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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, 1995
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)
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STATE OF OREGON 93-0246090
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
700 N.E. MULTNOMAH,
PORTLAND, OREGON
(Address of principal executive 97232-4116
offices) (Zip Code)
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Registrant's telephone number, including area code: (503) 731-2000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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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
8 3/8% Quarterly Income Debt Securities New York Stock Exchange
(Junior Subordinated Deferrable Interest
Debentures, Series A)
8.55% Quarterly Income Debt Securities New York Stock Exchange
(Junior Subordinated Deferrable Interest
Debentures, Series B)
</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. / /
On March 1, 1996, the aggregate market value of the shares of voting stock
of the Registrant held by nonaffiliates was approximately $6.5 billion.
As of March 1, 1996, there were 284,760,988 shares of the Registrant's
common stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders of the Registrant for the year
ended December 31, 1995 are incorporated by reference in Parts I and II.
Portions of the Annual Report on Form 10-K of Pacific Telecom, Inc. for the
year ended December 31, 1995 are incorporated by reference in Part I.
Portions of the proxy statement of the Registrant for the 1996 Annual
Meeting of Shareholders are incorporated by reference in Part III.
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TABLE OF CONTENTS
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PAGE
NO.
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Definitions............................................................. ii
Part I
Item 1. Business.................................................. 1
The Organization........................................ 1
Electric Utility Operations............................. 2
Pacific Telecom......................................... 10
Other................................................... 10
Employees............................................... 16
Item 2. Properties................................................ 17
Item 3. Legal Proceedings......................................... 18
Item 4. Submission of Matters to a Vote of Security Holders....... 20
Item 4A. Executive Officers of the Registrant...................... 20
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 21
Item 6. Selected Financial Data................................... 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 22
Item 8. Financial Statements and Supplementary Data............... 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................... 22
Part III
Item 10. Directors and Executive Officers of the Registrant........ 22
Item 11. Executive Compensation.................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................... 22
Item 13. Certain Relationships and Related Transactions............ 22
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................. 23
Signatures.............................................................. 28
Appendices
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 Report on Form 10-K of Pacific Telecom, Inc.
for the year ended December 31, 1995
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i
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DEFINITIONS
When the following terms are used in the text they will have the meanings
indicated:
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TERM MEANING
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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., a wholly owned subsidiary of Holdings, and
its subsidiaries
Powercor..................................... Powercor Australia Limited, a wholly owned subsidiary of Holdings,
and its immediate parent companies, PacifiCorp Australia Holdings
Pty Ltd and PacifiCorp Australia LLC
Utah Power................................... Utah Power & Light Company, the assumed business name of the
Company under which it conducts a portion of its retail electric
operations
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ii
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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 and to
develop and expand its nonregulated, energy-related activities, including its
independent power production and cogeneration business.
Through Holdings, the Company indirectly owns 100% (previously 87% owned) 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, provides cellular mobile telephone services
in six states and is engaged in sales of capacity in and operation and
maintenance of a submarine fiber optic cable between the United States and
Japan. On December 12, 1995, Holdings purchased 100% of Powercor, an electricity
distributor in Australia. Powercor serves approximately 540,000 customers in
suburban Melbourne and the western and central regions of the State of Victoria
in southeast Australia. Holdings also has interests in the independent power
production and cogeneration businesses through PGC, and continues to liquidate
portions of the loan, leasing and real estate investment portfolio of PFS. PFS
presently expects to retain only its tax-advantaged investments in leveraged
lease assets (primarily aircraft) and affordable housing, and is limiting its
pursuit of tax-advantaged investment opportunities to affordable housing.
Holdings is expanding its nonregulated businesses that are engaged in
wholesale marketing and aggregating of electricity, plant and fuels management,
utilities services and retail energy services. On January 30, 1996, Holdings and
Big Rivers Electric Corporation ("Big Rivers"), a generation and transmission
cooperative based in Henderson, Kentucky, signed a letter of intent providing
for PacifiCorp Kentucky Energy Company ("PKE"), a wholly owned subsidiary of
Holdings, to operate and manage Big Rivers' power plants under a 25-year
operating agreement.
Note 14 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, 1995, 77% of
PacifiCorp's revenues from operations were derived from Electric Operations,
while Pacific Telecom contributed 19%.
From time to time, the Company may issue forward-looking statements that
involve a number of risks and uncertainties. The following factors are among the
factors that could cause actual results to differ materially from the
forward-looking statements: utility commission practices; regional economic
conditions; weather variations affecting customer usage, competition in bulk
power markets and hydroelectric production; wholesale power marketing results;
environmental, regulatory and tax legislation; technological developments in the
electricity and telecommunications industries; and the cost of debt and equity
capital. Any forward-looking statements issued by the Company should be
considered in light of these factors.
The Company's common stock (symbol PPW) is traded on the New York and
Pacific Stock Exchanges. The Company's $1.98 No Par Serial Preferred Stock,
Series 1992, 8 3/8% Quarterly Income Debt Securities (Junior Subordinated
Deferrable Interest Debentures, Series A) and 8.55% Quarterly Income Debt
Securities (Junior Subordinated Deferrable Interest Debentures, Series B) are
traded on the New York Stock Exchange.
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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 over 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.
Principal industrial customers include oil and gas extraction, lumber and
wood products, paper and allied products, chemicals and primary metals and
mining companies. Agricultural products include potatoes, hay, grain and
livestock.
The geographical distribution of retail electric operating revenues for the
year ended December 31, 1995 was Utah, 37%; Oregon, 32%; Wyoming, 14%;
Washington, 8%; Idaho, 4%; California, 3%; and Montana, 2%.
CUSTOMERS
Electric utility revenues and energy sales, by class of customer, for the
three years ended December 31, 1995 were as follows:
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1995 1994 1993
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Operating Revenues (Dollars in millions):
Residential........................................ $ 721.9 28% $ 724.9 28% $ 698.9 29%
Commercial......................................... 575.9 23 570.4 22 543.9 22
Industrial......................................... 697.6 28 726.3 28 696.2 28
Government, Municipal and Other.................... 29.7 1 30.7 1 29.8 1
---------- --- ---------- --- ---------- ---
Total Retail Sales............................... 2,025.1 80 2,052.3 79 1,968.8 80
Wholesale Sales-Firm............................... 487.7 19 456.2 18 422.5 17
Wholesale Sales-Nonfirm............................ 32.3 1 76.5 3 77.3 3
---------- --- ---------- --- ---------- ---
Total Energy Sales............................... 2,545.1 100% 2,585.0 100% 2,468.6 100%
--- --- ---
--- --- ---
Other Revenues(1).................................. 71.0 62.8 38.3
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Total Operating Revenues......................... $ 2,616.1 $ 2,647.8 $ 2,506.9
---------- ---------- ----------
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Kilowatt-hours Sold (kWh in millions):
Residential........................................ 12,030 20% 12,127 21% 12,055 21%
Commercial......................................... 10,797 18 10,645 18 10,085 18
Industrial......................................... 19,748 33 20,306 34 19,671 34
Government, Municipal and Other.................... 592 1 623 1 602 1
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Total Retail Sales............................... 43,167 72 43,701 74 42,413 74
Wholesale Sales-Firm............................... 13,946 24 12,418 21 11,919 21
Wholesale Sales-Nonfirm............................ 2,430 4 3,207 5 3,030 5
---------- --- ---------- --- ---------- ---
Total kWh Sold................................... 59,543 100% 59,326 100% 57,362 100%
---------- --- ---------- --- ---------- ---
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(1) Includes miscellaneous and steam heating revenues.
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
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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 1995, no single retail customer accounted for more than 1.6% of the
Company's retail utility revenues and the 20 largest retail customers accounted
for 11.7% of total retail electric revenues.
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 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. In connection with these developments, the Company has filed open
access point-to-point and network integration tariffs with the FERC.
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 would include performance indexes 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 opened a wholesale power marketing office
in Nevada. A wholly owned subsidiary of Holdings, PacifiCorp Power Marketing,
has obtained authorization from the FERC to sell power at market prices
nationwide. 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 that are more dependent on hydroelectric generation than
the Company. During the winter, the Company is able to purchase power from
Southwest utilities,
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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 8,412.4 megawatts ("MW") and plant net capability of 7,995.2
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 1996 will be supplied by its hydroelectric plants and
76% by its thermal plants. The balance of 17% is expected to 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 long-term agreement that extends through August 1, 2011. The Company's current
annual payment under this agreement is $80.3 million. The agreement provides for
this amount to change at the rate of change 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. A proposed
decommissioning plan has been submitted to the Nuclear Regulatory Commission and
the State of Oregon. 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
($13.2 million at December 31, 1995) and estimated share of plant closure and
decommissioning costs ($15.1 million at December 31, 1995) 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 1995, the Company
purchased an average of 108 MW from qualifying facilities, compared to an
average of 102 MW in 1994.
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 10,082 MW occurred on February 2, 1996,
and historical on-system firm peak load of 7,678 MW occurred on February 2,
1996.
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 1995, wholesale sales accounted for
28% of total energy sales and 20% of total energy revenues.
In addition to its base of thermal and hydroelectric resources, the Company
utilizes a mix of long-term and short-term firm power purchases and nonfirm
purchases to meet its load obligations and to make sales to other utilities when
prices are favorable. Firm power purchases supplied 11% of the Company's total
energy requirements in 1995. Nonfirm purchases were 6% of total energy
requirements in 1995.
