SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
-- OR --
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Texas Utilities Company
A Texas Corporation I.R.S. Employer
Commission File Number 1-12833 Identification
No. 75-2669310
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
Texas Utilities Electric Company
A Texas Corporation I.R.S. Employer
Commission File Number 1-11668 Identification
No. 75-1837355
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Common Stock outstanding at May 8, 1998:
Texas Utilities Company: 245,315,522 shares, without par value.
Texas Utilities Electric Company: 138,156,400 shares, without par value.
This combined Form 10-Q is filed separately by Texas Utilities Company and
Texas Utilities Electric Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf except
that the information with respect to Texas Utilities Electric Company, other
than the condensed consolidated financial statements of Texas Utilities
Electric Company, is filed by each of Texas Utilities Company and Texas
Utilities Electric Company. Each registrant makes no representation as to
information filed by the other registrant.
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[THIS PAGE LEFT BLANK INTENTIONALLY]
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TABLE OF CONTENTS
Part I. Financial information Page
Item 1. Financial Statements
Texas Utilities Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three and Twelve Months Ended March 31, 1998 and 1997 3
Condensed Statements of Consolidated Comprehensive Income -
Three and Twelve Months Ended March 31, 1998 and 1997 4
Condensed Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 6
Texas Utilities Electric Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three and Twelve Months Ended March 31, 1998 and 1997 8
Condensed Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1998 and 1997 9
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 10
Notes to Condensed Consolidated Financial Statements 12
Independent Accountants' Reports 20
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 22
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 29
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 31
APPENDIX A - Financial Information of ENSERCH Corporation and Subsidiaries
2
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
---------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . . $2,498,666 $1,493,804 $8,950,470 $6,580,831
OPERATING EXPENSES
Fuel and purchased power. . . . . . . . . . . . . . . . . . . . . 454,324 492,281 2,174,732 2,146,758
Gas purchased for resale. . . . . . . . . . . . . . . . . . . . . 830,609 - 1,883,586 -
Operation and maintenance . . . . . . . . . . . . . . . . . . . . 440,250 325,200 1,663,200 1,300,037
Depreciation and amortization . . . . . . . . . . . . . . . . . . 184,652 158,210 692,890 625,406
Taxes other than income . . . . . . . . . . . . . . . . . . . . . 163,195 136,306 585,562 538,771
---------- ---------- ---------- ----------
Total operating expenses. . . . . . . . . . . . . . . . . . . . 2,073,030 1,111,997 6,999,970 4,610,972
---------- ---------- ---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 425,636 381,807 1,950,500 1,969,859
OTHER INCOME (DEDUCTIONS) - NET. . . . . . . . . . . . . . . . . . (1,750) (2,056) (17,282) (6,794)
---------- ---------- ---------- ----------
INCOME BEFORE INTEREST, OTHER CHARGES
AND INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . 423,886 379,751 1,933,218 1,963,065
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,488 181,684 784,741 780,002
Allowance for borrowed funds used during construction . . . . . . (2,522) (2,305) (9,107) (9,597)
Distributions on TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding solely debentures
of TU Electric. . . . . . . . . . . . . . . . . . . . . . . . . 17,149 15,003 71,847 39,755
Preferred stock dividends of subsidiaries . . . . . . . . . . . . 4,506 12,307 20,182 51,246
---------- ---------- ---------- ----------
Total interest and other charges. . . . . . . . . . . . . . . . 222,621 206,689 867,663 861,406
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . 201,265 173,062 1,065,555 1,101,659
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . 74,636 58,263 393,271 359,328
---------- ---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,629 $ 114,799 $ 672,284 $ 742,331
========== ========== ========== ==========
Average shares of common stock outstanding (thousands) . . . . . . 245,241 224,603 236,118 224,850
Per share of common stock:
Basic earnings. . . . . . . . . . . . . . . $0.52 $0.51 $2.85 $3.30
Diluted earnings. . . . . . . . . . . . . . $0.51 $0.51 $2.84 $3.30
Dividends declared. . . . . . . . . . . . . $0.55 $0.525 $2.15 $2.05
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
3
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C>
NET INCOME. . . . . . . . . . . . . $126,629 $114,799 $672,284 $742,331
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment. 37,540 (7,413) (84,697) 3,231
Income tax effect . . . . . . . . (13,139) - 17,022 -
-------- -------- -------- --------
Total . . . . . . . . . . . . 24,401 (7,413) (67,675) 3,231
-------- -------- -------- --------
COMPREHENSIVE INCOME . . . . . . . $ 151,030 $107,386 $604,609 $745,562
========= ======== ======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
4
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---- ----
Thousands of Dollars
<S>
CASH FLOWS - OPERATING ACTIVITIES <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,629 $ 114,799
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization (including amounts charged to fuel) . . . . 224,066 200,395
Deferred income taxes - net . . . . . . . . . . . . . . . . . . . . . . . 71,266 26,552
Investment tax credits - net. . . . . . . . . . . . . . . . . . . . . . . (5,713) (5,698)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,853 (313)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 283,918 18,435
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,405 8,335
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (202,854) (73,715)
Interest and taxes accrued. . . . . . . . . . . . . . . . . . . . . . . (29,248) (13,519)
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . (42,011) 13,325
Over/(under)-recovered fuel revenue - net of deferred taxes . . . . . . 25,591 12,846
Energy marketing risk management assets and liabilities . . . . . . . . (19,042) -
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,788 (19,089)
--------- ---------
Cash provided by operating activities. . . . . . . . . . . . . . . . . 486,648 282,353
--------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . - 106,350
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 -
TU Electric obligated, mandatorily redeemable, preferred securities
of subsidiary trusts holding solely debentures of TU Electric. . . . . - 493,273
Retirements/repurchases of securities:
First mortgage bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,065) (117,165)
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . (91,676) (27,427)
Preferred stock of subsidiaries . . . . . . . . . . . . . . . . . . . . . (114,138) (434,589)
TU Electric obligated, mandatorily redeemable, preferred securities
of subsidiary trusts holding solely debentures of TU Electric . . . . . (47,374) -
Change in notes payable:
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,430,009 160,849
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,105) 27,022
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (135,568) (117,917)
Debt premium, discount, financing and reacquisition expenses. . . . . . . . (75,001) (11,049)
--------- ---------
Cash provided by financing activities. . . . . . . . . . . . . . . . . 1,410,082 79,347
--------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Investment in The Energy Group. . . . . . . . . . . . . . . . . . . . . . . (1,639,958) -
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (152,883) (98,513)
Nuclear fuel (excluding allowance for equity funds used during construction) . (14,899) (2,922)
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88,282) (12,578)
--------- ---------
Cash used in investing activities. . . . . . . . . . . . . . . . . . . (1,896,022) (114,013)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. . . . . . . . . . . . . . . . . . . 21,715 -
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . 22,423 247,687
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE. . . . . . . . . . . . . . . . 44,435 15,845
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING BALANCE . . . . . . . . . . . . . . . . . $ 66,858 $ 263,532
========= =========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
5
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
------------- -------------
Thousands of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Electric:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,263,161 $16,294,778
Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,685,034 1,675,681
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,862,768 5,779,226
Gas distribution and pipeline . . . . . . . . . . . . . . . . . . . . . . . 1,077,870 1,068,708
Telecommunications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,115 145,125
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572,695 562,890
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,613,643 25,526,408
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . 6,854,014 6,715,662
----------- -----------
Net of accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . 18,759,629 18,810,746
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . 364,411 330,184
Nuclear fuel (net of accumulated amortization: 1998-$479,562,000;
1997-$456,490,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . 234,454 242,018
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,087 24,087
Less reserve for regulatory disallowances . . . . . . . . . . . . . . . . . 836,005 836,005
----------- -----------
Net property, plant and equipment. . . . . . . . . . . . . . . . . . . . . 18,546,576 18,571,030
----------- -----------
INVESTMENTS
Investment in The Energy Group. . . . . . . . . . . . . . . . . . . . . . . 1,666,929 -
Goodwill (net of accumulated amortization: 1998-$42,509,000; 1997-$33,444,000) 1,427,648 1,423,420
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,299 851,320
----------- -----------
Total investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,018,876 2,274,740
----------- -----------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 66,858 44,435
Accounts receivable (net of allowance for uncollectible accounts:
1998-$11,992,000; 1997-$11,322,000). . . . . . . . . . . . . . . . . . . 698,456 981,067
Inventories - at average cost:
Materials and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . 209,312 209,825
Fuel stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,009 81,490
Gas stored underground. . . . . . . . . . . . . . . . . . . . . . . . . . 121,315 156,637
Energy marketing risk management assets . . . . . . . . . . . . . . . . . . 367,089 365,650
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,309 59,809
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,839 76,307
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,518 19,628
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,731,705 1,994,848
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets . . . . . . . . . . . . . . . . . . . . . . . 1,828,512 1,876,228
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,280 157,283
----------- -----------
Total deferred debits. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,063,792 2,033,511
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,360,949 $24,874,129
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
6
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
---------- ----------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 500,000,000
Outstanding shares - 1998- 245,315,522 and 1997- 245,237,559. . . . . . . . . . . . . $5,592,383 $5,587,200
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,304,578 1,311,875
Accumulated other comprehensive income -
Cumulative currency translation adjustment. . . . . . . . . . . . . . . . . . . . . . (31,612) (56,013)
---------- ----------
Total common stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,865,349 6,843,062
Preferred stock of subsidiaries:
Not subject to mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . 190,055 304,194
Subject to mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,604 20,600
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric. . . . . . . . . . . . . . . . . . . . . . . 822,971 875,146
Long-term debt, less amounts due currently. . . . . . . . . . . . . . . . . . . . . . . 8,775,071 8,759,379
---------- ----------
Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,674,050 16,802,381
---------- ----------
CURRENT LIABILITIES
Notes payable:
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,319,507 570,000
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,961 44,442
Long-term debt due currently. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801,401 772,071
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681,050 879,593
Energy marketing risk management liabilities. . . . . . . . . . . . . . . . . . . . . . 343,309 357,044
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,767 139,994
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,805 91,440
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,296 182,532
Interest accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,459 193,125
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,485 7,919
Over-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,357 11,987
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,633 271,853
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,070,030 3,522,000
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,062,272 2,989,254
Unamortized investment tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . 564,569 570,283
Other deferred credits and noncurrent liabilities . . . . . . . . . . . . . . . . . . . 990,028 990,211
---------- ----------
Total deferred credits and other noncurrent liabilities . . . . . . . . . . . . . . 4,616,869 4,549,748
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,360,949 $24,874,129
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
7
<PAGE>
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $1,331,916 $1,365,459 $6,101,874 $6,046,740
---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power . . . . . . . . . . . . . . 430,391 450,208 2,042,892 1,966,142
Operation and maintenance. . . . . . . . . . . . . . 282,012 293,490 1,214,906 1,155,008
Depreciation and amortization. . . . . . . . . . . . 143,937 142,606 573,608 565,445
Income taxes . . . . . . . . . . . . . . . . . . . . 75,119 77,692 417,108 419,895
Taxes other than income. . . . . . . . . . . . . . . 129,919 129,596 507,629 510,841
---------- ---------- ---------- ----------
Total operating expenses. . . . . . . . . . . . . . 1,061,378 1,093,592 4,756,143 4,617,331
---------- ---------- ---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 270,538 271,867 1,345,731 1,429,409
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction. 1,665 306 6,561 1,316
Other income (deductions) - net. . . . . . . . . . . 6,009 363 3,947 1,093
Income tax benefit (expense) . . . . . . . . . . . . (2,362) 15,512 (7,739) 30,912
---------- ---------- ---------- ----------
Total other income. . . . . . . . . . . . . . . . . 5,312 16,181 2,769 33,321
---------- ---------- ---------- ----------
INCOME BEFORE INTEREST AND OTHER CHARGES . . . . . . . 275,850 288,048 1,348,500 1,462,730
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on mortgage bonds . . . . . . . . . . . . . 100,467 114,689 425,176 475,513
Interest on other long-term debt . . . . . . . . . . 8,857 3,574 27,407 21,734
Other interest . . . . . . . . . . . . . . . . . . . 14,783 13,981 66,546 82,301
Distributions on TU Electric obligated, mandatorily
redeemable, preferred securities of subsidiary
trusts holding solely debentures of TU Electric . 17,149 15,003 71,847 39,755
Allowance for borrowed funds used during construction. (2,234) (2,210) (8,167) (9,494)
---------- ---------- ---------- ----------
Total interest and other charges. . . . . . . . . . 139,022 145,037 582,809 609,809
---------- ---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 136,828 143,011 765,691 852,921
PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . . 3,224 12,460 17,614 51,399
---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR
COMMON STOCK . . . . . . . . . . . . . . . . . . . . $ 133,604 $ 130,551 $ 748,077 $ 801,522
========== ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
8
<PAGE>
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
---- ----
Thousands of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,828 $ 143,011
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel). . . . . . . . . . . 181,232 177,687
Deferred income taxes - net. . . . . . . . 37,453 16,700
Investment tax credits - net . . . . . . . (5,306) (5,306)
Allowance for equity funds used during construction. . . . . . . . . . . . . . . . . . (1,665) (306)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,302 21,338
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,256 (747)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,595) (48,867)
Interest and taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,557 4,816
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,696) 6,543
Over/(under) - recovered fuel revenue - net of deferred taxes . . . . . . . . . . . 25,591 12,846
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,869 11,471
--------- ---------
Cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . 480,826 339,186
--------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 106,350
TU Electric obligated, mandatorily redeemable, preferred securities of
subsidiary trusts holding solely debentures of TU Electric. . . . . . . . . . . . . . - 493,273
Retirements/repurchases of securities:
First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (117,150)
Other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (322) (297)
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,138) (39,986)
TU Electric obligated, mandatorily redeemable, preferred securities of
subsidiary trusts holding solely debentures of TU Electric. . . . . . . . . . . . . . (47,374) -
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143,238) -
Change in notes receivable/payable:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (253,151)
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (122,942) (28,796)
Preferred stock dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,529) (12,430)
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (136,416)
Debt premium, discount, financing and reacquisition expenses. . . . . . . . . . . . . . . (3,134) (6,316)
--------- ---------
Cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . . (334,677) 5,081
--------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,343) (87,407)
Allowance for equity funds used during construction (excluding amount for nuclear fuel) . 1,056 181
Nuclear fuel (excluding allowance for equity funds used during construction). . . . . . . (14,899) (2,922)
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,771) (6,178)
--------- ---------
Cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . (142,957) (96,326)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 3,192 247,941
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . . . . 11,829 13,005
--------- ---------
CASH AND CASH EQUIVALENTS - ENDING BALANCE . . . . . . . . . . . . . . . . . . . . . . . . $ 15,021 $ 260,946
========= =========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
9
<PAGE>
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
----------- -----------
Thousands of Dollars
<S> <C> <C>
ELECTRIC PLANT
In service:
Production. . . . . . . . . . . . . . . . . . . . . . . . . . . $15,339,386 $15,369,306
Transmission. . . . . . . . . . . . . . . . . . . . . . . . . . 1,678,612 1,669,259
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . 4,805,385 4,745,270
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442,204 436,059
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,265,587 22,219,894
Less accumulated depreciation . . . . . . . . . . . . . . . . 6,223,277 6,120,309
----------- -----------
Electric plant in service, less accumulated depreciation. . . 16,042,310 16,099,585
Construction work in progress . . . . . . . . . . . . . . . . . 207,759 190,579
Nuclear fuel (net of accumulated amortization: 1998- $479,562,000;
1997- $456,490,000). . . . . . . . . . . . . . .. . . . . . . 234,454 242,017
Held for future use . . . . . . . . . . . . . . . . . . . . . . 23,966 23,966
----------- -----------
Electric plant, less accumulated depreciation and amortization 16,508,489 16,556,147
Less reserve for regulatory disallowances . . . . . . . . . . . 836,005 836,005
----------- -----------
Net electric plant. . . . . . . . . . . . . . . . . . . . . . 15,672,484 15,720,142
----------- -----------
INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 562,742 534,487
----------- -----------
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . 15,021 11,829
Accounts receivable (net of allowance for uncollectible
accounts: 1998- $4,279,000; 1997- $6,049,000). . . . . . . . . 225,400 357,702
Inventories - at average cost:
Materials and supplies . . . . . . . . . . . . . . . . . . . . 181,382 181,157
Fuel stock. . . . . . . . . . . . . . . . . . . . . . . . . . 79,009 81,489
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . 43,296 31,338
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 64,181 49,359
Other current assets . . . . . . . . . . . . . . . . . . . . . . 3,673 1,818
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . 611,962 714,692
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets. . . . . . . . . . . . . . . . . . 1,770,862 1,796,516
Other deferred debits. . . . . . . . . . . . . . . . . . . . . . 60,890 67,596
----------- -----------
Total deferred debits. . . . . . . . . . . . . . . . . . . . . 1,831,752 1,864,112
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,678,940 $18,833,433
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
10
<PAGE>
<PAGE>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
------------- --------------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 180,000,000
Outstanding shares - 1998- 138,156,400 and 1997- 142,931,000. . . . $ 4,172,997 $ 4,316,235
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 2,115,814 1,982,210
----------- -----------
Total common stock equity. . . . . . . . . . . . . . . . . . . . . 6,288,811 6,298,445
Preferred stock:
Not subject to mandatory redemption . . . . . . . . . . . . . . . . 115,055 129,194
Subject to mandatory redemption . . . . . . . . . . . . . . . . . . 20,604 20,600
TU Electric obligated, mandatorily redeemable, preferred securities
of subsidiary trusts holding solely debentures of TU Electric . . . 822,971 875,146
Long-term debt, less amounts due currently. . . . . . . . . . . . . . 5,445,991 5,475,447
----------- -----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . 12,693,432 12,798,832
----------- -----------
CURRENT LIABILITIES
Notes payable - affiliates. . . . . . . . . . . . . . . . . . . . . . 59,988 182,929
Long-term debt due currently. . . . . . . . . . . . . . . . . . . . . 782,672 752,645
Accounts payable:
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,707 289,075
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,186 152,367
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . 2,262 2,567
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . . 75,692 74,256
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,182 167,009
Interest accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . 125,922 140,538
Over-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . . 51,357 11,987
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . 137,051 134,369
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . 1,806,019 1,907,742
----------- -----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes . . . . . . . . . . . . . . . . . . 3,258,526 3,216,951
Unamortized investment tax credits. . . . . . . . . . . . . . . . . . 551,437 556,743
Other deferred credits and noncurrent liabilities . . . . . . . . . . 369,526 353,165
----------- -----------
Total deferred credits and other noncurrent liabilities . . . . . 4,179,489 4,126,859
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $18,678,940 $18,833,433
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
11
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS, MERGERS AND ACQUISITIONS
The Company
Texas Utilities Company (TUC, or the Company) is a holding company which
owns all of the outstanding common stock of Texas Energy Industries
Inc. (TEI), ENSERCH Corporation (ENSERCH) and TU Finance
(No. 1) Limited. Through subsidiaries and divisions of TEI and ENSERCH, the
Company engages in the generation, transmission and distribution of
electricity; the processing, transmission, distribution and marketing of
natural gas; and telecommunications, power development and other businesses.
