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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, 1994
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
700 N.E. MULTNOMAH,
PORTLAND, OREGON
(Address of principal executive 97232-4116
offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (503) 731-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------------------------------- ---------------------------------------
<S> <C>
Common Stock New York Stock Exchange
Pacific Stock Exchange
$1.98 No Par Serial Preferred Stock, New York Stock Exchange
($25 Stated Value), Series 1992
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
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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. /X/
On March 1, 1995, the aggregate market value of the shares of voting stock
of the Registrant held by nonaffiliates was approximately $5.8 billion.
As of March 1, 1995, there were 284,259,719 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, 1994 are incorporated by reference in Parts I and II.
Portions of the Annual Reports on Form 10-K of Pacific Telecom, Inc. and
PacifiCorp Financial Services, Inc. for the year ended December 31, 1994 are
incorporated by reference in Part I.
Portions of the proxy statement of the Registrant for the 1995 Annual
Meeting of Shareholders are incorporated by reference in Part III.
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<PAGE>
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......................................... 9
Other................................................... 9
Employees............................................... 10
Item 2. Properties................................................ 10
Item 3. Legal Proceedings......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders....... 13
Item 4A. Executive Officers of the Registrant...................... 13
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 15
Item 6. Selected Financial Data................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 15
Item 8. Financial Statements and Supplementary Data............... 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... 15
Part III
Item 10. Directors and Executive Officers of the Registrant........ 15
Item 11. Executive Compensation.................................... 15
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... 15
Item 13. Certain Relationships and Related Transactions............ 15
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................. 16
Signatures.............................................................. 20
Appendices
Schedule II
Statements of Computation of Ratio of Earnings to Fixed Charges
Statements of Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
List of Subsidiaries
Portions of the Annual Reports on Form 10-K of Pacific Telecom, Inc.
and PacifiCorp Financial Services, Inc. for the year ended December
31, 1994
</TABLE>
i
<PAGE>
DEFINITIONS
When the following terms are used in the text they will have the meanings
indicated:
<TABLE>
<CAPTION>
TERM MEANING
--------------------------------------------- -------------------------------------------------------------------
<S> <C>
BPA.......................................... Bonneville Power Administration
Company...................................... PacifiCorp, an Oregon corporation
FERC......................................... Federal Energy Regulatory Commission
Holdings..................................... PacifiCorp Holdings, Inc., a wholly owned subsidiary of the Company
PGC.......................................... Pacific Generation Company, a wholly owned subsidiary of Holdings,
and its subsidiaries
PFS.......................................... PacifiCorp Financial Services, Inc., a wholly owned subsidiary of
Holdings, and its subsidiaries
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
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 Pacific Power and Utah Power, and engages in power production
and sales on a wholesale basis under the name PacifiCorp. The Company formed
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, to develop
and expand its independent power production and cogeneration business, and to
reduce the size and narrow the scope of its other diversified activities.
Through 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 involved in the operation and maintenance of and sale of capacity in a
submarine fiber optic cable between the United States and Japan. Holdings has
entered into an agreement and plan of merger with Pacific Telecom under which
Holdings would acquire the 13% publicly held minority interest in Pacific
Telecom for $30 per share. The merger requires approval by the holders of a
majority of the outstanding shares of Pacific Telecom not owned by Holdings (5.3
million shares), and is subject to regulatory approvals and other conditions
customary to such transactions.
Holdings owns 100% of PGC, which is engaged in the independent power
production and cogeneration business. Holdings also owns 100% of PFS. Consistent
with PacifiCorp's strategic plan, PFS has sold substantial portions of its loan,
leasing, manufacturing and real estate investments and expects to continue its
disposition activities over the next several years. PFS presently expects to
retain only its tax-advantaged investments in leveraged lease assets (primarily
aircraft) and low-income housing projects.
Note 16 to the Company's Consolidated Financial Statements, incorporated
herein by reference under Item 8, 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, 1994, 76% of
PacifiCorp's revenues from operations were derived from Electric Operations,
while Pacific Telecom contributed 20%.
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 Utah Power, and engages in wholesale electric transactions under the name
PacifiCorp. Pacific Power and Utah Power provide electric service within their
respective service territories. Power production, wholesale sales, fuel supply
and administrative functions are managed on a coordinated basis.
SERVICE AREA
The Company serves 1.3 million retail customers in service territories
aggregating about 153,000 square miles in portions of seven Western states:
Utah, Oregon, Wyoming, Washington, Idaho, California and Montana. The service
area contains diversified industrial and agricultural economies.
1
<PAGE>
Principal industries include oil and gas extraction, lumber and wood products,
paper and allied products, chemicals and primary metals and mining. Agricultural
products include potatoes, hay, grain and livestock.
The Company's distribution assets in northern Idaho were sold on December
31, 1994 following approval of the sale by the Idaho Public Utilities
Commission. The decision to sell these assets was based on a number of
competitive factors, including the likelihood of significant future price
increases. The sale affects 9,800 residential, commercial and industrial
customers.
The geographical distribution of retail electric operating revenues for the
year ended December 31, 1994 was Utah, 36%; Oregon, 31%; Wyoming, 15%;
Washington, 8%; Idaho, 5%; California, 3%; and Montana, 2%.
CUSTOMERS
Electric utility revenues and energy sales, by class of customer, for the
three years ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (Dollars in
millions):
Residential................. $ 724.9 28% $ 698.9 29% $ 649.8 28%
Commercial.................. 570.4 22 543.9 22 526.9 23
Industrial.................. 726.3 28 696.2 28 695.6 30
Government, Municipal and
Other...................... 30.7 1 29.8 1 29.9 1
-------- ---- -------- ---- -------- ----
Total Retail Sales........ 2,052.3 79 1,968.8 80 1,902.2 82
Wholesale Sales-Firm........ 456.2 18 422.5 17 356.5 15
Wholesale Sales-Nonfirm... 76.5 3 77.3 3 71.3 3
-------- ---- -------- ---- -------- ----
Total Energy Sales........ 2,585.0 100% 2,468.6 100% 2,330.0 100%
---- ---- ----
---- ---- ----
Other Revenues (1).......... 62.8 38.3 32.4
-------- -------- --------
Total Operating
Revenues................. $2,647.8 $2,506.9 $2,362.4
-------- -------- --------
-------- -------- --------
Kilowatt-hours Sold (kWh in
millions):
Residential................. 12,127 21% 12,055 21% 11,230 21%
Commercial.................. 10,645 18 10,085 18 9,733 18
Industrial.................. 20,306 34 19,671 34 19,942 36
Government, Municipal and
Other...................... 623 1 602 1 606 1
-------- ---- -------- ---- -------- ----
Total Retail Sales........ 43,701 74 42,413 74 41,511 76
Wholesale Sales-Firm........ 12,418 21 11,919 21 10,455 19
Wholesale Sales-Nonfirm..... 3,207 5 3,030 5 2,965 5
-------- ---- -------- ---- -------- ----
Total kWh Sold............ 59,326 100% 57,362 100% 54,931 100%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
<FN>
------------------------
(1) Includes miscellaneous and steam heating revenues.
</TABLE>
The Company's seven-state service territory has complementary seasonal load
patterns. In the western sector, customer demand peaks in the winter months due
to space heating requirements. In the eastern sector, 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 1994, no single retail customer accounted for more than 1.5% of the
Company's retail utility revenues and the 20 largest retail customers accounted
for 12% of total retail electric revenues.
2
<PAGE>
COMPETITION
Although the Company operates as a regulated monopoly within its service
territories, the Company encounters significant competition from both
traditional and nontraditional energy suppliers. Competition varies in form and
intensity and includes competition from both 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.
The Energy Policy Act of 1992 eased restrictions on independent power
production and gave the FERC authority to mandate wholesale wheeling. The FERC
is moving quickly to set the stage for competition. In a series of recently
released orders and notices of proposed rulemaking, the FERC has heightened the
level of industry discussion regarding topics such as transmission access and
pricing, stranded investment, unbundling of services and comparability of
service standards. In addition, several states have taken actions that may
increase competition at the retail level. For example, the California Public
Utilities Commission is conducting a rulemaking that would allow competition for
all retail electric customers in California. The Michigan Public Service
Commission has also ordered an experimental five-year program to evaluate
competition for large retail customers in that state.
The Company is formulating strategies to meet these new challenges and
maintain its competitive position. The Company has restructured its electric
operations into three internal business units -- generation, wholesale
transactions and transmission, and retail sales. The Company is also seeking
alternate forms of regulation that will include performance indices to give
shareholders an appropriate opportunity to share in the rewards and risks of
competition. The Company plans to focus on the development of new products and
services, as well as the use of existing technologies in new ways. The Company
has begun to offer power supply services to other utilities, including dispatch
assistance, daily system load monitoring, backup power, power storage and power
marketing, and services to retail customers that encourage efficient use of
energy. In addition, the Company has recently opened a wholesale power marketing
office in Nevada. Depending upon the success of these strategies, the Company
will continue to adjust its competitive direction.
For a discussion of accounting for the effects of regulation, see Note 1 to
the Company's Consolidated Financial Statements incorporated herein by reference
under Item 8.
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 8,413.5 megawatts ("MW") and plant net capability of 7,983.1
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 1995 will be supplied by its hydroelectric plants and
79% by
3
<PAGE>
its thermal plants. The balance of 14% will be obtained under long-term purchase
contracts, interchange and other purchase arrangements. Note 9 to the Company's
Consolidated Financial Statements, incorporated by reference under Item 8,
contains additional details relating to the Company's purchase of power under
long-term arrangements.
The Company is purchasing 1,100 MW of firm capacity from the BPA pursuant to
a recently executed long-term agreement that extends through August 1, 2011. The
Company's current annual payment under this agreement is $77.2 million. The
agreement provides for this amount to escalate at the rate of increase of BPA's
average system cost. See "Regulation" for information concerning an increase in
the BPA's rates.
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 the BPA, and the Company owns a 2.5% interest.
Recovery of the Company's remaining investment in the Trojan Plant ($13.4
million at December 31, 1994) and estimated share of plant closure and
decommissioning costs ($15.4 million at December 31, 1994) is 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 1994, the Company
purchased an average of 102 MW from qualifying facilities, compared to an
average of 94 MW in 1993.
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 8,903 MW occurred on December 5, 1994,
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 1994, wholesale sales accounted for
26% of total energy sales and 21% 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 9% of the Company's total
energy requirements in 1994. Nonfirm purchases were 5% of total energy
requirements in 1994 and slightly less than the total amount of energy sold by
the Company on the nonfirm wholesale market during the year.
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.
In 1993, the Company signed a contract to purchase the entire output from
the Hermiston Generating Project located near Hermiston, Oregon. This 474
megawatt natural gas cogeneration project is being developed by U.S. Generating
Company ("U.S. Generating"). In November 1994, U.S. Generating commenced
construction of the plant. The Company has entered into an agreement to
purchase, subject to certain conditions, a 50% ownership interest in this
project for approximately $156 million. The payment is also contingent upon
commercial operation of the project, which is expected to occur in July 1996.
4
<PAGE>
The Company has signed a contract to build a 50 MW cogeneration project at
the James River paper mill in Camas, Washington. The steam royalty agreement
extends for 20 years. The facility will use steam produced for the paper making
process to drive an electric turbine generator and is expected to begin
operating in late 1995.
The Company plans to participate in two wind generation projects, a 70 MW
project in Wyoming and a 31 MW project in Washington, both of which are to be
built by Kenetech Windpower and scheduled to begin producing power in 1996. The
Company plans to own 53.2%, or about 38 MW of the Wyoming project, and 60%, 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 a $20 million fee in
January 1997 for rights and services provided by APS. Commercial operation dates
for the turbines have not been established.
PROJECTED DEMAND
Annual increases in retail kilowatt-hour sales for the Company have averaged
2% since 1989. 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.
In connection with its long-range integrated resource planning process,
which includes load growth projections for its service areas, the Company
considered a range of average annual growth in energy requirements from 0.3% to
3.8% over a 20-year horizon. For the period 1995 to 1999, the average annual
growth is expected to be about 2%. 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 intends to 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 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 $44 million for demand-side resources in 1994, while
acquiring 18.7 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 to certain customers in those industries.
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.
5
<PAGE>
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 currently
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 alleges violations of
opacity emission standards and seeks civil monetary penalties and an injunction.
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 ("SO(2)") and nitrogen oxides ("NO(x)") from utility
generating plants, and establish a system of marketable SO(2) 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 SO(2) emission controls. However, the new law
will result in additional operating costs because the Company will be required
to maintain and manage SO(2) emission levels, install approximately $12 million
of emission monitoring equipment, and reduce NO(x) emissions at some of its
generating plants. The SO(2) emission allowances awarded to the Company are
sufficient to enable the Company to meet its current needs and expansion plans
and to enable the Company to take advantage of opportunities to sell surplus
allowances to other utilities. In 1994, the Company recorded the sales of a
portion of its surplus allowances for $9 million. The Company may have
approximately 20,000 to 25,000 tons of surplus SO(2) emission allowances
available for sale each year until 2024.
In February 1995, the Southwest Air Pollution Control Authority ("SWAPCA")
published a preliminary determination of the SO(2) emission limitations to be
imposed on the Centralia steam electric generating plant through the application
of Reasonably Available Control Technology ("RACT") as mandated by the state of
Washington's Clean Air Act. The RACT determination considers technical
feasibility, economic impact and other issues in setting an emissions level for
the plant. Such limitations could be achieved through the use of low-sulfur coal
from sources other than the Centralia mine, or by flue gas desulfurization
systems on a portion of the flue gasses, or a combination of those or other
means, certain of which could require capital expenditures. The Company and
SWAPCA are discussing the appropriate emission level to be imposed at the plant.
Emissions from coal-fired generating plants include carbon dioxide (CO(2)).
Carbon dioxide emissions are not currently subject to regulation, but have been
the subject of increasing public concern. In 1994, the Company joined with 37
other investor-owned utilities to sign a voluntary agreement with the U.S.
Department of Energy addressing CO(2) emissions. The Company's specific
agreement includes a commitment to reduce its 1990 CO(2) emissions rate by 10%
and to spend $1 million on offset projects by the year 2000. The Company is
testing various techniques of offsetting CO(2) emissions to determine their
feasibility and cost effectiveness.
6
<PAGE>
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 and other
species 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 energy 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 is also 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 the 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 directed by the U.S.
Bureau of Reclamation during periods of critically low flows. 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.
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 and cities 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 Public
Utilities 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 affected property, may be liable for the 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
7
<PAGE>
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 financial position or 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, the 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 currently has the required discharge permits for its
facilities, except for a dredging permit with respect to Bear Lake in Idaho
which is expected to involve a contested hearing. Failure to obtain that permit
could adversely affect certain of the Company's hydroelectric facilities on the
Bear River. 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, the 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 may be faced with considerable
expense to change its disposal practices and modify its existing disposal
facilities.
MISCELLANEOUS. In cooperation with Bureau of Land Management ("BLM") and
the FWS, the Company has installed a system to prevent birds from landing in the
flue gas desulfurization waste pond at the Naughton Plant pond. The Company is
studying possible methods of preventing bird landings on a similar pond at the
Jim Bridger plant.
REGULATION
The Company is subject to the jurisdiction of public utility regulatory
authorities of each of the states in which it conducts 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. The licenses of 11 of the Company's
hydroelectric projects expire within the next 10 years. These projects represent
458 MW, or 43%, of the Company's hydroelectric generating capacity. In the new
licenses, 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
are expected to 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 the Company 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 the Company to be about average in their treatment of
the rate applications of utilities.
BPA plans to increase its power and wheeling rates effective in late 1995 or
early 1996. The Company's firm capacity purchase and wheeling expenses will be
affected by this increase. In addition,
8
<PAGE>
any increase in the BPA's rates will reduce the exchange benefits directly
received by the Company's residential and small farm customers. The Company
intends to request price increases that will allow it to recover the loss of
exchange benefits.
CONSTRUCTION PROGRAM
The following table shows actual construction costs for 1994 and the
Company's estimated construction costs for 1995 through 1997, including costs of
acquiring demand-side resources. The estimates of construction costs for 1995
through 1997 are subject to continuing review and the Company makes appropriate
revisions. 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
ACTUAL ----------------
TYPE OF FACILITY 1994 1995 1996 1997
------------------------------ ------ ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Production.................... $143 $105 $181 $181
Transmission.................. 81 55 66 60
Distribution.................. 246 221 204 206
Mining........................ 77 20 29 42
Other......................... 91 133 82 80
------ ---- ---- ----
Total....................... $638 $534 $562 $569
------ ---- ---- ----
------ ---- ---- ----
</TABLE>
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. Pacific Telecom's sale of Alascom, Inc. to AT&T Corp. is pending.
Pacific Telecom has acquired and is developing, operating and managing cellular
mobile telephone services in seven states. Pacific Telecom is also involved in
the operation and maintenance of and sale of capacity in a submarine fiber optic
cable between the United States and Japan. For further information with respect
to the business of Pacific Telecom and the pending merger under which Holdings
would acquire the minority interest in Pacific Telecom, see "Item 1. Business"
of the Annual Report on Form 10-K of Pacific Telecom, Inc. for the year ended
December 31, 1994; such information is incorporated herein by this reference.
See "Item 3. Legal Proceedings" for a discussion of certain litigation
affecting Pacific Telecom.
OTHER
Consistent with PacifiCorp's strategic plan, PFS plans to continue to sell
portions of its loan, leasing and real estate investments over the next several
years. PFS expects to retain only its tax-advantaged investments in leveraged
lease assets (primarily aircraft) 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, 1994; such information is incorporated herein by this
reference.
During 1994, the Company's wholly owned independent power production and
cogeneration business, PGC, through its subsidiaries, began construction of a
240 MW cogeneration facility in California. When completed, the facility will be
operated by PGC and PGC will own approximately 46% of the completed project. PGC
plans to continue to pursue opportunities in the U.S. market and has begun a
preliminary investigation of opportunities in the international markets.
9
<PAGE>
EMPLOYEES
PacifiCorp and its subsidiaries had 12,845 employees on December 31, 1994.
Of these employees, 9,281 were employed by PacifiCorp and its mining affiliates,
2,762 were employed by Pacific Telecom and 802 were employed by PFS, PGC and
other subsidiaries.
Approximately 64% 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,
1994; such information is incorporated herein by this reference.
In the Company's judgment, employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company owns 52 hydroelectric generating plants and has an interest in
one additional plant, with an aggregate nameplate rating of 1,079.2 MW and plant
net capability of 1,124.5 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 6,858.6 MW. The following table summarizes the
Company's existing generating facilities:
<TABLE>
<CAPTION>
INSTALLATION NAMEPLATE PLANT NET
LOCATION ENERGY SOURCE DATES RATING(MW) CAPABILITY(MW)
--------------------- --------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
HYDROELECTRIC PLANTS
Swift....................... Cougar, Washington Lewis River 1958 240.0 267.9
Merwin...................... Ariel, Washington Lewis River 1931-1958 136.0 144.0
Yale........................ Amboy, Washington Lewis River 1953 134.0 132.0
Five North Umpqua Plants.... Toketee Falls, Oregon N. Umpqua River 1950-1956 133.5 135.5
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 14.0
Fish Creek.................. Toketee Falls, Oregon Fish Creek 1952 11.0 12.0
33 Minor Hydroelectric
Plants..................... Various Various 1896-1990 99.7 95.5*
---------- -------
Subtotal (53 Hydroelectric Plants) 1,079.2 1,124.5
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
INSTALLATION NAMEPLATE PLANT NET
LOCATION ENERGY SOURCE DATES RATING(MW) CAPABILITY(MW)
--------------------- --------------- ------------ ---------- --------------
THERMAL ELECTRIC PLANTS
<S> <C> <C> <C> <C> <C>
Jim Bridger................. Rock Springs, Wyoming Coal-Fired 1974-1979 1,495.0* 1,386.7*
Huntington.................. Huntington, Utah Coal-Fired 1974-1977 892.8 845.0
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* 639.4*
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* 268.0*
Gadsby...................... Salt Lake City, Utah Gas-Fired 1951-1955 251.6 237.0
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 6,858.6
---------- -------
Total Hydro and Thermal Generating Facilities (68) 8,413.5 7,983.1
---------- -------
---------- -------
<FN>
------------------------------
* Jointly owned plants; amount shown represents the Company's share only.
NOTE: Hydroelectric project locations are stated by locality and river
watershed.
</TABLE>
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, 1994. All coal reserves are dedicated to nearby Company operated
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 44(1)
Craig, Colorado............... Craig 72(2)
Glenrock, Wyoming............. Dave Johnston 64(1)
Emery County, Utah............ Huntington and Hunter 141(1)(3)
Rock Springs, Wyoming......... Jim Bridger 138(4)
<FN>
------------------------
(1) These reserves are mined by subsidiaries of the Company.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
(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 1994, the Company expended $3.6 million of reclamation
costs and accrued $5.7 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, 1994, the Company's pro rata
portion of these reclamation funds totaled $26 million and the Company had an
accrued reclamation liability of $104 million at December 31, 1994.
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, 1994; such information is incorporated herein by this reference.
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.
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 Transmission 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. On September 14, 1994, the Oregon Court of Appeals
affirmed the trial court's grant of summary judgment to defendants. Plaintiffs'
petition for review of that decision by the Oregon Supreme Court was denied on
December 27, 1994.
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
12
<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 a motion to dismiss the federal actions, which
has been held in abeyance pending settlement discussions. The parties have
reached a tentative settlement of the federal and state actions subject to court
approval.
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.
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.
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.
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 from September 1991
to February 1993 and as Senior Vice President of Utah Power from February 1990
to September 1991.
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 served as Vice President from February 1992 to November 1993 and as
Vice President of Pacific Power from 1989 to February 1992.
Paul G. Lorenzini, born April 16, 1942, Senior Vice President of the Company
Mr. Lorenzini was elected Senior Vice President of the Company in May 1994.
He served as President of Pacific Power from January 1992 to May 1994 and as
Executive Vice President from January 1989 to January 1992.
John E. Mooney, born March 9, 1937, Senior Vice President of the Company
Mr. Mooney was elected Senior Vice President of the Company in November
1994. He served as Executive Vice President of Utah Power from September 1991 to
November 1994 and as Vice President of Pacific Power from August 1990 to
September 1991.
13
<PAGE>
Daniel L. Spalding, born December 23, 1953, Senior Vice President of the
Company and Senior Vice President of PacifiCorp Holdings, Inc.
Mr. Spalding was elected Senior Vice President of the Company in February
1992. He served as Vice President from October 1987 to February 1992.
Dennis P. Steinberg, born December 5, 1946, Senior Vice President of the
Company
Mr. Steinberg was elected Senior Vice President of the Company in August
1994. He served as Vice President of the Company from February 1992 to August
1994 and as Vice President of Electric Operations from August 1990 to February
1992.
Verl R. Topham, born August 25, 1934, Senior Vice President and General
Counsel of the Company
Mr. Topham was elected Senior Vice President and General Counsel and a
director of the Company in May 1994. He had served as President of Utah Power
from February 1990 to May 1994.
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.
Mrs. Nofziger was elected Vice President of the Company in 1989 and has been
Corporate Secretary since 1983.
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 from 1990 to February 1992.
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.
Richard T. O'Brien, born March 20, 1954, Vice President of the Company and
Senior Vice President of PacifiCorp Holdings, Inc.
Mr. O'Brien was elected Vice President of the Company in August 1993. He
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.
Jacqueline S. Bell, born November 17, 1941, Controller of the Company and
PacifiCorp Holdings, Inc.
Ms. Bell became Controller of the Company and of PacifiCorp Holdings, Inc.
in June 1989 and served as Controller of PacifiCorp Financial Services, Inc.
from October 1993 to December 1994.
William E. Peressini, born May 23, 1956, Treasurer of the Company
Mr. Peressini was elected Treasurer of the Company in January 1994. He
served as Executive Vice President of PacifiCorp Financial Services, Inc. from
January 1992 to January 1994 and as Senior Vice President and Chief Financial
Officer of that company from 1989 to January 1992.
14
<PAGE>
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 "Capitalization" 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.
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 1995 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 for
the 1995 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 1995 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 1995 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 1995 Annual Meeting of Shareholders.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
REFERENCES
----------
<C> <S> <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,
1994................................. 37
Consolidated balance sheets at
December 31, 1994 and 1993........... 38
Statements of consolidated cash flows
for each of the three years ended
December 31, 1994.................... 40
Notes to consolidated financial
statements........................... 41
2. Schedules:**
Independent Auditors' Report.......... 22
II -- Valuation and qualifying
accounts for the three years ended
December 31, 1994.................... 23
</TABLE>
------------------------
* Page references are to the incorporated portion of the Annual Report to
Shareholders of the Registrant for the year ended December 31, 1994.
** 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.
3. Exhibits:
<TABLE>
<C> <C> <S>
*(2)a -- Agreement and Plan of Merger dated as of March 9, 1995 by
and among Pacific Telecom, Inc., PacifiCorp Holdings, Inc.
and PXYZ Corporation. (Exhibit 2A, Form 8-K dated March 9,
1995, File No. 0-873.)
*(2)b -- Agreement dated as of March 9, 1995 between PacifiCorp and
Pacific Telecom, Inc. (Exhibit 2B, Form 8-K dated March 9,
1995, File No. 0-873.)
*(3)a -- Second Restated Articles of Incorporation of the Company, as
amended. (Exhibit (3)a, Form 10-K for fiscal year ended
December 31, 1992, File No. 1-5152).
*(3)b -- Bylaws of the Company (as restated and amended November 17,
1993). (Exhibit (3)b, Form 10-K for fiscal year ended
December 31, 1993, File No. 1-5152).
*(4)a -- Mortgage and Deed of Trust dated as of January 9, 1989,
between the Company and Morgan Guaranty Trust Company of New
York (Chemical Bank, successor), Trustee, as supplemented
and modified by nine 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; Exhibit 4(a), Form 10-Q for the quarter
ended September 30, 1993, File No. 1-5152); and Exhibit
4(a), Form 10-Q for the quarter ended June 30, 1994, File
No. 1-5152).
(4)b -- Tenth Supplemental Indenture dated as of August 1, 1994 to
the Mortgage and Deed of Trust dated as of January 9, 1989
between the Company and Morgan Guaranty Trust Company of New
York (Chemical Bank, successor), Trustee.
*(4)c -- Mortgage and Deed of Trust dated as of July 1, 1947, between
Pacific Power & Light Company and Guaranty Trust Company of
New York (Chemical Bank, successor) and Oliver R. Brooks et
al. (resigned) Trustees, as supplemented and modified by
</TABLE>
16
<PAGE>
<TABLE>
<C> <C> <S>
fifty-two 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; Exhibit
4(b), Form 10-Q for the quarter ended September 30, 1993,
File No. 1-5152; and Exhibit 4(b), Form 10-Q for the quarter
ended June 30, 1994, File No. 1-5152).
(4)d -- Fifty-third Supplemental Indenture dated as of August 1,
1994 to the Mortgage and Deed of Trust dated as of July 1,
1947 between Pacific Power & Light Company and Guaranty
Trust Company of New York (Chemical Bank, successor) and
Oliver R. Brooks et al. (resigned), Trustees.
*(4)e -- 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-four 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;
</TABLE>
17
<PAGE>
<TABLE>
<C> <C> <S>
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; Exhibit
4(c), Form 10-Q for the quarter ended September 30, 1993,
File No. 1-5152; and Exhibit 4(c), Form 10-Q for the quarter
ended June 30, 1994, File No. 1-5152).
(4)f -- Fifty-fifth Supplemental Indenture dated as of August 1,
1994 to the Mortgage and Deed of Trust dated as of December
1, 1943 between Utah Power & Light Company and Guaranty
Trust Company of New York (Chemical Bank, successor) and
Arthur E. Burke et al. (resigned), Trustees.
*(4)g -- 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 -- PacifiCorp Compensation Reduction Plan dated December 1,
1994, as amended.
*+(10)c -- 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)d -- PacifiCorp 1995 PerformanceShare Incentive Plan.
+(10)e -- PacifiCorp 1995 Individual Incentive Plan.
+(10)f -- PacifiCorp Non-Employee Directors' Stock Compensation Plan
dated August 1, 1985, as amended.
*+(10)g -- PacifiCorp Long Term Incentive Plan, 1993 Restatement
(Exhibit 10G, Form 10-K for the year ended December 31,
1993, File No. 0-873).
*+(10)h -- Form of Restricted Stock Agreement under PacifiCorp Long
Term Incentive Plan, 1993 Restatement (Exhibit 10H, Form
10-K for the year ended December 31, 1993, File No. 0-873).
+(10)i -- PacifiCorp Supplemental Executive Retirement Plan 1988
Restatement, as amended.
*+(10)j -- PacifiCorp Executive Severance Plan (Exhibit (10)m, Form
10-K for fiscal year ended December 31, 1988, File No.
1-5152).
*+(10)k -- Pacific Telecom Executive Deferred Compensation Plan dated
as of January 1, 1994, as amended (Exhibit 10L, Form 10-K
for the year ended December 31, 1994, File No. 0-873).
*+(10)l -- 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).
</TABLE>
18
<PAGE>
<TABLE>
<C> <C> <S>
*+(10)m -- Pacific Telecom Executive Officer Severance Plan (Exhibit
10N, Form 10-K for the year ended December 31, 1994, File
No. 0-873).
*+(10)n -- Form of Restricted Stock Agreement under Pacific Telecom
Long-Term Incentive Plan 1994 Restatement (Exhibit (10)o,
Form 10-K for the year ended December 31, 1993, File No.
1-5152).
*+(10)o -- Incentive Compensation Agreement dated as of February 1,
1994 between PacifiCorp and Frederick W. Buckman (Exhibit
(10)k, Form 10-K for the fiscal year ended December 31,
1993, File No. 1-5152).
*+(10)p -- 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.
1-5152).
*+(10)q -- Compensation Agreement dated as of February 9, 1994 between
PacifiCorp and Keith R. McKennon. (Exhibit (10)m, Form 10-K
for the fiscal year ended December 31, 1993, File No.
1-5152).
+(10)r -- Amendment No. 1 to Compensation Agreement between PacifiCorp
and Keith R. McKennon dated as of February 9, 1995.
*(10)s -- 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. 1-5152).
(10)t -- Restated Surplus Firm Capacity Sale Agreement executed
September 27, 1994 by the United States of America
Department of Energy acting by and through the Bonneville
Power Administration and Pacific Power & Light Company.
(12)a -- Statements of Computation of Ratio of Earnings to Fixed
Charges. (See page S-1.)
(12)b -- Statements of Computation of Ratio of Earnings to combined
Fixed Charges and Preferred Stock Dividends. (See page S-2.)
(13) -- Portions of Annual Report to Shareholders of the Registrant
for the year ended December 31, 1994 incorporated by
reference herein.
(21) -- Subsidiaries. (See pages S-3 and S-4.)
(23) -- Consent of Deloitte & Touche LLP with respect to Annual
Report on Form 10-K.
(24) -- Powers of Attorney.
(27) -- Financial Data Schedule (filed electronically only).
(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,
1994.
<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 March 9, 1995, under "Item 5. Other Events," the Company
filed a press release reporting a proposed merger under which the minority
interest in Pacific Telecom, Inc. would be acquired by PacifiCorp Holdings.
In addition, the Company reported certain summary financial information.
(c) See (a) 3. above.
(d) See (a) 2. above.
19
<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, 1995
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
Frederick W. Buckman Officer and Director March 30, 1995
(President)
/s/ DANIEL L. SPALDING
------------------------------------------- Senior Vice President (Chief
Daniel L. Spalding Accounting Officer) March 30, 1995
(Senior Vice President)
*KATHRYN A. BRAUN
-------------------------------------------
Kathryn A. Braun
*C. TODD CONOVER
-------------------------------------------
C. Todd Conover
Director March 30, 1995
*RICHARD C. EDGLEY
-------------------------------------------
Richard C. Edgley
*A. M. GLEASON
-------------------------------------------
A. M. Gleason
(Vice Chairman)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------------------------------
<C> <S> <C>
*JOHN C. HAMPTON
-------------------------------------------
John C. Hampton
*NOLAN E. KARRAS
-------------------------------------------
Nolan E. Karras
*KEITH R. MCKENNON
-------------------------------------------
Keith R. McKennon
(Chairman)
Director March 30, 1995
*ROBERT G. MILLER
-------------------------------------------
Robert G. Miller
*VERL R. TOPHAM
-------------------------------------------
Verl R. Topham
*DON M. WHEELER
-------------------------------------------
Don M. Wheeler
*NANCY WILGENBUSCH
-------------------------------------------
Nancy Wilgenbusch
*By /s/ NANCY WILGENBUSCH
--------------------------------------
Nancy Wilgenbusch
(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, 1994 and 1993, and for each of the three years
in the period ended December 31, 1994, and have issued our report thereon dated
February 17, 1995, March 9, 1995 as to the agreement to acquire the minority
interest in Pacific Telecom, Inc. described in Note 1, (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); such consolidated financial statements and report are included in
your 1994 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 LLP
Portland, Oregon
February 17, 1995
(March 9, 1995 as to the agreement
to acquire the minority interest
in Pacific Telecom, Inc. described
in Note 1)
22
<PAGE>
PACIFICORP
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1994
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCE
AT CHARGED TO OTHER AT END
BEGINNING COSTS AND ACCOUNTS OF
DESCRIPTION OF PERIOD EXPENSES (1) DESCRIBE DEDUCTIONS (2) PERIOD
---------------------------------------- --------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
Accumulated amortization of estimated
recoverable nuclear project costs.... $61.8 $ 1.0 $-- $-- $62.8
Allowance for credit losses........... 53.4 1.5 -- 10.3 44.6
Other reserves........................ 36.6 10.7 (.6) 14.5 32.2
Year Ended December 31, 1993:
Accumulated amortization of estimated
recoverable nuclear project costs.... 60.0 1.8 -- -- 61.8
Allowance 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
Allowance for credit losses........... 15.0 77.1 -- 35.6 56.5
Other reserves........................ 33.4 83.5 -- 37.9 79.0
<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>
23
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PACIFICORP
(AN OREGON CORPORATION)
TO
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(A NEW YORK CORPORATION)
WHICH HEREIN RESIGNS AS TRUSTEE
AND
CHEMICAL BANK
(A NEW YORK CORPORATION)
HEREIN BECOMING SUCCESSOR TRUSTEE TO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AS TRUSTEE UNDER PACIFICORP'S
MORTGAGE AND DEED OF TRUST,
DATED AS OF JANUARY 9, 1989
---------------------
TENTH SUPPLEMENTAL INDENTURE
DATED AS OF AUGUST 1, 1994
---------------------
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TENTH SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of August, 1994, made and entered
into by and among (a) PACIFICORP, a corporation of the State of Oregon, whose
address is 700 NE Multnomah, Portland, Oregon 97232 (hereinafter sometimes
called the "Company"), (b) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York
corporation, whose address is 60 Wall Street, New York, New York 10260 (the
"Resigning Trustee"), and (c) CHEMICAL BANK, a New York corporation whose
address is 450 West 33rd Street, New York, New York 10001 (the "Successor
Trustee"), as Trustee under the Mortgage and Deed of Trust, dated as of January
9, 1989, as heretofore amended and supplemented (hereinafter called the
"Mortgage"), is executed and delivered by PacifiCorp in accordance with the
provisions of the Mortgage, this indenture (hereinafter called the "Tenth
Supplemental Indenture") being supplemental thereto.
WHEREAS, the Mortgage was or is to be recorded in the official records of
the States of Arizona, California, Colorado, Idaho, Montana, New Mexico, Oregon,
Utah, Washington and Wyoming and various counties within such states, which
counties include or will include all counties in which this Tenth Supplemental
Indenture is to be recorded; and
WHEREAS, by the Mortgage the Company covenanted that it would execute and
deliver such supplemental indenture or indentures and such further instruments
and do such further acts as might be necessary or proper to carry out more
effectually the purposes of the Mortgage and to make subject to the Lien of the
Mortgage any property thereafter acquired, made or constructed and intended to
be subject to the Lien thereof; and
WHEREAS, in addition to the property described in the Mortgage, the Company
has acquired certain other property, rights and interests in property; and
<PAGE>
2
WHEREAS, the Company has executed, delivered, recorded and filed
Supplemental Indentures as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
First March 31, 1989
Second December 29, 1989
Third March 31, 1991
Fourth December 31, 1991
Fifth March 15, 1992
Sixth July 31, 1992
Seventh March 15, 1993
Eighth November 1, 1993;
Ninth June 1, 1994;
</TABLE>
and
WHEREAS, the Company has heretofore issued, in accordance with the
provisions of the Mortgage, bonds entitled and designated First Mortgage and
Collateral Trust Bonds, of the series and in the principal amounts as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
SERIES DUE DATE ISSUED OUTSTANDING
------------------------ ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
First --10.45% 1/9/90 $ 500,000 0
Second --Medium-Term Notes, various 250,000,000 $ 240,000,000
Series A
Third --Medium-Term Notes, various 200,000,000 175,000,000
Series B
Fourth --Medium-Term Notes, various 300,000,000 289,428,781
Series C
Fifth --Medium-Term Notes, various 250,000,000 250,000,000
Series D
Sixth --C-U various 250,432,000 236,471,000
Seventh --Medium-Term Notes, various 500,000,000 500,000,000
Series E
Eighth --6 3/4% 4/1/2005 150,000,000 150,000,000
Ninth --Medium-Term Notes, various 480,000,000 480,000,000
Series F
Tenth --E-L various 71,200,000 71,200,000
Eleventh --Medium-Term Notes, various 0 0;
Series G
</TABLE>
and
<PAGE>
3
WHEREAS, Section 2.03 of the Mortgage provides that the form or forms, terms
and conditions of and other matters not inconsistent with the provisions of the
Mortgage, in connection with each series of bonds (other than the First Series)
issued thereunder, shall be established in or pursuant to one or more
Resolutions and/or shall be established in one or more indentures supplemental
to the Mortgage, prior to the initial issuance of bonds of such series; and
WHEREAS, Section 22.04 of the Mortgage provides, among other things, that
any power, privilege or right expressly or impliedly reserved to or in any way
conferred upon the Company by any provision of the Mortgage, whether such power,
privilege or right is in any way restricted or is unrestricted, may be in whole
or in part waived or surrendered or subjected to any restriction if at the time
unrestricted or to additional restriction if already restricted, and the Company
may enter into any further covenants, limitations, restrictions or provisions
for the benefit of any one or more series of bonds issued thereunder and provide
that a breach thereof shall be equivalent to a Default under the Mortgage, or
the Company may cure any ambiguity contained therein, or in any supplemental
indenture, or may (in lieu of establishment in or pursuant to Resolution in
accordance with Section 2.03 of the Mortgage) establish the forms, terms and
provisions of any series of bonds other than said First Series, by an instrument
in writing executed by the Company; and
WHEREAS, the Company now desires to create a new series of bonds and
(pursuant to the provisions of Section 22.04 of the Mortgage) to add to its
covenants and agreements contained in the Mortgage certain other covenants and
agreements to be observed by it; and
WHEREAS, the execution and delivery by the Company of this Tenth
Supplemental Indenture, and the terms of the bonds of the Twelfth series herein
referred to, have been duly authorized by the Board of Directors in or pursuant
to appropriate Resolutions;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That PACIFICORP, an Oregon corporation, in consideration of the premises and
of good and valuable consideration to it duly paid by the Trustee at or before
the ensealing and delivery of these presents, the
<PAGE>
4
receipt and sufficiency whereof is hereby acknowledged, and in order to secure
the payment of both the principal of and interest and premium, if any, on the
bonds from time to time issued under the Mortgage, according to their tenor and
effect and the performance of all provisions of the Mortgage (including any
instruments supplemental thereto and any modification made as in the Mortgage
provided) and of such bonds, and to confirm the Lien of the Mortgage on certain
after-acquired property, hereby mortgages, pledges and grants a security
interest in (subject, however, to Excepted Encumbrances as defined in Section
1.06 of the Mortgage), unto Chemical Bank, as Trustee, and to its successor or
successors in said trust, and to said Trustee and its successors and assigns
forever, all properties of the Company real, personal and mixed, owned by the
Company as of the date of the Mortgage and acquired by the Company after the
date of the Mortgage, subject to the provisions of Section 18.03 of the
Mortgage, of any kind or nature (except any herein or in the Mortgage expressly
excepted), now owned or, subject to the provisions of Section 18.03 of the
Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger,
donation, construction, erection or in any other way) and wheresoever situated,
including the properties described in Articles V and VI hereof, and including
(without limitation) all real estate, lands, easements, servitudes, licenses,
permits, franchises, privileges, rights of way and other rights in or relating
to real estate or the occupancy of the same; all power sites, flowage rights,
water rights, water locations, water appropriations, ditches, flumes,
reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites,
aqueducts, and all other rights or means for appropriating, conveying, storing
and supplying water; all rights of way and roads; all plants for the generation
of electricity and other forms of energy (whether now known or hereafter
developed) by steam, water, sunlight, chemical processes and/or (without
limitation) all other sources of power (whether now known or hereafter
developed); all power houses, gas plants, street lighting systems, standards and
other equipment incidental thereto; all telephone, radio, television and other
communications, image and data transmission systems, air-conditioning systems
and equipment incidental thereto, water wheels, water works, water systems,
steam and hot water plants, substations, lines, service and supply systems,
bridges, culverts, tracks, ice or
<PAGE>
5
refrigeration plants and equipment, offices, buildings and other structures and
the equipment thereof; all machinery, engines, boilers, dynamos, turbines,
electric, gas and other machines, prime movers, regulators, meters,
transformers, generators (including, but not limited to, engine-driven
generators and turbogenerator units), motors, electrical, gas and mechanical
appliances, conduits, cables, water, steam, gas or other pipes, gas mains and
pipes, service pipes, fittings, valves and connections, pole and transmission
lines, towers, overhead conductors and devices, underground conduits,
underground conductors and devices, wires, cables, tools, implements, apparatus,
storage battery equipment and all other fixtures and personalty; all municipal
and other franchises, consents or permits; all lines for the transmission and
distribution of electric current and other forms of energy, gas, steam, water or
communications, images and data for any purpose including towers, poles, wires,
cables, pipes, conduits, ducts and all apparatus for use in connection therewith
and (except as herein or in the Mortgage expressly excepted) all the right,
title and interest of the Company in and to all other property of any kind or
nature appertaining to and/or used and/or occupied and/or enjoyed in connection
with any property hereinbefore described;
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions,
servitudes and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of Section 13.01 of the
Mortgage) the tolls, rents, revenues, issues, earnings, income, product and
profits thereof, and all the estate, right, title and interest and claim
whatsoever, at law as well as in equity, which the Company now has or may
hereafter acquire in and to the aforesaid property and franchises and every part
and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 18.03 of the Mortgage, all the property, rights and franchises acquired
by the Company (by purchase, consolidation, merger, donation, construction,
erection or in any other way) after the date hereof, except any herein or in the
Mortgage expressly excepted, shall be and are as fully mortgaged and pledged
hereby and as fully embraced within the Lien of
<PAGE>
6
the Mortgage as if such property, rights and franchises were now owned by the
Company and were specifically described herein or in the Mortgage and mortgaged
hereby or thereby.
PROVIDED THAT the following are not and are not intended to be now or
hereafter mortgaged or pledged hereunder, nor is a security interest therein
hereby granted or intended to be granted, and the same are hereby expressly
excepted from the Lien and operation of the Mortgage, namely: (1) cash, shares
of stock, bonds, notes and other obligations and other securities not hereafter
specifically pledged, paid, deposited, delivered or held under the Mortgage or
covenanted so to be; (2) merchandise, equipment, apparatus, materials or
supplies held for the purpose of sale or other disposition in the usual course
of business or for the purpose of repairing or replacing (in whole or part) any
rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft
or boats, ships or other vessels, and any fuel, oil and similar materials and
supplies consumable in the operation of any of the properties of the Company;
rolling stock, buses, motor coaches, automobiles and other vehicles and all
aircraft; boats, ships and other vessels; all crops (both growing and
harvested), timber (both growing and harvested), minerals (both in place and
severed), and mineral rights and royalties; (3) bills, notes and other
instruments and accounts receivable, judgments, demands, general intangibles and
choses in action, and all contracts, leases and operating agreements not
specifically pledged under the Mortgage or covenanted so to be; (4) the last day
of the term of any lease or leasehold which may be or become subject to the Lien
of the Mortgage; (5) electric energy, gas, water, steam, ice and other
materials, forms of energy or products generated, manufactured, produced or
purchased by the Company for sale, distribution or use in the ordinary course of
its business; (6) any natural gas wells or natural gas leases or natural gas
transportation lines or other works or property used primarily and principally
in the production of natural gas or its transportation, primarily for the
purpose of sale to natural gas customers or to a natural gas distribution or
pipeline company, up to the point of connection with any distribution system;
(7) the Company's franchise to be a corporation; (8) any interest (as lessee,
owner or otherwise) in the Wyodak Facility, including, without limitation, any
equipment, parts, improvements, substitutions, replacements or other
<PAGE>
7
property relating thereto; (9) all properties that PacifiCorp, a Maine
corporation, and/or Utah Power & Light Company, a Utah corporation, had
contracted to dispose of and that had been released from the liens of the
Pacific Mortgage and the Utah Mortgage, respectively, prior to January 9, 1989,
but title to which properties had not passed to the grantee(s) thereof as of
said date; and (10) any property heretofore released pursuant to any provision
of the Mortgage and not heretofore disposed of by the Company; provided,
however, that the property and rights expressly excepted from the Lien and
operation of the Mortgage in the above subdivisions (2) and (3) shall (to the
extent permitted by law) cease to be so excepted in the event and as of the date
that the Trustee or a receiver for the Trustee shall enter upon and take
possession of the Mortgaged and Pledged Property in the manner provided in
Article XV of the Mortgage by reason of the occurrence of a Default;
AND PROVIDED FURTHER, that as to any property of the Company that, pursuant
to the after-acquired property provisions thereof, is now or hereafter becomes
subject to the lien of a mortgage, deed of trust or similar indenture that is
now or may in accordance with the Mortgage hereafter become designated as a
Class "A" Mortgage, the Lien hereof shall at all times be junior and subordinate
to the lien of such Class "A" Mortgage;
TO HAVE AND TO HOLD all such properties, real, personal and mixed, mortgaged
and pledged, or in which a security interest has been granted by the Company as
aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as
defined in Section 1.06 of the Mortgage), unto Chemical Bank, as Trustee, and
its successors and assigns forever;
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts
and conditions and subject to and with the same provisos and covenants as are
set forth in the Mortgage, this Tenth Supplemental Indenture being supplemental
to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Mortgage shall affect and
apply to the property hereinbefore described and conveyed, and to the estates,
rights, obligations and duties of the Company and the Trustee and the
beneficiaries of the trust with respect to said
<PAGE>
8
property, and to the Trustee and its successor or successors in the trust, in
the same manner and with the same effect as if the said property had been owned
by the Company at the time of the execution of the Mortgage, and had been
specifically and at length described in and conveyed to said Trustee by the
Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustee and its
successor or successors in such trust under the Mortgage, as follows:
ARTICLE I
REGARDING THE RESIGNATION OF THE RESIGNING TRUSTEE AND
APPOINTMENT OF SUCCESSOR TRUSTEE
SECTION 1.01. Morgan Guaranty Trust Company of New York hereby gives written
notice to the Company that it hereby resigns as Trustee under the Mortgage, such
resignation to take effect as of September 1, 1994.