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.
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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. In 1995, the Company exercised its option to
purchase, subject to certain conditions, a 50% ownership interest in this
project for approximately $174 million. The payment is also contingent upon
commercial operation of the project, which is expected to occur in July 1996.
The Company built a 50 MW cogeneration project at the James River paper mill
in Camas, Washington. The steam royalty agreement extends for 20 years. The
facility uses steam produced for the paper making process to drive an electric
turbine generator and began commercial operation on January 1, 1996.
The Company plans to participate in two wind generation projects, a 68 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 1997. The
Company plans to own 55%, 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
1.4% since 1990. Although the sale of the Sandpoint, Idaho properties and the
closure of oil and gas wells in Wyoming have negatively impacted retail sales,
the Company has benefited from improved economic conditions in portions of its
service territory and the Company's commitment to price stability. 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 1996 to 2000, the average annual
growth is expected to be about 2%. Actual results will be determined by a
variety of factors, including 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 $40 million for demand-side resources in 1995, while
acquiring 30.9 average MW of energy efficiency.
5
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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 sales of electricity 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.
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. Some of the Company's plants have recently
modified their fuel supply systems or processes in order to meet air quality
standards. The Company recently received a notice of alleged violations of the
opacity limitations applicable to its Jim Bridger Power Plant. See Item 3.
"Legal Proceedings."
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.
The Company has also received a notice of additional violations at the Station
from the EPA. See Item 3. "Legal Proceedings."
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, this Federal
law has resulted in additional operating costs. The Company has installed
approximately $13 million of emission monitoring equipment and must 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
requirements and expansion plans and have enabled the Company to take advantage
of opportunities to sell surplus allowances to other utilities. The Company
recorded sales of surplus SO(2) allowances of $6 million and $9 million in 1995
and 1994, respectively. In 1995, the Company sold surplus NO(x) emissions
credits for $.6 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. The Company also has over 1,000 tons of surplus NO(x) emission credits
that originated from the retirement of the Hale generating station and emission
reductions at the Gadsby thermal generating plant in the state of Utah.
The Southwest Air Pollution Control Authority ("SWAPCA") has ordered 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. 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 RACT
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order has been appealed to the Washington Pollution Controls Hearings Board by a
private citizen who alleges that SWAPCA failed to consider adequately the
plant's emission impact on human health. A hearing has been scheduled for April
1996.
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 CO(2) emissions to an amount that
is 10% less than the emissions in 1990 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.
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. In recent periods,
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.
7
<PAGE>
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 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 statements.
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 the Company's ability to supply contracted irrigation
water in future drought years. 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
in the process of installing a different system 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.
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.
8
<PAGE>
On September 1, 1995, the Company filed a request with the Oregon Public
Utility Commission to raise prices in Oregon by an average of 3.8%. The proposed
rate increase amounts to $25 million annually and involves a performance-based
formula. The Company expects that any changes to prices under this filing would
not occur until July 1996. This would be the Company's first general rate
increase in Oregon since 1987.
On November 8, 1995, the Company filed a request with the Wyoming Public
Service Commission ("PSC") for an overall price increase averaging approximately
4% for its Wyoming customers. The proposed rate increase amounts to $10 million
annually and also involves a performance-based formula. The Company expects any
changes in prices under this filing to occur during the third quarter of 1996,
subject to approval from the Wyoming PSC. This would be the Company's first
price increase filing in Wyoming since 1986.
It is uncertain whether or not the Company's proposal or any other
alternative form of regulation will be adopted in these jurisdictions.
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 12 of the Company's
hydroelectric projects expire within the next 10 years. These projects represent
664 MW, or 62%, of the Company's hydroelectric generating capacity, or 8% of
total 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.
BPA, a wholesale power and wheeling supplier, increased its rates effective
October 1, 1995. The new rates increased the Company's capacity and wheeling
expenses by approximately $4 million annually and reduced the exchange benefits
directly received by the Company's residential and small farm customers by
approximately $10 million annually. The Company has received approval for price
increases that will allow it to recover the loss of exchange benefits.
On July 10, 1995, BPA issued its initial 1996 rate case proposal. This
proposal will be subject to a rate hearing which is expected to conclude May 31,
1996, with final wholesale power and wheeling rates to be effective October 1,
1996.
CONSTRUCTION PROGRAM
The following table shows actual construction costs for 1995 and the
Company's estimated construction costs for 1996 through 1998, including costs of
acquiring demand-side resources. The estimates of construction costs for 1996
through 1998 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
-------------------------------
TYPE OF FACILITY ACTUAL 1995 1996 1997 1998
- ------------------------------------------------------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
Production................................................... $ 106 $ 97 $ 97 $ 110
Transmission................................................. 17 38 47 45
Distribution................................................. 244 185 209 210
Mining....................................................... 19 25 42 43
Other........................................................ 69 106 80 85
----- --------- --------- ---------
Total...................................................... $ 455 $ 451 $ 475 $ 493
----- --------- --------- ---------
----- --------- --------- ---------
</TABLE>
9
<PAGE>
PACIFIC TELECOM
Pacific Telecom provides local telephone service and access to the long
distance network in Alaska, seven other western states and three midwestern
states. Pacific Telecom's sale of its long distance business, Alascom, Inc., to
AT&T Corp. was completed in August 1995. Pacific Telecom has acquired and is
developing, operating and managing cellular mobile telephone services in six
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 merger under which Holdings acquired the minority interest of Pacific
Telecom, see "Item 1. Business" of the Annual Report on Form 10-K of Pacific
Telecom, Inc. for the year ended December 31, 1995; such information is
incorporated herein by this reference.
OTHER
POWERCOR
GENERAL
On December 12, 1995, Holdings completed the acquisition of Powercor, an
Australian electric distribution company, from Victoria for approximately $1.6
billion in cash. The acquisition, which was structured through a series of
wholly owned United States and Australian companies, was financed with
borrowings of A$1.2 billion (approximately U.S. $900 million based on the
applicable exchange rate as of December 12, 1995) in Australia under a $984
million credit facility and with an equity contribution of $700 million from
Holdings that was initially financed with short-term debt in the United States
and an equity contribution from PacifiCorp. Holdings is not obligated with
respect to repayment of the Australian borrowings.
Powercor is one of five electricity distribution businesses ("DBs") formed
by Victoria, each comprising a geographically based, regulated distribution
network function and a retail function that supplies a combination of franchise
customers on a geographic basis and non-franchise or contestable customers on a
competitive basis. Powercor serves approximately 540,000 customers in suburban
Melbourne and the western and central regions of Victoria. Powercor's
distribution area covers approximately 57,915 square miles. This region is the
largest franchise area in Victoria, representing approximately 64% of the total
area of Victoria. The Powercor distribution area accounts for over 1,450,000
people (approximately 32% of Victoria's population).
Powercor's business is organized into two strategic divisions, Network and
Retail, which are supported by a corporate function providing various services,
including finance, strategic development, engineering and technology,
information technology, human resources, corporate affairs and company
secretarial. The key functions of Powercor's divisions are briefly described
below.
NETWORK
Network is responsible for the effective transportation of electrical energy
from the extra high voltage transmission network of Power Net Victoria ("PNV"),
a body corporate established under Victoria's Electricity Industry Act 1993 (the
"Electricity Act"), to Powercor's customers' points of supply. Network is a
regulated monopoly and must provide open access to large customers who purchase
energy directly from the wholesale market, embedded generators including
co-generation, other licensed distributors and licensed retailers, including the
Retail division of Powercor. Network's activities are divided into two
functions, Distribution and Construction, with support provided by a small
number of specialist groups.
Powercor's electrical distribution network comprises: (i) 66 kV and 22 kV
subtransmission lines and underground subtransmission cables that transport
wholesale energy from 11 terminal stations owned by PNV and controlled, under
lease, by the Victorian Power Exchange, a body corporate established under the
Electricity Act ("VPX"); (ii) 51 zone substations that transform electricity to
10
<PAGE>
lower voltages (22 kV and below) and then distribute the energy through the
distribution network; and (iii) 22 kV, 11 kV and 6.6 kV distribution lines,
including distribution substations that transform electricity to low voltages
(415 V and below) suitable for connection to the majority of the customers.
Powercor is party to the following key network contracts: (i) a grid
connection agreement with PNV; (ii) a grid use of system agreement with VPX; and
(iii) distribution use of system agreements with Solaris Power Ltd. and Eastern
Energy Ltd. (two of the five DBs formed by Victoria). The contracts define the
technical relationships at all grid interface points, together with commercial
relationships for the associated payments. Although payment for connections and
use of system is defined under the relevant contracts, pricing of all network
services is subject to regulatory overview.
Almost all customers within the Powercor franchise area are connected to
Powercor's distribution system and have no effective choice in the system over
which electricity is supplied to them. Customers may establish or increase their
capacity for own generation, become directly connected to the Victorian grid, or
relocate operations outside Powercor's franchise area.
There are currently 11 independent systems operating within Powercor's
distribution area that supply (one intermittently) electricity to Powercor's
network. They include Cabot Australia (Altona/16 MW), Lake Mulwala mini-hydro
plant (Yarrawonga/9 MW), GEC Alsthom Australia (Sunshine/7.7 MW) and Varnsdorf
(Geelong and Bendigo/5.6 MW at each site). The combined capacity of all
independent systems in Powercor's distribution area is 65.1 MW. Shell (Corio)
also generates on-site for a percentage of its needs, but currently does not
supply electricity to Powercor.