The Company is currently determining its reportable segments under Statement
of Financial Accounting Standards (SFAS ) No. 131, "Disclosures About Segments
of an Enterprise and Related Information" which becomes effective for purposes
of reporting the full year 1998 results of operations.
On August 5, 1997, the merger transactions (Merger) between the former
Texas Utilities Company, now known as TEI, and ENSERCH were completed. On
November 21, 1997, the Company acquired Lufkin-Conroe Communications Co.
(LCC). The acquisitions of ENSERCH and LCC were accounted for as purchase
business combinations. The assets and liabilities of the acquired companies
at the acquisition dates were adjusted to their estimated fair values. The
excess of the purchase price paid by the Company over the estimated fair value
of net assets acquired and liabilities assumed was recorded as goodwill and
is being amortized over 40 years. The process of determining the fair value
of assets and liabilities of ENSERCH and LCC as of the date of acquisition is
continuing, and the final result awaits primarily the resolution of income tax
and other contingencies and finalization of some preliminary estimates. The
results of operations of ENSERCH and LCC are reflected in the consolidated
financial statements of the Company from the respective dates of their
acquisition.
In January 1998, the Company announced that it had approached The Energy
Group PLC (TEG), a diversified international energy group, in connection with
the Company's interest in acquiring TEG. TEG is the holding company for
Eastern Electricity PLC, which is one of the largest regional electric
companies in the United Kingdom (U.K.), one of the largest U.K. generators of
electricity and one of the largest U.K. suppliers of natural gas. On March 2,
1998, the Company announced through its indirect wholly owned subsidiary, TU
Acquisitions PLC (TU Acquisitions), an offer to holders of TEG securities, to
acquire 100% of TEG's ordinary shares, including the ordinary shares evidenced
by American Depository Shares (ADS) which offer was increased on March 3, 1998
to 8.40 pounds per share. Under the Company's offer, up to 20% of the
outstanding TEG shares may be exchanged for Company common stock with an
exchange value of approximately 8.65 pounds per TEG share.
The TEG businesses to be acquired by the Company, which exclude TEG's
Peabody Coal and Citizens Power businesses which are to be sold by TEG to an
unaffiliated party in connection with the Company's offer (Peabody Sale), had
assets of approximately $10.3 billion at September 30, 1997 and $5.2 billion
of revenues for the twelve months ended on that date. Such businesses had
debt outstanding at September 30, 1997 of approximately $3.8 billion. The
estimated purchase price for the TEG shares is approximately $7.3 billion.
The Company estimates that the financing necessary to purchase all outstanding
TEG shares at the 8.40 pounds price and to pay all associated expenses will
be approximately 4.6 billion pounds ($7.6 billion). The Company and TU
Acquisitions and other intermediate U.K. holding companies have entered into
credit facilities with banking institutions in the United States (U.S.) and
the U.K., respectively, which will provide committed financing sufficient to
purchase the outstanding TEG shares and pay related expenses. The U.S. credit
facilities, which will aggregate $5.0 billion, will replace the Company's
current Credit Facilities and Interim Facility described in Note 4.
12
<PAGE>
<PAGE>
As of March 31, 1998, the Company, through TU Acquisitions, had acquired
in the U.K. market 21.96% of TEG's shares. On April 17, 1998, the Secretary
of State in the U.K. announced that the Company's offer for TEG would not be
referred to the Monopolies and Mergers Commission. On April 22, 1998, the
Company announced that its cash offer for TEG had been extended until May 5,
1998. On April 23, 1998 the Company received notice of the consent of the
Federal Energy Regulatory Commission to the Peabody Sale. All other specific
regulatory approvals have now been either obtained or waived. The offer of a
competing bidder for TEG lapsed on May 5, 1998. The last date on which the
Company's offer may be declared unconditional is May 19, 1998.
In February 1998, the Company announced an offer through its wholly-owned
subsidiary, TU Australia, to acquire Allgas Energy Limited, a publicly held
gas distribution company based in Queensland, Australia. The original offer,
a combined cash and option offer of approximately $138 million, which was
increased on April 8, 1998 to approximately $145 million, is subject to the
waiver by the Queensland government of the current 12.5% limit on individual
share holdings in Allgas. The Queensland government has announced that this
limitation will be lifted on July 1, 1998. TU Australia has acquired 12.49%
of the outstanding shares of Allgas. The Company's bid has already received
all necessary Australian and U.S. regulatory approvals. A competing, although
lower, bid is still outstanding. Shareholders now have through July 10, 1998
to accept the Company's offer.
The Company continues to seek potential investment opportunities from
time to time when it concludes that such investments are consistent with its
business strategies and are likely to enhance the long-term return to its
shareholders. The timing, amount and funding of any new business investment
opportunities, other than those discussed above, are presently undetermined.
2.SIGNIFICANT ACCOUNTING POLICIES
TUC and TU Electric
Basis of Presentation -- The condensed consolidated financial statements
of TUC and its subsidiaries (System Companies) and Texas Utilities Electric
Company and its subsidiaries (TU Electric) have been prepared on the same
basis as those in the 1997 Annual Reports on Form 10-K of TUC and TU Electric
(1997 Form 10-K) and, in the opinion of TUC or TU Electric, as the case may
be, all adjustments (constituting only normal recurring accruals) necessary to
a fair presentation of the results of operation and financial position have
been included therein. Certain information and footnote disclosures normally
included in annual consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain previously reported amounts have been reclassified to conform to
current classifications.
The preparation of financial statements requires estimates and
assumptions by management; actual results could differ from those estimates.
No material adjustments were made to previous estimates during the current
period.
Consolidation -- The consolidated financial statements include the
accounts of the Company and all of its System Companies. Prior to August 5,
1997, the date of the Merger, the Company did not have any assets or
operations. Pursuant to the Merger, the Company became the parent of TEI and
of ENSERCH. For financial reporting purposes, the Company is treated as the
successor to TEI. Unless otherwise specified, all references to the Company
for periods prior to August 5, 1997, are deemed to be references to TEI since
the merger of the Company and TEI is the combination of entities under common
control. The Company's financial statements have
13
<PAGE>
<PAGE>
been restated in a manner similar to pooling of interests accounting. Since
the acquisitions of ENSERCH and LCC were purchase business combinations, no
financial and other information for those companies are presented for periods
prior to their dates of acquisition. The consolidated financial statements
of TU Electric include all of its business trusts.
All significant intercompany items and transactions have been eliminated
in consolidation. Investments in significant unconsolidated affiliates,
including the investment in TEG, are accounted for by the equity method.
Earnings Per Share -- Basic earnings per share applicable to common stock
are based on the weighted average number of common shares outstanding during
the year. Diluted earnings per share include the effect of potential common
shares that could be issued after the Merger Date resulting from the assumed
conversion of the 6 3/8% Convertible Subordinated Debentures due 2002 of
ENSERCH during the periods outstanding and the exercise of all outstanding
stock options. For the three-and twelve-months periods ended March 31, 1998,
2,476,354 and 1,611,241 shares, respectively, were added to the average shares
outstanding and $938,700 and $2,484,700, respectively, of after-tax interest
expense was added to earnings applicable to common stock for the purpose of
calculating diluted earnings per share.
Energy Marketing Activities -- The Company, through its energy marketing
subsidiary, Enserch Energy Services, Inc. (EES), enters into a variety of
transactions, including forward contracts involving physical delivery of
natural gas or electrical power commodities, as well as swaps, futures,
options and other derivative contractual arrangements. As part of these
business activities, EES offers price risk management services to the energy
sector. These transactions are primarily conducted with retail end users,
established energy companies and major financial institutions. EES uses the
mark-to-market method of valuing and accounting for these activities. Under
this method, the current market value of EES' energy portfolio, net of future
servicing costs is reflected within the Company's consolidated balance sheets,
with resulting unrealized gains and losses, as "Energy Risk Management Assets
or Liabilities". The actual timing of cash receipts and payments may,
however, vary as contracts may be settled at intervals other than their
scheduled maturities. (See Note 6).
3. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," became effective as of
the first quarter of 1998. This statement requires companies to report and
display comprehensive income and its components (revenues, expenses, gains and
losses). Comprehensive income includes all changes in equity during a period
except those resulting from investments by owners and distributions to
owners. For the Company, comprehensive income consists of net income reported
in the statements of consolidated income and the change in the foreign
currency translation adjustment, net of tax as included in common stock
equity. For TU Electric, comprehensive income is the same as net income
reported in the statements of consolidated income, since there were no other
items of comprehensive income for the periods presented.
14
<PAGE>
<PAGE>
4. SHORT-TERM FINANCING
TUC and TU Electric
At March 31, 1998, TUC, TU Electric and ENSERCH had joint lines of credit
under credit facility agreements (Credit Agreements) with a group of
commercial banks. The Credit Agreements have two facilities. Facility A
provides for short-term borrowings aggregating up to $570,000,000 outstanding
at any one time at variable interest rates and terminates April 22, 1999.
Facility B provides for short-term borrowings aggregating up to $1,330,000,000
outstanding at any one time at variable interest rates and terminates April
24, 2002. The combined borrowings of TUC, TU Electric and ENSERCH under both
facilities are limited to an aggregate of $1,900,000,000 outstanding at any
one time. ENSERCH's borrowings under both facilities are limited to an
aggregate of up to $650,000,000 outstanding at any one time. Borrowings under
these facilities will be used for working capital and other corporate
purposes, including commercial paper backup. The Company has also entered
into an interim 364 Day Competitive Advance and Revolving Credit Facility
Agreement (Interim Facility) dated as of March 6, 1998 and amended March 23,
1998, with a group of banking institutions for the purpose of financing the
purchase of TEG shares in the U.K. market through draws or backstop of
commercial paper issuances in an aggregate amount of up to $1,650,000,000.
The Company and TU Acquisitions and other intermediate U.K. holding companies
have entered into credit facilities with banking institutions in the United
States (U.S.) and the U.K., respectively, which will provide committed
financing sufficient to purchase the outstanding TEG shares and pay related
expenses. The U.S. credit facilities, which will aggregate $5.0 billion, will
replace the Company's current credit facilities and Interim Facility.
In addition, certain non-U.S. subsidiaries have revolving credit
agreements aggregating approximately $91,000,000, of which $60,000,000 was
outstanding at March 31, 1998. These revolving credit agreements expire at
various dates through 2000.
5. CAPITALIZATION
TUC
Common Stock -- During the three months ended March 31, 1998, common
stock equity increased by $2,046,000 due to an allocation of TUC common stock
held by the TUC's Employee Thrift Plan Trustee to the accounts of
participants, by $132,000 recorded for the amortization of costs of Long-Term
Incentive Plans and by $3,005,000 for the carrying value of ENSERCH's 6 3/8%
Convertible Subordinated Debentures which were converted into 77,963 shares of
TUC common stock.
Preferred Stock -- In January 1998, ENSERCH redeemed $100,000,000 of
Series E adjustable rate preferred stock. At March 31, 1998, ENSERCH had
issued and outstanding its Series F adjustable preferred stock, which had an
aggregate liquidation preference of $75,000,000.
Long-Term Debt -- In January 1998, TUC issued $200,000,000 aggregate
principal amount of its 6.375% Series C Senior Notes due 2008. In addition,
ENSERCH issued $125,000,000 of 6 1/4% Series A Notes due 2003 and $125,000,000
of Remarketed Reset Notes due 2008 having an interest rate of 5.82%. The
interest rate for the period from April 1, 1998 through July 1, 1998 is
5.99%. In February 1998, ENSERCH called for redemption on March 27 the
outstanding balance of its 6 3/8% Convertible Subordinated Debentures.
Holders of $3,005,000 principal amount of the debentures elected to convert
the debentures into shares of TUC common stock, and the remaining $87,745,000
principal amount was redeemed for cash.
15
<PAGE>
<PAGE>
TU Electric
Common Stock -- During the three months ended March 31, 1998, TU
Electric purchased and retired a total of 4,774,600 shares of its issued and
outstanding common stock at a total cost of approximately $143,238,000.
Preferred Stock -- During the three months ended March 31, 1998, TU
Electric redeemed 146,501 shares of its $8.20 Series preferred stock at a
total cost of approximately $14,138,000. At March 31, 1998, TU Electric had
17,000,000 shares of preferred stock authorized by its Articles of
Incorporation of which 1,169,062 shares were issued and outstanding.
