SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____________ to ____________
Commission File Number 1-3573
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Illinois 42-0673189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
206 East Second Street, Davenport, Iowa 52801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(319) 326-7111
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Chicago Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
$4.36 Cumulative Preferred Series
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The aggregate market value of the Company's Common Shares
was approximately $675 million based upon the New York Stock
Exchange composite transaction closing price as of February 28,
1994. The Company's $4.36, $4.22 and $7.50 Series Cumulative
Preferred Shares and the $7.80 and $5.25 Series Cumulative
Preference Shares are traded in the over-the-counter market. Bid
and asked prices on all such shares are not regularly quoted. As
of February 28, 1994, 99.8% of the Company's voting shares were
owned by nonaffiliates.
The aggregate number of the Company's Common Shares
outstanding at February 28, 1994 was 29,348,749.
Documents of Which Portions are Incorporated by Reference
Part of Form 10-K Document Incorporated by Reference
I and II Annual Report to Shareholders for the year
ended December 31, 1993
III Proxy Statement dated March 16, 1994
Only the portions of such documents which are specifically
incorporated by reference herein shall be deemed to be filed as a
part of this Form 10-K.<PAGE>
Part I
Item 1. Business
(a) General Development of Business
Iowa-Illinois Gas and Electric Company (the Company) was
incorporated under the laws of the State of Illinois in 1940 and
is engaged in the business of generating, transmitting,
distributing and selling electric energy and distributing,
selling and transporting natural gas in the States of Illinois
and Iowa. Through a wholly owned subsidiary, InterCoast Energy
Company, the Company engages in non-regulated energy-related
businesses. The Company's principal executive offices are
located at 206 East Second Street, Davenport, Iowa 52801
(telephone: 319-326-7111).
(b) Financial Information About Industry Segments
Financial information on the Company's segments of business
is included under the Note "Segment Information" on pages 40 and
41 of the Company's Annual Report to Shareholders for 1993 which
pages are incorporated herein by reference. This information is
also included in Exhibit 13.A.4 to this Form 10-K.
(c) Narrative Description of Business
General
The Company distributes electric energy in the Quad-Cities
(Davenport and Bettendorf, Iowa and Rock Island, Moline and East
Moline, Illinois), Iowa City and Fort Dodge, Iowa and in a number
of adjacent communities and areas.
The Company distributes natural gas in the Quad-Cities, Iowa
City, Cedar Rapids, Fort Dodge and Ottumwa, Iowa and in a number
of adjacent communities and areas.
Electric or gas service is provided in 22 incorporated
communities in Illinois and 48 incorporated communities in Iowa.
Franchises have been obtained from 69 communities. The length of
term of the franchises is typically 25 years, with various
expiration dates. Electric and gas franchises for Rock Island,
Illinois expired on February 28, 1992. Electric and gas service
continues to be provided to Rock Island while negotiations on a
new franchise proceed. This condition is not material in the
opinion of management.
The population of the Company's electric service territory
is approximately 425,000 and the population of its gas service
territory is approximately 600,000. As of December 31, 1993, the
Company had 200,097 retail electric customers and 240,839 gas
customers.
The Company has a residential, agricultural and diversified
commercial and industrial customer group, in which no single
industry or customer accounted for more than 8.6% (primary metal
industry) of the Company's total 1993 electric operating revenues
or 4.5% (real estate) of its total 1993 gas operating revenues.
Among the primary industries served by the Company are those
which are concerned with the manufacturing, processing and
fabrication of primary metals, real estate, food products, farm
and other non-electrical machinery, cement and gypsum products.
For the year ended December 31, 1993, the Company derived
approximately 62.1% of its gross operating revenues from its
electric business and 37.9% from its gas business. For 1992 and
1991, the corresponding percentages were 62.8% electric and 37.2%
gas, and 64.7% electric and 35.3% gas, respectively.
Historical electric sales (kwh) by customer class as a
percent of total electric sales and retail electric sales data
(kwh) by jurisdiction as a percent of total retail electric sales
are shown below:
Total Electric Sales
By Customer Class
1993 1992 1991
Residential 19.9% 19.4% 19.9%
Small Commercial and
Industrial 21.5 21.5 20.4
Large Commercial and
Industrial 31.9 34.9 31.0
Public Street Lighting 0.3 0.5 0.4
Public Authorities 1.6 1.6 1.5
Sales for Resale 24.8 22.1 26.8
Total 100.0% 100.0% 100.0%
Retail Electric Sales
By Jurisdiction
1993 1992 1991
Iowa 67.0% 65.4% 64.5%
Illinois 33.0 34.6 35.5
Total 100.0% 100.0% 100.0%
<PAGE>
Historical gas sales (ccf), including transportation, by
customer class and by jurisdiction as a percent of total gas
sales are shown below:
By Customer Class
1993 1992 1991
Residential 36.5% 36.6% 37.8%
Commercial 20.7 20.8 21.6
Industrial 5.3 6.5 7.3
Processing & Boiler Fuel 0.2 0.6 2.0
Transportation 37.3 35.5 31.3
Total 100.0% 100.0% 100.0%
By Jurisdiction
1993 1992 1991
Iowa 80.1% 79.4% 78.5%
Illinois 19.9 20.6 21.5
Total 100.0% 100.0% 100.0%
There are seasonal variations in the Company's electric and
gas businesses, which are principally related to the use of
energy for air conditioning and heating. In 1993, 40.6% of the
Company's electric revenues were reported in the months of June,
July, August and September, reflecting the use of electricity for
cooling, and 56.2% of the Company's gas revenues were reported in
the months of January, February, March and December, reflecting
the use of gas for heating.
At December 31, 1993, the Company had 1,423 employees, of
which 1,364 were employed in utility operations and 59 were
employed by InterCoast Energy Company.
Rate Matters
Under Illinois law, new rates may be put into effect by the
Company 45 days after filing with the Illinois Commerce
Commission (ICC), or on such earlier date as the ICC may approve,
subject to the power of the ICC to suspend the proposed new rates
for a period not to exceed eleven months after filing, pending a
hearing.
Under Iowa law, temporary collection of higher rates can
begin (subject to refund) 90 days after filing with the Iowa
Utilities Board (IUB) for that portion of such higher rates
approved by the IUB based on prior ratemaking principles and a
rate of return on common equity previously approved. If the IUB
has not issued a final order within ten months after the filing
date, the temporary rates cease to be subject to refund and any
balance of the requested rate increase may then be collected
subject to refund. Exceptions to the ten month limitation are
provided for extensions due to a utility's lack of due diligence
in the rate proceeding, judicial appeals and situations involving
new generating units being placed in service.
Pursuant to a 1983 Order of the ICC, the Company established
an adjustment clause which gave ratemaking recognition to the
depreciation charges and equity return requirements applicable to
the portion of the Company's Louisa Generating Station investment
which is allocable to Illinois. From October 1983 through June
1987, the Clause deferred the inclusion in rates of portions of
both the depreciation and equity return related to the Louisa
Station. From July 1, 1987 through June 30, 1993, the deferred
balances were recovered in rates at a levelized annual revenue
amount of approximately $6.6 million. The Clause, which provided
a current cash return on the deferred balances, expired on June
30, 1993 with the recovery of all deferred amounts.
On September 1, 1992, the Company filed revised electric and
gas rates with the ICC to increase annual electric and gas
revenues by approximately $14 million (12%) and $3 million
(5.9%), respectively. On July 28, 1993, electric and gas
increases of $9.6 million (8.6%) and $2 million (3.7%),
respectively, became effective following ICC approval. On
January 15, 1994, additional electric and gas increases of
$230,000 (0.2%) and $49,000 (0.1%), respectively, related to the
increase in the federal corporate income tax rate became
effective following ICC approval on rehearing. The ICC also
approved electric and gas riders which permit the Company to
recover costs of litigation, investigation and remediation
relating to former manufactured gas plant sites.
On May 3, 1993, the Company filed revised electric rates
with the IUB designed to increase annual electric revenues by
approximately $13.5 million (7.5%) and to provide for any
increase in the federal corporate income tax rate ultimately
enacted. A temporary annual rate increase of $6.8 million (3.8%)
became effective July 26, 1993. In 1993, approximately $3.1
million was billed, subject to refund, pursuant to such temporary
rates. On February 25, 1994, the IUB issued an order approving
rates at the $6.8 million level.
The Company completed its take-or-pay obligation with
Natural Gas Pipeline Company of America (NGPL) in 1992. A final
reconciliation payment was made in 1993. Both the ICC and IUB
authorized the Company to include such costs in customer
billings. The orders of the ICC and IUB have been affirmed by
the courts and are final.
In April 1992, the Federal Energy Regulatory Commission
(FERC) issued Order No. 636, directing a restructuring by
interstate pipeline companies for their natural gas sales and
transportation services. The FERC Order contemplated that
transitional gas supply realignment costs relating to this
restructuring may be billed by interstate pipelines to their
customers. The amount of transition costs which the FERC may
ultimately authorize the pipelines to bill the Company is
estimated to be $35 to $50 million. The Company expects to be
allowed to include provisions for such costs in its customer
billings.
The Company has established an external trust for the
investment of funds collected for nuclear decommissioning.
Electric tariffs for 1994 include provisions for annual
decommissioning costs of approximately $9.1 million. In
Illinois, nuclear decommissioning costs are included in customer
billings through a mechanism which permits annual adjustments.
In Iowa, such costs are reflected in base rates.
The Company's Iowa electric tariffs contain a Uniform
Electric Energy Adjustment Clause under which the Company's
billings reflect changes in the cost of all fuels used for
electric generation, including nuclear fuel disposition costs, as
well as the net effect of energy transactions (other than
capacity) with other utilities. Changes in the cost of gas to
the Company are reflected in its Iowa gas rates through the
Uniform Purchased Gas Adjustment Clause.
Under Illinois electric tariffs, the Company's Fuel Cost
Adjustment Clause reflects changes in the cost of all fuels used
for electric generation, including allowable fuel transportation
costs, nuclear fuel disposition costs and the effects of energy
transactions (other than capacity) with other utilities.
However, margins on interchange sales to other utilities are not
included in the Clause. Changes in the cost of gas to the
Company are reflected in its Illinois gas rates through the
Illinois Uniform Purchased Gas Adjustment Clause.
Electric Operations
The Company's accredited 1993 summer net generating capacity
was 1,429,480 kilowatts, consisting of (a) 384,750 kilowatts from
the Company's 25% undivided interest in the Quad-Cities Nuclear
Power Station (Quad-Cities Station), jointly owned with
Commonwealth Edison Company (Edison), (b) 913,530 kilowatts from
interests in wholly or jointly owned coal-fired units, (c)
128,000 kilowatts from wholly owned gas/oil fired units, and (d)
3,200 kilowatts from wholly owned hydro-electric units. The net
generating capacity at any time may be less due to regulatory
restrictions, fuel restrictions and generating units being
temporarily out of service for inspection, maintenance, refueling
or modifications.
On August 26, 1993, the Company established its record one-
hour peak electric demand of 1,084,965 kilowatts. Forecasts for
future peak load growth are reviewed annually. The Company
currently forecasts average peak load growth of 1.2% annually for
the next ten years.
The Company, along with two other Iowa investor-owned
utilities, is a partner in ENEREX, which arranges for the most
economical generating capacity to be used to meet the energy
requirements of customers of these utility companies, regardless
of which utility owns the generation facilities. ENEREX partners
realize a savings for their customers through higher utilization
of the lowest cost plants. The other partners in ENEREX are IES
Utilities, Inc. and Midwest Power Systems Inc.
The Company is one of over 40 members of the Mid-Continent
Area Power Pool (MAPP), which includes investor-owned utility
companies, rural cooperatives, municipal utilities and other
power suppliers in the North Central region of the United States
and in two Canadian provinces. The objective of MAPP is to
coordinate planning and operation of generation and
interconnecting transmission facilities to provide reliable and
economic electric service to members' customers. Customers
served by MAPP members may, therefore, benefit from regional high
voltage interconnections which are capable of transferring large
blocks of energy between systems. Also, high voltage
interconnections permit companies to buy and sell power according
to differing peak demands.
Fuel Supply for Electric Operations
The Company's sources of fuel from electric generation have
been as follows for the periods shown:
Year Ended December 31,
Fuel Source 1993 1992 1991
Coal 63.18% 63.95% 63.48%
Nuclear 36.52 35.56 36.09
Gas 0.28 0.45 0.41
Oil 0.02 0.04 0.02
In 1994 the Company projects its electric generation
requirements will be met as follows: coal - 63%, nuclear - 37%.
The average costs of fuels (including transportation and
handling costs) in cents per million BTU's consumed have been as
follows for the periods shown:
<PAGE>
Year Ended December 31,
Fuel Source 1993 1992 1991
Nuclear 47.36 44.57 46.03
Coal 105.79 102.97 101.19
Gas 373.25 313.33 289.67
Oil 440.95 412.80 482.08
Total Weighted Average 86.62 83.93 83.11
The average cost of coal (including transportation and
handling costs) per ton for the year 1993, 1992 and 1991 has been
$18.22, $17.57 and $17.37, respectively.
The Company has been advised by Edison that a portion of its
uranium concentrate requirements for the Quad-Cities Station
through 1994 and a portion of its requirements for periods beyond
1994 can be met under existing firm commitments. Edison further
advises that it has existing supplies or firm commitments to meet
all of its converted uranium requirements through 1995. Edison
also advises that all of the enrichment requirements have been
contracted for through 1999. Commitments for fuel fabrication
have been obtained at least through 2001. Edison does not
anticipate that it will have any difficulty in contracting for
uranium concentrates or for conversion, enrichment or fabrication
of nuclear fuel needed for the Quad-Cities units.
In June 1985, the Company satisfied its financial obligation
for Quad-Cities Station disposal costs for fuel burned prior to
April 7, 1983 by making a lump sum payment of $24.8 million to
the Department of Energy (DOE). The payment was made principally
from funds previously collected from customers. Disposal costs
for fuel burned after April 7, 1983 are paid quarterly. Such
costs are included in the cost of fuel and recovered through fuel
and energy adjustment clause billings. See Nuclear Regulation
herein for further information concerning the disposal of spent
nuclear fuel.
The Company believes its sources of coal for its fossil-
fueled generating stations are and will be satisfactory. Renewal
of expiring contracts and new agreements will be sought as
required. The coal requirements for Riverside and Neal Unit 3
are being met primarily through spot purchases. Contracts for
low-sulfur Wyoming coal have been executed for the Neal Unit 3,
Council Bluffs, Ottumwa and Louisa units which will supply a
portion of requirements through the years 1994, 1999, 2001 and
2003, respectively. Unit trains are being used for transporting
coal for the Neal, Council Bluffs, Ottumwa and Louisa units. The
Company has negotiated certain modifications to existing
contracts to achieve flexibility in volumes to be delivered while
also providing reasonable assurance of supply. In addition, the
Company has used spot market purchases of coal to effectively
manage inventory levels and take advantage of near term coal
market opportunities. The Company is continuing to monitor
existing contracts and coal supply requirements, balancing coal
requirements with a combination of contract and spot purchases.
Gas Operations
During 1993, the Company purchased approximately 89% of the
gas required to supply its customers from non-pipeline gas
suppliers on a firm or interruptible basis and transported on a
firm or interruptible basis through the NGPL, ANR Pipeline
Company (ANR) and Northern Natural Gas (NNG) systems. The
remainder was purchased from NGPL and NNG.
All gas supply purchased from NGPL and NNG is at rates
approved by the FERC under the Natural Gas Act. Likewise,
transportation rates negotiated with NGPL, ANR and NNG are
subject to FERC approval. Non-pipeline supply prices are
negotiated.
The use of firm and interruptible non-pipeline supply and
associated pipeline transportation has resulted in substantially
lower purchased gas costs than would have been incurred if all
supply needs had been placed under contract with the interstate
pipelines.
The Company withdrew approximately 97 percent of the gas in
leased storage during the 1992-93 heating season. Storage gas
was replaced during the summer. Storage was full for the 1993-94
heating season.
Beginning in December 1993, the Company has rebundled a
portion of its firm pipeline transportation with firm supply from
a third party supplier. This citygate service replaces bundled
sales service previously purchased from one of the Company's
pipeline suppliers.
The Company provides natural gas transportation service
through its distribution system for end-use customers.
Transportation of customer-owned gas was 37% of the total Company
throughput during 1993.
For the 1993-94 heating season, the Company's peak-day
supply delivery availability consists of gas available from NNG
plus firm capacity on the NGPL, ANR and NNG systems for the
transportation of firm non-pipeline gas. In addition, peak-day
supply is available from gas previously purchased by the Company
and held in leased pipeline storage. The Company leases storage
from NGPL, ANR and NNG. Liquefied natural gas (LNG) stored in
the Company's LNG facility is also available for peak-day use.
Following are the current peak-day supply sources for the Company
available for the 1993-94 heating season by volume and
proportions:
Millions Percent
of Cubic of
Feet Total
Underground Storage 220.1 45.0
Firm Non-Pipeline Supply 131.2 26.8
Rebundled Service 96.9 19.8
LNG Facility 40.0 8.2
Pipeline Supply 1.3 0.2
489.5 100.0
Peak-day firm demand for the 1993-94 heating season was
projected to be 467.5 million cubic feet for the Company. The
actual highest demand for peak-day firm sales for the 1993-94
heating season for the Company was 443 million cubic feet on
January 17, 1994. The weighted average temperature on that day
was 13 degrees below zero.
On January 17, 1994, a new record was set for total Company
gas throughput (sales and transportation) of 516 million cubic
feet.
See Rate Matters for a discussion of certain transition
costs.
Construction Program
The table below shows actual construction expenditures for
1993 and budgeted expenditures for 1994 and for the period 1995-
1998:
1993 1994 1995-98
Actual Budgeted Budgeted
(Thousands of Dollars)
Electric
Production $ 22,852 $ 22,982 $ 56,898
Transmission 1,792 1,010 9,189
Distribution 12,542 12,837 44,586
Gas 11,107 11,458 51,219
General Plant 11,869 30,413 27,391
Subtotal 60,162 78,700 189,283
Nuclear Fuel 6,795 8,905 42,664
Total $ 66,957 $ 87,605 $231,947
The amounts shown above include allowance for funds used
during construction but exclude capital leases. Of the $79.9
million of budgeted electric production expenditures for the
1994-1998 period, $47.1 million are for expenditures at the Quad-
Cities Station. In addition to the amounts shown above, the
Company also expects to contribute a total of $45.7 million to an
external trust for nuclear decommissioning during the 1994-1998
period. The Company's above budgeted construction expenditures
do not include any amounts which may be required to pay the
Company's share of the cost of replacing certain piping at the
Quad-Cities Station. See Nuclear Regulation.
General Regulation
The Company is a public utility under the laws of Illinois
and is regulated by the ICC as to retail rates, services,
accounts, issuance of securities, affiliate transactions,
construction, acquisition and sale of utility property,
acquisition and sale of securities and in other respects as
provided by the laws of Illinois. The Company is also a public
utility under the laws of Iowa and is regulated by the IUB as to
retail rates, services, accounts, construction of utility
property and in other respects as provided by the laws of Iowa.
The Company is subject to the jurisdiction of the FERC with
respect to certain matters, including short-term borrowings,
rates for transmission and sale of electric energy at wholesale,
interconnection of electric transmission facilities, acquisition
and sale of certain electric utility property, installation and
replacement of certain gas utility property and accounting
policies and practices.
Nuclear Regulation
The Company is subject to the jurisdiction of the Nuclear
Regulatory Commission (NRC) with respect to its nuclear
generating units. The NRC regulations control the granting of
permits and licenses for the construction and operation of
nuclear generating stations and subject such stations to
continuing review and regulation. The NRC review and regulatory
process covers, among other things, operations, maintenance, and
environmental and radiological aspects of such stations. The NRC
may modify, suspend or revoke licenses and impose civil penalties
for failure to comply with the Atomic Energy Act, the regulations
under such Act or the terms of such licenses. Attempts are made
from time to time by various individuals or citizen groups to
prohibit the development or use of nuclear power through
initiation of proceedings before the NRC, other agencies or
courts. Such proceedings frequently involve attacks on the
validity of NRC rules which, if successful, could provide a basis
for challenges to permits and licenses granted by the NRC in the
past.
The Illinois Department of Nuclear Safety (IDNS) has
jurisdiction over certain activities in Illinois relating to
nuclear power and safety and radioactive materials. Effective
June 1, 1987, the IDNS replaced the NRC as the regulator and
licensor of certain source, by-product and special nuclear
material in quantities not sufficient to form a critical mass,
including such material contained in various measuring devices
used at fossil-fuel power plants. The IDNS has promulgated
regulations which are substantially similar to the corresponding
federal regulations. The IDNS also has authority to license a
low-level radioactive waste disposal facility and to regulate
alternative methods for disposing of materials which contain only
trace amounts of radioactivity.
Under the Nuclear Waste Policy Act of 1982 (NWPA), the DOE
is responsible for the selection and development of repositories
for, and the permanent disposal of, spent nuclear fuel and high-
level radioactive wastes. Edison, as required by the NWPA, has
signed a contract with the DOE to provide for the disposal of
spent nuclear fuel and high-level radioactive waste beginning not
later than January 1998. The DOE has stated, however, that the
delivery schedule for spent nuclear fuel may be delayed, and
Edison expects that it will be significantly delayed. The costs
incurred by the DOE for disposal activities will be financed by
fees charged to owners and generators thereof. The primary
responsibility for the interim storage of spent nuclear fuel and
high-level radioactive wastes will rest with the owners and
generators thereof. Edison has informed the Company that there
is on-site storage capability at the Quad-Cities Station
sufficient to permit such interim storage at least through 2006.
Meeting spent nuclear fuel storage requirements beyond such time
could require a new and separate storage facility, the cost of
which has not been determined at this time. Edison anticipates
the possibility of serious difficulties in disposing of high-
level radioactive waste.
The Company has been informed by Edison that it currently
disposes of its low-level radioactive waste at a site in South
Carolina. There are no other commercial operating sites in the
United States for the disposal of low-level radioactive waste
available to Edison. The federal Low-Level Radioactive Waste
Policy Act of 1980 provides that states may enter into compacts
to provide for regional disposal facilities for such waste,
subject to approval by the U.S. Congress of each such compact.
Under the 1985 amendments to that Act, a compact could restrict
the use of a region's disposal facilities after January 1, 1993
to wastes generated within the region. South Carolina belongs to
a regional compact. Beginning January 1993, South Carolina has
granted Edison access to their waste disposal site for an 18-
month period. Illinois has entered into a compact with the State
of Kentucky which has been approved by Congress. The IDNS has
estimated that a low-level radioactive waste disposal facility
would be operational in Illinois by March 31, 1994 at the
earliest. However, in 1992 an independent panel rejected the
only site in Illinois then being considered for a low-level
disposal facility. Illinois has since enacted legislation
changing the procedures for siting a low-level waste disposal
facility. Edison has temporary on-site storage capacity for a
limited amount of low-level radioactive waste at the Quad-Cities
Station and is planning such additional capacity pending
development of disposal facilities by the State of Illinois.
Edison anticipates the possibility of serious difficulties in
disposing of low-level radioactive waste.
The continuing viability of commercial nuclear power is
subject to resolution of the issues of spent nuclear fuel storage
and disposal of radioactive waste.
In January 1994, the NRC noted adverse performance trends at
Quad-Cities Station. As a consequence, the Company anticipates
increased expenditures at Quad-Cities Station.
Federal regulations provide that any operating facility may
be required to cease operation if the NRC determines there are
deficiencies in state, local or utility emergency preparedness
plans relating to such facility and the deficiencies are not
corrected within four months of such determination. Under the
regulations, the NRC may permit operation of facilities, even
though the emergency preparedness plans are deficient, upon an
examination of other factors, including whether the deficiencies
are significant for the facility in question, whether adequate
interim compensatory actions have been or will be taken promptly
and whether other compelling reasons exist for operation
consistent with public health and safety. Edison has advised the
Company that emergency preparedness plans for the Quad-Cities
Station have been approved by the NRC. Edison has also advised
that state and local plans relating to the Quad-Cities Station
have been approved by the Federal Emergency Management Agency.
Edison continues to cooperate with the NRC and appropriate state
and local agencies on emergency preparedness issues.
On June 27, 1988, the NRC adopted final regulations with
respect to the decommissioning of nuclear power plants. Among
other things the regulations address the planning and funding of
the eventual decommissioning of nuclear power plants. In
response to these regulations, the Company submitted a report to
the NRC on July 20, 1990 indicating that it will provide
"reasonable assurance" that funds will be available to pay the
costs of decommissioning its nuclear power plants by making
monthly deposits to an external trust fund.
Inter-granular stress corrosion was discovered in 1983 in
certain stainless steel piping at the Quad-Cities Station.
Remedial actions intended to avoid the need to replace such
piping continue. Accordingly, the Company's budgeted
construction expenditures do not include any amounts which may be
required to pay the Company's share of the cost of replacing such
piping. If Edison is required to replace all of such piping, the
Company's share of the costs of such replacement would be
approximately $55 million at current price levels. Replacement
of such piping would result in an extended outage and require the
purchase of replacement power.
The Company is a member of Nuclear Mutual Limited (NML), an
industry mutual insurer established to provide property damage
coverage for members' nuclear generating facilities. The Company
would be subject to a maximum retrospective premium assessment of
approximately $2.4 million based on its 25% share of the NML
premium for Quad-Cities coverage in the event covered losses of
NML members exceed the financial resources of the insurance
company. A reserve has been established for this contingency.
At December 31, 1993, NML had accumulated capital to a level
which would assure that the Company would have no exposure to a
retrospective premium assessment in the event of a single
incident to a member's facility.
The Company is also a member of Nuclear Electric Insurance
Limited (NEIL), an industry mutual insurance company, and an
insured of American Nuclear Insurers/Mutual Atomic Energy
Liability Underwriters (ANI/MAELU). The related policy
provisions provide that expenses for decontamination and the
removal of debris shall be paid before any payment in respect of
claims for property damage. A separate NEIL insurance policy
covers the extra costs which would be incurred in obtaining
replacement power during a prolonged covered outage of a member's
nuclear plant. The Company is subject to retrospective premium
assessments of up to $4 million and $685,000 for its 25% share of
the premium under the NEIL portion of the excess property damage
coverage and the replacement power coverage, respectively. At
December 31, 1993, NEIL had accumulated capital to a level which
would assure that the Company would have no exposure to a
retrospective premium assessment in the event of a single
incident to a member's facility.
A Master Worker Policy issued by ANI/MAELU provides coverage
for worker tort claims filed for bodily injury caused by the
nuclear energy hazard. The coverage applies to workers whose
"nuclear related employment" began after January 1, 1988. Under
this policy, the Company could be subject to a maximum
retrospective premium assessment of $1.5 million.
Under the Price-Anderson federal legislation adopted in
1988, nuclear public liability coverage is supported by a
mandatory industry-wide program under which owners of nuclear
generating facilities could be assessed in the event of nuclear
incidents. The Company would currently be subject to a maximum
assessment of $39.6 million in the event of an incident, to be
paid in increments of no more than $5 million per year per
incident.
<PAGE>
Environmental Regulation
The Company is subject to regulation regarding air, water,
solid waste, hazardous and toxic materials and noise pollution by
agencies of the federal government and of the States of Illinois
and Iowa and may become subject to additional regulation as to
these and other matters in the future. The Quad-Cities Station
is subject to the jurisdiction of the NRC and IDNS as to atomic
radiation.
State and federal environmental laws and regulations as
adopted or now proposed have the effect of (i) increasing the
lead time for the construction of new facilities, (ii)
significantly increasing the total cost of new facilities, (iii)
requiring modification of certain of the Company's existing
facilities, (iv) increasing the risk of delay on construction
projects, (v) increasing the Company's cost of waste disposal and
(vi) possibly reducing the reliability of service provided by the
Company and the amount of energy available from the Company's
facilities. Any of such items could have a substantial impact on
amounts required to be expended by the Company in the future.
Air Quality. Air quality regulations, promulgated by both
the Iowa and Illinois pollution control boards in accordance with
federal standards, impose restrictions on the emission of
particulates, sulfur dioxide, nitrogen oxides and other air
pollutants and require permits from the respective state
environmental protection agency for the operation of emission
sources. Permits authorizing operation of the Company's fossil-
fueled generating facilities subject to this requirement have
been obtained and, when such permits are to expire, the Company
has, in a timely manner, filed applications for renewal.
Clean Air Act legislation was signed into law in November
1990 and U.S. Environmental Protection Agency rulemaking
proceedings are underway. Under the acid deposition control
section of this legislation, national utility emissions of sulfur
dioxide will be reduced in phased increments by 10 million tons
from 1980 levels by the year 2000 and permanently capped at that
level. National nitrogen oxide emissions will also be reduced in
phased increments by 2 million tons from 1980 levels by the year
2000. In addition, continuous emission monitoring systems will
be required at all affected facilities. This legislation also
requires the government to study what controls, if any, should be
imposed on utilities to control air toxics. The impact, if any,
of the air toxics study on the Company cannot be determined at
this time.
The Company has four jointly and one wholly owned coal-fired
generating stations, which represent approximately 65 percent of
the Company's electric generating capability. Each of these
facilities will be impacted to varying degrees by the
legislation.
Only one unit at the wholly owned generating station,
representing approximately 10 percent of the Company's electric
generating capability, will be impacted by the emission reduction
requirements effective in 1995. Beginning in 1995, this unit
will be required to hold allowances, issued by the federal
government, in order to emit sulfur dioxide. The compliance
strategy for this unit includes modifications to allow for
burning low sulfur coal, modifications for nitrogen oxide control
and installation of a new emission monitoring system. The
Company's remaining construction expenditures relative to this
work are estimated to be $5.4 million, of which $4 million is
budgeted for 1994 and $1.4 million is budgeted for 1995.
The four generating stations not affected until 2000 already
burn low sulfur coal, so additional capital costs will not be
incurred for sulfur dioxide emission reduction requirements.
Beginning in 2000, these stations will be required to hold
allowances, issued by the federal government, in order to emit
sulfur dioxide. Installation of low nitrogen oxide burners is
required at one of these facilities and existing emission
monitoring systems at all four facilities will require upgrading.
The Company's remaining construction cost of this work is
estimated to be $2.1 million, of which $600,000 is budgeted for
1994 and $1.5 million for 1996.
It is anticipated that any costs incurred by the Company to
comply with the Clean Air Act legislation would be included in
the cost of service on which the Company's rates for utility
service are based.
Water Quality. Under the Federal Water Pollution Control
Act Amendments of 1972, as amended, the Company is required to
obtain National Pollutant Discharge Elimination System (NPDES)
permits to discharge effluents (including thermal discharges)
from its properties into various waterways. All NPDES permits
are subject to renewal after specified time periods not to exceed
five years. The Company has obtained all necessary NPDES permits
for its generating stations and, when such permits are expected
to expire, the Company will file applications for renewal.
Hazardous Materials and Waste Management. The Company is
investigating five properties currently owned by the Company
which were, at one time, sites of gas manufacturing plants. The
purpose of these investigations is to determine whether waste
materials are present, whether such materials constitute an
environmental or health risk, and whether the Company has any
responsibility for remedial action. One site is located in
Illinois and four sites are located in Iowa. With regard to the
Illinois property, the Company has signed a working agreement
with the Illinois Environmental Protection Agency to perform
further investigation to determine whether waste materials are
present and, if so, whether such materials constitute an
environmental or health risk. At December 31, 1993, an estimated
liability of $3.4 million has been recorded for litigation,
investigation and remediation related to the Illinois site. A
regulatory asset has been recorded reflecting anticipated cost
recovery through rates in Illinois. With regard to the Iowa
sites, no agreement or consent order has been negotiated to
perform any site investigations or remediation. Approximately
$160,000 and $170,000 has been budgeted in 1994 and 1995,
respectively, for site studies. The Company has recorded a $4
million estimated liability for the Iowa sites. A regulatory
asset has been recorded based on the current regulatory treatment
of comparable costs in Iowa. The estimated recorded liabilities
for these properties are based upon preliminary data. Thus,
actual costs could vary significantly from the estimates. In
addition, insurance recoveries for some or all of the costs may
be possible, but the liabilities recorded have not been reduced
by any estimate of such recoveries. Although the timing of
incurred costs, recoveries and the inclusion of provision for
such costs in rates may affect the results of operations in
individual periods, management believes that the outcome of these
issues will not have a material adverse effect on the Company's
financial position or results of operations.
Pursuant to the Toxic Substances Control Act, a federal law
administered by the Environmental Protection Agency, the Company
developed a comprehensive program for the use, handling, control
and disposal of all polychlorinated biphenyls (PCB's) contained
in electrical equipment. The future use of equipment containing
PCB's will be minimized. Capacitors, transformers and other
miscellaneous equipment are being purchased with a non-PCB
dielectric fluid. The Company's exposure to PCB liability has
been reduced through the orderly replacement of a number of such
electrical devices with similar non-PCB electrical devices.
An unresolved issue is whether exposure to electric and
magnetic fields (EMFs) may result in adverse health effects.
EMFs are produced by all devices carrying or using electricity,
including transmission and distribution lines and home
appliances. The Company cannot predict the effect on
construction costs of electric utility facilities if EMF
regulations were to be adopted. Although the company is not the
subject of any suit involving EMFs, litigation has been filed in
a number of jurisdictions against a variety of defendants
alleging that EMFs had an adverse effect on health. If such
litigation was successful, the impact on the Company and on the
electric utility industry generally is not predictable, but could
be significant.
<PAGE>
InterCoast Energy Company
InterCoast Energy Company (InterCoast) is a wholly owned
non-regulated subsidiary of the Company. InterCoast provides a
vehicle for the separation of such non-regulated activities from
the Company's regulated utility businesses. The non-regulated
activities emphasize energy-related diversification, credit
quality and liquidity.
InterCoast takes advantage of a core expertise in energy,
participating in the energy industry through three major areas:
oil and gas (Medallion Production Company), energy services
(InterCoast Energy Services) and financial investments
(InterCoast Capital Company).