Construction operates as a major group within Network and provides
construction, maintenance and operational services to Powercor's distribution
network. It was established from the consolidation of the previous construction
and maintenance workforce distributed across Powercor's distribution area.
Construction has six strategically located centers in Victoria at Ballarat,
Bendigo, Geelong, Sunshine, Swan Hill and Warrnambool providing a full range of
functions and an additional 15 small satellite depots primarily providing
day-to-day operational services.
RETAIL
Retail conducts the commercial functions of purchasing, marketing and
selling of electricity and collecting sales revenue. Retail is responsible for
the management of the price, purchasing and volume risks associated with energy
sales and end-use demand management. Retail has the following principal
interfaces with other divisions within Powercor: (i) performs the sales,
marketing and customer service functions for Powercor; and (ii) administers
connections, metering and billing for Network.
The customer metered sites, energy demand and revenue percentages of
Powercor for the year ended December 31, 1995 are set forth below.
<TABLE>
<CAPTION>
ENERGY DEMAND(2)
CUSTOMER SITES(1)
-------------------- -------------------- REVENUE(2)
CUSTOMER SEGMENT NO. % GWH % %
- ----------------------------------------------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Residential.................................... 448,623 83 2,560 34 41
Commercial..................................... 47,475 9 1,388 19 23
Industrial..................................... 8,427 2 3,030 41 28
Farm........................................... 34,236 6 338 4 5
Public lighting and traction................... 1,460 -- 73 1 2
Other.......................................... 4 -- 75 1 1
--------- --- --------- --- ---
Total........................................ 540,225 100 7,464 100 100
--------- --- --------- --- ---
--------- --- --------- --- ---
</TABLE>
- ------------------------
(1) Connections as of December 31, 1995.
(2) For the year ended December 31, 1995.
Powercor's distribution area has a significant proportion of industrial
energy demand. As of December 31, 1995, industrial customers accounted for only
2% of customer sites, but, for the year
11
<PAGE>
ended December 31, 1995, such customers demanded approximately 3,000 GWh of
electricity and accounted for 28% of total electricity revenue. This compares to
Powercor's residential customers, who accounted for 83% of the total customer
sites at December 31, 1995 and 41% of total electricity revenue for the year
ended December 31, 1995. See "Regulation" for information concerning the
contestable profile of Powercor's customer base.
Retail's electricity revenue and load for the year ended December 31, 1995
were approximately A$745 million and 7,464 GWh, respectively. Electricity
revenue is derived from major industries such as chemicals, petroleum, food and
beverage, wholesale and retail, metal processing and transport equipment.
Powercor's largest customers include Smorgon Steel, Shell Refinery, Ford Motor
Company, Kemcor and Petroleum Refineries Australia. No single customer accounted
for more than 2% of Powercor's total revenue in 1995.
Powercor purchases all of its power, other than co-generation output,
through the VPX pool (the "Pool") for franchise customers. There are two major
components of the wholesale electricity market: (i) the competitive energy
market, centered around the Pool, which covers the sale of electricity by
generators; and (ii) the contract trade, involving bilateral financial contracts
between electricity buyers and sellers outside the Pool. The principal function
of the Pool is to allow market forces rather than monopolized central planning
to determine the amount, mix and cost characteristics of generating plants, and
the level and shape of demand. A spot price is determined for each half hour
period during the day, based on the market clearing price.
The Pool operations are governed by the Pool Rules developed by the industry
and issued by the Office of the Regulator General (the "ORG"), created by
Victoria's Office of the Regulator-General Act of 1994 (the "ORG Act"). Pool
trading is currently conducted through a system known as VicPool III. Each
licensed generator is required to sell its entire energy output through the
Pool, except if the electricity output from the generating unit, or a group of
generating units connected to the transmission or distribution network at a
common point of connection, is rated at less than 30 MW, in which case the
generator is not eligible to join the Pool.
Each retailer is required to purchase its entire demand for electricity
through the Pool unless the electricity is purchased from either a generator too
small to trade through the Pool or through another retailer who has purchased
that electricity from the Pool. A contestable customer may also apply to VPX to
become a participant in the Pool. New participants will be admitted to the Pool
if they satisfy VPX that they are of sufficient financial standing to meet their
financial obligations under the Pool Rules, including any prudential
requirements established by VPX, and will be able to maintain compliance with
certain system codes and wholesale metering codes.
Powercor is a party to a series of vesting contracts that have been
structured to hedge the price for the forecast franchise energy requirements
from July 1, 1995 to December 31, 2000. Vesting contracts take the form of
"two-way" and "one-way" contracts. Two-way contracts are structured such that
generators and DBs compensate each other for the difference between the System
Marginal Price ("SMP"), which is the price payable to generators in the
wholesale market, and the exercise price up to A$300/MWh. One way contracts
provide for amounts to be paid by generators to DBs for differences between the
SMP and the exercise price between A$300 and A$1,000/MWh.
Powercor has negotiated additional hedging contracts with the generators for
contestable customer loads. These non-vested contracts are optimized to fit a
generator's offering to the contestable load according to price, volume and load
factor constraints, while maintaining a minimum spread of supply sources among
generators.
12
<PAGE>
REGULATION
Powercor is one of the five electric DBs which came into existence as a
result of the restructuring and subsequent privatization of the Victorian
electric industry. The five DBs have each been granted an exclusive license to
sell electricity to franchise customers whose facilities are in its distribution
area, and a non-exclusive state wide license to sell to contestable customers.
Customers who are able to choose between retailers are referred to as
contestable or non-franchise customers, while customers who cannot choose
between retailers are referred to as franchise customers. Franchise customers
will progressively become contestable over the period to January 1, 2001. All
customers with loads in excess of one MW are now contestable. Other customers
will become contestable over the next five years depending on their energy
demand level, with substantially all residential customers remaining as
franchise customers until January 1, 2001. If a Powercor customer chooses a
different retailer, it is expected that Powercor will continue to receive the
Network revenues associated with that customer.
The following table sets forth information regarding the estimated
contestability profile of Powercor's customer base as of December 31, 1995.
<TABLE>
<CAPTION>
DATE FOR APPROXIMATE ESTIMATED % ESTIMATED REVENUE
INTRODUCTION OF NUMBER OF OF TOTAL (AUSTRALIAN DOLLARS
COMPETITION CUSTOMER LOAD DEMAND LEVEL CUSTOMERS(1) CONSUMPTION(2) IN MILLIONS)(2)
- ------------------------- --------------------------------- ------------ ------------------- -----------------------
<S> <C> <C> <C> <C>
December 1994............ Loads in excess of 5 MW 15 19 76
July 1995................ Loads in excess of 1 MW and less 103 15 73
than 5 MW
July 1996................ Energy demand in excess of 750 482 10 68
MWh/yr and loads less than 1 MW
July 1998................ Energy demand in excess of 160 1,504 6 56
MWh/yr and less than
750 MWh/yr
January 2001............. All remaining customers 538,121 50 472
</TABLE>
- ------------------------
(1) As of December 31, 1995.
(2) For the year ended December 31, 1995.
Regulation of the Victorian electricity supply industry is the
responsibility of the ORG, an independent regulatory body established under the
ORG Act. The ORG is required to facilitate efficiency in the industry and ensure
that users and consumers benefit from competition and efficiency in the
industry.
The structure of prices within the Victorian electricity industry reflects
the establishment of maximum uniform tariffs ("MUTs") which apply to franchise
customers and some limited categories of non-franchise customers until January
1, 2001. Under applicable regulations, the DBs are required to supply
electricity to franchise customers at no greater than the prices specified in
the applicable MUT. The prices specified in the MUTs are an all inclusive price,
including grid charges and energy costs. In general, annual movements in MUTs
for franchise customers are based upon the Consumer Price Index ("CPI"), a
measure of price inflation. DBs may, with the approval of the ORG, alter retail
tariffs either by varying the price components of existing tariffs (within the
prescribed price movement rate) or introducing new tariffs with the approval of
the ORG to which consumers may elect to transfer. Prices for contestable
customers are subject to competitive forces and overall prices are not directly
regulated by the ORG. However, the network tariff component of the contestable
price is regulated by the ORG.
Network tariffs include recovery of distribution use of system costs, use of
transmission system fees and PNV's connection charges. Network tariffs are
intended to cover the costs of providing,
13
<PAGE>
operating or maintaining the distribution network, except to the extent the
relevant costs are recoverable through connection charges or other excluded
services, and the charges levied by PNV and VPX for connection to and use of the
transmission systems. Network tariffs are paid by retailers supplying
electricity through a DB's distribution network, or by large customers dealing
directly with the Pool or are reflected in such DB's charges to its franchise
customers. Through December 31, 2000, the DBs have the ability to vary network
tariffs subject to the approval of the ORG. The approval process takes into
account a variety of factors, including the distribution charge price control,
the restrictions on annual variations of CPI plus 2% in any one year in the
average price for each of its network tariffs and restrictions designed to
ensure the DBs do not charge more in transmission and connection services than
they themselves are charged by PNV and VPX by way of connection and use of
system fees. After the year 2000, network tariffs will still be subject to
regulation by the ORG.