TU Electric Obligated, Mandatorily Redeemable, Preferred Securities of
Subsidiary Trusts Holding Solely Debentures of TU Electric --
At March 31, 1998 and December 31, 1997, the TU Electric Trusts had
preferred trust securities outstanding, as follows:
<TABLE>
<captions>
Preferred Securities Trust Assets
-------------------------------------------------- -----------------------
Units Outstanding Amount Amount
------------------------ ----------------------- -----------------------
March 31, December 31, March 31, December 31, March 31, December 31,
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C> <C> <C>
TU Electric Capital I (8.25% Series) 5,871,044 5,871,044 $140,896 $140,851 $154,869 $154,869
TU Electric Capital II (9.00% Series) -- 1,991,253 -- 47,374 -- 51,419
TU Electric Capital III (8.00% Series) 8,000,000 8,000,000 193,553 193,510 206,186 206,186
TU Electric Capital IV (floating rate
Capital Securities)(a) 100,000 100,000 96,607 97,570 103,093 103,093
TU Electric Capital V (8.175% Capital
Securities) 400,000 400,000 391,915 395,841 412,372 412,372
---------- ---------- -------- -------- -------- --------
Total 14,371,044 16,362,297 $822,971 $875,146 $876,520 $927,939
========== ========== ======== ======== ======== ========
<FN>
(a) Floating rate is determined quarterly based on LIBOR. A related
interest rate swap, expiring 2002, effectively fixes the rate at 7.183%.
</FN>
</TABLE>
In January 1998, TU Electric redeemed all of the outstanding shares
of the TU Electric Capital II preferred trust securities at 100% of the
liquidation amount of $25 per preferred security, plus accumulated and unpaid
dividends.
Long-Term Debt -- During the three months ended March 31, 1998, TU
Electric redeemed, reacquired or made principal payments on $322,000 of
long-term debt. On April 1, 1998, TU Electric paid off the $175,000,000
principal amount of 5 7/8% Series first mortgage bonds due on that date.
In April 1998, TU Electric issued $350,000,000 aggregate principal
amount of Floating Rate Debentures due April 24, 2000. Interest rates on the
debentures will be set quarterly based on LIBOR for three month deposits plus
.27%. The initial interest rate for the period from April 24, 1998 to July
24, 1998 is 5.9575%. On May 1, 1998, the Brazos River Authority of Texas
(Brazos Authority) issued $78,965,000 aggregate principal amount of 5.55%
Pollution Control Revenue Refunding Bonds, Series 1998A, due May 1, 2033 to
refund the 9 1/4% Brazos Authority Series 1988A Bonds and a portion of the
Brazos Authority Taxable Series 1991D Bonds. Pursuant to an Installment
Payment and Bond Amortization Agreement with the Brazos Authority, TU Electric
is obligated to make payments of the principal and interest on the bonds.
Such payments on the new bonds are insured.
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6. DERIVATIVE INSTRUMENTS
TUC and TU Electric
The Company enters into derivative instruments, including options, swaps,
futures and other contractual commitments to manage market risks related to
changes in interest rates and commodity price exposures. The Company's
participation in derivative transactions, except for the energy marketing
activities, has been designated for hedging purposes, and derivative
instruments are not held or issued for trading purposes.
Interest Rate Risk Management -- At March 31, 1998, Eastern Energy had
interest rate swaps outstanding with an aggregate notional amount of
$1,087,000,000. These swap agreements establish a mix of fixed and variable
interest rates on the outstanding debt and have remaining terms up to 19
years.
At March 31, 1998, TU Electric had an interest rate swap agreement with
respect to preferred securities of TU Electric Capital IV, with a notional
principal amount of $100,000,000 expiring 2002 that fixed the rate at 7.183%
per annum.
Foreign Currency Risk Management -- In connection with its planned
acquisition of TEG, the Company purchased options to fix the pound sterling to
U.S. dollar exchange rate on 2.9 billion pounds, which is
equivalent to the portion of the acquisition cost expected to be funded
through U.S. dollar borrowings. Prior to March 31, 1998, options on
966.7 million pounds had been exercised leaving a balance of 1.9 billion
pounds. The options were adjusted to their market value at March 31, 1998 of
$24.4 million, and resulting losses have been reflected in the results of
operation.
Electricity Price Risk Management -- Eastern Energy and the other
distribution companies in Victoria purchase their power from a competitive
power pool operated by a statutory, independent corporation. Eastern Energy
purchases about 95% of its energy from this pool, the cost of which is based
on spot market prices. Eastern Energy and other distribution companies were
required to enter into wholesale market contracts to cover a substantial
majority of their forecasted franchise load through the end of 2000. Eastern
Energy also maintains a strategy of seeking hedging contracts with individual
generators to cover forecasted contestable loads. These contracts fix the
price of energy within a certain range for the purpose of hedging or
protecting against fluctuations in the spot market price. During the first
quarter of 1998, the average spot price for electric energy from the pool
approximated $9.50 per megawatt-hour (MWh) as compared with the average fixed
price of Eastern Energy's electric energy under its contracts of
approximately $25 per MWh. At March 31, 1998, Eastern Energy's contracts
related to its forecasted contestable and franchise load cover a notional
volume of approximately 12.5 million MWh's for the period from April 1998
through 2001. Further hedge contracts may be required in that period to
service forecast sales. Under these contracts, payments are made between
Eastern Energy and the generators representing the difference between the
wholesale electricity market price and the contract price. The net payable or
receivable is recognized in earnings as adjustments to purchased power expense
in the period the related transactions are completed.
Energy Marketing Activities -- EES' energy portfolio is comprised of
forward commitments, futures, swaps, options and other derivative
instruments. The notional amounts and terms of the portfolio as of March 31,
1998 included financial instruments that provide for fixed price receipts of
2,410 trillion British thermal units equivalent (Tbtue) and fixed price
payments of 2,276 Tbtue, with a maximum term of five years. Additionally,
sales and purchase commitments totaling 574 Tbtue, with terms extending up to
five years, are included in the portfolio as of March 31, 1998.
17
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<PAGE>
Notional amounts reflect the volume of transactions but do not represent
the amounts exchanged by the parties to the financial instruments.
Accordingly, the notional amounts represented above do not necessarily measure
EES' exposure to market or credit risks. Additionally, the maximum term in
years are not indicative of likely future cash flows as these positions may be
offset in the markets at any time in response to EES' risk management needs.
7. REGULATION AND RATES
TUC AND TU ELECTRIC
Docket 18490 - The PUC approved the stipulation filed on December 17,
1997, by TU Electric, together with the PUC General Counsel, the Office of
Public Utility Counsel and various other parties interested in TU Electric's
rates and services. The stipulation, modified to incorporate changes made by
Commissioners, resulted in base rate credits beginning January 1, 1998, of 4%
for residential customers, 2% for general service secondary customers and 1%
for all other retail customers and additional base rate credits for
residential customers of 1.4% beginning January 1, 1999. All other provisions
of the stipulation were approved. They will (i) impose a 11.35% cap on TU
Electric's rate of return on common equity during 1998 and 1999, with any sums
earned above an earnings cap being applied as additional nuclear production
depreciation, (ii) allow TU Electric to record depreciation applicable to
transmission and distribution assets in 1998 and 1999 as additional
depreciation of nuclear production assets, (iii) establish an updated cost of
service study that includes interruptible customers as customer classes, (iv)
result in the permanent dismissal of pending appeals of prior PUC orders,
including Docket No. 11735, if all other parties that have filed appeals of
those dockets also dismiss their appeals, (v) result in the stay of any
proceedings in the remand of Docket No. 9300 prior to January 1, 2000, and,
(vi) flow all gains from off-system sales of electricity in excess of the
amount included in base rates to customers through the fuel factor.
Modifications that were also approved by the PUC include: (i) imputing $16
million of revenues from discounted rates in the calculation of the return
cap, (ii) limiting the recovery of interest on any new debt issued prior to
December 31, 1999 to the interest rate available to TU Electric at its bond
rating as of January 1, 1998 in the calculation of the return cap, (iii)
limiting the amount of annual capital additions to production plant to 1.5%
of TU Electric's net plant in service on December 31, 1996 in the calculation
of the return cap, and (iv) permitting TU Electric, at its discretion, to
apply earnings as additional depreciation of nuclear production assets, after
the determinations have been made under the return cap.
TUC
Lone Star Gas Rates -- On August 20, 1996, the Railroad Commission of
Texas (RRC) ordered a general inquiry into the rates and services of Lone Star
Gas, most notably a review of historic gas cost and gas acquisition practices
since the last rate setting. The inquiry docket has been separated into
different phases. Two of the phases, conversion to the National Association
of Regulatory Utility Commissioners account numbering system and unbundling,
have been dismissed by the RRC, and one other phase, rate case expense, has
been concluded. In the phase dealing with historic gas cost and gas
acquisition practices, Lone Star Gas and Lone Star Pipeline have filed a
motion for summary disposition stating that any retroactive rate action would
be inappropriate and unlawful. Settlement discussions with intervenor cities
are ongoing. In the event the motion for summary disposition is denied, a
hearing is currently scheduled to begin in November 1998. A number of
management and transportation related issues have been placed in a separate
phase, which still has an undefined scope and is being held in abeyance
pending the resolution of the phase dealing with gas costs. Management
believes that gas costs were prudently incurred and were properly accounted
for and recovered through the gas cost recovery mechanism previously approved
by the RRC. At this time, management is unable to predict the ultimate
outcome of the inquiry.
18
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8. COMMITMENTS AND CONTINGENCIES
TU Electric
Nuclear Decommissioning and Disposal of Spent Fuel -- TU Electric has
established a reserve, charged to depreciation expense and included in
accumulated depreciation, for the decommissioning of the Comanche Peak nuclear
generating station (Comanche Peak), whereby decommissioning costs are being
recovered from customers over the life of the plant and deposited in an
external trust fund (included in other investments). At March 31, 1998, such
reserve totaled $126,900,000 which includes accruals of $4,545,000 and
$18,179,000 for the three and twelve months ended March 31, 1998,
respectively. As of March 31, 1998, the market value of assets in the
external trust fund for decommissioning of Comanche Peak was $176,231,000.
Any difference between the market value of the external trust fund and the
decommissioning reserve that represents unrealized gains or losses of the
trust fund is treated as a regulatory liability or a regulatory asset.
Realized earnings on funds deposited in the external trust are recognized in
the reserve. Based on a site-specific study completed during 1997 using the
prompt dismantlement method and 1997 dollars, decommissioning costs for
Comanche Peak Unit 1 and for Unit 2 and common facilities were estimated to be
$271,000,000 and $404,000,000, respectively. Decommissioning activities are
projected to begin in 2030 for Comanche Peak Unit 1 and in 2033 for Unit 2 and
common facilities. TU Electric is recovering decommissioning costs based upon
a 1992 site-specific study through rates placed in effect under its January
1993 rate increase request. Actual decommissioning costs are expected to
differ from estimates due to possible changes in the assumed dates of
decommissioning activities, regulatory requirements, technology and costs of
labor, materials and equipment. In addition, the marketable fixed income debt
and equity securities in which assets of the external trust are invested are
subject to interest rate and equity price sensitivity.
TUC and TU Electric
Financial Guarantees -- TU Electric has entered into contracts with
public agencies to purchase cooling water for use in the generation of
electric energy. In connection with certain contracts, TU Electric has
agreed, in effect, to guarantee the principal, $30,005,000 at March 31, 1998,
and interest on bonds issued to finance the reservoirs from which the water is
supplied. The bonds mature at various dates through 2011 and have interest
rates ranging from 5-1/2% to 7%. TU Electric is required to make periodic
payments equal to such principal and interest. Payments made by TU Electric
are net of amounts assumed by a third party under such contracts. In
addition, TU Electric is obligated to pay certain variable costs of operating
and maintaining the reservoirs. TU Electric has assigned to a municipality
all contract rights and obligations of TU Electric in connection with
$69,395,000 remaining principal amount of bonds at March 31, 1998 issued for
similar purposes, which had previously been guaranteed by TU Electric. TU
Electric is, however, contingently liable in the unlikely event of default by
the municipality. The Company and/or its subsidiaries are the guarantor on
various commitments and obligations of others aggregating some $37,900,000 at
March 31, 1998.
General -- In addition to the above, the Company and TU Electric are each
involved in various legal and administrative proceedings which, in the opinion
of the management of each, should not have a material effect upon its
financial position, results of operation or cash flows.
19
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Texas Utilities Company and subsidiaries (Company) as of March 31, 1998, and
the related condensed statements of consolidated income and of comprehensive
income for the three-month and twelve-month periods ended March 31, 1998 and
1997, and of consolidated cash flows for the three-month periods ended March
31, 1998 and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1997, and the related consolidated statements of income, cash flows and common
stock equity for the year then ended (not presented herein); and in our report
dated February 24, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 11, 1998
20
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<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Electric Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Texas Utilities Electric Company and subsidiaries (TU Electric) as of March
31, 1998, and the related condensed statements of consolidated income for the
three-month and twelve-month periods ended March 31, 1998 and 1997, and of
consolidated cash flows for the three-month periods ended March 31, 1998 and
1997. These financial statements are the responsibility of TU Electric's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of TU Electric as of December 31,
1997, and the related consolidated statements of income, retained earnings and
cash flows for the year then ended (not presented herein); and in our report
dated February 24, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 11, 1998
21
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<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
TUC and TU Electric
This report and other presentations made by Texas Utilities Company (the
Company or TUC) and its direct and indirect subsidiaries (System Companies) or
Texas Utilities Electric Company and its subsidiaries (TU Electric) contain
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company and TU
Electric each believes that in making any such statement its expectations are
based on reasonable assumptions, any such statement involves uncertainties and
is qualified in its entirety by reference to factors contained in the
Forward-Looking Statements section of Item 7 Management's Discussion and
Analysis of Financial Condition and Results of Operation in TUC's and TU
Electric's Annual Reports on Form 10-K for the year 1997 (1997 Form 10-K),
among others, that could cause the actual results of the Company or TU
Electric to differ materially from those projected in such
forward-looking statement.
Any forward-looking statement speaks only as of the date on which
such statement is made, and neither the Company nor TU Electric undertakes any
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time and
it is not possible for the Company or TU Electric to predict all of such
factors, nor can they assess the impact of each such factor or the extent to
which any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statement.
MERGERS AND ACQUISITIONS
TUC
Certain comparisons in this Form 10-Q have been affected by the August
1997 acquisition of ENSERCH Corporation (ENSERCH) and the November 1997
acquisition of Lufkin-Conroe Communications Co. (LCC) by the Company. The
results of each acquired company are included only for the periods subsequent
to acquisition.
On August 5, 1997, the merger transactions (Merger) between the former
Texas Utilities Company, now known as Texas Energy Industries Inc. (TEI), and
ENSERCH were completed. On November 21, 1997, the Company acquired LCC. The
acquisitions of ENSERCH and LCC were accounted for as purchase business
combinations. The assets and liabilities of the acquired companies at the
acquisition dates were adjusted to their estimated fair values. For each
company acquired, the excess of the purchase price paid by the Company over
the estimated fair value of net assets acquired and liabilities assumed was
recorded as goodwill and is being amortized over 40 years. The process of
determining the fair value of assets and liabilities of ENSERCH and LCC as of
the respective dates of their acquisition is continuing, and the final results
await primarily the resolution of income tax and other contingencies and
finalization of some preliminary estimates.
For financial reporting purposes, the Company is being treated as the
successor to TEI. Unless otherwise specified, all references to the Company
which relate to a period prior to August 5, 1997, shall be deemed to be
references to TEI.
In January 1998, the Company announced that it had approached The Energy
Group PLC (TEG), a diversified international energy group, in connection with
the Company's interest in acquiring TEG. TEG is the holding company for
Eastern Electricity PLC, which is one of the largest regional electric
companies in the United Kingdom (U.K.), one of the largest U.K. generators of
electricity and one of the largest U.K. suppliers of natural gas. On March 2,
1998, the Company announced through its indirect wholly owned subsidiary, TU
Acquisitions PLC (TU Acquisitions), an offer to holders of TEG securities, to
acquire 100% of TEG's ordinary shares, including the ordinary shares evidenced
by American Depository Shares (ADS) which offer was increased on March 3, 1998
22
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to 8.40 pounds per share. Under the Company's offer, up to 20% of the
outstanding TEG shares may be exchanged for Company common stock with an
exchange value of approximately 8.65 pounds per TEG share.
