FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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.)
One RiverCenter Place,
106 East Second Street, Davenport, Iowa 52801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(319) 326-7111
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 the
filing requirements for the past 90 days.
Yes X No ____
Common shares outstanding at March 31, 1995 29,918,363<PAGE>
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<CAPTION>
Part I. Quarterly Financial Information
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
First Quarter Ended
March 31,
1995 1994
(In thousands, except
per share amounts)
(Unaudited)
<S> <C> <C>
OPERATING REVENUES
Electric $80,117 $84,608
Gas 72,162 100,256
152,279 184,864
OPERATING EXPENSES AND TAXES
Operation-
Cost of gas sold 49,137 75,040
Cost for fuel, energy and capacity 17,159 20,174
Other operation 24,637 27,197
Maintenance 10,477 12,028
Provision for depreciation 15,555 15,383
Income taxes 7,126 6,935
Property and other taxes 9,337 9,303
133,428 166,060
OPERATING INCOME 18,851 18,804
OTHER INCOME
InterCoast Energy Company -
Oil and gas revenues 13,437 15,775
Other income 6,225 9,625
Expenses, including interest and
provision for income taxes (18,641) (21,692)
Net income of InterCoast Energy Company 1,021 3,708
Allowance for equity funds
used during construction - 176
Miscellaneous (245) 332
776 4,216
INCOME BEFORE UTILITY INTEREST CHARGES 19,627 23,020
UTILITY INTEREST CHARGES
Interest on long-term debt 6,073 5,860
Other interest expense 895 285
Allowance for borrowed funds
used during construction (792) (215)
6,176 5,930
NET INCOME 13,451 17,090
PREFERRED AND PREFERENCE
DIVIDEND REQUIREMENTS 911 1,203
NET INCOME ON COMMON SHARES $12,540 $15,887
AVERAGE COMMON SHARES OUTSTANDING 29,828 29,349
NET INCOME PER AVERAGE
COMMON SHARE OUTSTANDING $0.42 $0.54
CASH DIVIDENDS DECLARED AND
PAID PER COMMON SHARE $0.4325 $0.4325
<FN>
The accompanying notes to consolidated financial statements are an intergral part
of these statements.
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<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
3-31-95 12-31-94
(In thousands, except
share amounts)
(Unaudited)
<S> <C> <C>
PROPERTY AND OTHER ASSETS
UTILITY PLANT, at original cost
Electric $1,297,740 $1,281,027
Gas 274,298 279,118
1,572,038 1,560,145
Less--Accumulated provision for depreciation 651,281 638,493
920,757 921,652
Nuclear fuel, net of accumulated amortization 29,001 31,103
Construction work in progress 62,436 51,316
1,012,194 1,004,071
CURRENT ASSETS
Cash and cash equivalents 33,359 24,740
Accounts receivable, less reserves of $1,256 and $1,165 39,495 41,498
Accrued unbilled revenues 15,337 21,637
Inventories 33,286 37,328
Deferred gas expense - 4,471
Other 15,711 16,262
137,188 145,936
INVESTMENTS
InterCoast Energy Company 474,781 489,830
Nuclear decommissioning trust fund 53,902 49,432
Corporate-owned life insurance 14,888 14,338
543,571 553,600
OTHER ASSETS
Regulatory assets 133,628 133,427
Other 13,580 12,865
147,208 146,292
1,840,161 1,849,899
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
COMMON SHAREHOLDERS' EQUITY
Common shares--authorized 80,000,000 shares--outstanding 29,918,363
and 29,783,486 shares stated at 291,586 288,692
Retained earnings 222,184 222,541
Other (8,403) (8,991)
505,367 502,242
PREFERENCE SHARES--authorized 2,386,250 shares, cumulative
--outstanding 500,000 shares subject to mandatory redemption 50,000 50,000
LONG-TERM DEBT
First Mortgage Bonds 311,125 323,745
Pollution Control Obligations 60,883 48,133
InterCoast Energy Company 231,000 239,000
603,008 610,878
TOTAL CAPITALIZATION 1,158,375 1,163,120
CURRENT LIABILITIES
Notes payable 50,000 67,500
Debt redeemable within one year 64,145 64,145
Accounts payable 36,555 37,785
Accrued taxes 37,555 26,240
Accrued interest 13,266 10,987
Accrued gas expense 11,583 9,499
Other 23,286 20,921
236,390 237,077
OTHER LIABILITIES
Accumulated provision for nuclear decommissioning 53,902 49,432
Other 69,181 69,650
123,083 119,082
ACCUMULATED DEFERRED INCOME TAXES 283,660 291,426
ACCUMULATED DEFERRED INVESTMENT TAX CREDITS 38,653 39,194
$1,840,161 $1,849,899
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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<CAPTION>
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1995 1994
(In thousands)
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $13,451 $17,090