Medallion Production Company (Medallion) is an independent
oil and gas company based in Tulsa, Oklahoma. Medallion's oil
and gas assets at December 31, 1993 and 1992 were $121 million
and $60.3 million, respectively. In September 1993, Medallion
acquired DKM Resources, Inc. The transaction totaled in excess
of $50 million and more than doubled Medallion's oil and gas
reserve base. Medallion's reserves totaled 27.6 million barrels
of oil equivalent at December 31, 1993. Principal oil and gas
production facilities are in Oklahoma, Texas, California and
Louisiana.
InterCoast Energy Services (Energy Services) consolidates
passive energy investment activities with actively managed energy
operations through development efforts and acquisitions to
provide a full spectrum of energy services. Energy Services'
assets at December 31, 1993 and 1992 were $48.8 million and $46.8
million, respectively.
Energy Services has investments in a variety of non-
regulated energy production technologies including wind, solar,
hydroelectric, and natural gas and coal-fueled generation.
Energy Services has an ownership interest in a 70 megawatt wind
plant that operates in northern California and has ownership
interests in four solar electric generating stations in southern
California's Mojave Desert. In addition, Energy Services has an
equity interest in a hydroelectric operating and development
company located in Annapolis, Maryland and is a participant in a
closed-end fund created to invest in independent power projects.
Such projects include a wood-fired plant in Maine, hydroelectric
plants in New York, wind-powered generation in California, a
waste coal plant in Pennsylvania, gas-fired cogeneration plants
in Nevada, California and New York and a coal-fired cogeneration
plant in New York. Energy Services also has equity investments
in two developing companies which produce products and services
for the electric and gas utility industries.
InterCoast Power Marketing (IPM), a subsidiary of Energy
Services, was established in October 1993. IPM has filed a
petition with FERC seeking "marketer" status under the Federal
Power Act. IPM, which acts as a broker for buyers and sellers of
wholesale electric power nationwide, seeks marketer status to be
able to directly buy and sell power. IPM will not market power
from or to the Company's system.
Tenaska Marketing Ventures (TMV), a partnership with
Tenaska, Inc., is located in Omaha, Nebraska. TMV provides a
full range of natural gas related services to industrial and
utility customers, with primary emphasis on owners of natural
gas-fired electric generation.
WindRiver Power Company, a joint venture of Energy Services
and KENETECH Windpower, was formed to develop, market and operate
wind-powered electric generation in an exclusive nine-state
midwestern region.
InterCoast Capital Company (InterCoast Capital), with
custodial and operational management based in Wilmington,
Delaware, manages InterCoast's financial investments. Such
investments consist primarily of investment grade marketable
securities. InterCoast Capital also has investments in aircraft
leases, special purpose funds and real estate. InterCoast
Capital's total financial investments at December 31, 1993 and
1992 were $332.1 million and $335 million, respectively.
InterCoast Capital's marketable securities portfolio,
totaling $233.4 million and $234.8 million at December 31, 1993
and 1992, respectively, focuses on energy securities consisting
primarily of preferred stocks issued by utility companies. All
such preferred stocks have been issued by companies having
investment grade senior debt ratings by Moody's or Standard &
Poor's. In addition to the preferred stocks, InterCoast Capital
has investments in an independently managed high-yield fund and
in the common stock of a business engaged in the exploration,
development, acquisition and production of oil and gas in off-
shore Gulf of Mexico.
InterCoast Capital has equity participations in equipment
leases for passenger and freight transport aircraft. Such
investments totaled $56.6 million and $54.6 million at December
31, 1993 and 1992, respectively. InterCoast Capital also had
invested $3.3 million and $4.2 million at December 31, 1993 and
1992, respectively, in safe harbor leases under the provisions of
the Economic Recovery Tax Act of 1981, as amended. Such safe
harbor lease transactions are considered leases for income tax
purposes only.
InterCoast Capital has equity interests in special purpose
funds that invest in venture capital and leveraged buyout
opportunities totaling $36 million and $35.7 million at December
31, 1993 and 1992, respectively.
InterCoast Capital has interests in three real estate
partnerships totaling $2.8 million and $2.7 million at December
31, 1993 and 1992, respectively.
Item 2. Properties
The Company's utility properties consist of physical assets
necessary and appropriate to rendering electric and gas service
in its service territories.
Electric property may be classified principally as
distribution, transmission or generation.
Gas property consists principally of distribution plant,
including feeder lines to communities served from natural gas
pipelines owned by others.
The following table sets forth certain information with
respect to the Company's accredited 1993 summer net generating
capacity. All electric energy generated by the Company is 60-
cycle alternating current, and the Company's generating units are
steam turbine, combustion turbine, and hydro.
<PAGE>
1993
Year Nameplate Total Summer
Placed Ratings of Nameplate Net
In Generators Rating Capacity
Station Service in KW In KW in KW Fuel
Quad-Cities 1972 207,079(1) 414,158(1) 384,750(1) Nuclear
Nuclear 207,079(1)
Power
Station
Cordova,
Illinois
Neal Station, 1975 159,445(2) 159,445(2) 149,350(2) Coal
Unit No. 3,
Sergeant
Bluff, Iowa
Council 1978 235,175(3) 235,175(3) 218,700(3) Coal
Bluffs
Station,
Unit No. 3,
Council
Bluffs, Iowa
Ottumwa 1981 134,282(4) 134,282(4) 130,980(4) Coal
Station,
Chillicothe,
Iowa
Louisa 1983 317,379(5) 317,379(5) 279,500(5) Coal
Station,
Fruitland,
Iowa
Riverside 1949 5,000 141,000 135,000 Coal-Gas
Station, 1961 136,000
Bettendorf,
Iowa
Moline 1970 4 @ 18,000 72,000 64,000 Gas-Oil
Station, 1941-42 4 @ 900 3,600 3,200 Hydro
Moline,
Illinois
Coralville 1970 4 @ 18,000 72,000 64,000 Gas-Oil
Station,
Coralville,
Iowa
1,549,039 1,429,480
(1) Company's share (25%) of jointly owned station with Edison
(operator of the station). Station has two units each
having a generator nameplate rating of 828,315 KW (920,350
KVA at 0.90 power factor).
(2) Company's share (29%) of jointly owned unit with Midwest
Power Systems Inc. (operator of the unit) and IES Utilities,
Inc. Unit has a generator nameplate rating of 549,810 KW
(610,900 KVA at 0.90 power factor).
(3) Company's share (32.4%) of jointly owned unit with Midwest
Power Systems Inc. (operator of the unit), Cedar Falls
Municipal Electric Utility, Central Iowa Power Cooperative,
Corn Belt Power Cooperative, Inc., and Atlantic Municipal
Utilities. Unit has a generator nameplate rating of 725,850
KW (806,500 KVA at 0.90 power factor).
(4) Company's share (18.5%) of jointly owned unit with IES
Utilities, Inc. (operator of the unit) and Midwest
Power Systems Inc. Unit has a generator nameplate
rating of 725,850 KW (806,500 KVA at 0.90 power
factor).
(5) Company's share (43%) of jointly owned station with
Midwest Power Systems Inc., Central Iowa Power Cooperative,
Interstate Power Company, the city of Geneseo, Illinois and
the cities of Waverly, Harlan, Tipton and Eldridge, Iowa.
Station has one unit with a generator nameplate rating of
738,090 KW (820,100 KVA at 0.90 power factor). The Company
is the operator of this station.
The electric system of the Company at December 31, 1993
included 305 miles of 345-kV transmission lines, 381 miles of
161-kV lines and 281 miles of 69-kV lines. Distribution lines
included 14,086 miles of overhead conductor and 1,457 miles of
underground conductor at December 31, 1993.
The gas distribution facilities of the Company at December
31, 1993 included 4,223 miles of gas mains.
Substantially all of the fixed utility property and
franchises of the Company, consisting principally of electric
generating plants, electric transmission and distribution lines
and systems, gas feeder and distribution lines and systems and
buildings, are subject to the lien of the Company's Indenture of
Mortgage and Deed of Trust dated as of March 1, 1947, as amended
and supplemented, relating to its First Mortgage Bonds.
The Company's principal plants and properties, insofar as
they constitute real estate, are owned in fee, except for minor
encroachments and other inconsequential defects of title not
interfering, in the opinion of counsel for the Company, with the
Company's operations or use of its property. The Company's
electric and gas distribution facilities and its electric
transmission lines (which constitute a substantial portion of the
Company's investment in physical property) are located over and
under streets, alleys, highways and other public places or on
property owned by others for which permits, grants, easements and
licenses (deemed satisfactory but without examination of
underlying land titles) have been obtained. Some of the
Company's overhead lines and appurtenant equipment are attached
to poles owned by others pursuant to contractual arrangements and
certain transformer vaults and other property are located in
buildings owned by others.
Item 3. Legal Proceedings
See Item 1. Business for discussion of rate and
environmental matters.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during the fourth quarter of 1993.
Item 4a. Executive Officers of the Registrant
Age at
Position Incumbent Dec. 31, 1993
Chairman and President S. J. Bright (a) 53
Senior Vice President W. T. Green (b) 61
Vice President T. L. Christensen (c) 60
Vice President-Finance
and Chief Financial
Officer L. E. Cooper (d) 50
Vice President B. E. Gale (e) 42
Vice President S. E. Hollonbeck (f) 43
Vice President D. J. Levy (g) 39
Vice President S. E. Shelton 46
Vice President R. W. Stepien (h) 47
Controller P. E. Burks (i) 58
Secretary and Treasurer K. M. Giger (j) 35
President and Chief
Operating Officer,
InterCoast Energy Company D. C. Heppermann (k) 50
All incumbents have held their respective positions for at
least five years, except where noted. Officers are elected
annually by the Board of Directors.
<PAGE>
(a) Elected May 1, 1991. Prior to that time Mr. Bright was
President and Chief Operating Officer (elected
effective April 1, 1990) and Vice President-Finance and
Chief Financial Officer (elected effective September 1,
1986).
(b) Mr. Green retired on January 31, 1994.
(c) Mr. Christensen retired on January 31, 1994.
(d) Elected effective October 9, 1991. Prior to that time
Mr. Cooper was Vice President-Control, Atlantic City
Electric Company.
(e) Elected effective January 23, 1992. Prior to that time
Mr. Gale was General Counsel, Associate General
Counsel, Assistant General Counsel and Attorney.
(f) Elected effective April 1, 1990. Prior to that time
Mr. Hollonbeck was Manager, Gas Department and Manager,
Gas Supply and System Design.
(g) Elected effective July 1, 1993. Prior to that time Mr.
Levy was Director, Energy Services and Director,
Marketing and Industrial Engineering.
(h) Elected effective August 15, 1990. Prior to that time
Mr. Stepien was Manager for International Parts and
Service After Market Sales of General Electric Company.
(i) Elected effective April 1, 1990. Prior to that time
Mr. Burks was Director, Accounting.
(j) Elected effective January 23, 1992. Prior to that time
Mr. Giger was Director, Corporate Tax (appointed
January 16, 1990). Previous to that position Mr. Giger
was a Senior Manager for Price Waterhouse.
(k) Elected effective June 1, 1990. Prior to that time Mr.
Heppermann was Vice President and Treasurer of Pinnacle
West Capital Corporation. Previous to that position,
he was Vice President-Finance and Administration with
Enron Corporation.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Incorporated by reference to the caption "Shareholders of
Record (1993)" on page 43 and "Stock Listings" on page 45 of the
Company's Annual Report to Shareholders for 1993. This
information is also included in Exhibit 13.A.1 to this Form 10-K.
The quarterly high and low prices for the Company's Common
Shares as reported on the New York Stock Exchange Composite
Transactions Tape for the years 1993 and 1992 are as follows:
1993 High Low 1992 High Low
1st Quarter $22.88 $19.25 1st Quarter $26.25 $23.50
2nd Quarter 23.75 22.38 2nd Quarter 25.00 23.75
3rd Quarter 26.63 23.63 3rd Quarter 24.88 23.50
4th Quarter 26.38 22.63 4th Quarter 24.75 21.38
The $1.73 per Common Share annual dividend was paid
quarterly in 1993 and 1992.
Item 6. Selected Financial Data
Incorporated by reference to the following captions for the
years 1989-1993 on page 43 of the Company's Annual Report to
Shareholders for 1993:
(1) Utility Revenues
(2) Net Income
(3) Net Income on Common Shares
(4) Common Share Statistics-Earnings per Share
(5) Total Assets
(6) Capitalization
(7) Common Share Statistics-Annual Dividend Rate at
December 31
This information is also included in Exhibit 13.A.2 to this Form
10-K.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Incorporated by reference to pages 21-25 of the Company's
Annual Report to Shareholders for 1993. This information is also
included in Exhibit 13.A.3 to this Form 10-K.
<PAGE>
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 26-42 of the Company's
Annual Report to Shareholders for 1993. This information is also
included in Exhibit 13.A.4 to this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors is incorporated by
reference to pages 2-5 of the Company's Proxy Statement dated
March 16, 1994. Information relating to executive officers is
set forth in Part I, Item 4a. of this Annual Report of Form 10-K.
Item 11. Executive Compensation
Incorporated by reference to: the third paragraph of page
5, page 6 -- "Executive Compensation" and pages 7-10 -- "Long-
Term Incentive Plan (LTIP) Awards Table", "Pension Plan",
"Supplemental Retirement Plan for Designated Officers" and
"Severance Plan" of the Company's Proxy Statement dated March 16,
1994.
Item 12. Principal Holders of Voting Securities and Security
Ownership of Management
Incorporated by reference to pages 2 and 5 of the Company's
Proxy Statement dated March 16, 1994.
Item 13. Certain Relationships and Related Transactions
NONE
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)(1) Financial Statements
The following financial statements, incorporated
herein by reference, are included in the Company's
1993 Annual Report to Shareholders:
Page No.
in 1993
Annual
Report
to Share-
holders
26 Consolidated statements of income for the three
years ended December 31, 1993
27,28 Consolidated balance sheets and statements of
capitalization as of December 31, 1993 and 1992
29,30 Consolidated statements of cash flows and retained
earnings for the three years ended December 31,
1993
31-41 Notes to consolidated financial statements
42 Independent Auditors' Report
(2) Financial statement schedules
The following schedules are included herein:
Page No.
of this
Annual
Report on
Form 10-K
31 Independent Auditors' Report - 1993
32 Report of Independent Public Accountants - 1992
33 Report of Independent Public Accountants - 1992
34 I Marketable Securities - Other Investments at
December 31, 1993.
35-37 V Utility plant at original cost including
intangibles for the years ended December 31,
1993, 1992 and 1991.
38 VI Accumulated depreciation and amortization of
utility plant, including intangibles, for the
years ended December 31, 1993, 1992 and 1991.
39 VIII Valuation and qualifying accounts for the
years ended December 31, 1993, 1992 and 1991.
40 X Supplementary income statement information
for the three years ended December 31, 1993,
1992 and 1991.
41 XIII Other Investments, at December 31, 1993.
All other schedules have been omitted as not
applicable or not required or because the
information required to be shown therein is
included in the financial statements or notes
thereto.
(3) Exhibits
See Exhibit Index on pages 44 through 49.
(b) No reports on 8-K were filed in the fourth quarter.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Iowa-Illinois Gas and Electric Company:
We have audited the consolidated financial statements of Iowa-
Illinois Gas and Electric Company as of December 31, 1993 and for
the year then ended, and have issued our report thereon dated
January 26, 1994; such financial statements and report are
included in your 1993 Annual Report to Shareholders and are
incorporated herein by reference. Our audit also included the
financial statement schedules of Iowa-Illinois Gas and Electric
Company as of and for the year ended December 31, 1993, listed in
Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion,
such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present
fairly, in all material respects, the information set forth
therein.
/s/Deloitte & Touche
Deloitte & Touche
Davenport, Iowa
January 26, 1994
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Iowa-Illinois Gas and Electric Company:
We have audited the consolidated balance sheet and statement of
capitalization of Iowa-Illinois Gas and Electric Company (an
Illinois corporation) and Subsidiary Company as of December 31,
1992, and the related consolidated statements of income, retained
earnings and cash flows for each of the two years in the period
ended December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Iowa-Illinois Gas and Electric Company and Subsidiary Company
as of December 31, 1992, and the results of their operations and
their cash flows for each of the two years in the period ended
December 31, 1992, in conformity with generally accepted
accounting principles.
/s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
January 28, 1993 <PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Iowa-Illinois Gas and Electric Company:
We have audited in accordance with generally accepted auditing
standards, the consolidated balance sheet and statement of
capitalization of Iowa-Illinois Gas and Electric Company and
Subsidiary Company as of December 31, 1992, and the related
consolidated statements of income, retained earnings and cash
flows for each of the two years in the period ended December 31,
1992, included in the Company's annual report to shareholders
incorporated by reference in this form 10-K, and have issued our
report thereon dated January 28, 1993.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules
listed in Item 14(a)(2) as of December 31, 1992, and for the two
years then ended are the responsibility of the Company's
management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of
the basic financial statements. These financial statement
schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
January 28, 1993 <PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
MARKETABLE SECURITIES - OTHER INVESTMENTS
December 31, 1993
(In Thousands)
Column A Column B Column C
Amount carried on
Type of Investment (Denotes Senior Debt Rating of Issuer) Market Value Balance Sheet (Cost)
<S> <C> <C>
Sinking fund preferred stocks <F1>
Preferred stocks (between A- and A) $ 14,751 $ 14,182
Preferred stocks (between BBB- and BBB+) 26,300 25,826
Total sinking fund preferred stocks 41,051 40,008
Adjustable rate preferred stocks 4,202 3,996
Common Stocks 7,675 3,154
Professionally managed preferred stock programs
Sinking fund preferred stocks <F1>
Preferred stocks (between A and AA+) 11,808 11,354
Preferred stocks (between A- and AA-) 35,168 33,567
Preferred stocks (between BBB and BBB+) 12,341 12,005
Perpetual preferred stocks <F1>
Preferred stocks (between AA and AA+) 24,457 23,754
Preferred stocks (A) 33,287 32,425
Preferred stocks (between A- and AA-) 18,982 18,191
Preferred stocks (between BBB and BBB+) 17,323 16,952
Futures/options 2,688 9,053
Adjustable rate preferred stocks 10,613 9,933
Money market investments 7,097 7,097
Total preferred stock programs 173,764 174,331
Mutual funds 12,421 11,897
Total marketable securities $239,113 $233,386
<FN>
<F1> Debt ratings on the preferred stocks are based on the Standard and Poor published senior debt ratings.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V
UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 1 of 3
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F
Transfers
Retirements Reclassifications
Balance Additions at at Original and Nuclear Fuel Balance
Classification Dec. 31, 1992 Original Cost Cost Amortization Dec. 31, 1993
<S> <C> <C> <C> <C> <C>
ELECTRIC PLANT
Intangible plant $2,916,248 $1,849,438 $0 ($350,653) $4,415,033
Production plant 620,465,837 26,886,892 2,947,415 29,298 644,434,612
Transmission plant 146,001,264 9,120,576 1,360,929 291,024 154,051,935
Distribution plant 262,450,311 25,701,207 3,089,668 637,189 285,699,039
General plant 49,030,617 9,815,411 2,464,717 (262,150) 56,119,161
Plant held for future use 1,987,347 592 0 0 1,987,939
Completed construction not classified 152,423,973 (19,431,623) 0 0 132,992,350
Subtotal plant in service $1,235,275,597 $53,942,493 $9,862,729 $344,708 $1,279,700,069
Construction work in progress 29,882,363 (10,764,922)<F1> 0 0 19,117,441
Total electric plant $1,265,157,960 $43,177,571 $9,862,729 $344,708 $1,298,817,510
GAS PLANT
Intangible plant $1,298,496 $1,529,099 $5,126 ($179,347) $2,643,122
Manufactured gas production plant 0 0 0 0 0
Natural gas storage plant 2,055,138 (9,762) 220,780 0 1,824,596
Distribution plant 195,862,464 13,010,949 2,436,630 61,400 206,498,183
General plant 29,371,408 5,824,540 2,544,390 (226,761) 32,424,797
Plant held for future use 0 0 0 0 0
Completed construction not classified 23,988,513 (4,423,987) 0 0 19,564,526
Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $260,962,918 $15,930,839 $5,206,926 ($344,708) $271,342,123
Construction work in progress 2,658,776 1,014,656 <F1> 0 0 3,673,432
Total gas plant $263,621,694 $16,945,495 $5,206,926 ($344,708) $275,015,555
NUCLEAR FUEL , NET $38,114,457 $6,794,284 $0 ($19,789,105)<F2> $25,119,636
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,566,894,111 $66,917,350 $15,069,655 ($19,789,105) $1,598,952,701
INCLUDING INTANGIBLES
<FN>
( ) Denotes negative figure
<F1> Net of transfers to plant-in-service.
<F2> Of this amount $7,989,105 represents amortization of nuclear fuel.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V
UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 2 of 3
FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F
Transfers
Retirements Reclassifications
Balance Additions at at Original and Nuclear Fuel Balance
Classification Dec. 31, 1991 Original Cost Cost Amortization Dec. 31, 1992
<S> <C> <C> <C> <C> <C>
ELECTRIC PLANT
Intangible plant $1,926,133 $991,100 $0 ($985) $2,916,248
Production plant 617,462,336 3,808,724 841,678 36,455 620,465,837
Transmission plant 149,089,601 827,825 3,916,162 0 146,001,264
Distribution plant 255,091,214 10,883,624 3,634,170 109,643 262,450,311
General plant 46,836,890 4,140,292 2,123,099 176,534 49,030,617
Plant held for future use 2,092,985 0 0 (105,638) 1,987,347
Completed construction not classified 138,841,932 13,582,041 0 0 152,423,973
Subtotal plant in service $1,211,341,091 $34,233,606 $10,515,109 $216,009 $1,235,275,597
Construction work in progress 20,006,999 9,875,364 <F1> 0 0 29,882,363
Total electric plant $1,231,348,090 $44,108,970 $10,515,109 $216,009 $1,265,157,960
GAS PLANT
Intangible plant $1,028,978 $269,361 $828 $985 $1,298,496
Manufactured gas production plant 0 0 0 0 0
Natural gas storage plant 2,189,268 59,714 193,844 0 2,055,138
Distribution plant 185,620,377 11,858,709 1,616,622 0 195,862,464
General plant 27,899,506 3,600,517 1,911,620 (216,995) 29,371,408
Plant held for future use 0 0 0 0 0
Completed construction not classified 20,208,834 3,779,679 0 0 23,988,513
Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $245,333,862 $19,567,980 $3,722,914 ($216,010) $260,962,918
Construction work in progress 1,506,055 1,152,721 <F1> 0 0 2,658,776
Total gas plant $246,839,917 $20,720,701 $3,722,914 ($216,010) $263,621,694
NUCLEAR FUEL, NET $24,861,269 $21,112,676 $0 ($7,859,488)<F2> $38,114,457
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,503,049,276 $85,942,347 $14,238,023 ($7,859,489) $1,566,894,111
INCLUDING INTANGIBLES
<FN>
( ) Denotes negative figure
<F1> Net of transfers to plant-in-service.
<F2> Represents amortization of nuclear fuel.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY SCHEDULE V
UTILITY PLANT AT ORIGINAL COST INCLUDING INTANGIBLES Page 3 of 3
FOR THE YEAR ENDED DECEMBER 31, 1991
Column A Column B Column C Column D Column E Column F
Transfers
Retirements Reclassifications
Balance Additions at at Original and Nuclear Fuel Balance
Classification Dec. 31, 1990 Original Cost Cost Amortization Dec. 31, 1991
<S> <C> <C> <C> <C> <C>
ELECTRIC PLANT
Intangible plant $1,420,908 $514,164 $8,608 ($331) $1,926,133
Production plant 614,105,105 4,254,208 936,977 40,000 617,462,336
Transmission plant 145,661,188 3,727,377 298,964 0 149,089,601
Distribution plant 245,946,002 11,091,025 1,945,813 0 255,091,214
General plant 48,810,136 3,043,276 5,901,407 884,885 46,836,890
Plant held for future use 2,079,300 13,685 0 0 2,092,985
Completed construction not classifie 115,944,841 22,897,091 0 0 138,841,932
Subtotal plant in service $1,173,967,480 $45,540,826 $9,091,769 $924,554 $1,211,341,091
Construction work in progress 24,415,554 (4,408,555)<F1> 0 0 20,006,999
Total electric plant $1,198,383,034 $41,132,271 $9,091,769 $924,554 $1,231,348,090
GAS PLANT
Intangible plant $426,929 $610,669 $8,951 $331 $1,028,978
Manufactured gas production plant 0 0 0 0 0
Natural gas storage plant 2,366,024 0 176,756 0 2,189,268
Distribution plant 180,047,651 7,017,432 1,444,706 0 185,620,377
General plant 28,127,405 3,342,406 2,645,420 (924,885) 27,899,506
Plant held for future use 15,054 0 15,054 0 0
Completed construction not classifie 15,442,189 4,766,645 0 0 20,208,834
Gas leases 8,386,899 0 0 0 8,386,899
Subtotal plant in service $234,812,151 $15,737,152 $4,290,887 ($924,554) $245,333,862
Construction work in progress 2,885,135 (1,379,080)<F1> 0 0 1,506,055
Total gas plant $237,697,286 $14,358,072 $4,290,887 ($924,554) $246,839,917
NUCLEAR FUEL, NET $27,530,404 $6,162,571 $0 ($8,831,706)<F2> $24,861,269
TOTAL UTILITY PLANT, AT ORIGINAL COST $1,463,610,724 $61,652,914 $13,382,656 ($8,831,706) $1,503,049,276
INCLUDING INTANGIBLES
<FN>
( ) Denotes negative figure
<F1> Net of transfers to plant-in-service.
<F2> Represents amortization of nuclear fuel.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
ACCUMULATED DEPRECIATION AND AMORTIZATION OF UTILITY PLANT, INCLUDING INTANGIBLES SCHEDULE VI
Column A Column B Column C Column D Column E Column F
Retirements Other
Removal
Balance Additions Cost and Charged to Balance
Beginning Charged to At Original Salvage Clearing Transfers and End
Description of Period Expense Cost (Net) Accounts Reclassifications of Period
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Plant$451,247,134 $42,434,588 ($9,903,767) ($4,301,836) $1,995,610 $1,705,508 $483,177,237
Gas Plant 117,856,373 8,267,962 (4,990,383) (950,654) 2,155,942 191,929 122,531,169
$569,103,507 $50,702,550 ($14,894,150) ($5,252,490) $4,151,552 $1,897,437 $605,708,406
YEAR ENDED DECEMBER 31, 1992
Electric Plant$422,229,994 $41,267,627 ($10,149,241) ($4,439,135) $1,875,826 $462,063 $451,247,134
Gas Plant 111,962,076 7,704,834 (3,065,145) (668,805) 1,808,191 115,222 117,856,373
$534,192,070 $48,972,461 ($13,214,386) ($5,107,940) $3,684,017 $577,285 $569,103,507
YEAR ENDED DECEMBER 31, 1991
Electric Plant$391,120,876 $39,593,000 ($8,705,501) ($2,180,464) $1,895,002 $507,081 $422,229,994
Gas Plant 108,259,227 7,205,583 (4,099,077) (102,873) 1,470,951 (771,735) 111,962,076
$499,380,103 $46,798,583 ($12,804,578) ($2,283,337) $3,365,953 ($264,654) $534,192,070
<FN>
( ) Denotes negative figure.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Balance Additions Balance
Beginning Charged to End of
Description of Period Income Deductions Period
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C>
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS:
Uncollectible Accounts $1,171,314 $882,951 ($889,268) $1,164,997
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS:
Property Insurance 2,426,440 134,845 2,561,285
Injuries and Damages 741,663 591,998 (359,122) 974,539
YEAR ENDED DECEMBER 31, 1992
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS:
Uncollectible Accounts $1,149,069 $825,283 ($803,038) $1,171,314
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS:
Property Insurance 2,605,000 43,000 (221,560) 2,426,440
Injuries and Damages 795,943 671,860 (726,140) 741,663
YEAR ENDED DECEMBER 31, 1991
ACCUMULATED PROVISION DEDUCTED FROM APPLICABLE ASSETS:
Uncollectible Accounts $1,099,930 $1,290,492 ($1,241,353) $1,149,069
ACCUMULATED PROVISIONS NOT DEDUCTED FROM ASSETS:
Property Insurance 2,805,000 (200,000) 2,605,000
Injuries and Damages 1,105,681 480,112 (789,850) 795,943
/TABLE
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE X
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
SUPPLEMENTARY INCOME STATEMENT INFORMATION
The amounts of maintenance and repairs, depreciation, taxes other than income taxes, royalties
and advertising costs, other than those set forth in the Consolidated Statements of Income or
mentioned below, are not significant.
Column B
Column A Charged to Costs and Expenses
Item Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Real and personal property taxes $20,230,469 $21,744,317 $20,258,618
Illinois utility taxes 6,631,286 5,970,291 6,338,327
/TABLE
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE XIII
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANY
OTHER INVESTMENTS
December 31, 1993
(In Thousands)
Column A Column B Column C
Original
Cost of Each Amount Carried
Type of Investment <F1> <F2> Investment on Balance Sheet
<S> <C> <C>
Oil and gas properties
Exploratory $ 29,251 $ 29,251
Developmental 18,768 18,768
Reserve Acquisition 98,737 98,737
Accumulated depreciation, depletion
and amortization (25,804)
Total oil and gas properties 146,756 120,952
Energy projects 31,949 30,185
Synergics, Inc. 16,448 13,410
Equity investments in developing companies 4,019 4,019
Tenaska Marketing Ventures 1,747 1,163
Equipment leases
Leveraged leases
Boeing 737-300 passenger aircraft leased
to United Airlines (two aircraft) 15,878 23,082
Boeing 747-200F airfreighter leased
to Federal Express Corporation 17,021 23,760
British Aerospace 146-200 aircraft leased
to Jet Acceptance Corporation (two aircraft) 7,208 9,772
Safe harbor leases involving mass transit equipment 9,478 3,323
Total equipment leases 49,585 59,937
Special purpose funds 26,544 23,295
Collateralized bond obligations 8,160 12,726
Real estate 6,941 2,756
Total other investments $292,149 $268,443
<FN>
<F1> Number of shares or units is not assignable to these investments.
<F2> Market values are either not readily available or approximate the carrying amounts.
/TABLE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
March 25, 1994 By /s/L. E. Cooper
L. E. Cooper
Vice President-Finance and CFO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/S. J. Bright Chairman, President, Chief
S. J. Bright Executive Officer and Director
(Principal executive officer) March 25, 1994
/s/L. E. Cooper Vice President-Finance, Chief
L. E. Cooper Financial Officer and Director
(Principal financial officer) March 25, 1994
/s/P. E. Burks Controller March 25, 1994
P. E. Burks (Principal accounting officer)
/s/John W. Colloton Director March 25, 1994
John W. Colloton
/s/Frank S. Cottrell Director March 25, 1994
Frank S. Cottrell
/s/William C. Fletcher Director March 25, 1994
William C. Fletcher
/s/Mel Foster, Jr. Director March 25, 1994
Mel Foster, Jr.
Signature Title Date
/s/Nancy L. Seifert Director March 25, 1994
Nancy L. Seifert
/s/S. E. Shelton Director March 25, 1994
S. E. Shelton
/s/W. Scott Tinsman Director March 25, 1994
W. Scott Tinsman
/s/L. L. Woodruff Director March 25, 1994
Leonard L. Woodruff
Exhibit Index
Certain Exhibits previously filed with the Commission are
indicated as set forth below. Such Exhibits are incorporated
herein by reference. The file number for the Company's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q is
1-3573.
Previously Filed
File No. or As
Exhibit description Exhibit
No. of Report No. Description of Document
3.A -- -- First Restated Articles of
Incorporation of Iowa-Illinois
Gas and Electric Company.
3.B -- -- By-laws as amended through April
25, 1991.
4.B.1 2-6922 7B Indenture of Mortgage and Deed of
Trust dated as of March 1, 1947.
4.B.2 2-6922 7C Supplemental Indenture dated as
of March 1, 1947.
4.B.3 2-8112 7B Second Supplemental Indenture
dated as of October 1, 1949.
4.B.4 2-9990 4.04 Third Supplemental Indenture
dated as of January 15, 1953.
4.B.5 2-62330 2.03E Resignation and appointment of
successor Individual Trustee.
4.B.6 2-17786 2.06 Fourth Supplemental Indenture
dated as of April 15, 1960.
4.B.7 2-26675 2.07 Fifth Supplemental Indenture
dated as of May 1, 1961.
4.B.8 2-28806 2.08 Sixth Supplemental Indenture
dated as of July 1, 1967.
4.B.9 2-34089 2.10 Seventh Supplemental Indenture
dated as of April 1, 1969.
4.B.10 2-38102 2.10 Eighth Supplemental Indenture
dated as of August 15, 1969.
4.B.11 2-38102 2.12 Ninth Supplemental Indenture
dated as of September 1, 1970.
4.B.12 2-45994 2.04L Resignation and appointment of
successor Individual Trustee.
4.B.13 2-53814 2.03M.2 Tenth Supplemental Indenture
dated as of June 15, 1975.
4.B.14 2-55527 2.03N.1 Eleventh Supplemental Indenture
dated as of March 15, 1976.
4.B.15 2-57912 2.03O.1 Twelfth Supplemental Indenture
dated as of January 15, 1977.
4.B.16 2-58838 2.03P Thirteenth Supplemental Indenture
dated as of October 1, 1977.
4.B.17 2-62330 2.03Q.1 Fourteenth Supplemental Indenture
dated as of September 1, 1979.
4.B.18 2-66779 2.03R Fifteenth Supplemental Indenture
dated as of July 15, 1979.
4.B.19 2-66779 2.03S Sixteenth Supplemental Indenture
dated as of January 15, 1980.
4.B.20 2-68600 2.03T Seventeenth Supplemental
Indenture dated as of June 15,
1980.
4.B.21 10-K for yr. 4.B.21 Eighteenth Supplemental Indenture
ended 12/31/80 dated as of February 15, 1981.
