WP&L and IPC, have been eliminated from the Consolidated Financial Statements.
Such energy-related transactions are made at prices that approximate market
value and the associated costs are recoverable from customers through the rate
making process. The financial statements are prepared in conformity with
generally accepted accounting principles, which give recognition to the rate
making and accounting practices of the Federal Energy Regulatory Commission
(FERC) and state commissions having regulatory jurisdiction.
Unconsolidated investments for which IEC has at least a 20% voting interest are
generally accounted for under the equity method of accounting. These investments
are stated at acquisition cost, increased or decreased for IEC's equity in net
income or loss, which is included in "Miscellaneous, net" in the Consolidated
Statements of Income and decreased for any dividends received. Investments that
do not meet the criteria for consolidation or the equity method of accounting
are accounted for under the cost method.
The preparation of the financial statements requires management to make
estimates and assumptions that affect: 1) the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and 2) the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Certain prior period amounts have been reclassified on a basis consistent with
the current year presentation.
(b) Regulation -
IEC is a registered public utility holding company subject to regulation by the
Securities and Exchange Commission (SEC) under the PUHCA. IESU, WP&L and IPC are
subject to regulation by the FERC and their respective state regulatory
commissions (Iowa Utilities Board (IUB), Public Service Commission of Wisconsin
(PSCW), Minnesota Public Utilities Commission (MPUC) and Illinois Commerce
Commission (ICC)).
(c) Regulatory Assets -
IESU, WP&L and IPC are subject to the provisions of Statement of Financial
Accounting Standards, "Accounting for the Effects of Certain Types of
Regulation" (SFAS 71). SFAS 71 provides that rate-regulated public utilities
record certain costs and credits allowed in the rate making process in different
periods than for unregulated entities. These are
14
<PAGE>
deferred as regulatory assets or regulatory liabilities and are recognized in
the Consolidated Statements of Income at the time they are reflected in rates.
At December 31, 1998 and 1997, regulatory assets of $368.8 million and $388.7
million, respectively, were comprised of the following items (in millions):
<TABLE>
<CAPTION>
IESU WP&L IPC
-------------------- --------------------- ------------------
1998 1997 1998 1997 1998 1997
---------- --------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tax-related (Note 1(d)) $81.4 $80.3 $49.3 $55.5 $29.8 $29.7
Energy efficiency program costs 39.8 59.4 53.5 29.5 25.9 30.0
Environmental liabilities (Note 12(f)) 35.2 42.9 19.5 22.2 17.5 6.2
Other 5.0 17.0 11.2 13.6 0.7 2.4
---------- --------- ---------- ---------- -------- ---------
Total $161.4 $199.6 $133.5 $120.8 $73.9 $68.3
========== ========= ========== ========== ======== =========
</TABLE>
Refer to the individual notes referenced above for a further discussion of
certain items reflected in regulatory assets. Regulators allow IESU and IPC to
earn a return on energy efficiency program costs but not on the other regulatory
assets. In Wisconsin, WP&L is allowed to earn a return on all regulatory assets
other than those associated with manufactured gas plants (MGP).
If a portion of IESU's, WP&L's or IPC's operations become no longer subject to
the provisions of SFAS 71 as a result of competitive restructuring or otherwise,
a write-down of related regulatory assets 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, IESU, WP&L or IPC would be required to determine any impairment to
other assets and write-down such assets to their fair value.
(d) Income Taxes -
IEC follows the liability method of accounting for deferred income taxes, which
requires the establishment of deferred tax assets and liabilities, as
appropriate, for all temporary differences between the tax basis of assets and
liabilities and the amounts reported in the financial statements. Deferred taxes
are recorded using currently enacted tax rates as shown in Note 6.
Except as noted below, income tax expense includes provisions for deferred taxes
to reflect the tax effects of temporary differences between the time when
certain costs are recorded in the accounts and when they are deducted for tax
return purposes. As temporary differences reverse, the related accumulated
deferred income taxes are reversed to income. Investment tax credits have been
deferred and are subsequently credited to income over the average lives of the
related property. As part of the affordable housing business, IEC is eligible to
claim affordable housing credits. These tax credits reduce current federal taxes
to the extent IEC has consolidated taxes payable.
Consistent with Iowa rate making practices for IESU and IPC, deferred tax
expense is not recorded for certain temporary differences (primarily related to
utility property, plant and equipment). As the deferred taxes become payable
(over periods exceeding 30 years for some generating plant differences) they are
recovered through rates. Accordingly, IESU and IPC have recorded deferred tax
liabilities and regulatory assets for certain temporary differences, as
identified in Note 1(c). In Wisconsin, the PSCW has allowed rate recovery of
deferred taxes on all temporary differences since August 1991. WP&L established
a regulatory asset associated with temporary differences occurring prior to
August 1991, which is recovered through rates.
(e) Common Shares Outstanding -
The weighted average common shares outstanding used in the calculation of basic
earnings per share for IEC were 76,912,219; 76,209,935 and 75,480,539 for 1998,
1997 and 1996, respectively. The common stock shares used for calculating
diluted earnings per share for IEC were 76,928,631; 76,212,073 and 75,484,281
for 1998, 1997 and 1996, respectively.
15
<PAGE>
(f) Temporary Cash Investments -
Temporary cash investments are stated at cost, which approximates market value,
and are considered cash equivalents for the Consolidated Statements of Cash
Flows. These investments consist of short-term liquid investments that have
maturities of less than 90 days from the date of acquisition.
(g) Depreciation of Utility Property, Plant and Equipment -
IESU, WP&L and IPC use a combination of remaining life and straight-line
depreciation methods as approved by their respective regulatory commissions. The
remaining life of the Duane Arnold Energy Center (DAEC), IESU's nuclear
generating facility, is based on the Nuclear Regulatory Commission (NRC) license
life of 2014. The remaining life of the Kewaunee Nuclear Power Plant (Kewaunee),
of which WP&L is a co-owner, is based on the PSCW approved revised end-of-life
of 2002 (prior to May 1997 the calculation was based on the NRC license life of
2013). Depreciation expense related to the decommissioning of DAEC and Kewaunee
is discussed in Note 12(h). WP&L implemented higher depreciation rates effective
January 1, 1997. The average rates of depreciation for electric and gas
properties of IESU, WP&L and IPC, consistent with current rate making practices,
were as follows:
<TABLE>
<CAPTION>
IESU WP&L IPC
---------------------------------- ---------------------------------- ---------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---------- ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Electric 3.5% 3.5% 3.5% 3.6% 3.6% 3.3% 3.6% 3.6% 3.6%
Gas 3.5% 3.5% 3.5% 3.8% 3.8% 3.7% 3.4% 3.4% 3.4%
</TABLE>
(h) Property, Plant and Equipment -
Utility plant (other than acquisition adjustments at IESU of $26.8 million, net
of accumulated amortization, recorded at cost) is recorded at original cost,
which includes overhead and administrative costs and an allowance for funds used
during construction (AFUDC). The AFUDC, which represents the cost during the
construction period of funds used for construction purposes, is capitalized as a
component of the cost of utility plant. The amount of AFUDC applicable to debt
funds and to other (equity) funds, a non-cash item, is computed in accordance
with the prescribed FERC formula. These capitalized costs are recovered in rates
as the cost of the utility plant is depreciated. The aggregate gross rates used
were as follows:
1998 1997 1996
------------------- ------------------ -------------------
IESU 8.9% 6.7% 5.5%
WP&L 5.2% 6.2% 10.2%
IPC 7.0% 6.0% 5.8%
Other property, plant and equipment is recorded at original cost. Upon
retirement or sale of other property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss is
included in "Miscellaneous, net" in the Consolidated Statements of Income.
Normal repairs, maintenance and minor items of utility plant and other property,
plant and equipment are expensed. Ordinary retirements of utility plant,
including removal costs less salvage value, are charged to accumulated
depreciation upon removal from utility plant accounts and no gain or loss is
recognized.
(i) Restatement of Consolidated Financial Statements / Oil and Gas
Properties -
During the third quarter of 1998, IEC's oil and gas subsidiary, Whiting
Petroleum Corporation (Whiting), changed its accounting method for oil and gas
properties from the full cost method to the successful efforts method. While
both methods are acceptable under generally accepted accounting principles,
successful efforts is the preferred method. Management believes that the
successful efforts method more accurately presents the results of Whiting's
exploration, development and production activities and minimizes asset
impairments caused by temporary declines in oil and gas prices, which may not be
representative of overall or long-term markets or management's estimate of fair
market value. As a result, impairments will only be recognized under the
successful efforts method when there has been a permanent decline in the fair
value of the oil and gas properties. As required by generally accepted
accounting principles, all prior period financial statements of IEC presented
herein have been restated to reflect the change in accounting method.
16
<PAGE>
Under the successful efforts method of accounting, Whiting capitalizes all costs
related to property acquisitions and successful exploratory wells, all
development costs and the costs of support equipment and facilities. Unproved
leasehold costs are capitalized and are reviewed periodically for impairment.
All costs related to unsuccessful exploratory wells are expensed when such wells
are determined to be non-productive and other exploration costs, including
geological and geophysical costs, are expensed as incurred. Depreciation,
depletion and amortization of proved oil and gas properties is determined on a
field-by-field basis using the unit-of-production method over the life of the
remaining proved reserves. Estimated costs (net of salvage value) of site
remediation, including offshore platform dismantlement, are included in the
depreciation and depletion calculation. Proved oil and gas properties are
reviewed on a field-by-field basis whenever events or circumstances indicate
that the carrying value of such properties may be impaired.
The cumulative effect of the restatement at January 1, 1994, was an after-tax
reduction in retained earnings of $2.7 million. The restated net income amounts
for 1994 through 1997 are as follows (in thousands):
<TABLE>
1997 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income prior to restatement $ 154,290 $ 158,675 $ 147,806 $ 150,281
Adjustment for change in accounting method for
oil and gas properties from the full cost method
to the successful efforts method
(9,712) (2,884) (1,835) (4,391)
------------ ------------ ------------ ------------
Restated net income $ 144,578 $ 155,791 $ 145,971 $ 145,890
============ ============ ============ ============
The restated earnings per average common share (basic and diluted) for 1994
through 1997 are as follows:
<CAPTION>
1997 1996 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings per average common share prior
to restatement (basic and diluted) $ 2.02 $ 2.10 $ 1.97 $ 2.04
Adjustment for change in accounting method for
oil and gas properties from the full cost method
to the successful efforts method (0.12) (0.04) (0.02) (0.06)
------------ ------------ ------------ ------------
Restated earnings per average common
share (basic and diluted) $ 1.90 $ 2.06 $ 1.95 $ 1.98
============ ============ ============ ============
</TABLE>
(j) Operating Revenues -
IEC accrues revenues for services rendered but unbilled at month-end in order to
more properly match revenues with expenses.
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 revenues. In 1997,
off-system gas sales were included in the Consolidated Statements of Income as
gas revenue.
(k) Utility Fuel Cost Recovery -
IESU's and IPC's tariffs provide for subsequent adjustments to its electric and
natural gas rates for changes in the cost of fuel and purchased energy and in
the cost of natural gas purchased for resale. Changes in the under/over
collection of these costs are reflected in "Electric and steam production fuels"
and "Cost of utility gas sold" in the Consolidated Statements of Income. The
cumulative effects are reflected on the Consolidated Balance Sheets as a current
asset or current liability, pending automatic reflection in future billings to
customers. At IESU and IPC, purchased capacity costs are not recovered from
electric customers through energy adjustment clauses. Recovery of these costs
must be addressed in base rates in a formal rate proceeding.
WP&L's retail electric rates are based in part on forecasted fuel and
purchased-power costs. Under PSCW rules,
17
<PAGE>
Wisconsin utilities can seek emergency rate increases if the annual costs are
more than 3% higher than the estimated costs used to establish rates. WP&L has a
gas performance incentive which includes a sharing mechanism whereby 40% of all
gains and losses relative to current commodity prices, as well as other
benchmarks, are retained by WP&L rather than refunded to or recovered from
customers.
(l) Nuclear Refueling Outage Costs -
The IUB allows IESU to collect, as part of its base revenues, funds to offset
other operating and maintenance expenditures incurred during refueling outages
at DAEC. As these revenues are collected, an equivalent amount is charged to
other operating and maintenance expenses with a corresponding credit to a
reserve. During a refueling outage, the reserve is reversed to offset the
refueling outage expenditures. Operating expenses incurred during refueling
outages at Kewaunee are expensed by WP&L as incurred.
(m) Nuclear Fuel -
Nuclear fuel for DAEC is leased. Annual nuclear fuel lease expenses include the
cost of fuel, based on the quantity of heat produced for the generation of
electric energy, plus the lessor's interest costs related to fuel in the reactor
and administrative expenses. Nuclear fuel for Kewaunee is recorded at its
original cost and is amortized to expense based upon the quantity of heat
produced for the generation of electricity. This accumulated amortization
assumes spent nuclear fuel will have no residual value. Estimated future
disposal costs of such fuel are expensed based on kilowatt-hours generated.
(n) Translation of Foreign Currency -
Assets and liabilities of international investments where the local currency is
the functional currency have been translated at year-end exchange rates and
related income statement results have been translated using average exchange
rates prevailing during the year. Adjustments resulting from translation have
been recorded in other comprehensive income.
(o) Comprehensive Income -
On January 1, 1998, IEC adopted SFAS 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, in addition
to net income: (1) unrealized holding gains/losses on securities classified as
available-for-sale under SFAS 115; (2) foreign currency translation adjustments
accounted for under SFAS 52; and (3) minimum pension liability adjustments made
pursuant to SFAS 87. Refer to the "Consolidated Statements of Changes in Common
Equity" for additional information regarding comprehensive income.
(p) Derivative Financial Instruments -
From time to time, IEC enters into interest rate swaps to reduce exposure to
interest rate fluctuations in connection with short and variable rate long-term
debt issues. The swap's cash flows correspond with those of the underlying
exposures. The related costs associated with these agreements are amortized over
their respective lives as components of interest expense.
IEC, through its consolidated subsidiaries, currently utilizes derivative
financial and commodity instruments to reduce price risk inherent in its gas and
electric activities on a very limited basis and such instruments may not be used
for trading purposes. The costs or benefits associated with any such hedging
activities are recognized when the related purchase or sale transactions are
completed.
(2) MERGER:
On April 21, 1998, IES, WPLH and IPC completed a three-way merger (Merger)
forming IEC. Each outstanding share of common stock of IES, WPLH and IPC was
exchanged for 1.14, 1.0 and 1.11 shares, respectively, of IEC
18
<PAGE>
common stock resulting in the issuance of approximately 77 million shares of IEC
common stock, $.01 par value per share. The outstanding debt and preferred stock
securities of IEC and its subsidiaries were not affected by the Merger. In
connection with the Merger, the number of authorized shares of IEC common stock
was increased to 200,000,000.
