UNITED STATES
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, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-7324
KANSAS GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
KANSAS 48-1093840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 208, WICHITA, KANSAS 67201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 316/261-6611
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock.
Common Stock, No par value 1,000 Shares
(Title of each class) (Outstanding at March 29, 1995)
Indicated by check mark whether the registrant (1) has filed all reports requird
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Registrant meets the conditions of General Instruction J(1)(a)(b) to Form 10-K
for certain wholly-owned subsidiaries and is therefore filing an abbreviated
form.
<PAGE> 2
KANSAS GAS AND ELECTRIC COMPANY
FORM 10-K
December 31, 1994
TABLE OF CONTENTS
Description Page
PART I
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of
Security Holders 13
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 44
PART III
Item 10. Directors and Executive Officers of the
Registrant 45
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain Beneficial
Owners and Management 46
Item 13. Certain Relationships and Related Transactions 46
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 47
Signatures 50
<PAGE> 3
PART I
ITEM 1. BUSINESS
ACQUISITION AND MERGER
On March 31, 1992, Western Resources, Inc. (formerly The Kansas Power and
Light Company) (Western Resources) through its wholly-owned subsidiary KCA
Corporation (KCA), acquired all of the outstanding common and preferred stock
of Kansas Gas and Electric Company (KG&E) for $454 million in cash and
23,479,380 shares of Western Resources common stock (the Merger). Western
Resources also paid approximately $20 million in costs to complete the Merger.
Simultaneously, KCA and Kansas Gas and Electric Company merged and adopted
the name Kansas Gas and Electric Company (the Company, KG&E).
Additional information relating to the Merger can be found in Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 1 of the Notes to Financial Statements.
GENERAL
The Company is an electric public utility engaged in the generation,
transmission, distribution and sale of electric energy in the southeastern
quarter of Kansas including the Wichita metropolitan area. The Company owns
47 percent of Wolf Creek Nuclear Operating Corporation, the operating company
for Wolf Creek Generating Station (Wolf Creek). Corporate headquarters of the
Company is located in Wichita, Kansas. The Company has no gas properties. At
December 31, 1994, the Company had no employees. All employees are provided
by Western Resources.
For discussion regarding competition in the electric utility industry and
the potential impact on the Company, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, Other Information,
Competition included herein.
The Company's business is subject to seasonal fluctuations with the peak
period occurring during the summer. Approximately one-third of residential
kilowatthour sales occur in the third quarter. Accordingly, earnings and
revenue information for any quarterly period should not be considered as a
basis for estimating results of operations for a full year.
Discussion of other factors affecting the Company are set forth in the
Notes to Financial Statements and Management's Discussion and Analysis
included herein.
ELECTRIC OPERATIONS
General
The Company supplies electric energy at retail to approximately 272,000
customers in 139 communities in Kansas. The Company also supplies electric
energy to 27 communities and 1 rural electric cooperative, and has contracts
for the sale, purchase or exchange of electricity with other utilities at
wholesale.
<PAGE> 4
The Company's electric sales for the last five years were as follows:
1994 1993 1992 1991 1990
(Thousands of MWH)
Residential 2,384 2,386 2,102 2,341 2,270
Commercial 2,068 1,991 1,892 1,908 1,838
Industrial 3,371 3,323 3,248 3,194 3,093
Wholesale and
Interchange 1,590 2,004 1,267 1,168 1,688
Other 45 45 46 46 48
----- ----- ----- ----- -----
Total 9,458 9,749 8,555 8,657 8,937
The Company's electric revenues for the last five years were as follows:
1994 1993 1992 1991 1990
(1)
(Dollars in Thousands)
Residential $220,067 $219,069 $194,142 $219,907 $214,544
Commercial 167,499 162,858 154,005 155,847 151,098
Industrial 181,119 179,256 174,226 172,953 168,294
Wholesale and
Interchange 38,750 45,843 28,086 29,989 36,152
Other 12,445 9,971 3,792 16,272 16,553
-------- -------- -------- -------- --------
Total $619,880 $616,997 $554,251 $594,968 $586,641
(1) See Note 4 of the Notes to Financial Statements for impact
of rate refund orders.
Capacity
The aggregate net generating capacity of the Company's system is presently
2,498 megawatts (MW). The system comprises interests in twelve fossil fueled
steam generating units, one nuclear generating unit (47 percent interest) and
one diesel generator, located at seven generating stations. One of the twelve
fossil fueled units has been "mothballed" for future use (see Item 2.
Properties).
The Company's 1994 peak system net load occurred on July 1, 1994 and
amounted to 1,747 MW. The Company's net generating capacity together with
power available from firm interchange and purchase contracts, provided a
capacity margin of approximately 27 percent above system peak responsibility
at the time of the peak.
The Company and ten companies in Kansas and western Missouri have agreed
to provide capacity (including margin), emergency and economy services for
each other. This arrangement is called the MOKAN Power Pool. The pool
participants also coordinate the planning of electric generating and
transmission facilities.
The Company is one of 47 members of the Southwest Power Pool (SPP). SPP's
responsibility is to maintain system reliability on a regional basis. The
region encompasses areas within the eight states of Kansas, Missouri,
Oklahoma, New Mexico, Texas, Louisiana, Arkansas, and Mississippi.
In 1994, the Company joined the Western Systems Power Pool (WSPP). Under
this arrangement, over 50 electric utilities and marketers throughout the
western
<PAGE> 5
United States have agreed to market energy and to provide transmission
services. WSPP's intent is to increase the efficiency of the interconnected
power systems operations over and above existing operations. Services
available include short-term and long-term economy energy transactions, unit
commitment service, firm capacity and energy sales, energy exchanges, and
transmission service by intermediate systems.
During 1994, the Company entered into an agreement with Midwest Energy,
Inc. (MWE), whereby the Company will provide MWE with peaking capacity of 61
megawatts through the year 2008. The Company also entered into an agreement
with Empire District Electric Company (Empire), whereby the Company will
provide Empire with peaking and base load capacity (20 megawatts in 1994
increasing to 80 megawatts in 2000) through the year 2000.
Future Capacity
The Company does not contemplate any significant expenditures in
connection with construction of any major generating facilities through the
turn of the century (see Item 7. Management's Discussion and Analysis,
Liquidity and Capital Resources). The Company has capacity available which
may not be fully utilized by growth in customer demand for at least 5 years.
The Company continues to market this capacity and energy to other utilities.
Fuel Mix
The Company's coal-fired units comprise 1,101 MW of the total 2,498 MW of
generating capacity and the Company's nuclear unit provides 545 MW of
capacity. Of the remaining 852 MW of generating capacity, units that can burn
either natural gas or oil account for 849 MW, and the remaining unit which
burns only diesel fuel accounts for 3 MW (see Item 2. Properties).
During 1994, low sulfur coal was used to produce 56% of the Company's
electricity. Nuclear produced 34 percent and the remainder was produced from
natural gas, oil, or diesel fuel. During 1995, based on the Company's
estimate of the availability of fuel, coal will to be used to produce
approximately 58 percent of the Company's electricity and nuclear will be used
to produce 36 percent.
The Company's fuel mix fluctuates with the operation of nuclear powered
Wolf Creek which has an 18-month refueling and maintenance schedule. The 18-
month schedule permits uninterrupted operation every third calendar year. In
mid-September 1994, Wolf Creek was taken off-line for its seventh refueling
and maintenance outage. The refueling outage took approximately 47 days to
complete, during which time electric demand was met primarily by the Company's
coal-fired generating units. There is no refueling outage scheduled for 1995.
Nuclear
The owners of Wolf Creek have on hand or under contract 63 percent of the
uranium required for operation of Wolf Creek through the year 2001. The
balance is expected to be obtained through spot market and contract purchases.
Contractual arrangements are in place for 100 percent of Wolf Creek's
uranium enrichment requirements for 1995-1997, 90 percent for 1998-1999, 95
percent for
<PAGE> 6
2000-2001 and 100 percent for 2005-2014. The balance of the 1998-2004
requirements is expected to be obtained through a combination of spot market
and contract purchases. The decision not to contract for the full enrichment
requirements is one of cost rather than availability of service.
Contractual arrangements are in place for the conversion of uranium to
uranium hexafluoride sufficient to meet Wolf Creek's requirements through 1996
as well as the fabrication of fuel assemblies to meet Wolf Creek's
requirements through 2012.
The Nuclear Waste Policy Act of 1982 established schedules, guidelines and
responsibilities for the Department of Energy (DOE) to develop and construct
repositories for the ultimate disposal of spent fuel and high-level waste.
The DOE has not yet constructed a high-level waste disposal site and has
announced that a permanent storage facility may not be in operation prior to
2010 although an interim storage facility may be available earlier. Wolf
Creek contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through
2006 while still maintaining full core off-load capability. The Company
believes adequate additional storage space can be obtained, as necessary.
The Company along with the other co-owners of Wolf Creek are among 14
companies that filed a lawsuit on June 20, 1994, seeking an interpretation of
the DOE's obligation to begin accepting spent nuclear fuel for disposal in
1998. The DOE has filed a motion to have this case dismissed. The issue to
be decided in this case is whether DOE must begin accepting spent fuel in 1998
or at a future date.
Coal
The three coal-fired units at Jeffrey Energy Center (JEC) have an
aggregate capacity of 423 MW (KG&E's 20 percent share) (see Item 2.
Properties). Western Resources, the operator of JEC, and KG&E, have a long-
term coal supply contract with Amax Coal West, Inc. (AMAX), a subsidiary of
Cyprus Amax Coal Company, to supply low sulfur coal to JEC from AMAX's Eagle
Butte Mine or an alternate mine source of AMAX's Belle Ayr Mine, both located
in the Powder River Basin in Campbell County, Wyoming. The contract expires
December 31, 2020. The contract contains a schedule of minimum annual
delivery quantities based on MMBtu provisions. The coal to be supplied is
surface mined and has an average Btu content of approximately 8,300 Btu per
pound and an average sulfur content of .43 lbs/MMBtu (see Environmental
Matters). The average delivered cost of coal for JEC was approximately $1.13
per MMBtu or $18.55 per ton during 1994.
Coal is transported by Western Resources from Wyoming under a long-term
rail transportation contract with Burlington Northern (BN) and Union Pacific
(UP) to JEC through December 31, 2013. Rates are based on net load carrying
capabilities of each rail car. Western Resources provides 890 aluminum rail
cars, under a 20 year lease, to transport coal to JEC.
The two coal-fired units at La Cygne Station have an aggregate generating
capacity of 678 MW (KG&E's 50 percent share) (see Item 2. Properties). The
operator, Kansas City Power & Light Company (KCPL), maintains coal contracts
as discussed in the following paragraphs.
<PAGE> 7
La Cygne 1 uses low sulfur Powder River Basin coal which is supplied under
a variety of spot market transactions, discussed below. Illinois or
Kansas/Missouri coal is blended with the Powder River Basin coal and is
secured from time to time under spot market arrangements. La Cygne 1 uses a
blend of 85 percent Powder River Basin coal.
La Cygne 2 and additional La Cygne 1 Powder River Basin coal is supplied
through several contracts expiring at various times through 1998. This low
sulfur coal had an average Btu content of approximately 8,500 Btu per pound
and a maximum sulfur content of .50 lbs/MMBtu (see Environmental Matters).
For 1994, KCPL secured Powder River Basin coal from two sources; Carter Mining
Company's Caballo Mine, a subsidiary of Exxon Coal USA; and Caballo Rojo Inc's
Caballo Rojo Mine, a subsidiary of Drummond Inc. Transportation is covered by
KCPL through its Omnibus Rail Transportation Agreement with BN and Kansas City
Southern Railroad through December 31, 1995. An alternative rail
transportation agreement with Western Railroad Property, Inc. (WRPI), a
partnership between UP and Chicago Northwestern (CNW), lasts through December
31, 1995. A new five-year coal transportation agreement is being negotiated
to provide transportation beyond 1995.
During 1994, the average delivered cost of all coal procured for La Cygne
1 was approximately $0.78 per MMBtu or $14.11 per ton and the average
delivered cost of Powder River Basin coal for La Cygne 2 was approximately
$0.73 per MMBtu or $12.30 per ton.
Natural Gas
The Company uses natural gas as a primary fuel in its Gordon Evans and
Murray Gill Energy Centers. Natural gas for these generating stations is
supplied under a firm contract that runs through 1995 by Kansas Gas Supply
(KGS). After 1995, the Company expects to use the spot market to purchase
most of the natural gas needed to fuel these generating stations. Short-term
economical spot market purchases from the Williams Natural Gas (WNG) system
provide the Company flexible natural gas supply arrangements to meet
operational needs.
Oil
The Company uses oil as an alternate fuel when economical or when
interruptions to natural gas make it necessary. Oil is also used as a
supplemental fuel at each of the coal plants. All oil burned by the Company
during the past several years has been obtained by spot market purchases. At
December 31, 1994, the Company had approximately 715 thousand gallons of No. 2
oil and 11 million gallons of No. 6 oil which is believed to be sufficient to
meet emergency requirements and protect against lack of availability of
natural gas and/or the loss of a large generating unit.
Other Fuel Matters
The Company's contracts to supply fuel for its coal- and natural gas-fired
generating units, with the exception of JEC, do not provide full fuel
requirements at the various stations. Supplemental fuel is procured on the
spot market to provide operational flexibility and, when the price is
favorable, to take advantage of economic opportunities.
<PAGE> 8
On March 26, 1992, in connection with the Merger, the Kansas Corporation
Commission (KCC) approved the elimination of the Energy Cost Adjustment Clause
(ECA) for most Kansas retail customers of the Company effective April 1, 1992.
The provisions for fuel costs included in base rates were established at a
level intended by the KCC to equal the projected average cost of fuel through
August 1995 and to include recovery of costs provided by previously issued
orders relating to coal contract settlements and storm damage recovery. Any
increase or decrease in fuel costs from the projected average will impact the
Company's earnings.
Set forth in the table below is information relating to the weighted
average cost of fuel used by the Company.
1994 1993 1992 1991 1990
Per Million Btu:
Nuclear $0.36 $0.35 $0.34 $0.32 $0.34
Coal 0.90 0.96 1.25 1.32 1.32
Gas 1.98 2.37 1.95 1.74 1.96
Oil 3.90 3.15 4.28 4.13 3.01
Cents per KWH Generation 0.89 0.93 0.98 1.09 1.01
Environmental Matters
The Company currently holds all Federal and State environmental approvals
required for the operation of its generating units. The Company believes it
is presently in substantial compliance with all air quality regulations
(including those pertaining to particulate matter, sulfur dioxide and oxides
of nitrogen (NOx)) promulgated by the State of Kansas and the Environmental
Protection Agency (EPA).
The Federal sulfur dioxide standards applicable to the Company's JEC and
La Cygne 2 units, prohibit the emission of more than 1.2 pounds of sulfur
dioxide per million Btu of heat input. Federal particulate matter emission
standards applicable to these units prohibit: (1) the emission of more than
0.1 pounds of particulate matter per million Btu of heat input and (2) an
opacity greater than 20 percent. Federal NOx emission standards applicable to
these units prohibit the emission of more than 0.7 pounds of NOx per million
Btu of heat input.
The JEC and La Cygne 2 units have met: (1) the sulfur dioxide standards
through the use of low sulfur coal (see Coal); (2) the particulate matter
standards through the use of electrostatic precipitators; and (3) the NOx
standards through boiler design and operating procedures. The JEC units are
also equipped with flue gas scrubbers providing additional sulfur dioxide and
particulate matter emission reduction capability.
The Kansas Department of Health and Environment regulations, applicable to
the Company's other generating facilities, prohibit the emission of more than
3.0 pounds of sulfur dioxide per million Btu of heat input at the Company's
generating units. The Company has sufficient low sulfur coal under contract
(see Coal) to allow compliance with such limits at La Cygne 1. All facilities
burning coal are equipped with flue gas scrubbers and/or electrostatic
precipitators.
The Clean Air Act Amendments of 1990 (the Act) require a two-phase
reduction in sulfur dioxide and NOx emissions effective in 1995 and 2000 and a
probable
<PAGE> 9
reduction in toxic emissions. To meet the monitoring and reporting
requirements under the acid rain program, the Company installed continuous
monitoring and reporting equipment at a total cost of approximately $2.3
million. The Company does not expect additional equipment to reduce sulfur
emissions to be necessary under Phase II. Although the Company currently has
no Phase I affected units, the owners have applied for an early substitution
permit to bring the co-owned La Cygne Generating Station under the Phase I
regulations.
The NOx and toxic limits, which were not set in the law, will be specified
in future EPA regulations. NOx regulations for Phase II units and Phase I
group 2 units are mandated in the Act. The EPA's proposed NOx regulations
were ruled invalid by the U.S. Court of Appeals for the District of Columbia
Circuit in November 1994, and until such time as the EPA resubmits new
proposed regulations, the Company will be unable to determine its compliance
options or related compliance costs.
All of the Company's generating facilities are in substantial compliance
with the Best Practicable Technology and Best Available Technology regulations
issued by EPA pursuant to the Clean Water Act of 1977. Most EPA regulations
are administered in Kansas by the Kansas Department of Health and Environment.
Additional information with respect to Environmental Matters is discussed
in Note 3 of the Notes to Financial Statements.
FINANCING
The Company's ability to issue additional debt is restricted under
limitations imposed by the Mortgage and Deed of Trust of the Company.
The Company's mortgage prohibits additional first mortgage bonds from
being issued (except in connection with certain refundings) unless the
Company's net earnings before income taxes and before provision for retirement
and depreciation of property for a period of 12 consecutive months within 15
months preceding the issuance are not less than two and one-half times the
annual interest charges on, or 10% of the principal amount of, all first
mortgage bonds outstanding after giving effect to the proposed issuance.
Based on the Company's results for the 12 months ended December 31, 1994,
approximately $743 million principal amount of additional first mortgage bonds
could be issued (8.75 percent interest rate assumed).
KG&E bonds may be issued, subject to the restrictions in the preceding
paragraph, on the basis of property additions not subject to an unfunded prior
lien and on the basis of bonds which have been retired. As of December 31,
1994, the Company had approximately $1.3 billion of net bondable property
additions not subject to an unfunded prior lien entitling the Company to issue
up to $909 million principal amount of additional bonds.
REGULATION AND RATES
The Company is subject as an operating electric utility to the
jurisdiction of the KCC which has general regulatory authority over the
Company's rates, extensions and abandonments of service and facilities,
valuation of property, the classification of accounts and various other
matters. The Company is also
<PAGE> 10
subject to the jurisdiction of the FERC and the KCC with respect to the
issuance of the Company's securities.
Additionally, the Company is subject to the jurisdiction of the FERC,
including jurisdiction as to rates with respect to sales of electricity for
resale, and the Nuclear Regulatory Commission as to nuclear plant operations
and safety.
Additional information with respect to Regulation and Rates is discussed
in Notes 1 and 4 of the Notes to Financial Statements.
<PAGE> 11
EXECUTIVE OFFICERS OF THE COMPANY
Other Offices or Positions
Name Age Present Office Held During Past Five Years
Kent R. Brown 49 Chairman of the Board, Group Vice President
(since June 1992)
President and Chief
Executive Officer
(since March 1992)
Richard D. LaGree 64 Vice President, Field Vice President, Electric
Operations (since Distribution Operations,
April 1992) Western Resources, Inc.
Richard D. Terrill 40 Secretary, Treasurer Secretary and Attorney
and General Counsel
(since April 1992)
Executive officers serve at the pleasure of the Board of Directors. There are
no family relationships among any of the officers, nor any arrangements or
understandings between any officer and other persons pursuant to which he/she
was appointed as an officer.
<PAGE> 12
ITEM 2. PROPERTIES
The Company owns or leases and operates an electric generation,
transmission, and distribution system in Kansas.
During the five years ended December 31, 1994, the Company's gross
property additions totalled $358,486,000 and retirements were $130,238,000.
ELECTRIC FACILITIES
Unit Year Principal Unit Capacity
Name No. Installed Fuel (MW) (2)
Gordon Evans Energy Center:
Steam Turbines 1 1961 Gas--Oil 150
2 1967 Gas--Oil 367
Jeffrey Energy Center (20%):
Steam Turbines 1 1978 Coal 140
2 1980 Coal 143
3 1983 Coal 140
La Cygne Station (50%):
Steam Turbines 1 1973 Coal 343
2 1977 Coal 335
Murray Gill Energy Center:
Steam Turbines 1 1952 Gas--Oil 46
2 1954 Gas--Oil 74
3 1956 Gas--Oil 107
4 1959 Gas--Oil 105
Neosho Energy Center:
Steam Turbine 3 1954 Gas--Oil 0 (1)
Wichita Plant:
Diesel Generator 5 1969 Diesel 3
Wolf Creek Generating Station (47%):
Nuclear 1 1985 Uranium 545
-----
Total 2,498
(1) This unit has been "mothballed" for future use.
(2) Based on MOKAN rating.
The Company jointly-owns Jeffrey Energy Center (20%), La Cygne Station
(50%)
and Wolf Creek Generating Station (47%).