4.B.22 10-K for yr. 4.B.22 Nineteenth Supplemental Indenture
ended 12/31/81 dated as of October 1, 1981.
4.B.23 10-Q for qtr. 4.B.23 Twentieth Supplemental Indenture
ended 6/30/82 dated as of May 1, 1982.
4.B.24 10-Q for qtr. 4.B.24 Twenty-First Supplemental
ended 6/30/82 Indenture dated as of July 1,
1982.
4.B.25 10-K for year 4.B.25 Twenty-Second Supplemental
ended 12/31/83 Indenture dated as of February
15, 1984.
4.B.26 10-K for year 4.B.26 Twenty-Third Supplemental
ended 12/31/84 Indenture dated as of November 1,
1984.
4.B.27 10-Q for qtr. 4.B.27 Twenty-Fourth Supplemental
ended 9/30/85 Indenture dated as of September
1, 1985.
4.B.28 10-Q for qtr. 4.B.28 Twenty-Fifth Supplemental
ended 9/30/86 Indenture dated as of September
15, 1986.
4.B.29 10-K for year 4.B.29 Twenty-Sixth Supplemental
ended 12/31/86 Indenture dated as of February
15, 1987.
4.B.30 Reg. No. 4.B.30 Resignation and Appointment of
33-39211 successor Individual Trustee
4.B.31 Current report 4.31.A Twenty-Seventh Supplemental
on Form 8-K Indenture dated as of October 1,
dated 10/1/91 1991.
4.B.32 Current report 4.31.B Twenty-Eighth Supplemental
on Form 8-K Indenture dated as of May 15,
dated 5/21/92 1992.
4.B.33 Current report 4.32.A Twenty-Ninth Supplemental
on Form 8-K Indenture dated as of March 15,
dated 3/24/93 1993.
4.B.34 Current report 4.34.A Thirtieth Supplemental Indenture
on Form 8-K dated as of October 1, 1993.
dated 10/7/93
10.A.1 2-62331 5.01A Quad-Cities Station Ownership
Agreement dated as of March 17,
1967 between the Company and
Commonwealth Edison Company.
10.A.2 2-45994 5.01B Amendment No. 1 dated as of April
20, 1972 to Quad-Cities Station
Ownership Agreement and Quad-
Cities Operating Agreement.
10.A.3 2-45994 5.02 Quad-Cities Operating Agreement
dated as of November 24, 1967
between the Company and
Commonwealth Edison Company.
10.B 2-45994 5.03 Agreement dated February 2, 1971
re Unit 3 George Neal Generating
Station between the Company, Iowa
Power and Light Company, Iowa
Southern Utilities Company and
Iowa Public Service Company.
10.C 2-45994 5.04 Transmission Facilities Agreement
dated July 28, 1972 between the
Company, Iowa Power and Light
Company, Iowa Southern Utilities
Company and Iowa Public Service Co.
10.D 2-45994 5.07 Financing Agreement dated as of
April 15, 1972 among the Company,
The First National Bank of Saint
Paul, First National Bank of
Muscatine, the institutions named
in Section 2 thereof and United
States Trust Company of New York.
10.E 10-K for yr. 10.E Mid-Continent Area Power Pool
ended 12/31/81 Agreement as amended through
Amendment No. 14 effective May 1,
1982.
10.F.1 2-49376 5.08 Agreement dated July 31, 1973 re
Unit 3 Council Bluffs Generating
Station between the Company,
Cedar Falls Municipal Electric
Utility, Central Iowa Power
Cooperative, Inc., Corn Belt
Power Co-operative, Inc., Eastern
Iowa Light and Power Cooperative
Inc. and Iowa Power and Light Co.
10.F.2 2-57912 5.08B Amendment No. 1 to Council Bluffs
Generating Station Unit 3 Agree-
ment, dated January 31, 1975.
10.F.3 2-57912 5.08C Amendment No. 2 to Council Bluffs
Generating Station Unit 3 Agree-
ment, dated September 5, 1975.
10.G 2-53814 5.09 Agreement dated April 16, 1975 re
Unit 1 Ottumwa Generating Station
between the Company, Iowa Power
and Light Company, Iowa Southern
Utilities Company and Iowa Public
Service Company.
10.H.1 2-53814 5.10 Ownership Agreement dated as of
August 15, 1974 re Units 1 and 2
Carroll County Station among the
Company, Commonwealth Edison
Company and Interstate Power
Company.
10.H.2 2-53814 5.11 Operating Agreement dated as of
August 15, 1974 re Units 1 and 2
Carroll County Station among the
Company, Commonwealth Edison
Company and Interstate Power
Company.
10.I.1 2-58838 5.12 Agreement dated October 4, 1977
re Unit 1 Louisa Generating
Station among the Company, Iowa
Power and Light Company, Iowa
Public Service Company, Eastern
Iowa Light and Power Cooperative
and City of Tipton.
10.I.2 10-K for yr. 10.J.2 Amendment No. 1 to Unit 1 Louisa
ended 12/31/80 Generating Station Agreement,
dated May 23, 1980.
10.I.3 10-K for yr. 10.I.3 Amendment No. 2 to Unit 1 Louisa
ended 13/31/82 Generating Station Agreement,
dated April 26, 1982.
10.I.4 10-K for yr. 10.I.4 Amendment No. 3 to Unit 1 Louisa
ended 12/31/82 Generating Station Agreement,
dated February 2, 1983.
10.I.5 10-K for yr. 10.I.5 Amendment No. 4 to Unit 1 Louisa
ended 12/31/83 Generating Station Agreement,
dated May 26, 1983.
10.I.6 10-K for yr. 10.I.6 Amendment No. 5 to Unit 1 Louisa
ended 12/31/83 Generating Station Agreement
dated October 11, 1983.
10.I.7 10-K for year 10.I.7 Amendment No. 6 to Unit 1 Louisa
ended 12/31/85 Generating Station Agreement
dated May 29, 1985.
10.J.1 Current report II Rights Agreement dated as of
on Form 8-K February 25,1992 between the
dated 2/26/92 Company and First Chicago
Trust Company of New York, as
Rights Agent
10.K.1* -- -- Severance Plan In The Event Of A
Change In Control, as amended as
of July 1, 1993
10.K.2* -- -- Supplemental Retirement Plan for
Principal Officers, as amended as
of July 1, 1993
10.K.3* -- -- Compensation Deferral Plan for
Principal Officers, as amended as
of July 1, 1993
10.K.4* 10-K for year 10.K.4 Board of Directors' Compensation
ended 12/31/92 Deferral Plan
10.K.5* 10-K for year 10.K.5 Trust Agreement
ended 12/31/92
10.K.6* -- -- Key Employee Sustained
Performance Plan
10.L.1 10-K for year 10.L.1 Employee Stock Purchase Plan
ended 12/31/92
13.A.1 -- -- "Shareholders of Record (1993)"
appearing on page 43 and "Stock
Listing" appearing on page 45 of
the Company's Annual Report to
Shareholders for 1993,
incorporated by reference into
Item 5 of this Form 10-K.
13.A.2 -- -- "Utility Revenues," "Net Income,"
"Net Income on Common Shares,"
"Common Share Statistics--
Earnings per Share," "Total
Assets," "Capitalization" and
"Common Share Statistics--Annual
Dividend Rate at December 31" for
the years 1989-1993, appearing on
page 43 of the Company's Annual
Report to Shareholders for 1993,
incorporated by reference into
Item 6 of this Form 10-K.
13.A.3 -- -- "Management's Discussion and
Analysis of Financial Condition
and Results of Operations,"
appearing on pages 21-25 of the
Company's Annual Report to
Shareholders for 1993,
incorporated by reference into
Item 7 of this Form 10-K.
13.A.4 -- -- "Financial Statements and
Supplementary Data," appearing on
pages 26-42 of the Company's
Annual Report to Shareholders for
1993, incorporated by reference
into Items 1(b), 8 and 14(a)(1)
of this Form 10-K.
21 -- -- Subsidiaries of the Registrant.
23.A -- -- Consent of Deloitte & Touche.
23.B -- -- Consent of Arthur Andersen.
* Compensatory Plan or Arrangement for Directors or Executive
Officers of the Company.
First Restated Articles Of Incorporation
Of
Iowa-Illinois Gas and Electric Company
As Restated on January 27, 1994; Original
Articles Of Incorporation Filed February 13, 1940.
ARTICLE ONE
The name of this corporation is Iowa-Illinois Gas and Electric
Company. The corporation was incorporated as Peoples Light and
Power Company on February 13, 1940. On October 17, 1941, the
name was changed to Iowa-Illinois Gas and Electric Company.
ARTICLE TWO
The address of the registered office of the corporation in the
State of Illinois at the time of restatement is 716 Seventeenth
Avenue, in the City of Moline, County of Rock Island, and the
name of its registered agent at said address at the time of
restatement is Gretta R. Knight.
ARTICLE THREE
The duration of the corporation is perpetual.
ARTICLE FOUR
The purposes for which the Corporation is organized is the
transaction of any or all lawful businesses for which
corporations may be incorporated under The Business Corporation
Act of the State of Illinois.
ARTICLE FIVE
The aggregate number of shares which the corporation is
authorized to issue is divided into three classes as follows:
400,000 Preferred Shares of the par value of $100 per
share (the Preferred Shares);
2,386,250 Preference Shares without par value (the
Preference Shares);
80,000,000 Common Shares of the par value of $1 per share
(the Common Shares).
<PAGE>
The preferences, qualifications, limitations, restrictions
and the special or relative rights in respect of the shares of
each class are as follows:
DIVISION I
Provisions Relating to Preferred Shares
(A) Issue in Series. The Preferred Shares may be divided
into and issued in series, each of which series shall
be so designated as to distinguish the shares thereof
from the shares of all other series and classes.
Authority is hereby expressly vested in the Board of
Directors to divide any or all of the Preferred
Shares from time to time authorized into series, to
fix the designation of each such series and, subject
to the limitations stated herein or imposed by law,
to fix and determine the following relative rights
and preferences of shares of each such series:
(1) the rate of dividend for shares for such series;
(2) the price at and the terms and conditions on
which such shares may be redeemed;
(3) the amount payable upon such shares in event of
voluntary liquidation;
(4) sinking fund provisions for the redemption or
purchase of such shares, provided, however, that
the Board of Directors shall not create a
sinking fund in respect of any series unless
provision for a sinking fund at least as
beneficial to all issued and outstanding shares
of the same class shall either then exist or be
at the same time created; and
(5) the terms and conditions on which such shares
may be converted, if the shares of such series
are issued with the privilege of conversion.
(B) Dividends. The holders of Preferred Shares of each
series shall be entitled to receive, when and as
declared by the Board of Directors from funds legally
available for the payment thereof, dividends at the
rate fixed for such series, and no more, payable
quarterly on the first day of each of the months of
February, May, August and November (the quarterly
dividend payment dates), in each case with respect to
the quarterly period ending on the day prior to such
quarterly dividend payment date.
<PAGE>
Such dividends shall accrue and be cumulative with
respect to each share of each series from and
including the date of issue thereof.
No dividend shall be declared on the shares of any
series of Preferred Shares in respect of the
accumulations for any quarterly dividend period or
portion thereof unless dividends shall likewise be or
have been declared with respect to accumulations on
all then outstanding Preferred Shares of each other
series for the same period or portion thereof. The
ratios of the dividends declared to dividends
accumulated with respect to any quarterly dividend
period on the Preferred Shares of each series
outstanding shall be identical. Accumulations of
dividends shall not bear interest.
So long as any Preferred Shares are outstanding, no
dividend shall be paid or declared, or other
distribution made, on Junior Shares, nor shall any
Junior Shares be purchased, redeemed, retired or
otherwise acquired for a consideration if
Preferential Dividends on outstanding Preferred
Shares for the current and all past quarterly
dividend periods or portions thereof shall not have
been paid, or declared and set apart for payment, or
if the Corporation shall be in default or deficient
under any requirement of a sinking fund established
with respect to outstanding Preferred Shares of any
series for any period then elapsed; provided,
however, that the restrictions of this paragraph
shall not apply to the declaration and payment of
dividends on Junior Shares if payable solely in
Junior Shares, nor to the acquisition of any Junior
Shares through the application of the proceeds of any
Junior Shares sold at or about the time of such
acquisition, nor shall such restrictions prevent the
transfer of any amount from surplus to stated
capital.
(C) Liquidation Preferences. In the event of involuntary
dissolution, liquidation or winding up of the
Corporation, the holders of Preferred Shares of each
series outstanding shall be entitled to receive out
of the assets of the Corporation an amount per share
equivalent to the par value thereof, plus an amount
equivalent to Preferential Dividends at the rate
fixed and determined for such series accrued and
unpaid to the date fixed for payment, but no more.
In the event of voluntary dissolution, liquidation or
winding up of the Corporation, the holders of
Preferred Shares of each series outstanding shall be
entitled to receive out of the assets of the
Corporation such amount per share as shall have been
fixed and determined for such series by the Board of
Directors, plus an amount equivalent to Preferential
Dividends at the rate fixed and determined for such
series accrued and unpaid to the date fixed for
payment, but no more.
Until payment to the holders of outstanding Preferred
Shares as aforesaid, or until moneys or other assets
sufficient for such payment shall have been set apart
for payment by the Corporation, separate and apart
from its other funds and assets for the account of
such holders so as to be and continue to be available
for payment to such holders, no payment or
distribution shall be made to holders of Junior
Shares in connection with or upon such dissolution,
liquidation or winding up.
Neither a consolidation nor merger of the Corporation
with or into any other corporation, nor a merger of
any other corporation into the Corporation, nor the
purchase or redemption of all or any part of the
outstanding shares of any class or classes of the
Corporation, nor the sale or transfer of the property
and business of the Corporation as or substantially
as an entirety, shall be construed to be a
dissolution, liquidation or winding up of the
Corporation within the meaning of the foregoing
provisions.
(D) Redemptions. The Corporation may at its option
expressed by vote of the Board of Directors, at any
time or from time to time, redeem the whole or any
part of the Preferred Shares, or of any series
thereof, at the redemption price or prices at the
time in effect, any such redemption of Preferred
Shares to be at such time and at such place in the
City of Chicago, State of Illinois, as shall likewise
be determined by vote of the Board of Directors.
Notice of any proposed redemption of Preferred Shares
shall be given by the Corporation by mailing a copy
of such notice, not more than 40 nor less than 30
days prior to the time fixed for redemption, to the
holders of record of Preferred Shares to be redeemed,
at their respective addresses then appearing on the
books of the Corporation. It shall not be necessary
that the holders of record of any Preferred Shares to
be redeemed shall actually have received notice of
redemption thereof, provided the same shall have been
mailed as aforesaid. In case less than all of the
Preferred Shares of any series are to be redeemed,
the shares so to be redeemed shall be determined by
lot in such manner as may be prescribed by the Board
of Directors, and the certificates evidencing such
shares shall be specified by number in the notice of
such redemption. By the time so fixed for
redemption, the Corporation shall, and at any time
within 40 days prior to such time may, deposit in
trust, for the account of the holders of Preferred
Shares to be redeemed, funds necessary for such
redemption with a bank or trust company in good
standing, organized under the laws of the United
States of America or of the State of Illinois,
located in the City of Chicago, Illinois, and having
a combined capital, surplus and undivided profits of
at least $5,000,000, which shall be designated in
such notice of redemption. Notice of redemption
having been mailed and funds necessary for such
redemption having been deposited as aforesaid so that
such funds shall be forthwith available to holders of
Preferred Shares to be redeemed upon surrender of
certificates evidencing such shares, then,
notwithstanding that the time fixed for such
redemption as aforesaid may not yet have occurred or
the certificates evidencing shares to be redeemed may
not have been surrendered for cancellation,
nevertheless all shares to be redeemed shall be
deemed no longer to be outstanding for any purpose,
and all voting and other rights with respect to such
shares shall thereupon cease and terminate, excepting
only the right of the holders of the certificates for
such shares to receive, out of funds so deposited in
trust, the redemption funds, without interest, to
which they are entitled, and the right to exercise
any privilege of conversion not theretofore expiring,
the Corporation to be entitled to the return of any
funds deposited for redemption of shares converted
pursuant to such privilege. Any interest accrued on
funds so deposited shall be paid to the Corporation
from time to time. In case the holder of Preferred
Shares which shall have been called for redemption
shall not, within six years after the redemption
date, claim the amount deposited with respect to the
redemption of such shares, the bank or trust company
in which such deposit was made shall upon demand pay
over to the Corporation such unclaimed amount and
thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof to
such holder.
(E) Repurchases; Limitations on Reacquisitions. Subject
to applicable law and the provisions of this Division
I, the Corporation may from time to time purchase or
otherwise acquire outstanding Preferred Shares at a
price per share not exceeding the amount at the time
payable in the event of redemption thereof otherwise
than through the operation of the applicable sinking
fund, if any.
No Preferred Shares shall be purchased, redeemed,
retired or otherwise acquired for a valuable
consideration if all accumulations of dividends on
the Preferred Shares of all series for all past
quarterly dividend periods or portions thereof shall
not have been paid, or declared and a sum sufficient
for the payment thereof set apart, or if the
Corporation shall be in default or deficient under
any requirement of a sinking fund established with
respect to outstanding Preferred Shares of any series
for any period then elapsed.
(F) Restrictions on Certain Corporate Action.
(1) The Corporation shall not, without the consent
(given by vote at an annual meeting or a special
meeting called for that purpose) of the holders
of at least a majority of the total number of
Preferred Shares then outstanding, issue any
bonds, notes, debentures or other securities
representing indebtedness, or assume any such
indebtedness, other than:
(a) indebtedness with a maturity not more than
12 months from date of issue (short-term
indebtedness) up to an aggregate at any
time outstanding which does not exceed 10%
of the sum of items (d) and (e)below,
(b) indebtedness issued for purposes of the
refunding, reacquisition, redemption or
other retirement of any outstanding
indebtedness theretofore issued or assumed
by the Corporation with a maturity date
beyond 12 months from date of issue of the
indebtedness being refunded, reacquired,
redeemed or retired, or
(c) indebtedness issued for purposes of the
reacquisition, redemption or other
retirement of all or any part of
outstanding Preferred Shares, Parity Shares
or Senior Shares,if, after giving effect to
such issue or assumption, the total
principal amount of all bonds, notes,
debentures or other securities representing
indebtedness issued or assumed by the
Corporation to be outstanding (but
excluding short-term indebtedness, as above
defined, in an amount not exceeding 10% of
the sum of items (d) and (e) below) would
exceed 65% of the aggregate of
<PAGE>
(d) the total principal amount of all bonds,
notes, debentures or other securities
representing indebtedness maturing in more
than 12 months from date of issue issued or
assumed by the Corporation and then to be
outstanding, and
(e) the capital and surplus of the Corporation
as then to be stated on the books of
account of the Corporation.
(2) The Corporation shall not, without the consent
(given by vote at an annual meeting or a special
meeting called for that purpose) of the holders
of at least two-thirds of the total number of
Preferred Shares then outstanding, issue, sell
or otherwise dispose of any additional Preferred
Shares, or any Parity Shares or Senior Shares,
unless the gross income of the Corporation
determined in accordance with such system of
accounts as may be prescribed by governmental
authorities having jurisdiction in the premises,
or, in the absence thereof, in accordance with
sound accounting practices (but in any event
after deducting the amount charged by the
Corporation on its books for depreciation
expense and all taxes), for a period of 12
consecutive calendar months within the 15
calendar months immediately preceding the
issuance, sale or disposition of such shares
available for the payment of interest shall have
been at least 1 1/2 times the sum of (a) the
annual interest charges on all interest-bearing
indebtedness of the Corporation and (b) the
annual dividend requirement on all outstanding
Preferred Shares, Parity Shares and Senior
Shares, including the shares proposed to be
issued; provided that there shall be excluded
from the foregoing computation interest charges
on all indebtedness and dividends on all shares
which are to be retired in connection with the
issue of such additional Preferred Shares,
Parity Shares or Senior Shares. In determining
such gross income, the Board of Directors shall
make such adjustment, by way of increase or
decrease in such gross income, as shall, in its
opinion, be necessary to give effect, for the
entire 12 months for which such gross income is
determined, to any acquisition or disposition of
property the income from which can be separately
ascertained.
(G) Preemptive Rights. No holder of Preferred Shares
shall have any preemptive right to subscribe for or
acquire additional shares of the Corporation of the
same or any other class, whether such shares are now
or hereafter authorized.
(H) Cancellation. Except as may otherwise be provided in
this Article Five or in any resolution of the Board
of Directors providing for the issue of any
particular series of Preferred Shares, Preferred
Shares redeemed or otherwise retired by the
Corporation may be reissued in the same manner as
authorized but unissued Preferred Shares undesignated
as to series until and unless canceled pursuant to
applicable law.
(I) Definitions. In this Division I and in any
resolution of the Board of Directors adopted pursuant
to this Division I establishing a series of Preferred
Shares and fixing the designation and terms thereof,
the meanings below assigned shall control:
"Senior Shares" shall mean shares of any class
ranking prior to Preferred Shares as to dividends or
upon the dissolution, liquidation or winding up of
the Corporation.
"Parity Shares" shall mean shares of any class
ranking on a parity with, but not prior to, Preferred
Shares as to dividends or upon the dissolution,
liquidation or winding up of the Corporation.
"Junior Shares" shall mean shares of any class
ranking subordinate to Preferred Shares both as to
dividends and upon the dissolution, liquidation or
winding up of the Corporation, including Preference
Shares and Common Shares.
"Preferential Dividends" accrued and unpaid on a
Preferred Share to any particular date shall mean an
amount per share at the annual dividend rate
applicable to such share for the period beginning
with the date from and including which dividends on
such share are cumulative and concluding with the day
prior to such particular date, less the aggregate of
all dividends paid with respect to such share during
such period.
DIVISION II
Provisions Relating to Preference Shares
(A) Issue in Series. The Preference Shares may be
divided into and issued in series, each of which
shall be so designated as to distinguish the shares
thereof from the shares of all other series and
classes. Authority is hereby expressly vested in the
board of directors to divide any or all of the
Preference Shares from time to time authorized into
series, to fix the designation of each such series
and, subject to the limitations stated herein or
imposed by law, to fix and determine the following as
to each such series:
(1) the dividend rate or rates for the shares of
such series, or the facts ascertainable outside
the Articles of Incorporation of the
Corporation, or the resolution of the board of
directors establishing such series, providing
the basis for determining such dividend rate or
rates, which may vary according to a formula
based upon market rates or rating agency ratings
for such series or other designated securities
and/or be determined periodically by auctions,
remarketing or other methods, but only if the
manner in which such facts are to operate upon
such dividend rate or rates shall be clearly and
expressly set forth in such Articles of
Incorporation or such resolution; the date or
dates on which such dividends may be payable;
and the date from which dividends on shares of
such series shall be cumulative;
(2) the price or prices at which, and the terms and
conditions on which, such shares may be
redeemed;
(3) the amount payable upon each of such shares in
the event of the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation;
(4) sinking fund provisions, if any, for the
redemption or purchase of such shares; and
(5) the terms and conditions on which such shares
may be converted into Common Shares, if such
shares are to be issued with such privilege of
conversion.
(B) Dividends. Subject to the preferential rights of the
holders of Preferred Shares with respect to the
payment of dividends, as set forth in subdivision (B)
of Division I, the holders of Preference Shares of
each series shall be entitled to receive, when and as
declared by the board of directors from funds legally
available for the payment thereof, dividends at the
rate fixed for such series, and no more, payable
quarterly on the first day of each of the months of
February, May, August and November in each year (the
"quarterly dividend payment dates"), each such
quarterly payment to be in respect of the quarterly
period ending with the day next preceding the date of
such payment, except in the case of the first
dividend payable on shares of any series issued
between quarterly dividend payment dates, in which
case such dividend shall be for the period beginning
with the date of issue of such shares or the next
preceding quarterly dividend payment date for the
Preference Shares, as determined by the board of
directors, and ending with the day next preceding
either the first or the second quarterly dividend
payment date for the Preference Shares succeeding the
date of issue of such shares, as determined by the
board of directors. Notwithstanding the immediately
preceding sentence, if so provided in the resolution
of the board of directors establishing a particular
series of Preference Shares, as authorized in
subdivision (A) of this Division II, dividends on the
shares of such series may be declared payable on such
dates and with respect to such periods as shall be
set forth in such resolution.
Except as may be otherwise provided in the resolution
establishing a particular series of Preference
Shares, such dividends shall accrue and be cumulative
with respect to each share of each series from and
including the beginning date of the period for which
the first dividend thereon was payable.
No dividend shall be declared in full on the
outstanding Preference shares of any series (the
"Declaring Series") in respect of any dividend period
for the Declaring Series at the dividend rate
applicable to such dividend period unless prior
thereto or concurrently therewith dividends in full
shall likewise have been declared on all then
outstanding Preference Shares of each other series
(the "Other Series") in respect of each dividend
period for each of the Other Series ending
concurrently with, or prior to, the last day of the
dividend period first above specified, at the
respective dividend rates applicable from time to
time to each Other Series. Whenever less than full
dividends shall be declared on the Declaring Series
in respect of any dividend period for the Declaring
Series at the dividend rate applicable to such
dividend period, dividends on the outstanding
Preference Shares of all series shall be declared
ratably in accordance with the respective amounts
which would be payable on all such outstanding
Preference Shares if all dividends, including
accumulated dividends, if any, were declared in full
on the declaration date. Accumulations of dividends
shall not bear interest.
So long as any Preference Shares are outstanding, no
dividend shall be paid or declared, or other
distribution made, on Junior Shares, nor shall any
Junior Shares be purchased, redeemed, retired or
otherwise acquired for a consideration, unless
dividends on the outstanding Preference Shares for
the current and all past dividend periods shall have
been paid in full, or declared and set apart for
payment, or if the Corporation shall be in default or
deficient under any requirement or a sinking fund
established with respect to outstanding Preference
Shares of any series for any period then elapsed;
provided, however, that the restrictions of this
paragraph shall not apply to the declaration and
payment of dividends on Junior Shares if payable
solely in Junior Shares, nor to the acquisition of
any Junior Shares through the application of the
proceeds of any Junior Shares sold at or about the
time of such acquisition, nor shall such restrictions
prevent the transfer of any amount from surplus to
stated capital.
(C) Liquidation Preferences. In the event of
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the
holders of Preference Shares of each series
outstanding shall be entitled to receive out of the
assets of the Corporation, before any payment or
distribution shall be made to the holders of any
Junior Shares, such amount per share as shall have
been fixed by the Board of Directors as the voluntary
liquidation price or the involuntary liquidation
price, as the case may be, for the shares of such
series; provided, however, that no such payment to
the holders of Preference Shares shall be made until
payment in full shall have been made to the holders
of Preferred Shares, or moneys or other assets
sufficient for such payment shall have been set apart
for payment by the Corporation, separate and apart
from its other funds and assets for the account of
such holders, in accordance with the provisions of
subdivision (C) of Division I. If upon any such
dissolution, liquidation or winding up the assets of
the Corporation available for payment to shareholders
are not sufficient to make payment in full to the
holders of Preference Shares as above provided,
payment shall be made to such holders ratably in
accordance with the numbers of shares held by them
respectively, and in case there shall then be
outstanding more than one series of Preference
Shares, ratably in accordance with the respective
distributive amounts to which such holders shall be
entitled.
Neither a consolidation nor merger of the Corporation
with or into any other corporation, nor a merger of
any other corporation into the Corporation, nor the
purchase or redemption of all or any part of the
outstanding shares of any class or classes of the
Corporation, nor the sale or transfer of the
property and business of the Corporation as or
substantially as an entirety, shall be construed to
be a dissolution, liquidation or winding up of the
Corporation within the meaning of the foregoing
provisions.
(D) Redemption and Repurchases. Subject to the
limitations stated in subdivision (B) of Division I
and in this subdivision (D), and except as may be
otherwise provided by the Board of Directors in the
resolution establishing a particular series,
Preference Shares of any one or more series may be
called for redemption and redeemed, at the option of
the Corporation, in whole at any time or in part from
time to time, by the payment therefor in cash of the
then applicable optional redemption price or prices
fixed by the Board of Directors for the shares of
such series, each redemption to be effected upon
notice the same as that provided in subdivision (D)
of Division I in respect of the redemption of
Preferred Shares. All other provisions of said
subdivision (D) with respect to the method and effect
of redemption of Preferred Shares shall be applicable
to the redemption of Preference Shares in the same
manner and with the same force and effect as though
such provisions were set forth in full in this
subdivision (D).
Subject to applicable law, to the provisions of
subdivision (B) of Division I and to the provisions
of this Division II, the Corporation may from time to
time purchase or otherwise acquire outstanding
Preference Shares at a price per share not exceeding
the amount at the time payable in the event of
redemption thereof otherwise than through the
operation of the applicable sinking fund, if any.
If and so long as the Company shall be in default in
the payment of any quarterly dividend on Preference
Shares of any series, or shall be in default in the
payment of funds into or the setting aside of funds
for any sinking fund created for any series of the
Preference Shares, the Corporation shall not (other
than by the use of unapplied funds, if any, paid into
or set aside for a sinking fund or funds prior to
such default):
(1) redeem any Preference Shares unless all shares
thereof are redeemed, or
(2) purchase or otherwise acquire for a valuable
consideration any Preference Shares, except
pursuant to offers of sale made by the holders
of Preference Shares in response to an
invitation for tenders given by mail by the
Corporation simultaneously to the holders of
record of all Preference Shares then
outstanding, at their respective addresses then
appearing on the books of the Corporation.
(E) Restrictions on Certain Corporate Action. So long as
any Preference Shares shall be outstanding, the
Corporation shall not, without the affirmative vote
or the written consent of the holders of at least
two-thirds of the Preference Shares at the time
outstanding, or as of a record date fixed by the
Board of Directors, create or authorize any shares of
any class, other than the Preferred Shares (whether
now or hereafter authorized), ranking prior to or on
a parity with the Preference Shares with respect to
the payment of dividends or the distribution of
assets upon the dissolution, liquidation or winding
up of the Corporation.
(F) Preemptive Rights. No holder of Preference Shares
shall have any preemptive right to subscribe for or
acquire additional shares of the Corporation of the
same or any other class, whether such shares are now
or hereafter authorized.
(G) Cancellation. All Preference Shares which shall be
redeemed or repurchased pursuant to any sinking fund
created for any series of Preference Shares, or
applied in lieu of the payment of funds into or the
setting aside of funds for any such sinking fund, and
all Preference Shares issued with the privilege of
conversion into Common Shares which shall be so
converted, shall be retired and canceled and shall
not be reissued. Preference Shares otherwise
redeemed, purchased or acquired by the Corporation
may be reissued in the same manner as authorized but
unissued Preference Shares undesignated as to series
until and unless canceled by the Board of Directors
pursuant to applicable law.
(H) Definitions. In this Division II and in any
resolution of the Board of Directors adopted pursuant
to this Division II establishing a series of
Preference Shares and fixing the designation and
terms thereof, the meanings below assigned shall
control:
"Junior Shares" shall mean shares of any class
ranking subordinate to the Preference Shares both as
to dividends and upon the dissolution, liquidation or
winding up of the Corporation, including Common
Shares.
DIVISION III
Provisions Relating to Common Shares
(A) Dividends. Subject to the preferential rights of the
holders of Preferred Shares and Preference Shares
with respect to the payment of dividends, as set
forth in subdivision (B) of Division I and
subdivision (B) of Division II, respectively, the
holders of Common Shares shall be entitled to receive
dividends when and as declared by the Board of
Directors, from funds legally available for the
payment thereof.
(B) Liquidation Preferences. In the event of the
dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the
holders of Common Shares shall be entitled to
receive, ratably in accordance with the numbers of
shares held by them respectively, the assets of the
Corporation remaining available for payment to
shareholders after payment in full shall have been
made to the holders of Preferred Shares and
Preference Shares, in accordance with the provisions
of subdivision (C) of Division I and subdivision (C)
of Division II, respectively.
(C) Preemptive Rights. No holder of Common Shares shall
have any preemptive right to subscribe for or acquire
additional shares of the Corporation of the same or
any other class, whether such shares are now or
hereafter authorized, or any securities convertible
into any such shares of the Corporation.
(D) Consideration for Common Shares. The entire
consideration received upon the issuance of Common
Shares shall be credited to stated capital, and this
requirement may not be eliminated or amended without
the affirmative vote or consent of the holders of at
least two-thirds of the Common Shares at the time
outstanding.
ARTICLE SIX
At the time of restatement, the class and number of shares
issued by the corporation and the paid-in capital (expressed in
dollars) received by the corporation therefor, are:
Class Series Shares Issued
Preferred $4.36 Cumulative 60,000
$4.22 Cumulative 40,000
$7.50 Cumulative 98,288
Preference $5.25 100,000
$7.80 400,000
Common 29,352,612
Paid-In Capital $349,966,271
ARTICLE SEVEN
Any vacancies in the membership of the board of directors
arising between meetings of shareholders by reason of an
increase in the number of directors or otherwise may be filled
by vote of a majority of the directors then in office, any
director so elected to serve until the next annual meeting of
shareholders; provided, however, that at no time shall the
number of directors so elected exceed 33-1/3% of the total
membership of the board of directors.
ARTICLE EIGHT
A holder of or subscriber to shares of the corporation shall be
under no obligation to the corporation or its creditors with
respect to such shares other than the obligation to pay to the
corporation the full consideration for which said shares were
issued or to be issued.
ARTICLE NINE
1. It was estimated that the value of all property to be
owned by the corporation for the year following the
execution of the original Articles of Incorporation,
wherever located, would be $18,550,000.00.
2. It was estimated that the value of the property to be
located within the State of Illinois during the year
following the execution of the original Articles of
Incorporation would be $12,900,000.00
3. It was estimated that the gross amount of business which
would be transacted by the corporation during the year
following the execution of the original Articles of
Incorporation would be $7,200,000.00
<PAGE>
4. It was estimated that the gross amount of business which
would be transacted in the State of Illinois during the
following year would be $4,000,000.00.