Adjustments to reconcile net income
to net cash from operating activities -
Depreciation 16,552 16,382
Depletion 4,949 4,272
Nuclear fuel amortization 2,102 2,213
Deferred income taxes, net (7,683) (543)
Tax credits, net (541) (540)
Net gain on disposition of securities (425) (528)
Allowance for equity funds used during construction - (176)
Changes in current assets and liabilities
Accounts receivable 2,003 (716)
Accrued unbilled revenues 6,300 1,257
Inventories 4,042 13,117
Deferred and accrued gas expense 6,554 15,822
Accounts payable (1,187) (17,688)
Accrued taxes 11,315 3,426
Other current assets and liabilities 4,514 (9,767)
Energy-efficiency program cost deferrals, net (2,016) (1,993)
Other 2,574 (1,459)
Net cash from operating activities 62,504 40,169
CASH FLOWS FROM INVESTING ACTIVITIES
Utility plant expenditures (23,933) (14,852)
Nuclear fuel expenditures - (3,202)
Allowance for equity funds used during construction - 176
Nuclear decommissioning trust fund (2,201) (2,186)
Oil and gas investments (10,389) (4,641)
Purchase of available-for-sale investments (13,637) (41,872)
Sale of available-for-sale investments 11,950 28,522
Purchase of investments (1,570) (4,089)
Sale of investments 984 7,672
Other 21,571 1,893
Net cash from investing activities (17,225) (32,579)
CASH FLOWS FROM FINANCING ACTIVITIES
Common shares issued 2,830 -
Long-term debt issued 12,750 -
Long-term debt retired (12,750) -
Decrease in short-term borrowings (17,500) (8,000)
Borrowings of InterCoast Energy Company -
Increase/(decrease) in unsecured revolving
credit facility (8,000) 12,500
Dividends paid (13,794) (13,940)
Issuance expense (196) (30)
Net cash from financing activities (36,660) (9,470)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 8,619 (1,880)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,740 17,844
CASH AND CASH EQUIVALENTS AT END OF PERIOD $33,359 $15,964
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the periods for -
Interest (net of amounts capitalized) $10,406 $13,795
Income taxes 118 15
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(a) The condensed consolidated financial statements
included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
The statements reflect all adjustments which are, in the
Company's opinion, necessary for a fair statement of the results
for the periods presented. The Company believes that the
disclosures are adequate to make the information presented not
misleading. Certain 1994 amounts have been reclassified to
conform to the current year presentation. It is suggested that
these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the
notes thereto incorporated by reference in the latest annual
report on Form 10-K.
(b) In October 1994, the Company filed an application with
the Iowa Utilities Board (IUB) to recover the costs of state-
mandated energy-efficiency programs offered to Iowa electric and
gas customers since 1992. Costs of the programs are to be
recovered over four years, as required by Iowa law. The total
annual cost to be recovered, including a return on deferred
amounts and an allowance for performance rewards, is
approximately $4.7 million. On May 8, 1995, the IUB issued an
order approving cost recovery of the full amount requested with
collection to begin in June 1995.
(c) In 1992, the Federal Energy Regulatory Commission
(FERC) issued Order No. 636, restructuring the natural gas sales
and transportation services of interstate pipeline companies.
The FERC Order contemplated that transitional gas supply
realignment costs related to this restructuring may be billed by
interstate pipelines to their customers. At March 31, 1995, a
regulatory asset of $21.9 million, with an offsetting non-current
Other Liability, has been recorded. In addition, the Company
estimates it may incur other future billings of approximately $15
million related to such restructuring. The Company is currently
recovering such costs through rates.
(d) 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. In the first three months of 1995
and 1994, AFUDC rates were 6.1% and 6.2%, 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.
<PAGE>
(e) In January 1995, $12.75 million of floating rate
Pollution Control Revenue Bonds, due 2025, were issued. In March
1995, proceeds from this financing were used to redeem $12.75
million of Collateralized Pollution Control Revenue Bonds, 5.8%
Series, due 2007.
