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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 1-5152
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PACIFICORP
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
STATE OF OREGON 93-0246090
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
organization)
700 N.E. MULTNOMAH, 97232-4116
PORTLAND, OREGON (Zip Code)
(Address of principal
executive offices)
</TABLE>
Registrant's telephone number, including area code: (503) 731-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------- -------------------------------
<C> <S>
Common Stock New York Stock Exchange
Pacific Stock Exchange
$1.98 No Par Serial Preferred Stock, ($25 New York Stock Exchange
Stated Value), Series 1992
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
5% PREFERRED STOCK (CUMULATIVE; $100 STATED VALUE)
SERIAL PREFERRED STOCK (CUMULATIVE; $100 STATED VALUE)
NO PAR SERIAL PREFERRED STOCK (CUMULATIVE; VARIOUS STATED VALUES)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
On March 1, 1994, the aggregate market value of the shares of voting stock
of the Registrant held by nonaffiliates was approximately $5.5 billion.
As of March 1, 1994, there were 281,786,301 shares of the Registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders of the Registrant for the year
ended December 31, 1993 are incorporated by reference in Parts I and II and
appended hereto.
Portions of the Annual Reports on Form 10-K of Pacific Telecom, Inc. and
PacifiCorp Financial Services, Inc. for the year ended December 31, 1993 are
incorporated by reference in Part I.
Portions of the proxy statement of the Registrant for the 1994 Annual
Meeting of Shareholders are incorporated by reference in Part III.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
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<S> <C> <C>
Definitions .............................................................................................. ii
Part I
Item 1. Business............................................................................... 1
The Organization..................................................................... 1
Electric Utility Operations.......................................................... 1
Pacific Telecom...................................................................... 10
Other................................................................................ 10
Discontinued Operations.............................................................. 10
Employees............................................................................ 10
Item 2. Properties............................................................................. 10
Item 3. Legal Proceedings...................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders.................................... 14
Item 4A. Executive Officers of the Registrant................................................... 14
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 16
Item 6. Selected Financial Data................................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................ 16
Item 8. Financial Statements and Supplementary Data............................................ 17
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 17
Part III
Item 10. Directors and Executive Officers of the Registrant..................................... 17
Item 11. Executive Compensation................................................................. 17
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 17
Item 13. Certain Relationships and Related Transactions......................................... 17
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 17
Signatures ............................................................................................... 21
Appendices
Financial Statements and Supplementary Data
Statements of Computation of Ratio of Earnings to Fixed Charges
List of Subsidiaries
</TABLE>
i
<PAGE>
DEFINITIONS
When the following terms are used in the text they will have the meanings
indicated:
<TABLE>
<CAPTION>
TERM MEANING
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<S> <C>
BPA.................................... Bonneville Power Administration
Company................................ PacifiCorp, an Oregon corporation
FERC................................... Federal Energy Regulatory Commission
Merger................................. The January 9, 1989 merger of PacifiCorp, a Maine corporation, and Utah
Power & Light Company, a Utah corporation, into the Company
NERCO.................................. NERCO, Inc., formerly an approximately 82% owned subsidiary of
PacifiCorp Holdings
PFS.................................... PacifiCorp Financial Services, Inc., a wholly-owned subsidiary of
PacifiCorp Holdings, and its subsidiaries
PacifiCorp Holdings.................... PacifiCorp Holdings, Inc., a wholly-owned subsidiary of the Company
Pacific Power.......................... Pacific Power & Light Company, the assumed business name of the Company
under which it conducts a portion of its retail electric operations
Pacific Telecom........................ Pacific Telecom, Inc., an approximately 87% owned subsidiary of
PacifiCorp Holdings, and its subsidiaries
Utah Power............................. Utah Power & Light Company, the assumed business name of the Company
under which it conducts a portion of its retail electric operations
</TABLE>
ii
<PAGE>
PART I
ITEM 1. BUSINESS
THE ORGANIZATION
The Company is an electric utility that conducts a retail electric utility
business through two divisions, Pacific Power and Utah Power, and engages in
power production and sales on a wholesale basis under the name PacifiCorp. The
Company formed PacifiCorp Holdings in 1984 to hold the stock of the Company's
principal subsidiaries and to facilitate the conduct of businesses not regulated
as electric utilities. The Company's strategic business plan is to strengthen
the scope and competitive position of its electric utility and
telecommunications operations, and to reduce the size and narrow the scope of
its other diversified activities.
Through PacifiCorp Holdings, the Company indirectly owns approximately 87%
of Pacific Telecom, a telecommunications company that provides local telephone
service and access to the long distance network in Alaska, seven other western
states and three midwestern states, intrastate and interstate long distance
communication services in Alaska, and cellular mobile telephone services.
Pacific Telecom is also engaged in the sale of capacity in and the operation of
a submarine fiber optic cable between the United States and Japan.
PacifiCorp Holdings also holds PFS (100%). Consistent with PacifiCorp's
strategic plan, PFS plans to continue to sell substantial portions of its loan,
leasing and real estate investments over the next several years. PFS presently
expects to retain only its tax advantaged investments in leveraged lease assets
(primarily aircraft and project finance) and low-income housing projects. In
addition, PacifiCorp Holdings owns Pacific Generation Company, which is engaged
in the independent power production and cogeneration business. The Company sold
NERCO through a merger transaction with a subsidiary of RTZ America, Inc. in
June 1993. See "Discontinued Operations."
Note 14 to the Consolidated Financial Statements appended hereto contains
information with respect to the revenue and income from operations contributed
by each of the Company's industry segments for the past three years and the
identifiable assets attributable to each segment at the end of each of those
years; this information is incorporated herein by this reference. For the year
ended December 31, 1993, 73% of PacifiCorp's revenues from operations were
derived from Electric Operations, while Pacific Telecom contributed 21%.
The Company's common stock (symbol PPW) is traded on the New York Stock
Exchange and the common stock of Pacific Telecom, Inc. (symbol PTCM) is traded
on the national over-the-counter market. The Company's $1.98 No Par Serial
Preferred Stock, Series 1992, is traded on the New York Stock Exchange.
ELECTRIC UTILITY OPERATIONS
PacifiCorp conducts its retail electric utility operations as Pacific Power
and as Utah Power, and engages in wholesale electric transactions under the name
PacifiCorp. Pacific Power and Utah Power are operated as separate divisions
providing electric service within their respective service territories. Power
production, wholesale sales, fuel supply and administrative functions are
managed on a coordinated basis.
SERVICE AREA
Pacific Power serves approximately 736,000 retail customers in service areas
aggregating about 71,000 square miles in portions of six western states: Oregon,
Wyoming, Washington, Idaho, California and Montana. Its electric service
territory is generally rural and suburban and principally agricultural. The
existing industrial base is diversified. Pacific Power also provides service to
several subregional business centers.
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Utah Power provides electric service to about 572,000 retail customers in a
service area of approximately 82,000 square miles in portions of Utah and Idaho.
The area served has a widely diversified industrial and agricultural economy and
an abundance of natural resources.
The geographical distribution of retail electric operating revenues for the
year ended December 31, 1993 was Utah, 35.0%; Oregon, 31.8%; Wyoming, 15.4%;
Washington, 8.5%; Idaho, 4.8%; California, 2.7%; and Montana, 1.8%.
CUSTOMERS
Electric utility revenues and energy sales, by class of customer, for the
three years ended December 31, 1993 were as follows:
<TABLE>
<CAPTION>
1992 1991
1993 ---------------- ----------------
----------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (Dollars in
millions):
Residential................. $ 698.9 29% $ 649.8 28% $ 663.8 30%
Commercial.................. 543.9 22 526.9 23 517.4 23
Industrial.................. 696.2 28 695.6 30 674.9 31
Government, Municipal and
Other...................... 29.8 1 29.9 1 34.2 1
---------- ---- ---------- ---- ---------- ----
Total Retail Sales........ 1,968.8 80 1,902.2 82 1,890.3 85
Wholesale Sales-Firm........ 422.5 17 356.5 15 264.7 12
Wholesale Sales-Nonfirm..... 77.3 3 71.3 3 59.9 3
---------- ---- ---------- ---- ---------- ----
Total Energy Sales........ 2468.6 100% 2,330.0 100% 2,214.9 100%
---- ---- ----
---- ---- ----
Other Revenues(1)........... 38.3 32.4 36.9
---------- ---------- ----------
Total Operating
Revenues................. $ 2,506.9 $ 2,362.4 $ 2,251.8
---------- ---------- ----------
---------- ---------- ----------
Kilowatt-hours Sold (kwh in
millions):
Residential................. 12,055 21% 11,230 21% 11,354 22%
Commercial.................. 10,085 18 9,733 18 9,416 19
Industrial.................. 19,671 34 19,942 36 19,322 38
Government, Municipal and
Other...................... 602 1 606 1 692 1
---------- ---- ---------- ---- ---------- ----
Total Retail Sales........ 42,413 74 41,511 76 40,784 80
Wholesale Sales-Firm........ 11,919 21 10,455 19 7,349 14
Wholesale Sales-Nonfirm..... 3,030 5 2,965 5 2,946 6
---------- ---- ---------- ---- ---------- ----
Total kwh Sold............ 57,362 100% 54,931 100% 51,079 100%
---------- ---- ---------- ---- ---------- ----
---------- ---- ---------- ---- ---------- ----
<FN>
- ------------------------
(1) Includes miscellaneous and steam heating revenues.
</TABLE>
Both Pacific Power's and Utah Power's sales are seasonal. Pacific Power's
customer demand peaks in the winter months due to space heating requirements.
Utah Power's customer demand peaks in the summer when irrigation and cooling
systems are heavily used. Many factors affect per customer consumption of
electricity. For residential customers, within a given year, weather conditions
are the dominant cause of usage variations from normal seasonal patterns.
However, the price of electricity is also considered a significant factor.
During 1993, no single retail customer accounted for more than 1.6% of the
Company's retail utility revenues and the 20 largest retail customers accounted
for 12.6% of total retail electric revenues.
COMPETITION
Although Pacific Power and Utah Power operate as regulated monopolies within
their respective service areas, the Company encounters significant competition
from both traditional and nontraditional energy suppliers. Competition varies in
form and intensity and includes competition from both
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utility and nonutility energy suppliers for industrial customers, as well as for
wholesale power sales to other utilities; self generation and cogeneration by
industrial customers; and substitute energy forms for residential and commercial
space heating, cooling and water heating.
In response to this competition, the Company is seeking to remain cost
competitive through utilization of its diverse electrical system to increase
operating efficiencies in power plant operations and transmission. The Company's
combined production and transmission cost in 1991 was one-third lower than the
average for investor owned utilities in the western United States according to a
study released by a major independent rating agency in July 1993. The Company
also seeks to acquire additional low cost resources, minimize price increases
and assist its customers in acquiring and implementing energy efficiency
measures. Through these efforts, the Company has been able to maintain customer
prices that are below the average for the western United States as reported by
Edison Electric Institute in 1993. See "Regulation."
The Energy Policy Act of 1992 ("Energy Act") became effective in October
1992. The Energy Act grants the FERC authority to require utilities that own
transmission facilities to provide transmission access to other entities. This
requirement has not had, nor is expected to have, a material adverse effect on
the Company because, as a condition of the FERC's approval of the Merger, the
Company is already subject to transmission access requirements similar to those
provided for in the Energy Act. The Energy Act also exempts certain independent
power producers from the Public Utility Holding Company Act. Over the long term,
this provision is expected to increase competition in the industry.
CURRENT POWER AND FUEL SUPPLY
The Company's generating facilities are interconnected through its own
transmission lines or by contract through the lines of others. Substantially all
generating facilities and reservoirs located within the Pacific Northwest are
managed on a coordinated basis to obtain maximum load carrying capability and
efficiency.
The Company's transmission system connects with other utilities in the
Northwest having low-cost hydroelectric generation and with utilities in
California and the Southwest having higher-cost, fossil-fuel generation. In
periods of favorable hydro conditions, the Company utilizes lower-cost
hydroelectric power to supply a greater portion of its load and attempts to sell
its displaced higher-cost thermal generation to other utilities. In periods of
less favorable hydro conditions, the Company seeks to sell excess thermal
generation to utilities which are more dependent on hydroelectric generation
than the Company. During the winter, the Company is able to purchase power from
Southwest utilities, either for its own peak requirements or for resale to other
Northwest utilities. During the summer, the Company is able to sell excess power
to Southwest utilities to assist them in meeting their peak requirements. See
"Wholesale Sales and Purchased Power."
The Company owns or has interests in generating plants with an aggregate
nameplate rating of 8,348.8 megawatts ("MW") and plant capability of 7,884.5 MW.
See "Item 2. Properties." With its present generating facilities, under average
water conditions, the Company expects that approximately 7% of its energy
requirements for 1994 will be supplied by its hydroelectric plants and 80% by
its thermal plants. The balance of 13% will be obtained under long-term purchase
contracts, interchange and other purchase arrangements. Note 8 to the
Consolidated Financial Statements appended hereto contains additional details
relating to the Company's purchase of power under long-term arrangements.
The Company is purchasing 1,100 MW of capacity from BPA pursuant to a
short-term agreement that extends through July 31, 1995. The Company's current
annual payment for purchases under the short-term agreement is $77.2 million,
which will increase at the rate of increase of BPA's average system cost. See
"Regulation" for information concerning an increase in BPA's rates. BPA is
undertaking an environmental review of a proposal to extend the capacity sale
through August 31, 2011. The Company has agreed to enter into a long-term
agreement if offered by BPA at the conclusion of
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this process. If BPA is unable to offer any long-term or short-term contract
after completion of the environmental review, the Company would be required to
obtain other sources of capacity, which it believes are available.
In January 1993, the Operating Committee for the Trojan Plant formally
approved the permanent cessation of nuclear operations at the plant, which had
been shut down since November 9, 1992 when a leak was detected in a steam
generator tube. Portland General Electric Company is the operator of the Trojan
Plant and owns a 67.5% share. The Eugene Water and Electric Board has assigned
its 30% interest in the plant to BPA, and the Company owns a 2.5% interest.
Recovery of the Company's remaining investment in the Trojan Plant ($14.4
million at December 31, 1993) and estimated plant closure and decommissioning
costs ($14.7 million at December 31, 1993) are subject to regulatory approval.
Under the requirements of the Public Utility Regulatory Policies Act of 1978
("PURPA"), the Company purchases the output of qualifying facilities constructed
and operated by entities that are not public utilities. During 1993, the Company
purchased an average of 94 MW from qualifying facilities, compared to an average
of 63 MW in 1992. The increase was attributable to a new 53 MW qualifying
facility that began deliveries in 1993. See "Wholesale Sales and Purchased
Power."
In 1993, the Company entered into a 20-year transmission agreement with
Southern California Edison Company, which initially provides the Company with 78
MW of off peak transfer capability and up to 165 MW of additional transfer
capability, if available, from Arizona through southern California and to the
Company's system at the Oregon border. Under the agreement, the off peak
transfer capability will increase to 260 MW and the additional transfer
capability, if available, to 347 MW in 1994. This arrangement is expected to
improve the Company's ability to utilize its resources in a more cost effective
manner, as well as provide access to surplus resources in the desert Southwest.
The Company plans and manages its capacity and energy resources based on
critical water conditions. Under critical or better water conditions in the
Northwest, the Company believes that it has adequate reserve generation capacity
for its requirements. The Company's historical total firm peak load (including
both retail and firm wholesale sales) of 8,838 MW occurred on November 24, 1993,
and historical on-system firm peak load of 7,623 MW occurred on December 21,
1990.
WHOLESALE SALES AND PURCHASED POWER
Wholesale sales continue to contribute significantly to total revenues. The
Company's wholesale sales complement its retail business and enhance the
efficient use of its generating capacity. In 1993, wholesale sales accounted for
26% of total energy sales and 20% of total energy revenues.
In addition to its base of thermal and hydroelectric resources, the Company
utilizes a mix of long-term and short-term firm power purchases and nonfirm
purchases to meet its load obligations and to make sales to other utilities when
prices are favorable. Firm power purchases supplied 10% of the Company's total
energy requirements in 1993. Nonfirm purchases were 6% of total energy
requirements in 1993 and slightly in excess of the total amount of energy sold
by the Company on the nonfirm wholesale market during the year.
During 1993, the Company commenced purchases under several new firm power
arrangements, including a 5-year agreement for the purchase of 100 MW of annual
capacity and energy, a 30-year agreement with respect to a 53 MW qualifying
facility and a short-term agreement covering 90 average MW of energy for the
period May 1 through September 15, 1993. The Company also purchased 222 MW under
a new 10-year winter capacity agreement in 1993, and has the right to receive
322 MW in 1994 and 422 MW in 1995 and each year thereafter through the term of
this agreement, which the Company may extend to 2008.
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PROPOSED ASSET ADDITIONS
In accordance with the Company's long range integrated resource planning
process, also referred to as "least-cost planning," the Company considers
various future demand and supply options for providing customers with reliable,
low-cost energy services. See "Projected Demand." In this connection, the
Company also seeks opportunities to acquire existing assets from other
utilities.
The Company has signed a contract to acquire electricity from a 474 MW
natural gas cogeneration plant in Hermiston, Oregon. Affiliates of U.S.
Generating Company will finance, build and operate the plant. The Company will
have an option to own up to 50% of the plant once it begins operation. U.S.
Generating Company must arrange for long-term gas supplies by mid-1994, and
construction is scheduled to begin in 1994, with commercial operation expected
by mid-1996. The project, which is located in the western part of the Company's
system, will provide power at a cost expected to be less expensive than other
supply side options available to the Company and to be competitive with coal
fired generation.
The Company has signed a contract to build a 50 MW cogeneration project at
the James River paper mill in Camas, Washington. The steam purchase agreement
extends for 20 years. The facility will use steam produced for the paper making
process to drive an electric turbine-generator. It should begin operating in
late 1995. The project provides the Company with an efficient source of
generation near the Portland metropolitan area.
The Company has signed contracts to build two wind generation projects, a 70
MW project in Wyoming and a 50 MW project in Washington, both of which are to be
built by Kenetech Windpower and scheduled to begin producing power in 1996. The
Company is to own 53.2, or about 37 MW, of the Wyoming project and 37.5%, or
about 19 MW, of the Washington project.
The terms of the Company's 1991 transaction with Arizona Public Service
Company ("APS") call for the construction by APS of 150 MW of combustion
turbines to be owned by the Company. The Company will pay APS a $20 million fee
upon commercial operation of the turbines for rights and services provided by
APS. Commercial operation of the turbines is expected by early 1997.
PROJECTED DEMAND
Annual increases in retail kilowatt-hour sales for the Company have averaged
2.2% since 1988. The Company has benefited from improved economic conditions in
portions of its service territory and the Company's commitment to price
stability. Substantial price reductions in many of the Company's service
territories have helped sustain sales volume growth. See "Regulation."
In connection with its long-range integrated resource planning process,
which includes load growth projections for its service areas, the Company
analyzed a range of average annual growth in energy requirements from 0.3% to
3.8% over a 20-year horizon. For the period 1994 to 1998, the average annual
growth is expected to be 2.1%, excluding the effect of the Company's demand-side
efficiency programs. Actual growth in the future will be determined by economic
and demographic growth, competition and the effectiveness of energy efficiency
programs.
The Company's base of existing resources, in combination with actions
outlined in its integrated resource plan, are expected to be sufficient to meet
the above range of possible load growth conditions throughout the 1990s. Actions
outlined in the integrated resource plan include energy efficiency by customers
(demand-side management), efficiency improvements to existing generation,
transmission and distribution systems, and investments in cogeneration, single
cycle and combined cycle combustion turbines and in renewable resources. See
"Proposed Asset Additions." The Company will use the results of its integrated
resource planning process as a framework to evaluate opportunities to acquire
surplus generating facilities from other utilities.
Demand-side management is an element of the Company's diversified portfolio
of resources identified in its integrated plan. The use of an energy service
charge concept in the Company's demand-side resource programs is intended to
allow these resources to be acquired at competitive
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costs. Under the energy service charge program, the customers receiving the
benefits of energy efficiency measures are expected to pay most of the related
costs. The Company expended an aggregate of $41.1 million for demand-side
resources in 1993, while acquiring 19.6 average MW of energy efficiency.
ENVIRONMENT
In addition to land use restrictions and other controls by local
governments, the Company is subject to regulation by federal, state and local
authorities pursuant to legislation designed to protect and enhance the quality
of the environment, including air and water quality, remediation of
contamination, waste disposal and protection of endangered species.
Environmental regulation has not only increased the cost of providing electric
service, it has adversely affected various industrial groups, thereby negatively
impacting kwh sales by the Company. However, the Company has been able to manage
these additional costs to date without having to pass the costs directly to its
customers in the form of higher rates. The Company's ability to avoid such price
increases in the future is uncertain.
AIR QUALITY. The Company's operations are subject to regulation under the
Federal Clean Air Act, as enforced by the Environmental Protection Agency
("EPA") and various state agencies. The Company believes that all of the
coal-fired generating plants operated by it comply in all material respects with
current emission standards. Some of the plants have recently modified their fuel
supply systems or processes in order to meet those standards. The Company
believes that it can continue to operate its plants at or below mandated
emission rates without incurring costs that would have a material adverse effect
on its consolidated results of operations.
In August 1993, the Sierra Club filed an action against the owners of the
Hayden Generating Station alleging violations of state and federal air quality
regulations at the station since 1988. In April 1992, the Company acquired
interests in two units of the station, which is operated by Public Service
Company of Colorado. Among other things, the complaint seeks civil monetary
penalties and an injunction requiring the defendants to operate the station in
compliance with applicable statutes and regulations. The Sierra Club has also
indicated that it may pursue similar claims with respect to the Craig Generating
Station, in which the Company also has ownership interests.
Various federal and state agencies have raised concerns with respect to
perceived visibility degradation in areas where the Company owns coal-fired
generating plants. Two visibility studies have been completed within the
Company's service territory, one in Washington and the other in the Canyonlands
area of Utah. To date, no additional emission control requirements have resulted
from these studies. The Company is participating in additional visibility
studies in western Wyoming, Colorado and the Grand Canyon area. The findings of
these studies may have a significant impact on operations at a number of
generating plants owned by the Company or in which the Company has an ownership
interest.
The 1990 Clean Air Act Amendments require an overall reduction in the
emission of sulfur dioxide (SO2) and nitrogen oxides (NOx) from utility
generating plants, and establish a system of marketable SO2 emission allowances.
The Company's generating plants burn low, sulfur coal and the majority of the
Company's plants representing a majority of its installed capacity have been
equipped with SO2 emission controls. However, the new law will result in
additional operating costs because the Company will be required to maintain and
manage SO2 emission levels, install approximately $10 million of emission
monitoring equipment, and reduce NOx emissions at some of its generating plants.
The SO2 emission allowances to be awarded to the Company are sufficient to
enable the Company to meet its current needs and expansion plans and may enable
the Company to take advantage of opportunities to sell surplus allowances to
other utilities. In 1993, the Company negotiated a sale of surplus allowances to
Illinois Power Company, which is still pending.
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Emissions from coal-fired generating plants include carbon dioxide. Carbon
dioxide emissions are not currently subject to regulation, but have been the
subject of increasing public concern. The Company is testing various techniques
of offsetting carbon dioxide emissions to determine their feasibility and cost
effectiveness.
ENDANGERED SPECIES. Enforcement of the Endangered Species Act ("ESA") and
other laws by the National Marine Fisheries Service ("NMFS") and the U.S. Fish
and Wildlife Service ("FWS") is affecting the Company's operations in a number
of areas.
Environmental regulation under the ESA has resulted in reduced availability
of timber for use by the Company's customers in the wood products industry, and
long range timber management plans for timberlands managed by federal and state
agencies are expected to further reduce the volume of timber available for
processing. In addition, the listing of the Northern Spotted Owl under the ESA
is expected to result in further restrictions on timber harvesting from both
public and private timber lands. These actions have adversely affected kwh sales
to the Company's customers in the wood products industry.
Protection of habitat of endangered and threatened species will make it more
difficult to site and construct new transmission and distribution facilities and
generating plants, and may be a consideration in connection with the relicensing
of existing hydroelectric generating projects.
NMFS is responsible for ESA actions regarding marine fish and certain marine
mammals. As a result of recent decisions with respect to the listing of species
of Columbia River salmon as endangered or threatened, NMFS is involved in
recovery measure planning that could result in changes in federal hydrosystem
operations and flows. These changes could affect the availability and cost of
power from BPA. Pending and threatened lawsuits under the ESA and the Northwest
Power Act could result in further restrictions on the federal hydropower system
and affect regional power supplies and costs.
The FWS has identified the Lost River sucker, the shortnose sucker, and the
bald eagle as species listed under the ESA that may be affected by operations of
the Klamath Project, a hydroelectric project in southern Oregon and Northern
California. Waterflows through the Klamath Project are largely subject to the
discretion of the U.S. Bureau of Reclamation, which owns the Link River Dam.
Because of recent drought conditions, flows past the Link River Dam have been
substantially reduced, which has contributed to a reduction in hydroelectric
generation at certain of the Company's downstream hydroelectric plants. In
addition, pending litigation with respect to diversions from Upper Klamath Lake
could result in further restrictions on hydroelectric generation at the Klamath
Project.
The Company anticipates that other fish species will be nominated for ESA
listings, and such actions could further impact the Company's hydroelectric
resources. The Company is continuing to monitor and participate in regional ESA
activities to minimize the generation and economic impacts resulting from such
actions. It is unknown at this time what impact, if any, these actions will have
on the Company's operations.
ELECTROMAGNETIC FIELDS. A number of studies have examined the possibility
of adverse health effects from electromagnetic fields ("EMF"), without
conclusive results. Certain states have enacted regulations to limit the
strength of magnetic fields at the edge of transmission line rights-of-way;
however, other than California, none of the jurisdictions in which the Company
operates has adopted formal rules or programs with respect to EMF or EMF
considerations in the siting of electric facilities. In California, the
Commission has issued an interim order requiring utilities to implement no cost
or low cost mitigation measures in the certification process for their
facilities. The Company expects that public concerns about EMF will make it more
difficult to site and construct new power lines and substations in the future.
It is uncertain whether the Company's operations may be adversely affected in
other ways as a result of EMF concerns.
ENVIRONMENTAL CLEANUPS. Under the Comprehensive Environmental Response,
Compensation and Liability Act and comparable state statutes, entities that
disposed of or arranged for the disposal of hazardous substances, and the owners
and operators of the related property, may be liable for the
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remediation of contaminated sites. The Company has been identified as a
potentially responsible party in connection with a number of cleanup sites to
which it may have sent transformers containing polychlorinated biphenyls
("PCBs"), used oil and other hazardous wastes. In addition, certain of the
Company's own properties have been identified as requiring remediation. The
Company is conducting or participating in investigations and remedial actions
with respect to those sites; however, the costs associated with those actions
are not expected to be material to the Company's consolidated results of
operations.
WATER QUALITY. The Clean Water Act requires permits for the discharge of
certain pollutants into the waters of the United States, including storm water
runoff. Under this Act, EPA has issued effluent limitation guidelines,
pretreatment standards and new source performance standards for the control of
certain pollutants; and individual states may impose still more stringent
limitations. The Company presently has the required discharge permits for its
facilities. Additional regulations may be promulgated in the future, but the
Company is unable to predict the extent to which such additional regulations
will affect its operations and capital expenditure requirements.
HAZARDOUS WASTES. The federal Resource Conservation and Recovery Act
("RCRA") has established a national program for the handling, treatment,
recycling, storage and disposal of hazardous wastes. To date, RCRA has not had a
material impact on the Company's operations or expenditures; however, EPA and
the Congress are studying the impacts of high volume, low toxicity utility
wastes, such as fly ash, which are now exempt from RCRA regulations. If this
exception were to be withdrawn, the Company would be faced with considerable
expense to change its disposal practices and modify its existing disposal
facilities.
MISCELLANEOUS. High sodium levels in the flue gas desulphurization waste
ponds at the Jim Bridger and Naughton coal-fired generating plants may have
caused mortalities of waterfowl protected under the Migratory Bird Treaty Act.
In cooperation with Bureau of Land Management ("BLM") and the FWS, the Company
has installed a pilot system at the Naughton Plant pond and is studying possible
methods of reducing or eliminating bird mortalities.
REGULATION
The Company is subject to the jurisdiction of public utility regulatory
authorities of each of the states in which Pacific Power and Utah Power conduct
retail electric operations as to prices, services, accounting, issuance of
securities and other matters. The Company is a "licensee" and a "public utility"
as those terms are used in the Federal Power Act and is, therefore, subject to
regulation by the FERC as to accounting policies and practices, certain prices
and other matters. Most of the Company's hydroelectric plants are licensed as
major projects under the Federal Power Act and certain of these projects are
licensed under the Oregon Hydroelectric Act.
The Company is currently in the process of relicensing certain of its
hydroelectric projects under the Federal Power Act and will be seeking licenses
for other projects in the future. As a condition to the relicensing, the FERC is
expected to impose conditions designed to address the impact of the projects on
fish and other environmental concerns. See "Environment; Endangered Species."
The Company is unable to predict the impact of imposition of such conditions,
but capital expenditures and operating costs could increase in future periods.
In addition, the Company may refuse relicenses for certain projects if the terms
of renewal make the projects uneconomical to operate.
Prices charged to retail customers are subject to regulation in each of the
states Pacific Power or Utah Power serves. Interstate sales of electricity at
wholesale prices and interstate wheeling rates are regulated by the FERC. Except
in Montana, where the commission is elected, commissioners are appointed by the
individual state's governor for varying terms. While regulation varies from
state to state, industry analysts consider the overall quality of the regulatory
commissions having jurisdiction over Pacific Power and Utah Power to be about
average in their treatment of the rate applications of utilities.
8
<PAGE>
The Company seeks to minimize retail price increases. From January 1, 1988
through December 31, 1993, the Company reduced prices paid by retail customers
by $178 million, or 10% on an annualized basis. Effective October 1, 1993, BPA
increased its wholesale power and transmission rates, increasing the price of
the Company's capacity purchases by 16% and wheeling services by 37%. In
addition, this rate increase reduced the Company's residential exchange benefits
under the Pacific Northwest Electric Power Planning and Conservation Act; such
benefits are passed on directly to the Company's residential and small farm
customers in Washington, Oregon, Montana and Idaho. Price increases in the 6% to
8% range were approved in all four states, reflecting the loss of residential
exchange benefits.
BPA also has the option of an additional interim rate increase (maximum of
10%) October 1, 1994, if operating conditions warrant. The additional interim
rate increase would be applicable only to the residential exchange benefits.
In December 1993, the California Public Utilities Commission ("CPUC")
adopted, at the Company's request, an alternate incentive form of regulation
which will be used for the next three to six years. In adopting the mechanism,
the CPUC approved a 2% average rate increase for the Company in 1994. Price
increases in the future will be based on a formula consisting of an inflation
index, less a productivity factor, with prices capped at 105% of the national
average.
A committee including representatives of the Company, FERC and each state
public service commission regulating Pacific Power and Utah Power has met to
discuss allocation of investment, costs and revenues, including the effect of
Merger benefits, among jurisdictions in order to satisfy post-Merger pricing
methodologies and reporting requirements. In January 1993, the state
representatives reached an agreement in principle on the allocation method to be
used beginning in 1993. The methodology is expected to be supported by the
commission staffs in the various jurisdictions, but adoption of the methodology
will be dependent upon commission action in specific rate proceedings.
CONSTRUCTION PROGRAM
The following table shows actual construction costs for 1993 and the
Company's estimated construction costs for 1994 through 1996, including costs of
acquiring demand-side resources. The estimates of construction costs for 1994
through 1996 are subject to continuing review and reductions are currently
anticipated. These estimates do not include expected expenditures for purchases
of generating assets. See "Proposed Asset Additions" for information concerning
recent and proposed additions to the Company's generating assets.
<TABLE>
<CAPTION>
Estimated
-------------------------------
Type of Facility Actual 1993 1994 1995 1996
- --------------------------------------------------- ----------- --------- --------- ---------
(Dollars in millions)
<S> <C> <C> <C> <C>
Production......................................... $ 165 $ 163 $ 185 $ 246
Transmission....................................... 117 103 105 138
Distribution....................................... 237 249 154 144
Mining............................................. 39 48 47 49
Other.............................................. 78 173 119 108
----- --------- --------- ---------
Total(1)....................................... $ 636 $ 736 $ 610 $ 685
----- --------- --------- ---------
----- --------- --------- ---------
<FN>
- ------------------------
(1) Excludes interest capitalized, or estimated to be capitalized, on equity
funds used during construction as follows: $4 million, $5 million, $6
million and $8 million for 1993, 1994, 1995 and 1996, respectively.
</TABLE>
9
<PAGE>
PACIFIC TELECOM
Pacific Telecom provides local telephone service and access to the long
distance network in Alaska, seven other western states and three midwestern
states. Alascom, Inc., Pacific Telecom's long distance telephone subsidiary,
provides Alaska with both intrastate and interstate long distance communication
services. In addition, Pacific Telecom has acquired and is developing, operating
and managing cellular mobile telephone services in seven states. Pacific Telecom
is also involved in the sale of capacity in and the operation of a submarine
fiber optic cable between the United States and Japan, a system that became
operational in May 1991. See "Telecommunications" appended hereto. For further
information with respect to the business of Pacific Telecom, see "Item 1.
Business" of the Annual Report on Form 10-K of Pacific Telecom, Inc. for the
year ended December 31, 1993; such information is incorporated herein by this
reference.
See "Item 3. Legal Proceedings" for a discussion of certain litigation
affecting Pacific Telecom.
OTHER
The other operations of the Company include PFS. Consistent with
PacifiCorp's strategic plan, PFS plans to continue to sell substantial portions
of its loan, leasing and real estate investments over the next several years.
PFS presently expects to retain only its tax advantaged investments in leveraged
lease assets (primarily aircraft and project finance) and low-income housing
projects. For further information with respect to the business of PFS, see "Item
1. Business" of the Annual Report on Form 10-K of PacifiCorp Financial Services,
Inc. for the year ended December 31, 1993; such information is incorporated
herein by this reference.
DISCONTINUED OPERATIONS
The Company's natural resource subsidiary, NERCO, was shown as a
discontinued operation in 1992. In June 1993, the Company completed the sale of
its ownership interest in NERCO through a merger transaction with a subsidiary
of RTZ America, Inc. PacifiCorp Holdings received cash consideration of
approximately $384 million for its shares of NERCO common stock. In connection
with the merger, a subsidiary of the Company loaned $225 million to a subsidiary
of RTZ America, Inc. that is to be repaid as, and only to the extent that,
certain future contract revenues are received.
A subsidiary of Pacific Telecom, International Communications Holdings, Inc.
("ICH"), was shown in 1992 as a discontinued operation pending completion of an
agreement to sell its wholly-owned subsidiary, TRT Communications, Inc. ("TRT"),
to IDB Communications Group, Inc. ("IDB"). Under the agreement, which closed in
the third quarter of 1993, the stock of TRT and the stock of another smaller
subsidiary were exchanged for 4.5 million shares of IDB's common stock, and $1
million in cash.
EMPLOYEES
PacifiCorp and its subsidiaries had 13,635 employees on December 31, 1993.
Of these employees, 9,475 were employed by PacifiCorp and its mining affiliates,
2,834 were employed by Pacific Telecom and 1,326 were employed by PFS and other
subsidiaries.
Approximately 65% of the employees of PacifiCorp and its mining affiliates
are covered by union contracts, principally with the International Brotherhood
of Electrical Workers, the Utility Workers Union of America and the United Mine
Workers of America.
For information with respect to the employees of Pacific Telecom and PFS,
see "Item 1. Business" of the Annual Reports on Form 10-K of Pacific Telecom,
Inc. and PacifiCorp Financial Services, Inc., for the year ended December 31,
1993; such information is incorporated herein by this reference.
In the Company's judgment, employee relations are satisfactory.
10
<PAGE>
ITEM 2. PROPERTIES
The Company owns 52 hydroelectric generating plants and has an interest in
one additional plant, with an aggregate nameplate rating of 1,014.5 MW and plant
capability of 1,110.8 MW. It also owns or has interests in 15 thermal-electric
generating plants with an aggregate nameplate rating of 7,334.3 MW and plant
capability of 6,773.7 MW. In January 1993, a decision was made to cease nuclear
operations at the Trojan Plant, in which the Company has a 2.5% interest (30.4
MW). See "Item 1. Business. Electric Utility Operations -- Current Power and
Fuel Supply." The following table summarizes the Company's existing generating
facilities:
<TABLE>
<CAPTION>
INSTALLATION NAMEPLATE PLANT
LOCATION ENERGY SOURCE DATES RATING(MW) CAPABILITY(MW)
--------------------- ---------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
HYDROELECTRIC PLANTS
Swift..................... Cougar, Washington Lewis River 1958 204.0 267.9
Merwin.................... Ariel, Washington Lewis River 1931-1958 136.0 144.0
Five North Umpqua Plants.. Toketee Falls, Oregon N. Umpqua River 1950-1956 133.5 135.5
Yale...................... Amboy, Washington Lewis River 1953 108.0 132.0
John C. Boyle............. Keno, Oregon Klamath River 1958 80.0 82.0
Copco Nos. 1 and 2
Plants................... Hornbrook, California Klamath River 1918-1925 47.0 54.5
Clearwater Nos. 1 and 2
Plants................... Toketee Falls, Oregon Clearwater River 1953 41.0 41.0
Grace..................... Grace, Idaho Bear River 1914-1923 33.0 33.0
Prospect No. 2............ Prospect, Oregon Rogue River 1928 32.0 36.0
Cutler.................... Collinston, Utah Bear River 1927 30.0 29.1
Oneida.................... Preston, Idaho Bear River 1915-1920 30.0 28.0
Iron Gate................. Hornbrook, California Klamath River 1962 18.0 20.0
Soda...................... Soda Springs, Idaho Bear River 1924 14.0 7.0
Fish Creek................ Toketee Falls, Oregon Fish Creek 1952 11.0 12.0
33 Minor Hydroelectric
Plants................... Various Various 1896-1990 97.0* 88.8*
---------- -------
Subtotal
(53 Hydroelectric
Plants)................ 1,014.5 1,110.8
THERMAL ELECTRIC PLANTS
Jim Bridger............... Rock Springs, Wyoming Coal-Fired 1974-1979 1,495.0* 1,386.7*
Huntington................ Huntington, Utah Coal-Fired 1974-1977 892.8 805.0
Dave Johnston............. Glenrock, Wyoming Coal-Fired 1959-1972 816.7 772.0
Naughton.................. Kemmerer, Wyoming Coal-Fired 1963-1971 707.2 700.0
Centralia................. Centralia, Washington Coal-Fired 1972 693.5* 636.5*
Hunter 1 and 2............ Castle Dale, Utah Coal-Fired 1978-1980 687.7* 608.5*
Hunter 3.................. Castle Dale, Utah Coal-Fired 1983 446.4 395.0
Cholla Unit 4............. Joseph City, Arizona Coal-Fired 1981 414.0 380.0
Wyodak.................... Gillette, Wyoming Coal-Fired 1978 289.7* 256.0*
Gadsby.................... Salt Lake City, Utah Gas-Fired 1951-1955 251.6 235.0
Carbon.................... Castle Gate, Utah Coal-Fired 1954-1957 188.6 175.0
Craig 1 and 2............. Craig, Colorado Coal-Fired 1979-1980 172.1* 165.0*
Colstrip 3 and 4.......... Colstrip, Montana Coal-Fired 1984-1986 155.6* 144.0*
Hayden 1 and 2............ Hayden, Colorado Coal-Fired 1965-1976 81.3* 78.0*
Blundell.................. Milford, Utah Geothermal 1984 26.1 23.0
Little Mountain........... Ogden, Utah Gas Turbine 1971 16.0 14.0
---------- -------
Subtotal (15 Thermal
Electric Plants)......... 7,334.3 6,773.7
---------- -------
Total Hydro and Thermal
Generating Facilities
(68)..................... 8,348.8 7,884.5
---------- -------
---------- -------
<FN>
- ------------------------------
* Jointly owned plants; amount shown represents the Company's share only.