ARTICLE TEN
At any meeting of shareholders, a majority of the outstanding
shares entitled to vote, represented in person or by proxy,
shall constitute a quorum; provided that less than such quorum
shall have the right successively to adjourn the meeting to a
specified date not longer than 90 days after such adjournment
and no notice need be given to the shareholders not present at
the meeting.
In all elections for directors of this Company every
shareholder shall have the right to vote, in person or by
proxy, for the number of shares owned by him, for as many
persons as there are directors to be elected, or to cumulate
said shares and give one candidate as many votes as the number
of directors multiplied by the number of his shares shall
equal, or to distribute them, on the same principle, among as
many candidates as he shall think fit.
The Articles of Incorporation of this Company may be amended in
accordance with and upon the vote prescribed by the laws of the
State of Illinois, provided, however, that in no event shall
any such amendment be adopted, after this amendment becomes
effective, without receiving the affirmative vote of at least a
majority of the outstanding shares of this Company entitled to
vote.
ARTICLE ELEVEN
1. Any person made a party to or involved in any litigation
(which term shall include any actual or threatened civil,
criminal, administrative or arbitration action,
proceeding, claim, suit or appeal therefrom) by reason of
the fact that such person at any time was or is a
director, officer or employee of the Corporation, or by
reason of the fact that, at the request of the
Corporation, such person served or is serving as a
director, officer or employee of any business corporation,
not-for-profit corporation, joint venture, trade
association or other entity, shall be indemnified by the
Corporation against all liabilities, judgments, fines and
amounts paid in settlement and all expenses (including
attorneys' fees) actually and reasonably incurred by such
person arising out of or in connection with any such
litigation, if such person acted in good faith and in a
manner which such person reasonably believed to be in, or
not opposed to, the best interests of the Corporation or
any such business corporation, not-for-profit corporation,
joint venture, trade association or other entity and, in
the case of criminal litigation, such person had no
reasonable cause to believe that his or her conduct was
unlawful; provided, however, that such person shall not be
indemnified hereunder if, in the case of litigation by or
in the right of the Corporation, it shall be finally
determined in such litigation that such person breached
his or her duty to the Corporation or any such business
corporation, not-for-profit corporation, joint venture,
trade association or other entity unless, and then only to
the extent that, a court shall finally determine that,
despite such breach of duty, such person, in view of all
the circumstances relating to such litigation, is fairly
and reasonably entitled to indemnification under this
paragraph 1.
2. Any action taken or omitted to be taken by any such
director, officer or employee in good faith and in
compliance with or pursuant to any order, determination,
approval or permission made or given by a commission,
board, official or other agency of the United States or of
any state or other governmental authority with respect to
the property or affairs of the Corporation or any such
business corporation, not-for-profit corporation, joint
venture, trade association or other entity over which such
commission, board, official or agency has jurisdiction or
authority or purports to have jurisdiction or authority
shall be deemed prima facie to be in compliance with the
applicable standard of conduct set forth in paragraph 1,
whether or not it may thereafter be determined that such
order, determination, approval or permission was
unauthorized, erroneous, unlawful or otherwise improper.
3. Unless finally determined as provided in paragraph 1, the
termination of any litigation, whether by judgment,
settlement, conviction or upon a plea of nolo contendere,
or its equivalent, shall not create a presumption that the
person seeking indemnification did not meet the applicable
indemnification standard set forth in paragraph 1.
4. Except where a person has been successful on the merits
with respect to any such litigation, any indemnification
hereunder shall be made only after (a) the Board of
Directors (acting by a quorum consisting only of directors
who were not involved in such litigation) determines that
such person met the applicable indemnification standard
set forth in paragraph 1 or (b) in the absence of such a
quorum, a panel (selected in the following manner)
determines that such person met the applicable
indemnification standard set forth in paragraph 1: one
member of such panel shall be selected by the members of
the Board of Directors who were not involved in such
litigation, or, if there should be no such directors, then
by the senior-ranking officer of the Corporation who was
not involved in such litigation; one member of such panel
shall be selected by the person seeking indemnification;
and the third member of such panel shall be selected by
the first two members or, in the event such two panel
members cannot agree within 30 days, by the President of
the Illinois State Bar Association. Such panel shall make
its determination by arbitration in accordance with the
laws of the State of Illinois. Judgment upon the award
rendered by such panel may be entered in any court having
jurisdiction thereof.
5. Advances may be made by the Corporation against costs,
expenses and fees arising out of, or in connection with,
any such litigation at the discretion of, and upon such
terms (but always subject to the final determination of a
person's right to indemnification) as may be determined
by, the Board of Directors.
6. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a
director, officer or employee of the Corporation, or is or
was serving, at the request of the Corporation, as a
director, officer or employee of any business corporation,
not-for-profit corporation, joint venture, trade
association or other entity, against any liability
asserted against such person which was incurred in any
such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power
to indemnify such person against any such liability under
the provisions of this Article.
7. The right of indemnification provided hereunder shall not
be deemed exclusive of any other right to indemnification
to which any person may be entitled, or of any other
indemnification which may lawfully be granted to any
person in addition to the indemnification provided
hereunder. Indemnification provided hereunder shall, in
the case of the death of the person entitled to
indemnification, inure to the benefit of such person's
heirs, executors or other lawful representatives.
8. The invalidity or unenforceability of any provision of
this Article shall not affect the validity or
enforceability of any other provision of this Article.
<PAGE>
IN WITNESS WHEREOF, the undersigned corporation has caused
these Articles of Amendment in the form of the First Restated
Articles of Incorporation to be executed in its name by its
Vice President, and its corporate seal to be hereto affixed,
attested by its Assistant Secretary, this 14th day of February,
1994.
Iowa-Illinois Gas and Electric Company
By_____________________________________
Lance E. Cooper
Vice President-Finance
ATTEST:
_________________________________________
Barbara A. Ven Horst
Assistant Secretary
STATE OF IOWA
COUNTY OF SCOTT
I, Karen K. Thode, a Notary Public, do hereby certify that
on the 14th day of February, 1994, Lance E. Cooper personally
appeared before me and, being first duly sworn by me,
acknowledged that he signed the foregoing document in the
capacity therein set forth; that the adoption of these Articles
of Amendment in the form of the First Restated Articles of
Incorporation is the free act and deed of Iowa-Illinois Gas and
Electric Company; and that the statements therein obtained are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
the day and year before written.
__________________________________
Notary Public
BY-LAWS
OF
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
AS IN EFFECT AFTER AMENDMENTS DATED APRIL 25, 1991
ARTICLE I
OFFICES
The principal office of the corporation in the State of
Illinois shall be located in the City of Rock Island, County of
Rock Island. The Central Office of the corporation shall include
the business offices of its principal executive officers and
staff and shall be located at 206 East Second Street, Davenport,
Iowa. The corporation may have such other offices, either within
or without the State of Illinois, as the business of the
corporation may require from time to time.
The registered office of the corporation required by the
Business Corporation Act to be maintained in the State of
Illinois may be, but need not be, identical with the principal
office in the State of Illinois, and the address of the
registered office may be changed from time to time by the board
of directors.
ARTICLE II
MEETINGS OF SHAREHOLDERS
1. The annual meeting of shareholders of this corporation
shall be held at 10:00 a.m., on the fourth Thursday in April at
which time they shall elect by plurality vote, by ballot, a board
of directors to hold office until the next succeeding annual
meeting and until their successors shall have been duly elected
and qualified, and shall transact such other business as may
properly come before the meeting. If the election of directors
shall not be held on the day designated herein for any annual
meeting, or at any adjournment thereof, the board of directors
shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
2. Special meetings of the shareholders may be called by
the chairman of the board of directors, by the president, by the
board of directors or by the holders of not less than one-fifth
of all the outstanding shares of the corporation.
<PAGE>
3. The board of directors may by resolution designate any
place, either within or without the State of Illinois, as the
place of meeting for any annual meeting or for any special
meeting called by the board of directors. If no designation is
made in such resolution, or if a special meeting be called
otherwise than by resolution of the board, the place of meeting
shall be the Central Office of the corporation, 206 East Second
Street, in the City of Davenport, Iowa.
4. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not
less than ten nor more than sixty days before the date of the
meeting, or in the case of a merger, consolidation, share
exchange, dissolution or sale, lease or exchange of assets not
less than 20 nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of
the chairman of the board of directors, the president, or the
secretary, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the
shareholder at his address as it appears on the records of the
corporation, with postage thereon prepaid.
Except as otherwise provided by law or by the articles of
incorporation of the corporation, the only business which shall
be conducted at any annual or special meeting of the shareholders
shall (i) have been specified in the written notice of the
meeting (or any supplement thereto) given as provided in the
preceding paragraph, (ii) be brought before the meeting at the
direction of the board of directors or the chairman of the
meeting or (iii) have been specified in a written notice (a
"Shareholder Meeting Notice") given to the corporation, in
accordance with all of the following requirements, by or on
behalf of any shareholder of record on the record date for such
meeting and who shall continue to be entitled to vote thereat.
Each Shareholder Meeting Notice must be delivered personally to,
or be mailed to and received by, the Secretary, at the Central
Office of the corporation, 206 East Second Street, Davenport,
Iowa (i) in the case of an annual meeting of shareholders, not
less than 10 days prior to the first anniversary date of the
initial mailing of notice of the previous year's annual meeting
of shareholders, provided that such Shareholder Meeting Notice
need not be given more than 75 days prior to such forthcoming
annual meeting, or (ii) in the case of a special meeting of
shareholders, not more than 10 days after the date of the initial
mailing of notice of such special meeting. Each Shareholder
Meeting Notice shall set forth: (i) a description of each item of
business proposed to be brought before the meeting; (ii) the name
and address of the shareholder proposing to bring such item of
business before the meeting; (iii) the class and number of shares
held of record, owned beneficially and represented by proxy by
such shareholder as of the record date for the meeting (if such
date shall then have been made publicly available) and as of the
date of such Shareholder Meeting Notice; (iv) if any such item of
business shall involve one or more nominations for director, all
information regarding each such nominee as would be required to
be set forth in a definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended, or any successor
thereto, and the written consent of each such nominee to serve if
elected; and (v) all other information which would be required to
be filed with the Securities and Exchange Commission if, with
respect to any such item of business, such shareholder were a
participant in a solicitation subject to such Section 14. No
business shall be brought before any meeting of shareholders of
the corporation otherwise than as provided in this paragraph.
When a meeting is adjourned to another time or place, notice
of the adjourned meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is
taken, unless the adjournment is for more than 30 days, or unless
after the adjournment a new record date is fixed for the
adjourned meeting, in which case notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at
the meeting. At the adjourned meeting, any business may be
transacted that might have been transacted at the original
meeting.
Notwithstanding Article VIII of these By-laws, this Article
II, paragraph 4, may be altered, amended or repealed at any
meeting of the board of directors only by the affirmative vote of
80 percent of the total number of authorized directors.
5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
proper purpose, the board of directors may provide that the share
transfer books shall be closed for a stated period but not to
exceed, in any case, 60 days.
If the share transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least
ten days, or in the case of a merger or consolidation at least
twenty days, immediately preceding such meeting. In lieu of
closing the share transfer books, the board of directors may fix
in advance a date as the record date for any such determination
of shareholders, such date in any case to be not more than 60
days and, for a meeting of shareholders, not less than ten days,
or in the case of a merger or consolidation not less than twenty
days, immediately preceding such meeting. If the stock transfer
books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the board of
directors declaring such dividends is adopted, as the case may
be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in
this paragraph, such determination shall apply to any adjournment
thereof.
6. The officer or agent having charge of the transfer
books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of, and the number of shares
held by, each, which list for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the
corporation and shall be subject to inspection by any shareholder
at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original share ledger or transfer
book, or a duplicate thereof kept in the State of Illinois, shall
be prima-facie evidence as to who are the shareholders entitled
to examine such list or share ledger or transfer book or to vote
at any meeting of shareholders.
7. Subject to the provisions of Section 5 and 9 of this
Article II, each outstanding share of the corporation, regardless
of the class or series thereof, shall be entitled to one vote on
each matter submitted to a vote at a meeting of shareholders.
8. Subject to the provisions of Section 5 of this Article
II, each shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the
proxy.
9. Subject to the provisions of Section 5 of this Article
II, in all elections for directors every shareholder shall have
the right to vote, in person or by proxy, the number of shares
owned by him for as many persons as there are directors to be
elected, or to cumulate said shares and give one candidate as
many votes as the number of directors multiplied by the number of
his shares shall equal, or to distribute them on the same
principle, among as many candidates as he shall designate.
10. A majority of the outstanding shares of the
corporation, represented in person or by proxy, shall constitute
a quorum at any meeting of shareholders; provided, that in case a
quorum be not present at any meeting of shareholders, a majority
of the shares represented at the meeting may adjourn to such day
as they shall agree upon, without further notice.
<PAGE>
ARTICLE III
DIRECTORS
1. The business and affairs of the corporation shall be
under the direction of its board of directors. In discharging
the duties of their respective positions, the board of directors,
committees of the board and individual directors may, in
considering the best interests of the corporation, consider the
effects of any action upon employees, suppliers and customers of
the corporation, communities in which offices or other
establishments of the corporation are located and all other
pertinent factors.
Notwithstanding Article VIII of these By-laws, this Article
III, paragraph 1, may be altered, amended or repealed at any
meeting of the board of directors only by the affirmative vote of
80 percent of the total number of authorized directors.
2. The number of directors of the corporation shall be
ten. Each director shall hold office for the term for which he
is elected or until his successor shall have been elected and
qualified. Directors need not be residents of Illinois or
shareholders of the corporation.
Notwithstanding Article VIII of these By-laws, this Article
III, paragraph 2, may be altered, amended or repealed at any
meeting of the board of directors only by the affirmative vote of
80 percent of the total number of authorized directors.
3. The regular meeting of the board of directors shall be
held, without other notice than this By-law, immediately after
and at the same place as the annual meeting of shareholders.
Unless otherwise ordered by the board of directors with respect
to a particular month, one additional regular meeting of the
board shall be held in the months of January, July, and October.
The board of directors may provide by resolution the time and
place, either within or without the State of Illinois, for the
holding of such additional regular meetings of the board of
directors without other notice than such resolution.
4. Special meetings of the board of directors may be
called by or at the request of the chairman of the board of
directors, the president, or any two directors. The person or
persons authorized to call special meetings of the board of
directors may fix any place, either within or without the State
of Illinois, as the place for holding any special meeting of the
board of directors.
5. Notice of any special meeting shall be given at least
three days previous thereto by written notice delivered
personally or mailed to each director at his business address, or
by telegram. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail in a sealed
envelope so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered
when the telegram is delivered to the telegraph company. Any
director may waive notice of any meeting. The attendance of a
director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular
or special meeting of the board of directors need be specified in
the notice or waiver of notice of such meeting.
6. A majority of the board of directors shall constitute a
quorum for the transaction of business at any meeting of the
board of directors, provided, that if less than a majority of the
directors are present at the said meeting, a majority of the
directors present may adjourn the meeting from time to time
without further notice.
7. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the
board of directors.
8. Any vacancies in the membership of the board of
directors arising between meetings of shareholders by reason of
an increase in the number of directors or otherwise may be filled
by vote of a majority of the directors then in office, any
director so elected to serve until the next annual meeting of
shareholders; provided, however, that at no time shall the number
of directors so elected exceed 33-1/3 % of the total membership
of the board of directors.
9. Directors as such shall not receive any stated salaries
for their services but by resolution of the board of directors a
fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of
directors. By resolution of the board of directors, a fixed sum
and expenses of attendance, if any, may be allowed members of any
committee of the board of directors for attendance at any meeting
of such committee. In addition, the board may allow by
resolution a fixed monthly sum payable to such director or
directors as are not officers or employees of the corporation.
This sum shall be in an amount which in the opinion of the board
of directors adequately compensates such director or directors
for extended consideration of corporation matters implicit in the
office of such director. Nothing herein contained shall be
construed to preclude any director from serving the corporation
in any other capacity and receiving compensation therefor.
<PAGE>
ARTICLE IV
EXECUTIVE COMMITTEE
1. The board of directors by resolution adopted by a
majority of the whole board may designate two or more directors
to constitute an executive committee. The designation of such
committee and the delegation thereto of authority shall not
operate to relieve the board of directors or any member thereof
of any responsibility imposed upon it or him by law.
2. The executive committee, when the Board of Directors is
not in session, shall have and exercise all of the authority of
the board of directors in the management of the corporation
except to the extent, if any, that such authority shall be
limited by the resolution appointing the executive committee and
except also that the executive committee shall not have the
authority of the board of directors in reference to amending the
Articles of Incorporation, adopting a plan of merger or adopting
a plan of consolidation with another corporation or corporations,
recommending to the shareholders the sale, lease, exchange,
mortgage, pledge or other disposition of all or substantially all
of the property and assets of the corporation if not made in the
usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending, altering or repealing the By-laws
of the corporation, electing or removing officers of the
corporation or members of the executive committee, fixing the
compensation of any member of the executive committee, declaring
dividends, or amending, altering or repealing any resolution of
the board of directors which by its terms provides that it shall
not be amended, altered or repealed by the executive committee.
3. Each member of the executive committee shall hold
office until the next regular annual meeting of the directors
following his designation and until his successor as a member of
the executive committee is elected and qualified. Members of the
executive committee must at all times be directors of the
corporation.
4. Regular meetings of the executive committee may be held
without notice at such times and places as the executive
committee may from time to time by resolution fix. Special
meetings of the executive committee may be called by any member
thereof upon not less than one day's notice, if delivered
personally, or not less than two day's notice, if mailed or sent
by telegram, stating the place, date and hour of the meeting. If
mailed, notice shall be deemed to be delivered when deposited in
the United States mail addressed to the member of the executive
committee at his business address. Any member of the executive
committee may waive notice of any meeting and no notice of any
meeting need be given to any member thereof who attends in
person. The notice of a meeting of the executive committee need
not state the business proposed to be transacted at the meeting.
5. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any
meeting thereof and action of the executive committee must be
authorized by the affirmative vote of a majority of the members
present at a meeting at which a quorum is present.
6. Any vacancy in the executive committee may be filled by
a resolution adopted by a majority of the whole board of
directors.
7. Any member of the executive committee may be removed at
any time with or without cause by resolution adopted by a
majority of the whole board of directors. Any member of the
executive committee may resign from the executive committee at
any time by giving written notice to the chairman or secretary of
the corporation, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
8. The executive committee shall elect a presiding officer
from its members and may fix its own rules of procedure which
shall not be inconsistent with these By-laws. It shall keep
regular minutes of its proceedings and report the same to the
board of directors for its information.
ARTICLE V
OFFICERS
1. The officers of this corporation shall consist of a
chairman of the board of directors, a president, one or more vice
presidents, a secretary, a treasurer, a controller, a general
counsel, one or more assistant secretaries, one or more assistant
treasurers and such other officers as from time to time may be
determined upon by the board of directors. The treasurer and
each assistant treasurer elected by the board of directors shall
by virtue of such office, be an assistant secretary of the
company. If more than one vice president is elected, each vice
president shall have such descriptive title, if any, as the board
of directors may determine. The officers of the corporation
shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting
of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold
office until his successor shall have been duly elected and shall
have qualified, or until his death, or until he shall resign or
shall have been removed in the manner provided by law. Vacancies
may be filled or new offices created and filled at any meeting of
the board of directors.
2. The chairman of the board of directors shall preside at
all meetings of the shareholders and of the board of directors at
which he is present. He shall have such other powers and perform
such other duties as may be assigned to him by the board of
directors, but he shall have no executive authority over the
affairs of the corporation.
3. The president shall be the principal executive officer
of the corporation and subject only to authority of the board of
directors, he shall determine fundamental policies and shall have
general control of the affairs of the corporation. In case of
death, disability, or absence of the chairman, the president
shall perform and be vested with all the duties of the chairman.
He may sign certificates for shares of the corporation and any
deeds, mortgages, bonds, contracts or other instruments which the
board of directors has authorized to be executed, which
authorizations may be either specific or general. In addition,
he shall in general perform all duties incident to the office of
the president and such other duties as may be prescribed by the
board of directors from time to time.
4. Vice presidents shall have and perform such duties as
may from time to time be assigned to them by the board of
directors or the president. Any vice president may sign
certificates for shares of the corporation and any deeds,
mortgages, bonds, contracts or other instruments which the board
of directors has authorized to be executed, which authorizations
may be either specific or general. In case of the death,
disability or absence of the president, the vice president (or
if there be more than one, the vice presidents in the order
designated by the board of directors, or in the absence of any
designation, then in the order of their first election) shall
perform the duties of the president, including interim duties,
and when so acting shall have all the powers of and be subject to
all restrictions upon the president.
5. The secretary shall keep a record of all proceedings of
all shareholders' and directors' meetings, and shall give notice
as required in these By-laws of all meetings of shareholders and
directors. He shall have the custody of all books and records of
the corporation, except such as shall be in the custody of the
treasurer. He shall have custody of the seal of the corporation,
and see that the seal is affixed to all documents, the execution
of which on behalf of the corporation under its seal is duly
authorized. He shall perform all duties incident to the office
of secretary and such other duties as from time to time may be
assigned to him by the president or by the board of directors.
6. The treasurer shall have charge and custody of all
funds and securities of the corporation, shall keep accounts of
all funds of the corporation received or disbursed, and shall
deposit all moneys and valuables in the name of and to the credit
of the corporation, in such banks or depositaries, and subject to
withdrawal in the manner and by such persons as from time to time
may be specified by resolution of the board of directors. He
shall perform all duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by
the president or by the board of directors.
7. The controller shall maintain records of all assets,
liabilities and financial transactions of the corporation. He
shall institute procedures for control of expenditures. He shall
perform all duties incident to the office of the controller and
such other duties as from time to time may be assigned to him by
the president or by the board of directors.
8. The general counsel shall conduct the legal affairs of
the corporation. He shall direct legal advisory and supervisory
procedures and legal actions for and on behalf of the
corporation. He shall perform all duties incident to the office
of general counsel and such other duties as from time to time may
be assigned to him by the president or by the board of directors.
9. The assistance secretaries and the assistant
treasurers, in general, shall perform such duties as may be
assigned to them by the secretary or the treasurer, respectively,
or by the president or by the board of directors. The assistant
secretaries and the assistant treasurers shall act for and in the
place of the secretary or the treasurer, respectively, in case of
his death, disability or absence.
10. Any two or more offices may be held by the same person,
except the offices of president and secretary and the offices of
treasurer and controller.
11. The salaries of the officers shall be fixed from time
to time by the board of directors, and no officer shall be
prevented from receiving such salary by reason of the fact that
he is also a director of the corporation.
ARTICLE VI
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under
the provisions of the Business Corporation Act of the State of
Illinois, or under the provisions of the Articles of
Incorporation or of the By-laws of the corporation, a waiver
thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
<PAGE>
ARTICLE VII
SEAL
The corporate seal of this corporation shall be a circular
seal with the name of the corporation around the border and the
word "Illinois" and the year of incorporation in the center.
ARTICLE VIII
AMENDMENTS
These By-laws may be altered, amended or repealed, and new
By-laws may be adopted at any meeting of the board of directors
of the corporation at which a quorum is present, by a majority
vote of the directors present at such meeting.
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
SEVERANCE PLAN IN THE EVENT OF A CHANGE IN CONTROL
(Amended as effective July 1, 1993)
October 1993
ARTICLE I - ESTABLISHMENT, TERM AND PURPOSE
1.1 - Establishment of the Plan. Iowa-Illinois Gas and
Electric Company (Iowa-Illinois), by and through the act
of its Board of Directors (Board), hereby establishes a
Severance Plan (Plan) for its Designated Officers in the
event of a Change in Control, all as hereinafter set
forth.
1.2 - Term of the Plan. This Plan shall be effective as of
April 26, 1991 and shall continue in effect until
terminated by at least two-thirds (66-2/3%) vote of the
directors then comprising the Incumbent Board, as defined
in Article II hereof, at a duly convened meeting thereof;
PROVIDED, HOWEVER, that upon a Change in Control, as
defined in Article II hereof, this Plan may not be
terminated or amended for twenty-four (24) full calendar
months after such Change in Control.
1.3 - Purpose. The purpose of this Plan is to assure that,
upon termination of a Designated Officer's employment
within twenty-four (24) full calendar months after a
Change in Control, the Designated Officer will receive
the type of severance treatment the Incumbent Board would
want to provide, even though the Incumbent Board might
otherwise be unable to so provide as a result of the
Change in Control. Although no Change in Control is
foreseen, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of the Designated Officers of
Iowa-Illinois to their assigned duties, without
distraction, in the face of the potentially disturbing
circumstances that would accompany a Change in Control.
ARTICLE II - DEFINITIONS
Whenever used in this Plan, the following terms shall
have the meanings set forth below.
2.1 - "Change in Control" shall mean either (a) approval by the
shareholders of Iowa-Illinois of a reorganization, merger
or consolidation, unless at least sixty percent (60%) of
the members of the Board of Directors of the corporation
resulting from the reorganization, merger or
consolidation were members of the Incumbent Board; or (b)
such other event as designated by a majority vote of the
directors of the Incumbent Board who are not also
employees of Iowa-Illinois.
2.2 - "Designated Officer" shall mean an officer of Iowa-
Illinois or its subsidiaries who is designated by the
Board to participate in the Plan.
2.3 - "Incumbent Board" shall mean the members of the Board of
Iowa-Illinois on April 26, 1991. For this purpose, an
individual who becomes a member of the Board subsequent
to April 26, 1991 and who has been nominated for election
by Iowa-Illinois' shareholders by resolution adopted by a
vote of at least two-thirds (66-2/3%) of the directors
then comprising the Incumbent Board at a duly convened
meeting thereof shall be deemed to be a member of the
Incumbent Board.
2.4 - "Qualifying Termination" shall occur when, within twenty-
four (24) full calendar months after a Change in Control,
a Designated Officer's employment with Iowa-Illinois, or
any of its subsidiaries, or the corporation which results
from such Change in Control is terminated either (a)
involuntarily for any reason; or (b) voluntarily,
PROVIDED THAT the Designated Officer shall have furnished
six (6) full months prior written notice of the intent to
voluntarily terminate employment to the President of such
corporation.
2.5 - "Severance Benefits" shall mean:
(a) an amount equal to two (2) times the Designated
Officer's highest Total Cash Compensation, said
amount to be paid in a lump sum on the effective date
of his/her Qualifying Termination; and
(b) the Designated Officer's accrued vacation pay
through the effective date of his/her Qualifying
Termination, said amount to be paid in a lump sum on
the effective date of such Qualifying Termination;
and
(c) a continuation of the welfare benefits of health
insurance, disability insurance, and group term life
insurance for twenty-four (24) full calendar months
after the effective date of the Designated Officer's
Qualifying Termination, at the same premium cost and
at the same coverage level as in effect on such
effective date; provided, however, in the event the
premium cost and/or coverage level shall change at
any time during such twenty-four month period for all
welfare benefit participants, then the minimum cost
and/or coverage level likewise shall change for such
Designated Officer in a corresponding manner; and
(d) standard outplacement services from a nationally
recognized firm of the Designated Officer's selection
for a period up to twenty-four (24) full calendar
months after the effective date of the Designated
Officer's Qualifying Termination or until such
Designated Officer obtains subsequent employment,
whichever period is less. The cost of such services
shall not exceed twenty percent (20%) of the
Designated Officer's Total Cash Compensation.
2.6 - "Total Cash Compensation" shall mean the amount payable
to a Designated Officer by Iowa-Illinois as annual
salary, without regard to deferrals.
ARTICLE III - QUALIFICATION FOR SEVERANCE BENEFITS
A Designated Officer shall be entitled to receive
Severance Benefits if, within twenty-four (24) full calendar
months after a Change in Control, such Designated Officer
incurs a Qualifying Termination of employment from the
corporation which results from such Change in Control. No
Severance Benefits shall become due or payable hereunder unless
and until (a) the occurrence of a Change in Control and (b) the
occurrence of a Qualifying Termination.
ARTICLE IV - TAXES
4.1 - Withholding of Taxes. The corporation paying the
Severance Benefits shall be entitled to withhold all
Federal, state, city, or other taxes legally required,
subject to Sections 4.2, 4.3 and 4.4 hereof.
4.2 - Equalization Payment. In the event any of the Severance
Benefits payable to a Designated Officer are subject to
the tax ("Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986 (or any similar tax that
may hereafter be imposed) ("Code"), the corporation
paying such Severance Benefits shall pay to the
Designated Officer in cash an additional amount ("Gross-
Up Payment") such that the net amount retained by the
Designated Officer after deduction of any Excise Tax
payable on the Severance Benefits and any Federal, state,
and local income tax and Excise Tax payable upon the
Gross-Up Payment shall be equal to the Severance
Benefits. Such Gross-Up Payment shall be made by the
corporation to the Designated Officer on the effective
date of his/her Qualifying Termination.
4.3 - Tax Computation. For the purpose of determining whether
any of the Severance Benefits will be subject to the
Excise Tax and the amount of such Excise Tax:
(a) any other payments of benefits received or to be
received by a Designated Officer in connection with a
Change in Control or his/her termination of
employment (whether pursuant to the terms of this
Plan or any other plan, arrangement, or agreement
with Iowa- Illinois, or with any person whose actions
result in a Change in Control or with any person
affiliated with Iowa-Illinois) shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel, selected by such
Designated Officer, such other payments or benefits
(in whole or in part) do not constitute parachute
payments, or that such excess parachute payments (in
whole or in part) represent reasonable compensation
for services actually rendered within the meaning of
Section 280G(b)(4) in excess of the base amount
within the meaning of Section 280G(b)(3), or are
otherwise not subject to the Excise Tax; and
(b) the amount of Severance Benefits which shall be
treated as subject to the Excise Tax shall be equal
to the lesser of: (i) the total amount of Severance
Benefits; or (ii) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of
the Code {after applying clause (a) above}; and
(c) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the
independent auditors of the corporation paying such
Severance Benefits in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.
For the purpose of determining the amount of the
Gross-Up Payment, the Designated Officer shall be
deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the
calendar year in which such Gross-Up Payment is to be
made and state and local income taxes at the highest
marginal rate of taxation in the state and locality
of the Designated Officer's residence on the
effective date of his/her Qualifying Termination, net
of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state
and local taxes.
4.4 - Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computations under Section
4.3 hereof such that the Designated Officer does not
receive the maximum Severance Benefits (including Gross-
Up Payment) permitted by this Plan, the corporation
paying such Severance Benefits shall reimburse the
Designated Officer for the full amount necessary to make
him/her whole, plus interest from the date such
additional Severance Benefits became due to the date of
such payment at the prime rate as may be established by
The First National Bank of Chicago from time-to-time.
ARTICLE V - CONTRACTUAL RIGHTS
This Plan establishes in each Designated Officer a right
to the benefits to which he or she is entitled hereunder.
Nothing herein contained shall require or be deemed to require,
or prohibit or be deemed to prohibit, that Iowa-Illinois
segregate or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for the payment of Severance
Benefits or other payments hereunder required.
ARTICLE VI - EXCLUSIVITY OF BENEFITS
Neither the provisions of this Plan nor the right to
receive Severance Benefits shall reduce any amounts otherwise
payable to any Designated Officer, or in any way diminish
his/her rights as an employee of Iowa-Illinois or any successor
corporation under any benefit, bonus, incentive, stock option,
stock bonus or stock purchase plan, or any employee agreement,
or any other plan, program, policy or practice for which such
Designated Officer may qualify. Vested benefits and other
amounts which the Designated Officer is otherwise entitled to
receive under any plan, program, policy or practice at or
subsequent to the effective date of such Designated Officer's
Qualifying Termination shall be payable in accordance with such
plan, program, policy or practice.
ARTICLE VII - EMPLOYMENT STATUS
In no event shall any Designated Officer be obligated to
seek other employment or to take other action by way of
mitigation of the amounts payable to such Designated Officer
under any of the provisions of this Plan, nor shall the amount
of any payment hereunder be reduced by any compensation earned
by such Designated Officer as a result of employment by another
employer. Nothing herein contained shall be deemed to create
an employment agreement between Iowa-Illinois and any
Designated Officer providing for the employment of such
Designated Officer for any fixed period of time.
ARTICLE VIII - SUCCESSORS
This Plan shall inure to the benefit and be enforceable
by each Designated Officer's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If a Designated Officer dies while any
Severance Benefits would still be payable to him/her under this
Plan, all such unpaid amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Plan
to such Designated Officer's designated beneficiaries or, in
the absence thereof, to such Designated Officer's estate. A
Designated Officer may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any
Severance Benefits. Such designation shall be signed and
submitted in writing by the Designated Officer to the President
of Iowa-Illinois of its successor. A Designated Officer may
make or change such designation at any time.
ARTICLE IX - LEGAL REMEDIES
9.1 - Legal Fees and Expenses. To the extent permitted by law,
the corporation obligated to pay any Severance Benefits
shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good
faith by each Designated Officer as a result of such
corporation's refusal to provide the Severance Benefits
to which the Designated Officer becomes entitled under
this Plan, or as a result of such corporation's
contesting the Plan, or as a result of such corporation's
contesting the validity, enforceability, or
interpretation of the Plan, or as a result of any
conflict pertaining to this Plan.
9.2 - Arbitration. Each Designated Officer shall have the
right and option to elect (in lieu of litigation) to have
any dispute or controversy arising under or in connection
with this Plan settled by arbitration, conducted by an
arbitrator in accordance with the rules of the American
Arbitration Association then in effect. A Designated
Officer's election to arbitrate and the decision of the
arbitrator in that proceeding shall be binding on the
parties to such arbitration.
Judgment may be entered on the award of the arbitrator in
any court having jurisdiction. All expenses of such
arbitration, including the fees and expenses of the
counsel for the Designated Officer, shall be borne by the
corporation which is the party to the arbitration.
ARTICLE X - SEVERABILITY
In the event any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of this Plan,
and the Plan shall be construed and enforced as if the illegal
or invalid provision had not been included. The captions of
this Plan are not part of the provisions hereof and shall have
no force and affect.
ARTICLE XI - APPLICABLE LAW
All matters relating to this Plan shall be interpreted in
accordance with the laws of the State of Illinois.