These retail and network prices are subject to regulation by the ORG, with
the regulatory arrangements being reviewed every five years. Pricing of the
competitive functions within the industry are also subject to market forces. The
first major review of the regulatory arrangements and respective transmission
and distribution network charges will be carried out by the ORG, with any
changes to apply from January 1, 2001. Any subsequent price control arrangements
for Network are required to apply for not less than five years.
PROPERTIES
In addition to Powercor's properties described above, Powercor leases its
principal executive offices at Level 3, 177 Southbank Boulevard, Southbank in
Victoria under a five-year lease with an option to renew for another five years.
Substantially all of the assets and stock of Powercor are pledged to secure the
obligations of PacifiCorp Australia LLC, an indirect subsidiary of the Company
and an indirect parent company of Powercor, under a credit facility used to
finance the acquisition of Powercor.
PACIFICORP FINANCIAL SERVICES
PFS is a holding company with two principal business segments, Financial
Services and Real Estate. PFS presently expects to retain only its
tax-advantaged investments in leveraged lease assets (primarily aircraft) and
affordable housing, and is limiting its pursuit of tax-advantaged investment
opportunities to affordable housing. To achieve PacifiCorp's strategic objective
of significantly reducing PFS's financial services assets, PFS has sold
substantial portions of its assets over the last five years. For the five-year
period ended December 31, 1995, PFS's total assets have declined by $984 million
to $702 million and the disposition of assets has generated $767 million in
proceeds, which have been used to reduce outstanding debt.
FINANCIAL SERVICES
As a result of PacifiCorp's strategic decision to reduce financial services
assets, PFS has made only limited new investments in aircraft or loans relating
to aircraft since 1991, and the last such investment was made in 1992. PFS's
portfolio consists primarily of Stage III noise compliant aircraft, both narrow
and widebody. At December 31, 1995, approximately 97% of aircraft in PFS's
portfolio investment were Stage III noise compliant. At December 31, 1995, PFS's
Aviation Finance portfolio had total leveraged lease and other financial assets
of $364 million (41 aircraft), representing approximately 52% of PFS's
consolidated assets.
Other financial services activities include centralized credit
administration and asset management for PFS. Although no longer originating new
business, PFS continues to manage its remaining lending portfolio and other
assets. At December 31, 1995, these assets totaled $152 million, or
approximately 22% of PFS's consolidated assets.
REAL ESTATE
Enacted as part of the Tax Reform Act of 1986, the Low Income Housing Tax
Credit (the "Tax Credit") provides a tax credit of approximately 9% of the
eligible basis of qualifying newly constructed
14
<PAGE>
low income housing projects each year for 10 years. The actual credit percentage
applicable to a new project is set at the outset of the project based on the
then current percentage announced by the Internal Revenue Service ("IRS"). The
Tax Credit percentage for new low income projects is set each month based on
changes in the "applicable federal rate," which is the arm's-length benchmark
interest rate set monthly by the IRS. In certain areas designated as "difficult
to develop" or "qualified census tracts," the project will receive 130% of the
normal credit amount. Although the Tax Credit is received over 10 years, it is
necessary to continue meeting the qualification standards for a longer period,
typically 15 years, in order to avoid recapture. Tax Credits are allocated by
the states to new projects annually on a competitive basis.
PFS shares interest in some of its multifamily residential rental projects
with third party investors. Typically, PFS retains a 20% or more limited
partnership interest and performs as the general partner while providing
extensive indemnifications relating to qualification for the Tax Credit and
deficit funding obligations.
At December 31, 1995, PFS had investments in 19 projects, consisting of
3,527 rental units, which were approximately 97% occupied. These projects, which
are generally suburban, garden style apartment complexes, are located throughout
the United States. Third parties participate as equity investors of up to an 80%
interest in seven of the 19 projects, representing 1,312 units. PFS expects to
complete similar transactions in the future. At December 31, 1995, affordable
housing assets totaled $186 million, representing approximately 26% of PFS's
consolidated assets.
COMPETITION
The only remaining business in which PFS continues to actively participate
is affordable housing. Within this market, PFS competes for Tax Credits with
owners and developers of residential rental properties, with investors who are
seeking acquisition transactions and with syndicators who are selling Tax
Credits to institutional investors. PFS's established projects have historically
had occupancy levels in excess of 95%. These projects are competitive as
compared to market rent projects because PFS's restricted rents are
significantly below market rates due to the economic subsidy provided by the Tax
Credit and PFS's adherence to a strong project maintenance and oversight
program.
The market for developing and acquiring projects having allocations of the
Tax Credit has become increasingly competitive. Many of the newer entrants are
willing to accept lower yields than PFS. As a result, PFS has migrated to the
development side of the business. By seeking its own allocation of Tax Credits
from the states, and acting as its own developer, PFS has been able to maintain
acceptable yields.
REGULATION
The affordable housing projects of PFS can only rent to eligible tenants in
order to maintain their qualification for, and avoid recapture of, the Tax
Credit. PFS monitors its compliance with Tax Credit requirements through various
controls, including site visits, central review of all tenant applications for
eligibility requirements and independent audits of certain projects. PFS's
management believes that these controls are effective in monitoring and
maintaining its compliance with the eligibility and qualification requirements.
The Tax Credit has been targeted for elimination as part of some recent tax
proposals, including H.R. 2491, which was passed by Congress, but ultimately
vetoed by the President on December 6, 1995. If such a provision becomes law, it
will terminate the origination side of the business. Current expectations are
that any such provision to terminate the Tax Credit would be effective only
after the end of 1997 and would not affect the Tax Credit available to PFS's
existing projects or additional projects in which it invests prior to the end of
1997.
15
<PAGE>
PACIFIC GENERATION COMPANY
PGC is engaged in the acquisition, development and operation of independent
power production and cogeneration facilities, principally in the United States.
PGC has interests in 12 power generation facilities representing an aggregate of
808 MW of generation capacity. At December 31, 1995, PGC also had a 3.1% limited
partnership interest and a $2 million investment in Energy Investors Fund, L.P.,
a fund that has investments in a number of independent power projects
aggregating 1,273.6 MW of generation capacity in various locations in the United
States.
During 1994, PGC, through its subsidiaries, began construction of a 248 MW
Crockett cogeneration facility in California. The Crockett facility produced
first energy late in 1995 and is expected to go into commercial operation in
April 1996. 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.
EMPLOYEES
PacifiCorp and its subsidiaries had 12,651 employees on December 31, 1995.
Of these employees, 8,966 were employed by PacifiCorp and its mining affiliates,
2,233 were employed by Pacific Telecom, 1,230 were employed by Powercor and 222
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. The Company believes that a significant portion of
Powercor's employees are represented by unions in Australia.
For information with respect to the employees of Pacific Telecom, see "Item
1. Business" of the Annual Report on Form 10-K of Pacific Telecom, Inc. for the
year ended December 31, 1995; such information is incorporated herein by this
reference.
In the Company's judgment, employee relations are satisfactory.
16
<PAGE>
ITEM 2. PROPERTIES
The Company owns 52 hydroelectric generating plants and has an interest in
one additional plant, with an aggregate nameplate rating of 1,078.1 MW and plant
net capability of 1,138.6 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 6,856.6 MW. The following table summarizes the
Company's existing generating facilities:
<TABLE>
<CAPTION>
NAMEPLATE PLANT NET
INSTALLATION RATING CAPABILITY
LOCATION ENERGY SOURCE DATES (MW) (MW)
--------------------- --------------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C>
HYDROELECTRIC PLANTS
Swift....................... Cougar, Washington Lewis River 1958 240.0 265.6
Merwin...................... Ariel, Washington Lewis River 1931-1958 136.0 144.0
Yale........................ Amboy, Washington Lewis River 1953 134.0 134.0
Five North Umpqua Plants.... Toketee Falls, Oregon N. Umpqua River 1950-1956 133.5 138.5
John C. Boyle............... Keno, Oregon Klamath River 1958 80.0 90.0
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 34.0
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 98.6* 100.9*
---------- -------
Subtotal (53 Hydroelectric Plants) 1,078.1 1,138.6
THERMAL ELECTRIC PLANTS
Jim Bridger................. Rock Springs, Wyoming Coal-Fired 1974-1979 1,495.0* 1,386.7*
Huntington.................. Huntington, Utah Coal-Fired 1974-1977 892.8 845.0
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 251.6 235.0
Carbon...................... Castle Gate, Utah Coal-Fired 1954-1957 188.6 175.0
Craig 1 and 2............... Craig, Colorado Coal-Fired 1979-1980 172.1* 165.0*
Colstrip 3 and 4............ Colstrip, Montana Coal-Fired 1984-1986 155.6* 144.0*
Hayden 1 and 2.............. Hayden, Colorado Coal-Fired 1965-1976 81.3* 78.0*
Blundell.................... Milford, Utah Geothermal 1984 26.1 23.0
Little Mountain............. Ogden, Utah Gas Turbine 1971 16.0 14.0
---------- -------
Subtotal (15 Thermal Electric Plants) 7,334.3 6,856.6
---------- -------
Total Hydro and Thermal Generating Facilities (68) 8,412.4 7,995.2
---------- -------
---------- -------
</TABLE>
- ------------------------------
* Jointly owned plants; amount shown represents the Company's share only.
NOTE: Hydroelectric project locations are stated by locality and river
watershed.
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.