(f) 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 March 31, 1995,
an estimated liability of $3.3 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. 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 are 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, is impacted by the emission reduction
requirements effective in 1995. Under such requirements,
beginning in 1995, this unit is 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 $2.4
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.
Beginning in 2000, these facilities 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 require upgrading. The
Company's remaining construction cost for this work is estimated
to be $1.4 million.
It is anticipated that any costs incurred by the Company to
comply with the Clean Air Act legislation would be included in
the cost of service on which the Company's rates for utility
service are based.
(g) Expenses of InterCoast include interest expense as
follows:
March 31,
1995 1994
Three Months Ended. . . .$ 6,508,000 $ 6,241,000
(h) On December 21, 1994, the shareholders of the Company,
Midwest Resources Inc. and Midwest Power Systems Inc. approved a
strategic merger of equals to form MidAmerican Energy Company
(MidAmerican). MidAmerican will be structured as a utility with
the Company, Midwest Resources Inc. and Midwest Power Systems
Inc. being merged into the new company.
Approval of the merger is required from the following
regulatory agencies: the IUB, the Illinois Commerce Commission
(ICC) and the FERC. Approval by the Nuclear Regulatory
Commission (NRC) of the transfer of the Quad-Cities Nuclear Power
Station license to MidAmerican must also be obtained.
Applications for approval of the merger were filed with the
IUB and the ICC in October 1994. An application for approval of
the merger was filed with the FERC in November 1994. At the same
time, consistent with FERC policy, the Company filed open-access,
comparable services electric tariffs with the FERC, which tariffs
will allow others to use MidAmerican's electric transmission
system in a manner comparable to its use by MidAmerican. A
filing with the NRC was made in November 1994. In January 1995,
the IUB issued an order approving the merger. The ICC approved
the merger on May 4, 1995. The FERC is expected to issue an
order on the merger by mid 1995. Completion of the merger is
expected during 1995.
The Company and Midwest Resources Inc. have announced plans
to reduce their combined utility work forces by approximately 15
percent in conjunction with development of a restructured
organization. As part of these reductions, the companies are
offering incentive retirement and severance programs to salaried
employees. The companies estimate these programs will reduce
1995 after-tax earnings of MidAmerican by approximately $9
million, or 9 cents a share, if the merger is consummated in
1995. The present value of the net savings from employment
reductions is estimated to be approximately $230 million.
(i) In April 1995, InterCoast completed the sale of a
partnership interest in Tenaska Marketing Ventures, a gas
marketing organization. The after-tax gain of $3.2 million on
this sale will be recorded in the quarter ending June 30, 1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Operating Revenues
Electric revenues decreased in the first quarter of 1995
compared to the first quarter of 1994 primarily due to decreased
sales for resale. Also contributing to the decrease in electric
revenues were decreased residential sales, decreased collections
through rate riders relating to former manufactured gas plant
sites and nuclear decommissioning costs, and decreased fuel and
energy billings. 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.
Beginning in January 1995, costs of investigation,
remediation and litigation relating to former manufactured gas
plant sites included in Illinois customer billings through a rate
rider were decreased by $450,000 annually. Also beginning in
January 1995, nuclear decommissioning costs included in Illinois
customer billings through a rate rider were decreased by $500,000
annually. Decreased revenues collected through rate riders
relating to former manufactured gas plant sites and nuclear
decommissioning will not affect net income due to a corresponding
decrease in costs.
The changes in electric revenues are shown below:
Revenue Decrease
First Quarter 1995 to First Quarter 1994
(In thousands)
Change in Retail Unit Sales $( 800)
Change in Retail Fuel and Energy
Adjustment Clause Billings ( 100)
Change in Sales for Resale ( 3,400)
Changes in Retail Rates ( 200)
$( 4,500)
Gas revenues decreased in the first quarter of 1995 compared
to the first quarter of 1994. The principal factors contributing
to the decrease were lower purchased gas cost billings and
decreased sales volumes due to temperatures which were 11 percent
warmer than the first quarter of 1994. Variations in purchased
gas cost billings reflect corresponding changes in cost of gas
sold and, thus, do not affect net income.
The changes in gas revenue are shown below:
Revenue Decrease
First Quarter 1995 to First Quarter 1994
(In thousands)
Change in Purchased Gas
Adjustment Clause Billings $(17,800)
Change in Unit Sales (10,300)
$(28,100)
Operation
Cost of gas sold decreased in the first quarter of 1995
compared to the first quarter of 1994 primarily due to decreased
purchased gas costs from suppliers and lower gas purchases
reflecting warmer temperatures in the first quarter of 1995.