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
SUPPLEMENTAL RETIREMENT PLAN FOR DESIGNATED OFFICERS
October 1993
I. ESTABLISHMENT
Iowa-Illinois Gas and Electric Company, an Illinois
corporation, (the "Company") hereby amends and restates
the Company's Supplemental Retirement Plan for Principal
Officers as the Company's Supplemental Retirement Plan for
Designated Officers (the "Plan"), effective as of July 1,
1993.
II. PURPOSE
The purpose of the Plan is to enable the Company and its
subsidiaries to attract, retain, and motivate persons of
outstanding competence, and to provide appropriate
supplemental retirement and survivor benefits to
Designated Officers of the Company.
III. CONSTRUCTION
Section 3.1. Definitions. Whenever used herein, the
following terms shall have the respective meanings set
forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means a Participant's discharge from the
employment of the Company because such Participant
willfully engages in conduct, or lack thereof, that
is demonstrably and materially injurious to the
Company, its business reputation of financial
structure, but shall not include a Qualifying
Termination. Determination of "Cause" shall be made
by the Committee in the exercise of good faith and
reasonable judgement and approved by the Board.
(c) "Change in Control" means either:
(i) Approval by the shareholders of the Company of a
plan of merger, consolidation, or reorganization
of the Company unless at least sixty percent
(60%) of the members of the board of directors
of the corporation resulting from such merger,
consolidation, or reorganization were members of
the Incumbent Board; or
(ii) The occurrence of any other event that is
designated as being a "Change in Control" by a
majority vote of the directors of the Incumbent
Board who are not also employees of the Company.
(d) "Change-in-Control Benefit" means:
(i) For a Participant who has made an effective
Transitional Election, a Normal Supplemental
Retirement Benefit reduced at the rate of four
percent (4%) for each full year that, on the
effective date of a Qualifying Termination, the
Participant's age is less than sixty-three (63)
years; provided, however, that the Change-in-
Control Benefit shall in all cases be no less
than thirty percent (30%) of a Normal
Supplemental Retirement Benefit;
(ii) For all Participants that have not made an
effective Transitional Election (including all
individuals who first become Participants
following the Effective Date), a pro rata
portion of a Normal Supplemental Retirement
Benefit, based upon the ratio of: (a) the
Participant's years of service (to the full day)
as a Designated Officer or Principal Officer on
the effective date of his or her Qualifying
Termination to (b) the number of years (to the
full day) from the day the Participant became a
Designated Officer or Principal Officer to the
day such Participant would have otherwise
reached his or her Normal Retirement Date;
provided, however, that the Change-In-Control
Benefit shall in all cases be no less than
thirty percent (30%) of a Normal Supplemental
Retirement Benefit.
(e) "Code" means the Internal Revenue code of 1986, as
amended.
(f) "Committee" means an Administrative Committee
comprised of Company employees selected by the
President of the Company and approved by the Board to
administer the Plan pursuant to Article IV herein.
(g) "Designated Officer" is an officer of the Company or
its subsidiaries who has been authorized by the Board
to participate in the Plan.
(h) "Disability" means a Termination of Services
resulting from a total and permanent disability of a
Participant, within the meaning of Code Section
22(e)(3), as a result of a medically determinable
physical or mental impairment which renders such
Participant unable to engage in any substantial
gainful employment, and which can be expected to be
of indefinite duration. Such Disability shall be
determined by the Committee in the exercise of good
faith and reasonable judgment in reliance on
competent medical advice from one or more qualified
individuals selected by the Committee.
(i) "Disability Benefit" means, for such Participant, the
Normal Supplemental Retirement Benefit computed as
though the Participant were age sixty-five (65),
regardless of his or her actual age on the date of
Termination of Services due to such Disability.
(j) "Early Retirement Supplemental Benefit" means:
(i) For each Participant who has made an effective
Transitional Election, a Normal Supplemental
Retirement Benefit reduced at the rate of four
percent (4%) for each full year that, on the
effective date of Termination of Services, such
Participant's age is less that sixty-five (65)
years, with such rate of reduction extending
down to age fifty-five (55). An Early
Retirement Supplemental Benefit will not be
available to any Participant whose Termination
of Services occurs prior to attaining age five
(55) years;
(ii) For a Participant who has not made an effective
Transitional Election (including all individuals
that first became Participants following the
Effective Date), a pro rata portion of a Normal
Supplemental Retirement Benefit, based on the
ratio of: (a) the Participant's years of
service (to the full day) as a Designated
Officer or Principal Officer on the effective
day of the Termination of Services {but
excluding all years of service as a Designated
Officer or Principal Officer prior to the
Participant reaching the age of forty-five to
(b) the number of years (to the full day) from
the day the Participant became a Designated
Officer or Principal Officer {but excluding all
years of service as a Designated Officer or
Principal Officer prior to the Participant
reaching the age of forty-five (45)} to the day
the Participant would have otherwise reached his
or her Normal Retirement.
(k) "Early Retirement" means, for each Participant, the
Termination of Services of such Participant other
than because of death, Disability, Cause, or
Qualifying Termination, but prior to such
Participant's Normal Retirement.
(l) "Early Retirement Date" means the first day of the
month next following the date of Early Retirement.
(m) "Effective Date" means April 26, 1991.
(n) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any
successor thereto.
(o) "Incumbent Board" means the members of the Board on
April 26, 1991. For this purpose, an individual who
becomes a member of the Board subsequent to April 26,
1991 and who has been nominated for election by the
Company's shareholders by resolution adopted by a
vote of at least two-thirds of the directors then
comprising the Incumbent Board at a duly convened
meeting thereof shall be deemed to be a member of the
Incumbent Board.
(p) "Normal Supplemental Retirement Benefit" means the
annual benefit provided under the Plan upon a
Termination of Services on or following a
Participant's Normal Retirement Date, in the amount
of sixty-five percent (65%) of such Participant's
highest rate of annual Total Cash Compensation in
effect at any time during the three (3) years
immediately prior to such Termination of Services
reduced by the sum of:
(i) the annual benefits provided to such Participant
under the Company's (tax qualified) Pension
Plan; and
(ii) tax qualified and non tax-qualified pension type
retirement plan benefits payable to such
Participant by other employers of such
converting such benefits to an actuarially
equivalent amount as provided in the Company's
(tax qualified) Pension Plan, as determined by
the Committee in the exercise of good faith and
reasonable judgment.
(q) "Normal Retirement" means, for each Participant, the
Termination of Services of such Participant upon
attaining age sixty-five (65) years.
(r) "Normal Retirement Date" means the first day of the
month next following the date of Normal Retirement.
(s) "Participant" means an officer of the Company or its
subsidiaries who has been approved by the Board, and
any retired individual who has a vested accrued
benefit under the Plan as specified in Article V.
(t) "Plan Year" means the calendar year beginning
January 1 and ending December 31.
(u) "Principal Officer" means a member of the Chairman's
Advisory Committee of the Company prior to July 1,
1993.
(v) "Qualifying Termination" means a Termination of
Services of a Participant within twenty-four (24)
full calendar months immediately after a Change in
Control either: (i) involuntarily for any reason or
(ii) voluntarily, provided that such Participant has
furnished six (6) full months prior written notice of
his or her intent to voluntarily terminate employment
to the President of the corporation resulting from
such Change in Control.
(w) "Rabbi Trust" means a grantor trust, within the
meaning of Sections 671-678 of the Code, established
by the Company for the benefit of the Participants,
both active and retired, and the Participants' desig-
nated beneficiaries, as specified in Article VIII.
(x) "Survivor's Benefit" means the benefit payable to a
Participant's designated beneficiary or estate under
the Plan as specified in section 6.5 in the event of
such Participant's death. The annual amount of the
Survivor's Benefit shall equal the annual amount of
such Participant's Normal Retirement Benefit
(determined as if such Participant were age sixty-
five (65) and without regard to such Participant's
actual age at the time of death or the age of his or
her designated beneficiary.
(y) "Termination of Services" means the severing of a
Participant's employment with the Company for any
reason.
(z) "Total Cash Compensation" means the amount payable to
a Participant by the Company as annual salary,
without regard to deferrals.
(aa) "Transitional Election" means a statement signed by a
Principal Officer, who was a Participant immediately
prior to the Effective Date, and delivered to the
President of the Company prior to February 1, 1994
which expresses an irrevocable election by the
Participant to be eligible for the benefits provided
by the Plan (which, in most respects, provide
benefits that are similar to those provided prior to
the Plan's April 26, 1991 amendment and restatement).
Designated Officers or Principal Officers who become
Participants after the Effective Date shall not be
allowed to make a Transitional Election.
Section 3.2. Gender and Number. Except when otherwise
indicated by the context, any masculine term used herein
also shall include the feminine; the plural shall include
the singular; and the singular shall include the plural.
Section 3.3. Severability. In the event any provision of
the Plan shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the
remaining parts of the Plan; and the Plan shall be
construed and enforced as if the illegal or invalid
provision had not been included.
IV. ADMINISTRATION
Section 4.1. The Committee. The Plan shall be
administered within the guidelines contained in this
Article IV by an Administrative Committee comprised of
Company employees selected by the President of the Company
and approved by the Board. The Committee may delegate the
responsibility of performing ministerial acts to such
administrative agents as it deems advisable or desirable
to carry out the purpose of the Plan.
Section 4.2. Authority of the Committee. Subject to
ratification by the Board, the Committee shall have the
power to construe and interpret the Plan and any agreement
or instrument entered into hereunder; to prescribe, amend,
or waive rules and regulations for the Plan's
administration; and to make any other determination which
may be necessary or advisable for the Plan's
administration. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent reasonable to effect
its purpose.
The Company may elect to insure the lives of Participants;
in such case, Participants must agree to undergo physical
examinations and otherwise cooperate in obtaining such
insurance as a condition precedent to participation in the
Plan. Any such life insurance policies shall be owned by
and be considered a general asset of the Company. Subject
to Section 7.2, no Participant or beneficiary shall have
any rights to or interest in or shall be entitled to any
benefits under such policies.
Section 4.3. Decisions Binding. All determinations and
decisions made by the Committee pursuant to the provisions
of the Plan, as ratified by the Board, and all related
orders or resolutions of the Board shall be final,
conclusive, and binding on all persons, including the
Company, its shareholders, employees, the Participants and
their estates and designated beneficiaries.
<PAGE>
The Board shall have the full power to amend or terminate
the Plan at any time prior to the occurrence of a Change
in Control, as further described in article VII herein.
V. ELIGIBILITY AND PARTICIPATION
Section 5.1. Participation. Upon approval by the
Board,Designated Officers shall automatically become
Participants under the Plan. Retired individuals who have
a vested accrued benefit under the Plan will also be
considered to be Participants.
Section 5.2. No Employment Guarantee. Neither this Plan
nor any action taken hereunder shall be construed as
giving a Participant the right to be retained as an
employee of the Company for any period.
VI. BENEFITS
Section 6.1. Benefits Upon Normal Retirement. Upon a
Participant's Normal Retirement, the Company shall pay to
such Participant, as compensation for services rendered
prior to such date, the Normal Supplemental Retirement
Benefit in equal monthly installments commencing on the
Normal Retirement Date and continuing on the first day of
each month thereafter during the lifetime of such
Participant.
Section 6.2. Benefits Upon Early Retirement. Upon a
Participant's Early Retirement, the Company shall pay to
the Participant, as compensation for services rendered
prior to such date, an Early Retirement Supplemental
Benefit in equal monthly installments commencing on the
later of (i) the Participant's Early Retirement Date; or
(ii) the first day of the month next following the date on
which such Participant attains age fifty-five (55); and,
in all cases, continuing on the first day of each month
thereafter during the lifetime of such Participant.
Section 6.3. Benefits Upon Disability. Upon a
Participant's Termination of Services for Disability, the
Company shall pay to the Participant, as compensation for
services rendered prior to such date, a Disability Benefit
in equal monthly installments commencing on the first day
of the month next following the date of Termination of
Services due to such Disability and continuing on the
first day of each month thereafter during the lifetime of
such Participant.
Section 6.4. Benefits Upon a Qualifying Termination.
After a Participant's Qualifying Termination, the Company
shall pay to the Participant, as compensation for services
rendered prior to such date, his or her Change-in-Control
Benefit in equal monthly installments commencing on the
later of: (i) the first day of the month next following
the effective date of such Qualifying Termination; or (ii)
the first day of the month next following the date that
the Participant attains age fifty-five (55); and, in all
cases, continuing on the first day of each month
thereafter during the lifetime of such Participant.
Section 6.5. Benefits Upon Death. Upon a Participant's
death, the Company shall pay to such Participant's
designated beneficiary or estate, as appropriate, the
following Survivor's Benefit;
(a) Death Prior to Commencement of Benefits. If a
Participant dies prior to commencement of the payment
of any benefit hereunder, the Company shall pay to
such Participant's designated beneficiary or estate
the Survivor's Benefit in one hundred eighty (180)
equal monthly installments commencing on the first
day of the month following such date of death and
receipt of a death certificate by the Company, and
continuing on the first day of each month thereafter
until the one hundred eighty (180) payments have been
made.
(b) Death After Commencement of Benefits. If a
Participant dies after commencement of the payment of
any benefit hereunder, the Company shall pay to the
Participant's surviving spouse two-thirds of the
Survivor's Benefit commencing on the first day of the
month following such date of death and receipt of a
death certificate by the Company and continuing on
the first day of each month thereafter for the
remaining lifetime of the surviving spouse.
(c) Payment by the Company of the benefit in section 6.5
(a) or (b) shall relieve the Company of the
obligation to pay a Normal Supplemental Retirement
Benefit, an Early Retirement Supplemental Benefit, a
Disability Benefit, a Change-in-Control Benefit, or
any other benefit which the Participant might have
otherwise received under the Plan.
(d) In the event a Participant dies, without a surviving
spouse, after commencement of the payment of any
benefits hereunder, all benefits hereunder shall
cease to be paid as of the date of death, and the
Company shall have no further obligation to the
Participant (or the Participant's estate and/or
beneficiaries) for purposes of this Plan.
Section 6.6. Forfeiture Upon Termination for Cause. Upon
a Participant's Termination of Services for Cause, such
Participant shall immediately forfeit all rights and
benefits provided under the Plan, and the Company shall
have no further obligation to such Participant under the
Plan.
Section 6.7. General Payout Restrictions. No benefits
shall be paid under this Plan prior to the actual
Termination of Services of a Participant.
VII. INDIVIDUAL ACCOUNTS AND THE RABBI TRUST
Section 7.1. Establishment of a Rabbi Trust. After the
Effective Date, the Company shall establish a revocable
Rabbi Trust for the benefit of the Participants, both
active and retired. The Rabbi Trust shall have an
independent trustee, selected by the Company, and, it
shall contain restrictions on the Company's ability to
amend or terminate any of the terms thereof after the
Rabbi Trust shall become irrevocable as provided in
Section 7.2.
All assets held in the Rabbi Trust (while revocable or
irrevocable) shall at all times be specifically subject to
the claims of the Company's general creditors in the event
of bankruptcy or insolvency; such terms shall be
specifically defined within the provisions of the Rabbi
Trust, along with a required procedure for notifying the
Trustee of any such bankruptcy or insolvency.
Section 7.2. Causing the Trust to Become Irrevocable.
The instrument establishing the Rabbi Trust shall provide
that the Rabbi Trust shall be revocable until the
occurrence of either of the following:
(i) A Change in Control; or
(ii) A majority vote by the Incumbent Board to make the
Rabbi Trust irrevocable.
Section 7.3. Payment of Benefits from the Trust. The
Company shall be primarily obligated to pay all benefits
of Participants under the Plan, whether the Rabbi Trust is
revocable or irrevocable at the time. In the event the
Company fails to fulfill any such obligation hereunder in
a timely manner, the Trustee shall be empowered, under the
terms of the Rabbi Trust, to either cash in the related
life insurance policies or to borrow against the policies,
to the extent necessary to pay past due benefits directly
from the Trust.
VIII. BENEFICIARY DESIGNATION
Section 8.1. Designation of Beneficiary. Each
Participant shall be entitled to designate one or more
beneficiaries by filing a signed, written notice of such
designation with the Committee, in a form as the Committee
may prescribe. A Participant may revoke or modify a
beneficiary designation at any time by filing a new
beneficiary designation form with the Committee.
Section 8.2. Payment to a Participant's Estate. A
Participant's beneficiary designation shall be deemed
automatically revoked in the event all designated
beneficiaries predecease such Participant or, if the sole
beneficiary is such Participant's spouse, in the event of
dissolution of marriage. In such event, or in the event a
Participant does not designate a beneficiary, the benefits
under Section 6.5(a) shall be paid to such Participant's
estate.
IX. MISCELLANEOUS
Section 9.1. Unfunded Plan. This Plan is intended to be
an unfunded plan maintained primarily to provide benefits
to a "select group of management or highly compensated
employees" within the meaning of Sections 201, 301, and
401 of ERISA and, therefore, is further intended to be
exempt from the provisions of Parts 2, 3, and 4 of Title I
of ERISA. Accordingly, the Committee may terminate the
Plan for any or all Participants in order to achieve and
maintain this intended result, provided that previously
accrued benefits hereunder shall not be reduced or
otherwise adversely affected without the written consent
of all affected Participants.
Section 9.2. Withholding. The Company shall have the
right to require Participants to remit to the Company an
amount sufficient to satisfy Federal, state, and local tax
withholding tax requirements, or to deduct from any or all
payments made pursuant to the Plan amounts sufficient to
satisfy such withholding tax requirements.
Section 9.3. Costs of the Plan. All costs of
implementing and administering the Plan shall be borne by
the Company.
Section 9.4. Nontransferability. Neither the
Participants nor any designated beneficiary shall have the
right to sell, assign, transfer, or otherwise convey the
right to receive any payment hereunder; nor shall any such
payment be subject to attachment, garnishment, levy,
pledge, bankruptcy, or any other manner or kind of
execution in connection with any claim against the
Participants or any designated beneficiary thereof.
Section 9.5. Successors. All obligations of the Company
under the Plan shall be binding upon and inure to the
benefit of any successor to the Company, whether the
existence of such successor is the direct or indirect
result of a merger, consolidation, or reorganization
involving the Company or the purchase or other acquisition
of all or substantially all of the business and/or assets
of the Company.
Section 9.6. Address of Participant or Beneficiary. Each
Participant shall keep the Company apprised of his or her
current address and that of any designated beneficiary
during his or her participation in the Plan. Upon the
death of a Participant, any beneficiaries entitled to
receive benefit payment under the Plan shall keep the
Company apprised of their current address until the entire
amount to be distributed has been paid.
Section 9.7. Applicable Law. To the extent not preempted
by Federal law, the Plan shall be governed by and
construed in accordance with the laws of the state of
Illinois.
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
COMPENSATION DEFERRAL PLAN FOR DESIGNATED OFFICERS
October 1993
I. ESTABLISHMENT
Iowa-Illinois Gas and Electric Company, an Illinois
corporation (the "Company"), hereby amends and restates
the Company's Compensation Deferral Plan for Principal
Officers as the Company's Compensation Deferral Plan for
Designated Officers (the "Plan"), effective as of
July 1, 1993.
II. PURPOSE
The purpose of the Plan is to enable the Company and its
subsidiaries to attract, retain, and motivate executives
of outstanding competence by providing, among other
benefits, the opportunity to defer a portion of their
Total Cash Compensation. The Plan permits each
Participant to custom design his or her individual level
of retirement income.
III. CONSTRUCTION
Section 3.1. Definitions. Whenever used herein, the
following terms shall have the respective meanings set
forth below:
(a) "Board" means the Board of Directors of the
Company.
(b) "Cause" shall mean a Participant's discharge from
the employment of the Company because the
Participant willfully engages in conduct, or lack
thereof, that is demonstrably and materially
injurious to the Company, its business reputation,
or financial structure. Determination of "Cause"
shall be made by the Committee in the exercise of
good faith and reasonable judgment and approved by
the Board.
(c) "Change in Control" means either:
(i) Approval by the shareholders of the Company of
a plan of merger, consolidation, or reorgani-
zation of the Company unless at least sixty
percent (60%) of the members of the board of
directors of the corporation resulting from
such merger, consolidation, or reorganization
were members of the Incumbent Board; or
(ii) The occurrence of any other event that is
designated as being a "Change in Control" by a
majority vote of the directors of the
Incumbent Board, who are not also employees of
Iowa-Illinois Gas and Electric Company.
(d) "Change-in-Control Benefit" means, with respect to
each Participant, his or her Early Retirement
Benefit, computed as of the effective date of his
or her Qualifying Termination as though such
Participant were age fifty-five (55) at such time,
or his or her actual age if greater. If a
Participant is age sixty-five (65) or older upon
the effective date of Qualifying Termination, his
or her "Change-in-Control Benefit" shall equal his
or her Normal Retirement Benefit.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means an Administrative Committee
comprised of Company employees selected by the
President of the Company and approved by the Board
to administer the Plan pursuant to Article IV.
(g) "Deferred Compensation" means the amount of Total
Cash Compensation which such Participant and the
Committee mutually agree shall be deferred in any
given Plan Year in accordance with the provisions
of the Plan.
(h) "Designated Officer" is an officer of the Company
or its subsidiaries who has been authorized by the
Board to participate in the Plan.
(i) "Disability" means a Termination of Services
resulting from a total and permanent disability of
a Participant, within the meaning of Section
22(e)(3) of the Code, as a result of a medically
determinable physical or mental impairment which
renders such Participant unable to engage in any
substantial gainful employment, and which can be
expected to continue for an indefinite duration.
Such Disability shall be determined by the
Committee in the exercise of good faith and
reasonable judgment in reliance on competent
medical advice from one or more qualified
individuals selected by the Committee.
(j) "Disability Benefit" means, with respect to each
Participant, his or her Early Retirement Benefit
computed as though such Participant were age fifty-
five (55) or such Participant's actual age if
greater. If a Participant is age sixty-five (65)
or older at the date of Termination of Services,
"Disability Benefit" means his or her Normal
Retirement Benefit.
(k) "Early Retirement Benefit" means:
(i) For deferrals made by a Participant prior to
January 1, 1994, his or her Normal Retirement
Benefit reduced by a cumulative percentage,
based upon his or her actual age on the
effective date of Termination of Services with
the Company, as follows:
Age of Participant Percentage Reduction
Upon Termination for Each Year Prior to
of Services Normal Retirement Age 65
65 or more 0%
55 to less than 65 4%
The cumulative percentage reduction is such
that a Termination of Services at age fifty-
five (55) would result in a forty percent
(40%) reduction in the Normal Retirement
Benefit [i.e., ten (10) years at four percent
(4%)].
(ii) For deferrals made by a Participant after
December 31, 1993, his or her Normal
Retirement Benefit reduced by a cumulative
percentage, based upon his or her actual age
on the effective date of Termination of
Services with the Company, as follows:
Age of Participant Percentage Reduction
Upon Termination for Each Year Prior to
of Services Normal Retirement Age 65
65 or more 0%
62 to less than 65 4%
50 to less than 62 6%
This reduction is cumulative such that a
Termination of Services at age fifty-five (55)
would result in a fifty-four percent (54%)
reduction in the Normal Retirement Benefit
[i.e., three (3) years at four percent (4%),
plus seven (7) years at six percent (6%)].
(l) "Early Retirement" means, with respect to each
Participant, the effective date of Termination of
Services of such Participant other than because of
death, Disability, Cause, or Qualifying Termination
after such Participant has attained age fifty (50)
for deferrals made after December 31, 1993, and age
fifty-five (55) for deferrals made prior to
January 1, 1994, but in all cases prior to such
Participant's Normal Retirement Date.
(m) "Early Retirement Date" means the first day of the
month next following the date of Early Retirement.
(n) "Effective Date" means April 26, 1991.
(o) "Eligible Employee" means a Designated Officer of
the Company, as further provided in Article V.
(p) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time,
or any successor thereto.
(q) "Incumbent Board" means the members of the Board on
April 26, 1991. For this purpose, an individual
who becomes a member of the Board subsequent to
April 26, 1991 and who has been nominated for
election by the Company's shareholders and by
resolution adopted by a vote of at least two-thirds
of the directors then comprising the Incumbent
Board at a duly convened meeting thereof shall be
deemed to be a member of the Incumbent Board.
(r) "Normal Retirement Benefit" means a benefit
provided under the Plan in an amount determined by
the Committee prior to the beginning of each Plan
Year, payable as described herein upon a
Participant's Normal Retirement Date, based upon:
(i) the amount of Total Cash Compensation deferred
by such Participant in such Plan Year; (ii) the age
of such Participant at the time of making each
deferral; and (iii) the Rate of Return pertaining
to each deferral as established by the Committee
for each Plan year in which a deferral is made.
Table I attached to this document, entitled "Iowa-
Illinois Revised Benefit Table," specifies the
Normal Retirement Benefit amount for deferrals made
in the Plan year beginning January 1, 1991 and each
Plan Year thereafter until such table is revised by
action of the Committee.
(s) "Normal Retirement" means, for each Participant,
the Termination of Services of such Participant
upon attaining age sixty-five (65) years.
(t) "Normal Retirement Date" means the first day of the
month next following the date of Normal Retirement.
<PAGE>
(u) "Participant" means an Eligible Employee who has
been approved by the Board, or a retired individual
who has a vested accrued benefit under the Plan, as
specified in Section 5.2.
(v) "Participation Agreement" means the agreement
executed by an Eligible Employee and the Committee
which identifies the amount of Deferred
Compensation for such Eligible Employee for a given
Plan Year pursuant to the Plan, such Agreement to
be in such form as may be determined by the
Committee.
(w) "Plan Year" means the calendar year beginning
January 1 and ending December 31.
(x) "Qualifying Termination" means a Termination of
Services of a Participant within twenty-four (24)
full calendar months immediately after a Change in
Control either: (i) involuntarily for any reason
or (ii) voluntarily, provided that such Participant
has furnished six (6) full months prior written
notice of his or her intent to voluntarily
terminate employment to the President of the
corporation resulting from such Change in Control.
(y) "Rabbi Trust" means a grantor trust, within the
meaning of Sections 671-678 of the Code,
established by the Company for the benefit of the
Participants, both active and retired, and the
Participants' designated beneficiaries, as
specified in Article VIII.
(z) "Rate of Return" means the rate of interest that
will be earned on Deferred Compensation made under
the Plan in the event a Participant experiences a
Termination of Services which results in the
payment of Normal Retirement Benefits, Early
Retirement Benefits, Survivor Benefits, or
Disability Benefits, such Rate of Return to be
established prior to the beginning of each Plan
Year by the Committee, in its sole discretion, and
disclosed to the Participants at such time.
Table I attached to this document, entitled "Iowa-
Illinois Revised Benefit Table," specifies the Rate
of Return for Deferred Compensation in the Plan
Year beginning January 1, 1991, and each Plan Year
thereafter until such Rate of Return is revised by
action of the Committee.
(aa) "Survivor's Benefit" means the benefit payable to a
Participant's designated beneficiary or estate
under the Plan, as specified in Section 7.5(a), in
the event of such Participant's death prior to the
commencement of the payment of any benefit
hereunder. Table I attached, entitled "Iowa-
Illinois Revised Benefit Table," specifies the
Survivor's Benefit amount for deferrals made in the
Plan Year beginning January 1, 1991 and each Plan
Year thereafter until such table is revised by
action of the Committee.
(bb) "Termination of Services" means the severing of a
Participant's employment with the Company for any
reason.
(cc) "Total Cash Compensation" means the amount payable
to a Participant by the Company as an annual
salary, without regard to deferrals.
Section 3.2. Gender and Number. Unless otherwise
required by the context, any masculine term used herein
also shall include the feminine; the plural shall
include the singular; and the singular shall include the
plural.
Section 3.3. Severability. In the event any provision
of the Plan shall be held illegal or invalid for any
reason, such illegality or invalidity shall not affect
the remaining provisions of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid
provision had not been included.
IV. ADMINISTRATION
Section 4.1. The Committee. The Plan shall be
administered within the guidelines contained in this
Article IV by an Administrative Committee comprised of
Company employees selected by the President of the
Company and approved by the Board. The Committee may
delegate the responsibility of performing ministerial
acts to such administrative agents as it shall deem
advisable or desirable to carry out the purpose of the
Plan.
Section 4.2. Authority of the Committee. Subject to
ratification by the Board, the Committee shall have the
power to construe and interpret the Plan and any
agreement or instrument entered into hereunder; to
prescribe, amend, or waive rules and regulations for the
Plan's administration; and to make any other
determination which may be necessary or advisable for
the Plan's administration. The Committee may correct
any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the
extent reasonable to effect its purpose.
The manner of investment of Deferred Compensation
hereunder shall be in the sole discretion of the
Committee. The Company may elect to insure the lives of
Participants, in which case Participants must agree to
undergo physical examinations and otherwise cooperate in
obtaining such insurance as a condition precedent to
participation in the Plan. Any such life insurance
policies shall be owned by and considered a general
asset of the Company. Subject to Section 8.2, no
Participant or designated beneficiary shall have any
rights to or interest in or shall be entitled to any
benefits under such policies.
Section 4.3. Decisions Binding. All determinations and
decisions made by the Committee pursuant to the
provisions of the Plan, as ratified by the Board, and
all related orders or resolutions of the Board, shall be
final, conclusive, and binding on all persons, including
the Company, its shareholders, employees, the
Participants and their estates and designated
beneficiaries.
The Board shall have the full power to amend or
terminate the Plan at any time prior to the occurrence
of a Change in Control.
V. ELIGIBILITY AND PARTICIPATION
Section 5.1. Eligibility. All Designated Officers
shall be eligible to participate in the Plan.
Section 5.2. Participation. Upon approval by the
Board, Eligible Employees shall be notified of their
ability to elect to make deferrals under the Plan. Upon
receiving notification of eligibility, and at the
beginning of each Plan Year thereafter, each Eligible
Employee desiring to become a Participant under the Plan
must complete and return to the Company a Participation
Agreement, as described in section 6.2, before any
deferrals can be made under the Plan.
Retired individuals who have a vested accrued benefit
under the Plan will also be considered to be
Participants.
Section 5.3. No Employment Guarantee. Neither the
existence of the Plan nor any action taken hereunder
shall be construed as giving a Participant the right to
be retained as an employee of the Company for any
period.
VI. DEFERRAL OPPORTUNITY
Section 6.1. Amount Which May Be Deferred. For the
1992 and 1993 Plan Years, each Participant may defer
twenty five percent (25%) of his or her Total Cash
Compensation. For each Plan Year beginning thereafter,
each Participant may defer a maximum of fifteen percent
(15%) of his or her Total Cash Compensation.
The Committee may establish, from time to time, a
minimum level of Total Cash Compensation which may be
deferred hereunder in any Plan Year.
Section 6.2. Participation Agreement. Each Eligible
Employee shall identify the amount of Deferred
Compensation in any Plan Year by the execution of a
Participation Agreement prior to the beginning of such
Plan Year. A Participation Agreement shall be sent to
each Eligible Employee by the Committee at least fifteen
(15) calendar days prior to the beginning of each Plan
Year. The amount of Deferred Compensation shall reduce
the Total Cash Compensation otherwise payable to such
Eligible Employee during such Plan Year by ratably
deducting an equal amount from the Participant's salary
for each pay period.
Such Participation Agreement shall remain in effect for
the entire Plan Year unless earlier amended or modified
pursuant to Section 6.3.
Section 6.3. Modification of Deferral During Plan Year.
The Committee, in its sole discretion, may permit
prospective modifications to a Participation Agreement
for the remainder of a Plan Year, but only for the
purpose of decreasing or terminating the amount to be
deferred.
A request to decrease or terminate the amount to be
deferred under a Participation Agreement shall be
submitted by a Participation agreement shall be
submitted by a Participant in writing to the Committee
and shall set forth in detail the reasons for the
requested modification. If a modification shall be
granted by the Committee, such modification shall be
effective for the balance of the Plan Year to which such
Participation Agreement relates.
VII. BENEFITS
Section 7.1. Benefits Upon Normal Retirement. Upon a
Participant's Normal Retirement, the Company shall pay
to such Participant, as compensation for services
rendered prior to such date, his or her Normal
Retirement Benefit in equal monthly installments
commencing on the Normal Retirement Date and continuing
on the first day of each month thereafter during the
lifetime of such Participant.
Section 7.2. Benefits Upon Early Retirement. Upon a
Participant's Early Retirement, the Company shall pay to
the Participant, as compensation for services rendered
prior to such date, his or her Early Retirement Benefit
in equal monthly installments commencing on the Early
Retirement Date and continuing on the first day of each
month thereafter during the lifetime of such
Participant.
Section 7.3. Benefits Upon Disability. Upon a
Participant's Termination of Services for Disability,
the Company shall pay to the Participant, as
compensation for services rendered prior to such date, a
Disability Benefit in equal monthly installments
commencing on the first day of the month following the
date of Termination of Services due to such Disability
and continuing on the first day of each month thereafter
until the first day of the month following such
Participant's attaining his or her Normal Retirement
Date, at which time the Company shall commence paying
his or her Normal Retirement Benefit.
Section 7.4. Benefits Upon a Qualifying Termination.
After a Participant's Qualifying Termination, the
Company shall pay to the Participant, as compensation
for services rendered prior to such date, his or her
Change-in-Control Benefit, payable in equal monthly
installments commencing on the later of: (i) the first
day of the month next following the effective date of
the Qualifying Termination; or (ii) the first day of the
month next following the date that the Participant
achieves age fifty-five (55); and in all cases,
continuing on the first day of each month thereafter
during the lifetime of the Participant.
Section 7.5. Benefits Upon Death. Upon a Participant's
death, the Company shall pay to such Participant's
designated beneficiary or estate, as appropriate, the
following benefit:
(a) Death Prior to Commencement of Benefits. If a
Participant dies prior to commencement of the
payment of any benefit hereunder, the Company shall
pay to such Participant's designated beneficiary or
estate the Survivor's Benefit in one hundred eighty
(180) equal monthly installments commencing on the
first day of the month following such date of death
and receipt of a death certificate by the Company
and continuing on the first day of each month
thereafter until one hundred eighty (180) payments
have been made.