17
<PAGE>
The following table describes the Company's recoverable coal reserves as of
December 31, 1995. 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 1996, 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 38(1)
Craig, Colorado............... Craig 72(2)
Glenrock, Wyoming............. Dave Johnston 54(1)
Emery County, Utah............ Huntington and Hunter 124(1)(3)
Rock Springs, Wyoming......... Jim Bridger 133(4)
</TABLE>
- ------------------------
(1) These reserves are mined by subsidiaries of the Company.
(2) These reserves are leased and mined by Trapper Mining Company, a wholly
owned subsidiary of Williams Fork Company, in which the Company owns
approximately 20% of the outstanding stock.
(3) These reserves are in underground mines.
(4) These reserves are leased and mined by Bridger Coal Company, a joint venture
between Pacific Minerals, Inc., a subsidiary of the Company, and a
subsidiary of Idaho Power Company. Pacific Minerals, Inc. has a two-thirds
interest in the joint venture.
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 1995, the Company expended $2.9 million of reclamation
costs and accrued $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, 1995, the Company's pro rata
portion of these reclamation funds totaled $32 million and the Company had an
accrued reclamation liability of $113 million at December 31, 1995.
For a description of the properties of Pacific Telecom, see "Item 1.
Business" and "Item 2. Properties" of the Annual Report on Form 10-K of Pacific
Telecom, Inc. for the year ended December 31, 1995; 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 financial
statements.
In April 1992, the Company acquired interests in two units at the Hayden
Generating Station (the "Station") located near Hayden, Colorado, which in total
average approximately 17.5% of each unit. The Public Service Company of Colorado
is the operator of the Station. On August 18, 1993, the
18
<PAGE>
Sierra Club filed an action against the Company and other joint owners of the
Station under the citizen's suit provisions of the federal Clean Air Act
alleging, based upon reports from emissions monitors at the Station, that over
19,000 violations of state and federal air quality regulations have occurred
(SIERRA CLUB V. PUBLIC SERVICE COMPANY OF COLORADO, INC., SALT RIVER PROJECT
AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, AND PACIFICORP, Case No. 93-B-1749,
U.S. District Court for the District of Colorado). The action seeks declaratory
and injunctive relief requiring the defendants to operate the Station in strict
compliance with applicable statutes and regulations, the imposition of civil
penalties, litigation costs, attorneys' fees and mitigation. The Court ruled as
a matter of law that the alleged violations occurred and that data from the
continuous emissions monitors at the Station are conclusive evidence of the
violations. The Tenth Circuit Court of Appeals denied the defendants' request
for an interlocutory appeal of that ruling. A trial on the injunctive phase of
the case has been set for May 1996. A trial date for the penalty phase of the
case has not been scheduled. On January 18, 1996, the EPA issued a notice of
violation with respect to the Station alleging over 28,000 additional violations
of air quality regulations. The Clean Air Act provides for penalties of up to
$25,000 per day for each violation, but the level of penalties imposed in any
particular instance is discretionary. The EPA initially proposed a civil penalty
of $24 million. The parties have been engaged in settlement discussions, and the
joint owners have expressed a willingness, subject to a number of conditions, to
install pollution control equipment at both units of the Station. The Company is
not able to predict the outcome of these discussions, the level of penalties or
other remedies that may be imposed upon the joint owners of the Station if a
settlement is not reached, or what portion of that liability would ultimately be
borne by the Company.
In December 1995, the Company received a Notice of Violation and Order
("NOV") from the Wyoming Department of Environmental Quality ("DEQ") alleging
that the Company has failed to maintain pollution control equipment at Unit 4 of
its Jim Bridger Power Plant in a manner consistent with good air pollution
control practices and alleging violations of the 30% opacity limitation in the
air quality permit issued for that Unit. The NOV states that the continuous
emissions monitors at the Unit show that violations have occurred, but does not
specify the number of alleged violations. The NOV orders the Company to identify
and perform any maintenance on Unit 4 required to bring emissions within the
allowable opacity standard, to perform certain stack tests to verify compliance
with particulate emission limitations and to submit a plan for the maintenance
and stack testing to DEQ for prior approval. Wyoming law provides for civil
penalties for violations of environmental laws not to exceed $10,000 for each
violation for each day during which violation continues, as well as temporary or
permanent injunctions. DEQ has not assessed a proposed civil penalty against the
Company or requested relief other than as ordered in the NOV. The Company has
requested a hearing on the NOV before the Wyoming Environmental Quality Council,
but the hearing has been indefinitely stayed pending discussions with DEQ
regarding a compliance plan to resolve the NOV. The Company is unable to predict
the outcome of the discussions, or of a hearing should the discussions fail to
resolve the NOV, or the amount of civil penalties, if any, that the Company may
ultimately be required to pay.
On March 1, 1996, a purported class action was filed against PacifiCorp
alleging negligence, nuisance and trespass by PacifiCorp as a result of the
operation of three dams on the Lewis River in the State of Washington during the
floods of February 1996 (LARRY AND BARBARA RAINEY, ET AL. V. PACIFICORP, Case
No. 96-2-00977-0, Superior Court of Washington for Clark County). Plaintiffs
request an unspecified amount of damages on behalf of the alleged class,
estimated by plaintiffs to have over 500 members, for injury to their property,
diminution of value of the related real estate and improvements, and
consequential damages in the form of lost income to businesses operating in the
flooded areas. The complaint also seeks injunctive relief compelling PacifiCorp
to establish additional warning systems downstream from the dams. PacifiCorp
believes that it operated the dams in an appropriate manner and intends to
vigorously defend this action.
On March 15, 1996, Utah Associated Municipal Power Systems ("UAMPS") filed
an action against PacifiCorp asserting 10 different causes of action, all
relating to the ownership interest of
19
<PAGE>
UAMPS in the Hunter Steam Electric Generating Unit No. II ("Hunter II") in Emery
County, Utah, which is operated by PacifiCorp. (UTAH ASSOCIATED MUNICIPAL POWER
SYSTEMS V. PACIFICORP, Civil No. 2:96CV 0240B, U.S. District Court for the
District of Utah, Central Division). The complaint alleges, among other things,
an illegal tying arrangement in the supply of coal by PacifiCorp to Hunter II,
violations of various federal and state antitrust laws, breach of contract and
breach of a duty of good faith and fair dealing. The complaint seeks damages in
excess of $1,000,000 with respect to each of several of the causes of action and
certain declaratory rulings.
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.
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.
Richard T. O'Brien, born March 20, 1954, Senior Vice President and Chief
Financial Officer of the Company and Senior Vice President and Chief Financial
Officer of PacifiCorp Holdings, Inc.
Mr. O'Brien was elected Senior Vice President and Chief Financial Officer of
the Company in August 1995, and of PacifiCorp Holdings in February 1996. He
served as Vice President of the
20
<PAGE>
Company from August 1993 to August 1995. 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.
Daniel L. Spalding, born December 23, 1953, Chairman and Chief Executive
Officer of Powercor, Senior Vice President of the Company and Senior Vice
President of PacifiCorp Holdings, Inc.
Mr. Spalding was elected Chairman and Chief Executive Officer of Powercor in
December 1995 and 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.
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 and
PacifiCorp Holdings, Inc.
Mr. Peressini was elected Treasurer of the Company in January 1994 and of
PacifiCorp Holdings in February 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.
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 24 and 41 of the Company's
Annual Report to Shareholders and is incorporated herein by this reference.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included under "Summary
Information" on page 24 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," "Electric Operations," "Telecommunications," "Other" and
"Liquidity and Capital Resources" on pages 24 through 40 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 1996 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 1996 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 1996 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 1996 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 1996 Annual Meeting of Shareholders.
22
<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.......... 42
Statements of consolidated income and
retained earnings for each of the
three years ended December 31,
1995................................. 43
Consolidated balance sheets at
December 31, 1995 and 1994........... 44
Statements of consolidated cash flows
for each of the three years ended
December 31, 1995.................... 46
Notes to consolidated financial
statements........................... 47
2. Schedules:**
</TABLE>
- ------------------------
* Page references are to the incorporated portion of the Annual Report to
Shareholders of the Registrant for the year ended December 31, 1995.
** All 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.)
*(2)c -- Asset Sale Agreement between Powercor Australia Limited and
PacifiCorp Australia Holdings Pty Ltd. (Exhibit 2.1, Form
8-K dated December 12, 1995, File No. 0-873).
*(2)d -- Share Sale Agreement between the State Electricity
Commission of Victoria and the State of Victoria and
PacifiCorp Australia Holdings Pty Ltd. and PacifiCorp
Holdings, Inc. (Exhibit 2.2, Form 8-K dated December 12,
1995, File No. 0-873).
*(2)e -- Asset Purchase Agreement between PacifiCorp Australia
Holdings Pty Ltd. and Powercor Australia Limited. (Exhibit
2.3, Form 8-K dated December 12, 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 May 10,
1995).
*(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 ten 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); Exhibit 4(a),
Form 10-Q for the quarter ended June 30, 1994, File No.
1-5152; and Exhibit 4b, Form 10-K for the fiscal year ended
December 31, 1994, File No. 1-5152).
</TABLE>
23
<PAGE>
<TABLE>
<C> <C> <S>
(4)b -- Eleventh Supplemental Indenture dated as of December 1, 1995
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
fifty-three 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; Exhibit 4(b), Form 10-Q for the quarter
ended June 30, 1994, File No. 1-5152; and Exhibit (4)d, Form
10-K for fiscal year ended December 31, 1994, File No.
1-5152).