</TABLE>
NOTE: Hydroelectric project locations are stated by locality and river
watershed.
11
<PAGE>
The Company's generating facilities are interconnected through its own
transmission lines or by contract through the lines of others. Substantially all
generating facilities and reservoirs located within the Pacific Northwest region
are managed on a coordinated basis to obtain maximum load carrying capability
and efficiency. Portions of the Company's transmission and distribution systems
are located, by franchise or permit, upon public lands, roads and streets and,
by easement or license, upon the lands of others.
Substantially all of the Company's electric utility plants are subject to
the liens of the Company's Mortgages and Deeds of Trust.
The following table describes the Company's recoverable coal reserves as of
December 31, 1993. All coal reserves are dedicated to nearby generating plants.
Recoverability by surface mining methods typically ranges between 90% and 95%.
Recoverability by underground mining techniques ranges from 50% to 70%. The
Company considers that the respective reserves assigned to the Centralia, Craig,
Dave Johnston, Huntington, Hunter and Jim Bridger plants, together with coal
available under both long-term and short-term contracts with external suppliers,
will be sufficient to provide these plants with fuel that meets the Clean Air
Act standards effective in 1995, for their current economically useful lives.
The sulfur content of the reserves ranges from 0.43% to 0.84% and the BTU value
per pound of the reserves ranges from 7,600 to 11,400. Reserve estimates are
subject to adjustment as a result of the development of additional data, new
mining technology and changes in regulation and economic factors affecting the
utilization of such reserves.
<TABLE>
<CAPTION>
RECOVERABLE TONS
LOCATION PLANT SERVED (IN MILLIONS)
- -------------------------------------------------- ---------------------- ----------------
<S> <C> <C>
Centralia, Washington............................. Centralia 49 (1)
Craig, Colorado................................... Craig 73 (2)
Glenrock, Wyoming................................. Dave Johnston 69 (1)
Emery County, Utah................................ Huntington and Hunter 163 (1)(3)
Rock Springs, Wyoming............................. Jim Bridger 160 (4)
<FN>
- ------------------------
(1) These reserves are mined by subsidiaries of the Company.
(2) These reserves are leased and mined by Trapper Mining Company, a wholly
owned subsidiary of Williams Fork Company, in which the Company owns
approximately 20% of the outstanding stock.
(3) These reserves are in underground mines.
(4) These reserves are leased and mined by Bridger Coal Company, a joint
venture between Pacific Minerals, Inc., a subsidiary of the Company, and a
subsidiary of Idaho Power Company. Pacific Minerals, Inc. has a two-thirds
interest in the joint venture.
</TABLE>
Most of the Company's coal reserves are held pursuant to leases from the
federal government through the BLM and from certain states and private parties.
The leases generally have multi-year terms that may be renewed or extended and
require payment of rentals and royalties. In addition, federal and state
regulations require that comprehensive environmental protection and reclamation
standards be met during the course of mining operations and upon completion of
mining activities. In 1993, the Company expended $3.2 million of reclamation
costs and accrued $5.4 million of estimated final mining reclamation costs.
Final mine reclamation funds have been established with respect to certain of
the Company's mining properties. At December 31, 1993, the Company's pro rata
portion of these reclamation funds totalled $20 million and the Company had an
accrued reclamation liability of $96 million at December 31, 1993.
For a description of the properties of Pacific Telecom and PFS, see "Item 1.
Business" and "Item 2. Properties" of the Annual Reports on Form 10-K of Pacific
Telecom, Inc. and PacifiCorp Financial Services, Inc. for the year ended
December 31, 1993; such information is incorporated herein by this reference.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various legal claims,
actions and complaints, certain of which are described below. Although it is
impossible to predict with certainty whether or not the Company and its
subsidiaries will ultimately be successful in its legal proceedings or, if not,
what the impact might be, management believes that disposition of these matters
will not have a material adverse effect on the Company's consolidated results of
operations.
The Company is a defendant in BONNEVILLE POWER ADMINISTRATION V. WASHINGTON
PUBLIC POWER SUPPLY SYSTEM, ET AL. (formerly styled WASHINGTON PUBLIC POWER
SUPPLY SYSTEM V. ALDER MUTUAL LIGHT COMPANY, ET AL.) (United States District
Court, Western District of Washington, filed October 26, 1982), a case initially
filed by the Washington Public Power Supply System, a joint operating agency of
public utility district organizations and other public bodies ("Supply System"),
to obtain a judgment declaring the proper formula to allocate common costs of
Supply System Units 1, 3, 4 and 5. The Company, a 10% owner of Unit 3,
subsequently asserted in this proceeding that the Unit 3 Ownership Agreement had
been breached or that its purpose had been frustrated, and that the Company was
excused from further obligation under the Ownership Agreement and was entitled
to recover its investment. On September 17, 1985, the Company and the other
private utility owners of Unit 3 executed agreements with BPA and the Supply
System to settle the Unit 3 dispute and requested that the court dismiss the
claims relating to that dispute. A number of public utilities in Washington
opposed the settlement and filed claims alleging that the settlement was
illegal. In May 1989, most of the parties entered into an agreement under which
the challenges to the settlement agreements were dismissed. A trustee for
certain Supply System bondholders is continuing to pursue the cost sharing
claims. On October 5, 1990, the court issued an order ruling that costs appeared
to have been misallocated and granting the trustee's request for an accounting.
In February 1992, the Ninth Circuit Court of Appeals reversed the trial court's
order and remanded the case for further proceedings.
In November 1991, former shareholders of American Network, Inc. ("AmNet")
filed a third amended complaint against Pacific Telecom and others, suing
individually and also derivatively on behalf of AmNet for damages allegedly
arising out of the acquisition of AmNet by United States Transamerica Systems,
Inc. ("USTS"), a subsidiary of ITT Corporation, in 1988 and various alleged
actions in connection with certain transactions that occurred in 1984 and 1986
between AmNet or its subsidiaries and Pacific Telecom or between AmNet and other
parties. (LOEWEN, ET AL. V. GALLIGAN, ET AL., Circuit Court for the State of
Oregon, County of Multnomah; United States District Court, District of Oregon.)
At the time of the acquisition by USTS, Pacific Telecom owned 36.4% of the
common shares of AmNet. The third amended complaint revised the plaintiffs' 1984
and 1986 fraud claims and changed the plaintiffs under all claims. As a result,
differing plaintiff groups are now suing Pacific Telecom and other defendants
for state securities and common law fraud allegedly committed in 1984, 1986 and
1988, and four plaintiffs are suing Pacific Telecom alone for breach of an
alleged promise to provide financial support to AmNet in 1984. Plaintiffs seek
to recover damages from Pacific Telecom in the amount of plaintiffs' lost
investments, plaintiffs' costs, disbursements and reasonable attorney fees, and
punitive damages of $100,000,000. On August 19, 1992, the court granted
defendants' motions for summary judgment against all claims in the third amended
complaint. Judgment in favor of defendants was entered on November 23, 1992 and
plaintiffs' appeal to the Oregon Court of Appeals is pending.
A class action complaint was filed against Equitec Financial Group, Inc.
("Equitec"), certain of its subsidiaries and former directors and officers, as
well as the Company, PacifiCorp Holdings and PacifiCorp Financial Services.
(DUVAL, ET AL. V. GLEASON, ET AL., Alameda County Superior Court, filed August
16, 1989). PacifiCorp Holdings acquired an interest in Equitec in December 1987
and owns approximately 49% of Equitec's stock. The complaint, as amended, was
filed on behalf of the limited partners in twelve real estate limited
partnerships sponsored by Equitec during the 1980-1988 period, and alleges fraud
and breach of fiduciary duty by the defendants in connection with the public
offering
13
<PAGE>
and management of the real estate partnerships. Plaintiffs seek an unspecified
amount of compensatory and punitive damages, an accounting of transactions
entered into by the partnerships and rescission of the purchase of their
partnership interests. The PacifiCorp defendants filed a demurrer to the amended
complaint, which was allowed with prejudice and without further leave to amend.
The plaintiffs in the DUVAL case have also filed two actions in the federal
district court for the Northern District of California alleging fraud under the
federal securities laws in connection with the sale of interests in the same
partnerships. (SPENCER, ET AL. V. GLEASON, ET AL. and DUVAL, ET AL. V. GLEASON,
ET AL., United States District Court for the Northern District of California.)
The PacifiCorp defendants filed answers in the federal proceedings denying any
liability. The PacifiCorp defendants also filed a motion to dismiss all of
plaintiffs' remaining claims. This motion was heard by the court on November 12,
1993 and is pending.
The Company, PacifiCorp Holdings and PacifiCorp Financial Services are also
among the defendants in a consolidated class action filed by certain limited
partners in Equitec partnerships alleging violations of the securities laws in
connection with the roll-up of the partnerships into a master limited
partnership. (IN RE EQUITEC ROLL-UP LITIGATION, United States District Court for
the Northern District of California.) The case was consolidated for trial with a
similar suit brought by individuals who opted out of the class certified in the
class action. (AABERG, ET AL. V. EQUITEC FINANCIAL GROUP, INC. ET AL., United
States District Court for the Northern District of California.) The court
granted the PacifiCorp defendants' motion for judgment as a matter of law on
February 8, 1994.
In August 1992, Equitec and certain of its subsidiaries filed a complaint
against the Company, PacifiCorp Holdings, PacifiCorp Financial Services, certain
other subsidiaries of the Company, and certain current and former directors and
officers of the Company or its subsidiaries. (EQUITEC, ET AL. V. PACIFICORP, ET
AL., Superior Court of California for Alameda County.) The complaint asserted
claims arising out of PacifiCorp Holding's acquisition of an interest in Equitec
in December 1987, and its continued ownership of approximately 49% of Equitec's
stock. The parties negotiated a settlement agreement, and the court dismissed
this action with prejudice on November 29, 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No information is required to be reported pursuant to this item.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of all executive officers of the Company. There are
no family relationships among the executive officers. Officers are normally
elected annually.
MEMBERS OF CORPORATE POLICY GROUP
Frederick W. Buckman, born March 9, 1946, President and Chief Executive
Officer of the Company
Mr. Buckman was elected President and Chief Executive Officer of the Company
effective February 1, 1994 and became a director of the Company and PacifiCorp
Holdings, Inc. in February 1994. He formerly served as President and Chief
Executive Officer of Consumers Power Company, Jackson, Michigan, from 1992 to
1994 and as President and Chief Operating Officer of Consumers Power Company
from 1988 to 1991.
William J. Glasgow, born September 29, 1946, Senior Vice President and Chief
Financial Officer of the Company, President, Chief Executive Officer and
Director of PacifiCorp Holdings, Inc., Chairman and Chief Executive Officer of
PacifiCorp Financial Services, Inc.
Mr. Glasgow was elected Senior Vice President of the Company in February
1992 and became Chief Financial Officer in June 1993. He served as Chairman,
President and Chief Executive Officer of PacifiCorp Financial Services, Inc.
from July 1989 to April 1993 and continues as Chairman and Chief Executive
Officer. He became President and Chief Executive Officer of PacifiCorp Holdings,
Inc. in June 1993. He was President and General Manager of that company since
February 1992.
14
<PAGE>
Paul G. Lorenzini, born April 16, 1942, President of Pacific Power
Mr. Lorenzini was elected President of Pacific Power effective January 31,
1992. He had served as Executive Vice President of Pacific Power since January
1989 and as Vice President since July 1987.
Charles E. Robinson, born December 3, 1933, Chairman, President and Chief
Executive Officer of Pacific Telecom, Inc. and Chairman, President and Director
of Alascom, Inc.
Mr. Robinson was elected Chairman of Pacific Telecom, Inc. in February 1989.
He has been serving as Chief Executive Officer since April 1985 and served as
President from April 1985 to October 1990. He resumed the role of President on
December 31, 1992. He served as Director, President and Chief Operating Officer
of Pacific Telecom, Inc. from April 1982 to April 1985.
Verl R. Topham, born August 25, 1934, President of Utah Power
Mr. Topham became President of Utah Power in February 1990. He had served as
Executive Vice President of Electric Operations since May 1989, as well as
Executive Vice President of Utah Power since January 1989, and Senior Vice
President, Chief Financial Officer, Commercial Manager and Director of Utah
Power since 1984.
OTHER PACIFICORP EXECUTIVE OFFICERS
Jacqueline S. Bell, born November 17, 1941, Controller of the Company,
PacifiCorp Holdings, Inc. and PacifiCorp Financial Services, Inc.
Ms. Bell became Controller of the Company in June 1989, of PacifiCorp
Holdings, Inc. in June 1989 and of PacifiCorp Financial Services, Inc. in
October 1993. She had been Manager, Corporate Accounting and Reporting since
1984.
John A. Bohling, born June 23, 1943, Senior Vice President of the Company
Mr. Bohling was elected Senior Vice President of the Company in February
1993. He served as Executive Vice President of Pacific Power since September
1991, Senior Vice President of Utah Power since February 1990, as Vice President
of Utah Power since January 1989 and Assistant Vice President, Commercial
Operations since 1985.
Shelley R. Faigle, born June 8, 1951, Senior Vice President of the Company
Ms. Faigle was elected Senior Vice President of the Company in November
1993. She had previously served as Vice President since February 1992, as Vice
President of Pacific Power since 1989 and as Assistant Vice President of Utah
Power since 1986.
Harry A. Haycock, born May 6, 1935, Senior Vice President of the Company
Mr. Haycock was elected Senior Vice President of the Company in February
1992. He had served as Executive Vice President of Electric Operations since
December 1990, as Senior Vice President of Utah Power since January 1989 and as
Vice President of Utah Power since 1981.
Thomas J. Imeson, born March 20, 1950, Vice President of the Company
Mr. Imeson was elected Vice President of the Company in February 1992. He
had served as Vice President of Electric Operations since 1990. He had
previously served as Chief of Staff for Oregon Governor Neil Goldschmidt since
1987. He was Federal Affairs Manager for Pacific Power during 1985 and 1986.
Robert F. Lanz, born October 30, 1942, Vice President of the Company
Mr. Lanz was elected Vice President of the Company in 1980. He served as
Treasurer of the Company from June 1984 to December 1993.
Sally A. Nofziger, born July 5, 1936, Vice President and Corporate Secretary
of the Company, Secretary of PacifiCorp Holdings, Inc. and PacifiCorp Financial
Services, Inc.
15
<PAGE>
Mrs. Nofziger was elected Vice President of the Company in 1989 and has been
Corporate Secretary since 1983.
Richard T. O'Brien, born March 20, 1954, Vice President of the Company
Mr. O'Brien was elected Vice President of the Company in August 1993. He had
previously served as Senior Vice President, Treasurer and Chief Financial
Officer of NERCO, Inc., a former subsidiary of the Company, during 1992 and 1993
and Vice President and Treasurer of NERCO from 1989 to 1992.
William E. Peressini, born May 23, 1956, Treasurer of the Company
Mr. Peressini was elected Treasurer of the Company in January 1994. Prior to
his election at PacifiCorp, he served as Executive Vice President of PacifiCorp
Financial Services, Inc. from January 1992 and as Senior Vice President and
Chief Financial Officer of that company since 1989.
Daniel L. Spalding, born December 23, 1953, Senior Vice President of the
Company and Vice President of PacifiCorp Holdings, Inc.
Mr. Spalding was elected Senior Vice President of the Company in February
1992. He had previously served as Vice President since October 1987.
Dennis P. Steinberg, born December 5, 1946, Vice President of the Company
Mr. Steinberg was elected Vice President of the Company in February 1992. He
had previously served as Vice President of Electric Operations since August
1990, and has held various positions in power resource planning since joining
the Company in 1978.
OTHER EXECUTIVE OFFICERS OF UTAH POWER
John E. Mooney, born March 9, 1937, Executive Vice President of Utah Power
Mr. Mooney was elected Executive Vice President of Utah Power in September
1991. He had previously served as Vice President of Pacific Power since August
1990 and as Assistant Vice President since 1985.
OTHER EXECUTIVE OFFICERS OF PACIFIC POWER
Diana E. Snowden, born October 29, 1947, Senior Vice President of Pacific
Power
Ms. Snowden was elected Senior Vice President of Pacific Power in May 1993.
She had served as Vice President of Pacific Power since 1986.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is included under "Summary
Information" and "Quarterly Financial Data" on pages 20 and 53 of the Company's
Annual Report to Shareholders and is incorporated herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included under "Summary
Information" and "Financing Activities" on pages 20 and 26 of the Company's
Annual Report to Shareholders and is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is included under "Summary
Information," "Liquidity and Capital Resources," "Electric Operations,"
"Telecommunications," "Other" and "Discontinued Operations" on pages 20 through
35 of the Company's Annual Report to Shareholders and is incorporated herein by
this reference.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by this reference from
the Company's Annual Report to Shareholders or filed with this Report as listed
in Item 14 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No information is required to be reported pursuant to this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to the Company's
directors is incorporated herein by this reference to "Election of Directors" in
the Proxy Statement for the 1994 Annual Meeting of Shareholders. The information
required by this item with respect to the Company's executive officers is set
forth in Part I of this report under Item 4A. The information required by this
item with respect to compliance with Section 16(a) of the Securities Exchange
Act of 1934 is incorporated herein by this reference to "Compliance within
Section 16(a) of the Securities Exchange Act of 1934" in the Proxy Statement
next for the 1994 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by this
reference to "Executive Compensation" in the Proxy Statement for the 1994 Annual
Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by this
reference to "Security Ownership of Certain Beneficial Owners and Management" in
the Proxy Statement for the 1994 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by this
reference to "Director Compensation and Certain Transactions" in the Proxy
Statement for the 1994 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
REFERENCES
----------
<S> <C> <C>
(a) 1. Index to Consolidated Financial Statements:
Independent Auditors' Report.................................................. 36
Statements of consolidated income and retained earnings for each of the three
years ended December 31, 1993................................................ 37
Consolidated balance sheets at December 31, 1993 and 1992..................... 38
Statements of consolidated cash flows for each of the three years ended
December 31, 1993............................................................ 40
Notes to consolidated financial statements.................................... 41
2. Schedules:**
Independent Auditors' Report.................................................. 22
II -- Amounts receivable from related parties and underwriters, promoters and
employees (other than related parties) for the three years ended December 31,
1993......................................................................... 23
V -- Property, plant and equipment for the three years ended December 31,
1993......................................................................... 24
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
VI -- Accumulated depreciation, depletion and amortization of property, plant
and equipment for the three years ended December 31, 1993.................... 27
VIII -- Valuation and qualifying accounts for the three years ended December
31, 1993..................................................................... 30
IX -- Short-term borrowings for the three years ended December 31, 1993....... 31
X -- Supplementary income statement information for the three years ended
December 31, 1993............................................................ 32
<FN>
- ------------------------
* Page references are to the incorporated portion of the Annual Report to
Shareholders of the Registrant for the year ended December 31, 1993, which
portion is appended hereto.
** All other schedules have been omitted because of the absence of the
conditions under which they are required or because the required
information is included elsewhere in the financial statements incorporated
by reference herein.
</TABLE>
3. Exhibits:
<TABLE>
<C> <C> <S>
*(3)a -- Second Restated Articles of Incorporation of the Company, as amended. (Exhibit
(3)a, Form 10-K for fiscal year ended December 31, 1993, File No. 1-5152).
(3)b -- Bylaws of the Company (as restated and amended November 17, 1993).
*(4)a -- Mortgage and Deed of Trust dated as of January 9, 1989, between the Company and
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), Trustee, as
supplemented and modified by eight Supplemental Indentures (Exhibit 4-E, Form
8-B, File No. 1-5152; Exhibit (4)(b), File No. 33-31861; Exhibit (4)(a), Form
8-K dated January 9, 1990, File No. 1-5152; Exhibit 4(a), Form 8-K dated
September 11, 1991, File No. 1-5152; Exhibit 4(a), Form 8-K dated January 7,
1992, File No. 1-5152; Exhibit 4(a), Form 10-Q for the quarter ended March 31,
1992, File No. 1-5152; and Exhibit 4(a), Form 10-Q for the quarter ended
September 30, 1992, File No. 1-5152; Exhibit 4(a), Form 8-K dated April 1,
1993, File No. 1-5152; and Exhibit 4(a), Form 10-Q for the quarter ended
September 30, 1993, File No. 1-5151).
*(4)b -- Mortgage and Deed of Trust dated as of July 1, 1947, between Pacific Power &
Light Company and Guaranty Trust Company of New York (Morgan Guaranty,
successor) and Oliver R. Brooks et al. (resigned) Trustees, as supplemented and
modified by fifty-one Supplemental Indentures (Exhibit 7(d), File No. 2-7118;
Exhibit 7(b), File No. 2-8354; Exhibit 4(b)-3, File No. 2-9446; Exhibit 4(b)-4,
File No. 2-9809; Exhibit 4(b)-5, File No. 2-10731; Exhibit 4(b)-6, File No.
2-11022; Exhibit 4(b)-7, File No. 2-12576; Exhibit 4(b)-8, File No. 2-13403;
Exhibit 4(b)-2, File No. 2-13793; Exhibit 4(b)-2, File No. 2-14125; Exhibit
4(b)-2, File No. 2-14706; Exhibit 4(b)-2, File No. 2-16843; Exhibit 4(b)-2,
File No. 2-19841; Exhibit 4(b)-2, File No. 2-20797; Exhibit 4(b)-3, File No.
2-20797; Exhibit 4(b)-2, File No. 2-15327; Exhibit 4(b)-2, File No. 2-21488;
Exhibit 4(b)-2, File No. 2-15327; Exhibit 4(b)-2, File No. 2-23922; Exhibit
4(b)-5, File No. 2-15327; Exhibit 4(b)-2, File No. 2-32390; Exhibit 4(b)-2,
File No. 2-34731; Exhibit 2(b)-1, File No. 2-37436; Exhibit 2(b)-4, Thirteenth
Amendment, File No. 2-15327; Exhibit 5(gg), File No. 2-43377; Exhibit 2(b)-1,
File No. 2-45648; Exhibit 2(b)-1, File No. 2-49808; Exhibit 2(b)-1, File No.
2-52039; Exhibit 2, Form 8-K for the month of June 1975, File No. 1-5152;
Exhibit 2, Form 8-K for the month of January 1976, File No. 1-5152; Exhibit
3(c), Form 8-K for the month of July 1976, File No. 1-5152; Exhibit 2, Form 8-K
for the month of December 1976, File No. 1-5152; Exhibit 3(c), Form 8-K for the
month of January 1977, File No. 1-5152; Exhibit 5(yy), File No. 2-60582;
Exhibit 5(m)-2, File No. 2-66153; Exhibit 4(a)-2, File No. 2-70905; Exhibit
(4)a, Form 10-K for the fiscal year ended December 31, 1980, File No. 1-5152;
Exhibit 4(b), Form 10-K for the fiscal year ended December 31, 1981, File No.
1-5152; Exhibit (4)b, Form 10-K for the fiscal year ended December 31, 1982,
File No. 1-5152; Exhibit (4)b, File No. 2-82676; Exhibit (4)b, Form 10-K for
the fiscal year ended December 31, 1985, File No. 1-5152; Exhibit 4, Form 8-K
dated July 25, 1986, File
</TABLE>
18
<PAGE>
<TABLE>
<C> <C> <S>
No. 1-5152; Exhibit 4, Form 8-K dated May 18, 1988, File No. 1-5152; Exhibit
4(a), Form 8-K dated January 9, 1989, File No. 1-5152; Exhibit (4)(d), File No.
33-31861; Exhibit (4)(b), Form 8-K dated January 9, 1990, File No. 1-5152;
Exhibit 4(b), Form 8-K dated September 11, 1991, File No. 1-5152; Exhibit 4(b),
Form 8-K dated January 7, 1992, File No. 1-5152; Exhibit 4(b), Form 10-Q for
the quarter ended March 31, 1992, File No. 1-5152; Exhibit 4(b), Form 10-Q for
the quarter ended September 30, 1992, File No. 1-5152; Exhibit 4(b), Form 8-K
dated April 1, 1993, File No. 1-5152; and Exhibit 4(b), Form 10-Q for the
quarter ended September 30, 1993, File No. 1-5152).
*(4)c -- Mortgage and Deed of Trust dated as of December 1, 1943, between Utah Power &
Light Company and Guaranty Trust Company of New York (Morgan Guaranty,
successor) and Arthur E. Burke et al. (resigned) Trustees, as supplemented and
modified by fifty-three Supplemental Indentures (Exhibits 7(a), 7(b) and 7(e),
File No. 2-6245; Exhibit 7(a), File No. 2-7420; Exhibit 7(a), File No. 2-7880;
Exhibit 7(a), File No. 2-8057; Exhibit 7(g), File No. 2-8564; Exhibit 7(h),
File No. 2-9121; Exhibit 4(d), File No. 2-9796; Exhibit 4(d), File No. 2-10707;
Exhibit 4(d), File No. 2-11822; Exhibit 4(d), File No. 2-13560; Exhibit 4(d),
File No. 2-16861; Exhibit 4(d), File No. 2-20176; Exhibit 2(c), File No.
2-21141; Exhibit 2(c), File No. 2-59660; Exhibit 2(e), File No. 2-28131;
Exhibit 2(e), File No. 2-59660; Exhibit 2(e), File No. 2-36342; Exhibit 2(e),
File No. 2-39394; Exhibits 2(h) and 2(i), File No. 2-59660; Exhibit 2(d), File
No. 2-51736; Exhibit 2(c), File No. 2-54812; Exhibit 2(c), File No. 2-55331;
Exhibit 2(c), File No. 2-55762; Exhibit 2(d), File No. 2-56990; Exhibit 2(e),
File No. 2-56990; Exhibits 2(c) and 2(d), File No. 2-58227; Exhibit 2(r), File
No. 2-59660; Exhibits 2(c) and 2(d), File No. 2-61221; Exhibit 2(c), File No.
2-63813; Exhibit 2(c), File No. 2-65221; Exhibit 2(c)-1, File No. 2-66680;
Exhibits 4(b) and 4(c)-1, File No. 2-74773; Exhibit 4(d), File No. 2-80100;
Exhibits 4(d)-2 and 4(d)-3, File No. 2-76293; Exhibit 4(b), File No. 33-9932;
Exhibit 4(b), File No. 33-13207; Exhibits 4(a) and 4(b), File No. 33-01890;
Exhibit 4(b), Form 8-K dated January 9, 1989, File No. 1-5152; Exhibit (4)(f),
File No. 33-31861; Exhibit (4)(c), Form 8-K dated January 9, 1990, File No.
1-5152; Exhibit 4(c), Form 8-K dated September 11, 1991, File No. 1-5152;
Exhibit 4(c), Form 8-K dated January 7, 1992, File No. 1-5152; Exhibit 4(c),
Form 10-Q for the quarter ended March 31, 1992, File No. 1-5152; Exhibit 4(c),
Form 10-Q for the quarter ended September 30, 1992, File No. 1-5152; Exhibit
4(c), Form 8-K dated April 1, 1993, File No. 1-5152; and Exhibit 4(c), Form
10-Q for the quarter ended September 30, 1993, File No. 1-5152).
(4)d -- Second Restated Articles of Incorporation, as amended, and Bylaws. See (3)a and
(3)b above.
In reliance upon item 601(4)(iii) of Regulation S-K, various instruments
defining the rights of holders of long-term debt of the Registrant and its
subsidiaries are not being filed because the total amount authorized under each
such instrument does not exceed 10 percent of the total assets of the
Registrant and its subsidiaries on a consolidated basis. The Registrant hereby
agrees to furnish a copy of any such instrument to the Commission upon request.
*+(10)a -- PacifiCorp Deferred Compensation Payment Plan (Exhibit 10-F, Form 10-K for
fiscal year ended December 31, 1992, File No. 1-8749).
*+(10)b -- Pacific Telecom Executive Bonus Plan, dated October 26, 1990 (Exhibit 10B, Form
10-K for the fiscal year ended December 31, 1990, File No. 0-873).
*+(10)c -- PacifiCorp PerformanceShare Officers' Annual Incentive Plan (Exhibit (10)c, Form
10-K for fiscal year ended December 31, 1993. File No. 1-5152).
*+(10)d -- PacifiCorp Non-Employee Directors' Stock Compensation Plan dated August 1, 1985,
as amended. (Exhibit (10)h, Form 10-K for fiscal year ended December 31, 1988,
File No. 1-5152).
</TABLE>
19
<PAGE>
<TABLE>
<C> <C> <S>
*+(10)e -- PacifiCorp Long Term Incentive Plan, 1993 Restatement (Exhibit 10G, Form 10-K
for the year ended December 31, 1993, File No. 0-873).
*+(10)f -- Form of Restricted Stock Agreement under PacifiCorp Long Term Incentive Plan
(Exhibit 10H, Form 10-K for the year ended December 31, 1993, File No. 0-873).
*+(10)g -- PacifiCorp Supplemental Executive Retirement Plan 1988 Restatement (Exhibit
(10)q, Form 10-K for the fiscal year ended December 31, 1987, File No. 1-5152).
*+(10)h -- PacifiCorp Executive Severance Plan (Exhibit (10)m, Form 10-K for fiscal year
ended December 31, 1988, File No. 1-5152).
*+(10)i -- Pacific Telecom Executive Deferred Compensation Plan dated as of January 1, 1994
(Exhibit 10L, Form 10-K for the year ended December 31, 1993, File No. 0-873).
*+(10)j -- Pacific Telecom Long Term Incentive Plan 1994 Restatement dated as of January 1,
1994 (Exhibit 10F, Form 10-K for the fiscal year ended December 31, 1993, File
No. 0-873).
+(10)k -- Incentive Compensation Agreement dated as of February 1, 1994 between PacifiCorp
and Frederick W. Buckman.
*+(10)l -- Restricted Stock Agreement dated as of December 3, 1992 between PacifiCorp and
A. M. Gleason (Exhibit (10)k, Form 10-K for the fiscal year ended December 31,
1992, File No. 1-8749).
+(10)m -- Compensation Agreement dated as of February 9, 1994 between PacifiCorp and Keith
R. McKennon.
*(10)n -- Short-Term Surplus Firm Capacity Sale Agreement executed July 9, 1992 by the
United States of America Department of Energy acting by and through the
Bonneville Power Administration and Pacific Power & Light Company (Exhibit
(10)n, Form 10-K for the fiscal year ended December 31, 1992, File No. 1-8749).
(12) -- Computation of Ratio of Earnings to Fixed Charges. (See page S-1.)
(13) -- Portions of Annual Report to Shareholders of the Registrant for the year ended
December 31, 1993 incorporated by reference herein.
(21) -- Subsidiaries. (See pages S-2 through S-4.)
(23) -- Consent of Deloitte & Touche with respect to Annual Report on Form 10-K.
(24) -- Powers of Attorney.
(99) -- "Item 1. Business" and "Item 2. Properties" from the Annual Reports on Form 10-K
of Pacific Telecom, Inc. and PacifiCorp Financial Services, Inc. for the year
ended December 31, 1993.
<FN>
- ------------------------
* Incorporated herein by reference.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
</TABLE>
(b) Reports on Form 8-K.
On Form 8-K dated October 29, 1993, under "Item 5. Other Events," the
Company filed a press release reporting financial results for the three and
nine-months ended September 30, 1993.
On Form 8-K dated November 19, 1993, under "Item 5. Other Events," the
Company filed a press release issued by Pacific Telecom, Inc., reporting Pacific
Telecom's sale of its shares of common stock of IDB Communications Group, Inc.
On Form 8-K dated January 18, 1994, under "Item 5. Other Events," the
Company filed a press release reporting certain actions taken at its Board of
Directors meeting held on January 17, 1994.
(c) See (a) 3. above.
(d) See (a) 2. above.
20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
PACIFICORP
By /s/ FREDERICK W. BUCKMAN
-----------------------------------
Frederick W. Buckman
(PRESIDENT)
Date: March 30, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------------- ------------------------------------- ------------------
<C> <S> <C>
/s/ FREDERICK W. BUCKMAN
------------------------------------------ President, Chief Executive Officer
Frederick W. Buckman and Director March 30, 1994
(President)
/s/ WILLIAM J. GLASGOW
------------------------------------------ Senior Vice President and Chief
William J. Glasgow Financial Officer March 30, 1994
(Senior Vice President)
/s/ DANIEL L. SPALDING
------------------------------------------ Senior Vice President (Chief
Daniel L. Spalding Accounting Officer) March 30, 1994
(Senior Vice President)
*C. M. BISHOP, JR.
------------------------------------------
C. M. Bishop, Jr.
*C. TODD CONOVER
------------------------------------------
C. Todd Conover
*RICHARD C. EDGLEY
------------------------------------------
Richard C. Edgley
*A. M. GLEASON
------------------------------------------
A. M. Gleason
(Vice Chairman)
*JOHN C. HAMPTON
------------------------------------------
John C. Hampton
*STANLEY K. HATHAWAY
------------------------------------------ Director March 30, 1994
Stanley K. Hathaway
*NOLAN E. KARRAS
------------------------------------------
Nolan E. Karras
*KEITH R. MCKENNON
------------------------------------------
Keith R. McKennon
(Chairman)
*DON M. WHEELER
------------------------------------------
Don M. Wheeler
*NANCY WILGENBUSCH
------------------------------------------
Nancy Wilgenbusch
*By /s/ C. M. BISHOP, JR.
-------------------------------------
C. M. Bishop, JR.
(Attorney-in-Fact)
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
PacifiCorp:
We have audited the consolidated financial statements of PacifiCorp and
subsidiaries as of December 31, 1993 and 1992, and for each of the three years
in the period ended December 31, 1993, and have issued our report thereon dated
February 18, 1994 (which expresses an unqualified opinion and includes an
explanatory paragraph relating to changes adopted in accounting for income taxes
and other postretirement benefits); such consolidated financial statements and
report are included in your 1993 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of PacifiCorp and subsidiaries, listed in Item 14.
These consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE
Portland, Oregon
February 18, 1994
22
<PAGE>
PACIFICORP
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------------------- ---------- --------- --------- -----------
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ---------------------- ----------------
BEGINNING AMOUNTS AMOUNTS NOT
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT DUE
-------------------- ---------- --------- --------- ----------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993 (1)
YEAR ENDED DECEMBER 31, 1992 (1)
YEAR ENDED DECEMBER 31, 1991
PacifiCorp Financial Services...... Michael C. Henderson
(mortgage) $ -- $ 0.2 $ 0.2 -- -- -- Bridge
----- --- ---
----- --- ---
<CAPTION>
INTEREST COLLATERAL
-------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993 (1)
YEAR ENDED DECEMBER 31, 1992 (1)
YEAR ENDED DECEMBER 31, 1991
PacifiCorp Financial Services......
N/A N/A
<FN>
- --------------------------
(1) Information omitted because indebtedness does not exceed $100,000 or 1% of
total assets.
</TABLE>
23
<PAGE>
PACIFICORP
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1992
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------------------------------------------------- ------------ -------- ----------- --------- ----------
BALANCE AT RETIREMENTS TRANSFERS BALANCE AT
BEGINNING OF ADDITIONS OR SALES AND OTHER ENDING OF
CLASSIFICATION PERIOD AT COST AT COST CHANGES PERIOD
-------------------------------------------------- ------------ -------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service.......................
Production.................................... $ 4,171.5 $ 105.4 $ 20.7 $ 25.4 $ 4,281.6
Transmission.................................. 1,738.2 164.6 9.5 (1.5) 1,891.8
Distribution.................................. 2,280.5 205.2 31.6 1.0 2,455.1
General....................................... 884.2 107.7 19.1 (24.5) 948.3
Other......................................... 121.0 6.9 1.2 134.6 261.3
Nonutility Plant................................ 132.7 31.1 2.1 0.8 162.5
Pacific Telecom:
Telecommunications Plant in Service
Central office equipment...................... 527.2 44.4 42.8 (0.2) 528.6
Poles, cable and conduit...................... 520.0 42.3 6.9 0.6 556.0
Earth stations, buildings and towers.......... 328.5 7.6 19.1 1.0 318.0
Satellite..................................... -- 7.8 -- -- 7.8
Other......................................... 218.9 14.6 10.5 (1.3) 221.7
Nonutility Plant................................ 15.9 2.0 0.1 -- 17.8
Other............................................. 65.6 2.5 3.0 0.7 65.8
Construction Work in Progress..................... 305.1 52.3 0.6 -- 356.8
------------ -------- ----------- --------- ----------
$ 11,309.3 $ 794.4 $ 167.2 $ 136.6 $ 12,073.1
------------ -------- ----------- --------- ----------
------------ -------- ----------- --------- ----------
</TABLE>
24
<PAGE>
PACIFICORP
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
YEAR ENDED DECEMBER 31, 1992
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ------------ --------- ----------- --------- ----------
BALANCE AT RETIREMENTS TRANSFERS BALANCE AT
BEGINNING OF ADDITIONS OR SALES AND OTHER ENDING OF
CLASSIFICATION PERIOD AT COST AT COST CHANGES PERIOD
- -------------------------------------------------- ------------ --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service
Production $ 3,862.2 $ 353.6 $ 24.2 $ (20.1) $ 4,171.5
Transmission.................................. 1,627.2 120.6 10.4 0.8 1,738.2
Distribution.................................. 2,106.8 206.9 32.6 (0.6) 2,280.5
General....................................... 824.1 96.6 37.0 0.5 884.2
Other......................................... 135.3 2.5 0.5 (16.3) 121.0
Nonutility Plant................................ 140.8 9.9 5.9 (12.1) 132.7
Pacific Telecom:
Telecommunications Plant in Service.............
Central office equipment 517.0 57.7 46.2 (1.3) 527.2
Poles, cable and conduit...................... 497.5 34.6 12.0 (0.1) 520.0
Earth stations, buildings and towers.......... 329.4 13.7 15.1 0.5 328.5
Satellite..................................... 84.6 -- 84.6 -- --
Other......................................... 205.5 28.1 15.2 0.5 218.9
Nonutility Plant................................ 17.5 0.3 2.3 0.4 15.9
Other............................................. 23.0 -- -- 42.6 65.6
Construction Work in Progress..................... 323.5 23.4 -- (41.8) 305.1
------------ --------- ----------- --------- ----------
$ 10,694.4 $ 947.9 $ 286.0 $ (47.0) $ 11,309.3
------------ --------- ----------- --------- ----------
------------ --------- ----------- --------- ----------
</TABLE>
25
<PAGE>
PACIFICORP
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
YEAR ENDED DECEMBER 31, 1991
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ------------ ---------- ----------- ----------- ----------
BALANCE AT RETIREMENTS TRANSFERS BALANCE AT
BEGINNING OF ADDITIONS OR SALES AND OTHER ENDING OF
CLASSIFICATION PERIOD AT COST AT COST CHANGES PERIOD
- -------------------------------------------------- ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service
Production.................................... $ 3,524.3 $ 540.0 $ 19.3 $(182.8) $ 3,862.2
Transmission.................................. 1,532.6 99.8 4.5 (0.7) 1,627.2
Distribution.................................. 1,993.4 130.9 17.7 0.2 2,106.8
General....................................... 708.8 149.7 33.9 (0.5) 824.1
Other......................................... 151.2 35.7 2.2 (49.4) 135.3
Nonutility Plant................................ 18.3 0.4 0.7 122.8 140.8
Pacific Telecom:
Telecommunications Plant in Service
Central office equipment...................... 489.0 80.8 52.9 0.1 517.0
Poles, cable and conduit...................... 408.8 94.2 5.7 0.2 497.5
Earth stations, buildings and towers.......... 318.9 27.2 20.2 3.5 329.4
Satellite..................................... 81.2 84.6 81.2 -- 84.6
Other......................................... 185.7 36.7 16.1 (0.8) 205.5
Nonutility Plant................................ 22.0 0.6 5.4 0.3 17.5
Other............................................. 34.7 9.0 20.7 -- 23.0
Construction Work in Progress..................... 378.4 (56.1) -- 1.2 323.5
------------ ---------- ----------- ----------- ----------
$ 9,847.3 $ 1,233.5 $ 280.5 $(105.9)(1) $ 10,694.4
------------ ---------- ----------- ----------- ----------
------------ ---------- ----------- ----------- ----------
<FN>
- ------------------------
(1) Includes transfers and other miscellaneous adjustments and $182.8 million
for the termination of a capital lease related to a generating plant.