SECTION 1.02. Pursuant to Section 19.15 of the Mortgage, and by order of its
Board of Directors, the Company hereby accepts the foregoing resignation and
appoints Chemical Bank as Successor Trustee under the Mortgage, effective as of
September 1, 1994. By execution hereof Chemical Bank hereby acknowledges its
acceptance of its appointment by the Company as Successor Trustee under the
Mortgage.
SECTION 1.03. The Resigning Trustee hereby conveys, assigns and transfers to
the Successor Trustee, and its successors and assigns, upon the trusts expressed
in the Mortgage (as amended hereby), all rights, title, powers and trusts of the
Resigning Trustee under and pursuant to the Mortgage and all property and money
held by the Resigning Trustee under the Mortgage. The Resigning Trustee and the
Company agree, upon request of the Successor Trustee, to execute, acknowledge
and deliver such further instruments of conveyance and further assurances and to
do such other things as may reasonably be required for more fully and certainly
vesting in and confirming to the Successor Trustee such rights, title, powers
and trusts.
<PAGE>
9
ARTICLE II
TWELFTH SERIES OF BONDS
SECTION 2.01. There shall be a series of bonds designated "Series 1994-1
Bonds" (herein sometimes referred to as the Twelfth Series), each of which shall
also bear the descriptive title "First Mortgage and Collateral Trust Bond," and
the form thereof, which shall be established by or pursuant to a Resolution,
shall contain suitable provisions with respect to the matters hereinafter in
this Section specified.
(I) Bonds of the Twelfth Series shall mature on such date or dates
not more than 30 years from the date of issue as shall be set forth in or
determined in accordance with a Resolution filed with the Trustee and, unless
otherwise established by or pursuant to a Resolution, shall be issued as fully
registered bonds in the denomination of Five Thousand Dollars and, at the option
of the Company, of any multiple or multiples of Five Thousand Dollars (the
exercise of such option to be evidenced by the execution and delivery thereof).
(II) Bonds of the Twelfth Series shall bear interest at such rate or
rates (which may either be fixed or variable), payable on such dates, and have
such other terms and provisions not inconsistent with the Mortgage as may be set
forth in or determined in accordance with a Resolution filed with the Trustee.
Bonds of the Twelfth Series shall be dated and shall accrue interest as provided
in Section 2.06 of the Mortgage.
(III) The principal of and interest on each bond of the Twelfth
Series shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York, in such coin or currency of the United States
of America as at the time of payment is legal tender for public and private
debts or in such other currency or currency unit as shall be determined by or in
accordance with a Resolution filed with the Trustee.
(IV) Each bond of the Twelfth Series may be redeemable prior to
maturity at the option of the Company, as determined by or in accordance with a
Resolution filed with the Trustee.
<PAGE>
10
(V) Each bond of the Twelfth Series may be subject to the obligation
of the Company to redeem such bond, as determined by or in accordance with a
Resolution filed with the Trustee.
(VI) Each bond of the Twelfth Series may have such other terms as
are not inconsistent with Section 2.03 of the Mortgage, including, without
limitation, terms and conditions regarding interest rates and the payment
thereof, place or places for payment, exchange privileges, rights with respect
to redemption, prepayment or purchase, and default provisions, and as may be
determined by or in accordance with a Resolution filed with the Trustee.
(VII) At the option of the registered owner, any bonds of the Twelfth
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, shall be exchangeable
for a like aggregate principal amount of bonds of the same series of other
authorized denominations.
(VIII) Bonds of the Twelfth Series shall be transferable, subject to any
restrictions thereon set forth in any such bond of the Twelfth Series, upon the
surrender therefor for cancellation, together with a written instrument of
transfer in form approved by the registrar duly executed by the registered owner
or by his duly authorized attorney, at the office or agency of the Company in
the Borough of Manhattan, The City of New York. Upon any transfer or exchange of
bonds of the Twelfth Series, the Company may make a charge therefor sufficient
to reimburse it for any tax or taxes or other government charge, as provided in
Section 2.08 of the Mortgage, but the Company hereby waives any right to make a
charge in addition thereto for any exchange or transfer of bonds of the Twelfth
Series.
(IX) After the execution and delivery of this Tenth Supplemental
Indenture and upon compliance with the applicable provisions of the Mortgage and
this Tenth Supplemental Indenture, it is contemplated that there shall be an
issue of bonds of the Twelfth Series in an aggregate principal amount not to
exceed Two Hundred Twenty-Five Million Dollars ($225,000,000). Bonds of the
Twelfth Series shall be issued pro rata on the basis of Class "A" Bonds of the
Fifty-eighth Series, designated "First Mortgage Bond Series 1994-1," issued
under each of the Utah
<PAGE>
11
Mortgage and the Pacific Mortgage and delivered to the Trustee. The claim of the
registered owner of any such Class "A" Bond shall be limited to the principal
amount of the bonds of the Twelfth Series issued and Outstanding on the basis of
such Class "A" Bond.
(X) Upon receipt by the Trustee from time to time of a written
request or requests (stating that the Trustee holds an aggregate principal
amount of Class "A" Bonds of the Fifty-eighth Series, designated "First Mortgage
Bond Series 1994-1," issued under the Utah Mortgage and the Pacific Mortgage
which exceeds the principal amount of bonds of the Twelfth Series then
Outstanding and stating the amount of such excess and the principal amount of
any such Class "A" Bonds to be cancelled) executed by an Authorized Executive
Officer of the Company, the Trustee shall return to the corporate trustee under
the Utah Mortgage or corporate trustee under the Pacific Mortgage, as the case
may be, for cancellation, a principal amount of Class "A" Bonds issued in the
name of and held by the Trustee with respect to bonds of the Twelfth Series not
to exceed the excess of the principal amount of such Class "A" Bonds then so
held over the principal amount of bonds of the Twelfth Series then Outstanding.
Upon cancellation of any such principal amount of Class "A" Bonds, the Trustee
shall receive from the corporate trustee under the Utah Mortgage or corporate
trustee under the Pacific Mortgage, as the case may be, a Class "A" Bond in the
principal amount not so cancelled.
ARTICLE III
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS REGARDING PROPERTIES EXCEPTED
FROM LIEN OF MORTGAGE
SECTION 3.01. The Company reserves the right, without any consent or other
action by holders of bonds of the Eighth Series, or any other series of bonds
subsequently created under the Mortgage (including the bonds of the Twelfth
Series), to make such amendments to the Mortgage, as heretofore amended and
supplemented, as shall be necessary in order to amend the first proviso to the
granting clause of the Mortgage, which proviso sets forth the properties
excepted from the Lien of the Mortgage, to add a new exception (10) which shall
read as follows:
<PAGE>
12
"(10) allowances allocated to steam-electric generating plants owned by
the Company or in which the Company has interests, pursuant to Title IV of
the Clean Air Act Amendments of 1990, Pub. L. 101-549, Nov. 15, 1990, 104
Stat. 2399, 42 USC 7651, et seq., as now in effect or as hereafter
supplemented or amended."
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. The right, if any, of the Company to assert the defense of
usury against a holder or holders of bonds of the Twelfth Series or any
subsequent series shall be determined only under the laws of the State of New
York.
SECTION 4.02. The terms defined in the Mortgage shall, for all purposes of
this Tenth Supplemental Indenture, have the meanings specified in the Mortgage.
SECTION 4.03. The Trustee hereby accepts the trusts hereby declared,
provided, created or supplemented, and agrees to perform the same upon the terms
and conditions herein and in the Mortgage, as hereby supplemented, set forth,
including the following:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Tenth Supplemental Indenture or
for or in respect of the recitals contained herein, all of which recitals are
made by the Company solely. Each and every term and condition contained in
Article XIX of the Mortgage shall apply to and form part of this Tenth
Supplemental Indenture with the same force and effect as if the same were herein
set forth in full, with such omissions, variations and insertions, if any, as
may be appropriate to make the same conform to the provisions of this Tenth
Supplemental Indenture.
SECTION 4.04. Whenever in this Tenth Supplemental Indenture either of the
Company or the Trustee is named or referred to, this shall, subject to the
provisions of Articles XVIII and XIX of the Mortgage, be deemed to include the
successors and assigns of such party, and all the
<PAGE>
13
covenants and agreements in this Tenth Supplemental Indenture contained by or on
behalf of the Company, or by or on behalf of the Trustee, shall, subject as
aforesaid, bind and inure to the respective benefits of the respective
successors and assigns of such parties, whether so expressed or not.
SECTION 4.05. Nothing in this Tenth Supplemental Indenture, expressed or
implied, is intended, or shall be construed to confer upon, or to give to, any
person, firm or corporation, other than the parties hereto and the holders of
the bonds and coupons outstanding under the Mortgage, any right, remedy or claim
under or by reason of this Tenth Supplemental Indenture or any covenant,
condition, stipulation, promise or agreement hereof, and all the covenants,
conditions, stipulations, promises and agreements in this Tenth Supplemental
Indenture contained by or on behalf of the Company shall be for the sole and
exclusive benefit of the parties hereto, and of the holders of the bonds and of
the coupons outstanding under the Mortgage.
SECTION 4.06. This Tenth Supplemental Indenture shall be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
ARTICLE V
SPECIFIC DESCRIPTION OF PROPERTY
(Added to Pacific Power System)
The following described properties of the Company, owned as of the date
hereof, and used (or held for future development and use) in connection with the
Pacific Power Division of the Company's electric utility systems, or for other
purposes, as hereinafter indicated, respectively:
H--OFFICE BUILDINGS
The following office and service center of the Company in the State of
Washington including the following described real property:
<PAGE>
14
H-48--YAKIMA OFFICE AND SERVICE CENTER
In YAKIMA County, State of WASHINGTON
H-48 ITEM: That part of the East 1/2 of the Southeast 1/4 of Section 17,
Township 13 North, Range 19 East, W.M., lying northerly of the Northerly
right-of-way line of the Burlington Northern, Inc. Railroad (now
W.C.R.C.) right-of-way as conveyed by deed recorded in Volume 83 of
Deeds, page 552;
EXCEPTING THEREFROM the following:
1) That portion thereof conveyed to Union Gap Irrigation District by
deed dated April 6, 1916, and recorded in Volume 165 of Deeds, page 285,
under Auditor's File No. 90399, described as all of the Northeast 1/4 of
the Southeast 1/4 of said Section 17 lying North of a line 25 feet South
of and parallel with the centerline of the Union Gap Ditch;
2) That portion thereof lying Westerly of the following described line:
Commencing at a point on the South line of the tract of land conveyed to
Union Gap Irrigation District by deed recorded in Volume 165 of Deeds,
page 285, under Auditor's File No. 90399, which point is 23.8 feet South
and 59 feet North 89 DEG. 55' East of the Northwest corner of said
subdivision; thence North 89 DEG. 55' East along the South line of said
Union Gap Irrigation District property 653.11 feet to the point of
beginning of said described line; thence South 00 DEG. 05' East to the
Northeasterly right-of-way line of said Burlington Northern, Inc.
Railroad right-of-way and the terminus of said described line;
3) That portion thereof lying Easterly of the following described line:
Beginning at the point of intersection of the Northeasterly right-of-way
line of said Burlington Northern, Inc. Railroad right-of-way, with the
West line of the East 30.00 feet of the Southeast 1/4 of said Section
17; thence North 00 DEG. 32' 30" West parallel with the East line of
said Section 1146.28 feet to the P.C. of a curve to the left; thence
along the arc of a curve to the left having a radius of 925.00 feet,
through a central angle of 30 DEG. 00';
<PAGE>
15
thence North 30 DEG. 32' 30" West to the North line of the Southeast 1/4
of said Section 17 and the terminus of said described line (Parcel No.
191317-41001/Levy Code 385).
ARTICLE VI
SPECIFIC DESCRIPTION OF PROPERTY
(Added to Utah Power System)
The following described properties of the Company, owned as of the date
hereof, and used (or held for future development and use) in connection with the
Utah Power Division of the Company's electric utility systems, or for other
purposes, as hereinafter indicated, respectively:
SAND CREEK 46 KV SUBSTATION--PARCEL NUMBER: I8B00038
Lands in BONNEVILLE County, State of IDAHO
A portion of the SE 1/4 SE 1/4, Section 10, Township 2 North, Range 38
East, of the Boise Meridian, described as beginning at a point 240 feet
North and 48 feet West, more or less, from the Southeast Corner of said
Section 10; thence North 250 feet along a boundary line; thence West 150
feet; thence South 250 feet; thence East 150 feet to the point of
beginning.
TOGETHER WITH an Easement and Right-of-Way described as beginning at a
point 240 feet North and 198 feet West, more or less, from the Southeast
corner of said Section 10; thence North 27 feet; thence West 300 feet to
the East boundary line of Richard Avenue; thence South 27 feet along
said East boundary line; thence East 300 feet to the point of beginning.
TOOELE-DUGWAY 46 KV REGULATOR SITE--PARCEL NUMBER: UT00028
Lands in TOOELE County, State of UTAH
Beginning at a point on an existing right-of-way fence, said point being
North 89 DEG. 22' 38" East along Section line 820.24 feet and South
2417.15 feet from the Northwest corner of Section 18, Township 5 South,
Range 5 West, Salt Lake Base and Meridian;
<PAGE>
16
and running thence South 6 DEG. 20' 58" East along said right-of-way
fence 100.00 feet; thence South 83 DEG. 39' 02" West 100.00 feet; thence
North 6 DEG. 20' 58" West 100.00 feet; thence North 83 DEG. 39' 02" East
100.00 feet to the point of beginning.
NEW HARMONY 46 KV SUBSTATION--PARCEL NUMBER: UI00045
Lands in IRON County, State of UTAH
A tract of land situate in the S 1/2 of the SE 1/4 of Section 17,
Township 38 South, Range 12 West, Salt Lake Meridian, described as
beginning South 89 DEG. 43' 36" East 1090.73 feet along the section line
and NORTH 964.94 feet from the south one quarter corner of said Section
17; thence North 65 DEG. 08' 25" East 54.12 feet, North 11 DEG. 15' 29"
West 65.05 feet, North 71 DEG. 44' 47" West 69.92 feet, North 38 DEG.
23' 55" East 143.93 feet, and North 46 DEG. 23' 39" East 203.42 feet
along the easterly top of bank of an existing wash, thence NORTH 86.36
feet, more or less, to a north boundary fence; thence EASTERLY 422.24
feet, more or less, along said fence to the easterly boundary line, said
easterly boundary line also being the westerly right of way line of
Interstate 15, thence Southwesterly along said right of way line and the
arc of a 1818.08 foot radius curve to the right 233.59 feet (chord bears
South 21 DEG. 39' 47" West 233.43 feet), South 25 DEG. 19' 40" West
203.82 feet, and southwesterly along the arc of a 1238.28 foot radius
curve to the right 58.3706 feet (chord bears South 23 DEG. 58' 33" West
58.3652 feet), thence North 89 DEG. 43' 36" West, 431.85 feet to the
point of beginning.
COTTONWOOD DISTRICT GARAGE--PARCEL NUMBER: US01016
Lands in SALT LAKE County, State of UTAH
Beginning at a point which is North 579.21 feet and West 279.96 feet
from the Southeast corner of Section 26, Township 2 South, Range 1 West,
SLB&M; and running thence North 89 DEG. 53' 21" West 174.00 feet; thence
North 00 DEG. 21' 20" West 72.00 feet; thence South 89 DEG. 53' 21" East
174.00 feet; thence South 00 DEG. 21' 20" East 72.00 feet to the point
of beginning.
<PAGE>
17
IN WITNESS WHEREOF, PACIFICORP has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by an Authorized Executive
Officer of the Company, and its corporate seal to be attested to by its
Secretary or one of its Assistant Secretaries for and in its behalf, and Morgan
Guaranty Trust Company Of New York has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents or one of its Assistant Vice Presidents, and its corporate seal to be
attested to by one of its Assistant Secretaries, and Chemical Bank has caused
its corporate name to be hereunto affixed, and this instrument to be signed and
sealed by one of its Vice Presidents or one of its Assistant Vice Presidents,
and its corporate seal to be attested to by one of its Senior Trust Officers,
all as of the day and year first above written.
[SEAL] PACIFICORP
By RICHARD T. O'BRIEN
-------------------------------
Vice President
Attest:
JOHN M. SCHWEITZER
----------------------------------
Assistant Secretary
<PAGE>
18
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
[SEAL] as Resigning Trustee
By PETER VITELLIO
-------------------------------
Vice President
Attest:
TAMARA FELICETTI
----------------------------------
Assistant Secretary
CHEMICAL BANK
as Successor Trustee
By F.J. GRIPPO
-------------------------------
Vice President
Attest:
M. KATZ
----------------------------------
Senior Trust Officer
<PAGE>
19
STATE OF OREGON
COUNTY OF MULTNOMAH ss.:
On this 7th day of September, 1994, before me, SHERYL LEE STRATTON, a Notary
Public in and for the State of Oregon, personally appeared RICHARD T. O'BRIEN
and JOHN M. SCHWEITZER, known to me to be a Vice President and an Assistant
Secretary, respectively, of PACIFICORP, an Oregon corporation, who being duly
sworn, stated that the seal affixed to the foregoing instrument is the corporate
seal of said corporation and acknowledged this instrument to be the free,
voluntary and in all respects duly and properly authorized act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
SHERYL LEE STRATTON
----------------------------------
My commission expires: May 25, 1996
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK
COUNTY OF NEW YORK ss.:
On this 1st day of September, 1994, before me, JOHN MIECHKOWSKI a Notary
Public in and for the State of New York, personally appeared PETER VITELLIO and
TAMARA FELICETTI, known to me to be a Vice President and Assistant Secretary,
respectively, of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York
corporation, who being duly sworn, stated that the seal affixed to the foregoing
instrument is the corporate seal of said corporation and acknowledged this
instrument to be the free, voluntary and in all respects duly and properly
authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
JOHN MIECHKOWSKI
----------------------------------
[SEAL] Notary Public, State of New York
No. 30-4893319
Qualified in Nassau County
Commission expires: May 18, 1995
<PAGE>
20
STATE OF NEW YORK
COUNTY OF NEW YORK ss.:
On this 2nd day of September, 1994, before me, EMILY FAYAN a Notary Public
in and for the State of New York, personally appeared F.J. GRIPPO and M. KATZ,
known to me to be a Vice President and a Senior Trust Officer, respectively, of
CHEMICAL BANK, a New York corporation, who being duly sworn, stated that the
seal affixed to the foregoing instrument is the corporate seal of said
corporation and acknowledged this instrument to be the free, voluntary and in
all respects duly and properly authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
EMILY FAYAN
----------------------------------
[SEAL] Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Commission expires December 31, 1995
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PACIFICORP
(AN OREGON CORPORATION)
TO
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(A NEW YORK CORPORATION)
WHICH HEREIN RESIGNS AS CORPORATE TRUSTEE
AND
CHEMICAL BANK
(A NEW YORK CORPORATION)
HEREIN BECOMING SUCCESSOR CORPORATE TRUSTEE TO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AS TRUSTEE UNDER UTAH POWER &
LIGHT COMPANY'S MORTGAGE AND
DEED OF TRUST, DATED AS OF
DECEMBER 1, 1943
---------------------
FIFTY-FIFTH SUPPLEMENTAL INDENTURE
DATED AS OF AUGUST 1, 1994
SUPPLEMENTAL TO UTAH POWER & LIGHT COMPANY'S
MORTGAGE AND DEED OF TRUST
DATED AS OF DECEMBER 1, 1943
---------------------
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
FIFTY-FIFTH SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of August, 1994 (hereinafter
referred to as the "Fifty-fifth Supplemental Indenture") is made as a supplement
to that certain Mortgage and Deed of Trust, dated as of December 1, 1943, as
heretofore amended and supplemented (the "Mortgage"), executed and delivered by
Utah Power & Light Company, a Maine corporation that subsequently merged into
Utah Power & Light Company, a Utah corporation (hereinafter referred to
respectively as the "Maine Company" and the "Utah Company"; and hereinafter
referred to collectively as the "Original Mortgagor").
This Fifty-fifth Supplemental Indenture is entered into by and among (a)
PACIFICORP, a corporation of the State of Oregon into which the Original
Mortgagor heretofore was merged, whose address is 700 NE Multnomah, Portland,
Oregon 97232 (the "Company"); (b) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a
New York corporation whose address is 60 Wall Street, New York, New York 10260
(the "Resigning Corporate Trustee"); and (c) CHEMICAL BANK, a New York
corporation whose address is 450 West 33rd Street, New York, New York 10001 (the
"Successor Corporate Trustee" or "Trustee").
WHEREAS, the Mortgage (including all indentures supplemental thereto) was
recorded in the official records of the States of Colorado, Idaho, New Mexico,
Utah and Wyoming and various counties within said states in which this
Fifty-fifth Supplemental Indenture is to be recorded, and was filed as a
financing statement in accordance with the Uniform Commercial Code of each of
said states; and
WHEREAS, the Maine Company executed, delivered, recorded and filed the First
Supplemental Indenture through the Twenty-fifth Supplemental Indenture to the
Mortgage, inclusive, and the Utah Company executed, delivered, recorded and
filed subsequent Supplemental Indentures as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
First January 1, 1945
Second May 1, 1946
Third April 1, 1948
Fourth May 1, 1949
Fifth October 1, 1949
Sixth October 1, 1950
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
Seventh October 1, 1951
<S> <C>
Eighth October 1, 1952
Ninth May 1, 1954
Tenth September 1, 1955
Eleventh October 1, 1957
Twelfth September 1, 1960
Thirteenth June 1, 1962
Fourteenth April 1, 1963
Fifteenth August 1, 1964
Sixteenth March 1, 1968
Seventeenth December 1, 1969
Eighteenth April 1, 1970
Nineteenth March 1, 1971
Twentieth May 1, 1972
Twenty-first February 1, 1974
Twenty-second October 1, 1974
Twenty-third November 1, 1975
Twenty-fourth February 1, 1976
Twenty-fifth April 1, 1976
Twenty-sixth August 31, 1976
Twenty-seventh September 1, 1976
Twenty-eighth November 1, 1976
Twenty-ninth March 1, 1977
Thirtieth September 1, 1977
Thirty-first April 1, 1978
Thirty-second May 1, 1978
Thirty-third April 1, 1979
Thirty-fourth September 1, 1979
Thirty-fifth March 1, 1980
Thirty-sixth April 1, 1981
Thirty-seventh December 1, 1981
Thirty-eighth July 1, 1982
Thirty-ninth December 1, 1982
Fortieth September 1, 1984
Forty-first October 1, 1986
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
Forty-second December 1, 1986
<S> <C>
Forty-third May 1, 1987
Forty-fourth June 1, 1987;
</TABLE>
and
WHEREAS, the Maine Company has heretofore issued, in accordance with the
provisions of the Mortgage, bonds entitled and designated First Mortgage Bonds,
of the First Series through the Twenty-ninth Series, inclusive, and the Utah
Company has heretofore issued subsequent Series, all in the principal amounts as
follows:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT AGGREGATE PRINCIPAL
SERIES DUE DATE ISSUED AMOUNT OUTSTANDING
----------------------------- ------------- ------------------ -------------------
<S> <C> <C> <C> <C>
1968 $ 42,000,000 0
1. First--3 3/4%
1976 32,000,000 0
2. Second--2 3/4%
1978 3,000,000 0
3. Third--3 1/8%
1979 3,000,000 0
4. Fourth--3%
10/1/1979 3,000,000 0
5. Fifth--2 7/8%
1980 8,000,000 0
6. Sixth--2 7/8%
1981 9,000,000 0
7. Seventh--3 5/8%
1982 10,000,000 0
8. Eighth--3 1/2%
1984 15,000,000 0
9. Ninth--3 1/4%
1985 15,000,000 0
10. Tenth--3 5/8%
1987 15,000,000 0
11. Eleventh--5 1/4%
1990 16,000,000 0
12. Twelfth--4 7/8%
1992 22,000,000 0
13. Thirteenth--4 1/2%
1993 15,000,000 0
14. Fourteenth--4 1/2%
1994 15,000,000 0
15. Fifteenth--4 5/8%
1998 20,000,000 $ 16,000,000
16. Sixteenth--7%
2000 30,000,000 0
17. Seventeenth--9 1/4%
1976 35,000,000 0
18. Eighteenth--6 1/4%
2002 25,000,000 20,310,000
19. Nineteenth--7 1/2%
2004 14,000,000 13,190,000
20. Twentieth--6 1/8% First
Series
2004 11,000,000 9,365,000
21. Twenty-first--6 1/8% Second
Series
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT AGGREGATE PRINCIPAL
SERIES DUE DATE ISSUED AMOUNT OUTSTANDING
----------------------------- ------------- ------------------ -------------------
2004 $ 16,000,000 $ 15,060,000
22. Twenty-second--6 1/8% Third
Series
<S> <C> <C> <C> <C>
1983 40,000,000 0
23. Twenty-third--10 1/4%
2005 60,000,000 0
24. Twenty-fourth-- 10 1/4%
2006 35,000,000 0
25. Twenty-fifth--9%
4/1/2006 32,000,000 0
26. Twenty-sixth--8 3/4%
9/1/2006 40,000,000 0
27. Twenty-seventh-- 8 3/8%
11/1/2006 50,000,000 50,000,000
28. Twenty-eighth--6 3/8%
3/1/2007 55,000,000 0
29. Twenty-ninth--8 1/2%
9/1/2007 50,000,000 0
30. Thirtieth--8 1/4%
4/1/2008 42,000,000 42,000,000
31. Thirty-first--5.90%
5/1/2008 50,000,000 0
32. Thirty-second--9 1/8%
4/1/2009 35,000,000 0
33. Thirty-third--10 1/8%
9/1/2009 65,000,000 0
34. Thirty-fourth--10 1/4%
3/1/2010 60,000,000 0
35. Thirty-fifth--14 3/4%
4/1/2011 45,000,000 0
36. Thirty-sixth--11 1/8% First
Series
4/1/2011 45,000,000 0
37. Thirty-seventh-- 11 1/8%
Second Series
12/1/2011 90,000,000 0
38. Thirty-eighth--16 3/8%
7/1/2012 46,500,000 0
39. Thirty-ninth--13 1/2%
12/1/2012 90,000,000 0
40. Fortieth--13%
9/1/2014 16,750,000 16,750,000
41. Forty-first--10.70%
10/1/2016 170,000,000 0
42. Forty-second--9 3/8%
12/1/2016 92,000,000 0
43. Forty-third--8 3/4%
5/1/2017 95,000,000 0
44. Forty-fourth--9 7/8%
6/1/2017 46,500,000 0
45. Forth-fifth--8 1/4% First
Series
6/1/2017 16,400,000 0
46. Forty-sixth--8 5/8% Second
Series
6/1/2017 8,300,000 0;
47. Forty-seventh--8 5/8% Third
Series
</TABLE>
and
<PAGE>
5
WHEREAS, the Utah Company entered into a Reorganization Agreement and Plan
of Merger dated August 12, 1987, as amended, pursuant to which, among other
things, the Utah Company was merged into the Company as of January 9, 1989, upon
such terms as fully to preserve and in no respect to impair the Lien or security
of the Mortgage or any of the rights or powers of the trustees or the
bondholders thereunder; and
WHEREAS, pursuant to Article XVII of the Mortgage, the Company executed,
delivered, recorded and filed its Forty-fifth Supplemental Indenture dated as of
January 9, 1989, whereby the Company assumed and agreed to pay, duly and
punctually, the principal of and interest on the bonds issued under the
Mortgage, in accordance with the provisions of said bonds and coupons and the
Mortgage, and agreed to perform and fulfill all the covenants and conditions of
the Mortgage to be kept or performed by the Original Mortgagor, and whereby The
Chase Manhattan Bank (National Association) was appointed Corporate Trustee in
succession to Morgan Guaranty Trust Company of New York (formerly Guaranty Trust
Company of New York), resigned, under the Mortgage, and C.J. Heinzelmann was
appointed Co-Trustee in succession to W.A. Spooner, resigned, under the
Mortgage; and
WHEREAS, the Company executed, delivered, recorded and filed additional
Supplemental Indentures to the Mortgage as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
Forty-sixth March 31, 1989
Forty-seventh December 29, 1989
Forty-eighth March 31, 1991;
</TABLE>
and
WHEREAS, pursuant to said Forty-eighth Supplemental Indenture, Morgan
Guaranty Trust Company of New York was appointed Corporate Trustee in succession
to The Chase Manhattan Bank (National Association), resigned, under the Mortgage
and C.J. Heinzelmann resigned as Co-Trustee under the Mortgage and all the
right, title and powers of the Co-Trustee devolved upon the Corporate Trustee
and its successors alone until such time as a successor to the Co-Trustee shall
be appointed; and
<PAGE>
6
WHEREAS, the Company executed, delivered, recorded and filed additional
Supplemental Indentures to the Mortgage as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
Forty-ninth December 31, 1991
Fiftieth March 15, 1992
Fifty-first July 31, 1992
Fifty-second March 15, 1993
Fifty-third November 1, 1993
Fifty-fourth June 1, 1994;
</TABLE>
and
WHEREAS, the Company has heretofore issued, in accordance with the
provisions of the Mortgage, bonds entitled and designated First Mortgage Bonds,
of the Series and in the principal amounts as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
SERIES DUE DATE ISSUED OUTSTANDING
------------------------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
various $ 125,000,000 $ 120,000,000
48. Forty-eighth--Medium-Term
Notes, Series A
various 100,000,000 87,500,000
49. Forty-ninth--Medium-Term Notes,
Series B
various 150,000,000 144,714,391
50. Fiftieth--Medium-Term Notes,
Series C
various 125,000,000 125,000,000
51. Fifty-first--Medium-Term Notes,
Series D
various 125,216,000 118,235,500
52. Fifty-second--C-U
various 250,000,000 250,000,000
53. Fifty-third--Medium-Term Notes,
Series E
4/1/2005 75,000,000 75,000,000
54. Fifty-fourth--6 3/4%
various 250,000,000 250,000,000
55. Fifty-fifth--Medium-Term Notes,
Series F
various 35,600,000 35,600,000
56. Fifty-sixth--E-L
various 250,000,000 250,000,000;
57. Fifty-seventh--Medium Term
Notes, Series G
</TABLE>
and
<PAGE>
7
WHEREAS, in addition to the property described in the Mortgage, the Company
has acquired certain other property, rights and interests in property; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of
bonds (other than the First Series) issued thereunder and of the coupons to be
attached to coupon bonds of such series shall be established by Resolution of
the Board of Directors of the Company and that the form of such series, as
established by said Board of Directors, shall specify the descriptive title of
the bonds and various other terms thereof, and may also contain such provisions
not inconsistent with the provisions of the Mortgage as the Board of Directors
may, in its discretion, cause to be inserted therein expressing or referring to
the terms and conditions upon which such bonds are to be issued and/or secured
under the Mortgage; and
WHEREAS, Section 130 of the Mortgage provides, among other things, that any
power, privilege or right expressly or impliedly reserved to or in any way
conferred upon the Company by any provision of the Mortgage, whether such power,
privilege or right is in any way restricted or is unrestricted, may be in whole
or in part waived or surrendered or subjected to any restriction if at the time
unrestricted or to additional restriction if already restricted, and the Company
may enter into any further covenants, limitations or restrictions for the
benefit of any one or more series of bonds issued thereunder and provide that a
breach thereof shall be equivalent to a default under the Mortgage, or the
Company may cure any ambiguity contained therein or in any supplemental
indenture or may establish the terms and provisions of any series of bonds other
than the First Series, by an instrument in writing executed and acknowledged by
the Company in such manner as would be necessary to entitle a conveyance of real
estate to record in all of the states in which any property at the time subject
to the Lien of the Mortgage shall be situated; and the Trustee is further
authorized by said Section 130 to join with the Company in the execution of any
such instrument or instruments, and such instrument, executed and acknowledged
as aforesaid, shall be delivered to the Trustee and thereupon any modification
of the provisions of the Mortgage therein set forth, authorized by said Section
130, shall be
<PAGE>
8
binding upon the parties to the Mortgage, their successors and assigns, and the
holders of the bonds and coupons thereby secured; provided, however, anything
therein contained to the contrary notwithstanding, said Section 130 shall not be
construed to permit any act, waiver, surrender or restriction adversely
affecting any bonds then Outstanding under the Mortgage; and
WHEREAS, in Section 42 of the Mortgage, the Original Mortgagor covenanted
that it would execute and deliver such supplemental indenture or indentures and
such further instruments and do such further acts as might be necessary or
proper to carry out more effectually the purposes of the Mortgage and to make
subject to the Lien of the Mortgage any property thereafter acquired, made or
constructed and intended to be subject to the Lien thereof, and to transfer to
any new trustee or trustees or co-trustee or co-trustees, the estates, powers,
instruments or funds held in trust thereunder; and
WHEREAS, the Company now desires to create a new series of bonds and
(pursuant to Section 130 of the Mortgage) to add to its covenants and agreements
contained in the Mortgage certain other covenants and agreements to be observed
by it; and
WHEREAS, the execution and delivery by the Company of this Fifty-fifth
Supplemental Indenture has been duly authorized by the Board of Directors by
appropriate Resolutions;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
ARTICLE I
GRANTING CLAUSES
The Company, in consideration of the premises and of One Dollar ($1) to it
duly paid by the Trustee at or before the ensealing and delivery of these
presents, the receipt whereof is hereby acknowledged, and in further evidence of
assurance of the estate, title and rights of the Trustee under the Mortgage and
in order further to secure the payment of both the principal of and interest and
premium, if any, on the bonds from time to time issued under the Mortgage,
according to their tenor and effect,
<PAGE>
9
and the performance of all the provisions of the Mortgage (including any
instruments supplemental thereto and any modification made as in the Mortgage
provided) and of such bonds, and to confirm the Lien of the Mortgage on certain
after-acquired property, hereby grants, bargains, sells, releases, conveys,
assigns, transfers, mortgages, pledges, sets over and confirms (subject,
however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto
Chemical Bank as Trustee under the Mortgage, and to its successor or successors
in said trust, and to said Trustee and its successors and assigns forever, all
property, real, personal and mixed, owned by the Original Mortgagor as of the
date of the Mortgage and acquired by the Original Mortgagor or the Company after
the date of the Mortgage, subject to the provisions of Section 97 of the
Mortgage and Section 2.02 of the Forty-fifth Supplemental Indenture thereto, of
the kind or nature specifically mentioned in Paragraphs One through Twelve,
inclusive, of the Mortgage, or of any other kind or nature (except any herein or
in the Mortgage expressly excepted), now owned, or, subject to the provisions of
Section 97 of the Mortgage and Section 2.02 of the Forty-fifth Supplemental
Indenture thereto, hereafter acquired by the Company (by purchase,
consolidation, merger, donation, construction, erection or in any other way) and
wheresoever situated, including the properties described in Article VI hereof,
and including (without in anywise limiting or impairing by the enumeration of
the same the scope and intent of the foregoing) all lands, power sites, flowage
rights, water rights, water locations, water appropriations, ditches, flumes,
reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and
all other rights or means for appropriating, conveying, storing and supplying
water; all rights of way and roads; all plants for the generation of electricity
by steam, water and/or other power; all power houses, gas plants, street
lighting systems, standards and other equipment incidental thereto, telephone,
radio and television systems, air conditioning systems and equipment incidental
thereto, water works, water systems, steam heat and hot water plants,
substations, lines, service and supply systems, bridges, culverts, tracks,
street and interurban railway systems, offices, buildings and other structures
and equipment thereof; all machinery, engines, boilers, dynamos, electric, gas
and other
<PAGE>
10
machines, regulators, meters, transformers, generators, motors, electrical, gas
and mechanical appliances, conduits, cables, water, steam heat, gas or other
pipes, mains and pipes, service pipes, fittings, valves and connections, pole
and transmission lines, wires, cables, tools, implements, apparatus, furniture,
chattels and chooses in action; all municipal and other franchises, consents or
permits; all lines for the transmission and distribution of electric current,
gas, steam heat or water for any purpose, including towers, poles, wires,
cables, pipes, conduits, ducts and all apparatus for use in connection
therewith; all real estate, lands, easements, servitudes, licenses, permits,
franchises, privileges, rights of way and other rights in or relating to real
estate or the occupancy of the same and (except as herein or in the Mortgage
expressly excepted) all the right, title and interest of the Company in and to
all other property of like kind and character as herein described or of any
other kind or character appertaining to and/or used and/or occupied and/or
enjoyed in connection with any property herein or in the Mortgage described;
And the Company does hereby confirm that the Company will not cause or
consent to a partition, either voluntarily or through legal proceedings, of
property subject to the Lien of the Mortgage whether herein described or
heretofore or hereafter acquired, in which its ownership shall be as a tenant in
common, except as permitted by and in conformity with the provisions of the
Mortgage and particularly of Article XII thereof;
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders
and (subject to the provisions of Section 67 of the Mortgage) the tolls, rents,
revenues, issues, earnings, income, product and profits thereof, and all the
estate, right, title and interest and claim whatsoever, at law as well as in
equity, which the Company now has or (subject to the provisions of Section 97 of
the Mortgage and Section 2.02 of the Forty-fifth Supplemental Indenture thereto)
may hereafter acquire in and to the aforesaid property and franchises and every
part and parcel thereof.
<PAGE>
11
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 97 of the Mortgage and Section 2.02 of the Forty-fifth Supplemental
Indenture thereto, all the property, rights and franchises acquired by the
Company (by purchase, consolidation, merger, donation, construction, erection or
in any other way) after the date hereof, except any herein or in the Mortgage
expressly excepted, shall be and are as fully granted and conveyed hereby and by
the Mortgage, and as fully embraced within the Lien of the Mortgage as if such
property, rights and franchises were now owned by the Company and were
specifically described herein or in the Mortgage and conveyed hereby or thereby;
PROVIDED THAT the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over or confirmed hereunder and are expressly excepted
from the Lien and operation of the Mortgage, viz.: (1) cash, shares of stock,
bonds, notes and other obligations and other securities not hereafter
specifically pledged, paid, deposited, delivered or held under the Mortgage or
covenanted so to be; (2) merchandise, equipment, materials or supplies held for
the purpose of sale or other disposition in the usual course of business and
fuel, oil and similar materials and supplies consumable in the operation of any
of the properties of the Company; electric trolley coaches, rolling stock,
buses, motor coaches, automobiles and other vehicles; (3) bills, notes and
accounts receivable, and all contracts, leases and operating agreements not
specifically pledged under the Mortgage or covenanted so to be; the last day of
the term of any lease or leasehold which may be or become subject to the Lien of
the Mortgage; (4) electric energy, gas and other materials or products
generated, manufactured, produced or purchased by the Company for sale,
distribution or use in the ordinary course of its business; and (5) the
Company's franchise to be a corporation; provided, however, that the property
and rights expressly excepted from the Lien and operation of the Mortgage in the
above subdivisions (2) and (3) shall (to the extent permitted by law) cease to
be so excepted in the event and as of the date that the Trustee or a receiver or
trustee shall enter upon and take possession of the Mortgaged and Pledged
Property in the manner provided in Article XIV of the Mortgage by reason of the
occurrence of a Default as defined in Section 75 thereof.
<PAGE>
12
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed by the Company as aforesaid, or intended so to be, unto
Chemical Bank as Trustee, and its successors and assigns forever;
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts
and conditions and subject to and with the same provisos and covenants as are
set forth in the Mortgage, this Fifty-fifth Supplemental Indenture being
supplemental to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Mortgage shall affect and
apply to the property hereinbefore described and conveyed, and to the estates,
rights, obligations and duties of the Company and the Trustee under the Mortgage
and the beneficiaries of the trust with respect to said property, and to the
Trustee under the Mortgage and its successors in the trust, in the same manner
and with the same effect as if the said property had been owned by the Company
at the time of the execution of the Mortgage, and had been specifically and at
length described in and conveyed to said Trustee by the Mortgage as a part of
the property therein stated to be conveyed.
ARTICLE II
REGARDING THE RESIGNATION OF THE RESIGNING CORPORATE TRUSTEE AND
APPOINTMENT OF SUCCESSOR CORPORATE TRUSTEE
SECTION 2.01. Morgan Guaranty Trust Company of New York hereby gives written
notice to the Company that it hereby resigns as Corporate Trustee under the
Mortgage, such resignation to take effect as of September 1, 1994.
SECTION 2.02. Pursuant to Section 112 of the Mortgage, and by order of its
Board of Directors, the Company hereby accepts the foregoing resignation and
appoints Chemical Bank as Successor Corporate Trustee under the Mortgage,
effective as of September 1, 1994. By execution
<PAGE>
13
hereof Chemical Bank hereby acknowledges its acceptance of its appointment by
the Company as Successor Corporate Trustee under the Mortgage.
SECTION 2.03. The Resigning Corporate Trustee hereby conveys, assigns and
transfers to the Successor Corporate Trustee, and its successors and assigns,
upon the trusts expressed in the Mortgage (as amended hereby), all rights,
title, powers and trusts of the Resigning Corporate Trustee under and pursuant
to the Mortgage and all property and money held by the Resigning Corporate
Trustee under the Mortgage. The Resigning Corporate Trustee and the Company
agree, upon request of the Successor Corporate Trustee, to execute, acknowledge
and deliver such further instruments of conveyance and further assurances and to
do such other things as may reasonably be required for more fully and certainly
vesting in and confirming to the Successor Corporate Trustee such rights, title,
powers and trusts.
ARTICLE III
FIFTY-EIGHTH SERIES OF BONDS
SECTION 3.01. There shall be a series of bonds designated "First Mortgage
Bonds, Series 1994-1" (herein sometimes referred to as the "Fifty-eighth
Series"), each of which shall also bear the descriptive title First Mortgage
Bond, and the form thereof, which shall be established by Resolution of the
Board of Directors of the Company, shall contain suitable provisions with
respect to the matters hereinafter in this Section specified. Bonds of the
Fifty-eighth Series shall mature on the maturity date, and in principal amounts
corresponding to the principal amounts, of first mortgage and collateral trust
bonds designated "Series 1994-1," issued under the Company's Mortgage and Deed
of Trust, dated as of January 9, 1989, as amended and supplemented, to Chemical
Bank, as trustee, on the basis of such bonds of the Fifty-eighth Series. Bonds
of the Fifty-eighth Series shall be issued as fully registered bonds in the
denomination of One Thousand Dollars and, at the option of the Company, in any
multiple or multiples of One Thousand Dollars (the exercise of such option to be
evidenced by the execution and delivery thereof); they shall bear no interest;
and the principal of each such bond shall be payable at
<PAGE>
14
the office or agency of the Company in the Borough of Manhattan, The City of New
York, in such coin or currency of the United States of America as at the time of
payment is legal tender for public and private debts. Bonds of the Fifty-eighth
Series shall be dated as in Section 10 of the Mortgage provided.
(I) Bonds of the Fifty-eighth Series shall be redeemable either at the
option of the Company or pursuant to the requirements of the Mortgage
(including, among other things, the provisions of Sections 39 or 74 of the
Mortgage or with the proceeds of released property pursuant to Section 71 of the
Mortgage).
(II) At the option of the registered owner, any bonds of the Fifty-eighth
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, together with a
written instrument of transfer whenever required by the Company duly executed by
the registered owner or by his duly authorized attorney shall (subject to the
provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate
principal amount of bonds of the same series of other authorized denominations.
Bonds of the Fifty-eighth Series shall be transferable (subject to the
provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-fifth Supplemental Indenture), upon the surrender thereof for
cancellation, together with a written instrument of transfer in form approved by
the registrar duly executed by the registered owner or by his duly authorized
attorney, at the office or agency of the Company in the Borough of Manhattan,
The City of New York. Upon any transfer or exchange of bonds of the Fifty-eighth
Series, the Company may make a charge therefor sufficient to reimburse it for
any tax or taxes or other governmental charge, as provided in Section 12 of the
Mortgage, but the Company hereby waives any right to make a charge in addition
thereto for any exchange or transfer of bonds of the Fifty-eighth Series.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Fifty-eighth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the trustee under the
Company's Mortgage and Deed of Trust, dated as of
<PAGE>
15
January 9, 1989, as amended and supplemented, to Chemical Bank, as trustee,
signed by the President, a Vice President, an Assistant Vice President or a
Trust Officer of such trustee, stating that interest or principal due and
payable on any bonds issued under said Mortgage and Deed of Trust has not been
fully paid and specifying the amount of funds required to make such payment.