(4)d -- Fifty-fourth Supplemental Indenture dated as of December 1,
1995 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-five 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
</TABLE>
24
<PAGE>
<TABLE>
<C> <C> <S>
No. 2-59660; Exhibit 2(e), File No. 2-28131; Exhibit 2(e),
File No. 2-59660; Exhibit 2(e), File No. 2-36342; Exhibit
2(e), File No. 2-39394; Exhibits 2(h) and 2(i), File No.
2-59660; Exhibit 2(d), File No. 2-51736; Exhibit 2(c), File
No. 2-54812; Exhibit 2(c), File No. 2-55331; Exhibit 2(c),
File No. 2-55762; Exhibit 2(d), File No. 2-56990; Exhibit
2(e), File No. 2-56990; Exhibits 2(c) and 2(d), File No.
2-58227; Exhibit 2(r), File No. 2-59660; Exhibits 2(c) and
2(d), File No. 2-61221; Exhibit 2(c), File No. 2-63813;
Exhibit 2(c), File No. 2-65221; Exhibit 2(c)-1, File No.
2-66680; Exhibits 4(b) and 4(c)-1, File No. 2-74773; Exhibit
4(d), File No. 2-80100; Exhibits 4(d)-2 and 4(d)-3, File No.
2-76293; Exhibit 4(b), File No. 33-9932; Exhibit 4(b), File
No. 33-13207; Exhibits 4(a) and 4(b), File No. 33-01890;
Exhibit 4(b), Form 8-K dated January 9, 1989, File No.
1-5152; Exhibit (4)(f), File No. 33-31861; Exhibit (4)(c),
Form 8-K dated January 9, 1990, File No. 1-5152; Exhibit
4(c), Form 8-K dated September 11, 1991, File No. 1-5152;
Exhibit 4(c), Form 8-K dated January 7, 1992, File No.
1-5152; Exhibit 4(c), Form 10-Q for the quarter ended March
31, 1992, File No. 1-5152; Exhibit 4(c), Form 10-Q for the
quarter ended September 30, 1992, File No. 1-5152; Exhibit
4(c), Form 8-K dated April 1, 1993, File No. 1-5152; Exhibit
4(c), Form 10-Q for the quarter ended September 30, 1993,
File No. 1-5152; Exhibit 4(c), Form 10-Q for the quarter
ended June 30, 1994, File No. 1-5152; and Exhibit (4)f, Form
10-K for fiscal year ended December 31, 1994, File No.
1-5152).
(4)f -- Fifty-sixth Supplemental Indenture dated as of December 1,
1995 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% 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) (Exhibit (10)b, Form 10-K for fiscal year ended
December 31, 1994, File No. 1-5152).
*+(10)b -- PacifiCorp Compensation Reduction Plan dated December 1,
1994, as amended (Exhibit (10)b, Form 10-K for fiscal year
ended December 31, 1994, File No. 1-5152).
*+(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 Executive Incentive Program.
*+(10)e -- PacifiCorp Non-Employee Directors' Stock Compensation Plan
dated August 1, 1985, as amended. (Exhibit (10)f, Form 10-K
for fiscal year ended December 31, 1994, File No. 1-5152).
*+(10)f -- PacifiCorp Long Term Incentive Plan, 1993 Restatement
(Exhibit 10G, Form 10-K for the year ended December 31,
1993, File No. 0-873).
*+(10)g -- 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)h -- PacifiCorp Supplemental Executive Retirement Plan, as
amended.
</TABLE>
25
<PAGE>
<TABLE>
<C> <C> <S>
*+(10)i -- 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)j -- Pacific Telecom Long Term Incentive Plan 1994 Restatement
dated as of January 1, 1994 (Exhibit 10F, Form 10-K for the
fiscal year ended December 31, 1993, File No. 0-873).
*+(10)k -- Pacific Telecom Executive Officer Severance Plan (Exhibit
10N, Form 10-K for the year ended December 31, 1994, File
No. 0-873).
*+(10)l -- 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)m -- 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)n -- 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)o -- Amendment No. 1 to Compensation Agreement between PacifiCorp
and Keith R. McKennon dated as of February 9, 1995. (Exhibit
(10)r, Form 10-K for the fiscal year ended December 31,
1994, File No. 1-5152).
*(10)p -- 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)q -- 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.
(Exhibit (10)t, Form 10-K for the fiscal year ended December
31, 1994, File No. 1-5152).
(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, 1995 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
Report on Form 10-K of Pacific Telecom, Inc. for the year
ended December 31, 1995.
</TABLE>
- ------------------------
* Incorporated herein by reference.
+ This exhibit constitutes a management contract or compensatory plan or
arrangement.
26
<PAGE>
(b) Reports on Form 8-K.
On Form 8-K dated November 15, 1995, under "Item 5. Other Events," the
Company filed a press release reporting a proposed acquisition of an
electricity distributor in Australia.
On Form 8-K dated December 12, 1995, under "Item 2. Acquisition or
Disposition of Assets," the Company reported the acquisition of Powercor
Australia, Limited and under "Item 7. Financial Statements, Pro Forma
Information and Exhibits," the Company filed financial statements for
businesses acquired and pro forma financial information.
On Form 8-K dated January 16, 1996, under "Item 5. Other Events," the
Company reported information with respect to an environmental compliance
matter at the Jim Bridger Power Plant Unit 4.
On Form 8-K dated February 12, 1996, under "Item 5. Other Events," the
Company filed a press release reporting financial results for the three and
twelve months ended December 31, 1996.
(c) See (a) 3. above.
(d) See (a) 2. above.
27
<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 28, 1996
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 28, 1996
(President)
/s/ RICHARD T. O'BRIEN
------------------------------------------- Senior Vice President
Richard T. O'Brien (Chief Financial Officer and March 28, 1996
(Senior Vice President) Accounting Officer)
*KATHRYN A. BRAUN
-------------------------------------------
Kathryn A. Braun
*C. TODD CONOVER
-------------------------------------------
C. Todd Conover
Director March 28, 1996
*RICHARD C. EDGLEY
-------------------------------------------
Richard C. Edgley
*NOLAN E. KARRAS
-------------------------------------------
Nolan E. Karras
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------
<C> <S> <C>
*KEITH R. MCKENNON
-------------------------------------------
Keith R. McKennon
(Chairman)
*ROBERT G. MILLER
-------------------------------------------
Robert G. Miller
*VERL R. TOPHAM
-------------------------------------------
Verl R. Topham
Director March 28, 1996
*DON M. WHEELER
-------------------------------------------
Don M. Wheeler
*NANCY WILGENBUSCH
-------------------------------------------
Nancy Wilgenbusch
*PETER I. WOLD
-------------------------------------------
Peter I. Wold
*By /s/ NANCY WILGENBUSCH
--------------------------------------
Nancy Wilgenbusch
(Attorney-in-Fact)
</TABLE>
29
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
*(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.).................................................
*(2)c Asset Sale Agreement between Powercor Australia Limited and
PacifiCorp Australia Holdings Pty Ltd. (Exhibit 2.1, Form
8-K dated December 12, 1995, File No. 0-873)................
*(2)d Share Sale Agreement between the State Electricity
Commission of Victoria and the State of Victoria and
PacifiCorp Australia Holdings Pty Ltd. and PacifiCorp
Holdings, Inc. (Exhibit 2.2, Form 8-K dated December 12,
1995, File No. 0-873).......................................
*(2)e Asset Purchase Agreement between PacifiCorp Australia
Holdings Pty Ltd. and Powercor Australia Limited. (Exhibit
2.3, Form 8-K dated December 12, 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 May 10,
1995).......................................................
*(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 ten 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); Exhibit 4(a),
Form 10-Q for the quarter ended June 30, 1994, File No.
1-5152; and Exhibit 4b, Form 10-K for the fiscal year ended
December 31, 1994, File No. 1-5152).........................
(4)b Eleventh Supplemental Indenture dated as of December 1, 1995
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
fifty-three 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
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; Exhibit 4(b), Form 10-Q for the
quarter ended June 30, 1994, File No. 1-5152; and Exhibit
(4)d, Form 10-K for fiscal year ended December 31, 1994,
File No. 1-5152)............................................
(4)d Fifty-fourth Supplemental Indenture dated as of December 1,
1995 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-five 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
No. 2-63813; Exhibit 2(c), File No. 2-65221; Exhibit 2(c)-1,
File No. 2-66680; Exhibits 4(b) and 4(c)-1, File No.
2-74773; Exhibit 4(d), File No. 2-80100; Exhibits 4(d)-2 and
4(d)-3, File No. 2-76293; Exhibit 4(b), File No. 33-9932;
Exhibit 4(b), File No. 33-13207; Exhibits 4(a) and 4(b),
File No. 33-01890; Exhibit 4(b), Form 8-K dated January 9,
1989, File No. 1-5152; Exhibit (4)(f), File No. 33-31861;
Exhibit (4)(c), Form 8-K dated January 9, 1990, File No.
1-5152; Exhibit 4(c), Form 8-K dated September 11, 1991,
File No. 1-5152; Exhibit 4(c), Form 8-K dated January 7,
1992, File No. 1-5152; Exhibit 4(c), Form 10-Q for the
quarter ended March 31, 1992, File No. 1-5152; Exhibit 4(c),
Form 10-Q for the quarter ended September 30, 1992, File No.
1-5152; Exhibit 4(c), Form 8-K dated April 1, 1993, File No.