The Merger was accounted for as a pooling of interests and the accompanying
Consolidated Financial Statements, along with the related notes, are presented
as if the companies were combined as of the earliest period presented. As part
of the pooling, the accrued pension liability (and offsetting regulatory asset),
of IES was recomputed using the method used by WPLH and IPC to recognize
deferred asset gains. In addition, IPC adopted unbilled revenues as part of the
pooling to conform to the revenue accounting method used by WPLH and IES.
Neither of these adjustments had any income statement impact for the periods
presented in this report.
Operating revenues and net income for the three months ended March 31, 1998, and
for the years ended December 31, 1997, and December 31, 1996, were as follows
(in millions):
<TABLE>
<CAPTION>
WPLH IES IPC IEC
------------ ------------ ------------ -------------
Three months ended March 31, 1998
<S> <C> <C> <C> <C>
Operating revenues $229.5 $241.7 $85.1 $556.3
Net income $15.8 $8.1 $5.0 $28.9
Year ended December 31, 1997
Operating revenues $978.7 $990.1 $331.8 $2,300.6
Net income $61.3 $56.6 $26.7 $144.6
Year ended December 31, 1996
Operating revenues $932.8 $973.9 $326.1 $2,232.8
Net income $71.9 $58.0 $25.9 $155.8
</TABLE>
The financial results of IES have been restated for all periods presented to
reflect a change in accounting method for Whiting's oil and gas properties
implemented in the third quarter of 1998 from the full cost method to the
successful efforts method. See Note 1(i) for additional information. In
addition, the operating revenues of WPLH and IES for the 1998 and 1997 periods
presented have been adjusted to reflect the financial results of a joint venture
between the two companies as a consolidated subsidiary.
(3) LEASES:
IESU has a capital lease covering its 70% undivided interest in nuclear fuel
purchased for DAEC. Future purchases of fuel may also be added to the fuel
lease. This lease provides for annual one-year extensions and IESU intends to
continue exercising such extensions. Interest costs under the lease are based on
commercial paper costs incurred by the lessor. IESU is responsible for the
payment of taxes, maintenance, operating cost, risk of loss and insurance
relating to the leased fuel. The lessor has a $45 million credit agreement with
a bank supporting the nuclear fuel lease. The agreement continues on a
year-to-year basis, unless either party provides at least a three-year notice of
termination; no such notice of termination has been provided by either party.
Annual nuclear fuel lease expenses (included in "Electric and steam production
fuels" in the Consolidated Statements of Income) for 1998, 1997 and 1996 were
$14.2 million, $16.6 million and $18.2 million, respectively.
IEC's operating lease rental expenses for 1998, 1997 and 1996 were $21.6
million, $20.3 million and $20.0 million, respectively. IEC's future minimum
lease payments by year are as follows (in thousands):
19
<PAGE>
Capital Operating
Year Leases Leases
------------------------------------- --------------- ---------------
1999 $ 12,293 $ 23,075
2000 8,051 19,743
2001 4,338 14,183
2002 2,674 9,649
2003 561 7,333
Thereafter 141 29,961
---------------
---------------
28,058 $ 103,944
===============
Less: Amount representing interest 2,325
---------------
Present value of net minimum
capital lease payments $ 25,733
===============
(4) UTILITY ACCOUNTS RECEIVABLE:
Utility customer accounts receivable, including unbilled revenues, arise
primarily from the sale of electricity and natural gas. At December 31, 1998,
IEC was serving a diversified base of residential, commercial and industrial
customers and did not have any significant concentrations of credit risk.
Separate accounts receivable financing arrangements exist for two of IEC's
utility subsidiaries, IESU and WP&L, which are similar in most important
aspects. In both cases, the utility subsidiaries sell up to a pre-determined
maximum amount of accounts receivable to a financial institution on a limited
recourse basis, including sales to customers and to other public, municipal and
cooperative utilities, as well as billings to the co-owners of the jointly-owned
electric generating plants that the utility subsidiaries operate. The amounts
are discounted at the then-prevailing market rate and additional administrative
fees are payable according to the activity levels undertaken. All billing and
collection functions remain the responsibility of the respective utilities.
Specifics of the two agreements include (dollars in millions):
IESU WP&L
-------------- -----------
Year agreement expires 1999 1999
Maximum amount of receivables that can be sold $65 $150
Effective 1998 all-in cost 6.02% 5.95%
Average monthly sale of receivables - 1998 $63 $83
- 1997 $65 $92
Receivables sold at December 31, 1998 $55 $75
(5) INVESTMENTS:
(a) McLeodUSA Inc. (McLeod) -
At December 31, 1998, IEC had the following investment in McLeod, a
telecommunications company (in millions):
Shares Cost Fair Market Value
----------- ---------- -------------------
Class A common stock 9.0 $ 29.1 $ 282.0
Unexercised vested options,
net of cost to exercise 1.3 - 38.3
----------- ---------- -------------------
10.3 $ 29.1 $ 320.3
=========== ========== ===================
Pursuant to the provisions of SFAS 115, IEC's investment in McLeod is considered
an available-for-sale security thus the carrying value of the investment is
adjusted to the estimated fair value each quarter based on the closing price at
the end of the quarter. The adjustment does not impact earnings as the
unrealized gains or losses, net of taxes, are recorded directly to the common
equity section of the Consolidated Balance Sheets. In addition, any such gains
or losses are reflected in current earnings only at the time they are realized
through a sale. IEC entered into an agreement in November 1998 with McLeod
whereby IEC's ability to sell the McLeod stock is subject to various
restrictions.
20
<PAGE>
(b) Foreign Entities -
At December 31, 1998, IEC had $68.9 million of investments in foreign entities
on its Consolidated Balance Sheets that included: 1) investments in several
generation facilities in China; 2) investments in several New Zealand utility
entities; and 3) an investment in an international venture capital fund. IEC
accounts for the China investments under the equity method and the other
investments under the cost method. The geographic concentration of IEC's
investments in foreign entities at December 31, 1998, included investments of
approximately $36.1 million in China, $32.3 million in New Zealand and $0.5
million in other countries.
(c) Alliant Energy Resources -
Summary financial information for Alliant Energy Resources was as follows (in
millions):
December 31, December 31,
1998 1997
------------ ------------
Current assets $92.1 $92.7
Non-current assets 777.1 745.8
Current liabilities 63.6 101.4
Non-current liabilities
(excludes minority interest) 160.3 153.9
Minority interest 6.2 5.4
Refer to the "Nonregulated Businesses" column of Note 14 for summary income
statement data of Alliant Energy Resources.
(6) INCOME TAXES:
The components of federal and state income taxes for IEC for the years ended
December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- ---------------
<S> <C> <C> <C>
Current tax expense $ 92.5 $ 99.6 $ 96.9
Deferred tax expense (22.2) (6.1) 20.3
Amortization of investment tax credits (5.6) (5.6) (5.6)
Affordable housing tax credits (6.6) (6.2) (5.8)
--------------- -------------- ---------------
$ 58.1 $ 81.7 $ 105.8
=============== ============== ===============
</TABLE>
The overall effective income tax rates shown below for the years ended December
31 were computed by dividing total income tax expense by income before income
taxes and preferred dividend requirements of subsidiaries.
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 8.0 6.4 6.5
Affordable housing tax credits (4.1) (2.7) (2.2)
Amortization of investment tax credits (3.4) (2.4) (2.1)
Adjustment of prior period taxes (0.4) (2.2) 1.0
Merger expenses 2.4 0.5 1.2
Oil and gas production credits (1.6) (0.6) (0.5)
Other items, net 0.1 1.1 0.3
-------------- -------------- -------------
Overall effective income tax rate 36.0% 35.1% 39.2%
============== ============== =============
</TABLE>
21
<PAGE>
The accumulated deferred income taxes (assets) and liabilities as set forth
below on the Consolidated Balance Sheets at December 31 arise from the following
temporary differences (in millions):
1998 1997
--------------- --------------
Property related $ 677.7 $ 654.7
McLeod investment 121.1 124.3
Investment tax credit related (43.0) (46.1)
Decommissioning related (33.4) (31.7)
Other (30.8) 18.7
--------------- --------------
$ 691.6 $ 719.9
=============== ==============
(7) BENEFIT PLANS:
(a) Pension Plans and Other Postretirement Benefits -
IEC adopted SFAS 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" in 1998. IEC has several non-contributory defined
benefit pension plans that cover substantially all of its employees who are
subject to a collective bargaining agreement. Plan benefits are generally based
on years of service and compensation during the employees' latter years of
employment. Eligible employees of IEC that are not subject to a collective
bargaining agreement are covered by the Alliant Energy Cash Balance Pension
Plan, a non-contributory defined benefit pension plan. During each year of
service, IEC credits each participant's account with a benefit credit equal to
5% of base pay as well as a guaranteed minimum interest credit equal to 4%. The
projected unit credit actuarial cost method was used to compute pension cost and
the accumulated and projected benefit obligations. IEC's policy is to fund all
of the pension plans at an amount that is at least equal to the minimum funding
requirements mandated by the Employee Retirement Income Security Act of 1974, as
amended (ERISA), and that does not exceed the maximum tax deductible amount for
the year.
IEC also provides certain other postretirement benefits to retirees, including
medical benefits for retirees and their spouses (and Medicare Part B
reimbursement for certain retirees) and, in some cases, retiree life insurance.
IESU's and IPC's funding of other postretirement benefits generally approximates
the annual rate recovery of such costs, while WP&L's funding generally
approximates the maximum tax deductible amount on an annual basis.
The weighted-average assumptions as of the measurement date of September 30 are
as follows:
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
----------------------------------- --------------------------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 9% 8-9% 8-9% 9% 8-9% 8-9%
Rate of compensation increase 3.5-4.5% 3.5-5.0% 3.5-5.0% 3.5% 3.5% 3.5%-4.5%
Medical cost trend on covered charges:
Initial trend range N/A N/A N/A 8% 8% 8-9%
Ultimate trend range N/A N/A N/A 5.0-6.0% 5.0-6.5% 5.0-6.5%
The components of IEC's qualified pension benefits and other postretirement
benefits costs are as follows (in millions):
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 13.8 $ 13.1 $ 13.4 $ 5.1 $ 4.7 $ 4.9
Interest cost 35.4 32.2 30.0 9.7 9.8 9.6
Expected return on plan assets (47.2) (39.0) (36.8) (3.7) (2.6) (1.9)
Amortization of:
Transition obligation (asset) (2.4) (2.4) (2.4) 4.7 4.9 5.0
Prior service cost 2.8 2.5 1.7 (0.3) (0.3) (0.3)
Actuarial (gain) / loss (0.9) - 0.4 (1.2) (0.2) (0.1)
---------- ----------- --------- ------- -------- ---------
Total $ 1.5 $ 6.4 $ 6.3 $ 14.3 $ 16.3 $ 17.2
========== ========== ========= ======= ======== =========
</TABLE>
22
<PAGE>
During 1998, 1997 and 1996, IEC recognized an additional $10.3 million, $5.1
million and $4.7 million, respectively, of costs in accordance with SFAS 88. The
charges were for severance and early retirement programs in the respective
years. In addition, during 1998 and 1997, IEC recognized $10.2 million and $1.7
million, respectively, of curtailment charges relating to IEC's other
postretirement benefits. The amounts include a December 1998 early retirement
program.
The measurement date for accounting purposes is September 30 for IEC as
disclosed above. Prior to the Merger, WPLH, IPC and IES used December 31,
November 1 and September 30 measurement dates, respectively.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 1998, holding all other assumptions constant, would have the
following effects (in millions):
<TABLE>
<CAPTION>
1 Percent Increase 1 Percent Decrease
--------------------- ---------------------
<S> <C> <C>
Effect on total of service and interest cost components $2.3 ($1.8)
Effect on postretirement benefit obligation $15.6 ($13.0)
</TABLE>
A reconciliation of the funded status of IEC's plans to the amounts recognized
on IEC's Consolidated Balance Sheets at December 31 is presented below (in
millions):
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
---------------------------- --------------------------------
1998 1997 1998 1997
----------- ------------ ------------ --------------
Change in benefit obligation:
<S> <C> <C> <C> <C>
Net benefit obligation at beginning of year $ 474.2 $ 426.6 $ 146.4 $ 136.5
Service cost 13.8 13.1 5.1 4.7
Interest cost 35.4 32.2 9.7 9.8
Plan participants' contributions - - 1.3 1.4
Plan amendments (2.5) 11.8 - -
Actuarial (gain) / loss 24.8 13.7 (3.6) 1.0
Curtailments (3.0) 2.5 1.9 0.7
Special termination benefits 10.7 5.1 - -
Gross benefits paid (25.0) (30.8) (7.5) (7.7)
----------- ------------ ------------ --------------
Net benefit obligation at end of year 528.4 474.2 153.3 146.4
----------- ------------ ------------ --------------
Change in plan assets:
Fair value of plan assets at beginning of year 529.1 482.6 50.7 37.2
Actual return on plan assets 2.2 72.5 2.5 3.7
Employer contributions - 4.8 7.0 16.1
Plan participants' contributions - - 1.3 1.4
401(h) assets recognized - - 1.1 -
Gross benefits paid (25.0) (30.8) (7.5) (7.7)
----------- ------------ ------------ --------------
Fair value of plan assets at end of year 506.3 529.1 55.1 50.7
----------- ------------ ------------ --------------
Funded status at end of year (22.1) 54.9 (98.2) (95.7)
Unrecognized net actuarial (gain) / loss 30.3 (56.9) (7.5) (4.0)
Unrecognized prior service cost 25.8 32.1 (1.7) (2.3)
Unrecognized net transition obligation (asset) (10.6) (13.0) 60.6 73.2
----------- ------------ ------------ --------------
Net amount recognized at end of year $ 23.4 $ 17.1 $ (46.8) $ (28.8)
=========== ============ ============ ==============
Amounts recognized on the Consolidated
Balance Sheets consist of:
Prepaid benefit cost $ 38.9 $ 42.7 $ 0.9 $ 0.9
Accrued benefit cost (15.5) (25.6) (47.7) (29.7)
Additional minimum liability (7.7) - - -
Intangible asset 7.7 - - -
----------- ------------ ------------ --------------
Net amount recognized at measurement date 23.4 17.1 (46.8) (28.8)
----------- ------------ ------------ --------------
Contributions paid after 9/30 and prior to 12/31 - - 6.8 -
----------- ------------ ------------ --------------
Net amount recognized at 12/31/98 $ 23.4 $ 17.1 $ (40.0) $ (28.8)
=========== ============ ============ ==============
</TABLE>
23
<PAGE>
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $146.5
million and $45.3 million, respectively, as of September 30, 1998 and $139.8
million and $46.3 million, respectively, as of the prior measurement date. The
projected benefit obligation, accumulated benefit obligation and fair value of
plan assets for the pension plans with benefit obligations in excess of plan
assets were $250.5 million, $241.1 million and $217.9 million, respectively, as
of September 30, 1998.
IEC also sponsors several non-qualified pension plans which cover certain
current and former officers. Funding of such plans at December 31, 1998, totaled
approximately $4 million. IEC's pension benefit obligation under these plans was
$25.8 million and $18.7 million at December 31, 1998 and 1997, respectively.