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS
Information on legal proceedings involving the Company is set forth in
Note 10 of Notes to Financial Statements included herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information required by Item 4 is omitted pursuant to General Instruction
J(2)(c) to Form 10-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On March 31, 1992, Western Resources through its wholly-owned subsidiary
KCA, acquired all of the outstanding common and preferred stock of KG&E. As a
result, the Company's common stock was delisted from the New York Stock
Exchange and the Pacific Stock Exchange.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
1994 1993 1992 1991 1990(1)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenues . . . . . . . $ 619,880 $ 616,997 $ 554,251 $ 594,968 $ 586,641
Operating expenses . . . . . . . 470,869 469,616 424,089 468,885 447,355
Operating income . . . . . . . . 149,011 147,381 130,162 126,083 139,286
Net income . . . . . . . . . . . 104,526 108,103 77,981 53,602 64,184
Balance Sheet Data:
Gross electric plant in service. $3,390,406 $3,339,832 $3,293,365 $2,468,959 $2,435,090
Construction work in progress. . 32,874 28,436 29,634 13,612 14,760
Total assets . . . . . . . . . . 3,142,810 3,187,479 3,279,232 2,350,546 2,348,862
Long-term debt . . . . . . . . . 699,992 653,543 871,652 850,851 824,424
Interest coverage ratio (before
income taxes, including
AFUDC) . . . . . . . . . . . . 4.02 3.58 2.35 1.90 2.07
Ratio of Earnings to Fixed Charges 2.61 2.60 1.89 1.59 1.71
(1) See Note 1 of the Notes to Financial Statements for impact of rate refund orders.
</TABLE>
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The results of operations for the years ended December 31, 1994 and 1993,
and the nine months ended December 31, 1992, included herein, refer to the
Company following the merger with Western Resources, Inc. (formerly The Kansas
Power and Light Company) through its wholly-owned subsidiary, KCA Corporation,
on March 31,
1992 (the Merger) (see Note 1).
Pro forma results of operations for the twelve months ended December 31,
1992 presented herein, give effect to the Merger as if it occurred on January
1, 1992 and were derived by combining the historical information for the three
month period ended March 31, 1992 and the nine month period ended December 31,
1992. Additional information relating to changes between years is provided in
the Notes to Financial Statements.
GENERAL: The Company had net income of $104.5 million for 1994 compared
to net income of $108.1 million in 1993. The decrease in net income is
primarily due to increases in income taxes as a result of the completion of
the accelerated amortization of certain deferred income tax reserves and the
receipt of death benefit proceeds from corporate-owned life insurance policies
in the third quarter of 1993. As of December 31, 1993, the Company had fully
amortized the deferred income tax reserves related to the allowance for funds
used during construction capitalized for Wolf Creek Generating Station (Wolf
Creek). The completion of the amortization of these deferred income tax
reserves increased income tax expense and thereby reduced net income by
approximately $12 million in 1994, and in the future will reduce net income by
this same amount each year.
LIQUIDITY AND CAPITAL RESOURCES: The Company's liquidity is a function of
its ongoing construction program, designed to improve facilities which provide
electric service and meet future customer service requirements.
During 1994, construction expenditures for the Company's electric system
were approximately $69 million and nuclear fuel expenditures were
approximately $21 million. It is projected that adequate capacity margins
will be maintained through the turn of the century. The construction program
is focused on providing service to new customers and improving present
electric facilities.
Capital expenditures for 1995 through 1997 are anticipated to be as
follows:
Electric Nuclear Fuel
(Dollars in Thousands)
1995. . . . . . . . . . $53,961 $ 21,400
1996. . . . . . . . . . 47,388 8,100
1997. . . . . . . . . . 42,453 24,000
These expenditures are estimates prepared for planning purposes and are
subject to revisions from time to time.
<PAGE> 15
The Company's net cash flows to capital expenditures exceeded 100 percent
for 1994 and during the last five years has also averaged in excess of 100
percent. The Company anticipates all of its cash requirements for capital
expenditures through 1997 will be provided from net cash flows. The Company
also has $16 million of bonds maturing through 1999 which will be provided
from internal and external sources available under then existing financial
conditions.
During 1994, the Company continued to take advantage of favorable long-
term interest rates by refinancing long-term debt issues. The embedded cost
of long-term debt was 7.3% at December 31, 1994, a decrease from 7.7% at
December 31, 1993.
On January 20, 1994, the Company issued $100 million of First Mortgage
Bonds, 6.20% Series due January 15, 2006. The net proceeds were used to
reduce short-term debt.
On February, 17, 1994, the Company refinanced the City of La Cygne,
Kansas, 5 3/4% Pollution Control Revenue Refunding Bonds Series 1973,
$13,980,000 principal amount, with 5.10% Pollution Control Revenue Refunding
Bonds Series 1994, $13,982,500 principal amount, due 2023.
On April 28, 1994, three series of Market-Adjusted Tax Exempt Securities
totalling $46.4 million were sold on behalf of the Company at a rate of 2.95%
for the initial auction period. The interest rates are being reset
periodically via an auction process. As of December 31, 1994, the rate on
these bonds was 4.10%. The net proceeds from the new issues, together with
available cash, were used to refund three series of Pollution Control Bonds
totalling $46.4 million bearing interest rates between 5 7/8% and 6.8%.
On November 1, 1994, the Company terminated a long-term agreement which
contained provisions for the sale of accounts receivable and unbilled
revenues, and phase-in revenues (see Note 6).
In 1986, the Company purchased corporate-owned life insurance policies
(COLI) on certain of its employees. The annual cash outflow for the premiums
on these policies from 1992 through 1994 was approximately $27 million. See
Note 2 of the Notes to Financial Statements for additional information on the
accumulated cash surrender value. The borrowings are expected to produce
annual cash inflows, net of expenses, through the remaining life of the
policies. Borrowings against the policies will be repaid from death proceeds.
The Company's short-term financing requirements are satisfied, as needed,
through short-term bank loans and borrowings under other unsecured lines of
credit maintained with banks. At December 31, 1994, short-term borrowings
amounted to $50 million compared to $155.8 million at December 31, 1993. The
decrease is primarily the result of the issuance of the $100 million of bonds
on January 20, 1994 (see Note 5).
The KG&E common and preferred stock was redeemed in connection with the
Merger, leaving 1,000 shares of common stock held by Western Resources. The
debt structure of the Company and available sources of funds were not affected
by the Merger.
<PAGE> 16
The Company's capital structure at December 31, 1994, was 64 percent
common stock equity and 36 percent long-term debt. The capital structure at
December 31, 1994, including short-term debt was 62 percent common stock
equity and 38 percent debt. As of December 31, 1994, the Company's bonds were
rated "A3" by Moody's Investors Service, "A-" by Standard & Poor's Ratings
Group, and "A-" by Fitch Investors Service.
RESULTS OF OPERATIONS
The following is an explanation of significant variations from prior year
results in revenues, operating expenses, other income and deductions, and
interest charges. Additional information relating to changes between years is
provided in the Notes to Financial Statements.
REVENUES
The operating revenues of the Company are based on sales volumes and rates
authorized by the Kansas Corporation Commission (KCC) and the Federal Energy
Regulatory Commission (FERC). Rates charged for the sale and delivery of
electricity are designed to recover the cost of service and allow investors a
fair rate of return. Future electric sales will continue to be affected by
weather conditions, competition from other generating sources, competing fuel
sources, customer conservation efforts and the overall economy of the
Company's service area.
The KCC order approving the Merger provided a moratorium on increases,
with certain exceptions, in the Company's electric rates until August 1995.
The KCC ordered refunds totalling $32 million to the combined companies'
(Western Resources and the Company) customers to share with customers the
Merger-related cost savings achieved during the moratorium period. Refunds of
approximately $4.9 (Company's portion) million were made in April 1992 and
December 1993 and the remaining refund of approximately $8.7 million
(Company's portion) was made in September 1994 (see Note 1).
On March 26, 1992, in connection with the Merger, the KCC approved the
elimination of the Energy Cost Adjustment Clause (ECA) for most retail
customers of the Company effective April 1, 1992. The fuel costs are now
included in base rates and were established at a level intended by the KCC to
equal the projected average cost of fuel through August 1995. Any increase or
decrease in fuel costs from the projected average will impact the Company's
earnings.
1994 Compared to 1993: Total operating revenues for 1994 of $619.9
million increased less than one percent from revenues of $617.0 million for
1993. The increase can be attributed to higher revenues in all retail
customer classes. While residential sales remained virtually unchanged,
commercial and industrial sales increased over two percent during 1994.
Partially offsetting these increases was a 21 percent decrease in wholesale
and interchange sales as a result of higher than normal sales in 1993 to other
utilities while their generating units were down due to the flooding of 1993.
<PAGE> 17
1993 Compared to 1992: Total operating revenues increased $62.7 million
or 11 percent in 1993 compared to 1992 pro forma revenues. The increase is
due to the return of near normal temperatures during 1993 compared to
unusually mild winter and summer temperatures in 1992. All customer classes
experienced increased sales volumes during 1993. The number of cooling degree
days recorded for the city of Wichita were 1,546 for 1993, a 23 percent
increase from 1992. Contributing to the increase in wholesale sales were
sales to neighboring utilities to meet peak demand periods while those
utilities' units were down as a result of the summer flooding.
Partially offsetting these increases in revenues was the amortization of
the Merger-related refund.
OPERATING EXPENSES
1994 Compared to 1993: Total operating expenses for 1994 of $470.9
million increased slightly from total operating expenses of $469.6 million for
1993. Federal and state income taxes increased $13.5 million and maintenance
expense increased three percent primarily as a result of the major boiler
overhaul of the Company's coal fired La Cygne 1 generating station.
The increase in income tax expense was due to the completion at December
31, 1993, of the accelerated amortization of deferred income tax reserves
related to the allowance for borrowed funds used during construction
capitalized for Wolf Creek. The completion of the amortization of these
deferred income tax reserves increased income tax expense and thereby reduced
net income by approximately $12 million in 1994, and in the future will reduce
net income by this same amount each year.
Partially offsetting the increases in total operating expenses were lower
fuel costs, due to decreased electric generation during 1994, and lower other
operations expense.
1993 Compared to 1992: Total operating expenses increased $45.5 million
or 11 percent in 1993 compared to 1992. Fuel and purchased power expenses
increased $21.4 million or 23 percent primarily due to increased generation
resulting from increased customer demand for electricity during the summer
peak season. Federal and state income taxes increased $28.6 million primarily
as a result of higher net income. General taxes increased $4.8 million
primarily due to an increase in plant, the property tax assessment ratio, and
higher mill levies.
Partially offsetting these increases in total operating expenses was a
decrease in other operations expense of $10.1 million primarily as a result of
merger-related savings for the entire year of 1993 and reduced net lease
expense for La Cygne 2 resulting from refinancing of the secured facility
bonds (see Note 7) compared to pro forma operating expenses of 1992.
<PAGE> 18
OTHER INCOME AND DEDUCTIONS: Other income and deductions, net of taxes,
decreased significantly in 1994 compared to 1993 primarily as a result of
increased interest expense on higher COLI borrowings. Interest on COLI
borrowings increased $9.1 million in 1994 compared to 1993. Also contributing
to the decrease was the receipt of death benefit proceeds from COLI policies
in the third quarter of 1993.
Other income and deductions, net of taxes, increased slightly in 1993
compared to 1992 due to the increased cash surrender values of COLI policies
and the receipt of death benefit proceeds. Partially offsetting these
increases was higher interest expense on COLI borrowings.
INTEREST CHARGES: Interest charges decreased 12 percent in 1994 compared
to 1993 primarily as a result of the refinancing of higher cost fixed-rate
debt. Also accounting for the decrease was the impact of increased COLI
borrowings which reduce the need for other long-term debt and thereby reduced
interest expense. COLI interest is reflected in Other Income and Deductions
on the Income Statement. The Company's embedded cost of long-term debt
decreased to 7.3% at December 31, 1994 compared to 7.7% and 7.8% at December
31, 1993 and 1992, respectively.
Interest charges decreased $12.4 million in 1993 compared to 1992 as the
Company continued to take advantage of lower interest rates on variable-rate
and fixed-rate debt by retiring and refinancing higher cost debt.
MERGER IMPLEMENTATION: In accordance with the KCC Merger order,
amortization of the acquisition adjustment will commence August 1995. The
amortization will amount to approximately $20 million (pre-tax) per year for
40 years. Western Resources and the Company (combined companies) can recover
the amortization of the acquisition adjustment through cost savings under a
sharing mechanism approved by the KCC as described in Note 1 of the Notes to
the Financial Statements. While the combined companies have achieved savings
from the Merger, there is no assurance that the savings achieved will be
sufficient to, or the cost savings sharing mechanism will operate as to, fully
offset the amortization of the acquisition adjustment.
OTHER INFORMATION
INFLATION: Under the ratemaking procedures prescribed by the regulatory
commissions to which the Company is subject, only the original cost of plant
is recoverable in revenues as depreciation. Therefore, because of inflation,
present and future depreciation provisions are inadequate for purposes of
maintaining the purchasing power invested by common shareholders and the
related cash flows are inadequate for replacing property. The impact of this
ratemaking process on common shareholders is mitigated to the extent
depreciable property is financed with debt that can be repaid with dollars of
less purchasing power. While the Company has experienced relatively low
inflation in the recent past, the cumulative effect of inflation on operating
costs may require the Company to seek regulatory rate relief to recover these
higher costs.
ENVIRONMENTAL: The Company has taken a proactive position with respect to
the potential environmental liability associated with former manufactured gas
sites and has an agreement with the Kansas Department of Health and
Environment (KDHE) to systematically evaluate these sites (see Note 3).
<PAGE> 19
Although the Company currently has no Phase I affected units under the
Clean Air Act of 1990, the Company has applied for an early substitution
permit to bring the co-owned La Cygne Station under the Phase I guidelines.
The oxides of nitrogen (NOx) and air toxic limits, which were not set in law,
will be specified in future Environmental Protection Agency (EPA) regulations.
The EPA's proposed NOx regulations were ruled invalid by the U.S. Court of
Appeals for the District of Columbia Circuit in November 1994, and until such
time as the EPA resubmits new proposed regulations, the Company will be unable
to determine its compliance options or related compliance costs (see Note 3).
COMPETITION: As a regulated utility, the Company currently has limited
direct competition for retail electric service in its certified service area.
However, there is competition, based largely on price, from the generation, or
potential generation, of electricity by large commercial and industrial
customers, and independent power producers.
The 1992 Energy Policy Act (Act) requires increased efficiency of energy
usage and has effected the way electricity is marketed. The Act also provides
for increased competition in the wholesale electric market by permitting the
FERC to order third party access to utilities' transmission systems and by
liberalizing the rules for ownership of generating facilities. As part of the
Merger, the Company agreed to open access of its transmission system for
wholesale transactions. During 1994, wholesale revenues represented less than
seven percent of the Company's total revenues.
Operating in this competitive environment could place pressure on utility
profit margins and credit quality. Wholesale and industrial customers may
threaten to pursue cogeneration, self-generation, retail wheeling,
municipalization or relocation to other service territories in an attempt to
obtain reduced energy costs. Increasing competition has resulted in credit
rating agencies applying more stringent guidelines when making utility credit
rating determinations.
The Company is providing reduced electric rates for industrial expansion
projects and economic development projects in an effort to maintain and
increase electric load. In 1994, The Boeing Company announced it would
develop its 777 jetliner in Wichita and Cessna Aircraft Company announced it
would build a production plant in Independence, Kansas along with expanding
its Wichita facilities, with an addition of 2,000 jobs.
In order to retain its current electric load, the Company has and will
continue to negotiate with some of its larger industrial customers, who are
able to develop cogeneration facilities, for long term contracts although some
negotiated rates may result in reduced margins for the Company. During 1996,
the Company will lose a major industrial customer to cogeneration resulting in
a reduction to pre-tax earnings of approximately $7 to $8 million. This
customer's decision to develop its own cogeneration project was based
partially on factors other than energy cost.
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS PAGE
Report of Independent Public Accountants 21
Financial Statements:
Balance Sheets, December 31, 1994 and 1993 23
Statements of Income for the year ended December 31, 1994 24
and 1993 (Successor), the nine months ended December 31, 1992
(Successor), and the three months ended March 31, 1992
(Predecessor)
Statements of Cash Flows for the years ended December 31, 1994 25
and 1993 (Successor), the period March 31 to December 31, 1992
(Successor), and the three months ended March 31, 1992
(Predecessor)
Statements of Taxes for the years ended December 31, 1994 26
and 1993 (Successor), the nine months ended December 31, 1992
(Successor), and the three months ended March 31, 1992
(Predecessor)
Statements of Capitalization, December 31, 1994 and 1993 27
Statements of Common Stock Equity for the years ended 28
December 31, 1994 and 1993 (Successor), the nine months ended
December 31, 1992 (Successor), and the three months ended
March 31, 1992 (Predecessor)
Notes to Financial Statements 29
SCHEDULES OMITTED
The following schedules are omitted because of the absence of the
conditions under which they are required or the information is included
in the financial statements and schedules presented:
I, II, III, IV, and V.
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Kansas Gas and Electric Company:
We have audited the accompanying balance sheets and statements of
capitalization of Kansas Gas and Electric Company (a wholly-owned subsidiary
of Western Resources, Inc.) as of December 31, 1994 and 1993, and the related
statements of income, cash flows, taxes, and common stock equity for the years
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance 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 Kansas Gas and Electric
Company as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
As explained in Note 8 to the financial statements, effective January 1, 1993,
the Company changed its method of accounting for postretirement benefits.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
January 25, 1995
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
Kansas Gas and Electric Company:
We have audited the 1992 financial statements of Kansas Gas and Electric
Company (a wholly-owned subsidiary of Western Resources, Inc.) listed in the
accompanying table of contents. 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.