(b) Death After Commencement of Benefits. If a
Participant dies after commencement of the payment
of any benefits hereunder (but prior to receiving
one hundred eighty (180) such payments), the
Company shall continue the payment of his or her
Normal Retirement Benefit, Early Retirement
Benefit, Disability Benefit or Change-in-Control
Benefit to his or her designated beneficiary or
estate until a total of one hundred eighty (180)
payments (including those previously paid to the
Participant) have been made.
Following a Participant's death, in the event the
Participant's beneficiary dies before receiving the
remainder of the one hundred eighty (180) of the
above described Normal Retirement Benefit, Early
Retirement Benefit, Disability Benefit or Change-
in-Control Benefit payments, the then remaining
payments shall be paid to the beneficiary's estate
in equal monthly installments until the one hundred
eighty (180) payments have been made or, in the
event the beneficiary is a spouse, to the
beneficiary of the spouse as elected pursuant to
the beneficiary election form.
(c) Payment by the Company of the benefit in Section
7.5(a) or (b) shall relieve the Company of the
obligation to pay a Normal Retirement Benefit, an
Early Retirement Benefit, a Disability Benefit, or
a Change-in-Control Benefit or any other benefit
which the Participant might have otherwise received
under the Plan.
Section 7.6. Benefits Upon Termination for Cause. Upon
a Participant's Termination of Services for Cause, the
Company shall pay, as compensation for services rendered
prior to such date and in complete fulfillment of all
its obligations under the Plan, an amount equal to the
aggregate of all of such Participant's Deferred
Compensation hereunder, together with interest
compounded annually on all such deferrals at five
percent (5%) per annum from the respective dates of such
deferrals. Such amount shall be paid in a lump sum as
soon as administratively practicable, but in no event
later than January 31 of the year following the date of
such Termination of Services.
Section 7.7. Benefits Upon Other Termination of
Services. Upon Termination of Services prior to a
Participant's Normal Retirement Date for any reason
other than death, Disability, Early Retirement,
Qualifying Termination, or Cause, the Company shall pay
to such Participant such Participant's total Deferred
Compensation previously deferred hereunder with interest
compounded annually on all such deferrals (beginning
with the dates of such deferrals and continuing until
paid to such Participant). Interest shall be at the
prime lending rate, as determined and adjusted by the
Committee on a basis no less frequent than annually.
The payment of such amount shall be made in a lump sum
as soon as administratively practicable, but in no event
later than January 31 of the year following the date of
such Termination of Services.
Section 7.8. General Payout Restrictions. No benefits
will be paid under this Plan prior to the actual
Termination of Services of the Participant.
VIII. INDIVIDUAL ACCOUNTS AND THE RABBI TRUST
Section 8.1. Establishment of a Rabbi Trust. After the
Effective Date, the Company shall establish a revocable
Rabbi Trust for the benefit of the Participants, both
active and retired. The Rabbi Trust shall have an
independent trustee, selected by the Company, and it
shall contain restrictions on the Company's ability to
amend or terminate any of the terms thereof after the
Rabbi Trust shall become irrevocable as provided in
section 8.2.
All assets held in the Rabbi Trust (while revocable or
irrevocable) shall at all times be specifically subject
to the claims of the Company's general creditors in the
event of bankruptcy or insolvency; such terms shall be
specifically defined within the provisions of the Rabbi
Trust, along with a required procedure for notifying the
Trustee of any such bankruptcy or insolvency.
Section 8.2. Causing the Trust to Become Irrevocable.
The instrument establishing the Rabbi Trust shall
provide that the Rabbi Trust shall be revocable until
the occurrence of either of the following:
(i) A Change in Control; or
(ii) A majority vote by the Incumbent Board to make the
Rabbi Trust irrevocable.
Section 8.3. Payment of Benefits from the Trust. The
Company shall be primarily obligated to pay all benefits
of Participants under the Plan, whether the Rabbi Trust
is revocable or irrevocable at the time. In the event
the Company fails to fulfill any such obligation
hereunder in a timely manner, the Trustee shall be
empowered, under the terms of the Rabbi Trust, to either
cash in the related life insurance policies or to borrow
against the policies, to the extent necessary to pay
past due benefits directly from the Trust.
IX. BENEFICIARY DESIGNATION
Section 9.1. Designation of Beneficiary. Each
Participant shall be entitled to designate one or more
beneficiaries by filing a signed, written notice of such
designation with the Committee, in a form as the
Committee may prescribe. A Participant may revoke or
modify a beneficiary designation at any time by filing a
new beneficiary designation form with the Committee.
Section 9.2. Payment to a Participant's Estate. A
Participant's beneficiary designation shall be deemed
automatically revoked in the event all designated
beneficiaries predecease such Participant or, if the
sole beneficiary is such Participant's spouse, in the
event of dissolution of marriage. In such event, or in
the event a Participant does not designate a
beneficiary, the benefits under Section 7.5 shall be
paid to such Participant's estate.
X. MISCELLANEOUS
Section 10.1. Unfunded Plan. This Plan is intended to
be an unfunded plan maintained primarily to provide
benefits to a "select group of management or highly
compensated employees" within the meaning of Sections
201, 301, and 401 of ERISA and, therefore, is further
intended to be exempt from the provisions of Parts 2, 3,
and 4 of Title I of ERISA. Accordingly, the Committee
may terminate the Plan for any or all Participants in
order to achieve and maintain this intended result,
provided that previously accrued benefits hereunder
shall not be reduced or otherwise adversely affected
without the written consent of all affected
Participants.
Section 10.2. Withholding. The Company shall have the
right to require Participants to remit to the Company an
amount sufficient to satisfy Federal, state, and local
tax withholding tax requirements, or to deduct from any
or all payments made pursuant to the Plan amounts
sufficient to satisfy such withholding tax requirements.
Section 10.3. Costs of the Plan. All costs of
implementing and administering the Plan shall be borne
by the Company.
Section 10.4. Nontransferability. Neither the
Participants nor any designated beneficiary shall have
the right to sell, assign, transfer, or otherwise convey
the right to receive any payment hereunder; nor shall
any such payment be subject to attachment, garnishment,
levy, pledge, bankruptcy, or any other manner or kind of
<PAGE>
execution in connection with any claim against the
Participants or any designated beneficiary thereof.
Section 10.5. Successors. All obligations of the
Company under the Plan shall be binding upon and inure
to the benefit of any successor to the Company, whether
the existence of such successor is the direct or
indirect result of a merger, consolidation, or
reorganization involving the Company or the purchase or
other acquisition of all or substantially all of the
business and/or assets of the Company.
Section 10.6. Address of Participant or Beneficiary.
Each Participant shall keep the Company apprised of his
or her current address and that of any designated
beneficiary during his or her participation in the Plan.
Upon the death of a Participant, any beneficiaries
entitled to receive benefit payment under the Plan shall
keep the Company apprised of their current address until
the entire amount to be distributed has been paid.
Section 10.7. Applicable Law. To the extent not
preempted by Federal law, the Plan shall be governed by
and construed in accordance with the laws of the State
of Illinois.
<PAGE>
Officers' Deferred Compensation
IOWA-ILLINOIS REVISED BENEFIT TABLE
TABLE 1
ASSUMES ONE $10,000 DEFERRAL
ANNUAL 15 YRS
RETIRE- CERTAIN ANNUAL TOTAL RATE
MENT TOTAL SURVIVOR SURVIVOR OF
AGE BENEFIT BENEFIT BENEFIT BENEFIT RETURN
30 48,250 723,750 25,000 375,000 11.00%
31 45,170 677,550 23,908 358,620
32 42,288 634,320 22,864 342,960
33 39,590 593,850 21,866 327,990
34 37,064 555,960 20,912 313,680
35 34,700 520,500 20,000 300,000 11.60%
36 32,097 481,455 19,126 286,890
37 29,690 445,350 18,291 274,365
38 27,464 411,960 17,493 262,395
39 25,404 381,060 16,729 250,935
40 23,500 352,500 16,000 240,000 12.20%
41 21,509 322,635 15,348 230,220
42 19,688 295,320 14,724 220,860
43 18,021 270,315 14,125 211,875
44 16,496 247,440 13,550 203,250
45 15,100 226,500 13,000 195,000 12.80%
46 13,671 205,065 12,128 181,920
47 12,379 185,685 11,315 169,725
48 11,208 168,120 10,557 158,355
49 10,149 152,235 9,849 147,735
50 9,190 137,850 9,190 137,850 13.40%
51 8,329 124,935 8,329 124,935
52 7,550 113,250 7,550 113,250
53 6,844 102,660 6,844 102,660
54 6,203 93,045 6,203 93,045
55 5,624 84,360 5,624 84,360 14.50%
56 4,956 74,340 4,956 74,340
57 4,368 65,520 4,368 65,520
58 3,850 57,750 3,850 57,750
59 3,394 50,910 3,394 50,910
60 2,992 44,880 2,992 44,880 15.00%
61 2,601 39,015 2,601 39,015
62 2,262 33,930 2,262 33,930
63 1,967 29,505 1,967 29,505
64 1,711 25,665 1,711 25,665
65 1,487 22,305 1,487 22,305
12/21/92
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
KEY EMPLOYEE SUSTAINED PERFORMANCE PLAN
Adopted October 28, 1993
A. Effective Date and Plan Continuance.
1. The Key Employee Sustained Performance Plan (the SPP
or the Plan) is effective January 1, 1993, with
initial Award opportunities covering performance
during fiscal year 1993 (1/1/93 - 12/31/93).
2. It is the intent of Iowa-Illinois Gas and Electric
Company (the Company) to continue this Plan
indefinitely with new performance goals and Award
opportunities established for each fiscal year
subsequent to fiscal year 1993. However, the
Committee reserves the right to amend or discontinue
the Plan at any time should such action be deemed
appropriate by the Committee for the best interests of
the Company and its shareholders.
B. Definitions
1. Award(s) shall mean annually determined dollar amounts
credited to Participant Accounts under the Plan.
2. Award Date shall mean April first of each calendar
year.
3. CEO shall mean the Chief Executive Officer of the
Company.
4. Change of Control shall mean either (a) approval by
the shareholders of Iowa-Illinois of a reorganization,
merger or consolidation, unless at least sixty percent
(60%) of the members of the board of directors of the
corporation resulting from the reorganization, merger
or consolidation were members of the Incumbent Board;
or (b) such other event as designated by a majority
vote of the directors of the Incumbent Board who are
not also employees of Iowa-Illinois.
5. Committee shall mean the Compensation Committee of the
Company's Board of Directors as constituted from time
to time.
6. Company shall mean Iowa-Illinois Gas and Electric
Company or its successor organization.
<PAGE>
7. Incumbent Board shall mean the members of the Board of
Directors of Iowa-Illinois Gas and Electric Company on
October 28, 1993. For this purpose, an individual who
becomes a member of the Board subsequent to October
28, 1993 and who has been nominated for election by
the Company's shareholders and by resolution adopted
by a vote of at least two-thirds of the directors then
comprising the Incumbent Board at a duly convened
meeting thereof shall be deemed to be a member of the
Incumbent Board.
8. Participant shall mean a key employee of the Company
designated to participate in the Plan by the
Committee.
9. Participant Account shall mean the deferred incentive
account established to receive annually determined
Awards for each Participant.
10. Payout shall mean the distribution of cash from
Participant Accounts.
11. Personal Performance shall mean the individual
contributions to Company success demonstrated by each
Participant.
12. Plan or SPP shall mean this Key Employee Sustained
Performance Plan.
13. Qualifying Termination shall occur when, within
twenty-four (24) full calendar months after a Change
of Control, a Participant's employment with the
corporation which results from such Change in Control
is terminated either (a) involuntarily for any reason;
or (b) voluntarily, provided that the Participant
shall have furnished six (6) full months prior written
notice of the intent to voluntarily terminate
employment to the President of such corporation.
14. Retirement shall mean the cessation of employment with
the Company on or after attaining age 55. For
purposes of this Plan a Participant's Retirement shall
be deemed to be effective as of the first of the month
next following the Participant's last day of active
employment including, if applicable, vacation or
holiday days.
15. Stock shall mean the Common Stock of the Company as
traded on applicable public exchanges.
16. Total Return shall mean the sum of the change in the
fair market value (trading price) of the Company's
Common Stock plus the total amount of dividend paid
thereon over a specific period of time, expressed as a
rate of return on the initial trading price for such
period.
17. Total Disability shall mean a physical or mental
impairment qualifying a Participant for the
commencement of payments under the Company's Long Term
Disability (LTD) Plan. For purposes of the SPP, Total
Disability shall be deemed to commence coincident with
the date such LTD payments would become effective if
the Participant elected LTD coverage.
18. Value Change Percentage shall mean the adjustment
applied to Participant Accounts each Award Date which
shall change the dollar value of such Accounts in a
manner reflective of Company and Personal Performance
in the preceding fiscal year.
C. Plan Purpose and General Description
1. The main purposes of the Plan are:
a. To motivate Participants to develop and
successfully execute those sustained performance
objectives which will assure the continuous
delivery of reliable energy to customers at a
competitive price, and maximize the Company's
prospects for achieving a sustainable competitive
return for its shareholders over the long term.
b. To focus Participants on key annual goals
representing progress toward longer term
strategic objectives.
c. To recognize and reward superior performance on
both an individual and a team basis.
d. To help retain and attract superior talent at the
senior executive level and to do so with pay-for-
performance, variable cost incentive award
dollars where the level of award is linked to
sustained successful Participant performance,
Company performance and the returns to the
Company's shareholders.
2. Personal Performance shall be evaluated each fiscal
year. Awards and other opportunities otherwise
applicable under this Plan shall be reduced or
eliminated for any Participant if his or her Personal
Performance is less than the level expected for a key
employee of the Company.
3. Exhibit A provides an overview of the Plan in
operation.
4. Performance goals shall be established by the
Committee for the Plan each fiscal year and shall
focus on a few very key results. These goals shall be
set forth on an Exhibit B each year, which shall be
amended by the Committee from time to time, as
appropriate. Performance in areas not set forth in
such Exhibit B can also be recognized by the Committee
on a subjective basis each year.
5. A Trigger, as detailed in F. below, shall be
established each fiscal year. Awards and other
opportunities otherwise applicable shall be reduced or
eliminated unless the related corporate performance
threshold(s), as set forth in the Trigger, are
satisfied.
6. Awards earned for each fiscal year, if any, shall be
credited to individually maintained Participant
Accounts. Beginning April 1, 1995 the dollar value of
such Accounts shall fluctuate up or down each year (as
reflected by the Value Change Percentage) - based on
Company and Personal Performance and shareholder
returns.
7. Each Participant shall receive a Payout of a portion
of the dollar value of his or her Participant Account
on the first two of every three Award Dates beginning
on April 1, 1996. Payouts shall be in cash.
8. In the event of a Participant's death, Total
Disability, Retirement, or Qualifying Termination, the
then dollar value of such Participant's Account shall
become immediately vested and shall then be paid out
in cash to the Participant or his or her beneficiary
as designated by the Plan. For the fiscal year in
which such an event occurs, the Participant's Annual
Award shall be paid in cash and prorated for the
period of participation up to the date of death, Total
Disability, Retirement, or Qualifying Termination.
9. In the event a Participant's employment with the
Company terminates for any reason other than death,
Total Disability, Retirement, or Qualifying
Termination, such Participant shall forfeit the entire
amount of his or her Participant Account as in effect
at such termination. In addition, such a termination
occurring before Annual Awards are actually credited
for any fiscal years performance shall result in the
total and complete forfeiture of such Participant's
right in any such Annual Awards credited for such
fiscal year.
<PAGE>
D. Participation in the SPP
1. Participation in the SPP shall be limited to key
employees so designated on an Exhibit C as
Participants by the Committee each fiscal year.
2. Participation in one fiscal year does not guarantee
participation in any subsequent year. Should a former
Participant be judged by the Committee to be
ineligible for continued participation and is so
informed in writing by the Company, such Participant
shall immediately cease to be eligible for any
subsequent Annual Award, and shall also immediately
surrender all rights to his or her Participant Account
in exchange for three annual payments equal to one-
third of the dollar value of such Account as of the
date of the notice of non-participation sent by the
Company plus interest at a rate determined by the
Company for the second and third installments. At the
Company's sole option, such payments may be made in a
single lump sum.
3. Prorata participation during a fiscal year may be
authorized by the Committee.
E. Incentive Opportunity
1. Incentive opportunity consists of three distinct
items:
a. Annual Awards;
b. Dollar value enhancement for Participant
Accounts; and
c. Dollar gains realized due to the appreciation in
Stock price as utilized in the Payout
calculation.
2. Annual Award opportunity shall be expressed as a
percentage of each Participant's annual salary rate as
in effect at the end of the fiscal year for which
performance was measured. The Annual Award
opportunity shall be set forth on an Exhibit C each
year, as amended.
F. Trigger Element
1. Each fiscal year the Committee shall establish a
Trigger element for the Plan. The Trigger shall be
set forth on an Exhibit D each year, as amended.
2. This Trigger shall consist of a specified base level
of financial or other performance which must be
satisfied if the full, otherwise generated, Annual
Award opportunity under the Plan is to be realized by
the Participants.
G. Determining Annual Awards
1. Annual Awards shall be determined by the Committee as
of each Award Date.
2. This determination shall be a two-step process using a
"100 point system" as described below:
a. Formal Award: The Committee shall award from 0 -
100 points on the basis of actual, demonstrated
Company performance against the specific
performance goals established for the fiscal year
to which such awards relate.
b. Discretionary Award: The Committee may also
award from 0 - 30 points on a discretionary basis
to recognize and reward other outstanding
performance results not, in the Committee's sole
judgment, adequately recognized or rewarded by
the Formal Award above.
c. The two point awards shall then be added together
and the sum, not to exceed 100, used in
conjunction with this Annual Award table:
If Total Points Annual Award Annual Awards As
Awarded Are: Level Is: % Salary Are:
less than 35 None 0
35 Threshold Level As Set By
70 Target Level Committee For
100 Maximum Level Fiscal Year
Annual Awards prorated for results between
Threshold and Target or Target and Maximum
d. Exhibit E sets forth the specific performance
goals, and examples of total point awards and the
resulting percentage of salary Annual Awards set
for the current fiscal year for a hypothetical
participant.
e. Once determined, Annual Awards, if any, shall be
credited to Participant Accounts each year as of
the Award Date.
H. Value Changes for Participant Accounts
1. The dollar value of all Participant Accounts shall be
adjusted in an identical manner as of each Award Date
beginning April 1, 1995.
2. This adjustment shall be from a 20% loss to a 30% gain
with such adjustment being applicable to:
a. the full dollar value of each Participant Account
prior to any Payout due on such Award Date; but
b. excluding the Annual Award, if any, being
credited to each Participant Account on such
Award Date.
3. The adjustment in dollar value shall be based upon the
Value Change Percentage determined as set forth in (4)
below.
4. The Value Change Percentage shall be set by the
Committee for each Award Date based on this two step
process:
a. First, the total points already established for
the Annual Awards for such Award Date shall be
applied to this table to determine a Value Change
Percentage:
Points Used For Annual Awards Value Change
less than 35 Minus 10%
35 Plus 5%
70 Plus 10%
100 Plus 20%
Prorate Percentage for points between 35 and 70
or 70 and 100
b. Second, the Percentage from the above table shall
be increased or reduced by up to ten percentage
points by comparing the Total Return to the
Company's Shareholders for the prior fiscal year
to the Median Total Return for all Utility
Companies included in the Solomon Brothers
Utility Group for the period to which the value
change relates. A percentage increase shall be
used if the Total Return to Company Shareholders
is higher than such Median, and a decrease if
lower.
c. The following is an example of this two step
process in operation:
<PAGE>
Points First Step Company Stock Median Final
Earned Percentage Total Return Total Return Percentage
30 (10%) 6.0% 8.0% (12%)
35 5% 8.0% 8.0% 5%
70 10% 10.0% 8.0% 12%
85 15% 12.0% 8.0% 19%
100 20% 19.0% 8.0% 30% (max)
5. Should the Annual Awards to which Participants would
otherwise be entitled on a given award date be reduced
or eliminated as a result of the operation of the
Trigger Element, the Committee may, at its discretion,
modify the Value Change Percentage.
I. Payouts - Active Participants
1. No Payouts shall occur prior to April 1, 1996.
2. Subject to the Trigger, periodic Payouts shall be made
on the first two out of every three Award Dates on and
after April 1, 1996.
3. Effective April 1, 1996 and every third year
thereafter (April 1, 1999, April 1, 2002, etc.), each
Participant shall receive a cash payment equal to two-
thirds of the dollar value of his or her Participant
Account with such dollar value being equal to:
a. The dollar value of the Account from the prior
Award Date increased or reduced by the Value
Change Percentage applied for the current Award
Date; plus
b. The Annual Award credited to the Participant
Account as of the current Award Date.
4. Effective April 1, 1997 and every three years
thereafter (April 1, 2000, April 1, 2003, etc.), each
Participant shall receive a payment in cash equal to:
a. One-half of the dollar value of his or her
Participant Account with such "dollar value"
determined as set forth in (3)(a) and (b) above;
divided by
b. $22.13 (Stock price on 12/31/92); and
c. Multiplied by the Stock price as of the close of
business on the March 15 immediately preceding
the Award Date.
5. The following is an example of this calculation if the
Stock price referred to in 4.c. above is $25.00:
Dollar Value One-Half Divided by Multiplied by
of Account of This $22.13 $25.00
$20,000 $10,000 451.88 $11,297
$46,004 $23,002 1,039.40 $25,985
6. The actual dollar value of this payment will be more
than one-half of the dollar value of the Participant
Account if the actual market value of Company Stock is
over $22.13, and less than such amount if the Stock
price is under $22.13.
7. Exhibit F is a sample Participant Account illustrating
both Payouts.
J. Personal Performance
1. The CEO shall evaluate the Personal Performance of
every Participant, other than himself (or herself),
each fiscal year, and the Committee shall do the same
for the CEO. The evaluations of performance made by
the CEO shall be reviewed with the Committee.
2. Should the Personal Performance of any Participant be
less than that expected from a key employee, the
Committee (acting on a recommendation from the CEO in
respect to any Participant other than the CEO) may,
not withstanding any other provision of the Plan,
eliminate or reduce any Annual Award otherwise
payable.
K. Performance Goals and Unusual Events
1. Specific performance goals established for any fiscal
year shall not normally be altered or otherwise
adjusted. However, in the event of highly unusual
circumstances or significant events which render
established goals totally inconsistent with the
purposes an intents of the Plan, the Committee may
adjust such goals during a fiscal year.
L. Miscellaneous and Administrative Provisions
1. All calculated amounts under the Plan shall be rounded
to the next higher whole dollar amount.
2. All Payouts shall be subject to all applicable
Federal, State, and local taxation and shall be
subject to all applicable withholding for such
taxation.
3. Payouts shall not count as "compensation" for the
purpose of any benefit plan of the Company including
the Supplemental Retirement Plan.
4. Voluntary, irrevocable deferral of any or all Payouts
may be elected by Participants on terms approved by
the Committee.
5. Participation in the SPP does not guarantee employment
rights to any employee, and participation in the SPP
in one fiscal year does not automatically result in
participation in any subsequent year.
6. Each Participant shall be required to provide the
Company with a written beneficiary designation for
Plan purposes, and maintaining such designation shall
be the sole responsibility of the Participant. In the
event the beneficiary of record does not survive the
Participant, any payments otherwise due shall be made
to the Participant's estate.
7. The Company shall establish appropriate accounting
reserves to recognize the liability of Annual Awards
and periodic Payouts under the Plan.
Exhibit 13.A.1
Iowa-Illinois Gas and Electric Company
1993
Shareholders of Record
Common 24,424
Preferred and Preference 279
Stock Listings:
Iowa-Illinois' common stock is listed on the New York Stock
Exchange and on the Chicago Stock Exchange under the ticker
symbol "IWG". Preferred and preference shares are traded in the
over-the-counter market. Many daily newspapers carry quotes on
the common stock.
Exhibit 13.A.2
Iowa-Illinois Gas and Electric Company
Selected Financial Data
(Dollars in thousands, except per share amounts)
(1) Utility Revenues
1993: 545,414
1992: 497,534
1991: 512,537
1990: 511,672
1989: 527,284
(2) Net Income
1993: 59,228
1992: 45,433
1991: 54,367
1990: 55,490
1989: 58,544
(3) Net Income on Common Shares
1993: 54,233
1992: 40,404
1991: 50,020
1990: 53,490
1989: 56,499
(4) Common Share Statistics-Earnings per Share
1993: $ 1.85
1992: $ 1.45
1991: $ 1.86
1990: $ 1.99
1989: $ 2.10
(5) Total Assets
1993: 1,793,563
1992: 1,659,371
1991: 1,530,912
1990: 1,415,394
1989: 1,361,443
(6) Capitalization
First Mortgage Bonds
1993: 323,625
1992: 293,727
1991: 296,466
1990: 293,757
1989: 309,773
<PAGE>
Exhibit 13.A.2
Iowa-Illinois Gas and Electric Company
Selected Financial Data
(Dollars in thousands, except per share amounts)
Other Long-Term Debt
1993: 48,275
1992: 37,453
1991: 37,682
1990: 37,910
1989: 46,045
Long-Term Debt of InterCoast Energy Company
1993: 242,500
1992: 257,000
1991: 215,100
1990: 159,000
1989: 112,000
Preferred/Preference -- nonredeemable
1993: 19,829
1992: 19,829
1991: 19,829
1990: 19,829
1989: 19,829
Preferred/Preference -- redeemable
1993: 50,000
1992: 48,625
1991: 49,200
1990: 9,775
1989: 10,350
Common Equity
1993: 499,412
1992: 495,582
1991: 443,608
1990: 436,855
1989: 431,100
Total
1993: 1,183,641
1992: 1,152,216
1991: 1,061,885
1990: 957,126
1989: 929,097
(7) Common Share Statistics-Annual Dividend Rate at Dec. 31
1993: $ 1.73
1992: $ 1.73
1991: $ 1.71
1990: $ 1.67
1989: $ 1.63
Exhibit 13.A.3
Iowa-Illinois Gas and Electric Company
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The operating results and financial condition of Iowa-
Illinois Gas and Electric Company (the Company) reflect the
Company's regulated utility operations and the operations of its
wholly owned, non-regulated subsidiary, InterCoast Energy Company
(InterCoast).
The Company's regulated utility operations are concerned
with the generation, transmission and distribution of electric
energy and the purchase, sale and transportation of natural gas.
The business strategy of InterCoast is focused on areas
closely related to the Company's core electric and gas utility
businesses. These activities are: oil and natural gas, energy
services and financial investments.
OVERVIEW
Contributions to consolidated earnings per share for the
last three years are:
1993 1992 1991
Utility operations....... $1.42 $1.11 $1.58
InterCoast............... .43 .34 .28
Earnings per share....... $1.85 $1.45 $1.86
Earnings increased in 1993 compared to 1992 primarily due to
more typical weather, new rate levels, utility cost control
programs and an increased contribution from InterCoast.
The utility's ratio of earnings to fixed charges (pretax),
excluding the income of InterCoast, was 3.54 in 1993 and 2.77 in
1992. The return on average consolidated common equity was 10.9%
for 1993 and 8.7% for 1992.
In January 1994, the Board of Directors declared the
quarterly dividend of 43.25 cents per common share, the rate
established in January 1992.
<PAGE>
RESULTS OF OPERATIONS
Operating Revenues
Electric revenues increased in 1993 compared to 1992
primarily due to increased revenues reflecting higher rates,
increased retail sales volumes reflecting more typical
temperatures (approximately 40% warmer in 1993 than 1992 when
measured by cooling degree days) and increased sales for resale.
The Company began billing higher electric rates in Iowa in
July 1992. Effective Jan. 1, 1993, the Iowa Utilities Board
(IUB) approved a permanent annual increase of $10.4 million,
including $4.8 million related to nuclear decommissioning costs
which will not affect net income due to a corresponding increase
in expense. (See Provision for Depreciation.) In addition, a
temporary annual electric rate increase in Iowa of $6.8 million
became effective July 26, 1993. In 1993, approximately $3.1
million was billed, subject to refund, pursuant to such temporary
rates. In February 1994, the IUB approved rates at the $6.8
million level.
On July 28, 1993, an annual electric rate increase in
Illinois of $9.6 million became effective following Illinois
Commerce Commission (ICC) approval. On Jan. 15, 1994, an
additional electric increase of $230,000 related to the increase
in the federal corporate income tax rate became effective
following ICC approval on rehearing. The ICC also approved a
rate rider which permits the Company to recover costs of
investigation, remediation and litigation relating to former
manufactured gas plant sites. Base rate increases were partially
offset by a $3.3 million decrease in revenues in 1993 reflecting
the expiration of the Company's Louisa Phase-In Clause on June
30, 1993. In addition, the Company began billing its customers
for the costs of energy-efficiency plans in Illinois in April of
1993. Such electric billings of approximately $700,000 in 1993
will not affect net income due to a corresponding amortization of
previously deferred costs.
Partially offsetting these rate increases were lower fuel
and energy cost billings to retail customers. Variations in fuel
and energy cost billings reflect corresponding changes in fuel
and purchased energy costs from levels included in base rates
and, thus, do not affect net income.
Electric revenues decreased in 1992 compared to 1991
primarily due to decreased retail sales volumes reflecting
temperatures which were approximately 50 percent cooler in 1992.
Revenues also decreased due to lower sales for resale and lower
fuel and energy cost billings to retail customers. Partially
offsetting these decreases were increased revenues due to the
effect of higher rates in Iowa beginning in July 1992.
The changes in electric revenues are shown below:
Revenue Increase (Decrease) from Prior Year
1993 1992
(In thousands)
Change in Retail Unit Sales..... $ 7,900 $(17,800)
Change in Retail Fuel and Energy
Adjustment Clause Billings.... ( 600) ( 400)
Change in Sales for Resale...... 5,900 ( 5,000)
Change Due to the Effect of
Higher Rates.................. 12,700 4,300
$ 25,900 $(18,900)
Gas revenues increased in 1993 compared to 1992. The
principal factors contributing to the increase were increased
sales volumes reflecting temperatures which were 10% colder than
1992 (when measured by heating degree days), higher purchased gas
cost billings and higher rates. Variations in purchased gas cost
billings reflect corresponding changes in cost of gas sold from
levels included in base rates and, thus, do not affect net
income. The Company began billing higher gas rates in Iowa in
July 1992. Effective Jan. 1, 1993, the IUB approved a permanent
annual increase of $5.4 million. On July 28, 1993, an annual gas
rate increase in Illinois of $2 million became effective
following ICC approval. On Jan. 15, 1994, an additional gas
increase of $49,000 related to the increase in the federal
corporate income tax rate became effective following ICC approval
on rehearing. As noted previously, the ICC also approved a rate
rider which permits the Company to recover costs of
investigation, remediation and litigation relating to former
manufactured gas plant sites. In addition, the Company began
billing its customers for the costs of gas energy-efficiency
plans in Illinois in April of 1993. Such billings of
approximately $1.1 million will not affect net income due to a
corresponding amortization of previously deferred costs.
Gas revenues increased in 1992 compared to 1991 due to
higher purchased gas cost billings and higher rates in Iowa
beginning in July 1992. Partially offsetting these increases
were lower residential and commercial sales due to temperatures
which were warmer than 1991 and a change in sales mix reflecting
decreased industrial sales and increased transportation volumes.
Transportation volumes have a lower revenue rate because they
exclude the commodity cost of gas. However, the margins which
had been realized on the industrial sales have been maintained on
transportation volumes resulting in no significant effect on net
income.
The changes in gas revenues are shown below:
Revenue Increase (Decrease) from Prior Year
1993 1992
(In thousands)
Change in Purchased Gas
Adjustment Clause Billings.... $ 8,600 $ 4,500
Change in Unit Sales............ 9,000 (2,600)
Change Due to the Effect of
Higher Rates.................. 4,400 2,000
$22,000 $ 3,900
Operation
Changes in the cost of electric fuel, energy and capacity
reflect fluctuations in generation mix, fuel cost and energy and
capacity purchases. Increased fuel, energy and capacity costs in
1993 compared to 1992 are primarily due to increased sales.
Decreased fuel, energy and capacity costs in 1992 compared
to 1991 are primarily due to lower sales.
Cost of gas sold increased in 1993 compared to 1992
primarily due to increased purchased gas costs from suppliers and
higher gas purchases reflecting colder temperatures in 1993.
Cost of gas sold decreased in 1992 compared to 1991
primarily due to warmer temperatures in the first quarter of the
year and an increase in transportation volumes of customer-owned
gas. Substantially offsetting these decreases were increased
costs of gas purchased from suppliers.
Other operation and maintenance increased in 1993 compared
to 1992 and in 1992 compared to 1991 primarily due to increased
costs at the Quad-Cities Nuclear Power Station (Quad-Cities). In
addition, the increase in other operation expense in 1993
reflects adoption of Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, and amortization of previously deferred costs of
energy-efficiency programs.
In 1993, a Nuclear Regulatory Commission (NRC) "diagnostic
evaluation team" inspected the Quad-Cities Station. The NRC
team's report noted deficiencies in management and equipment at
the station. In their response to the NRC, Commonwealth Edison
Company, the operator of the station, has committed to fully
resolve the leadership, process and plant performance weaknesses
at the Quad-Cities Station by 1996 at the latest. The station
operator also plans to resolve the plant equipment deficiencies
during the next four refueling outages. The Company anticipates
that it will need to make additional operating and capital
expenditures in future years in connection with the resolution of
the noted deficiencies at the Quad-Cities Station.
Provision for Depreciation
The provision for depreciation increased in 1993 compared to
1992 and in 1992 compared to 1991 primarily due to a greater
provision for nuclear decommissioning consistent with current
ratemaking treatment as well as greater utility plant investment.
Depreciation and Equity Funds
Recovered Under Louisa Phase-In Clause
The decrease in the amount being recovered under the Louisa
Phase-In Clause in 1993 compared to 1992 reflects the expiration
of the Louisa Phase-In Clause on June 30, 1993.