Changes in the cost of electric fuel, energy and capacity
reflect fluctuations in generation mix, fuel cost and energy and
capacity purchases. Decreased fuel, energy and capacity costs in
the first quarter of 1995 compared to the first quarter of 1994
are primarily due to decreased total sales and decreased average
unit fuel and energy costs.
Other operation and maintenance decreased in the first
quarter of 1995 compared to the first quarter of 1994 primarily
due to lower costs at the Quad-Cities Nuclear Power Station
(Quad-Cities Station). In January 1994, the Company was advised
by ComEd, operator and 75 percent owner of the Quad-Cities
Station, that the NRC had placed the station on its list of
plants with adverse performance trends. The NRC concerns with
the Quad-Cities Station include deficiencies in the condition of
certain station equipment and the effectiveness of the operators
of the units in identifying and responding to certain operational
problems. ComEd has provided written and verbal responses to the
NRC and is working to resolve the concerns. As of February 1995,
the Quad-Cities Station remains on the list of plants with
adverse performance trends.
Oil and Gas Revenues of InterCoast Energy Company
Oil and gas revenues of InterCoast decreased in the first
quarter of 1995 compared to the first quarter of 1994 primarily
due to lower margins on gas marketed and lower gas prices on gas
produced, partially offset by greater prices on oil produced and
greater gas production volumes.
Other Income of InterCoast Energy Company
Other income of InterCoast decreased in the first quarter of
1995 compared to the first quarter of 1994 primarily due to gains
on the disposition of special-purpose funds in 1994, which were
not duplicated in the first quarter of 1995, and lower lease
income.
In April 1995, InterCoast completed the sale of a
partnership interest in Tenaska Marketing Ventures, a gas
marketing organization. The after-tax gain of $3.2 million on
this sale will be recorded in the quarter ending June 30, 1995.
Expenses of InterCoast Energy Company
Expenses of InterCoast decreased in the first quarter of
1995 compared to the first quarter of 1994 primarily due to lower
expenses associated with gas marketed.
Allowance for Funds Used During Construction
The increase in the total allowance for the first quarter of
1995 compared to first quarter of 1994 is primarily due to higher
construction work in progress balances.
Other Interest Expense
The increase in other interest expense in the first quarter
of 1995 compared to the first quarter of 1994 is primarily due to
increased interest rates on notes payable and greater notes
payable balances.
Preferred and Preference Dividend Requirements
The decrease in the preferred and preference dividend
requirements in the first quarter of 1995 compared to the first
quarter of 1994 is due to the redemption of all outstanding
preferred shares in December 1994.
Other Matters
On December 21, 1994, the shareholders of the Company,
Midwest Resources Inc. and Midwest Power Systems Inc. approved a
strategic merger of equals to form MidAmerican. MidAmerican will
be structured as a utility with the Company, Midwest Resources
Inc. and Midwest Power Systems Inc. being merged into the new
company.
Approval of the merger is required from the following
regulatory agencies: the IUB, the ICC and the FERC. Approval by
the NRC of the transfer of the Quad-Cities Nuclear Power Station
license to MidAmerican must also be obtained.
Applications for approval of the merger were filed with the
IUB and the ICC in October 1994. An application for approval of
the merger was filed with the FERC in November 1994. At the same
time, consistent with FERC policy, the Company filed open-access,
comparable services electric tariffs with the FERC, which tariffs
will allow others to use MidAmerican's electric transmission
system in a manner comparable to its use by MidAmerican. A
filing with the NRC was made in November 1994. In January 1995,
the IUB issued an order approving the merger. The ICC approved
the merger on May 4, 1995. The FERC is expected to issue an
order on the merger by mid 1995. Completion of the merger is
expected during 1995.
The Company and Midwest Resources Inc. have announced plans
to reduce their combined utility work forces by approximately 15
percent in conjunction with development of a restructured
organization. As part of these reductions, the companies are
offering incentive retirement and severance programs to salaried
employees. The companies estimate these programs will reduce
1995 after-tax earnings of MidAmerican by approximately $9
million, or 9 cents a share, if the merger is consummated in
1995. The present value of the net savings from employment
reductions is estimated to be approximately $230 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current utility construction program forecast
calls for expenditures of $84 million in 1995. In excess of 75%
of these expenditures are expected to be met from cash generated
from operations. The Company's utility capital requirements for
the years 1995-1999 include budgeted construction expenditures of
$300 million, expected contributions to nuclear decommissioning
trust funds of $43 million, and maturities and cash sinking fund
requirements related to long-term debt of $98 million.