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 financial statements present fairly, in all material
respects, the results of the Company's operations and its cash flows for the
periods indicated in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
January 29, 1993
<PAGE> 23
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
ASSETS
UTILITY PLANT:
Electric plant in service (Notes 2 and 12). . . . . . . . $3,390,406 $3,339,832
Less - Accumulated depreciation . . . . . . . . . . . . . 833,953 790,843
---------- ----------
2,556,453 2,548,989
Construction work in progress . . . . . . . . . . . . . . 32,874 28,436
Nuclear fuel (net). . . . . . . . . . . . . . . . . . . . 39,890 29,271
---------- ----------
Net utility plant . . . . . . . . . . . . . . . . . . . 2,629,217 2,606,696
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Decommissioning trust (Note 3). . . . . . . . . . . . . . 16,944 13,204
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 11,561 10,941
---------- ----------
28,505 24,145
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents (Note 2). . . . . . . . . . . . 47 63
Accounts receivable and unbilled revenues (net)(Note 6) . 67,833 11,112
Advances to parent company (Note 14). . . . . . . . . . . 64,393 192,792
Fossil fuel, at average cost, . . . . . . . . . . . . . . 13,752 7,594
Materials and supplies, at average cost . . . . . . . . . 30,921 29,933
Prepayments and other current assets. . . . . . . . . . . 16,662 14,995
---------- ----------
193,608 256,489
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Deferred future income taxes (Note 9) . . . . . . . . . . 102,789 102,789
Deferred coal contract settlement costs (Note 4). . . . . 17,944 21,247
Phase-in revenues (Note 4). . . . . . . . . . . . . . . . 61,406 78,950
Other deferred plant costs. . . . . . . . . . . . . . . . 31,784 32,008
Corporate-owned life insurance (net) (Note 2) . . . . . . 9,350 45
Unamortized debt expense. . . . . . . . . . . . . . . . . 27,777 27,365
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 40,430 37,745
---------- ----------
291,480 300,149
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $3,142,810 $3,187,479
========== ==========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION (see Statements) . . . . . . . . . . . . . . $1,925,196 $1,899,221
---------- ----------
CURRENT LIABILITIES:
Short-term debt (Note 5). . . . . . . . . . . . . . . . . 50,000 155,800
Long-term debt due within one year (Note 6) . . . . . . . - 238
Accounts payable. . . . . . . . . . . . . . . . . . . . . 49,093 51,095
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 15,737 12,185
Accrued interest. . . . . . . . . . . . . . . . . . . . . 8,337 7,381
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 11,160 9,427
---------- ----------
134,327 236,126
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes (Notes 1 and 9) . . . . . . . . . . 689,169 646,159
Deferred investment tax credits (Note 9). . . . . . . . . 74,841 78,048
Deferred gain from sale-leaseback (Note 7). . . . . . . . 252,341 261,981
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 66,936 65,944
---------- ----------
1,083,287 1,052,132
COMMITMENTS AND CONTINGENCIES (Notes 3 and 10) ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . . . . $3,142,810 $3,187,479
========== ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 24
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME
(Dollars in Thousands)
<CAPTION>
Year Ended December 31,
1992
Pro Forma April 1 | January 1
1994 1993 1992 to Dec. 31 | to March 31
(Successor) |(Predecessor)
<S> <C> <C> <C> <C> | <C>
OPERATING REVENUES (Notes 2 and 4). . . . $ 619,880 $ 616,997 $ 554,251 $ 423,538 | $ 130,713
|
OPERATING EXPENSES: |
Fuel used for generation: |
Fossil fuel . . . . . . . . . . . . . 90,383 93,388 73,785 53,701 | 20,084
Nuclear fuel. . . . . . . . . . . . . 13,562 13,275 12,558 10,126 | 2,432
Power purchased . . . . . . . . . . . . 7,144 9,864 8,746 3,207 | 5,539
Other operations. . . . . . . . . . . . 115,060 118,948 129,083 91,436 | 37,647
Maintenance . . . . . . . . . . . . . . 47,988 46,740 46,702 35,956 | 10,746
Depreciation and amortization . . . . . 71,457 75,530 74,696 55,547 | 19,149
Amortization of phase-in revenues . . . 17,544 17,545 17,544 13,158 | 4,386
Taxes (see Statements): |
Federal income. . . . . . . . . . . . 50,212 39,553 16,305 17,523 | (1,218)
State income . . . . . . . . . . . . 12,427 9,570 4,264 4,732 | (468)
General . . . . . . . . . . . . . . . 45,092 45,203 40,406 30,155 | 10,251
--------- --------- --------- --------- | ---------
Total operating expenses. . . . . . 470,869 469,616 424,089 315,541 | 108,548
--------- --------- --------- --------- | ---------
OPERATING INCOME. . . . . . . . . . . . . 149,011 147,381 130,162 107,997 | 22,165
--------- --------- --------- --------- | ---------
OTHER INCOME AND DEDUCTIONS: |
Corporate-owned life insurance (net). . (5,354) 7,841 10,724 9,308 | 1,416
Miscellaneous (net) . . . . . . . . . . 5,079 9,271 7,873 9,417 | (1,544)
Income taxes (net) (see Statements) . . 7,290 2,227 191 (1,296) | 1,487
--------- --------- --------- --------- | ---------
Total other income and deductions . 7,015 19,339 18,788 17,429 | 1,359
--------- --------- --------- --------- | ---------
INCOME BEFORE INTEREST CHARGES. . . . . . 156,026 166,720 148,950 125,426 | 23,524
--------- --------- --------- --------- | ---------
INTEREST CHARGES: |
Long-term debt. . . . . . . . . . . . . 47,827 53,908 57,862 42,889 | 14,973
Other . . . . . . . . . . . . . . . . . 5,183 6,075 15,121 11,777 | 3,344
Allowance for borrowed funds used |
during construction (credit). . . . . (1,510) (1,366) (2,014) (1,181) | (833)
--------- --------- --------- --------- | ---------
Total interest charges. . . . . . . 51,500 58,617 70,969 53,485 | 17,484
--------- --------- --------- --------- | ---------
NET INCOME. . . . . . . . . . . . . . . . 104,526 108,103 77,981 71,941 | 6,040
|
PREFERRED DIVIDENDS . . . . . . . . . . . - - - - | 205
--------- --------- --------- --------- | ---------
EARNINGS APPLICABLE TO COMMON STOCK . . . $ 104,526 $ 108,103 $ 77,981 $ 71,941 | $ 5,835
========= ========= ========= ========= | =========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 25
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
Year Ended December 31,
1992
March 31 | January 1
1994 1993 to Dec. 31 | to March 31
(Successor) | (Predecessor)
<S> <C> <C> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income. . . . . . . . . . . . . . . . . . . . . . $ 104,526 $ 108,103 $ 71,941 | $ 6,040
Depreciation and amortization . . . . . . . . . . . . 71,457 75,530 55,547 | 19,149
Other amortization (including nuclear fuel) . . . . . 10,905 11,254 8,930 | 1,352
Deferred taxes and investment tax credits (net) . . . 25,349 22,572 9,326 | (2,851)
Amortization of phase-in revenues . . . . . . . . . . 17,544 17,545 13,158 | 4,386
Corporate-owned life insurance. . . . . . . . . . . . (17,246) (21,650) (14,704) | (3,295)
Amortization of gain from sale-leaseback. . . . . . . (9,640) (9,640) (7,231) | (2,409)
Changes in working capital items: |
Accounts receivable and unbilled |
revenues (net) (Note 2) . . . . . . . . . . . . . (56,721) (569) 1,079 | 1,272
Fossil fuel . . . . . . . . . . . . . . . . . . . . (6,158) 8,507 4,425 | (1,858)
Accounts payable. . . . . . . . . . . . . . . . . . (2,002) (9,813) (7,216) | (6,100)
Interest and taxes accrued. . . . . . . . . . . . . 4,508 (9,053) (14,345) | 10,598
Other . . . . . . . . . . . . . . . . . . . . . . . (922) (2,191) (8,456) | 1,689
Changes in other assets and liabilities . . . . . . . (11,181) (16,530) (41,402) | (5,479)
--------- --------- --------- | ---------
Net cash flows from operating activities. . . . . 130,419 174,065 71,052 | 22,494
--------- --------- --------- | ---------
CASH FLOWS USED IN INVESTING ACTIVITIES: |
Additions to utility plant. . . . . . . . . . . . . . 89,880 66,886 53,138 | 11,496
Corporate-owned life insurance policies . . . . . . . 26,418 27,268 20,233 | 6,802
Death proceeds of corporate-owned life insurance. . . - (10,160) (6,789) | -
Other investments . . . . . . . . . . . . . . . . . . - - - | (552)
Merger: |
Purchase of KG&E common stock-net of cash received. - - 432,043 | -
Purchase of KG&E preferred stock. . . . . . . . . . - - 19,665 | -
--------- --------- --------- | ---------
Net cash flows used in investing activities . . . 116,298 83,994 518,290 | 17,746
--------- --------- --------- | ---------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Short-term debt (net) . . . . . . . . . . . . . . . . (105,800) 62,300 49,900 | 5,800
Advances to parent company (net). . . . . . . . . . . 128,399 (118,503) (74,289) | -
Bonds issued. . . . . . . . . . . . . . . . . . . . . 160,422 65,000 135,000 | -
Bonds retired . . . . . . . . . . . . . . . . . . . . (46,440) (140,000) (125,000) | -
Other long-term debt (net). . . . . . . . . . . . . . (67,893) 7,043 14,498 | (3,810)
Borrowings against life insurance policies (net). . . 42,175 183,260 (5,649) | 6,398
Revolving credit agreement (net). . . . . . . . . . . - (150,000) - | -
Other (net) . . . . . . . . . . . . . . . . . . . . . - - - | (17)
Dividends to parent company . . . . . . . . . . . . . (125,000) - - | -
Dividends on preferred and common stock . . . . . . . - - - | (13,535)
Issuance of KCA common stock. . . . . . . . . . . . . - - 453,670 | -
--------- --------- --------- | ---------
Net cash flows from (used in) financing activities (14,137) (90,900) 448,130 | (5,164)
--------- --------- --------- | ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . (16) (829) 892 | (416)
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD. . . . 63 892 - | 2,378
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . $ 47 $ 63 $ 892 | $ 1,962
========= ========= ========= | =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
CASH PAID FOR: |
Interest on financing activities (net of amount |
capitalized) . . . . . . . . . . . . . . . . . . $ 68,544 $ 77,653 $ 63,451 | $ 11,635
Income taxes . . . . . . . . . . . . . . . . . . . . 28,509 29,354 14,225 | -
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 26
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF TAXES
(Dollars in Thousands)
<CAPTION>
Year Ended December 31,
1992
April 1 | January 1
1994 1993 to Dec. 31 | to March 31
(Successor) | (Predecessor)
<S> <C> <C> <C> | <C>
FEDERAL INCOME TAXES: |
Payable currently . . . . . . . . . . . . . . . . . $ 24,427 $ 19,220 $ 11,356 | $ (322)
Deferred (net). . . . . . . . . . . . . . . . . . . 23,002 16,691 8,633 | (1,785)
Investment tax credit-Deferral. . . . . . . . . . . - 4,900 946 | -
-Amortization. . . . . . . . . (3,208) (3,114) (2,400) | (777)
--------- --------- --------- | ---------
Total Federal income taxes . . . . . . . . . . . 44,221 37,697 18,535 | (2,884)
Less: |
Federal income taxes applicable |
to non-operating items . . . . . . . . . . . . . (5,991) (1,856) 1,012 | (1,666)
--------- --------- --------- | ---------
Total Federal income taxes charged to operations. . 50,212 39,553 17,523 | (1,218)
--------- --------- --------- | ---------
STATE INCOME TAXES: |
Payable currently . . . . . . . . . . . . . . . . . 5,574 5,104 2,869 | -
Deferred (net). . . . . . . . . . . . . . . . . . . 5,554 4,095 2,147 | (289)
--------- --------- --------- | ---------
Total State income taxes . . . . . . . . . . . . 11,128 9,199 5,016 | (289)
Less: |
State income taxes applicable |
to non-operating items . . . . . . . . . . . . . (1,299) (371) 284 | 179
--------- --------- --------- | ---------
Total State income taxes charged to operations. . . 12,427 9,570 4,732 | (468)
--------- --------- --------- | ---------
GENERAL TAXES: |
Property. . . . . . . . . . . . . . . . . . . . . . 40,104 38,432 26,380 | 8,622
Payroll and other taxes . . . . . . . . . . . . . . 4,988 6,771 3,775 | 1,629
--------- --------- --------- | ---------
Total general taxes charged to operations. . . . 45,092 45,203 30,155 | 10,251
--------- --------- --------- | ---------
TOTAL TAXES CHARGED TO OPERATIONS . . . . . . . . . . $ 107,731 $ 94,326 $ 52,410 | $ 8,565
========= ========= ========= | =========
Year Ended December 31,
Pro Forma
1994 1993 1992
EFFECTIVE INCOME TAX RATE . . . . . . . . . . . . . . 35% 30% 21%
Effect of:
Additional depreciation . . . . . . . . . . . . . . (1) (3) (4)
Accelerated amortization of deferred income
tax credits. . . . . . . . . . . . . . . . . . - 8 11
State income taxes, net of Federal benefit. . . . . (5) (4) (2)
Amortization of investment tax credits. . . . . . . 2 2 2
Corporate-owned life insurance. . . . . . . . . . . 4 5 6
Other items (net) . . . . . . . . . . . . . . . . . - (3) -
---- ---- ----
STATUTORY FEDERAL INCOME TAX RATE . . . . . . . . . . 35% 35% 34%
==== ==== ====
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 27
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
(Dollars in Thousands)
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
COMMON STOCK EQUITY (Note 1):
(see Statements)
Common stock, without par value, authorized and issued
1,000 shares. . . . . . . . . . . . . . . . . . . . . . . $1,065,634 $1,065,634
Retained earnings . . . . . . . . . . . . . . . . . . . . . 159,570 180,044
---------- ----------
Total common stock equity . . . . . . . . . . . . . . . . 1,225,204 64% 1,245,678 66%
</TABLE>
<TABLE>
LONG-TERM DEBT (Note 6):
First Mortgage Bonds:
<S> <C> <C> <C> <C> <C>
Series Due 1994 1993
5-5/8% 1996 $ 16,000 $ 16,000
7.6% 2003 135,000 135,000
6-1/2% 2005 65,000 65,000
6.20% 2006 100,000 -
316,000 216,000
Pollution Control Bonds:
6.80% 2004 - 14,500
5-7/8% 2007 - 21,940
6% 2007 - 10,000
5.10% 2023 13,982 -
Variable (a) 2027 21,940 -
7.0% 2031 327,500 327,500
Variable (a) 2032 14,500 -
Variable (a) 2032 10,000 -
387,922 373,940
---------- ----------
Total bonds. . . . . . . . . . . . . . . . . . . . . . 703,922 589,940
Other Long-Term Debt:
Pollution control obligations:
5-3/4% series 2003 - 13,980
Other long-term agreement 1995 - 53,913
------- -------
Total other long-term debt . . . . . . . . . . . . . . - 67,893
Less:
Unamortized premium and discount (net). . . . . . . . . . 3,930 4,052
Long-term debt due within one year. . . . . . . . . . . . - 238
---------- ----------
Total long-term debt . . . . . . . . . . . . . . . . . 699,992 36% 653,543 34%
---------- ----------
TOTAL CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . $1,925,196 100% $1,899,221 100%
========== ==========
(a) Market-Adjusted Tax Exempt Securities (MATES). The interest rate is reset
periodically via an auction process. As of December 31, 1994, the rate
on these bonds was 4.10%.
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 28
<TABLE>
KANSAS GAS AND ELECTRIC COMPANY
STATEMENTS OF COMMON STOCK EQUITY
(Thousands of Dollars, Except Shares)
Years Ended December 31,
<CAPTION>
Other
Common Stock Paid-in Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1991. . 40,997,745 $ 637,003 $ 284 $170,598 (9,996,426) $(199,255) $ 608,630
(Predecessor)
Net income . . . . . . . . 6,040 6,040
Cash dividends:
Common stock . . . . . . (13,330) (13,330)
Preferred stock. . . . . (205) (205)
Employee stock plans . . . (12) (966) (12)
Merger of KG&E with KCA. . (40,997,745) (636,991) (284) (163,103) 9,997,392 199,255 (601,123)
----------- ---------- ------ --------- ---------- --------- ----------
BALANCE MARCH 31, 1992
(Predecessor). . . . . . . -0- -0- -0- -0- -0- -0- -0-
=========== ========== ====== ========= ========== ========= ==========
KCA common stock issued. . 1,000 $1,065,634 $ - $ - - $ - $1,065,634
Net income . . . . . . . . 71,941 71,941
----------- ---------- ------ --------- ---------- --------- ----------
BALANCE DECEMBER 31, 1992. . 1,000 1,065,634 - 71,941 - - 1,137,575
(Successor)
Net income . . . . . . . . 108,103 108,103
----------- ---------- ------ --------- ---------- --------- ----------
BALANCE DECEMBER 31, 1993. . 1,000 1,065,634 - 180,044 - - 1,245,678
----------- ---------- ------ --------- ---------- --------- ----------
Net income . . . . . . . . 104,526 104,526
Dividend to parent company (125,000) (125,000)
----------- ---------- ------ --------- ---------- --------- ----------
BALANCE DECEMBER 31, 1994. . 1,000 $1,065,634 $ - $ 159,570 - $ - $1,225,204
=========== ========== ====== ========= ========== ========= ==========
The NOTES TO FINANCIAL STATEMENTS are an integral part of these statements.
</TABLE>
<PAGE> 29
KANSAS GAS AND ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ACQUISITION AND MERGER
On March 31, 1992, Western Resources, Inc. (formerly The Kansas Power and
Light Company) (Western Resources) through its wholly-owned subsidiary KCA
Corporation (KCA), acquired all of the outstanding common and preferred stock
of Kansas Gas and Electric Company (KG&E) for $454 million in cash and
23,479,380 shares of Western Resources common stock (the Merger). Western
Resources also paid $20 million in costs to complete the Merger. The total
cost of the acquisition to Western Resources was $1.066 billion.
Simultaneously, KCA and KG&E merged and adopted the name of Kansas Gas and
Electric Company. The Merger was accounted for as a purchase. For income tax
purposes the tax basis of the Company's assets was not changed by the Merger.
In the accompanying statements, KG&E prior to the Merger is labeled as the
"Predecessor" and after the Merger as the "Successor". Throughout the notes
to financial statements, the "Company, KG&E" refers to both Predecessor and
Successor.
As Western Resources acquired 100% of the common and preferred stock of
KG&E, the Company recorded an acquisition premium of $490 million on the
balance sheet for the difference in purchase price and book value and
increased common stock equity to reflect the new cost basis of Western
Resources' investment in the Company. This acquisition premium and related
income tax requirement of $311 million under Statement of Financial Accounting
Standards No. 109 (SFAS 109) have been classified as plant acquisition
adjustment in electric plant in service on the balance sheets. Under the
provisions of the order of the Kansas Corporation Commission (KCC), the
acquisition premium is recorded as an acquisition adjustment and not allocated
to the other assets and liabilities of the Company.
The pro forma information for the year ended December 31, 1992 in the
accompanying financial statements gives effect to the Merger as if it occurred
on January 1, 1992, and was derived by combining the historical information
for the three month period ended March 31, 1992 and the nine month period
ended December 31, 1992. No purchase accounting adjustments were made for
periods prior to the Merger in determining pro forma amounts, other than the
elimination of preferred dividends, because such adjustments would be
immaterial. This pro forma information is not necessarily indicative of the
results of operations that would have occurred had the Merger been consummated
on January 1, 1992, nor is it necessarily indicative of future operating
results or financial position.
In the November 1991 KCC order approving the Merger, a mechanism was
approved to share equally between the shareholders and ratepayers the cost
savings generated by the Merger in excess of the revenue requirement needed to
allow recovery of the amortization of a portion of the acquisition adjustment,
including income tax, calculated on the basis of a purchase price of KG&E's
common stock at $29.50 per share. The order provides an amortization period
for the acquisition adjustment of 40 years commencing in August 1995, at which
time the full amount of cost savings is expected to have been implemented.
Merger savings will be measured by application of an inflation index to
certain pre-merger operating and maintenance costs at the time of the next
Kansas rate case. While Western Resources and the Company (combined
companies) have achieved savings from the Merger, there is no assurance that
the savings achieved will be sufficient to, or the cost savings sharing
<PAGE> 30
mechanism will operate as to fully offset the amortization of the acquisition
adjustment. The order further provides a moratorium on increases, with
certain exceptions, in the Company's Kansas electric rates until August 1995.
The KCC ordered refunds totalling $32 million to the combined companies'
customers to share with customers the Merger-related cost savings achieved
during the moratorium period. Refunds of approximately $4.9 (Company's share)
million for the Company were made in April 1992 and December 1993 and the
remaining refund of approximately $8.7 (Company's share )million was made in
September 1994.
The KCC order approving the Merger required the legal reorganization of
the Company so that it was no longer held as a separate subsidiary after
January 1, 1995, unless good cause was shown why such separate existence
should be maintained. The Securities and Exchange Commission order relating
to the Merger granted Western Resources an exemption under the Public Utility
Holding Company Act (PUHCA) until January 1, 1995. Western Resources has been
granted regulatory approval from the KCC which eliminates the requirement for
a combination. As a result of the sales of Western Resources' Missouri
Properties, Western Resources is now exempt from regulation as a holding
company under Section 3(a)(1) of the PUHCA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General: The financial statements of KG&E include, through March 31,
1992, its 80% owned subsidiary, CIC Systems, Inc. (CIC). In April 1992, the
Company disposed of its 80% interest in CIC. KG&E owns 47 percent of Wolf
Creek Nuclear Operating Corporation (WCNOC), the operating company for Wolf
Creek Generating Station (Wolf Creek). The Company records its proportionate
share of all transactions of WCNOC as it does other jointly-owned facilities.
The accounting policies of the Company are in accordance with generally
accepted accounting principles as applied to regulated public utilities. The
accounting and rates of the Company are subject to requirements of the KCC and
the Federal Energy Regulatory Commission (FERC).
Utility Plant: Utility plant (including plant acquisition adjustment) is
stated at cost. For constructed plant, cost includes contracted services,
direct labor and materials, indirect charges for engineering, supervision,
general and administrative costs, and an allowance for funds used during
construction (AFUDC). The AFUDC rate was 4.07% for 1994, 4.41% for 1993,
6.51% for the nine months ended December 31, 1992, and 6.70% for the three
months ended March 31, 1992. The cost of additions to utility plant and
replacement units of property is capitalized. Maintenance costs and
replacement of minor items of property are charged to expense as incurred.
When units of depreciable property are retired, they are removed from the
plant accounts and the original cost plus removal charges less salvage are
charged to accumulated depreciation.
Depreciation: Depreciation is provided on the straight-line method based
on estimated useful lives of property. Composite provisions for book
depreciation approximated 2.7% during 1994, 2.9% during 1993, 2.9% during the
nine months ended December 31, 1992, and 3.0% during the three months ended
March 31, 1992 of the average original cost of depreciable property.
<PAGE> 31
Cash and Cash Equivalents: For purposes of the Statements of Cash Flows,
cash and cash equivalents include cash on hand and highly liquid
collateralized debt instruments purchased with maturities of three months or
less.
Income Taxes: Income tax expense includes provisions for income taxes
currently payable and deferred income taxes calculated in conformance with
income tax laws, regulatory orders and Statement of Financial Accounting
Standards No. 109 (SFAS 109) (see Note 9).
Investment tax credits previously deferred are being amortized to income
over the life of the property which gave rise to the credits.
Revenues: Operating revenues include amounts actually billed for
services rendered and an accrual of estimated unbilled revenues. Unbilled
revenues represent the estimated amount customers will be billed for service
provided from the time meters were last read to the end of the accounting
period. Unbilled revenues of $21.4 and $22.3 million at December 31, 1994 and
1993, respectively, are recorded as a component of accounts receivable on the
balance sheets. At December 31, 1993, certain amounts of unbilled revenues
were sold (see Note 6).
The Company had reserves for doubtful accounts receivable of $1.9 and
$3.0 million at December 31, 1994 and 1993, respectively.
Fuel Costs: The cost of nuclear fuel in process of refinement,
conversion, enrichment, and fabrication is recorded as an asset at original
cost and is amortized to expense based upon the quantity of heat produced for
the generation of electricity. The accumulated amortization of nuclear fuel
in the reactor at December 31, 1994 and 1993, was $13.6 and $17.4 million,
respectively.
Cash Surrender Value of Life Insurance Contracts: The following amounts
related to corporate-owned life insurance contracts (COLI), primarily with one
highly rated major insurance company, are recorded on the balance sheets:
1994 1993
(Dollars in Millions)
Cash surrender value of contracts. . . $320.6 $269.0
Borrowings against contracts . . . . . 311.2 (269.0)
------ ------
COLI (net) . . . . . . . . . . . . $ 9.4 $ 0.0
====== ======
The COLI borrowings will be repaid upon receipt of proceeds from death
benefits under contracts. The Company recognizes increases in the cash
surrender value of contracts, resulting from premiums and investment earnings
on a tax free basis, and the tax deductible interest on the COLI borrowings in
Corporate-owned Life Insurance (net) on the Statements of Income. Interest
expense included in corporate-owned life insurance (net) on the statements of
income was $21.0 million for 1994, $11.9 million for 1993, $5.3 million for
the nine months ended December 31, 1992, and $1.9 million for the three months
ended March 31, 1992.
<PAGE> 32
Reclassifications: Certain amounts in prior years have been reclassified
to conform with classifications used in the current year presentation.
3. COMMITMENTS AND CONTINGENCIES
Manufactured Gas Sites: The Company was previously associated with six
former manufactured gas sites which contain coal tar and other potentially
harmful materials. The Company and the Kansas Department of Health and
Environment (KDHE) conducted preliminary assessments of these sites at minimal
cost. The results of the preliminary investigations determined the Company
does not have a connection to two of the sites.