The TEG businesses to be acquired by the Company, which exclude TEG's
Peabody Coal and Citizens Power businesses which are to be sold by TEG to an
unaffiliated party in connection with the Company's offer (Peabody Sale), had
assets of approximately $10.3 billion at September 30, 1997 and $5.2 billion
of revenues for the twelve months ended on that date. Such businesses had
debt outstanding at September 30, 1997 of approximately $3.8 billion. The
estimated purchase price for the TEG shares is approximately $7.3 billion.
The Company estimates that the financing necessary to purchase all outstanding
TEG shares at the 8.40 pounds price and to pay all associated expenses will
be approximately 4.6 billion pounds ($7.6 billion). In addition, the Company
has a $1.65 billion interim credit facility providing for borrowings at
variable interest rates. (See Note 4 to Condensed Consolidated Financial
Statements). Borrowings under this facility will be used for acquisition
financing associated with TEG, including commercial paper backup. The Company
and TU Acquisitions and other intermediate U.K. holding companies have entered
into credit facilities with banking institutions in the United States (U.S.)
and the U.K., respectively, which will provide committed financing sufficient
to purchase the outstanding TEG shares and pay related expenses.
As of March 31, 1998, the Company, through TU Acquisitions, had acquired
in the U.K. market 21.96% of TEG's shares. On April 17, 1998, the Secretary
of State in the U.K. announced that the Company's offer for TEG would not be
referred to the Monopolies and Mergers Commission. On April 22, 1998, the
Company announced that its cash offer for TEG had been extended until May 5,
1998. On April 23, 1998, the Company received notice of the consent of the
Federal Energy Regulatory Commission to the Peabody Sale. All other specific
regulatory approvals have now been either obtained or waived. The offer of a
competing bidder for TEG lapsed on May 5, 1998. The last date on which the
Company's offer may be declared unconditional is May 19, 1998.
In February 1998, the Company announced an offer through its wholly-owned
subsidiary, TU Australia, to acquire Allgas Energy Limited, a publicly held
gas distribution company based in Queensland, Australia. The original offer,
a combined cash and option offer of approximately $138 million, which was
increased on April 8, 1998 to approximately $145 million, is subject to the
waiver by the Queensland government of the current 12.5% limit on individual
share holdings in Allgas. The Queensland government has announced that this
limitation will be lifted on July 1, 1998. TU Australia has acquired 12.49%
of the outstanding shares of Allgas. The Company's bid has already received
all necessary Australian and U.S. regulatory approvals. A competing, although
lower, bid is still outstanding. Shareholders now have through July 10, 1998
to accept the Company's offer.
The Company continues to seek potential investment opportunities from
time to time when it concludes that such investments are consistent with its
business strategies and are likely to enhance the long-term return to its
shareholders. The timing, amount and funding of any new business investment
opportunities, other than those discussed above, are presently undetermined.
FINANCIAL CONDITION
Liquidity and Capital Resources
TUC and TU Electric
For information concerning liquidity and capital resources, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation in TUC's and TU Electric's 1997 Form 10-K. Quarterly results
presented herein are not necessarily indicative of expectations for a full
year's operations because of seasonal and other factors, including variations
in maintenance and other operating expense patterns. No significant changes or
events which might affect the financial condition of the Company or TU
Electric have occurred subsequent to year-end other than as disclosed in other
reports of TUC or TU Electric or included herein.
23
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External funds of a permanent or long-term nature are obtained through
the issuance of common stock, preferred stock, preferred securities and
long-term debt by the System Companies. The capitalization ratios of the
Company at March 31, 1998 consisted of approximately 52.6% long-term debt,
4.9% preferred securities of trusts, 1.3% preferred stock and 41.2% common
stock equity. The capitalization ratios of TU Electric at March 31, 1998
consisted of approximately 42.9% long-term debt, 6.5% preferred securities of
trusts, 1.1% preferred stock and 49.5% common stock equity.
In January 1998, TUC issued $200 million aggregate principal amount of
its 6.375% Series C Senior Notes due 2008. Also in January 1998, ENSERCH
issued $125 million of its 6 1/4% Series A Notes due 2003 and $125 million of
its Remarketed Reset Notes due 2008 with a variable interest rate ( 5.82% per
annum at date of issuance). Interest rates on the Remarketed Reset Notes are
determined for variable rate periods. After July 1, 1998, rate periods will
not be shorter than six months. Net proceeds from these borrowings were used
to refinance or redeem like amounts of higher rate debt and preferred stock.
In April 1998, TU Electric issued $350 million aggregate principal
amount of Floating Rate Debentures due April 24, 2000. Interest rates on the
debentures will be set quarterly, based on LIBOR for three month deposits plus
.27%. The initial interest rate for the period from April 24, 1998 to July
24, 1998 is 5.9575%. On May 1, 1998, the Brazos River Authority (Brazos
Authority) issued approximately $79 million of 5.55% Pollution Control Revenue
Refunding Bonds due May 1, 2033. Proceeds were used to refund the 9 1/4%
Brazos Authority Series 1988A Bonds and a portion of the Brazos Authority
Taxable Series 1991D Bonds. TU Electric is obligated to make payments of
principal and interest on the bonds.
During the three month period ended March 31, 1998, the Company redeemed,
reacquired or made principal payments of $254.3 million (including $61.8
million for TU Electric) on long-term debt, preferred stock and preferred
securities.
In January 1998, TU Electric purchased 146,501 shares of its $8.20 series
preferred stock at a total cost of approximately $14.1 million, and ENSERCH
redeemed $100 million of its Series E adjustable rate preferred stock, all
purchased primarily with the proceeds from the above described debt issues.
Also in January 1998, TU Electric redeemed all of the outstanding shares of
the TU Electric Capital II preferred trust at a cost of $47.4 million. In
February 1998, ENSERCH called for redemption on March 27 the outstanding
balance of its 6 3/8% Convertible Subordinated Debentures. Holders of the
debentures elected to convert $3.0 million principal amount of the debentures
into 77,963 shares of TUC common stock, and the remaining $87.7 million
principal amount was redeemed for cash.
At March 31, 1998, TUC, TU Electric and ENSERCH had joint lines of credit
under credit facility agreements (Credit Agreements) with a group of
commercial banks. The Credit Agreements have two facilities. Facility A
provides for short-term borrowings aggregating up to $570 million outstanding
at any one time at variable interest rates and terminates April 22, 1999.
Facility B provides for short-term borrowings aggregating up to $1,330 million
outstanding at any one time at variable interest rates and terminates April
24, 2002. The combined borrowings of TUC, TU Electric and ENSERCH under both
facilities are limited to an aggregate of $1,900 million outstanding at any
one time. ENSERCH's borrowings under both facilities are limited to an
aggregate of up to $650 million outstanding at any one time. Borrowings under
these facilities are used for working capital and other corporate purposes,
including commercial paper backup. The Company has also entered into an
interim 364 Day Competitive Advance and Revolving Credit Facility Agreement
(Interim Facility) dated as of March 6, 1998 and amended March 23, 1998, with
a group of banking institutions for the purpose of financing the purchase of
TEG shares in the U.K. market through draws or backstop of commercial paper
issuances in an aggregate amount of up to $1,650 million. The Company and TU
Acquisitions and other intermediate U.K. holding companies have entered into
credit facilities with banking institutions in the United States (U.S.) and
the U.K., respectively, which will provide committed financing sufficient to
purchase the outstanding TEG shares and pay related expenses. The U.S. credit
facilities, which will aggregate $5.0 billion, will replace the Company's
current credit facilities and Interim Facility.
24
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In addition, certain non-U.S. subsidiaries have revolving credit
agreements aggregating approximately $91 million, of which $60 million was
outstanding at March 31, 1998. These revolving credit agreements expire at
various dates through 2000.
The Company and TU Electric may issue additional debt and equity
securities as needed, including the possible future sale: (i) by TU Electric
of up to $498.9 million principal amount of debt securities, (ii) by TU
Electric of up to $25 million of its Cumulative Preferred Stock, and (iii) by
ENSERCH of up to $250 million aggregate principal amount of securities, all of
which are currently registered with the Securities and Exchange Commission
(SEC) for offering pursuant to Rule 415 under the Securities Act of 1933.
The Company's and TU Electric's operations involve managing market risks
related to changes in interest rates and, for the Company, foreign exchange
and commodity price exposures. Derivative instruments including swaps and
forward contracts are used to reduce and manage a portion of those risks.
With the exception of the marketing activities of an ENSERCH subsidiary,
Enserch Energy Services, Inc. (EES), the Company's and TU Electric's
participations in derivative transactions are designed for hedging purposes;
and derivative instruments are not held or issued for trading purposes. As
part of its energy marketing business activities, EES enters into a variety of
transactions, including forward contracts involving physical delivery of
natural gas or electrical power commodities, as well as swaps, futures,
options and other derivative contractual arrangements. These activities
involve price commitments into the future and, therefore, give rise to market
risk. EES uses the mark-to-market method of valuing and accounting for
these activities. The notional amounts and terms of the portfolio as of March
31, 1998 included financial instruments that provide for fixed price receipts
of 2,410 trillion British thermal units equivalent (Tbtue) and fixed price
payments of 2,276 Tbtue, with a maximum term of five years. Additionally,
sales and purchase commitments totaling 574 Tbtue, with terms extending up to
five years, are included in the portfolio as of March 31, 1998. Credit risk
relates to the risk of loss that the Company and TU Electric would incur as a
result of nonperformance by counterparties to their respective derivative
instruments. The Company and TU Electric believe the risk of nonperformance
by counterparties is minimal. For other information regarding derivative
instruments, see Note 6 to Condensed Consolidated Financial Statements.
Regulation, Rates and Competition
TUC and TU Electric
Docket 18490 - The PUC approved the stipulation filed on December 17,
1997 by TU Electric, together with the PUC General Counsel, the Office of
Public Utility Counsel and various other parties interested in TU Electric's
rates and services. The stipulation, modified to incorporate changes made by
Commissioners, resulted in base rate credits beginning January 1, 1998, of 4%
for residential customers, 2% for general service secondary customers and 1%
for all other retail customers and additional base rate credits for
residential customers of 1.4% beginning January 1, 1999. All other provisions
of the stipulation were approved. They will (i) impose a 11.35% cap on TU
Electric's rate of return on common equity during 1998 and 1999, with any sums
earned above an earnings cap being applied as additional nuclear production
depreciation, (ii) allow TU Electric to record depreciation applicable to
transmission and distribution assets in 1998 and 1999 as additional
depreciation of nuclear production assets, (iii) establish an updated cost of
service study that includes interruptible customers as customer classes, (iv)
result in the permanent dismissal of pending appeals of prior PUC orders,
including Docket No. 11735, if all other parties that have filed appeals of
those dockets also dismiss their appeals, (v) result in the stay of any
proceedings in the remand of Docket No. 9300 prior to January 1, 2000,
and, (vi) flow all gains from off-system sales of electricity in excess of the
amount included in base rates to customers through the fuel factor.
Modifications that were also approved by the PUC include: (i) imputing $16
million of revenues from discounted rates in the calculation of the return
cap, (ii) limiting the recovery of interest on any new debt issued prior to
December 31, 1999, to the interest rate available to TU Electric at its bond
rating as of January 1, 1998 in the calculation of the return cap, (iii)
limiting the amount of annual capital additions to production plant to
1.5% of TU Electric's net plant in service on December 31, 1996 in the
calculation of the return cap, and (iv) permitting TU Electric, at its
25
<PAGE>
<PAGE>
discretion, to apply earnings as additional depreciation of nuclear production
assets, after the determinations have been made under the return cap.
TUC
Lone Star Gas Rates -- On August 20, 1996, the Railroad Commission of
Texas (RRC) ordered a general inquiry into the rates and services of Lone Star
Gas, most notably a review of historic gas cost and gas acquisition practices
since the last rate setting. The inquiry docket has been separated into
different phases. Two of the phases, conversion to the National Association
of Regulatory Utility Commissioners account numbering system and unbundling,
have been dismissed by the RRC, and one other phase, rate case expense, has
been concluded. In the phase dealing with historic gas cost and gas
acquisition practices, Lone Star Gas and Lone Star Pipeline have filed a
motion for summary disposition stating that any retroactive rate action would
be inappropriate and unlawful. Settlement discussions with intervenor cities
are ongoing. In the event the motion for summary disposition is denied, a
hearing is currently scheduled to begin in November 1998. A number of
management and transportation related issues have been placed in a separate
phase, which still has an undefined scope and is being held in abeyance
pending the resolution of the phase, dealing with gas costs. Management
believes that gas costs were prudently incurred and were properly accounted
for and recovered through the gas cost recovery mechanism previously approved
by the RRC. At this time, management is unable to predict the ultimate
outcome of the inquiry.
Capital Expenditures
TUC and TU Electric
The re-evaluation of growth expectations, the effects of inflation,
additional regulatory requirements and the availability of fuel, labor,
materials and capital may result in changes to the estimated construction
costs and dates of completion in TUC's and TU Electric's construction
programs (see Item 2 Properties -- Capital Expenditures in the 1997 Form
10-K). Commitments in connection with the construction program are generally
revocable subject to reimbursement to manufacturers for expenditures incurred
or other cancellation penalties.
TUC plans to seek new investment opportunities from time to time when it
is concluded that such investments are consistent with its business strategies
and will likely enhance the long-term returns to shareholders (See Note 1 to
Condensed Consolidated Financial Statements). The timing and amounts of any
other specific new business investment opportunities, except those discussed
previously herein, are presently undetermined.
RESULTS OF OPERATION
TU Electric
Net income for TU Electric for the three months and twelve months ended
March 31, 1998 decreased approximately 4% and 10% from the same periods of
1997. Results for the 1998 twelve months were reduced by recognition in
August 1997 of an $81.1 million fuel disallowance (including interest) and a
charge of $10.1 million from the sale of sulfur dioxide allowances previously
recognized. After revenue-related and income taxes, these settlements
reduced income by $55.4 million. Excluding these items, net income for the
twelve months ended March 31, 1998 was $31.8 million below that for the
comparable 1997 period. Results for the current twelve-month period were also
reduced by the recognition of the $80.0 million rate settlement refund
recorded in July 1997. On April 21, 1998, the Public Utility Commission of
Texas (PUC) approved a permanent rate settlement agreement that will reduce TU
Electric's revenues by an estimated $263 million over the next two years. The
reductions, described below, were effective January 1, 1998.
26
<PAGE>
<PAGE>
TU Electric's residential customers received a 4 percent reduction of
their base rate charges through 1998, with an additional 1.4 percent reduction
planned for 1999. General service secondary customers received a 2 percent
decrease, and all other retail customers received a 1 percent decrease. Under
the agreement, TU Electric's return is limited and any earnings over the cap
will be used as additional depreciation to lower investments in nuclear
production assets. The agreement also allows transfer of depreciation from
transmission and distribution assets to nuclear production assets.
For the three month period ended March 31, 1998, operating revenues
decreased approximately 2.5% from the comparable period of 1997 but for the
twelve month period increased slightly. The following table details the
factors contributing to these changes:
Increase (Decrease)
---------------------------
Three Months Twelve Months
Ended Ended
-------- --------
Thousands of Dollars
Base rate revenue $(15,837) $(11,240)
Fuel revenue (including over/under-recovered) (23,606) 71,156
Fuel disallowance -- (68,556)
Transmission service revenue 1,246 86,509
Other revenue 4,654 (22,735)
-------- --------
Total $(33,543) $ 55,134
======== ========
Total energy sales for the three-and twelve-month periods ended March 31,
1998 increased by 1.2% and 2.3%, respectively, in comparison to the same
periods for 1997. Growth in electric energy sales more than offset unfavorable
weather conditions. However, base rate electricity revenues decreased
slightly from the 1997 periods as a result of the implementation in January
1998 of the rate settlement agreement.