Column C Additions at Cost includes $225.7 million for the purchase of the
formerly leased plant.
</TABLE>
26
<PAGE>
PACIFICORP
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE AT
BEGINNING OF COSTS AND ADD END OF
CLASSIFICATION PERIOD EXPENSES RETIREMENTS (DEDUCT) PERIOD
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service
Production.................................... $ 1,299.7 $ 100.9 $ 23.5 $ 167.9 $ 1,545.0
Transmission.................................. 421.4 40.7 12.5 9.1 458.7
Distribution.................................. 634.4 78.3 52.2 6.1 666.6
General....................................... 275.1 47.0 17.7 0.6 305.0
Nonutility Plant and Other...................... 121.0 21.2 2.2 0.4 140.4
Pacific Telecom:
Telecommunications Plant
Central office equipment...................... 228.9 45.7 31.0 0.3 243.9
Poles, cable and conduit...................... 198.2 30.7 7.5 -- 221.4
Earth stations, buildings and towers.......... 169.8 17.9 17.8 0.3 170.2
Satellite..................................... -- 0.2 -- -- 0.2
Nonutility and Other............................ 99.1 14.3 7.5 (0.6) 105.3
Other............................................. 4.1 2.7 0.2 0.2 6.8
------------ ---------- ----------- --------- ----------
$ 3,451.7 $ 399.6 $ 172.1 $ 184.3 $ 3,863.5
------------ ---------- ----------- --------- ----------
------------ ---------- ----------- --------- ----------
</TABLE>
27
<PAGE>
PACIFICORP
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1992
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE AT
BEGINNING OF COSTS AND ADD END OF
CLASSIFICATION PERIOD EXPENSES RETIREMENTS (DEDUCT) PERIOD
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service
Production.................................... $ 1,214.8 $ 115.5 $ 26.6 $ (4.0) $ 1,299.7
Transmission.................................. 396.9 35.8 12.8 1.5 421.4
Distribution.................................. 602.6 77.3 49.1 3.6 634.4
General....................................... 258.7 48.9 32.7 0.2 275.1
Nonutility Plant and Other...................... 117.6 19.6 3.2 (13.0) 121.0
Pacific Telecom:
Telecommunications Plant
Central office equipment...................... 225.3 45.6 41.7 (0.3) 228.9
Poles, cable and conduit...................... 174.9 28.4 5.1 -- 198.2
Earth stations, buildings and towers.......... 160.7 17.8 9.0 0.3 169.8
Satellite..................................... 4.2 7.3 11.5 -- --
Nonutility and Other............................ 96.2 13.8 11.0 0.1 99.1
Other............................................. 4.6 1.1 -- (1.6) 4.1
------------ ---------- ----------- --------- ----------
$ 3,256.5 $ 411.1 $ 202.7 $ (13.2) $ 3,451.7
------------ ---------- ----------- --------- ----------
------------ ---------- ----------- --------- ----------
</TABLE>
28
<PAGE>
PACIFICORP
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1991
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE AT
BEGINNING OF COSTS AND ADD END OF
CLASSIFICATION PERIOD EXPENSES RETIREMENTS (DEDUCT) PERIOD
- -------------------------------------------------- ------------ ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Electric Operations:
Electric Plant in Service
Production.................................... $ 1,129.0 $ 102.4 $ 21.6 $ 5.0 $ 1,214.8
Transmission.................................. 368.8 33.8 7.2 1.5 396.9
Distribution.................................. 558.2 71.5 29.4 2.3 602.6
General....................................... 249.9 42.1 32.9 (0.4) 258.7
Nonutility Plant and Other...................... 49.9 9.8 2.4 60.3 117.6
Pacific Telecom:
Telecommunications Plant
Central office equipment...................... 203.8 54.6 33.1 -- 225.3
Poles, cable and conduit...................... 154.1 27.1 6.4 0.1 174.9
Earth stations, buildings and towers.......... 154.7 22.5 16.7 0.2 160.7
Satellite..................................... 78.1 7.3 81.2 -- 4.2
Nonutility and Other............................ 89.5 17.0 10.0 (0.3) 96.2
Other............................................. 7.2 1.5 4.1 -- 4.6
------------ ---------- ----------- --------- ----------
$ 3,043.2 $ 389.6 $ 245.0 $ 68.7 $ 3,256.5
------------ ---------- ----------- --------- ----------
------------ ---------- ----------- --------- ----------
</TABLE>
29
<PAGE>
PACIFICORP
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT CHARGED TO TO OTHER
BEGINNING OF COSTS AND ACCOUNTS BALANCE AT
DESCRIPTION PERIOD EXPENSES (1) DESCRIBE DEDUCTIONS (2) END OF PERIOD
- -------------------------------------------------- ------------ ------------ --------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Accumulated amortization of estimated
recoverable nuclear project costs.............. $ 60.0 $ 1.8 $ -- $ -- $ 61.8
Provisions for credit losses.................... 56.5 2.6 24.6 30.3 53.4
Other reserves.................................. 79.0 14.0 (24.6) 31.8 36.6
Year Ended December 31, 1992
Accumulated amortization of estimated
recoverable nuclear project costs.............. 59.0 1.0 -- -- 60.0
Provisions for credit losses.................... 15.0 77.1 -- 35.6 56.5
Other reserves.................................. 33.4 83.5 -- 37.9 79.0
Year Ended December 31, 1991
Accumulated amortization of estimated
recoverable nuclear project costs.............. 57.9 1.1 -- -- 59.0
Provisions for credit losses.................... 22.1 10.4 -- 17.5 15.0
Other reserves.................................. 21.7 20.2 -- 8.5 33.4
<FN>
- ------------------------
(1) Charged principally to depreciation and amortization, provision for
uncollectible accounts, provision for credit losses and other expense.
(2) Uncollectible amounts written off net of recoveries.
</TABLE>
30
<PAGE>
PACIFICORP
SCHEDULE IX -- SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
BALANCE AT AVERAGE MAXIMUM AMOUNT AVERAGE AMOUNT INTEREST RATE
END OF INTEREST RATE OUTSTANDING OUTSTANDING DURING PERIOD
PERIOD (1) DURING PERIOD DURING PERIOD (2)
----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
Commercial Paper and Other.................. $ 186.9 3.34% $ 531.5 $ 426.9 3.60%
Bank Borrowings............................. 366.5 4.06% 470.8 260.8 3.81%
Year Ended December 31, 1992:
Commercial Paper and Other.................. 342.1 4.17% 421.0 525.2 4.80%
Bank Borrowings............................. 211.3 4.03% 404.6 253.5 4.33%
Year Ended December 31, 1991:
Commercial Paper and Other.................. 307.7 5.24% 429.4 358.8 6.49%
Bank Borrowings............................. 373.4 5.56% 484.9 343.4 6.65%
<FN>
- ------------------------
(1) Computed, by instrument, as the total interest to be paid on principal
amounts outstanding at the end of the period divided by the weighted daily
principal amounts outstanding.
(2) Computed, by instrument, as the total accrued interest for the period
divided by the average daily principal amount outstanding for the period.
</TABLE>
31
<PAGE>
PACIFICORP
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Operations Expense:
Royalties.............................................................. $ 30.7 $ 31.6 $ 18.0
Taxes, other than payroll and income taxes:
Property............................................................... 100.8 101.2 87.9
Production............................................................. 27.1 29.4 14.3
</TABLE>
Maintenance and depreciation and amortization expenses are disclosed
separately in the consolidated financial statements. Royalty expense is included
in operations expense. Depreciation and amortization of intangible assets is
included in depreciation and amortization expense. Advertising costs are not
material.
32
<PAGE>
EXHIBIT (12)
PACIFICORP
STATEMENTS OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1989 1990 1991 1992 1993
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................... $ 473.1 $ 431.2 $ 428.0 $ 409.7 $ 377.8
Estimated interest portion of rentals charged to
expense............................................ 29.9 23.3 20.4 17.1 20.1
Preferred dividend requirement of majority-owned
subsidiary......................................... 4.5 4.2 -- -- --
---------- ---------- ---------- --------- ----------
Total fixed charges............................. $ 507.5 $ 458.7 $ 448.4 $ 426.8 $ 397.9
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Earnings, as defined:*
Income from continuing operations................... $ 403.0 $ 413.4 $ 446.8 $ 150.2 $ 422.7
Add (deduct):
Provision for income taxes........................ 207.1 179.1 176.7 90.8 187.4
Minority interest................................. 12.3 18.1 14.1 8.4 11.3
Undistributed losses (income) of less than 50%
owned affiliates................................. 14.7 -- (1.8) (5.7) (16.2)
Fixed charges as above............................ 507.5 458.7 448.4 426.8 397.9
---------- ---------- ---------- --------- ----------
Total earnings.................................. $ 1,144.6 $ 1,069.3 $ 1,084.2 $ 670.5 $ 1,003.1
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Ratio of Earnings to Fixed Charges.................... 2.3x 2.3x 2.4x 1.6x 2.5x
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
<FN>
- ------------------------
* "Fixed charges" represents consolidated interest charges, an estimated amount
representing the interest factor in rents and preferred stock dividend
requirements of majority-owned subsidiaries. "Earnings" represent the
aggregate of (a) income from continuing operations, (b) taxes based on income
from continuing operations, (c) minority interest in the income of
majority-owned subsidiaries that have fixed charges, (d) fixed charges and (e)
undistributed losses (income) of less than 50% owned affiliates without loan
guarantees.
</TABLE>
S-1
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THE COMPANY
PacifiCorp Holdings, Inc., a wholly-owned subsidiary of the Company and a
Delaware corporation, has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION
NAME OF SUBSIDIARY VOTING SECURITIES OWNED OR ORGANIZATION
- ------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
PACE Group, Inc.......................................................... 100% Oregon
PacifiCorp Financial Services, Inc....................................... 100% Oregon
Color Spot, Inc........................................................ 100% Oregon
Pacific Development, Inc............................................... 100% Oregon
Pacific Harbor Capital, Inc............................................ 100% Delaware
Pacific Relocation Service Company..................................... 100% Oregon
PacifiCorp Capital, Inc................................................ 100% Virginia
PacifiCorp Credit, Inc................................................. 100% Oregon
Vermont Castings, Inc.................................................. 100% Vermont
Pacific Generation Company............................................... 100% Oregon
Energy National, Inc................................................... 100% Utah
ONSITE Energy, Inc..................................................... 100% Oregon
Pacific Telecom, Inc..................................................... 87% Washington
PacifiCorp Trans, Inc.................................................... 100% Oregon
</TABLE>
Pacific Telecom, Inc., an 87% owned subsidiary of PacifiCorp Holdings, Inc.,
and a Washington corporation, has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION OR
NAME OF SUBSIDIARY VOTING SECURITIES OWNED ORGANIZATION
- ----------------------------------------------------------------------- ------------------------- ----------------
<S> <C> <C>
Alascom, Inc........................................................... 100% Alaska
Cascade Autovon Company................................................ 100% Washington
Eagle Telecommunications, Inc./Colorado................................ 100% Colorado
Eagle Valley Communications Corporation................................ 100% Colorado
Gem State Utilities Corporation........................................ 92% Idaho
Indianhead Communications Corporation.................................. 100% Wisconsin
Inter Island Telephone Company, Inc.................................... 100% Washington
International Communications Holdings, Inc............................. 85% Delaware
North-West Cellular, Inc............................................... 100% Nevada
North-West Telecommunications, Inc..................................... 100% Nevada
Northland Telephone Company.......................................... 100% Minnesota
North-West Telephone Company......................................... 100% Wisconsin
Postville Telephone Company.......................................... 100% Wisconsin
The Footville Telephone Company...................................... 100% Wisconsin
Sullivan Telephone Company........................................... 100% Wisconsin
Turtle Lake Telephone Company, Inc................................... 100% Wisconsin
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION OR
NAME OF SUBSIDIARY VOTING SECURITIES OWNED ORGANIZATION
- ----------------------------------------------------------------------- ------------------------- ----------------
<S> <C> <C>
Northwestern Telephone Systems, Inc.................................... 99% Oregon
Pacific Telecom Cable, Inc............................................. 80% Delaware
Pacific Telecom Cellular, Inc.......................................... 100% Delaware
Pacific Telecom Cellular of Alaska, Inc.............................. 100% Alaska
Pacific Telecom Cellular of I-5, Inc................................. 100% Washington
Pacific Telecom Cellular of Michigan, Inc............................ 100% Michigan
Pacific Telecom Cellular of Minnesota, Inc........................... 100% Minnesota
Pacific Telecom Cellular of Oregon, Inc.............................. 100% Oregon
Pacific Telecom Cellular of South Dakota, Inc........................ 100% South Dakota
Pacific Telecom Cellular of Washington, Inc.......................... 100% Washington
Pacific Telecom Cellular of Wisconsin, Inc........................... 100% Wisconsin
Pacific Telecom Transmission Services, Inc............................. 100% Oregon
Price County Telephone Cellular, Inc................................... 100% Wisconsin
PTI Broadcasting, Inc.................................................. 100% Oregon
PTI Harbor Bay, Inc.................................................... 100% Washington
Bay Area Teleport, Inc............................................... 100% Delaware
Rib Lake Cellular for Wisconsin RSA #2, Inc............................ 100% Wisconsin
Shell Lake Telephone Company, Inc...................................... 100% Wisconsin
Telephone Utilities of Alaska, Inc..................................... 100% Alaska
Telephone Utilities of Eastern Oregon, Inc............................. 100% Oregon
Telephone Utilities of Northland, Inc.................................. 100% Alaska
Telephone Utilities of Oregon, Inc..................................... 100% Oregon
Telephone Utilities of Washington, Inc................................. 100% Washington
Telephone Utilities of Wyoming, Inc.................................... 100% Wyoming
Thorp Telephone Company................................................ 100% Wisconsin
UpSouth Corporation.................................................... 100% Georgia
Wayside Telecom, Inc................................................... 100% Wisconsin
The Wayside Telephone Company.......................................... 100% Wisconsin
</TABLE>
S-3
<PAGE>
The Company also has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
APPROXIMATE PERCENTAGE JURISDICTION OF
OF VOTING SECURITIES INCORPORATION
NAME OF SUBSIDIARY OWNED OR ORGANIZATION
- ------------------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
Centralia Mining Company................................................. 100% Washington
Energy West Mining Company............................................... 100% Utah
Glenrock Coal Company.................................................... 100% Wyoming
Interwest Mining Company................................................. 100% Oregon
Pacific Minerals, Inc.................................................... 100% Wyoming
Bridger Coal Company, a joint venture.................................. 66.67% Wyoming
</TABLE>
S-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED PAGE
- -------------- -------------
<C> <C> <S> <C>
*(3)a -- Second Restated Articles of Incorporation of the Company, as amended. (Exhibit
(3)a, Form 10-K for fiscal year ended December 31, 1993, File No. 1-5152)......
(3)b -- Bylaws of the Company (as restated and amended November 17, 1993)...............
*(4)a -- Mortgage and Deed of Trust dated as of January 9, 1989, between the Company and
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), Trustee, as
supplemented and modified by eight Supplemental Indentures (Exhibit 4-E, Form
8-B, File No. 1-5152; Exhibit (4)(b), File No. 33-31861; Exhibit (4)(a), Form
8-K dated January 9, 1990, File No. 1-5152; Exhibit 4(a), Form 8-K dated
September 11, 1991, File No. 1-5152; Exhibit 4(a), Form 8-K dated January 7,
1992, File No. 1-5152; Exhibit 4(a), Form 10-Q for the quarter ended March 31,
1992, File No. 1-5152; and Exhibit 4(a), Form 10-Q for the quarter ended
September 30, 1992, File No. 1-5152; Exhibit 4(a), Form 8-K dated April 1,
1993, File No. 1-5152; and Exhibit 4(a), Form 10-Q for the quarter ended
September 30, 1993, File No. 1-5151)...........................................
*(4)b -- Mortgage and Deed of Trust dated as of July 1, 1947, between Pacific Power &
Light Company and Guaranty Trust Company of New York (Morgan Guaranty,
successor) and Oliver R. Brooks et al. (resigned) Trustees, as supplemented and
modified by fifty-one Supplemental Indentures (Exhibit 7(d), File No. 2-7118;
Exhibit 7(b), File No. 2-8354; Exhibit 4(b)-3, File No. 2-9446; Exhibit 4(b)-4,
File No. 2-9809; Exhibit 4(b)-5, File No. 2-10731; Exhibit 4(b)-6, File No.
2-11022; Exhibit 4(b)-7, File No. 2-12576; Exhibit 4(b)-8, File No. 2-13403;
Exhibit 4(b)-2, File No. 2-13793; Exhibit 4(b)-2, File No. 2-14125; Exhibit
4(b)-2, File No. 2-14706; Exhibit 4(b)-2, File No. 2-16843; Exhibit 4(b)-2,
File No. 2-19841; Exhibit 4(b)-2, File No. 2-20797; Exhibit 4(b)-3, File No.
2-20797; Exhibit 4(b)-2, File No. 2-15327; Exhibit 4(b)-2, File No. 2-21488;
Exhibit 4(b)-2, File No. 2-15327; Exhibit 4(b)-2, File No. 2-23922; Exhibit
4(b)-5, File No. 2-15327; Exhibit 4(b)-2, File No. 2-32390; Exhibit 4(b)-2,
File No. 2-34731; Exhibit 2(b)-1, File No. 2-37436; Exhibit 2(b)-4, Thirteenth
Amendment, File No. 2-15327; Exhibit 5(gg), File No. 2-43377; Exhibit 2(b)-1,
File No. 2-45648; Exhibit 2(b)-1, File No. 2-49808; Exhibit 2(b)-1, File No.
2-52039; Exhibit 2, Form 8-K for the month of June 1975, File No. 1-5152;
Exhibit 2, Form 8-K for the month of January 1976, File No. 1-5152; Exhibit
3(c), Form 8-K for the month of July 1976, File No. 1-5152; Exhibit 2, Form 8-K
for the month of December 1976, File No. 1-5152; Exhibit 3(c), Form 8-K for the
month of January 1977, File No. 1-5152; Exhibit 5(yy), File No. 2-60582;
Exhibit 5(m)-2, File No. 2-66153; Exhibit 4(a)-2, File No. 2-70905; Exhibit
(4)a, Form 10-K for the fiscal year ended December 31, 1980, File No. 1-5152;
Exhibit 4(b), Form 10-K for the fiscal year ended December 31, 1981, File No.
1-5152; Exhibit (4)b, Form 10-K for the fiscal year ended December 31, 1982,
File No. 1-5152; Exhibit (4)b, File No. 2-82676; Exhibit (4)b, Form 10-K for
the fiscal year ended December 31, 1985, File No. 1-5152; Exhibit 4, Form 8-K
dated July 25, 1986, File No. 1-5152; Exhibit 4, Form 8-K dated May 18, 1988,
File No. 1-5152; Exhibit 4(a), Form 8-K dated January 9, 1989, File No. 1-5152;
Exhibit (4)(d), File No. 33-31861; Exhibit (4)(b), Form 8-K dated January 9,
1990, File No. 1-5152; Exhibit 4(b), Form 8-K dated September 11, 1991, File
No. 1-5152; Exhibit 4(b), Form 8-K dated January 7, 1992, File No. 1-5152;
Exhibit 4(b), Form 10-Q for the quarter ended March 31, 1992, File No. 1-5152;
Exhibit 4(b), Form 10-Q for the quarter ended September 30, 1992, File No.
1-5152; Exhibit 4(b), Form 8-K dated April 1, 1993, File No. 1-5152; and
Exhibit 4(b), Form 10-Q for the quarter ended September 30, 1993, File No.
1-5152)........................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED PAGE
- -------------- -------------
<C> <C> <S> <C>
*(4)c -- Mortgage and Deed of Trust dated as of December 1, 1943, between Utah Power &
Light Company and Guaranty Trust Company of New York (Morgan Guaranty,
successor) and Arthur E. Burke et al. (resigned) Trustees, as supplemented and
modified by fifty-three Supplemental Indentures (Exhibits 7(a), 7(b) and 7(e),
File No. 2-6245; Exhibit 7(a), File No. 2-7420; Exhibit 7(a), File No. 2-7880;
Exhibit 7(a), File No. 2-8057; Exhibit 7(g), File No. 2-8564; Exhibit 7(h),
File No. 2-9121; Exhibit 4(d), File No. 2-9796; Exhibit 4(d), File No. 2-10707;
Exhibit 4(d), File No. 2-11822; Exhibit 4(d), File No. 2-13560; Exhibit 4(d),
File No. 2-16861; Exhibit 4(d), File No. 2-20176; Exhibit 2(c), File No.
2-21141; Exhibit 2(c), File No. 2-59660; Exhibit 2(e), File No. 2-28131;
Exhibit 2(e), File No. 2-59660; Exhibit 2(e), File No. 2-36342; Exhibit 2(e),
File No. 2-39394; Exhibits 2(h) and 2(i), File No. 2-59660; Exhibit 2(d), File
No. 2-51736; Exhibit 2(c), File No. 2-54812; Exhibit 2(c), File No. 2-55331;
Exhibit 2(c), File No. 2-55762; Exhibit 2(d), File No. 2-56990; Exhibit 2(e),
File No. 2-56990; Exhibits 2(c) and 2(d), File No. 2-58227; Exhibit 2(r), File
No. 2-59660; Exhibits 2(c) and 2(d), File No. 2-61221; Exhibit 2(c), File No.
2-63813; Exhibit 2(c), File No. 2-65221; Exhibit 2(c)-1, File No. 2-66680;
Exhibits 4(b) and 4(c)-1, File No. 2-74773; Exhibit 4(d), File No. 2-80100;
Exhibits 4(d)-2 and 4(d)-3, File No. 2-76293; Exhibit 4(b), File No. 33-9932;
Exhibit 4(b), File No. 33-13207; Exhibits 4(a) and 4(b), File No. 33-01890;
Exhibit 4(b), Form 8-K dated January 9, 1989, File No. 1-5152; Exhibit (4)(f),
File No. 33-31861; Exhibit (4)(c), Form 8-K dated January 9, 1990, File No.
1-5152; Exhibit 4(c), Form 8-K dated September 11, 1991, File No. 1-5152;
Exhibit 4(c), Form 8-K dated January 7, 1992, File No. 1-5152; Exhibit 4(c),
Form 10-Q for the quarter ended March 31, 1992, File No. 1-5152; Exhibit 4(c),
Form 10-Q for the quarter ended September 30, 1992, File No. 1-5152; Exhibit
4(c), Form 8-K dated April 1, 1993, File No. 1-5152; and Exhibit 4(c), Form
10-Q for the quarter ended September 30, 1993, File No. 1-5152)................
(4)d -- Second Restated Articles of Incorporation, as amended, and Bylaws. See (3)a and
(3)b above.....................................................................
In reliance upon item 601(4)(iii) of Regulation S-K, various instruments
defining the rights of holders of long-term debt of the Registrant and its
subsidiaries are not being filed because the total amount authorized under each
such instrument does not exceed 10 percent of the total assets of the
Registrant and its subsidiaries on a consolidated basis. The Registrant hereby
agrees to furnish a copy of any such instrument to the Commission upon request
*+(10)a -- PacifiCorp Deferred Compensation Payment Plan (Exhibit 10-F, Form 10-K for
fiscal year ended December 31, 1992, File No. 1-8749)..........................
*+(10)b -- Pacific Telecom Executive Bonus Plan, dated October 26, 1990 (Exhibit 10B, Form
10-K for the fiscal year ended December 31, 1990, File No. 0-873)..............
*+(10)c -- PacifiCorp PerformanceShare Officers' Annual Incentive Plan (Exhibit (10)c, Form
10-K for fiscal year ended December 31, 1993. File No. 1-5152).................
*+(10)d -- PacifiCorp Non-Employee Directors' Stock Compensation Plan dated August 1, 1985,
as amended. (Exhibit (10)h, Form 10-K for fiscal year ended December 31, 1988,
File No. 1-5152)...............................................................
*+(10)e -- PacifiCorp Long Term Incentive Plan, 1993 Restatement (Exhibit 10G, Form 10-K
for the year ended December 31, 1993, File No. 0-873)..........................
*+(10)f -- Form of Restricted Stock Agreement under PacifiCorp Long Term Incentive Plan
(Exhibit 10H, Form 10-K for the year ended December 31, 1993, File No.
0-873).........................................................................
*+(10)g -- PacifiCorp Supplemental Executive Retirement Plan 1988 Restatement (Exhibit
(10)q, Form 10-K for the fiscal year ended December 31, 1987, File No.
1-5152)........................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBITS NUMBERED PAGE
- -------------- -------------
<C> <C> <S> <C>
*+(10)h -- PacifiCorp Executive Severance Plan (Exhibit (10)m, Form 10-K for fiscal year
ended December 31, 1988, File No. 1-5152)......................................
*+(10)i -- Pacific Telecom Executive Deferred Compensation Plan dated as of January 1, 1994
(Exhibit 10L, Form 10-K for the year ended December 31, 1993, File No.
0-873).........................................................................
*+(10)j -- Pacific Telecom Long Term Incentive Plan 1994 Restatement dated as of January 1,
1994 (Exhibit 10F, Form 10-K for the fiscal year ended December 31, 1993, File
No. 0-873).....................................................................
+(10)k -- Incentive Compensation Agreement dated as of February 1, 1994 between PacifiCorp
and Frederick W. Buckman.......................................................
*+(10)l -- Restricted Stock Agreement dated as of December 3, 1992 between PacifiCorp and
A. M. Gleason (Exhibit (10)k, Form 10-K for the fiscal year ended December 31,
1992, File No. 1-8749).........................................................
+(10)m -- Compensation Agreement dated as of February 9, 1994 between PacifiCorp and Keith
R. McKennon....................................................................
*(10)n -- Short-Term Surplus Firm Capacity Sale Agreement executed July 9, 1992 by the
United States of America Department of Energy acting by and through the
Bonneville Power Administration and Pacific Power & Light Company (Exhibit
(10)n, Form 10-K for the fiscal year ended December 31, 1992, File No.
1-8749)........................................................................
(12) -- Computation of Ratio of Earnings to Fixed Charges. (See page S-1.)..............
(13) -- Portions of Annual Report to Shareholders of the Registrant for the year ended
December 31, 1993 incorporated by reference herein.............................
(21) -- Subsidiaries. (See pages S-2 through S-4.)......................................
(23) -- Consent of Deloitte & Touche with respect to Annual Report on Form 10-K.........
(24) -- Powers of Attorney..............................................................
(99) -- "Item 1. Business" and "Item 2. Properties" from the Annual Reports on Form 10-K
of Pacific Telecom, Inc. and PacifiCorp Financial Services, Inc. for the year
ended December 31, 1993........................................................
<FN>
- ------------------------
* Incorporated herein by reference.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
</TABLE>
<PAGE>
EXHIBIT 3(b)
BYLAWS
of
PACIFICORP
AS AMENDED
EFFECTIVE NOVEMBER 17, 1993
<PAGE>
AS AMENDED EFFECTIVE NOVEMBER 17, 1993
ARTICLE I
OFFICES
The principal office of the Company in the State of Oregon shall be in the
City of Portland, County of Multnomah. The Company may have such other offices,
either within or without the State of Oregon, as the Board of Directors may
designate or as the business of the Company may, from time to time, require.
ARTICLE II
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be held
on the third Wednesday in the month of May in each year, unless a different date
is fixed by the Board of Directors, at such time and place as are fixed by the
Board of Directors and stated in the notice of the meeting. The failure to hold
an annual meeting at the time stated herein shall not affect the validity of any
corporate action.
2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman of the Board, the President or the Board of Directors and shall be
called by the Chairman of the Board or the President upon the written demand,
describing the purpose or purposes for which the meeting is to be held, signed,
dated and delivered to the Company's Secretary, of the holders of not less than
one-tenth of all the outstanding votes of the Company entitled to be cast on any
issue proposed to be considered at the meeting.
2.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at such
place, within or without the State of Oregon, as may be designated by the Board
of Directors.
2.4 NOTICE OF MEETINGS. Written or printed notice stating the date, time
and place of the meeting and, in the case of a special meeting or where
otherwise required by law, the purpose or purposes for which the meeting is
called shall be mailed by the Secretary to each shareholder entitled to vote at
the meeting, and if required by law, to such additional shareholders as are
entitled to receive notice, at the shareholder's address shown in the Company's
stock transfer books, with postage thereon prepaid, not less than 10 nor more
than 60 days before the date of the meeting.
2.5 FIXING OF RECORD DATE. For the purpose of determining shareholders
entitled to notice of a shareholders' meeting, to demand a special meeting, to
vote or to take any other action, or shareholders entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Company may fix a future date as
the record date for any such determination of shareholders, such date in any
case to be not more than 70 days nor, in the case of a meeting, less than 10
days before the meeting or action requiring a determination of shareholders. The
record date for any meeting, vote or other action of the shareholders shall be
the same for all voting groups.
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2.6 SHAREHOLDERS' LIST FOR MEETING. After a record date for a meeting has
been fixed, the Company shall prepare an alphabetical list of the names of all
its shareholders entitled to notice of the shareholders' meeting. The list
shall be arranged by voting group and within each voting group by class or
series of shares and show the address of and number of shares held by each
shareholder. The shareholders' list shall be available for inspection by any
shareholder, upon proper demand as may be required by law, beginning two
business days after notice of the meeting is given for which the list was
prepared and continuing through the meeting, at the Company's principal office
or at a place identified in the meeting notice in the city where the meeting
will be held. The Company shall make the shareholders' list available at the
meeting, and any shareholder or the shareholder's agent or attorney shall be
entitled to inspect the list at any time during the meeting or any adjournment.
Refusal or failure to prepare or make available the shareholders' list does not
affect the validity of action taken at the meeting.
2.7 QUORUM; ADJOURNMENT.
(a) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
in that matter.
(b) A majority of votes represented at the meeting, whether or not a
quorum, may adjourn the meeting from time to time to a different time and place
without further notice to any shareholder of any adjournment, except as may be
required by law. At such adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting
originally held.
(c) Once a share is represented for any purpose at a meeting, it
shall be deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is set for the
adjourned meeting. A new record date shall be set if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
2.8 VOTING REQUIREMENTS; ACTION WITHOUT MEETING.
(a) If a quorum exists, action on a matter, other than the election
of directors, is approved if the votes cast by the shares entitled to vote
favoring the action exceed the votes cast opposing the action, unless a greater
number of affirmative votes is required by law or the Company's Restated
Articles of Incorporation. If any share of capital stock of the Company is
entitled to more or less than one vote on any matter, every reference in these
Bylaws to a majority or other proportion of shares shall refer to such a
majority or other proportion of votes entitled to be cast.
(b) Action required or permitted by law to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
Secretary for inclusion in the minutes or filing with the Company's records.
Such action shall not be effective unless, at least 10 days before the action is
taken, any non-voting shareholder entitled to notice of the proposed action is
given written notice of the proposed action as required by law. Action taken
under this section is effective when the last shareholder signs the consent,
unless the consent specifies an earlier or later effective date.
2.9 PROXIES. A shareholder may vote shares in person or by proxy by
signing an appointment. A shareholder may appoint a proxy by signing an
appointment form either personally or by the
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shareholder's attorney-in-fact. An appointment of a proxy shall be effective
when received by the Secretary or other officer of the corporation authorized to
tabulate votes.
2.10 NOTICE OF BUSINESS. At any meeting of the shareholders, only such
business shall be conducted as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any shareholder of the
Company who is a beneficial or record holder at the time of giving of the notice
provided for in this Section 2.10, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.10. For
business to be properly brought before a shareholder meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made, notice by the shareholder to be timely must be
received no later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address of
the shareholder proposing such business, (c) the class and number of shares of
the Company which are beneficially owned by the shareholder and (d) any material
interest of the shareholder in such business. If the shareholder is not a
shareholder of record at the time of giving the notice, the notice shall be
accompanied by appropriate documentation of the shareholder's claim of
beneficial ownership. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at a shareholder meeting except in accordance
with the procedures set forth in this Section 2.10. The officer presiding at the
meeting shall, if in the officer's opinion the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of these Bylaws, and if such officer should so
determine, such officer shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Section 2.10, a shareholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth in this Section 2.10.
2.11 NOMINATION OF DIRECTORS. Only persons who are nominated in accordance
with the procedures set forth in these Bylaws shall be eligible to serve as
directors. Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders (a) by or at the direction of
the Board of Directors or (b) by any shareholder of the Company who is a
beneficial or record holder at the time of giving of notice provided for in this
Section 2.11, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section
2.11. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a shareholder's notice shall be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made, notice by the shareholder to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the meeting or such public disclosure was
made. Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice (i) the name and address of such shareholder
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<PAGE>
and (ii) the class and number of shares of the Company which are beneficially
owned by such shareholder. If the shareholder is not a shareholder of record at
the time of giving the notice, the notice shall be accompanied by appropriate
documentation of the shareholder's claim of beneficial ownership. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary that information required
to be set forth in a shareholder's notice of nomination which pertains to the
nominee. No person shall be eligible to serve as a director of the Company
unless nominated in accordance with the procedures set forth in this Section
2.11. The officer presiding at the meeting shall, if in the officer's opinion
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if such
officer should so determine, such officer shall so declare to the meeting and
the defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 2.11, a shareholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Section 2.11.
2.12 CONDUCT OF MEETING. The officer presiding at any meeting of the
shareholders shall have authority to determine the agenda and order of business
at the meeting and to adopt such rules and regulations as may be necessary or
desirable to promote the fair and efficient conduct of the business of the
meeting.
ARTICLE III
BOARD OF DIRECTORS
3.1 DUTIES OF BOARD OF DIRECTORS; ELECTION. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, its Board of Directors, which
shall be divided into three classes, as nearly equal in number as possible, with
one class being elected each year. Members of a class shall be elected by the
shareholders, by a plurality of the votes cast at the meeting.
3.2 NUMBER, ELECTION AND QUALIFICATION. The exact number of directors
may, within the limits of not less than nine (9) nor more than twenty-one (21)
set forth in Article VI of the Company's Restated Articles of Incorporation, be
fixed and increased or decreased from time to time by resolution of the Board of
Directors. Directors shall hold office for a term of three years, and until
their successors are elected and qualified or the number of directors is
decreased; provided, however, that, effective on and after the date of the 1989
annual meeting of shareholders, the term of office of any director shall not
extend beyond the regular quarterly meeting of the Board of Directors following
the date the director reaches age 70; and, provided further, that the term of
any director reaching age 70 prior to the date of the 1989 annual meeting of
shareholders shall expire at the date of such annual meeting. No reduction in
the number of directors shall shorten the term of any incumbent director.
3.3 REGULAR MEETINGS. The Board of Directors may provide the time and
place, either within or without the State of Oregon, for the holding of regular
meetings of the Board of Directors without other notice.
3.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or any
two directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Oregon, as the place for holding any special meeting of the Board of Directors
called by them.
4
<PAGE>
3.5 NOTICE. Notice of the date, time and place of any special meeting of
the Board of Directors shall be given at least 48 hours prior to the meeting by
notice communicated in person, by telephone, telegraph, teletype or other form
of wire or wireless communication, or by mail or private carrier. If mailed,
notice shall be deemed effective when deposited in the United States mail
addressed to the director at the director's business address, with postage
thereon prepaid. Notice by all other means shall be deemed effective when
received by or on behalf of the director. Except as otherwise provided by law
or in the Company's Restated Articles of Incorporation, neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
3.6 QUORUM. A majority of the total number of directors fixed in
accordance with Section 3.2 of these Bylaws shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. If less than
a quorum is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
3.7 MANNER OF ACTING. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors, unless a different number is provided by law, the Restated Articles
of Incorporation or these Bylaws.
3.8 VACANCIES. Any vacancy, including a vacancy resulting from an
increase in the number of directors, occurring on the Board of Directors may be
filled by the shareholders, the Board of Directors or the affirmative vote of a
majority of the remaining directors if less than a quorum of the Board of
Directors or by a sole remaining director. Any directorship not filled by the
directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose; if the vacant office was held
by a director elected by a voting group of shareholders, then only the holders
of shares of that voting group are entitled to vote to fill the vacancy. A
director elected to fill a vacancy shall be elected to serve until the next
meeting of shareholders at which directors are elected and shall continue to
serve until a successor shall be elected and qualified or there is a decrease in
the number of directors. A vacancy that will occur at a specific later date, by
reason of a resignation or otherwise, may be filled before the vacancy occurs,
but the new director may not take office until the vacancy occurs.
3.9 COMPENSATION. By resolution of the Board of Directors, the directors
may be paid a reasonable compensation for their services as directors, and their
expenses, if any, of attendance at each meeting of the Board of Directors;
provided, that no director who is also a full-time officer or employee of the
Company shall receive additional compensation as a director. No such payment
shall preclude any director from serving the Company in any other capacity and
receiving compensation therefor.
3.10 PRESUMPTION OF ASSENT. A director of the Company who is present at a
meeting of the Board of Directors or a committee of the Board of Directors shall
be deemed to have assented to the action taken unless (a) the director's dissent
or abstention from the action is entered in the minutes of the meeting, (b) the
director delivers a written notice of dissent or abstention to the action to the
presiding officer of the meeting before the adjournment thereof or to the
Company immediately after the adjournment of the meeting or (c) the director
objects at the beginning of the meeting or promptly upon the director's arrival
to the holding of the meeting or transacting business at the meeting. The right
to dissent or abstain shall not apply to a director who voted in favor of the
action.
3.11 EXECUTIVE COMMITTEE. The Board of Directors, as soon as may be after
its election in each year, shall by resolution adopted by a majority of all the
Directors in office when the action is taken, designate from among its members
an Executive Committee to consist of the officer designated as Chief Executive
Officer and two or more other directors. Such Committee shall have and may
exercise all of
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the powers of the Board during the intervals between its meetings which may be
lawfully delegated, subject to such limitations as may be provided by resolution
of the Board. The Board shall have the power at any time to change the
membership of such Committee and to fill vacancies in it. The Executive
Committee may make rules for the conduct of its business and may appoint such
committees and assistants as it may deem necessary. A majority of the members
of such Committee shall be a quorum. The Executive Committee shall elect one of
its members as chairman.
3.12 OTHER COMMITTEES. The Board of Directors, by resolution adopted by a
majority of all the Directors in office when the action is taken, from time to
time may establish, fix the membership, define the duties and appoint the
members of each of such other committees of the Board of Directors as it shall
determine. One-third of the members of each such other committee, but in no
case fewer than two directors, shall be a quorum of the committee.
ARTICLE IV
OFFICERS
4.1 NUMBER. The officers of the Company shall be a Chairman of the Board
(who shall be a Director of the Company), a President, one or more Vice
Presidents (who may be distinguished from one another by such designations as
the Board of Directors may specify), a Secretary, a Treasurer, and if the Board
of Directors shall deem such an officer desirable, a Controller. Each of the
aforesaid officers shall be appointed by the Board of Directors. The Board of
Directors shall designate one of the officers of the Company (who shall also be
a Director of the Company) as Chief Executive Officer. Other officers and
assistant officers may be appointed as determined by the Board of Directors. Any
two or more offices may be held by the same person.
4.2 APPOINTMENT AND TERM OF OFFICE. With the exception of the initial
appointment of any new officer or assistant officer, or the initial election of
an officer to another or different office, which may be at any meeting of the
Board of Directors, the officers of the Company shall be appointed annually at
the first meeting of the Board of Directors held after each annual meeting of
the shareholders. If the appointment of officers shall not be held at such
meeting, such appointment shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until a successor shall have been duly
appointed and shall have qualified or until such officer's death, resignation,
or removal from office in the manner hereinafter provided.