The Company and KDHE entered into a consent agreement governing all
future work at the four remaining sites. The terms of the consent agreement
will allow the Company to investigate these sites and set remediation
priorities based upon the results of the investigations and risk analysis.
The prioritized sites will be investigated over a 10 year period. The
agreement will allow the Company to set mutual objectives with the KDHE in
order to expedite effective response activities and to control costs and
environmental impact. The Company is aware of other utilities in Region VII
of the EPA (Kansas, Missouri, Nebraska, and Iowa) which have incurred
remediation costs for such sites ranging between $500,000 and $10 million,
depending on the site and that the KCC has permitted another Kansas utility to
recover its remediation costs through rates. To the extent that such
remediation costs are not recovered through rates, the costs could be material
to the Company's financial position or results of operations depending on the
degree of remediation and number of years over which the remediation must be
completed.
Spent Nuclear Fuel Disposal: Under the Nuclear Waste Policy Act of 1982,
the U.S. Department of Energy (DOE) is responsible for the ultimate storage
and disposal of spent nuclear fuel removed from nuclear reactors. Under a
contract with the DOE for disposal of spent nuclear fuel, the Company pays a
quarterly fee to DOE of one mill per kilowatthour on net nuclear generation.
These fees are included as part of nuclear fuel expense and amounted to $3.8
million for 1994, $3.5 million for 1993, $1.6 million for the nine months
ended December 31, 1992, and $.5 million for the three months ended March 31,
1992.
The Company along with the other co-owners of Wolf Creek are among 14
companies that filed a lawsuit on June 20, 1994, seeking an interpretation of
the DOE's obligation to begin accepting spent nuclear fuel for disposal in
1998. The Federal Nuclear Waste Policy Act requires DOE ultimately to accept
and dispose of nuclear utilities' spent fuel. The DOE has filed a motion to
have this case dismissed. The issue to be decided in this case is whether DOE
must begin accepting spent fuel in 1998 or at a future date. Wolf Creek
contains an on-site spent fuel storage facility which, under current
regulatory guidelines, provides space for the storage of spent fuel through
the year 2006 while still maintaining full core off-load capability. The
Company believes adequate additional storage space can be obtained as
necessary.
<PAGE> 33
Decommissioning: On June 9, 1994, the KCC issued an order approving the
decommissioning costs of the 1993 Wolf Creek Decommissioning Cost Study which
estimates the Company's share of Wolf Creek decommissioning costs, under the
immediate dismantlement method, to be approximately $595 million primarily
during the period from 2025 through 2033, or approximately $174 million in
1993 dollars. These costs were calculated using an assumed inflation rate of
3.45% over the remaining service life, in 1993, of 32 years.
Decommissioning costs are being charged to operating expenses in
accordance with the KCC order. Electric rates charged to customers provide
for recovery of these decommissioning costs over the life of Wolf Creek.
Amounts so expensed ($3.5 million in 1994 increasing annually to $5.5 million
in 2024) and earnings on trust fund assets are deposited in an external trust
fund. The assumed return on trust assets is 5.9%.
The Company's investment in the decommissioning fund, including
reinvested earnings was $16.9 million and $13.2 million at December 31, 1994
and December 31, 1993, respectively. These amounts are reflected in
Decommissioning Trust, and the related liability is included in Deferred
Credits and Other Liabilities, Other, on the Balance Sheets.
The Company carries $118 million in premature decommissioning insurance.
The insurance coverage has several restrictions. One of these is that it can
only be used if Wolf Creek incurs an accident exceeding $500 million in
expenses to safely stabilize the reactor, to decontaminate the reactor and
reactor station site in accordance with a plan approved by the Nuclear
Regulatory Commission (NRC), and to pay for on-site property damages. If the
amount designated as decommissioning insurance is needed to implement the
NRC-approved plan for stabilization and decontamination, it would not be
available for decommissioning purposes.
Nuclear Insurance: The Price-Anderson Act limits the combined public
liability of the owners of nuclear power plants to $8.9 billion for a single
nuclear incident. The Wolf Creek owners (Owners) have purchased the maximum
available private insurance of $200 million and the balance is provided by an
assessment plan mandated by the NRC. Under this plan, the Owners are jointly
and severally subject to a retrospective assessment of up to $79.3 million
($37.3 million, Company's share) in the event there is a major nuclear
incident involving any of the nation's licensed reactors. This assessment is
subject to an inflation adjustment based on the Consumer Price Index and
applicable premium taxes. There is a limitation of $10 million ($4.7 million,
Company's share) in retrospective assessments per incident per year.
The Owners carry decontamination liability, premature decommissioning
liability, and property damage insurance for Wolf Creek totalling
approximately $2.8 billion ($1.3 billion, Company's share). This insurance is
provided by a combination of "nuclear insurance pools" ($500 million) and
Nuclear Electric Insurance Limited (NEIL) ($2.3 billion). In the event of an
accident, insurance proceeds must first be used for reactor stabilization and
site decontamination. The Company's share of any remaining proceeds can be
used for property damage up to $1.2 billion (Company's share) and premature
decommissioning costs up to $118 million (Company's share) in excess of funds
previously collected for decommissioning (as discussed under
"Decommissioning").
<PAGE> 34
The Owners also carry additional insurance with NEIL to cover costs of
replacement power and other extra expenses incurred during a prolonged outage
resulting from accidental property damage at Wolf Creek. If losses incurred
at any of the nuclear plants insured under the NEIL policies exceed premiums,
reserves, and other NEIL resources, the Company may be subject to
retrospective assessments of approximately $13 million per year.
Although the Company maintains various insurance policies to provide
coverage for potential losses or liabilities resulting from an accident or
extended outage, the Company's insurance coverage may not be adequate to cover
the costs that could result from a major accident or extended outage at Wolf
Creek. Any substantial losses not covered by insurance, to the extent not
recoverable through rates, would have a material adverse effect on the
Company's financial position and results of operations.
Clean Air Act: The Clean Air Act Amendments of 1990 (the Act) require a
two-phase reduction in sulfur dioxide and oxides of nitrogen (NOx) emissions
effective in 1995 and 2000 and a probable reduction in toxic emissions. To
meet the monitoring and reporting requirements under the acid rain program,
the Company installed continuous monitoring and reporting equipment at a total
cost of approximately $2.3 million. The Company does not expect additional
equipment to reduce sulfur emissions to be necessary under Phase II. Although
the Company currently has no Phase I affected units, the owners have applied
for an early substitution permit to bring the co-owned La Cygne Station under
the Phase I regulations.
The NOx and air toxic limits, which were not set in the law, will be
specified in future EPA regulations. The EPA's proposed NOx regulations were
ruled invalid by the U.S. Court of Appeals for the District of Columbia
Circuit in November 1994, and until such time as the EPA resubmits new
proposed regulations, the Company will be unable to determine its compliance
options or related compliance costs.
Federal Income Taxes: During 1991, the Internal Revenue Service (IRS)
completed an examination of the Company's federal income tax returns for the
years 1984 through 1988. In April 1992, the Company received the examination
report and upon review filed a written protest in August 1992. In October
1993, the Company received another examination report for the years 1989 and
1990 covering the same issues identified in the previous examination report.
Upon review of this report, the Company filed a written protest in November
1993. The most significant proposed adjustments reduce the depreciable basis
of certain assets and investment tax credits generated. Management believes
there are significant questions regarding the theory, computations, and
sampling techniques used by the IRS to arrive at its proposed adjustments, and
also believes any additional tax expense incurred or loss of investment tax
credits will not be material to the Company's financial position and results
of operations. Additional income tax payments, if any, are expected to be
offset by investment tax credit carryforwards, alternative minimum tax credit
carryforwards, or deferred tax provisions.
Fuel Commitments: To supply a portion of the fuel requirements for its
generating plants, the Company has entered into various commitments to obtain
nuclear fuel, coal, and natural gas. Some of these contracts contain
provisions for price escalation and minimum purchase commitments. At
December 31, 1994, WCNOC's nuclear fuel commitments (Company's share) were
<PAGE> 35
approximately $12.6 million for uranium concentrates expiring at various times
through 1997, $122.9 million for enrichment expiring at various times through
2014, and $56.5 million for fabrication through 2012. At December 31, 1994,
the Company's coal and natural gas contract commitments in 1994 dollars under
the remaining term of the contracts are $721 million and $9 million,
respectively. The largest coal contract was renegotiated in early 1993 and
expires in 2020 with the remaining coal contracts expiring at various times
through 2013. The majority of natural gas contracts expire in 1995 with
automatic one-year extension provisions. In the normal course of business,
additional commitments and spot market purchases will be made to obtain
adequate fuel supplies.
Energy Act: As part of the 1992 Energy Policy Act, a special assessment
is being collected from utilities for a uranium enrichment decontamination and
decommissioning fund. The Company's portion of the assessment for Wolf Creek
is approximately $7 million, payable over 15 years. Management expects such
costs to be recovered through the ratemaking process.
4. RATE MATTERS AND REGULATION
Elimination of the Energy Cost Adjustment Clause (ECA): On March 26,
1992, in connection with the Merger, the KCC approved the elimination of the
ECA for most retail customers effective April 1, 1992. The provisions for
fuel costs included in base rates were established at a level intended by the
KCC to equal the projected average cost of fuel through August 1995, and to
include recovery of costs provided by previously issued orders relating to
coal contract settlements and storm damage recovery discussed below. Any
increase or decrease in fuel costs from the projected average will impact the
Company's earnings.
Rate Stabilization Plan: In 1988, the KCC issued an order requiring that
the accrual of phase-in revenues be discontinued effective December 31, 1988.
Effective January 1, 1989, the Company began amortizing the phase-in revenue
asset on a straight-line basis over 9-1/2 years. At December 31, 1994
approximately $61 million of deferred phase-in revenues remained on the
Balance Sheet.
Coal Contract Settlements: In March 1990, the KCC issued an order
allowing the Company to defer its share of a 1989 coal contract settlement
with the Pittsburg and Midway Coal Mining Company amounting to $22.5 million.
This amount was recorded as a deferred charge on the balance sheets. The
settlement resulted in the termination of a long-term coal contract. The KCC
permitted the Company to recover this settlement as follows: 76% of the
settlement plus a return over the remaining term of the terminated contract
(through 2002) and 24% to be amortized to expense with a deferred return
equivalent to the carrying cost of the asset. Approximately $18 million of
this deferral remains on the balance sheet at December 31, 1994.
In February 1991, the Company paid $8.5 million to settle a coal contract
lawsuit with AMAX Coal Company and recorded the payment as a deferred charge
on the Company's Balance Sheet. In July 1991, the KCC approved the recovery
of the settlement plus a return equivalent to the carrying cost of the asset,
over the remaining term of the terminated contract (through 1996).
<PAGE> 36
5. SHORT-TERM BORROWINGS
The Company's short-term financing requirements are satisfied through
short-term bank loans and uncommitted loan participation agreements. Maximum
short-term borrowings outstanding during 1994 and 1993 were $172.3 million on
January 4, 1994 and $175.8 million on December 14, 1993. The weighted average
interest rates, including fees, were 4.5% for 1994, 3.5% for 1993, 6.4% for
the nine months ended December 31, 1992, and 7.1% for the three months ended
March 31, 1992.
6. LONG-TERM DEBT
The amount of first mortgage bonds authorized by the KG&E Mortgage and
Deed of Trust (Mortgage) dated April 1, 1940, as supplemented, is limited to a
maximum of $2 billion. Amounts of additional bonds which may be issued are
subject to property, earnings, and certain restrictive provisions of the
Mortgage. Electric plant is subject to the lien of the Mortgage except for
transportation equipment.
Debt discount and expenses are being amortized over the remaining lives
of each issue. The improvement and maintenance fund requirements for certain
first mortgage bond series can be met by bonding additional property. The
sinking fund requirements for certain pollution control series bonds can be
met only through the acquisition and retirement of outstanding bonds.
On November 1, 1994, the Company terminated a long-term agreement which
contained provisions for the sale of accounts receivable and unbilled revenues
(receivables) and phase-in revenues up to a total of $180 million. Amounts
related to receivables were accounted for as sales while those related to
phase-in revenues were accounted for as collateralized borrowings. At
December 31, 1993, outstanding receivables amounting to $56.8 million, were
considered sold under the agreement. The weighted average interest rate,
including fees, on this agreement was 4.6% for 1994, 3.7% for 1993, 6.6% for
the nine months ended December 31, 1992, and 7.9% for the three months ended
March 31, 1992.
7. SALE-LEASEBACK OF LA CYGNE 2
In 1987, the Company sold and leased back its 50 percent undivided
interest in the La Cygne 2 generating unit. The lease has an initial term of
29 years, with various options to renew the lease or repurchase the 50 percent
undivided interest. The Company remains responsible for its share of
operation and maintenance costs and other related operating costs of La Cygne
2. The lease is an operating lease for financial reporting purposes.
As permitted under the lease agreement, the Company in 1992 requested the
Trustee Lessor to refinance $341.1 million of secured facility bonds of the
Trustee and owner of La Cygne 2. The transaction was requested to reduce
recurring future net lease expense. In connection with the refinancing on
September 29, 1992, a one-time payment of approximately $27 million was made
by the Company which has been deferred and is being amortized over the
remaining life of the lease and included in operating expense as part of the
future lease expense. At December 31, 1994, approximately $24.8 million of
this deferral remained on the Balance Sheet.
<PAGE> 37
Future minimum annual lease payments required under the lease agreement
are approximately $34.6 million for each year through 1999 and $680 million
over the remainder of the lease.
The gain of approximately $322 million realized at the date of the sale
has been deferred for financial reporting purposes, and is being amortized
over the initial lease term in proportion to the related lease expense. The
Company's lease expense, net of amortization of the deferred gain and a one-
time payment, was approximately $22.5 million for 1994 and 1993, $20.6 million
for the nine months ended December 31, 1992, and $7.5 million for the three
months ended March 31, 1992.
8. EMPLOYEE BENEFIT PLANS
Pension: The Company maintains noncontributory defined benefit pension
plans covering substantially all employees of the Company prior to the Merger.
Pension benefits are based on years of service and the employee's compensation
during the five highest paid consecutive years out of ten before retirement.
The Company's
policy is to fund pension costs accrued, subject to limitations set by the
Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.
The following table provides information on the components of pension
cost for the Company's pension plans (dollars in millions):
1992
April 1 | Jan.1 to
1994 1993 to Dec.31 | March 31
(Successor)|(Predecessor)
Pension Cost: |
Service cost . . . . . . . . . . $ 3.7 $ 3.2 $ 2.5 | $ .8
Interest cost on projected |
benefit obligation . . . . . . 9.7 9.5 6.7 | 2.1
(Gain) loss on plan assets . . . 2.1 (14.1) (5.8) | (9.0)
Net amortization & deferral. . . (11.4) 4.9 (1.0) | 6.7
------ ------ ------ | ------
Net pension cost . . . . . . . $ 4.1 $ 3.5 $ 2.4 | $ .6
====== ====== ====== ======
The following table sets forth the plans' actuarial present value and
funded status at November 30, 1994 and 1993 (the plan years) and a
reconciliation of such status to the December 31, 1994, 1993, and 1992
financial statements (dollars in millions):
1994 1993 1992
Reconciliation of Funded Status:
Actuarial present value of
benefit obligations:
Vested. . . . . . . . . . . . . . . $ 94.0 $ 95.2 $ 82.9
Non-vested. . . . . . . . . . . . . 6.3 6.1 3.6
------ ------ ------
Total . . . . . . . . . . . . . . $100.3 $101.3 $ 86.5
====== ====== ======
<PAGE> 38
Plan assets at November 30 (principally
debt and equity securities)
at fair value . . . . . . . . . . . . . $115.4 $119.9 $113.7
Projected benefit obligation
at November 30 . . . . . . . . . . . . (125.4) (125.5) (110.8)
------ ------ ------
Funded status at November 30. . . . . . . (10.0) (5.6) 2.9
Unrecognized transition asset . . . . . . (1.5) (1.7) (2.0)
Unrecognized prior service costs. . . . . 9.6 12.4 12.1
Unrecognized net gain . . . . . . . . . . (11.1) (20.6) (26.1)
------ ------ -------
Accrued pension costs at December 31. . . $(13.0) $(15.5) $(13.1)
====== ====== =======
Year Ended December 31, 1994 1993 1992
Actuarial Assumptions:
Discount rate . . . . . . . . . . 8.0-8.5 % 7.0-7.75% 8.0-8.5 %
Annual salary increase rate . . . 5.0 % 5.0 % 6.0 %
Long-term rate of return. . . . . 8.0-8.5 % 8.0-8.5 % 8.0-8.5 %
Retirement and Voluntary Separation Plans: In January 1992, the Board of
Directors approved an early retirement plan and a voluntary separation
program. The voluntary early retirement plan was offered to all vested
participants of the Company's defined benefit pension plan who reached the age
of 55 with 10 or more years of service on or before May 1, 1992. Certain
pension plan improvements were made including a waiver of the actuarial
reduction factors for early retirement and a cash incentive payable as a
monthly supplement up to 60 months or a lump sum payment. Of the 111
employees eligible for the early retirement option, 71, representing 6% of the
Company's work force, elected to retire on or before the May 1, 1992,
deadline. Another 29 employees, with 10 or more years of service, elected to
participate in the voluntary separation program. In addition, 61 employees
received Merger-related severance benefits. The actuarial cost, based on plan
provisions for early retirement and voluntary separation programs, and Merger-
related severance benefits, was approximately $3.9 million of which $1.8
million was included in the pension liability at December 31, 1992. The
actuarial cost was considered in purchase accounting for the Merger (See Note
1).
Postretirement: Western Resources adopted the provisions of Statement of
Financial Accounting Standards No. 106 (SFAS 106) in the first quarter of
1993. This statement requires the accrual of postretirement benefits other
than pensions, primarily medical benefits costs, during the years an employee
provides service.
Based on actuarial projections and adoption of the transition method of
implementation which allows a 20-year amortization of the accumulated benefit
obligation, the annual expense to be allocated to the Company under SFAS 106
was approximately $3.8 million in 1994 and $3.4 million in 1993. The
Company's total obligation to be allocated from Western Resources was
approximately $25.3 million and $23.9 million at December 31, 1994 and 1993,
respectively. To mitigate the impact of SFAS 106 expense, Western Resources
implemented programs to reduce health care costs. In addition, the KCC issued
an order permitting the initial deferral of SFAS 106 expense. To mitigate the
impact SFAS 106 expense will have on rate increases, Western Resources will
include in the future computation of SFAS 106 expense allocated to the Company
for computation of cost of service and
<PAGE> 39
expense recognition, the actual SFAS 106 expense and an income stream
generated from corporate-owned life insurance policies (COLI) purchased in
1993 and 1992. To the extent SFAS 106 expense exceeds income from the COLI
program, this excess will be deferred (as allowed by FASB Emerging Issues Task
Force Issue No. 92-12) and offset by income generated through the deferral
period by the COLI program. Should the income stream generated by the COLI
program not be sufficient to offset the deferred SFAS 106 expense, the KCC
order allows recovery of such deficit through the ratemaking process by the
Company.
Prior to the adoption of SFAS 106 the Company's policy was to recognize
expenses as claims were paid. The costs of benefits were $0.8 million for the
nine months ended December 31, 1992 and $0.2 million for the three months
ended March 31, 1992.
The following table summarizes the status of the Company's postretirement
plans for financial statement purposes and the related amount included in the
balance sheet:
December 31, 1994 1993
(Dollars in Millions)
Reconciliation of Funded Status:
Actuarial present value of postretirement
benefit obligations:
Retirees. . . . . . . . . . . . . . . . . . . $ 12.9 $ 12.4
Active employees fully eligible . . . . . . . 3.0 2.5
Active employees not fully eligible . . . . . 9.4 9.0
Unrecognized prior service cost . . . . . . . (3.2) (.1)
Unrecognized transition obligation. . . . . . (19.3) (20.4)
Unrecognized net gain (loss). . . . . . . . . .9 (1.7)
------ ------
Balance sheet liability . . . . . . . . . . . . . $ 3.7 $ 1.7
====== ======
Year Ended December 31, 1994 1993
Assumptions:
Discount rate. . . . . . . . . . . . . . . . . 8.0-8.5 % 7.75%
Annual compensation increase rate. . . . . . . 5.0 % 5.0 %
Expected rate of return. . . . . . . . . . . . 8.5 % 8.5 %
For measurement purposes, an annual health care cost growth rate of 12%
was assumed for 1994, decreasing 1% per year to 5% by 2001 and thereafter.
The health care cost trend rate has a significant effect on the projected
benefit obligation. Increasing the trend rate by 1% each year would increase
the present value of the accumulated projected benefit obligation by $.3
million and the aggregate of the service and interest cost components by
$26,000.
Savings Plans: Effective January 1, 1995, the Company's 401(k) savings
plans were merged with Western Resources savings plans. Prior to the merger
of the savings plans, funds of the plans were deposited with a trustee and
invested at each employee's option in one or more investment funds, including
a Western Resources common stock fund. The Company's contributions were $1.8
million for 1994, $2.0 million for 1993, $1.7 million for the nine months
ended December 31, 1992, and $0.2 million for the three months ended March 31,
1992.
<PAGE> 40
9. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 96
(SFAS 96) in 1987. This statement required the Company to establish deferred
tax assets and liabilities, as appropriate, for all temporary differences, and
to adjust deferred tax balances to reflect changes in tax rates expected to be
in effect during the periods the temporary differences reverse. SFAS 96 was
superseded by SFAS 109 issued in February 1992 and the Company adopted the
provisions of that standard prospectively in the first quarter of 1992. The
accounting for SFAS 109 is substantially the same as SFAS 96.