IEC's pension expense under these plans was $4.5 million, $3.7 million, and $2.0
million in 1998, 1997 and 1996, respectively.
A significant number of IEC employees also participate in defined contribution
pension plans (401(k) plans). IEC's contributions to the plans, which are based
on the participants' level of contribution, were $7.7 million, $5.5 million and
$4.9 million in 1998, 1997 and 1996, respectively.
(b) Long-Term Equity Incentive Plan -
IEC has a long-term equity incentive plan which permits the grant of
non-qualified stock options, incentive stock options, restricted stock,
performance shares and performance units to key employees. As of December 31,
1998, only non-qualified stock options and performance units had been granted to
key employees. The maximum number of shares of IEC common stock that may be
issued under the plan may not exceed one million. Options are granted at the
fair market value of the shares on the date of grant and vest over three years.
Options outstanding will expire no later than 10 years after the grant date. The
first options were granted in 1995 and became exercisable in January 1998. All
options granted prior to the consummation of the Merger were issued by WPLH. A
summary of the stock option activity for 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 191,800 $28.98 114,150 $29.56 41,900 $27.50
Options granted 636,451 31.32 77,650 28.12 72,250 30.75
Options exercised (8,900) 28.59 - - - -
Options forfeited (68,267) 30.49 - - - -
----------------------- ----------------------- -----------------------
Outstanding at end of year 751,084 $30.83 191,800 $28.98 114,150 $29.56
======================= ======================= =======================
Exercisable at end of year 38,250 $27.50 - -
</TABLE>
The range of exercise prices for the options outstanding at December 31, 1998
was $27.50 to $31.56.
24
<PAGE>
The value of the options at the grant date using the Black-Scholes pricing
method is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Value of options based on Black-Scholes model $4.93 $3.30 $3.47
Volatility 21% 15% 16%
Risk free interest rate 5.75% 6.43% 5.56%
Expected life 10 years 10 years 10 years
Expected dividend yield 7.0% 7.0% 7.0%
</TABLE>
IEC follows Accounting Principles Board (APB) Opinion 25, "Accounting for Stock
Issued to Employees," to account for stock options. No compensation cost is
recognized because the option exercise price is equal to the market price of the
underlying stock on the date of grant. Had compensation cost for the plan been
determined based on the Black-Scholes value at the grant dates for awards as
prescribed by SFAS 123 "Accounting for Stock-Based Compensation," pro forma net
income and earnings per share would have been:
1998 1997 1996
----------- ----------- -----------
Net income (in millions) $93.5 $144.3 $155.5
Earnings per share (basic and diluted) $1.22 $1.89 $2.06
The performance units represent accumulated dividends on the shares underlying
the non-qualified stock options and are expensed over a three-year vesting
period based on the annual dividend rate at the grant date. The performance unit
payout is contingent upon three-year performance criteria. The cost of this
program in 1998, 1997 and 1996 was not significant.
(8) COMMON, PREFERRED AND PREFERENCE STOCK:
(a) Common Stock -
During 1998, 1997 and 1996, IEC issued 890,035; 687,962 and 777,649 shares of
common stock under its various stock plans, respectively. Shares issued prior to
the Merger consummation by IES and IPC have been adjusted for the applicable
conversion ratios. In addition, 260,039 shares were issued in 1998 in connection
with the acquisition of oil and gas properties. At December 31, 1998, IEC had a
total of 4.0 million shares available for issuance pursuant to its Shareowner
Direct Plan, Long-Term Equity Incentive Plan and 401(k) Savings Plan. IEC has
declared a quarterly dividend of 50 cents per share each quarter since the
consummation of the Merger.
During 1998, 1997 and 1996, IEC reacquired 1,133 shares, 3,278 shares and 10,771
shares, respectively, of its common stock on the open market. Such shares were
reacquired by IES prior to the consummation of the Merger and have been adjusted
for the IES conversion ratio. These shares were subsequently issued to various
IEC directors and employees. At December 31, 1998, no shares remained held as
treasury stock.
In October 1998, the Board of Directors of IEC adopted a new Shareowner Rights
Plan (new plan) to replace IEC's former plan that expired on February 22, 1999.
The new plan was approved on January 15, 1999 by the SEC. On January 20, 1999,
the Board of Directors declared a dividend of one common share purchase right
(right) on each outstanding share of IEC's common stock which was issued on
February 22, 1999 to coincide with the expiration of the former plan. Rights
under the new plan will be exercisable only if a person or group acquires, or
announces a tender offer to acquire, 15% or more of IEC's common stock. Each
right will initially entitle shareowners to buy one-half of one share of IEC's
common stock. The rights will only be exercisable in multiples of two at an
initial price of $95.00 per full share, subject to adjustment. If any shareowner
acquires 15% or more of the outstanding common stock of IEC, each right (subject
to limitations) will entitle its holder to purchase, at the right's then current
exercise price, a number of common shares of IEC or of the acquirer having a
market value at the time of twice the right's per full share exercise price. The
Board of Directors is also authorized to reduce the 15% thresholds to not less
than 10%.
25
<PAGE>
In rate order UR-110, the PSCW ordered that it must approve the payment of
dividends by WP&L to IEC 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. The dividends paid by WP&L to
IEC since the rate order was issued have not exceeded the level forecasted in
the rate order.
(b) Preferred and Preference Stock -
In 1993, IPC issued 545,000 shares of 6.40%, $50 par value preferred stock with
a final redemption date of May 1, 2022. Under the provisions of the mandatory
sinking fund, beginning in 2003, IPC is required to redeem annually $1.4 million
of 6.40% preferred stock (27,250 shares).
(9) DEBT:
(a) Short-Term Debt
IEC maintains committed bank lines of credit, most of which are at the bank
prime rates, to obtain short-term borrowing flexibility, including pledging
lines of credit as security for any commercial paper outstanding. Amounts
available under these lines of credit totaled $150 million as of December 31,
1998. Commitment fees are paid to maintain these lines and there are no
conditions which restrict the unused lines of credit. Alliant Energy Resources
also maintains a credit agreement with various banking institutions. The
unborrowed portion of this agreement is also used to support Alliant Energy
Resources' commercial paper program. The amount available under this agreement
as of December 31, 1998, was $150 million. Information regarding short-term debt
and lines of credit is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
---------------- --------------- ---------------
As of year end--
<S> <C> <C> <C>
Commercial paper outstanding $64.5 $114.5 $198.2
Notes payable outstanding $51.8 $42.0 $68.3
Discount rates on commercial paper 5.10-6.55% 5.82-5.90% 5.35-6.05%
Interest rates on notes payable 5.44-7.00% 5.00-5.90% 5.28-6.59%
For the year ended--
Average amount of short-term debt
(based on daily outstanding balances) $126.6 $211.0 $207.9
Average interest rate on short-term debt 5.55% 5.61% 5.57%
</TABLE>
(b) Long-Term Debt
IESU's Indentures and Deeds of Trust securing its First Mortgage Bonds
constitute direct first mortgage liens upon substantially all tangible public
utility property. IESU's Indenture and Deed of Trust securing its Collateral
Trust Bonds constitutes a second lien on substantially all tangible public
utility property while First Mortgage Bonds remain outstanding. Substantially
all of WP&L's and IPC's utility plant is secured by its First Mortgage Bonds.
WP&L also maintains an unsecured indenture relating to the issuance of debt
securities. In addition, IEC's long-term debt includes unsecured debentures,
notes payable and revenue bonds related to its affordable housing properties.
Alliant Energy Resources 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 Energy
Resources' 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 December 31, 1998, Alliant Energy Resources had $253
million of commercial paper outstanding backed by this facility with interest
rates ranging from 5.15%-5.85%. (See Note 11(a) for a discussion of several
interest rate swaps Alliant Energy Resources has entered into relative to $200
million of short-term borrowings under, or backed by, this agreement). Alliant
Energy Resources intends to continue issuing commercial paper backed by this
facility and no conditions existed at December 31, 1998 that would prevent the
issuance of commercial paper or direct borrowings on its bank lines.
Accordingly, this debt is classified as long-term.
26
<PAGE>
Debt maturities (excluding periodic sinking fund requirements, which will not
require additional cash expenditures) for 1999 to 2003 are $318.1 million, $56.0
million, $84.7 million, $3.8 million and $9.3 million, respectively. 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.
Refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (MD&A) for a further discussion of IEC's debt.
(10) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
o Current Assets and Current Liabilities - The carrying amount approximates
fair value because of the short maturity of such financial instruments.
o Nuclear Decommissioning Trust Funds - The carrying amount represents the
fair value of these trust funds, as reported by the trustee. The balance of
the "Nuclear decommissioning trust funds" as shown on the Consolidated
Balance Sheets included $43.0 million and $35.7 million of net unrealized
gains at December 31, 1998 and December 31, 1997, respectively, on the
investments held in the trust funds. The accumulated reserve for
decommissioning costs was adjusted by a corresponding amount.
o Cumulative Preferred Stock - Based upon the market yield of similar
securities and quoted market prices.
o Long-Term Debt - Based upon the market yield of similar securities and
quoted market prices.
o Investment in McLeod - Pursuant to the provisions of SFAS 115, the carrying
value of the McLeod investment is adjusted to estimated fair value based on
the closing price at the end of the quarter.
o Investments in New Zealand - Fair value of the New Zealand investments are
generally based on quoted market prices.
The following table presents the carrying amount and estimated fair value of
certain financial instruments for IEC as of December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
--------------------------- ----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Nuclear decommissioning trust funds $ 226 $ 226 $ 190 $ 190
Cumulative preferred stock 113 109 113 105
Long-term debt, including current portion 1,664 1,753 1,543 1,600
Investment in McLeod (Note 5(a)) 320 320 328 328
Investments in New Zealand (Note 5(b)) 32 44 34 33
</TABLE>
Since IESU, WP&L and IPC are subject to regulation, any gains or losses related
to the difference between the carrying amount and the fair value of its
financial instruments may not be realized by IEC's shareowners.
(11) DERIVATIVE FINANCIAL INSTRUMENTS:
IEC, through its consolidated subsidiaries, 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.
(a) Interest Rate Swaps and Forward Contracts -
At December 31, 1998, Alliant Energy Resources had two interest rate swap
agreements outstanding (both expiring in April 2000 with the bank having a
1-year extension option for one of the agreements) each with a notional amount
of $100 million. WP&L also had two interest rate swap agreements outstanding
(both expiring in 2000) at December 31, 1998, and the combined notional amount
of the two agreements was $30 million. These agreements were entered into in
order to reduce the impact of changes in variable interest rates by converting
variable rate borrowings into fixed rate borrowings thus all agreements require
Alliant Energy Resources and WP&L to pay a fixed rate and receive a variable
rate. Had Alliant Energy Resources and WP&L terminated the agreements at
December 31, 1998, they would have had to make payments of $2.9 million and $0.3
million, respectively.
27
<PAGE>
On September 14, 1998, WP&L entered into an interest rate forward contract
related to the anticipated issuance of $60 million of debentures. The securities
were issued on October 30, 1998, and the forward contract was settled, which
resulted in a cash payment of $1.5 million by WP&L.
(b) Gas Commodities Instruments -
WP&L uses gas commodity swaps to reduce the impact of price fluctuations on gas
purchased and injected into storage during the summer months and withdrawn and
sold at current market prices during the winter months. The notional amount of
gas commodity swaps outstanding as of December 31, 1998, was 5.8 million
dekatherms. Had WP&L terminated all of the agreements existing at December 31,
1998, it would have realized an estimated gain of $0.8 million.
(c) Electricity Trading Joint Venture -
IEC has a 50% interest in an electricity trading joint venture with Cargill
Incorporated (Cargill) which is accounted for under the equity method of
accounting. The joint venture's trading activities principally consist of
marketing and trading over-the-counter contracts for the purchase and sale of
electricity. The majority of the forward contracts represent commitments to
purchase or sell electricity at fixed prices in the future and require
settlement by physical delivery of electricity or are netted out in accordance
with industry trading standards. The value-at-risk of the joint venture for its
forward contracts outstanding at December 31, 1998, was not significant.
(12) COMMITMENTS AND CONTINGENCIES:
(a) Construction and Acquisition Program -
Plans for IEC's construction and acquisition program can be found elsewhere in
this report in the "Liquidity and Capital Resources - Capital Requirements"
section of MD&A.
(b) Purchased-Power, Coal and Natural Gas Contracts
IEC has entered into purchased-power capacity and coal contracts and its minimum
commitments are as follows (dollars in millions, megawatt-hours (MWHs) and tons
in thousands):
Coal
(including transportation
Purchased-Power costs)
--------------------------- --------------------------------
Dollars MWHs Dollars Tons
----------- ------------ ------------- ---------------
1999 $ 104.0 1,691 $ 49.2 11,560
2000 102.4 1,571 24.6 4,457
2001 71.0 925 15.7 2,695
2002 43.5 280 5.4 1,036
2003 36.2 280 0.3 95
IEC is in the process of negotiating several new coal contracts. In addition, it
expects to supplement its coal contracts with spot market purchases to fulfill
its future fossil fuel needs.
IEC also has various natural gas supply, transportation and storage contracts
outstanding. The minimum dekatherm commitments, in millions, for 1999-2003 are
194.8, 162.8, 146.8, 122.3 and 95.1, respectively. The minimum dollar
commitments for 1999-2003, in millions, are $158.7, $95.9, $83.5, $58.8 and
$46.1, respectively. The gas supply commitments are all index-based. IEC expects
to supplement its natural gas supply with spot market purchases as needed.
(c) Information Technology Services -
In May 1998, IEC entered into an agreement, expiring in 2004, with Electronic
Data Systems Corporation (EDS) for information technology services. IEC's
anticipated operating and capital expenditures under the agreement for 1999 are
estimated to total approximately $21 million. Future costs under the agreement
are variable and are dependent upon IEC's level of usage of technological
services from EDS.
28
<PAGE>
(d) Financial Guarantees and Commitments
IEC has financial guarantees, which were generally issued to support third-party
borrowing arrangements and similar transactions, amounting to $18.1 million
outstanding at December 31, 1998. Such guarantees are not reflected in the
consolidated financial statements. Management believes that the likelihood of
IEC having to make any material cash payments under these agreements is remote.
In addition, as part of IEC's electricity trading joint venture with Cargill,
Cargill has made guarantees to certain counterparties regarding the performance
of contracts entered into by the joint venture. Guarantees of approximately $50
million have been issued of which approximately $5 million were outstanding at
December 31, 1998. Under the terms of the joint venture agreement, any payments
required under the guarantees would be shared by IEC and Cargill on a 50/50
basis to the extent the joint venture is not able to reimburse the guarantor for
payments made under the guarantee.
As of December 31, 1998, Alliant Energy Resources had extended commitments to
provide $7.2 million in nonrecourse, fixed rate, permanent financing to
developers which are secured by affordable housing properties. IEC anticipates
other lenders will ultimately finance these properties.