Operating Income Taxes
Income tax expense increased in 1993 compared to 1992
primarily due to higher taxable income.
The Omnibus Budget Reconciliation Act of 1993 (the Act) was
signed into law on Aug. 10, 1993. In accordance with Statement
of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which the Company adopted Jan. 1, 1993, the adjustments
required as a result of the increase in income tax rates included
in the Act were recorded in the third quarter of 1993. The
primary financial effect of the new tax law was an increase in
net regulatory assets and deferred income tax liabilities of
approximately $8 million.
Income tax expense decreased in 1992 compared to 1991
primarily due to lower taxable income.
Oil and Gas Revenues of InterCoast Energy Company
Oil and gas revenues of InterCoast increased in 1993
compared to 1992 and in 1992 compared to 1991 primarily due to
higher production volumes reflecting additional acquired
reserves, successful drilling results and higher gas prices,
partially offset by lower oil prices.
In the event that 1994 oil and gas prices are below such
prices for 1993, oil and gas operating income could be reduced
from 1993 levels.
Expenses of InterCoast Energy Company
Expenses of InterCoast increased in 1993 compared to 1992
and in 1992 compared to 1991 primarily due to greater oil and gas
expenses, increased interest expense reflecting InterCoast's
additional long-term debt outstanding and greater other operating
expenses.
Utility Interest Charges
Decreased interest on long-term debt in 1993 compared to
1992 and in 1992 compared to 1991 reflects refinancing of several
series of long-term debt at lower interest rates.
Miscellaneous
The change in 1993 compared to 1992 is due primarily to the
receipt of non-recurring interest income related to federal
income tax refunds.
Other Matters
Since utility properties are accounted for, and reflected in
the cost of service on which utility rates are based, at
historical cost, the potentially material effect of inflation and
changing prices is not reflected in the consolidated financial
statements.
The Company's efforts continue to focus on achievement of
business growth through the application of marketing and economic
development programs to achieve energy-efficient growth in its
sales of utility services, pursuit of off-system electric sales
and development of its non-regulated energy businesses. The
Company currently forecasts average annual growth in electric and
gas sales of 1.7% and 1.4%, respectively, for the next ten years.
The Company's electric generation and transmission systems are
sufficient to meet future demands and the Company has access to
multiple suppliers of natural gas.
The National Energy Policy Act (NEPA) of 1992 will likely
have a significant effect on electric utility companies. With
passage of NEPA, the Company could be required to open its
transmission lines to non-utility energy producers. Although the
Company cannot now predict the ultimate impact of NEPA, the
Company believes it is likely that the competitive factors which
impact its utility businesses will continue to increase. In
light of this belief, in rate cases filed in 1992 and 1993, the
Company took steps to more fully implement "cost-of-service"
pricing.
The Company is also continuing to work to more closely
balance its electric generating capacity with customers' energy
demands.
The Company's corporate improvement program, begun in 1992,
focuses on the achievement of major productivity gains.
The strategy of the non-regulated business is focused on
areas which relate closely to the Company's core utility
businesses: oil and natural gas, energy services and financial
investments.
Deregulation of the electric utility industry may provide
some new opportunities for InterCoast. InterCoast Power
Marketing Company (IPM), a subsidiary of InterCoast which was
established in October 1993, has filed a petition with the
Federal Energy Regulatory Commission (FERC) seeking "marketer"
status. IPM currently acts as a broker for buyers and sellers of
wholesale electric power. With marketer status, IPM also could
acquire and resell power.
LIQUIDITY AND CAPITAL RESOURCES
In 1993, 1992 and 1991, net cash from utility operating
activities, after dividends, was $68 million, $30 million and $58
million, respectively.
Utility construction expenditures totaled $67 million in
1993. The Company's current utility construction program
forecast calls for expenditures of $87.6 million in 1994.
Approximately 65% of these expenditures are expected to be met
from cash generated from operations. The Company's utility
capital requirements for the years 1994-1998 include budgeted
construction expenditures of $319.6 million, expected
contributions to nuclear decommissioning trust funds of $45.7
million and maturities, sinking funds and redemptions related to
long-term debt of $98.2 million. The estimated 1994-1998
construction expenditures include $67.6 million for electric
transmission and distribution system construction, $79.9 million
for electric production construction (principally at the Quad-
Cities Station), $57.8 million for general plant construction,
$51.6 million for nuclear fuel and $62.7 million for gas plant
construction. Approximately 95% of these construction
expenditures are expected to be met by cash generated from
operations.
The Company presently plans to take the necessary steps in
1994 to convert its Dividend Reinvestment Plan from one where its
common shares are purchased for participants in the open market
to one providing for original issue shares. The additional cash
obtained is expected to be used to fund current and future
utility construction expenditures.
Inter-granular stress corrosion was discovered in 1983 in
certain stainless steel piping at the Quad-Cities Station.
Remedial actions intended to avoid the need to replace such
piping continue. Accordingly, the Company's budgeted
construction expenditures do not include any amounts which may be
required to pay the Company's share of the cost of replacing such
piping. If replacement of all such piping were required, the
Company's share of the costs of such replacement would be
approximately $55 million at current price levels. Replacement
of such piping would result in an extended outage and require the
purchase of replacement power.
In 1993 and prior years, additional current income tax
liability resulted and accumulated deferred income tax benefits
have been recorded due to the application of federal and state
Alternative Minimum Tax (AMT). The accumulated provision for
these additional taxes at Dec. 31, 1993, in the amounts of $32.3
million in federal AMT and $5.5 million in state AMT, represents
AMT credits which may be carried forward indefinitely to offset
future regular tax liabilities.
In 1993, the Company sold $176.1 million principal amount of
First Mortgage Bonds and Pollution Control Obligations to
refinance $160.2 million principal amount of First Mortgage
Bonds, Pollution Control Obligations and short-term debt. In
addition, the Company sold $10 million of Preference Stock
principally to refinance $8.6 million of Preference Stock. The
balance of such proceeds was used for general corporate purposes.
The aggregate amounts of maturities and cash sinking fund
requirements for long-term debt outstanding at Dec. 31, 1993 are
$200,000 for 1994 and $98.2 million for the years 1994-1998.
At Dec. 31, 1993, the Company had bank lines of credit of
$72.8 million to provide short-term financing for its utility
operations. All such lines of credit were unused. The Company
generally maintains compensating balances under its bank line of
credit arrangements. The Company has regulatory authority to
incur up to $100 million of short-term debt for its utility
operations. At Dec. 31, 1993, the Company had $31 million of
outstanding short-term commercial paper notes.
The capitalization ratios for the Company's utility
businesses (including short-term debt, long-term debt maturing
within one year and preference shares redeemable within one year)
at the end of each of the last three years were as follows:
Dec. 31,
1993 1992 1991
Long-term debt, including
current maturities........ 45.0% 40.8% 42.7%
Short-term debt............. 3.7 6.4 6.7
Total debt............... 48.7 47.2 49.4
Preferred and Preference
stock equity.............. 8.5 8.4 8.9
Common stock equity......... 42.8 44.4 41.7
100.0% 100.0% 100.0%
The Company's selections of long-term financing alternatives
are affected by provisions of its Mortgage relating to its First
Mortgage Bonds and its Articles of Incorporation relating to
Preferred Shares.
Under the Mortgage, the Company may issue First Mortgage
Bonds on the basis of 60% of available net property additions,
provided net earnings available for interest (before income
taxes) are at least two times annual interest charges on First
Mortgage Bonds and Prior Lien Bonds then to be outstanding. Not
more than 10% of such net earnings can be derived from certain
sources, principally non-operating income (which includes
allowance for funds used during construction). As of Dec. 31,
1993, available net property additions would have permitted the
issuance of at least $240 million principal amount of additional
First Mortgage Bonds.
Under the Articles of Incorporation, the Company may not
become liable for debt (other than short-term indebtedness not
exceeding 10% of the sum of items (a) and (b) below, or
indebtedness issued for purposes of refunding, reacquiring or
retiring certain securities) if, after becoming liable, the total
principal amount of all indebtedness (excluding short-term
indebtedness, as defined above) would exceed 65% of the aggregate
of (a) the total principal amount of all long-term indebtedness
and (b) the capital and surplus of the Company.
The Company's First Mortgage Bond ratings as assigned by
Duff & Phelps Inc., Fitch Investors' Service, Moody's Investor
Services Inc. and Standard & Poor's Corporation are AA-, AA, Aa3
and AA, respectively.
In April 1992, the FERC issued Order No. 636, directing a
restructuring by interstate pipeline companies for their natural
gas sales and transportation services. The FERC Order
contemplated that transitional gas supply realignment costs
relating to this restructuring may be billed by interstate
pipelines to their customers. The amount of transition costs
which the FERC may ultimately authorize the pipelines to bill the
Company is estimated to be $35 to $50 million. The Company
expects to be allowed to include provisions for such costs in its
customer billings.
The Company is investigating five properties currently owned
by the Company which were, at one time, sites of gas
manufacturing plants. The purpose of these investigations is to
determine whether waste materials are present, whether such
materials constitute an environmental or health risk, and whether
the Company has any responsibility for remedial action. One site
is located in Illinois and four sites are located in Iowa. With
regard to the Illinois property, the Company has signed a working
agreement with the Illinois Environmental Protection Agency to
perform further investigation to determine whether waste
materials are present and, if so, whether such materials
constitute an environmental or health risk. At Dec. 31, 1993, an
estimated liability of $3.4 million has been recorded for
litigation, investigation and remediation related to the Illinois
site. A regulatory asset has been recorded reflecting
anticipated cost recovery through rates in Illinois. With regard
to the Iowa sites, no agreement or consent order has been
negotiated to perform any site investigations or remediation.
The Company has recorded a $4 million estimated liability for the
Iowa sites. A regulatory asset has been recorded based on the
current regulatory treatment of comparable costs in Iowa. The
estimated recorded liabilities for these properties are based
upon preliminary data. Thus, actual costs could vary
significantly from the estimates. In addition, insurance
recoveries for some or all of the costs may be possible, but the
liabilities recorded have not been reduced by any estimate of
such recoveries. Although the timing of incurred costs,
recoveries and the inclusion of provision for such costs in rates
may affect the results of operations in individual periods,
management believes that the outcome of these issues will not
have a material adverse effect on the Company's financial
position or results of operations.
Clean Air Act legislation was signed into law in November
1990 and U.S. Environmental Protection Agency rulemaking
proceedings are underway. The Company has four jointly and one
wholly owned coal-fired generating stations which represent
approximately 65% of the Company's electric generating
capability. Each of these facilities will be impacted to varying
degrees by the legislation.
Only one unit at the wholly owned generating station,
representing approximately 10% of the Company's electric
generating capability, will be impacted by the emission reduction
requirements effective in 1995. The compliance strategy for this
unit includes modifications to allow for burning low sulfur coal,
modifications for nitrogen oxide control and installation of a
new emission monitoring system. The Company's remaining
construction expenditures relative to this work are estimated to
be $5.4 million.
The four generating stations not affected until 2000 already
burn low sulfur coal, so additional capital costs will not be
incurred for sulfur dioxide emission reduction requirements.
Installation of low nitrogen oxide burners is required at one of
these facilities and existing emission monitoring systems at all
four facilities will require upgrading. The Company's remaining
construction cost for this work is estimated to be $2.1 million.
It is anticipated that any costs incurred by the Company to
comply with the Clean Air Act legislation would be included in
the cost of service on which the Company's rates for utility
service are based.
The National Energy Policy Act of 1992 established funding
for the decontamination and decommissioning of nuclear enrichment
facilities operated by the Department of Energy (DOE). A portion
of such funding is to be collected over a 15-year period which
began in 1992 from electric utilities that had previously
purchased enrichment services from the DOE. At Dec. 31, 1993,
the Company's liability for its share of such funding is $10.7
million. In 1993 and 1992, $770,000 and $200,000 of such
payments were charged to fuel expense and recognized in the
energy adjustment clauses.
In September 1993, Medallion Production Company acquired all
the outstanding capital stock of DKM Resources Inc. from the
Dyson-Kissner-Moran Corporation, New York. Medallion is the oil
and gas business of InterCoast. The transaction totaled more
than $50 million and more than doubled Medallion's oil and gas
reserve base.
The forecasted 1994 capital expenditures for InterCoast are
approximately $82.6 million. Actual expenditures are dependent
on overall InterCoast performance and general market conditions.
InterCoast's unsecured Senior Notes (Notes) are issued in
private placement transactions. All Notes are issued without
recourse to the parent Company.
InterCoast's aggregate amounts of maturities and cash
sinking fund requirements for long-term debt outstanding at Dec.
31, 1993 are $59 million for 1994 and $256.5 million for the
years 1994-1998. Amounts due in 1994 are expected to be
refinanced with debt instruments and operating cash flow.
In January 1994, InterCoast renegotiated its unsecured
revolving credit facility agreement. The renegotiation increased
the amount of capital available from $65 million to $110 million.
The amended credit agreement matures Feb. 14, 1996. Borrowings
under this agreement may be on a fixed rate, floating rate or
competitive bid rate basis. All such borrowings are without
recourse to the parent Company. Borrowings at Dec. 31, 1993 were
$44.5 million at a weighted average interest cost of 4.1%. No
such borrowings were outstanding at Dec. 31, 1992.
InterCoast is subject to certain restrictions under the
terms of its borrowing arrangements. Such restrictions include
provisions which limit the amounts that can be expended for
dividends and the issuance of additional debt. At Dec. 31, 1993,
$16.5 million was available for dividends. In addition, at Dec.
31, 1993, under the most restrictive of such provisions,
additional debt up to $17 million could be issued.
The Company's consolidated capitalization ratios (including
short-term debt, long-term debt maturing within one year and
preference shares redeemable within one year) at the end of each
of the last three years were as follows:
Dec. 31,
1993 1992 1991
Long-term debt, including
current maturities......... 52.9% 49.2% 49.3%
Short-term debt.............. 2.4 4.3 4.7
Total debt................ 55.3 53.5 54.0
Preferred and Preference
stock equity............... 5.5 5.7 6.2
Common stock equity.......... 39.2 40.8 39.8
100.0% 100.0% 100.0%
Quarterly common stock dividends were paid in 1993 and 1992
at a rate of 43.25 cents per share, a total of $1.73 for each of
the years.
<PAGE>
<TABLE>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric $338,593 $312,667 $331,577
Gas 206,821 184,867 180,960
545,414 497,534 512,537
OPERATING EXPENSES AND TAXES
Operation-
Cost of gas sold 141,712 125,317 126,134
Cost of fuel, energy and capacity 64,619 58,266 65,437
Other operation 104,281 102,311 95,590
Maintenance 44,524 39,536 39,408
Provision for depreciation 58,647 53,941 48,501
Depreciation and equity funds recovered
under Louisa Phase-In Clause 2,370 4,515 4,086
Income taxes 24,477 16,320 25,360
Property and other taxes 33,401 33,827 32,711
474,031 434,033 437,227
OPERATING INCOME 71,383 63,501 75,310
OTHER INCOME
InterCoast Energy Company -
Oil and gas revenues 54,979 28,478 6,740
Other income 29,105 27,350 26,350
Expenses, including interest and
provision for income taxes (71,583) (46,351) (25,697)
Net income of InterCoast Energy Company 12,501 9,477 7,393
Miscellaneous 461 (984) (648)
12,962 8,493 6,745
INCOME BEFORE UTILITY INTEREST CHARGES 84,345 71,994 82,055
UTILITY INTEREST CHARGES
Interest on long-term debt 24,471 25,793 27,096
Other interest expense 1,625 1,872 2,040
Allowance for borrowed funds
used during construction (979) (1,104) (1,448)
25,117 26,561 27,688
NET INCOME 59,228 45,433 54,367
PREFERRED AND PREFERENCE
DIVIDEND REQUIREMENTS 4,995 5,029 4,347
NET INCOME ON COMMON SHARES $54,233 $40,404 $50,020
AVERAGE COMMON SHARES OUTSTANDING 29,338 27,944 26,838
NET INCOME PER AVERAGE
COMMON SHARE OUTSTANDING $1.85 $1.45 $1.86
CASH DIVIDENDS DECLARED AND PAID PER COMMON SHARE $1.73 $1.73 $1.71
<FN>
The accompanying notes to consolidated financial statements are an intergral
part of these statements.
-1-
/TABLE
<PAGE>
<TABLE>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1993 1992
(In thousands)
<S> <C> <C>
PROPERTY AND OTHER ASSETS
UTILITY PLANT, at original cost
Electric $1,279,700 $1,235,276
Gas 271,342 260,963
1,551,042 1,496,239
Less--Accumulated provision for depreciation 605,708 569,104
945,334 927,135
Nuclear fuel, net of accumulated amortization 25,120 26,314
Construction work in progress 22,791 32,541
993,245 985,990
CURRENT ASSETS
Cash and cash equivalents 17,844 20,827
Accounts receivable, less reserves of $1,165 and $1,171 43,389 45,823
Accrued unbilled revenues 22,182 20,615
Inventories 35,597 40,147
Deferred gas expense 5,794 8,887
Other 18,246 14,972
143,052 151,271
INVESTMENTS
InterCoast Energy Company investments 501,829 442,149
Nuclear decommissioning trust fund 39,470 29,675
Corporate-owned life insurance 12,836 9,344
554,135 481,168
OTHER ASSETS
Regulatory assets 92,828 31,257
Other 10,303 9,685
103,131 40,942
1,793,563 1,659,371
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (See accompanying statements) 1,183,641 1,152,216
CURRENT LIABILITIES
Notes payable 31,000 52,500
Debt and preference shares redeemable within one year 59,232 11,235
Accounts payable 44,847 39,783
Accrued taxes 24,913 27,556
Accrued interest 11,413 13,018
Accrued gas expense 11,745 11,528
Other 18,322 17,542
201,472 173,162
OTHER LIABILITIES
Capital lease obligations 10,036 10,500
Accumulated provision for nuclear decommissioning 39,470 29,675
Other 42,984 35,929
92,490 76,104
ACCUMULATED DEFERRED INCOME TAXES 274,605 214,326
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 41,355 43,563
$1,793,563 $1,659,371
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-2-
/TABLE
<PAGE>
<TABLE>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
December 31,
1993 1992
(In thousands,
except share amounts)
<S> <C> <C> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common shares-authorized 80,000,000 shares-
outstanding 29,352,173 and 29,349,177 shares stated at $280,009 $280,055
Retained earnings 219,371 216,082
Other 32 (555)
Total 499,412 42% 495,582 43%
PREFERRED SHARES-authorized 400,000 shares, cumulative-
Not subject to mandatory redemption-outstanding-
$4.36 Series Preferred, 60,000 shares (callable at $102.125) 6,000 6,000
$4.22 Series Preferred, 40,000 shares (callable at $100) 4,000 4,000
$7.50 Series Preferred, 98,288 shares (callable at $101.88) 9,829 9,829
Total 19,829 2% 19,829 2%
PREFERENCE SHARES-authorized 2,386,250 and 2,392,000 shares, cumulative-
Subject to mandatory redemption-outstanding-
$5.25 Series Preference, 100,000 shares 10,000 -
$7.90 Series Preference, 86,250 shares - 8,625
$7.80 Series Preference, 400,000 shares (callable at $107.80) 40,000 40,000
Total 50,000 4% 48,625 4%
LONG-TERM DEBT
First Mortgage Bonds-
5-7/8% Series, due 1997 22,000 22,000
Adjustable Rate Series, due 1997 (7.6% and 9.7%) 25,000 25,000
5.05% Series, due 1998 50,000 -
7-5/8% Series, due 1999 - 15,000
7-7/8% Series, due 1999 - 20,000
6.0% Series, due 2000 35,000 -
8.15% Series, due 2001 40,000 40,000
7.70% Series, due 2004 60,000 60,000
7-5/8% Series, due 2005 - 6,850
8-1/4% Series, due 2007 - 30,000
5.8% Series, due 2007 12,750 12,750
7-3/4% Series, due 2010 - 4,200
8-1/2% Series, due 2017 - 60,000
7.45% Series, due 2023 30,000 -
6.95% Series, due 2025 50,000 -
324,750 295,800
Pollution Control Obligations-
5.75%, due 2003 3,828 4,060
Variable Rate-
Due 2016 (3.2%) 4,200 -
Due 2016 (2.4% and 2.8%) 29,500 29,500
Due 2017 (2.5% and 3.0%) 3,900 3,900
Due 2023 (3.2%) 6,850 -
Unamortized debt premium and discount, net (1,128) (2,080)
Total utility 371,900 331,180
InterCoast Energy Company-
Senior Notes-
9.83%, due 1994 - 15,000
7.89%, due 1994 - 28,000
9.80%, due 1995 9,000 17,000
10.01%, due 1995 15,000 15,000
8.27%, due 1995 32,000 32,000
9.30%, due 1995 and 1996 17,000 25,000
10.20%, due 1996 and 1997 60,000 60,000
7.34%, due 1998 20,000 20,000
7.76%, due 1999 45,000 45,000
Borrowings under unsecured revolving credit facility (4.1%) 44,500 -
Total InterCoast Energy Company 242,500 257,000
Total 614,400 52% 588,180 51%
$1,183,641 100%$1,152,216 100%
<FN>
The accompanying notes to consolidated financial statements are an integral part of these statements.
-3-
/TABLE
<PAGE>
<TABLE>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $59,228 $45,433 $54,367
Adjustments to reconcile net income
to net cash from operating activities -
Depreciation 63,839 58,374 52,381
Depletion 12,880 8,517 3,025
Depreciation and equity funds recovered under
Louisa Phase-In Clause 2,370 4,515 4,086
Nuclear fuel amortization 7,989 7,860 8,832
Deferred income taxes, net 9,707 5,128 10,874
Tax credits, net (2,208) (2,326) (2,385)
Net gain on disposition of securities (3,289) (4,261) (3,464)
Changes in current assets and liabilities -
Accounts receivable 2,434 (2,937) 2,664
Accrued unbilled revenues (1,567) (2,340) 6,028
Inventories 4,550 (349) (4,603)
Deferred and accrued gas expense 3,310 (7,641) 428
Accounts payable 5,038 3,529 (2,797)
Accrued taxes (2,643) 2,794 (2,613)
Other current assets and liabilitie (4,659) (6,568) 2,533
Energy-efficiency program cost deferra (5,669) (4,005) (877)
Other 3,054 (5,743) 1,318
Net cash from operating activities 154,364 99,980 129,797
CASH FLOWS FROM INVESTING ACTIVITIES
Utility plant expenditures (60,162) (64,385) (55,389)
Nuclear fuel expenditures (6,795) (9,313) (6,163)
Nuclear decommissioning trust fund (7,918) (4,469) (11,766)
Oil and gas investments (73,538) (22,169) (34,885)
Purchase of investments (68,239) (94,179) (116,675)
Sale of investments 70,371 51,856 58,296
Other (1,151) (6,826) (4,849)
Net cash from investing activities (147,432) (149,485) (171,431)
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued - 61,563 -
Preference shares issued 10,000 - 40,000
Preference shares redeemed (9,373) (575) (575)
Long-term debt issued 175,784 59,830 39,945
Long-term debt retired (143,493) (62,626) (56,122)
Long-term borrowings of InterCoast Energy Company -
Senior Notes issued - 65,000 60,000
Senior Notes retired (8,000) - -
Increase (decrease) in unsecured revolving
credit facility 44,500 (15,100) (3,900)
Increase (decrease) in short-term borrowings (21,500) - 20,000
Dividends paid (55,745) (53,630) (49,735)
Issuance expense (2,088) (3,187) (868)
Net cash from financing activities (9,915) 51,275 48,745
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,983) 1,770 7,111
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,827 19,057 11,946
CASH AND CASH EQUIVALENTS AT END OF YEAR $17,844 $20,827 $19,057
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for -
Interest (net of amounts capitalized) $51,295 $48,036 $45,354
Income taxes 18,014 10,074 18,129
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-4-
/TABLE
<PAGE>
<TABLE>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands)
<S> <C> <C> <C>
BALANCE BEGINNING OF YEAR $216,082 $224,345 $220,512
ADD-NET INCOME 59,228 45,433 54,367
DEDUCT:
Cash dividends declared-
Preferred and preference shares 4,978 5,026 4,604
Common shares 50,756 48,592 45,901
Loss on reissuance of treasury shares 32 78 29
Premium paid to reacquire preference shares 173 - -
55,939 53,696 50,534
BALANCE END OF YEAR $219,371 $216,082 $224,345
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-5-
</TABLE>
<PAGE>
Iowa-Illinois Gas and Electric Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies:
(A) Principles of Consolidation
The consolidated financial statements include the Company and its wholly
owned, non-regulated subsidiary, InterCoast Energy Company (InterCoast).
Intercompany transactions have been eliminated.
_________________________________________________________________
(B) Regulation
The Company's utility operations are subject to the regulation of the Iowa
Utilities Board (IUB), the Illinois Commerce Commission (ICC) and the Federal
Energy Regulatory Commission (FERC). The Company's accounting policies and the
accompanying Consolidated Financial Statements conform to generally accepted
accounting principles applicable to rate-regulated enterprises and reflect the
effects of the ratemaking process. Such effects concern mainly the time at
which various items enter into the determination of net income in accordance
with the principle of matching costs and revenues.
The following regulatory assets represent probable future revenue to the
Company because provisions for these costs are expected to be included in
charges to utility customers through the ratemaking process:
Dec. 31,
1993 1992
(In thousands)
Income taxes related to Statement
of Financial Accounting
Standards No. 109 (SFAS 109). $50,535 $ -
Unamortized premium on reacquired
debt......................... 11,513 5,963
Deferred energy-efficiency
program costs................ 10,791 5,122
United States Department of Energy
(DOE) nuclear enrichment
facilities decontamination
and decommissioning fee...... 10,656 11,800
Manufactured gas plant site
related costs................ 7,768 5,341
Deferred pension costs............ 1,565 661
Louisa Phase-In Clause............ - 2,370
$92,828 $31,257
Refer to Note 4 for information regarding SFAS 109.
Consistent with regulatory treatment, the premiums paid to reacquire debt
prior to scheduled maturity dates are deferred and amortized over the life of
the debt issued to finance the reacquisitions.
In 1991, the Company filed a comprehensive three-year energy-efficiency
plan with the IUB in compliance with 1990 Iowa legislation. The legislation
permits recovery of deferred energy-efficiency program costs, and related
carrying charges, so long as the utility's programs are cost effective or, if
not cost effective, planned and implemented in a prudent and reasonable manner.
The Company will file its initial application for cost recovery of deferred
energy-efficiency program costs in October 1994.
The National Energy Policy Act of 1992 established funding for the
decontamination and decommissioning of nuclear enrichment facilities operated
by the DOE. A portion of such funding is to be collected over a 15-year period
which began in 1992 from electric utilities that had previously purchased
enrichment services from the DOE. At Dec. 31, 1993, the Company's liability
for its share of such funding is $10.7 million. In 1993 and 1992, $770,000 and
$200,000 of such payments were charged to fuel expense and recognized in the
energy adjustment clauses.
In Illinois, costs related to the litigation, investigation and
remediation of former manufactured gas plant sites are recovered through gas
and electric adjustment riders. Costs from 1992 and 1993 were deferred
pursuant to an ICC order for recovery beginning in 1994. All such costs are to
be amortized over a five-year period and no carrying charges are assigned to
the unamortized balances. In Iowa, costs related to the litigation,
investigation and remediation of former manufactured gas plant sites are being
expensed as incurred. The Company's current Iowa gas rates include an annual
provision of $250,000 for such costs. Refer to Note 14 for information
regarding former manufactured gas plant sites.
Refer to Note 5 for information regarding deferred pension costs.
Pursuant to a 1983 Order of the ICC, the Company established an adjustment
clause which gave ratemaking recognition to the depreciation charges and equity
return requirements applicable to the portion of the Company's Louisa
Generating Station investment which is allocable to Illinois. From October
1983 through June 1987, the Clause deferred the inclusion in rates of portions
of both the depreciation and equity return related to the Louisa Station. From
July 1, 1987 through June 30, 1993, the deferred balances were recovered in
rates at a levelized annual revenue amount of approximately $6.6 million. The
Clause, which provided a current cash return on the deferred balances, expired
on June 30, 1993 with the recovery of all deferred amounts.
_________________________________________________________________
(C) Customer Receivables and Operating Revenues
The Company's customer receivables, gas and electric sales and gas
transportation revenue are derived from supplying and delivering electricity
and natural gas to a well diversified base of residential, commercial and
industrial customers located in central and eastern Iowa and western Illinois.
Customer accounts receivable include the following amounts by class of
customer:
Dec. 31,
1993 1992
(In thousands)
Residential.................... $ 25,564 $ 23,810
Commercial..................... 8,166 8,380
Industrial..................... 6,608 6,647
Other.......................... 646 1,156
Revenues are recorded as services are rendered to customers. The Company
records unbilled revenues, and related energy costs, representing the estimated
amount customers will be billed for services rendered between the meter reading
dates in a particular month and the end of that month.
_________________________________________________________________
(D) Energy Costs
The energy (electric fuel and energy and purchased gas) rate provisions in
the Company's tariffs are designed to provide for separately stated energy
billings which cover changes in applicable net energy costs from levels
incorporated in base rates. Differences between applicable energy costs
incurred and energy rate revenues billed in any given period are accounted for
as other current assets or other current liabilities, pending the disposition
of such differences through reconciliation provisions provided in the energy
adjustment clauses.
_________________________________________________________________
(E) Nuclear Fuel Costs
Included as a part of the cost of nuclear fuel is a provision for its
estimated disposal cost which is being recognized at a rate of 1 mill per
kilowatt-hour of nuclear generation in conformance with DOE rules. Such
amounts are recoverable through the energy adjustment clauses.
_________________________________________________________________
(F) Allowance for Funds Used During Construction
The allowance for funds used during construction (AFUDC) includes the
costs of equity and borrowed funds used to finance construction which are
capitalized in accordance with rules prescribed by the FERC. The FERC's
Uniform System of Accounts defines AFUDC as the net cost of borrowed funds used
for construction and a reasonable rate to reflect the costs of other funds so
used. Under FERC rules, if average short-term debt outstanding exceeds average
construction work in progress (CWIP), all CWIP is assumed to have been financed
with short-term debt. This situation arose in 1993, 1992 and 1991, when the
Company's AFUDC rates were 3.3%, 3.8% and 6.0%, respectively, compounded semi-
annually. While currently capitalized AFUDC does not represent a current
source of cash, it does represent a basis for future sources of cash through
the inclusion in rates of depreciation charges and allowance for returns on
investment.
_________________________________________________________________
(G) Depreciation
Depreciation is computed using the straight-line method. Provisions for
depreciation, expressed as an annual percentage of the cost of average
depreciable plant in service, were as follows for the periods shown:
Year Ended Dec. 31,
1993 1992 1991
Electric........................ 4.2% 4.0% 3.7%
Gas............................. 4.0 3.8 3.7
An allowance for the estimated decommissioning costs of the Quad-Cities
Nuclear Power Station (Quad-Cities) is included in depreciation expense. The
Company's share of the cost to decommission the Quad-Cities units is estimated
to be $172.7 million in 1993 dollars. Such decommissioning costs include the
cost of decontamination, dismantlement and site restoration in accordance with
Nuclear Regulatory Commission guidelines. Electric tariffs included provisions
for the costs of nuclear decommissioning of $7.9 million, $5.0 million and $1.7
million for 1993, 1992 and 1991, respectively.
The Company has established an external trust for the investment of funds
collected for nuclear decommissioning. Electric tariffs for 1994 include
provisions for annual decommissioning costs of approximately $9.1 million. In
Illinois, nuclear decommissioning costs are included in customer billings
through a mechanism which permits annual adjustments. In Iowa, such costs are
reflected in base rates.
_________________________________________________________________
(H) Scheduled Nuclear Refueling Outage Costs
Incremental operation and maintenance costs due to scheduled nuclear
refueling outages are accrued, based upon the planned outage schedules and the
estimated costs for such outages, over the estimated periods (approximately
eighteen months) between scheduled outages. Any differences between accrued
and actual outage costs are expensed in the periods in which the outages occur.
_________________________________________________________________
(I) Marketable Securities
InterCoast's holdings of preferred stocks, common stocks and mutual funds
are stated at the lower of aggregate cost or market. A decline in the market
value of marketable equity securities below their cost basis is recognized in
the consolidated financial statements through the establishment of a valuation
allowance which is reflected as a reduction of shareholders' equity. An other
than temporary decline in the value of a marketable security is recognized
through a write-down or write-off of the investment.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (SFAS 115). This statement requires that equity
securities with readily determinable fair values and all debt securities be
classified into one of the following three categories: 1) Trading securities,
2) Available-for-Sale securities or 3) Held-to-Maturity securities. The
Company will adopt SFAS 115 in 1994. It is anticipated that such adoption will
not have a material effect on financial position or results of operations.
_______________________________________________________________
(J) Oil and Gas
InterCoast uses the full cost method of accounting for oil and gas
drilling operations. Under the full cost method, all exploration and
development costs are capitalized and amortized over the estimated production
from proved oil and gas reserves. Under the full cost method, net capitalized
costs may not exceed the present value of proved reserves as determined under
the rules of the Securities and Exchange Commission.
_________________________________________________________________
(K) Consolidated Statements of Cash Flows
For purposes of the Consolidated Balance Sheets and the Consolidated
Statements of Cash Flows, the Company considers all highly liquid debt
instruments held which have original maturities of three months or less to be
cash equivalents. No material non-cash investing or financing transactions
occurred during 1993, 1992 or 1991.
_________________________________________________________________
(L) Reclassification
Certain 1991 and 1992 amounts have been reclassified to conform to the
current year presentation.
_________________________________________________________________
(2) Rate Matters:
(A) Iowa Rate Filing
On May 3, 1993, the Company filed revised electric rates with the IUB
designed to increase annual electric revenues by approximately $13.5 million
(7.5%) and to provide for any increase in the federal corporate income tax rate
ultimately enacted. A temporary annual rate increase of $6.8 million (3.8%)
became effective July 26, 1993. In 1993, approximately $3.1 million was
billed, subject to refund, pursuant to such temporary rates. In February 1994,
the IUB approved rates at the $6.8 million level.