In accordance with various rate orders received from the KCC, the Company
has not yet collected through rates the amounts necessary to pay a significant
portion of the net deferred income tax liabilities. As management believes it
is probable that the net future increases in income taxes payable will be
recovered from customers through future rates, it has recorded a deferred
asset for these amounts. These assets are also a temporary difference for
which deferred income tax liabilities have been provided. Accordingly, the
adoption of SFAS 109 did not have a material effect on the Company's results
of operations.
At December 31, 1994, the Company has alternative minimum tax credits
generated prior to April 1, 1992, which carryforward without expiration, of
$41.2 million which may be used to offset future regular tax to the extent the
regular tax exceeds the alternative minimum tax. These credits have been
applied in determining the Company's net deferred income tax liability and
corresponding deferred future income taxes at December 31, 1994.
Beginning April 1, 1992, the Company is part of the consolidated income
tax return of Western Resources. However, the Company determines its income
tax provisions on a separate company basis.
Deferred income taxes result from temporary differences between the
financial statement and tax basis of the Company's assets and liabilities.
The sources of these differences and their cumulative tax effects are as
follows:
<TABLE>
December 31, 1994
Debits Credits Total
(Dollars in Thousands)
<S> <C> <C> <C>
Sources of Deferred Income Taxes:
Accelerated depreciation and
other property items . . . . . . $ - $ (381,800) $ (381,800)
Energy and purchased gas
adjustment clauses . . . . . . . 2,245 - 2,245
Phase-in revenues. . . . . . . . . - (27,677) (27,677)
Deferred gain on sale-leaseback. . 110,556 - 110,556
Alternative minimum tax credits. . 41,163 - 41,163
Deferred coal contract
settlements. . . . . . . . . . . - (6,703) (6,703)
Deferred compensation/pension
liability. . . . . . . . . . . . 9,676 - 9,676
Acquisition premium. . . . . . . . - (317,610) (317,610)
Deferred future income taxes . . . - (102,789) (102,789)
Loss on reacquisition of debt. . . - (4,103) (4,103)
Prepaid power sale . . . . . . . . 1,577 1,577
Other. . . . . . . . . . . . . . . - (13,704) (13,704)
----------- ----------- -----------
Total Deferred Income Taxes. . . . . $ 165,217 $ (854,386) $ (689,169)
</TABLE> =========== =========== ===========
<PAGE> 41
<TABLE>
December 31, 1993
Debits Credits Total
(Dollars in Thousands)
<S> <C> <C> <C>
Sources of Deferred Income Taxes:
Accelerated depreciation and
other property items . . . . . . $ - $ (356,494) $ (356,494)
Energy and purchased gas
adjustment clauses . . . . . . . 3,257 - 3,257
Phase-in revenues. . . . . . . . . - (35,573) (35,573)
Deferred gain on sale-leaseback. . 116,186 - 116,186
Alternative minimum tax credits. . 39,882 - 39,882
Deferred coal contract
settlements. . . . . . . . . . . - (7,797) (7,797)
Deferred compensation/pension
liability. . . . . . . . . . . . 10,856 - 10,856
Acquisition premium. . . . . . . . - (300,814) (300,814)
Deferred future income taxes . . . - (102,789) (102,789)
Loss on reacquisition of debt. . . - (4,508) (4,508)
Other. . . . . . . . . . . . . . . - (8,365) (8,365)
----------- ----------- -----------
Total Deferred Income Taxes. . . . . $ 170,181 $ (816,340) $ (646,159)
=========== =========== ===========
</TABLE>
10. LEGAL PROCEEDINGS
The Company is involved in various legal and environmental proceedings.
Management believes that adequate provision has been made within the financial
statements for these matters and accordingly believes their ultimate
dispositions will not have a material adverse effect upon the financial
position or results of operations of the Company.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value as set forth in Statement of Financial Accounting
Standards No. 107:
Cash and Cash Equivalents-
The carrying amount approximates the fair value because of the short-
term maturity of these investments.
Decommissioning Trust-
The fair value of the decommissioning trust is based on quoted market
prices at December 31, 1994 and 1993.
Variable-rate Debt-
The carrying amount approximates the fair value because of the short-
term variable rates of these debt instruments.
Fixed-rate Debt-
The fair value of the fixed-rate debt is based on the sum of the
estimated value of each issue taking into consideration the coupon
rate, maturity, and redemption provisions of each issue.
The estimated fair values of the Company's financial instruments are as
follows:
<PAGE> 42
<TABLE>
Carrying Value Fair Value
December 31, 1994 1993 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Cash and cash
equivalents. . . . . . . $ 47 $ 63 $ 47 $ 63
Decommissioning trust. . . 16,944 13,204 16,633 13,929
Variable-rate debt . . . . 407,645 478,743 407,645 478,743
Fixed-rate debt. . . . . . 657,482 603,920 623,331 660,750
</TABLE>
<TABLE>
12. JOINT OWNERSHIP OF UTILITY PLANTS
Company's Ownership at December 31, 1994
In-Service Invest- Accumulated Net Per-
Dates ment Depreciation (MW) cent
(Dollars in Thousands)
<S> <C> <C> <C> <C>
La Cygne 1 (a) Jun 1973 $ 152,816 $ 98,124 343 50
Jeffrey 1 (b) Jul 1978 65,467 30,333 140 20
Jeffrey 2 (b) May 1980 66,475 26,921 143 20
Jeffrey 3 (b) May 1983 95,421 33,491 140 20
Wolf Creek (c) Sep 1985 1,376,335 317,311 545 47
(a) Jointly owned with Kansas City Power & Light Company (KCPL)
(b) Jointly owned with Western Resources and UtiliCorp United Inc.
(c) Jointly owned with KCPL and Kansas Electric Power Cooperative, Inc.
Amounts and capacity represent the Company's share. The Company's share
of operating expenses of the plants in service above, as well as such expenses
for a 50 percent undivided interest in La Cygne 2 (representing 335 MW
capacity) sold and leased back to the Company in 1987, are included in
operating expenses in the Statements of Income. The Company's share of other
transactions associated with the plants is included in the appropriate
classification in the Company's financial statements.
</TABLE>
13. QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in Thousands)
The amounts in the table are unaudited but, in the opinion of management,
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The
business of the Company is seasonal in nature and, in the opinion of
management, comparisons between the quarters of a year do not give a true
indication of overall trends and changes in operations.
<PAGE> 43
<TABLE>
1994
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C>
Operating revenues. . . . . $139,087 $189,202 $154,987 $136,604
Operating income. . . . . . 33,607 56,978 33,548 24,878
Net income. . . . . . . . . 22,212 45,481 23,623 13,210
1993
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Operating revenues. . . . . $136,097 $191,941 $150,478 $138,481
Operating income. . . . . . 26,188 52,874 35,545 32,774
Net income. . . . . . . . . 13,692 46,406 24,274 23,731
</TABLE>
14. RELATED PARTY TRANSACTIONS
Subsequent to the Merger, the cash management function, including cash
receipts and disbursements, for KG&E has been assumed by Western Resources.
As a result, the proceeds of cash collections, including short-term
borrowings, less disbursements related to KG&E transactions have been recorded
by the Companies through an intercompany account which, at December 31, 1994,
resulted in a net advance by KG&E to Western Resources of $64.4 million.
Certain of the Company's operating expenses have been allocated from Western
Resources. These expenses are allocated, depending on the nature of the
expense, based on allocation studies, net investment, number of customers,
and/or other appropriate allocators. Management believes such allocation
procedures are reasonable. During 1994, the Company declared a dividend to
Western Resources of $125 million.
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and financial
disclosure. Information relating to a change in accountants is incorporated
by reference from the Company's Current Report on Form 8-K dated March 8,
1993.
<PAGE> 45
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Western Resources, Inc. owns 100 percent of the Company's outstanding
common stock.
A Director
Business Experience Since 1988 and Other Continuously
Name Age Directorships Other Than The Company Since
Kent R. Brown 49 Chairman of the Board (since June 1992), 1992
President and Chief Executive Officer
(since March 1992), and prior to that
Group Vice President
Directorships
Bank IV Wichita
Robert T. Crain 69 Owner, Crain Realty, Co., Fort Scott, 1992(b)
(a) Kansas
Directorships
Citizens National Bank
Ft. Scott Industries, Inc.
Anderson E. 61 President, Jackson Mortuary, Wichita, 1994
Jackson Kansas
Donald A. 61 President, Maupintour, Inc., Lawrence, 1992(b)
Johnston Kansas (Escorted Tours and Travel)
(a) Directorships
Commerce Bank, Lawrence
Maupintour, Inc.
Steven L. 49 Executive Vice President and Chief 1992
Kitchen Financial Officer, Western Resources,
Inc.
Glenn L. 69 Retired Vice President - Nuclear of the 1992(b)
Koester Company
James J. Noone 74 Attorney and retired Administrative Judge 1992(b)
(a) for the District Court of Sedgwick
County, Kansas
Marilyn B. 45 President (since October 1993) and prior 1994
Pauly to that Executive Vice President,
Bank IV Wichita, Wichita, Kansas
Directorships
Farmers Mutual Alliance Insurance Company
<PAGE> 46
A Director
Business Experience Since 1988 and Other Continuously
Name Age Directorships Other Than The Company Since
Newton C. Smith 73 Physician and Surgeon, Arkansas City, 1992(b)
Kansas
Richard D. Smith 61 President, Range Oil Company 1993
Directorships
Bank IV Kansas
(a) Member of the Audit Committee of which Mr. Johnston is Chairman.
The Audit Committee has responsibility for the investigation and
review of the financial affairs of the Company and its relations
with independent accountants.
(b) Mr. Crain, Mr. Johnston, Mr. Koester, Mr. Noone, and Mr. Newton
Smith were directors of the former Kansas Gas & Electric Company
since 1981, 1980, 1986, 1986, and 1985, respectively.
Outside Directors are paid $3,750 per quarter retainer and are paid an
attendance fee of $600 for Directors' meetings ($300 if attending by phone).
A committee attendance fee of $800 is paid to the outside Director Audit
Committee Chairman, and $500 to other outside Committee members. All outside
Directors are reimbursed mileage and expenses while attending Directors' and
Committee Meetings.
During 1994, the Board of Directors met seven times and the Audit
Committee met two times. Each director attended at least 75% of the total
number of Board and Committee meetings held while he/she served as a director
or a member of the committee, except Mr. Richard D. Smith who attended 71% of
such meetings.
Other information required by Item 10 is omitted pursuant to General
Instruction J(2)(c) to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is omitted pursuant to General
Instruction J(2)(c) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 is omitted pursuant to General
Instruction J(2)(c) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is omitted pursuant to General
Instruction J(2)(c) to Form 10-K.
<PAGE> 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following financial statements are included herein under Item 8.
FINANCIAL STATEMENTS
Balance Sheets, December 31, 1994 and 1993
Statements of Income for the year ended December 31, 1994 and 1993
(Successor), the nine months ended December 31, 1992 (Successor),
and the three months ended March 31, 1992 (Predecessor)
Statements of Cash Flows for the year ended December 31, 1994 and 1993
(Successor), the period March 31 to December 31, 1992 (Successor),
and the three months ended March 31, 1992 (Predecessor)
Statements of Taxes for the year ended December 31, 1994 and 1993
(Successor), the nine months ended December 31, 1992 (Successor),
and the three months ended March 31, 1992 (Predecessor)
Statements of Capitalization, December 31, 1994 and 1993
Statements of Common Stock Equity for the year ended December 31, 1994
and 1993 (Successor), the nine months ended December 31, 1992
(Successor), and the three months ended March 31, 1992 (Predecessor)
Notes to Financial Statements
REPORTS ON FORM 8-K
None
<PAGE> 48
EXHIBIT INDEX
All exhibits marked "I" are incorporated herein by reference.
Description
2(a) Agreement and Plan of Merger (Filed as Exhibit 2 to Form 10-K I
for the year ended December 31, 1990, File No. 1-7324)
2(b) Amendment No. 1 to Agreement and Plan of Merger (Filed as I
Exhibit 2 to Form 10-K for the year ended December 31, 1990,
File No. 1-7324)
3(a) Articles of Incorporation (Filed as Exhibit 3(a) to Form 10-K I
for the year ended December 31, 1992, File No. 1-7324)
3(b) Certificate of Merger of Kansas Gas and Electric Company into I
KCA Corporation (Filed as Exhibit 3(b) to Form 10-K
for the year ended December 31, 1992, File No. 1-7324)
3(c) By-laws as amended (Filed as Exhibit 3(c) to Form 10-K I
for the year ended December 31, 1992, File No. 1-7324)
4(c)1 Mortgage and Deed of Trust, dated as of April 1, 1940 to I
Guaranty Trust Company of New York (now Morgan Guaranty Trust
Company of New York) and Henry A. Theis (to whom W. A. Spooner
is successor), Trustees, as supplemented by thirty-eight
Supplemental Indentures, dated as of June 1, 1942, March 1, 1948,
December 1, 1949, June 1, 1952, October 1, 1953, March 1, 1955,
February 1, 1956, January 1, 1961, May 1, 1966, March 1, 1970,
May 1, 1971, March 1, 1972, May 31, 1973, July 1, 1975,
December 1, 1975, September 1, 1976, March 1, 1977, May 1, 1977,
August 1, 1977, March 15, 1978, January 1, 1979, April 1, 1980,
July 1, 1980, August 1, 1980, June 1, 1981, December 1, 1981,
May 1, 1982, March 15, 1984, September 1, 1984 (Twenty-ninth
and Thirtieth), February 1, 1985, April 15, 1986, June 1, 1991
March 31, 1992, December 17, 1992, August 24, 1993, January 15,
1994 and March 1, 1994, (Filed, respectively, as Exhibit A-1 to
Form U-1, File No. 70-23; Exhibits 7(b) and 7(c), File No. 2-7405;
Exhibit 7(d), File No. 2-8242; Exhibit 4(c), File No. 2-9626;
Exhibit 4(c), File No. 2-10465; Exhibit 4(c), File No. 2-12228;
Exhibit 4(c), File No. 2-15851; Exhibit 2(b)-1, File No. 2-24680;
Exhibit 2(c), File No. 2-36170; Exhibits 2(c) and 2(d), File
No. 2-39975; Exhibit 2(d), File No. 2-43053; Exhibit 4(c)2 to
Form 10-K, for December 31, 1989, File No. 1-7324; Exhibit 2(c),
File No. 2-53765; Exhibit 2(e), File No. 2-55488; Exhibit 2(c),
File No. 2-57013; Exhibit 2(c), File No. 2-58180; Exhibit 4(c)3
to Form 10-K for December 31, 1989, File No. 1-7324; Exhibit 2(e),
File No. 2-60089; Exhibit 2(c), File No. 2-60777; Exhibit 2(g), File
No. 2-64521; Exhibit 2(h), File No. 2-66758; Exhibits 2(d) and
2(e), File No. 2-69620; Exhibits 4(d) and 4(e), File No. 2-75634;
Exhibit 4(d), File No. 2-78944; Exhibit 4(d), File No. 2-87532;
Exhibits 4(c)4, 4(c)5 and 4(c)6 to Form 10-K for December 31,
1989, File No. 1-7324; Exhibits 4(c)2 and 4(c)3 to Form 10-K for
<PAGE> 49
Description
December 31, 1992, File No. 1-7324; Exhibit 4(b) to Form S-3,
File No. 33-50075; Exhibits 4(c)2 and 4(c)3 to Form 10-K for
December 31, 1993, File No. 1-7324)
4(c)2 Thirty-ninth Supplemental Indenture dated as of April 15, 1994,
to the Company's Mortgage and Deed of Trust (Filed electronically)
Instruments defining the rights of holders of other long-term debt not
required to be filed as exhibits will be furnished to the Commission
upon request.
10(a)1 Severance Agreement (Filed as Exhibit 10(a)1 to Form 10-K for the I
year ended December 31, 1990, File No. 1-7324)
10(a)2 Severance Agreement (Filed as Exhibit 10(a)2 to Form 10-K for the I
year ended December 31, 1990, File No. 1-7324)
10(a)3 Severance Agreement (Filed as Exhibit 10(a)3 to Form 10-K for the I
year ended December 31, 1990, File No. 1-7324)
10(b) La Cygne 2 Lease (Filed as Exhibit 10(a) to Form 10-K for the year I
ended December 31, 1988, File No. 1-7324)
10(b)1 Amendment No. 3 to La Cygne 2 Lease Agreement dated as of September I
29, 1992 (Filed as Exhibit 10(b)1 to Form 10-K for the year ended
December 31, 1992, File No. 1-7324)
10(c) Outside Directors' Deferred Compensation Plan (Filed as Exhibit I
10(c) to the Form 10-K for the year ended December 31, 1993,
File No. 1-7324)
12 Computation of Ratio of Consolidated Earnings to Fixed Charges.
(Filed electronically)
16 Letter re Change in Certifying Accountant (Filed as Exhibit 16 to I
the Current Report on Form 8-K dated March 8, 1993)
23(a) Consent of Independent Public Accountants, Arthur Andersen LLP
(Filed electronically)
23(b) Consent of Independent Public Accountants, Deloitte & Touche LLP
(Filed electronically)
<PAGE> 50
SIGNATURE
Pursuant to the requirements of Sections 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.
KANSAS GAS AND ELECTRIC COMPANY
March 29, 1995 By KENT R. BROWN
Kent R. Brown, Chairman of the Board,
President and Chief Executive Officer
<PAGE> 49
Exhibit 4(c)2
[CONFORMED]
======================================================================
KANSAS GAS AND ELECTRIC COMPANY
TO
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(formerly Guaranty Trust Company of New York)
AND
W. A. SPOONER
(successor to Henry A. Theis, Oliver R. Brooks,
Wesley L. Baker, Edwin F. McMichael and R. Amundsen)
as Trustees under Kansas Gas and Electric Company's
Mortgage and Deed of Trust, Dated as of April 1, 1940
_______________________
THIRTY-NINTH SUPPLEMENTAL INDENTURE, as corrected*
Providing, among other things, for
First Mortgage Bonds, 7-1/2% Series A Due 2032
and
First Mortgage Bonds, 7-1/2% Series B Due 2027
and
First Mortgage Bonds, 7-1/2% Series C Due 2032
Dated as of April 15, 1994
======================================================================
* Correcting Article I, Section 1, paragraphs (II) and (III); Section
1, paragraphs (II) and (III); and, Article III, Section 1, paragraphs
(II) and (III) by deleting references to the term "Bond Fund" from,
and correcting certain typographical errors in, the Thirty-Ninth
Supplemental Indenture filed in the office of the Register of Deeds of
Sedgwick County, Kansas (filed on April 21, 1994, Film 1438, pages
1663-1686), and Office of Secretary of the State of Kansas (filed on
April 22, 1994 and indexed at No. 2015521).
THIRTY-NINTH SUPPLEMENTAL INDENTURE
INDENTURE, dated as of April 15, 1994, between KANSAS GAS AND
ELECTRIC COMPANY, a corporation of the State of Kansas (formerly named
KCA Corporation and successor by merger to Kansas Gas and Electric
Company, a corporation of the State of Kansas, hereinafter sometimes
called the ``Company-Kansas''), whose post office address is 120 East
First Street, Wichita, Kansas 67202 (hereinafter sometimes called the
``Company''), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (formerly
Guaranty Trust Company of New York), a corporation of the State of New
York, whose post office address is 60 Wall Street, New York, New York
10260-0060 (hereinafter sometimes called the ``Corporate Trustee''),
and W. A. SPOONER (successor to Henry A. Theis, Oliver R. Brooks,
Wesley L. Baker, Edwin F. McMichael and R. Amundsen, and being
hereinafter sometimes called the ``Individual Trustee''), whose post
office address is 1 Juliet Court, Old Bridge, New Jersey 08857 (the
Corporate Trustee and the Individual Trustee being hereinafter
together sometimes called the ``Trustees''), as Trustees under the
Mortgage and Deed of Trust, dated as of April 1, 1940 (hereinafter
called the ``Mortgage''), which Mortgage was executed and delivered by
Kansas Gas and Electric Company, a corporation of the State of West
Virginia to which the Company-Kansas was successor by merger
(hereinafter sometimes called the ``Company-West Virginia''), to
secure the payment of bonds issued or to be issued under and in
accordance with the provisions of the Mortgage, reference to which
Mortgage is hereby made, this Indenture (hereinafter sometimes called
the ``Thirty-ninth Supplemental Indenture'') being supplemental
thereto;
WHEREAS, the Company-West Virginia caused the Mortgage to be
filed for record as a mortgage of real property and as a chattel
mortgage in the offices of the Registers of Deeds in various counties
in the State of Kansas, and on April 25, 1940 paid to the Register of
Deeds of Sedgwick County, Kansas, that being the County in which the
Mortgage was first filed for record, the sum of $40,000 in payment of
the Kansas mortgage registration tax as provided by Section 79-3101 et
seq., General Statutes of Kansas 1935; and
WHEREAS, by the Mortgage, the Company-West Virginia covenanted
that it would execute and deliver such supplemental indenture or
indentures and such further instruments and do such further acts as
might be necessary or proper to carry out more effectually the
purposes of the Mortgage and to make subject to the lien of the
Mortgage any property thereafter acquired, intended to be subject to
the lien thereof; and
WHEREAS, an instrument, dated May 31, 1949, was executed by the
Company-West Virginia appointing Oliver R. Brooks as Individual
Trustee in succession to said Henry A. Theis, resigned, under the
Mortgage, and by Oliver R. Brooks accepting the appointment as
Individual Trustee under the Mortgage in succession to said Henry A.