Fuel revenues decreased for the first quarter of 1998 compared with the
1997 period due to lower fuel gas costs. For the twelve-month period, fuel
revenues increased primarily due to higher volumes of energy sales and higher
gas prices. The increases in transmission revenues primarily reflect the
impact of implementing the PUC's Open Access Transmission Rule effective
January 1, 1997.
Fuel and purchased power expense for the three-month period decreased
4.4% from the comparable 1997 period as a result of decreased gas prices, but
for the twelve-month period increased 3.9%, primarily due to increased energy
sales as compared to the prior periods and higher spot market gas prices.
Operation and maintenance expenses decreased 3.9% for the three month
period mainly because of workforce reductions and timing of projects but
increased 5.2% for the twelve month period primarily due to transmission
tariffs implemented in January 1997, partially offset by workforce reductions
and lower employee benefits.
Interest on mortgage bonds for the three-and twelve-month periods ended
March 31, 1998, decreased as compared to the comparable 1997 periods due to
retirement of mortgage bonds, while interest on other long-term debt increased
due to the issuance of unsecured debt during 1997. Other interest increased
for the current three-month period due primarily to higher levels of
borrowings. Other interest for the twelve-month period of 1997 included an
interest payment related to a settlement with the Internal Revenue Service
(IRS), while the 1998 period includes the interest on the fuel disallowance,
as noted above. The increase in distribution on preferred securities of
trusts reflects a full year's effect on the 1998 twelve-month period of the
issuance of TU Electric obligated, mandatorily redeemable, preferred
securities of subsidiary trusts in January 1997, somewhat offset by a partial
redemption of these securities in January 1998.
For the comparable three-and twelve-month periods, preferred stock
dividends decreased from 1997 to 1998, primarily due to the redemption of a
significant portion of TU Electric's preferred stock.
27
<PAGE>
<PAGE>
TUC
For all periods presented, the factors affecting the results of TU
Electric, as discussed above, are also the major factors affecting the results
of TUC. For both the three and twelve months ended 1998, the acquisitions of
ENSERCH and LCC added to results, as did improved results from Australian
operations. Net income contributions from ENSERCH and LCC totaled $20.9
million for the three-month period and $8.5 million for the twelve-month
period. Earnings per share for the first quarter of 1998 were 52 cents (51
cents diluted) compared to 51 cents (basic and diluted) for the first quarter
of 1997. Earnings for the twelve-month period, excluding TU Electric's
non-recurring items discussed above, were $3.08 per share ($3.07 per share
diluted) compared with $3.30 per share for the prior twelve-month period.
Earnings per share for both periods were affected by the issuance of
additional shares of common stock for the acquisition of ENSERCH and LCC,
partially offset by the repurchases of common stock in the third and fourth
quarters of 1997.
For the three-and twelve-month periods ended March 31, 1998, operating
revenues increased 67% and 36%, respectively, from the year earlier periods
due to the inclusion of ENSERCH and LCC revenues. Revenues of ENSERCH and LCC
combined were $1,047 million and $2,335 million for the respective periods.
Excluding ENSERCH and LCC, revenues were down 3% for the quarter but were 1%
higher for the twelve-month period.
Other income (deductions) -- net for the three-and twelve-month periods
includes $8.2 million equity in earnings from TUC's ownership interest in
TEG. The twelve months ended March 31, 1998 were also affected by losses from
an interest in a telecommunications partnership.
Year-to-year comparisons of interest expense and distributions on
preferred securities and preferred stock of subsidiaries have been affected by
the Company's capital restructuring and debt reduction programs, the debt and
preferred stock assumed in connection with the 1997 acquisitions of ENSERCH
and LCC and by the higher level of commercial paper borrowings. Interest
expense for the twelve-month period of 1997 included an interest payment
related to a settlement with the IRS, while the 1998 twelve-month period
included a charge of $12 million related to the fuel disallowance.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Company,
comprehensive income consists of net income reported in the statements of
consolidated income and the change in the foreign currency translation
adjustment, net of tax as included in common stock equity. For TU Electric,
comprehensive income is the same as net income reported in the statements of
consolidated income, since there were no other items of comprehensive income
for the periods presented. (See Condensed Statements of Consolidated
Comprehensive Income).
CHANGE IN ACCOUNTING STANDARDS
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," will become effective in 1998 for reporting full year results of
operations. This statement establishes standards for defining and reporting
business segments. TUC is currently determining its reportable segments.
The adoption of SFAS 130 and SFAS 131 will not affect consolidated
financial position, results of operations or cash flows.
28
<PAGE>
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder for TUC and TU Electric related to
Energy Marketing Activities and Foreign Currency Risk Management is set forth
in Note 6 to Condensed Consolidated Financial Statements of Item 1 Financial
Statements. All other information required hereunder for TUC and TU Electric
is not significantly different from the information set forth in Item 7A
Quantitative and Qualitative Disclosures About Market Risk included in the
1997 Form 10-K and is therefore not presented herein.
29
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
TUC and TU Electric
(a) Exhibits filed as a part of Part II are:
15 - Letters from Deloitte & Touche LLP
as to unaudited interim financial information
15(a) Texas Utilities Company
15(b) Texas Utilities Electric Company
27 - Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
99(a) - Officer's Certificate establishing TU Electric's Floating
Rate debentures due April 24, 2000
99(b) - Amendment, dated as of April 24, 1998, to Amended and
Restated 364 Day Competitive Advance and Revolving Credit
Facility Agreement, "Facility A", dated as of April 24,
1997, among the Company, TEI, TU Electric, ENSERCH,
certain banks, Chase Manhattan Bank and Texas Commerce
Bank National Association, as Agents
(b) Reports on Form 8-K filed since December 31, 1997:
Date of Report Item Reported
-------------- -------------
TUC
February 26, 1998 Item 7. Financial Statements and Exhibits
March 13, 1998 Item 5. Other Events
April 8, 1998 Item 5. Other Events
April 9, 1998 Item 7. Financial Statements and Exhibits
April 17, 1998 Item 5. Other Events
30
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES COMPANY
By /s/ J. W. Pinkerton
------------------------
J. W. Pinkerton
Controller and Principal
Accounting Officer
Date: May 13, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ J. W. Pinkerton
-----------------------
J. W. Pinkerton
Controller and Principal
Accounting Officer
Date: May 13, 1998
31
<PAGE>
<PAGE>
Appendix A
ENSERCH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF TEXAS UTILITIES COMPANY)
INDEX TO FINANCIAL INFORMATION
March 31, 1998
Page
Condensed Statements of Consolidated Income A-2
Condensed Statements of Consolidated Cash Flows A-3
Condensed Consolidated Balance Sheets A-4
Notes to Condensed Consolidated Financial Statements A-6
Independent Accountants' Report A-10
Management's Discussion and Analysis of Financial Condition and
Results of Operation A-11
A-1
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Predecessor
-------------
Three Months Ended March 31
----------------------------
1998 1997
---- ----
Thousands of Dollars
<S> <C> <C>
OPERATING REVENUES $1,018,978 $ 794,813
---------- ---------
OPERATING EXPENSES
Gas purchased for resale 830,954 615,445
Operation and maintenance 97,949 90,287
Depreciation and amortization 19,128 14,471
Taxes other than income 22,712 23,282
---------- ---------
Total operating expenses 970,743 743,485
---------- ---------
OPERATING INCOME 48,235 51,328
OTHER INCOME (DEDUCTIONS) - NET (68) (632)
INTEREST CHARGES (18,751) (18,934)
---------- ---------
INCOME BEFORE INCOME TAXES 29,416 31,762
INCOME TAX EXPENSE 11,932 13,186
---------- ---------
INCOME FROM CONTINUING OPERATIONS 17,484 18,576
LOSS FROM DISCONTINUED OPERATIONS -- (219,501)
---------- ---------
NET INCOME (LOSS) 17,484 (200,925)
PREFERRED STOCK DIVIDENDS 1,282 2,862
---------- ---------
NET INCOME (LOSS) AVAILABLE FOR COMMON STOCK $ 16,202 $(203,787)
========== =========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-2
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Predecessor
-----------
Three Months Ended March 31
----------------------------
1998 1997
---- ----
Thousands of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Income from continuing operations $ 17,484 $ 18,576
Depreciation and amortization 18,661 16,044
Deferred income taxes 6,838 11,547
Changes in operating assets and liabilities:
Accounts receivable 146,069 83,607
Inventories 26,809 15,909
Accounts payable
Affiliates 23,545 --
Other (96,108) (121,490)
Interest and taxes accrued (533) (17,581)
Other working capital (29,446) 13,784
Energy marketing risk management assets and liabilities (19,042) --
Other -- net 1,240 386
--------- --------
Cash provided by operating activities 95,517 20,782
--------- --------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
Long-term debt 250,000 100,000
Common stock -- 3,613
Retirements of securities:
Long-term debt (90,750) (100,399)
Preferred stock (100,000) --
Change in notes payable:
Commercial paper -- 42,500
Banks (3,513) --
Affiliates (118,033) --
Cash dividends paid (2,517) (6,388)
Debt financing expenses (1,060) --
Other -- (7)
--------- --------
Cash provided by (used for) financing activities (65,873) 39,319
--------- --------
CASH FLOWS - INVESTING ACTIVITIES
Construction expenditures (21,839) (17,792)
Other investments (6,609) (20,744)
--------- --------
Cash used in investing activities (28,448) (38,536)
CASH PROVIDED BY (USED FOR) DISCONTINUED OPERATIONS 2,741 (24,066)
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,937 (2,501)
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE 11,770 17,715
--------- --------
CASH AND CASH EQUIVALENTS - ENDING BALANCE $ 15,707 $ 15,214
========= =========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-3
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
----------- ------------
Thousands of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Gas distribution and pipeline $1,077,870 $1,068,708
Other 47,475 46,400
---------- ----------
Total 1,125,345 1,115,108
Less accumulated depreciation 38,742 24,669
---------- ----------
Net of accumulated depreciation 1,086,603 1,090,439
Construction work in progress 95,951 85,635
Held for future use 121 121
---------- ----------
Net property, plant and equipment 1,182,675 1,176,195
---------- ----------
INVESTMENTS 43,486 37,041
---------- ----------
CURRENT ASSETS
Cash and cash equivalents 15,707 11,770
Accounts receivable (net of allowance for uncollectible
accounts: 1998 - $6,045,000; 1997 - $3,902,000) 366,460 524,908
Energy marketing risk management assets 367,089 365,650
Inventories - at average cost:
Materials and supplies 5,890 6,544
Gas stored underground 88,089 114,244
Prepayments 8,896 1,527
Deferred income taxes 22,663 22,663
Other current assets 7,073 7,678
---------- ----------
Total current assets 881,867 1,054,984
---------- ----------
DEFERRED DEBITS
Goodwill (net of accumulated amortization:
1998 - $13,110,000; 1997 - $8,113,000) 786,404 791,401
Unamortized regulatory assets 51,227 52,336
Deferred income taxes 64,465 72,631
Other deferred debits 64,083 55,560
---------- ----------
Total deferred debits 966,179 971,928
---------- ----------
Total $3,074,207 $3,240,148
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-4
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(Unaudited) 1997
-----------------------------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common Stock (par value -- $.01 per share):
Authorized shares -- 100,000,000
Outstanding shares -- 201,000 $ 2 $ 2
Paid in capital 771,401 771,207
Retained earnings (deficit) 6,637 (9,565)
---------- ----------
Total common stock equity 778,040 761,644
Preferred stock not subject to mandatory redemption 75,000 175,000
Advances from parent 175,616 293,843
Long-term debt, less amounts due currently 803,341 646,796
---------- ----------
Total capitalization 1,831,997 1,877,283
---------- ----------
CURRENT LIABILITIES
Notes payable - banks 2,554 6,067
Accounts payable:
Affiliates 28,471 4,926
Other 395,194 491,645
Energy marketing risk management liabilities 343,309 357,044
Taxes accrued 11,558 19,010
Interest accrued 14,033 20,264
Dividends declared 624 1,859
Customers' deposits 7,458 7,751
Other current liabilities 58,823 79,078
---------- ----------
Total current liabilities 862,024 987,644
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes 10,414 10,498
Unamortized investment tax credits 3,349 3,364
Pensions and other postretirement benefits 162,806 165,514
Other deferred credits and noncurrent liabilities 203,617 195,845
---------- ----------
Total deferred credits and other noncurrent
liabilities 380,186 375,221
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
---------- ----------
Total $3,074,207 $3,240,148
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-5
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. MERGERS AND DISPOSITIONS
On August 5, 1997 (Merger Date or Acquisition Date), the merger
transactions between Texas Utilities Company (TUC) and ENSERCH Corporation
(ENSERCH or the Corporation) were completed. All of the common stock of
ENSERCH was converted into common stock of TUC, and ENSERCH became a
wholly-owned subsidiary of TUC. Immediately prior to ENSERCH's merger with
TUC, Enserch Exploration, Inc. (EEX) and Lone Star Energy Plant Operations,
Inc. (LSEPO), former subsidiaries of the Corporation, were merged to form a
new company (New EEX), and ENSERCH distributed to its common shareholders its
ownership interest in these businesses.
TUC accounted for its acquisition of ENSERCH as a purchase, and purchase
accounting adjustments, including goodwill, have been pushed down and are
reflected in the financial statements of ENSERCH and its subsidiaries for the
period subsequent to August 5, 1997. The financial statements of ENSERCH for
the periods ended before August 5, 1997 were prepared using ENSERCH's
historical basis of accounting and are designated as "Predecessor". The
comparability of the operating results for the Predecessor and the periods
encompassing push down accounting are affected by the purchase accounting
adjustments, including the amortization of goodwill over a period of forty
years.
The Predecessor financial statements have been restated to reflect EEX
and LSEPO as a discontinued operation. The historical financial statements of
ENSERCH reflect certain reclassifications made to conform to TUC's
presentation style. On December 31, 1997, ENSERCH sold, to another subsidiary
of TUC, at net book value, the group of companies which had constituted the
Corporation's power development and international gas distribution
operations. For financial reporting purposes, the sale was deemed to have
occurred on August 5, 1997. Accordingly, operating results for periods
following the Merger Date exclude those operations. Prior periods were not
restated to reflect the sale.
The fair value of the assets and liabilities of ENSERCH's rate-regulated
natural gas utility business (conducted through its Lone Star Gas Company and
Lone Star Pipeline Company divisions) is considered to be equivalent to the
historical basis of accounting and accordingly, no adjustment has been made to
the carrying value. The excess of the consideration paid by TUC over the
estimated fair value of the assets and liabilities of ENSERCH at the merger
date was approximately $800 million and is reflected as goodwill in the
ENSERCH balance sheet as of December 31, 1997. The process of determining the
fair value of assets and liabilities at the merger date is continuing, and the
final result awaits the resolution of income tax and other contingencies and
finalization of certain estimates.
A-6
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The condensed consolidated financial statements
of ENSERCH and its subsidiaries have been prepared on the same basis as those
in the 1997 Annual Report on Form 10-K (1997 Form 10-K) and, in the opinion of
ENSERCH, all adjustments (constituting only normal recurring accruals)
necessary to a fair presentation of the results of operation and financial
position have been included therein. Certain information and footnote
disclosures normally included in annual consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to rules and regulations of the Securities and Exchange
Commission.
Certain previously reported amounts have been reclassified to
conform to current classifications.
Energy Marketing Activities -- The Corporation, through its energy
marketing subsidiary, Enserch Energy Services, Inc. (EES), enters into a
variety of transactions, including forward contracts involving physical
delivery of natural gas or electrical power commodities, as well as swaps,
futures, options and other derivative contractual arrangements. As part of
these business activities, EES offers price risk management services to the
energy sector. These transactions are primarily conducted with retail end
users, established energy companies and major financial institutions. EES
uses the mark-to-market method of valuing and accounting for these
activities. Under this method, the current market value of EES' energy
portfolio, net of future servicing costs is reflected within the Corporation's
consolidated balance sheets, with resulting unrealized gains and losses, as
"Energy Risk Management Assets or Liabilities". The actual timing of cash
receipts and payments may however vary as contracts may be settled at
intervals other than their scheduled maturities. (See Note 6).