_________________________________________________________________
(B) Illinois Rate Filings
On Sept. 1, 1992, the Company filed revised electric and gas rates with
the ICC to increase annual electric and gas revenues by approximately $14
million (12%) and $3 million (5.9%), respectively. On July 28, 1993, electric
and gas increases of $9.6 million (8.6%) and $2 million (3.7%), respectively,
became effective following ICC approval. On Jan. 15, 1994, additional electric
and gas increases of $230,000 (0.2%) and $49,000 (0.1%), respectively, related
to the increase in the federal corporate income tax rate became effective
following ICC approval on rehearing. The ICC also approved electric and gas
riders which permit the Company to recover costs of litigation, investigation
and remediation relating to former manufactured gas plant sites.
_________________________________________________________________
(C) Federal Gas Transition Costs
In April 1992, the FERC issued Order No. 636, directing a restructuring by
interstate pipeline companies for their natural gas sales and transportation
services. The FERC Order contemplated that transitional gas supply realignment
costs relating to this restructuring may be billed by interstate pipelines to
their customers. The amount of transition costs which the FERC may ultimately
authorize the pipelines to bill the Company is estimated to be $35 to $50
million. The Company expects to be allowed to include provisions for such
costs in its customer billings.
_________________________________________________________________
(3) InterCoast Energy Company:
InterCoast is a wholly owned, non-regulated subsidiary of the Company.
The business strategy of InterCoast is focused on areas closely related to the
Company's core electric and gas utility businesses. These activities are: oil
and natural gas, energy services and financial investments.
Condensed consolidated financial information of InterCoast and its
subsidiaries follows.
Consolidated Statements of Income
Year Ended Dec. 31,
1993 1992 1991
(In thousands)
Income:
Oil and gas revenues.......... $54,979 $28,478 $ 6,740
Dividends and interest........ 19,103 18,917 16,307
Realized gains................ 3,289 4,261 3,464
Other income.................. 6,713 4,172 6,579
Total income.................... 84,084 55,828 33,090
Expenses:
Oil and gas................... 38,749 20,285 4,911
Interest...................... 24,573 20,994 17,694
Other expenses................ 8,885 6,240 3,789
Provision for income taxes.... ( 624) ( 1,168) ( 697)
Total expenses.................. 71,583 46,351 25,697
Net income...................... $12,501 $ 9,477 $ 7,393
<PAGE>
Consolidated Balance Sheets
Dec. 31,
1993 1992
(In thousands)
Current assets.................. $ 21,926 $ 20,978
Investments:
Marketable securities......... 233,386 234,772
Oil and gas................... 120,952 60,334
Equipment leases.............. 59,937 58,831
Energy projects............... 48,777 46,817
Special purpose funds......... 36,021 35,723
Other......................... 2,756 5,672
Total investments............... 501,829 442,149
Other assets.................... 2,961 3,008
Total assets.................... 526,716 466,135
Long-term debt maturing
within one year............... 59,000 8,000
Other current liabilities....... 20,682 13,869
Long-term debt.................. 242,500 257,000
Accumulated deferred income
taxes......................... 59,433 55,253
Shareholder's equity............ 145,101 132,013
Total liabilities and
shareholder's equity.......... $526,716 $466,135
InterCoast is subject to certain restrictions under the terms of its
borrowing arrangements. Such restrictions include provisions which limit the
amounts that can be expended for dividends. At Dec. 31, 1993 and 1992, $16.5
million and $7.1 million, respectively, of InterCoast's equity was available
for dividends.
_________________________________________________________________
(4) Income Taxes:
The IUB has primarily limited the use of deferred income tax accounting to
federal income taxes deferred as a result of the use of accelerated tax
depreciation, as mandated by the normalization provisions of the Internal
Revenue Code. The ICC, however, generally permits deferral of the tax effect
of all book and tax differences.
Investment tax credits (ITC) on the Company's investments in utility plant
have been deferred and are being amortized to income over the life of the
related property.
In 1993 and prior years, additional current income tax liability resulted
and accumulated deferred income tax benefits have been recorded due to the
application of federal and state Alternative Minimum Tax (AMT). The
accumulated provision for these additional taxes at Dec. 31, 1993, in the
amounts of $32.3 million in federal AMT and $5.5 million in state AMT,
represents AMT credits which may be carried forward indefinitely to offset
future regular tax liabilities.
On Jan. 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). This statement
requires recognition of deferred income tax assets and liabilities, based on
enacted tax laws, for all temporary differences between the financial reporting
and tax bases of assets and liabilities. The portion of the Company's deferred
tax liability applicable to utility operations which has not been reflected in
service rates represents income taxes recoverable through future rates. On a
consolidated basis, the adoption of SFAS 109 on Jan. 1, 1993 increased deferred
income tax liabilities by $42.3 million and resulted in the establishment of a
net regulatory asset of $43 million. On a consolidated basis, the cumulative
effect on net income of the change in accounting principle was immaterial.
Income tax expense is reflected in the Consolidated Statements of Income
as follows:
Year Ended Dec. 31,
1993 1992 1991
(In thousands)
Included in Operating Expenses:
Current -Federal............. $16,398 $12,607 $24,756
-State............... 4,429 3,464 6,823
Deferred -Federal............. 5,318 2,532 ( 3,030)
-State............... 539 43 ( 804)
Deferred federal ITC, net..... ( 2,207) ( 2,326) ( 2,385)
Total included in Operating
Expenses.................... 24,477 16,320 25,360
Included in Other Income........ ( 666) ( 1,763) ( 1,262)
Total income tax expense........ $23,811 $14,557 $24,098
<PAGE>
The components of the net deferred tax liability are as follows:
Dec. 31, 1993
(In thousands)
Accelerated depreciation methods.............. $ 267,942
Income taxes recoverable through future rates. 75,212
AMT credit carryforward....................... ( 37,756)
Deferred ITC refundable through future rates.. ( 24,641)
Nuclear reserves and decommissioning.......... ( 6,708)
Other deferred taxes, net..................... 556
Accumulated deferred income taxes............. $ 274,605
The following is a reconciliation of the statutory federal income tax rate
to the overall effective income tax rate (computed by dividing income taxes,
including income tax amounts applicable to other income, by net income before
the deduction of such taxes):
Year Ended Dec. 31,
1993 1992 1991
Statutory federal income
tax rate...................... 35.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit.... 4.7 3.3 4.6
Investment and energy tax
credits....................... ( 2.7) ( 3.9) ( 3.1)
Excess of book depreciation over
tax depreciation not deferred. 1.6 2.2 2.6
Dividends received deduction.... ( 5.2) ( 6.9) ( 4.3)
Adjustment for method of
deducting property taxes...... ( 1.4) ( 2.0) ( 1.5)
Other items, net................ ( 3.3) ( 2.4) ( 1.6)
Overall effective income
tax rate...................... 28.7% 24.3% 30.7%
_________________________________________________________________
(5) Pensions and Other Employee Benefits:
The Company has a noncontributory defined benefit retirement income plan
covering substantially all regular employees. Benefits under the plan are
based on participants' compensation, years of service and age at retirement.
Funding is based upon the actuarially determined costs of the plan and the
requirements of the Internal Revenue Code and the Employee Retirement Income
Security Act.
Provisions for pension costs are determined under generally accepted
accounting principles, which include the use of the projected unit credit
actuarial cost method. A regulatory adjustment has been made to the pension
cost amounts to reflect only the amount of pension cost recognized through the
ratemaking process. Net pension cost, part of which was charged to utility
plant or billed to others, was $562,000 in 1993, $175,000 in 1992 and $67,000
in 1991. The components of the 1993, 1992 and 1991 pension cost provisions are
as follows:
Year Ended Dec. 31,
1993 1992 1991
(In thousands)
Cost of benefits earned during
the year...................... $ 3,283 $ 2,769 $ 2,434
Interest on projected benefit
obligation.................... 10,480 9,519 8,944
Actual investment return on
plan assets................... (17,009) (12,340) (13,224)
Net amortization and deferral... 4,712 548 2,034
Pension cost.................... 1,466 496 188
Regulatory adjustment........... ( 904) ( 321) ( 121)
Net pension cost................ $ 562 $ 175 $ 67
The expected long-term rate of return on plan assets used in determining
pension cost was 8.75% for 1993, 1992 and 1991.
A reconciliation of plan assets and liabilities to the accrued pension
costs included in the Consolidated Balance Sheets is presented below:
<PAGE>
Dec. 31,
1993 1992
(In thousands)
Fair market value of pension plan
assets, invested primarily in
equity and fixed-income
securities.................... $151,134 $140,038
Actuarial present value of
benefits for services
rendered to date:
Accumulated benefits to date,
including vested benefits
of $118,300 and $92,318
for 1993 and 1992,
respectively.............. 122,221 96,382
Additional benefits based
on estimated future
compensation levels....... 29,478 35,859
Projected benefit obligation.... 151,699 132,241
Plan assets in excess of (or less
than) projected benefit
obligation.................... ( 565) 7,797
Unamortized balance of plan net
assets existing at Jan. 1, 1986,
being amortized over 17 years. ( 10,305) ( 11,450)
Unrecognized prior service cost. 18,849 20,327
Unrecognized net gain........... ( 10,492) ( 17,721)
Accrued pension cost............ $( 2,513) $( 1,047)
Assumed discount rate........... 7.0% 8.0%
Assumed rate of increase in
future compensation levels.... 5.0% 6.0%
The Company currently provides certain health care and life insurance
benefits for retired employees. Substantially all of the Company's employees
become eligible for these additional benefits if they reach retirement age
while employed by the Company.
On Jan. 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions (SFAS 106). SFAS 106 requires accrual of the expected cost of
providing postretirement benefits other than pensions to employees over the
years the employees are expected to render the necessary service.
The Company, as permitted by SFAS 106, has elected to amortize to expense
over 20 years the $13.6 million accumulated postretirement benefit obligation
at Jan. 1, 1993. Prior to 1993, the Company recognized the costs associated
with postretirement benefits other than pensions in the year that the benefits
were paid. The incremental effect of this change in accounting was to increase
1993 annual operating expenses before income taxes by approximately $1.4
million.
For its Iowa operations, the Company began including provisions for these
costs in its customer rates in January 1993. For its Illinois operations, the
Company began including provisions for these costs in its customer rates in
July 1993. The Company is externally funding all such provisions.
The components of the 1993 net postretirement benefits other than pensions
cost provision are as follows:
Year Ended Dec. 31,
1993
(In thousands)
Cost of benefits earned
during the year.................. $ 474
Interest on accumulated
postretirement benefit
obligation....................... 1,061
Actual investment return
on plan assets................... ( 6)
Net amortization and deferral...... 688
Net postretirement benefits
other than pensions cost......... $ 2,217
A reconciliation of such postretirement benefit plan assets and
liabilities to the amounts included in the Consolidated Balance Sheets is
presented below:
<PAGE>
Dec. 31, Jan. 1,
1993 1993
(In thousands)
Fair market value of plan assets,
invested primarily in short-
term securities.................. $ 976 $ -
Actuarial present value of
benefits for services
rendered to date:
Active plan participants........ 6,941 6,721
Fully eligible plan participants 2,321 3,097
Retirees........................ 3,792 3,828
Accumulated postretirement
benefit obligation............... 13,054 13,646
Accumulated postretirement
benefit obligation in excess
of plan assets................... (12,078) (13,646)
Unamortized balance of plan
obligation existing at
Jan. 1, 1993, being amortized
over 20 years.................... 12,829 13,646
Unrecognized net gain.............. ( 751) -
Accrued postretirement benefit
other than pensions cost......... $ - $ -
For measurement purposes, the health care cost trend rate assumed for pre-
65 coverage is 13% for 1994, decreasing 1% per year to 5% in 2002 and
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. To illustrate, increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation for health care costs as of Dec.
31, 1993 by $924,000 and the aggregate of the 1993 service and interest cost
components of net postretirement health care cost by $137,000. The discount
rate used was 7%.
The Company has adopted voluntary Compensation Deferral and Supplemental
Retirement plans for designated executives. Such plans are unfunded and the
liabilities thereunder are payable from general funds of the Company. To
provide for its liabilities under these plans, the Company has purchased, owns
and is the beneficiary of life insurance policies on the lives of participating
executives. Returns on such policies are expected to cover the full cost of
the related plans.
In November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment Benefits (SFAS
112), which will require the Company to accrue the estimated cost of benefits
provided to former or inactive employees after employment but before
retirement. The Company will adopt SFAS 112 in 1994. Adoption will not have a
material effect on financial position or results of operations.
_________________________________________________________________
(6) Jointly Owned Generating Stations:
Under joint ownership agreements with other utility companies, the Company
has undivided interests in one nuclear and four coal-fired electric generating
stations. Information concerning each of the jointly owned stations follows:
Nuclear Coal-fired
Council
Quad-Cities Neal Bluffs Ottumwa Louisa
Units Unit Unit Unit Unit
No. 1 & 2 No.3 No.3 No.1 No.1
In service date..... 1972 1975 1978 1981 1983
Company share of
utility plant in
service (in
millions)......... $193.0 $49.1 $124.1 $73.7 $259.9
Total plant capacity
-megawatts........ 1,539 515 675 708 650
Company share
-percent.......... 25% 29% 32.4% 18.5% 43%
The Consolidated Financial Statements reflect the Company's portions of
all plant investments and all operating costs associated with these units.
Depreciation reserves by individual station are not maintained.
Although the Louisa Unit No. 1 is operated and maintained by the Company,
each of the other units is operated and maintained by another utility company.
Each participant has provided the financing for its share of the total
investment in each project.
________________________________________________________________
<PAGE>
(7) Inventories:
Inventories include the following amounts:
Dec. 31,
1993 1992
(In thousands)
Materials and supplies,
at average cost............ $15,151 $14,683
Coal stocks, at Last-In,
First-Out (LIFO) cost...... 6,385 11,263
Fuel oil, at average cost......... 249 348
Gas in storage, at LIFO cost...... 13,812 13,853
$35,597 $40,147
At Dec. 31, 1993 prices, the current costs of coal stocks and gas in
storage were $7.5 million and $30.5 million, respectively.
_________________________________________________________________
(8) Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value
at Dec. 31, 1993 of each class of financial instruments for which it is
practicable to make such estimates. Tariffs for the Company's utility services
are established based on historical cost ratemaking and therefore the impact of
any realized gains or losses related to financial instruments applicable to the
Company's utility operations is dependent on the treatment authorized under
future ratemaking proceedings.
Cash and cash equivalents - The carrying amount approximates fair value
due to the short maturity of these instruments.
Nuclear decommissioning trust fund - Fair value is based on quoted market
prices of the investments held by the fund.
Marketable securities - Fair value is based on quoted market prices.
Debt securities - Fair value is based on the discounted value of the
future cash flows expected to be received from such investments.
Equity investments carried at cost - Fair value is based on an estimate of
the Company's share of partnership equity or on the discounted value of the
future cash flows expected to be received from such investments.
Equity investments in developing companies - It is not practicable to
determine the fair value of such investments as they represent new ventures for
which no market price exists.
Notes payable - Fair value is estimated to be the carrying amount due to
the short maturity of these issues.
Preference shares - Fair value of preference shares with mandatory
redemption provisions is estimated based on the quoted market prices for
similar issues.
Long-term debt - Fair value of long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
Dec. 31, 1993 Dec. 31, 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
(In thousands)
Electric and gas utility:
Nuclear decommissioning
trust fund........... $ 39,470 $ 41,588 $ 29,675 $ 30,417
Preference shares,
including
current portion...... 50,000 54,850 49,200 52,511
Long-term debt,
including
current portion...... 372,132 384,954 333,840 347,807
InterCoast Energy Company:
Marketable securities.. 233,386 239,114 236,251 239,132
Debt securities........ 14,195 16,124 12,184 11,956
Equity investments
carried at cost...... 27,141 27,789 25,540 23,983
Long-term debt,
including
current portion...... 301,500 317,700 265,000 277,625
_________________________________________________________________
(9) Common Shareholders' Equity:
Changes in the Company's outstanding common shares for the years 1993,
1992 and 1991 are as follows:
<PAGE>
Year Ended Dec. 31,
Amount
1993 1992 1991
(In thousands)
Outstanding, beginning of year. $280,055 $220,819 $221,397
Public sale of shares........ - 61,563 -
Capital stock expense........ (122) ( 2,392) ( 451)
Treasury shares
Purchased.................. (689) ( 632) ( 653)
Reissued................... 765 697 526
Outstanding, end of year....... $280,009 $280,055 $220,819
Shares
1993 1992 1991
Outstanding, beginning of year. 29,349,177 26,845,687 26,851,424
Public sale of shares........ - 2,500,000 -
Treasury shares
Purchased.................. (31,100) ( 25,000) ( 30,110)
Reissued................... 34,096 28,490 24,373
Outstanding, end of year....... 29,352,173 29,349,177 26,845,687
The components of Other Common Shareholders' Equity are as follows:
Dec. 31,
1993 1992
(In thousands)
Premium on Preferred shares.... $ 32 $ 32
Valuation allowance............ - ( 587)
$ 32 $( 555)
The Company has a Dividend Reinvestment Plan and an Employee Stock
Purchase Plan. The purchase of common shares under these Plans is made on the
open market. At Dec. 31, 1993 and 1992, 439 and 3,435 treasury shares
acquired in the open market for the Employee Stock Purchase Plan were held for
reissuance.
_________________________________________________________________
(10) Long-Term Debt, Maturities and Sinking Fund Requirements:
The 1993 sinking fund requirements for First Mortgage Bonds and Senior
Notes were satisfied through the reacquisition of debt or the bonding of
additional property. The aggregate maturities and sinking fund requirements
for long-term debt outstanding at Dec. 31, 1993 are as follows:
1994 1995 1996 1997 1998
(In thousands)
First Mortgage Bonds. $ 220 $ 220 $ 220 $47,200 $50,200
Pollution Control
Obligations........ 232 145 145 145 145
Senior Notes of
InterCoast Energy
Company............ 59,000 64,000 39,000 30,000 20,000
Unsecured Revolving
Credit Facility of
InterCoast Energy
Company............ - - 44,500 - -
Total................ $59,452 $64,365 $83,865 $77,345 $70,345
Included in the above amounts are sinking fund requirements related to
First Mortgage Bonds of $220,000 for each of the years 1994 through 1996, which
may be reduced by certifying net property additions not previously bonded, in
accordance with the terms of the Company's Indenture of Mortgage securing its
First Mortgage Bonds.
The interest rate on the Company's Adjustable Rate Series First Mortgage
Bonds is reset every two years at 160 basis points over the average yield to
maturity of 10-year Treasury securities. The rate was reset in 1993.
The Company's Variable Rate Pollution Control Obligations bear interest at
rates which are periodically established through remarketing of the bonds in
the short-term tax-exempt market. The Company, at its option, may change the
mode of interest calculation for these bonds by selection from among several
alternative floating or fixed rate modes. The interest rates shown in the
Consolidated Statements of Capitalization are the weighted average interest
rates as of Dec. 31, 1993 and 1992. The Company maintains backup long-term
letters of credit providing liquidity for holders of the $29.5 million and $3.9
million issues and a dedicated long-term revolving line of credit for holders
of the $4.2 million and $6.85 million issues.
The Company's First Mortgage Bonds are secured by substantially all fixed
property and franchises of the Company devoted to its utility businesses.
InterCoast's unsecured Senior Notes (Notes) are issued in private
placement transactions. All Notes are issued without recourse to the parent
Company.
In January 1994, InterCoast renegotiated its unsecured revolving credit
facility agreement. The renegotiation increased the amount of capital
available from $65 million to $110 million. The amended credit agreement
matures Feb. 14, 1996. Borrowings under this agreement may be on a fixed rate,
floating rate or competitive bid rate basis. All such borrowings are without
recourse to the parent Company. Borrowings at Dec. 31, 1993 were $44.5 million
at a weighted average interest cost of 4.1%. No such borrowings were
outstanding at Dec. 31, 1992.
_________________________________________________________________
(11) Redeemable Preference Shares:
The $5.25 Series Preference Shares, which are not redeemable prior to Nov.
1, 1998 for any purpose, are subject to mandatory redemption on Nov. 1, 2003 at
$100 per share. The $7.80 Series Preference Shares have sinking fund
requirements under which 66,600 shares will be redeemed at $100 per share each
May 1, beginning in 2001 through May 1, 2006.
_________________________________________________________________
(12) Notes Payable:
The Company's notes payable reflect borrowings which have been obtained
solely through its short-term commercial paper program. Information regarding
short-term debt follows:
1993 1992 1991
(Dollars in thousands)
Balance at year-end............. $31,000 $52,500 $52,500
Weighted average interest rate
on year-end balance........... 3.4% 3.6% 5.0%
Maximum amount outstanding
during the year............... $73,000 $77,000 $52,500
Average daily amount outstanding
during the year............... $43,291 $39,973 $26,255
Weighted average interest rate
on average daily amount
outstanding during the year... 3.3% 3.8% 6.0%
At Dec. 31, 1993, the Company had bank lines of credit of $72.8 million
to provide short-term financing for its utility operations. All such lines of
credit were unused. The Company generally maintains compensating balances
under its bank line of credit arrangements. The Company has regulatory
authority to incur up to $100 million of short-term debt for its utility
operations.
_________________________________________________________________
(13) Leases:
The Company has capitalized lease obligations for certain transmission
lines and other property, all of which are accounted for as operating leases in
the Consolidated Statements of Income pursuant to ratemaking practices.
Components of rent expense are as follows:
Year Ended Dec. 31,
1993 1992 1991
(In thousands)
Capital leases
Interest...................... $1,002 $1,037 $1,026
Amortization of utility
plant....................... 421 387 391
Total capital leases.......... 1,423 1,424 1,417
Operating leases................ 590 517 399
Total rent expense.............. $2,013 $1,941 $1,816
At Dec. 31, 1993, the future minimum lease payments under noncancelable
operating and capital leases are as follows:
Obligation
Operating Under
Leases Capital Leases
(In thousands)
1994........................... $ 575 $ 1,423
1995........................... 563 1,423
1996........................... 462 1,423
1997........................... 292 1,326
1998........................... 283 1,133
After 1998..................... 759 12,234
Total minimum lease payments... $ 2,934 18,962
Less amount representing interest............ 8,469
Present value of minimum lease payments...... $ 10,493
_________________________________________________________________
(14) Commitments and Contingencies:
Utility construction expenditures in 1994 are estimated at $87.6 million,
including $8.9 million for nuclear fuel. The forecasted 1994 capital
expenditures for InterCoast are $82.6 million. Actual expenditures are
dependent on overall InterCoast performance and general market conditions.
The Company is investigating five properties currently owned by the
Company which were, at one time, sites of gas manufacturing plants. The
purpose of these investigations is to determine whether waste materials are
present, whether such materials constitute an environmental or health risk, and
whether the Company has any responsibility for remedial action. One site is
located in Illinois and four sites are located in Iowa. With regard to the
Illinois property, the Company has signed a working agreement with the Illinois
Environmental Protection Agency to perform further investigation to determine
whether waste materials are present and, if so, whether such materials
constitute an environmental or health risk. At Dec. 31, 1993, an estimated
liability of $3.4 million has been recorded for litigation, investigation and
remediation related to the Illinois site. A regulatory asset has been recorded
reflecting anticipated cost recovery through rates in Illinois. With regard to
the Iowa sites, no agreement or consent order has been negotiated to perform
any site investigations or remediation. The Company has recorded a $4 million
estimated liability for the Iowa sites. A regulatory asset has been recorded
based on the current regulatory treatment of comparable costs in Iowa. The
estimated recorded liabilities for these properties are based upon preliminary
data. Thus, actual costs could vary significantly from the estimates. In
addition, insurance recoveries for some or all of the costs may be possible,
but the liabilities recorded have not been reduced by any estimate of such
recoveries. Although the timing of incurred costs, recoveries and the
inclusion of provision for such costs in rates may affect the results of
operations in individual periods, management believes that the outcome of these
issues will not have a material adverse effect on the Company's financial
position or results of operations.
Clean Air Act legislation was signed into law in November 1990 and U.S.
Environmental Protection Agency rulemaking proceedings are underway. The
Company has four jointly and one wholly owned coal-fired generating stations
which represent approximately 65% of the Company's electric generating
capability. Each of these facilities will be impacted to varying degrees by
the legislation.
Only one unit at the wholly owned generating station, representing
approximately 10% of the Company's electric generating capability, will be
impacted by the emission reduction requirements effective in 1995. The
compliance strategy for this unit includes modifications to allow for burning
low sulfur coal, modifications for nitrogen oxide control and installation of
a new emission monitoring system. The Company's remaining construction
expenditures relative to this work are estimated to be $5.4 million.
The four generating stations not affected until 2000 already burn low
sulfur coal, so additional capital costs will not be incurred for sulfur
dioxide emission reduction requirements. Installation of low nitrogen oxide
burners is required at one of these facilities and existing emission monitoring
systems at all four facilities will require upgrading. The Company's remaining
construction cost for this work is estimated to be $2.1 million.
It is anticipated that any costs incurred by the Company to comply with
the Clean Air Act legislation would be included in the cost of service on which
the Company's rates for utility service are based.
The Company is a member of Nuclear Mutual Limited (NML), an industry
mutual insurer established to provide property damage coverage for members'
nuclear generating facilities. The Company would be subject to a maximum
retrospective premium assessment of approximately $2.4 million based on its 25%
share of the NML premium for Quad-Cities coverage in the event covered losses
of NML members exceed the financial resources of the insurance company. A
reserve has been established for this contingency. At Dec. 31, 1993, NML had
accumulated capital to a level which would assure that the Company would have
no exposure to a retrospective premium assessment in the event of a single
incident to a member's facility.
The Company is also a member of Nuclear Electric Insurance Limited (NEIL),
an industry mutual insurance company, and an insured of American Nuclear
Insurers/Mutual Atomic Energy Liability Underwriters (ANI/MAELU). The related
policy provisions provide that expenses for decontamination and the removal of
debris shall be paid before any payment in respect of claims for property
damage. A separate NEIL insurance policy covers the extra costs which would be
incurred in obtaining replacement power during a prolonged covered outage of a
member's nuclear plant. The Company is subject to retrospective premium
assessments of up to $4 million and $685,000 for its 25% share of the premium
under the NEIL portion of the excess property damage coverage and the
replacement power coverage, respectively. At Dec. 31, 1993, NEIL had
accumulated capital to a level which would assure that the Company would have
no exposure to a retrospective premium assessment in the event of a single
incident to a member's facility.
A Master Worker Policy issued by ANI/MAELU provides coverage for worker
tort claims filed for bodily injury caused by the nuclear energy hazard. The
coverage applies to workers whose "nuclear related employment" began after Jan.
1, 1988. Under this policy, the Company could be subject to a maximum
retrospective premium assessment of $1.5 million.
Under the Price-Anderson federal legislation adopted in 1988, nuclear
public liability coverage is supported by a mandatory industry-wide program
under which owners of nuclear generating facilities could be assessed in the
event of nuclear incidents. The Company would currently be subject to a
maximum assessment of $39.6 million in the event of an incident, to be paid in
increments of no more than $5 million per year per incident.
_________________________________________________________________
(15) Segment Information:
Information related to segments of the Company's business is as follows:
Year Ended Dec. 31,
1993 1992 1991
(In thousands)
Operating information
Electric-
Operating revenues.......... $ 338,593 $ 312,667 $ 331,577
Operating expenses
excluding income taxes.... 257,493 245,753 240,978
Pre-tax operating income.... 81,100 66,914 90,599
Income taxes................ 20,171 12,959 22,328
Operating income............ 60,929 53,955 68,271
Allowance for funds used
during construction
(AFUDC)................... 886 1,019 1,375
Operating income and AFUDC.. 61,815 54,974 69,646
Depreciation expense........ 50,379 46,236 41,288
Depreciation and equity
funds recovered under
Louisa Phase-In
Clause (LPIC)............. 2,370 4,515 4,086
Total depreciation expense.. 52,749 50,751 45,374
Capital expenditures........ 49,976 52,922 46,484
Gas-
Operating revenues.......... 206,821 184,867 180,960
Operating expenses
excluding income taxes.... 192,061 171,960 170,889
Pre-tax operating income.... 14,760 12,907 10,071
Income taxes................ 4,306 3,361 3,032
Operating income............ 10,454 9,546 7,039
AFUDC....................... 93 85 73
Operating income and AFUDC.. 10,547 9,631 7,112
Depreciation expense........ 8,268 7,705 7,213
Capital expenditures........ 16,981 20,776 15,068
InterCoast Energy Company-
Income...................... 84,084 55,828 33,090
Expenses excluding
income taxes.............. 72,207 47,519 26,394
Pre-tax operating income.... 11,877 8,309 6,696
Depreciation, depletion
and amortization.......... 13,920 9,267 3,536
Capital expenditures........ $ 68,147 $ 64,096 $ 93,161
Dec. 31,
1993 1992 1991
(In thousands)
Asset information
Identifiable assets-
Electric (a)................ $ 997,861 $ 945,845 $ 921,167
Gas (a)..................... 236,406 216,592 186,886
Used in overall utility
operations................ 32,580 30,799 31,757
InterCoast Energy Company... 526,716 466,135 391,102
Total assets.................. $1,793,563 $1,659,371 $1,530,912
(a) Utility plant less accumulated provision for depreciation, accounts
receivable, accrued unbilled revenues, inventories, deferred gas expense,
energy adjustment clause balance, nuclear decommissioning trust fund and
regulatory assets.
_________________________________________________________________
(16) Quarterly Results (Unaudited):
1993 Quarter Ended
Dec. Sept. June March
31 30 30 31
(In thousands, except per share amounts)
Operating revenues....... $141,210 $127,720 $114,614 $161,870
Operating income......... 10,592 23,871 16,608 20,312
Net income on common
shares................. 7,215 17,921 12,099 16,998
Net income per average
common share
outstanding............ $ .25 $ .61 $ .41 $ .58
<PAGE>
1992 Quarter Ended
Dec. Sept. June March
31 30 30 31
(In thousands, except per share amounts)
Operating revenues....... $142,225 $112,542 $107,380 $135,387
Operating income......... 12,974 19,060 15,995 15,472
Net income on common
shares................. 7,008 13,258 9,164 10,974
Net income per average
common share
outstanding............ $ .24 $ .46 $ .34 $ .41
The quarterly data reflect seasonal variations common in the utility
industry.
<PAGE>
Report of Management
Management is responsible for the preparation of all information contained
in this Annual Report, including the financial statements. The statements and
related financial information have been prepared in conformity with generally
accepted accounting principles. In the opinion of management, the financial
position, results of operation and cash flows of the Company are reflected
fairly in the statements. The statements have been audited by the Company's
independent public accountants, Deloitte & Touche, whose report appears below.
The Company maintains a system of internal controls which is designed to
provide reasonable assurance, on a cost effective basis, that transactions are
executed in accordance with management's authorization, the financial
statements are reliable and the Company's assets are properly accounted for and
safeguarded. The Company's internal auditors continually evaluate and test the
system of internal controls and actions are taken when opportunities for
improvement are identified. Management believes that the system of internal
controls is effective.
The financial statements have been reviewed by the Audit Committee of the
Board of Directors. The Audit Committee, the members of which are directors
who are not employees of the Company, meets regularly with management, the
internal auditors and Deloitte & Touche to discuss accounting, auditing,
internal control and financial reporting matters. The Company's independent
public accountants are appointed annually by the Board of Directors on
recommendation of the Audit Committee. The internal auditors and Deloitte &
Touche each have full access to the Audit Committee, without management
representatives present.
/s/S. J. Bright
S. J. Bright
Chairman and Chief Executive Officer
/s/L. E. Cooper
L. E. Cooper
Vice President-Finance and Chief Financial Officer
<PAGE>
Independent Auditor's Report
To the Shareholders and Board of Directors of Iowa-Illinois Gas and Electric
Company:
We have audited the accompanying consolidated balance sheet and statement
of capitalization of Iowa-Illinois Gas and Electric Company and subsidiary as
of December 31, 1993, and the related consolidated statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The consolidated financial statements of the companies for the
years ended December 31, 1992 and 1991 were audited by other auditors whose
report, dated January 28, 1993, expressed an unqualified opinion on those
statements.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies as of December
31, 1993, and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
As discussed in Note 4 and Note 5 to the consolidated financial
statements, the companies changed their method of accounting for income taxes
and postretirement benefits other than pensions effective January 1, 1993.
/s/DELOITTE & TOUCHE
DELOITTE & TOUCHE
Davenport, Iowa
January 26, 1994
EXHIBIT 21
Iowa-Illinois Gas and Electric Company has one wholly owned
subsidiary, InterCoast Energy Company, a Delaware corporation.
CONSENT OF INDEPENDENT AUDITORS
Iowa-Illinois Gas and Electric Company:
We consent to the incorportion by reference in Registration
Statement No. 33-23081 on Form S-8 and Registration Statement No.
33-20329 on Form S-8 of our report dated January 26, 1994,
appearing in and incorporated by reference in this Annual Report
on Form 10-K of Iowa-Illinois Gas and Electric Company for the
year ended December 31, 1993.
/s/DELOITTE & TOUCHE
DELOITTE & TOUCHE
Davenport, Iowa
March 24, 1994
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in Registration Statement No. 33-23081
on Form S-8 and Registration Statement No. 33-20329 on Form S-8
of our report dated January 28, 1993, covering the consolidated
balance sheet and statement of capitalization of Iowa-Illinois
Gas and Electric Company and Subsidiary Company as of December
31, 1992, and the related statements of income, retained earnings
and cash flows for each of the two years in the period ended
December 31, 1992, included in the Company's Form 10-K for the
year ended December 31, 1993, (Commission file number 1-3573).
It should be noted that we have not audited any financial
statements of the Company subsequent to December 31, 1992, or
performed any audit procedures subsequent to the date of our
report.
/s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 23, 1994