Theis, which instrument was filed for record in the offices of the
Registers of Deeds in various counties in the State of Kansas; and
WHEREAS, an instrument, dated March 3, 1958, was executed by the
Company-West Virginia appointing Wesley L. Baker as Individual Trustee
in succession to said Oliver R. Brooks, resigned, under the Mortgage,
and by Wesley L. Baker accepting the appointment as Individual Trustee
under the Mortgage in succession to said Oliver R. Brooks, which
instrument was filed for record in the offices of the Registers of
Deeds in various counties in the State of Kansas; and
WHEREAS, an instrument, dated November 20, 1969, was executed by
the Company-West Virginia appointing Edwin F. McMichael as Individual
Trustee in succession to said Wesley L. Baker, resigned, under the
Mortgage, and by Edwin F. McMichael accepting the appointment as
Individual Trustee under the Mortgage in succession to said Wesley L.
Baker, which instrument was filed for record in the offices of the
Registers of Deeds in various counties in the State of Kansas; and
WHEREAS, by the Twenty-seventh Supplemental Indenture mentioned
below, the Company-Kansas, among other things, appointed R. Amundsen
as Individual Trustee in succession to said Edwin F. McMichael,
resigned, under the Mortgage, and by R. Amundsen accepting the
appointment as Individual Trustee under the Mortgage in succession to
said Edwin F. McMichael; and
WHEREAS, by the Thirty-second Supplemental Indenture mentioned
below, the Company-Kansas, among other things, appointed W. A. Spooner
as Individual Trustee in succession to said R. Amundsen, resigned,
under the Mortgage, and by W. A. Spooner accepting the appointment as
Individual Trustee under the Mortgage in succession to said R.
Amundsen; and
WHEREAS, the Company-West Virginia executed and delivered to the
Trustees a First Supplemental Indenture, dated as of June 1, 1942
(which supplemental indenture is hereinafter sometimes called the
``First Supplemental Indenture''); and
WHEREAS, the Company-West Virginia caused the First Supplemental
Indenture to be filed for record as a mortgage of real property and as
a chattel mortgage in the offices of the Registers of Deeds in various
counties in the State of Kansas, but paid no mortgage registration tax
in connection with the recordation of the First Supplemental
Indenture, no such tax having been payable in connection with such
recordation; and
WHEREAS, the Company-West Virginia executed and delivered to the
Trustees the following supplemental indentures:
Designation Dated as of
Second Supplemental Indenture. . . . . . . March 1, 1948
Third Supplemental Indenture . . . . . . . December 1, 1949
Fourth Supplemental Indenture. . . . . . . June 1, 1952
Fifth Supplemental Indenture . . . . . . . October 1, 1953
Sixth Supplemental Indenture . . . . . . . March 1, 1955
Seventh Supplemental Indenture . . . . . . February 1, 1956
Eighth Supplemental Indenture. . . . . . . January 1, 1961
Ninth Supplemental Indenture . . . . . . . May 1, 1966
Tenth Supplemental Indenture . . . . . . . March 1, 1970
Eleventh Supplemental Indenture. . . . . . May 1, 1971
Twelfth Supplemental Indenture . . . . . . March 1, 1972
which supplemental indentures are hereinafter sometimes called the
Second through Twelfth Supplemental Indentures, respectively; and
WHEREAS, the Company-West Virginia caused the Second through
Eighth Supplemental Indentures to be filed for record as a mortgage of
real property and as a chattel mortgage in the offices of the
Registers of Deeds in various counties in the State of Kansas, and
caused the Ninth through Twelfth Supplemental Indentures to be filed
for record as a mortgage of real property in the offices of the
Registers of Deeds in various counties in the State of Kansas and as a
chattel mortgage in the Office of the Secretary of State of Kansas,
and on the following dates paid to the Register of Deeds of Sedgwick
County, Kansas, that being the County in which the Second through
Twelfth Supplemental Indentures were first filed for record as a
mortgage of real property, the following amounts:
Date Amount
March 30, 1948. . . . . . . . . . . $12,500
December 7, 1949. . . . . . . . . . 7,500
June 17, 1952 . . . . . . . . . . . 30,000
October 21, 1953. . . . . . . . . . 25,000
March 22, 1955. . . . . . . . . . . 25,000
March 5, 1956 . . . . . . . . . . . 17,500
January 24, 1961. . . . . . . . . . 17,500
May 17, 1966. . . . . . . . . . . . 40,000
March 10, 1970. . . . . . . . . . . 87,500
May 19, 1971. . . . . . . . . . . . 87,500
March 23, 1972. . . . . . . . . . . 62,500
such amounts being in payment of the Kansas mortgage registration tax
as provided by the then currently applicable sections of the statutes
of the State of Kansas in effect on those dates; and
WHEREAS, the Company-West Virginia was merged into the Company-
Kansas on May 31, 1973; and
WHEREAS, in order to evidence the succession of the Company-
Kansas to the Company-West Virginia and the assumption by the Company-
Kansas of the covenants and conditions of the Company-West Virginia in
the bonds and in the Mortgage contained, and to enable the Company-
Kansas to have and exercise the powers and rights of the Company-West
Virginia under the Mortgage in accordance with the terms thereof, the
Company-Kansas executed and delivered to the Trustees a Thirteenth
Supplemental Indenture, dated as of May 31, 1973 (which supplemental
indenture is hereinafter sometimes called the ``Thirteenth
Supplemental Indenture''); and
WHEREAS, the Company-Kansas caused the Thirteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
offices of the Registers of Deeds in various counties in the State of
Kansas and as a chattel mortgage in the Office of the Secretary of
State of Kansas, but paid no mortgage registration tax in connection
with the recordation of the Thirteenth Supplemental Indenture, no such
tax having been payable in connection with such recordation; and
WHEREAS, the Company-Kansas executed and delivered to the
Trustees the following supplemental indentures:
Designation Dated as of
Fourteenth Supplemental Indenture. . . . . . . July 1, 1975
Fifteenth Supplemental Indenture . . . . . . . December 1, 1975
Sixteenth Supplemental Indenture . . . . . . . September 1, 1976
Seventeenth Supplemental Indenture . . . . . . March 1, 1977
Eighteenth Supplemental Indenture. . . . . . . May 1, 1977
Nineteenth Supplemental Indenture. . . . . . . August 1, 1977
Twentieth Supplemental Indenture . . . . . . . March 15, 1978
Twenty-first Supplemental Indenture. . . . . . January 1, 1979
Twenty-second Supplemental Indenture . . . . . April 1, 1980
Twenty-third Supplemental Indenture. . . . . . July 1, 1980
Twenty-fourth Supplemental Indenture . . . . . August 1, 1980
Twenty-fifth Supplemental Indenture. . . . . . June 1, 1981
Twenty-sixth Supplemental Indenture. . . . . . December 1, 1981
Twenty-seventh Supplemental Indenture. . . . . May 1, 1982
Twenty-eighth Supplemental Indenture . . . . . March 15, 1984
Twenty-ninth Supplemental Indenture. . . . . . September 1, 1984
Thirtieth Supplemental Indenture . . . . . . . September 1, 1984
Thirty-first Supplemental Indenture. . . . . . February 1, 1985
Thirty-second Supplemental Indenture . . . . . April 15, 1986
Thirty-third Supplemental Indenture. . . . . . June 1, 1991
Thirty-fourth Supplemental Indenture . . . . . March 31, 1992
Thirty-fifth Supplemental Indenture. . . . . . December 17, 1992
Thirty-sixth Supplemental Indenture. . . . . . August 12, 1993
Thirty-seventh Supplemental Indenture. . . . . January 15, 1994
Thirty-eighth Supplemental Indenture . . . . . March 1, 1994
which supplemental indentures are hereinafter sometimes called the
Fourteenth through Thirty-eighth Supplemental Indentures,
respectively; and
WHEREAS, the Company-Kansas caused the Fourteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
offices of the Registers of Deeds in various counties in the State of
Kansas and as a chattel mortgage in the Office of the Secretary of
State of Kansas; and
WHEREAS, the Company-Kansas caused the Fifteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
December 10, 1975, Film 169, page 363), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on December 10,
1975 and indexed as No. 325,911); and
WHEREAS, the Company-Kansas caused the Sixteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
September 29, 1976, Film 211, page 363), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on September 29,
1976 and indexed as No. 363,835); and
WHEREAS, the Company-Kansas caused the Seventeenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
March 16, 1977, Film 234, page 492), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on March 1, 1977 and
indexed as No. 384,759); and
WHEREAS, the Company-Kansas caused the Eighteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
May 26, 1977, Film 246, page 655), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on May 26, 1977 and
indexed as No. 394,573); and
WHEREAS, the Company-Kansas caused the Nineteenth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
August 31, 1977, Film 263, page 882), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on September 1, 1977
and indexed as No. 406,577); and
WHEREAS, the Company-Kansas caused the Twentieth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
March 29, 1978, Film 297, pages 635-656), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on March 30,
1978 and indexed as No. 434,072); and
WHEREAS, the Company-Kansas caused the Twenty-first Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
January 9, 1979, Film 345, page 648), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on January 10, 1979
and indexed as No. 470,851); and
WHEREAS, the Company-Kansas caused the Twenty-second Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
April 2, 1980, Film 413, page 1,468), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on April 3, 1980 and
indexed as No. 533,415); and
WHEREAS, the Company-Kansas caused the Twenty-third Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
July 1, 1980, Film 425, page 1,003), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on July 2, 1980 and
indexed as No. 546,185); and
WHEREAS, the Company-Kansas caused the Twenty-fourth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
August 28, 1980, Film 435, page 266), and as a chattel mortgage in the
Office of the Secretary of State of Kansas (filed on August 29, 1980
and indexed as No. 554,543); and
WHEREAS, the Company-Kansas caused the Twenty-fifth Supplemental
Indenture to be filed for record as a mortgage of real property in
the office of the Register of Deeds of Sedgwick County, Kansas (filed
on June 30, 1981, Film 483, page 1,512), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on June 30, 1981
and indexed as No. 601,270); and
WHEREAS, the Company-Kansas caused the Twenty-sixth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
December 30, 1981, Film 510, page 300), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on December 31,
1981 and indexed as No. 628,293); and
WHEREAS, the Company-Kansas caused the Twenty-seventh
Supplemental Indenture to be filed for record as a mortgage of real
property in the office of the Register of Deeds of Sedgwick County,
Kansas (filed on May 6, 1982, Film 526, page 1,141), and as a chattel
mortgage in the Office of the Secretary of State of Kansas (filed on
May 7, 1982 and indexed as No. 650,115); and
WHEREAS, the Company-Kansas caused the Twenty-eighth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
March 22, 1984, Film 645, page 1,524), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on March 23,
1984 and indexed as No. 796,449); and
WHEREAS, the Company-Kansas caused the Twenty-ninth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
September 5, 1984, Film 681, page 763), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on September 6,
1984 and indexed as No. 852,425); and
WHEREAS, the Company-Kansas caused the Thirtieth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
September 12, 1984, Film 682, page 1,087), and as a chattel mortgage
in the Office of the Secretary of State of Kansas (filed on September
13, 1984 and indexed as No. 854,284); and
WHEREAS, the Company-Kansas caused the Thirty-third Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
June 18, 1991, Film 1177, page 0876), and as a security agreement in
the Office of Secretary of State of Kansas (filed on June 18, 1991 and
indexed as No. 1,693,446); and
WHEREAS, the Company on the following dates paid to the Register
of Deeds of Sedgwick County, Kansas, that being the County in which
the Fourteenth through Thirtieth Supplemental Indentures and the
Thirty-third Supplemental Indenture were first filed for record as a
mortgage of real property, the following amounts:
Date Amount
July 2, 1975. . . . . . . . . . . $100,000
December 10, 1975 . . . . . . . . 48,750
September 29, 1976. . . . . . . . 62,500
March 16, 1977. . . . . . . . . . 62,500
May 26, 1977. . . . . . . . . . . 25,000
August 31, 1977 . . . . . . . . . 6,100
March 29, 1978. . . . . . . . . . 62,500
January 9, 1979 . . . . . . . . . 36,250
April 2, 1980 . . . . . . . . . . 67,500
July 1, 1980. . . . . . . . . . . 37,500
August 28, 1980 . . . . . . . . . 63,750
June 30, 1981 . . . . . . . . . . 75,000
December 30, 1981 . . . . . . . . 62,500
May 6, 1982 . . . . . . . . . . . 100,000
March 22, 1984. . . . . . . . . . 93,750
September 5, 1984 . . . . . . . . 75,000
September 12, 1984. . . . . . . . 50,000
June 18, 1991 . . . . . . . . . . 334,100
such amounts being in payment of the Kansas mortgage registration tax
as provided by the then currently applicable sections of the statutes
of the State of Kansas in effect on those dates; and
WHEREAS, the Company-Kansas caused the Thirty-first Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
February 1, 1985, Film 707, page 378), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on February 4,
1985 and indexed as No. 895,468), but paid no mortgage registration
tax in connection with the recordation of the Thirty-first
Supplemental Indenture, no such tax having been payable in connection
with such recordation; and
WHEREAS, the Company-Kansas caused the Thirty-second Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
April 16, 1986, Film 791, page 1,336), and as a chattel mortgage in
the Office of the Secretary of State of Kansas (filed on April 17,
1986 and indexed as No. 1,048,212), but paid no mortgage registration
tax in connection with the recordation of the Thirty-second
Supplemental Indenture, no such tax having been payable in connection
with such recordation; and
WHEREAS, in order to evidence the succession of the Company to
the Company-Kansas and the assumption by the Company of the covenants
and conditions of the Company-Kansas in the bonds and in the Mortgage
contained, and to enable the Company to have and exercise the powers
and rights of the Company-Kansas under the Mortgage in accordance with
the terms thereof, the Company executed and delivered to the Trustees
a Thirty-fourth Supplemental Indenture, dated as of March 31, 1992
(which supplemental indenture is hereinafter sometimes called the
``Thirty-fourth Supplemental Indenture''); and
WHEREAS, the Company-Kansas caused the Thirty-fourth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
March 31, 1992, Film 1236, page 987), and as a security agreement in
the Office of Secretary of State of Kansas (filed on March 31, 1992
and indexed as No. 1,780,893), but paid no mortgage registration tax
in connection with the recordation of the Thirty-fourth Supplemental
Indenture, no such tax having been payable in connection with such
recordation; and
WHEREAS, the Company caused the Thirty-fifth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
December 16, 1992, Film 301, page 0104), and as a security agreement
in the Office of Secretary of State of Kansas (filed on December 16,
1992 and indexed as No. 1,861,886), but paid no mortgage registration
tax in connection with the recordation of the Thirty-fifth
Supplemental Indenture, no such tax having been payable in connection
with such recordation; and
WHEREAS, the Company-Kansas caused the Thirty-sixth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
August 10, 1993, Film 1364, page 0515), and as a security agreement
in the Office of Secretary of State of Kansas (filed on August 11,
1993 and indexed as No. 1,936,501), but paid no mortgage registration
tax in connection with the recordation of the Thirty-sixth
Supplemental Indenture, no such tax having been payable in connection
with such recordation; and
WHEREAS, the Company-Kansas caused the Thirty-seventh
Supplemental Indenture to be filed for record as a mortgage of real
property in the office of the Register of Deeds of Sedgwick County,
Kansas (filed on January 18, 1994, Film 1411, page 0710), and as a
security agreement in the Office of Secretary of State of Kansas
(filed on January 18, 1994 and indexed as No. 1,985,104), but paid no
mortgage registration tax in connection with the recordation of the
Thirty-seventh Supplemental Indenture, no such tax having been payable
in connection with such recordation; and
WHEREAS, the Company-Kansas caused the Thirty-eighth Supplemental
Indenture to be filed for record as a mortgage of real property in the
office of the Register of Deeds of Sedgwick County, Kansas (filed on
February 28, 1994, Film 1422, page 1046), and as a security agreement
in the Office of Secretary of State of Kansas (filed on February 28,
1994, and indexed as No. 1,997,743), but paid no mortgage restriction
tax in connection with the recordation of the Thirty-eighth
Supplemental Indenture, no such tax having been payable in connection
with such recordation; and
WHEREAS, the Company-West Virginia, the Company-Kansas or the
Company has from time to time caused to be filed in the respective
offices of the above-mentioned Registers of Deeds and Secretary of
State affidavits executed by the Trustees under the Mortgage,
preserving and continuing the lien thereof either as a chattel
mortgage in accordance with the provisions of K.S.A. 58-303
(Section 58-303 of the General Statutes of Kansas 1935) or as a
security agreement under the provisions of K.S.A. 84-9-401 et seq.;
and
WHEREAS, in addition to the aforesaid filings for record in the
respective offices of the above-mentioned Registers of Deeds, the
Company-West Virginia, the Company-Kansas or the Company has filed
copies of the Mortgage and the First through Thirty-eighth
Supplemental Indentures, certified as true by it, with the Secretary
of State of Kansas; and
WHEREAS, the Company-West Virginia, the Company-Kansas or the
Company has heretofore issued, in accordance with the provisions of
the Mortgage, as heretofore supplemented, the following series of
First Mortgage Bonds:
Principal Principal
Amount Amount
Series Issued Outstanding
3-3/8% Series due 1970. . . $16,000,000 None
3-1/8% Series due 1978. . . 5,000,000 None
2-3/4% Series due 1979. . . 3,000,000 None
3-3/8% Series due 1982. . . 12,000,000 None
3-5/8% Series due 1983. . . 10,000,000 None
3-3/8% Series due 1985. . . 10,000,000 None
3-3/8% Series due 1986. . . 7,000,000 None
4-5/8% Series due 1991. . . 7,000,000 None
5-5/8% Series due 1996. . . 16,000,000 $16,000,000
8-1/2% Series due 2000. . . 35,000,000 None
8-1/8% Series due 2001. . . 35,000,000 None
7-3/8% Series due 2002. . . 25,000,000 None
9-5/8% Series due 2005. . . 40,000,000 None
6% Series due 1985. . . . . 7,000,000 None
7-3/4% Series due 2005. . . 12,500,000 None
8-3/8% Series due 2006. . . 25,000,000 None
8-1/2% Series due 2007. . . 25,000,000 None
6% Series due 2007. . . . . 10,000,000 10,000,000*
5-7/8% Series due 2007. . . 21,940,000 21,940,000*
8-7/8% Series due 2008. . . 30,000,000 None
6.80% Series due 2004 . . . 14,500,000 14,500,000*
16-1/4% Series due 1987 . . 30,000,000 None
6-1/2% Series due 1983. . . 15,000,000 None
7-1/4% Series due 1983. . . 25,500,000 None
14-7/8% Series due 1987-1991 30,000,000 None
16% Series due 1996 . . . . 25,000,000 None
15-3/4% Series due 1989 . . 40,000,000 None
13-1/2% Series due 1989 . . 100,000,000 None
14.05% Series due 1991. . . 30,000,000 None
14-1/8% Series due 1991 . . 20,000,000 None
10-7/8% Series due 1987 . . 30,000,000 None
9-3/4% Series due 2016. . . 50,000,000 None
7.00% Series A due 2031 . . 18,900,000 18,900,000
7.00% Series B due 2031 . . 308,600,000 308,600,000
7.60% Series due 2003 . . . 135,000,000 135,000,000
6-1/2% Series due 2005. . . 65,000,000 65,000,000
6.20% Series due 2006 . . . 100,000,000 100,000,000
5.10% Series due 2023 . . . 13,982,500 13,982,500
____________________
* Upon the issuance of the Thirty-ninth Series,
Fortieth Series and Forty-first Series pursuant
to this Supplemental Indenture and deposit of
the proceeds plus additional funds from the
Company with the St. Marys, La Cygne and Wamego
Trustees, these series will no longer be
Outstanding.
hereinafter sometimes called Bonds of the First through Thirty-eighth
Series; and
WHEREAS, Section 8 of the Mortgage provides that the form of each
series of bonds (other than the First Series) issued thereunder and of
the coupons to be attached to the coupon bonds of such series shall be
established by Resolution of the Board of Directors of the Company and
that the form of such series, as established by said Board of
Directors, shall specify the descriptive title of the bonds and
various other terms thereof, and may also contain such provisions not
inconsistent with the provisions of the Mortgage as the Board of
Directors may, in its discretion, cause to be inserted therein
expressing or referring to the terms and conditions upon which such
bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly
reserved to or in any way conferred upon the Company by any provision
of the Mortgage whether such power, privilege or right is in any way
restricted or is unrestricted, may be in whole or in part waived or
surrendered or subjected to any restriction if at the time
unrestricted or to additional restriction if already restricted, and
the Company may enter into any further covenants, limitations or
restrictions for the benefit of any one or more series of bonds issued
thereunder, or the Company may cure any ambiguity contained therein or
in any supplemental indenture, or may establish the terms and
provisions of any series of bonds other than said First Series, by an
instrument in writing executed and acknowledged by the Company in such
manner as would be necessary to entitle a conveyance of real estate to
record in all of the states in which any property at the time subject
to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds;
and
WHEREAS, the execution and delivery by the Company of this
Thirty-ninth Supplemental Indenture, and the terms of the bonds of the
Thirty-ninth Series, Fortieth Series, and Forty-first Series,
hereinafter referred to, have been duly authorized by the Board of
Directors of the Company by appropriate Resolutions of said Board of
Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Kansas Gas and Electric Company, in consideration of the
premises and of One Dollar ($1) to it duly paid by the Trustees at or
before the ensealing and delivery of these presents, the receipt
whereof is hereby acknowledged, and in further evidence of assurance
of the estate, title and rights of the Trustees and in order further
to secure the payment both of the principal of and interest and
premium, if any, on the bonds from time to time issued under the
Mortgage, according to their tenor and effect and the performance of
all the provisions of the Mortgage (including any instruments
supplemental thereto and any modification made as in the Mortgage
provided) and of said bonds, hereby grants, bargains, sells, releases,
conveys, assigns, transfers, mortgages, pledges, sets over and
confirms (subject, however, to Excepted Encumbrances as defined in
Section 6 of the Mortgage) unto Morgan Guaranty Trust Company of New
York and to W. A. Spooner, as Trustees under the Mortgage, and to
their successor or successors in said trust, and to said Trustees and
their successors and assigns forever, all property, real, personal
and mixed, acquired by the Company after the date of the execution and
delivery of the Mortgage, in addition to property covered by the First
through the Thirty-eighth Supplemental Indentures (except any herein
or in the Mortgage, as heretofore supplemented, expressly excepted),
now owned or, subject to the provisions of Section 87 of the Mortgage,
hereafter acquired by the Company and wheresoever situated, including
(without in anywise limiting or impairing by the enumeration of the
same the scope and intent of the foregoing or of any general
description contained in this Thirty-ninth Supplemental Indenture) all
lands, flowage rights, water rights, flumes, raceways, dams, rights of
way and roads; all steam and power houses, gas plants, street lighting
systems, standards and other equipment incidental thereto, telephone,
radio and television systems, air-conditioning systems and equipment
incidental thereto, water works, steam heat and hot water plants,
lines, service and supply systems, bridges, culverts, tracks, rolling
stock, ice or refrigeration plants and equipment, street and
interurban railway systems, offices, buildings and other structures
and the equipment thereof; all machinery, engines, boilers, dynamos,
electric and gas machines, regulators, meters, transformers,
generators, motors, electrical, gas and mechanical appliances,
conduits, cables, water, steam heat, gas or other pipes, gas mains and
pipes, service pipes, fittings, valves and connections, pole and
transmission lines, wires, cables, tools, implements, apparatus,
furniture, chattels and chooses in action; all municipal and other
franchises; all lines for the transmission and distribution of
electric current, gas, steam heat or water for any purpose, including
poles, wires, cables, pipes, conduits, ducts and all apparatus for use
in connection therewith; all real estate, lands, easements,
servitudes, licenses, permits, franchises, privileges, rights of way
and other rights in or relating to real estate or the occupancy of the
same and (except as herein or in the Mortgage, as heretofore
supplemented, expressly excepted), all the right, title and interest
of the Company in and to all other property of any kind or nature
appertaining to and/or used and/or occupied and/or enjoyed in
connection with any property hereinbefore or in the Mortgage, as
heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid
property or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of Section 57
of the Mortgage) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which the
Company now has or may hereafter acquire in and to the aforesaid
property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the
provisions of Section 87 of the Mortgage, all the property, rights and
franchises acquired by the Company after the date hereof (except any
herein or in the Mortgage, as heretofore supplemented, expressly
excepted), shall be as fully embraced within the lien hereof and the
lien of the Mortgage, as if such property, rights and franchises were
now owned by the Company and were specifically described herein and
conveyed hereby.