4.3 REMOVAL. Any officer or agent appointed by the Board of Directors may
be removed by the Board of Directors with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. The appointment of an officer does not itself create contract rights.
4.4 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors and shall perform other duties
assigned by the Board of Directors.
4.6 PRESIDENT. The President shall perform all duties incident to the
office of President and such other duties assigned by the Board of Directors.
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4.7 VICE PRESIDENTS. Each of the Vice Presidents shall perform such
duties as from time to time may be assigned by the Chief Executive Officer or
the Board of Directors.
4.8 TREASURER. The Treasurer shall perform the duties usually pertaining
to such office and such other duties as from time to time may be assigned by the
Chief Executive Officer or the Board of Directors. The Treasurer shall give a
bond for faithful discharge of the Treasurer's duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
4.9 SECRETARY. The Secretary shall have the responsibility for preparing
minutes of all meetings of the directors and shareholders and for authenticating
records of the Company. The Secretary shall in addition perform other duties
assigned by the Chief Executive Officer or the Board of Directors.
4.10 OTHER OFFICERS. Other officers and assistant officers shall perform
such duties as from time to time may be assigned to each of them by the Chief
Executive Officer or the Board of Directors.
4.11 SALARIES. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary because the officer is also a director of the Company.
ARTICLE V
INDEMNIFICATION
The Company shall indemnify to the fullest extent not prohibited by law any
person who is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative, or otherwise
(including an action, suit or proceeding by or in the right of the Company) by
reason of the fact that the person is or was a director, officer, employee or
agent of the Company or a fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit plan
of the Company, or serves or served at the request of the Company as a director,
officer, employee or agent, or as a fiduciary of an employee benefit plan, of
another corporation, partnership, joint venture, trust or other enterprise. The
Company shall pay for or reimburse the reasonable expenses incurred by any such
person in any such proceeding in advance of the final disposition of the
proceeding to the fullest extent not prohibited by law. This Article shall not
be deemed exclusive of any other provisions for indemnification or advancement
of expenses of directors, officers, employees, agents and fiduciaries that may
be included in any statute, bylaw, agreement, general or specific action of the
Board of Directors, vote of shareholders or otherwise.
ARTICLE VI
ISSUANCE OF SHARES
6.1 CERTIFICATES FOR SHARES.
(a) Certificates representing shares of the Company shall be in form
determined by the Board of Directors. Such certificates shall be signed by the
Chairman of the Board, the President or a Vice President, and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be
sealed with the seal of the Company or a facsimile thereof. All certificates
for shares shall be consecutively numbered or otherwise identified. The
signatures of officers upon a certificate may be facsimiles.
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<PAGE>
(b) Every certificate for shares of stock that are subject to any
restriction on transfer pursuant to the Restated Articles of Incorporation, the
Bylaws, applicable securities laws, agreements among or between shareholders or
any agreement to which the Company is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction and that the Company retains a
copy of the restriction. Every certificate issued when the Company is
authorized to issue more than one class or series of stock shall set forth on
its face or back either the full text of the designations, relative rights,
preferences and limitations of the shares of each class and series authorized to
be issued and the authority of the Board of Directors to determine variations
for future series or a statement of the existence of such designations, relative
rights, preferences and limitations and a statement that the Company will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
(c) All certificates surrendered to the Company for transfer shall be
canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Company as the Board of
Directors prescribes.
6.2 TRANSFER OF SHARES. Transfer of shares of the Company shall be made
only on the stock transfer books of the Company by the holder of record thereof
or by the holder's legal representative, who shall furnish proper evidence of
authority to transfer, or by the holder's attorney thereunto authorized by power
of attorney duly executed.
6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from time to
time appoint one or more transfer agents and one or more registrars for the
shares of the Company, with such powers and duties as the Board of Directors
determines by resolution.
6.4 OFFICER CEASING TO ACT. If the person who signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
7.1 CONTRACTS. The Board of Directors may authorize any officer or
officers, or agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Company, and such authority
may be general or confined to specific instances.
7.2 LOANS. No loans shall be contracted on behalf of the Company and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the Company shall be signed by such officer or officers, or agent or agents
of the Company and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
7.4 DEPOSITS. All funds of the Company not otherwise employed shall be
deposited from time to time to the credit of the Company in such banks, trust
companies or other depositaries as the Board of Directors or officers of the
Company designated by the Board of Directors may select; or be invested as
authorized by the Board of Directors.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 SEAL. The corporate seal of the Company shall be circular in form and
shall bear an inscription containing the name of the Company, the year 1910 and
the state of incorporation.
8.2 SEVERABILITY. Any determination that any provision of these Bylaws is
for any reason inapplicable, invalid, illegal or otherwise ineffective shall not
affect or invalidate any other provision of these Bylaws.
8.3 WAIVER OF NOTICE.
(a) A shareholder may at any time waive any notice required by these
Bylaws, the Restated Articles of Incorporation or the provisions of any
applicable law. Such waiver shall be in writing, be signed by the shareholder
entitled to the notice and be delivered to the Company for inclusion in the
minutes for filing with the corporate records. A shareholder's attendance at a
meeting waives objection to (i) lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting and (ii)
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
(b) A director may at any time waive any notice required by these
Bylaws, the Restated Articles of Incorporation or the provisions of any
applicable law. Except as set forth below, such waiver must be in writing, be
signed by the director entitled to the notice, must specify the meeting for
which notice is waived and must be filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting, or promptly upon the director's arrival, objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
8.4 ENGINEERING DECISIONS IN WASHINGTON. Engineering decisions pertaining
to any project or engineering activities in the State of Washington shall be
made by the engineer designated by or in accordance with resolutions of the
Board of Directors.
ARTICLE IX
AMENDMENTS
The Company's Bylaws may be amended or repealed or new bylaws may be made:
(a) by the affirmative vote of the holders of record of a majority of the
outstanding capital stock of the Company entitled to vote thereon, irrespective
of class, given at any annual or special meeting of the shareholders; provided
that notice of the proposed amendment, repeal or new bylaw or bylaws be included
in the notice of such meeting or waiver thereof; or (b) by the affirmative vote
of a majority of the entire Board of Directors given at any regular meeting of
the Board, or any special meeting thereof; provided that notice of the proposed
amendment, repeal or new bylaw or bylaws be included in the notice of such
meeting or waiver thereof or all of the directors at the time in office be
present at such meeting.
9
<PAGE>
CERTIFICATE
I, Secretary of
PacifiCorp, a corporation organized under the laws of the State of Oregon,
HEREBY CERTIFY that the foregoing printed pages, entitled on page 1 "Bylaws of
PacifiCorp as Amended effective November 17, 1993" constitute a full and true
copy of the Bylaws of said corporation as amended to the date of this
certificate.
WITNESS my hand this day of 19
----------------------------------------
Secretary
<PAGE>
EXHIBIT (10)k
INCENTIVE COMPENSATION AGREEMENT
--------------------------------
This Incentive Compensation Agreement ("Agreement") is made effective
as of February 1, 1994 between PacifiCorp, an Oregon corporation (the "Company")
and Frederick W. Buckman (the "Executive").
The Executive is leaving employment with Consumers Power Co. to become
employed by the Company as its President and chief executive officer effective
February 1, 1994. The Company wishes to provide incentive compensation to the
Executive to induce him to accept such employment and to perform in such a way
as to enhance the investment return to the Company's shareholders. Part of the
inducement will be achieved by causing the Executive to hold a substantial
investment in the Company's common stock (the "Common Stock"). Therefore, the
Company and the Executive agree as follows:
1. 1993 BONUS FROM CONSUMERS POWER CO. The Company shall pay the
Executive the difference, if any, between the annual cash bonus for 1993 from
Consumers Power Co. he would have received if he had remained employed by
Consumers Power Co. and the amount he actually receives. Such payment shall be
made in cash on, or as soon as practicable after, the date such amount would
have been received by the Executive from Consumers Power Co.
2. ANNUAL CASH INCENTIVE. If the Executive continues in employment with
the Company until December 31, 1994, the Executive's annual cash incentive from
the Company for 1994 shall be $252,083, payable in the first quarter of 1995 at
the same time as cash incentive payments are made to other executive employees
of the Company. For 1995 and subsequent years, the Executive's annual cash
incentive shall be determined by the Personnel Committee of the Company's Board
of Directors (the "Committee") under the general procedures with respect to such
incentive compensation established by the Committee from time to time.
3. LONG TERM INCENTIVE PLAN GRANT. Any grant of restricted stock to the
Executive under the Company's Long Term Incentive Plan that is based on services
performed in 1994 shall be in an amount that is eleven twelfths of 15,000
shares.
<PAGE>
4. INITIAL GRANT OF COMMON STOCK. The Company hereby grants to the
Executive 25,000 shares of Common Stock (the "Initial Grant") as of February 1,
1994. The Initial Grant shall become vested if the Executive continues in
employment with the Company until specified dates as follows:
<TABLE>
<CAPTION>
DATES PERCENT VESTED
----- --------------
<S> <C>
Before February 1, 1995 0%
February 1, 1995 25%
February 1, 1996 50%
February 1, 1997 75%
February 1, 1998 100%
</TABLE>
If the Executive's employment with the Company terminates before February 1,
1998 for any reason, he shall forfeit the percentage of the Initial Grant that
is not vested on the termination date.
5. MATCHING GRANTS OF COMMON STOCK.
5.1 The Company shall make matching grants of up to 25,000 shares of
Common Stock (the "Matching Grants") to the Executive, as provided in 5.2. The
Matching Grants shall be based on the Executive's purchases of Common Stock on
the public market, on the Executive's purchases of Common Stock through the
Company's Dividend Reinvestment and Stock Purchase Plan, or through investment
in the PacifiCorp Stock Fund of the PacifiCorp K Plus Employee Savings and Stock
Ownership Plan directed by the Executive for his own account (collectively,
"Purchases").
5.2 The Company shall make a Matching Grant to the Executive of
shares of Common Stock equal to the number of shares of Common Stock acquired in
Purchases made in 1994 through 1997, not to exceed 25,000 shares of Common Stock
for the entire period, subject to the restriction described in 5.3. The
Matching Grant with respect to each of such Purchases shall be made as soon as
practicable after the escrow holder under 6.2 receives sufficient information to
confirm the Purchase.
5.3 Matching Grants shall be subject to the following vesting
restriction. If fewer than 6,250 shares of Common Stock are acquired in
Purchases for any of the calendar years 1994, 1995, 1996 and 1997, the Executive
shall forfeit any Matching Grants with respect to Purchases made for that year.
When Purchases of 6,250 shares of Common Stock are made for any of the calendar
years 1994, 1995, 1996 and 1997, the Matching Grants made with respect to those
shares shall become vested. The forfeiture of unvested Matching Grants under
this restriction shall occur as of December 31 of the year as to which the
shares acquired in Executive's Purchases total fewer than 6,250 shares.
2
<PAGE>
5.4 If the Executive makes Purchases in excess of 6,250 shares of
Common Stock during any calendar year in the period 1994 through 1996, the
excess and related Matching Grants shall be carried over and treated as made in
Purchases for succeeding years. Thus, for example, if the Executive acquired
12,500 shares of Common Stock in a Purchase on June 15, 1994, the Company would
make a Matching Grant of 12,500 as soon as practicable after that date and all
of the Matching Grant would be immediately vested, having satisfied the vesting
restriction for 1994 and for 1995.
6. PURCHASE OF COMMON STOCK AND PLACEMENT IN ESCROW.
6.1 When the Executive is entitled to an Initial Grant or Matching
Grant under this Agreement, the Company shall pay to a securities broker or
other third party an amount equal to the purchase price of the granted shares
with instructions to purchase such shares on the market in the Executive's name
and deliver them to the escrow holder under 6.2. Payment for the Initial Grant
shall be made upon execution of this Agreement by the Company and the Executive.
6.2 For purposes of facilitating the enforcement of the provisions of
Sections 4 and 5 of this Agreement, the Initial Grant shares and Matching Grant
shares shall be issued in the Executive's name and the certificate or
certificate(s) representing such shares shall be delivered, together with a
stock power or stock powers executed by the Executive, in blank, to an
individual designated by the Committee, to hold said certificate(s) and stock
power(s) in escrow and to take all such actions as are in accordance with the
terms of this Agreement. The Executive hereby acknowledges that such individual
is so appointed as the escrow holder with the foregoing authorities as a
material inducement to make this Agreement and that said appointment is coupled
with an interest and is irrevocable.
6.3 The Executive agrees that the escrow holder under 6.2 shall not
be liable to any party to this Agreement (or to any other party) for any actions
or omissions unless the escrow holder is grossly negligent with respect thereto.
Upon release of the Initial Grant shares or Matching Grant shares from the
restrictions provided by Sections 4 or 5, the escrow holder shall deliver to the
Executive or, in the event of the Executive's death, to the Executive's
successor a certificate or certificates representing the granted shares.
3
<PAGE>
7. RIGHTS AS SHAREHOLDER. Subject to the provisions of this Agreement,
the Executive shall be entitled to all of the rights of a shareholder with
respect to the Initial Grant shares and Matching Grant shares, including the
right to vote such shares and to receive ordinary dividends payable with respect
to such shares from the date of the grant.
8. TRANSFER RESTRICTIONS. None of the Initial Grant shares or Matching
Grant shares may be sold, assigned, pledged or otherwise transferred,
voluntarily or involuntarily, by the Executive prior to the date such shares
become vested under the provisions of Sections 4 and 5.
9. MERGERS, CONSOLIDATIONS OR CHANGES IN CAPITAL STRUCTURE. If, after
the date of this Agreement, the outstanding Common Stock of the Company is
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any reorganization, merger, consolidation, plan of exchange,
recapitalization, reclassification, stock split-up, combination of shares or
dividend payable in shares, or in the event of any consolidation, merger or plan
of exchange involving the Company pursuant to which Common Stock is converted
into cash, any Common Stock, other securities or other consideration issued or
distributed with respect to the Initial Grant shares or Matching Grant shares in
any such transaction shall be subject to the restrictions and conditions set
forth herein.
10. WITHHOLDING TAXES. The Company shall take income tax withholding and
other payroll taxes from any cash payment to the Executive under this Agreement.
The Company shall have the right to require the Executive to remit to the
Company, or to withhold from other amounts payable to the Executive, as
compensation or otherwise, an amount sufficient to satisfy all federal, state
and local withholding tax requirements with respect to Initial Grants or
Matching Grants or vesting thereof.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed under the laws
of the state of Oregon, exclusive of choice of law rules. If any provision or
provisions of this Agreement are found to be unenforceable, the remaining
provisions shall nevertheless be enforceable and shall be construed as if the
unenforceable provisions were deleted.
4
<PAGE>
(b) This is the entire agreement between the parties with respect to
the Executive's incentive compensation for 1994 and this Agreement supersedes
all prior oral or written agreements between the Company and the Executive
relating to that subject matter.
(c) This Agreement may be amended or modified only by written consent
of the Company and the Executive.
Company: PACIFICORP, an Oregon corporation
By: JOHN C. HAMPTON
-----------------------------
Its: Chairman of the Personnel
Committee
Executive: FREDERICK W. BUCKMAN
---------------------------------
Frederick W. Buckman
5
<PAGE>
EXHIBIT (10)m
COMPENSATION AGREEMENT
----------------------
This Compensation Agreement ("Agreement") is made effective as of
February 9, 1994 between PacifiCorp, an Oregon corporation (the "Company") and
Keith R. McKennon (the "Director").
The Director has been elected Chairman of the Board of Directors of
the Company. The Company wishes to provide compensation to the Director that
will induce him to perform in such a way as to enhance the investment return to
the Company's shareholders. Part of the inducement will be achieved by causing
the Director to hold a substantial investment in the Company's common stock (the
"Common Stock"). Therefore, the Company and the Director agree as follows:
1. ANNUAL COMPENSATION OF DIRECTOR. The Director's total annual
compensation for service on the Company's Board of Directors for the 12 months
beginning February 9, 1994 shall be $150,000. The total annual compensation for
subsequent years shall be as determined by the Board of Directors. Of the total
annual compensation, $10,000 shall be provided through the Director's
participation in the PacifiCorp Non-Employee Directors' Stock Compensation Plan.
The balance of the total annual compensation shall be provided through a grant
of restricted stock under Section 2.
2. GRANT OF COMMON STOCK.
2.1 The Company hereby grants to the Director $140,000 in Common
Stock (the "First Year Grant") as of February 9, 1994, subject to the following
vesting restriction. One-twelfth of the First Year Grant shall become vested on
the 9th day of each calendar month starting with March 9, 1994 if the Director
continues in service as Chairman of the Company's Board of Directors until such
day. If the Director's service as Chairman of the Company's Board of Directors
terminates for any reason before February 9, 1995, the Director shall forfeit
any unvested portion of the granted Common Stock.
2.2 If the Director continues as Chairman of the Company's Board of
Directors on February 9 of any year after 1994 (the "Grant Date"), the Company
shall grant to the Director Common Stock equal in value on the Grant Date to the
Director's total annual compensation for the 12 months beginning on the Grant
Date, minus $10,000, subject to the following vesting restriction. One-twelfth
of the Common Stock granted on the Grant Date shall become vested on the 9th day
of
<PAGE>
each calendar month starting with the March 9 following the Grant Date if the
Director continues in service as Chairman of the Company's Board of Directors
until such day. If the Director's service as Chairman of the Company's Board of
Directors terminates for any reason before the first anniversary of the Grant
Date, the Director shall forfeit any unvested portion of the granted Common
Stock.
3. PURCHASE OF COMMON STOCK AND PLACEMENT IN ESCROW.
3.1 When the Director is entitled to a grant of Common Stock under
Section 2, the Company shall pay to a securities broker or other third party
cash in the amount provided in 2.1 or 2.2 with instructions to purchase shares
of Common Stock on the market at the current market price in the Director's name
and deliver them to the escrow holder under 3.2. Payment for the First Year
Grant shall be made upon execution of this Agreement by the Company and the
Director.
3.2 For purposes of facilitating the enforcement of the provisions of
Section 2 of this Agreement, the granted shares shall be issued in the
Director's name and the certificate or certificate(s) representing such shares
shall be delivered, together with a stock power or stock powers executed by the
Director, in blank, to the Secretary of the Company, to hold said certificate(s)
and stock power(s) in escrow and to take all such actions as are in accordance
with the terms of this Agreement. The Director hereby acknowledges that the
Secretary of the Company is so appointed as the escrow holder with the foregoing
authorities as a material inducement to make this Agreement and that said
appointment is coupled with an interest and is irrevocable.
3.3 The Director agrees that the escrow holder under 3.2 shall not be
liable to any party to this Agreement (or to any other party) for any actions or
omissions unless the escrow holder is grossly negligent with respect thereto.
Upon release of granted shares from the restrictions provided by Section 2, the
escrow holder shall deliver to the Director or, in the event of the Director's
death, to the Director's successor a certificate or certificates representing
the granted shares.
4. RIGHTS AS SHAREHOLDER. Subject to the provisions of this Agreement,
the Director shall be entitled to all of the rights of a shareholder with
respect to the granted shares, including the right to vote such shares and to
receive ordinary dividends payable with respect to such shares from the date of
the grant.
2
<PAGE>
5. TRANSFER RESTRICTIONS. None of the granted shares may be sold,
assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the
Director prior to the date such shares become vested under the provisions of
Section 2.
6. MERGERS, CONSOLIDATIONS OR CHANGES IN CAPITAL STRUCTURE. If, after
the date of this Agreement, the outstanding Common Stock of the Company is
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any reorganization, merger, consolidation, plan of exchange,
recapitalization, reclassification, stock split-up, combination of shares or
dividend payable in shares, or in the event of any consolidation, merger or plan
of exchange involving the Company pursuant to which Common Stock is converted
into cash, any Common Stock, other securities or other consideration issued or
distributed with respect to the granted shares in any such transaction shall be
subject to the restrictions and conditions set forth herein.
7. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed under the laws
of the state of Oregon, exclusive of choice of law rules. If any provision or
provisions of this Agreement are found to be unenforceable, the remaining
provisions shall nevertheless be enforceable and shall be construed as if the
unenforceable provisions were deleted.
(b) This is the entire agreement between the parties with respect to
the subject matter hereof and this Agreement supersedes all prior oral or
written agreements between the Company and the Director relating to the subject
matter hereof.
(c) This Agreement may be amended or modified only by written consent
of the Company and the Director.
Company: PACIFICORP, an Oregon corporation
By: JOHN C. HAMPTON
-----------------------------
Its: Chairman of the Personnel
Committee
Director: KEITH R. MCKENNON
---------------------------------
Keith R. McKennon
3
<PAGE>
EXHIBIT (12)
PACIFICORP
STATEMENTS OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1989 1990 1991 1992 1993
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................... $ 473.1 $ 431.2 $ 428.0 $ 409.7 $ 377.8
Estimated interest portion of rentals charged to
expense............................................ 29.9 23.3 20.4 17.1 20.1
Preferred dividend requirement of majority-owned
subsidiary......................................... 4.5 4.2 -- -- --
---------- ---------- ---------- --------- ----------
Total fixed charges............................. $ 507.5 $ 458.7 $ 448.4 $ 426.8 $ 397.9
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Earnings, as defined:*
Income from continuing operations................... $ 403.0 $ 413.4 $ 446.8 $ 150.2 $ 422.7
Add (deduct):
Provision for income taxes........................ 207.1 179.1 176.7 90.8 187.4
Minority interest................................. 12.3 18.1 14.1 8.4 11.3
Undistributed losses (income) of less than 50%
owned affiliates................................. 14.7 -- (1.8) (5.7) (16.2)
Fixed charges as above............................ 507.5 458.7 448.4 426.8 397.9
---------- ---------- ---------- --------- ----------
Total earnings.................................. $ 1,144.6 $ 1,069.3 $ 1,084.2 $ 670.5 $ 1,003.1
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
Ratio of Earnings to Fixed Charges.................... 2.3x 2.3x 2.4x 1.6x 2.5x
---------- ---------- ---------- --------- ----------
---------- ---------- ---------- --------- ----------
<FN>
- ------------------------
* "Fixed charges" represents consolidated interest charges, an estimated amount
representing the interest factor in rents and preferred stock dividend
requirements of majority-owned subsidiaries. "Earnings" represent the
aggregate of (a) income from continuing operations, (b) taxes based on income
from continuing operations, (c) minority interest in the income of
majority-owned subsidiaries that have fixed charges, (d) fixed charges and (e)
undistributed losses (income) of less than 50% owned affiliates without loan
guarantees.
</TABLE>
S-1
<PAGE>19
EXHIBIT (13)
FINANCIAL SECTION CONTENTS
______________________________________________
______________________________________________
Management's Discussion
and Analysis of Financial Condition
and Results of Operations 20
______________________________________________
Report of Management 36
______________________________________________
Independent Auditors' Report 36
______________________________________________
Statements of Consolidated Income
and Retained Earnings 37
______________________________________________
Consolidated Balance Sheets 38
______________________________________________
Statements of Consolidated Cash Flows 40
______________________________________________
Notes to Consolidated Financial Statements 41
______________________________________________
<PAGE>20
<TABLE>
SUMMARY INFORMATION
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1993 to 1992 Compound
Percentage Annual
1993 1992 1991 1990 1989 1988 Comparison Growth
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $3,412.4 $3,242.0 $3,168.3 $3,093.9 $3,007.0 $2,944.6 5% 3%
_______ _______ _______ _______ _______ _______ ____ ___
INCOME FROM OPERATIONS 915.5 633.0 941.3 923.0 900.1 895.1 45 -
_______ _______ _______ _______ _______ _______ ____ ___
NET INCOME (LOSS) 479.1 (340.4) 507.2 473.9 465.6 446.7 * 1
_______ _______ _______ _______ _______ _______ ____ ___
EARNINGS CONTRIBUTION (LOSS) ON
COMMON STOCK
Continuing operations
Electric Operations 322.3 202.9 346.6 334.2 329.6 309.0 59 1
Telecommunications 50.9 57.3 76.6 76.6 64.2 50.3 (11) -
Other (a) 10.2 (147.3) (3.1) (19.3) (12.0) 7.0 107 8
TOTAL 383.4 112.9 420.1 391.5 381.8 366.3 * 1
Discontinued operations (b) 52.4 (490.6) 60.4 60.5 62.6 59.7 * *
Cumulative effect of
change in accounting
for income taxes 4.0 - - - - - * *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL $ 439.8 $ (377.7) $ 480.5 $ 452.0 $ 444.4 $ 426.0 * 1
_______ _______ _______ _______ _______ _______ ____ ___
EARNINGS (LOSS) PER SHARE
Continuing operations
Electric Operations $ 1.17 $ .76 $ 1.34 $ 1.37 $ 1.34 $ 1.25 54 (1)
Telecommunications .19 .21 .30 .31 .26 .21 (10) (2)
Other (a) .04 (.55) (.01) (.08) (.04) .03 107 6
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL 1.40 .42 1.63 1.60 1.56 1.49 * (1)
Discontinued operations (b) .19 (1.84) .23 .25 .25 .24 * *
Cumulative effect of
change in accounting
for income taxes .01 - - - - - * *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL $ 1.60 $ (1.42) $ 1.86 $ 1.85 $ 1.81 $ 1.73 * (2)
_______ _______ _______ _______ _______ _______ ____ ___
_______ _______ _______ _______ _______ _______ ____ ___
CASH DIVIDENDS PER
COMMON SHARE
Paid $ 1.195 $ 1.52 $ 1.47 $ 1.41 $ 1.35 $ 1.305 (21) (2)
Declared $ 1.08 $ 1.53 $ 1.485 $ 1.425 $ 1.365 $ 1.635 (29) *
OTHER INFORMATION
Total assets $ 11,959 $ 11,257 $ 11,910 $ 11,201 $ 10,886 $ 10,448 6 3
Total employees (c) 13,635 13,093 13,239 13,411 12,560 13,318 4 -
Common shareholders of
record (Thousands) 157.5 165.7 162.3 164.6 171.0 188.0 (5) (4)
Book value per share $ 11.61 $ 10.75 $ 13.40 $ 12.69 $ 12.29 $ 11.91 8 (1)
Market price per share $ 19 1/4 $ 19 3/4 $ 25 1/8 $ 22 3/8 $ 22 7/8 $ 17 1/2 (3) 2
Price earnings multiple (d) 13.8 21.5 15.4 14.0 14.7 11.7 (36) 3
Pretax interest coverage (d) 2.6 2.0 2.5 2.4 2.3 2.3 30 2
Return on average
common equity (d) 12.5 7.4 12.5 12.9 12.8 12.5 69 -
_______ _______ _______ _______ _______ _______ ____ ___
_______ _______ _______ _______ _______ _______ ____ ___
<FN>
____________________
*Not a meaningful number.
(a) Other includes the operations of PacifiCorp Financial Services, Inc., and
independent power production, as well as the activities of PacifiCorp
Holdings, Inc.
(b) Discontinued operations represented the Company's interest in NERCO, Inc.
and TRT Communications, Inc.
(c) Excludes employees of discontinued operations.
(d) Calculated using earnings from continuing operations, excluding special
charges in 1992. See Note 13 to Consolidated Financial Statements.
Including the effect of special charges, 1992 ratios were as follows: price
earnings multiple, 47; pretax interest coverage, 1.6; and return on average
common equity, 3.4.
</TABLE>
<PAGE>21
In 1993, the Company implemented its strategic business plan to strengthen the
scope and competitive position of its electric utility and telecommunications
operations, and to reduce the size and scope of its other diversified activi-
ties. Actions were taken to improve and build on the Company's strengths and to
focus management and other resources on opportunities in these core businesses,
which are expected to face increased competition.
During 1993, the Company completed the sales of its mining and resource develop-
ment subsidiary, NERCO, Inc. ("NERCO"), and an international communications
operation. These businesses had been classified as discontinued operations.
The Company's financial services business continues on its course of controlled
liquidation of certain assets. By eliminating and reducing these business
activities, the Company expects to reduce earnings volatility, while reducing
pressure on capital and management resources. Reflecting these downsizing
activities, the Board of Directors reduced the indicated annual dividend rate on
the Company's common stock to $1.08 from $1.54 per share effective with the May
1993 dividend payment.
1993 COMPARED TO 1992
_____________________
.. Electric Operations' earnings contribution increased $119 million or 59%
primarily due to the effects of $70 million of write-offs and adjustments
in 1992, an increase in energy sales and increased hydroelectric genera-
tion, partially offset by higher employee benefit expenses.
.. Telecommunications' earnings contribution from continuing operations
declined $6 million or 11% primarily due to the effect of gains in 1992 on
sales of a noncore investment and cellular operations.
.. The earnings contribution of other businesses increased $158 million
primarily due to the effect of special charges of $132 million in 1992,
interest revenues from a note received in June 1993 in connection with the
sale of NERCO, by means of a merger, and income from an independent power
subsidiary.
.. Discontinued operations earnings contribution in 1993 was $52 million
compared with losses of $491 million in 1992. A $52 million gain on the
closing of the sale of an international communications subsidiary was
recorded in 1993. Losses from asset dispositions and write-downs at NERCO
of $451 million and valuation adjustments and operating losses of $40 mill-
ion relating to the international communications subsidiary were recorded
in 1992.
.. The average number of common shares outstanding increased 3% due to the
issuance of 6 million shares in a September 1993 public offering and
issuances under the dividend reinvestment and employee stock ownership
plans.
1992 COMPARED TO 1991
_____________________
.. Electric Operations' earnings contribution declined $144 million or 41%
primarily due to mild weather conditions, higher power costs, write-offs,
increased pension contributions and higher preferred dividend requirements,
offset in part by increased energy sales to other utilities.
.. Telecommunications' earnings contribution from continuing operations
declined $19 million or 25% primarily due to lower out-of-period revenues,
competition in the state of Alaska and lower cable capacity sales.
.. The negative contribution of other businesses increased by $144 million
primarily due to after-tax special charges of $132 million.
.. Discontinued operations' losses in 1992 were $491 million compared to
earnings of $60 million in 1991. Adverse commodities markets, lower than
expected oil and gas production volumes and the decision to sell certain
operations led to the numerous asset write-downs and losses at NERCO in
1992. In addition, a $40 million loss relating to the disposal of an
international communications subsidiary was recognized in 1992.
.. The average number of common shares outstanding increased 3% due to issu-
ances under the dividend reinvestment and employee stock ownership plans
and issuances of shares to the public.
<PAGE>22
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
Actual Forecasted
________________________________ __________________________________
1991 1992 1993 1994 1995 1996
________________________________ __________________________________
<S> <C> <C> <C> <C> <C> <C>
NET CASH FLOW FROM CONTINUING OPERATIONS
Electric Operations $ 740 $ 642 $ 764
Telecommunications 110 177 180
Other 170 123 93
_____ _____ _____
TOTAL 1,020 942 1,037
CASH DIVIDENDS PAID 409 440 366
_____ _____ _____
NET $ 611 $ 502 $ 671 $575-625 $575-625 $650-700
_____ _____ _____ _______ _______ _______
_____ _____ _____ _______ _______ _______
CONSTRUCTION
Electric Operations $ 504 $ 585 $ 636 $ 736(a) $ 610(a) $ 685(a)
Telecommunications 195 109 103 124 119 112
Other 4 - 3 - - -
_____ _____ _____ _______ _______ ______
TOTAL 703 694 742 860 729 797
ACQUISITIONS AND INVESTMENTS
Electric Operations 292 279(b) 1 - - 150(d)
Telecommunications 41 31 23 418(c) - -
Other 23 (3) 39 - - -
_____ _____ _____ _______ _______ _______
TOTAL CAPITAL SPENDING $1,059 $1,001 $ 805 $ 1,278 $ 729 $ 947
_____ _____ _____ _______ _______ _______
_____ _____ _____ _______ _______ _______
MATURITIES OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS
Electric Operations $ 88 $ 111 $ 62 $ 80 $ 56 $ 188
Telecommunications 16 19 32 16 113 12
Other 337 321 273 61 52 22
_____ _____ _____ _______ _______ _______
TOTAL $ 441 $ 451 $ 367 $ 157 $ 221 $ 222
_____ _____ _____ _______ _______ _______
_____ _____ _____ _______ _______ _______
Other Refinancings $ 379 $ 751 $ 864
_____ _____ _____
_____ _____ _____
<FN>
(a) The Company's present estimate of construction expenditures is being
reviewed and reductions to these estimates are anticipated.
(b) Includes noncash acquisition costs of $255 million relating to Colorado-Ute
properties acquired in April 1992 through the assumption of long-term debt
and liabilities.
(c) Pacific Telecom's proposed acquisition of US West Communications, Inc.
properties in Colorado, Oregon and Washington. See TELECOMMUNICATIONS,
page 24.
(d) PacifiCorp may exercise its option to purchase a 50% interest in a 474 meg-
awatt, natural gas-fired generating plant in Hermiston, Oregon. See
ELECTRIC OPERATIONS, page 23.
</TABLE>
<PAGE>23
ELECTRIC OPERATIONS
Electric Operations uses several tools to plan for future growth. The planning
process starts with the Company's least-cost plan, which is revised every two
years. The Company's three-year financial forecast is derived from the least-
cost plan. These plans define how the Company intends to acquire efficient,
cost-effective energy resources for its customers and achieve its financial and
operating goals.
For the period 1994 to 1998, annual retail megawatt-hour sales are expected to
increase at an average rate of 2% per year, excluding the impact of the Company-
's demand-side efficiency programs. After demand-side resources are considered,
sales would be expected to increase 1.6% per year. The Company's plan relies on
no single energy source to meet customers' needs. The Company has identified a
variety of resource alternatives to manage supply and demand, such as purchases
of existing power plants, improvements in equipment and operations at its own
generating facilities, power purchase agreements and demand-side resources.
Demand-side options include customer efficiency programs to reduce existing
energy use and to make new customer usage more efficient.
On February 15, 1994, the Company announced its intent to transfer the ownership
of all its electric properties in northern Idaho to Washington Water Power
Company ("WWP"). The service area had 9,852 customers and $13 million in retail
sales revenues in 1993. The cash purchase price for the properties is expected
to be approximately $30 million. Factors such as isolation and remoteness of
the area, the absence of Company transmission lines to the area, impending
increases in wheeling prices and reductions of the Bonneville Power Administra-
tion ("BPA") exchange credit forced upward pressure on prices in northern Idaho
and led to the decision to sell the properties. The transaction is subject to
regulatory review and final documentation. The Company hopes to close the
transaction during the summer of 1994.
During 1993, the Company invested in construction consisting of production,
$165 million; transmission, $117 million; distribution, $237 million; and other,
$117 million.
The Company's estimated construction expenditures for 1994 through 1996 are set
forth below. These estimates are being reviewed and reductions are anticipated.
<TABLE>
<CAPTION>
IN MILLIONS
1994 1995 1996
____ ____ ____
<S> <C> <C> <C>
Production $163 $185 $246
Transmission 103 105 138
Distribution 249 154 144
Other 221 166 157
___ ___ ___
Total $736 $610 $685
___ ___ ___
___ ___ ___
</TABLE>
Included in the table above are the Company's estimates of the costs of acquir-
ing demand-side resources. The Company is implementing demand-side programs to
improve the energy efficiency of residences, commercial buildings and industrial
facilities -- both new and existing.
In October 1993, the Company entered into a long-term agreement with Hermiston
Generating Company, L.P. to purchase electricity from a 474 megawatt, natural
gas-fired generating plant to be built near Hermiston, Oregon. During the first
15 years of the 20-year contract, the Company will acquire more than 3,000,000
MWh of power annually, beginning in mid-1996. The Company has the option to
acquire up to a 50% interest in the facility at the contract operation date and
at 5 and 20 years following the contract operation date. The agreement is
subject to termination by the Company if certain gas supply and transmission
contracts are not secured or Federal Energy Regulatory Commission ("FERC")
approval is not obtained.
Whenever the Company has power available and the market price is favorable, it
makes off-system sales, generally to other utilities. Off-system sales permit
the Company to use existing and newly acquired power supplies in a manner that
keeps down long-run costs for retail customers and provides added flexibility in
meeting changes in customer demand.
The Company expects to support its capital requirements through internally
generated cash flow and issuances of additional debt, preferred stock and common
stock in amounts that should result in a modest improvement in the equity
component of its capital structure.
<PAGE>24
TELECOMMUNICATIONS
Over the past few years, Pacific Telecom's strategy has been to focus on its
core business of providing local exchange service to suburban and rural markets
and long distance services in the state of Alaska, and to divest its diversified
portfolio of noncore businesses. This strategy is being implemented through the
acquisition of local exchange properties, the sale of certain international
operations, the consolidation and sale of cellular holdings, and ongoing efforts
to achieve a satisfactory restructuring of the Alaska long distance marketplace.
With the completed sale of TRT Communications, Inc. ("TRT") and upon closing of
the pending sale of two additional noncore operations, Pacific Telecom will have
exited from all of its material noncore businesses.
In 1993, Pacific Telecom had no major construction projects that required more
than one year to complete. During 1993, Pacific Telecom's construction expendi-
tures consisted of $74 million for local exchange operations, $18 million for
long lines, $7 million for cellular operations and $4 million for other. These
expenditures related mainly to network upgrades and growth in Pacific Telecom's
operations.
Construction expenditures for 1994 through 1996 are estimated to be as follows:
<TABLE>
<CAPTION>
IN MILLIONS
1994 1995 1996
____ ____ ____
<S> <C> <C> <C>
Local exchange $ 79 $ 99 $ 94
Long lines 29 12 11
Cellular 7 6 5
Other 9 2 2
___ ___ ___
Total $124 $119 $112
___ ___ ___
___ ___ ___
</TABLE>
Pacific Telecom is seeking to expand its local exchange operations and cellular
interests through acquisitions that complement its existing properties and
operations. In August 1993, Pacific Telecom signed a definitive agreement with
US West Communications, Inc. ("USWC"), under which it will acquire certain rural
telephone exchange properties in Colorado. The properties include 45 exchanges
that serve 50,000 access lines. Pacific Telecom expects to pay $207 million for
these properties at closing, subject to a purchase price adjustment mechanism
based principally on the estimated book value of the assets to be acquired.
Pacific Telecom spent $6 million in 1993 and expects to spend $28 million in
1994 to upgrade the service to these properties. If the transaction does not
close, USWC is required to reimburse Pacific Telecom for these expenditures,
together with interest. Completion of this transaction will be dependent upon
receipt of appropriate regulatory approvals. Transition planning efforts have
commenced and Pacific Telecom expects to close the transaction in late 1994.
On March 15, 1994, Pacific Telecom signed letters of intent with USWC to acquire
certain rural exchange properties located in Oregon and Washington from USWC for
$183 million in cash, subject to certain purchase price adjustments at closing.
These properties represent 49 exchanges that serve approximately 34,100 access
lines. Many of these exchanges are contiguous to or located near exchanges that
Pacific Telecom owns and operates in these states. The transaction is subject
to negotiation of a definitive purchase agreement with USWC, which is expected
to be completed in early April 1994. Completion of the transaction will also be
dependent on corporate, regulatory and governmental approvals, all of which
should be received by late 1994 or early 1995.
Pacific Telecom expects to fund these acquisitions through the issuance of
external debt and the use of internally generated funds. Future local exchange
company acquisitions may require a significant amount of funding depending on
Pacific Telecom's success in pursuing its strategy. Pacific Telecom expects to
fund such acquisitions through a combination of internally generated funds,
external debt and may, if necessary to maintain appropriate capitalization
ratios, consider equity issuances to help fund the acquisitions.