3.COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Corporation,
comprehensive income is the same as net income reported in the consolidated
statement of income. There are no other items of comprehensive income for the
periods presented.
4.SHORT-TERM FINANCING
At March 31, 1998, TUC, TU Electric and ENSERCH had joint lines of credit
under credit facility agreements (Credit Agreements) with a group of
commercial banks. The Credit Agreements have two facilities. Facility A
provides for short-term borrowings aggregating up to $570,000,000 outstanding
at any one time at variable interest rates and terminates April 22, 1999.
Facility B provides for short-term borrowings aggregating up to
$1,330,000,000 outstanding at any one time at variable interest rates and
terminates April 24, 2002. ENSERCH's borrowings under both facilities are
limited to an aggregate of up to $650,000,000 outstanding at any one time.
Borrowings under these facilities will be used for working capital and other
corporate purposes, including commercial paper backup. TUC will amend or
replace this credit facility to provide for a significantly increased level of
borrowing in connection with its pending acquisition
A-7
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
of The Energy Group. However, ENSERCH is expected to have the same or similar
capacity under the new agreements as it does presently.
5.CAPITALIZATION
In January 1998, the Corporation issued $125,000,000 of 6 1/4% Series A
Notes due January 1, 2003 (Series A Notes) and $125,000,000 of Remarketed
Reset Notes due January 1, 2008 (Reset Notes). Net proceeds from these
borrowings were used to refinance or redeem like amounts of higher rate debt
and preferred stock.
The Series A Notes are redeemable as a whole at any time or in part, from
time to time, at the option of the Corporation, at a redemption price equal to
the sum of (a) the greater of (i) 100% of the principal amount and (ii) the
sum of the present values of the remaining scheduled payments of principal and
interest thereon from the redemption date to the maturity date, plus (b)
accrued interest on the principal amount thereof to the date of redemption.
The Reset Notes were issued at an initial rate of 5.82% per annum for the
period to April 1, 1998. Interest rates are reset for variable rate periods
and may be tendered for remarketing at the end of each such period. After
July 1, 1998, rate periods will not be shorter than six months. The interest
rate for each new rate period is based either on LIBOR or may be fixed for a
succeeding rate period as determined for each such period by the Remarketing
Agent and the Corporation. The interest rate for the period from April 1,
1998 through July 1, 1998 is 5.99%. The Reset Notes may be redeemed in whole
or in part at the option of the Corporation at 100% of the principal amount
thereof, plus accrued interest.
In February 1998, ENSERCH called for redemption on March 27 the
outstanding balance of its 6 3/8% Convertible Subordinated Debentures.
Holders of $3,005,000 principal amount of the debentures elected to convert
the debentures into 77,963 shares of TUC common stock, and the remaining
$87,745,000 principal amount was redeemed for cash.
In January 1998, the Corporation redeemed all of the outstanding shares
of its Adjustable Rate Preferred Stock, Series E, at $1,000 per share,
$100,000,000 principal amount, plus accrued and unpaid dividends of $14.777
per share.
ENSERCH may issue additional debt and equity securities as needed,
including the possible future sale of up to $250,000,000 aggregated principal
amount of securities currently registered with the SEC for offering pursuant
to Rule 415 under the Securities Act of 1933.
6.DERIVATIVE INSTRUMENTS
Energy Marketing Activities --EES' energy portfolio is comprised of
forward commitments, futures, swaps, options and other derivative
instruments. The notional amounts and terms of the portfolio as of March 31,
1998 included financial instruments that provide for fixed price receipts of
2,410 trillion British thermal units equivalent (Tbtue) and fixed price
payments of 2,276 Tbtue, with a maximum term of five years. Additionally,
sales and purchase commitments totaling 574 Tbtue, with terms extending up to
five years are included in the portfolio as of March 31, 1998.
A-8
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notional amounts reflect the volume of transactions but do not represent
the amounts exchanged by the parties to the financial instruments.
Accordingly, the notional amounts represented above do not necessarily measure
EES' exposure to market or credit risks. Additionally, the maximum term in
years are not indicative of likely future cash flows as these positions may be
offset in the markets at any time in response to EES' risk management needs.
7.REGULATION AND RATES
Lone Star Gas Rates -- On August 20, 1996, the Railroad Commission of
Texas (RRC) ordered a general inquiry into the rates and services of Lone Star
Gas, most notably a review of historic gas cost and gas acquisition practices
since the last rate setting. The inquiry docket has been separated into
different phases. Two of the phases, conversion to the National Association
of Regulatory Utility Commissioners account numbering system and unbundling,
have been dismissed by the RRC, and one other phase, rate case expense has
been concluded. In the phase dealing with historic gas cost and gas
acquisition practices, Lone Star Gas and Lone Star Pipeline have filed a
motion for summary disposition stating that any retroactive rate action would
be inappropriate and unlawful. Settlement discussions with intervenor cities
are ongoing. In the event the motion for summary disposition is denied, a
hearing is currently scheduled to begin in November 1998. A number of
management and transportation related issues have been placed in a separate
phase which still has an undefined scope and is being held in abeyance pending
the resolution of the phase dealing with gas costs. Management believes that
gas costs were prudently incurred and were properly accounted for and
recovered through the gas cost recovery mechanism previously approved by the
RRC. At this time, management is unable to predict the ultimate outcome of
the inquiry.
8.COMMITMENTS AND CONTINGENCIES
Guarantees -- The Corporation and/or its subsidiaries are the guarantor
on various commitments and obligations of others aggregating approximately
$37,900,000 at March 31, 1998. The Corporation is exposed to loss in the
event of nonperformance by other parties. However, the Corporation does not
anticipate nonperformance by the counterparties.
A-9
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
ENSERCH Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
ENSERCH Corporation and subsidiary companies (the Corporation) as of March 31,
1998, and the related condensed statements of consolidated income and cash
flows for the three months ended March 31, 1998 and 1997 (Predecessor Company
Operations, see Note 1). These financial statements are the responsibility
of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of the Corporation as of
December 31, 1997, and the related consolidated statements of income, cash
flows and common stock equity for the year then ended (not presented herein);
and in our report dated February 24, 1998, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1997, is fairly stated in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 11, 1998
A-10
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
This report and other presentations made by ENSERCH Corporation (ENSERCH
or the Corporation) and its subsidiaries contain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Although ENSERCH believes that in making any such statement its
expectations are based on reasonable assumptions, any such statement involves
uncertainties and is qualified in its entirety by reference to the factors
contained in the Forward-looking Statements section of Item 7 Management's
Discussion and Analysis of Financial Condition and Results of Operation in
ENSERCH's 1997 Annual Report on Form 10-K for the year 1997 (1997 Form 10-K),
among others, that could cause the actual results of ENSERCH to differ
materially from those projected in such forward-looking statement.
Any forward-looking statement speaks only as of the date on which such
statement is made, and ENSERCH undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
ENSERCH to predict all of such factors, nor can the impact of each such factor
or the extent to which any factor, or combination of factors, may cause
results to differ materially from those contained in any forward-looking
statement be assessed.
FINANCIAL CONDITION
Merger With TUC and Disposition
On August 5, 1997 (Merger Date or Acquisition Date), the merger
transactions between Texas Utilities Company (TUC) and ENSERCH Corporation
(ENSERCH or the Corporation) were completed. All of the common stock of
ENSERCH was converted into common stock of TUC, and ENSERCH became a
wholly-owned subsidiary of TUC. Immediately prior to ENSERCH's merger with
TUC, Enserch Exploration, Inc. (EEX) and Lone Star Energy Plant Operations,
Inc. (LSEPO), former subsidiaries of the Corporation, were merged to form a
new company (New EEX), and ENSERCH distributed to its common shareholders its
ownership interest in these businesses.
TUC accounted for its acquisition of ENSERCH as a purchase, and purchase
accounting adjustments, including goodwill, have been pushed down and are
reflected in the financial statements of ENSERCH and its subsidiaries for the
period subsequent to August 5, 1997. The financial statements of ENSERCH for
the periods ended before August 5, 1997, were prepared using ENSERCH's
historical basis of accounting and are designated as "Predecessor". The
comparability of the operating results for the Predecessor and the periods
encompassing push down accounting are affected by the purchase accounting
adjustments including the amortization of goodwill over a period of forty
years.
The Predecessor financial statements have been restated to reflect EEX
and LSEPO as a discontinued operation. The historical financial statements of
ENSERCH reflect certain reclassifications made to conform to TUC's
presentation style. On December 31, 1997, ENSERCH sold, to another subsidiary
of TUC, at net book value, the group of companies which had constituted the
Corporation's power development and international gas distribution
operations. For financial reporting purposes, the sale was deemed to have
occurred on August 5, 1997. Accordingly, operating results for periods
following the Merger Date exclude those operations. Prior periods were not
restated to reflect the sale.
A-11
<PAGE>
<PAGE>
Liquidity and Capital Resources
For information concerning liquidity and capital resources, see Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operation in ENSERCH's 1997 Form 10-K. Quarterly results presented herein are
not necessarily indicative of expectations for a full year's operations
because of seasonal and other factors, including variations in maintenance and
other operating expense patterns. No significant changes or events which might
affect the financial condition of the Corporation have occurred subsequent to
year-end other than as disclosed in other reports of ENSERCH or included
herein.
Continuing operations provided cash of $96 million for operating
activities in the first three months of 1998 compared with $21 million in the
same period of 1997. Changes in operating assets and liabilities provided
cash of $53 million in the first quarter of 1998 but used cash of $25 million
in the comparable 1997 period.
Discontinued operations provided cash of $2.7 million in the 1998
first quarter and used cash of $24 million in the 1997 quarter.
Investing activities required $28 million in the first quarter of 1998
versus $39 million in 1997. Capital spending in the first quarter of 1998 was
$4.0 million higher than last year's first quarter. Other investing activities
used cash of $6.6 million in 1998 and $21 million in 1997.
Total capitalization at March 31, 1998 was $1,832 million, down 2% from
year-end 1997. Common stock equity as a percentage of total capitalization
was 42.5% at March 31, 1998 compared with 40.6% at year-end 1997.
In January 1998, ENSERCH issued $125 million of 6 1/4% Series A Notes
due 2003 and $125 million of Remarketed Reset Notes due 2008 with a variable
interest rate (5.99% for the period from April 1, 1998 to July 1, 1998). Net
proceeds from these borrowings were used to refinance or redeem like amounts
of higher rate debt and preferred stock. In January, the Series E Adjustable
Rate Preferred Stock was redeemed at 100% of its liquidation price plus
accrued and unpaid dividends. In February 1998, the Corporation called for
redemption on March 27 the outstanding balance of its 6 3/8% Convertible
Subordinated Debentures. Holders of the debentures elected to convert $3.0
million principal amount of the debentures into 77,963 shares of TUC common
stock, and the remaining $87.7 million principal amount was redeemed for
cash.
ENSERCH may issue additional debt and equity securities as needed,
including the possible future sale of up to $250 million aggregate principal
amount of securities currently registered with the Securities and Exchange
Commission (SEC) for offering pursuant to Rule 415 under the Securities Act of
1933.
At March 31, 1998, TUC, Texas Utilities Electric Company, a wholly-owned
indirect subsidiary of TUC, and ENSERCH had joint lines of credit under credit
facility agreements (Credit Agreements) with a group of commercial banks. The
Credit Agreements have two facilities. Facility A provides for short-term
borrowings aggregating up to $570 million outstanding at any time at variable
interest rates and terminates April 22, 1999. Facility B provides for
short-term borrowings aggregating up to $1,330 million outstanding at any time
at variable interest rates and terminates April 24, 2002. ENSERCH borrowings
under both facilities are limited to an aggregate of $650 million outstanding
at any time. ENSERCH borrowings under these facilities will be used for
working capital and other needs. At March 31, 1998, ENSERCH had no borrowings
under these facilities. TUC will amend or replace this credit facility to
provide for an increased level of borrowing in connection with its pending
acquisition of The Energy Group. However, ENSERCH is expected to have the
same or similar capacity under the new agreements as it does presently.
A-12
<PAGE>
<PAGE>
Regulation and Rates
Lone Star Gas Rates -- On August 20, 1996, the Railroad Commission of
Texas (RRC) ordered a general inquiry into the rates and services of Lone Star
Gas, most notably a review of historic gas cost and gas acquisition practices
since the last rate setting. The inquiry docket has been separated into
different phases. Two of the phases, conversion to the National Association
of Regulatory Utility Commissioners account numbering system and unbundling,
have been dismissed by the RRC, and one other phase, rate case expense, has
been concluded. In the phase dealing with historic gas cost and gas
acquisition practices, Lone Star Gas and Lone Star Pipeline have filed a
motion for summary disposition stating that any retroactive rate action would
be inappropriate and unlawful. Settlement discussions with intervenor cities
are ongoing. In the event the motion for summary disposition is denied, a
hearing is currently scheduled to begin in November 1998. A number of
management and transportation related issues have been placed in a separate
phase which still has an undefined scope and is being held in abeyance pending
the resolution of the phase dealing with gas costs. Management believes that
gas costs were prudently incurred and were properly accounted for and
recovered through the gas cost recovery mechanism previously approved by the
RRC. At this time, management is unable to predict the ultimate outcome of
the inquiry.
RESULTS OF OPERATION
For the first quarter of 1998, ENSERCH had income from continuing
operations of $17.5 million compared with $18.6 million income for the
Predecessor for the same period of 1997. The amortization of goodwill arising
from the acquisition by Texas Utilities was $5.0 million in the 1998 first
quarter. First quarter 1997 income was reduced by an $8.6 million pretax,
$5.6 million after-tax, provision for a credit Lone Star Pipeline Company
made voluntarily to its customers.
Consolidated revenues for the first quarter of 1998 were $1,019 million
compared with $795 million for the first quarter of 1997. The higher revenues
reflect an increase of $339 million in energy marketing revenues. Gas
purchased for resale increased from $615 million in the first quarter of 1997
to $831 million in the same period of 1998, reflecting the increase in natural
gas marketing activity. Quarterly operating income was $48.2 million in 1998
compared with $51.3 million in 1997. Operating income from natural gas
gathering and processing operations decreased $5.1 million in 1998 from
1997. Fluctuations in natural gas liquids (NGL) demand, price volatility for
NGL products and natural-gas feedstock costs are the major factors that
influence financial results in the NGL processing business. Lone Star
Pipeline operating income increased $3.6 million in the 1998 period from the
1997 first quarter, partially attributable to lower operating and maintenance
expenses. The results in 1997 were after a voluntary refund of $8.6 million
made to residential and commercial customers. Lone Star Gas operating income
decreased $7.5 million in 1998 from 1997 primarily due to higher operating
and maintenance expenses. Energy marketing activities reported an
improvement in operating results of some $10.1 million compared with the 1997
first quarter, the result of improved gas margins. Power development and
international gas operations, transferred to another TUC affiliate effective
with the Merger, detracted $1.9 million from operating income in the first
quarter of 1997.
A-13
<PAGE>
<PAGE>
The loss from discontinued operations of $219.5 million for the
quarter ended March 31, 1997, included a $236 million after-tax impact of a
write-down of the carrying value of EEX's oil and gas properties due to the
U.S. cost center ceiling limitation at March 31, 1997, and a $9.7 million
($14.9 million pre-tax) provision for estimated costs and expenses to wind-up
engineering and construction operations.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Corporation,
comprehensive income is the same as net income reported in the statements of
consolidated income, since there are no other items of comprehensive income
for the periods presented.
CHANGES IN ACCOUNTING STANDARDS
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," will become effective in 1998. This statement establishes
standards for defining and reporting business segments. The Corporation is
currently determining its reportable segments.