PROVIDED that the following are not and are not intended to be
now or hereafter granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over or confirmed
hereunder and are hereby expressly excepted from the lien and
operation of this Thirty-ninth Supplemental Indenture and from the
lien and operation of the Mortgage, viz.: (1) cash, shares of stock
and obligations (including bonds, notes and other securities) not
hereafter specifically pledged, paid, deposited or delivered under the
Mortgage or covenanted so to be; (2) merchandise, equipment, materials
or supplies held for the purpose of sale in the usual course of
business and fuel, oil and similar materials and supplies consumable
in the operation of any properties of the Company; vehicles and
automobiles; (3) bills, notes and accounts receivable, and all
contracts, leases and operating agreements not specifically pledged
under the Mortgage or covenanted so to be; and (4) electric energy,
and other materials or products generated, manufactured, produced or
purchased by the Company for sale, distribution or use in the ordinary
course of its business; provided, however, that the property and
rights expressly excepted from the lien and operation of the Mortgage
and this Thirty-ninth Supplemental Indenture in the above subdivisions
(2) and (3) shall (to the extent permitted by law) cease to be so
excepted in the event that either or both of the Trustees or a
receiver or trustee shall enter upon and take possession of the
Mortgaged and Pledged Property in the manner provided in Article XII
of the Mortgage by reason of the occurrence of a Default as defined in
said Article XII.
THERE is expressly excepted from the lien of the Mortgage and
from the lien hereof all property of the Company located in the State
of Missouri now owned or hereafter acquired unless such property in
the State of Missouri shall be subjected to the lien of the Mortgage
by an indenture or indentures supplemental thereto, pursuant to
authorization by the Board of Directors of the Company.
TO HAVE AND TO HOLD all such properties, real, personal and
mixed, granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed by the Company
as aforesaid, or intended so to be, unto the Trustees, their
successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same
terms, trusts and conditions and subject to and with the same provisos
and covenants as are set forth in the Mortgage, as supplemented, this
Thirty-ninth Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms,
conditions, provisos, covenants and provisions contained in the
Mortgage, as supplemented, shall affect and apply to the property
hereinbefore described and conveyed and to the estate, rights,
obligations and duties of the Company and Trustees and the
beneficiaries of the trust with respect to said property, and to the
Trustees and their successors as Trustees of said property in the same
manner and with the same effect as if the said property had been owned
by the Company at the time of the execution of the Mortgage, and had
been specifically and at length described in and conveyed to the
Trustees by the Mortgage as a part of the property therein stated to
be conveyed.
The Company further covenants and agrees to and with the Trustees
and their successors in said trust under the Mortgage, as follows:
ARTICLE I.
THIRTY-NINTH SERIES OF BONDS
SECTION 1. (I) There shall be a series of bonds designated ``7-
1/2% Series A due 2032'' (herein sometimes referred to as the
``Thirty-ninth Series''), each of which shall also bear the
descriptive title, First Mortgage Bond, and the form thereof, which is
established by Resolution of the Board of Directors of the Company,
shall contain suitable provisions with respect to the matters
hereinafter in this Article I specified. Bonds of the Thirty-ninth
Series shall be limited to $14,500,000 in aggregate principal amount,
except as provided in Section 16 of the Mortgage, shall mature on
April 15, 2032, and shall be issued as fully registered bonds in
denominations of Five Thousand Dollars and in any multiple or
multiples of Five Thousand Dollars. Bonds of the Thirty-ninth Series
shall bear interest at the rate of 7-1/2% per annum, payable on the
Interest Payment Date for the 1994 St. Marys Bonds, commencing
June 21, 1994, on which date interest from April 28, 1994 will be
payable, and thereafter, the Bonds of the Thirty-ninth Series shall
bear interest from the Business Day following the preceding Interest
Payment Date for the 1994 St. Marys Bonds. The principal of and
interest on bonds of the Thirty-ninth Series shall be payable at the
office or agency of the Company in the Borough of Manhattan, The City
of New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for public and private
debts. Bonds of the Thirty-ninth Series shall be dated as in Section
10 of the Mortgage provided.
(II) Upon the redemption, in whole or in part, of the City of
St. Marys, Kansas, Pollution Control Revenue Refunding Bonds (Kansas
Gas and Electric Company Project) Series 1994 (hereinafter referred to
as the ``1994 St. Marys Bonds''), issued under the Indenture of Trust,
dated as of April 15, 1994 (hereinafter referred to as the ``St. Marys
Indenture''), of the City of St. Marys, Kansas, bonds of the Thirty-
ninth Series shall be redeemed in whole or in like part. To effect
the redemption of bonds of the Thirty-ninth Series, the trustee under
the St. Marys Indenture (hereinafter referred to as the ``St. Marys
Trustee'') shall deliver to the Corporate Trustee (and mail a copy
thereof to the Company) a written demand (hereinafter referred to as a
``St. Marys Redemption Demand'') for the redemption of bonds of the
Thirty-ninth Series equal in principal amount to the principal amount
of the 1994 St. Marys Bonds to be redeemed. The St. Marys Redemption
Demand shall be signed by the President, a Vice President, an
Assistant Vice President or a Trust Officer of the St. Marys Trustee
and shall state: (1) the aggregate principal amount of the 1994 St.
Marys Bonds then outstanding under the St. Marys Indenture; (2) the
principal amount of the 1994 St. Marys Bonds to be redeemed; (3) the
interest thereon to be payable on the redemption date; (4) the
redemption date and that notice thereof has been given as
required in the St. Marys Indenture; (5) in the case of an optional
redemption of the 1994 St. Marys Bonds, that the Company has informed
the St. Marys Trustee that the Company intends to deposit sufficient
available funds with the St. Marys Trustee to effect such redemption;
and (6) that the Corporate Trustee is thereby instructed to call for
redemption bonds of the Thirty-ninth Series equal in principal amount
to the principal amount of the 1994 St. Marys Bonds specified in (2)
above. The St. Marys Redemption Demand shall also contain a waiver of
notice of such redemption by the St. Marys Trustee, as holder of all
bonds of the Thirty-ninth Series then outstanding. The Corporate
Trustee may conclusively presume the statements contained in the St.
Marys Redemption Demand to be correct.
Except as provided in the next sentence, redemption of bonds of
the Thirty-ninth Series shall be at the principal amount of the bonds
to be redeemed, together with accrued interest to the redemption date,
and such amount shall become and be due and payable on the redemption
date. In the event the 1994 St. Marys Bonds bear interest at a Long-
Term Interest Rate (as defined in the St. Marys Indenture), the bonds
of the Thirty-ninth Series will be redeemable as follows: If the 1994
St. Marys Bonds bear interest at the Long-Term MATES Rate (as defined
in the St. Marys Indenture), the bonds of the Thirty-ninth Series
shall be redeemable at the same percentages of their principal amount
and during the same call periods as are established under the St.
Marys Indenture with respect to the 1994 St. Marys Bonds, plus accrued
interest to the date of redemption. If, on the date the 1994 St.
Marys Bonds begin to bear a Long-Term Interest Rate ("Effective
Date"), the length of the Long-Term Interest Rate Period falls within
one of the entries in the Long-Term Interest Rate Period column, the
bonds of the Thirty-ninth Series will not be redeemable for the number
of years after the Effective Date shown in the No-call Period column.
After the No-call Period, the bonds of the Thirty-ninth Series may be
redeemed at the percentage of the principal amount shown in the
Initial Premium column. The premium will decline every six months by
one-half of one percentage point until the bonds of the Thirty-ninth
Series are redeemable without premium.
Long-Term Interest Rate Period
But Less Than No-Call Initial
Greater Than Or Equal To Period Premium
15 years N/A 10 years 102%
10 years 15 years 7 years 101.5
7 years 10 years 5 years 101
4 years 7 years 3 years 101
3 years 4 years 2 years 100.5
2 years 3 years 1 year 100.5
1 year 2 years 1 year 100
The Company hereby covenants that it shall notify the Corporate
Trustee no later than thirty days after the date, if any, on which the
1994 St. Marys Bonds commence bearing a Long-Term Interest Rate, such
notice to set forth the Long-Term Interest Rate Period then in effect
for the 1994 St. Marys Bonds; and of any change to the redemption
table if different from above.
The Company hereby covenants that if a St. Marys Redemption
Demand shall be delivered to the Trustee, the Company, except as
otherwise provided in paragraph (III) of this Section 1, will deposit,
on or before the redemption date, with the Corporate Trustee, in
accordance with Article X of the Mortgage, an amount in cash
sufficient to redeem the bonds of the Thirty-ninth Series so called
for redemption.
(III) All bonds of the Thirty-ninth Series shall be pledged
by the Company with the St. Marys Trustee to secure the payment of the
principal of, and interest on, the 1994 St. Marys Bonds. The
obligation of the Company to make payments with respect to the
principal of and up to 7 1/2% per annum of the interest on bonds of
the Thirty-ninth Series shall be fully or partially, as the case may
be, satisfied and discharged to the extent that, at the time that any
such payment shall be due, the then due principal of and interest on
the 1994 St. Marys Bonds shall have been fully or partially paid, or
there shall be held by the St. Marys Trustee pursuant to the St. Marys
Indenture sufficient available funds to fully or partially pay the
then due principal of and interest on the 1994 St. Marys Bonds. The
Corporate Trustee may conclusively presume that the obligation of the
Company to make payments with respect to the principal of and interest
on bonds of the Thirty-ninth Series shall have been fully satisfied
and discharged unless and until the Corporate Trustee shall have
received a written notice from the St. Marys Trustee, signed by its
President, a Vice President or a Trust Officer, stating (i) that
timely payment of the principal of or interest on the 1994 St. Marys
Bonds required to be made by the Company has not been made, (ii) that
there are not sufficient available funds held by the St. Marys Trustee
pursuant to the St. Marys Indenture to make such payment, and
(iii) the amount of funds, in addition to available funds held by the
St. Marys Trustee pursuant to the St. Marys Indenture, required to
make such payment. Notwithstanding any other provisions of this
Supplemental Indenture, interest on the bonds of the Thirty-ninth
Series shall be deemed fully satisfied and discharged as provided
herein even if the interest rate on bonds of the Thirty-ninth Series
may be higher or lower than the interest rate on the 1994 St. Marys
Bonds at the time interest on the 1994 St. Marys Bonds is paid.
(IV) At the option of the registered owner, any bonds of the
Thirty-ninth Series, upon surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The City
of New York, shall be exchangeable for a like aggregate principal
amount of bonds of the same series of other authorized denominations.
The bonds of the Thirty-ninth Series may bear such legends as may be
necessary to comply with any law or with any rules or regulations made
pursuant thereto or with the rules or regulations of any stock
exchange or to conform to usage with respect thereto.
(V) Bonds of the Thirty-ninth Series shall be transferable
upon the surrender thereof, for cancellation together with a written
instrument of transfer in form approved by the registrar duly executed
by the registered owner or by his duly authorized attorney, at the
office or agency of the Company in the Borough of Manhattan, The City
of New York.
ARTICLE II.
FORTIETH SERIES OF BONDS
SECTION 1. (I) There shall be a series of bonds designated ``7-
1/2% Series B due 2027'' (herein sometimes referred to as the
``Fortieth Series''), each of which shall also bear the descriptive
title, First Mortgage Bond, and the form thereof, which is established
by Resolution of the Board of Directors of the Company, shall contain
suitable provisions with respect to the matters hereinafter in this
Article II specified. Bonds of the Fortieth Series shall be limited
to $21,940,000 in aggregate principal amount, except as provided in
Section 16 of the Mortgage, shall mature on April 15, 2027, and shall
be issued as fully registered bonds in denominations of Five Thousand
Dollars and in any multiple or multiples of Five Thousand Dollars.
Bonds of the Fortieth Series shall bear interest at the rate of 7-1/2%
per annum, payable on the Interest Payment Date for the 1994 La Cygne
Bonds (as defined below), commencing June 21, 1994, on which date
interest from April 28, 1994 will be payable, and thereafter, the
Bonds of the Fortieth Series shall bear interest from the Business Day
following the preceding Interest Payment Date for the 1994 La Cygne
Refunding Bonds. The principal of and interest on bonds of the
Fortieth Series shall be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, in such
coin or currency of the United States of America as at the time of
payment is legal tender for public and private debts. Bonds of the
Fortieth Series shall be dated as in Section 10 of the Mortgage
provided.
(II) Upon the redemption, in whole or in part, of the City of La
Cygne, Kansas, Pollution Control Revenue Refunding Bonds (Kansas Gas
and Electric Company Project) Series 1994B (hereinafter referred to as
the ``1994 La Cygne Bonds''), issued under the Indenture of Trust,
dated as of April 15, 1994 (hereinafter referred to as the ``La Cygne
Indenture''), of the City of La Cygne, Kansas, Bonds of the Fortieth
Series shall be redeemed in whole or in like part. To effect the
redemption of bonds of the Fortieth Series, the trustee under the La
Cygne Indenture (hereinafter referred to as the ``La Cygne Trustee'')
shall deliver to the Corporate Trustee (and mail a copy thereof to the
Company) a written demand (hereinafter referred to as a ``La Cygne
Redemption Demand'') for the redemption of bonds of the Fortieth
Series equal in principal amount to the principal amount of the 1994
La Cygne Bonds to be redeemed. The La Cygne Redemption Demand shall
be signed by the President, a Vice President, an Assistant Vice
President or a Trust Officer of the La Cygne Trustee and shall state:
(1) the aggregate principal amount of the 1994 La Cygne Bonds then
outstanding under the La Cygne Indenture; (2) the principal amount of
the 1994 La Cygne Bonds to be redeemed; (3) the interest thereon to be
payable on the redemption date; (4) the redemption date and that
notice thereof has been given as required in the La Cygne Indenture;
(5) in the case of an optional redemption of the 1994 La Cygne Bonds,
that the Company has informed the La Cygne Trustee that the Company
intends to deposit sufficient available funds with the La Cygne
Trustee to effect such redemption; and (6) that the Corporate Trustee
is thereby instructed to call for redemption bonds of the Fortieth
Series equal in principal amount to the principal amount of the 1994
La Cygne Bonds specified in (2) above. The La Cygne Redemption Demand
shall also contain a waiver of notice of such redemption by the La
Cygne Trustee, as holder of all bonds of the Fortieth Series then
outstanding. The Corporate Trustee may conclusively presume the
statements contained in the La Cygne Redemption Demand to be correct.
Except as provided in the next sentence, redemption of bonds of
the Fortieth Series shall be at the principal amount of the bonds to
be redeemed, together with accrued interest to the redemption date,
and such amount shall become and be due and payable on the redemption
date. In the event the 1994 La Cygne Bonds bear interest at a Long-
Term Interest Rate (as defined in the La Cygne Indenture), the bonds
of the Fortieth Series will be redeemable as follows: If the 1994 La
Cygne Bonds bear interest at the Long-Term MATES Rate (as defined in
the La Cygne Indenture), the bonds of the Fortieth Series shall be
redeemable at the same percentages of their principal amount and
during the same call periods as are established under the La Cygne
Indenture with respect to the 1994 La Cygne Bonds, plus accrued
interest to the date of redemption. If, on the date the 1994 La Cygne
Bonds begin to bear a Long-Term Interest Rate ("Effective Date"), the
length of the Long-Term Interest Rate Period falls within one of the
entries in the Long-Term Interest Rate Period column, the bonds of the
Fortieth Series will not be redeemable for the number of years after
the Effective Date shown in the No-call Period column. After the No-
call Period, the bonds of the Fortieth Series may be redeemed at the
percentage of the principal amount shown in the Initial Premium
column. The premium will decline every six months by one-half of one
percentage point until the bonds of the Fortieth Series are redeemable
without premium.
Long-Term Interest Rate Period
But Less Than No-Call Initial
Greater Than Or Equal To Period Premium
15 years N/A 10 years 102%
10 years 15 years 7 years 101.5
7 years 10 years 5 years 101
4 years 7 years 3 years 101
3 years 4 years 2 years 100.5
2 years 3 years 1 year 100.5
1 year 2 years 1 year 100
The Company hereby covenants that it shall notify the Corporate
Trustee no later than thirty days after the date, if any, on which the
1994 La Cygne Bonds commence bearing a Long-Term Interest Rate, such
notice to set forth the Long-Term Interest Rate Period then in effect
for the 1994 La Cygne Bonds; and of any change in the redemption table
if different from above.
The Company hereby covenants that if a La Cygne Redemption Demand
shall be delivered to the Trustee, the Company, except as otherwise
provided in paragraph (III) of this Section 1, will deposit, on or
before the redemption date, with the Corporate Trustee, in accordance
with Article X of the Mortgage, an amount in cash sufficient to redeem
the bonds of the Fortieth Series so called for redemption.
(III) All bonds of the Fortieth Series shall be pledged by the
Company with the La Cygne Trustee to secure the payment of the
principal of, and up to 7 1/2% per annum of the interest on, the 1994
La Cygne Bonds. The obligation of the Company to make payments with
respect to the principal of and interest on bonds of the Fortieth
Series shall be fully or partially, as the case may be, satisfied and
discharged to the extent that, at the time that any such payment shall
be due, the then due principal of and interest on the 1994 La Cygne
Bonds shall have been fully or partially paid, or there shall be held
by the La Cygne Trustee pursuant to the La Cygne Indenture sufficient
available funds to fully or partially pay the then due principal of
and interest on the 1994 La Cygne Bonds. The Corporate Trustee may
conclusively presume that the obligation of the Company to make
payments with respect to the principal of and interest on bonds of the
Fortieth Series shall have been fully satisfied and discharged unless
and until the Corporate Trustee shall have received a written notice
from the La Cygne Trustee, signed by its President, a Vice President
or a Trust Officer, stating (i) that timely payment of the principal
of or interest on the 1994 La Cygne Bonds required to be made by the
Company has not been made, (ii) that there are not sufficient
available funds held by the La Cygne Trustee pursuant to the La Cygne
Indenture to make such payment, and (iii) the amount of funds, in
addition to available funds held by the La Cygne Trustee pursuant to
the La Cygne Indenture, required to make such payment.
Notwithstanding any other provisions of this Supplemental Indenture,
interest on the bonds of the Fortieth Series shall be deemed fully
satisfied and discharged as provided herein even if the interest rate
on bonds of the Fortieth Series may be higher or lower than the
interest rate on the 1994 La Cygne Bonds at the time interest on the
1994 La Cygne Bonds is paid.
(IV) At the option of the registered owner, any bonds of the
Fortieth Series, upon surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The City
of New York, shall be exchangeable for a like aggregate principal
amount of bonds of the same series of other authorized denominations.