1-5152; Exhibit 4(c), Form 10-Q for the quarter ended
September 30, 1993, File No. 1-5152; Exhibit 4(c), Form 10-Q
for the quarter ended June 30, 1994, File No. 1-5152; and
Exhibit (4)f, Form 10-K for fiscal year ended December 31,
1994, File No. 1-5152)......................................
(4)f Fifty-sixth Supplemental Indenture dated as of December 1,
1995 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% 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) (Exhibit (10)b, Form 10-K for fiscal year ended
December 31, 1994, File No. 1-5152).........................
*+(10)b PacifiCorp Compensation Reduction Plan dated December 1,
1994, as amended (Exhibit (10)b, Form 10-K for fiscal year
ended December 31, 1994, File No. 1-5152)...................
*+(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 Executive Incentive Program......................
*+(10)e PacifiCorp Non-Employee Directors' Stock Compensation Plan
dated August 1, 1985, as amended. (Exhibit (10)f, Form 10-K
for fiscal year ended December 31, 1994, File No. 1-5152)...
*+(10)f PacifiCorp Long Term Incentive Plan, 1993 Restatement
(Exhibit 10G, Form 10-K for the year ended December 31,
1993, File No. 0-873).......................................
*+(10)g 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)h PacifiCorp Supplemental Executive Retirement Plan, as
amended.....................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------ ------------
<S> <C> <C>
*+(10)i 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)j Pacific Telecom Long Term Incentive Plan 1994 Restatement
dated as of January 1, 1994 (Exhibit 10F, Form 10-K for the
fiscal year ended December 31, 1993, File No. 0-873)........
*+(10)k Pacific Telecom Executive Officer Severance Plan (Exhibit
10N, Form 10-K for the year ended December 31, 1994, File
No. 0-873)..................................................
*+(10)l 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)m 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)n 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)o Amendment No. 1 to Compensation Agreement between PacifiCorp
and Keith R. McKennon dated as of February 9, 1995. (Exhibit
(10)r, Form 10-K for the fiscal year ended December 31,
1994, File No. 1-5152)......................................
*(10)p 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)q 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.
(Exhibit (10)t, Form 10-K for the fiscal year ended December
31, 1994, File No. 1-5152)..................................
(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, 1995 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
Report on Form 10-K of Pacific Telecom, Inc. for the year
ended December 31, 1995.....................................
</TABLE>
- ------------------------
* Incorporated herein by reference.
+ This Exhibit constitutes a management contract or compensatory plan or
arrangement.
<PAGE>
BYLAWS EXHIBIT [3][b]
OF
PACIFICORP
AS AMENDED EFFECTIVE MAY 10, 1995
ARTICLE I
OFFICES
The principal office of the Company in the State of Oregon shall be in the
City of Portland, County of Multnomah. The Company may have such other offices,
either within or without the State of Oregon, as the Board of Directors may
designate or as the business of the Company may, from time to time, require.
ARTICLE II
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be held
on the third Wednesday in the month of May in each year, unless a different date
is fixed by the Board of Directors, at such time and place as are fixed by the
Board of Directors and stated in the notice of the meeting. The failure to hold
an annual meeting at the time stated herein shall not affect the validity of any
corporate action.
2.2 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman of the Board, the President or the Board of Directors and shall be
called by the Chairman of the Board or the President upon the written demand,
describing the purpose or purposes for which the meeting is to be held, signed,
dated and delivered to the Company's Secretary, of the holders of not less than
one-tenth of all the outstanding votes of the Company entitled to be cast on any
issue proposed to be considered at the meeting.
2.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at such
place, within or without the State of Oregon, as may be designated by the Board
of Directors.
2.4 NOTICE OF MEETINGS. Written or printed notice stating the date, time
and place of the meeting and, in the case of a special meeting or where
otherwise required by law, the purpose or purposes for which the meeting is
called shall be mailed by the Secretary to each shareholder entitled to vote at
the meeting, and if required by law, to such additional shareholders as are
entitled to receive notice, at the shareholder's address shown in the Company's
stock transfer books, with postage thereon prepaid, not less than 10 nor more
than 60 days before the date of the meeting.
2.5 FIXING OF RECORD DATE. For the purpose of determining shareholders
entitled to notice of a shareholders' meeting, to demand a special meeting, to
vote or to take any other action, or shareholders entitled to receive payment of
any dividend, or in order to make a
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determination of shareholders for any other proper purpose, the Board of
Directors of the Company may fix a future date as the record date for any such
determination of shareholders, such date in any case to be not more than 70 days
nor, in the case of a meeting, less than 10 days before the meeting or action
requiring a determination of shareholders. The record date for any meeting, vote
or other action of the shareholders shall be the same for all voting groups.
2.6 SHAREHOLDERS' LIST FOR MEETING. After a record date for a meeting has
been fixed, the Company shall prepare an alphabetical list of the names of all
its shareholders entitled to notice of the shareholders' meeting. The list shall
be arranged by voting group and within each voting group by class or series of
shares and show the address of and number of shares held by each shareholder.
The shareholders' list shall be available for inspection by any shareholder,
upon proper demand as may be required by law, beginning two business days after
notice of the meeting is given for which the list was prepared and continuing
through the meeting, at the Company's principal office or at a place identified
in the meeting notice in the city where the meeting will be held. The Company
shall make the shareholders' list available at the meeting, and any shareholder
or the shareholder's agent or attorney shall be entitled to inspect the list at
any time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders' list does not affect the validity of action
taken at the meeting.
2.7 QUORUM; ADJOURNMENT.
(a) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
in that matter.
(b) A majority of votes represented at the meeting, whether or not a
quorum, may adjourn the meeting from time to time to a different time and place
without further notice to any shareholder of any adjournment, except as may be
required by law. At such adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting
originally held.
(c) Once a share is represented for any purpose at a meeting, it
shall be deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is set for the
adjourned meeting. A new record date shall be set if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
2.8 VOTING REQUIREMENTS; ACTION WITHOUT MEETING.
(a) If a quorum exists, action on a matter, other than the election
of directors, is approved if the votes cast by the shares entitled to vote
favoring the action exceed the votes cast opposing the action, unless a greater
number of affirmative votes is required by law or the Company's Restated
Articles of Incorporation. If any share of capital stock of the Company is
entitled to more or less than one vote on any matter, every reference in these
Bylaws to a majority or other proportion of shares shall refer to such a
majority or other proportion of votes entitled to be cast.
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(b) Action required or permitted by law to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
Secretary for inclusion in the minutes or filing with the Company's records.
Such action shall not be effective unless, at least 10 days before the action is
taken, any non-voting shareholder entitled to notice of the proposed action is
given written notice of the proposed action as required by law. Action taken
under this section is effective when the last shareholder signs the consent,
unless the consent specifies an earlier or later effective date.
2.9 PROXIES. A shareholder may vote shares in person or by proxy by
signing an appointment. A shareholder may appoint a proxy by signing an
appointment form either personally or by the shareholder's attorney-in-fact. An
appointment of a proxy shall be effective when received by the Secretary or
other officer of the corporation authorized to tabulate votes.
2.10 NOTICE OF BUSINESS. At any meeting of the shareholders, only such
business shall be conducted as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any shareholder of the
Company who is a beneficial or record holder at the time of giving of the notice
provided for in this Section 2.10, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.10. For
business to be properly brought before a shareholder meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made, notice by the shareholder to be timely must be
received no later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address of
the shareholder proposing such business, (c) the class and number of shares of
the Company which are beneficially owned by the shareholder and (d) any material
interest of the shareholder in such business. If the shareholder is not a
shareholder of record at the time of giving the notice, the notice shall be
accompanied by appropriate documentation of the shareholder's claim of
beneficial ownership. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at a shareholder meeting except in accordance
with the procedures set forth in this Section 2.10. The officer presiding at the
meeting shall, if in the officer's opinion the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of these Bylaws, and if such officer should so
determine, such officer shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Section 2.10, a shareholder shall also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder with respect to the matters
set forth in this Section 2.10.
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2.11 NOMINATION OF DIRECTORS. Only persons who are nominated in accordance
with the procedures set forth in these Bylaws shall be eligible to serve as
directors. Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders (a) by or at the direction of
the Board of Directors or (b) by any shareholder of the Company who is a
beneficial or record holder at the time of giving of notice provided for in this
Section 2.11, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section
2.11. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a shareholder's notice shall be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made, notice by the shareholder to be timely must be so
received not later than the close of business on the 10th day following the day
on which such notice of the date of the meeting or such public disclosure was
made. Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the shareholder giving the notice (i) the name and address of such shareholder
and (ii) the class and number of shares of the Company which are beneficially
owned by such shareholder. If the shareholder is not a shareholder of record at
the time of giving the notice, the notice shall be accompanied by appropriate
documentation of the shareholder's claim of beneficial ownership. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary that information required
to be set forth in a shareholder's notice of nomination which pertains to the
nominee. No person shall be eligible to serve as a director of the Company
unless nominated in accordance with the procedures set forth in this Section
2.11. The officer presiding at the meeting shall, if in the officer's opinion
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if such
officer should so determine, such officer shall so declare to the meeting and
the defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 2.11, a shareholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Section 2.11.
2.12 CONDUCT OF MEETING. The officer presiding at any meeting of the
shareholders shall have authority to determine the agenda and order of business
at the meeting and to adopt such rules and regulations as may be necessary or
desirable to promote the fair and efficient conduct of the business of the
meeting.