(e) Nuclear Insurance Programs-
Public liability for nuclear accidents is governed by the Price Anderson Act of
1988, which sets a statutory limit of $9.8 billion for liability to the public
for a single nuclear power plant incident and requires nuclear power plant
operators to provide financial protection for this amount. As required, IESU
provides this financial protection for a nuclear incident at DAEC through a
combination of liability insurance ($200 million) and industry-wide
retrospective payment plans ($9.6 billion). Under the industry-wide plan, each
operating licensed nuclear reactor in the United States is subject to an
assessment in the event of a nuclear incident at any nuclear plant in the United
States. The owners of DAEC could be assessed a maximum of $88.1 million per
nuclear incident, with a maximum of $10 million per incident per year (of which
IESU's 70 % ownership portion would be approximately $61.7 million and $7
million, respectively) if losses relating to the incident exceeded $200 million.
These limits are subject to adjustments for changes in the number of
participants and inflation in future years. On a similar note, WP&L, as a 41%
owner of Kewaunee, is subject to an overall assessment of approximately $36.1
million per incident, not to exceed $4.1 million payable in any given year.
IESU and WP&L are members of Nuclear Electric Insurance Limited (NEIL). NEIL
provides $1.9 billion of insurance coverage for IESU and $1.8 billion for WP&L
on certain property losses for property damage, decontamination and premature
decommissioning. The proceeds from such insurance, however, must first be used
for reactor stabilization and site decontamination before they can be used for
plant repair and premature decommissioning. NEIL also provides separate coverage
for additional expense incurred during certain outages. Owners of nuclear
generating stations insured through NEIL are subject to retroactive premium
adjustments if losses exceed accumulated reserve funds. NEIL's accumulated
reserve funds are currently sufficient to more than cover its exposure in the
event of a single incident under the primary and excess property damage or
additional expense coverages. However, IESU could be assessed annually a maximum
of $1.9 million for NEIL primary property, $3.5 million for NEIL excess property
and $0.7 million for NEIL additional expenses if losses exceed the accumulated
reserve funds. WP&L could be assessed annually a maximum of $1.1 million for
NEIL primary property, $2.0 million for NEIL excess property and $0.6 million
for NEIL additional expense coverage. IESU and WP&L are not aware of any losses
that they believe are likely to result in an assessment.
In the unlikely event of a catastrophic loss at Kewaunee or DAEC, the amount of
insurance available may not be adequate to cover property damage,
decontamination and premature decommissioning. Uninsured losses, to the extent
not recovered through rates, would be borne by IEC and could have a material
adverse effect on IEC's financial position and results of operations.
(f) Environmental Liabilities -
IEC has recorded environmental liabilities of approximately $78.4 million on its
Consolidated Balance Sheets at December 31, 1998. IEC's significant
environmental liabilities are discussed below.
29
<PAGE>
Manufactured Gas Plant Sites
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:
<TABLE>
<CAPTION>
IESU WP&L IPC
<S> <C> <C> <C>
Number of known sites for which liability may exist 34 14 9
Liability recorded at December 31, 1998 (millions) $26.6 $7.7 $17.5
Regulatory asset recorded at December 31, 1998 (millions) $26.6 $14.1 $17.5
</TABLE>
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 records environmental liabilities based upon periodic studies, most
recently updated in the fourth quarter of 1998, 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. It is possible that future cost estimates will be greater
than current estimates as the investigation process proceeds and as additional
facts become known. The amounts recognized as liabilities are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their fair value.
Management currently estimates the range of remaining costs to be incurred for
the investigation, remediation and monitoring of all IEC sites to be
approximately $35 million to $66 million. IESU, WP&L and IPC currently estimate
their share of the remaining costs to be incurred to be approximately $17
million to $36 million, $5 million to $9 million and $13 million to $21 million,
respectively.
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, IESU, WP&L and IPC believe
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 its carriers and all issues 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 but is unable to predict the amount of any
additional recoveries they may realize. 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 all of its carriers.
30
<PAGE>
National Energy Policy Act of 1992
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 December 31, 1998 was $7.8 million
and has been recorded as a liability with a related regulatory asset for the
unrecovered amount. WP&L had a regulatory asset and a liability of $5.4 million
and $4.6 million recorded at December 31, 1998, respectively. IEC continues to
pursue relief from this assessment through litigation.
Oil and Gas Properties Dismantlement and Abandonment Costs
Whiting 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 $13 million and the most significant expenditures are not expected
to be incurred until 2004. In accordance with applicable accounting
requirements, Whiting has accrued these costs resulting in a recorded liability
of $13 million at December 31, 1998.
(g) Spent Nuclear Fuel -
The Nuclear Waste Policy Act of 1982 assigned responsibility to the U.S.
Department of Energy (DOE) to establish a facility for the ultimate disposition
of high level waste and spent nuclear fuel and authorized the DOE to enter into
contracts with parties for the disposal of such material beginning in January
1998. 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, the 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. IEC has participated in several litigation proceedings against the
DOE on this issue and the respective courts have affirmed the DOE's
responsibility for spent nuclear fuel acceptance. IEC is evaluating its options
for recovery of damages due to the DOE's delay in accepting spent nuclear fuel.
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. To provide assurance that both the operating and
post-shutdown storage needs are satisfied, construction of a dry cask modular
facility is being contemplated. With minor modifications, Kewaunee would have
sufficient fuel storage capacity to store all of the fuel it will generate
through the end of the license life in 2013. No decisions have been made
concerning post-shutdown storage needs. Legislation is being considered on the
federal level that would, among other provisions, expand the DOE's permanent
spent nuclear fuel storage to include interim storage for spent nuclear fuel as
early as 2002. This legislation has been submitted in the U.S. House. The
prospects for passage by the U.S. Congress, and subsequent successful
implementation by the DOE, are uncertain at this time.
(h) Decommissioning of DAEC and Kewaunee -
Pursuant to the most recent electric rate case order, the IUB and PSCW allow
IESU and WP&L to recover $6 million and $16 million annually for their share of
the cost to decommission DAEC and Kewaunee, respectively. Decommissioning
expense is included in "Depreciation and amortization" in the Consolidated
Statements of Income and the cumulative amount is included in "Accumulated
depreciation" on the Consolidated Balance Sheets to the extent recovered through
rates.
31
<PAGE>
Additional information relating to the decommissioning of DAEC and Kewaunee
includes (dollars in millions):
<TABLE>
<CAPTION>
DAEC Kewaunee
------------------------- --------------------------
Assumptions relating to current rate recovery figures:
<S> <C> <C>
IEC's share of estimated decommissioning cost $252.8 $189.7
Year dollars in 1993 1998
Method to develop estimate NRC minimum formula Site-specific study
Annual inflation rate 4.91% 5.83%
Decommissioning method Prompt dismantling and Prompt dismantling and
removal removal
Year decommissioning to commence 2014 2013
Average after-tax return on external investments 6.82% 6.21%
External trust fund balance at December 31, 1998 $91.7 $134.1
Internal reserve at December 31, 1998 $21.7 -
After-tax earnings on external trust funds in 1998 $2.7 $5.2
</TABLE>
The rate recovery figures for DAEC only included an inflation estimate through
1997. Both IESU and WP&L are funding all rate recoveries for decommissioning
into external trust funds and funding on a tax-qualified basis to the extent
possible. All of the rate recovery assumptions are subject to change in future
regulatory proceedings. In accordance with their respective regulatory
requirements, IESU and WP&L record the earnings on the external trust funds as
interest income with a corresponding entry to interest expense at IESU and to
depreciation expense at WP&L. The earnings accumulate in the external trust fund
balances and in accumulated depreciation on utility plant.
IESU's 70% share of the estimated cost to decommission DAEC based on the most
recent site-specific study completed in 1998 is $334.2 million, in 1998 dollars.
This study includes the costs to terminate DAEC's NRC license and to return the
site to a greenfield condition. IESU's 70% share of the estimated cost to
decommission DAEC based on the most recent NRC minimum formula is $347.0 in 1997
dollars. The NRC minimum formula is intended to apply only to the cost of
terminating DAEC's NRC license. The additional decommissioning expense funding
requirements which should result from these updated studies are not reflected in
IESU's rates.
(i) Legal Proceedings -
IEC is involved in legal and administrative proceedings before various courts
and agencies with respect to matters arising in the ordinary course of business.
Although unable to predict the outcome of these matters, IEC believes that
appropriate reserves have been established and final disposition of these
actions will not have a material adverse effect on its financial position or
results of operations.
(13) JOINTLY-OWNED ELECTRIC UTILITY PLANT:
Under joint ownership agreements with other Iowa and Wisconsin utilities, IESU,
WP&L and IPC have undivided ownership interests in jointly-owned electric
generating stations and related transmission facilities. Each of the respective
owners is responsible for the financing of its portion of the construction
costs. Kilowatt-hour generation and operating expenses are divided on the same
basis as ownership with each owner reflecting its respective costs in its
Consolidated Statements of Income. Information relative to IESU's, WP&L's and
IPC's ownership interest in these facilities at December 31, 1998 is as follows
(dollars in millions):
32
<PAGE>
<TABLE>
<CAPTION>
1998 1997
--------- ------------- -------- -------- ------------- -------
Accumulated Accumulated
In-service Plant Provision Plant Provision
Ownership Date MW Plant in for in for
Interest % Capacity Service Depreciation CWIP Service Depreciation CWIP
- -------------------- ----------- --------- --------- -- --------- ------------- -------- -- -------- ------------- -------
IESU
Coal:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ottumwa Unit 1 48.0 1981 716 $193.1 $102.7 $0.8 $191.6 $96.6 $ -
Neal Unit 3 28.0 1975 515 59.0 32.4 0.1 60.8 30.6 0.1
Nuclear:
DAEC 70.0 1974 520 507.1 247.2 1.4 500.6 230.8 2.8
--------- ------------- -------- -------- ------------- -------
Total IESU $759.2 $382.3 $2.3 $753.0 $358.0 $2.9
WP&L
Coal:
Columbia Energy 1975 &
Center 46.2 1978 1,023 $161.5 $93.8 $1.4 $161.4 $89.2 $0.8
Edgewater Unit 4 68.2 1969 330 52.4 30.8 0.4 51.5 29.5 1.0
Edgewater Unit 5 75.0 1985 380 229.0 85.9 0.2 229.4 79.8 0.1
Nuclear:
Kewaunee Nuclear
Power Plant 41.0 1974 535 132.2 93.7 6.4 132.0 86.6 0.3
--------- ------------- ------- --------- ------------ -------
Total WP&L $575.1 $304.2 $8.4 $574.3 $285.1 $2.2
IPC
Coal:
Neal Unit 4 21.5 1979 640 $82.1 $48.4 $1.5 $82.2 $45.8 $ -
Louisa Unit 1 4.0 1983 738 24.7 11.7 - 24.7 10.9 -
--------- ------------- ------- --------- ------------ -------
Total IPC $106.8 $60.1 $1.5 $106.9 $56.7 $ -
--------- ------------- ------- --------- ------------ -------
Total IEC $1,441.1 $746.6 $12.2 $1,434.2 $699.8 $5.1
========= ============= ======= ========= ============ =======
</TABLE>
(14) SEGMENTS OF BUSINESS:
In 1998, IEC adopted SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information." IEC's principal business segments are:
o Regulated domestic utilities - consists of IEC's three regulated utility
operating companies (IESU, WP&L, and IPC) serving customers in Iowa,
Wisconsin, Minnesota and Illinois. The regulated domestic utility business
is broken down into three segments which are: 1) electric operations; 2)
gas operations; and 3) other, which includes the water and steam businesses
as well as the unallocated portions of the utility business.
o Nonregulated businesses - represents the operations of Alliant Energy
Resources and its subsidiaries. This includes the company's domestic and
international energy products and services businesses; industrial services,
which includes environmental, engineering and transportation services;
investments in affordable housing initiatives; and investments in various
other strategic initiatives.
o Other - includes the operations of IEC's parent company and Alliant Energy
Corporate Services, as well as any reconciling/eliminating entries.
Intersegment revenues were not material to IEC's operations and there was no
single customer whose revenues exceeded 10% or more of IEC's consolidated
revenues. Refer to Note 5(b) for a breakdown of IEC's international investments
by country.
33
<PAGE>
Certain financial information relating to IEC's significant business segments
and products and services is presented below:
<TABLE>
<CAPTION>
Regulated Domestic Utilities
----------------------------------------------- Nonregulated IEC
Electric Gas Other Total Businesses Other Consolidated
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1998
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $1,567,442 $295,590 $31,235 $1,894,267 $238,676 ($2,069) $2,130,874
Depreciation and
amortization expense 219,364 23,683 2,623 245,670 33,835 - 279,505
Operating income (loss) 271,511 16,027 5,598 293,136 (8,608) (1,226) 283,302
Interest expense, net 96,951 96,951 23,298 2,302 122,551
Preferred and preference 6,699 6,699 - - 6,699
dividends
Net (income) loss from equity (858) (858) 2,197 - 1,339
method subsidiaries
Miscellaneous, net (other than
equity income/loss) 3,545 3,545 (7,973) 2,353 (2,075)
Income tax expense (benefit) 77,257 77,257 (17,232) (1,912) 58,113
Net income (loss) 109,542 109,542 (8,898) (3,969) 96,675
Total assets 3,202,837 458,832 469,822 4,131,491 869,261 (41,415) 4,959,337
Investments in equity method
subsidiaries 5,189 5,189 49,446 - 54,635
Construction and acquisition
expenditures 233,638 33,200 2,295 269,133 102,925 - 372,058
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1997
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $1,515,753 $393,907 $30,882 $1,940,542 $361,961 ($1,876) $2,300,627
Depreciation and amortization
expense 201,742 21,553 2,432 225,727 33,936 - 259,663
Operating income (loss) 316,880 29,330 2,169 348,379 (6,818) (5,178) 336,383
Interest expense, net 95,734 95,734 23,197 (1,642) 117,289
Preferred and preference
dividends 6,693 6,693 - - 6,693
Net (income) loss from equity
method subsidiaries (32) (32) 849 - 817
Miscellaneous, net (other than
equity income/loss) (8,257) (8,257) (8,282) 1,812 (14,727)
Income tax expense (benefit) 101,739 101,739 (18,616) (1,390) 81,733
Net income (loss) 152,502 152,502 (3,966) (3,958) 144,578
Total assets 3,142,910 448,845 485,225 4,076,980 838,504 8,066 4,923,550
Investments in equity method
subsidiaries 5,694 5,694 39,175 - 44,869
Construction and acquisition
expenditures 217,023 33,984 5,753 256,760 71,280 - 328,040
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Regulated Domestic Utilities
----------------------------------------------- Nonregulated IEC
Electric Gas Other Total Businesses Other Consolidated
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1996
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $1,440,375 $375,955 $24,008 $1,840,338 $393,963 ($1,461) $2,232,840
Depreciation and amortization
expense 180,989 18,124 1,891 201,004 31,359 - 232,363
Operating income (loss) 326,370 40,521 7,001 373,892 (6,666) (1,787) 365,439
Interest expense, net 86,084 86,084 17,859 3,804 107,747
Preferred and preference
dividends 6,687 6,687 - - 6,687
Net (income) loss from equity
method subsidiaries (372) (372) 18 - (354)
Miscellaneous, net (other than
equity income/loss) (1,390) (1,390) (9,968) (131) (11,489)
Income tax expense (benefit) 115,033 115,033 (12,724) 3,451 105,760
Net income (loss) from
continuing operations 167,850 167,850 (1,851) (8,911) 157,088
Discontinued operations - - (1,297) - (1,297)
Net income (loss) 167,850 167,850 (3,148) (8,911) 155,791
Total assets 3,122,761 511,110 452,885 4,086,756 546,690 6,380 4,639,826
Investments in equity method
subsidiaries 6,110 6,110 11,163 - 17,273
Construction and acquisition
expenditures 247,323 34,738 15,135 297,196 115,078 - 412,274
<CAPTION>
Products and Services
- ---------------------
Revenues
----------------------------------------------------------------------------------------------------------------------
Regulated Domestic Utilities Nonregulated Businesses
------------------------------------ ---------------------------------------------------------------------------------
Environmental Total
Transportation,
and Engineering Oil and Nonregulated Rents and Nonregulated
Gas
Year Electric Gas Other Services Production Energy Other Businesses
- -------------------------------------------- ---------------------------------------------------------------------------------
(in thousands)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $1,567,442 $295,590 $31,235 $72,616 $64,622 $40,536 $60,902 $238,676
1997 1,515,753 393,907 30,882 78,105 68,922 151,128 63,806 361,961
1996 1,440,375 375,955 24,008 84,859 65,724 192,217 51,163 393,963
</TABLE>
(15) DISCONTINUED OPERATIONS:
IEC's financial statements reflect the discontinuance of operations of its
utility energy and marketing consulting business in 1995. During 1996, IEC
recognized a loss of $1.3 million, net of applicable income tax benefit,
associated with the final disposition of the business.