The adoption of SFAS 130 and SFAS 131 will not affect the Corporation's
consolidated financial position, results of operations or cash flows.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder for the Corporation is not
significantly different from the information set forth in Item 7A
Quantitative and Qualitative Disclosures About Market Risk included in the
1997 Form 10-K and is therefore not presented herein.
A-14
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0001023291
<NAME> TEXAS UTILITIES COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 18,546,576
<OTHER-PROPERTY-AND-INVEST> 4,018,876
<TOTAL-CURRENT-ASSETS> 1,731,705
<TOTAL-DEFERRED-CHARGES> 2,063,792
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 26,360,949
<COMMON> 5,592,383
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,304,578
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,865,349
843,575
190,055
<LONG-TERM-DEBT-NET> 8,775,071
<SHORT-TERM-NOTES> 39,961
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 2,319,507
<LONG-TERM-DEBT-CURRENT-PORT> 801,401
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 6,526,030
<TOT-CAPITALIZATION-AND-LIAB> 26,360,949
<GROSS-OPERATING-REVENUE> 2,498,666
<INCOME-TAX-EXPENSE> 74,636
<OTHER-OPERATING-EXPENSES> 2,073,030
<TOTAL-OPERATING-EXPENSES> 2,073,030
<OPERATING-INCOME-LOSS> 425,636
<OTHER-INCOME-NET> (1,750)
<INCOME-BEFORE-INTEREST-EXPEN> 423,886
<TOTAL-INTEREST-EXPENSE> 222,621
<NET-INCOME> 126,629
0
<EARNINGS-AVAILABLE-FOR-COMM> 126,629
<COMMON-STOCK-DIVIDENDS> 135,568
<TOTAL-INTEREST-ON-BONDS> 100,485
<CASH-FLOW-OPERATIONS> 486,648
<EPS-PRIMARY> .52
<EPS-DILUTED> .51
</TABLE>
EXHIBIT 15 (a)
Texas Utilities Company:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Company and
subsidiaries (the "Company") for the periods ended March 31, 1998 and 1997, as
indicated in our report dated May 11, 1998; because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, is incorporated by reference in Registration Statements No. 33-55931,
333-27989, and 333-32831 on Form S-3; Registration Statements No. 333-45999,
333-47135 and 333-49395 on Form S-4; and Registration Statements No.
333-32833, 333-32835, 333-32837, 333-32839, 333-32841, 333-32843, and
333-45657 on Form S-8 of Texas Utilities Company.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 11, 1998
Exhibit 99(a)
Texas Utilities Electric Company
OFFICER'S CERTIFICATE
Robert S. Shapard, the Treasurer of Texas Utilities Electric Company (the
"Company"), pursuant to the authority granted in the Board Resolutions of the
Company dated November 10, 1997, and Sections 201 and 301 of the Indenture
defined herein, does hereby certify to The Bank of New York (the "Trustee"),
as Trustee under the Indenture of the Company (For Unsecured Debt Securities)
dated as of August 1, 1997 (the "Indenture") that:
1.The securities of the second series to be issued under the Indenture
shall be designated "Floating Rate Debentures due April 24, 2000" (the
"Debentures of the Second Series"). All capitalized terms used in this
certificate which are not defined herein but are defined in the form of
Debentures of the Second Series attached hereto as Exhibit A shall have the
meanings set forth in such Exhibit A; all other capitalized terms used in this
certificate which are not defined herein but are defined in the Indenture
shall have the meanings set forth in the Indenture;
2.The Debentures of the Second Series shall be limited in aggregate
principal amount to $350,000,000 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture;
3.The Debentures of the Second Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest thereon
on April 24, 2000;
4.The Debentures of the Second Series shall bear interest as provided in
the form set forth in Exhibit A hereto;
5.The principal and each installment of interest on the Debentures of the
Second Series shall be payable at, and registration and registration of
transfers and exchanges in respect of the Debentures of the Second Series may
be effected at, the office or agency of the Company in The City of New York;
provided that payment of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto. Notices and
demands to or upon the Company in respect of the Debentures of the Second
Series may be served at the office or agency of the Company in The City of New
York. The Corporate Trust Office of the Trustee will initially be the agency
of the Company for such payment, registration and registration of transfers
and exchanges and service of notices and demands and the Company hereby
appoints the Trustee as its agent for all such purposes; provided, however,
that the Company reserves the right to change, by one or more Officer's
Certificates any such office or
<PAGE>
<PAGE>
agency and such agent. The Trustee will be the Security Registrar and
the Paying Agent for the Debentures of the Second Series;
6.The Calculation Agent for the Debentures of the Second Series shall be
The Bank of New York, or its successor as Calculation Agent. At any time, the
Company may designate a successor Calculation Agent, who may be any person or
entity who is eligible to be a successor Trustee or co-trustee under the
Indenture or who (a) is in fact independent, (b) does not have any direct
material financial interest in the Company or in any affiliate of the Company,
(c) is not connected with the Company as an officer, employee, promoter,
underwriter, partner, director or person performing similar functions, (d) is
selected by an Authorized Officer and (e) is approved by the Trustee in the
exercise of reasonable care;
7.The Debentures of the Second Series will not be redeemable prior to
maturity;
8.The Debentures of the Second Series will be initially issued pursuant
to Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), in global form registered in the name of Cede & Co. (as nominee for The
Depository Trust Company ("DTC"), New York, New York). The Debentures of the
Second Series in global form shall bear the depository legend in substantially
the form set forth in Exhibit A hereto. The Debentures of the Second Series
shall contain restrictions on transfer, substantially as described in the form
set forth in Exhibit A hereto. Each Debenture of the Second Series, whether
in a global form or in a certificated form, shall bear the non-registration
legend in substantially the form set forth in such form, unless otherwise
agreed by the Company, such agreement to be confirmed in writing to the
Trustee. Nothing in the Indenture, the Debentures of the Second Series or
this certificate shall be construed to require the Company to register any
Debentures of the Second Series under the Securities Act, unless otherwise
expressly agreed by the Company, confirmed in writing to the Trustee, or to
make any transfer of such Debentures of the Second Series in violation of
applicable law;
9.The Trustee, the Security Registrar and the Company will have no
responsibility under the Indenture for transfers of beneficial interests in
the Debentures of the Second Series. In connection with any transfer of
Debentures of the Second Series, the Trustee, the Security Registrar and the
Company shall be under no duty to inquire into, may conclusively presume the
correctness of, and shall be fully protected in relying upon the certificates
and other information (in the forms of certificate of transfer and accredited
investor certificate attached hereto as part of Exhibit A, or otherwise)
received from the Holders and any transferees of any Debentures of the Second
Series regarding the validity, legality and due authorization of any such
transfer, the eligibility of the transferee to receive such Security and any
other facts and circumstances related to such transfer;
10.No service charge shall be made for the registration of transfer or
exchange of the Debentures of the Second Series; provided, however, that the
Company may require
-2-
<PAGE>
<PAGE>
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with the exchange or transfer;
11.If the Company shall make any deposit of money and/or Eligible
Obligations with respect to any Debentures of the Second Series, or any
portion of the principal amount thereof, as contemplated by Section 701 of the
Indenture, the Company shall not deliver an Officer's Certificate described in
clause (z) in the first paragraph of said Section 701 unless the Company shall
also deliver to the Trustee, together with such Officer's Certificate, either:
(A) an instrument wherein the Company, notwithstanding the
satisfaction and discharge of its indebtedness in respect of the Debentures of
the Second Series, shall assume the obligation (which shall be absolute and
unconditional) to irrevocably deposit with the Trustee or Paying Agent such
additional sums of money, if any, or additional Eligible Obligations (meeting
the requirements of Section 701), if any, or any combination thereof, at such
time or times, as shall be necessary, together with the money and/or Eligible
Obligations theretofore so deposited, to pay when due the principal of and
premium, if any, and interest due and to become due on such Debentures of the
Second Series or portions thereof, all in accordance with and subject to the
provisions of said Section 701; provided, however, that such instrument may
state that the obligation of the Company to make additional deposits as
aforesaid shall be subject to the delivery to the Company by the Trustee of a
notice asserting the deficiency accompanied by an opinion of an independent
public accountant of nationally recognized standing, selected by the Trustee,
showing the calculation thereof; or
(B) an Opinion of Counsel to the effect that, as a result of a
change in law occurring after the date of this certificate, the Holders of
such Debentures of the Second Series, or portions of the principal amount
thereof, will not recognize income, gain or loss for United States federal
income tax purposes as a result of the satisfaction and discharge of the
Company's indebtedness in respect thereof and will be subject to United States
federal income tax on the same amounts, at the same times and in the same
manner as if such satisfaction and discharge had not been effected.
12.The Debentures of the Second Series shall have such other terms and
provisions as are provided in the form set forth in Exhibit A hereto, and
shall be issued in substantially such form;
13.The undersigned has read all of the covenants and conditions contained
in the Indenture relating to the issuance of the Debentures of the Second
Series and the definitions in the Indenture relating thereto and in respect of
which this certificate is made;
14.The statements contained in this certificate are based upon the
familiarity of the undersigned with the Indenture, the documents accompanying
this certificate, and upon discussions by the undersigned with officers and
employees of the Company familiar with the matters set forth herein;
-3-
<PAGE>
<PAGE>
15.In the opinion of the undersigned, he has made such examination or
investigation as is necessary to enable him to express an informed opinion
whether or not such covenants and conditions have been complied with; and
16.In the opinion of the undersigned, such conditions and covenants and
conditions precedent, if any (including any covenants compliance with which
constitutes a condition precedent) to the authentication and delivery of the
Debentures of the Second Series requested in the accompanying Company Order
have been complied with.
-4-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's Certificate this 24th
day of April, 1998.
/s/ Robert S. Shapard
-----------------------
Robert S. Shapard
Treasurer
<PAGE>
<PAGE>
EXHIBIT A
[depository legend]
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Company
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
[non-registration legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO THE COMPANY, (2) IN
A TRANSACTION ENTITLED TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT, (3) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE
OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE
BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY), (4) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), OR
(5) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT
FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS
DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT
WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT
OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3)
A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF, OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER,
REGULATION S UNDER THE SECURITIES ACT."
<PAGE>
<PAGE>
No._______________
Cusip No.__________
[FORM OF FACE OF DEBENTURE]
[(See legend at the end of this Security for
restrictions on transferability and change of form)]
TEXAS UTILITIES ELECTRIC COMPANY
FLOATING RATE DEBENTURES DUE APRIL 24, 2000
TEXAS UTILITIES ELECTRIC COMPANY, a corporation duly organized and
existing under the laws of the State Texas (herein referred to as the "Company",
which term includes any successor Person under the Indenture), for value
received, hereby promises to pay to
[Cede & Co.]
or registered assigns, the principal sum of
____________________________________________________________________________
Dollars
on April 24, 2000 (Maturity Date), and to pay interest on said principal sum,
quarterly on January 24, April 24, July 24 and October 24 of each year (each
an Interest Payment Date), commencing July 24, 1998, at the per annum interest
rate determined by the Calculation Agent on each Interest Determination Date,
as such terms are defined herein, until the principal hereof is paid or made
available for payment. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of the actual number of days for which
interest is payable in the relevant Interest Period, divided by 360. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the 15th calendar day next preceding such Interest Payment Date. Any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than
10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture referred to on the reverse hereof.
Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Company maintained
for that purpose in The City of New York, the State of New York in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, provided, however, that, at
the option of the Company, interest on this Security may be paid by check
mailed to the address of the person entitled thereto, as such address shall
appear on the Security Register.
A-2
<PAGE>
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
TEXAS UTILITIES ELECTRIC COMPANY
By:_______________________________________
ATTEST:
____________________________
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:_______________________________________
Authorized Signatory
A-3
<PAGE>
<PAGE>
[FORM OF REVERSE OF DEBENTURE]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of August 1, 1997 (herein, together
with any amendments thereto, called the "Indenture", which term shall have the
meaning assigned to it in such instrument), between the Company and The Bank
of New York, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture, including the Board Resolutions and Officer's Certificate filed
with the Trustee on April 24, 1998 creating the series designated on the face
hereof, for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders
of the Securities and of the terms upon which the Securities are, and are to
be, authenticated and delivered. This Security is one of the series
designated on the face hereof, limited in aggregate principal amount to
$350,000,000.
The Securities of the Second Series will bear interest at a per
annum rate (Interest Rate) determined by The Bank of New York, or its
successor appointed by the Company as permitted by the Indenture, acting as
calculation agent (Calculation Agent). The Interest Rate for each Interest
Period will be equal to LIBOR (as defined below) on the second London Business
Day (as defined below) immediately preceding the first day of such Interest
Period (Interest Determination Date), plus .27%; provided, however, that in
certain circumstances described below, the Interest Rate will be determined in
an alternative manner without reference to LIBOR. Promptly upon such
determination, the Calculation Agent will notify the Trustee of the Interest
Rate for such Interest Period.
Interest on the Securities of the Second Series will accrue from and
including April 24, 1998 (Issue Date) to but excluding July 24, 1998 (the
first Interest Payment Date) and thereafter from and including each Interest
Payment Date to but excluding the next succeeding Interest Payment Date or
Maturity Date, as the case may be.
"London Business Day" shall mean a day on which dealings in deposits
in U.S. dollars are transacted, or with respect to any future date, are
expected to be transacted, in the London interbank market.
"LIBOR" for any Interest Determination Date will be the offered rate
for deposits in U.S. dollars having an index maturity of three months for a
period commencing on the second London Business Day immediately following the
Interest Determination Date (Three Month Deposits) in amounts of not less than
$1,000,000, as such rate appears on Telerate Page 3750 (as defined below), or
a successor reporter of such rates selected by the Calculation Agent and
acceptable to the Company, at approximately 11:00 A.M., London time, on the
Interest Determination Date (Reported Rate).
"Telerate Page 3750" means the display designated on page "3750" on
Dow Jones Markets Limited (or such other page as may replace the 3750 page on
that service or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying London interbank
offered rates for U.S. Dollar deposits).
If the following circumstances exist on any Interest Determination
Date, the Calculation Agent shall determine the Interest Rate for the Offered
Bonds as follows:
A-4
<PAGE>
<PAGE>
(i) In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m. London time on an Interest Determination Date, the
Calculation Agent shall request the principal London offices of each of four
major banks in the London interbank market selected by the Calculation Agent
(after consultation with the Company) to provide a quotation of the rate (Rate
Quotation) at which Three Month Deposits in amounts of not less than
$1,000,000 are offered by it to prime banks in the London interbank market, as
of approximately 11:00 a.m. London time on such Interest Determination Date,
that is representative of single transactions at such time (Representative
Amounts). If at least two Rate Quotations are provided, the Interest Rate
will be the arithmetic mean of the Rate Quotations obtained by the Calculation
Agent, plus .27%.
(ii) In the event no Reported Rate appears on Telerate Page 3750 and
there are fewer than two Rate Quotations, the Interest Rate will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M. New York City
time on such Interest Determination Date, by three major banks in New York
City, selected by the Calculation Agent, for loans in Representative Amounts
in U.S. dollars to leading European banks, having an index maturity of three
months for a period commencing on the second London Business Day immediately
following such Interest Determination Date, plus .27%; provided, however, that
if fewer than three banks selected by the Calculation Agent are quoting such
rates, the Interest Rate for the applicable period will be the same as the
Interest Rate in effect for the immediately preceding Interest Period.
Upon the request of the Holder of this Security, the Calculation
Agent will provide to such Holder the Interest Rate in effect on the date of
such request and, if determined, the Interest Rate for the next Interest
Period.
"Interest Period" shall mean the period commencing on an Interest
Payment Date and ending on the day preceding the next succeeding Interest
Payment Date, with the exception that the first Interest Period shall begin on
the Issue Date and extend through the day preceding the first Interest Payment
Date.
If an Interest Payment Date or the Maturity Date for the Securities
of the Second Series falls on a day that is not a Business Day in The City of
New York, the related payment of interest or principal and interest may be
made on the next succeeding Business Day with the same force and effect as if
it were made on the date such payment was due, and no interest will accrue on
the amounts so payable for the period from and after such dates.