In 1985, the Federal Communications Commission ("FCC") established a Federal-
State Joint Board ("Joint Board") to review the interstate market structure of
Alaska and to reconcile various existing and emerging federal policies affecting
universal service, rate integration and competition. In October 1993, the Joint
Board released a Final Recommended Decision ("FRD"), which proposed, among other
matters, to terminate the Joint Services Agreement ("JSA") between Pacific
Telecom's subsidiary, Alascom, Inc. ("Alascom"), and American Telephone and
Telegraph Company ("AT&T") effective September 1, 1995. The JSA has been in
effect since January 1, 1980. In addition, Alascom would receive a $150 million
payment from AT&T for accelerated cost recovery in two equal installments of
$75 million each; AT&T would be required to continue to utilize Alascom's
facilities for the origination and termination of interstate traffic on a
declining scale for a period of two and one-half years following
<PAGE>25
termination of the JSA; and Alascom would create an interstate tariff for
carrier services based upon an as yet to be developed allocation of costs
between rural and nonrural locations. Subsequent to the issuance of the FRD,
Alascom filed an application for review of the FRD with the FCC; others have in
turn filed objections to Alascom's application. To date, the FCC has taken no
action on either the FRD or Alascom's application. Under applicable Federal
statutes, the FCC will render the final decision in this proceeding. As a
practical matter, since a majority of the FCC Commissioners participate as
members of the Joint Board, the final decisions of the FCC often reflect
recommendations of the Joint Board.
On October 12, 1993, Pacific Telecom and AT&T entered into an agreement to
exchange proprietary information relating to Alascom's structure and operations
for the purpose of promoting a negotiated resolution to some or all of the
issues relating to the JSA and the restructure of the Alaska interstate market.
Pacific Telecom is unable to predict the outcome of this matter.
OPERATING ACTIVITIES
Cash provided by operating activities continues to be the Company's primary
source of funds to finance operating needs, dividends and construction expendi-
tures. Cash generated by continuing operations less dividends paid provided for
90%, 72% and 87% of construction expenditures in 1993, 1992 and 1991, respec-
tively. Despite a $48 million, or 7%, increase in construction expenditures,
the Company increased its 1993 coverage of construction expenditures. The
increased coverage is attributable to a 17% decrease in dividends paid and 10%
growth in the Company's cash flows provided by continuing operations.
INVESTING ACTIVITIES
In 1993, net cash flows used in investing activities were $263 million, reflect-
ing construction expenditures of $742 million, mainly by Electric Operations,
net of cash proceeds of $384 million from the disposition of the 82% interest in
NERCO held by PacifiCorp Holdings, Inc. ("Holdings") and $195 million received
by Pacific Telecom from the sale of IDB Communications Group, Inc. ("IDB")
common stock, which was received through the sale of TRT. The proceeds from the
disposition of NERCO were used to repay short-term debt and to fund a $225 mill-
ion loan to a subsidiary of the purchaser. The loan is repayable by the
borrower as, and only to the extent that, it receives certain future coal
contract revenues.
The Company is the beneficiary of life insurance policies and in 1993 obtained
advances against the cash surrender value of these policies. At December 31,
1993, the balance was $70 million. The advances currently bear interest at 6.5%
and are payable from the proceeds of the insurance contracts in the event of the
insured's death or cancellation of the contracts.
<PAGE>26
<TABLE>
FINANCING ACTIVITIES
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993 1992 1991 1990 1989 1988
______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Common equity $3,263 $2,908 $3,512 $3,208 $3,007 $2,936
Preferred stock 367 417 342 342 242 246
Preferred stock subject
to mandatory redemption 219 219 150 50 50 56
Long-term borrowings 3,924 4,181 4,348 3,944 3,795 3,653
Long-term borrowings
currently maturing 155 420 274 380 407 402
Short-term debt 554 553 681 698 1,045 979
</TABLE>
Common stock
During 1993, the Company issued 10,441,675 shares of its common stock to the
public and under the Dividend Reinvestment and Employee Savings and Stock
Ownership Plans. The issuances included 6,000,000 shares of common stock sold
to the public in late September 1993 for net proceeds of $115 million.
Preferred stock
In January 1993, the Company redeemed 500 shares of its Series B auction rate
preferred stock at stated value or $50 million.
Long-term debt, including current maturities
Long-term debt decreased $522 million in 1993 as a result of debt repayments of
$1.2 billion, net of debt issuances of $699 million. Pacific Telecom's long-
term debt decreased $160 million due to the application of proceeds from the
sale of IDB common stock. The long-term debt of PacifiCorp Financial Services,
Inc. ("PFS") and Holdings decreased $390 million primarily due to proceeds from
the disposition of NERCO and net principal payments received on finance assets.
During 1993, PacifiCorp's long-term debt increased $61 million primarily due to
the refinancing of long-term debt with interest rates from 7.9% to 8.9% through
the issuance of long-term debt with interest rates of 4.5% to 7.4%.
As of December 31, 1993, the Company had $850 million of mortgage bonds and
common stock registered with the Securities and Exchange Commission.
In September 1993, Holdings entered into a five-year, $500 million revolving
credit agreement ("Agreement"), and revolving credit agreements of $350 million
for Holdings and $430 million for PFS were terminated. The commitment under the
Agreement declines by $50 million per year beginning in December 1994, declining
to $300 million in 1997. Holdings has pledged its shares of Pacific Telecom and
PFS and certain other assets, including the note received in connection with the
disposition of NERCO, as security for repayment of its obligations under the
Agreement and other agreements. In conjunction with the Agreement, Holdings and
PFS entered into a new intercompany borrowing agreement.
Holdings has executed various agreements that support the credit ratings and
credit facilities of PFS, under which Holdings has agreed to maintain ownership
of not less than 80% of the voting shares of PFS; provide equity contributions
to PFS to cause its tangible net worth to come into compliance with applicable
covenants in the event such covenants are violated; and provide liquidity
support to enable PFS to fund debt maturities.
Capitalization limits
The Company's Articles of Incorporation limit the amount of unsecured debt
outstanding to the equivalent of 30% of total defined equity and secured debt.
Under this provision, approximately $1.3 billion principal amount of additional
unsecured debt could have been outstanding at December 31, 1993.
Issuance of the Company's mortgage bonds or preferred stock is limited by
earnings coverage and fundable property provisions of the Company's mortgage
indentures and its Articles of Incorporation. Under these provisions and at
current interest rates, approximately $3.1 billion of additional mortgage bonds
or $2.8 billion of preferred stock could have been issued at December 31, 1993.
However, certain of the Company's credit facilities would have limited addition-
al long-term borrowings to approximately $1.0 billion.
<PAGE>27
Under the Company's principal credit agreement, it is an event of default if any
person or group acquires 35% or more of the Company's common shares or if,
during any period of 14 consecutive months, individuals who were directors of
the Company on the first day of such period (and any new directors whose
election or nomination was approved by such individuals and directors) cease to
constitute a majority of the Board of Directors. For additional information
regarding bank credit agreements, lines of credit and other short-term borrowing
facilities and related limitations on borrowings, see Note 4 to Consolidated
Financial Statements.
INFLATION
Due to the capital intensive nature of the Company's core businesses, inflation
may have a significant impact on replacement of property, acquisition and
development activities and final mine reclamation. The effects of inflation on
the Company's utility businesses are not significant to ongoing operations.
While the rate-making process gives no recognition to the current cost of
replacing plant, based upon past practices, the Company's utility businesses
expect to be allowed to recover and earn on the increased cost of their net
investment when replacement of facilities actually occurs.
ENVIRONMENTAL ISSUES
During 1991, the Environmental Protection Agency ("EPA") and the states began
the process of implementing the newly amended Clean Air Act ("Act"). Through
the ongoing rulemaking process, the EPA has issued regulations to implement the
Act's acid rain provisions; established a national emissions allowance trading
system; and required monitoring of plant emissions.
The Company's generating plants burn low-sulphur coal. Major construction
expenditures have already been made at many plants to reduce sulphur dioxide
emissions, but some additional expenditures may be necessary. The plant most
affected by the Act is the Centralia Plant in Washington. The Company is
studying how to bring this plant into compliance in a cost-effective manner by
the required January 1, 2000 compliance deadline. Since the Act does not
mandate the use of a particular emission reduction technology, the Company will
have the flexibility to select from several possible compliance strategies.
The greenhouse effect is believed to occur when certain trace gases in the
atmosphere trap radiant heat. There is uncertainty regarding the amount of
warming, its timing and impact and the effect, if any, carbon dioxide emissions
have on warming. As a coal-based utility, the passage of a carbon tax or a
stringent across-the-board emission reduction could make it difficult for the
Company to achieve its goal of providing competitively priced energy. The
Company is investigating cost-effective ways of offsetting future carbon dioxide
emissions and is undertaking demonstration projects involving tree planting as a
possible means of offsetting emissions.
The Company continues to monitor the results of research concerning the possible
relationship between health effects from exposure to electromagnetic fields
("EMF") and the delivery and use of electricity. The Company has supported EMF
research in the past, and continues to encourage such research.
Actions under the Endangered Species Act with respect to certain salmon and
other endangered or threatened species could result in restrictions on the
Federal hydropower system and affect regional power supplies and costs. These
actions could also result in further restrictions on timber harvesting and
adversely affect kilowatt-hour sales to the Company's customers in the wood
products industry.
The Company is currently in the process of relicensing certain of its hydroelec-
tric projects under the Federal Power Act and will be relicensing nearly all of
its hydroelectric capacity in the next decade. As part of relicensing, the FERC
is expected to impose conditions designed to address the impact of the projects
on fish and other environmental concerns. The Company is unable to predict the
impact of imposition of such conditions, but capital expenditures and operating
costs could increase in future periods and certain projects may not be economi-
cal to operate.
Several Superfund sites have been identified where the Company has been or may
be designated as a potentially responsible party. In such cases, the Company
reviews the circumstances and, where possible, negotiates with other potentially
responsible parties to provide funds for clean-up and, if necessary, monitoring
activities. In addition, insurance resources are reviewed and investigated.
Future costs associated with the disposition of these matters are not expected
to be material to the Company's consolidated results of operations.
<PAGE>28
<TABLE>
ELECTRIC OPERATIONS
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1993 to 1992 Compound
Percentage Annual
1993 1992 1991 1990 1989 1988 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Residential $ 698.9 $ 649.8 $ 663.8 $ 646.6 $ 646.4 $ 651.1 8% 1%
Commercial 543.9 526.9 517.4 509.0 517.3 526.5 3 1
Industrial 696.2 695.6 674.9 673.8 670.6 670.2 - 1
Other 29.8 29.9 34.2 34.3 38.2 42.6 - (7)
_______ _______ _______ _______ _______ _______ ___ ___
Retail sales 1,968.8 1,902.2 1,890.3 1,863.7 1,872.5 1,890.4 4 1
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale - firm 422.5 356.5 264.7 209.9 190.3 150.8 19 23
Wholesale - nonfirm 77.3 71.3 59.9 78.4 79.0 87.4 8 (2)
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale sales 499.8 427.8 324.6 288.3 269.3 238.2 17 16
Other 38.3 32.4 36.9 32.5 33.9 31.0 18 4
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 2,506.9 2,362.4 2,251.8 2,184.5 2,175.7 2,159.6 6 3
_______ _______ _______ _______ _______ _______ ___ ___
EXPENSES
Depreciation and amortization 280.5 286.6 256.0 235.4 227.8 231.4 (2) 4
Operations, maintenance and
other 1,442.1 1,398.1 1,212.8 1,204.1 1,192.9 1,183.4 3 4
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 1,722.6 1,684.7 1,468.8 1,439.5 1,420.7 1,414.8 2 4
_______ _______ _______ _______ _______ _______ ___ ___
INCOME FROM OPERATIONS 784.3 677.7 783.0 745.0 755.0 744.8 16 1
_____ _____ _____ _____ _____ _____ ___ ___
NET INCOME 361.6 240.2 373.3 356.1 350.8 329.7 51 2
PREFERRED DIVIDEND REQUIREMENT 39.3 37.3 26.7 21.9 21.2 20.7 5 14
_____ _____ _____ _____ _____ _____ ___ ___
EARNINGS CONTRIBUTION (a) $ 322.3 $ 202.9 $ 346.6 $ 334.2 $ 329.6 $ 309.0 59 1
_______ _______ _______ _______ _______ _______ ___ ___
_______ _______ _______ _______ _______ _______ ___ ___
Identifiable assets $ 9,181 $ 8,192 $ 7,665 $ 7,027 $ 6,728 $ 6,459 12 7
Capital spending $ 637 $ 864(b)$ 796 $ 459 $ 344 $ 265 (26) 19
Number of employees 9,475(c) 9,555 9,419 8,974 8,913 9,163 (1) 1
EXPENSES
Fuel $ 464.7 $ 479.0 $ 424.1 $ 403.5 $ 397.4 $ 412.1 (3) 2
Purchased power $ 274.9 $ 210.2 $ 176.4 $ 149.6 $ 133.3 $ 81.1 31 28
Other operations $ 287.9 $ 288.0 $ 249.7 $ 259.5 $ 271.1 $ 295.7 - (1)
Maintenance $ 172.2 $ 167.8 $ 146.6 $ 151.2 $ 158.7 $ 165.0 3 1
Administrative and general $ 138.2 $ 144.5 $ 119.1 $ 139.5 $ 135.7 $ 136.7 (4) -
Depreciation and amortization $ 280.5 $ 286.6 $ 256.0 $ 235.4 $ 227.8 $ 231.4 (2) 4
Taxes, other than income taxes $ 104.2 $ 108.6 $ 96.9 $ 100.8 $ 96.7 $ 92.8 (4) 2
Income taxes - utility $ 188.8 $ 170.5 $ 180.8 $ 169.7 $ 189.1 $ 184.4 11 -
Income taxes - other $ (9.5) $ (12.8) $ (6.5) $ (7.9) $ (.9) $ (9.9) 26 1
INTEREST CAPITALIZED
AFUDC - equity $ 4.3 $ 7.3 $ 7.9 $ 8.4 $ 10.5 $ 7.2 (41) (10)
AFUDC - debt $ 9.6 $ 8.9 $ 7.9 $ 14.0 $ 12.2 $ 7.7 8 5
ENERGY SALES (Millions of kWh)
Residential 12,055 11,230 11,354 10,990 10,765 10,491 7 3
Commercial 10,085 9,733 9,416 9,101 8,803 8,666 4 3
Industrial 19,671 19,942 19,322 19,507 18,878 18,085 (1) 2
Other 602 606 692 690 750 711 (1) (3)
_______ _______ _______ _______ _______ _______ ___ ___
Retail sales 42,413 41,511 40,784 40,288 39,196 37,953 2 2
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale - firm 11,919 10,455 7,349 6,147 5,441 4,331 14 22
Wholesale - nonfirm 3,030 2,965 2,946 3,323 3,118 4,066 2 (6)
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale sales 14,949 13,420 10,295 9,470 8,559 8,397 11 12
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 57,362 54,931 51,079 49,758 47,755 46,350 4 4
_______ _______ _______ _______ _______ _______ ___ ___
_______ _______ _______ _______ _______ _______ ___ ___
<FN>
(a) Does not reflect elimination of interest on intercompany borrowing arrange-
ments and includes income taxes on a separate-company basis.
(b) Including noncash acquisition costs of $255 million relating to the Colora-
do-Ute properties.
(c) In 1993, 127 employees of Pacific Generation, Inc. were reported in other
business.
</TABLE>
<PAGE>29
FACTORS INFLUENCING EARNINGS
PacifiCorp generates power primarily at coal-fired and hydroelectric plants and
relies on a transmission and distribution network to serve retail and wholesale
customers throughout the Pacific Northwest, Rocky Mountain and desert Southwest
regions. PacifiCorp also offers retail customers a variety of services encour-
aging efficient use of energy.
Earnings depend on efficiently and economically balancing power-supply resources
with customer demand; utility commission practices; regional economic condi-
tions; retention of municipal franchises; weather variations affecting customer
usage and hydroelectric production; fuel costs; wholesale firm power marketing
results; environmental and tax legislation; and the cost of debt and equity
capital.
PRICING STRATEGY
PacifiCorp seeks to minimize retail price increases. From January 1, 1988
through December 31, 1993, the Company reduced prices paid by retail customers
by $178 million, or 10% on an annualized basis. These decreases were made
possible by power supply coordination, insurance savings, lower interest rates
and work force reductions. The increase in the federal income tax rate, BPA
price increases, possible rising interest rates, and hydroelectric relicensing
and other cost increases are among the factors expected to place upward pressure
on the Company's costs and pricing structure in the next several years. See
ENVIRONMENTAL ISSUES on page 27.
1993 COMPARED TO 1992
_____________________
Revenues increased $145 million or 6%.
.. Retail sales revenues increased $67 million or 4% on increased volume
of 2%. Residential revenues increased $49 million or 8% primarily due
to the $26 million effect of colder temperatures in 1993, a 2% increase
in the number of customers and a 5% increase in average annual customer
usage. Residential revenues also increased $5 million and industrial
revenues increased $6 million due to the effect of the decrease in BPA
exchange benefits. Commercial revenues increased $17 million or 3%,
primarily due to a 2% increase in the number of customers and a 1%
increase in average customer usage.
Beginning in April 1994, retail sales revenues are expected to decline
by $7 million annually due to the effect of a rate reduction in Oregon
attributable to $7 million of previously accrued property tax savings
resulting from a ballot measure which limited property taxes. During
1994, the Company will continue to accrue property tax savings which
will be passed to customers in the future.
.. Wholesale sales revenues increased $72 million or 17% on increased
volume of 11%. New contracts added $36 million and increased prices
added $15 million to revenue from long-term firm contract sales.
Secondary and short-term firm sales revenues increased $17 million as a
result of higher volume and prices.
Operating expenses increased $38 million or 2%.
.. Fuel expense decreased $14 million or 3% primarily due to reductions of
$10 million resulting from lower fuel costs and $7 million from a 1%
decrease in thermal generation as a result of increased hydroelectric
generation and increased purchases of hydroelectric power.
.. Purchased power expense increased $65 million or 31% reflecting a $39
million or 23% increase in kWh purchases; a $15 million increase due to
higher prices for secondary purchases in early 1993 and for firm
purchases; and the effect of an $11 million decrease in BPA exchange
benefits. The secondary purchases were higher due to increased kWh
sales and the availability of lower cost hydroelectric power.
BPA, a wholesale power and wheeling supplier, increased its rates
effective October 1, 1993. The new rates will increase the Company's
capacity and wheeling expenses by approximately $17 million annually
and will reduce the Company's net residential exchange benefits by
approximately $30 million annually. Retail sales prices were increased
in Oregon, Washington, Montana and Idaho to reflect the reduction in
the BPA exchange benefits.
In certain circumstances, BPA has the option of implementing an interim
rate increase of up to 10% for the period October 1, 1994 through
September 30, 1995. If a maximum increase occurred, it would reduce
the Company's residential exchange benefits by approximately $20 -
million for the 12-month period. The Company would consider requesting
price increases that will allow it to recover the loss of benefits.
.. Other operations expense remained constant. Increased employee expense
of $16 million and increased demand side management expense of $5 mill-
ion were offset by the $19 million effect of charges in 1992 relating
primarily to cancellation of a coal purchase option and a contract
settlement. Employee expense increased as a result of the adoption of
Statement of Financial Accounting Standards ("SFAS") 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," on January
1, 1993 and higher pension and benefits expense.
<PAGE>30
<TABLE>
<CAPTION>
FOR THE YEAR
5-Year
1993 to 1992 Compound
Percentage Annual
1993 1992 1991 1990 1989 1988 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ENERGY SOURCE (%)
Coal 77 81 78 78 78 81 (5)% (1)%
Hydroelectric 6 4 6 7 8 7 50 (3)
Other 1 2 1 1 - 1 (50) -
Purchase and exchange contracts 16 13 15 14 14 11 23 8
_____ _____ _____ _____ _____ _____ ___ ___
NUMBER OF CUSTOMERS (Thousands)
Residential 1,135 1,112 1,093 1,076 1,060 1,047 2 2
Commercial 152 149 146 142 142 140 2 2
Industrial 18 17 16 15 13 12 6 8
Other 3 3 3 3 3 3 - -
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 1,308 1,281 1,258 1,236 1,218 1,202 2 2
_____ _____ _____ _____ _____ _____ ___ ___
Residential average annual
usage (kWh) 10,733 10,183 10,464 10,283 10,209 10,070 5 1
Residential average annual
revenue per customer (Dollars) 622 589 612 605 613 625 6 -
Residential revenue per kWh (Cents) 5.8 5.8 5.8 5.9 6.0 6.2 - (1)
MILES OF LINE
Transmission 14,900 14,900 14,900 14,900 14,700 14,600 - -
Distribution 44,800 44,500 44,400 44,200 44,200 44,100 1 -
SYSTEM PEAK DEMAND (Megawatts)
Net system load (a) - summer 6,554 6,734 6,405 6,407 5,978 5,939 (3) 2
- winter 7,268 6,968 7,019 7,623 6,875 6,267 4 3
Total firm load (b) - summer 8,390 8,477 7,639 7,019 6,741 6,503 (1) 5
- winter 8,838 8,335 7,710 8,417 7,559 6,833 6 5
SYSTEM CAPABILITY (Megawatts) (c)
- summer 9,757 9,753 9,629 8,551 8,570 8,923 - 2
- winter 9,916 9,982 9,316 9,141 8,948 8,831 (1) 2
_____ _____ _____ _____ _____ _____ ___ ___
_____ _____ _____ _____ _____ _____ ___ ___
<FN>
(a) Excludes off-system wholesale sales.
(b) Includes off-system firm wholesale sales.
(c) Owned and contractual generating capability at the time of system firm peak.
</TABLE>
.. Maintenance expense increased $4 million or 3% primarily due to $8 mil-
lion resulting from unscheduled plant outages, the $3 million effect of
the addition of new plants during 1992 and $7 million of increased
employee expense. The increases were offset in part by the effect of a
$17 million write-off in 1992 of obsolete materials and supplies
inventory.
.. Administrative and general expense decreased $6 million or 4% primarily
due to valuation adjustments in 1992 of $11 million relating to de-
ferred costs, offset in part by increased employee expense of $3
million in 1993.
.. Depreciation and amortization expense decreased $6 million or 2% due to
a $24 million reduction primarily resulting from extending the depre-
ciable lives of thermal plants. The reduction was largely offset by
additional depreciation attributable to increased plant in service,
including the addition of new plants in April 1992.
Pension costs for 1993 were $46 million compared to $27 million in
1992. The Company expects pension funding in years 1994 through 1998
to be at a level between $40 and $50 million each year. Approximately
69% of the cost is allocated to various categories of operating expens-
es as described above.
<PAGE>31
Earnings contribution increased $119 million or 59%.
.. Income from operations increased $107 million or 16% primarily due to
$61 million of write-offs and adjustments in 1992. Decreased BPA
exchange credits increased retail sales revenue and purchased power
expense $11 million each, with no effect on income from operations.
.. Other income was $13 million in 1993 compared with other expense of $27
million in 1992. A gain of $5 million from the sale of property and a
$5 million increase in the cash surrender value of life insurance were
recorded in 1993. The 1992 expense included $20 million of valuation
adjustments relating to investments in cogeneration projects, a coal
lease and other properties.
.. Income tax expense increased $22 million or 14% primarily due to the
$50 million effect of higher taxable income and the $5 million effect
of a higher federal income tax rate. The tax increase was partially
offset by $8 million of 1992 tax adjustments recorded in 1993 and
$25 million of other tax reductions.
1992 COMPARED TO 1991
_____________________
Revenues increased $111 million or 5%.
.. Retail sales revenues increased $12 million or 1%. Commercial revenues
increased $10 million due to increased customers and customer usage,
partially offset by selective price reductions and the effects of mild
weather. Industrial revenues increased $21 million due to higher
contract revenue and increased sales to irrigation customers. Residen-
tial revenues decreased $14 million primarily due to price reductions
and the effect of mild weather that contributed to a 3% decrease in
average usage, offset in part by a 2% increase in customers.
.. Wholesale sales revenues increased $103 million or 32% primarily due to
a 30% increase in volume sold. Long-term firm power sales increased
$69 million from contracts implemented after July 1991 and $14 million
from sales under previously existing agreements. Short-term firm sales
increased $9 million and secondary sales were up $11 million.
Operating expenses increased $216 million or 15%.
.. Fuel expense increased $55 million or 13% due to increased coal-fired
generation as a result of the acquisition of additional plant capacity,
increased off-system sales and poor hydro conditions. As a result of
drought conditions, the Company's hydroelectric projects set an all-
time low generation record. The 1992 hydroelectric output was 21%
below the previous lowest year, which was 1977.
.. Purchased power expense increased $34 million or 19% due to higher
prices, partially offset by a 5% decrease in volumes purchased. Firm
purchases increased $20 million and secondary purchases increased
$16 million primarily due to higher prices.
.. Other operations expense increased $38 million or 15% primarily due to
a $10 million increase in wheeling expense as a result of increased
volumes wheeled, a contract settlement and a BPA price increase; a $9
million increase for pension funding; a $9 million charge in 1992
relating to cancellation of a coal purchase option; and increased
expense of $8 million due to acquisitions of interests in thermal
generating plants.
.. Maintenance expense increased $21 million or 14% primarily due to a $17
million write-off of obsolete materials and supplies inventory and the
acquisition of interests in thermal generating plants.
.. Administrative and general expense increased $25 million or 21% primar-
ily due to increased pension funding and the effect of adjustments in
1991 that reduced insurance reserves and benefit accruals.
.. Depreciation and amortization expense increased $31 million or 12%
primarily due to acquisitions of interests in thermal generating
plants.
.. Taxes other than income taxes increased $12 million or 12% due to
acquisitions of interests in thermal generating plants and property tax
adjustments in 1991 relating to valuation corrections and settlement
refunds.
Earnings contribution decreased $144 million or 41%.
.. Income from operations decreased $105 million or 13%.
.. Other expense increased $44 million primarily due to $20 million of
valuation adjustments relating to investments in cogeneration projects,
a coal lease and other properties; a $14 million reduction in interest
income; and the $6 million effect of a terminated sale of water rights.
.. Provision for income taxes decreased $17 million or 10% due to de-
creased taxable income, partially offset by reversal of prior flow-
through tax depreciation.
.. Preferred dividend requirements increased $11 million or 40% due to
issuances of preferred stock in August 1991 and May and June 1992.
<PAGE>32
<TABLE>
TELECOMMUNICATIONS
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1993 to 1992 Compound
Percentage Annual
1993 1992 1991 1990 1989 1988 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Local network service $ 81.8 $ 74.1 $ 68.4 $ 57.7 $ 55.4 $ 50.1 10% 10%
Network access service 183.9 174.9 168.2 147.4 127.8 120.3 5 9
Long distance network service 262.5 275.4 286.1 253.8 274.0 270.0 (5) (1)
Private line service 63.8 70.4 66.0 60.1 58.3 61.3 (9) 1
Sales of cable capacity 4.9 10.8 30.9 83.2 - - (55) *
Other 112.2 98.9 104.8 80.7 62.2 58.3 13 14
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 709.1 704.5 724.4 682.9 577.7 560.0 1 5
_____ _____ _____ _____ _____ _____ ___ ___
EXPENSES
Depreciation and amortization 110.0 114.1 117.3 101.9 98.5 93.6 (4) 3
Operations, maintenance and
other 458.3 451.8 447.5 426.8 345.4 349.9 1 6
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 568.3 565.9 564.8 528.7 443.9 443.5 - 5
_____ _____ _____ _____ _____ _____ ___ ___
INCOME FROM OPERATIONS 140.8 138.6 159.6 154.2 133.8 116.5 2 4
_____ _____ _____ _____ _____ _____ ___ ___
INCOME FROM CONTINUING
OPERATIONS (a) 58.4 67.2 89.5 95.4 75.1 58.6 (13) -
Minority interest and other 7.5 9.9 12.9 18.8 10.9 8.3 (24) (2)
_____ _____ _____ _____ _____ _____ ___ ___
EARNINGS CONTRIBUTION FROM
CONTINUING OPERATIONS (a) $ 50.9 $ 57.3 $ 76.6 $ 76.6 $ 64.2 $ 50.3 (11) -
_____ _____ _____ _____ _____ _____ ___ ___
_____ _____ _____ _____ _____ _____ ___ ___
Identifiable assets $1,479 $1,513 $1,674 $1,703 $1,192 $1,206 (2) 4
Capital spending $ 126 $ 140 $ 236 $ 475 $ 180 $ 170 (10) (6)
Number of employees (b) 2,834 2,891 3,050 3,412 2,737 3,485 (2) (4)
Telephone access lines (Thousands) 399 379 357 340 253 240 5 11
Long lines originating billed
minutes (Millions) 710 679 654 632 597 512 5 7
_____ _____ _____ _____ _____ _____ ___ ___
_____ _____ _____ _____ _____ _____ ___ ___
<FN>
*Not a meaningful number.
(a) Does not reflect elimination of interest on intercompany borrowing arrange-
ments and includes income taxes on a separate-company basis.
(b) Excludes employees of discontinued operations.
</TABLE>
FACTORS INFLUENCING EARNINGS
Pacific Telecom provides voice, data, video and other services through long
lines and local exchange operations. Pacific Telecom also operates, maintains
and sells capacity on the North Pacific Cable. Pricing for services is both
rate regulated and market driven. Long-term profitability in franchised service
territories is influenced by technological developments, efficiency of opera-
tions, cost of capital and competition. Pacific Telecom's revenues for 1993
were derived 48% from long lines, 45% from local exchange companies, 3% from
cable and backhaul capacity sales and related cable services and 2% from
cellular operations. See discussion of Alaska restructuring in TELECOMMUNICA-
TIONS on pages 24 and 25.
1993 COMPARED TO 1992
_____________________
. Revenues increased $5 million or 1%.
.. Local network service revenues (local telephone services to residential
and business customers) increased $8 million or 10% primarily due to
the effects of internal access line growth of 5% that added $6 million
and $1 million of revenues from enhanced and extended services.
.. Network access service revenues (fees charged to long-distance interex-
change carriers using the local exchange network to access their
customers) increased $9 million or 5% primarily due to an increase of
$8 million in Universal Service Fund ("USF") support, funded by inter-
exchange carriers, which helps fund nontraffic sensitive costs that are
above the national average.
An indexed cap has been placed on USF growth to allow growth at a rate
no faster than the rate of growth in the U.S.'s total working local
loops. The indexed rate may be in effect for up to two years while the
FCC and a Joint Board reevaluate the USF assistance mechanism. Placing
the indexed cap on USF growth will have a negative impact on Pacific
Telecom's revenues, but the impact is not expected to be material.
.. Long distance network service revenues (charges for long-distance
calling services) decreased $13 million or 5% primarily due to the $11
million revenue effect of a lower rate base resulting mainly from the
sale of satellite transponders in late 1992, the $5 million revenue
effect of recoverable expense reductions and $3 million due to lower
average rates
<PAGE>33
per minute for intrastate message toll services. These decreases were
offset in part by an increase in out-of-period revenue adjustments of
$6 million.
.. Private line service revenues (charges for dedicated facilities that
provide communications services to major customers) decreased $7 milli-
on or 9% primarily due to the sale of a portion of the Alaska Spur in
late 1992 to a customer that previously used those services.
.. Sales of cable capacity revenues (sales of capacity in a submarine
fiber optic cable between the U. S. and Japan) decreased $6 million or
55%. Approximately 51% of the North Pacific Cable's capacity has been
sold -- 1%, 4%, 10% and 36% sold in 1993, 1992, 1991 and 1990, respec-
tively. A competing AT&T cable was placed in service in 1992 and AT&T
has announced plans for an additional Pacific cable system to be
completed between 1995 and 1997. The competition from AT&T, adverse
economic conditions in Japan and other Far East countries and outages
on the North Pacific Cable may have contributed to the slowing of cable
capacity sales. Pacific Telecom is investigating use of the North
Pacific Cable to provide video services. Pacific Telecom continues to
market the remaining cable capacity and believes that most of the
remaining capacity can be sold over the next five years.
.. Other revenues increased $13 million or 13% primarily due to increased
cellular revenues of $6 million, one-time revenue of $3 million from
service in Saudi Arabia and $4 million from resale of long lines
equipment.
. Operating expenses increased $2 million.
.. Operations expense increased $6 million or 3% primarily due to a
$12 million increase in leased circuit expense relating mainly to the
lease of satellite transponders and $4 million of increased customer
operations expense relating to customer growth, acquisitions and higher
directory assistance expense. The increases were partially offset by a
$5 million reduction as a result of lower cable capacity sales and a
$2 million reduction in access expense.
.. Maintenance expense increased $5 million or 4% primarily due to $6 mil-
lion of expense from a long lines service contract and equipment
resale.
.. Administrative and general expense decreased $6 million or 6% primarily
due to the effect of an accrual in 1992 for an early retirement pro-
gram.
.. Depreciation and amortization expense decreased $4 million or 4%
primarily due to a $7 million decrease relating to the sale of satel-
lite transponders, offset in part by the $2 million effect of increased
depreciation rates and $1 million resulting from growth in cellular
operations.
. Earnings contribution decreased $6 million or 11%.
.. Income from operations increased $2 million.
.. Interest expense decreased $8 million or 15% primarily due to lower
borrowing levels in 1993.
.. Other expense increased $27 million due to the effect of a $21 million
gain in 1992 from the sale of an investment in a noncore business and a
$6 million decrease in gains from sales and exchanges of cellular
operations.
.. Income tax expense decreased $9 million or 27% due to a favorable
settlement of state income taxes for 1992 recorded in 1993 and lower
taxable income.
1992 COMPARED TO 1991
_____________________
. Revenues decreased $20 million or 3%.
.. Local network service revenues increased $6 million or 8% primarily due
to an internal access line growth rate of 6% that added $4 million and
local service rate increases totaling $1 million.
.. Network access service revenues increased $7 million or 4% primarily
due to increased USF support, $7 million; higher expense recovery,
$3 million; and acquisitions, $1 million. Partially offsetting these
increases were lower out-of-period revenue adjustments of $2 million
and rate decreases of $1 million.
.. Long distance network service revenues decreased $11 million or 4%
primarily due to a $12 million reduction in out-of-period revenue
adjustments, a $9 million reduction resulting from the introduction of
competition in Alaska in May 1991 and the effects of a $6 million
annual rate decrease in Alaska that became effective in July 1991. As
a result of competition, intrastate minute volumes declined 7%. These
reductions were offset in part by increased interstate revenues of
$11 million relating to an increased rate of return and increased
recoverable expenses.
.. Sales of cable capacity revenues decreased $20 million or 65%.
Operating expenses were unchanged.
.. Operations expenses decreased $11 million or 5% primarily due to an
$8 million reduction stemming from lower cable capacity sales and
$7 million of expense in 1991 for leasing transponders on an interim
satellite, partially offset by increased expense relating to growth in
cellular operations, local exchange company acquisitions and access
line growth.
.. Administrative and general expenses increased $12 million or 15%
primarily due to $7 million relating to development of customer support
and billing software and $6 million relating to an early retirement
program.
Earnings contribution from continuing operations decreased $19 million or
25%.
.. Income from operations decreased $21 million.
.. Interest capitalized decreased $6 million due to the absence of long-
term construction projects in 1992 versus the effect of construction of
the replacement satellite and cable in 1991.
<PAGE>34
OTHER
Consistent with PacifiCorp's strategic focus on its core utility operations, PFS
plans to sell, over the next several years, substantial portions of its assets.
Cash generated from these sales will be used primarily to pay down debt. PFS
presently expects to retain only its tax advantaged investments in leveraged
lease assets (primarily aircraft and project finance) and low-income housing
projects (included with real estate), which presently represents $479 million of
its assets.
The $10 million earnings contribution of other businesses in 1993 resulted from
$11 million of after-tax interest income recorded on the note received in
connection with the disposition of NERCO and a $3 million gain from the sale of
an investment in a cogeneration project. Partially offsetting these increases
was PFS' negative contribution of $3 million resulting from additional valuation
and impairment charges of $25 million after-tax.
PFS and Holdings' negative contribution of $147 million in 1992 was primarily
due to after-tax special charges of $132 million relating to asset reduction
plans, as well as the write-off of certain intangible assets primarily associat-
ed with PFS' computer leasing unit.
The following is a summary of PFS' assets and revenues by business line:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
________________________________________________________________________
1993 1992 1991
_______________________ _________________________ ______________________
Revenues Revenues Revenues
Assets at for the Assets at for the Assets at for the
year end year year end year year end year
_______________________ _________________________ ______________________
<S> <C> <C> <C> <C> <C> <C>
Aviation financing $ 454 $ (8.6)(a) $ 506 $ 33.5 $ 563 $ 35.4
Computer leasing 88 19.2 139 28.6 390 51.1
Other 217 38.6 353 43.1 487 45.3
_____ _____ _____ _____ _____ _____
Total finance 759 49.2 998 105.2 1,440 131.8
Real estate 324 49.3 252 29.7 254 25.1
Manufacturing 31 42.4 26 40.2 24 35.2
Agriculture 20 38.7 - - - -
_____ _____ _____ _____ _____ _____
Total $1,134 $179.6 $1,276 $175.1 $1,718 $192.1
_____ _____ _____ _____ _____ _____
_____ _____ _____ _____ _____ _____
<FN>
(a) An impairment charge of $22 million for certain aircraft under operating
leases reduced net aviation finance revenues.
</TABLE>
At December 31, 1993, the aviation portfolio (with net assets of $454 million)
consisted of 52 aircraft, 51 of which were placed with 15 separate carriers and
one (with a book value of $9 million) was being held for lease or sale. In
February 1994, this aircraft was put on lease. About 90% of the aircraft are
Stage III noise compliant.
The aviation industry has been adversely affected by a variety of factors during
the past three years. This has impacted PFS' aviation finance portfolio in a
number of ways, including having one lessee/borrower (involving two planes)
currently involved as debtor-in-possession in bankruptcy proceedings. Although
industry performance appears to be stabilizing, further deterioration may occur.
Loss provisions have been established based upon PFS' best estimate of the
present situation.
Given the limited number and relatively large size of individual loan and lease
assets, PFS analyzes each discrete account in its process of establishing the
level of allowance for credit losses. PFS' allowance and earnings are subject
to a higher degree of volatility than larger more diversified finance companies,
a situation which is magnified by the current weak industry conditions in
aviation and real estate. Allowances for credit losses and accumulated valua-
tion and impairment charges were $115 million and $90 million at December 31,
1993 and 1992, respectively.
PFS and Holdings expect to fund scheduled debt maturities and financing commit-
ments through cash flow from operations and further asset sales.
<PAGE>35
DISCONTINUED OPERATIONS
On June 2, 1993, Holdings sold, by means of a merger, its 82% ownership interest
in NERCO to a subsidiary of RTZ America, Inc. ("RTZ") for $12 per NERCO common
share, or $384 million. In connection with this transaction, a subsidiary of
Holdings loaned $225 million at 13% interest to a subsidiary of RTZ, with
repayment contingent upon future revenues received under a coal supply contract.
The sale resulted in a gain of approximately $183 million, including earnings
through June 2, 1993, which has been deferred and is being recognized in
earnings, using a modified installment method, as the $225 million loan is
repaid. The loan could extend through 2009, but is prepayable without premium.
The Company incurred after-tax losses from the discontinued operations of NERCO
of $146 million, $21 million and $285 million for the first, third and fourth
quarters of 1992, respectively. In the second quarter of 1992, NERCO reported
earnings of $1 million.
A subsidiary of Pacific Telecom, International Communications Holdings, Inc.
("ICH"), closed the sale of its wholly owned subsidiary, TRT, to IDB on Septem-
ber 23, 1993. Pacific Telecom received 4,500,000 shares of IDB common stock and
$1 million in cash in exchange for the stock of TRT and the stock of another
smaller subsidiary. Based on appreciation in the market value of IDB common
stock, the Company recorded an after-tax gain of $52 million at closing of the
transaction. The Company had recorded valuation adjustments and operating
losses totaling $40 million in 1992 based, in part, on the then value of the IDB
common stock to be received by Pacific Telecom as consideration in the sale.