35
<PAGE>
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited):
<TABLE>
<CAPTION>
Quarter Ended *
------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ---------------- ------------------ -----------------
(in thousands, except per share data)
1998**
- ------
<S> <C> <C> <C> <C>
Operating revenues $556,283 $491,012 $555,313 $528,266
Operating income 73,880 32,627 122,196 54,599
Net income (loss) 28,875 (9,098) 51,704 25,194
Earnings per average common
share (basic and diluted) 0.38 (0.12) 0.67 0.33
1997
- ----
Operating revenues $663,650 $493,842 $556,858 $586,277
Operating income 92,319 56,987 120,297 66,780
Net income 40,688 19,799 54,969 29,122
Earnings per average common
share (basic and diluted) 0.54 0.26 0.72 0.38
* Financial results have been restated for all quarters presented with the
exception of the third and fourth quarter of 1998 to reflect a change in
accounting method for IEC's oil and gas properties implemented in the third
quarter of 1998 from the full cost method to the successful efforts method. See
Note 1(i) for additional information.
**Net income for 1998 was impacted by the recording of approximately $10
million, $35 million, $6 million and $3 million of pre-tax merger-related
expenses in the first, second, third and fourth quarters, respectively.
</TABLE>
(17) SUBSEQUENT EVENT:
At the Annual Shareowners meeting on May 19, 1999, the shareowners approved a
proposal to change the name of the corporation from Interstate Energy
Corporation to Alliant Energy Corporation. The name change was effective May 20,
1999.
36
<PAGE>
IES UTILITIES INC.
FINANCIAL SECTION
37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of IES Utilities Inc.:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of IES Utilities Inc. (an Iowa corporation) and subsidiaries as
of December 31, 1998 and 1997, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements and the supplemental
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
supplemental schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IES Utilities Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14(a)(2) is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 29, 1999
38
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
<S> <C> <C> <C>
Electric utility $ 639,423 $ 604,270 $ 574,273
Gas utility 141,279 183,517 160,864
Steam and other 26,228 26,191 19,842
---------------- ---------------- ----------------
806,930 813,978 754,979
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 113,181 108,344 84,579
Purchased power 71,637 74,098 88,350
Cost of gas sold 84,642 126,631 103,877
Other operation 187,932 161,418 148,051
Maintenance 52,040 53,833 45,869
Depreciation and amortization 93,965 89,754 84,975
Taxes other than income taxes 48,537 46,130 43,603
---------------- ---------------- ----------------
651,934 660,208 599,304
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Operating income 154,996 153,770 155,675
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 52,354 52,791 43,714
Allowance for funds used during construction (3,351) (2,309) (2,103)
Miscellaneous, net 2,589 2,279 7,243
---------------- ---------------- ----------------
51,592 52,761 48,854
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Income before income taxes 103,404 101,009 106,821
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Income taxes 41,494 42,216 43,092
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Net income 61,910 58,793 63,729
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Preferred dividend requirements 914 914 914
---------------- ---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Earnings available for common stock $ 60,996 $ 57,879 $ 62,815
================ ================ ================
- --------------------------------------------------------------------------------------------------------
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 233,216 $ 231,337 $ 212,522
Net income 61,910 58,793 63,729
Cash dividends declared on common stock (18,840) (56,000) (44,000)
Cash dividends declared on preferred stock (914) (914) (914)
---------------- ---------------- ----------------
Balance at end of year $ 275,372 $ 233,216 $ 231,337
================ ================ ================
- --------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1998 1997
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Property, plant and equipment:
Utility -
Plant in service -
Electric $ 2,140,322 $2,072,866
Gas 198,488 187,098
Steam 55,797 55,374
Common 106,940 90,342
----------------- -----------------
2,501,547 2,405,680
Less - Accumulated depreciation 1,209,204 1,115,261
----------------- -----------------
1,292,343 1,290,419
Construction work in progress 48,991 38,923
Leased nuclear fuel, net of amortization 25,644 36,731
----------------- -----------------
1,366,978 1,366,073
Other property, plant and equipment, net of accumulated
depreciation and amortization of $1,948 and $1,709, respectively 5,623 5,762
----------------- -----------------
1,372,601 1,371,835
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 4,175 230
Temporary cash investments with associated companies 53,729 -
Accounts receivable:
Customer, less allowance for doubtful accounts
of $1,058 and $630, respectively 16,703 29,259
Associated companies 2,662 907
Other, less allowance for doubtful accounts
of $357 and $224, respectively 10,346 9,235
Production fuel, at average cost 11,863 10,579
Materials and supplies, at average cost 25,591 22,976
Gas stored underground, at average cost 12,284 17,192
Regulatory assets 23,487 36,330
Prepayments and other 4,185 11,680
----------------- -----------------
165,025 138,388
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 91,691 77,882
Other 6,019 5,167
----------------- -----------------
97,710 83,049
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 137,908 163,264
Deferred charges and other 15,734 12,393
----------------- -----------------
153,642 175,657
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
$ 1,788,978 $1,768,929
================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31,
CAPITALIZATION AND LIABILITIES 1998 1997
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
<S> <C> <C>
Common stock $ 33,427 $ 33,427
Additional paid-in capital 279,042 279,042
Retained earnings 275,372 233,216
------------------ -----------------
Total common equity 587,841 545,685
Cumulative preferred stock, not mandatorily redeemable 18,320 18,320
Long-term debt (excluding current portion) 602,020 651,848
------------------ -----------------
1,208,181 1,215,853
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 50,140 140
Capital lease obligations 11,965 13,183
Accounts payable 43,953 60,546
Accounts payable to associated companies 22,487 2,736
Accrued payroll and vacations 6,365 7,615
Accrued interest 12,045 12,230
Accrued taxes 55,295 58,996
Accumulated refueling outage provision 6,605 10,606
Environmental liabilities 5,660 4,054
Other 17,617 11,533
------------------ -----------------
232,132 181,639
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 224,510 238,829
Accumulated deferred investment tax credits 29,243 31,838
Environmental liabilities 29,195 38,256
Pension and other benefit obligations 25,655 17,334
Capital lease obligations 13,679 23,548
Other 26,383 21,632
------------------ -----------------
348,665 371,437
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 12)
- --------------------------------------------------------------------------------------------------------------------
$ 1,788,978 $ 1,768,929
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 61,910 $ 58,793 $ 63,729
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 93,965 89,754 84,975
Amortization of leased nuclear fuel 12,513 14,774 16,491
Amortization of deferred energy efficiency expenditures 18,707 10,987 5,453
Deferred taxes and investment tax credits (17,921) (16,059) 7,763
Refueling outage provision (4,001) 9,290 (6,374)
Impairment of regulatory assets 8,969 - -
Other (346) 3,952 4,602
Other changes in assets and liabilities:
Accounts receivable 9,690 (5,670) (6,200)
Production fuel (1,284) 2,743 (1,168)
Materials and supplies (2,615) (1,261) 4,811
Gas stored underground 4,908 (3,740) (551)
Accounts payable 3,158 (11,198) 12,147
Accrued taxes (3,701) 18,043 (9,416)
Adjustment clause balances 8,829 5,354 (13,900)
Benefit obligations and other 13,332 14,538 8,293
----------------- ----------------- -----------------
Net cash flows from operating activities 206,113 190,300 170,655
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends declared (18,840) (56,000) (44,000)
Dividends payable 4,840 - -
Preferred stock dividends (914) (914) (914)
Proceeds from issuance of long-term debt 10,000 190,000 60,000
Reductions in long-term debt (10,140) (63,140) (15,140)
Net change in short-term borrowings - (135,000) 25,112
Principal payments under capital lease obligations (13,250) (12,964) (19,108)
Other (137) (871) (420)
----------------- ----------------- -----------------
Net cash flows from (used for) financing activities (28,441) (78,889) 5,530
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction expenditures (115,371) (108,966) (143,648)
Deferred energy efficiency expenditures - (8,450) (16,857)
Nuclear decommissioning trust funds (6,008) (6,008) (6,008)
Other 1,381 635 (798)
----------------- ----------------- -----------------
Net cash flows used for investing activities (119,998) (122,789) (167,311)
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 57,674 (11,378) 8,874
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 230 11,608 2,734
----------------- ----------------- -----------------
- ------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 57,904 $ 230 $ 11,608
================= ================= =================
- ------------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information: Cash paid during
the period for:
Interest $ 50,177 $ 46,377 $ 44,275
================= ================= =================
Income taxes $ 41,017 $ 41,422 $ 45,383
================= ================= =================
Noncash investing and financing activities -
Capital lease obligations incurred $ 1,426 $ 16,781 $ 14,281
================= ================= =================
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
IES UTILITIES INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Common equity:
Common stock - $2.50 par value - authorized 24,000,000 shares;
<S> <C> <C>
13,370,788 shares outstanding $ 33,427 $ 33,427
Additional paid-in capital 279,042 279,042
Retained earnings 275,372 233,216
------------------ ------------------
587,841 545,685
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, par value $50 per share, not mandatorily redeemable - authorized
466,406 shares; 366,406 shares outstanding:
6.10% series, 100,000 shares outstanding 5,000 5,000
4.80% series, 146,406 shares outstanding 7,320 7,320
4.30% series, 120,000 shares outstanding 6,000 6,000
------------------ ------------------
18,320 18,320
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt:
Collateral Trust Bonds:
7.65% series, due 2000 50,000 50,000
7.25% series, due 2006 60,000 60,000
6-7/8% series, due 2007 55,000 55,000
6% series, due 2008 50,000 50,000
7% series, due 2023 50,000 50,000
5.5% series, due 2023 19,400 19,400
------------------ ------------------
284,400 284,400
First Mortgage Bonds:
Series Y, 8-5/8%, due 2001 60,000 60,000
Series Z, 7.6%, due 1999 50,000 50,000
9-1/8% series, due 2001 21,000 21,000
7-1/4% series, due 2007 30,000 30,000
------------------ ------------------
161,000 161,000
Pollution control obligations:
5.75%, due serially 1999 to 2003 3,136 3,276
5.95%, retired in 1998 - 10,000
Variable rate (4.20% at December 31, 1998), due 2000 to 2010 11,100 11,100
Variable/fixed rate series 1998 (4.25% through 2003), due 2023 10,000 -
------------------ ------------------
24,236 24,376
Subordinated Deferrable Interest Debentures, 7-7/8%, due 2025 50,000 50,000
Senior Debentures, 6-5/8%, due 2009 135,000 135,000
------------------ ------------------
654,636 654,776
------------------ ------------------
Less:
Current maturities (50,140) (140)
Unamortized debt premium and (discount), net (2,476) (2,788)
------------------ ------------------
602,020 651,848
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
$ 1,208,181 $ 1,215,853
================== ==================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
43
<PAGE>
IES UTILITIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Interstate Energy Corporation (IEC) Notes to
Consolidated Financial Statements are incorporated by reference insofar as they
relate to IES Utilities Inc. (IESU). IEC Notes 1(e), 1(i), 1(n), 5, 8, 11 and 15
do not relate to IESU and, therefore, are not incorporated by reference.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) General -
The Consolidated Financial Statements include the accounts of IESU and its
consolidated subsidiaries. IESU is a subsidiary of IEC. IEC is currently doing
business as Alliant Energy Corporation. IESU is engaged principally in the
generation, transmission, distribution and sale of electric energy; the
purchase, distribution, transportation and sale of natural gas; and steam
services. All of IESU's retail customers are located in Iowa. IESU's principal
consolidated subsidiary is IES Ventures Inc.
(o) Comprehensive Income -
IESU had no other comprehensive income in the periods presented.
(3) LEASES:
IESU's operating lease rental expenses for 1998, 1997 and 1996 were $9.0
million, $8.3 million and $9.0 million, respectively. IESU's future minimum
lease payments by year are as follows (in thousands):
Capital Operating
Year Leases Leases
------------------------------------ --------------- ----------------
1999 $ 12,278 $ 9,053
2000 8,037 7,750
2001 4,324 4,852
2002 2,660 2,511
2003 547 1,868
Thereafter 108 2,325
--------------- ----------------
27,954 $ 28,359
================
Less: Amount representing interest 2,310
Present value of net minimum ---------------
capital lease payments $ 25,644
===============
(6) INCOME TAXES:
The components of federal and state income taxes for IESU for the years ended
December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
---------------- -------------- ---------------
<S> <C> <C> <C>
Current tax expense $ 59.4 $ 58.3 $ 35.3
Deferred tax expense (15.3) (13.5) 10.4
Amortization of investment tax credits (2.6) (2.6) (2.6)
---------------- -------------- ---------------
$ 41.5 $ 42.2 $ 43.1
================ ============== ===============
</TABLE>
44
<PAGE>
The overall effective income tax rates shown below for the years ended December
31 were computed by dividing total income tax expense by income before income
taxes.