Bonds of the Fifty-eighth Series shall be initially issued in the name of
Chemical Bank, as trustee under the Company's Mortgage and Deed of Trust, dated
as of January 9, 1989, as amended and supplemented, and shall not be
transferable, except to any successor trustee under said Mortgage and Deed of
Trust.
After the execution and delivery of this Fifty-fifth Supplemental Indenture
and upon compliance with the applicable provisions of the Mortgage, as
supplemented, it is contemplated that there shall be issued bonds of the
Fifty-eighth Series in an aggregate principal amount not to exceed One Hundred
Twelve Million Five Hundred Thousand Dollars ($112,500,000).
ARTICLE IV
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS
REGARDING PROPERTIES EXCEPTED FROM LIEN OF MORTGAGE
SECTION 4.01. The Company reserves the right, without any consent or other
action by holders of bonds of the Fifty-fourth Series, or any other series of
bonds subsequently created under the Mortgage (including the bonds of the
Fifty-eighth Series) to make such amendments to the Mortgage, as heretofore
amended and supplemented, as shall be necessary in order to amend the first
proviso to the granting clause of the Mortgage, which proviso sets forth the
properties excepted from the Lien of the Mortgage, to add a new exception (6)
which shall read as follows:
"(6) allowances allocated to steam-electric generating plants owned by the
Company or in which the Company has interests, pursuant to
<PAGE>
16
Title IV of the Clean Air Act Amendments of 1990, Pub. L. 101-549, Nov. 15,
1990, 104 Stat. 2399, 42 USC 7651, ET SEQ., as now in effect or as hereafter
supplemented or amended."
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.01. The right, if any, of the Company to assert the defense of
usury against a holder or holders of bonds of the Fifty-eighth Series or any
subsequent series shall be determined only under the laws of the State of New
York.
SECTION 5.02. The terms defined in the Mortgage shall, for all purposes of
this Fifty-fifth Supplemental Indenture, have the meanings specified in the
Mortgage.
SECTION 5.03. The Trustee hereby accepts the trusts declared, provided,
created or supplemented in the Mortgage and herein, and agrees to perform the
same upon the terms and conditions set forth herein and in the Mortgage, and
upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fifty-fifth Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely. In general, each and every term and
condition contained in Article XVIII of the Mortgage shall apply to and form
part of this Fifty-fifth Supplemental Indenture with the same force and effect
as if the same were herein set forth in full, with such omissions, variations
and insertions, if any, as may be appropriate to make the same conform to the
provisions of the Fifty-fifth Supplemental Indenture.
SECTION 5.04. Whenever in this Fifty-fifth Supplemental Indenture either the
Company or the Trustee is named or referred to, this shall, subject to the
provisions of Articles XVII and XVIII of the Mortgage, be deemed to include the
successors and assigns of such party, and all the covenants and agreements in
this Fifty-fifth Supplemental Indenture contained by or on behalf of the
Company, or by or on behalf of the
<PAGE>
17
Trustee, or either of them, shall, subject as aforesaid, bind and inure to the
respective benefits of the respective successors and assigns of such parties,
whether so expressed or not.
SECTION 5.05. Nothing in this Fifty-fifth Supplemental Indenture, expressed
or implied, is intended, or shall be construed, to confer upon, or to give to
any person, firm or corporation, other than the parties hereto and the holders
of the bonds and coupons Outstanding under the Mortgage, any right, remedy or
claim under or by reason of this Fifty-fifth Supplemental Indenture or any
covenant, condition, stipulation, promise or agreement hereof, and all the
covenants, conditions, stipulations, promises and agreements in this Fifty-fifth
Supplemental Indenture contained by or on behalf of the Company shall be for the
sole and exclusive benefit of the parties hereto, and of the holders of the
bonds and coupons Outstanding under the Mortgage.
SECTION 5.06. This Fifty-fifth Supplemental Indenture shall be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
ARTICLE VI
SPECIFIC DESCRIPTION OF PROPERTY
The following described properties of the Company, owned as of the date
hereof, and used (or held for future development and use) in connection with the
Utah Power Division of the Company's electric utility systems, or for other
purposes, as hereinafter indicated, respectively:
SAND CREEK 46 KV SUBSTATION--PARCEL NUMBER: I8B00038
Lands in BONNEVILLE County, State of IDAHO
A portion of the SE 1/4 SE 1/4, Section 10, Township 2 North, Range 38
East, of the Boise Meridian, described as beginning at a point 240 feet
North and 48 feet West, more or less, from the Southeast Corner of said
Section 10; thence North 250 feet along a boundary line; thence West 150
feet; thence South 250 feet; thence East 150 feet to the point of
beginning.
<PAGE>
18
TOGETHER WITH an Easement and Right-of-Way described as beginning at a
point 240 feet North and 198 feet West, more or less, from the Southeast
corner of said Section 10; thence North 27 feet; thence West 300 feet to
the East boundary line of Richard Avenue; thence South 27 feet along
said East boundary line; thence East 300 feet to the point of beginning.
TOOELE-DUGWAY 46 KV REGULATOR SITE--PARCEL NUMBER: UT00028
Lands in TOOELE County, State of UTAH
Beginning at a point on an existing right-of-way fence, said point being
North 89 DEG.22'38" East along Section line 820.24 feet and South
2417.15 feet from the Northwest corner of Section 18, Township 5 South,
Range 5 West, Salt Lake Base and Meridian; and running thence South
6 DEG.20'58" East along said right-of-way fence 100.00 feet; thence
South 83 DEG.39'02" West 100.00 feet; thence North 6 DEG.20'58" West
100.00 feet; thence North 83 DEG.39'02" East 100.00 feet to the point of
beginning.
NEW HARMONY 46 KV SUBSTATION--PARCEL NUMBER: UI00045
Lands in IRON County, State of UTAH
A tract of land situate in the S 1/2 of the SE 1/4 of Section 17,
Township 38 South, Range 12 West, Salt Lake Meridian, described as
beginning South 89 DEG.43'36" East 1090.73 feet along the section line
and NORTH 964.94 feet from the south one quarter corner of said Section
17; thence North 65 DEG.08'25" East 54.12 feet, North 11 DEG.15'29" West
65.05 feet, North 71 DEG.44'47" West 69.92 feet, North 38 DEG.23'55"
East 143.93 feet, and North 46 DEG.23'39" East 203.42 feet along the
easterly top of bank of an existing wash, thence NORTH 86.36 feet, more
or less, to a north boundary fence; thence EASTERLY 422.24 feet, more or
less, along said fence to the easterly boundary line, said easterly
boundary line also being the westerly right of way line of Interstate
15, thence Southwesterly along said right of way line and the arc of a
1818.08 foot radius curve to the right 233.59 feet (chord bears South
21 DEG.39'47" West 233.43 feet), South 25 DEG.19'40"
<PAGE>
19
West 203.82 feet, and southwesterly along the arc of a 1238.28 foot
radius curve to the right 58.3706 feet (chord bears South 23 DEG.58'33"
West 58.3652 feet), thence North 89 DEG.43'36" West, 431.85 feet to the
point of beginning.
COTTONWOOD DISTRICT GARAGE--PARCEL NUMBER: US01016
Lands in SALT LAKE County, State of UTAH
Beginning at a point which is North 579.21 feet and West 279.96 feet
from the Southeast corner of Section 26, Township 2 South, Range 1 West,
SLB&M; and running thence North 89 DEG.53'21" West 174.00 feet; thence
North 00 DEG.21'20" West 72.00 feet; thence South 89 DEG.53'21" East
174.00 feet; thence South 00 DEG.21'20" East 72.00 feet to the point of
beginning.
<PAGE>
20
IN WITNESS WHEREOF, PACIFICORP has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents, and its corporate seal to be attested to by its Secretary or one of
its Assistant Secretaries; and Morgan Guaranty Trust Company of New York has
caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by one of its Vice Presidents or one of its Assistant Vice
Presidents, and its corporate seal to be attested to by one of its Assistant
Secretaries and Chemical Bank has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents or one of its Assistant Vice Presidents, and its corporate seal to be
attested to by one of its Senior Trust Officers, all as of the day and year
first above written.
[SEAL] PACIFICORP
By RICHARD T. O'BRIEN
-------------------------------
Vice President
Attest:
JOHN M. SCHWEITZER
----------------------------------
Assistant Secretary
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK
[SEAL] as Resigning Corporate Trustee
By PETER VITELLIO
-------------------------------
Vice President
Attest:
TAMARA FELICETTI
----------------------------------
Assistant Secretary
CHEMICAL BANK
as Successor Corporate Trustee
By F.J. GRIPPO
-------------------------------
Vice President
Attest:
M. KATZ
----------------------------------
Senior Trust Officer
<PAGE>
21
STATE OF OREGON )
COUNTY OF MULTNOMAH ) ss.:
On this 8th day of September, 1994, before me, SHERYL LEE STRATTON, a Notary
Public in and for the State of Oregon, personally appeared RICHARD T. O'BRIEN
and JOHN M. SCHWEITZER, known to me to be a Vice President and an Assistant
Secretary, respectively, of PACIFICORP, an Oregon corporation, who being duly
sworn, stated that the seal affixed to the foregoing instrument is the corporate
seal of said corporation and acknowledged this instrument to be the free,
voluntary and in all respects duly and properly authorized act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
SHERYL LEE STRATTON
----------------------------------
My commission expires: May 25, 1996
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 1st day of September, 1994, before me, JOHN MIECHKOWSKI, a Notary
Public in and for the State of New York, personally appeared PETER VITELLIO and
TAMARA FELICETTI, known to me to be a Vice President and Assistant Secretary,
respectively, of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York
corporation, who being duly sworn, stated that the seal affixed to the foregoing
instrument is the corporate seal of said corporation and acknowledged this
instrument to be the free, voluntary and in all respects duly and properly
authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
JOHN MIECHKOWSKI
----------------------------------
Notary Public, State of New York
No. 30-4893319
Qualified in Nassau County
Commission expires: May 18, 1995
<PAGE>
22
[SEAL]
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 2nd day of September, 1994, before me, EMILY FAYAN, a Notary Public
in and for the State of New York, personally appeared F.J. GRIPPO and M. KATZ,
known to me to be a Vice President and a Senior Trust Officer, respectively, of
CHEMICAL BANK, A NEW YORK CORPORATION, who being duly sworn, stated that the
seal affixed to the foregoing instrument is the corporate seal of said
corporation and acknowledged this instrument to be the free, voluntary and in
all respects duly and properly authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
EMILY FAYAN
----------------------------------
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Commission expires: December 31, 1995
[SEAL]
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PACIFICORP
(AN OREGON CORPORATION)
TO
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(A NEW YORK CORPORATION)
WHICH HEREIN RESIGNS AS CORPORATE TRUSTEE
AND
CHEMICAL BANK
(A NEW YORK CORPORATION)
HEREIN BECOMING SUCCESSOR CORPORATE TRUSTEE TO
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AS TRUSTEE UNDER PACIFIC POWER &
LIGHT COMPANY'S MORTGAGE AND
DEED OF TRUST, DATED AS OF
JULY 1, 1947
---------------------
FIFTY-THIRD SUPPLEMENTAL INDENTURE
DATED AS OF AUGUST 1, 1994
SUPPLEMENTAL TO PACIFIC POWER & LIGHT COMPANY'S
MORTGAGE AND DEED OF TRUST
DATED AS OF JULY 1, 1947
---------------------
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
FIFTY-THIRD SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of August, 1994 (hereinafter
referred to as the "Fifty-third Supplemental Indenture") is made as a supplement
to that certain Mortgage and Deed of Trust, dated as of July 1, 1947, as
heretofore amended and supplemented (the "Mortgage"), executed and delivered by
Pacific Power & Light Company, a Maine corporation that heretofore changed its
name to PacifiCorp (the "Original Mortgagor").
This Fifty-third Supplemental Indenture is entered into by and among (a)
PACIFICORP, a corporation of the State of Oregon into which the Original
Mortgagor heretofore was merged, whose address is 700 NE Multnomah, Portland,
Oregon 97232 (the "Company"); (b) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a
New York corporation whose address is 60 Wall Street, New York, New York 10260
(the "Resigning Corporate Trustee"); and (c) CHEMICAL BANK, a New York
corporation whose address is 450 West 33rd Street, New York, New York 10001 (the
"Successor Corporate Trustee" or "Trustee").
WHEREAS, the Mortgage (including all indentures supplemental thereto) was
recorded in the official records of the States of California, Idaho, Montana,
Oregon, Utah, Washington and Wyoming and various counties within said states in
which this Fifty-third Supplemental Indenture is to be recorded, and was filed
as a financing statement in accordance with the Uniform Commercial Code of each
of said states; and
WHEREAS, the Original Mortgagor executed, delivered, recorded and filed its
Supplemental Indentures as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
First April 1, 1950
Second March 1, 1952
Third September 1, 1952
Fourth April 1, 1954
Fifth August 1, 1954
Sixth October 1, 1955
Seventh January 1, 1957
Eighth September 1, 1957
Ninth January 1, 1958
Tenth July 1, 1958
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
Eleventh September 1, 1960
Twelfth June 22, 1961
Thirteenth April 1, 1962
Fourteenth December 1,1962
Fifteenth April 1, 1963
Sixteenth August 1, 1963
Seventeenth October 1, 1964
Eighteenth October 1, 1965
Nineteenth December 15, 1967
Twentieth May 1, 1969
Twenty-first November 1, 1969
Twenty-second July 1, 1970
Twenty-third February 1, 1971
Twenty-fourth October 1, 1971
Twenty-fifth October 1, 1972
Twenty-sixth January 1, 1974
Twenty-seventh October 1, 1974
Twenty-eighth May 1, 1975
Twenty-ninth January 1, 1976
Thirtieth July 1, 1976
Thirty-first December 1, 1976
Thirty-second January 1, 1977
Thirty-third November 1, 1977
Thirty-fourth April 1, 1979
Thirty-fifth October 1, 1980
Thirty-sixth March 1, 1981
Thirty-seventh October 15, 1981
Thirty-eighth August 1, 1982
Thirty-ninth April 1, 1983
Fortieth March 1, 1986
Forty-first July 1, 1986
Forty-second July 1, 1987;
</TABLE>
and
<PAGE>
3
WHEREAS, the Original Mortgagor has heretofore issued, in accordance with
the provisions of the Mortgage, bonds entitled and designated First Mortgage
Bonds, of the Series and in the principal amounts as follows:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT AGGREGATE PRINCIPAL
SERIES DUE DATE ISSUED AMOUNT OUTSTANDING
------------------------------- -------------- ------------------ -------------------
<S> <C> <C> <C> <C>
1. First--3 1/4% 1977 $ 38,000,000 0
2. Second--3% 1980 9,000,000 0
3. Third--3 5/8% 1982 12,500,000 0
4. Fourth--3 3/4% 9/1/1982 7,500,000 0
5. Fifth--3 3/8% 1984 8,000,000 0
6. Sixth--3 1/2% 8/1/1984 30,000,000 0
7. Seventh--3 5/8% 1985 10,000,000 0
8. Eighth--5 3/8% 1987 12,000,000 0
9. Ninth--5 3/4% 9/1/1987 20,000,000 0
10. Tenth--4 1/4% 1988 15,000,000 0
11. Eleventh--4 3/8% 7/1/1988 20,000,000 0
12. Twelfth--5 1/8% 1990 20,000,000 0
13. Thirteenth--4 3/4% 1992 35,000,000 0
14. Fourteenth--4 1/2% 12/1/1992 32,000,000 0
15. Fifteenth--3 5/8% 11/1/1974 11,434,000 0
16. Sixteenth--3 5/8% 4/1/1978 4,500,000 0
17. Seventeenth--3 3/8% 8/1/1979 4,951,000 0
18. Eighteenth--4 1/8% 6/1/1981 5,849,000 0
19. Nineteenth--4 1/8% 10/1/1982 6,157,000 0
20. Twentieth--3 3/4% 3/1/1984 8,659,000 0
21. Twenty-first--4 3/8% 5/1/1986 14,454,000 0
22. Twenty-second--4 5/8% 1993 30,000,000 0
23. Twenty-third--4 5/8% 1994 30,000,000 $ 20,261,000
24. Twenty-fourth--5% 1995 30,000,000 14,168,000
25. Twenty-fifth--8% 1999 25,000,000 0
26. Twenty-sixth--8 3/4% 11/1/1999 20,000,000 0
27. Twenty-seventh--9 5/8% 2000 25,000,000 0
28. Twenty-eighth--7 7/8% 2001 40,000,000 0
29. Twenty-ninth--8% 10/1/2001 35,000,000 0
30. Thirtieth--7 3/4% 2002 30,000,000 19,744,000
31. Thirty-first--8 3/8% 2004 60,000,000 0
32. Thirty-second--9 7/8% 1983 70,000,000 0
33. Thirty-third--10 3/4% 1990 60,000,000 0
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT AGGREGATE PRINCIPAL
SERIES DUE DATE ISSUED AMOUNT OUTSTANDING
------------------------------- -------------- ------------------ -------------------
<S> <C> <C> <C> <C>
34. Thirty-fourth--10% 2006 75,000,000 0
35. Thirty-fifth--7 3/4% 7/1/2006 35,000,000 0
36. Thirty-sixth--8 5/8% 12/1/2006 50,000,000 0
37. Thirty-seventh--6 3/8% 1/1/2007 17,000,000 $ 8,190,000
38. Thirty-eighth--8 7/8% 11/1/2007 100,000,000 0
39. Thirty-ninth--10 1/4% 2009 100,000,000 0
40. Fortieth--14 3/4% 2010 50,000,000 0
41. Forty-first--15 5/8% 1991 75,000,000 0
42. Forty-second--18% 10/15/1991 100,000,000 0
43. Forty-third--Adjustable Rate 11/1/2002 50,000,000 13,234,000
44. Forty-fourth--12 5/8% 2013 100,000,000 0
45. Forty-fifth--8 5/8% 3/1/1996 80,000,000 0
46. Forty-sixth--8 1/2% 7/1/1996 75,000,000 0
47. Forty-seventh--9 3/8% 1997 50,000,000 50,000,000;
</TABLE>
and
WHEREAS, the Original Mortgagor entered into a Reorganization Agreement and
Plan of Merger dated August 12, 1987, as amended, pursuant to which, among other
things, the Original Mortgagor was merged into the Company as of January 9,
1989, upon such terms as fully to preserve and in no respect to impair the Lien
or security of the Mortgage or any of the rights or powers of the trustees or
the bondholders thereunder; and
WHEREAS, pursuant to Article XVI of the Mortgage, the Company executed,
delivered, recorded and filed its Forty-third Supplemental Indenture dated as of
January 9, 1989, whereby the Company assumed and agreed to pay, duly and
punctually, the principal of and interest on the bonds issued under the
Mortgage, in accordance with the provisions of said bonds and coupons and the
Mortgage, and agreed to perform and fulfill all the covenants and conditions of
the Mortgage to be kept or performed by the Original Mortgagor, and whereby
Bankers Trust Company was appointed Corporate Trustee in succession to Morgan
Guaranty Trust Company of New York, resigned, under the Mortgage, and James F.
Conlan was appointed Co-Trustee in succession to R.E. Sparrow, resigned, under
the Mortgage; and
<PAGE>
5
WHEREAS, the Company executed, delivered, recorded and filed additional
Supplemental Indentures to the Mortgage as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
Forty-fourth March 31, 1989
Forty-fifth December 29, 1989
Forty-sixth March 31, 1991;
</TABLE>
and
WHEREAS, pursuant to said Forty-sixth Supplemental Indenture, Morgan
Guaranty Trust Company of New York was appointed Corporate Trustee in succession
to Bankers Trust Company, resigned, under the Mortgage and James F. Conlan
resigned as Co-Trustee under the Mortgage and all the right, title and powers of
the Co-Trustee devolved upon the Corporate Trustee and its successors alone
until such time as a successor to the Co-Trustee shall be appointed; and
WHEREAS, the Company executed, delivered, recorded and filed additional
Supplemental Indentures to the Mortgage as follows:
<TABLE>
<CAPTION>
DATED AS OF
-------------------------
<S> <C>
Forty-seventh December 31, 1991
Forty-eighth March 15, 1992
Forty-ninth July 31, 1992
Fiftieth March 15, 1993
Fifty-first November 1, 1993;
Fifty-second June 1, 1994;
</TABLE>
and
<PAGE>
6
WHEREAS, the Company has heretofore issued, in accordance with the
provisions of the Mortgage, bonds entitled and designated First Mortgage Bonds,
of the Series and in the principal amounts as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
SERIES DUE DATE ISSUED OUTSTANDING
------------------------------------ ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
48. Forty-eighth--Medium-Term Notes, various $ 125,000,000 $ 120,000,000
Series A
49. Forty-ninth--Medium-Term Notes, various 100,000,000 87,500,000
Series B
50. Fiftieth--Medium-Term Notes, Series various 150,000,000 144,714,391
C
51. Fifty-first--Medium-Term Notes, various 125,000,000 125,000,000
Series D
52. Fifty-second--C-U various 125,216,000 118,235,500
53. Fifty-third--Medium-Term Notes, various 250,000,000 250,000,000
Series E
54. Fifty-fourth--6 3/4% 4/1/2005 75,000,000 75,000,000
55. Fifty-fifth--Medium-Term Notes, various 250,000,000 250,000,000
Series F
56. Fifty-sixth--E-L various 35,600,000 35,600,000
57. Fifty-seventh Medium-Term Notes, various 250,000,000 250,000,000;
Series G
</TABLE>
and
WHEREAS, in addition to the property described in the Mortgage, the Company
has acquired certain other property, rights and interests in property; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of
bonds (other than the First Series) issued thereunder and of the coupons to be
attached to the coupon bonds, if any, of such series shall be established by
Resolution of the Board of Directors of the Company; that the form of such
series, as established by said Board of Directors, shall specify the descriptive
title of the bonds and various other terms thereof; and that such series may
also contain such provisions not inconsistent with the provisions of the
Mortgage, as supplemented, as the Board of
<PAGE>
7
Directors may, in its discretion, cause to be inserted therein expressing or
referring to the terms and conditions upon which such bonds are to be issued
and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any
power, privilege or right expressly or impliedly reserved to or in any way
conferred upon the Company by any provision of the Mortgage, whether such power,
privilege or right is in any way restricted or is unrestricted, may (to the
extent permitted by law) be in whole or in part waived or surrendered or
subjected to any restriction if at the time unrestricted or to additional
restriction if already restricted, and the Company may enter into any further
covenants, limitations or restrictions for the benefit of any one or more series
of bonds issued thereunder and provide that a breach thereof shall be equivalent
to a default under the Mortgage, or the Company may cure any ambiguity contained
therein, or in any supplemental indenture, or may (in lieu of establishment by
Resolution as provided in Section 8 of the Mortgage) establish the terms and
provisions of any series of bonds other than the First Series, by an instrument
in writing executed and acknowledged by the Company in such manner as would be
necessary to entitle a conveyance of real estate to record in all of the states
in which any property at the time subject to the Lien of the Mortgage shall be
situated; and the Trustee is further authorized by said Section 120 to join with
the Company in the execution of such instrument or instruments, and such
instrument, executed and acknowledged as aforesaid, shall be delivered to the
Trustee, and thereupon any modification of the provisions of the Mortgage
therein set forth, authorized by said Section 120, shall be binding upon the
parties to the Mortgage, their successors and assigns, and the holders of the
bonds and coupons thereby secured; provided, however, anything therein contained
to the contrary not withstanding, said Section 120 shall not be construed to
permit any act, waiver, surrender or restriction adversely affecting any bonds
then Outstanding under the Mortgage; and
WHEREAS, in Section 42 of the Mortgage the Original Mortgagor covenanted
that it would execute and deliver such supplemental indenture or indentures and
such further instruments and do such further acts
<PAGE>
8
as might be necessary or proper to carry out more effectually the purposes of
the Mortgage and to make subject to the Lien of the Mortgage any property
thereafter acquired, made or constructed and intended to be subject to the Lien
thereof, and to transfer to any new trustee or trustees or co-trustee or
co-trustees, the estates, powers, instruments or funds held in trust thereunder;
and
WHEREAS, the Company now desires to create a new series of bonds and
(pursuant to the provisions of Section 120 of the Mortgage) to add to its
covenants and agreements contained in the Mortgage, as heretofore supplemented,
certain other covenants and agreements to be observed by it; and
WHEREAS, the execution and delivery by the Company of this Fifty-third
Supplemental Indenture has been duly authorized by the Board of Directors of the
Company by appropriate Resolutions;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
ARTICLE I
GRANTING CLAUSES
The Company, in consideration of the premises and of One Dollar ($1) to it
duly paid by the Trustee at or before the ensealing and delivery of these
presents, the receipt whereof is hereby acknowledged, and in further assurance
of the estate, title and rights of the Trustee under the Mortgage and in order
further to secure the payment of both the principal of and interest and premium,
if any, on the bonds from time to time issued under the Mortgage, according to
their tenor and effect, and the performance of all the provisions of the
Mortgage (including any instruments supplemental thereto and any modification
made as in the Mortgage provided) and of such bonds, and to confirm the Lien of
the Mortgage on certain after-acquired property, hereby grants, bargains, sells,
releases, conveys, assigns, transfers, mortgages, pledges, sets over and
confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of
the Mortgage) unto Chemical Bank as Trustee under the Mortgage, and to its
successor or successors in said trust, and to said Trustee and its successors
and assigns forever, all property, real, personal
<PAGE>
9
and mixed, owned by the Original Mortgagor as of the date of the Mortgage and
acquired by the Original Mortgagor or the Company after the date of the
Mortgage, subject to the provisions of subsection (I) of Section 87 of the
Mortgage and Section 2.02 of the Forty-third Supplemental Indenture thereto, of
the kind or nature specifically mentioned in Article XXI of the Mortgage or of
any other kind or nature (except any herein or in the Mortgage expressly
excepted), now owned, or, subject to the provisions of subsection (I) of Section
87 of the Mortgage and Section 2.02 of the Forty-third Supplemental Indenture
thereto, hereafter acquired by the Company (by purchase, consolidation, merger,
donation, construction, erection or in any other way) and wheresoever situated,
including the properties described in Article VI hereof, and including (without
in anywise limiting or impairing by the enumeration of the same the scope and
intent of the foregoing) all lands, power sites, flowage rights, water rights,
water locations, water appropriations, ditches, flumes, reservoirs, reservoir
sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or
means for appropriating, conveying, storing and supplying water; all rights of
way and roads; all plants for the generation of electricity by steam, water
and/or other power; all power houses, gas plants, street lighting systems,
standards and other equipment incidental thereto, telephone, radio, television
and air conditioning systems and equipment incidental thereto, water works,
water systems, steam heat and hot water plants, substations, lines, service and
supply systems, bridges, culverts, tracks, ice or refrigeration plants and
equipment, offices, buildings and other structures and the equipment thereof;
all machinery, engines, boilers, dynamos, electric, gas, and other machines,
regulators, meters, transformers, generators, motors, electrical, gas and
mechanical appliances, conduits, cables, water, steam heat, gas or other pipes,
gas mains and pipes, service pipes, fittings, valves and connections, pole and
transmission lines, wires, cables, tools, implements, apparatus, furniture and
chattels; all franchises, consents or permits; all lines for the transmission
and distribution of electric current, gas, steam heat or water for any purpose,
including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus
for use in connection therewith; all real estate, lands, easements, servitudes,
licenses, permits, franchises, privileges, rights of way and other rights in or
relating to public or
<PAGE>
10
private property, real or personal, or the occupancy of such property and
(except as herein or in the Mortgage expressly excepted) all right, title and
interest the Company may now have or may hereafter acquire in and to any and all
property of any kind or nature wheresoever situated;
And the Company does hereby confirm that the Company will not cause or
consent to a partition, either voluntarily or through legal proceedings, of
property subject to the Lien of the Mortgage whether herein described or
heretofore or hereafter acquired, in which its ownership shall be as a tenant in
common, except as permitted by and in conformity with the provisions of the
Mortgage and particularly of Article XI thereof;
TOGETHER WITH and all and singular the tenements, hereditaments,
prescriptions, servitudes and appurtenances belonging or in anywise appertaining
to the aforementioned property or any part thereof, with the reversion and
reversions, remainder and remainders and (subject to the provisions of Section
57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and interest and
claim whatsoever, at law as well as in equity, which the Company now has or
(subject to the provisions of subsection (I) of Section 87 of the Mortgage and
Section 2.02 of the Forty-third Supplemental Indenture thereto) may hereafter
acquire in and to the aforementioned property and franchises and every part and
parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
subsection (I) of Section 87 of the Mortgage and Section 2.02 of the Forty-third
Supplemental Indenture thereto, all the property, rights and franchises acquired
by the Company (by purchase, consolidation, merger, donation, construction,
erection or in any other way) after the date hereof, except any herein or in the
Mortgage expressly excepted, shall be and are as fully granted and conveyed
hereby and by the Mortgage, and as fully embraced within the Lien of the
Mortgage, as if such property, rights and franchises were now owned by the
Company and were specifically described herein or in the Mortgage and conveyed
hereby or thereby;
Provided that the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over or confirmed hereunder and are
<PAGE>
11
hereby expressly excepted from the Lien and operation of the Mortgage, viz.: (1)
cash, shares of stock, bonds, notes and other obligations and other securities
not hereafter specifically pledged, paid, deposited, delivered or held under the
Mortgage or covenanted so to be; (2) merchandise, equipment, apparatus,
materials or supplies held for the purpose of sale or other disposition in the
usual course of business; fuel, oil and similar materials and supplies
consumable in the operation of any of the properties of the Company; all
aircraft, tractors, rolling stock, trolley coaches, buses, motor coaches,
automobiles, motor trucks, and other vehicles and materials and supplies held
for the purpose of repairing or replacing (in whole or part) any of the same;
(3) bills, notes and accounts receivable, judgments, demands and choses in
action, and all contracts, leases and operating agreements not specifically
pledged under the Mortgage or covenanted so to be; the Company's contractual
rights or other interest in or with respect to tires not owned by the Company;
(4) the last day of the term of any lease or leasehold which may be or become
subject to the Lien of the Mortgage; (5) electric energy, gas, steam, water, ice
and other materials or products generated, manufactured, stored, produced,
purchased or acquired by the Company for sale, distribution or use in the
ordinary course of its business; all timber, minerals, mineral rights and
royalties and all Natural Gas and Oil Production Property, as defined in Section
4 of the Mortgage; and (6) the Company's franchise to be a corporation;
provided, however, that the property and rights expressly excepted from the Lien
and operation of the Mortgage in the above subdivisions (2) and (3) shall (to
the extent permitted by law) cease to be so excepted in the event and as of the
date that the Trustee or a receiver or trustee shall enter upon and take
possession of the Mortgaged and Pledged Property in the manner provided in
Article XIII of the Mortgage by reason of the occurrence of a Default as defined
in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged,
set over or confirmed by the Company as aforesaid, or intended so to be, unto
Chemical Bank as Trustee, and its successors and assigns forever;
<PAGE>
12
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts
and conditions and subject to and with the same provisions and covenants as are
set forth in the Mortgage, this Fifty-third Supplemental Indenture being
supplemental to the Mortgage;
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Mortgage shall affect and
apply to the property hereinbefore described and conveyed, and to the estates,
rights, obligations and duties of the Company and the Trustee under the Mortgage
and the beneficiaries of the trust with respect to said property, and to the
Trustee under the Mortgage and its successors in the trust, in the same manner
and with the same effect as if the said property had been owned by the Company
at the time of the execution of the Mortgage, and had been specifically and at
length described in and conveyed to said Trustee by the Mortgage as a part of
the property therein stated to be conveyed.
ARTICLE II
REGARDING THE RESIGNATION OF THE RESIGNING TRUSTEE AND
APPOINTMENT OF SUCCESSOR TRUSTEE
SECTION 2.01. Morgan Guaranty Trust Company of New York hereby gives written
notice to the Company that it hereby resigns as Corporate Trustee under the
Mortgage, such resignation to take effect as of September 1, 1994.
SECTION 2.02. Pursuant to Section 102 of the Mortgage, and by order of its
Board of Directors, the Company hereby accepts the foregoing resignation and
appoints Chemical Bank as Successor Corporate Trustee under the Mortgage,
effective as of September 1, 1994. By execution hereof Chemical Bank hereby
acknowledges its acceptance of its appointment by the Company as Successor
Corporate Trustee under the Mortgage.
SECTION 2.03. The Resigning Corporate Trustee hereby conveys, assigns and
transfers to the Successor Corporate Trustee, and its successors and assigns,
upon the trusts expressed in the Mortgage (as amended hereby), all rights,
title, powers and trusts of the Resigning Corporate
<PAGE>
13
Trustee under and pursuant to the Mortgage and all property and money held by
the Resigning Corporate Trustee under the Mortgage. The Resigning Corporate
Trustee and the Company agree, upon request of the Successor Corporate Trustee,
to execute, acknowledge and deliver such further instruments of conveyance and
further assurances and to do such other things as may reasonably be required for
more fully and certainly vesting in and confirming to the Successor Corporate
Trustee such rights, title, powers and trusts.
ARTICLE III
FIFTY-EIGHTH SERIES OF BONDS
SECTION 3.01. There shall be a series of bonds designated "First Mortgage
Bonds, Series 1994-1" (herein sometimes referred to as the "Fifty-eighth
Series"), each of which shall also bear the descriptive title First Mortgage
Bond, and the form thereof, which shall be established by Resolution of the
Board of Directors of the Company, shall contain suitable provisions with
respect to the matters hereinafter in this Section specified. Bonds of the
Fifty-eighth Series shall mature on the maturity date, and in principal amounts
corresponding to the principal amounts, of first mortgage and collateral trust
bonds designated "Series 1994-1," issued under the Company's Mortgage and Deed
of Trust, dated as of January 9, 1989, as amended and supplemented, to Chemical
Bank, as trustee, on the basis of such bonds of the Fifty-eighth Series. Bonds
of the Fifty-eighth Series shall be issued as fully registered bonds in the
denomination of One Thousand Dollars and, at the option of the Company, in any
multiple or multiples of One Thousand Dollars (the exercise of such option to be
evidenced by the execution and delivery thereof); they shall bear no interest;
and the principal of each such bond shall be payable at the office or agency of
the Company in the Borough of Manhattan, The City of New York, in such coin or
currency of the United States of America as at the time of payment is legal
tender for public and private debts. Bonds of the Fifty-eighth Series shall be
dated as in Section 10 of the Mortgage provided.
<PAGE>
14
(I) Bonds of the Fifty-eighth Series shall be redeemable either at
the option of the Company or pursuant to the requirements of the Mortgage
(including, among other things, the provisions of Sections 39, 64 or 87 of the
Mortgage or with the Proceeds of Released Property).
(II) At the option of the registered owner, any bonds of the Fifty-
eighth Series, upon surrender thereof for cancellation at the office or agency
of the Company in the Borough of Manhattan, The City of New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Fifty-eighth Series shall be transferable (subject to the
provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-third Supplemental Indenture), upon the surrender thereof for
cancellation, together with a written instrument of transfer in form approved by
the registrar duly executed by the registered owner or by his duly authorized
attorney, at the office or agency of the Company in the Borough of Manhattan,
The City of New York. Upon any transfer or exchange of bonds of the Fifty-eighth
Series, the Company may make a charge therefor sufficient to reimburse it for
any tax or taxes or other governmental charge, as provided in Section 12 of the
Mortgage, but the Company hereby waives any right to make a charge in addition
thereto for any exchange or transfer of bonds of the Fifty-eighth Series.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Fifty-eighth Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the trustee under the
Company's Mortgage and Deed of Trust, dated as of January 9, 1989, as amended
and supplemented, to Chemical Bank, as trustee, signed by the President, a Vice
President, an Assistant Vice President or a Trust Officer of such trustee,
stating that interest or principal due and payable on any bonds issued under
said Mortgage and Deed of Trust has not been fully paid and specifying the
amount of funds required to make such payment.
Bonds of the Fifty-eighth Series shall be initially issued in the name of
Chemical Bank, as trustee under the Company's Mortgage and Deed of
<PAGE>
15
Trust, dated as of January 9, 1989, as amended and supplemented, and shall not
be transferable, except to any successor trustee under said Mortgage and Deed of
Trust.
After the execution and delivery of this Fifty-third Supplemental Indenture
and upon compliance with the applicable provisions of the Mortgage, as
supplemented, it is contemplated that there shall be issued bonds of the
Fifty-eighth Series in an aggregate principal amount not to exceed One Hundred
Twelve Million Five Hundred Thousand Dollars ($112,500,000).
ARTICLE IV
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS
REGARDING PROPERTIES EXCEPTED FROM LIEN OF MORTGAGE
SECTION 4.01. The Company reserves the right, without any consent or other
action by holders of bonds of the Fifty-fourth Series, or any other series of
bonds subsequently created under the Mortgage (including the bonds of the
Fifty-eighth Series), to make such amendments to the Mortgage, as heretofore
amended and supplemented, as shall be necessary in order to amend the first
proviso to the granting clause of the Mortgage, which proviso sets forth the
properties excepted from the Lien of the Mortgage, to add a new exception (7)
which shall read as follows:
"(7) allowances allocated to steam-electric generating plants owned by the
Company or in which the Company has interests, pursuant to Title IV of the
Clean Air Act Amendments of 1990, Pub. L. 101-549, Nov. 15, 1990, 104 Stat.
2399, 42 USC 7651, ET SEQ., as now in effect or as hereafter supplemented or
amended."
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.01. The right, if any, of the Company to assert the defense of
usury against a holder or holders of bonds of the Fifty-eighth Series or any
subsequent series shall be determined only under the laws of the State of New
York.
<PAGE>
16
SECTION 5.02. The terms defined in the Mortgage shall, for all purposes of
this Fifty-third Supplemental Indenture, have the meanings specified in the
Mortgage.
SECTION 5.03. The Trustee hereby accepts the trusts declared, provided,
created or supplemented in the Mortgage and herein, and agrees to perform the
same upon the terms and conditions set forth herein and in the Mortgage, and
upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fifty-third Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely. In general, each and every term and
condition contained in Article XVII of the Mortgage shall apply to and form part
of this Fifty-third Supplemental Indenture with the same force and effect as if
the same were herein set forth in full, with such omissions, variations and
insertions, if any, as may be appropriate to make the same conform to the
provisions of this Fifty-third Supplemental Indenture.
SECTION 5.04. Whenever in this Fifty-third Supplemental Indenture either the
Company or the Trustee is named or referred to, this shall, subject to the
provisions of Articles XVI and XVII of the Mortgage, be deemed to include the
successors and assigns of such party, and all the covenants and agreements in
this Fifty-third Supplemental Indenture contained by or on behalf of the
Company, or by or on behalf of the Trustee, or either of them, shall, subject as
aforesaid, bind and inure to the respective benefits of the respective
successors and assigns of such parties, whether so expressed or not.
SECTION 5.05. Nothing in this Fifty-third Supplemental Indenture, expressed
or implied, is intended, or shall be construed, to confer upon, or to give to,
any person, firm or corporation, other than the parties hereto and the holders
of the bonds and coupons Outstanding under the Mortgage, any right, remedy or
claim under or by reason of this Fifty-third Supplemental Indenture or any
covenant, condition, stipulation, promise or agreement hereof, and all the
covenants, conditions, stipulations, promises and agreements in this Fifty-third
Supplemental Indenture
<PAGE>
17
contained by or on behalf of the Company shall be for the sole and exclusive
benefit of the parties hereto, and of the holders of the bonds and coupons
Outstanding under the Mortgage.
SECTION 5.06. This Fifty-third Supplemental Indenture shall be executed in
several counterparts each of which shall be an original and all of which shall
constitute but one and the same instrument.
ARTICLE VI
SPECIFIC DESCRIPTION OF PROPERTY
The following described properties of the Company, owned as of the date
hereof, and used (or held for future development and use) in connection with the
Pacific Power Division of the Company's electric utility systems, or for other
purposes, as hereinafter indicated, respectively:
H--OFFICE BUILDINGS
The following office and service center of the Company in the State of
Washington including the following described real property:
H-48--YAKIMA OFFICE AND SERVICE CENTER
In YAKIMA County, State of WASHINGTON
H-48 ITEM: That part of the East 1/2 of the Southeast 1/4 of Section 17,
Township 13 North, Range 19 East, W.M., lying northerly of the Northerly
right-of-way line of the Burlington Northern, Inc. Railroad (now
W.C.R.C.) right-of-way as conveyed by deed recorded in Volume 83 of
Deeds, page 552;
EXCEPTING THEREFROM the following:
1) That portion thereof conveyed to Union Gap Irrigation District by
deed dated April 6, 1916, and recorded in Volume 165 of Deeds, page 285,
under Auditor's File No. 90399, described as all of the Northeast 1/4 of
the Southeast 1/4 of said Section 17 lying North of a line 25 feet South
of and parallel with the centerline of the Union Gap Ditch;
<PAGE>
18
2) That portion thereof lying Westerly of the following described line:
Commencing at a point on the South line of the tract of land conveyed to
Union Gap Irrigation District by deed recorded in Volume 165 of Deeds,
page 285, under Auditor's File No. 90399, which point is 23.8 feet South
and 59 feet North 89 DEG. 55' East of the Northwest corner of said
subdivision; thence North 89 DEG. 55' East along the South line of said
Union Gap Irrigation District property 653.11 feet to the point of
beginning of said described line; thence South 00 DEG. 05' East to the
Northeasterly right-of-way line of said Burlington Northern, Inc.
Railroad right-of-way and the terminus of said described line;
3) That portion thereof lying Easterly of the following described line:
Beginning at the point of intersection of the Northeasterly right-of-way
line of said Burlington Northern, Inc. Railroad right-of-way, with the
West line of the East 30.00 feet of the Southeast 1/4 of said Section
17; thence North 00 DEG. 32' 30" West parallel with the East line of
said Section 1146.28 feet to the P.C. of a curve to the left; thence
along the arc of a curve to the left having a radius of 925.00 feet,
through a central angle of 30 DEG. 00'; thence North 30 DEG. 32' 30"
West to the North line of the Southeast 1/4 of said Section 17 and the
terminus of said described line (Parcel No. 191317-41001/Levy Code 385).
<PAGE>
19
IN WITNESS WHEREOF, PACIFICORP has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents, and its corporate seal to be attested to by its Secretary or one of
its Assistant Secretaries; and MORGAN GUARANTY TRUST COMPANY OF NEW YORK has
caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by one of its Vice Presidents or one of its Assistant Vice
Presidents, and its corporate seal to be attested to by one of its Assistant
Secretaries; and Chemical Bank has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents or one of its Assistant Vice Presidents, and its corporate seal to be
attested to by one of its Senior Trust Officers, all as of the day and year
first above written.
[SEAL] PACIFICORP
By RICHARD T. O'BRIEN
-------------------------------
Vice President
Attest:
JOHN M. SCHWEITZER
----------------------------------
Assistant Secretary
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
[SEAL] as Resigning Corporate Trustee
By PETER VITELLIO
-------------------------------
Vice President
Attest:
TAMARA FELICETTI
----------------------------------
Assistant Secretary
<PAGE>
20
CHEMICAL BANK
as Successor Corporate Trustee
By F.J. GRIPPO
-------------------------------
Attest: Vice President
M. KATZ
----------------------------------
Senior Trust Officer
<PAGE>
21
STATE OF OREGON )
COUNTY OF MULTNOMAH ) ss.:
On this 8th day of September, 1994, before me, SHERYL LEE STRATTON, a Notary
Public in and for the State of Oregon, personally appeared RICHARD T. O'BRIEN
and JOHN M. SCHWEITZER, known to me to be a Vice President and an Assistant
Secretary, respectively, of PACIFICORP, an Oregon corporation, who being duly
sworn, stated that the seal affixed to the foregoing instrument is the corporate
seal of said corporation and acknowledged this instrument to be the free,
voluntary and in all respects duly and properly authorized act and deed of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
SHERYL LEE STRATTON
----------------------------------
My commission expires: May 25, 1996
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 1st day of September, 1994, before me, JOHN MIECHOWSKI, a Notary
Public in and for the State of New York, personally appeared PETER VITELLIO and
TAMARA FELICETTI, known to me to be a Vice President and Assistant Secretary,
respectively, of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York
corporation, who being duly sworn, stated that the seal affixed to the foregoing
instrument is the corporate seal of said corporation and acknowledged this
instrument to be the free, voluntary and in all respects duly and properly
authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
JOHN MIECHKOWSKI
----------------------------------
Notary Public, State of New York
No. 30-4893319
Qualified in Nassau County
[SEAL] Commission expires: May 18, 1995
<PAGE>
22
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On this 2nd day of September, 1994, before me, EMILY FAYAN, a Notary Public
in and for the State of New York, personally appeared F.J. GRIPPO and M. KATZ,
known to me to be a Vice President and a Senior Trust Officer, respectively, of
CHEMICAL BANK, a New York corporation, who being duly sworn, stated that the
seal affixed to the foregoing instrument is the corporate seal of said
corporation and acknowledged this instrument to be the free, voluntary and in
all respects duly and properly authorized act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
EMILY FAYAN
----------------------------------
Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Commission expires: December 31,
[SEAL] 1995
<PAGE>
EXHIBIT (10)b
PACIFICORP
COMPENSATION REDUCTION PLAN
DECEMBER 1, 1994
(AS AMENDED THROUGH AMENDMENT NO. 1)
PACIFICORP
AN OREGON CORPORATION
700 NE MULTNOMAH
PORTLAND, OREGON 97232 COMPANY
<PAGE>
i
TABLE OF CONTENTS
Page
----
1. ADMINISTRATION; PLAN YEAR 1
2. ELIGIBILITY 1
3. DEFERRAL ELECTION 2
4. DEFERRED COMPENSATION ACCOUNTS 3
5. TRUST 5
6. TIME AND MANNER OF PAYMENT 5
7. DEATH OR DISABILITY 7
8. WITHDRAWALS 9
9. SUPPLEMENTAL PENSION BENEFIT 9
10. AMENDMENT; TERMINATION 10
11. CLAIMS PROCEDURE 10
12. GENERAL PROVISIONS 11
13. EXPENSES 12
14. EFFECTIVE DATE 12
<PAGE>
ii
INDEX OF TERMS
Section Page
_______ ____
Accounts 4.1 3
Advisory Boards 2.1(b) 2
Code 3.3 2
Committee 1.2 1
Common Stock 3.3 2
Company Preamble 1
Compensation 3.2 2
Controlled Group of Corporations 6.1(b) 6
Credit Account 4.3 4
Deferred Election 3.1 2
Disabled 7.6 8
Employer 1.1 1
Financial Hardship 8.2 9
LTIP 3.3 2
Participant 2.2 2
Plan 1 1
Plan Year 1.3 1
Restricted Stock Awards 3.3 2
Retirement Plan 6.3(a) 6
Stock Account 4.2 3
Trust 5.1 4
Years of Service 6.3(b) 6
<PAGE>
PACIFICORP
COMPENSATION REDUCTION PLAN
DECEMBER 1, 1994
(AS AMENDED BY AMENDMENT NO. 1)
PACIFICORP
AN OREGON CORPORATION
700 NE MULTNOMAH
PORTLAND, OREGON 97232 "COMPANY"
The Company adopts this Compensation Reduction Plan (the "Plan") as a
nonqualified plan of deferred compensation for directors and a select group of
management or highly compensated employees. The purpose of the Plan is to
provide an additional benefit to eligible directors and employees as a means to
attract and retain highly effective individuals. Furthermore, by allowing
Participants to elect to have their deferred compensation adjusted by the
performance of Company stock, the Plan provides a vehicle for further incentive
to improve the economic return to shareholders.