The bonds of the Fortieth Series may bear such legends as may be
necessary to comply with any law or with any rules or regulations made
pursuant thereto or with the rules or regulations of any stock
exchange or to conform to usage with respect thereto.
(V) Bonds of the Fortieth Series shall be transferable upon the
surrender thereof, for cancellation together with a written instrument
of transfer in form approved by the registrar duly executed by the
registered owner or by his duly authorized attorney, at the office or
agency of the Company in the Borough of Manhattan, The City of New
York.
ARTICLE III.
FORTY-FIRST SERIES OF BONDS
SECTION 1. (I) There shall be a series of bonds designated ``7-
1/2% Series C due 2032'' (herein sometimes referred to as the ``Forty-
first Series''), each of which shall also bear the descriptive title,
First Mortgage Bond, and the form thereof, which is established by
Resolution of the Board of Directors of the Company, shall contain
suitable provisions with respect to the matters hereinafter in this
Article III specified. Bonds of the Forty-first Series shall be
limited to $10,000,000 in aggregate principal amount, except as
provided in Section 16 of the Mortgage, shall mature on April 15,
2032, and shall be issued as fully registered bonds in denominations
of Five Thousand Dollars and in any multiple or multiples of Five
Thousand Dollars. Bonds of the Forty-first Series shall bear interest
at the rate of 7-1/2% per annum, payable on the Interest Payment Date
for the 1994 Wamego Bonds, commencing June 21, 1994, on which date
interest from April 28, 1994 will be payable, and thereafter, the
Bonds of the Forty-first Series shall bear interest from the Business
day following the preceding Interest Payment Date for the 1994 Wamego
Bonds. The principal of and interest on bonds of the Forty-first
Series shall be payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, in such coin or currency
of the United States of America as at the time of payment is legal
tender for public and private debts. Bonds of the Forty-first Series
shall be dated as in Section 10 of the Mortgage provided.
(II) Upon the redemption, in whole or in part, of the City of
Wamego, Kansas, Pollution Control Revenue Refunding Bonds (Kansas Gas
and Electric Company Project) Series 1994 (hereinafter referred to as
the ``1994 Wamego Bonds''), issued under the Indenture of Trust, dated
as of March 1, 1994 (hereinafter referred to as the ``Wamego
Indenture''), of the City of Wamego, Kansas, bonds of the Forty-first
Series shall be redeemed in whole or in like part. To effect the
redemption of bonds of the Forty-first Series, the trustee under the
Wamego Indenture (hereinafter referred to as the ``Wamego Trustee'')
shall deliver to the Corporate Trustee (and mail a copy thereof to the
Company) a written demand (hereinafter referred to as a ``Wamego
Redemption Demand'') for the redemption of bonds of the Forty-first
Series equal in principal amount to the principal amount of the 1994
Wamego Bonds to be redeemed. The Wamego Redemption Demand shall be
signed by the President, a Vice President, an Assistant Vice President
or a Trust Officer of the Wamego Trustee and shall state: (1) the
aggregate principal amount of the 1994 Wamego Bonds then outstanding
under the Wamego Indenture; (2) the principal amount of the 1994
Wamego Bonds to be redeemed; (3) the interest thereon to be payable on
the redemption date; (4) the redemption date and that notice thereof
has been given as required in the Wamego Indenture; (5) in the case of
an optional redemption of the 1994 Wamego Bonds, that the Company has
informed the Wamego Trustee that the Company intends to deposit
sufficient available funds with the Wamego Trustee to effect such
redemption; and (6) that the Corporate Trustee is thereby instructed
to call for redemption bonds of the Forty-first Series equal in
principal amount to the principal amount of the 1994 Wamego Bonds
specified in (2) above. The Wamego Redemption Demand shall also
contain a waiver of notice of such redemption by the Wamego Trustee,
as holder of all bonds of the Forty-first Series then outstanding.
The Corporate Trustee may conclusively presume the statements
contained in the Wamego Redemption Demand to be correct.
Except as provided in the next sentence, redemption of bonds of
the Forty-first Series shall be at the principal amount of the bonds
to be redeemed, together with accrued interest to the redemption date,
and such amount shall become and be due and payable on the redemption
date. In the event the 1994 Wamego Bonds bear interest at a Long-Term
Interest Rate (as defined in the Wamego Indenture), the bonds of the
Forty-First Series will be redeemable as follows: If the 1994 Wamego
Bonds bear interest at the Long-Term MATES Rate (as defined in the
Wamego Indenture), the bonds of the Forty-first Series shall be
redeemable at the same percentages of their principal amount and
during the same call periods as are established under the Wamego
Indenture with respect to the 1994 Wamego Bonds, plus accrued interest
to the date of redemption. If, on the date the 1994 Wamego Bonds
begin to bear a Long-Term Interest Rate ("Effective Date"), the length
of the Long-Term Interest Rate Period falls within one of the entries
in the Long-Term Interest Rate Period column, the bonds of the Forty-
first Series will not be redeemable for the number of years after the
Effective Date shown in the No-call Period column. After the No-call
Period, the bonds of the Forty-first Series may be redeemed at the
percentage of the principal amount shown in the Initial Premium
column. The premium will decline every six months by one-half of one
percentage point until the bonds of the Forty-first Series are
redeemable without premium.
Long-Term Interest Rate Period
But Less Than No-Call Initial
Greater Than Or Equal To Period Premium
15 years N/A 10 years 102%
10 years 15 years 7 years 101.5
7 years 10 years 5 years 101
4 years 7 years 3 years 101
3 years 4 years 2 years 100.5
2 years 3 years 1 year 100.5
1 year 2 years 1 year 100
The Company hereby covenants that it shall notify the Corporate
Trustee no later than thirty days after the date, if any, on which the
1994 Wamego Bonds commence bearing a Long-Term Interest Rate, such
notice to set forth the Long-Term Interest Rate Period then in effect
for the 1994 Wamego Bonds; and of any change to the redemption table
if different from above.
The Company hereby covenants that if a Wamego Redemption Demand
shall be delivered to the Trustee, the Company, except as otherwise
provided in paragraph (III) of this Section 1, will deposit, on or
before the redemption date, with the Corporate Trustee, in accordance
with Article X of the Mortgage, an amount in cash sufficient to redeem
the bonds of the Forty-first Series so called for redemption.
(III) All bonds of the Forty-first Series shall be pledged by
the Company with the Wamego Trustee to secure the payment of the
principal of, and up to 7 1/2% per annum of the interest on, the 1994
Wamego Bonds. The obligation of the Company to make payments with
respect to the principal of and interest on bonds of the Forty-first
Series shall be fully or partially, as the case may be, satisfied and
discharged to the extent that, at the time that any such payment shall
be due, the then due principal of and interest on the 1994 Wamego
Bonds shall have been fully or partially paid, or there shall be held
by the Wamego Trustee pursuant to the Wamego Indenture sufficient
available funds to fully or partially pay the then due principal of
and interest on the 1994 Wamego Bonds. The Corporate Trustee may
conclusively presume that the obligation of the Company to make
payments with respect to the principal of and interest on bonds of the
Forty-first Series shall have been fully satisfied and discharged
unless and until the Corporate Trustee shall have received a written
notice from the Wamego Trustee, signed by its President, a Vice
President or a Trust Officer, stating (i) that timely payment of the
principal of or interest on the 1994 Wamego Bonds required to be made
by the Company has not been made, (ii) that there are not sufficient
available funds held by the Wamego Trustee pursuant to the Wamego
Indenture to make such payment, and (iii) the amount of funds, in
addition to available funds held by the Wamego Trustee pursuant to the
Wamego Indenture, required to make such payment. Notwithstanding any
other provisions of this Supplemental Indenture, interest on the bonds
of the Forty-first Series shall be deemed fully satisfied and
discharged as provided herein even if the interest rate on bonds of
the Forty-first Series may be higher or lower than the interest rate
on the 1994 Wamego Bonds at the time interest on the 1994 Wamego Bonds
is paid.
(IV) At the option of the registered owner, any bonds of the
Forty-first Series, upon surrender thereof, for cancellation, at the
office or agency of the Company in the Borough of Manhattan, The City
of New York, shall be exchangeable for a like aggregate principal
amount of bonds of the same series of other authorized denominations.
The bonds of the Forty-first Series may bear such legends as may be
necessary to comply with any law or with any rules or regulations made
pursuant thereto or with the rules or regulations of any stock
exchange or to conform to usage with respect thereto.
(V) Bonds of the Forty-first Series shall be transferable upon
the surrender thereof, for cancellation together with a written
instrument of transfer in form approved by the registrar duly executed
by the registered owner or by his duly authorized attorney, at the
office or agency of the Company in the Borough of Manhattan, The City
of New York.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 1. All bonds of the Thirty-ninth Series, Fortieth Series
and Forty-first Series acquired by the Company shall forthwith be
delivered to the Corporate Trustee for cancellation.
SECTION 2. Section 64 of the Mortgage is hereby deleted in its
entirety.
SECTION 3. Subject to the amendments provided for in this
Thirty-ninth Supplemental Indenture, the terms defined in the
Mortgage, as heretofore supplemented, shall, for all purposes of this
Thirty-ninth Supplemental Indenture, have the meanings specified in
the Mortgage, as heretofore supplemented.
SECTION 4. The Trustees hereby accept the trusts herein
declared, provided, created or supplemented and agree to perform the
same upon the terms and conditions set forth herein and in the
Mortgage, as heretofore amended and supplemented, and upon the
following terms and conditions:
The Trustees shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Thirty-ninth
Supplemental Indenture or for or in respect of the recitals contained
herein, all of which recitals are made by the Company solely. In
general, each and every term and condition contained in Article XVI of
the Mortgage, as heretofore amended and supplemented, shall apply to
and form part of this Thirty-ninth Supplemental Indenture with the
same force and effect as if the same were herein set forth in full
with such omissions, variations and insertions, if any, as may be
appropriate to make the same conform to the provisions of this Thirty-
ninth Supplemental Indenture.
SECTION 5. Subject to the provisions of Article XV and
Article XVI of the Mortgage, as heretofore amended and supplemented,
whenever in this Thirty-ninth Supplemental Indenture any of the
parties hereto is named or referred to, this shall be deemed to
include the successors or assigns of such party, and all the covenants
and agreements in this Thirty-ninth Supplemental Indenture contained
by or on behalf of the Company or by or on behalf of the Trustees
shall bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not.
SECTION 6. Nothing in this Thirty-ninth Supplemental Indenture,
expressed or implied, is intended, or shall be construed, to confer
upon, or to give to, any person, firm or corporation, other than the
parties hereto and the holders of the bonds and coupons Outstanding
under the Mortgage, any right, remedy or claim under or by reason of
this Thirty-ninth Supplemental Indenture or any covenant, condition,
stipulation, promise or agreement hereof, and all the covenants,
conditions, stipulations, promises and agreements in this Thirty-ninth
Supplemental Indenture contained by or on behalf of the Company shall
be for the sole and exclusive benefit of the parties hereto, and of
the holders of the bonds and of the coupons Outstanding under the
Mortgage.
SECTION 7. The Company reserves the right, subject to
appropriate corporate action, but without any consent or other action
by holders of bonds of the Thirty-ninth Series, Fortieth Series,
Forty-first Series, or of any subsequent series of bonds, to make such
amendments to the Mortgage, as supplemented, as shall be necessary in
order to (A) permit the issuance of additional Prior Lien Bonds other
than to the Corporate Trustee (i) in a principal amount not to exceed
the principal amount of Bonds which could then be issued on the basis
of Property Additions under the Mortgage or (ii) upon the redemption
or retirement of Prior Lien Bonds secured by such Prior Lien, (B) to
remove the requirement that Prior Lien Bonds be issued to the
Corporate Trustee, (C) remove the provisions of Article V which
eliminate from the calculation of unfunded net Property Additions
available for issuance of Bonds the amount of any Property Additions
subject to a Prior Lien if the aggregate amount of Outstanding Prior
Lien Bonds is 15% or more of the sum of the Outstanding Bonds and
Prior Lien Bonds, and (D) make such other amendments to the Mortgage
as may be necessary or desirable in the opinion of the Company to
effect the foregoing.
SECTION 8. This Thirty-ninth Supplemental Indenture shall be
executed in several counterparts, each of which shall be an original
and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, KANSAS GAS AND ELECTRIC COMPANY has caused
its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by its President or one of its Vice Presidents, and
its corporate seal to be attested by its Secretary or one of its
Assistant Secretaries for and in its behalf, MORGAN GUARANTY TRUST
COMPANY OF NEW YORK has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its
Vice Presidents and its corporate seal to be attested by one of its
Assistant Secretaries, and has hereunto set his hand and affixed his
seal, all as of the day and year first above written.
KANSAS GAS AND ELECTRIC COMPANY
By /s/ Kent R. Brown
Kent R. Brown
President
Attest:
/s/ Richard D. Terrill
Richard D. Terrill
Secretary
Executed, sealed and delivered by
KANSAS GAS AND ELECTRIC COMPANY,
in the presence of:
/s/ Stacy F. Kramer
Stacy F. Kramer
/s/ Robert J. Knott
Robert J. Knott
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Trustee
By /s/ Norma Pane
Norma Pane
Vice President
Attest:
/s/ Michele D. Sledge
Assistant Secretary
/s/ W. A. Spooner
(W.A. Spooner)
Executed, sealed and delivered by
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK and W.A. SPOONER, in
the presence of:
/s/ Madeline Schneider
/s/ Dennis Karoly
STATE OF KANSAS )
: ss.:
COUNTY OF SEDGWICK )
BE IT REMEMBERED, that on this 15th day of April, A.D. 1994,
before me, the undersigned, a Notary Public within and for the
County and State aforesaid, came Kent R. Brown, the President of
KANSAS GAS AND ELECTRIC COMPANY, a corporation duly organized,
incorporated and existing under the laws of the State of Kansas,
who is personally known to me to be such officer, and who is
personally known to me to be the same person who executed, as
such officer, the within instrument of writing, and such person
duly acknowledged the execution of the same to be the act and
deed of said corporation and that said instrument of writing was
so executed by order of the Board of Directors of said
corporation.
On this 15th day of April, 1994, before me appeared Kent R.
Brown, to me personally known, who being by me duly sworn did say
that he is the President of KANSAS GAS AND ELECTRIC COMPANY, and
that the seal affixed to the foregoing instrument is the
corporate seal of said corporation, and that said instrument was
signed and sealed in behalf of said corporation by authority of
its Board of Directors, and said Kent R. Brown acknowledged said
instrument to be the free act and deed of said corporation.
On the 15th day of April in the year 1994, before me
personally came Kent R. Brown to me known, who, being by me duly
sworn, did depose and say that he resides at 4907 Portwest
Circle, Wichita, Kansas; that he is the President of KANSAS GAS
AND ELECTRIC COMPANY, one of the corporations described in and
which executed the above instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name
thereto by like order.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal on the day and year above written.
/s/ Regina I. Degarmo
REGINA I. DEGARMO
NOTARY PUBLIC - STATE OF KANSAS
MY APPOINTMENT EXPIRES AUGUST 4, 1997
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED, that on this 15th day of April, A.D. 1994,
before me, the undersigned, a Notary Public within and for the
County and State aforesaid, came Norma Pane, a Vice President of
Morgan Guaranty Trust Company of New York, a corporation, duly
organized, incorporated and existing under the laws of the State
of New York, who is personally known to me to be such officer,
and who is personally known to me to be the same person who
executed, as such officer, the within instrument of writing, and
such person duly acknowledged the execution of the same to be the
act and deed of said corporation and that said instrument of
writing was so executed by authority of the Board of Directors of
said corporation.
On this 15th day of April, 1994, before me appeared Norma
Pane, to me personally known, who being by me duly sworn did say
that she is a Vice President of MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, and that the seal affixed to the foregoing instrument
is the corporate seal of said corporation, and that said
instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors, and said Norma Pane
acknowledged said instrument to be the free act and deed of said
corporation.
On the 15th day of April in the year 1994, before me
personally came Norma Pane, to me known, who, being by me duly
sworn, did depose and say that she resides at 2057 63rd Street,
Brooklyn, New York; that she is a Vice President of MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, one of the corporations
described in and which executed the above instrument; that she
knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
she signed her name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal on the day and year above written.
/s/ Alison M. Levchuck
ALISON M. LEVCHUCK
NOTARY PUBLIC, STATE OF NEW YORK
NO. 4997425
QUALIFIED IN NASSAU COUNTY
COMMISSION EXPIRES JUNE 8, 1994
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 15th day of April in the year 1994, before me, the
undersigned, a Notary Public in and for the State of New York, in
the County of New York, personally appeared and came W. A.
Spooner, to me known and known to me to be the person described
in and who executed the within and foregoing instrument and whose
name is subscribed thereto and acknowledged to me that he
executed the same.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal the day and year in this certificate
first above written.
/s/ Alison M. Levchuck
ALISON M. LEVCHUCK
NOTARY PUBLIC, STATE OF NEW YORK
NO. 4997425
QUALIFIED IN NASSAU COUNTY
COMMISSION EXPIRES JUNE 8, 1994
<TABLE> Exhibit 12
KANSAS GAS AND ELECTRIC COMPANY
Computations of Ratio of Earnings to Fixed Charges
(Dollares in Thousands)
<CAPTION>
1994 1993
<S> <C> <C>
Net Income. . . . . . . . . . . . . $104,526 $108,103
Taxes on Income . . . . . . . . . . 55,349 46,896
Net Income Plus Taxes. . . . . 159,875 154,999
Fixed Charges:
Interest on Long-Term Debt. . . . 47,827 53,908
Interest on Other Indebtedness. . 5,183 6,075
Interest on Corporate-owned
Life Insurance Borrowings . . . 20,990 11,865
Interest Applicable to Rentals. . 25,096 24,967
Total Fixed Charges . . . . . 99,096 96,815
Earnings (1). . . . . . . . . . . . $258,971 $251,814
Ratio of Earnings to Fixed Charges. 2.61 2.60
</TABLE>
<TABLE>
1992
Pro Forma April 1 | January 1
1992 (2) to Dec. 31 | to March 31 1991 1990
(Successor) |(Predecessor)
<S> <C> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . $ 77,981 $ 71,941 | $ 6,040 $ 53,602 $ 64,184
Taxes on Income . . . . . . . . . . 20,378 23,551 | (3,173) 15,955 17,916
Net Income Plus Taxes. . . . . 98,359 95,492 | 2,867 69,557 82,100
|
Fixed Charges: |
Interest on Long-Term Debt. . . . 57,862 42,889 | 14,973 59,668 59,263
Interest on Other Indebtedness. . 15,121 11,777 | 3,344 17,838 17,432
Interest on Corporate-owned |
Life Insurance Borrowings . . . 7,155 5,294 | 1,861 7,304 7,134
Interest Applicable to Rentals. . 30,212 22,133 | 8,079 32,193 32,119
Total Fixed Charges . . . . . 110,350 82,093 | 28,257 117,003 115,948
|
Earnings (1). . . . . . . . . . . . $208,709 $177,585 | $ 31,124 $186,560 $198,048
|
Ratio of Earnings to Fixed Charges. 1.89 2.16 | 1.10 1.59 1.71
(1) Earnings are deemed to consist of net income to which has been added income taxes (including
net deferred investment tax credit) and fixed charges. Fixed charges consist of all
interest on indebtedness, amortization of debt discount and expense, and the portion of
rental expense which represents an interest factor.
(2) The pro forma information for the year ended December 31, 1992 was derived by combining the
historical information of the three month period ended March 31, 1992 (Predecessor) and the
nine month period ended December 31, 1992 (Successor). No purchase accounting adjustments
were made for periods prior to the Merger in determining pro forma amounts because such
adjustments would be immaterial. (See Note 1 of Notes to Financial Statements)
</TABLE>
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously filed
Registration Statements File No. 33-50075 of Kansas Gas and Electric Company on
Form S-3, No. 33-57435 of Western Resources, Inc. on Form S-8 and Nos. 33-49467,
33-49505, 33-49553, and 33-50069 of Western Resources, Inc. on Form S-3.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
March 10, 1995
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-50075 of Kansas Gas and Electric Company on Form S-3, No. 33-57435 of
Western Resources, Inc. on Form S-8 and Nos. 33-49467, 33-49505, 33-49553, and
33-50069 of Western Resources, Inc. on Form S-3 of our report dated January
29, 1993 appearing in this Annual Report on Form 10-K of Kansas Gas and
Electric Company for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AT DECEMBER 31, 1994 AND THE STATEMENT OF INCOME
AND THE STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER
31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,629,217
<OTHER-PROPERTY-AND-INVEST> 28,505
<TOTAL-CURRENT-ASSETS> 193,608
<TOTAL-DEFERRED-CHARGES> 291,480
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,142,810
<COMMON> 1,065,634
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 159,570
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,225,204
0
0
<LONG-TERM-DEBT-NET> 699,992
<SHORT-TERM-NOTES> 50,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 1,048
<LEASES-CURRENT> 708
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,215,858
<TOT-CAPITALIZATION-AND-LIAB> 3,142,810
<GROSS-OPERATING-REVENUE> 619,880
<INCOME-TAX-EXPENSE> 69,929
<OTHER-OPERATING-EXPENSES> 408,230
<TOTAL-OPERATING-EXPENSES> 470,869
<OPERATING-INCOME-LOSS> 149,011
<OTHER-INCOME-NET> 7,015
<INCOME-BEFORE-INTEREST-EXPEN> 156,026
<TOTAL-INTEREST-EXPENSE> 51,500
<NET-INCOME> 104,526
0
<EARNINGS-AVAILABLE-FOR-COMM> 104,526
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 47,827
<CASH-FLOW-OPERATIONS> 130,419
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