All percentages resulting from any calculation of any interest rate
for the Securities of the Second Series will be rounded, if necessary, to the
nearest one hundred thousandth of a percentage point, with five one millionths
of a percentage point rounded upward and all dollar amounts will be rounded to
the nearest cent, with one-half cent being rounded upward.
The Securities of this series will not be redeemable prior to
maturity.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security upon compliance with certain conditions
set forth in the Indenture, including the Officer's Certificate described
above.
A-5
<PAGE>
<PAGE>
If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this series
may be declared due and payable in the manner and with the effect provided in
the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of all series to be affected. The
Indenture contains provisions permitting the Holders of a majority in
aggregate principal amount of the Securities of all series then Outstanding to
waive compliance by the Company with certain restrictive provisions of the
Indenture. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such
series, to waive certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof
or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee
or for any other remedy thereunder, unless such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities of this series, the Holders of a majority in aggregate
principal amount of the Securities of all series at the time Outstanding in
respect of which an Event of Default shall have occurred and be continuing
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity, and the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of Securities of all series at the time
Outstanding in respect of which an Event of Default shall have occurred and be
continuing a direction inconsistent with such request, and shall have failed
to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit
instituted by the Holder of this Security for the enforcement of any payment
of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
The Securities of this series are issuable only in registered form
without coupons in denominations of $5,000 and any integral multiples of
$1,000 in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for
a like aggregate principal amount of Securities of this series and of like
tenor and of authorized denominations, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
A-6
<PAGE>
<PAGE>
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the absolute
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
A-7
<PAGE>
<PAGE>
[LEGEND
Unless and until this Security is exchanged in whole or in part for
certificated Securities registered in the names of the various beneficial
holders hereof as then certified to the Corporate Trustee by The Depository
Trust Company (55 Water Street, New York, New York) or its successor (the
"Depositary"), this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary.
Unless this certificate is presented by an authorized representative of
the Depositary to the Company or its agent for registration of transfer,
exchange or payment, and any certificate to be issued is registered in the
name of Cede & Co., or such other name as requested by an authorized
representative of the Depositary and any amount payable thereunder is made
payable to Cede & Co., or such other name, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
This Security may be exchanged for certificated Securities registered in
the names of the various beneficial owners hereof if (a) the Depositary is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, or (b) the Company
elects to issue certificated Securities to beneficial owners. Any such
exchange shall be made upon receipt by the Trustee of a Company Order therefor
and certificated Securities of this series shall be registered in such names
and in such denominations as shall be certified to the Company and the Trustee
by the Depositary.]
<PAGE>
<PAGE>
[CERTIFICATE OF TRANSFER]
TEXAS UTILITIES ELECTRIC COMPANY
Floating Rate Debentures due April 24, 2000
Principal Amount $_________________
FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
-----------------------------------------------------------
Name and address of assignee must be printed or typewritten.
the referenced Security of the Company and does hereby irrevocably constitute
and appoint
to transfer the said Security on the books of the within-named Company, with
full power of substitution in the premises.
The undersigned certifies that said Security is being resold, pledged or
otherwise transferred as follows: (check one)
[ ] ;to the Company;
[ ] ;to a Person whom the undersigned reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act") purchasing for its own account or
for the account of a qualified institutional buyer to whom notice is given
that the resale, pledge or other transfer is being made in reliance on Rule
144A;
[ ] ;in an offshore transaction in accordance with Rule 904 of Regulation S
under the Securities Act;
[ ] ;to an institution that is an "accredited investor" as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring this
Security for investment purposes and not for distribution; (attach a copy of
an Accredited Investor Certificate in the form annexed signed by an authorized
officer of the transferee)
[ ] ;as otherwise permitted by the non-registration legend appearing on
this Security; or
[ ] ;as otherwise agreed by the Company, confirmed in writing to the
Trustee, as follows: [describe]
Dated:
A-9
<PAGE>
<PAGE>
[FORM OF ACCREDITED INVESTOR CERTIFICATE]
[Transferor Name and Address]
Ladies and Gentlemen:
In connection with our proposed purchase of Floating Rate Debentures due
April 24, 2000 (the "Debentures") issued by Texas Utilities Electric Company
("Issuer"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum") relating to the Debentures and such other information as we deem
necessary in order to make our investment decision. We acknowledge that we
have read and agree to the matters stated under the caption NOTICE TO
INVESTORS in such Offering Memorandum, and the restrictions on duplication or
circulation of, or disclosure relating to, such Offering Memorandum.
2. We understand that any subsequent transfer of the Debentures is
subject to certain restrictions and conditions set forth in the Indenture
relating to Debentures (the "Indenture") and that any subsequent transfer of
the Debentures is subject to certain restrictions and conditions set forth
under NOTICE TO INVESTORS in the Offering Memorandum and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the
Debentures except in compliance with such restrictions and conditions and the
Securities Act of 1933, as amended ("Securities Act").
3. We understand that the offer and sale of the Debentures have not
been registered under the Securities Act, and that the Debentures may not be
offered or sold except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we sell any Debentures, we will do so only (A) to
the Company, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes to the Trustee (as defined in the Indenture) a signed letter
containing certain representations and agreements relating to the restrictions
on transfer of the Debentures (substantially in the form of this letter) and,
if such transfer is in respect of an aggregate principal amount of Debentures
at the time of transfer of less than $100,000, an opinion of counsel
acceptable to the Issuer that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Debentures
from us a notice advising such purchaser that resales of the Debentures are
restricted as stated herein.
A-10
<PAGE>
<PAGE>
4. We understand that, on any proposed resale of any Debentures, we
will be required to furnish to the Trustee and Issuer such certifications,
legal opinions and other information as the Trustee and Issuer may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Debentures purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Debentures, and we and any accounts for which are acting are each able to bear
the economic risk of our or its investment.
6. We are acquiring the Debentures purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You, the Issuer and the Trustee are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By:____________________
Name:
Title:
A-11
Exhibit 99 (b)
EXECUTION COPY
AMENDMENT
This AMENDMENT, dated as of April 15, 1998, among TEXAS UTILITIES
COMPANY, a Texas corporation ("TUC"), TEXAS UTILITIES ELECTRIC COMPANY, a
Texas corporation ("TU Electric"), ENSERCH CORPORATION, a Texas corporation
("Enserch" and, together with TUC and TU Electric, the "Borrowers"), the
lenders parties to the Credit Agreement referred to below (the "Lenders"), THE
CHASE MANHATTAN BANK, as Competitive Advance Facility Agent (the "CAF Agent"),
and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as administrative agent for the
lenders (the "Administrative Agent" and, together with the CAF Agent, the
"Agents").
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Lenders and the Agents have entered into an
Amended and Restated 364-Day Competitive Advance and Revolving Credit Facility
Agreement, dated as of April 24, 1997, as amended as of November 10, 1997 (as
amended, the "Credit Agreement"). Capitalized terms used but not defined
herein are used with the meanings assigned to them in the Credit Agreement.
(2) The Borrowers have requested that the Lenders agree to amend the
Credit Agreement to extend the Maturity Date from April 23, 1998 to April 22,
1999 and to provide for the assumption, on of after April 23, 1998, of the
Commitments of any Lenders that do not consent to such extension.
SECTION 1. Amendment to Credit Agreement. The Credit Agreement is,
effective as of the Maturity Date (as determined without giving effect to this
Amendment, the "Current Maturity Date") and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, hereby amended by deleting
the date "April 23, 1998" from the definition of "Maturity Date" set forth in
Section 1.01 and replacing it with the date "April 22, 1999".
SECTION 2. Adjustments to the Commitments and Amendment and Restatement
of Schedule 2.01. Each Lender that consents to this Amendment by duly
completing, executing and delivering to the Administrative Agent a signature
page to this Amendment (each such Lender being an "Extending Lender") shall
also indicate on its signature page hereto whether and by what amount such
Lender would be willing, in such Lender's sole discretion, to increase its
Commitment on and after the Current Maturity Date in the event that any Lender
does not consent to this Amendment (any such Lender being a "Terminating
Lender"). The Administrative Agent may determine, in its sole discretion, the
amount by which the Commitment of each Extending Lender that has agreed to
increase its Commitment (each such Lender being an "Increasing Commitment
Lender") shall be increased; provided that (i) no Increasing Commitment
Lender's
<PAGE>
<PAGE>
Commitment may be increased by an amount in excess of the amount of
the increase offered by such Increasing Commitment Lender, as set forth on
such Increasing Commitment Lender's signature page to this Amendment, and (ii)
the aggregate amount of the Commitments after giving effect to all such
increases shall be equal to the aggregate amount of the Commitments
immediately prior to the Current Maturity Date. The Administrative Agent
shall notify the Lenders, no later than three Business Days prior to the
Current Maturity Date, of the Commitments of the Extending Lenders that will
be in effect on and after the Current Maturity Date, after giving effect to
any increases in such Commitments pursuant to the procedures set forth in this
Section 2, by distributing to the Extending Lenders a revised Schedule 2.01.
On and after the Current Maturity Date, and subject to the satisfaction of the
conditions precedent set forth in Section 3 below, such revised Schedule 2.01
shall constitute an amendment and restatement of Schedule 2.01 of the Credit
Agreement. From and after the Current Maturity Date, and subject to the
satisfaction of the condition precedent set forth in clause (ii) of Section 3
below, the Commitment of each Terminating Lender shall be zero.
SECTION 3. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Administrative Agent, on or prior to April
17, 1998, shall have received counterparts of this Amendment executed by the
Borrowers and Lenders that consent to this Amendment representing 100% of the
Commitments (after giving effect to any adjustments to the Commitments under
Section 2), and Sections 1 and 2 hereof shall become effective when, and only
when, on or prior to the Current Maturity Date:
(i) the Administrative Agent shall have additionally received (all
dated on or as of the same date, which shall be on or prior to the Current
Maturity Date):
(A) favorable opinions of Reid & Priest LLP and Worsham,
Forsythe & Wooldridge, L.L.P., each to the effect that this Amendment has been
duly authorized, executed and delivered by the Borrowers and confirming the
opinions of such counsel furnished pursuant to Section 4.01(a) of the Credit
Agreement, with references therein to the Credit Agreement to mean this
Amendment and the Credit Agreement, as amended by this Amendment;
(B) a certificate of the Secretary or Assistant Secretary of
each Borrower certifying that attached thereto are true and complete copies of
(1) the resolutions duly adopted by the Board of Directors of such Borrower
authorizing the execution and delivery of this Amendment by such Borrower and
the performance of its obligations under the Credit Agreement, as amended
hereby, and that such resolutions have not been modified, rescinded on amended
and are in full force and effect, and (2) all Governmental Approvals that
relate to such Borrower and are required in connection with the execution and
delivery of this Amendment by such Borrower and the performance of its
obligations under the Credit Agreement, as amended hereby, and that such
Governmental Approvals are
final, have not been modified, rescinded on amended, are not subject
to any pending or threatened appeal and are in full force and effect; and
(C) such other documents as the Administrative Agent shall
reasonably request; and
(ii) the principal amount of all outstanding Loans made by any
Terminating Lender, accrued interest thereon to the date of payment, and all
Facility Fees accrued to the Current Maturity Date and payable to any
Terminating Lender, together with any all other amounts payable under the
Credit Agreement to any Terminating Lender, shall have been paid in full.
SECTION 4. Representations and Warranties of the Borrowers. Each
Borrower confirms and repeats, as of the date hereof, the representations and
warranties made by such Borrower in Article III of the Credit Agreement, with
references therein to the Credit Agreement to be deemed to be references to
this Amendment and the Credit Agreement, as amended by this Amendment.
SECTION 5. Reference to and Effect on the Credit Agreement. Upon the
effectiveness of Sections 1 and 2 hereof, on and after the date hereof each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof"
or words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement, as amended hereby. Except as specifically
amended above and as waived in the Letter Waivers, dated March 4, 1998 and
March 17, 1998, among the Borrowers, the Administrative Agent and certain
Lenders, the Credit Agreement is and shall continue to be in full force and
effect and is hereby in all respects ratified and confirmed. The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of any
Lender or any Agent under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.
SECTION 6. Costs and Expenses. The Borrowers agree to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent in
connection with entering into this Amendment (whether or not the transactions
hereby contemplated are consummated), or incurred by the Administrative Agent
or any Lender in connection with the enforcement of its rights in connection
with this Amendment.
SECTION 7. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and
the same agreement.
SECTION 8. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
TEXAS UTILITIES COMPANY
By
Name:
Title:
TEXAS UTILITIES ELECTRIC COMPANY
By
Name:
Title:
ENSERCH CORPORATION
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:______________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Lender and as
Administrative Agent
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE CHASE MANHATTAN BANK,
as Lender and as Competitive Advance
Facility Agent
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE BANK OF NEW YORK
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE BANK OF TOKYO-MITSUBISHI, LTD.
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
NATIONSBANK OF TEXAS, N.A.
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
BANQUE NATIONALE DE PARIS
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CIBC OPPENHEIMER CORP.
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CITIBANK, N.A.
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CREDIT SUISSE FIRST BOSTON
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
FLEET NATIONAL BANK
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:____________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
MELLON BANK, N.A.
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
TORONTO DOMINION (TEXAS), INC.
By
Name:
Title:
<PAGE>
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CREDIT AGRICOLE INDOSUEZ
By
Name:
Title:
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
COMMERZBANK AG, ATLANTA AGENCY
By
Name:
Title:
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:_________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
CREDIT LYONNAIS
By
Name:
Title:
<PAGE>
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE FIRST NATIONAL BANK OF CHICAGO
By
Name:
Title:
<PAGE>
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
FIRST UNION NATIONAL BANK
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE FUJI BANK, LIMITED
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By
Name:
Title:
<PAGE>
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By
Name:
Title:
<PAGE>
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE SAKURA BANK, LIMITED
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE SANWA BANK, LIMITED, DALLAS
AGENCY
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:___________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
THE TOKAI BANK, LIMITED
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By
Name:
Title:
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<PAGE>
<PAGE>
The undersigned Lender hereby:
Consents to the Amendment: ______________
Declines to consent to the Amendment:__________
Consents to an increase in the amount
of its Commitment, pursuant to the
provisions of Section 2 of the Amend-
ment, of up to: $_____________
WESTPAC BANKING CORPORATION
By
Name:
Title:
[SIGNATURE PAGE TO AMENDMENT]
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000710182
<NAME> TEXAS UTILITIES ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 15,672,484
<OTHER-PROPERTY-AND-INVEST> 562,742
<TOTAL-CURRENT-ASSETS> 611,962
<TOTAL-DEFERRED-CHARGES> 1,831,752
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 18,678,940
<COMMON> 4,172,997
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 2,115,814
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,288,811
843,575
115,055
<LONG-TERM-DEBT-NET> 5,445,991
<SHORT-TERM-NOTES> 59,988
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 782,672
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,142,848
<TOT-CAPITALIZATION-AND-LIAB> 18,678,940
<GROSS-OPERATING-REVENUE> 1,331,916
<INCOME-TAX-EXPENSE> 75,119
<OTHER-OPERATING-EXPENSES> 986,259
<TOTAL-OPERATING-EXPENSES> 1,061,378
<OPERATING-INCOME-LOSS> 270,538
<OTHER-INCOME-NET> 5,312
<INCOME-BEFORE-INTEREST-EXPEN> 275,850
<TOTAL-INTEREST-EXPENSE> 139,022
<NET-INCOME> 136,828
3,224
<EARNINGS-AVAILABLE-FOR-COMM> 133,604
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 100,467
<CASH-FLOW-OPERATIONS> 480,826
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 15 (b)
Texas Utilities Electric Company:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Electric Company
and subsidiaries ("TU Electric") for the periods ended March 31, 1998
and 1997, as indicated in our report dated May 11, 1998; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in
TU Electric's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, is incorporated by reference in Registration Statements No.
33-69554 and 333-42985 on Form S-3, and Registration Statement No. 333-83976
on Post Effective Amendment No. 1 to Form S-3, of Texas Utilities Electric
Company.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 11, 1998