1. ADMINISTRATION; PLAN YEAR.
1.1 The Plan shall apply to the Company and affiliates of the Company
for whom an eligible employee or director performs services. The term
"Employer" refers to the Company or such affiliate for which such services are
performed.
1.2 This Plan shall be administered by the Personnel Committee of the
Board of Directors of the Company (the "Committee"). The Committee shall
interpret the Plan, determine eligibility and the amount of benefits, maintain
records, determine interest rates and stock credits and generally be responsible
for seeing that the purposes of the Plan are accomplished. The Committee may
delegate all or part of its administrative duties to others.
1.3 The fiscal year of the Plan (the "Plan Year") shall be a calendar
year.
1.4 The Plan is unfunded for tax purposes and for purposes of Title I
of ERISA.
2. ELIGIBILITY.
2.1 The following persons shall be eligible to participate in this
Plan:
<PAGE>
2
(a) A director of the Company;
(b) A member of the Advisory Boards of Pacific Power
and Light Company and Utah Power and Light Company (together
the "Advisory Boards");
(c) An executive officer of the Company; and
(d) Any other employee of the Company or an affiliate
who is designated in writing for participation in the Plan by
the Chief Executive Officer of the Company.
2.2 An eligible employee or director who elects to defer Compensation
or Restricted Stock Awards pursuant to Section 3 for any Plan Year shall
participate in the Plan (a "Participant").
3. DEFERRAL ELECTION.
3.1 An eligible employee or director may elect to participate for each
Plan Year by completing a form prescribed by the Committee (a "Deferral
Election"), signing it and returning it to the Committee. The Deferral Election
may provide for a deferral of Compensation under 3.2 or deferral of Restricted
Stock Awards under 3.3, or both.
3.2 "Compensation" means an eligible director's retainer and fees and
an eligible employee's salary and bonus earned within the Plan Year for which a
Deferral Election is made. The Deferral Election shall designate a dollar
amount or percentage to be deferred out of the director's annual retainer and/or
fees, or the employee's annual salary and/or bonus, which dollar amount or
percentage may be different as between retainer and fee, or salary and bonus.
The minimum annual retainer deferred shall be $3,600 and the minimum monthly
salary deferred shall be $300.
3.3 "Restricted Stock Award" means a grant to a Participant of
restricted Common Stock of the Company (the "Common Stock") under the PacifiCorp
Long-Term Incentive Plan, as amended by the 1993 Restatement (the "LTIP") or
under another plan or arrangement providing for the grant of Common Stock in
connection with performance of services that is not substantially vested for
purposes of Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Deferral Election shall apply to any portion of a Restricted Stock
Award that vests during the next Plan Year based on actions required to be taken
during such Plan Year. The Participant may elect deferral of all or one-half of
such portion, except that no deferral shall be allowed of a Restricted Stock
Award as to which the Participant has made an election under Section 83(b) of
the Code. If a Participant is required to remain employed as of a date within
the year following the relevant Plan Year in order to become vested in a portion
of a Restricted Stock Award, such portion shall be treated for purposes of this
3.3 as
<PAGE>
3
becoming vested based on actions required to be taken in the Plan Year for which
the Deferral Election is made.
3.4 To be effective for a Plan Year, the Deferral Election must be
returned before January 1 of the Plan Year, except as follows:
(a) The Deferral Election of an eligible employee's
1994 bonus must be returned by December 30, 1994.
(b) The Deferral Election of an eligible employee's
Restricted Stock Award granted under the LTIP or an individual
agreement and becoming vested as of a date in February 1995
based on actions required to be taken in 1994 must be returned
by December 30, 1994.
(c) A Participant who becomes eligible under 2.1 during
a Plan Year may return a Deferral Election for that Plan Year
within 30 days after the eligibility date. Such Deferral
Election shall be effective for Compensation and Restricted
Stock Awards for such Plan Year that are payable after the
eligibility date.
3.5 The Employer shall reduce the Participant's Compensation by the
amounts deferred and shall credit such amounts and any deferred Restricted Stock
Awards to the Participant's Account(s) as provided under Section 4. Amounts due
for FICA taxes on an employee-Participant's elected amounts, including all
deferred Compensation and Restricted Stock Awards, will be withheld from the
Participant's remaining nondeferred Compensation. If an employee-Participant
has no remaining nondeferred Compensation, such employee-Participant shall pay
cash to the Employer in an amount sufficient to cover amounts due for FICA taxes
on the employee-Participant's deferrals.
4. DEFERRED COMPENSATION ACCOUNTS.
4.1 Each Participant shall have one or two Accounts in the Plan: a
Stock Account and/or a Credit Account (individually, an "Account" and
collectively, the "Accounts"). Compensation deferred by a Participant under
Section 3 shall be credited to the Stock Account or Credit Account as elected by
the Participant in the Deferral Election. Such election may be divided between
the two Accounts in increments of 25 percent of the deferred Compensation
governed by the election, except as provided in 4.4. An election between the
Stock Account or the Credit Account shall be irrevocable as to the deferred
Compensation covered by the election. Restricted Stock Awards deferred by a
Participant under Section 3 shall be credited to the Stock Account.
<PAGE>
4
4.2 A Participant's Stock Account shall be denominated in shares of
the Company's publicly traded common stock ("Common Stock"), including
fractional shares. With respect to each amount of Compensation deferred to the
Stock Account, the Participant's Stock Account shall be credited with a number
of shares equal to the deferred Compensation divided by the market value of the
Common Stock on the day the deferred Compensation would have been paid had it
not been deferred. As of each date for payment of dividends on the Common
Stock, the Participant's Stock Account shall be credited with an additional
number of shares (including fractional shares) equal to the amount of dividends
that would be paid on the number of shares recorded as the balance of the Stock
Account as of the record date for such dividend divided by the market value per
share of Common Stock on such payment date. As of each date for payment of
dividends on the Common Stock, the Participant's Stock Account shall be credited
with an additional number of shares (including fractional shares) equal to the
amount of dividends that would be paid on the number of shares then recorded as
the balance of the Stock Account divided by the market value per share of Common
Stock on such payment date. Market value for purposes of this section shall be
the closing price on the New York Stock Exchange as of the relevant date. If
the day to be used for valuing Common Stock in a deferral of Compensation or a
dividend payment date is not a trading day, market value shall be taken from the
last preceding trading day.
4.3 A Participant's Credit Account shall be denominated in dollars.
As of each date on which a Participant would have received Compensation deferred
to the Credit Account had it not been deferred, the amount of the deferred
Compensation shall be credited to the Participant's Credit Account. The Credit
Account also shall be credited with interest on the balance in the Account until
the entire Account has been paid out. Interest shall be compounded monthly at
the rate determined as of the last business day of the preceding calendar
quarter. The rate of interest shall be the Moody's Intermediate Corporate Bond
Yield for Aa rated Public Utility Bonds. If the index described in the
foregoing sentence ceases to exist, the rate of interest shall be determined
under the most nearly comparable index as selected by the Committee.
4.4 A Participant shall be permitted to transfer amounts from the
Credit Account to the Stock Account up to two times each year. Such transfers
shall be permitted within a period commencing with the third business day
following each date on which the Company releases its earnings report for the
preceding calendar quarter and ending with the twelfth business day following
such date. The minimum amount of each transfer shall be $2,000.
4.5 The Accounts shall be established solely for the purpose of
measuring the amount owed to a Participant under the Plan and shall not give
Participants any ownership rights in any assets of the Company or the Trust.
5. TRUST.
5.1 The Company shall establish a trust with a financial institution
for payment of benefits under the Stock Account described in 4.2 (the "Trust").
The Trust may be established by amendment to the PacifiCorp Supplemental
Executive Retirement Trust or by separate agreement. The Trust shall be a
grantor trust for tax purposes and shall provide that any assets contributed to
the trustee shall be used exclusively for payment of benefits under 4.2 of this
Plan except in the event the Company becomes insolvent, in which case the trust
fund shall be held for payment of the Company's obligations to its general
creditors. The Trust shall further provide that all rights associated with the
assets of the Trust shall be exercised by the trustee, or a person
<PAGE>
5
designated by the trustee, and in no event shall be exercisable by or rest with
Participants.
5.2 The Company shall periodically contribute to the Trust the amounts
necessary to purchase Common Stock equal to the total balance of all Stock
Accounts. Such contributions shall be held in a separate fund within the Trust
for the sole purpose of paying benefits under the Plan measured by Stock
Accounts, except as provided in the Trust document upon the Company's
insolvency. The assets of such fund shall be invested by the trustee in Common
Stock. If the assets of such fund exceed the total balance of all Stock
Accounts, the excess shall be retained in the fund until reduced by payment of
benefits.
5.3 The Company may, in its discretion, contribute amounts to the
Trust to be held in a separate fund for the sole purpose of paying benefits
under the Plan measured by the Credit Accounts described in 4.3, except as
provided in the Trust document upon the Company's insolvency. The assets of
such fund shall be invested by the trustee in accordance with instructions by
the Committee. If the assets of such fund exceed the total balance of all
Credit Accounts, the excess shall be retained in the fund until reduced by
payment of benefits.
5.4 Common Stock included in any deferred Restricted Stock Award shall
be transferred to the Trustee as soon as practicable after the date that such
Restricted Stock Award vests, which date may be after the end of the Plan Year
for which the Deferral Election was made.
6. TIME AND MANNER OF PAYMENT
6.1 A benefit based on the Participant's deferrals shall be paid to
the Participant at a time determined as follows:
(a) A benefit derived from deferral of Compensation or
from deferral of Restricted Stock Awards receivable as a
member of the Company's Board of Directors or the Advisory
Boards shall be payable upon termination of membership of the
Participant on such Board of Directors and Advisory Boards.
(b) A benefit derived from deferral of Compensation or
from deferral of Restricted Stock Awards receivable as an
employee shall be payable upon termination of all employment
with the controlled group of corporations, as defined in
Section 1563(a) of the Code, of which the Company is a member.
(c) A benefit derived from deferral of Compensation or
from deferral of Restricted Stock Awards with respect to which
the Participant elected payment on a date certain under 6.5(c)
shall be payable on that date.
<PAGE>
6
6.2 The total benefit payable to a Participant shall be an amount
equal to the Participant's Accounts. Subject to 6.4, the method of payment
shall be determined as follows:
(a) An amount payable to an employee-Participant upon a
termination of employment described in 6.1(b) that does not
constitute a retirement under 6.3 shall be paid as soon as
practicable after the January 15 following the employment
termination.
(b) An amount payable in circumstances other than those
described in (a) shall be paid by the method selected by the
Participant under 6.5.
6.3 An employee-Participant's termination of employment shall
constitute a retirement if:
(a) The employee-Participant qualifies at the time of
employment termination for early, normal or deferred
retirement under the PacifiCorp Retirement Plan (the
"Retirement Plan"); or
(b) At the time of employment termination the employee-
Participant is not covered by the Retirement Plan, has
attained age 55 and has completed five "Years of Service"
under the definition of such term in that Retirement Plan as
in effect at the time this Plan is adopted.
6.4 Subject to 8.1, benefits payable to a Participant from a Stock
Account shall only be paid to such Participant as a distribution of Common Stock
plus cash for fractional shares of Common Stock credited to such Participant's
Stock Account.
6.5 In the Participant's Deferral Election the Participant shall
select the method of payment under 6.2(a) from among the following:
(a) A lump sum from the Credit Account and a
distribution of Common Stock plus cash for fractional shares
from the Stock Account, both as soon as practicable after the
January 15 following the termination of membership on the
Board of Directors or Advisory Boards, or employment.
(b) Substantially equal annual installments of cash
from the Credit Account and Common Stock and cash for
fractional shares from the Stock Account beginning, both as
soon as practicable after the January 15 following the
termination of membership on the Board of
<PAGE>
7
Directors or Advisory Boards, or employment and continuing for 5, 10 or
15 years.
(c) A lump sum from the Credit Account and a
distribution of Common Stock plus cash for fractional shares
from the Stock Account, both as soon as practicable after a
date certain.
6.6 A Participant's selection under 6.5 shall be irrevocable for
deferrals credited to the Participant's Account(s) while the selection is in
effect and any interest credited thereto. Upon application from a Participant
at the time of termination of membership on the Board of Directors or Advisory
Boards, termination of employment or at the date certain specified in such
Participant's Deferral Election, the Company, in its sole discretion, may change
the form of payment. The application shall be submitted to the Committee, which
shall transmit it to the Company. The Company shall consider its capital
requirements and the effective cost of funds. If the Company modifies the form
of payment, such a change may require a reduction in the rate of interest
credited to the Participant's Credit Account to three percentage points less
than the rate stated in 4.3, or such a change may require the Company to reduce
the total value of Participant's Stock Account by a specified discount
determined upon such application.
6.7 The Employer may withhold from any payments any deductions
required by law. If payments of cash are insufficient to cover the entire
amount required to be withheld, the Employer may withhold the required amounts
from nondeferred Compensation or require the Participant to pay such amounts.
7. DEATH OR DISABILITY.
7.1 Regardless of the provisions of Section 6, amounts payable to a
Participant thereunder shall be payable under 7.2 through 7.6 on the
Participant's death or disability.
7.2 On death, the amount payable shall be paid as follows:
(a) If the recipient is the surviving spouse and the
Participant had selected an installment payout, by
installments in accordance with the selection under 6.5,
beginning within 60 days after the Participant's death.
(b) In all other cases, by a lump sum from the Credit
Account and a distribution of Common Stock plus cash for
fractional shares from the Stock Account, payable within 60
days after the Participant's death.
7.3 An amount payable on death of a Participant shall be paid to the
Participant's beneficiary in the following order of priority:
<PAGE>
8
(a) To the surviving beneficiaries designated by the
Participant in writing to the Committee.
(b) To the Participant's estate.
7.4 If a surviving spouse is receiving installments from a Credit
Account and dies when a balance remains in one or both Accounts, the balance
shall be paid to the spouse's estate in a lump sum from the Credit Account and a
distribution of Common Stock plus cash for fractional shares from the Stock
Account.
7.5 A Participant temporarily disabled while employed or receiving
long-term disability benefits under a plan described in 7.6 shall be treated as
employed, and no payments will be made under this Plan. If disability benefits
stop and disability continues, the amount payable shall be paid in the manner
selected under 6.5, with either the lump sum or the first installment due within
30 days of the date the disability benefits stop. If the Participant dies, the
provisions applicable to death shall be followed. If the Participant ceases to
be disabled and does not resume active employment, the amount payable shall be
paid in accordance with Section 6.
7.6 A Participant is disabled if the Committee determines that either
of the following apply:
(a) The Participant is eligible to receive long-term
disability benefits under a plan maintained by the Employer.
(b) In the absence of eligibility for a plan described
in (a), the Participant is permanently and totally disabled on
the basis of comparable criteria.
8. WITHDRAWALS.
8.1 A Participant or surviving spouse may withdraw amounts from an
Account before those amounts would otherwise have been paid because of Financial
Hardship, as determined by the Committee. The withdrawal shall be limited to
the amount reasonably necessary to meet the Financial Hardship. Distributions
based upon Financial Hardship shall be paid entirely in cash even if withdrawals
are from a Stock Account.
8.2 "Financial Hardship" means a Participant's or surviving spouse's
immediate and substantial financial need that cannot be met from other
reasonably available resources and is caused by one or more of the following:
<PAGE>
9
(a) Medical expenses for the Participant or surviving
spouse, a member of the Participant's or surviving spouse's
immediate family or household, or other dependent.
(b) Loss of or damage to a Participant's possessions or
property due to casualty.
(c) Other extraordinary and unforeseeable circumstances
arising from events beyond the Participant's control.
8.3 The Committee shall establish guidelines and procedures for
implementing withdrawals. An application shall be written, be signed by the
Participant or surviving spouse and include a statement of facts causing the
Financial Hardship and any other facts required by the Committee.
8.4 The withdrawal date shall be fixed by the Committee. The
Committee may require a minimum advance notice and may limit the amount, time
and frequency of withdrawals.
9. SUPPLEMENTAL PENSION BENEFIT.
9.1 The Company's Retirement Plan provides retirement benefits for
eligible employees based in part on Compensation. A Participant that elects
deferral of Compensation may receive smaller benefits under the Retirement Plan
than would have been paid if none of the Participant's Compensation had been
deferred. If the Participant receives benefits under the PacifiCorp
Supplemental Executive Retirement Plan, or another nonqualified deferred
compensation plan providing benefits that are offset by benefits of the
Retirement Plan, the reduction in Retirement Plan benefits may be made up.
9.2 If a Participant receives benefits under the Company's Retirement
Plan that are reduced as a result of deferrals under this Plan and not made up
by another nonqualified deferred compensation plan, a supplemental pension
benefit shall be paid under this Plan as follows:
(a) The supplemental pension benefit shall be the
amount by which the benefit payable from the Retirement Plan
is less than the amount of such benefit that would have been
payable if the Participant had not deferred Compensation under
this Plan.
(b) Employer shall pay the supplemental pension benefit
to the Participant at the same time and in the same form as
the Participant's benefit is paid under the Retirement Plan.
<PAGE>
10
10. AMENDMENT; TERMINATION.
10.1 The Company may amend this Plan effective the first day of any
month by notice to the Participants, except the provisions in 4.2 on adjustments
of Stock Accounts shall not be changed, nor shall the rate of interest credited
under 4.3 be reduced, without the consent of a Participant as to the
Participant's Credit Account or Stock Account balance as of the date of the
change or reduction.
10.2 At any time the Company may terminate the Plan and pay out all
amounts payable to the Participants, spouses or other persons then entitled to
such amounts and thereby discharge all the benefit obligations of the Plan.
Upon such termination any assets remaining in the Trust shall be returned to the
Company.
10.3 If the Internal Revenue Service issues a final ruling that any
amounts deferred under this Plan will be subject to current income tax, all
amounts to which the ruling is applicable shall be paid to the Participants
within 30 days.
11. CLAIMS PROCEDURE.
11.1 Any person claiming a benefit or requesting an interpretation,
ruling or information under the Plan shall present the request in writing to the
Committee, which shall respond in writing as soon as practicable.
11.2 If the claim or request is denied, the written notice of denial
shall state:
(a) The reasons for denial, with specific reference to
the Plan provisions on which the denial is based.
(b) A description of any additional materials or
information required and an explanation of why it is
necessary.
(c) An explanation of the Plan's claim review
procedure.
11.3 The initial notice of denial shall normally be given within 90
days of receipt of the claim. If special circumstances require an extension of
time, the claimant shall be so notified and the time limit shall be 180 days.
11.4 Any person whose claim or request is denied or who has not
received a response within the time period described in 11.3 may request review
by notice in writing to the Committee. The original decision shall be reviewed
by the Committee, which may, but shall not be required to, grant the claimant a
hearing. On review, whether or not there is a hearing, the claimant may have
representation, examine pertinent documents and submit issues and comments in
writing.
<PAGE>
11
11.5 The decision on review shall ordinarily be made within 60 days.
If an extension of time is required for a hearing or other special
circumstances, the claimant shall be so notified and the time limit shall be 120
days. The decision shall be in writing and shall state the reasons and the
relevant plan provisions. All decisions on review shall be final and bind all
parties concerned.
12. GENERAL PROVISIONS.
12.1 If suit or action is instituted to enforce any rights under this
Plan, the prevailing party may recover from the other party reasonable
attorneys' fees at trial and on any appeal.
12.2 Any notice under this Plan shall be in writing and shall be
effective when actually delivered or, if mailed, when deposited as first class
mail postage prepaid. Mail shall be directed to the Company at the address
stated in this Plan, to the Participant's last known home address shown in the
Company's records, or to such other address as a party may specify by notice to
the other parties. Notices to an Employer or the Committee shall be sent to the
Company's address.
12.3 The rights of a Participant under this Plan are personal. Except
for the limited provisions of Section 7 no interest of a Participant or one
claiming through a Participant may be directly or indirectly assigned,
transferred or encumbered and no such interest shall be subject to seizure by
legal process or in any other way subjected to the claims of any creditor. A
Participant's rights to benefits payable under this Plan are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge or
encumbrance. Such rights shall not be subject to the debts, contracts,
liabilities, engagements or torts of the Participant or the Participant's
beneficiary.
12.4 Following termination of membership on the Board of Directors of
the Company or Advisory Boards or employment, a Participant shall not be a
director or an employee of an Employer or an affiliate for any purpose, and
payments under Sections 6 and 7 shall not constitute salary or wages. A
Participant shall receive such payments as retirement benefits, not as
compensation for performance of any substantial services.
12.5 Amounts payable under this Plan shall be an obligation of the
Company and the Trust described in Section 5. If an Employer merges,
consolidates, or otherwise reorganizes or if its business or assets are acquired
by another company, this Plan shall continue with respect to those eligible
individuals who continue in the employ of the successor company. The transition
of Employers shall not be considered a termination of employment for purposes of
this Plan. In such an event, however, a successor corporation may terminate
this Plan as to its Participants on the effective date of the succession by
notice to Participants within 30 days after the succession.
12.6 The Committee may decide that because of the mental or physical
condition of a person entitled to payments, or because of other relevant
factors, it is in
<PAGE>
12
the person's best interest to make payments to others for the benefit of the
person entitled to payment. In that event, the Committee may in its discretion
direct that payments be made as follows:
(a) To a parent or spouse or a child of legal age;
(b) To a legal guardian; or
(c) To one furnishing maintenance, support, or
hospitalization.
13. EXPENSES.
Costs of administration of the Plan will be paid by the Company.
14. EFFECTIVE DATE.
This Plan shall be effective December 1, 1994.
Adopted: November 9, 1994
PACIFICORP
By: MICHAEL J. PITTMAN
_______________________________
Executed: November 30, 1994
AMENDMENT NO. 1 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1995:
_____________________________________________________________
COMPANY PACIFICORP
By: MICHAEL J. PITTMAN
_______________________________
Executed: February 7, 1995
<PAGE>
EXHIBIT (10)d
PACIFICORP
1995 PERFORMANCESHARE
INCENTIVE PLAN
FEBRUARY 1995
<PAGE>
1
2/7/95
PACIFICORP
1995 PERFORMANCESHARE
INCENTIVE PLAN
PURPOSE
The purpose of the PerformanceShare Incentive Plan is to provide a means for
sharing company financial success and rewarding employees for their
contributions to the operational effectiveness of their business units and the
company overall.
INCENTIVE OPPORTUNITY
The maximum award opportunity for participating employees is 4% of their
eligible earnings as defined below:
Bargaining Unit: Eligible Earnings (includes Overtime)
Salaried: Greater of Eligible Earnings or
Annualized Year-end Salary
This maximum award is the result of multiplying a guideline award of 2.67% of
eligible earnings by company and organization unit factors which indicate
exceptional achievement.
ELIGIBILITY
Eligible employees are all regular employees, full- and part-time, who have
been continuously employed for at least six months prior to December 31, 1995.
A participant must be actively employed at payout to receive an award.
Participants who have at least six months of service, but less than twelve,
will be eligible for pro rata awards. An employee who retires during the year
will be eligible for a pro rata payout based on eligible earnings at the time
of retirement.
TERM
The plan year is defined as January 1 through December 31, 1995.
PERFORMANCE TARGETS
Two primary performance targets influence incentive opportunity. These are
company performance and organizational unit performance, as follows:
<PAGE>
2
2/7/95
COMPANY PERFORMANCE FACTOR (CPF)
The Company Performance Factor is determined considering several
components including Earnings Available for Common (EAC), Safety, Company
Renewal, Total Shareholder Return, and Prices. A financial threshold of
$330M in earnings has been established as well as a maximum EAC of $365M.
Performance between the threshold and maximum will be calculated
utilizing the formula displayed in Exhibit 1. No awards will be paid if
the EAC threshold is not achieved. This EAC performance factor is
subject to being modified by the following:
SAFETY -
PacifiCorp's commitment to a safe work place for our employees and
the people in the communities in which we serve must be absolute.
Therefore, the Company's demonstration of this commitment to safety
will be assessed by the CEO and Personnel Committee at year-end.
Based upon this assessment the Committee will assign a factor in the
range of minus twenty percentage points to zero percentage points.
COMPANY RENEWAL -
PacifiCorp is committed to continuous renewal of the business
through reaching new customers and markets beyond our current
geographic constraints, developing new competencies, and introducing
new products and services. PacifiCorp's ability to demonstrate to
the Personnel Committee our success in these areas of Company
renewal will determine this factor. At year-end the Personnel
Committee will receive a report on the Company's renewal
accomplishments. The Personnel Committee will be asked to
subjectively determine PacifiCorp's success and assign a renewal
factor in the range of minus ten to plus ten percentage points.
TOTAL SHAREHOLDER RETURN -
PacifiCorp's Total Shareholder Return (TSR) (stock price movement
plus dividends) is compared with the performance of a peer group
(top 50 electric utilities as listed by Salomon Brothers.) If
PacifiCorp's total shareholder return for the year equals the
average performance of the peer group, then the factor will be zero
percentage points. The relative percentage of performance above or
below the peer group will be added to or subtracted from zero; not
to be greater than plus ten points or less than minus ten points.
<PAGE>
3
2/7/95
PRICES -
The Company's residential, commercial, and industrial tariff prices
will be compared with competing investor-owned and publicly-owned
utilities' tariff prices in the seven states in which PacifiCorp
serves. As of the fourth quarter of 1994 our prices were 94% of the
weighted average price in our seven state service territory. If our
prices continue to equal 94% of the average price in our service
territory then this factor will be five percentage points. If our
prices exceed 94% of the average price in our service territory,
then for each full percentage point by which we exceed that level,
one point will be reduced from five to no less than a factor of
minus ten points. If our prices are less than 94% of the average
price in our service territory, then each full percentage point by
which we are lower is added to five for a maximum price factor of
plus ten percentage points.
The modifier is calculated as follows:
Safety Factor + Company Renewal Factor +
Total Shareholder Return Factor + Prices Factor
This final modifier is added to or subtracted from the EAC performance factor
to produce the Company Performance Factor (CPF). Maximum CPF is 180%.
OPERATIONS PERFORMANCE FACTOR (OPF)
The Operations Performance Factor (OPF) is determined based upon performance
against pre-established goals set by each organizational unit and approved by
the CEO.
Individuals responsible for overseeing multiple organizations will have their
OPF calculated based upon the weighted average of subordinate OPFs. Maximum
OPF is 120%.
<PAGE>
4
2/7/95
AWARD FORMULA
The formula for all employees is the same:
Guideline Award x [(.50 x CPF) + (.50 x OPF)] = Individual Award
AWARD EXAMPLE:
Assumptions:
Employee eligible earnings = $40,000
Employee incentive guideline = 2.67%
Company Performance Factor (CPF)
EAC Performance = 1.00
+ Modifier (Safety, Renewal, TSR, Prices) = .20
______
Final CPF = 1.20
Organization Performance Factor (OPF) = 1.10
Award Calculation:
$40,000 x .0267 x [(.50 x 1.20) + (.50 x 1.10)] = Award
Guideline Award
$1,068 x 1.15 = $1,228
PAYOUT
Awards will be paid in cash. Awards will be paid as soon as is practicable
after 1995 financial statements close. Payout will be based on the
organizational unit to which an employee is assigned at year-end.
<PAGE>
5
2/7/95
AUDIT AND APPROVAL OF AWARD RECOMMENDATIONS
The financial calculations necessary to determine the company earnings and
corresponding EAC Performance Factor, as well as other steps in determining
the award for each individual, will be reviewed by the corporate auditing
staff before incentive payments are made. The Personnel Committee of the
Board of Directors will approve awards prior to payout.
If minor errors are identified after audit or approval have occurred which
result in nonmaterial adjustments to individual awards, the Vice President of
Human Resources will have the authority to approve adjusted awards according
to the procedures defined in the administrative guidelines.
ADMINISTRATIVE GUIDELINES
Administrative issues not specifically included in the plan document will be
included in the administrative guidelines to the plan. The CEO will approve
these guidelines and has authority to amend them.
<PAGE>
EXHIBIT (10)e
PACIFICORP
1995 INDIVIDUAL INCENTIVE PLAN
FEBRUARY 1995
<PAGE>
1
2/7/95
PACIFICORP
1995 INDIVIDUAL INCENTIVE PLAN
PURPOSE
The purpose of the Individual Incentive Plan is to provide a means for sharing
company financial success and rewarding employees for their contributions to
the operational effectiveness of their business units and the company overall.
The Plan is designed to augment the PerformanceShare program in aligning the
interests of employees with those of shareholders and promoting the
achievement of business-driven organizational unit and individual goals.
ELIGIBILITY
All regular, non-bargaining unit employees are eligible to participate in the
individual incentive plan. A participant must be employed in an incentive
eligible position for at least six months, and must be actively employed at
the time of payout to receive an award. Individuals with at least six months
of service but less than twelve months will receive prorated awards.
Employment of less than one plan year due to retirement, disability, or death
of a participant may result in a prorated award regardless of the six-month
requirement. Officers who change guideline incentives during the year will
receive prorated awards based on the appropriate guidelines. All other full-
year participants will have their full incentives based on the guideline in
effect at year-end.
GUIDELINE INCENTIVE
Each participant in the Plan is assigned a guideline incentive which is
dependent upon the responsibility level of the participant (see Appendix A).
Each participant's guideline incentive opportunity is calculated as a
percentage of year-end annual salary, including any merit and promotional lump
sums, (or other payments as may be included at the discretion of the
PacifiCorp President and CEO). However, if actual earnings plus overtime
compensation would result in a greater amount, that number will serve as the
base for determining the award. Guideline incentive opportunity must be
approved by the President and CEO of PacifiCorp. Guideline incentive
opportunity for officers is determined by the Personnel Committee of the Board
of Directors.
<PAGE>
2
2/7/95
INCENTIVE OPPORTUNITY
The incentive award is based on overall company performance, achievement of
organizational unit goals, and achievement of individual goals for each
participant. Assuming exceptional performance at both company and
organization unit levels, a typical employee would receive between 150% and
165% of guideline. Officers' individual award opportunity is limited to 150%
of guideline.
PERFORMANCE GOALS
Three primary performance targets influence incentive opportunity. These are
company performance, organizational unit performance, and individual
performance:
COMPANY PERFORMANCE FACTOR (CPF)
The Company Performance Factor is determined considering several
components including Earnings Available for Common (EAC), Safety,
Company Renewal, Total Shareholder Return, and Prices. A financial
threshold for earnings has been established as well as a maximum EAC.
Performance between the threshold and maximum will be calculated
utilizing the formula displayed in Exhibit 1. No awards will be paid if
the EAC threshold is not achieved. This EAC performance factor is
subject to being modified by the following:
SAFETY -
PacifiCorp's commitment to a safe work place for our employees and
the people in the communities in which we serve must be absolute.
Therefore, the Company's demonstration of this commitment to safety
will be assessed by the CEO and Personnel Committee at year-end.
Based upon this assessment the Committee will assign a factor in the
range of minus twenty percentage points to zero percentage points.
COMPANY RENEWAL -
PacifiCorp is committed to continuous renewal of the business
through reaching new customers and markets beyond our current
geographic constraints, developing new competencies, and introducing
new products and services. PacifiCorp's ability to demonstrate to
the Personnel Committee our success in these areas of Company
renewal will determine this factor. At year-end the Personnel
Committee will receive a report on the Company's renewal
accomplishments. The Personnel Committee will be asked to
subjectively determine PacifiCorp's success and assign a renewal
factor in the range of minus ten to plus ten percentage points.
<PAGE>
3
2/7/95
TOTAL SHAREHOLDER RETURN -
PacifiCorp's Total Shareholder Return (TSR) (stock price movement
plus dividends) is compared with the performance of a peer group
(top 50 electric utilities as listed by Salomon Brothers.) If
PacifiCorp's total shareholder return for the year equals the
average performance of the peer group, then the factor will be zero
percentage points. The relative percentage of performance above or
below the peer group will be added to or subtracted from zero; not
to be greater than plus ten points or less than minus ten points.
PRICES -
The Company's residential, commercial, and industrial tariff prices
will be compared with competing investor-owned and publicly-owned
utilities' tariff prices in the seven states in which PacifiCorp
serves. As of the fourth quarter of 1994 our prices were 94% of the
weighted average price in our seven state service territory. If our
prices continue to equal 94% of the average price in our service
territory then this factor will be five percentage points. If our
prices exceed 94% of the average price in our service territory,
then for each full percentage point by which we exceed that level
one point will be reduced from five to no less than a factor of
minus ten points. If our prices are less than 94% of the average
price in our service territory, then each full percentage point by
which we are lower is added to five for a maximum price factor of
plus ten percentage points.
The modifier is calculated as follows:
Safety Factor + Company Renewal Factor +
Total Shareholder Return Factor + Prices Factor
This final modifier is added to or subtracted from the EAC performance factor
to produce the Company Performance Factor (CPF). Maximum company performance
factor is 180%.
OPERATIONS PERFORMANCE FACTOR (OPF)
The Operations Performance Factor (OPF) is determined based upon performance
against pre-established goals set by each organizational unit and approved by
the CEO.
Individuals responsible for overseeing multiple organizations will have their
OPF calculated based upon the weighted average of subordinates' OPFs. Maximum
OPF is 120%.
<PAGE>
4
2/7/95
INDIVIDUAL PERFORMANCE FACTOR (IPF)
The Individual Performance Factor (IPF) is determined by measuring year-end
performance against specific goals as established and approved by each
participant's immediate supervisor. Maximum IPF is 150% for an individual;
however the average IPF within an officer's organization must average 110% or
less.
AWARD FORMULA
Individual Award = Guideline Award [(.50 x CPF) + (.50 x OPF)] x IPF
Officers are limited to maximum payout equal to 150% of Guideline.
AWARD EXAMPLE
Assumptions:
Employee eligible earnings = $40,000
Employee incentive guideline = 2.33%
Company Performance Factor (CPF)
EAC Performance Factor = 1.00
+ Modifier (Safety, Renewal, TSR, Prices) = .20
______
Final CPF = 1.20
Organization Performance Factor = 1.10
Individual Performance Factor = 1.30
Award Calculation:
$40,000 x .0233 x [(.50 x 1.20) + (.50 x 1.10)] x 1.30 =
Guideline Award CPF OPF IPF
$932 x 1.15 x 1.30 = $1,393 Award
Note: This employee would receive an additional $1,228 from the
PerformanceShare Plan, calculated as follows:
$40,000 x .0267 x [(.50 x 1.20) + (.50 x 1.10)] = $1,228
Guideline Award CPF OPF Award
Note: The total award from both plans would be $2,621.
<PAGE>
5
2/7/95
AUDIT AND APPROVAL OF AWARD RECOMMENDATIONS
The financial calculations necessary to determine the company earnings and
corresponding EAC Performance Factor, as well as other steps in determining
the award for each individual, will be reviewed by the corporate auditing
staff before incentive payments are made. The Personnel Committee of the
Board of Directors will approve awards prior to payout.
If minor errors are identified after audit or approval have occurred which
result in nonmaterial adjustments to individual awards, the Vice President of
Human Resources will have the authority to approve adjusted awards according
to the procedures defined in the administrative guidelines.
ADMINISTRATIVE GUIDELINES
Administrative issues not specifically included in the plan document will be
included in the administrative guidelines to the plan. The CEO will approve
these guidelines and has authority to amend them.
<PAGE>
6
2/7/95
APPENDIX A
<TABLE>
GUIDELINE AWARDS
<CAPTION>
1995 1995
1995 Individual Total 1995
Typical Grade 1994 PerfShare Incentive Guideline Max
Level (1) Guideline Guideline Guideline Incentive Incentive (2)
<S> <C> <C> <C> <C> <C>
Bargaining Unit 2.67% 2.67% 0% 2.67% 4.00%
41 - 49 2.67% 2.67% .83% 3.50% 5.37%
50 - 55 4.00% 2.67% 2.33% 5.00% 7.84%
56 - 60 4.00% 2.67% 4.33% 7.00% 11.14%
61 - 64 8.00% 2.67% 8.33% 11.00% 17.74%
65 - 67 12.00% - 2.67% 12.33% 15.00% 24.34%
15.00%
Officers Officer Award Guidelines vary by individual and are determined
by the Board of Directors.
<FN>
(1) Grade ranges generally apply. Exceptions, if any, will be approved
by the CEO and communicated to affected employees by their
management.
(2) Based on maximum company and organization unit performance, adjusted
for individual performance at the organizational unit limit of 110%.
</TABLE>
<PAGE>
EXHIBIT (10)f
8-10-94
PACIFICORP
NON-EMPLOYEE DIRECTORS' STOCK COMPENSATION PLAN
PacifiCorp
700 N.E. Multnomah, Suite 1600
Portland, OR 97204 PacifiCorp
PacifiCorp considers it desirable that members of the board of
directors, who represent shareholders, be themselves shareholders. In order
to supplement the direct efforts of the directors themselves towards this end,
PacifiCorp wishes to increase the ownership interest of non-employee directors
through awards of PacifiCorp Common Stock. PacifiCorp wishes by this means to
increase the community of interest of the shareholders at large and the
PacifiCorp directors and to make ownership a dynamic influence on the
attitudes of the board.
The following plan is therefore adopted:
1. Administration.
______________
The plan shall be administered by the Corporate Secretary of
PacifiCorp (the Administrator) who may delegate all or part of that authority
and responsibility. The Administrator shall interpret the plan, arrange for
the purchase and delivery of shares, determine forfeitures, and otherwise
assume general responsibility for administration of the plan. Any decision by
the Administrator shall be final and bind all parties. The Administrator may
be replaced from time to time in the discretion of the chief executive officer
of PacifiCorp.
2. Awards.
______
2.1 Each non-employee director of PacifiCorp shall participate in
this plan as follows:
<PAGE>
2
(a) Directors shall participate as of the date of their
election or appointment.
(b) A director's date of participation shall be the award
date. Each annual meeting of shareholders after that date shall be
an anniversary date; provided, however, that if a participant's term
as a director ends because of age between annual meetings, the date
the director's term ends shall be deemed an anniversary date.
2.2 As of the award date a participant shall, subject to 2.3, be
awarded $75,000 worth of stock as follows:
(a) As soon as practicable after the award date the
Administrator shall deliver cash in the amount of the award and
applicable commissions to one or more brokers or other third persons
with instructions to purchase PacifiCorp common stock on the open
market. It is understood that market conditions or regulations
affecting open market purchases by a corporation of its own shares
may extend the period of purchase over several days or weeks when
substantial sums are involved.
(b) When several participants have the same award date, all
of the stock shall be purchased and then divided equally among the
participants so that each receives the same number of shares
regardless of any changes in price that occur while purchases are
being carried out.
(c) When all of the stock has been purchased, certificates in
the names of the participants for their respective shares shall be
delivered to the Administrator. Each participant shall deposit with
the Administrator a blank stock power duly executed and guaranteed
in a form satisfactory to the Administrator for each certificate for
shares standing in the participant's name.
<PAGE>
3
(d) The Administrator shall hold the certificates and stock
powers until the shares are vested and released from time to time as
provided in 3.7.
2.3 If, assuming that the participant were reelected, a
participant's term as a director would end because of age before the fifth
anniversary date after an award date, the amount awarded shall be reduced by
one-fifth for each anniversary date that would fall after the date the term
ends.
2.4 If a participant continues to be a non-employee director after
all of the shares from an award have vested, the award cycle shall be repeated
for such participant. The award date for the next award shall be the date of
the annual meeting of shareholders coinciding with the last anniversary date
for the prior award. The next award shall be $75,000 worth of stock, subject
to 2.3. Such stock shall be acquired, vest and otherwise be subject to all
the provisions of this plan.
3. Vesting; Delivery of Shares; Forfeitures.
________________________________________
3.1 Subject to 3.2 through 3.6, awarded shares shall vest as
follows:
<TABLE>
<CAPTION>
Percent Vested Cumulative Percent
______________ __________________
<S> <C> <C>
Award Date 0% 0%
First Anniversary Date 20 20
Second Anniversary Date 20 40
Third Anniversary Date 20 60
Fourth Anniversary Date 20 80
Fifth Anniversary Date 20 100
</TABLE>
3.2 If a participant receives a reduced award under 2.3, the
vesting percentages shall be accelerated so that the entire award shall vest
evenly over the anniversary dates that fall on or before the date the
director's term ends. For example, if the award were reduced to $30,000 worth
of stock, one-third of the shares would vest on each of the first three
anniversary dates.
<PAGE>
4
3.3 Subject to 3.5 and 3.6, the following shall apply with respect
to awards to a participant whose award date is not the date of an annual
meeting of shareholders:
(a) The shares which would otherwise vest on the first
anniversary date shall instead vest on the date six months
immediately following the date certificates for the shares are
delivered to the Administrator under 2.2(c), or the first
anniversary date for the award, whichever is later.
(b) Notwithstanding (a), if the participant's term as a
director ends because of age on the first anniversary date, the
shares which would otherwise vest at a later date under (a) shall
instead vest on the first anniversary date.
3.4 If a participant ceases to be a non-employee director on an
anniversary date, that anniversary date shall be included in determining the
number of shares vested for that participant.
3.5 The following shall apply if a participant dies while serving
as a non-employee director:
(a) The participant's awarded shares scheduled to vest on the
date specified in 3.3 shall instead vest as of the date of death.
(b) If the date of death is not an anniversary date, the
participant's awarded shares scheduled to vest on the anniversary
date immediately following the date of death shall instead vest as
of the date of death.
(c) If the date of death is an anniversary date, the number of
shares vested for the participant shall be determined in accordance
with 3.4.
3.6 Subject to 3.5, if a participant ceases to be a non-employee
director on a date other than an anniversary date, the participant's awarded
<PAGE>
5
shares scheduled to vest on the immediately following anniversary date shall
vest as of the date the participant ceases to be a non-employee director
prorata based on the number of days the participant served as a non-employee
director that year.
3.7 The certificate and stock power covering vested shares shall be
delivered to the participant or in accordance with 5.2 as soon as practicable
after the shares vest.
3.8 If a participant ceases to be a non-employee director, awarded
shares remaining unvested shall be forfeited. The Administrator, acting for
the participant pursuant to the blank stock power, shall transfer the unvested
shares to PacifiCorp. The participant or the participant's representative
shall execute any documents reasonably requested by the Administrator to
facilitate the transfer.
4. Status Before Full Vesting.
__________________________
4.1 Each participant shall be a shareholder of record with respect
to all shares awarded, whether or not vested, and shall be entitled to all of
the rights of such a holder, except that a participant's share certificates
shall be held by the Administrator until delivered in accordance with 3.7.
4.2 Any dividend checks or communications to shareholders received
by the Administrator with respect to shares held by the Administrator shall
promptly be transmitted to the participant. The participant shall furnish to
the Administrator or PacifiCorp a current mailing address for such purpose.
4.3 No participant may transfer any interest in unvested shares to
any person other than PacifiCorp.
5. Death of a Participant.
______________________
5.1 Any vested shares held by the Administrator for a participant
who has died shall be delivered as soon as practicable to the participant's
death beneficiary under 5.2.
<PAGE>
6
5.2 Any vested shares to be delivered on death of a participant
under 5.1 shall go to a participant's beneficiary in the following order of
priority:
(a) To the surviving beneficiary designated by the participant
in writing to the Administrator;
(b) To the participant's surviving spouse; or
(c) To the participant's estate.
6. Amendment or Termination; Miscellaneous.
_______________________________________
6.1 The Board of Directors of PacifiCorp may amend or terminate
this plan at any time. No amendment or termination shall adversely affect any
then outstanding award.
6.2 Subject to the rights of amendment and termination in 6.1, this
plan shall continue indefinitely and future awards will be made in accordance
with 2.1 and 2.4.
6.3 Nothing in this plan shall create any obligation on the part of
the Board of Directors of PacifiCorp to nominate any director for reelection
by the shareholders or the Board.