In January 1995, $12.75 million of floating rate Pollution
Control Revenue Bonds, due 2025, were issued. In March 1995,
proceeds from this financing were used to redeem $12.75 million
of Collateralized Pollution Control Revenue Bonds, 5.8% Series,
due 2007.
At March 31, 1995 and December 31, 1994, the Company had $50
million and $67.5 million, respectively, of outstanding short-
term commercial paper notes. The Company currently has
regulatory authority to incur up to $100 million of short-term
debt for its utility operations. Effective July 1, 1995, the
authorized amount is increasing to $150 million.
In 1992, the FERC issued Order No. 636, restructuring the
natural gas sales and transportation services of interstate
pipeline companies. The FERC Order contemplated that
transitional gas supply realignment costs related to this
restructuring may be billed by interstate pipelines to their
customers. At March 31, 1995, a regulatory asset of $21.9
million, with an offsetting non-current Other Liability, has been
recorded. In addition, the Company estimates it may incur other
future billings of approximately $15 million related to such
restructuring. The Company is currently recovering such costs
through rates.
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 March 31, 1995,
an estimated liability of $3.3 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. 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 are 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, is impacted by the emission reduction
requirements effective in 1995. Under such requirements,
beginning in 1995, this unit is 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 $2.4
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.
Beginning in 2000, these facilities 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 require upgrading. The
Company's remaining construction cost for this work is estimated
to be $1.4 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.
Capital expenditures for InterCoast during 1995 are
estimated to be approximately $65 million. Actual capital
expenditures for InterCoast are dependent on overall InterCoast
performance and general market conditions.
InterCoast's aggregate amounts of maturities and cash
sinking fund requirements for long-term debt outstanding at March
31, 1995 are $64 million for 1995 and $161 million for the years
1996-1999. Amounts due in 1995 are expected to be refinanced
with debt instruments and operating cash flow.
InterCoast has a $110 million unsecured revolving credit
facility agreement, which matures in July 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 March 31, 1995
were $27 million at a weighted average interest cost of 6.9%.
In the first quarter of 1995, the lessee in a leveraged
lease investment held by InterCoast exercised the purchase option
provision of the lease agreement. This resulted in the
termination of the lease agreement, the receipt of $23 million in
cash by InterCoast and an increase in current tax expense of $11
million, offset by the reversal of $11 million in previously
deferred income taxes including the utilization of Alternative
Minimum Tax credit carryforwards.<PAGE>
Part II - Other Information
Item 5. Other Events
Rate Matters
See Note (b) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion of an Iowa
energy-efficiency program filing.
Federal Gas Transition Costs
See Note (c) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion of federal
gas transition costs related to Federal Energy Regulatory
Commission Order No. 636.
Refinancing
See Note (e) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion related to
the refinancing of $12.75 million of Collateralized Pollution
Control Revenue Bonds.
Environmental Matters
See Note (f) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion related to
manufactured gas plant sites and Clean Air Act legislation.
Merger
See Note (h) to the Consolidated Financial Statements
contained in Part I of this Form 10-Q for a discussion related to
the pending merger of the Company, Midwest Resources Inc. and
Midwest Power Systems Inc. into a new utility, MidAmerican Energy
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
A report on form 8-K dated February 1, 1995 was filed. the
report included under "Item 5 Other Events" and "Item 7 Financial
Statements and Exhibits" information related to the announcement
by the Company and Midwest Resources Inc. to reduce their
combined utility work forces by approximately 15 percent (650
positions) in conjunction with the development of a restructured
organization.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Iowa-Illinois Gas and Electric Company
(Registrant)
Date: May 9, 1995 By L. E. Cooper
L. E. Cooper
Vice President-Finance
(Chief Financial Officer)
Date: May 9, 1995 By B. A. Ven Horst
B. A. Ven Horst
Assistant Secretary and
Assistant Treasurer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Iowa-Illinois Gas and Electric Company as of
March 31, 1995 and the related consolidated statements of income and cash flows
for the three months ended March 31, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> DEC-31-1995
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<TOTAL-OPERATING-EXPENSES> 133,428
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<OTHER-INCOME-NET> 776
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<EARNINGS-AVAILABLE-FOR-COMM> 12,540
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