The IDB common stock was sold in November 1993 and the net proceeds of $195 mil-
lion were used to pay down Pacific Telecom debt. The Company incurred after-tax
losses relating to discontinued operations of ICH totaling $6 million in the
third quarter of 1992, $34 million in the fourth quarter of 1992 and $7 million
in 1991.
<PAGE>36
REPORT OF MANAGEMENT
The management of PacifiCorp is responsible for preparing the accompanying
consolidated financial statements and for their integrity and objectivity. The
statements were prepared in accordance with generally accepted accounting
principles giving consideration to materiality. The financial statements
include amounts that are based on management's best estimates and judgments.
Management also prepared the other information in the annual report and is
responsible for its accuracy and consistency with the financial statements.
The Company's financial statements have been audited by Deloitte & Touche,
independent public accountants. Management has made available to Deloitte &
Touche all the Company's financial records and related data, as well as the
minutes of shareholders' and directors' meetings.
Management of the Company has established and maintains an internal control
structure that provides reasonable assurance as to the integrity and reliability
of the financial statements, the protection of assets from unauthorized use or
disposition and the prevention and detection of fraudulent financial reporting.
The Company maintains an internal auditing program that independently assesses
the effectiveness of the internal control structure and recommends possible
improvements. Deloitte & Touche also considered the internal control structure
in connection with its audit. Management considers the internal auditors' and
Deloitte & Touche's recommendations concerning the Company's internal control
structure and takes cost-effective actions to respond appropriately to these
recommendations.
The Company's principles of business conduct are publicized throughout the
Company. The principles address, among other things, potential conflicts of
interests, compliance with laws, including those relating to financial disclo-
sure and the confidentiality of proprietary information.
The Audit Committee of the Board of Directors is comprised solely of outside
directors. It meets at least quarterly with the Chairpersons of divisions and
subsidiary audit committees, management, Deloitte & Touche, internal auditors
and counsel to review the work of each and ensure the Committee's responsibili-
ties are being properly discharged. Deloitte & Touche and internal auditors
have free access to the Committee, without management present, to discuss their
audit work and their evaluations of the adequacy of the internal control
structure and the quality of financial reporting.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of PacifiCorp:
We have audited the accompanying consolidated balance sheets of PacifiCorp and
subsidiaries as of December 31, 1993 and 1992, and the related statements of
consolidated income and retained earnings and of consolidated cash flows for
each of the three years in the period ended December 31, 1993. These consoli-
dated financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of PacifiCorp and subsidiaries at
December 31, 1993 and 1992, and the results of their operations and their cash
flows for each of three years in the period ended December 31, 1993 in conformi-
ty with generally accepted accounting principles.
As discussed in Notes 9 and 11 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and other
postretirement benefits in the year ended December 31, 1993.
DELOITTE & TOUCHE
Portland, Oregon
February 18, 1994
<PAGE>37
<TABLE>
STATEMENTS OF CONSOLIDATED
INCOME AND RETAINED EARNINGS
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR ENDED DECEMBER 31
1993 1992 1991
___________________________________________________________________________________
<S> <C> <C> <C>
REVENUES $3,412.4 $3,242.0 $3,168.3
_______ _______ _______
EXPENSES
Operations 1,373.9 1,376.6 1,139.8
Maintenance 297.2 287.9 264.2
Administrative and general 247.4 298.2 239.9
Depreciation and amortization 404.8 452.5 381.3
Taxes, other than income taxes 119.9 123.3 110.6
Financial Services' interest expense 53.7 70.5 91.2
_______ _______ _______
TOTAL 2,496.9 2,609.0 2,227.0
_______ _______ _______
INCOME FROM OPERATIONS 915.5 633.0 941.3
_______ _______ _______
INTEREST EXPENSE AND OTHER
Interest expense 323.2 341.4 336.0
Interest capitalized (13.9) (16.2) (21.5)
Minority interest and other (3.9) 66.8 3.3
_______ _______ _______
TOTAL 305.4 392.0 317.8
_______ _______ _______
Income from continuing operations before
income taxes 610.1 241.0 623.5
Income taxes 187.4 90.8 176.7
_______ _______ _______
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 422.7 150.2 446.8
Discontinued operations less applicable
income tax expense (benefit): 1993/$26.0,
1992/($178.5), 1991/$26.5 52.4 (490.6) 60.4
Cumulative effect on prior years of
change in accounting for income taxes 4.0 - -
_______ _______ _______
NET INCOME (LOSS) 479.1 (340.4) 507.2
RETAINED EARNINGS, JANUARY 1 210.4 999.6 907.9
Cash dividends declared
Preferred stock (39.5) (39.0) (28.0)
Common stock per share: 1993/$1.08,
1992/$1.53, 1991/$1.485 (298.7) (410.6) (384.4)
Common and preferred stock retired
and ESOP dividend tax savings - .8 (3.1)
_______ _______ _______
RETAINED EARNINGS, DECEMBER 31 $ 351.3 $ 210.4 $ 999.6
_______ _______ _______
_______ _______ _______
EARNINGS (LOSS) ON COMMON STOCK Net income
(loss) less preferred dividend requirement $ 439.8 $ (377.7) $ 480.5
Average number of common shares
outstanding (Thousands) 274,551 266,527 258,350
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ 1.40 $ .42 $ 1.63
Discontinued operations .19 (1.84) .23
Cumulative effect on prior years of
change in accounting for income taxes .01 - -
_______ _______ _______
TOTAL $ 1.60 $ (1.42) $ 1.86
_______ _______ _______
_______ _______ _______
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>38
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
ASSETS 1993 1992
______________________________________________________________________________________________
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Electric $10,000.6 $ 9,328.1
Telecommunications 1,649.9 1,610.5
Other 65.8 65.6
Accumulated depreciation and amortization (3,863.5) (3,451.7)
________ ________
Net 7,852.8 7,552.5
Construction work in progress 356.8 305.1
________ ________
TOTAL PROPERTY, PLANT AND EQUIPMENT 8,209.6 7,857.6
________ ________
CURRENT ASSETS
Cash and cash equivalents 31.2 50.2
Accounts receivable
Less allowance for doubtful
accounts: 1993/$8.2 and 1992/$9.6 451.0 482.8
Materials, supplies and fuel stock at average cost 203.2 215.9
Inventory 70.1 104.1
Finance assets 118.7 187.6
Other 80.5 53.6
________ ________
TOTAL CURRENT ASSETS 954.7 1,094.2
________ ________
OTHER ASSETS
Investments in and advances to affiliated companies 252.5 192.5
Cost in excess of net assets of businesses acquired 171.1 169.1
Regulatory assets - net 974.9 238.8
Finance note receivable 223.3 -
Finance assets 561.4 627.6
Real estate investments 303.7 293.7
Deferred charges and other 307.9 470.5
Net assets of discontinued operations - 312.5
________ ________
TOTAL OTHER ASSETS 2,794.8 2,304.7
________ ________
TOTAL ASSETS $11,959.1 $11,256.5
________ ________
________ ________
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>39
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
CAPITALIZATION AND LIABILITIES 1993 1992
__________________________________________________________________________
<S> <C> <C>
COMMON EQUITY
Common shareholder capital
shares authorized 750,000,000;
shares outstanding: 1993/281,020,717
and 1992/270,579,042 $ 2,953.4 $ 2,755.2
Retained earnings 351.3 210.4
Guarantees of Employee Stock Ownership
Plan borrowings (42.1) (57.4)
________ ________
TOTAL COMMON EQUITY 3,262.6 2,908.2
________ ________
PREFERRED STOCK 367.4 417.4
________ ________
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION 219.0 219.0
________ ________
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 3,923.6 4,181.4
________ ________
CURRENT LIABILITIES
Long-term debt and capital lease obligations
currently maturing 155.6 420.3
Notes payable and commercial paper 553.5 553.4
Accounts payable 360.5 312.4
Taxes, interest and dividends payable 252.5 417.2
Customer deposits and other 121.2 130.4
________ ________
TOTAL CURRENT LIABILITIES 1,443.3 1,833.7
________ ________
DEFERRED CREDITS
Income taxes 1,833.3 972.1
Investment tax credits 200.0 209.2
Other 605.7 429.5
________ ________
TOTAL DEFERRED CREDITS 2,639.0 1,610.8
________ ________
MINORITY INTEREST 104.2 86.0
________ ________
COMMITMENTS AND CONTINGENCIES (See Notes 7 and 8)
TOTAL CAPITALIZATION AND LIABILITIES $11,959.1 $11,256.5
________ ________
________ ________
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>40
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
MILLIONS OF DOLLARS/YEAR ENDED DECEMBER 31
1993 1992 1991
________________________________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 422.7 $ 150.2 $ 446.8
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities
Depreciation and amortization 468.3 507.7 485.7
Deferred income taxes and investment tax
credits - net 113.5 (64.1) (31.5)
Interest capitalized on equity funds (4.2) (7.3) (11.3)
Payment from sale of power entitlements - - 114.1
Minority interest and other 27.1 70.8 (20.1)
Special charges - 185.7 -
Accounts receivable and prepayments 52.9 (6.6) 49.9
Materials, supplies, fuel stock and inventory 26.1 56.7 47.0
Accounts payable and accrued liabilities (69.0) 48.5 (60.2)
_______ ______ ________
Net cash provided by continuing operations 1,037.4 941.6 1,020.4
Net cash provided (used) by discontinued operations - 14.2 (155.5)
_______ ______ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,037.4 955.8 864.9
_______ ______ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Construction (741.5) (694.0) (702.6)
Operating companies and assets acquired (16.4) (40.8) (309.5)
Investments and advances to affiliated companies - net (46.8) (10.9) (46.8)
Proceeds from sales of assets 602.8 143.8 78.8
Proceeds from sales of finance assets and
principal payments 168.3 281.9 476.8
Purchase of finance assets (57.7) (125.6) (550.1)
Investment in finance note (225.0) - -
Other 53.2 20.6 10.1
_______ ______ ________
NET CASH USED IN INVESTING ACTIVITIES (263.1) (425.0) (1,043.3)
_______ ______ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in short-term debt (8.6) (74.5) (30.0)
Proceeds from long-term debt 698.9 849.1 1,021.1
Proceeds from issuance of common stock 197.4 184.8 199.3
Proceeds from issuance of preferred stock - 195.2 98.4
Dividends paid (366.7) (439.5) (408.6)
Repayments of long-term debt and capital
lease obligations (1,230.9) (1,190.2) (782.8)
Redemptions of capital stock (50.0) (56.1) (.5)
Other (33.4) (25.2) (15.0)
_______ ______ ______
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (793.3) (556.4) 81.9
_______ ______ ______
DECREASE IN CASH AND CASH EQUIVALENTS (19.0) (25.6) (96.5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 50.2 75.8 172.3
_______ ______ ______
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31.2 $ 50.2 $ 75.8
_______ ______ ______
_______ ______ ______
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
___________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of PacifiCorp (the "Company") encompass
two businesses primarily of a utility nature--Electric Operations (Pacific Power
and Utah Power) and an 87%-owned Telecommunications operation (Pacific Telecom,
Inc.); and a wholly owned Financial Services business (PacifiCorp Financial
Services, Inc.). The Company's wholly owned subsidiary, PacifiCorp Holdings,
Inc. ("Holdings"), holds all of its nonelectric utility investments. Together
these businesses are referred to herein as the Companies. Significant intercom-
pany transactions and balances have been eliminated.
In June 1993, Holdings sold by merger its 82% interest in a mining and resource
development business (NERCO, Inc.). In September 1993, Pacific Telecom, Inc.
("Pacific Telecom") closed the sale of its interest in an international communi-
cations business (TRT Communications, Inc.). See Note 2.
Investments in and advances to affiliated companies represent investments in
unconsolidated affiliated companies carried on the equity basis, which approxi-
mates the Company's equity in their underlying net book value.
REGULATORY AUTHORITIES
Accounting for the utility businesses conforms with generally accepted account-
ing principles as applied to regulated public utilities and as prescribed by
federal agencies and the commissions of the various states in which the utility
businesses operate.
CASH AND CASH EQUIVALENTS
For the purposes of these financial statements, the Company considers all liquid
investments with original maturities of three months or less to be cash equiva-
lents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at original cost of contracted servic-
es, direct labor and material, interest capitalized during construction and
indirect charges for engineering, supervision and similar overhead items. The
cost of depreciable utility properties retired, including the cost of removal,
less salvage, is charged to accumulated depreciation. Telecommunications plant
at December 31, 1993, included $70 million relating to cellular franchises that
are being amortized over 40 years.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization is computed generally by the straight-line method
over the estimated useful lives of the related assets. Provisions for deprecia-
tion (excluding amortization of capital leases) in the utility businesses were
3.5%, 3.8% and 3.9% of average depreciable assets in 1993, 1992 and 1991,
respectively.
In 1993, based on a study by an independent consultant, the Company extended the
lives of its thermal generating plants, decreasing depreciation expense by
$24 million and increasing net income by $16 million and earnings per share by
$0.06.
The cost in excess of net assets of consolidated businesses acquired is general-
ly amortized over 40 years.
INVENTORY VALUATION
Inventories are generally valued at the lower of average cost or market.
REGULATORY ASSETS
The Company's utility operations capitalize certain costs in accordance with
regulatory authority whereby those costs will be recovered in future periods.
Regulatory assets-net at December 31 included the following: 1993 - deferred
taxes-net, $716 million; deferred pension costs, $128 million; and various other
costs of $131 million; 1992 - deferred pension costs of $135 million and various
other costs, $104 million.
FINANCE AND LEASE INCOME RECOGNITION
Direct financing lease revenue is recognized as a constant yield on asset
carrying values. Operating lease revenues consist of periodic rentals, primari-
ly monthly. The cost of equipment under operating lease is depreciated on a
straight-line basis over the lease term. Leveraged lease revenue is recorded so
as to produce a constant yield on the outstanding investments in periods when
Financial Services' net investment in the lease is positive.
INTEREST CAPITALIZED
Costs of debt and equity funds applicable to electric and telecommunication
utility properties are capitalized during construction. Generally, the compos-
ite capitalization rates were 5.1% for 1993, 7.1% for 1992 and 9.4% for 1991.
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 109, "Accounting for Income Taxes." This statement requires
use of the liability method of accounting for deferred income taxes. Deferred
tax liabilities and assets reflect the expected future tax consequences, based
on enacted tax law, of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts. The cumulative effect of
adoption of SFAS 109 resulted in an increase in consolidated net income in 1993
of $4 million, or $0.01 per share.
Investment tax credits are deferred and amortized to income over the average
estimated lives of the properties.
REVENUE RECOGNITION
The Company accrues estimated unbilled revenues for electric services provided
after cycle billing to month-end.
RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform with the 1993
method of presentation. These reclassifications had no effect on previously
reported consolidated net income.
<PAGE>42
NOTE 2. DISCONTINUED OPERATIONS
On February 18, 1993, Holdings announced an agreement to sell, by means of a
merger, its interest in an 82%-owned mining and resource development business,
NERCO, Inc. ("NERCO"), to a subsidiary of RTZ America, Inc. ("RTZ"). On June 2,
1993, Holdings completed the sale for a cash consideration of $12 per NERCO
common share, or $384 million. In connection with this transaction, a subsid-
iary of Holdings loaned $225 million at 13% interest to a subsidiary of RTZ,
with repayment contingent upon future revenues received under a coal supply
contract. The sale resulted in a gain of approximately $183 million, including
earnings through June 2, 1993, which has been deferred and is being recognized
in earnings, using a modified installment method, as the loan is repaid. The
loan could extend through 2009, but is prepayable without premium. The fair
value of the finance note approximates its carrying value at December 31, 1993.
The summarized 1992 and 1991 discontinued operations of NERCO are as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1992 1991
____ ____
<S> <C> <C>
Revenues $ 672.0 $919.6
Costs and expenses 668.0 803.7
Losses on asset dispositions
and write-downs 710.8 -
______ _____
Income (loss) from operations
before income taxes (706.8) 115.9
Income tax (benefit) expense (155.6) 32.8
Minority interest and other 100.3 (15.4)
______ _____
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS $(450.9) $ 67.7
______ _____
______ _____
</TABLE>
A subsidiary of Pacific Telecom, International Communications Holdings, Inc.
("ICH"), closed the sale of its wholly owned subsidiary, TRT Communications,
Inc.("TRT"), to IDB Communications Group, Inc. ("IDB") on September 23, 1993.
TRT had been shown as a discontinued operation, pending completion of an
agreement to sell. Pacific Telecom received 4,500,000 shares of IDB common
stock and $1 million in cash in exchange for the stock of TRT and the stock of
another smaller subsidiary. Based on appreciation in the market value of the
IDB common stock, the Company recorded a $52 million gain at closing in Septem-
ber 1993 on the transaction. The IDB common stock was registered and sold in a
public offering in November 1993 and Pacific Telecom received $45 per share
before commissions and expenses.
From the discontinued operations of ICH, the Company incurred losses in 1992 of
$40 million, which included $9 million of operating losses and a $31 million
valuation adjustment, and $7 million of operating losses in 1991. The valuation
adjustment was based on the market value of the IDB common stock at the time the
agreement was signed.
NOTE 3. FINANCE ASSETS
Investment in finance assets, net of allowances for credit losses and accumulat-
ed impairment charges of $80 million and $62 million at December 31, 1993 and
1992, respectively, was as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993 1992
______ ______
<S> <C> <C>
Finance receivables $225.1 $360.7
Leveraged leases 339.4 339.3
Operating leases 115.6 115.2
_____ _____
TOTAL 680.1 815.2
Less current portion 118.7 187.6
_____ _____
Long-term Investment in Finance Assets $561.4 $627.6
_____ _____
_____ _____
</TABLE>
<PAGE>43
Payment terms of finance receivables and operating leases are generally from two
to five years, while payment terms of leveraged leases, which are presented net
of principal and interest on third party nonrecourse debt, are up to 25 years.
Finance assets are net of unearned income of $254 million and $279 million at
December 31, 1993 and 1992, respectively. The estimated unguaranteed residual
value of leased assets included in finance assets was $245 million and $252 mil-
lion at December 31, 1993 and 1992, respectively.
Deferred income tax liability related to leveraged leases was $308 million and
$292 million at December 31, 1993 and 1992, respectively.
NOTE 4. SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies' short-term debt and borrowing arrangements are as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31, 1993
PACIFICORP SUBSIDIARIES
__________ ____________
<S> <C> <C>
Revolving credit agreements $ 500 $ 814
Commercial paper outstanding (187) (50)
Borrowings under bank lines (77) (297)
_____ _____
AVAILABLE CAPACITY $ 236 $ 467
_____ _____
_____ _____
</TABLE>
Covenants in certain PacifiCorp reimbursement agreements relating to letters of
credit limit short-term borrowings to 12% of defined capitalization (limiting
such borrowings by PacifiCorp to approximately $491 million at December 31,
1993). The Companies have the intent and ability to support short-term borrowi-
ngs through various revolving credit agreements on a long-term basis. At
December 31, 1993, subsidiaries had $60 million of short-term debt classified as
long-term. Consolidated commitment fees were approximately $4 million in 1993
and 1992 and $2 million in 1991.
NOTE 5. COMMON AND PREFERRED STOCK
Changes in shares of capital stock and common shareholder capital are listed
below:
<TABLE>
<CAPTION>
THOUSANDS OF SHARES/MILLIONS OF DOLLARS
COMMON
SHARES SHARES SHARE-
COMMON PREFERRED HOLDER
STOCK STOCK CAPITAL
______ _________ _________
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1991 252,832 3,843 $2,377.0
1991 Sales through Dividend Reinvestment
and Stock Purchase Plan 2,933 - 65.2
Sales through Employees' Stock Plans 224 - 5.2
Sales to public 6,050 1,000 125.6
Disposition of shares held by
Holdings 57 - 1.1
_______ ______ _______
BALANCE, DECEMBER 31, 1991 262,096 4,843 2,574.1
1992 Sales through Dividend Reinvestment
and Stock Purchase Plan 3,781 - 81.4
Sales through Employees' Stock Plans 1,070 - 23.4
Sales to public 3,308 5,750 70.0
Redemptions - (60) (.8)
Disposition of shares held by
Holdings 324 - 7.1
_______ ______ _______
BALANCE, DECEMBER 31, 1992 270,579 10,533 2,755.2
1993 Sales through Dividend Reinvestment
and Stock Purchase Plan 2,947 - 56.2
Sales through Employees' Stock Plans 853 - 15.9
Sales to public 6,642 - 128.3
Redemptions and repurchases - (1) (2.2)
_______ ______ _______
BALANCE, DECEMBER 31, 1993 281,021 10,532 $2,953.4
_______ ______ _______
_______ ______ _______
</TABLE>
At December 31, 1993, there were 15,035,454 authorized but unissued shares of
common stock reserved for issuance under the Dividend Reinvestment and Stock
Purchase Plan and the Employee Savings and Stock Ownership Plans and for sales
to the public. Eligible employees under the employee plans may direct their
pretax elective contributions
<PAGE>44
into the purchase of the Company's common stock. The Company makes matching
contributions equal to a percentage of employee contributions, which are also
invested in the Company's common stock. Employee contributions eligible for
matching contributions are limited to 6% of compensation.
Generally, preferred stock is redeemable at stipulated prices plus accrued
dividends, subject to certain restrictions. Upon involuntary liquidation, all
preferred stock is entitled to stated value or specified preference amount per
share plus accrued dividends.
<TABLE>
<CAPTION>
PREFERRED STOCK OUTSTANDING
THOUSANDS OF SHARES/MILLIONS OF DOLLARS/DECEMBER 31
______________________________________________________________________________
1993 1993 1992 1992
SERIES Shares Amount Shares Amount
______ ______ ______ ______ ______
<S> <C> <C> <C> <C>
SUBJECT TO MANDATORY REDEMPTION
No Par Serial Preferred, 16,000 Shares
Authorized
$7.12 ($100 stated value) 440 $ 44.0 440 $ 44.0
7.70 1,000 100.0 1,000 100.0
7.48 750 75.0 750 75.0
_____ _____
TOTAL $219.0 $219.0
_____ _____
_____ _____
NOT SUBJECT TO MANDATORY REDEMPTION
$1.16 ($25 stated value) 193 $ 4.8 193 $ 4.8
1.18 420 10.5 420 10.5
1.28 381 9.5 381 9.5
1.76 394 9.8 394 9.8
1.98 502 12.6 502 12.6
2.13 666 16.7 666 16.7
1.98, Series 1992 5,000 125.0 5,000 125.0
Auction Rate ($100,000 stated value)(a) 1 100.0 2 150.0
Serial Preferred $100 Stated Value Per
Share, 3,500 Shares Authorized
4.52% 2 .2 2 .2
4.56 85 8.5 85 8.5
4.72 70 7.0 70 7.0
5.00 42 4.2 42 4.2
5.40 66 6.6 66 6.6
6.00 6 .6 6 .6
7.00 18 1.8 18 1.8
7.96 135 13.5 135 13.5
8.92 69 6.9 69 6.9
9.08 165 16.5 165 16.5
5% Preferred, $100 Stated Value, 127
Shares Authorized and Outstanding 127 12.7 127 12.7
_____ _____
TOTAL $367.4 $417.4
_____ _____
_____ _____
<FN>
(a) Dividend rates at December 31, 1993 on 500 shares each of Series A and
Series C were 3.45% and 3.46%, respectively.
</TABLE>
The fair value, based upon bid prices from an investment bank, of the redeemable
preferred stock is estimated to be $234 million, or 107% of the carrying value,
and $218 million, or 99% of the carrying value, at December 31, 1993 and 1992,
respectively.
Mandatory redemption requirements at stated value plus accrued dividends on No
Par Serial Preferred Stock are as follows: beginning in 1997, 15,000 shares of
the $7.12 series are redeemable annually; the $7.70 series is redeemable in its
entirety on August 15, 2001; and 37,500 shares of the $7.48 series are redeem-
able on each June 15 from 2002 through 2006, with all shares outstanding on
June 15, 2007
<PAGE>45
redeemable on that date. Mandatory redemption requirements for 1993 through
1996 on the $7.12 series were satisfied by the purchase of 60,000 shares at a
discount in December 1992. If the Company is in default in its obligation to
make any future redemptions on the $7.12 series or the $7.48 series, it may not
pay cash dividends on common stock.
NOTE 6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Company's long-term debt and capital lease obligations were as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993 1992
_________________________________________________________________________
<S> <C> <C>
PACIFICORP
First mortgage and collateral trust bonds
Maturing 1994 through 1998/4.5%-9.4% (a) $ 651.2 $ 571.3
Maturing 1999 through 2003/5.9%-10% 895.5 743.7
Maturing 2004 through 2008/6.8%-7.9% 257.7 455.5
Maturing 2009 through 2013/7.3%-9.2% 216.5 168.5
Maturing 2014 through 2018/8.3%-8.7% 109.1 202.8
Maturing 2019 through 2023/6.7%-8.5% 341.5 175.0
Guaranty of pollution control revenue bonds
6% due 2003 21.3 21.3
5.6%-10.7% due 1994 through 2023 (b) 271.0 272.9
Variable rate due 2005 through 2019 (c) 404.9 407.4
Funds held by trustees - (.9)
Commercial paper and uncommitted bank lines - 93.0
Leveraged ESOP loan guaranty 16.7 27.3
Unamortized premium and discount 10.1 11.0
Capital lease obligations 21.6 18.2
_______ _______
TOTAL 3,217.1 3,167.0
Less current maturities 70.3 52.3
_______ _______
TOTAL 3,146.8 3,114.7
_______ _______
SUBSIDIARIES
2%-11.8% First mortgage notes and bonds
maturing through 2028 155.7 171.7
5.8%-12% Notes due through 2007 (d) 188.5 231.0
Unsecured domestic credit agreements - 206.0
Commercial paper and uncommitted bank lines (c)(d) 50.0 155.0
Variable rate notes due through 1997 (c)(d) 25.5 49.5
5.4%-10.7% Medium-term notes due through 2006(d) 236.0 373.1
4.5%-11% Nonrecourse debt due through 2031 172.2 208.7
Leveraged ESOP loan guaranty 25.4 30.1
Capital lease obligations 8.8 9.6
_______ _______
TOTAL 862.1 1,434.7
Less current maturities 85.3 368.0
_______ _______
TOTAL 776.8 1,066.7
_______ _______
TOTAL $3,923.6 $4,181.4
_______ _______
_______ _______
<FN>
(a) Includes $50 million of 9.4% bonds issued to secure obligations under an
equivalent 10-year yen loan. A currency swap converted the fixed rate yen
liability to a floating rate U.S. dollar liability based on six-month LIBOR
plus .02% (interest rate 3.5% at December 31, 1993).
(b) Secured by pledged first mortgage and collateral trust bonds generally at
the same interest rates, maturity dates and redemption provisions as the
secured pollution control revenue bonds.
(c) Interest rates fluctuate based on various rates, primarily on certificate
of deposit rates, interbank borrowing rates or prime rates.
(d) The Companies have the ability to support short-term borrowings and current
debt being refinanced on a long-term basis through revolving lines of
credit and therefore, based upon management's intent, have classified
$60 million of short-term debt and $55 million of currently maturing long-
term debt as long-term debt in 1993.
</TABLE>
<PAGE>46
In accordance with SFAS 107, "Disclosures about Fair Value of Financial Instru-
ments," the fair value of the Company's long-term debt at December 31, 1993 and
December 31, 1992 has been estimated by discounting the projected future cash
flows, using the current rate at which similar loans would be made to borrowers
with similar credit ratings and for the same maturities. The fair value of the
Company's long-term debt, including current portion and excluding leveraged ESOP
loan guarantees and capital lease obligations, is estimated to be $4.3 billion,
or 106% of the carrying value of $4.0 billion, and $4.6 billion, or 102% of the
carrying value of $4.5 billion, at December 31, 1993 and 1992, respectively.
The Companies have entered into interest rate swap and exchange agreements to
reduce the impact of changes in interest rates on their variable rate long-term
debt. At December 31, 1993, the Companies had outstanding eleven interest rate
contracts with commercial banks and Fortune 500 companies, having a total
notional principal amount of $283 million. These agreements effectively change
the Companies' interest rate exposure on the underlying variable rate debt to
rates of 5.7% to 9%. These contracts mature at various times up to the year
2002. The Companies are exposed to credit loss in the event of nonperformance
by the other parties to the interest rate swap agreements. However, the
Companies do not anticipate nonperformance by the counterparties.
The fair value of interest rate swaps is the estimated amount the Company would
pay to terminate the swap agreements, taking into account current interest rates
and the current creditworthiness of the swap counterparties. The estimated
termination cost would have been $65 million and $64 million at December 31,
1993 and 1992, respectively.
Approximately $7 billion of the assets of the Companies secure long-term debt
and capital lease obligations. First mortgage and collateral trust bonds of the
Company may be issued in amounts limited by property, earnings and other
provisions of the mortgage indentures.
The Company and Holdings guarantee certain debt of the Leveraged ESOP Trust
established under the K Plus Plan (the "Trust"). In addition, the Company and
Holdings guarantee the Trust's performance under certain interest rate swaps
having a total notional principal amount of $24 million that were entered into
by the Trust and a commercial bank. These arrangements change the interest rate
exposure on the variable rate debt guaranteed by the Company and Holdings to
effective rates of 7% and 6.7%, respectively, at December 31, 1993. The debt
was used to acquire the Company's common stock. Common equity has been reduced
and long-term debt has been increased by the amount of the debt guaranteed.
Remaining unallocated common shares held in trust total 1,921,287.
Nonrecourse long-term notes are secured by assignment of related finance
receivables, asset security interests and cash flows from operating leases. The
noteholders have no additional recourse to the Companies.
Maturity and sinking fund requirements on all long-term debt and capital lease
obligations and redeemable preferred stock outstanding are $157 million,
$221 million, $222 million, $241 million and $315 million in 1994 through 1998,
respectively.
The Company's Mortgages and Deeds of Trust, as supplemented, relating to its
long-term debt, restrict the payment of cash dividends and other distributions
on common stock. At December 31, 1993, the Company's retained earnings avail-
able for these purposes was $266 million.
Holdings has pledged its shares of Pacific Telecom and Financial Services stock
and certain other assets, including the note received in connection with the
NERCO disposition, as security for repayment of its obligations under certain
debt agreements.
The Company made interest payments, net of capitalized interest, of $436 millio-
n, $482 million and $475 million in 1993, 1992 and 1991, respectively.
NOTE 7. LEASES
The Companies lease certain properties under leases with various expiration
dates and renewal options. Rentals on lease renewals are subject to negotia-
tion. Certain leases provide for options to purchase at fair market value. The
Companies are also committed to pay all taxes, expenses of operation (other than
depreciation) and maintenance applicable to the leased property.
Net rent expense for the years ending December 31, 1993, 1992 and 1991 was
$60 million, $51 million and $60 million, respectively.
Future minimum lease payments under noncancellable operating leases are $40 mil-
lion, $35 million, $32 million, $31 million and $50 million for 1994 through
1998, respectively. In October 1992, the transponders on Telecommunications'
satellite were sold and leased back under an operating lease agreement.
<PAGE>47
NOTE 8. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION AND OTHER
Construction and acquisitions are estimated at $1,278 million for 1994. As a
part of these programs, substantial commitments have been made.
Several Superfund sites have been identified where the Company has been or may
be designated as a potentially responsible party. Future costs associated with
the disposition of these matters are not expected to be material to the
Company's consolidated results of operations.
The Company and its subsidiaries are parties to various legal claims, actions
and complaints, certain of which involve material amounts. Although the Company
is unable to predict with certainty whether or not it will ultimately be
successful in these legal proceedings or, if not, what the impact might be,
management presently believes that disposition of these matters will not have a
materially adverse effect on the Company's consolidated results of operations.
JOINTLY OWNED PLANTS
At December 31, 1993, Electric Operations' participation in jointly owned plants
was as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
ELECTRIC PLANT CONSTRUCTION
OPERATIONS' IN ACCUMULATED WORK IN
SHARE SERVICE DEPRECIATION PROGRESS
___________ _______ ____________ ___________
<S> <C> <C> <C> <C>
Centralia 47.5% $175.6 $ 98.7 $ 5.6
Jim Bridger
Units 1,2,3 and 4 66.7 781.8 272.6 3.9
Trojan (a) 2.5 - - -
Colstrip Units 3 and 4 10.0 199.3 47.6 1.0
Hunter Unit 1 93.8 252.1 85.5 .6
Hunter Unit 2 60.3 180.1 56.8 1.4
Wyodak 80.0 289.4 86.3 20.2
Craig Station Units 1
and 2 19.3 144.1(b) 47.3 2.9
Hayden Station Unit 1 24.5 15.0(b) 11.5 .6
Hayden Station Unit 2 12.6 16.4(b) 7.5 .4
<FN>
(a) Plant, inventory, fuel and decommissioning costs totaling $29 million
relating to the Trojan Plant, were included in regulatory assets-net at
December 31, 1993. Recovery of these costs is pending approval of certain
regulatory commissions.
(b) Excludes unallocated acquisition adjustments of $135 million.
</TABLE>
Under the joint agreements, each participating utility is responsible for
financing its share of construction, operating and leasing costs. Electric
Operations' portion is recorded in its applicable operations, maintenance and
tax accounts.
Substantial amounts of power are purchased from several hydroelectric projects
under long-term arrangements with public utility districts. These purchases are
made on a "cost-of-service" basis for a stated percentage of project output and
for a like percentage of project annual costs (operating expenses and debt
service). These costs are included in operations expense. Electric Operations
is required to pay its portion of the debt service, whether or not any power is
produced. The arrangements provide for nonwithdrawable power and most of them
also provide for additional power, withdrawable by the districts upon one to
five years' notice. For 1993, such purchases approximated 2.9% of energy
requirements; an additional 12.7% was obtained through other purchase and net
interchange arrangements.
At December 31, 1993, Electric Operations' share of long-term arrangements with
public utility districts was as follows:
<TABLE>
<CAPTION>
GENERATING YEAR CONTRACT CAPACITY PERCENTAGE ANNUAL
FACILITY EXPIRES (kW) OF OUTPUT COSTS(a)
__________ _____________ ________ __________ ________
<S> <C> <C> <C> <C>
Wanapum 2009 155,444 18.7% $ 5.5
Priest Rapids 2005 109,602 13.9 3.8
Rocky Reach 2011 64,297 5.3 1.8
Wells 2018 54,198 7.0 1.9
_______ ____
TOTAL 383,541 $13.0
_______ ____
_______ ____
<FN>
(a) Annual costs, in millions of dollars, include debt service of $8 million.
</TABLE>
<PAGE>48
The Company has a 4% interest in the Intermountain Power Project ("Project"),
located in central Utah. The Company and the City of Los Angeles have agreed
that the City will purchase capacity and energy from Company plants equal to the
Company's 4% entitlement of the Project at a price equivalent to 4% of the
expenses and debt service of the Project.
NOTE 9. INCOME TAXES
The Company's effective combined federal and state income tax rate from continu-
ing operations was 31% in 1993, 38% in 1992 and 28% in 1991. The difference
between taxes calculated as if the statutory federal tax rate of 35% in 1993 and
34% in 1992 and 1991 was applied to income from continuing operations before
income taxes and the recorded tax expense is reconciled as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1993 1992 1991
____ ____ ____
<S> <C> <C> <C>
COMPUTED FEDERAL INCOME TAXES $213.5 $ 81.9 $212.0
_____ _____ _____
REDUCTION (INCREASE) IN TAX RESULTING FROM
Excess (deficiency) of tax over book
depreciation (flow-through basis) (9.4) (20.3) 1.8
Investment tax credits 15.1 15.2 16.7
Depletion 5.3 4.9 5.2
Affordable housing credits 8.7 10.0 7.2
Purchase accounting adjustments - (12.0) (.6)
Other items capitalized and miscellaneous
differences 13.8 .9 11.6
_____ _____ _____
TOTAL 33.5 (1.3) 41.9
_____ _____ _____
FEDERAL INCOME TAX 180.0 83.2 170.1
STATE INCOME TAX, NET OF FEDERAL INCOME TAX
BENEFIT 7.4 7.6 6.6
_____ _____ _____
TOTAL INCOME TAX EXPENSE $187.4 $ 90.8 $176.7
_____ _____ _____
_____ _____ _____
</TABLE>
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1993 1992 1991
____ ____ ____
<S> <C> <C> <C>
CURRENT
Federal $ 70.3 $145.2 $189.7
State 3.6 9.7 18.5
_____ _____ _____
TOTAL 73.9 154.9 208.2
_____ _____ _____
DEFERRED
Federal 120.9 (49.6) (6.4)
State 7.7 .7 (8.4)
_____ _____ _____
TOTAL 128.6 (48.9) (14.8)
_____ _____ _____
INVESTMENT TAX CREDITS (15.1) (15.2) (16.7)
_____ _____ _____
TOTAL INCOME TAX EXPENSE $187.4 $ 90.8 $176.7
_____ _____ _____
_____ _____ _____
</TABLE>
The Company adopted SFAS 109, "Accounting for Income Taxes," effective Janu-
ary 1, 1993. This statement requires use of the liability method of accounting
for deferred income taxes. Deferred tax liabilities and assets reflect the
expected future tax consequences, based on enacted tax law, of temporary
differences between the tax bases of assets and liabilities and their financial
reporting amounts. The cumulative effect of adoption of SFAS 109 resulted in an
increase in consolidated net income in 1993 of $4 million, or $0.01 per share.
Assets increased $619 million and liabilities increased $619 million, reflecting
deferred income tax liabilities and related regulatory assets recorded for
cumulative income tax temporary differences which will be recovered through
rates when the temporary differences reverse. The regulatory asset is primarily
based upon differences between the book and tax bases of utility plant in
service and the accumulated reserve for depreciation.
<PAGE>49
The tax effects of significant items comprising the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31, 1993
<S> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment $1,198.0
Regulatory asset 816.8
Other deferred liabilities 19.7
DEFERRED TAX ASSETS
Regulatory liability (100.9)
Book reserves not deductible for tax (100.3)
_______
NET DEFERRED TAX LIABILITY $1,833.3
_______
_______
</TABLE>
The Internal Revenue Service ("IRS") completed its examination of the Company's
federal income tax returns for the years 1983 through 1986. The Company and the
IRS have agreed to a settlement on all of the issues, except for certain issues
relating to the Company's abandonment of its 10% interest in Washington Public
Power Supply System Unit 3. The Company and the IRS continue to discuss the
remaining unagreed issues.
During 1993, the IRS completed its examination of the Company's federal income
tax returns for 1987 and 1988, and has proposed certain adjustments increasing
taxes by $26 million. The Company has appealed adjustments totaling more than
the net proposed increased tax. Conferences with the IRS are ongoing in 1994.
In the opinion of management, the outcome of the 1983 through 1988 federal
income tax examinations will not have a material effect on the Company's
consolidated financial position or results of operations.
The Company's 1989 and 1990 federal income tax returns are currently under
examination by the IRS.
Financial Services acquires housing projects that qualify for the low income
housing credit established as part of the Tax Reform Act of 1986 to provide an
incentive for the development and preservation of privately owned affordable
rental housing. Annual tax benefits scheduled to be received from these
projects are expected to be $9 million each year from 1994 through 1998.
The Company made income tax payments, net of refunds, of $143 million, $146 mil-
lion and $172 million in 1993, 1992 and 1991, respectively.
NOTE 10. RETIREMENT PLANS
The Companies have pension plans covering substantially all of their employees.
Benefits under these plans are generally based on the employee's years of
service and average monthly pay in the 60 consecutive months of highest pay out
of the last 120 months, with adjustments, to reflect benefits estimated to be
received from Social Security. Pension costs are funded annually by no more
than the maximum amount of pension expense which can be deducted for federal
income tax purposes. Unfunded prior service costs are amortized over the
remaining service period of employees expected to receive benefits. At Decem-
ber 31, 1993, plan assets were primarily invested in common stocks, bonds and
U.S. government obligations.