PACIFICORP
By: FREDERICK W. BUCKMAN
_________________________________
Executed August 11, 1994
Originally Adopted: August 1, 1985
Amended: January 11, 1989
Amended: May 16, 1990
Amended: August 10, 1994
<PAGE>
EXHIBIT (10)i
PACIFICORP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1988 RESTATEMENT
January 1, 1988
(As Amended Through Amendment No. 5)
PacifiCorp
an Oregon corporation
700 NE Multnomah
Portland, Oregon 97232 Company
<PAGE>
i
TABLE OF CONTENTS
_________________
Page
____
Index of Terms (iii)
1. Purpose; Employers; Administration
__________________________________
1.1 Purpose 1
1.2 Employers 1
1.3 Administration 2
2. Participation; Service; Forfeiture
__________________________________
2.1 Designation; Participants 2
2.2 Service 2
2.3 Misconduct Forfeiture 2
2.4 Change in Control 3
2.5 Removal from Active Participation 3
3. Participants' Retirement Benefits
_________________________________
3.1 Entitlement; Retirement Dates 4
3.2 Normal Retirement Benefit 4
3.3 Actuarial Equivalents 7
3.4 Early Retirement Benefit 7
3.5 Deferred Retirement Benefit 8
3.6 Termination Benefit 8
3.7 Time and Manner of Payment 8
3.8 Basic Plan Make-Up 9
4. Preretirement Death Benefits
____________________________
4.1 Spouse's Benefit 10
4.2 Dependent Child's Benefit 10
5. Disability
__________
5.1 Service Continuation 10
5.2 Benefits 11
6. Claims Procedure
________________
6.1 Original Claim 11
6.2 Denial 11
6.3 Request for Review 11
6.4 Final Decision 11
<PAGE>
ii
7. Amendment; Termination
______________________
7.1 Amendment 12
7.2 Termination 12
8. General Provisions
__________________
8.1 Nonassignability 13
8.2 Funding 13
8.3 Trust 13
8.4 Notices 13
8.5 Attorneys' Fees 13
8.6 Indemnity 14
8.7 Applicable Law 14
8.8 Company Obligation 14
8.9 Payment for Individual's Benefit 14
8.10 Not Contract of Employment 15
9. Effective Date 15
______________
APPENDIX A 17
<PAGE>
iii
INDEX OF TERMS
______________
Section Page
_______ ____
Accrued Benefit 3.6 8
Actuarial Equivalent 3.3 7
Basic Plan Preamble 1
Benefit Starting Date 3.7 8
Benefit Year 2.2 2
Board 1.3 2
Career Ratio 3.4(b) 7
Chief Executive Officer 2.1 2
Committee 1.3 2
Earliest Normal Retirement Date 3.5 8
Early Retirement Date 3.1(b) 4
Early Retirement Factor 3.4(c) 7, 8, 9
Final Average Pay 3.2(a) 4
Normal Retirement Benefit 3.2 4
Normal Retirement Date 3.1(a) 4
Participant 2.1 2
Primary Social Security Benefit 3.2(c) 5
Prior Affiliate Plans Preamble 1
Prior PacifiCorp Plan Preamble 1
Prior Plans Preamble 1
Projected Short Service Factor 3.4(a) 7
Qualified Plan Offset 3.2(d) 6
Short Service Factor 3.2(b) 5
Years of Service 2.2 2
<PAGE>
PACIFICORP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1988 RESTATEMENT
January 1, 1988
(As Amended Through Amendment No. 5)
PacifiCorp
an Oregon corporation
700 NE Multnomah
Portland, Oregon 97232 Company
The Company maintains a Supplemental Retirement Plan (the Prior
PacifiCorp Plan) providing retirement benefits for its executive employees.
Several affiliates of the Company also maintain supplemental retirement plans
for their executive employees (the Prior Affiliate Plans). The benefits
provided by the Prior PacifiCorp Plan and the Prior Affiliate Plans
(collectively, the Prior Plans) are in addition to those provided by the tax
qualified defined benefit plans maintained by the Company and its affiliates
(the Basic Plans).
In order to limit eligibility for participation, expand the definition
of compensation, change the benefit formula, provide for vesting, and expand
death benefits, the Company adopts this plan as a complete restatement of the
Prior PacifiCorp Plan. The Prior Affiliate Plans will be consolidated into this
plan through affiliate adoptions.
1. Purpose; Employers; Administration
__________________________________
1.1 Purpose
_______
The purpose of this plan is to provide eligible employees of the
Company and its affiliates with additional retirement benefits that will help to
attract and retain individuals of very high quality.
1.2 Employers
_________
The plan shall apply to the Company and to corporations or other
entities affiliated with the Company that adopt the plan for their employees
with the approval of the Company. An entity shall be affiliated with the
Company for this purpose if it is a member, with the Company, of a controlled
group or group of trades or businesses under common control under sections
414(b) or (c) of the Internal Revenue
<PAGE>
2
Code. The term "Employer" refers to the Company and such an adopting affiliate.
Adoption of the plan by an affiliate shall be by a statement in writing that is
signed by the affiliate and by the Company. The statement shall include the
effective date of adoption and any special provisions that are to be applicable
to employees of the adopting affiliate.
1.3 Administration
______________
This plan shall be administered by the Personnel Committee (the
Committee) of the Company's Board of Directors (the Board). The Committee shall
interpret the plan and make determinations about benefits. Any decision by the
Committee within its authority shall be final and binding on all parties. The
Committee shall consider recommendations from the President of the Company where
provided for in this plan and otherwise in its discretion.
2. Participation; Service; Forfeiture
__________________________________
2.1 Designation; Participants
_________________________
An executive officer of Employer shall accrue benefits under this
Restatement upon being designated for participation in writing by the President
or chief executive officer of Employer and approved in writing by the President
of the Company and the Committee. An individual who has benefits accrued under
a Prior Plan and is not so designated shall participate in the plan for the
purpose of receiving Prior Plan benefits. An executive officer or other
individual who has an accrued benefit under the plan shall be referred to as a
participant.
2.2 Service
_______
A participant's Years of Service and Benefit Years for purposes of
this plan shall be determined under the rules for such service under the Basic
Plan covering the participant, except as follows. Any limitation of the Basic
Plan on the length of service counted for periods in which no services are
performed shall be disregarded.
2.3 Misconduct Forfeiture
_____________________
Subject to 2.4, the Committee may forfeit the benefit for any
participant, or the participant's spouse, beneficiary or contingent annuitant,
if:
(a) The participant is discharged for any act that is
materially inimical to the best interests of the Company and
that
<PAGE>
3
constitutes, on the part of the participant, common law
fraud, felony, or other gross malfeasance of duty; or
(b) After retirement, the participant performs
services for an organization where there is a major conflict
of interest that is materially adverse to the Company as a
whole or any of its principal subsidiaries.
2.4 Change in Control
_________________
After a Change in Control no misconduct forfeiture shall occur with
respect to benefits for participants who were designated for participation prior
to such Change in Control. A "Change in Control" shall occur if:
(a) Any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the Act)) becomes the "beneficial
owner" (as defined in Rule 13-d under the Act) of more than
20 percent of the then outstanding voting stock of the
Company, otherwise than through a transaction arranged by,
or consummated with the prior approval of, the Board; or
(b) During any period of two consecutive years,
individuals who at the beginning of such period constitute
the Board (and any new director whose election by the Board
or whose nomination for election by the stockholders of the
Company was approved by a vote of at least 2/3 of the
directors then still in office who either were directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any
reason to constitute a majority thereof.
2.5 Removal from Active Participation
_________________________________
An individual who previously has been designated under 2.1 may be
removed from active participation at any time by the Committee. Removal from
active participation shall be effective as of a date fixed by the Committee,
but no sooner than the date of notice to the participant of such removal. Upon
removal the participant shall have an Accrued Benefit determined under 3.6 on
the basis of the participant's
<PAGE>
4
Final Average Pay, Projected Short Service Factor, Primary Social Security
Benefit, Career Ratio, and Qualified Plan Offset, all calculated as of the
effective date of removal. If the participant qualifies for a retirement
benefit under 3.1, the Accrued Benefit shall be paid as either a normal
retirement benefit or an early retirement benefit depending on whether the
participant terminates employment before normal retirement date. If an early
retirement benefit is paid, the Early Retirement Factor shall be based on the
months by which commencement of benefit precedes normal retirement date.
3. Participants' Retirement Benefits
_________________________________
3.1 Entitlement; Retirement Dates
_____________________________
A participant shall be entitled to retirement benefits under this plan
on becoming eligible for benefits under a Basic Plan because of termination of
employment after vesting under 3.6 or one of the following retirement dates:
(a) Normal retirement - the earlier of age 65 or age
62 and 30 Years of Service.
(b) Early retirement - age 55 and 5 Years of Service.
3.2 Normal Retirement Benefit
_________________________
A participant's normal retirement benefit under this plan shall be a
single life annuity for the life of the participant equal to 65 percent of Final
Average Pay (FAP) times the Short Service Factor (SSF) minus the Primary Social
Security Benefit (PSSB) and the Qualified Plan Offset (QPO) as follows:
Benefit = (65% x FAP x SSF) - PSSB - QPO
The benefit shall be no less than the participant's accrued benefit under the
Prior Plan as of December 31, 1987. The terms used in this formula are defined
as follows:
(a) Final Average Pay (FAP) means the amount
determined for the participant under the Basic Plan, with
the following adjustments:
(1) The limit on annual compensation counted for
any participant to $200,000 per year through 1993 and
to $150,000 per year
<PAGE>
5
thereafter (both subject to cost of living adjustments)
shall not apply.
(2) No reduction shall be made for deferrals
elected by the participant under a nonqualified
deferred compensation plan maintained by the Company or
an affiliate.
(3) No benefit payments under a nonqualified
deferred compensation plan shall be counted.
(4) No part of long-term incentive, stock bonus
or stock option compensation shall be counted.
(5) All cash bonuses that are not part of a long-
term incentive plan or arrangement shall be counted,
without the 10 percent limit of the Basic Plan.
(6) A bonus earned in one calendar year and paid
in the following calendar year, including any bonus
paid in the year following employment termination,
shall be divided evenly among the participant's
completed calendar months of employment with Employer
during the year the bonus was earned and counted as
compensation in those months.
(b) Short Service Factor (SSF) means a percentage, not
to exceed 100 percent, determined by dividing the
participant's Benefit Years by 15.
(c) Primary Social Security Benefit (PSSB) means the
primary insurance amount for the participant on retirement
at or after age 65 under the federal Social Security Act
determined as follows:
(1) The amount shall be estimated from the
regular pay rate under rules established by the
Committee assuming a standard pay progression over a
full working career.
<PAGE>
6
(2) The amount shall not be changed by amendments
to the Act or cost of living index adjustments after
the participant's actual termination date or attainment
of Social Security retirement age, whichever is first.
(3) If a participant retires early, the Primary
Social Security Benefit shall be the amount that would
be received at age 65 assuming no further earnings and
no change in the Act.
(d) Qualified Plan Offset (QPO) means the sum of the
straight life actuarial equivalents of (1) through (4)
below, as interpreted under (5) below:
(1) Retirement benefits payable under the Basic
Plan and under the Utah Power & Light Company Deferred
Compensation Plan.
(2) Retirement benefits payable under a defined
benefit plan or individual retirement benefit
agreement, whether or not tax-qualified, on account of
service before employment with Employer.
(3) Benefits paid or payable under a defined
contribution plan on account of service before
employment with Employer if the earlier employer
maintained no defined benefit plan covering the
participant during the period of such service and the
aggregate employer contributions to the defined
contribution plan were 3 percent or more of the
participant's compensation, as defined for determining
Final Average Pay under this plan, with the earlier
employer.
(4) Any amount added to an account of the
participant under a nonqualified deferred compensation
plan maintained by Employer to compensate for reduction
in the Basic
<PAGE>
7
Plan benefit on account of compensation deferrals.
(5) For purposes of determining whether employer
contributions to a defined contribution plan are 3
percent or more of compensation, and for measuring the
amount of offset, elective contributions under a 401(k)
plan and contributions individually elected by a self-
employed person shall be disregarded.
3.3 Actuarial Equivalents
_____________________
Actuarial equivalents shall be determined on the basis of the
actuarial equivalency factors used by the Basic Plan.
3.4 Early Retirement Benefit
________________________
A participant's early retirement benefit shall be a single life
annuity for the life of the participant equal to 65 percent of Final Average Pay
(FAP) times the Projected Short Service Factor (PSSF) times the Career Ratio
(CR) minus the Primary Social Security Benefit (PSSB) times the Early Retirement
Factor (ERF) minus the Qualified Plan Offset (QPO) as follows:
Benefit = ([(65% x FAP x PSSF x CR)-PSSB] x ERF) - QPO
The terms Final Average Pay (FAP), Primary Social Security Benefit (PSSB) and
Qualified Plan Offset (QPO) are defined in 3.2. The definitions of the
remaining terms are as follows:
(a) Projected Short Service Factor (PSSF) means the
Short Service Factor the participant would have had at
normal retirement date if Years of Service had continued to
that date.
(b) Career Ratio (CR) means the participant's actual
Benefit Years, up to a maximum of 30, divided by the
participant's projected Benefit Years at normal retirement
date, up to a maximum of 30, assuming continuous full-time
service to that date.
(c) Early Retirement Factor (ERF) means a percentage
equal to 100 percent
<PAGE>
8
minus .25 percent for each month by which the commencement
of benefits precedes the participant's normal retirement
date.
3.5 Deferred Retirement Benefit
___________________________
A participant's benefit commencing after the earliest date on which
the participant could have terminated employment and received a normal
retirement benefit (the Earliest Normal Retirement Date) shall be the benefit
provided in 3.2, increased as follows:
(a) The normal retirement benefit calculated under 3.2
shall be increased by one-third of one percent for each
month by which the participant's Earliest Normal Retirement
Date precedes the participant's actual benefit commencement
date.
(b) No increase under (a) shall be made for a month
beginning after the participant's 65th birthday.
3.6 Termination Benefit
___________________
A participant who terminates employment before retirement date shall
receive the Accrued Benefit if the participant is vested as provided below. The
Accrued Benefit is a single life annuity for the life of the participant equal
to 65 percent of Final Average Pay (FAP) times the Projected Short Service
Factor (PSSF) minus the Primary Social Security Benefit (PSSB) times the Career
Ratio (CR) times the Early Retirement Factor (ERF) minus the Qualified Plan
Offset (QPO) as follows:
Benefit = ([(65% x FAP x PSSF)-PSSB] x CR x ERF) - QPO
The terms used in this formula are defined in 3.2 and 3.4. A participant is
vested if the participant has five or more Years of Service and terminates,
either voluntarily or involuntarily, from all employment with the Company or its
affiliates within twenty-four months after a Change in Control.
3.7 Time and Manner of Payment
__________________________
Retirement benefits shall commence as of the first day of the month
beginning after a termination of employment that constitutes a retirement under
3.1 or a vested termination under 3.6, which shall be the participant's Benefit
Starting Date. Payment shall be made monthly in one of the forms listed below
on the payment schedule maintained for that form by the Basic Plan covering the
participant. If the participant is covered by more than one Basic Plan, the
payment schedule for the plan with the largest benefit shall apply. The amount
paid
<PAGE>
9
in the forms provided in (b), (c) or (d) shall be the actuarial equivalent, as
determined under 3.3, of the amount paid in the form provided in (a). However,
the percentage reduction from the benefit in the form provided in (a) shall be
no greater than the percentage reduction that would have applied at the
participant's Earliest Normal Retirement Date. The form shall be irrevocably
elected by the participant on a form provided by the Committee prior to receipt
of the first payment, subject to the following. An election by a married
participant of a form provided in (a) or (d) shall not be effective unless the
spouse consents in the manner provided under the Basic Plan for elections not to
receive a joint and survivor annuity.
(a) A single life annuity for the life of the
participant.
(b) A life annuity with payments continuing after the
participant's death at 50 percent to a contingent annuitant
for life.
(c) A life annuity with payments continuing after the
participant's death at 100 percent to a contingent annuitant
for life.
(d) A life annuity with payments continuing to a
designated beneficiary for the remainder of the first 120
months if the participant dies before then.
3.8 Basic Plan Make-Up
__________________
If a participant in this plan has a reduced benefit under the Basic
Plan as a result of having elected deferral of pay under a nonqualified deferred
compensation plan of Employer for a year in which the participant is removed
from participation under 2.5 and such reduction is not otherwise made up by this
plan, the amount of such reduction shall be paid as an additional benefit under
this plan. The additional benefit provided by this 3.8 shall be paid at the
same time and in the same form as it would have been under the Basic Plan if
there had been no reduction.
4. Preretirement Death Benefits
____________________________
If a participant with a spouse or dependent children dies before the
Benefit Starting Date while employed with the Company or an affiliate, whether
or not an adopting Employer, a death benefit shall be paid as provided below.
The death benefit shall be a percentage of the participant's Accrued Benefit as
of the date of death, based on an Early Retirement Factor of 100 percent.
<PAGE>
10
4.1 Spouse's Benefit
________________
A surviving spouse shall be paid a benefit as follows:
(a) The amount shall be 50 percent of the
participant's Accrued Benefit.
(b) The form shall be a single life annuity for the
life of the spouse starting with the month following the
date of death.
4.2 Dependent Child's Benefit
_________________________
If the participant is unmarried with one or more dependent children,
the benefit shall be paid to such children. A dependent child is one who is age
19 to 22 and enrolled in a full-time program of education at a secondary school
or at a college, university or other post-secondary school or who is age 18 or
younger. The dependent child's benefit shall be paid as follows:
(a) The amount payable to a sole dependent child shall
be 25 percent of the participant's Accrued Benefit.
(b) The amount payable to two or more dependent
children shall be 40 percent of the participant's Accrued
Benefit, divided equally among such children.
(c) The dependent child's benefit shall be paid
monthly starting with the month following the date of death
and ending with the month the individual ceases to be a
dependent child. If one of two dependent children receiving
a share of the amount under (b) ceases to be a dependent
child, the remaining dependent child then shall receive the
amount under (a).
5. Disability
__________
5.1 Service Continuation
____________________
A disabled participant shall continue to accrue benefit service under
this plan so long as Benefit Hours are accrued for the participant under the
Basic Plan.
<PAGE>
11
5.2 Benefits
________
A disabled participant continuing to accrue service shall be treated
like any other employee until disability ends or retirement or death occurs. In
the event of death or retirement after disability, retirement or spouse's death
benefits under this plan shall be determined in the same manner as for any
participant.
6. Claims Procedure
________________
6.1 Original Claim
______________
Any person whose benefit under this plan is not promptly paid may
present a written claim for the benefit to the Committee. The Committee shall
respond to the claim in writing as soon as practicable.
6.2 Denial
______
If the claim is denied, the written notice of denial shall state:
(a) The reasons for denial, with specific reference to
the plan provisions on which the denial is based.
(b) A description of any additional material or
information required and an explanation of why it is
necessary.
(c) An explanation of the plan's claim review
procedure.
6.3 Request for Review
__________________
Any person whose claim is denied or who has not received a response
within 30 days may request review of the claim by the trustee for the plan
appointed under 8.3 by notice given in writing to the trustee. The claim or
request shall be reviewed by the trustee which may, but shall not be required
to, have the claimant and a representative of the Committee appear before it.
On review, the claimant may have representation, examine pertinent documents,
and submit issues and comments in writing.
6.4 Final Decision
______________
The trustee's decision on review shall normally be made within 60
days. If an extension is required for a hearing or other special circumstances
the claimant shall be so
<PAGE>
12
notified and the time limit shall be 120 days. The trustee's decision shall be
in writing and shall state the reasons and the relevant plan provisions. All
decisions on review shall be final and bind all parties concerned.
7. Amendment; Termination
______________________
7.1 Amendment
_________
The Company may amend this plan at any time so long as the rights
preserved on termination under 7.2 are not reduced. No amendment may accelerate
the time of payment of benefits to persons participating in the plan at the time
of the amendment.
7.2 Termination
___________
The Board of Directors of the Company may terminate the plan at any
time as follows:
(a) Termination shall be by notice to the Committee,
which shall notify participants of the termination. The
termination date shall not be earlier than the first day of
the month in which notice is given.
(b) After the effective date of termination no further
executive officers shall be selected for participation and
no further benefits shall accrue for existing participants.
(c) The Accrued Benefit of each existing participant
shall be paid under the terms of the plan as in effect
before termination. The Accrued Benefit shall be calculated
as follows:
(1) Final Average Pay and Years of Service shall
be determined as though the effective date of plan
termination were a termination of employment.
(2) The Primary Social Security Benefit shall be
estimated on the basis of the pay level and the Social
Security Act as in existence at the time of plan
termination.
<PAGE>
13
(3) The Qualified Plan Offset shall be based on
the benefits accrued under the Basic Plan and other
qualified plans at the time of plan termination.
8. General Provisions
__________________
8.1 Nonassignability
________________
The rights of a participant under this plan are personal. No interest
of a participant or any beneficiary or representative of a participant may be
directly or indirectly transferred, encumbered, seized by legal process or in
any other way subjected to the claims of any creditor.
8.2 Funding
_______
The rights of the participants and beneficiaries under this plan shall
be an unfunded, unsecured promise of the Company to make future payments.
8.3 Trust
_____
The Company shall establish a trust with a financial institution for
payment of benefits under the plan, which shall be a grantor trust for tax
purposes. The trust shall provide that any assets contributed to the Trustee
shall be used exclusively for payment of benefits under this plan except in the
event the Company becomes insolvent, in which case the trust fund shall be held
for payment of the Company's obligations to its general creditors.
8.4 Notices
_______
A notice under this plan shall be in writing and shall be effective
when actually delivered or, if mailed, when deposited postpaid as first class
mail. Mail shall be directed to the Company at the address stated in this plan,
to the participant at the address shown on the Company's employment records, or
to such other address as a party shall specify by notice to the other parties or
as the Committee may determine to be appropriate. Notices to the Committee
shall be sent to the Company's address.
8.5 Attorneys' Fees
_______________
If suit or action is instituted to enforce any rights under this plan,
the prevailing party may recover from the other party reasonable attorneys' fees
at trial and on any appeal.
<PAGE>
14
8.6 Indemnity
_________
The Company shall indemnify and defend any member of the Committee or
any officer, director or employee of an Employer from any claim or liability
that arises from any action or inaction in connection with the plan subject to
the following rules:
(a) Coverage shall be limited to actions taken in good
faith that the fiduciary reasonably believed were not
opposed to the best interests of the plan;
(b) Negligence by the fiduciary shall be covered to
the fullest extent permitted by law; and
(c) Coverage shall be reduced to the extent of any
insurance coverage.
8.7 Applicable Law
______________
This plan shall be construed according to the laws of Oregon except as
preempted by federal law.
8.8 Company Obligation
__________________
Benefits payable under this plan shall be an obligation of the
Company, which may charge the cost back to the Employer of the participant. If
an Employer merges, consolidates, or otherwise reorganizes or if its business or
assets are acquired by another entity and it remains an affiliate of the
Company, this plan shall continue with respect to those eligible individuals who
continue as employees of the successor company. The transition of Employers
shall not be considered a termination of employment for purposes of this plan.
If an Employer ceases to be an affiliate of the Company, a participant employed
by that Employer shall cease accruing Years of Service and changes in Final
Average Pay. The participant shall receive benefits under this plan on a later
termination of employment with Employer if the participant had reached a
retirement date or become vested before the affiliation ceased.
8.9 Payment for Individual's Benefit
________________________________
Payment for a person entitled to benefits shall be made to one of the
following if the recipient is court-appointed or the payment is ordered by a
court:
<PAGE>
15
(a) To a parent or spouse or a child of legal age;
(b) To a legal guardian; or
(c) To one furnishing maintenance, support, or
hospitalization.
8.10 Not Contract of Employment
__________________________
Nothing in this plan shall give any employee the right to continue
employment. The plan shall not prevent discharge of any employee at any time
for any reason.
9. Effective Date
______________
This Restatement shall be effective January 1, 1988.
RESTATEMENT EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1988.
Adopted: October 14, 1987.
PACIFICORP
By A. M. GLEASON
__________________________
President
Executed: June 24, 1988
AMENDMENT NO. 1 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1988.
PACIFICORP
By A. M. GLEASON
__________________________
President
Executed: August 31, 1988
<PAGE>
16
AMENDMENT NO. 2 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1988
PACIFICORP
By A. M. GLEASON
__________________________
President
Executed: September 23, 1988
AMENDMENT NO. 3 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1988
PACIFICORP
By A. M. GLEASON
__________________________
President
Executed: March 14, 1989
AMENDMENT NO. 4 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1992
PACIFICORP
By A. M. GLEASON
__________________________
President
Executed: August 14, 1992
AMENDMENT NO. 5 EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1994
PACIFICORP
By MICHAEL J. PITTMAN
__________________________
Executed: January 25, 1994
<PAGE>
17
APPENDIX A
TO
PACIFICORP SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1988 RESTATEMENT
ENHANCED EARLY RETIREMENT PROGRAM
FOR NERCO, INC. EMPLOYEES
Enhanced early retirement benefits shall be paid under this Appendix
to the PacifiCorp Supplemental Executive Retirement Plan (THE PLAN) to eligible
Plan participants who qualify for enhanced benefits under the Enhanced Early
Retirement Program provided in Appendix A to the NERCO Retirement Plan (THE
PROGRAM) as provided below. Terms used in this Appendix and not defined in it
shall have the same meaning as the Plan document.
1. ELIGIBILITY
___________
Benefits under this Appendix shall be provided to Plan participants
who elect to participate and receive benefits under the Program.
2. BENEFIT ENHANCEMENT
___________________
A participant eligible under Section 1 shall receive enhanced early
retirement benefits under the Plan as follows:
2.1 FIVE ADDITIONAL BENEFIT YEARS. The participant's
_____________________________
early retirement benefit shall be calculated with a Career Ratio based on the
sum of actual Benefit Years plus five additional Benefit Years, up to a maximum
of 30. This sum shall be divided by projected Benefit Years, up to a maximum of
30, determined in the manner provided in Plan Section 3.4(b) with no additional
Benefit Years.
2.2 NO EARLY RETIREMENT REDUCTION. The participant's
_____________________________
early retirement benefit shall be calculated with an Early Retirement Factor of
100 percent.
2.3 SOCIAL SECURITY BRIDGE. The participant's benefit
______________________
before reduction by the Qualified Plan Offset shall be increased by $1,000 per
month. The Social Security Bridge benefit paid a participant by the Basic Plan
pursuant to the Program shall be included in the Qualified Plan Offset in
calculating the participant's benefit under the Plan. The additional monthly
benefit, if any, shall commence along with the regular retirement benefit and
shall be paid on the same
<PAGE>
18
monthly schedule. The additional benefit shall terminate with the month prior
to the first month for which the participant is eligible to receive a Social
Security retirement benefit, or the month of the participant's death if earlier.
3. DEATH OF PARTICIPANT
____________________
The surviving spouse or qualifying dependent of an eligible individual
who has elected to participate in the Program and who dies while employed by
Employer or an affiliate shall have a preretirement death benefit under the Plan
calculated without regard to the enhancements provided by the Program.
Company: PACIFICORP
By: A.M. GLEASON
__________________________________
Executed: May 25, 1993
<PAGE>
EXHIBIT (10)r
AMENDMENT NO. 1
TO
COMPENSATION AGREEMENT
BETWEEN PACIFICORP AND KEITH R. McKENNON
PacifiCorp entered into a Compensation Agreement (the "Agreement")
with Keith R. McKennon (the "Director") effective as of February 9, 1994. In
order to reflect that the PacifiCorp Non-Employee Directors' Stock Compensation
Plan has been amended to increase the amount of Common Stock awarded from
$10,000 worth of Common Stock per year to $15,000 worth of Common Stock per
year, the Company and the Director hereby amend the Agreement as follows:
1. ANNUAL COMPENSATION OF DIRECTOR
The third sentence of Section 1 of the Agreement is amended to read as
follows:
"Of the total annual compensation, $15,000 shall be
provided through the Directors' participation in the PacifiCorp
Non-Employee Directors' Stock Compensation Plan."
2. GRANT OF COMMON STOCK
The first sentence of Section 2.2 is amended to read as follows:
"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 $15,000, subject to the following vesting
restriction."
3. MISCELLANEOUS
The effective date of this Amendment shall be February 9, 1995.
Except as specifically amended hereby, the Agreement shall remain unmodified and
in full force and effect.
PACIFICORP, an Oregon corporation
By: JOHN C. HAMPTON
______________________________
John C. Hampton, Chairman of
the Personnel Committee
KEITH R. MCKENNON
_________________________________
Keith R. McKennon
<PAGE>
EXHIBIT (10)t
Contract No. DE-MS79-88BP92497
RESTATED SURPLUS FIRM CAPACITY SALE AGREEMENT
executed by the
UNITED STATES OF AMERICA
DEPARTMENT OF ENERGY
acting by and through the
BONNEVILLE POWER ADMINISTRATION
and
PACIFIC POWER & LIGHT COMPANY
Index to Sections
______________________________________________________________________________
Section Page
1. Term of Agreement ........................................ 3
2. Exhibits ................................................. 3
3. Definitions .............................................. 3
4. Points of Delivery ....................................... 5
5. Sale of Capacity and Amounts Sold ........................ 5
6. Scheduling Provisions .................................... 8
7. Contract Demand .......................................... 10
8. Payment and Rates ........................................ 14
9. Termination of Prior Agreements .......................... 17
Exhibit A(General Contract Provisions GCP Form PSC-2) .. 3
Exhibit B(General Rate Schedule Provisions) ............ 3
Exhibit C(Contract Demand and Points of Delivery) ...... 3
This AGREEMENT, executed 9/27/94 , by the UNITED STATES OF AMERICA
_______________
(Government), Department of Energy, acting by and through the BONNEVILLE POWER
ADMINISTRATION (Bonneville) and PACIFICORP, doing business as PACIFIC POWER &
LIGHT COMPANY (Pacific), a corporation organized and existing under the laws of
the State of Oregon, hereinafter sometimes referred to individually as "Party"
and collectively as "Parties".
<PAGE>
2
W I T N E S S E T H:
WHEREAS Bonneville is engaged in the sale of electric capacity and energy
at wholesale and plans to meet the requirements of this Agreement only with
surplus firm capacity.
WHEREAS Bonneville, in accordance with subsection 5(f) of the Pacific
Northwest Electric Power Planning and Conservation Act, Public Law 96-501
(Northwest Power Act), has capacity available that is surplus to its obligations
incurred pursuant to subsections 5(b), 5(c), and 5(d) of the Northwest Power
Act; and
WHEREAS Pacific is a utility engaged in the generation, transmission, and
distribution of electric energy in the Pacific Northwest; and
WHEREAS Bonneville and Pacific were Parties to a Power Sales Contract dated
August 31, 1971, which provides for the sale of firm capacity by Bonneville to
Pacific (Contract No. 14-03-29136) and which expired under its own terms at 2400
hours on August 31, 1991; and
WHEREAS Pacific, in reliance on the former regional Hydro-Thermal Program,
incorporated the purchase of firm capacity from Bonneville into its long-term
resource planning decisions and therefore desires to continue to purchase
surplus firm capacity from Bonneville in order to meet its Pacific Northwest
firm load obligations; and
WHEREAS Bonneville desires to sell surplus firm capacity to Pacific under
the terms specified herein; and
WHEREAS the Parties intend that Bonneville's surplus firm capacity
obligations under this Agreement shall be incorporated into Bonneville's long-
term planning forecasts and associated capacity marketing decisions; and
<PAGE>
3
WHEREAS Bonneville is authorized pursuant to law to dispose of electric
power and energy generated at various federal hydroelectric projects in the
Pacific Northwest or acquired from other resources, to construct and operate
transmission facilities, to provide transmission and other services, and to
enter into agreements to carry out such authority;
NOW, THEREFORE, the Parties hereto mutually agree as follows:
1. TERM OF AGREEMENT
This Agreement shall be effective at 2400 hours on August 31, 1991, and
shall continue until 2400 hours on August 31, 2011. All obligations
incurred hereunder shall be preserved until satisfied.
2. EXHIBITS
General Contract Provisions GCP Form PSC-2 (Exhibit A), Bonneville
Wholesale Power Rate Schedules and General Rate Schedule Provisions
(Exhibit B), and Contract Demand and Points of Delivery (Exhibit C) are
hereby made a part of this Agreement. If a provision in the body of this
Agreement or of Exhibit C is in conflict with a provision in Exhibit A or
B, the provision in the body of this Agreement or in Exhibit C shall
prevail. If a provision of Exhibit A is in conflict with a provision of
Exhibit B, the provision of Exhibit A shall prevail.
3. DEFINITIONS
The following terms, when used in this Agreement with initial
capitalization, whether singular or plural, shall have the meanings
specified:
(a) "Agreement" means this Restated Surplus Firm Capacity Sale Agreement
between Bonneville and Pacific.
<PAGE>
4
(b) "Calendar Week" means the week beginning at 0001 hours on Sunday, and
ending at 2400 hours on the following Saturday.
(c) "Contract Demand" means the maximum rate of delivery in any hour, in
megawatts (MW), for surplus firm capacity as specified in Exhibit C.
(d) "Contract Year" means the period September 1, 1991, through June 30,
1992, and thereafter each 12 months beginning July 1, or such other 12-
month period as may be adopted as a contract year under the Pacific
Northwest Coordination Agreement, as it may be amended or replaced.
(e) "Heavy Load Hours" means the period from 0700 hours through 2200 hours
on any day Monday through Saturday.
(f) "Light Load Hours" means those hours which are not Heavy Load Hours.
(g) "Peaking Energy" means the electric energy associated with the delivery
of surplus firm capacity to Pacific.
(h) "Peaking Replacement Energy" means an amount of energy equal to the
Peaking Energy which Pacific is obligated to return to Bonneville.
(i) "Point(s) of Delivery" means the point(s) of interconnection between
Bonneville's and Pacific's systems as specified in Exhibit C.
(j) "Whitebook" means Bonneville's publication of its forecasted firm loads
and planned firm resources in an annual long-range planning document
entitled PACIFIC NORTHWEST LOADS AND RESOURCES STUDY or its comparable
successor planning document.
<PAGE>
5
(k) "Workday" means each day which both Parties observe as a regular day of
work.
4. POINTS OF DELIVERY
Bonneville shall make surplus firm capacity and associated Peaking Energy
available to Pacific pursuant to section 5(a), and Pacific shall make
available Peaking Replacement Energy to Bonneville pursuant to section 5(b)
at the Points of Delivery specified in Exhibit C.
5. SALE OF CAPACITY AND AMOUNTS SOLD
Bonneville shall make available and Pacific shall purchase each month of
each Contract Year an amount of surplus firm capacity equal to the Contract
Demand specified in Exhibit C for such Contract Year.
(a) SURPLUS FIRM CAPACITY AND PEAKING ENERGY
Bonneville shall make scheduled amounts of surplus firm capacity and
associated Peaking Energy available to Pacific in any hour or in any
portion of an hour, in amounts up to the Contract Demand, pursuant to
the scheduling provisions of section 6. During the Heavy Load Hours,
such scheduled amounts of Peaking Energy shall not exceed 10
megawatthours (MWh) per MW of Contract Demand in any day and shall not
exceed 50 MWh per MW of Contract Demand in any Calendar Week.
(b) PEAKING REPLACEMENT ENERGY
(1) DEADLINE FOR RETURNS
Except as provided in section 5(b)(3), or unless arrangements for
compensation pursuant to section 8(c) have been agreed to by the
Parties, Pacific shall, within 168 hours after the receipt of any
<PAGE>
6
Peaking Energy at the Points of Delivery, deliver an equal amount
of Peaking Replacement Energy to Bonneville at the Points of
Delivery. The Parties' schedulers or dispatchers may agree to
delay deliveries of Peaking Replacement Energy beyond 168 hours or
provide for advanced delivery of such Peaking Replacement Energy.
(2) NORMAL RATE OF RETURN.
Except as provided in section 5(b)(3), Pacific may deliver Peaking
Replacement Energy at hourly rates of up to 100 percent of Contract
Demand, or at hourly rates greater than 100 percent of Contract
Demand upon agreement by Bonneville.
(3) RESTRICTED RATE OF RETURN.
Bonneville shall have the right, subject to the limitations in
section 5(b)(4), to limit such hourly schedules of Peaking
Replacement Energy during any month of any Contract Year to amounts
not less than, unless otherwise mutually agreed, an amount (MWhs
per hour) equal to the Contract Demand applicable for such month of
such Contract Year, as set forth in Exhibit C, multiplied by the
Limitation Factor for such month as set forth below:
LIMITATION
MONTH FACTOR
July 0.60
August 0.60
September 0.60
October 0.60
November 1.00
December 1.00
January 1.00
February 1.00
March 0.60
April 0.60
May 0.80
June 0.80
<PAGE>
7
(4) LIMITATIONS ON RATE OF RETURN RESTRICTIONS.
If, pursuant to section 5(b)(3), Bonneville elects to limit
Pacific's hourly schedules of Peaking Replacement Energy during any
hour(s) of any Contract Year, such hourly limitations shall, unless
otherwise mutually agreed, be imposed for a minimum of five (5)
consecutive hours and provided, that the sum of such hourly
limitations in any Contract Year or in any Calendar Week shall not
exceed the maximum number of hours per Contract Year or per
Calendar Week set forth below for such Contract Year and provided
further, that the number of hours of such limitations shall be
calculated for each hour during the months of March through October
of any Contract Year as:
1.0 - ((ASL)/(CD))
H = __________________
(1.0 - LF)
Where:
H = The number of hours of limitations on Peaking Replacement
Energy, calculated to the nearest 0.1 hour.
ASL = The maximum hourly schedule of Peaking Replacement Energy
allowed by Bonneville in the hour (MWh/hr).
CD = The Contract Demand (MW).
LF = The Limitation Factor for such hour.
CONTRACT MAXIMUM HOURS MAXIMUM HOURS
YEAR(S) PER CONTRACT YEAR PER CALENDAR WEEK
1 500 35
2-5 600 35
6-10 850 42
11-20 1100 42
<PAGE>
8
6. SCHEDULING PROVISIONS
Unless otherwise agreed by the Parties' respective schedulers or
dispatchers for a specific schedule, all schedules of Peaking Energy and
Peaking Replacement Energy shall be subject to the following provisions:
(a) All deliveries of Peaking Energy and Peaking Replacement Energy shall
be prescheduled on each Workday for each hour of the following day or
days through the next regular Workday.
(1) Except as provided in section 6(a)(2), all preschedules under this
Agreement shall be submitted in accordance with Bonneville's
prevailing scheduling practice within the Pacific Northwest under
Bonneville's utility firm power sales contracts entered into
pursuant to section 5(b) of the Northwest Power Act as such
contracts may be amended or replaced; provided that Pacific shall
not be required to submit a preschedule earlier than 1200 hours.
(2) In the event Bonneville elects to limit schedules of Peaking
Replacement Energy pursuant to section 5(b)(3), Bonneville shall
give reasonable advance notice to Pacific but in no event shall
such notice be later than 1100 hours on any Workday for the
following day or days through the next Workday. If such schedules
are so restricted, preschedules will be due the later of:
(A) three hours from the time such notice is received by Pacific,
or
(B) the time preschedules are normally due pursuant to section
6(a)(1).
<PAGE>
9
(b) CHANGES TO PRESCHEDULES
Pacific shall have the right to make limited changes to prescheduled
deliveries of Peaking Energy as described below, provided that the
schedule of Peaking Energy in any hour or portion of an hour shall not
exceed the Contract Demand.
(1) HEAVY LOAD HOURS
Upon verbal notice given not less than 30 minutes prior to the
beginning of any Heavy Load Hour, or less than 30 minutes if agreed
by Bonneville, Pacific shall have the right to increase or decrease
the amount of Peaking Energy prescheduled or scheduled for delivery
during such Heavy Load Hour; provided that the sum of the absolute
values of any differences between the final schedule and the
original preschedule pursuant to section 6(a)(1) for Peaking Energy
(expressed in MWh) during the Heavy Load Hours of any day shall not
exceed an amount equal to six times Contract Demand (expressed in
MWh).
(2) LIGHT LOAD HOURS
Upon verbal notice given not less than 30 minutes prior to the
beginning of any Light Load Hour, or less than 30 minutes if agreed
by Bonneville, Pacific shall have the right to increase the amount
of Peaking Energy prescheduled or scheduled for delivery during
such Light Load Hour.
(c) Bonneville shall schedule Peaking Energy to Pacific in hourly amounts
requested by Pacific pursuant to this section.
(d) Except as provided in section 6(b), any changes to preschedules or
schedules of Peaking Energy and Peaking Replacement Energy under this
Agreement shall be only upon mutual agreement of the Parties. The
Parties shall use best efforts to avoid requesting such additional
changes from the prescheduled amounts.
<PAGE>
10
7. CONTRACT DEMAND
(a) INCREASES IN CONTRACT DEMAND
Based on Bonneville's determination of the availability of surplus firm
capacity, the Parties may mutually agree to increase the Contract
Demand specified in Exhibit C.
(b) DECREASES IN CONTRACT DEMAND
(1) DECREASE BY BONNEVILLE
Upon 5 years' written notice to Pacific, Bonneville may, based on
the then current Whitebook, reduce Pacific's Contract Demand as
follows:
(A) To the extent necessary to meet Bonneville's obligations under
its firm power sales contracts entered into pursuant to
sections 5(b), (c), and (d) of the Northwest Power Act and
under any renewal or extension of such contracts, and
(B) To the extent necessary to meet Bonneville's obligations
pursuant to other contracts for the sale of capacity (or
capacity with energy) to Pacific Northwest public bodies and
cooperatives entitled to preference and priority under the then
applicable law, and
(C) To the extent necessary to meet Bonneville's capacity/energy
exchange obligations under contracts entered into prior to
November 1, 1989, and
(D) To the extent necessary to meet Bonneville's capacity/energy
exchange obligations under contracts entered into subsequent
<PAGE>
11
to November 1, 1989; provided that, at the time such exchange
obligations were incurred, Bonneville, for the term of this
Agreement had a projected firm capacity surplus of at least 300
MW in excess of the aggregate of such new obligations, based on
the medium load forecast projection in the Whitebook in effect
at the time such obligations were incurred.
(E) In the event that Bonneville, pursuant to (A), (B), (C), or (D)
above, elects to provide notice of a reduction in Pacific's
Contract Demand, such reductions shall be limited to the
amounts and for the months and Contract Years as necessary to
meet the obligations as specified in this section 7(b)(1). In
such event, Pacific may elect to apply any monthly reduction to
any other or to all months of the Contract Year or subsequent
Contract Years or for the remaining term of this Agreement.
(2) DECREASE BY PACIFIC
(A) Pacific, upon 5-years' written notice to Bonneville, may
commence reducing, including to zero, the Contract Demand
applicable to subsequent Contract Year(s), provided that any
such reductions shall be limited to amounts of up to 175 MW per
Contract year and shall be effective at the beginning of such
subsequent Contract Year(s).
(B) Pacific shall have a limited right to decrease its Contract
Demand on one (1) years' notice if Bonneville executes a
contract(s) to sell or exchange surplus firm capacity based on
<PAGE>
12
the then current Whitebook and utilizing planned resources not
then in service to support such sale or exchange. Such right
to decrease Contract Demand shall be limited to the lesser of
(i) 175 MW per year (including to zero), or (ii) the amount by
which the surplus firm capacity sale or exchange entitled to
priority over Pacific pursuant to section 7(b)(1), exceeds
during any period, the amount of the sale or exchange which
would have been entitled to such priority if such Whitebook had
included only resources then in service. The required notice
by Pacific may be given any time after the execution of such
sale or exchange contract(s). Any such Contract Demand
reductions by Pacific shall be effective one (1) year from the
date of such notice, without regard to the period for which
such sale or exchange contract(s) rely on such planned
Whitebook resources.
(3) RESTORATION OF CONTRACT DEMAND
In the event that Bonneville, pursuant to section 7(b)(1), elects
to provide notice of a reduction in Pacific's Contract Demand and:
(A) subsequently determines, based upon the medium load forecast
from the then current Whitebook projection, that in any month,
amounts of surplus firm capacity will become available which
are in excess of the sum of:
(i) any of Bonneville's obligations under section 7(b)(1)
(A) and (B);
(ii) Bonneville's obligations resulting from contracts under
section 7(b)(1)(C) and (D) which existed at the time of
Bonneville's notice;
<PAGE>
13
(iii) the capacity obligations hereunder which have not been
so reduced; and
(iv) 300 MW; or
(B) prior to any restoration of service to other customers or other
disposition of capacity (or capacity with energy), other than:
(i) any of Bonneville's obligations under section 7(b)(1)
(A) and (B); and
(ii) Bonneville's obligations resulting from contracts under
section 7(b)(1)(C) and (D) which existed at the time of
Bonneville's notice;
then Bonneville shall offer such excess firm capacity calculated
under section 7(b)(3)(A) or the amount of such proposed restoration
or disposition of capacity under section 7(b)(3)(B) to Pacific in
writing under the terms of this Agreement and up to the amount of
Contract Demand that was reduced pursuant to section 7(b)(1). Such
increase shall be effective at the beginning of the next Contract
Year, or earlier by mutual agreement. Pacific shall have sixty
(60) days to accept Bonneville's offer.
(4) TRANSMISSION ASSISTANCE
In the event that Pacific's Contract Demand is reduced pursuant to
section 7(b)(1) or 7(b)(2)(B), Bonneville will use its best efforts
to grant any reasonable request by Pacific for transmission
services as may be required to acquire replacement peaking capacity
from other sources, provided, that excess transmission capacity is
available, and the
<PAGE>
14
provision of such capacity is consistent with applicable statutory
requirements as well as Bonneville's then existing policies and
practices.