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 6.6 7.0 6.9
Effect of ratemaking on property related differences 1.5 3.5 2.9
Amortization of investment tax credits (2.5) (2.6) (2.5)
Adjustment of prior period taxes (1.4) (1.4) (3.3)
Other items, net 0.9 0.3 1.3
------------- ------------- ------------
Overall effective income tax rate 40.1% 41.8% 40.3%
============= ============= ============
</TABLE>
The accumulated deferred income taxes (assets) and liabilities as set forth
below on the Consolidated Balance Sheets at December 31 arise from the following
temporary differences (in millions):
1998 1997
--------------- --------------
Property related $ 275.7 $ 269.9
Investment tax credit related (20.8) (22.7)
Decommissioning related (15.9) (15.7)
Other (14.5) 7.3
--------------- --------------
$ 224.5 $ 238.8
=============== ==============
(7) BENEFIT PLANS:
(a) Pension Plans and Other Postretirement Benefits
IESU adopted Statement of Financial Accounting Standards (SFAS) 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" in 1998. IESU has
a non-contributory defined benefit pension plan that covers substantially all of
its employees who are subject to a collective bargaining agreement. Plan
benefits are generally based on years of service and compensation during the
employees' latter years of employment. Effective in 1998, eligible employees of
IESU that are not subject to a collective bargaining agreement are covered by
the Alliant Energy Cash Balance Pension Plan, a non-contributory defined benefit
pension plan. The projected unit credit actuarial cost method was used to
compute pension cost and the accumulated and projected benefit obligations.
IESU's policy is to fund the pension plan at an amount that is at least equal to
the minimum funding requirements mandated by the Employee Retirement Income
Security Act of 1974 (ERISA) and that does not exceed the maximum tax deductible
amount for the year.
IESU also provides certain other postretirement benefits to retirees, including
medical benefits for retirees and their spouses (and Medicare Part B
reimbursement for certain retirees) and, in some cases, retiree life insurance.
IESU's funding of other postretirement benefits generally approximates the
annual rate recovery of such costs.
The weighted-average assumptions as of the measurement date of September 30 are
as follows:
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------ ---------------------------------------
1998 1997 1996 1998 1997 1996
----------- ------------------------ ----------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 4.75% 4.75% N/A N/A N/A
Medical cost trend on covered charges:
Initial trend range N/A N/A N/A 8% 8% 9%
Ultimate trend range N/A N/A N/A 6.0% 6.5% 6.5%
</TABLE>
45
<PAGE>
The components of IESU's qualified pension benefits and other postretirement
benefits costs are as follows (in millions):
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2.9 $ 5.4 $ 5.4 $ 1.5 $ 1.5 $ 1.7
Interest cost 8.0 14.1 12.4 4.2 3.5 3.6
Expected return on plan assets (11.3) (15.1) (14.6) (1.1) (0.7) (0.4)
Amortization of:
Transition obligation (asset) (0.2) (0.3) (0.3) 1.9 1.9 2.0
Prior service cost 0.9 1.8 1.3 - - -
Actuarial gain (0.4) - (0.1) - - -
---------- ---------- --------- -------- -------- ---------
Total $ (0.1) $ 5.9 $ 4.1 $ 6.5 $ 6.2 $ 6.9
========== ========== ========= ======== ======== =========
</TABLE>
During 1997 and 1996, IESU recognized an additional $3.8 million and $4.5
million, respectively, of costs in accordance with SFAS 88. The charges were for
severance and early retirement programs in the respective years. In addition,
during 1998, IESU recognized $1.2 million of curtailment charges relating to
IESU's other postretirement benefits. The amounts include a December 1998 early
retirement program.
The pension benefit cost shown above (and in the following tables) for 1998
represents only the pension benefit cost for bargaining unit employees of IESU
covered under the bargaining unit pension plan that is sponsored by IESU. The
pension benefit cost for IESU's non-bargaining employees who are now
participants in other IEC plans was $2.7 million for 1998, including a special
charge of $1.9 million for severance and early retirement window programs. In
addition, Alliant Energy Corporate Services, Inc. (Alliant Energy Corporate
Services) provides services to IESU. The allocated pension benefit costs
associated with these services was $0.5 million for 1998. The other
postretirement benefit cost shown above for each period (and in the following
tables) represents the other postretirement benefit cost for all IESU employees.
The allocated other postretirement benefit cost associated with Alliant Energy
Corporate Services for IESU was $0.2 million for 1998.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 1998, holding all other assumptions constant, would have the
following effects (in millions):
<TABLE>
<CAPTION>
1 Percent 1 Percent
Increase Decrease
--------------- ---------------
<S> <C> <C>
Effect on total of service and interest cost components $1.2 ($0.9)
Effect on postretirement benefit obligation $9.2 ($7.4)
</TABLE>
46
<PAGE>
A reconciliation of the funded status of IESU's plans to the amounts recognized
on IESU's Consolidated Balance Sheets at December 31 is presented below (in
millions):
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
----------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------- -------------
Change in benefit obligation:
<S> <C> <C> <C> <C>
Net benefit obligation at beginning of year $ 206.1 $ 179.4 $ 50.8 $ 48.0
Transfer of obligation (to)/from other IEC plans (99.1) - 2.3 -
Service cost 2.9 5.4 1.5 1.5
Interest cost 8.0 14.1 4.2 3.5
Plan participants' contributions - - 0.4 0.3
Plan amendments - 7.4 - -
Actuarial (gain) / loss 2.2 6.2 8.2 -
Curtailments - 2.5 0.4 -
Special termination benefits - 3.8 - -
Gross benefits paid (7.0) (12.7) (2.6) (2.5)
------------ ------------ ------------- -------------
Net benefit obligation at end of year 113.1 206.1 65.2 50.8
------------ ------------ ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year 225.7 205.7 19.9 12.3
Transfer of assets to other IEC plans (97.5) - - -
Actual return on plan assets (2.5) 32.7 0.1 2.4
Employer contributions - - 2.7 7.4
Plan participants' contributions - - 0.4 0.3
401(h) assets recognized - - 1.2 -
Gross benefits paid (7.0) (12.7) (2.6) (2.5)
------------ ------------ ------------- -------------
Fair value of plan assets at end of year 118.7 225.7 21.7 19.9
------------ ------------ ------------- -------------
Funded status at end of year 5.6 19.6 (43.5) (30.9)
Unrecognized net actuarial (gain) / loss (7.3) (41.7) 5.7 (4.3)
Unrecognized prior service cost 9.8 20.1 (0.3) -
Unrecognized net transition obligation (asset) (1.6) (2.6) 25.9 29.1
------------ ------------ ------------- -------------
Net amount recognized at end of year $ 6.5 $ (4.6) $ (12.2) $ (6.1)
============ ============ ============= =============
Amounts recognized on the Consolidated Balance
Sheets consist of:
Prepaid benefit cost $ 6.5 $ - $ - $ -
Accrued benefit cost - (4.6) (12.2) (6.1)
------------ ------------ ------------- -------------
Net amount recognized at measurement date 6.5 (4.6) (12.2) (6.1)
------------ ------------ ------------- -------------
Contributions paid after 9/30 and prior to 12/31 - - 3.6 -
------------ ------------ ------------- -------------
Net amount recognized at 12/31/98 $ 6.5 $ (4.6) $ (8.6) $ (6.1)
============ ============ ============= =============
</TABLE>
IEC sponsors a non-qualified pension plan which covers certain current and
former officers. The pension expense allocated to IESU for this plan was $1.4
million, $2.3 million and $0.8 million in 1998, 1997 and 1996, respectively.
IESU employees also participate in defined contribution pension plans (401(k)
plans) covering substantially all employees. IESU's contributions to the plans,
which are based on the participants' level of contribution, were $2.8 million,
$1.2 million and $1.5 million in 1998, 1997 and 1996, respectively.
47
<PAGE>
(9) DEBT:
(a) Short-Term Debt -
Information regarding short-term debt is as follows (dollars in millions):
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
As of end of year -
<S> <C> <C> <C>
Commercial paper outstanding - - $ 110.0
Notes payable outstanding - - $ 25.0
Discount rates on commercial paper N/A N/A 5.37-6.05%
Interest rates on notes payable N/A N/A 6.20-6.59%
For the year ended -
Average amount of short-term debt
(based on daily outstanding balances) - $ 88.4 $ 120.1
Average interest rate on short-term debt N/A 5.58% 5.52%
</TABLE>
(b) Long-Term Debt -
Debt maturities (excluding periodic sinking fund requirements, which will not
require additional cash expenditures) for 1999 to 2003 are $50.1 million, $51.2
million, $81.5 million, $0.6 million and $4.1 million, respectively. 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.
Refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (MD&A) for a further discussion of IESU's debt.
(10) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
o Current Assets and Current Liabilities - The carrying amount approximates
fair value because of the short maturity of such financial instruments.
o Nuclear Decommissioning Trust Funds - The carrying amount represents the
fair value of these trust funds, as reported by the trustee. The balance of
the "Nuclear decommissioning trust funds" as shown on the Consolidated
Balance Sheets included $24.3 million and $19.3 million of net unrealized
gains at December 31, 1998 and December 31, 1997, respectively, on the
investments held in the trust funds. The accumulated reserve for
decommissioning costs was adjusted by a corresponding amount.
o Cumulative Preferred Stock - Based upon the market yield of similar
securities and quoted market prices.
o Long-Term Debt - Based upon the market yield of similar securities and
quoted market prices.
The following table presents the carrying amount and estimated fair value of
certain financial instruments for IESU as of December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
--------------------------- ----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Nuclear decommissioning trust funds $ 92 $ 92 $ 78 $ 78
Cumulative preferred stock 18 15 18 13
Long-term debt, including current portion 652 687 652 678
</TABLE>
48
<PAGE>
Since IESU is subject to regulation, any gains or losses related to the
difference between the carrying amount and the fair value of its financial
instruments may not be realized by IESU's parent.
(12) COMMITMENTS AND CONTINGENCIES:
(b) Purchased-Power, Coal and Natural Gas Contracts
IESU has entered into purchased-power capacity and coal contracts and its
minimum commitments are as follows (dollars in millions, megawatt-hours (MWHs)
and tons in thousands):
Coal
Purchased-Power (including transportation
costs)
--------------------------- --------------------------------
Dollars MWHs Dollars Tons
----------- ------------ ------------- ---------------
1999 $ 6.9 220 $ 14.1 2,028
2000 4.8 - 9.9 1,162
2001 5.0 - 6.4 885
2002 2.8 - 0.5 135
2003 2.9 - 0.2 45
IESU is in the process of negotiating several new coal contracts. In addition,
it expects to supplement its coal contracts with spot market purchases to
fulfill its future fossil fuel needs.
IESU also has various natural gas supply, transportation and storage contracts
outstanding. The minimum dekatherm commitments, in millions, for 1999-2003 are
90.0, 79.5, 78.8, 75.0 and 70.0, respectively. The minimum dollar commitments
for 1999-2003, in millions, are $56.4, $35.9, $33.6, $27.6 and $26.2,
respectively. The gas supply commitments are all index-based. IESU expects to
supplement its natural gas supply with spot market purchases as needed.
(c) Information Technology Services -
In May 1998, IEC entered into an agreement, expiring in 2004, with Electronic
Data Systems Corporation (EDS) for information technology services. IESU's
anticipated operating and capital expenditures under the agreement for 1999 are
estimated to total approximately $17.6 million. Future costs under the agreement
are variable and are dependent upon IESU's level of usage of technological
services from EDS.
(d) Financial Guarantees and Commitments
IESU has financial guarantees, which were generally issued to support
third-party borrowing arrangements and similar transactions, amounting to $17.9
million outstanding at December 31, 1998. Such guarantees are not reflected in
the consolidated financial statements. Management believes that the likelihood
of IESU having to make any material cash payments under these agreements is
remote.
49
<PAGE>
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- --------------- ----------------- ------------------
(in thousands)
1998 *
<S> <C> <C> <C> <C>
Operating revenues $208,278 $174,733 $222,190 $201,729
Operating income 34,289 21,756 69,940 29,011
Net income 11,660 2,961 30,637 16,652
Earnings available for common stock 11,431 2,732 30,408 16,425
1997
Operating revenues $226,398 $169,623 $205,711 $212,246
Operating income 32,588 26,574 63,987 30,621
Net income 11,851 6,891 28,636 11,415
Earnings available for common stock 11,622 6,662 28,407 11,188
* Earnings in 1998 were impacted by the recording of approximately $2 million,
$10 million, $3 million and $2 million of pre-tax merger-related expenses in the
first, second, third and fourth quarters, respectively.