Net pension cost is summarized as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1993 1992 1991
______ ______ ______
<S> <C> <C> <C>
Service cost - benefits earned $ 19.2 $ 17.2 $ 16.9
Interest cost on projected
benefit obligation 70.8 66.8 63.6
Actual gain on plan assets (89.5) (18.0) (104.5)
Net amortization and deferral 44.0 (23.5) 69.8
Regulatory deferral (a) 3.4 (6.5) (33.1)
______ ______ ______
NET PENSION COST $ 47.9 $ 36.0 $ 12.7
______ ______ ______
______ ______ ______
<FN>
(a) Electric Operations has received accounting orders from its primary and
certain other regulatory authorities to defer the difference between
pension cost as determined in accordance with SFAS 87 and 88 and that
determined for funding purposes.
</TABLE>
<PAGE>50
The funded status, net pension liability and significant assumptions are as
follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993 1992
____ ____
<S> <C> <C>
Actuarial present value of
benefit obligations
Vested benefit obligation $ 835.3 $ 647.8
________ ______
Accumulated benefit obligation 868.0 711.0
________ ______
Projected benefit obligation 1,003.5 816.2
Plan assets at fair value 705.8 583.8
________ ______
Projected benefit obligation
in excess of plan assets (297.7) (232.4)
Unrecognized prior service cost 7.4 11.2
Unrecognized net (gain) loss 20.0 (82.1)
Unrecognized net obligation
at January 1, being amortized
over 8 to 16 years 99.9 105.2
Minimum liability adjustment (26.3) (26.8)
________ ______
NET PENSION LIABILITY $ (196.7) $(224.9)
________ ______
________ ______
Discount rate 7.5% 8-9%
Expected long-term rate of return
on assets 8.75-9% 8-9%
Rate of increase in compensation
levels 5-6% 6-6.5%
</TABLE>
Electric Operations offered early retirement incentive programs in 1987 and
1990. Included in the table above is the present value of all future termina-
tion benefits provided of $68 million. Electric Operations has received
regulatory accounting orders to defer these costs as a regulatory asset to be
amortized over 20 and 30 years.
NOTE 11. OTHER POSTRETIREMENT BENEFITS
Electric Operations and Telecommunications provide health care and life insur-
ance benefits for their eligible retirees on a basis substantially similar to
those who are active employees. Effective January 1, 1993, the Company adopted
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pen-
sions." The cost of postretirement benefits are now accrued over the active
service period of employees. Prior to 1993, the cost of these benefits, $12
million in 1992 and $10 million in 1991, was charged to operating expenses as
claims and premiums were paid. The transition obligation, which represents the
previously unrecognized prior service cost, was $319 million at January 1, 1993,
and is being amortized over a period of 20 years. For those employees already
retired at January 1, 1993, the Company will continue to fund postretirement
benefit expense on a pay-as-you-go basis. For those employees retiring after
January 1, 1993, the Company will fund postretirement benefit expense through a
combination of funding vehicles. The Company funded $36 million of
postretirement benefit expense during 1993. These funds are invested in bonds
and common stock.
The net periodic postretirement benefit cost is summarized as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993
______
<S> <C>
Service costs - benefits earned $ 7.6
Interest cost on accumulated postretirement
benefit obligation 28.8
Amortization of transition obligation 16.0
Regulatory deferral (5.6)
Actual return on plan assets (.2)
_____
NET PERIODIC POSTRETIREMENT BENEFIT COST $ 46.6
_____
_____
</TABLE>
<PAGE>51
The accumulated postretirement benefit obligation ("APBO") was as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1993
______
<S> <C>
Retirees and dependents $ 257.0
Fully eligible active plan participants 20.9
Other active plan participants 130.2
______
APBO 408.1
Plan assets at fair value 39.4
______
APBO in excess of plan assets 368.7
Unrecognized prior service cost .8
Unrecognized transition obligation (302.7)
Unrecognized net loss (47.8)
______
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION $ 19.0
______
______
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The assumed health care cost trend
rates for participants under age 65 were 12% to 14%, with gradual decreases to
5% over 9 to 11 years and 4.5% thereafter. The assumed health care cost trend
rate for participants over age 65 was 10%, with gradual decreases to 5% over
9 to 11 years and 4.5% thereafter. The health care cost trend rate assumptions
have a significant effect on the amounts reported. Increasing the assumed
health care cost trend rate by one percentage point would have increased the
APBO as of December 31, 1993 by $25 million and the annual net periodic
postretirement benefit cost by $3 million.
NOTE 12. ACQUISITIONS
On April 15, 1992, the Company purchased 243 megawatts of generating assets and
fuel resources from Colorado-Ute Electric Association, Inc. for $279 million.
The purchase was financed with $250 million of first mortgage and collateral
trust bonds, including $48 million issued as collateral for obligations assumed
relating to pollution control revenue bonds.
On April 8, 1991, Electric Operations purchased an equity interest in the Wyodak
Plant. On June 8, 1991, the Company retired its share of the Wyodak debt, which
had been recorded as a capital lease obligation, with issuances of medium-term
notes and cash.
Noncash investing and financing activities associated with these acquisitions
were as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
1992 1991
____ ____
<S> <C> <C>
Net assets acquired $(279.3) $(169.9)
Disposition of net property under capital lease - 132.5
Long-term debt assumed 250.3 105.6
Accrued liabilities and deferred credits assumed 4.9 8.0
Retirement of obligations under capital lease - (132.5)
</TABLE>
On July 15, 1991, Electric Operations paid $234 million to Arizona Public
Service Company ("APS") to purchase Unit 4 of the Cholla coal-fired generating
plant and related common facilities and commenced providing power to APS under a
related power supply agreement.
<PAGE>52
NOTE 13. SPECIAL CHARGES
As a result of credit rating downgrades in 1992, Financial Services and Holdings
experienced restricted access to debt markets. In order to improve this
situation, these subsidiaries attempted to reduce debt with cash generated by
accelerating sales of underperforming and nonstrategic assets. Related to this
action, Financial Services and Holdings recorded various pretax adjustments of
$186 million to the carrying value of certain assets in the first quarter of
1992.
The following table is a summary of the special charges by income statement
category:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
1992
____
<S> <C>
Revenues $ 10
Operations expense 73
Administrative and general expense 21
Depreciation and amortization 38
Other expense 44
Income taxes (54)
___
NET AFTER-TAX CHARGE $132
___
___
</TABLE>
NOTE 14. BUSINESS SEGMENTS
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
Electric Telecom- Discontinued
Consolidated Operations munications Other(a) Operations
____________ __________ ____________ _____ ____________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Revenues $ 3,412 $2,507 $ 709 $ 196 $ -
Income from operations 916 784 141 (9) -
Depreciation and amortization 405 281 110 14 -
Capital spending 805 637 126 42 -
Identifiable assets 11,959 9,181 1,479 1,299 -
______ _____ _____ _____ ___
______ _____ _____ _____ ___
Year ended December 31, 1992
Revenues $ 3,242 $2,362 $ 705 $ 175 $ -
Income from operations 633 678 138 (183) -
Depreciation and amortization 453 287 114 52 -
Capital spending 1,001 864(b) 140 (3) -
Identifiable assets 11,257 8,192 1,513 1,326 226(c)
______ _____ _____ _____ ___
______ _____ _____ _____ ___
Year ended December 31, 1991
Revenues $ 3,168 $2,252 $ 724 $ 192 $ -
Income from operations 941 783 159 (1) -
Depreciation and amortization 381 256 117 8 -
Capital spending 1,059 796 236 27 -
Identifiable assets 11,910 7,665 1,674 1,863 708(c)
______ _____ _____ _____ ___
______ _____ _____ _____ ___
<FN>
(a) Includes the operations of finance, real estate, manufacturing and
agriculture activities of Financial Services and independent power
production, as well as the activities of Holdings.
(b) Includes noncash acquisition costs of $255 million relating to the
Colorado-Ute properties acquired in April 1992.
(c) The net assets of the discontinued operations of TRT are included in
Telecommunications.
</TABLE>
<PAGE>53
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/QUARTER ENDED
March June September December
31 30 30 31
_____________________________________________________________________________
<S> <C> <C> <C> <C>
1993
Revenues $862.3 $809.2 $861.7 $879.2
Income from operations 245.9 199.2 238.4 232.0
Income from continuing
operations 112.5 91.9 105.2 113.1
Discontinued operations - - 52.4 -
Cumulative effect of change
in accounting principle 4.0 - - -
Net income 116.5 91.9 157.6 113.1
Earnings on common stock 106.5 82.2 147.8 103.3
Earnings per common share
from continuing operations .38 .30 .35 .37
Earnings per common share .39 .30 .54 .37
Common dividends paid per share .385 .27 .27 .27
Common dividends declared
per share .27 .27 .27 .27
Common stock price
per share (NYSE)
High 20 5/8 19 1/8 20 5/8 20 1/8
Low 16 7/8 17 1/2 18 3/8 18 1/4
1992
Revenues $780.0 $773.3 $821.0 $ 867.7
Income from operations 81.7 186.2 228.6 136.5
Income (loss) from continuing
operations (33.7) 66.0 97.2 20.7
Discontinued operations (145.8) 1.4 (26.7) (319.5)
Net income (loss) (179.5) 67.4 70.5 (298.8)
Earnings (loss) on common stock (186.7) 58.8 59.8 (309.6)
Earnings (loss) per common share
from continuing operations (.15) .22 .32 .03
Earnings (loss) per common share (.71) .22 .22 (1.15)
Common dividends paid per share .375 .375 .385 .385
Common dividends declared
per share .375 .385 .385 .385
Common stock price
per share (NYSE)
High 25 1/4 23 3/8 23 5/8 23 1/8
Low 21 1/8 21 1/4 22 1/8 18 1/8
</TABLE>
A significant portion of the operations are of a seasonal nature.
Previously reported quarterly information has been revised to reflect certain
reclassifications. These reclassifications had no effect on previously reported
consolidated net income.
See DISCONTINUED OPERATIONS on page 35 and Note 2 for information regarding
discontinued operations.
The first quarter of 1992 includes special charges to reduce the carrying value
of certain assets. See Note 13.
The fourth quarter of 1992 includes various unusual charges totaling $50 million
after-tax. The items primarily relate to obsolete inventory, valuation
adjustments, contract settlements and a number of other items. See ELECTRIC
OPERATIONS on pages 29, 30 and 31.
<PAGE>
Appendix A - PacifiCorp 1993 Annual Report Graphic Material
___________________________________________________________
1. The following is a description of graphic material omitted from the current
filing:
Graph Title: Cash Flows from Continuing Operations by Segment
Graph Page Number: Page 22
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 0, 200, 400, 600,
800, 1000, 1200
Legend Description: Bottom of Stacked Bar, Electric Operations; Middle of
Stacked Bar, Telecommunications; Top of Stacked Bar,
Other
Y-Axis Data Points: Electric Operations Telecommunications Other
1991 740 850 1,020
1992 642 819 942
1993 764 944 1,037
Footnote to Graph: None
2. The following is a description of graphic material omitted from the current
filing:
Graph Title: Capital Spending Mix by Segment
Graph Page Number: Page 23
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 91; 92; 93
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, 100
Legend Description: Bottom of Stacked Bar, Electric Operations; Middle of
Stacked Bar, Telecommunications; Top of Stacked Bar,
Other
Y-Axis Data Points: Electric Operations Telecommunications Other
1991 75 97 100
1992 86 100 -
1993 79 95 100
Footnote to Graph: None
<PAGE>
3. The following is a description of graphic material omitted from the current
filing:
Graph Title: Common Equity
Graph Page Number: Page 26
Type of Graph: Area Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 0, 500, 1000,
1500, 2000, 2500, 3000, 3500, 4000
Legend Description: None
Y-Axis Data Points: PacifiCorp
1988 2,936
1989 3,007
1990 3,208
1991 3,512
1992 2,908
1993 3,263
Footnote to Graph: None
4. The following is a description of graphic material omitted from the current
filing:
Graph Title: Electric Operations
Graph Page Number: Page 28
Type of Graph: Horizontal Line Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 0, 500, 1000,
1500, 2000, 2500
Legend Description: Bottom Horizontal Line, Earnings Contribution; Middle
Horizontal Line, Income from Operations; Top Horizontal
Line, Revenues
Y-Axis Data Points: Revenues Income from Operations Earnings Contribution
1988 2,160 745 309
1989 2,176 755 330
1990 2,185 745 334
1991 2,252 783 347
1992 2,362 678 203
1993 2,507 784 322
Footnote to Graph: None
<PAGE>
5. The following is a description of graphic material omitted from the current
filing:
Graph Title: Kilowatt-Hour Sales by Customer Segment
Graph Page Number: Page 29
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Billions of Kilowatt-Hours from bottom to top 0, 10, 20,
30, 40, 50, 60
Legend Description: Bottom of Stacked Bar, Residential; Second of Stacked
Bar, Commercial; Third of Stacked Bar, Industrial; Top
of Stacked Bar, Wholesale
Y-Axis Data Points: Residential Commercial Industrial Wholesale
1988 10,491 19,157 37,953 46,350
1989 10,765 19,568 39,196 47,755
1990 10,990 20,091 40,288 49,758
1991 11,354 20,770 40,784 51,079
1992 11,230 20,963 41,511 54,931
1993 12,055 22,140 42,413 57,362
Footnote to Graph: None
6. The following is a description of graphic material omitted from the current
filing:
Graph Title: Energy Source
Graph Page Number: Page 30
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, 100
Legend Description: Bottom of Stacked Bar, Coal; Middle of Stacked Bar,
Hydroelectric; Top of Stacked Bar, Purchase & Exchange
Contracts
Y-Axis Data Points: Coal Hydroelectric Purchase &
Exchange Contracts
1988 81 88 100
1989 78 86 100
1990 78 85 100
1991 78 84 100
1992 81 85 100
1993 77 83 100
Footnote to Graph: None
<PAGE>
7. The following is a description of graphic material omitted from the current
filing:
Graph Title: Kilowatt-Hour Sales by Customer Segment
Graph Page Number: Page 31
Type of Graph: Pie Chart
X-Axis Information: Year 1993
Y-Axis Information: Percent
Legend Description: Bottom of Legend, Residential; Second in Legend, Commer-
cial; Third in Legend, Industrial; Top of Legend, Whole-
sale
Data Points: Residential Commercial Industrial Wholesale
1993 21 18 34 27
Footnote to Graph: None
8. The following is a description of graphic material omitted from the current
filing:
Graph Title: Telecommunications
Graph Page Number: Page 32
Type of Graph: Horizontal Line Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 0, 100, 200, 300,
400, 500, 600, 700, 800
Legend Description: Bottom Horizontal Line, Earnings Contribution from
Continuing Operations; Middle Horizonal Line, Income
from Operations; Top Horizontal Line, Revenues
Y-Axis Data Points: Earnings Contribution
from Continuing
Revenues Income from Operations Operations
1988 560 117 50
1989 578 134 64
1990 683 154 77
1991 724 160 77
1992 705 139 57
1993 709 141 51
Footnote to Graph: None
<PAGE>
9. The following is a description of graphic material omitted from the current
filing:
Graph Title: Access Lines by Region
Graph Page Number: Page 33
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Thousands from bottom to top 0, 50, 100, 150, 200, 250,
300, 350, 400
Legend Description: Bottom of Stacked Bar, Western; Middle of Stacked Bar,
Midwest; Top of Stacked Bar, Alaska
Y-Axis Data Points: Western Midwest Alaska
1988 166 187 240
1989 175 197 253
1990 185 280 340
1991 194 292 357
1992 206 310 379
1993 217 328 399
Footnote to Graph: None
10. The following is a description of graphic material omitted from the current
filing:
Graph Title: Disposition of Income from Operations
Graph Page Number: Page 37
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top -200, 0, 200,
400, 600, 800, 1000
Legend Description: Bottom of Stacked Bar, Retained Earnings; Second of
Stacked Bar, Interest Expense & Other; Third of Stacked
Bar, Income Taxes; Top of Stacked Bar, Dividends Paid
Interest
Retained Expense Income Dividends
Y-Axis Data Points: Earnings & Other Taxes Paid
1988 2 323 510 895
1989 38 328 535 900
1990 42 373 552 923
1991 34 352 529 941
1992 (167) 286 405 776
1993 85 390 578 916
Footnote to Graph: Calculated using earnings from continuing operations,
excluding 1992 special charges. See Note 13.
<PAGE>
11. The following is a description of graphic material omitted from the current
filing:
Graph Title: Property, Plant and Equipment/Construction Work in
Progress
Graph Page Number: Page 38
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 0, 1500, 3000,
4500, 6000, 7500, 9000
Legend Description: Bottom of Stacked Bar, Electric; Middle of Stacked Bar,
Telecommunications, Top of Stacked Bar, CWIP
Y-Axis Data Points: Electric Telecommunications CWIP
1988 5,282 6,121 6,337
1989 5,370 6,202 6,509
1990 5,600 6,426 6,805
1991 6,124 7,114 7,438
1992 6,638 7,553 7,858
1993 6,944 7,853 8,210
Footnote to Graph: None
12. The following is a description of graphic material omitted from the current
filing:
Graph Title: Capitalization
Graph Page Number: Page 39
Type of Graph: Stacked Bar Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, 100
Legend Description: Bottom of Stacked Bar, Long-Term Debt & Capital Lease
Obligations; Second of Stacked Bar, Preferred Stock; Top
of Stacked Bar, Common Equity
Long-Term
Debt &
Capital Lease Preferred Common
Y-Axis Data Points: Obligations Stock Equity
1988 53 57 100
1989 54 58 100
1990 52 58 100
1991 52 58 100
1992 54 62 100
1993 50 58 100
Footnote to Graph: None
<PAGE>
13. The following is a description of graphic material omitted from the current
filing:
Graph Title: Preferred Dividend Requirement
Graph Page Number: Page 44
Type of Graph: Horizontal Line Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Millions of Dollars from bottom to top 20, 25, 30, 35,
40
Legend Description: None
Y-Axis Data Points: PacifiCorp
1988 21
1989 21
1990 22
1991 27
1992 37
1993 39
Footnote to Graph: None
14. The following is a description of graphic material omitted from the current
filing:
Graph Title: Embedded Cost of Mortgage Bond Debt
Graph Page Number: Page 45
Type of Graph: Horizontal Line Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Percent from bottom to top 7.0, 7.5, 8.0, 8.5, 9.0
Legend Description: None
Y-Axis Data Points: PacifiCorp
1988 8.8
1989 8.8
1990 8.9
1991 8.4
1992 8.1
1993 7.7
Footnote to Graph: None
<PAGE>
15. The following is a description of graphic material omitted from the current
filing:
Graph Title: Effective Income Tax Rate
Graph Page Number: Page 48
Type of Graph: Horizontal Line Graph
X-Axis Information: Years from left to right 88; 89; 90; 91; 92; 93
Y-Axis Information: Percent from bottom to top 20, 25, 30, 35, 40, 45, 50
Legend Description: None
Y-Axis Data Points: PacifiCorp
1988 33
1989 34
1990 30
1991 28
1992 38
1993 31
Footnote to Graph: Calculated using earnings from continuing operations.
16. The following is a description of graphic material omitted from the current
filing:
Graph Title: Common Stock Market Price
Graph Page Number: Page 53
Type of Graph: Area Graph
X-Axis Information: Months from left to right depicted by dashes with only
the quarters marked with longer dashes labeled as Q1,
Q2, Q3, Q4 for 1992 and 1993 respectively.
Y-Axis Information: Month-End in Dollars from bottom to top 0, 5, 10, 15,
20, 25, 30
Legend Description: None
Y-Axis Data Points: 1992 1993
January 22.500 19.750
February 21.375 18.125
March 21.500 18.125
April 21.625 17.875
May 22.250 17.750
June 22.250 19.000
July 23.000 18.750
August 22.375 20.000
September 23.000 19.625
October 22.125 19.625
November 19.500 19.125
December 19.750 19.250
Footnote to Graph: None
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THE COMPANY
PacifiCorp Holdings, Inc., a wholly-owned subsidiary of the Company and a
Delaware corporation, has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION
NAME OF SUBSIDIARY VOTING SECURITIES OWNED OR ORGANIZATION
- ------------------------------------------------------------------------- ------------------------- ---------------
<S> <C> <C>
PACE Group, Inc.......................................................... 100% Oregon
PacifiCorp Financial Services, Inc....................................... 100% Oregon
Color Spot, Inc........................................................ 100% Oregon
Pacific Development, Inc............................................... 100% Oregon
Pacific Harbor Capital, Inc............................................ 100% Delaware
Pacific Relocation Service Company..................................... 100% Oregon
PacifiCorp Capital, Inc................................................ 100% Virginia
PacifiCorp Credit, Inc................................................. 100% Oregon
Vermont Castings, Inc.................................................. 100% Vermont
Pacific Generation Company............................................... 100% Oregon
Energy National, Inc................................................... 100% Utah
ONSITE Energy, Inc..................................................... 100% Oregon
Pacific Telecom, Inc..................................................... 87% Washington
PacifiCorp Trans, Inc.................................................... 100% Oregon
</TABLE>
Pacific Telecom, Inc., an 87% owned subsidiary of PacifiCorp Holdings, Inc.,
and a Washington corporation, has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION OR
NAME OF SUBSIDIARY VOTING SECURITIES OWNED ORGANIZATION
- ----------------------------------------------------------------------- ------------------------- ----------------
<S> <C> <C>
Alascom, Inc........................................................... 100% Alaska
Cascade Autovon Company................................................ 100% Washington
Eagle Telecommunications, Inc./Colorado................................ 100% Colorado
Eagle Valley Communications Corporation................................ 100% Colorado
Gem State Utilities Corporation........................................ 92% Idaho
Indianhead Communications Corporation.................................. 100% Wisconsin
Inter Island Telephone Company, Inc.................................... 100% Washington
International Communications Holdings, Inc............................. 85% Delaware
North-West Cellular, Inc............................................... 100% Nevada
North-West Telecommunications, Inc..................................... 100% Nevada
Northland Telephone Company.......................................... 100% Minnesota
North-West Telephone Company......................................... 100% Wisconsin
Postville Telephone Company.......................................... 100% Wisconsin
The Footville Telephone Company...................................... 100% Wisconsin
Sullivan Telephone Company........................................... 100% Wisconsin
Turtle Lake Telephone Company, Inc................................... 100% Wisconsin
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
STATE OR
JURISDICTION OF
APPROXIMATE PERCENTAGE OF INCORPORATION OR
NAME OF SUBSIDIARY VOTING SECURITIES OWNED ORGANIZATION
- ----------------------------------------------------------------------- ------------------------- ----------------
<S> <C> <C>
Northwestern Telephone Systems, Inc.................................... 99% Oregon
Pacific Telecom Cable, Inc............................................. 80% Delaware
Pacific Telecom Cellular, Inc.......................................... 100% Delaware
Pacific Telecom Cellular of Alaska, Inc.............................. 100% Alaska
Pacific Telecom Cellular of I-5, Inc................................. 100% Washington
Pacific Telecom Cellular of Michigan, Inc............................ 100% Michigan
Pacific Telecom Cellular of Minnesota, Inc........................... 100% Minnesota
Pacific Telecom Cellular of Oregon, Inc.............................. 100% Oregon
Pacific Telecom Cellular of South Dakota, Inc........................ 100% South Dakota
Pacific Telecom Cellular of Washington, Inc.......................... 100% Washington
Pacific Telecom Cellular of Wisconsin, Inc........................... 100% Wisconsin
Pacific Telecom Transmission Services, Inc............................. 100% Oregon
Price County Telephone Cellular, Inc................................... 100% Wisconsin
PTI Broadcasting, Inc.................................................. 100% Oregon
PTI Harbor Bay, Inc.................................................... 100% Washington
Bay Area Teleport, Inc............................................... 100% Delaware
Rib Lake Cellular for Wisconsin RSA #2, Inc............................ 100% Wisconsin
Shell Lake Telephone Company, Inc...................................... 100% Wisconsin
Telephone Utilities of Alaska, Inc..................................... 100% Alaska
Telephone Utilities of Eastern Oregon, Inc............................. 100% Oregon
Telephone Utilities of Northland, Inc.................................. 100% Alaska
Telephone Utilities of Oregon, Inc..................................... 100% Oregon
Telephone Utilities of Washington, Inc................................. 100% Washington
Telephone Utilities of Wyoming, Inc.................................... 100% Wyoming
Thorp Telephone Company................................................ 100% Wisconsin
UpSouth Corporation.................................................... 100% Georgia
Wayside Telecom, Inc................................................... 100% Wisconsin
The Wayside Telephone Company.......................................... 100% Wisconsin
</TABLE>
S-3
<PAGE>
The Company also has the following subsidiaries:
<TABLE>
<CAPTION>
STATE OR
APPROXIMATE PERCENTAGE JURISDICTION OF
OF VOTING SECURITIES INCORPORATION
NAME OF SUBSIDIARY OWNED OR ORGANIZATION
- ------------------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
Centralia Mining Company................................................. 100% Washington
Energy West Mining Company............................................... 100% Utah
Glenrock Coal Company.................................................... 100% Wyoming
Interwest Mining Company................................................. 100% Oregon
Pacific Minerals, Inc.................................................... 100% Wyoming
Bridger Coal Company, a joint venture.................................. 66.67% Wyoming
</TABLE>
S-4
<PAGE>
EXHIBIT (23)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-36452, 33-49607, 33-51163, all on Form S-3; in Registration Statement Nos.
33-32211, 33-39195, 33-49479 and Post-Effective Amendment No. 1 to Registration
Statement No. 33-17970, all on Form S-8; and in Registration Statement No.
33-36239 on Form S-4 of our report dated February 18, 1994 (which expresses an
unqualified opinion and includes an explanatory paragraph relating to the change
in the Company's method of accounting for income taxes and other postretirement
benefits), appearing in and incorporated by reference in your Annual Report on
Form 10-K of PacifiCorp for the year ended December 31, 1993.
DELOITTE & TOUCHE
Portland, Oregon
March 30, 1994
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
C. M. BISHOP, JR.
--------------------------------------
C. M. Bishop, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
FREDERICK W. BUCKMAN
--------------------------------------
Frederick W. Buckman
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
C. TODD CONOVER
--------------------------------------
C. Todd Conover
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
RICHARD C. EDGLEY
--------------------------------------
Richard C. Edgley
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
A. M. GLEASON
--------------------------------------
A. M. Gleason
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
JOHN C. HAMPTON
--------------------------------------
John C. Hampton
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
STANLEY K. HATHAWAY
--------------------------------------
Stanley K. Hathaway
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
NOLAN E. KARRAS
--------------------------------------
Nolan E. Karras
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
KEITH R. MCKENNON
--------------------------------------
Keith R. McKennon
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
DON M. WHEELER
--------------------------------------
Don M. Wheeler
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and appoints
C. M. Bishop, Jr., Richard C. Edgley, Stanley K. Hathaway, Nolan E. Karras, Don
M. Wheeler and Nancy Wilgenbusch, and each of them, his true and lawful
attorneys and agents, with full power of substitution and resubstitution for him
and in his name, place and stead, in any and all capacities, to sign the Annual
Report of PacifiCorp on Form 10--K for the year ended December 31, 1993 and any
and all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys and agents, and each of them, full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: February 9, 1994.
NANCY WILGENBUSCH
--------------------------------------
Nancy Wilgenbusch
<PAGE>
EXHIBIT (99)
PART I
Item 1. BUSINESS
INTRODUCTION
PTI was organized in 1955 to provide telephone service to suburban and
rural communities principally in the Pacific Northwest. Since that time, the
Company has grown significantly through acquisitions and expanded its service
offerings in several areas within the telecommunications industry. This
expansion included the provision of long distance services in the State of
Alaska, investments in cellular telephone operations and international
communications, including the construction of a trans-Pacific fiber optic cable.
Over the past few years, the Company's strategy has been to focus on its core
business of providing local exchange service to suburban and rural markets and
to divest its diversified portfolio of noncore businesses. This strategy is
being implemented through the acquisition of LECs, the sale of certain
international operations, the consolidation and sale of cellular holdings, and
ongoing efforts to achieve a satisfactory restructuring of the Alaska long
distance marketplace. With the completed sale of TRT and upon closing of the
pending sale of two additional noncore operations, the Company will have exited
from all of its material noncore businesses.
PTI has been a majority-owned subsidiary of PacifiCorp since 1973. At
December 31, 1993, PacifiCorp beneficially owned approximately 87 percent of
PTI's common stock.
TELECOMMUNICATIONS OPERATIONS
LOCAL EXCHANGE COMPANIES
The Company's LECs operate under a common business name and logo, PTI
Communications. This marketing concept was established in 1991 to create a
unified identity for the local operations, improve communication with customers
and assist in the marketing of new products and services. As one of the major
independent telephone companies in the U.S., the Company's LECs provide both
local telephone service and access to the long distance network for customers in
their respective service areas. The Company presently operates 20 LECs within
eleven states comprised of 398,700 access lines in 253 exchanges. The average
number of access lines per exchange is approximately 1,576, reflecting the lower
population density generally found in the Company's service areas which are
rural in nature. The Company's largest exchange in terms of access lines is in
Kalispell, Montana, which had 21,976 access lines at December 31, 1993. Service
areas are located primarily in the states of Alaska, Montana, Oregon, Washington
and Wisconsin. States also served, but to a lesser extent, include Colorado,
Idaho, Iowa, Minnesota, Nevada and Wyoming. (See "Regulation - General.") The
Company provides service to its suburban and rural customer base through
centralized administrative services.
During the five years ended December 31, 1993, the number of access
lines served by the Company increased from 239,600 to 398,700. Approximately
69,000, 3,200 and 1,100 access lines were added in 1990, 1992 and 1993,
respectively, as a result of the acquisitions of several LECs located in the
Midwest. The LECs have also experienced strong internal access line growth in
certain service areas, as evidenced by a five percent increase in access lines
served during 1993. The Company anticipates that access line growth in the
future will come from population growth in current service areas and
acquisitions.
- 4 -
<PAGE>
The Company's LECs have replaced virtually all of their
electromechanical switches with digital switches that provide significant space
savings, higher reliability and expanded business and residential service
capabilities. High volume traffic routes continue to be upgraded with fiber
optic or digital microwave systems to meet customer needs for special services.
The fiber optic systems provide increased transmission capabilities at a lower
cost. Basic exchange telecommunications radio systems have been installed to
provide local service to new and existing customers in more remote areas. The
Company has nearly completed the conversion of all multi-party lines to
single-party lines. Approximately one percent of the Company's access lines were
multi-party at the end of 1993.
The LECs have contracts with interexchange carriers under which the
Company provides billing and collection services. During 1992, the Company
signed an agreement to provide these services for AT&T through 2001, and an
agreement with Independent NECA Services, a clearinghouse service bureau, to
provide these services for other carriers for a minimum of two years. In Alaska,
the Company's LECs have similar agreements with Alascom.
In addition to its basic telephone service, the Company offered
enhanced services, such as caller identification, name display, automatic call
back, auto recall and call trace, to certain areas of Washington on a trial
basis under the Custom Local Area Signaling Service (CLASS). The Company began
providing these services in Washington on a permanent basis in January 1994 and
plans to make enhanced services available on a trial basis to other service
areas during 1994. The Company's existing switching equipment provides these
services with minimal software and hardware enhancements. Some of the Company's
switching equipment also has other enhanced service capabilities, such as voice
messaging and call forwarding, that are being offered to certain of its
customers in Washington. The LECs also sell and lease, on a nonregulated basis,
customer premise (i.e., telephone) equipment primarily for use by residential
customers. As part of this program, residential and business customers are
offered maintenance services on a monthly fee basis.
The Company continues to seek expansion of its local exchange
operations through acquisition. In July 1993, the Company acquired Casco
Telephone Company (Casco), an LEC in Wisconsin, for cash and shares of the
Company's common stock aggregating approximately $4.7 million. The Company
acquired shares in the market in an amount approximating those used in the
acquisition. Casco has approximately 1,100 access lines, 1,100 cable television
subscribers and 18,900 pro-rata cellular POPs in Wisconsin.
In August 1993, the Company signed a definitive agreement with USWC
under which the Company would acquire certain rural telephone exchange
properties in Colorado. The properties represent 45 exchanges that serve
approximately 50,000 access lines. The Company will pay approximately $207
million for these properties at closing, subject to a purchase price adjustment
mechanism, based principally on the estimated book value of the assets to be
acquired. Current estimates of book value indicate that the purchase price may
be less than $207 million. The Company intends to fund the Colorado acquisition
through external debt and internally generated funds. In an attempt to satisfy
certain regulatory concerns in Colorado, the Company also entered into a
construction contract with USWC in July 1993 that requires the Company to
construct and upgrade plant in the properties subject to the agreement. Under
the contract, the Company acts as general contractor for USWC. The construction
and upgrade program will
- 5 -
<PAGE>
accelerate single-party service and digital switching required by the CPUC.
During 1993, the Company spent $5.7 million under this contract. Expenditures of
$28 million are projected to be made under the contract in 1994. If the
transaction does not close, USWC is required to reimburse the Company for all of
the Company's expenditures under the construction contract including interest.
The Company filed an application for approval of the transaction with
the CPUC in August 1993 and approval, with conditions, was received in early
March 1994. The parties to the transaction are reviewing the conditions of the
CPUC approval. The Company has also submitted filings with the FCC in which the
Company has requested waivers from the FCC to reclassify the exchanges from
USWC's study area in Colorado to the Company's study area in Colorado and to
permit rate of return regulation on the exchanges being acquired. Approval of
the study area waiver would qualify these exchanges for receipt of support from
the USF, as the cost to provide service in these exchanges exceeds the national
average. Approval of rate of return regulation would allow the Company to
replace the incentive regulation adopted for these exchanges by USWC. (See
"Regulation - Local Exchange Companies.") Certain local government approvals may
also be needed. Transition planning efforts have commenced and the Company
expects to close the transaction in late 1994.
On March 15, 1994, the Company signed letters of intent with USWC to
acquire certain rural exchange properties located in Oregon and Washington from
USWC for $183 million in cash, subject to certain purchase price adjustments at
closing. These properties represent 49 exchanges that serve approximately 34,100
access lines. Many of these exchanges are contiguous to or located near
exchanges that the Company owns and operates in these states. The transaction is
subject to negotiation of a definitive purchase agreement with USWC, which is
expected to be completed in early April. Completion of the transaction will also
be dependent on corporate, regulatory and governmental approvals, all of which
should be received by late 1994 or early 1995. The Company expects to fund the
acquisition of these properties through the issuance of external debt and the
use of internally generated funds.
LONG LINES
Through Alascom, the Company provides intrastate and interstate MTS,
WATS, private line, leased channel and other communications services within
Alaska and between Alaska and the rest of the world. Alascom's facilities
interconnect with 22 LECs and the military bases within Alaska and with the
interstate and international long distance network. Virtually all services are
provided in accordance with tariffs filed with the appropriate regulatory
agencies. (See "Regulation - Long Lines - Interstate Revenues" for information
concerning Alascom's settlements arrangement with AT&T for interstate services.)
Alascom uses both satellite and terrestrial facilities in providing
service. In August 1991, Alascom transferred all interstate MTS and certain
interstate private line services from satellite facilities to the Alaska Spur.
(See "Telecommunications Operations - Pacific Telecom Cable.") Satellite
facilities continue to provide intrastate MTS, WATS and private line services,
link remote areas of Alaska to the long distance network (both interstate and
intrastate) and serve as alternate routing for vital customer services.
- 6 -
<PAGE>
Alascom operates 17 satellite transponders on Aurora II, a
communication satellite that replaced Alascom's original satellite in 1991.
Alascom purchased one transponder in July 1993 and leases 16 transponders under
an operating lease that expires in mid-1998. Telemetry, tracking, control and
in-orbit protection services are provided under contract by GE American
Communications, Inc. for the projected service life of the satellite.
Alascom owns 168 satellite transmit and receive earth stations
(including nine transportable earth stations), a 50 percent interest in 46 earth
stations used generally for service throughout Alaska and 10 additional earth
stations located in the lower 48 states, Hawaii, Panama, Russia and Saudi
Arabia. Alascom routinely upgrades earth stations with digital technology to
provide enhanced communication services. Approximately 70 percent of the earth
station circuits are digital. Alascom has digital switching equipment located at
its toll centers in Anchorage, Fairbanks and Juneau. It also owns and operates
major terrestrial microwave systems (primarily digital) that provide
communications between Anchorage and Fairbanks and Anchorage and the cities on
the Kenai Peninsula. The microwave system also interconnects Anchorage with
leased Canadian facilities at the Canadian border and with Haines, Juneau and
Ketchikan in the rugged terrain of southeastern Alaska. Alascom owns and
operates the communications system along the Trans-Alaska Pipeline that is used
to monitor and control the flow of oil through the pipeline.
Alaska's geographic location makes the state strategically important
for the military. Alascom has numerous private line facilities serving the
government, including several transportable earth stations used to support
military communication needs. In 1993, the Company sold four transportable earth
stations to the U.S. Department of Defense. Alascom continues to operate one
transportable earth station in Saudi Arabia, which provides telecommunication
services under an agreement with the U.S. Department of Defense. Alascom is
participating in a joint venture providing international MTS and private line
service to several locations in the eastern part of Russia.
ALASKA MARKET RESTRUCTURING
In 1985, the FCC established a Federal-State Joint Board (FCC CC
Docket No. 83-1376) to review the interstate market structure of Alaska and to
reconcile various existing and emerging federal policies affecting universal
service, rate integration and competition. On October 29, 1993, the Federal-
State Joint Board released a Final Recommended Decision (FRD), which proposed
modifications to the existing structure for interstate service in and to Alaska.
Among other matters, the FRD proposed termination of the JSA between Alascom and
AT&T, effective September 1, 1995; the payment by AT&T to Alascom of $150
million for accelerated cost recovery in two equal installments of $75 million
each on March 1, 1994 and September 1, 1995; a requirement that AT&T continue to
utilize Alascom's facilities for the origination and termination of interstate
traffic on a declining scale for a period of two and one-half years following
termination of the JSA; and the creation by Alascom of an interstate tariff for
carrier services based upon an as yet to be developed allocation of costs
between rural and nonrural locations.
On November 29, 1993, Alascom filed an Application for Review
(Application) of the FRD with the FCC. In the Application, Alascom cited
multiple substantive and procedural errors contained in the FRD, which it
believes render the FRD legally defective and contrary to the public interest.
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AT&T and GCI subsequently made filings in opposition to Alascom's Application.
To date, the FCC has taken no action on either the FRD or Alascom's Application.
By statute, the FCC has the sole and final authority with respect to issues in
this proceeding, and may adopt, modify and adopt, or reject the FRD. As a
practical matter, since a majority of the FCC Commissioners sit on the Joint
Board, final actions taken by the FCC often reflect the recommendations of the
Joint Board.
On October 12, 1993, the Company and AT&T entered into an agreement,
under which the parties may exchange proprietary information relating to
Alascom's structure and operations. The purpose of the agreement was to promote
the possibility of a negotiated resolution of some or all of the outstanding
issues relating to the JSA and the restructuring of the Alaska interstate
market. Under the terms of the agreement, the substance and progress of any
negotiations between the parties are generally not disclosable. Alascom
continues its efforts to correct perceived errors in the FRD and to achieve a
satisfactory alternative resolution to the Alaska interstate market issues, but
is unable to predict the outcome of this matter.
CELLULAR OPERATIONS
The Company's wholly-owned subsidiary, PT Cellular, is a holding
company with subsidiaries in Alaska, Michigan, Minnesota, Oregon, South Dakota,
Washington and Wisconsin. The Company has ownership interests with respect to 29
MSAs and RSAs and manages 11 of these interests in Alaska, Michigan, South
Dakota and Wisconsin. The Company also manages five other RSA interests in
Minnesota. Revenues from cellular operations represented approximately two
percent of total Company revenues in 1993.