8. PAYMENT AND RATES
(a) PAYMENT
Bonneville shall prepare a consolidated power bill for net payments due
by either Party to the other Party under this and other agreements. In
accordance with Bonneville's General Rate Schedule Provisions in
Exhibit B, Bonneville shall submit such bill to Pacific, and Pacific
shall pay Bonneville each month, for all amounts described in this
section.
(b) RATE FOR SURPLUS FIRM CAPACITY
Payment for surplus firm capacity made available by Bonneville under
this Agreement shall be at the rate specified in this section 8(b).
The effective rate shall be rounded to the nearest cent. The rates for
surplus firm capacity are as follows:
(1) INITIAL RATE
$4.92 per kilowatt (kW) - month of Contract Demand.
(2) ESCALATION
Beginning on September 1, 1991, the rate for surplus firm capacity
purchased by Pacific under this Agreement shall be adjusted
periodically to reflect changes in Bonneville's average system
cost. Such adjustment shall be made whenever Bonneville has a
general rate case and such adjustment shall be effective on the
same day that adjustments to Bonneville's other rates become
effective.
<PAGE>
15
The adjusted rate for firm capacity shall be determined from the
following formula:
BASCn
PPL - 90n = PPL - 90inst = ________
BASCinst
WHERE: PPL-90n = The adjusted firm capacity rate (in $/kW-month of
Contract Demand and calculated to the nearest
cent) to be effective subsequent to Bonneville's
then most recent general rate case on the
effective date of Bonneville's other newly
adjusted rates.
PPL-90inst = $4.92 per kW-month of Contract Demand.
BASCn = Bonneville's average system cost (in mills per kWh
and calculated to the nearest one-tenth of a mill)
as determined in Bonneville's then most recent
general rate case that will be used to adjust
Bonneville's wholesale power rate schedules.
Bonneville's average system cost shall be equal to
Bonneville's total system costs for the test
period of such general rate case divided by
Bonneville's total annual system sales (kWh)
forecasted for such test period. Bonneville's
total system costs shall be the sum of all
Bonneville's costs forecasted in each general rate
case for the applicable rate period, including
total transmission costs, Federal base system
costs,
<PAGE>
16
new resource costs, exchange resource costs, and
other costs not specifically allocated to a rate
pool, such as section 7(g) costs under the
Northwest Power Act. Bonneville's total annual
system sales shall be the sum of all Bonneville's
system firm and nonfirm sales forecasted in each
general rate case for the applicable test period.
Bonneville average system cost shall be
redetermined in each subsequent general rate case
according to the above formula and will be in
effect for the entire rate period over which the
rates are in effect.
BASCinst = 23.8 mills per kilowatthour.
<PAGE>
17
(c) CASHOUT
The Parties may agree that Pacific shall provide a payment rather than
deliver Peaking Replacement Energy to Bonneville pursuant to section
5(b)(1). Any such payment shall be at a rate authorized under
Bonneville's then-effective rate schedules.
9. TERMINATION OF OTHER AGREEMENTS
This Agreement supersedes and replaces all other agreements related to the
purchase by Pacific of surplus firm capacity from Bonneville; namely the
Bridge Agreement, Contract No. DE-MS79-91BP93119 and the Short-Term Surplus
Firm Capacity Agreement, Contract No. DE-MS79-92BP93757.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement.
UNITED STATES OF AMERICA
Department of Energy
Bonneville Power Administration
By PATRICK MCRAE
_________________________________
Senior Account Executive
Name Patrick McRae
_________________________________
(Print/Type)
Date 9/27/94
_________________________________
PACIFIC POWER & LIGHT COMPANY
By DENNIS P. STEINBERG
_______________________
Name Dennis P. Steinberg
_______________________
(Print/Type)
Title Senior Vice President
_______________________
Date September 30, 1994
_______________________
<PAGE>
Exhibit C, Page 1 of 4
Contract No. DE-MS79-88BP92497
CONTRACT DEMAND
Subject to changes as provided in this Agreement, the Contract Demand for any
month of any contract period shall be 1100 megawatts (MW). In the event of any
such changes to the Contract Demand, the Parties shall prepare an amended
Exhibit C to reflect such changes.
POINTS OF DELIVERY
GENERAL
The Parties agree that for the purposes of this Agreement, Peaking Energy and
Peaking Replacement Energy shall be scheduled between the Parties' systems for
receipt and/or delivery at all of the Points of Delivery set forth below,
provided that:
1. Nothing in this Agreement shall be construed to limit or change either
Party's rights to receive and/or deliver power and energy at other points
of delivery or locations under other agreements.
2. Nothing in this Agreement shall be construed to obligate either Party to
construct new facilities at any Point of Delivery unless the Parties
mutually agree upon a set of objectives for the provision of such
facilities.
3. Nothing in this Agreement shall be construed to limit or change either
Party's ownership or contractual rights or obligations (including intertie
rights or obligations) under other agreements.
4. By mutual agreement, the Parties may from time to time add or delete Points
of Delivery from this Exhibit C and in such event, the Parties shall
prepare an amended Exhibit C to reflect such changes.
<PAGE>
Exhibit C, Page 2 of 4
Contract No. DE-MS79-88BP92497
POD DESCRIPTIONS
1. ALVEY 500 kV POINT OF DELIVERY
LOCATION: the point in Bonneville's Alvey Substation where the 500 kV
facilities of the Parties hereto are connected;
VOLTAGE: 500 kV;
METERING: in Bonneville's Alvey Substation, in the 500 kV circuits over
which electric power and energy flows;
2. FAIRVIEW 230 kV POINT OF DELIVERY
LOCATION: the point in Bonneville's Fairview Substation where the 230 kV
facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Bonneville's Fairview Substation, in the 230 kV circuit over
which electric power and energy flows;
3. MCNARY 230 kV POINT OF DELIVERY
LOCATION: the point in Bonneville's McNary Substation where the 230 kV
facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Bonneville's McNary Substation, in the 230 kV circuit over
which electric power and energy flows;
4. MIDWAY POINT OF DELIVERY
LOCATION: the point in Bonneville's Midway Substation where the 230 kV
facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Bonneville's Midway Substation, in the 230 kV circuit over
which electric power and energy flows;
5. OUTLOOK POINT OF DELIVERY
LOCATION: the point in Pacific's Outlook Substation where the 230 kV
facilities of the Parties hereto are connected;
<PAGE>
Exhibit C, Page 3 of 4
Contract No. DE-MS79-88BP92497
VOLTAGE: 230 kV;
METERING: in Pacific's Outlook Substation, in the 115 kV circuit over
which electric power and energy flows;
EXCEPTION: there shall be an adjustment for losses between the point of
metering and the point of delivery;
6. PILOT BUTTE POINT OF DELIVERY
LOCATION: the point in Bonneville's Redmond-Yamsay 230 kV transmission
line where the facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Pacific's Pilot Butte Substation, in the 69 kV circuits over
which electric power and energy flows;
EXCEPTION: there shall be an adjustment for losses between the point of
metering and point of delivery;
7. PONDEROSA POINT OF DELIVERY
LOCATION: the point in Bonneville's Ponderosa Substation where the 230 kV
facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Bonneville's Ponderosa Substation, in the 230 kV circuit over
which electric power and energy flows;
8. RESTON POINT OF DELIVERY
LOCATION: the point in Bonneville's Reston Switching Station where the 230
kV facilities of the Parties hereto are connected;
VOLTAGE: 230 kV;
METERING: in Bonneville's Reston Switching Station, in the 230 kV circuit
over which electric power and energy flows;
9. TROUTDALE POINT OF DELIVERY
LOCATION: the points in Bonneville's Troutdale Substation where the 230 kV
facilities of the Parties hereto are connected;
<PAGE>
Exhibit C, Page 4 of 4
Contract No. DE-MS79-88BP92497
VOLTAGE: 230 kV;
METERING: in Bonneville's Troutdale Substation, in the 230 kV circuits
over which electric power and energy flows;
EXCEPTION: the Integrated Demands of the two circuits are totalized;
10. YAMSAY POINT OF DELIVERY
LOCATION: the point where Bonneville's Redmond-Yamsay 230 kV transmission
line and Pacific's Yamsay-Klamath Falls 230 kV transmission line are
connected;
VOLTAGE: 230 kV;
METERING:
(a) in Pacific's Chiloquin Substation in the 230 kV circuit over which
electric power and energy flows;
(b) in Pacific's Pilot Butte Substation, in the 69 kV circuit over which
electric power and energy flows;
EXCEPTION: there shall be an adjustment for losses between the point of
delivery and the points of metering;
11. SUMMER LAKE POINT OF DELIVERY
LOCATION: the point in Bonneville's Summer Lake Substation where the
500 kV facilities of the Parties hereto are connected;
VOLTAGE: 500 kV;
METERING: in Bonneville's Summer Lake Substation, in the 500 kV circuits
over which electric power and energy flows.
<PAGE>
EXHIBIT (12)A
PACIFICORP
STATEMENTS OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................. $ 431.2 $ 428.0 $ 409.7 $ 377.8 $ 336.8
Estimated interest portion of rentals charged to
expense.......................................... 23.3 20.4 17.1 20.1 19.5
Preferred dividend requirement of majority-owned
subsidiary....................................... 4.2 -- -- -- --
---------- ---------- ---------- ---------- ----------
Total fixed charges........................... $ 458.7 $ 448.4 $ 426.8 $ 397.9 $ 356.3
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings, as defined:*
Income from continuing operations................. $ 413.4 $ 446.8 $ 150.2 $ 422.7 $ 468.0
Add (deduct):
Provision for income taxes...................... 179.1 176.7 90.8 187.4 249.8
Minority interest............................... 18.1 14.1 8.4 11.3 13.3
Undistributed income of less than 50% owned
affiliates..................................... -- (1.8) (5.7) (16.2) (14.7)
Fixed charges as above.......................... 458.7 448.4 426.8 397.9 356.3
---------- ---------- ---------- ---------- ----------
Total earnings................................ $ 1,069.3 $ 1,084.2 $ 670.5 $ 1,003.1 $ 1,072.7
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of Earnings to Fixed Charges.................. 2.3x 2.4x 1.6x 2.5x 3.0x
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<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 income of less than 50% owned affiliates without loan
guarantees.
</TABLE>
S-1
<PAGE>
EXHIBIT (12)B
PACIFICORP
STATEMENTS OF COMPUTATION OF
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................. $ 431.2 $ 428.0 $ 409.7 $ 377.8 $ 336.8
Estimated interest portion of rentals charged to
expense.......................................... 23.3 20.4 17.1 20.1 19.5
Preferred dividend requirement of majority-owned
subsidiary....................................... 4.2 -- -- -- --
---------- ---------- ---------- ---------- ----------
Total fixed charges........................... 458.7 448.4 426.8 397.9 356.3
Preferred Stock Dividends, as defined:*........... 31.7 37.4 59.9 56.8 60.8
---------- ---------- ---------- ---------- ----------
Total fixed charges and preferred dividends... $ 490.4 $ 485.8 $ 486.7 $ 454.7 $ 417.1
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings, as defined:*
Net income from continuing operations............. $ 413.4 $ 446.8 $ 150.2 $ 422.7 $ 468.0
Add (deduct):
Provision for income taxes...................... 179.1 176.7 90.8 187.4 249.8
Minority interest............................... 18.1 14.1 8.4 11.3 13.3
Undistributed income of less than 50% owned
affiliates..................................... -- (1.8) (5.7) (16.2) (14.7)
Fixed charges as above.......................... 458.7 448.4 426.8 397.9 356.3
---------- ---------- ---------- ---------- ----------
Total earnings................................ $ 1,069.3 $ 1,084.2 $ 670.5 $ 1,003.1 $ 1,072.7
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.......................... 2.2x 2.2x 1.4x 2.2x 2.6x
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<FN>
------------------------
* "Fixed charges" represent consolidated interest charges, an estimated
amount representing the interest factor in rents and preferred stock
dividend requirements of majority-owned subsidiaries. "Preferred Stock
Dividends" represent preferred dividend requirements multiplied by the
ratio which pre-tax income from continuing operations bears to income from
continuing operations. "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 income of less than 50% owned affiliates without loan
guarantees.
</TABLE>
S-2
<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, EXCEPT PER SHARE AMOUNTS/FOR THE YEAR
5-Year
1994 to 1993 Compound
Percentage Annual
1994 1993 1992 1991 1990 1989 Comparison Growth
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $3,506.5 $3,405.4 $3,235.7 $3,163.9 $3,093.9 $3,007.0 3% 3%
_______ _______ _______ _______ _______ _______ ____ ___
INCOME FROM OPERATIONS 986.6 915.5 633.0 941.3 923.0 900.1 8 2
_______ _______ _______ _______ _______ _______ ____ ___
NET INCOME (LOSS) 468.0 479.1 (340.4) 507.2 473.9 465.6 (2) -
_______ _______ _______ _______ _______ _______ ____ ___
EARNINGS CONTRIBUTION (LOSS) ON
COMMON STOCK
Continuing operations
Electric Operations 339.8 322.3 202.9 346.6 334.2 329.6 5 1
Telecommunications 70.5 50.9 57.3 76.6 76.6 64.2 39 2
Other (a) 18.0 10.2 (147.3) (3.1) (19.3) (12.0) 76 *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL 428.3 383.4 112.9 420.1 391.5 381.8 12 2
Discontinued operations (b) - 52.4 (490.6) 60.4 60.5 62.6 * *
Cumulative effect of
change in accounting
for income taxes - 4.0 - - - - * *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL $ 428.3 $ 439.8 $ (377.7) $ 480.5 $ 452.0 $ 444.4 (3) (1)
_______ _______ _______ _______ _______ _______ ____ ___
_______ _______ _______ _______ _______ _______ ____ ___
EARNINGS (LOSS) PER SHARE
Continuing operations
Electric Operations $ 1.20 $ 1.17 $ .76 $ 1.34 $ 1.37 $ 1.34 3 (2)
Telecommunications .25 .19 .21 .30 .31 .26 32 (1)
Other (a) .06 .04 (.55) (.01) (.08) (.04) 50 *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL 1.51 1.40 .42 1.63 1.60 1.56 8 (1)
Discontinued operations (b) - .19 (1.84) .23 .25 .25 * *
Cumulative effect of
change in accounting
for income taxes - .01 - - - - * *
_______ _______ _______ _______ _______ _______ ____ ___
TOTAL $ 1.51 $ 1.60 $ (1.42) $ 1.86 $ 1.85 $ 1.81 (6) (4)
_______ _______ _______ _______ _______ _______ ____ ___
_______ _______ _______ _______ _______ _______ ____ ___
CASH DIVIDENDS PER
COMMON SHARE
Paid $ 1.08 $ 1.195 $ 1.52 $ 1.47 $ 1.41 $ 1.35 (10) (4)
Declared $ 1.08 $ 1.08 $ 1.53 $ 1.485 $ 1.425 $ 1.365 - (5)
OTHER INFORMATION
Total assets $ 11,846 $ 11,957 $ 11,257 $ 11,910 $ 11,201 $ 10,886 (1) 2
Total employees (c) 12,845 13,464 12,901 13,239 13,411 12,560 (5) -
Common shareholders of
record (Thousands) 149.4 157.5 165.7 162.3 164.6 171.0 (5) (3)
Book value per share $ 12.17 $ 11.61 $ 10.75 $ 13.40 $ 12.69 $ 12.29 5 -
Market price per share $ 18 1/8 $ 19 1/4 $ 19 3/4 $ 25 1/8 $ 22 3/8 $ 22 7/8 (6) (5)
Price earnings multiple (d) 12.0 13.8 47.0 15.4 14.0 14.7 (13) (4)
Pretax interest coverage (d) 3.1 2.6 1.6 2.5 2.4 2.3 19 6
Return on average
common equity (d) 12.8 12.5 3.4 12.5 12.9 12.8 2 -
_______ _______ _______ _______ _______ _______ ____ ___
_______ _______ _______ _______ _______ _______ ____ ___
<FN>
____________________
*Not a meaningful number.
(a) Other includes the operations of PacifiCorp Financial Services, Inc. and
Pacific Generation Company, 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 the effect
of special charges, see Note 14 to Consolidated Financial Statements, 1992
ratios were as follows: price earnings multiple, 21.5; pretax interest
coverage, 2.0; and return on average common equity, 7.4.
</TABLE>
<PAGE>
21
In 1994, PacifiCorp (the "Company") made substantial progress toward
strengthening the scope and competitive position of its electric utility and
telecommunications operations, and continued the reduction in the size and scope
of its financial services activities.
1994 COMPARED TO 1993
_____________________
.. Electric Operations' earnings contribution increased $18 million or 5%
primarily due to increased energy sales in all customer categories and
after-tax gains of $6 million relating to the sale of a portion of its
emission allowances and $4 million relating to the sale of distribution
facilities in Sandpoint, Idaho.
.. Telecommunications' earnings contribution from continuing operations
increased $20 million or 39% primarily due to long lines settlement
revenue, decreased interest expense, increased local telephone exchange
access lines and continued growth in cellular operations.
.. The earnings contribution of other businesses increased $8 million
primarily due to a $12 million increase in interest revenues from a note
received in connection with the June 1993 sale of NERCO, Inc. ("NERCO"),
the Company's former mining and resource development subsidiary.
.. Discontinued operations contribution decreased $52 million due to the
effect of a gain in 1993 relating to the sale of an international
communications subsidiary.
.. The average number of common shares outstanding rose 3% due to the issuance
of 6 million shares in a September 1993 public offering and issuances under
dividend reinvestment and employee stock ownership plans. In November
1994, the Company ceased issuing new shares to meet the requirements under
the plans. The Company periodically evaluates the advantages of common
share issuances in the context of its current capital structure, financing
needs and market price and may consider future issuances.
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
generation, 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 certain 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 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 million 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.
<PAGE>
22
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
Actual Forecasted
________________________________ __________________________________
1992 1993 1994 1995 1996 1997
________________________________ __________________________________
<S> <C> <C> <C> <C> <C> <C>
NET CASH FLOWS FROM CONTINUING
OPERATIONS
Electric Operations $ 642 $ 764 $ 747
Telecommunications 177 180 141
Other 123 93 74
_____ _____ _____
TOTAL 942 1,037 962
CASH DIVIDENDS PAID 440 366 345
_____ _____ _____
NET $ 502 $ 671 $ 617 $550-600 $625-675 $675-725
_____ _____ _____ _______ _______ _______
_____ _____ _____ _______ _______ _______
CONSTRUCTION
Electric Operations $ 585 $ 636 $ 638 $ 534 $ 562 $ 569
Telecommunications 109 103 148 128 117 109
Other - 3 3 4 8 58
_____ _____ _____ _______ _______ ______
TOTAL 694 742 789 666 687 736
ACQUISITIONS AND INVESTMENTS
Electric Operations 279(a) 1 - - 156(b) -
Telecommunications 31 23 5 380(c) - -
Other (3) 39 4 160(d) - -
_____ _____ _____ _______ _______ _______
TOTAL CAPITAL SPENDING $1,001 $ 805 $ 798 $ 1,206 $ 843 $ 736
_____ _____ _____ _______ _______ _______
_____ _____ _____ _______ _______ _______
MATURITIES OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS
Electric Operations $ 111 $ 62 $ 76 $ 52 $ 183 $ 211
Telecommunications 19 32 17 15 6 16
Other 321 273 61 29 21 6
_____ _____ _____ _______ _______ _______
TOTAL $ 451 $ 367 $ 154 $ 96 $ 210 $ 233
_____ _____ _____ _______ _______ _______
Other Refinancings $ 751 $ 864 $ 295
_____ _____ _____
_____ _____ _____
<FN>
(a) 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.
(b) PacifiCorp has entered into an agreement to purchase a 50% interest in a
474 megawatt, natural gas-fired generating plant in Hermiston, Oregon.
(c) Pacific Telecom's acquisitions of certain US WEST Communications, Inc.
assets in Colorado, Oregon and Washington. The construction numbers above
for 1995, 1996 and 1997 include expenditures relating to these assets.
(d) Holdings' acquisition of the minority shareholders' interest in Pacific
Telecom.
</TABLE>
<PAGE>
23
ELECTRIC OPERATIONS
Electric Operations uses several tools to plan for future growth. The planning
process starts with the Electric Operations' least-cost plan, which is
frequently revised. Electric Operations' three-year financial forecast is
derived, in part, from the least-cost plan. These plans define how Electric
Operations intends to acquire efficient, cost-effective energy resources for its
customers and achieve its financial and operating goals.
For the period 1995 to 1999, annual retail megawatt-hour sales are expected to
increase at an average rate of about 2% per year. In 1995, Electric Operations
currently plans to acquire new demand-side resources that are expected to
conserve about 30 average megawatts. Electric Operations' plan relies on no
single energy source to meet customers' needs. Electric Operations 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.
Construction--
During 1994, Electric Operations invested in construction consisting of
production, $143 million; transmission, $81 million; distribution, $246 million;
and other, $168 million.
Electric Operations' estimated construction expenditures for 1995 through 1997
are set forth below. Electric Operations rigorously reviews its capital budgets
and makes appropriate revisions.
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
1995 1996 1997
____ ____ ____
<S> <C> <C> <C>
Production $105 $181 $181
Transmission 55 66 60
Distribution 221 204 206
Other 153 111 122
___ ___ ___
Total $534 $562 $569
___ ___ ___
___ ___ ___
</TABLE>
Included in the table above are Electric Operations' estimates of the capital
costs of acquiring demand-side resources. Electric Operations is implementing
demand-side programs to improve the energy efficiency of residences, commercial
buildings and industrial facilities -- both new and existing.
Proposed Acquisitions--
In 1993, Electric Operations signed a contract to purchase the entire output
from the Hermiston Generating Project located near Hermiston, Oregon. This 474
megawatt natural gas cogeneration project is being developed by U.S. Generating
Company ("U.S. Generating"). In November 1994, U.S. Generating commenced
construction of the plant. Electric Operations entered into an agreement to
purchase, subject to certain conditions, a 50% ownership interest in this
project for approximately $156 million. The payment is also contingent upon
commercial operation of the plant, expected to occur in July 1996.
Whenever Electric Operations has power available and the market price is
favorable, it makes off-system sales, generally to other utilities. Off-system
sales permit Electric Operations to use power supplies in a manner that keeps
costs down for retail customers and provides added flexibility in meeting
changes in customer demand.
Disposition--
Electric Operations' distribution facilities, based in Sandpoint, Idaho, were
sold on December 31, 1994 to Washington Water Power, following approval of the
sale by the Idaho Public Utilities Commission. The decision to sell the
northern Idaho facilities was based on a number of competitive factors,
including the likelihood of significant future price increases due to
circumstances beyond Electric Operations' control. The sale affects 9,800
residential, commercial and industrial customers. Cash proceeds of $33 million
were received from the sale in 1994.
Capital Resources--
Electric Operations expects to support its capital and maturing debt
requirements primarily through internally generated cash flows and issuances of
additional debt. Sales of preferred stock and common stock may also be
considered.
Competition--
Competition with other energy providers has historically been limited to
suppliers of natural gas, oil and wood. The energy marketplace is becoming much
more competitive, with more suppliers vying for customers' energy service
dollars than ever before. While utilities still have defined service areas,
customers have an increasing number of choices, including energy efficiency
technologies, and they are exercising their options. Electric Operations is
also competing with new providers of electricity -- independent power marketing
and brokering companies, independent power producers, cogenerators and emerging
technologies.
The Energy Policy Act of 1992 eased restrictions on independent power production
and gave the Federal Energy Regulatory Commission ("FERC") authority to mandate
wholesale wheeling. The FERC is moving quickly to set the stage for
competition. In a series of recently released orders and notices of proposed
rulemaking, the FERC has heightened the level of industry discussion regarding
topics such as transmission access and pricing, stranded investment, unbundling
of services and comparability of service standards.
<PAGE>
24
Even the notion of defined service areas is likely to change, as various states
begin experimenting with competition through direct access to alternative
electricity suppliers at the retail level. For example, the California Public
Utilities Commission is conducting a rulemaking that would allow competition for
all retail electric customers in California. The Michigan Public Service
Commission has also ordered an experimental five-year program to evaluate
competition for large retail customers in that state.
Electric Operations is formulating strategies to meet these new challenges and
maintain its competitive position. Electric Operations believes the industry
has become more customer-driven and to grow it must be flexible, promote
entrepreneurial thinking and pursue innovative pricing approaches. Electric
Operations is seeking alternate forms of regulation that will include
performance indices to give shareholders an appropriate opportunity to share in
the rewards and risks of competition. Electric Operations will focus on the
development of new products and services, as well as the use of existing
technologies in new ways. Electric Operations has begun to offer power supply
services to other utilities, including dispatch assistance, daily system load
monitoring, backup power, power storage and power marketing, and services to
retail customers that encourage efficient use of energy. Electric Operations
intends to continue to control the cost of doing business and will seek to
increase profitability by expanding its investment in productive assets,
redeploying capital from unproductive assets and generally continuing to
minimize the amount of capital it expends.
Electric Operations believes there are opportunities to grow shareholder value
in today's energy marketplace by carefully managing costs and capital spending;
staying attuned to customers and effectively meeting their needs; working with
policymakers to gain the flexibility required to respond quickly to changes; and
stepping up to both the challenges and the opportunities of increasing
competition. Electric Operations will use a rigorous, ongoing strategic process
to continue to adjust its competitive position and direction.
For a discussion of accounting for the effects of regulation, see Note 1 to
Consolidated Financial Statements.
TELECOMMUNICATIONS
Over the past few years, Pacific Telecom's strategy has been to focus on its
core business of providing local exchange service to rural and suburban markets
and to divest its diversified portfolio of noncore businesses. This strategy is
being implemented through the acquisition of local exchange companies, the sale
of certain international operations, the consolidation and sale of cellular
holdings, and ongoing efforts to complete the sale of the Alaska long distance
operations to AT&T Corp. ("AT&T"). Upon completion of the pending sale of its
wholly owned subsidiary, Alascom, Inc. ("Alascom"), to AT&T, Pacific Telecom
will have resolved its uncertainties relating to the Alaska long distance
market. With the sale of two noncore operations in 1993, Pacific Telecom exited
from all of its material noncore businesses.
Construction--
In 1994, Pacific Telecom had no major construction projects that required more
than one year to complete. During 1994, Pacific Telecom's construction
expenditures consisted of $111 million for local exchange operations,
$22 million for long lines, $10 million for cellular operations and $5 million
for other. These expenditures related mainly to network upgrades and growth in
Pacific Telecom's operations.
Construction expenditures for 1995 through 1997 are estimated to be as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
1995 1996 1997
____ ____ ____
<S> <C> <C> <C>
Local exchange $109 $109 $ 99
Long lines 7 - -
Cellular 9 5 7
Other 3 3 3
___ ___ ___
Total $128 $117 $109
___ ___ ___
___ ___ ___
</TABLE>
Pending Acquisitions--
In February 1995, Pacific Telecom acquired certain rural telephone exchange
assets in Colorado from US WEST Communications, Inc. ("USWC"). Pacific Telecom
paid $200 million in cash for these assets, which serve 50,000 access lines.
In May 1994, Pacific Telecom signed definitive purchase agreements to acquire
certain rural exchange assets located in Oregon and Washington from USWC.
Pacific Telecom will pay $180 million in cash, subject to certain adjustments at
closing, for the assets, which serve 35,000 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 expected to close prior to the
end of 1995.
Pending Disposition--
In October 1994, Pacific Telecom signed an agreement to sell the stock of
Alascom to AT&T. The agreement was reached after the Federal Communications
Commission ("FCC") ordered the restructuring of the Alaska telecommunications
market. Among other things, the May 1994 FCC order required the termination of
the Joint Services Agreement between AT&T and Alascom effective January 1, 1996
and the payment by AT&T to Alascom of a $150 million transition payment in two
installments of $75 million each. Although the FCC order remains in effect, the
agreement to sell Alascom to AT&T was reached as a solution to issues that
remained unresolved by the order.
<PAGE>
25
In the transaction, Pacific Telecom will receive $365 million in proceeds.
Under the terms of the agreement, AT&T will pay $290 million in cash for the
Alascom stock and for settlement of all past cost study issues. Pacific Telecom
will retain the $75 million transition payment made by AT&T to Alascom in July
1994. AT&T made a down payment of $30 million to Pacific Telecom upon signing
the stock purchase agreement, which would be applied to the final $75 million
transition payment required in the FCC order if the transaction failed to close.
The $30 million down payment received from AT&T was included in Other Deferred
Credits at December 31, 1994, pending completion of the transaction. The
remaining $260 million is to be paid when the transaction closes. Closing of
the sale of Alascom is subject to certain conditions, including receipt of state
and federal regulatory approvals that are expected to be received during the
first half of 1995. Pacific Telecom anticipates recognizing a material gain
from the sale of Alascom, but the lost earnings from Alascom would be
substantial. See "Telecommunications" on page 32.
Capital Resources--
Pacific Telecom funded the Colorado acquisition with short-term borrowings and
anticipates repaying these borrowings with proceeds from the sale of Alascom.
Pacific Telecom expects to fund the Oregon and Washington acquisitions with
proceeds from the sale of Alascom, 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 and external debt. Pacific
Telecom expects to fund its construction expenditures primarily through
internally generated cash.
Competition--
Approximately 80% of Pacific Telecom's revenues are derived from operations
subject to state and federal regulation. While urban telecommunication
companies are operating in increasingly competitive environments, Pacific
Telecom's regulated operations continue to be based on rate of return and/or
cost recovery regulation. The environment of increasing competition in urban
markets may raise concerns over the valuation of embedded long-lived assets.
Pacific Telecom's situation is not expected to change significantly in the
foreseeable future because its operations are predominantly in rural areas where
there is less competitive pressure.
OTHER
During 1994, PacifiCorp Financial Services, Inc. ("PFS") reduced its assets by
$400 million. Proceeds from sales of its assets were used to reduce debt.
PacifiCorp Holdings, Inc. ("Holdings") has entered into an agreement and plan of
merger with Pacific Telecom under which Holdings would acquire the 13% publicly
held minority interest in Pacific Telecom for $30 per share. The merger
requires approval by the holders of a majority of the outstanding shares of
Pacific Telecom not owned by Holdings (5.3 million shares), and is subject to
regulatory approvals and other conditions customary to such transactions.
During 1994, the Company's wholly owned independent power production subsidiary,
Pacific Generation Company ("PGC"), through its subsidiaries, began construction
of a 240 megawatt cogeneration facility in California. When completed, the
facility will be operated by PGC, and PGC will effectively own approximately 46%
of the completed project. PGC plans to continue to pursue opportunities in the
U.S. market and has begun a preliminary investigation of opportunities in the
international markets.
PFS and Holdings expect to fund scheduled debt maturities and financing
commitments through cash flows from operations, further asset sales and through
issuances of additional debt.
OPERATING ACTIVITIES
Consolidated operating needs, dividends and construction expenditures are
primarily funded from cash provided by operations. Cash provided by continuing
operations less dividends paid provided for 78%, 90% and 72% of construction
expenditures in 1994, 1993 and 1992, respectively. Consolidated cash flows from
operations declined $75 million in 1994. Pacific Telecom's cash provided by
operating activities was reduced by $64 million for taxes paid on $150 million
of transition payments received or to be received from AT&T. The cash used for
the tax payment relates directly to $75 million of cash received in July 1994
for the first transition payment, which is included in net cash flows used in
investing activities. This tax payment had minimal effect on net income, as the
increase in current tax expense was mostly offset by a reduction in deferred
income tax expense.
INVESTING ACTIVITIES
Consolidated cash flows of $340 million were used in investing activities in
1994. Construction expenditures were $789 million, including $638 million for
Electric Operations and $148 million for Telecommunications. Proceeds of
$277 million from sales of assets resulted primarily from the planned
disposition of finance assets. Proceeds of $105 million from the Alaska
restructuring included a $75 million transition payment in July 1994 and a
$30 million down payment in connection with Pacific Telecom's sale of Alascom to
AT&T. Lease payments representing principal and proceeds from the sale of
receivables totaled $109 million at PFS.
FINANCING ACTIVITIES
Common stock
During 1994, the Company issued 3,230,307 shares of its common stock under the
Dividend Reinvestment and Employee Savings and Stock Ownership Plans for
proceeds of $57 million. In the fourth quarter of 1994, the Company ceased
issuing new shares to fund requirements under these plans and beginning in
November 1994, open market purchases were used for these requirements. The
Company periodically evaluates the advantages of common share issuances in the
context of its current capital structure, financing needs and market price and
may consider future issuances.
<PAGE>
26
The Company paid common stock dividends of $305 million in 1994 and $327 million
in 1993.
Short-term and long-term debt, including current maturities
Consolidated debt decreased $314 million in 1994. Holdings and PFS retired
$347 million of debt with the proceeds from sales of finance assets. Pacific
Telecom's debt decreased $54 million primarily due to the application of net
proceeds from the down payment for the sale of Alascom and the transition
payment received from AT&T. The Company's debt increased $103 million due to a
$169 million increase in short-term debt, partially offset by a $66 million
decrease in long-term debt. During 1994, the Company refinanced long-term debt
with fixed interest rates ranging from 6% to 10.7% with variable rate debt with
year-end interest rates ranging from 5.2% to 6.2%. At December 31, 1994, the
Company's variable rate debt totaled $1.3 billion.
As of December 31, 1994, the Company had $830 million of mortgage bonds and
common stock registered for sale with the Securities and Exchange Commission,
including the Company's $500 million Series G Medium-Term Note program.
Holdings has executed various agreements that support certain obligations 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 maintain its
tangible net worth at not less than $10 million; and provide liquidity support.
<TABLE>
Capitalization
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993 1992 1991 1990 1989
______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Common equity $3,460 $3,263 $2,908 $3,512 $3,208 $3,007
Preferred stock 367 367 417 342 342 242
Preferred stock subject
to mandatory redemption 219 219 219 150 50 50
Long-term borrowings 3,768 3,924 4,181 4,348 3,944 3,795
Long-term borrowings
currently maturing 96 155 420 274 380 407
Short-term debt 455 554 553 681 698 1,045
</TABLE>
Policy --
To insure access to capital markets and to produce a competitive cost of
capital, the Company attempts to maintain an appropriate mix of debt and equity
in its consolidated capital structure. In order to maintain its target debt
rating of "A", the Company has a target debt to capitalization range of 48% to
54%. At December 31, 1994, the Company's total debt was 52% of total
capitalization. Within its debt structure, the Company has historically
attempted to match the life of its borrowed liabilities with its assets and to
actively manage its exposure to fluctuating interest rates.
Derivatives --
The Company adopted a derivative policy during 1994, including a policy
statement which states that derivative products could be used, along with other
tools, to manage the Company's liability exposure and will not be used for
speculative purposes. Derivative products are one of the tools available to the
Company in its overall liability management system. Given the nature of the
Company's borrowed liabilities, its use of derivative products in the future is
expected to be limited to those markets that are the most liquid. At
December 31, 1994, the Companies had foreign currency and interest rate swaps on
debt totaling $287 million. As the price for electricity becomes based more on
market activities than on regulation, utilities and customers will be more
exposed to price variations created by changes in supply and demand. To manage
these risks, the Company anticipates that its derivative policy may be expanded
to allow the use of electricity futures and options, as the market for those
instruments expands.
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 $1.2 billion principal amount of additional
unsecured debt could have been outstanding at December 31, 1994.
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 $2.3 billion of additional mortgage bonds
or $2.1 billion of preferred stock could have been issued at December 31, 1994.
However, certain of the Company's credit facilities would have limited
additional long-term borrowings to approximately $1.1 billion.
Under the Company's principal credit agreements, 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
arrangements, see Note 3 to Consolidated Financial Statements.
<PAGE>
27
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, past practices have allowed the Company to recover and earn on
the increased cost of its net investment when replacement of facilities actually
occurs. To what extent this practice will continue in the changing regulatory
environment cannot be predicted.
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-sulfur coal. Major construction
expenditures have already been made at many plants to reduce sulfur 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. The Company has also been
engaged in discussions with the environmental authorities in the state of
Washington with respect to the emission reduction technology to be applied,
certain of which could involve capital expenditures.
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 ("CO2")
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 to offset future CO2 emissions and
is undertaking demonstration projects involving tree planting as a possible
means of offsetting emissions. In 1994, the Company joined with 37 other
investor-owned utilities to sign a voluntary agreement with the U.S. Department
of Energy addressing CO(2) emissions. The Company's specific agreement includes
a commitment to reduce 1990 CO(2) emissions rate by 10% and to spend $1 million
on offset projects by the year 2000.
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
hydroelectric projects under the Federal Power Act and will be seeking licenses
for other projects in the future. The licenses of 11 of the Company's
hydroelectric projects expire within the next 10 years. These projects
represent 458 MW, or 43%, of the Company's hydroelectric generating capacity.
In the new licenses, 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 are expected to increase in future
periods and certain projects may not be economical 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 financial position or results of
operations.
<PAGE>
28
<TABLE>
ELECTRIC OPERATIONS
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1994 to 1993 Compound
Percentage Annual
1994 1993 1992 1991 1990 1989 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Residential $ 724.9 $ 698.9 $ 649.8 $ 663.8 $ 646.6 $ 646.4 4% 2%
Commercial 570.4 543.9 526.9 517.4 509.0 517.3 5 2
Industrial 726.3 696.2 695.6 674.9 673.8 670.6 4 2
Other 30.7 29.8 29.9 34.2 34.3 38.2 3 (4)
_______ _______ _______ _______ _______ _______ ___ ___
Retail 2,052.3 1,968.8 1,902.2 1,890.3 1,863.7 1,872.5 4 2
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale - firm 456.2 422.5 356.5 264.7 209.9 190.3 8 19
Wholesale - nonfirm 76.5 77.3 71.3 59.9 78.4 79.0 (1) (1)
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale 532.7 499.8 427.8 324.6 288.3 269.3 7 15
Other 62.8 38.3 32.4 36.9 32.5 33.9 64 13
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 2,647.8 2,506.9 2,362.4 2,251.8 2,184.5 2,175.7 6 4
_______ _______ _______ _______ _______ _______ ___ ___
EXPENSES
Depreciation and amortization 301.6 280.5 286.6 256.0 235.4 227.8 8 6
Operations, maintenance and
other 1,526.9 1,442.1 1,398.1 1,212.8 1,204.1 1,192.9 6 5
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 1,828.5 1,722.6 1,684.7 1,468.8 1,439.5 1,420.7 6 5
_______ _______ _______ _______ _______ _______ ___ ___
INCOME FROM OPERATIONS 819.3 784.3 677.7 783.0 745.0 755.0 4 2
_____ _____ _____ _____ _____ _____ ___ ___
NET INCOME 379.5 361.6 240.2 373.3 356.1 350.8 5 2
PREFERRED DIVIDEND REQUIREMENT 39.7 39.3 37.3 26.7 21.9 21.2 1 13
_____ _____ _____ _____ _____ _____ ___ ___
EARNINGS CONTRIBUTION (a) $ 339.8 $ 322.3 $ 202.9 $ 346.6 $ 334.2 $ 329.6 5 1
_______ _______ _______ _______ _______ _______ ___ ___
_______ _______ _______ _______ _______ _______ ___ ___
Identifiable assets $ 9,372 $ 9,055 $ 8,192 $ 7,665 $ 7,027 $ 6,728 4 7
Capital spending $ 638 $ 637 $ 864(b)$ 796 $ 459 $ 344 - 13
Number of employees 9,281 9,304(c) 9,363 9,419 8,974 8,913 - 1
<FN>
(a) Does not reflect elimination of interest on intercompany borrowing
arrangements and includes income taxes on a separate-company basis.
(b) Includes noncash acquisition costs of $255 million relating to the
Colorado-Ute properties.
(c) Beginning in 1993, employees of Pacific Generation, Inc. were reported in
other businesses (127 employees in 1993).
</TABLE>
FACTORS INFLUENCING EARNINGS
Electric Operations 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. Financial performance is dependent on efficiently and
economically balancing power supply resources with customer demand; utility
commission practices; regional economic conditions; retention of commercial and
industrial customers and municipal franchises; weather variations affecting
customer usage, competition in bulk power markets and hydroelectric production;
wholesale firm power marketing results; environmental and tax legislation; and
the cost of debt and equity capital.
A higher effective tax rate, Bonneville Power Administration ("BPA") price
increases, possible rising interest rates, hydroelectric relicensing and other
cost increases are among the factors expected to place upward pressure on
Electric Operations' costs and pricing structure in the next several years. See
Environmental Issues on page 27.
1994 COMPARED TO 1993
_____________________
. Revenues increased $141 million or 6%.
.. Residential revenues increased $26 million or 4% and kWh volume
increased 1%. Revenues increased $19 million due to decreased BPA
exchange benefits and $16 million due to a 2% increase in the number of
customers. Revenues decreased $10 million due to unseasonably warm
temperatures early in 1994, partially offset by the effects of
continuing warm temperatures throughout the summer months.
.. Commercial revenues increased $27 million or 5% primarily due to a 2%
increase in the average number of customers and an increase in customer
usage.
<PAGE>
29
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1994 to 1993 Compound
Percentage Annual
1994 1993 1992 1991 1990 1989 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES
Fuel $ 496.4 $ 464.7 $ 479.0 $ 424.1 $ 403.5 $ 397.4 7 5
Purchased power $ 310.4 $ 274.9 $ 210.2 $ 176.4 $ 149.6 $ 133.3 13 18
Other operations $ 296.1 $ 287.9 $ 288.0 $ 249.7 $ 259.5 $ 271.1 3 2
Maintenance $ 174.5 $ 172.2 $ 167.8 $ 146.6 $ 151.2 $ 158.7 1 2
Administrative and general $ 142.7 $ 138.2 $ 144.5 $ 119.1 $ 139.5 $ 135.7 3 1
Depreciation and amortization $ 301.6 $ 280.5 $ 286.6 $ 256.0 $ 235.4 $ 227.8 8 6
Taxes, other than income taxes $ 106.8 $ 104.2 $ 108.6 $ 96.9 $ 100.8 $ 96.7 2 2
Income taxes - utility $ 223.0 $ 188.8 $ 170.5 $ 180.8 $ 169.7 $ 189.1 18 3
Income taxes - other $ (2.8) $ (9.5) $ (12.8) $ (6.5) $ (7.9) $ (.9) 71 (25)
INTEREST CAPITALIZED
AFUDC - equity $ - $ 4.3 $ 7.3 $ 7.9 $ 8.4 $ 10.5 * *
AFUDC - debt $ 14.5 $ 9.6 $ 8.9 $ 7.9 $ 14.0 $ 12.2 51 4
ENERGY SALES (Millions of kWh)
Residential 12,127 12,055 11,230 11,354 10,990 10,765 1 2
Commercial 10,645 10,085 9,733 9,416 9,101 8,803 6 4
Industrial 20,306 19,671 19,942 19,322 19,507 18,878 3 1
Other 623 602 606 692 690 750 3 (4)
_______ _______ _______ _______ _______ _______ ___ ___
Retail sales 43,701 42,413 41,511 40,784 40,288 39,196 3 2
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale - firm 12,418 11,919 10,455 7,349 6,147 5,441 4 18
Wholesale - nonfirm 3,207 3,030 2,965 2,946 3,323 3,118 6 1
_______ _______ _______ _______ _______ _______ ___ ___
Wholesale sales 15,625 14,949 13,420 10,295 9,470 8,559 5 13
_______ _______ _______ _______ _______ _______ ___ ___
TOTAL 59,326 57,362 54,931 51,079 49,758 47,755 3 4
_______ _______ _______ _______ _______ _______ ___ ___
_______ _______ _______ _______ _______ _______ ___ ___
<FN>
*Not a meaningful number.
</TABLE>
.. Industrial revenues increased $30 million or 4% due to a 3% increase in
kWh volume. Irrigation revenues increased $12 million due to the
effects of drier weather in 1994. Revenues from other industrial
customers increased $18 million due to customer growth, higher prices
resulting from contract escalators and changes in customer mix, and
increased sales to customers primarily in the paper and pulp industry.
.. Wholesale revenues increased $33 million or 7% on increased volume of
5%. Long-term firm power sales increased $28 million; $15 million from
higher prices and $13 million from higher volume under new and existing
contracts. Increased volume in the spot market and from short-term
firm contracts added revenue of $12 million, which was partially offset
by a $7 million reduction in prices, mainly in the spot market. Spot
market prices were influenced by the availability of energy in the
region caused by mild weather and low natural gas prices which made
production of natural gas-fired generation more economical, as well as
by more competition in the market.
.. Other revenues increased $25 million or 64% due to increases in
deferred regulatory revenue of $13 million, rental revenue of
$8 million and wheeling revenue of $4 million.
. Operating expenses increased $106 million or 6%.
.. Fuel expense increased $32 million or 7% due to a 6% increase in
thermal generation, resulting from increased customer demand, a 14%
reduction in hydroelectric generation and a 5% reduction in volume of
purchased power.
.. Purchased power expense increased $36 million or 13% while kWh volume
purchased declined 5%. The increased expense was due to a decrease in
BPA exchange benefits of $15 million, a price increase relating to a
BPA peaking purchase contract of $8 million, price increases on other
firm purchase contracts of $8 million and secondary purchase price
increases of $5 million.