</TABLE>
50
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
FINANCIAL SECTION
51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Wisconsin Power and Light Company (a Wisconsin corporation)
and subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements and the
supplemental schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and supplemental schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wisconsin Power and Light
Company and subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14(a)(2) is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 29, 1999
52
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
<S> <C> <C> <C>
Electric utility $ 614,704 $ 634,143 $ 589,482
Gas utility 111,737 155,883 165,627
Water 5,007 4,691 4,166
---------------- ---------------- ----------------
731,448 794,717 759,275
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 120,485 116,812 114,470
Purchased power 113,936 125,438 81,108
Cost of gas sold 61,409 99,267 104,830
Other operation 143,666 131,398 140,339
Maintenance 49,912 48,058 46,492
Depreciation and amortization 119,221 104,297 84,942
Taxes other than income taxes 30,169 30,338 29,206
---------------- ---------------- ----------------
638,798 655,608 601,387
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Operating income 92,650 139,109 157,888
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 36,584 32,607 31,472
Allowance for funds used during construction (3,049) (2,775) (3,208)
Miscellaneous, net (1,129) (3,796) (6,669)
---------------- ---------------- ----------------
32,406 26,036 21,595
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Income before income taxes 60,244 113,073 136,293
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Income taxes 24,670 41,839 53,808
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Net income 35,574 71,234 82,485
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Preferred dividend requirements 3,310 3,310 3,310
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------
Earnings available for common stock $ 32,264 $ 67,924 $ 79,175
================ ================ ================
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Year Ended December 31,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 320,386 $ 310,805 $ 297,717
Net income 35,574 71,234 82,485
Cash dividends declared on common stock (58,341) (58,343) (66,087)
Cash dividends declared on preferred stock (3,310) (3,310) (3,310)
---------------- ---------------- ----------------
Balance at end of year $ 294,309 $ 320,386 $ 310,805
================ ================ ================
- ---------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1998 1997
- --------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility -
Plant in service -
<S> <C> <C>
Electric $ 1,839,545 $ 1,790,641
Gas 244,518 237,856
Water 26,567 24,864
Common 219,268 195,815
---------------- ----------------
2,329,898 2,249,176
Less - Accumulated depreciation 1,168,830 1,065,726
---------------- ----------------
1,161,068 1,183,450
Construction work in progress 56,994 42,312
Nuclear fuel, net of amortization 18,671 19,046
---------------- ----------------
1,236,733 1,244,808
Other property, plant and equipment, net of accumulated
depreciation and amortization of $44 for both years 630 684
---------------- ----------------
1,237,363 1,245,492
---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 1,811 2,492
Accounts receivable:
Customer 13,372 20,928
Associated companies 3,019 5,017
Other 8,298 11,589
Production fuel, at average cost 20,105 18,857
Materials and supplies, at average cost 20,025 19,274
Gas stored underground, at average cost 10,738 12,504
Prepaid gross receipts tax 22,222 22,153
Other 6,987 4,824
---------------- ----------------
106,577 117,638
---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 134,112 112,356
Other 15,960 14,877
---------------- ----------------
150,072 127,233
---------------- ----------------
- --------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 133,501 120,826
Deferred charges and other 57,637 53,415
---------------- ----------------
191,138 174,241
---------------- ----------------
- --------------------------------------------------------------------------------------------------------
$ 1,685,150 $ 1,664,604
================ ================
- --------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31,
CAPITALIZATION AND LIABILITIES 1998 1997
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Capitalization (See Consolidated Statements of Capitalization):
<S> <C> <C>
Common stock $ 66,183 $ 66,183
Additional paid-in capital 199,438 199,170
Retained earnings 294,309 320,386
------------------ -----------------
Total common equity 559,930 585,739
------------------ -----------------
Cumulative preferred stock, not mandatorily redeemable 59,963 59,963
Long-term debt (excluding current portion) 414,579 354,540
------------------ -----------------
1,034,472 1,000,242
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities - 8,899
Variable rate demand bonds 56,975 56,975
Commercial paper - 81,000
Notes payable 50,000 -
Notes payable to associated companies 26,799 -
Accounts payable 84,754 85,617
Accounts payable to associated companies 20,315 -
Accrued payroll and vacations 5,276 12,221
Accrued interest 6,863 6,317
Other 14,600 25,162
------------------ -----------------
265,582 276,191
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 245,489 251,709
Accumulated deferred investment tax credits 33,170 35,039
Customer advances 34,367 34,240
Environmental liabilities 11,683 13,738
Other 60,387 53,445
------------------ -----------------
385,096 388,171
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 12)
- --------------------------------------------------------------------------------------------------------------------
$ 1,685,150 $ 1,664,604
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 35,574 $ 71,234 $ 82,485
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 119,221 104,297 84,942
Amortization of nuclear fuel 5,356 3,534 4,845
Deferred taxes and investment tax credits (7,529) 3,065 6,306
(Gain) loss on disposition of other property and equipment 38 710 (5,676)
Other (2,127) (2,033) (2,270)
Other changes in assets and liabilities:
Accounts receivable 12,845 (3,314) (250)
Production fuel (1,248) (3,016) (1,216)
Materials and supplies (751) 641 696
Gas stored underground 1,766 (2,512) (3,673)
Prepaid gross receipts tax (69) (2,764) (1,087)
Accounts payable 19,452 (7,102) 10,291
Benefit obligations and other (5,207) (12,809) 16,834
---------------- ---------------- ----------------
Net cash flows from operating activities 177,321 149,931 192,227
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (58,341) (58,343) (66,087)
Preferred stock dividends (3,310) (3,310) (3,310)
Proceeds from issuance of long-term debt 60,000 105,000 -
Reductions in long-term debt (8,899) (55,000) (5,000)
Net change in short-term borrowings (4,201) 11,500 (3,000)
Other (1,966) (2,601) -
---------------- ---------------- ----------------
Net cash flows used for financing activities (16,717) (2,754) (77,397)
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction expenditures (117,143) (119,232) (123,942)
Nuclear decommissioning trust funds (14,297) (11,427) (9,986)
Additions to nuclear fuel (4,981) (3,212) (5,344)
Proceeds from sale of other property and equipment 53 4 36,613
Shared savings expenditures (24,355) (17,610) (5,196)
Other (562) 2,625 (7,479)
---------------- ---------------- ----------------
Net cash flows used for investing activities (161,285) (148,852) (115,334)
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (681) (1,675) (504)
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 2,492 4,167 4,671
---------------- ---------------- ----------------
- ---------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 1,811 $ 2,492 $ 4,167
================ ================ ================
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information: Cash paid during the period for:
Interest $ 33,368 $ 32,955 $ 29,092
================ ================ ================
Income taxes $ 31,951 $ 37,407 $ 48,622
================ ================ ================
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C>
Common equity:
Common stock - $5.00 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $ 66,183 $ 66,183
Additional paid-in capital 199,438 199,170
Retained earnings 294,309 320,386
------------------ ------------------
559,930 585,739
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Cumulative, without par value, not mandatorily redeemable - authorized
3,750,000 shares, maximum aggregate stated value $150,000,000:
$100 stated value - 4.50% series, 99,970 shares outstanding 9,997 9,997
$100 stated value - 4.80% series, 74,912 shares outstanding 7,491 7,491
$100 stated value - 4.96% series, 64,979 shares outstanding 6,498 6,498
$100 stated value - 4.40% series, 29,957 shares outstanding 2,996 2,996
$100 stated value - 4.76% series, 29,947 shares outstanding 2,995 2,995
$100 stated value - 6.20% series, 150,000 shares outstanding 15,000 15,000
$25 stated value - 6.50% series, 599,460 shares outstanding 14,986 14,986
------------------ ------------------
59,963 59,963
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
Series L, 6.25%, retired in 1998 - 8,899
1984 Series A, variable rate (3.85% at December 31, 1998), due 2014 8,500 8,500
1988 Series A, variable rate (4.20% at December 31, 1998), due 2015 14,600 14,600
1990 Series V, 9.3%, due 2025 27,000 27,000
1991 Series A, variable rate (5.15% at December 31, 1998), due 2015 16,000 16,000
1991 Series B, variable rate (5.15% at December 31, 1998), due 2005 16,000 16,000
1991 Series C, variable rate (5.15% at December 31, 1998), due 2000 1,000 1,000
1991 Series D, variable rate (5.15% at December 31, 1998), due 2000 875 875
1992 Series W, 8.6%, due 2027 90,000 90,000
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
------------------ ------------------
307,975 316,874
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 -
------------------ ------------------
472,975 421,874
------------------ ------------------
Less:
Current maturities - (8,899)
Variable rate demand bonds (56,975) (56,975)
Unamortized debt premium and (discount), net (1,421) (1,460)
------------------ ------------------
414,579 354,540
------------------ ------------------
- ----------------------------------------------------------------------------------------------------------------------------
$ 1,034,472 $ 1,000,242
================== ==================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
57
<PAGE>
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Except as modified below, the Interstate Energy Corporation (IEC) Notes to
Consolidated Financial Statements are incorporated by reference insofar as they
relate to Wisconsin Power and Light Company (WP&L). IEC Notes 1(e), 1(i), 1(n),
5, 8(b), 11(c), and 15 do not relate to WP&L and, therefore, are not
incorporated by reference.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) General -
The Consolidated Financial Statements include the accounts of WP&L and its
consolidated subsidiaries. WP&L is a subsidiary of IEC. IEC is currently doing
business as Alliant Energy Corporation. WP&L is engaged principally in the
generation, transmission, distribution and sale of electric energy; the
purchase, distribution, transportation and sale of natural gas; and water
services. Nearly all of WP&L's retail customers are located in south and central
Wisconsin. WP&L's principal consolidated subsidiary is South Beloit Water, Gas
and Electric Company.
(o) Comprehensive Income -
WP&L had no other comprehensive income in the periods presented.
(3) LEASES:
WP&L's operating lease rental expenses for 1998, 1997 and 1996 were $6.4
million, $5.5 million and $5.3 million, respectively. WP&L's future minimum
lease payments by year are as follows (in thousands):
Operating
Year Leases
---------------------- ------------------
1999 $ 7,772
2000 6,948
2001 5,925
2002 5,303
2003 4,146
Thereafter 26,042
------------------
$ 56,136
==================
(6) INCOME TAXES:
The components of federal and state income taxes for WP&L for the years ended
December 31 were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
---------------- -------------- ---------------
<S> <C> <C> <C>
Current tax expense $ 32.2 $ 38.8 $ 47.5
Deferred tax expense (5.6) 4.9 8.2
Amortization of investment tax credits (1.9) (1.9) (1.9)
---------------- -------------- ---------------
$ 24.7 $ 41.8 $ 53.8
================ ============== ===============
</TABLE>
58
<PAGE>
The overall effective income tax rates shown below for the years ended December
31 were computed by dividing total income tax expense by income before income
taxes.
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- -------------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefits 7.8 5.7 6.1
Amortization of investment tax credits (3.1) (1.7) (1.4)
Adjustment of prior period taxes - (2.1) 0.4
Merger expenses 2.5 0.3 0.4
Amortization of excess deferred taxes (2.5) (1.3) (1.3)
Other items, net 1.3 1.1 0.3
-------------- -------------- -------------
Overall effective income tax rate 41.0% 37.0% 39.5%
============== ============== =============
</TABLE>
The accumulated deferred income taxes (assets) and liabilities as set forth
below on the Consolidated Balance Sheets at December 31 arise from the following
temporary differences (in millions):
1998 1997
--------------- --------------
Property related $ 282.7 $ 287.2
Investment tax credit related (22.2) (23.5)
Decommissioning related (17.5) (16.0)
Other 2.5 4.0
--------------- --------------
$ 245.5 $ 251.7
=============== ==============
(7) BENEFIT PLANS:
(a) Pension Plans and Other Postretirement Benefits
WP&L adopted Statement of Financial Accounting Standard (SFAS) 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" in 1998. WP&L has
a noncontributory, defined benefit pension plan covering substantially all
employees who are subject to a collective bargaining agreement. The benefits are
based upon years of service and levels of compensation. Effective in 1998,
eligible employees of WP&L that are not subject to a collective bargaining
agreement are covered by the Alliant Energy Cash Balance Pension Plan, a
non-contributory defined benefit pension plan. The projected unit credit
actuarial cost method was used to compute pension cost and the accumulated and
projected benefit obligations. WP&L's policy is to fund the pension cost in an
amount that is at least equal to the minimum funding requirements mandated by
the Employee Retirement Income Security Act of 1974 (ERISA), and that does not
exceed the maximum tax deductible amount for the year.
WP&L also provides certain other postretirement benefits to retirees, including
medical benefits for retirees and their spouses (and Medicare Part B
reimbursement for certain retirees) and, in some cases, retiree life insurance.
WP&L's funding of other postretirement benefits generally approximates the
maximum tax deductible amount on an annual basis.
The weighted-average assumptions as of the measurement date of September 30 are
as follows:
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------------
1998 1997 1996 1998 1997 1996
------------ ----------- ------------ ------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5-4.5% 3.5-4.5% 3.5% 3.5% 3.5-4.5%
Medical cost trend on covered charges:
Initial trend range N/A N/A N/A 8% 8% 9%
Ultimate trend range N/A N/A N/A 5% 5% 5%
</TABLE>
59
<PAGE>
The components of WP&L's qualified pension benefits and other postretirement
benefits costs are as follows (in millions):
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
------------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996
---------- ----------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3.2 $ 4.8 $ 5.1 $ 1.7 $ 1.8 $ 1.8
Interest cost 8.5 13.9 13.6 2.6 3.3 3.4
Expected return on plan assets (12.8) (19.2) (17.9) (1.5) (1.1) (1.0)
Amortization of:
Transition obligation (asset) (2.1) (2.4) (2.4) 1.3 1.5 1.5
Prior service cost 0.5 0.4 0.3 - - -
Actuarial (gain)/loss - - 0.5 (1.1) (0.3) -
---------- ----------- --------- -------- -------- ---------
Total $ (2.7) $ (2.5) $ (0.8) $ 3.0 $ 5.2 $ 5.7
========== =========== ========= ======== ======== =========
</TABLE>
During 1998 and 1997, WP&L recognized an additional $0.6 million and $1.3
million, respectively, of costs in accordance with SFAS 88. The charges were for
severance and early retirement programs in the respective years. In addition,
during 1998 and 1997, WP&L recognized $3.6 million and $1.7 million,
respectively, of curtailment charges relating to WP&L's other postretirement
benefits. The amounts include a December 1998 early retirement program.
The pension benefit cost shown above (and in the following table) for 1998
represents only the pension benefit cost for bargaining unit employees of WP&L
covered under the bargaining unit pension plan that is sponsored by WP&L. The
pension benefit cost for WP&L's non-bargaining employees who are now
participants in other IEC plans was $3.0 million for 1998, including a special
charge of $3.6 for severance and early retirement window programs. In addition,
Alliant Energy Corporate Services, Inc. (Alliant Energy Corporate Services)
provides services to WP&L. The allocated pension benefit costs associated with
these services was $0.6 million for 1998. The other postretirement benefit cost
shown above for each period (and in the following tables) represents the other
postretirement benefit cost for all WP&L employees. The allocated other
postretirement benefit cost associated with Alliant Energy Corporate Services
for WP&L was $0.2 million for 1998.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 1998, holding all other assumptions constant, would have the
following effects (in millions):
<TABLE>
<CAPTION>
1 Percent 1 Percent Decrease
Increase
------------------- ----------------------
<S> <C> <C>
Effect on total of service and interest cost components $0.3 ($0.3)
Effect on postretirement benefit obligation $1.7 ($1.7)
</TABLE>
60
<PAGE>
A reconciliation of the funded status of WP&L's plans to the amounts recognized
on WP&L's Consolidated Balance Sheets at December 31 is presented below (in
millions):
<TABLE>
<CAPTION>
Qualified Pension Benefits Other Postretirement Benefits
---------------------------- -------------------------------
1998 1997 1998 1997
----------- ------------ -------------- ------------
Change in benefit obligation:
<S> <C> <C> <C> <C>
Net benefit obligation at beginning of year $ 205.1 $ 189.6 $ 47.1 $ 46.6
Transfer of obligations to other IEC plans (91.9) - - -
Service cost 3.2 4.8 1.7 1.8
Interest cost 8.5 13.9 2.6 3.3
Plan participants' contributions - - 0.8 1.0
Plan amendments - 4.4 - -
Actuarial (gain) / loss 12.2 2.9 (9.7) (2.7)
Curtailments - - 0.7 0.6
Special termination benefits 0.6 1.3 - -
Gross benefits paid (5.4) (11.8) (2.9) (3.5)
----------- ------------ -------------- ------------
Net benefit obligation at end of year 132.3 205.1 40.3 47.1
----------- ------------ -------------- ------------
Change in plan assets:
Fair value of plan assets at beginning of year 244.4 218.9 16.1 13.8
Transfer of assets to other IEC plans (100.2) - - -
Actual return on plan assets (1.3) 36.2 1.1 1.9
Employer contributions - 1.1 - 2.9
Plan participants' contributions - - 0.8 1.0
Gross benefits paid (5.4) (11.8) (2.9) (3.5)
----------- ------------ -------------- ------------
Fair value of plan assets at end of year 137.5 244.4 15.1 16.1
----------- ------------ -------------- ------------
Funded status at end of year 5.2 39.3 (25.2) (31.0)
Unrecognized net actuarial (gain) / loss 26.0 0.8 (17.0) (8.3)
Unrecognized prior service cost 5.1 7.8 (0.2) (0.3)
Unrecognized net transition obligation (asset) (7.9) (12.0) 17.2 21.0
----------- ------------ -------------- ------------
Net amount recognized at end of year $ 28.4 $ 35.9 $ (25.2) $ (18.6)
=========== ============ ============== ============
Amounts recognized on the Consolidated Balance
Sheets consist of:
Prepaid benefit cost $ 28.4 $ 35.9 $ 0.4 $ 0.3
Accrued benefit cost - - (25.6) (18.9)
----------- ------------ -------------- ------------
Net amount recognized at measurement date 28.4 35.9 (25.2) (18.6)
----------- ------------ -------------- ------------
Contributions paid after 9/30 and prior to 12/31 - - 2.1 -
----------- ------------ -------------- ------------
Net amount recognized at 12/31/98 $ 28.4 $ 35.9 $ (23.1) $ (18.6)
=========== ============ ============== ============
</TABLE>
IEC sponsors a non-qualified pension plan which covers certain current and
former officers. The pension expense allocated to WP&L for this plan was $0.8
million, $0.5 million and $0.5 million in 1998, 1997 and 1996, respectively.