Cellular mobile telephone service is being provided or developed in
areas designated as RSAs or MSAs within boundaries defined by the FCC. Cellular
systems provide local and long distance telephone services through mobile radio
telephones (cellular phones) that are generally either hand-held or mounted in
vehicles. These cellular phones transmit and receive radio signals to and from
transmitter, receiver and signaling equipment (cell sites). Cell sites in an RSA
or MSA are located in a manner that will allow for the most complete coverage of
an area. Each cell site is connected to a switching facility that controls the
cellular system of the specific RSA or MSA and connects the cellular customer to
the conventional wireline local and long distance telephone networks or to other
cellular phone users in the area.
The following table sets forth the Company's POP ownership by state as of
December 31, 1993.
<TABLE>
<CAPTION>
NON-
STATE CONTROLLED(1) CONTROLLED TOTAL
----- ---------- ---------- ----------
<S> <C> <C> <C>
Alaska 201,000 - 201,000
Michigan 315,000 - 315,000
Minnesota - 23,567 23,567
Oregon - 96,194 96,194
South Dakota 16,147 - 16,147
Washington - 44,819 44,819
Wisconsin 688,646 627,407 1,316,053
--------- ------- ----------
Total 1,220,793 791,987 2,012,780
--------- ------- ----------
--------- ------- ----------
<FN>
(1) Represents interests with respect to RSAs and MSAs where the Company
has an ownership position and manages the operations.
</TABLE>
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<PAGE>
The Company plans to increase its ownership interests in certain
cellular properties in order to achieve ownership control and to consolidate the
Company's cellular service areas into larger contiguous units for operating
efficiencies. This plan may be accomplished through the exchange of existing
cellular interests and/or future acquisitions. In 1993, the Company sold its
interests in an RSA where it had a noncontrolling position and exchanged an RSA
where it had a controlling position. In 1993, the Company also increased its
ownership interests in an RSA and gained a controlling interest in an MSA, both
of which are in Wisconsin. The Company recognized after-tax gains on these
transactions totaling $.8 million. The Company has budgeted $17.9 million for
the development of cellular operations over the next three years.
In 1993, the Company obtained 18,900 pro-rata POPs through an LEC
acquisition in Wisconsin and another 75,150 POPs in Wisconsin through the
purchase of certain cellular ownership interests. All of the cellular
properties in which the Company has an ownership interest are operational.
Customers served by the cellular operations controlled by the Company increased
65 percent in 1993, 70 percent in 1992 and 100 percent in 1991.
PACIFIC TELECOM CABLE
PTC, which is owned 80 percent by PTI and 20 percent by Cable &
Wireless plc (C&W), a United Kingdom corporation, is involved in the operation,
maintenance and sale of capacity of a submarine fiber optic cable between the
U.S. and Japan, known as the North Pacific Cable. The eastern end of the cable
is operated by PTC. The western end is operated by International Digital
Communications, Inc. (IDC), a Japanese corporation. Major IDC shareholders
include C. Itoh & Co., Ltd, Toyota Motor Corporation, Pacific Telesis
International and C&W.
The North Pacific Cable is the first submarine fiber optic cable to
provide direct service between the U.S. and Japan. In addition, through the
Alaska Spur, it provides the first digital fiber optic link between Alaska and
the lower 48 states. Service between the U.S. and Japan is carried on three, 420
Mbit/s digital fiber optic pairs, providing a total capacity of 1,260 Mbit/s.
Service between Alaska and the lower 48 states is carried on one, 420 Mbit/s
digital fiber optic pair. On the eastern end, the cable lands at Pacific City,
Oregon and Seward, Alaska. From the landing stations, traffic is transmitted to
carrier access centers near Portland, Oregon and Anchorage, Alaska for
interconnection with digital communications facilities serving the lower 48
states and Alaska and with facilities transmitting traffic to foreign countries.
In 1991, PTC sold capacity on the Alaska Spur and capacity in the landing
station facilities at Pacific City, Oregon and Seward, Alaska to Alascom for
approximately $56 million. In December 1992, Alascom sold 11 percent of the
Alaska Spur's capacity to GCI. On the western end, the cable lands at Miura,
Japan, and traffic is transmitted to IDC's carrier access centers in Tokyo,
Yokohama and Osaka for interconnection with Japanese domestic service providers.
For service to points beyond Japan, IDC has constructed a 75-mile submarine
cable from Miura to Chikura where it interconnects with other international
cables. IDC also participates in the Asia Pacific Cable system that links Miura
with Hong Kong, Singapore, Taiwan and Malaysia.
Construction and laying of the North Pacific Cable were completed in
December 1990, the system was made available for commercial traffic in May 1991
and final system acceptance occurred in November 1991. Forty-one private and
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<PAGE>
government-owned telecommunications firms representing 25 countries have
purchased approximately 51 percent of the cable's 17,010 circuit capacity. PTC
recognized revenues of $4.9 million in 1993, $10.8 million in 1992 and $30.9
million in 1991 related to cable and backhaul capacity sales, excluding the
Alaska Spur revenues.
The cable system is operating under a warranty of one to eight years
depending on the component of the system. The cable contractor has agreed to
certain remedies, including providing industry support programs and enhanced
repair arrangements. The Company reduced the cable inventory carrying value by
$19.2 million in 1993 as a result of the agreement with the cable contractor and
increased cash and accounts receivable by a corresponding aggregate amount.
PTC continues to market the remaining 49 percent of unsold capacity.
Marketing efforts have included the completion of tests demonstrating the
feasibility of transmitting international high-quality television signals via
fiber optics using the North Pacific Cable. Based on the Company's estimates of
growth in trans-Pacific demand for communications capacity and the availability
of other sources of capacity over the next five years, PTC believes that a
majority of the remaining capacity can be sold in that time frame.
PTC, IDC and C&W (Founders) are responsible for procuring maintenance
for the North Pacific Cable and have renewed the existing maintenance
arrangements with Cable & Wireless (Marine) Limited for an additional five-year
period beginning in April 1994. Thereafter, the contract has annual renewal
options for up to five years. The Founders continue to seek arrangements for a
maintenance vessel to be available for service on the western end of the cable.
The majority of maintenance service costs are passed on to owners of capacity on
the cable.
PT Transmission provides restoration services for the eastern end of
the North Pacific Cable under the terms of its tariff. In the event of a cable
failure, restoration services are provided via a PT Transmission satellite earth
station located at Moores Valley, Oregon.
INTERNATIONAL COMMUNICATIONS
Since 1990, the Company had reported ICH as a discontinued operation
for financial statement reporting purposes. In October 1993, the Company
purchased the remaining minority interest in ICH, which held investments in
international telecommunications subsidiaries, including TRT. TRT provides
international record messaging, message telephone and private line service
between the U.S. and foreign countries, as well as special domestic
communications services. The 14.9 percent minority interest in ICH was purchased
from a subsidiary of France Cables et Radio.
On September 23, 1993, the Company completed the sale of TRT, the
major operating subsidiary of ICH, and a smaller subsidiary, to IDB for 4.5
million shares of IDB common stock and $1 million in cash. The agreement
provided for the transfer of certain tangible assets and lease obligations from
TRT to ICH. Based on the market value of IDB stock at closing, the Company
recognized an after-tax gain from discontinued operations of $60.4 million on
the sale of TRT and the smaller subsidiary. The IDB common stock was registered
and sold in a secondary public offering in November 1993 and the Company
received $45 per share before commissions and expenses. The $190.9 million in
proceeds received by ICH
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<PAGE>
from the sale of IDB stock was paid to PTI in the form of intercompany note
repayments and dividends. PTI used these funds to reduce its long-term and
short-term debt. (See Notes 3, 4 and 12 to the Consolidated Financial Statements
incorporated herein by reference.)
OTHER COMMUNICATIONS SUBSIDIARIES AND PARTNERSHIPS
In May 1984, the Company entered into a 50 percent partnership, Bay
Area Teleport, involved in designing, constructing, operating and marketing a
regional microwave system and satellite earth station complex near San
Francisco, California. During 1991, the partnership was restructured. Under the
restructure agreement, the Company received 100 percent of Bay Area Teleport,
which is currently held by PTI Harbor Bay, Inc., a wholly-owned subsidiary.
After the restructure, Bay Area Teleport was reorganized into two corporations,
Niles Canyon Earth Station, Inc. (Niles Canyon), which provides satellite uplink
and downlink services, and Bay Area Teleport, Inc., which provides transmission
services principally in the greater San Francisco Bay Area. In the transaction
involving the sale of TRT, the Company also sold Niles Canyon to IDB. Proceeds
related to the sale of the IDB stock received in exchange for the stock of Niles
Canyon amounted to $4.3 million. (See "Telecommunications Operations -
International Communications" concerning this transaction.)
The Company also owns Upsouth Corporation (Upsouth), which owns an
earth station complex near Atlanta, Georgia and another near Carteret, New
Jersey.
In October 1993, the Company agreed to sell PTI Harbor Bay and Upsouth
to IntelCom Group, Inc. (IntelCom:ITR) for 853,147 shares of IntelCom stock and
$.2 million in cash. The Company will also receive at least 250,000 more shares
of IntelCom common stock in lieu of debt that will not be assumed by the
purchaser. The Company will be granted certain demand and piggyback registration
rights for the IntelCom stock it receives and expects the transaction to close
in the first half of 1994. Based on recent prices for IntelCom stock, the
Company could record a pre-tax gain ranging from $7 million to $10 million on
this transaction, excluding selling commissions and other expenses. The actual
gain or loss realized will be dependent on IntelCom's stock price when the
shares are sold. The transaction is subject to necessary regulatory approvals.
IntelCom provides alternative local network access, local area networks and
systems integration, as well as operating a full-service domestic and
international satellite uplink teleport.
In 1989, the Company acquired three AM/FM combination radio stations
in Oregon, Nevada and Idaho in an effort to protect an investment made when the
Company was investing in non-telecommunications businesses. In 1992, the AM
radio station in Idaho was contributed to an institution of higher education.
The Company also has signed a letter of intent to sell the FM station in Idaho
and is waiting for regulatory approval of the sale, which is expected to close
in the first half of 1994.
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<PAGE>
REGULATION
GENERAL
Alascom and the Company's LECs operate in an industry that is subject
to extensive regulation by the FCC and state regulatory agencies. Virtually all
services, both local and long distance, are provided in accordance with tariffs
filed with the appropriate regulatory agencies. The telecommunications industry
continues to undergo change as a result of a series of regulatory and judicial
proceedings regarding the deregulation of certain aspects of the industry. The
FCC and some state regulatory agencies are exploring alternative forms of
regulation that depart from traditional rate of return regulation for
telecommunications companies. These alternatives include possibilities of
opening local exchange franchises to encourage greater competition. The effects
of any such alternative form of regulation on the Company's LECs is uncertain.
Interstate and certain international services provided by Alascom are
governed by tariffs filed with the FCC. The Company's LECs are governed by
tariffs filed with the FCC for interstate access services provided to
interexchange carriers. The FCC also licenses other aspects of the Company's
telecommunications operations, including the construction and operation of its
microwave, cable and radio facilities and its satellite and earth stations.
As part of its regulation, the FCC prescribes a Uniform System of
Accounts (USOA) that dictates the account structure and accounting policies used
by both Alascom and the LECs. The FCC also establishes the principles and
procedures (separations procedures) that allocate telephone investment,
operating expenses and taxes between interstate and intrastate jurisdictions for
the Company's LEC operations and Alascom. Generally, the state regulatory
agencies have adopted the USOA and the principles and procedures prescribed by
the FCC.
To discourage carriers from subsidizing the cost of nonregulated
business activities and to protect customers from unjust and unreasonable rates,
the FCC and certain state regulatory commissions have adopted accounting and
cost allocation rules for segregating the costs of regulated services and
nonregulated services. The rules are based on fully distributed costing
principles. In addition to segregating costs, the accounting policies prescribe
guidelines for recording transactions between affiliates, require monitoring of
jurisdictional earnings of various services and set forth a process for auditing
the allocation procedures.
The Company's cellular interests are regulated by the FCC with respect
to the construction, operation and technical standards of cellular systems and
the licensing and designation of geographic boundaries of service areas. Certain
states also require operators of cellular systems to satisfy a state
certification process to serve as cellular operators.
LOCAL EXCHANGE COMPANIES
The facilities of the Company's LECs are used principally to provide
local telephone service and customer access to the long distance network. The
costs of providing services are allocated between the interstate and intrastate
jurisdictions.
Interstate service costs (both traffic sensitive and nontraffic
sensitive) are recovered through an access charge plan under which LEC and NECA
tariffs filed with the FCC allow for charges to interexchange carriers for
access
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<PAGE>
to customers. The traffic sensitive costs are recovered either directly through
access charges or through settlements with NECA. The nontraffic sensitive
portion (subscriber loop) of these interstate-related costs is recovered through
a settlement process with NECA. The nontraffic sensitive revenue pool
administered by NECA is funded by a subscriber line charge to individual
customers, interexchange carrier access charges and long-term support payments
by nonpooling LECs. Since January 1, 1991, the interstate rate-of-return
authorized by the FCC for LECs' interstate access services, has been 11.25
percent. The USF administered by NECA compensates companies whose nontraffic
sensitive costs per subscriber are greater than an established threshold over
the national average. Due to the suburban and rural nature of its operations,
most of the Company's LECs receive this compensation, as the cost of providing
local service in rural areas generally exceeds the national average.
In November 1993, based on a concern over recent growth in the size of
the USF, a Federal-State Joint Board issued a recommended decision to the FCC
proposing the adoption of interim USF rules. These interim rules recommend that
an indexed cap be placed on USF growth to allow the USF to grow at a rate no
greater than the rate of growth in the U.S.'s total working local loops. The
interim rules are intended to allow moderate growth in the total level of the
USF while the FCC and the Federal-State Joint Board undertake a re-evaluation of
the USF assistance mechanism. The Federal-State Joint Board proposed that the
interim rules remain in effect for two years. The FCC adopted the Joint Board
recommendation at the end of 1993. As most of the Company's LEC operations
receive USF compensation, significant changes to the USF assistance mechanism
could affect the Company's future results. The Company believes that placing the
indexed cap on USF growth may have a negative impact on the Company's revenues,
but the impact is not expected to be material. In addition, the Company may
request a revenue increase at the state level to offset some or all of the lost
assistance where USF proceeds are used to maintain lower rates.
As an alternative for rate-of-return regulation, the FCC adopted
optional incentive regulation for LECs beginning in 1991. Due to specific
constraints, including the requirement that all LECs under common ownership must
adopt incentive regulation when it is adopted by any LEC in the group, it is
unlikely that the Company will adopt this form of regulation in the near future.
NECA has recently filed with the FCC its own recommendation for an incentive
regulation plan. The Company intends to monitor the progress of NECA's efforts
and evaluate its options if an alternative regulation plan is implemented.
In September 1993, the Company filed, in compliance with FCC Docket
No. 91-213, to restructure its interstate switched access transport prices
consistent with the related proposal of the Telephone Utilities Exchange Carrier
Association, which was ultimately approved by the FCC in December 1993 and made
effective January 1, 1994. The local transport restructure proceeding
accomplished a further unbundling of exchange carrier switched access services.
The new structure is expected to promote network efficiency by moving access
prices for local transport closer to cost.
In 1993, the Wisconsin Public Service Commission (WPSC) mandated a new
service, effective December 1, 1993, called Extended Community Calling (ECC).
This service extends local calling areas to allow customers to reach their local
areas of interest without incurring long distance charges, even if exchange
boundaries are crossed. These areas of interest generally extend 15-miles from
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<PAGE>
the customer's home exchange. The Company believes that ECC will cause
immaterial reductions in the Company's billing and collection revenues and
access revenues, which reductions are expected to be offset in part by ECC
revenues.
In Washington, a process was started in 1990 to restructure rates to
allow the conversion of all multi-party to single-party lines, to eliminate
touchtone charges and to offer certain customers Extended Area Service (EAS). In
August 1993, the Company proposed additional revisions to rates for further
extension of EAS to substantially all of its Washington customers. By the end of
1994, all lines in Washington are expected to be single-party, with
approximately 98 percent having EAS capabilities. In May 1993, toll free calling
was implemented for the entire Flathead Valley in Montana. Evolution to
single-party service in Montana was completed during 1993. These changes are not
expected to have a significant effect on the financial results of the Company.
The Company received authorization from the Oregon Public Utilities
Commission to implement revised depreciation rates retroactive to January 1,
1993. This adjustment increased the depreciation rate and increased operating
expenses by $2.2 million. In addition, the Company has a depreciation study on
file with the WUTC for its LEC operations in the state of Washington. The
Company is in negotiation with the WUTC to resolve issues relating to the
proposed depreciation rate increase. The Company has also agreed to provide a
depreciation study to the APUC.
LONG LINES - INTERSTATE REVENUES
Alascom's interstate MTS and WATS revenues are presently derived
through the JSA with AT&T providing for cost-based settlements determined in
accordance with historical practices and regulatory procedures. The entire
Alaska interstate long distance market, including these procedures and the
settlement arrangement, have been under review by a Joint Board for several
years. Prior to 1991, AT&T, GCI and Alascom submitted proposals to the Joint
Board recommending alternative market structures in Alaska. None of these
proposals were acted upon by the Joint Board or the FCC. In December 1991, the
Company and AT&T signed an agreement to transfer to AT&T the provision of
interstate and international MTS and WATS services then currently provided in
Alaska by Alascom. This agreement terminated in January 1993 without
implementation. In October 1993, the Joint Board issued a final recommendation
concerning the restructuring of the interstate telecommunications market for
Alaska. That recommendation is awaiting FCC action. (See "Telecommunications
Operations - Alaska Market Restructuring.")
LONG LINES - ACCESS CHARGES
While Alascom's interstate MTS and WATS revenues continue to be
determined under the JSA with AT&T, Alascom purchases access to the local
network under an access tariff and billing and collection services under a
separate contract. These charges for interstate access services are determined
using access charge procedures used by LECs in the contiguous 48 states. (See
"Regulation - Local Exchange Companies.") Interstate access charges and billing
and collection charges are included under the JSA with AT&T.
Alascom makes payments for intrastate access charges through a state
access tariff. The access charge system was implemented in 1991 to accommodate
intrastate competitive entry. (See "Competition - Long Lines - Intrastate.")
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<PAGE>
The Alaska Exchange Carriers Association coordinates the filing of access
tariffs and the pooling of costs. The adoption of intrastate access charges has
had no material adverse effect on the Company's results of operations. Alascom
purchases intrastate billing and collection services under a separate contract.
LONG LINES - ALASKA SPUR
In November 1989, Alascom filed an application with the FCC seeking
authorization to acquire the Alaska Spur. (See "Telecommunications Operations
- -Pacific Telecom Cable.") On May 13, 1991, the FCC granted Alascom authorization
to acquire and operate the Alaska Spur, subject to certain conditions. Alascom
requested the FCC to issue a revised order without the conditions and did not
accept the authorization. Subsequently, the FCC issued temporary authorization
for Alascom to acquire and operate the Alaska Spur, subject to periodic renewal.
The Alaska Spur was placed into service in August 1991. The request for
reconsideration of the order is still pending before the FCC. The FCC has
granted Alascom a renewal of the temporary authorization through August 8, 1994.
In December 1992, Alascom sold 11 percent of the Alaska Spur's capacity to GCI.
COMPETITION
LOCAL EXCHANGE COMPANIES
The Company's LECs have experienced little competition in providing
basic services, primarily due to the suburban and rural nature of their service
territories. Competition from the development of alternative networks by other
carriers and of private networks (bypass) by government agencies and large
corporate customers has resulted in minor diversions of traffic from the
Company's LECs. To date, the Company has also experienced little competition
from cable TV providers and wireless technologies. Competition from these
sources may increase if regulators open basic telephone service to cable TV
operators and as wireless technologies advance. However, investment by others in
facilities will be required to provide competitive service and these investments
will be based on appropriate economic opportunities and demand for such
services. The Company believes it is well positioned to meet this type of
competition and that price and service are the significant competitive factors
in dealing with alternative networks, bypass and other forms of competition.
With respect to access service, the Company's LECs may face
competition from several sources in the future. Alternative or competitive
access carriers (CAPs) have, in various parts of the country, constructed
facilities which bypass those of the local exchange carrier to provide access
between customers and interexchange carriers. The location and extent of such
activity is determined by a number of factors, including applicable state and
federal regulatory policies, and economic and market conditions in the area. A
number of interexchange carriers have also announced or implemented programs to
construct facilities which bypass those of local exchange companies. AT&T has
entered into an acquisition agreement with a major cellular company, McCaw
Cellular Communication, in part for the apparent purpose of reducing its
dependence upon local exchange companies for access services. MCI has announced
a program for construction of facilities in twenty major metropolitan areas,
also for the purpose, in part, of reducing its dependence upon local exchange
companies for access services.
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<PAGE>
The Company believes that the activities of CAPs and the major
interexchange carriers, at present, do not pose a direct, material threat to the
Company's revenues due to the rural nature of its operations. The Company
anticipates that competition in services and facilities will evolve over time in
its LEC service areas. The Company is reviewing the potential effect such
competitive activity may have on its operations and is analyzing ways to benefit
from changes which may occur as competition increases.
LONG LINES - INTERSTATE
In 1982, the FCC authorized a variety of carriers to provide
interstate services in Alaska in competition with Alascom. GCI, a carrier
providing private line, MTS and WATS equivalent services to and from Alaska,
attracted a significant number of customers as LECs converted to equal access in
Anchorage, Fairbanks, Juneau and other areas. Although rates were a significant
competitive issue during the introduction of equal access, the rate advantage
enjoyed by GCI prior to rate integration was reduced with the integration of
toll rates in January 1987 and subsequent nationwide annual rate reductions
through 1990. As a result of these rate reductions and other factors, Alascom
has experienced growth in interstate billed minutes of 6.2 percent in 1993, 11.9
percent in 1992 and 10.4 percent in 1991. The Company believes that with minimal
rate differences, service is currently the predominant competitive factor in the
Alaska interstate market.
In January 1990, GCI filed a petition for rulemaking with the FCC
seeking to abolish the present prohibition against construction of duplicate
earth station facilities in rural Alaska. GCI stated that it desired to extend
its services to rural Alaska over a five-year period. Alascom opposed GCI's
petition, as being contrary to the public interest. The FCC has taken no action
with regard to the GCI petition.
LONG LINES - INTRASTATE
In 1990, the Alaska Legislature enacted legislation that authorized
intrastate competition and the APUC established specific regulations for
competition that allowed facilities-based competition in some areas, but
prohibited construction of duplicative facilities in most remote locations. The
APUC also designed a competitive framework under which high costs of providing
service in rural locations are shared by Alascom and its competitors through the
LEC access charge pooling mechanism.
Intrastate competition in Alaska commenced in May 1991. Competition
has been introduced in approximately 90 percent of the Company's intrastate
market. The Company's intrastate long distance service revenues, net of related
access charges, accounted for approximately five percent of the Company's total
revenues for 1993 and six percent in 1992 and 1991. As a result of competition,
intrastate minute volumes increased 1.7 percent in 1993 and decreased 7.3
percent in 1992 and 4.9 percent in 1991. The Company has mounted a marketing
campaign in response to this competition and believes that price and service are
the significant competitive factors in this market.
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CELLULAR OPERATIONS
Under FCC guidelines, two licenses were granted in each MSA and RSA to
provide cellular service. All of the MSAs and RSAs in which the Company has an
ownership interest are operational. The Company believes that price and service
are significant competitive factors in the cellular market. A competitive threat
to cellular operations from other wireless communications technologies also
exists. This threat may increase as these technologies are developed in the
future.
In September 1993, the FCC allocated 160 megahertz (MHz) of spectrum
for Personal Communications Services (PCS). The FCC created seven licensed
frequency blocks representing 120 MHz of spectrum and identified 40 MHz of
spectrum for unlicensed PCS. The licensed spectrum was channelized into two 30
MHz blocks, one 20 MHz block and four 10 MHz blocks. The FCC defined the PCS
license areas based on 51 Major and 492 Basic Trading Areas (MTA and BTA,
respectively), as defined by Rand McNally. PCS licenses will be awarded through
an auction process starting not earlier than May 1994. The Company's cellular
operations are eligible to participate in the PCS auction subject to certain
limitations established by the FCC. The PCS license term is set at 10 years with
requirements to cover 33 percent of the POPs within five years, 67 percent
within seven years and 90 percent of the POPs within ten years. The Company is
monitoring PCS developments and evaluating its alternatives under the proposed
PCS licensing rules.
CABLE OPERATIONS
The North Pacific Cable is currently the only operating cable between
the U.S. and the western Pacific that has available capacity for sale. AT&T
placed a cable into service between the U.S. and Japan in late 1992. This cable
competed directly with the North Pacific Cable for subscribers. AT&T has stated
that all capacity on its cable has been subscribed. AT&T has announced plans for
an additional cable system between the eastern and western Pacific for
completion in the period from 1995 to 1997. The North Pacific Cable also
competes with available capacity on international satellites.
ENVIRONMENT
Compliance with federal, state and local provisions relating to
protection of the environment has had no significant effect on the capital
expenditures or earnings of the Company. Future effects of compliance with
environmental laws are not expected to be material, but environmental laws could
become more stringent over time.
EMPLOYEES
At December 31, 1993, the Company had 2,834 employees, approximately
41 percent of whom were members of seven different bargaining units. These units
are represented by one of the International Brotherhood of Teamsters, the
International Brotherhood of Electrical Workers, Communication Workers of
America or the NTS Employee Committee. During 1993, negotiations were completed
on two collective bargaining agreements governing 144 employees. Negotiations on
six contracts covering 1,180 employees are planned in 1994. Relations with
represented and non-represented employees continue to be generally good.
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<PAGE>
CONSTRUCTION PROGRAM
The Company financed its 1993 construction program primarily through
internally generated funds. Construction expenditures for 1993 and estimated
expenditures for 1994 through 1996, excluding expenditures for the construction
contract with USWC amounting to $5.7 million in 1993 and estimated at $28
million for 1994, are as follows (in millions):
<TABLE>
<CAPTION>
Plan
----------------------------------------
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C>
LECs $ 73.7 $ 79.6 $ 98.4 $ 94.2
Long Lines 17.9 28.6 12.2 10.5
PT Cellular 7.4 6.8 5.8 5.3
Other 3.6 8.8 2.4 2.2
----- ----- ----- -----
Total $102.6 $123.8 $118.8 $112.2
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The estimates of construction costs set forth above are subject to continuing
review and adjustment. The Company anticipates that it will be able to finance
substantially all of its construction programs for 1994 from internally
generated funds. Estimated increases in LEC construction expenditures in 1995
and 1996 relates mainly to the acquisition of USWC properties in Colorado
anticipated at the end of 1994.
ACQUISITION PROGRAM
The Company expects to complete additional acquisitions as attractive
opportunities become available. The Company's strategy is to acquire rural or
suburban local exchange properties with operating characteristics similar to
existing properties of the Company. These opportunities will allow the Company
to leverage LEC investments by providing data processing and administration
through its centralized systems. The Company seeks to realize economies of scale
through these acquisitions, particularly where the properties are near the
Company's current operations or are of sufficient size to support moving into a
new geographic area. (See "Item 1. Business - Telecommunications Operations -
Local Exchange Companies" for information regarding pending acquisitions of USWC
properties in Colorado, Oregon and Washington.)
Item 2. PROPERTIES
The telephone properties of the Company's LECs include central office
equipment, microwave and radio equipment, poles, cables, rights of way, land and
buildings, customer premise equipment, vehicles and other work equipment. Most
of the Company's division headquarters buildings, telephone exchange buildings,
business offices, warehouses and storage areas are owned by the Company's LECs
and are pledged to secure long-term debt. In addition, certain of the LECs'
microwave facilities, central office equipment and warehouses are located on
leased land. Such leases are not considered material, and their termination
would not substantially interfere with the operation of the Company's business.
(See "Item 1. Business - Telecommunications Operations - Local Exchange
Companies" for information regarding the states in which the Company has LEC
operations.)
The properties of Alascom include toll centers with toll switching
facilities, microwave and radio equipment, satellite transmit and receive earth
stations, submarine cables (including the Alaska Spur), land, warehouse and
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<PAGE>
administrative buildings, as well as transportation and other work equipment.
Although Alascom owns most of its buildings, much of its telecommunications
equipment is located on leased property. In addition, Alascom leases certain
microwave and satellite circuits to carry both interstate and intrastate
communications. The Company owned 16 transponders on Aurora II until October
1992 when the transponders were sold and leased back on an operating lease basis
for a 69-month period. Aurora II was launched in May 1991 to replace the
Company's original satellite and was placed in service in July 1991. The Company
purchased and placed in service one additional transponder on Aurora II in 1993.
(See "Item 1. Business - Telecommunications Operations - Long Lines" for
information concerning other properties of Alascom.)
PT Cellular's subsidiaries are partners in partnerships that own or
lease switching facilities, cell site towers, cell site radio equipment and
other equipment required to furnish cellular service to the areas they serve.
(See "Item 1. Business - Telecommunications Operations - Cellular Operations"
for information regarding the states in which the Company has cellular
operations.)
The properties of PTC and PT Transmission include a satellite transmit
and receive earth station, located at Moores Valley, Oregon, fiber optic cables,
land, buildings, operating facilities and business offices, all of which are
owned. In addition, PTC leases a duplicate cable for backup between Pacific
City, Oregon and Portland, Oregon and business office space. PTC also holds in
inventory its portion of the unsold capacity in the North Pacific Cable and
backhaul facilities.
Almost all the properties of ICH were sold in 1993 to IDB. However,
ICH owns land, buildings and office equipment in Florida. ICH is obligated under
a lease for office space in Washington D.C., which housed TRT's administrative
offices. ICH is actively pursuing the lease or sublease of these properties. ICH
has leased the Florida building and equipment to IDB for three years with
renewal options for an additional four years. (See Item 1. "Business -
Telecommunications Operations - International Communications" for information
concerning the sale of ICH's major operating subsidiary to IDB.)
The Company's executive, administrative, purchasing and certain
engineering functions are headquartered in Vancouver, Washington. The Company
has a 50 percent ownership interest in its headquarters building and, through a
long-term lease, occupies approximately 72 percent of the 225,000 square-foot
building. The Company leases most of the equipment used in conjunction with
providing data processing services.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
PacifiCorp Financial Services, Inc. (the "Company") is a holding company
with four principal business segments - Financial Services, Real Estate,
and, as a result of problem loan situations, Manufacturing and Agriculture.
These business segments conform to the definitions provided by Statement of
Financial Accounting Standards No. 14 - "Financial Reporting of Segments of
a Business Enterprise." Financial information concerning these segments
can be found in the Company's Consolidated Financial Statements and Notes
thereto.
The Company is a wholly-owned subsidiary of PacifiCorp Holdings, Inc.
("Holdings"), which is, in turn, a wholly-owned subsidiary of PacifiCorp.
PacifiCorp is a Portland, Oregon-based electric utility, conducting retail
electric utility operations under the names of Pacific Power & Light
Company and Utah Power & Light Company. The common stock of PacifiCorp
(PPW) is traded on the New York Stock Exchange and the Pacific Stock
Exchange. Holdings was incorporated in Delaware in 1984 for the purpose of
holding the non-electric subsidiaries of PacifiCorp. In addition to owning
100% of the Company's common stock, Holdings owns approximately 87% of the
common stock of Pacific Telecom, Inc. ("Pacific Telecom"). The common
stock of Pacific Telecom (PTCM) is traded on the national over-the-counter
market. Pacific Telecom provides local telephone and access services in
Alaska, seven other western states and three midwestern states; long-
distance voice and data services in Alaska; cellular mobile telephone
services; and is also involved in the sale of capacity in and operation of
a submarine fiber optic cable between the United States and Japan.
The Company was incorporated in the State of Oregon in 1949 and was
acquired by Holdings in September 1985. The Company's principal executive
offices are located at 825 N.E. Multnomah, Suite 775, Portland, Oregon
97232, and its telephone number is (503) 797-7200.
STRATEGY
To achieve PacifiCorp's strategic objective of significantly reducing the
Company's financial services assets, the Company expects to sell
substantial portions of its assets. The Company presently expects to
retain only its tax advantaged investments in leveraged lease assets
(primarily aircraft and project finance) and affordable housing projects
(included with real estate). As a result, the Company expects to
substantially reduce its workforce during 1994. For further discussion of
the impact of the Company's strategic direction, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
3
<PAGE>
BUSINESS SEGMENTS
FINANCIAL SERVICES
AVIATION FINANCE
The Company has been a financier to the aviation industry since 1985.
However, as a result of the desire of PacifiCorp to reduce financial
services assets, the Company has made only limited new investments in
aircraft or loans relating to aircraft since 1991. The Company's portfolio
consists primarily of Stage III noise compliant aircraft, both narrow and
widebody (at December 31, 1993, approximately 90% of the Company's
portfolio investment was Stage III noise compliant). At December 31, 1993,
the Company's Aviation Finance portfolio had total assets of $454.3 million
(52 aircraft, one of which was held in inventory at December 31 but
subsequently leased in February 1994), representing approximately 40% of
the Company's consolidated assets.
COMPUTER LEASING
In late 1992, the Company began conducting its computer leasing activity
through a 50% owned corporation, Pacific Atlantic Systems Leasing, Inc.
("PASLI"). PASLI is owned by PacifiCorp Capital, Inc., a wholly-owned
subsidiary of the Company, and Bell Atlantic Systems Leasing, Inc. In
addition to being the vehicle for these shareholders to conduct all
computer leasing business activities, PASLI manages both shareholders'
preexisting computer leasing portfolios. PASLI also provides equipment
trading, syndication and systems integration for both mainframe and mid-
range systems. At December 31, 1993, Computer Leasing had a portfolio of
$87.6 million, including its $31.2 million investment in PASLI,
representing approximately 7.7% of the Company's consolidated assets.
OTHER FINANCIAL SERVICES
Other Financial Services includes centralized credit administration and
asset management for the Company. Although no longer originating new
business, the Company continues to manage its remaining asset-based lending
portfolio, which includes revolving lines of credit secured by accounts
receivable and inventory, intermediate term loans secured by plant and
equipment, and unsecured or partially secured cash flow-based loans to its
existing customers. These customers are manufacturers and operators in
various industries and other owners of capital equipment. Other Financial
Services also includes the Company's project finance investments, which
include a polymer plastics complex and an undivided interest in a
traditional coal-fired power plant. At December 31, 1993, Other Financial
Services had a portfolio of $212.9 million, or approximately 18.8% of the
Company's consolidated assets.
REAL ESTATE
AFFORDABLE HOUSING GROUP
The Company has historically focused on investing in apartment housing
projects that are eligible for the federal low income housing tax credit.
At December 31, 1993, the Company had investments in 14 projects consisting
of 2,895 rental units, which were approximately 96% occupied. These
projects, which are generally suburban, garden style apartment complexes,
are located throughout the United States. In February 1993, the Company
successfully completed its first syndication of an approximate 80% interest
in three projects for $11.6 million in cash. The Company expects to
complete similar
4
<PAGE>
transactions in the future. Further information related to these tax
credits can be found in Note 12 to the Company's Consolidated Financial
Statements. At December 31, 1993, Affordable Housing assets totaled $139.7
million, representing approximately 12.3% of the Company's consolidated
assets.
PACIFIC DEVELOPMENT, INC. ("PDI")
PDI owns and manages several office buildings (in aggregate, approximately
1,019,000 square feet), in which the Company and PacifiCorp are significant
tenants. At December 31, 1993, these buildings were approximately 97%
occupied. PDI also owns other developed and undeveloped property in the
east side business district of Portland, Oregon, known as the Lloyd
District. During the past few years, PDI has sold certain of its Lloyd
District properties and will continue efforts to sell additional
properties. In March 1994, PDI sold one of its office buildings and
certain other assets to PacifiCorp for a gross sales price of $47.7 million
and net cash proceeds of $30.3 million, after repayment of related non-
recourse debt (see Note 21 to the Consolidated Financial Statements).
At December 31, 1993, PDI had assets of $112.6 million, representing
approximately 9.9% of the Company's consolidated assets.
OTHER REAL ESTATE
At December 31, 1993, the Company had other real estate holdings, primarily
in Springfield, Illinois, totaling $71.0 million, or 6.3% of the Company's
consolidated assets. Four of the Company's Springfield properties were
subsequently sold in March 1994 (see Note 21 to the Consolidated Financial
Statements).
MANUFACTURING
VERMONT CASTINGS, INC. ("VCI")
Since the acquisition of VCI in May 1990 (as the result of a loan default),
the Company has overseen the management of VCI with the objective of
improving operating performance to a point where the Company could maximize
the recovery of its investment. During the past three years, VCI's
performance has improved and the Company is actively pursuing the sale of
its interest in VCI.
VCI is a major participant in the Fire on the Hearth industry (heating and
decorative appliances, including freestanding stoves, fireplaces and
fireplace inserts, fueled by either wood, natural or propane gas, pellets
or coal). VCI's principal products currently consist of cast iron
freestanding wood and gas burning stoves, fireplaces and inserts. These
products are marketed under the Vermont Castings, DutchWest and Wonderfire
brand names. In 1992, the Company successfully introduced three new gas
fueled appliances that significantly advanced its presence in this growing
segment of the industry. The Company's products are currently distributed
through independent domestic and foreign dealers.
The Fire on the Hearth industry is seasonal with the majority of revenues
occurring during the last four months of the calendar year. VCI's raw
material is primarily scrap iron and pig iron, which are readily available
commodities.
At December 31, 1993, this segment had total assets of $30.6 million,
representing approximately 2.7% of the Company's consolidated assets.
5
<PAGE>
AGRICULTURE
COLOR SPOT, INC. ("COLOR SPOT")
Effective March 1, 1993, in response to a loan default by Color Spot, Inc.,
the Company acquired certain assets and assumed certain liabilities of
Color Spot, Inc., a large West Coast wholesale nursery headquartered near
Richmond, California, in exchange for forgiveness of a portion of the loan.
The Company is operating this business under the name "Color Spot." The
Company oversees the management of Color Spot with the objective of
increasing value in a manner that would facilitate the disposition of its
interest in Color Spot.
Color Spot's primary business is the sale of bedding plants to large retail
customers. Color Spot's six largest customers account for approximately
80% of its sales. Color Spot's business is seasonal, with the highest
level of activity occurring during the spring and early summer. For
further discussion, see Note 3 to the Company's Consolidated Financial
Statements.
At December 31, 1993, Color Spot had total assets of $19.9 million,
representing approximately 1.8% of the Company's consolidated assets.
ITEM 2. PROPERTIES
FINANCIAL SERVICES - The principal executive offices of the Company are
leased from the Company's real estate subsidiary, PDI. The Company's
financial services operations also maintain other leased office premises,
generally under noncancellable leases. For additional information
concerning the Company's lease obligations, see Note 15 to the Company's
Consolidated Financial Statements.
REAL ESTATE - The Company's Affordable Housing group owns interests in 14
projects consisting of 2,895 rental units located throughout the United
States. As of December 31, 1993, PDI owned several office buildings
(approximate aggregate square footage of 1,019,000 and other developed and
undeveloped property) in the Lloyd District of Portland, Oregon. PDI sold
one of its office buildings (approximate square footage of 428,000) to
PacifiCorp in March 1994. This building houses the principal executive
offices of the Company.
MANUFACTURING - VCI owns certain real property, primarily consisting of a
cast iron foundry located on 76 acres in Randolph, Vermont, an enamelling
and assembly plant located on 12 acres in Bethel, Vermont, and an
assembly/administrative facility in Bristol, England. VCI leases certain
real property consisting of an administrative and research facility located
on 4.5 acres in Bethel, Vermont.
AGRICULTURE - Color Spot owns and/or leases 456 acres of land, located at
six sites in California. Color Spot owns 3,225,290 square feet of
greenhouses at these locations. Color Spot also owns an office building in
San Pablo, California that houses its administrative personnel.
6