<PAGE>
30
<TABLE>
ELECTRIC OPERATIONS
<CAPTION>
FOR THE YEAR
5-Year
1994 to 1993 Compound
Percentage Annual
1994 1993 1992 1991 1990 1989 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ENERGY SOURCE (%)
Coal 79 77 81 78 78 78 3% -%
Hydroelectric 5 6 4 6 7 8 (17) (9)
Other 2 1 2 1 1 - 100 *
Purchase and exchange contracts 14 16 13 15 14 14 (13) -
_____ _____ _____ _____ _____ _____ ___ ___
NUMBER OF RETAIL CUSTOMERS
(Thousands)
Residential 1,155 1,135 1,112 1,093 1,076 1,060 2 2
Commercial 156 152 149 146 142 142 3 2
Industrial 19 18 17 16 15 13 6 8
Other 4 3 3 3 3 3 33 6
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 1,334 1,308 1,281 1,258 1,236 1,218 2 2
_____ _____ _____ _____ _____ _____ ___ ___
RESIDENTIAL CUSTOMERS
Average annual usage (kWh) 10,568 10,733 10,183 10,464 10,283 10,209 (2) 1
Average annual revenue
per customer (Dollars) 631 622 589 612 605 613 1 1
Revenue per kWh (Cents) 6.0 5.8 5.8 5.8 5.9 6.0 3 -
MILES OF LINE
Transmission 14,900 14,900 14,900 14,900 14,900 14,700 - -
Distribution 44,800 44,700 44,500 44,400 44,200 44,200 - -
SYSTEM PEAK DEMAND (Megawatts)
Net system load (a) - summer 7,151 6,554 6,734 6,405 6,407 5,978 9 4
- winter 7,174 7,268 6,968 7,019 7,623 6,875 (1) 1
Total firm load (b) - summer 8,830 8,390 8,477 7,639 7,019 6,741 5 6
- winter 8,903 8,838 8,335 7,710 8,417 7,559 1 3
SYSTEM CAPABILITY (Megawatts)(c)
- summer 10,020 9,757 9,753 9,629 8,551 8,570 3 3
- winter 10,391 9,916 9,982 9,316 9,141 8,948 5 3
______ _____ _____ _____ _____ _____ ___ ___
______ _____ _____ _____ _____ _____ ___ ___
<FN>
*Not a meaningful number.
(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>
BPA, a wholesale power and wheeling supplier, increased its rates
effective October 1, 1993. Electric Operations' capacity and wheeling
expenses and exchange benefits were affected by that increase. BPA
plans to increase its power and wheeling rates effective in late 1995
or early in 1996. Electric Operations' firm capacity purchase and
wheeling expenses will be affected by this increase. In addition, any
increase in BPA's rates will reduce the exchange benefits directly
received by Electric Operations' residential and small farm customers.
Electric Operations intends to request price increases that will allow
it to recover the loss of exchange benefits.
.. Other operations expense increased $8 million or 3% primarily due to $7
million of increased wheeling expense, resulting from higher volumes
wheeled, and $2 million of increased distribution system expense.
.. Depreciation and amortization expense increased $21 million or 8%
primarily due to additional plant in service.
<PAGE>
31
. Earnings contribution increased $18 million or 5%.
.. Income from operations increased $35 million or 4%. Decreased BPA
exchange benefits increased retail revenues and purchased power expense
$15 million each, with no effect on income from operations.
.. Interest expense decreased $9 million or 3% primarily due to an
$11 million decrease relating to refinancing long-term debt during 1993
at lower interest rates and $8 million of adjustments relating to
contract settlements. The decreases were offset in part by the
$10 million effect of higher levels of short-term debt outstanding at
higher interest rates.
.. Other income increased $14 million primarily due to gains in 1994 of $9
million on the sale of a portion of its surplus sulfur dioxide emission
allowances and $6 million on the sale of electric properties in
Sandpoint, Idaho, partially offset by a gain in 1993 of $5 million on a
sale of property. Electric Operations is a Phase II utility under the
Clean Air Act of 1990 and may have approximately 20,000 to 25,000 tons
of surplus sulfur dioxide emission allowances available for sale each
year until 2024.
.. Income tax expense increased $41 million or 23% primarily due to the
$20 million effect of higher taxable income, an $11 million increase in
adjustments to prior year estimates and $10 million of various tax
adjustments.
1993 COMPARED TO 1992
_____________________
Revenues increased $145 million or 6%.
.. 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 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.
.. Wholesale 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.
.. Other operations expense remained constant. Increased employee expense
of $16 million and increased demand-side management expense of
$5 million 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 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," on January 1, 1993, and higher pension and benefits expense.
.. Maintenance expense increased $4 million or 3% primarily due to
$8 million 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
deferred 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
depreciable 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. Approximately 69% of the cost is allocated to various categories
of operating expenses as described above.
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 benefits 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.
<PAGE>
32
<TABLE>
TELECOMMUNICATIONS
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
5-Year
1994 to 1993 Compound
Percentage Annual
1994 1993 1992 1991 1990 1989 Comparison Growth
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Local network service $ 96.9 $ 81.8 $ 74.1 $ 68.4 $ 57.7 $ 55.4 18% 12%
Network access service 168.5 183.9 174.9 168.2 147.4 127.8 (8) 6
Long distance network service 272.0 262.5 275.4 286.1 253.8 274.0 4 -
Private line service 58.2 63.8 70.4 66.0 60.1 58.3 (9) -
Sales of cable capacity 4.6 4.9 10.8 30.9 83.2 - (6) *
Cellular and other 104.8 105.2 92.6 100.4 80.7 62.2 - 11
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 705.0 702.1 698.2 720.0 682.9 577.7 - 4
_____ _____ _____ _____ _____ _____ ___ ___
EXPENSES
Depreciation and amortization 104.5 110.0 114.1 117.3 101.9 98.5 (5) 1
Operations, maintenance and
other 435.8 451.3 445.5 443.1 426.8 345.4 (3) 5
_____ _____ _____ _____ _____ _____ ___ ___
TOTAL 540.3 561.3 559.6 560.4 528.7 443.9 (4) 4
_____ _____ _____ _____ _____ _____ ___ ___
INCOME FROM OPERATIONS 164.7 140.8 138.6 159.6 154.2 133.8 17 4
_____ _____ _____ _____ _____ _____ ___ ___
INCOME FROM CONTINUING
OPERATIONS (a) 81.4 58.4 67.2 89.5 95.4 75.1 39 2
Minority interest and other 10.9 7.5 9.9 12.9 18.8 10.9 45 -
_____ _____ _____ _____ _____ _____ ___ ___
EARNINGS CONTRIBUTION FROM
CONTINUING OPERATIONS (a) $ 70.5 $ 50.9 $ 57.3 $ 76.6 $ 76.6 $ 64.2 39 2
_____ _____ _____ _____ _____ _____ ___ ___
_____ _____ _____ _____ _____ _____ ___ ___
Identifiable assets $1,378 $1,413 $1,540 $1,702 $1,732 $1,220 (2) 2
Capital spending $ 153 $ 126 $ 140 $ 236 $ 475 $ 180 21 (3)
Number of employees (b) 2,762 2,834 2,891 3,050 3,412 2,737 (3) -
Telephone access lines (Thousands) 418 399 379 357 340 253 5 11
Long lines originating billed
minutes (Millions) 743 710 679 654 632 597 5 4
_____ _____ _____ _____ _____ _____ ___ ___
_____ _____ _____ _____ _____ _____ ___ ___
<FN>
*Not a meaningful number.
(a) Does not reflect elimination of interest on intercompany borrowing
arrangements and includes income taxes on a separate-company basis.
(b) Excludes employees of discontinued operations.
</TABLE>
See "Other" on page 25 for information regarding a proposal by Holdings to
acquire the 13% publicly held minority interest in Pacific Telecom.
See "Telecommunications-Pending Disposition" on page 24 for information
regarding the sale of Alascom to AT&T. In 1994, settlement revenues of
$16 million were recognized in long distance network service relating to the
settlement of past cost study issues. Alascom's revenues were $344 million in
1994, $338 million in 1993 and $347 million in 1992 and income from operations
was $81 million in 1994, $59 million in 1993 and $60 million in 1992. Alascom's
total assets were $276 million in 1994 and $384 million in 1993.
FACTORS INFLUENCING EARNINGS
Pacific Telecom provides voice, data, video and other services through local
exchange and long lines operations. Pacific Telecom is involved in cellular
operations and manages cellular properties for other owners. 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
is influenced by technological developments, efficiency of operations, cost of
capital and competition.
Pacific Telecom's revenues for 1994 were derived 49% from long lines, 45% from
local exchange companies, 3% from cellular operations and 3% from cable and
backhaul capacity sales and related cable services.
1994 COMPARED TO 1993
_____________________
. Revenues increased $3 million.
.. Local network service revenues (local telephone services to residential
and business customers) increased $15 million or 18% due to $9 million
of revenue from enhanced and extended calling area service and the $5
million effect of a 5% access line growth.
<PAGE>
33
.. Network access service revenues (fees charged to long distance
interexchange carriers using the local exchange network to access their
customers) decreased $15 million or 8% primarily due to a $6 million
decrease as a result of the shift to extended calling area services in
local exchange companies, the $5 million effect of a decrease in
operating expenses used in setting interstate access rates and lower
revenue adjustments of $4 million.
An indexed cap was placed on Universal Service Fund ("USF") growth in
1993 to allow growth at a rate no greater than the rate of growth in
the nation's total working local loops. The indexed rate may be in
effect through 1995 while the FCC and a Joint Board re-evaluate the USF
assistance mechanism. Revenues derived from the USF assistance
mechanism were $30 million in 1994 and 1993. With the purchase of
Colorado assets and the pending purchase of Oregon and Washington
assets, revenues received under the USF could double in 1996 over 1994
levels. Placing the indexed cap on USF growth may 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) increased $10 million or 4% due to interstate
revenues of $19 million relating to the settlement of all open revenue
studies and a $3 million improvement in intrastate revenue relating to
increased billed minutes. These increases were offset in part by a
$6 million decrease in revenue recovery for interstate access expense
as a result of the exit of Anchorage Telephone Utility ("ATU") from
National Exchange Carrier Association ("NECA") traffic sensitive pools,
the $5 million revenue effect of other recoverable expense reductions
and the $3 million effect of a reduced rate base.
.. Private line service revenues (charges for dedicated facilities that
provide communications services to major customers) decreased
$6 million or 9% primarily due to Pacific Telecom's exit of certain
noncore businesses.
.. Sales of cable capacity revenues were virtually unchanged.
Approximately 53% of the North Pacific Cable's capacity has been sold -
- 2%, 1%, 4%, 10% and 36% sold in 1994, 1993, 1992, 1991 and 1990,
respectively. A competing AT&T cable was placed in service in 1992,
and AT&T has announced plans for an additional Pacific cable system for
completion over the next three years. The competition from AT&T,
adverse economic conditions in Japan and other Far East countries and
outages on the North Pacific Cable have contributed to the slowing of
cable capacity sales. These conditions may continue to have an adverse
effect on future 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 the
$63 million inventory value of the cable system at December 31, 1994
will be recovered.
.. Cellular and other revenues were virtually unchanged. Increased
revenues of $10 million due to growth in cellular operations were
offset by other revenue declines. The declines were primarily due to
$3 million of revenue in 1993 from service in Saudi Arabia, a
$2 million decline in long lines equipment resale revenue and a
$2 million decline in local exchange operations billing and collection
revenue.
. Operating expenses decreased $21 million or 4%.
.. Operations expense decreased $2 million or 1%. Access expense
decreased $3 million due to a $6 million decrease in intrastate access
expense relating to the exit of ATU from NECA traffic sensitive pools,
partially offset by the $4 million effect of increased facility costs
and higher common carrier network usage. Leased circuit expense
decreased $4 million primarily due to the sale of noncore businesses.
The decreases were offset in part by $4 million of increased expense
due to cellular customer growth.
.. Maintenance expense decreased $4 million or 4% primarily due to the
effect of a $3 million one-time charge in 1993 relating to service
provided in Saudi Arabia.
.. Administrative and general expense decreased $10 million or 11%
primarily due to $8 million of reduced corporate support and employee
benefit expense and $2 million relating to noncore businesses that
were sold.
.. Depreciation and amortization expense decreased $6 million or 5% due to
the $6 million effect of a reduction in rates allowed for local
exchange companies in Alaska and a $3 million reduction relating to
noncore businesses that were sold, offset in part by the $3 million
effect of increased local exchange company plant in service.
. Earnings contribution increased $20 million or 39%.
.. Income from operations increased $24 million or 17%.
.. Interest expense decreased $10 million or 22% due to the $15 million
effect of lower debt levels, partially offset by the $5 million effect
of higher interest rates.
.. Other expense decreased $7 million primarily due to decreased valuation
adjustments for noncore businesses in 1994.
.. Income tax expense increased $17 million or 71% primarily due to higher
taxable income and a higher effective tax rate.
Pacific Telecom's future results will be affected by the proposed sale
of Alascom and by its pending or recently completed acquisitions.
Although Pacific Telecom anticipates a material gain on the pending
sale of Alascom, lost earnings from Alascom would be substantial. See
information concerning Alascom on page 32. Acquisitions of rural
telephone exchange assets are expected to contribute significantly to
revenues and earnings over time as the assets are integrated with
Pacific Telecom's existing operations.
<PAGE>
34
1993 COMPARED TO 1992
_____________________
. Revenues increased $4 million or 1%.
.. Local network service revenues 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 increased $9 million or 5% primarily
due to an increase of $8 million in USF support funded by interexchange
carriers, which helps fund nontraffic sensitive costs that are above
the national average.
.. Long distance network service revenues 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 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 decreased $7 million or 9% primarily due
to the sale of a portion of the Alaska Spur in late 1992 to a customer
that previously leased those services.
.. Sales of cable capacity revenues decreased $6 million or 55%.
.. Cellular and other revenues increased $13 million or 14% primarily due
to increased cellular revenues of $6 million, one-time revenue of
$3 million from service in Saudi Arabia and $3 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 million 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
program.
.. Depreciation and amortization expense decreased $4 million or 4%
primarily due to a $7 million decrease relating to the sale of
satellite 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.
<PAGE>
35
OTHER
The following is a summary of PFS' assets and revenues by business line:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS
______________________________________________________________
1994 1993 1992
____________________ ____________________ ____________________
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(a) $ 391 $ 3.0 $ 454 $ (8.6) $ 506 $ 33.5
Computer leasing - 15.3 88 19.2 139 28.6
Other 160 12.9 217 38.6 353 43.1
_____ _____ _____ _____ _____ _____
Total finance 551 31.2 759 49.2 998 105.2
Real estate 171 41.3 324 49.3 252 29.7
Manufacturing - 16.9 31 42.4 26 40.2
Agriculture 12 35.9 20 38.7 - -
_____ _____ _____ _____ _____ _____
Total $ 734 $125.3 $1,134 $179.6 $1,276 $175.1
_____ _____ _____ _____ _____ _____
_____ _____ _____ _____ _____ _____
<FN>
(a) Impairment charges of $17 million in 1994 and $22 million in 1993 for
certain aircraft under operating leases reduced net aviation finance
revenues.
</TABLE>
Consistent with PacifiCorp's strategic focus on its core utility operations, PFS
has been selling and liquidating substantial portions of its assets. PFS
disposed of its computer leasing and manufacturing operations and significant
portions of its real estate and asset-based lending portfolios in 1994. Future
asset sales are not expected to be as significant as the level of 1994 sales.
Cash generated from these sales has been used primarily to pay down debt. PFS
expects to retain only its tax-advantaged investments in leveraged lease assets
(primarily aircraft) and low-income housing projects (included with real
estate), which presently represent $444 million of its assets.
The earnings contribution of other businesses increased $8 million, or 76%, to
$18 million in 1994. PFS' earnings increased $6 million primarily due to gains
associated with sales of certain assets. Income from operations for PFS was
virtually unchanged, reflecting decreased revenues and operating expenses that
resulted from lower levels of finance assets, and lower valuation adjustments in
1994. Earnings from PGC increased $3 million. Interest revenues from a note
received in connection with the sale of NERCO increased $12 million and interest
expense for Holdings decreased $6 million. These positive results were
partially offset by increased income tax expense for Holdings of $11 million and
a $10 million charitable donation expense in 1994.
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.
At December 31, 1994, the aviation portfolio (with net assets of $391 million)
consisted of 44 aircraft, 42 of which were placed with 17 separate carriers.
About 91% of the aircraft are Stage III noise compliant.
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.
Allowances for credit losses and accumulated valuation and impairment charges
were $103 million and $115 million at December 31, 1994 and 1993, respectively.
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, 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.
A subsidiary of Pacific Telecom, International Communications Holdings, Inc.,
closed the sale of its wholly owned subsidiary, TRT Communications, Inc.
("TRT"), to IDB Communications Group, Inc. ("IDB") on September 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 IDB common stock was sold in November 1993 and the net proceeds of
$195 million were used to pay down Pacific Telecom debt.
<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. 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 LLP,
independent public accountants. Management has made available to Deloitte &
Touche LLP 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 LLP also considered the internal control
structure in connection with its audit. Management considers the internal
auditors' and Deloitte & Touche LLP's recommendations concerning the Company's
internal control structure and takes cost-effective actions to respond
appropriately to these recommendations.
The Company's "Guide to Business Conduct" is publicized throughout the Company.
The guide addresses, among other things, potential conflicts of interests,
compliance with laws, including those relating to financial disclosure 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 Chairs of subsidiary audit
committees, management, Deloitte & Touche LLP, internal auditors and counsel to
review the work of each and ensure the Committee's responsibilities are being
properly discharged. Deloitte & Touche LLP 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, 1994 and 1993, 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, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of PacifiCorp and subsidiaries at
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Notes 10 and 12 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes and other postretirement benefits.
DELOITTE & TOUCHE LLP
Portland, Oregon
February 17, 1995
(March 9, 1995 as to the agreement to acquire the minority interest in Pacific
Telecom, Inc. described in Note 1)
<PAGE>
37
<TABLE>
STATEMENTS OF CONSOLIDATED
INCOME AND RETAINED EARNINGS
<CAPTION>
MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS/FOR THE YEAR ENDED DECEMBER 31
1994 1993 1992
_____________________________________________________________________________________
<S> <C> <C> <C>
REVENUES $3,506.5 $3,405.4 $3,235.7
_______ _______ _______
EXPENSES
Operations 1,400.3 1,369.9 1,372.9
Maintenance 292.3 294.2 285.3
Administrative and general 244.6 247.4 298.2
Depreciation and amortization 424.3 404.8 452.5
Taxes, other than income taxes 122.7 119.9 123.3
Finance interest expense 35.7 53.7 70.5
_______ _______ _______
TOTAL 2,519.9 2,489.9 2,602.7
_______ _______ _______
INCOME FROM OPERATIONS 986.6 915.5 633.0
_______ _______ _______
INTEREST EXPENSE AND OTHER
Interest expense 298.8 323.2 341.4
Interest capitalized (14.5) (13.9) (16.2)
Minority interest and other (15.5) (3.9) 66.8
_______ _______ _______
TOTAL 268.8 305.4 392.0
_______ _______ _______
Income from continuing operations before
income taxes 717.8 610.1 241.0
Income taxes 249.8 187.4 90.8
_______ _______ _______
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 468.0 422.7 150.2
Discontinued operations less applicable
income tax expense (benefit):
1993/$26.0, 1992/($178.5) - 52.4 (490.6)
Cumulative effect on prior years of
change in accounting for income taxes - 4.0 -
_______ _______ _______
NET INCOME (LOSS) 468.0 479.1 (340.4)
RETAINED EARNINGS, JANUARY 1 351.3 210.4 999.6
Cash dividends declared
Preferred stock (39.6) (39.5) (39.0)
Common stock per share: 1994 and
1993/$1.08, 1992/$1.53 (305.4) (298.7) (409.8)
_______ _______ _______
RETAINED EARNINGS, DECEMBER 31 $ 474.3 $ 351.3 $ 210.4
_______ _______ _______
_______ _______ _______
EARNINGS (LOSS) ON COMMON STOCK (Net income
(loss) less preferred dividend requirement) $ 428.3 $ 439.8 $ (377.7)
Average number of common shares
outstanding (Thousands) 282,912 274,551 266,527
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ 1.51 $ 1.40 $ .42
Discontinued operations - .19 (1.84)
Cumulative effect on prior years of
change in accounting for income taxes - .01 -
_______ _______ _______
TOTAL $ 1.51 $ 1.60 $ (1.42)
_______ _______ _______
_______ _______ _______
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
38
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
ASSETS 1994 1993
_______________________________________________________________________________________
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Electric
Production $ 4,390.2 $ 4,281.6
Transmission 1,974.6 1,891.8
Distribution 2,628.9 2,455.1
Other 1,583.5 1,372.1
________ ________
ELECTRIC 10,577.2 10,000.6
Telecommunications 1,572.7 1,579.8
Other 64.9 65.8
Accumulated depreciation and amortization (4,136.9) (3,863.5)
________ ________
Net 8,077.9 7,782.7
Construction work in progress 368.3 356.8
________ ________
TOTAL PROPERTY, PLANT AND EQUIPMENT 8,446.2 8,139.5
________ ________
CURRENT ASSETS
Cash and cash equivalents 23.3 31.2
Accounts receivable less allowance for doubtful
accounts: 1994/$9.4 and 1993/$8.2 442.7 451.3
Materials, supplies and fuel stock at average cost 193.2 203.2
Inventory 66.3 70.1
Finance assets 27.9 118.7
Other 62.0 76.1
________ ________
TOTAL CURRENT ASSETS 815.4 950.6
________ ________
OTHER ASSETS
Investments in and advances to affiliated companies 189.9 242.9
Intangible assets - net 237.2 240.6
Regulatory assets - net 1,081.2 1,072.1
Finance note receivable 220.7 223.3
Finance assets 481.9 561.4
Real estate investments 166.5 303.7
Deferred charges and other 206.6 222.6
________ ________
TOTAL OTHER ASSETS 2,584.0 2,866.6
________ ________
TOTAL ASSETS $11,845.6 $11,956.7
________ ________
________ ________
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
39
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
CAPITALIZATION AND LIABILITIES 1994 1993
________________________________________________________________________________
<S> <C> <C>
COMMON EQUITY
Common shareholders' capital
shares authorized 750,000,000;
shares outstanding: 1994/284,251,024
and 1993/281,020,717 $ 3,010.6 $ 2,953.4
Retained earnings 474.3 351.3
Guarantees of Employee Stock Ownership
Plan borrowings (25.1) (42.1)
________ ________
TOTAL COMMON EQUITY 3,459.8 3,262.6
________ ________
PREFERRED STOCK 367.4 367.4
________ ________
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION 219.0 219.0
________ ________
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 3,768.2 3,923.6
________ ________
CURRENT LIABILITIES
Long-term debt and capital lease obligations
currently maturing 95.8 155.6
Notes payable and commercial paper 454.7 553.5
Accounts payable 338.4 355.6
Taxes, interest and dividends payable 253.3 255.0
Customer deposits and other 126.8 121.2
________ ________
TOTAL CURRENT LIABILITIES 1,269.0 1,440.9
________ ________
DEFERRED CREDITS
Income taxes 1,822.6 1,833.3
Investment tax credits 190.1 200.0
Other 641.6 605.7
________ ________
TOTAL DEFERRED CREDITS 2,654.3 2,639.0
________ ________
MINORITY INTEREST 107.9 104.2
________ ________
COMMITMENTS AND CONTINGENCIES (See Notes 8, 9 and 10)
TOTAL CAPITALIZATION AND LIABILITIES $11,845.6 $11,956.7
________ ________
________ ________
<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
1994 1993 1992
________________________________________________________________________________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 468.0 $ 422.7 $ 150.2
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities
Depreciation and amortization 472.5 468.3 507.7
Deferred income taxes and investment tax
credits - net (7.5) 113.5 (64.1)
Interest capitalized on equity funds - (4.2) (7.3)
Minority interest and other 23.6 27.1 70.8
Special charges - - 185.7
Accounts receivable and prepayments 5.4 52.9 (6.6)
Materials, supplies, fuel stock and inventory 11.8 26.1 56.7
Accounts payable and accrued liabilities (11.7) (69.0) 48.5
______ ________ ________
Net cash provided by continuing operations 962.1 1,037.4 941.6
Net cash provided by discontinued operations - - 14.2
______ ________ ________
NET CASH PROVIDED BY OPERATING ACTIVITIES 962.1 1,037.4 955.8
______ ________ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Construction (788.7) (741.5) (694.0)
Operating companies and assets acquired - (16.4) (40.8)
Investments in and advances to affiliated
companies - net (9.5) (46.8) (10.9)
Proceeds from sales of assets 276.6 602.8 143.8
Proceeds from sales of finance assets and
principal payments 109.1 168.3 281.9
Purchase of finance assets (13.7) (57.7) (125.6)
Investment in finance note - (225.0) -
Proceeds from Alaska restructuring 105.0 - -
Other (18.9) 53.2 20.6
______ ________ ________
NET CASH USED IN INVESTING ACTIVITIES (340.1) (263.1) (425.0)
______ ________ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in short-term debt (98.7) (8.6) (74.5)
Proceeds from long-term debt 246.6 698.9 849.1
Proceeds from issuance of common stock 57.2 197.4 184.8
Proceeds from issuance of preferred stock - - 195.2
Dividends paid (344.8) (366.7) (439.5)
Repayments of long-term debt and capital
lease obligations (448.5) (1,230.9) (1,190.2)
Redemptions of capital stock - (50.0) (56.1)
Other (41.7) (33.4) (25.2)
______ ________ ________
NET CASH USED BY FINANCING ACTIVITIES (629.9) (793.3) (556.4)
______ ________ ________
DECREASE IN CASH AND CASH EQUIVALENTS (7.9) (19.0) (25.6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 31.2 50.2 75.8
______ ________ ________
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 23.3 $ 31.2 $ 50.2
______ ________ ________
______ ________ ________
<FN>
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
<PAGE>
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
___________________________________________________________________________
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
intercompany transactions and balances have been eliminated. On March 9, 1995,
Holdings entered into an agreement and plan of merger with Pacific Telecom, Inc.
("Pacific Telecom") under which Holdings would acquire the 13% publicly held
minority interest in Pacific Telecom for $30 per share. The merger requires
approval by the holders of a majority of the outstanding shares of Pacific
Telecom not owned by Holdings (5.3 million shares), and is subject to regulatory
approvals and other conditions customary to such transactions.
In June 1993, Holdings sold by merger its 82% interest in a mining and resource
development business (NERCO, Inc.). In September 1993, Pacific Telecom closed
the sale of its interest in an international communications business (TRT
Communications, Inc.). See Note 13.
Investments in and advances to affiliated companies represent investments in
unconsolidated affiliated companies carried on the equity basis, which
approximates the Company's equity in their underlying net book value.
REGULATION
Accounting for the utility businesses conforms with generally accepted
accounting 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.
ACCOUNTING FOR THE EFFECTS OF REGULATION
The Company prepares its financial statements in accordance with Statement of
Financial Accounting Standards ("SFAS") 71, "Accounting for the Effects of
Certain Types of Regulation." Accounting under SFAS 71 is appropriate as long
as: rates are established by or subject to approval by independent, third-party
regulators; rates are designed to recover the specific enterprise's cost-of-
service; and in view of demand for service, it is reasonable to assume that
rates set at levels that will recover costs can be charged to and collected from
customers. In applying SFAS 71, the Company must give consideration to changes
in the level of demand or competition during the cost recovery period. In
accordance with SFAS 71, the Company's utility operations capitalize certain
costs in accordance with regulatory authority whereby those costs will be
expensed and recovered in future periods.
Regulatory assets-net at December 31, 1994 and 1993 included the following:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
________ ________
<S> <C> <C>
Deferred taxes - net $ 707.1 $ 715.9
Deferred pension costs 148.3 142.1
Demand-side resource costs 84.6 60.4
Unamortized net losses on reacquired debt 78.2 83.2
Unrecovered Trojan Plant and regulatory
study costs 29.0 29.4
Various other costs 34.0 41.1
_______ _______
TOTAL $1,081.2 $1,072.1
_______ _______
_______ _______
</TABLE>
If the Company, at some point in the future, determines that all or a portion of
the utility operations no longer meets the criteria for continued application of
SFAS 71, the Company would be required to adopt the provisions of SFAS 101,
"Regulated Enterprises -- Accounting for the Discontinuation of Application of
FASB Statement No. 71." Adoption of SFAS 101 would require the Company to write
off the regulatory assets and liabilities related to those operations not
meeting SFAS 71 requirements.
CASH FLOW INFORMATION
For the purposes of these financial statements, the Company considers all liquid
investments with original maturities of three months or less to be cash
equivalents.
Supplemental information required by SFAS 95, "Statement of Cash Flows," for the
years 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1994 1993 1992
______ ______ ______
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $399.4 $435.6 $ 481.5
Income taxes 225.6 142.5 145.5
Supplemental schedule of noncash investing
and financing activities associated
with assets purchased from Colorado-Ute
Electric Association, Inc.
Net assets acquired - - (279.3)
Long-term debt assumed - - 250.3
Accrued liabilities and deferred
credits assumed - - 4.9
</TABLE>
<PAGE>
42
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at original cost of contracted
services, 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.
DEPRECIATION AND AMORTIZATION
At December 31, 1994, the average depreciable life of property, plant and
equipment by category was: Electric -- Production, 41 years; Transmission, 42
years; Distribution, 29 years; Other, 18 years; and Telecommunications, 16
years.
Depreciation and amortization is computed generally by the straight-line method
over the estimated useful lives of the related assets. Provisions for
depreciation (excluding amortization of capital leases) in the utility
businesses were 3.4%, 3.5% and 3.8% of average depreciable assets in 1994, 1993
and 1992, 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 in that year.
INTANGIBLE ASSETS
Intangible assets are primarily franchises of local exchange and cellular
companies ($260 million in 1994 and $256 million in 1993) and excess cost over
net assets of businesses acquired ($19 million in both 1994 and 1993), offset by
accumulated amortization ($42 million in 1994 and $34 million in 1993). These
assets are being amortized over 10 to 40 years.
The Company will recognize impairments related to intangible assets if the
market value of the investment or the investment's ability to return cash to the
Company through operations or through sale do not equal or exceed the carrying
value of the investment, including related intangible assets.
INVENTORY VALUATION
Inventories are generally valued at the lower of average cost or market.
FINANCE AND LEASE INCOME RECOGNITION
Direct financing lease revenue is recognized as a constant yield on asset
carrying values. Operating lease revenue consists of periodic rentals,
primarily 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.
DERIVATIVES
The Companies involvement with derivative financial instruments is currently
limited to interest rate and currency swap agreements. Derivative financial
instruments are not held or issued for trading or speculative purposes.
The differential to be paid or received on interest rate and foreign currency
swap agreements is accrued as interest rates change and is recognized as
interest expense over the life of the agreements.
INTEREST CAPITALIZED
Costs of debt and equity funds applicable to electric and telecommunication
utility properties are capitalized during construction. Generally, the
composite capitalization rates were 4.7% for 1994, 5.1% for 1993 and 7.1% for
1992.
INCOME TAXES
Effective January 1, 1993, the Company adopted 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.
Pacific Telecom participates with other telephone companies in access revenue
pools for certain interstate and intrastate revenues, which are initially
recorded based on estimates. Certain long distance network service revenues are
estimated under cost separations procedures that base revenues on current
operating costs and investments in facilities to provide such services. These
estimates are subject to subsequent adjustment as refined operational
information becomes available.
RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform with the 1994
method of presentation. These reclassifications had no effect on previously
reported consolidated net income.
<PAGE>
43
NOTE 2. FINANCE ASSETS
Investment in finance assets, net of allowances for credit losses and
accumulated impairment charges of $68 million and $80 million at December 31,
1994 and 1993, respectively, was as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
______ ______
<S> <C> <C>
Finance receivables $137.6 $225.1
Leveraged leases 308.2 339.4
Operating leases 64.0 115.6
_____ _____
TOTAL 509.8 680.1
Less current portion 27.9 118.7
_____ _____
LONG-TERM INVESTMENT IN FINANCE ASSETS $481.9 $561.4
_____ _____
_____ _____
</TABLE>
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 20 years.
Finance assets are net of unearned income of $224 million and $254 million at
December 31, 1994 and 1993, respectively. The estimated unguaranteed residual
value of leased assets included in finance assets was $209 million and
$245 million at December 31, 1994 and 1993, respectively.
The deferred income tax liability related to leveraged leases was $283 million
and $308 million at December 31, 1994 and 1993, respectively.
NOTE 3. SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies' short-term debt and borrowing arrangements are as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31 FOR THE YEAR
AVERAGE AVERAGE
INTEREST AVERAGE INTEREST
BALANCE RATE(a) OUTSTANDING RATE(b)
__________________________________________________________________________
<S> <C> <C> <C> <C>
1994
PacifiCorp $433.0 6.01% $372.8 4.51%
Subsidiaries 21.7 7.52 95.0 4.63
1993
PacifiCorp $263.6 3.37% $213.4 3.31%
Subsidiaries 289.9 4.22 474.3 3.85
1992
PacifiCorp $269.6 3.95% $154.4 3.92%
Subsidiaries 283.8 4.27 624.4 4.83
<FN>
(a) Computed by dividing the total interest on principal amounts outstanding at
the end of the period by the weighted daily principal amounts outstanding.
(b) Computed by dividing the total accrued interest for the period by the
average daily principal amount outstanding for the period.
</TABLE>
At December 31, 1994, PacifiCorp's commercial paper and bank line borrowings
were supported by revolving credit agreements totaling $500 million. A
$150 million revolving credit agreement will terminate in August 1995.
Management intends to replace this agreement with an equivalent facility prior
to the termination date. At December 31, 1994, subsidiaries had committed bank
revolving credit agreements totaling $660 million.
The Companies have the intent and ability to support short-term borrowings
through various revolving credit agreements on a long-term basis. At
December 31, 1994, subsidiaries had $75 million of short-term debt classified as
long-term. Consolidated commitment fees were approximately $3 million in 1994
and $4 million in 1993 and 1992.
<PAGE>
44
NOTE 4. COMMON AND PREFERRED STOCK
Changes in shares of capital stock and common shareholders' capital are listed
below:
<TABLE>
<CAPTION>
THOUSANDS OF SHARES/MILLIONS OF DOLLARS
COMMON
SHARES SHARES SHARE-
COMMON PREFERRED HOLDERS'
STOCK STOCK CAPITAL
______ _________ _________
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1992 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
1994 Sales through Dividend Reinvestment
and Stock Purchase Plan 2,194 - 38.0
Sales through Employees' Stock Plans 1,036 - 19.2
_______ ______ _______
BALANCE, DECEMBER 31, 1994 284,251 10,532 $3,010.6
_______ ______ _______
_______ ______ _______
</TABLE>
At December 31, 1994, there were 11,805,097 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. At its February 8, 1995 meeting, the Board of Directors
authorized an additional 3,000,000 shares to be reserved under employee plans.
Eligible employees under the employee plans may direct their pretax elective
contributions into the purchase of the Company's common stock. The Company
makes matching contributions, equal to a percentage of employee contributions,
which are 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 a specified preference amount per
share plus accrued dividends.
<TABLE>
PREFERRED STOCK OUTSTANDING
<CAPTION>
THOUSANDS OF SHARES/MILLIONS OF DOLLARS/DECEMBER 31, 1994 and 1993
___________________________________________________________________________
SERIES Shares Amount
______ ______ ______
<S> <C> <C>
SUBJECT TO MANDATORY REDEMPTION
No Par Serial Preferred, 16,000 Shares
Authorized
$7.12 ($100 stated value) 440 $ 44.0
7.70 1,000 100.0
7.48 750 75.0
_____
TOTAL $219.0
_____
_____
NOT SUBJECT TO MANDATORY REDEMPTION
$1.16 ($25 stated value) 193 $ 4.8
1.18 420 10.5
1.28 381 9.5
1.76 394 9.8
1.98 502 12.6
2.13 666 16.7
1.98, Series 1992 5,000 125.0
Auction Rate ($100,000 stated value)(a) 1 100.0
Serial Preferred $100 Stated Value Per
Share, 3,500 Shares Authorized
4.52% 2 .2
4.56 85 8.5
4.72 70 7.0
5.00 42 4.2
5.40 66 6.6
6.00 6 .6
7.00 18 1.8
7.96 135 13.5
8.92 69 6.9
9.08 165 16.5
5% Preferred, $100 Stated Value, 127
Shares Authorized and Outstanding 127 12.7
_____
TOTAL $367.4
_____
_____
<FN>
(a) Dividend rates at December 31, 1994 on 500 shares each of Series A and
Series C were 4.5% and 4.8%, respectively.
</TABLE>
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
redeemable on each June 15 from 2002 through 2006, with all shares outstanding
on June 15, 2007 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.
<PAGE>
45
NOTE 5. 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
1994 1993
___________________________________________________________________________
<S> <C> <C>
PACIFICORP
First mortgage and collateral trust bonds
Maturing 1995 through 1999/4.5%-9.5% (a) $ 880.7 $ 938.4
Maturing 2000 through 2004/5.9%-10% 683.5 688.2
Maturing 2005 through 2009/6.8%-7.7% 177.7 177.7
Maturing 2010 through 2014/7.3%-9.2% 240.9 243.6
Maturing 2015 through 2019/8.3%-8.6% 80.7 82.1
Maturing 2020 through 2024/6.7%-8.6% 361.5 341.5
Guaranty of pollution control revenue bonds
6% due 2003 - 21.3
5.6%-5.7% due 2021 through 2023 (b) 71.2 271.0
Variable rate due 2013 through 2024 (b)(c) 216.5 -
Variable rate due 2005 through 2019 (c) 404.9 404.9
Leveraged ESOP loan guaranty 4.6 16.7
Unamortized premium and discount 9.1 10.1
Capital lease obligations 19.5 21.6
_______ _______
TOTAL 3,150.8 3,217.1
Less current maturities 45.1 70.3
_______ _______
TOTAL 3,105.7 3,146.8
_______ _______
SUBSIDIARIES
2%-11.8% First mortgage notes and bonds
maturing through 2028 159.1 155.7
6.4%-12% Notes due through 2007 68.9 165.0
Commercial paper and uncommitted bank lines (c)(d) 75.0 50.0
Variable rate notes due through 2007 (c) 57.6 49.0
5.9%-9.4% Medium-term notes due through 2006 184.5 236.0
4.5%-11% Nonrecourse debt due through 2031 139.7 172.2
Leveraged ESOP loan guaranty 20.5 25.4
Capital lease obligations 7.9 8.8
_______ _______
TOTAL 713.2 862.1
Less current maturities 50.7 85.3
_______ _______
TOTAL 662.5 776.8
_______ _______
TOTAL $3,768.2 $3,923.6
_______ _______
_______ _______
<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 5.1% at December 31, 1994).
(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
$75 million of short-term debt as long-term debt.
</TABLE>
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 ("Trust"). 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 1,148,634 at December 31, 1994.
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 $96 million,
$210 million, $233 million, $308 million and $345 million in 1995 through 1999,
respectively.
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.
<PAGE>
46
NOTE 6. DERIVATIVES
Interest rate and currency swap agreements are used to manage interest rate
fluctuations. At December 31, 1994, the Companies had nine outstanding interest
rate contracts with commercial banks and Fortune 500 companies, having a total
notional amount of $237 million. These agreements effectively change the
Companies' interest rate exposure on the underlying variable rate debt to rates
of 5.7% to 8.9%. These contracts mature at various times through 2002. A
currency swap has been used to convert a 7.4 billion yen liability to a floating
rate $50 million U.S. dollar liability based on the six-month London Interbank
Offered Rate plus .02%.
The Companies are exposed to credit loss in the event of nonperformance by the
other parties to the interest rate and currency swap agreements. However, the
Companies do not anticipate nonperformance by the counterparties. The credit
exposure that results from interest rate and currency exchange agreements is
represented by the fair value of the contracts and is reported in Note 7.
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, receivables, payables, accrued
liabilities and short-term borrowings approximates fair value because of the
short-term maturity of these instruments.
The fair value of the finance note receivable approximates its carrying value at
December 31, 1994.
The fair value of redeemable preferred stock, based upon bid prices from an
investment bank, is estimated to be $219 million, or 100% of the carrying value,
and $234 million, or 107% of the carrying value of $219 million, at December 31,
1994 and 1993, respectively.
The fair value of long-term debt has been estimated by discounting 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. Current
maturities of long-term debt were included and leveraged ESOP loan guarantees
and capital lease obligations were excluded. The fair value of the Company's
long-term debt is estimated to be $3.7 billion, or 97% of the carrying value of
$3.8 billion, and $4.3 billion, or 106% of the carrying value of $4.0 billion,
at December 31, 1994 and 1993, respectively.
The fair value of interest rate and currency 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 $27 million and $65 million at
December 31, 1994 and 1993.
<PAGE>
47
NOTE 8. LEASES
The Companies lease certain properties under leases with various expiration
dates and renewal options. Rentals on lease renewals are subject to
negotiation. 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 ended December 31, 1994, 1993 and 1992 was
$59 million, $60 million and $51 million, respectively.
Future minimum lease payments under noncancellable operating leases are
$41 million, $37 million, $34 million, $52 million and $13 million for 1995
through 1999, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION AND OTHER
Construction and acquisitions are estimated at $1,206 million for 1995. 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 financial position or 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 financial position or
results of operations.
JOINTLY OWNED PLANTS
At December 31, 1994, 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% $178.0 $102.5 $ 4.1
Jim Bridger
Units 1,2,3 and 4 66.7 784.2 285.2 .9
Trojan (a) 2.5 - - -
Colstrip Units 3 and 4 10.0 199.9 52.8 1.4
Hunter Unit 1 93.8 252.5 90.1 3.1
Hunter Unit 2 60.3 184.0 58.7 3.0
Wyodak 80.0 311.9 91.5 1.3
Craig Station Units 1
and 2 19.3 147.0(b) 48.2 .9
Hayden Station Unit 1 24.5 16.7(b) 11.5 .2
Hayden Station Unit 2 12.6 16.7(b) 8.2 .1
<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, 1994. Recovery of these costs is pending approval of certain
regulatory commissions.
(b) Excludes unallocated acquisition adjustments of $129 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
<PAGE>
48
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 1994, such
purchases approximated 2.9% of energy requirements; an additional 11.5% was
obtained through other purchase and net interchange arrangements.
At December 31, 1994, 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% $ 4.8
Priest Rapids 2005 109,602 13.9 3.3
Rocky Reach 2011 64,297 5.3 2.0
Wells 2018 59,617 7.7 2.0
_______ ____
TOTAL 388,960 $12.1
_______ ____
_______ ____
<FN>
(a) Annual costs, in millions of dollars, include debt service of $8 million.
</TABLE>
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 10. INCOME TAXES
The Company's effective combined federal and state income tax rate from
continuing operations was 35% in 1994, 31% in 1993 and 38% in 1992. The
difference between taxes calculated as if the statutory federal tax rate of 35%
in 1994 and 1993 and 34% in 1992 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
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
COMPUTED FEDERAL INCOME TAXES $251.2 $213.5 $ 81.9
_____ _____ _____
REDUCTION (INCREASE) IN TAX RESULTING FROM
Depreciation differences (flow-through
basis) (8.4) (9.4) (20.3)
Investment tax credits 15.5 15.1 15.2
Depletion 4.1 5.3 4.9
Affordable housing credits 8.2 8.7 10.0
Purchase accounting adjustments - - (12.0)
Other items capitalized and miscellaneous
differences (3.4) 13.8 .9
_____ _____ _____
TOTAL 16.0 33.5 (1.3)
_____ _____ _____
FEDERAL INCOME TAX 235.2 180.0 83.2
STATE INCOME TAX, NET OF FEDERAL INCOME TAX
BENEFIT 14.6 7.4 7.6
_____ _____ _____
TOTAL INCOME TAX EXPENSE $249.8 $187.4 $ 90.8
_____ _____ _____
_____ _____ _____
</TABLE>
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
CURRENT
Federal $222.7 $ 70.3 $145.2
State 34.6 3.6 9.7
_____ _____ _____
TOTAL 257.3 73.9 154.9
_____ _____ _____
DEFERRED
Federal 17.8 120.9 (49.6)
State (9.8) 7.7 .7
_____ _____ _____
TOTAL 8.0 128.6 (48.9)
_____ _____ _____
INVESTMENT TAX CREDITS (15.5) (15.1) (15.2)
_____ _____ _____
TOTAL INCOME TAX EXPENSE $249.8 $187.4 $ 90.8
_____ _____ _____
_____ _____ _____
</TABLE>
<PAGE>
49
The Company adopted SFAS 109, "Accounting for Income Taxes," effective
January 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. See
"Accounting for the Effects of Regulation" in Note 1.
The tax effects of significant items comprising the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
________ ________
<S> <C> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment $1,134.1 $1,155.7
Regulatory asset 797.8 816.8
Other deferred liabilities 41.5 24.3
DEFERRED TAX ASSETS
Regulatory liability (90.7) (100.9)
Book reserves not deductible for tax (60.1) (62.6)
_______ _______
NET DEFERRED TAX LIABILITY $1,822.6 $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 1988. The Company and the
IRS have agreed to a settlement on all of the issues, except for certain matters
relating to the Company's abandonment of its 10% interest in Washington Public
Power Supply System Unit 3 and a securities transaction involving stock of
Comdial Corporation, an equity investee. The Company and the IRS continue to
discuss the remaining unagreed issues. In the event the Company and the IRS
cannot reach agreement as to these issues, litigation is likely.
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 $8 million each year from 1995 through 1999.
NOTE 11. 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
December 31, 1994, 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
1994 1993 1992
______ ______ ______
<S> <C> <C> <C>
Service cost - benefits earned $ 26.4 $ 19.2 $ 17.2
Interest cost on projected
benefit obligation 74.1 70.8 66.8
Actual gain (loss) on plan assets 4.9 (89.5) (18.0)
Net amortization and deferral (59.7) 44.0 (23.5)
Regulatory deferral (a) .7 3.4 (6.5)
______ ______ ______
NET PENSION COST $ 46.4 $ 47.9 $ 36.0
______ ______ ______
______ ______ ______
<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. See "Accounting for the Effects of
Regulation" in Note 1.