WP&L employees also participate in defined contribution pension plans (401(k)
plans) covering substantially all employees. WP&L's contributions to the plans,
which are based on the participants' level of contribution, were $2.4 million,
$2.8 million and $1.8 million in 1998, 1997 and 1996, respectively.
The benefit obligation and fair value of plan assets for the postretirement
welfare plans with benefit obligations in excess of plan assets were $33.4
million and $6.2 million as of September 31, 1998 and $40.6 million and $7.7
million, respectively, as of the prior measurement date.
61
<PAGE>
(9) DEBT:
(a) Short-Term Debt -
Information regarding short-term debt is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
As of year end--
<S> <C> <C> <C>
Commercial paper outstanding - $81.0 $59.5
Notes payable outstanding $50.0 - $10.0
Money pool borrowings $26.8 - -
Discount rates on commercial paper N/A 5.82-5.90% 5.35-5.65%
Interest rates on notes payable 5.44% N/A 5.95%
Interest rate on money pool borrowings 5.17% N/A N/A
For the year ended--
Average amount of short-term debt
(based on daily outstanding balances) $48.4 $49.2 $33.9
Average interest rate on short-term debt 5.55% 5.64% 5.86%
</TABLE>
(b) Long-Term Debt -
Debt maturities (excluding periodic sinking fund requirements, which will not
require additional cash expenditures) for 1999 to 2003 are $0, $1.9 million, $0,
$0 and $0, respectively.
Refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (MD&A) for a further discussion of WP&L's debt.
(10) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
o Current Assets and Current Liabilities - The carrying amount approximates
fair value because of the short maturity of such financial instruments.
o Nuclear Decommissioning Trust Funds - The carrying amount represents the
fair value of these trust funds, as reported by the trustee. The balance of
the "Nuclear decommissioning trust funds" as shown on the Consolidated
Balance Sheets included $18.7 million and $16.4 million of net unrealized
gains at December 31, 1998 and December 31, 1997, respectively, on the
investments held in the trust funds. The accumulated reserve for
decommissioning costs was adjusted by a corresponding amount.
o Cumulative Preferred Stock - Based upon the market yield of similar
securities and quoted market prices.
o Long-Term Debt - Based upon the market yield of similar securities and
quoted market prices.
The following table presents the carrying amount and estimated fair value of
certain financial instruments for WP&L as of December 31 (in millions):
<TABLE>
<CAPTION>
1998 1997
--------------------------- ----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Nuclear decommissioning trust funds $ 134 $ 134 $ 112 $ 112
Cumulative preferred stock 60 55 60 52
Long-term debt, including current portion 472 513 420 449
</TABLE>
Since WP&L is subject to regulation, any gains or losses related to the
difference between the carrying amount and the fair value of its financial
instruments may not be realized by WP&L's parent.
62
<PAGE>
(12) COMMITMENTS AND CONTINGENCIES:
(b) Purchased-Power, Coal and Natural Gas Contracts
WP&L has entered into purchased-power capacity and coal contracts and its
minimum commitments are as follows (dollars in millions, megawatt-hours (MWHs)
and tons in thousands):
Coal
Purchased-Power (including transportation
costs)
--------------------------- --------------------------------
Dollars MWHs Dollars Tons
----------- ------------ ------------- ---------------
1999 $ 62.3 1,290 $ 22.2 6,124
2000 66.0 1,509 10.1 2,986
2001 52.4 864 8.4 1,600
2002 31.8 219 4.4 750
2003 24.3 219 - -
WP&L is in the process of negotiating several new coal contracts. In addition,
it expects to supplement its coal contracts with spot market purchases to
fulfill its future fossil fuel needs.
WP&L also has various natural gas supply, transportation and storage contracts
outstanding. The minimum dekatherm commitments, in millions, for 1999-2003 are
70.3, 59.7, 45.4, 31.5 and 24.5, respectively. The minimum dollar commitments
for 1999-2003, in millions, are $42.8, $32.5, $27.1, $24.7 and $17.0,
respectively. The gas supply commitments are all index-based. WP&L expects to
supplement its natural gas supply with spot market purchases as needed.
(c) Information Technology Services -
In May 1998, IEC entered into an agreement, expiring in 2004, with Electronic
Data Systems Corporation (EDS) for information technology services. WP&L's
anticipated operating and capital expenditures under the agreement for 1999 are
estimated to total approximately $2.8 million. Future costs under the agreement
are variable and are dependent upon WP&L's level of usage of technological
services from EDS.
63
<PAGE>
(16) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited):
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Quarter Ended
------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- --------------- ----------------- ------------------
(in thousands)
1998*
<S> <C> <C> <C> <C>
Operating revenues $202,803 $172,509 $176,130 $180,006
Operating income 33,651 10,828 29,696 18,475
Net income (loss) 17,598 (1,233) 12,677 6,532
Earnings available for common stock 16,770 (2,061) 11,850 5,705
1997
Operating revenues $231,005 $176,065 $180,192 $207,455
Operating income 45,413 20,882 34,158 38,656
Net income 23,351 11,044 15,236 21,603
Earnings available for common stock 22,523 10,216 14,409 20,776
*Earnings for 1998 were impacted by the recording of approximately $3 million,
$11 million, $2 million and $1 million of pre-tax merger-related expenses in the
first, second, third and fourth quarters, respectively.
</TABLE>
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Consolidated Financial Statements
Refer to Index to Financial Statements at Item 8. "Financial Statements
and Supplementary Data."
(a) (2) Financial Statement Schedules
Report of Independent Public Accountants on Schedules
Schedule II. Valuation and Qualifying Accounts and Reserves
(Previously filed)
NOTE: All other schedules are omitted because they are not applicable or
not required, or because that required information is shown either in
the consolidated financial statements or in the notes thereto.
(a) (3) Exhibits Required by 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, effective as of January
20, 1999+
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, effective as of
January 20, 1999+
3.5* Amended and Restated Articles of Incorporation of IES Utilities
Inc. (incorporated by reference to Exhibit 3.5 to IESU's Form
10-Q for the quarter ended June 30, 1998)
65
<PAGE>
3.6 Bylaws of IES Utilities Inc., effective as of January 20, 1999+
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 January 20, 1999, between Interstate
Energy Corporation and Firstar Bank Milwaukee, N.A.
(incorporated by reference to Exhibit 4.1 to IEC's Registration
Statement on Form 8-A, dated January 20, 1999)
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* Officers' Certificate, dated as of October 27, 1998, creating
the 5.70% debentures due October 15, 2008 of WP&L (incorporated
by reference to Exhibit 4 to WP&L's Current Report on Form 8-K,
dated October 27, 1998)
66
<PAGE>
4.6* 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)
4.7* 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)
4.8* 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)
4.9* Supplemental Indentures to the 1940 Indenture:
<TABLE>
<CAPTION>
IESU
Number Dated as of File Reference Exhibit
------------------- ---------------------- --------------------------- ---------
<S> <C> <C> <C>
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)
67
<PAGE>
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)
</TABLE>
4.10* 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)
4.11* Supplemental Indentures to the 1923 Indenture:
Dated as of File 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)
68
<PAGE>
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)
4.12* 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)
4.13* 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)
4.14* 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)
4.15* 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
(incorporated by reference to Exhibit 10.1 to IEC's Form 10-Q
for the quarter ended June 30, 1998)
10.2* Service Agreement by and among Alliant Industries, Inc., IPC
Development Company, Inc. and Alliant Services Company
(incorporated by reference to Exhibit 10.2 to IEC's Form 10-Q
for the quarter ended June 30, 1998)
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.
(incorporated by reference to Exhibit 10.3 to IEC's Form 10-Q
for the quarter ended June 30, 1998)
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
69
<PAGE>
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 (incorporated by
reference to Exhibit 10.15 to IEC's Form 10-Q for the quarter
ended June 30, 1998)
70
<PAGE>
10.16#* Interstate Energy Corporation 1998 Officer Incentive
Compensation Plan (incorporated by reference to Exhibit 10.16 to
IEC's Form 10-Q for the quarter ended June 30, 1998)
10.17#* Interstate Energy Corporation Long-Term Incentive Program,
revised July 1, 1998 (incorporated by reference to Exhibit 10.17
to IEC's Form 10-Q for the quarter ended June 30, 1998)
10.18#* Alliant Services Company Key Employee Deferred Compensation Plan
(incorporated by reference to Exhibit 10.18 to IEC's Form 10-Q
for the quarter ended June 30, 1998)
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 (incorporated by reference to Exhibit 10.19a to IEC's
Form 10-Q for the quarter ended June 30, 1998)
10.20#* 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)
10.20a#* 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)
10.20b#* 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)
10.21#* 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)
10.22#* 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)
10.23#* Key Executive Employment and Severance Agreement by and between
Interstate Energy Corporation and Erroll B. Davis, Jr.
(incorporated by reference to Exhibit 4.2 to IEC's Form 10-Q for
the quarter ended June 30, 1994)
10.23a#* 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)
10.24#* 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)
10.25#* 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)
10.26#* Severance Agreement by and between Interstate Energy Corporation
and Anthony J. Amato (incorporated by reference to Exhibit 10.28
to IEC's Form 10-Q for the quarter ended June 30, 1998)
10.27#* Early Retirement Agreement, dated as of October 7, 1998, by and
between Interstate Energy Corporation et al. and Michael R.
Chase (incorporated by reference to Exhibit 10.1 to IEC's Form
10-Q for the quarter ended September 30, 1998)
10.28#* 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)
71
<PAGE>
10.29#* 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)
10.30#* Supplemental Retirement Plan (incorporated by reference to
Exhibit 10(l) to IES's Form 10-K for the year ended December 31,
1987)
10.31#* 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)
10.31a#* 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)
10.32#* Executive Guaranty Plan (incorporated by reference to Exhibit
10(p) to IES's Form 10-K for the year ended December 31, 1987)
10.33#* 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)
10.34#* 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)
10.35#* 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)
10.36#* 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)
10.37#* 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)
10.38#* 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)
10.39#* 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)
10.40#* 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)
10.41#* 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)
10.42#* 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)
10.43#* 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)
10.44#* 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)
72
<PAGE>
10.45#* 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)
10.46# Early Retirement Agreement, dated as of December 4, 1998, by and
between Interstate Energy Corporation et al. and Richard R.
Ewers+
10.47 Stockholders' Agreement entered into as of November 18, 1998, by
and among McLeodUSA Incorporated, Alliant Energy Investments,
Inc. (formerly known as IES Investments Inc.) and certain other
principal stockholders of McLeodUSA Incorporated+
21 Subsidiaries of Interstate Energy Corporation+
23 Consent of Independent Public Accountants for Interstate Energy
Corporation
27.1 Financial Data Schedule for Interstate Energy Corporation at and
for the period ended December 31, 1998+
27.2 Restated Financial Data Schedule for Interstate Energy
Corporation at and for the period ended June 30, 1998+
27.3 Restated Financial Data Schedule for Interstate Energy
Corporation at and for the period ended March 31, 1998+
27.4 Restated Financial Data Schedule for Interstate Energy
Corporation at and for the period ended June 30, 1997+
27.5 Restated Financial Data Schedule for Interstate Energy
Corporation at and for the period ended March 31, 1997+
27.6 Restated Financial Data Schedule for Interstate Energy
Corporation at and for the period ended December 31, 1996+
27.7 Financial Data Schedule for IES Utilities Inc. at and for the
period ended December 31, 1998+
27.8 Restated Financial Data Schedule for IES Utilities Inc. at and
for the period ended March 31, 1998+
27.9 Restated Financial Data Schedule for IES Utilities Inc. at and
for the period ended December 31, 1997+
27.10 Restated Financial Data Schedule for IES Utilities Inc. at and
for the period ended March 31, 1997+
27.11 Restated Financial Data Schedule for IES Utilities Inc. at and
for the period ended December 31, 1996+
27.12 Financial Data Schedule for Wisconsin Power and Light Company at
and for the period ended December 31, 1998+
+ Previously filed.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the registrants agree 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-K. 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
73
<PAGE>
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
Wisconsin Power and Light Company filed a Current Report on Form 8-K, dated
October 27, 1998, reporting (under Item 5) that on October 27, 1998, Wisconsin
Power and Light Company agreed to sell $60,000,000 principal amount of its 5.70%
Debentures due October 15, 2008 in a public offering.
Interstate Energy Corporation filed a Current Report on Form 8-K, dated January
20, 1999, reporting (under Item 5) that on January 20, 1999 the Board of
Directors of Interstate Energy Corporation adopted a series of amendments to the
Bylaws of Interstate Energy Corporation.
Interstate Energy Corporation filed a Current Report on Form 8-K, dated January
20, 1999, reporting (under Item 5) that on January 20, 1999, the Board of
Directors of Interstate Energy Corporation declared a dividend of one common
share purchase right for each outstanding share of common stock, $.01 par value,
of Interstate Energy Corporation. The description and terms of the common share
purchase rights are set forth in a Rights Agreement dated January 20, 1999
between Interstate Energy Corporation and Firstar Bank Milwaukee, N.A., as
Rights Agent.
IESU - none.
74
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Alliant Energy Corporation, IES Utilities Inc. and
Wisconsin Power and Light Company have each duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized on the 1st
day of November 1999.
ALLIANT ENERGY CORPORATION
- --------------------------
Registrant
By:/s/ John E. Ebright Vice President-Controller (Principal Accounting
John E. Ebright Officer)
IES UTILITIES INC.
- ------------------
Registrant
By:/s/ John E. Ebright Vice President-Controller (Principal Accounting
John E. Ebright Officer)
WISCONSIN POWER AND LIGHT COMPANY
- ---------------------------------
Registrant
By:/s/ John E. Ebright Vice President-Controller (Principal Accounting
John E. Ebright Officer)
75
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports on the consolidated financial statements of Interstate Energy
Corporation (name changed to Alliant Energy Corporation as of May 20, 1999)
included in this Form 10-K/A into Interstate Energy Corporation's previously
filed Registration Statements on Form S-8 (Nos. 333-41485 and 333-46735) and
Form S-3 (Nos. 333-26627 and 333-87883).
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
October 29, 1999