</TABLE>
<PAGE>
50
The funded status, net pension liability and significant assumptions are as
follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
____ ____
<S> <C> <C>
Actuarial present value of
benefit obligations
Vested benefit obligation $ 779.1 $ 835.3
_______ _______
Accumulated benefit obligation 820.6 868.0
_______ _______
Projected benefit obligation 943.7 1,003.5
Plan assets at fair value 673.3 705.4
_______ _______
Projected benefit obligation
in excess of plan assets (270.4) (298.1)
Unrecognized prior service cost 6.5 7.4
Unrecognized net (gain) loss (.2) 20.4
Unrecognized net obligation
at January 1, being amortized
over 3 to 20 years 94.7 99.9
Minimum liability adjustment (11.6) (26.3)
_______ _______
NET PENSION LIABILITY $ (181.0) $ (196.7)
_______ _______
_______ _______
Discount rate 8.5% 7.5%
Expected long-term rate of return
on assets 8.75-9% 8.75-9%
Rate of increase in compensation
levels 5.5% 5-6%
</TABLE>
Electric Operations offered early retirement incentive programs in 1987 and
1990. Included in the table above is the present value of all future
termination benefits provided of $65 million. Electric Operations received
regulatory accounting orders to defer early retirement costs as a regulatory
asset to be amortized through the year 2020. See "Accounting for the Effects of
Regulation" in Note 1.
NOTE 12. OTHER POSTRETIREMENT BENEFITS
Electric Operations and Telecommunications provide health care and life
insurance 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
Pensions." The cost of postretirement benefits are now accrued over the active
service period of employees. In 1992, the $12 million cost of these benefits
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 $29 million and $36 million of postretirement benefit expense
during 1994 and 1993, respectively. These funds are invested in bonds and
common stock.
The net periodic postretirement benefit cost is summarized as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1994 1993
______ ______
<S> <C> <C>
Service costs - benefits earned $ 9.5 $ 7.6
Interest cost on accumulated postretirement
benefit obligation 30.7 28.8
Amortization of transition obligation 16.3 16.0
Regulatory deferral (5.2) (5.6)
Net asset loss during the period
deferred for future recognition (4.4) -
Actual return on plan assets .3 (.2)
_____ _____
NET PERIODIC POSTRETIREMENT BENEFIT COST $ 47.2 $ 46.6
_____ _____
_____ _____
</TABLE>
<PAGE>
51
The accumulated postretirement benefit obligation ("APBO") was as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
______ ______
<S> <C> <C>
Retirees and dependents $ 237.1 $ 257.0
Fully eligible active plan participants 20.1 20.9
Other active plan participants 125.9 130.2
______ ______
APBO 383.1 408.1
Plan assets at fair value 68.8 39.4
______ ______
APBO in excess of plan assets 314.3 368.7
Unrecognized prior service cost .7 .8
Unrecognized transition obligation (286.8) (302.7)
Unrecognized net gain (loss) 3.8 (47.8)
______ ______
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION $ 32.0 $ 19.0
______ ______
______ ______
Discount rate 8.5% 7.5%
Estimated long-term rate of
return on assets 8.5-9% 8.5-9%
Initial health care cost trend rate-
under 65 11% 12%-14%
Initial health care cost trend rate-
over 65 10% 10%
Ultimate health care cost trend rate 5.5% 5%
</TABLE>
The assumed health care cost trend rates gradually decrease over nine years.
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, 1994 by
$28 million, and the annual net periodic postretirement benefit costs by
$3 million.
NOTE 13. DISCONTINUED OPERATIONS
During 1993, Holdings sold its interest in an 82%-owned mining and resource
development business, NERCO, Inc. for proceeds of $384 million. Revenues of
$672 million were recorded by NERCO, Inc. in 1992 and are included in
discontinued operations. In connection with this transaction, a subsidiary of
Holdings loaned $225 million at 13% interest to a subsidiary of the purchaser,
with repayment contingent upon future revenues received under a coal supply
contract. The sale resulted in a gain of approximately $183 million 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.
A gain of $52 million and proceeds of $195 million were recorded in 1993
relating to the sale of an international communications subsidiary. Revenues,
net of settlements, included in discontinued operations in 1992 were
$108 million.
<PAGE>
52
NOTE 14. 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 15. PENDING SALE
In October 1994, Pacific Telecom signed an agreement to sell the stock of its
wholly owned subsidiary Alascom, Inc. ("Alascom") to AT&T Corp. ("AT&T"), for
proceeds of $365 million. Under the terms of the agreement, AT&T will pay
$290 million in cash for the Alascom stock and for settlement of all past cost
study issues. AT&T has also agreed to allow Pacific Telecom to retain the
$75 million transition payment made by AT&T to Alascom in July 1994, which was
used to reduce telecommunications plant, pursuant to a Federal Communications
Commission ("FCC") order. AT&T made a down payment of $30 million to Pacific
Telecom, which would be applied to the final $75 million transition payment
required in the FCC order if the transaction failed to close. The remaining
$260 million is to be paid when the transaction closes, which is subject to
certain conditions, including receipt of state and federal regulatory approvals
that are expected to be received during the first half of 1995. The Company
anticipates recognizing a material gain from the sale of Alascom, relative to
its ownership percentage in Pacific Telecom.
Condensed financial information for Alascom is as follows:
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/FOR THE YEAR
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Revenues $343.5 $337.8 $346.8
Income from operations 80.7 59.5 60.1
<CAPTION>
MILLIONS OF DOLLARS/DECEMBER 31
1994 1993
____ ____
<S> <C> <C>
Property, plant and equipment $185.5 $274.7
Current assets 82.7 101.3
Other assets 7.5 8.4
_____ _____
TOTAL ASSETS $275.7 $384.4
_____ _____
_____ _____
Common equity $196.4 $244.8
Current liabilities 69.9 49.5
Deferred credits 9.4 90.1
_____ _____
TOTAL CAPITALIZATION AND LIABILITIES $275.7 $384.4
_____ _____
_____ _____
</TABLE>
<PAGE>
53
NOTE 16. 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, 1994
Revenues $ 3,507 $2,648 $ 705 $ 154 $ -
Income from operations 987 819 165 3 -
Depreciation and amortization 424 302 104 18 -
Capital spending 798 638 153 7 -
Identifiable assets 11,846 9,372 1,378 1,096 -
______ _____ _____ _____ ___
______ _____ _____ _____ ___
Year ended December 31, 1993
Revenues $ 3,405 $2,507 $ 702 $ 196 $ -
Income from operations 916 784 141 (9) -
Depreciation and amortization 405 281 110 14 -
Capital spending 805 637 126 42 -
Identifiable assets 11,957 9,055 1,413 1,489 -
______ _____ _____ _____ ___
______ _____ _____ _____ ___
Year ended December 31, 1992
Revenues $ 3,236 $2,362 $ 698 $ 176 $ -
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 1,540 1,299 226(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>
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
MILLIONS OF DOLLARS/QUARTER ENDED
March June September December
31 30 30 31
_______________________________________________________________________________
<S> <C> <C> <C> <C>
1994
Revenues $865.3 $836.1 $915.0 $890.1
Income from operations 250.1 202.6 265.4 268.5
Net income 120.5 89.3 131.8 126.4
Earnings on common stock 110.8 79.3 121.8 116.4
Earnings per common share .39 .28 .43 .41
Common dividends paid per share .27 .27 .27 .27
Common dividends declared
per share .27 .27 .27 .27
Common stock price
per share (NYSE)
High 19 1/2 18 3/8 18 3/8 19 1/8
Low 17 1/4 16 15 7/8 16 1/2
1993
Revenues $861.0 $807.0 $860.1 $877.3
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
</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 51 and Note 13 for information regarding
discontinued operations.
<PAGE>
Appendix A - PacifiCorp 1994 Annual Report Graphic
__________________________________________________
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, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 200, 400, 600,
800, 1000, and 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
1994 747 888 962
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 92, 93, and 94
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, and 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
1992 86 100 100
1993 79 95 100
1994 80 99 100
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: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 500, 1000, 1500,
2000, 2500, 3000, 3500 and 4000
Legend Description: None
Y-Axis Data Points: PacifiCorp
1989 3,007
1990 3,208
1991 3,512
1992 2,908
1993 3,263
1994 3,460
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: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 500, 1000, 1500,
2000, 2500 and 3000
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
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
1994 2,648 819 340
Footnote to Graph: None
<PAGE>
5. The following is a description of graphic material omitted from the current
filing:
Graph Title: Wholesale
Graph Page Number: Page 28
Type of Graph: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 100, 200, 300,
400, 500, and 600
Legend Description: None
Y-Axis Data Points: PacifiCorp
1989 269
1990 288
1991 325
1992 428
1993 500
1994 533
Footnote to Graph: None
6. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Billions of Kilowatt-Hours from bottom to top 0, 10, 20,
30, 40, 50, and 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
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
1994 12,127 22,772 43,701 59,326
Footnote to Graph: None
<PAGE>
7. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, and 100
Legend Description: Bottom of Stacked Bar, Coal; Middle of Stacked Bar,
Hydroelectric Top of Stacked Bar, Purchases & Exchange
Contracts
Y-Axis Data Points: Hydro- Purchases &
Coal electric Exchange Contracts
1989 78 86 100
1990 78 85 100
1991 78 84 100
1992 81 85 100
1993 77 83 100
1994 79 84 100
Footnote to Graph: None
8. 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 1994
Y-Axis Information: None
Legend Description: Bottom of Legend, Residential; Second in Legend,
Commercial; Third in Legend, Industrial; Top of Legend,
Wholesale
Data Points: Residential Commercial Industrial Wholesale
1994 21 18 34 27
Footnote to Graph: None
<PAGE>
9. The following is a description of graphic material omitted from the current
filing:
Graph Title: Telecommunications
Graph Page Number: Page 32
Type of Graph: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 100, 200, 300,
400, 500, 600, 700 and 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
Revenues Income from Operations from Continuing Operations
1989 578 134 64
1990 683 154 77
1991 720 160 77
1992 698 139 57
1993 702 141 51
1994 705 165 71
Footnote to Graph: None
10. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Thousands from bottom to top 0, 50, 100, 150, 200, 250,
300, 350, 400 and 450
Legend Description: Bottom of Stacked Bar, Western; Middle of Stacked Bar,
Midwest Top of Stacked Bar, Alaska
Y-Axis Data Points: Western Midwest Alaska
1989 175 197 253
1990 185 280 340
1991 194 292 357
1992 206 310 379
1993 217 328 399
1994 230 345 418
Footnote to Graph: None
<PAGE>
11. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top -200, 0, 200, 400,
600, 800, and 1000
Legend Description: Bottom of Stacked Bar, Retained Earnings; Second of
Stacked Bar, Dividends Accrued; Third of Stacked Bar,
Income Taxes; Top of Stacked Bar, Interest Expense & Other
Interest
Retained Dividends Income Expense
Y-Axis Data Points: Earnings Accrued Taxes & Other
1989 38 403 610 900
1990 42 413 592 923
1991 34 446 623 941
1992 (167) 283 428 725
1993 85 423 611 916
1994 123 468 718 987
Footnote to Graph: 1992 is calculated using earnings from continuing
operations, excluding special charges. See note 14.
12. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 0, 1500, 3000,
4500, 6000, 7500 and 9000
Legend Description: Bottom of Stacked Bar, Electric Operations; Middle of
Stacked Bar, Telecommunications Top of Stacked Bar, CWIP
Y-Axis Data Points: Electric Telecommunications CWIP
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
1994 7,305 8,078 8,446
Footnote to Graph: None
<PAGE>
13. 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 89, 90, 91, 92, 93, and 94
Y-Axis Information: Percent from bottom to top 0, 20, 40, 60, 80, and 100
Legend Description: Bottom of Stacked Bar, Long-Term Debt & Capital Lease
Obligations; Second of Stacked Bar, Common Equity; Third
of Stacked Bar, Short-term & Currently Maturing Debt; Top
of Stacked Bar, Preferred Stock
Long-Term Short-Term
Debt & & Currently
Capital Lease Common Maturing Preferred
Y-Axis Data Points: Obligations Equity Debt Stock
1989 44 79 96 100
1990 46 83 95 100
1991 47 85 95 100
1992 48 82 93 100
1993 46 85 93 100
1994 45 86 93 100
Footnote to Graph: None
14. 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: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Millions of Dollars from bottom to top 20, 25, 30, 35,
and 40
Legend Description: None
Y-Axis Data Points PacifiCorp
1989 21
1990 22
1991 27
1992 37
1993 39
1994 40
Footnote to Graph: None
<PAGE>
15. 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: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Percent from bottom to top 7.0, 7.5, 8.0, 8.5, and 9.0
Legend Description: None
Y-Axis Data Points: PacifiCorp
1989 8.8
1990 8.9
1991 8.4
1992 8.1
1993 7.7
1994 7.5
Footnote to Graph: None
16. 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: Line Graph
X-Axis Information: Years from left to right 89, 90, 91, 92, 93, and 94
Y-Axis Information: Percent from bottom to top 20, 25, 30, 35, 40, 45, and 50
Legend Description: None
Y-Axis Data Points: PacifiCorp
1989 33
1990 31
1991 29
1992 38
1993 31
1994 35
Footnote to Graph: Calculated using earnings from continuing operations.
<PAGE>
17. 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: Line Graph
X-Axis Information: Months from left to right depicted by tick marks with only
the quarters marked with longer tick marks and a
description of Q1, Q2, Q3, and Q4 for 93 and 94
respectively.
Y-Axis Information: Month-End in Dollars from bottom to top 0, 5, 10, 15, 20,
and 25
Legend Description: None
Y-Axis Data Points: 1993 1994
January 19.750 18.750
February 18.125 18.000
March 18.125 17.625
April 17.875 17.750
May 17.750 17.625
June 19.000 16.875
July 18.750 17.750
August 20.000 17.000
September 19.625 16.875
October 19.625 17.625
November 19.125 18.500
December 19.250 18.125
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>
APPROXIMATE
PERCENTAGE OF STATE OR
VOTING JURISDICTION OF
SECURITIES INCORPORATION OR
NAME OF SUBSIDIARY OWNED 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
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>
APPROXIMATE
PERCENTAGE OF STATE OR
VOTING JURISDICTION OF
SECURITIES INCORPORATION OR
NAME OF SUBSIDIARY 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
Northland Telephone Company...................................................... 100% Minnesota
North-West Telephone Company..................................................... 100% Wisconsin
Northwestern Telephone Systems, Inc. ............................................ 99% Oregon
Pacific Telecom Cable, Inc. ..................................................... 80% Delaware
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE OF STATE OR
VOTING JURISDICTION OF
SECURITIES INCORPORATION OR
NAME OF SUBSIDIARY OWNED ORGANIZATION
--------------------------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
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 Service Company.................................................. 100% Washington
Pacific Telecom Transmission Services, Inc. ..................................... 100% Oregon
Postville Telephone Company...................................................... 100% Wisconsin
Price County Telephone Cellular, Inc. ........................................... 100% Wisconsin
PTI Broadcasting, Inc. .......................................................... 100% Oregon
Rib Lake Cellular for Wisconsin RSA #2, Inc. .................................... 100% Wisconsin
Telephone Utilities, Inc. ....................................................... 100% Washington
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
Wayside Cellular, Inc. .......................................................... 100% Wisconsin
Wayside Telecom, Inc. ........................................................... 100% Wisconsin
The Wayside Telephone Company.................................................... 100% Wisconsin
</TABLE>
The Company also has the following subsidiaries:
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE OF STATE OR
VOTING JURISDICTION OF
SECURITIES INCORPORATION OR
NAME OF SUBSIDIARY OWNED 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>
Deloitte & Touche LLP
_____________________ _____________________________________________________
3900 US Bancorp Tower Telephone:(503)222-1341
111 SW Fifth Avenue Facsimile:(503)224-2172
Portland, Oregon 97204-3698
EXHIBIT (23)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-36452, 33-51163, and 33-55309, all on Form S-3; in Registration Statement No.
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 reports, dated February 17, 1995, March 9, 1995 as to the agreement to
acquire the minority interest in Pacific Telecom, Inc. described in Note 1,
(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,
1994.
DELOITTE & TOUCHE LLP
Portland, Oregon
March 30, 1995
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
KATHRYN A. BRAUN
_____________________________________
Kathryn A. Braun
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
FREDERICK W. BUCKMAN
_____________________________________
Frederick W. Buckman
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
C. TODD CONOVER
_____________________________________
C. Todd Conover
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
RICHARD C. EDGLEY
_____________________________________
Richard C. Edgley
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
A. M. GLEASON
_____________________________________
A. M. Gleason
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
JOHN C. HAMPTON
_____________________________________
John C. Hampton
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
NOLAN E. KARRAS
_____________________________________
Nolan E. Karras
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
KEITH R. MCKENNON
_____________________________________
Keith R. McKennon
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
ROBERT G. MILLER
_____________________________________
Robert G. Miller
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
VERL R. TOPHAM
_____________________________________
Verl R. Topham
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
DON M. WHEELER
_____________________________________
Don M. Wheeler
<PAGE>
EXHIBIT (24)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Richard C. Edgley, 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, 1994 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 8, 1995.
NANCY WILGENBUSCH
_____________________________________
Nancy Wilgenbusch
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PACIFICORP'S DECEMBER 31, 1994 ANNUAL REPORT FORM 10-K AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000075594
<NAME> PACIFICORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
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39700
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</TABLE>
<PAGE>
EXHIBIT 99
PACIFIC TELECOM, INC.
ITEM 1. BUSINESS AND
ITEM 2. PROPERTIES
1994 ANNUAL REPORT ON FORM 10-K
<PAGE>
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 expansion of 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 certain cellular
holdings, and ongoing efforts to complete the sale of the Alaska long distance
operations to AT&T. Upon completion of the pending sale of Alascom to AT&T, the
Company will have resolved its uncertainties related to the Alaska long distance
market. The sale of two noncore operations in 1993 successfully completed the
Company's exit from its material noncore businesses.
PTI has been a majority-owned subsidiary of PacifiCorp since 1973. At
December 31, 1994, PacifiCorp, through a wholly-owned subsidiary, PacifiCorp
Holdings, Inc. (Holdings), beneficially owned approximately 87 percent of PTI's
common stock. On March 9, 1995, PacifiCorp and PTI announced a definitive merger
agreement pursuant to which a newly-formed, wholly-owned subsidiary of Holdings
will merge with and into PTI. Under the agreement, the holders of the
approximately 5.3 million shares of common stock of PTI not held by Holdings
will receive $30 in cash in exchange for each share of PTI common stock. As a
result of the merger, PTI would become an indirect, wholly-owned subsidiary of
PacifiCorp. The merger is conditioned upon, among other things, affirmative
approval of the merger by holders of a majority of the shares held by the
unaffiliated public shareholders.
On November 1, 1994, Holdings originally proposed to acquire the shares not
owned by it for $28 per share in cash. Promptly thereafter, PTI's Board of
Directors formed a Special Committee of independent directors to receive, study,
negotiate and make recommendations to the PTI Board regarding that proposal. The
merger agreement was unanimously approved by the Board of Directors of PTI as
fair to, and in the best interests of, PTI's public minority shareholders upon
the unanimous recommendation of the Special Committee. In connection with its
recommendation of the transaction, the Special Committee received the written
opinions of Smith Barney Inc. and CS First Boston Corporation, to the effect
that the consideration to be received by the minority shareholders in the merger
is fair, from a financial point of view, to such holders.
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. At February 28, 1995, the Company operated 15
LECs within eleven states comprised of approximately 471,000 access lines in 297
exchanges. The average number of access lines per exchange is approximately
1,586, 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 23,390 access lines at
December 31, 1994. Of the Company's 252 exchanges at December 31, 1994, 143
serve less than 1,000 access lines. Service areas are located primarily in the
states of Alaska, Colorado, Montana, Oregon, Washington and Wisconsin. States
also served, but to a lesser extent, include Idaho, Iowa, Minnesota, Nevada and
Wyoming. (See "Regulation -- General.") The Company provides centralized
administrative services to field operations from its corporate offices in
Vancouver, Washington.
4
<PAGE>
During the five years ended December 31, 1994, the number of access lines
served by the Company increased from 252,700 to 418,000. As a result of the
acquisitions of several LECs located in the Midwest, the Company added
approximately 69,000 access lines in 1990, 3,200 in 1992 and 1,100 in 1993.
Approximately 50,000 access lines in Colorado were added in February 1995 upon
completion of the purchase of rural telephone exchange assets from USWC. (See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Acquisitions" for more information concerning the Colorado
acquisition.) The LECs have also experienced strong internal access line growth
in certain service areas, as evidenced by a 4.8 percent increase in access lines
served during 1994. The Company anticipates that access line growth in the
future will come from acquisitions and population growth in current service
areas.
Excluding the Colorado properties recently acquired from USWC, the Company
has completed the conversion of all multi-party lines to single-party lines.
Approximately 60 percent of the multi-party lines in these newly acquired
Colorado exchanges were converted to single-party service by the end of 1994,
and the Company expects that these exchanges will be fully converted to
single-party service by December 31, 1995.
The LECs have contracts with interexchange carriers under which the Company
provides billing and collection services. The Company has an agreement to
provide these services for AT&T and an agreement with Independent NECA Services
(INS), a clearinghouse service bureau, to provide these services for other
carriers for varying periods of time, some with automatic renewals and some
terminating in 1995 and 1996. In Alaska, the Company's LECs have similar
agreements with Alascom.
Effective March 6, 1995, AT&T started billing and collection for most of
its toll messages in the western areas served by the Company, and will do so in
the midwest areas served by the Company beginning in April 1995. This change is
expected to reduce the Company's billing and collection revenues by
approximately $1 million in 1995 compared to 1994. It is anticipated that this
reduction will be partially offset by the effects of increased message volumes
billed due to acquisitions and billing for additional carriers through the
agreement with INS.
In addition to its basic telephone service, the Company offers enhanced
services, such as caller name and number identification, automatic call back,
auto recall and call trace, to certain of its service areas under the Custom
Local Area Signaling Service (CLASS). CLASS services were offered to certain of
the Company's customers in Washington, Montana and Wisconsin in 1994. The
Company is evaluating the offering of CLASS services in 1995 to certain Alaska,
Colorado and Oregon markets and additional markets in Washington and Wisconsin.
The Company's existing switching equipment provides these services with minimal
software and hardware enhancements. Some of the Company's switching equipment
has other enhanced service capabilities, such as voice messaging, that are being
offered to its customers where available. The Company also offers certain
customers custom calling features like call forwarding, call waiting and speed
dial. The LECs also sell and lease, on a nonregulated basis, customer premise
(i.e., telephone) equipment for use by residential and business customers. As
part of this program, residential and business customers are offered maintenance
services on a monthly fee basis. In 1994, revenues from these services totalled
$1.4 million.
The Company continues to seek expansion of its local exchange operations
through acquisition. In February 1995, the Company acquired certain rural
telephone exchange assets in Colorado from USWC. The assets represent 45
exchanges that serve approximately 50,000 access lines. The Company paid
approximately $200 million for these assets at closing. The Company funded the
Colorado acquisition through short-term bank borrowings and anticipates repaying
these borrowings with proceeds from the sale of Alascom. In an attempt to
satisfy certain regulatory concerns in Colorado, the Company also entered into a
construction contract with USWC in July 1993 that required the Company to
construct and upgrade plant related to the acquired assets. Under the contract,
the Company acted as general contractor on behalf of USWC. The construction and
upgrade program accelerated single-party service and digital switching required
by the CPUC. During 1993 and 1994, the Company spent an aggregate of $30.1
million under this contract. The Company has added the amounts expended under
the contract to its construction work in progress or plant in service accounts
for these exchanges.
The Company has received an order from the FCC granting the waivers to
reclassify the exchanges from USWC's regulatory study area in Colorado to the
Company's regulatory study area in Colorado and to permit rate of return
regulation on the exchanges served by the acquired assets. Included in the study
area waivers was permission for these exchanges to be eligible to receive
support from the USF, as the cost to provide service in these exchanges exceeds
the national average. The FCC waivers will allow the
5
<PAGE>
Company to replace the incentive regulation adopted for these exchanges by USWC
with cost based rate of return regulation, which is consistent with the
Company's other LEC operations. (See "Regulation -- Local Exchange Companies"
for additional information concerning new USF limitations.)
In May 1994, the Company signed definitive purchase agreements to acquire
certain rural telephone exchange assets in Oregon and Washington from USWC. The
assets to be acquired by the Company represent 49 exchanges that serve
approximately 35,000 access lines. Many of these exchanges are contiguous to or
located near other rural exchanges that the Company owns and operates in these
states. The combined price for these assets of approximately $180 million in
cash is subject to certain adjustments, including adjustments for actual book
value of the assets at closing. The Company will not assume any financial
liabilities from USWC in the transactions. Applications seeking Washington
Utilities and Transportation Commission and Oregon Public Utilities Commission
approvals and FCC study area and price cap waivers were filed in the second
quarter of 1994. The FCC order approving the Colorado transaction grandfathered
the FCC waiver requests for the Oregon and Washington assets, permitting them to
be evaluated without application of a newly imposed restriction limiting the
redistribution of USF funding. (See "Regulation -- Local Exchange Companies" for
additional information about changes in the USF.) Completion of the transactions
with USWC is also dependent on other regulatory and governmental approvals,
receipt of which is expected to occur prior to the end of 1995. The Company
expects to fund the acquisition of these assets through proceeds from the sale
of Alascom to AT&T, 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. All interstate MTS and certain interstate private line services are
provided via the Alaska Spur. (See "Telecommunications Operations -- Pacific
Telecom Cable.") Satellite facilities 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.
Alascom operates 18 satellite transponders on a communication satellite
that replaced Alascom's original satellite in 1991. Alascom purchased two
transponders, one in 1994 and one in 1993, and leases 16 transponders under an
operating lease that expires in mid-1998. At the end of the lease, the Company
has the option of either repurchasing the satellite or guaranteeing a minimum
sales price to a non-affiliated party. Telemetry, tracking, control and in-orbit
protection services are provided under contract by GE American Communications,
Inc. for the projected remaining service life of the satellite estimated at 8
years.
Alascom owns 173 satellite transmit and receive earth stations (including
12 transportable earth stations), a 50 percent interest in 46 earth stations
used generally for service throughout Alaska and 7 additional earth stations
located in the lower 48 states, 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. 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.
6
<PAGE>
Alaska Market Restructuring
In October 1994, the Company signed an agreement to sell the stock of
Alascom to AT&T in a transaction providing $365 million in proceeds. Under the
terms of the agreement, AT&T will pay $290 million in cash for the Alascom stock
and for settlement of all past cost study issues. AT&T has also agreed to allow
PTI to retain a $75 million transition payment made by AT&T to Alascom in July
1994 pursuant to an FCC order. AT&T made a down payment of $30 million to the
Company upon signing the stock purchase agreement, which would be applied to the
final $75 million transition payment required in the FCC order if the sale
failed to close. The remaining $260 million is to be paid when the transaction
closes. Closing of the sale of Alascom is subject to certain conditions,
including receipt of state and federal regulatory approvals that are expected to
be received during the first half of 1995. The Company has agreed to provide
accounting, data processing and human resource service support for up to 15
months following the sale to allow for a smooth transition in exchange for
certain equipment that the Company intends to incorporate in its LEC operations.
The Company anticipates recognizing a material gain from the sale of Alascom.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Forecast" for information about this gain.
The JSA and the entire telecommunications market in Alaska have been under
review by a Joint Board of the FCC and state regulators over the past ten years.
In May 1994, the FCC, based on recommendations of the Joint Board, ordered a
restructuring of the Alaska telecommunications market. Among other matters, the
FCC order would have required termination of the JSA between Alascom and AT&T,
effective January 1, 1996; the payment by AT&T to Alascom of $150 million for
transition payments in two equal installments of $75 million each; AT&T to
continue utilizing 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 allocation of costs between rural and
nonrural locations. Although the FCC order remains in effect, the agreement to
sell Alascom to AT&T was reached as a solution to issues that remained
unresolved by the order. Alascom filed a petition for review of the FCC order
with the United States Court of Appeals for the District of Columbia in June
1994. This petition has been stayed pending completion of the proposed
transaction with AT&T.
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 10 of these interests in Alaska, Michigan and
Wisconsin. The Company also manages five other RSAs in Minnesota. Revenues from
cellular operations represented approximately three percent of total Company
revenues in 1994.
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 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 Company believes that the creation of a large regional automatic call
delivery area is important to the continued success of its cellular operations.
During 1994, the Company's cellular properties in Wisconsin and Michigan were
networked with the major MSA markets in Wisconsin and with all of the markets in
rural Minnesota. This provided the Company's Wisconsin and Michigan customers
with one of the largest regional automatic call delivery areas available in the
U.S. The Company plans to continue its efforts to expand its presence in the
Midwest and to network with additional major MSA markets in Minnesota, Michigan
and Illinois in early 1995. The provision of automatic call delivery services
within the region simplifies the process by which customers receive cellular
calls in the areas that they travel most often, thus increasing the convenience
and value of their cellular service.
7
<PAGE>
The Company continues to test and evaluate digital cellular technology and
is preparing to provide digital cellular service when market forces warrant its
deployment. The Company does not anticipate that in the near future it will be
required to deploy digital cellular technology solely to increase the capacity
of its cellular systems.
The following table sets forth the Company's POP ownership by state as of
December 31, 1994.
<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 -- 107,035 107,035
South Dakota -- 16,147 16,147
Washington -- 41,152 41,152
Wisconsin 688,646 627,407 1,316,053
-------------------------------------------------------------------------------
Total 1,204,646 815,308 2,019,954
-------------------------------------------------------------------------------
<FN>
(1) Represents interests with respect to RSAs and MSAs where the Company has an
ownership position and manages the operations.
</TABLE>
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. On January 18, 1995, the Company
signed a letter of intent to sell 20 percent of its interest in the Alaska RSA
#1 market (Fairbanks) for cash and notes receivable. The letter of intent also
provides options for the buyer to increase its ownership of the market to a
maximum level of 49 percent over a two-year period. Consummation of the
transaction is subject to negotiation of definitive agreements and certain
corporate approvals. This sale is not anticipated to have a significant impact
on the financial results of the Company. The Company has budgeted $20.6 million
for the development of cellular operations over the next three years.
Customers served by the cellular operations controlled by the Company
increased 61 percent in 1994, 65 percent in 1993 and 70 percent in 1992.
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 was 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.
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
8
<PAGE>
1991. Forty-three private and government-owned telecommunications firms
representing 26 countries have purchased approximately 53 percent of the cable's
17,010 circuit capacity. PTC recognized revenues of $4.6 million in 1994, $4.9
million in 1993 and $10.8 million in 1992 related to cable and backhaul capacity
sales.
PTC continues to market the remaining 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, interconnectivity between
existing and planned cable systems and the North Pacific Cable, the availability
of other sources of capacity over the next five years and the possible
development of alternative business uses of the cable, the Company believes that
the inventory value of the cable system at December 31, 1994 can be recovered.
The original three-year warranty on the North Pacific Cable system's
submersible plant and terminal equipment ended on November 11, 1994. This
warranty covered the repeaters, electronics, cable and branching unit. Testing
to verify the status of the system was completed prior to warranty expiration.
Results of the completed tests indicated that the North Pacific Cable system was
operating at or above contracted levels before an outage in February 1995. This
outage is under investigation. Extended warranties for certain components of the
North Pacific Cable system will continue in effect until November 2001. These
extended warranties apply to the majority of the cable supplied by the
manufacturers.
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.
Other Communications Subsidiaries and Partnerships
On April 29, 1994, the Company completed the sale of two wholly-owned
noncore subsidiaries, PTI Harbor Bay, Inc. and Upsouth Corporation, to IntelCom
Group, Inc. (IntelCom) (AMEX:ITR) for 1,183,147 shares of IntelCom common stock
and $.2 million in cash. On October 17, 1994, the Company sold its IntelCom
stock in an underwritten public offering. Cash proceeds of $15.9 million and a
gain of $1.0 million, net of tax and selling expenses, were recognized in 1994.
PTI Harbor Bay, Inc. provides transmission services principally in the greater
San Francisco Bay Area. Upsouth Corporation owns an earth station complex near
Atlanta, Georgia and another near Carteret, New Jersey. The net assets of PTI
Harbor Bay, Inc. and Upsouth Corporation prior to the sale were classified in
"other current assets."
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 and
the Company recognized a tax benefit. The Company sold the FM station in Idaho
in July 1994 and recognized a pre-tax loss of $.3 million. On February 28, 1995,
the Company completed the sale of the Oregon stations and recognized no gain or
loss on the transaction. The Company also has agreements to sell the remaining
stations in Nevada and is waiting for regulatory approval of the sales, which
are expected to close in the first half of 1995. Due to their pending sale, the
net assets of the radio stations were classified as "other current assets" at
December 31, 1994. The Company expects to recover its investment in these
entities as the result of these transactions.
9
<PAGE>
REGULATION
General
The Company's LECs and Alascom 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, Congress and some state regulatory agencies are pursuing alternative forms
of regulation that depart from traditional rate of return regulation for
telecommunications companies such as the Company. These alternatives include the
possible opening of local exchange franchises to competition. The effects of any
such alternative forms of regulation on the Company's LECs is uncertain.
The Company's LECs are governed by tariffs filed with the FCC for
interstate access services provided to interexchange carriers. Interstate and
certain international services provided by Alascom are governed by tariffs
filed with the FCC. 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
the LECs and Alascom. 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 or NECA tariffs
filed with the FCC allow for charges to interexchange carriers for access to
customers. The traffic sensitive costs are recovered either directly through
access charges or through cost based settlements with NECA. The nontraffic
sensitive portion (subscriber loop) of these interstate-related costs is
recovered through a settlement process with NECA. The subscriber loop represents
investment in plant from the central office to the customer's premise. 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 loop 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.
Based on a concern over recent growth in the size of the USF, a
Federal-State Joint Board proposed interim USF rules that were adopted by the
FCC in 1993. These interim rules place an indexed cap on USF growth to allow the
USF to grow at a rate no greater than the rate of growth in the nation's total
work-
10
<PAGE>
ing 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 1994 and 1995. 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, a reduction in USF revenues will shift revenue requirement to the
intrastate jurisdiction where 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.
In 1994, Congress considered legislation (S. 1822) that would rewrite the
1934 Communications Act. Efforts to pass comprehensive telecommunications
legislation are expected to continue in 1995. Based upon statements of
Congressional leaders, it is expected that the 1995 effort, much like the 1994
effort, will address universal service concepts and the support mechanisms
necessary to sustain them.
On January 5, 1995, the FCC issued its order granting the Company a study
area waiver and price cap waiver associated with the Company's purchase of USWC
assets in Colorado. The order clears the way for the purchased assets to fully
participate in the USF and allows them to be operated on a rate of return as
opposed to price cap basis. The order also implemented new standards on
transactions having an impact on the USF. any future transaction that would
cause a shift of USF payments exceeding one percent of the total fund will be
held to a higher standard of review by the FCC. However, the Company's pending
waiver requests associated with the Company's purchase of USWC Washington and
Oregon assets were grandfathered and will be evaluated without application of
the one percent cap.
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 for interstate purposes in
the near future. NECA has recently filed its own recommendation for an incentive
regulation plan with the FCC. The Company will monitor the progress of NECA's
efforts and evaluate its options if an alternative regulation plan is
implemented.
In early 1995, the Company's largest Wisconsin LEC filed proposed local
exchange and intrastate access rate changes with the Wisconsin Public Service
Commission, which would become effective June 1, 1995. The proposed rate design
would be revenue neutral with lower revenues from interexchange access and
services offset by increased local exchange revenues of approximately $.6
million. Extended Area Service (EAS), which extends local calling areas, would
not be part of the basic rates and would be measured on a minute of use basis or
a flat rate optional service. Management does not believe that these changes
will significantly impact the Company's financial results.
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 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 were
single-party, with approximately 98 percent having EAS capabilities.
In December 1994, the Company received an order from the APUC to implement
revised depreciation rates retroactive to January 1, 1994. This adjustment
decreased the depreciation rate, which resulted in an annual increase in
operating income of $3.6 million. The income was recognized in the last quarter
of 1994. There are no other LEC depreciation rate adjustments currently pending
with any of the Company's regulatory commissions.
Long Lines
Long Lines -- Interstate Revenues
Through September 1994, Alascom's interstate MTS and WATS revenues were
derived through the JSA with AT&T. Based on a May 1994 FCC order, the JSA is
scheduled to be terminated on January 1, 1996. Since that order was received,
the Company has agreed to sell the stock of Alascom to AT&T. Long lines
interstate revenues from October 1994 until the sale closes are recognized based
on the interim cash settlement amounts outlined in the stock sale agreement.
These monthly payments are fixed at historically projected settlement amounts.
Prior to signing the agreement in October 1994, long lines recognized revenue
under the JSA based on the current computation of the revenue requirements. (See
"Telecommunications Operations -- Alaska Market Restructuring.")
11
<PAGE>
Long Lines -- Access Charges
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.")
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
Alascom purchased and operates the Alaska Spur under a temporary
authorization from the FCC which expires on August 8, 1995. 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 the Company
believes that these investments will be made only if appropriate economic
opportunities and demand for such services exist. The Company also 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 providers
(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. This
activity is most prominent in the business districts of large urban areas. A
number of interexchange carriers have also announced or implemented programs to
construct facilities which bypass those of local exchange companies. This
competitive activity pressures LECs to lower access rates. There are also
political pressures supporting lower access rates.
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 ratio of
residential to business access lines for the Regional Bell Operating Companies
averages two to one, while the Company's LECs average three to one. 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 seeking to find ways to
benefit from changes which may occur as competition increases.
12
<PAGE>
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 2.7 percent in 1994, 6.2 percent in 1993
and 11.9 percent in 1992. 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 in 1994 and in 1993 and six percent in 1992. 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. Intrastate
minute volumes increased 5.0 percent in 1994 and 1.7 percent in 1993 but
decreased 7.3 percent in 1992.
Cellular Operations
Under FCC guidelines, two licenses to provide cellular service were granted in
each MSA and RSA. 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 June 1994, the FCC modified the rules issued in September 1993 governing
broadband Personal Communications Services (PCS). The FCC defined the PCS
license areas based on 51 major and 493 basic trading areas (MTA and BTA,
respectively). Under the PCS rules as modified, the FCC created six licensed
frequency blocks representing 120 MHz of spectrum and identified 20 MHz of
spectrum for unlicensed PCS. The licensed spectrum was divided into two 30 MHz
MTA blocks, one 30 MHz BTA block and three 10 MHz BTA blocks. The FCC began the
broadband PCS auction process in December 1994 by auctioning the MTA licenses.
The auctions for the BTA licenses are expected to be initiated by the second
quarter of 1995. The Company's cellular operations are eligible to participate
in the PCS auctions subject to certain limitations established by the FCC. The
PCS license term is set at 10 years with 30 MHz licensees required to cover
one-third of the POPs within five years and two-thirds of the POPs within ten
years; 10 MHz licensees are required to cover one-quarter of the POPs within
five years. Although the Company is not planning on bidding for PCS licences, it
continues to monitor PCS developments and evaluate its opportunities in the PCS
market.
13
<PAGE>
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
over the next three years. The North Pacific Cable also competes with available
capacity on international communication 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, 1994, the Company had 2,762 employees, approximately 39
percent of whom were members of six different bargaining units. These units are
represented by the International Brotherhood of Teamsters, the International
Brotherhood of Electrical Workers, Communication Workers of America or the NTS
Employee Committee. During 1994, negotiations were completed on three collective
bargaining agreements governing 392 employees. Negotiations on three contracts
covering 692 employees commenced in 1994 and continued into 1995. Relations with
represented and non-represented employees continue to be generally good.
As a result of the pending sale of Alascom, the Company's workforce would
no longer include the 632 full-time employees of Alascom. PTI would retain all
liabilities related to Alascom's retired employees in accordance with the
Company's retirement plans while AT&T would make available its plans to existing
Alascom employees at closing under terms of the stock purchase agreement.
CONSTRUCTION PROGRAM
The Company financed its 1994 construction program primarily through
internally generated funds. Construction expenditures for 1994 and estimated
expenditures for 1995 through 1997, including expenditures relating to assets
acquired or to be acquired from USWC of $24.4 million, $34.9 million, $19.9
million and $15.8 million for 1994, 1995, 1996 and 1997, respectively, are as
follows (in millions):
<TABLE>
<CAPTION>
Plan
------------------------------
1994 1995 1996 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LECs $110.9 $108.7 $109.5 $99.0
Long Lines 22.2 7.1 -- --
PT Cellular 9.8 8.5 5.0 7.1
Other 5.3 3.2 2.6 2.6
-----------------------------------------------------------------------------
Total $148.2 $127.5 $117.1 $108.7
</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 1995 from internally
generated funds.
14
<PAGE>
ACQUISITION PROGRAM
The Company continues to seek expansion of its local exchange operations
and cellular interests through the acquisition of additional local exchange
companies and assets and cellular properties that complement its existing
properties and operations. 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 "Telecommunications Operations -- Local Exchange
Companies" and Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Pro Forma Financial Information" and
"Financial Forecast" for information regarding pending acquisitions of USWC
assets in 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
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 leases 16 transponders on a satellite through an
operating lease with a term of 69 months. The Company also purchased and placed
in service two additional transponders on this satellite, one in 1993 and one in
1994. (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.
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 73 percent of the 225,000 square-foot building.
The Company owns its mainframe computer and leases most of the other equipment
used in conjunction with providing data processing services.
15
<PAGE>
PACIFICORP FINANCIAL SERVICES, INC.
ITEM 1. BUSINESS AND
ITEM 2. PROPERTIES
1994 ANNUAL REPORT ON FORM 10-K
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
PacifiCorp Financial Services, Inc. (the "Company") is a holding company
with three principal business segments - Financial Services, Real Estate,
and, as a result of the resolution of a problem loan situation,
Agriculture. A formal plan for disposal of the Company's investment in its
Agriculture operations was adopted late in the fourth quarter of 1994 and
Agriculture is now classified as part of discontinued operations (see Note
10 to the Consolidated Financial Statements). A fourth business segment,
Manufacturing, was disposed of in the third quarter of 1994. The Financial
Services and Real Estate business segments conform to the definitions
provided by Statement of Financial Accounting Standards No. 14 - "Financial
Reporting of Segments of a Business Enterprise." The net assets and
results of operations of the Agriculture and Manufacturing segments have
been classified as discontinued operations. Financial information
concerning Financial Services, Real Estate and discontinued operations 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 has sold substantial
portions of its assets. The Company presently expects to continue this
selling effort over the next several years and retain only its tax
advantaged investments in leveraged lease assets (primarily aircraft) and
affordable housing projects. 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
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, 1994, approximately 91% of aircraft in the Company's
portfolio investment was Stage III noise compliant. At December 31, 1994,
the Company's Aviation Finance portfolio had total assets of $391 million
(44 aircraft, of which two C-130's aggregating $1 million were held as
Assets Held for Sale at December 31, 1994), representing approximately 53%
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 was owned by PacifiCorp Capital, Inc., a wholly-owned
subsidiary of the Company, and Bell Atlantic Systems Leasing, Inc. In
addition to conducting its own computer leasing business activities, PASLI
managed both shareholders' preexisting computer leasing portfolios. In
November 1994, the Company sold its computer leasing assets and its 50%
interest in PASLI.
OTHER FINANCIAL SERVICES
Other Financial Services include 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 and other assets. At December 31, 1994, Other Financial Services
had a portfolio of $126 million, or approximately 17% 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
and anticipates that in the future it will increase its involvement in the
development phase of new projects. At December 31, 1994, the Company had
investments in 15 projects, consisting of 3,037 rental units, which were
approximately 95% occupied. These projects, which are generally suburban,
garden style apartment complexes, are located throughout the United States.
In February 1993 and April 1994, the Company successfully completed
syndications of approximate 80% interests in certain of its projects for
$11.6 million and $3.5 million in cash, respectively. The Company expects
to complete similar transactions in the future. Further information
relating to these tax credits can be found in Note 12 to the Company's
Consolidated Financial Statements. At December 31, 1994, Affordable
Housing assets totaled $135 million, representing approximately 18% of the
Company's consolidated assets.
4
<PAGE>
PACIFIC DEVELOPMENT, INC. ("PDI")
PDI owns or manages several office buildings (in aggregate, approximately
1,178,000 square feet), in which the Company and PacifiCorp are significant
tenants. At December 31, 1994, these buildings were approximately 98%
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 several 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.
At December 31, 1994, PDI had assets of $34 million, representing
approximately 5% of the Company's consolidated assets. These assets are
classified as "Held for Sale" in the Company's consolidated balance sheet.
PDI agreed to sell the majority of these properties on March 7, 1995. The
sale is contingent on financing and is expected to close in the third
quarter of 1995.
OTHER REAL ESTATE
At December 31, 1994, the Company had other real estate holdings in Bartow,
Florida and Columbus, Ohio totaling $2 million. The Company sold its
Springfield, Illinois properties in 1994.
DISCONTINUED OPERATIONS
MANUFACTURING
VERMONT CASTINGS, INC. ("VCI")
VCI was acquired in May 1990 as the result of a loan default. The Company
sold its interest in VCI in August 1994.
The net assets of VCI at December 31, 1993, and the results of operations
for the periods ended December 31, 1994 and 1993 are reported as
discontinued operations.
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.
A formal plan for disposal of the Company's investment in its agriculture
operations was adopted late in the fourth quarter of 1994. As a result,
the net assets and results of operations of Color Spot are reported as
discontinued operations.
5
<PAGE>
ITEM 2. PROPERTIES
FINANCIAL SERVICES - The principal executive offices of the Company are
leased from PacifiCorp. 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 15
projects consisting of 3,037 rental units located throughout the United
States. As of December 31, 1994, PDI owns several office buildings
(approximate aggregate square footage of 369,771) and other developed and
undeveloped property in the Lloyd District of Portland, Oregon.
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