ARTICLE III
BOARD OF DIRECTORS
3.1 DUTIES OF BOARD OF DIRECTORS; ELECTION. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under
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the direction of, its Board of Directors, which shall be divided into three
classes, as nearly equal in number as possible, with one class being elected
each year. Members of a class shall be elected by the shareholders, by a
plurality of the votes cast at the meeting.
3.2 NUMBER, ELECTION AND QUALIFICATION. The exact number of directors may,
within the limits of not less than nine (9) nor more than twenty-one (21) set
forth in Article VI of the Company's Restated Articles of Incorporation, be
fixed and increased or decreased from time to time by resolution of the Board of
Directors. Directors shall hold office for a term of three years, and until
their successors are elected and qualified or the number of directors is
decreased; provided, however, that the term of office of any director shall not
extend beyond the regular quarterly meeting of the Board of Directors following
the date the director reaches age 70; and, provided further, that the term of
any director who is also an employee of the Company shall expire at the date of
the employee's retirement as an employee. No reduction in the number of
directors shall shorten the term of any incumbent director.
3.3 REGULAR MEETINGS. The Board of Directors may provide the time and
place, either within or without the State of Oregon, for the holding of regular
meetings of the Board of Directors without other notice.
3.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or any
two directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Oregon, as the place for holding any special meeting of the Board of Directors
called by them.
3.5 NOTICE. Notice of the date, time and place of any special meeting of
the Board of Directors shall be given at least 48 hours prior to the meeting by
notice communicated in person, by telephone, telegraph, teletype or other form
of wire or wireless communication, or by mail or private carrier. If mailed,
notice shall be deemed effective when deposited in the United States mail
addressed to the director at the director's business address, with postage
thereon prepaid. Notice by all other means shall be deemed effective when
received by or on behalf of the director. Except as otherwise provided by law or
in the Company's Restated Articles of Incorporation, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
3.6 QUORUM. A majority of the total number of directors fixed in
accordance with Section 3.2 of these Bylaws shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. If less than a
quorum is present at a meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice.
3.7 MANNER OF ACTING. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors, unless a different number is provided by law, the Restated Articles
of Incorporation or these Bylaws.
3.8 VACANCIES. Any vacancy, including a vacancy resulting from an increase
in the number of directors, occurring on the Board of Directors may be filled by
the shareholders, the
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Board of Directors or the affirmative vote of a majority of the remaining
directors if less than a quorum of the Board of Directors or by a sole remaining
director. Any directorship not filled by the directors shall be filled by
election at an annual meeting or at a special meeting of shareholders called for
that purpose; if the vacant office was held by a director elected by a voting
group of shareholders, then only the holders of shares of that voting group are
entitled to vote to fill the vacancy. A director elected to fill a vacancy shall
be elected to serve until the next meeting of shareholders at which directors
are elected and shall continue to serve until a successor shall be elected and
qualified or there is a decrease in the number of directors. A vacancy that will
occur at a specific later date, by reason of a resignation or otherwise, may be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.
3.9 COMPENSATION. By resolution of the Board of Directors, the directors
may be paid a reasonable compensation for their services as directors, and their
expenses, if any, of attendance at each meeting of the Board of Directors;
provided, that no director who is also a full-time officer or employee of the
Company shall receive additional compensation as a director. No such payment
shall preclude any director from serving the Company in any other capacity and
receiving compensation therefor.
3.10 PRESUMPTION OF ASSENT. A director of the Company who is present at a
meeting of the Board of Directors or a committee of the Board of Directors shall
be deemed to have assented to the action taken unless (a) the director's dissent
or abstention from the action is entered in the minutes of the meeting, (b) the
director delivers a written notice of dissent or abstention to the action to the
presiding officer of the meeting before the adjournment thereof or to the
Company immediately after the adjournment of the meeting or (c) the director
objects at the beginning of the meeting or promptly upon the director's arrival
to the holding of the meeting or transacting business at the meeting. The right
to dissent or abstain shall not apply to a director who voted in favor of the
action.
3.11 EXECUTIVE COMMITTEE. The Board of Directors, as soon as may be after
its election in each year, shall by resolution adopted by a majority of all the
Directors in office when the action is taken, designate from among its members
an Executive Committee to consist of the officer designated as Chief Executive
Officer and two or more other directors. Such Committee shall have and may
exercise all of the powers of the Board during the intervals between its
meetings which may be lawfully delegated, subject to such limitations as may be
provided by resolution of the Board. The Board shall have the power at any time
to change the membership of such Committee and to fill vacancies in it. The
Executive Committee may make rules for the conduct of its business and may
appoint such committees and assistants as it may deem necessary. A majority of
the members of such Committee shall be a quorum. The Executive Committee shall
elect one of its members as chairman.
3.12 OTHER COMMITTEES. The Board of Directors, by resolution adopted by a
majority of all the Directors in office when the action is taken, from time to
time may establish, fix the membership, define the duties and appoint the
members of each of such other committees of the Board of Directors as it shall
determine. One-third of the members of each such other committee, but in no case
fewer than two directors, shall be a quorum of the committee.
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ARTICLE IV
OFFICERS
4.1 NUMBER. The officers of the Company shall be a Chairman of the Board
(who shall be a Director of the Company), a President, one or more Vice
Presidents (who may be distinguished from one another by such designations as
the Board of Directors may specify), a Secretary, a Treasurer, and if the Board
of Directors shall deem such an officer desirable, a Controller. Each of the
aforesaid officers shall be appointed by the Board of Directors. The Board of
Directors shall designate one of the officers of the Company (who shall also be
a Director of the Company) as Chief Executive Officer. Other officers and
assistant officers may be appointed as determined by the Board of Directors. Any
two or more offices may be held by the same person.
4.2 APPOINTMENT AND TERM OF OFFICE. With the exception of the initial
appointment of any new officer or assistant officer, or the initial election of
an officer to another or different office, which may be at any meeting of the
Board of Directors, the officers of the Company shall be appointed annually at
the first meeting of the Board of Directors held after each annual meeting of
the shareholders. If the appointment of officers shall not be held at such
meeting, such appointment shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until a successor shall have been duly
appointed and shall have qualified or until such officer's death, resignation,
or removal from office in the manner hereinafter provided.
4.3 REMOVAL. Any officer or agent appointed by the Board of Directors may
be removed by the Board of Directors with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. The appointment of an officer does not itself create contract rights.
4.4 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors and shall perform other duties
assigned by the Board of Directors.
4.6 PRESIDENT. The President shall perform all duties incident to the
office of President and such other duties assigned by the Board of Directors.
4.7 VICE PRESIDENTS. Each of the Vice Presidents shall perform such duties
as from time to time may be assigned by the Chief Executive Officer or the Board
of Directors.
4.8 TREASURER. The Treasurer shall perform the duties usually pertaining
to such office and such other duties as from time to time may be assigned by the
Chief Executive Officer or the Board of Directors. The Treasurer shall give a
bond for faithful discharge of the Treasurer's duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
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4.9 SECRETARY. The Secretary shall have the responsibility for preparing
minutes of all meetings of the directors and shareholders and for authenticating
records of the Company. The Secretary shall in addition perform other duties
assigned by the Chief Executive Officer or the Board of Directors.
4.10 OTHER OFFICERS. Other officers and assistant officers shall perform
such duties as from time to time may be assigned to each of them by the Chief
Executive Officer or the Board of Directors.
4.11 SALARIES. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary because the officer is also a director of the Company.
ARTICLE V
INDEMNIFICATION
The Company shall indemnify to the fullest extent not prohibited by law any
person who is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative, or otherwise
(including an action, suit or proceeding by or in the right of the Company) by
reason of the fact that the person is or was a director, officer, employee or
agent of the Company or a fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit plan
of the Company, or serves or served at the request of the Company as a director,
officer, employee or agent, or as a fiduciary of an employee benefit plan, of
another corporation, partnership, joint venture, trust or other enterprise. The
Company shall pay for or reimburse the reasonable expenses incurred by any such
person in any such proceeding in advance of the final disposition of the
proceeding to the fullest extent not prohibited by law. This Article shall not
be deemed exclusive of any other provisions for indemnification or advancement
of expenses of directors, officers, employees, agents and fiduciaries that may
be included in any statute, bylaw, agreement, general or specific action of the
Board of Directors, vote of shareholders or otherwise.
ARTICLE VI
ISSUANCE OF SHARES
6.1 CERTIFICATES FOR SHARES.
(a) Certificates representing shares of the Company shall be in form
determined by the Board of Directors. Such certificates shall be signed by the
Chairman of the Board, the President or a Vice President, and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be
sealed with the seal of the Company or a facsimile thereof. All certificates for
shares shall be consecutively numbered or otherwise identified. The signatures
of officers upon a certificate may be facsimiles.
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(b) Every certificate for shares of stock that are subject to any
restriction on transfer pursuant to the Restated Articles of Incorporation, the
Bylaws, applicable securities laws, agreements among or between shareholders or
any agreement to which the Company is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction and that the Company retains a
copy of the restriction. Every certificate issued when the Company is authorized
to issue more than one class or series of stock shall set forth on its face or
back either the full text of the designations, relative rights, preferences and
limitations of the shares of each class and series authorized to be issued and
the authority of the Board of Directors to determine variations for future
series or a statement of the existence of such designations, relative rights,
preferences and limitations and a statement that the Company will furnish a copy
thereof to the holder of such certificate upon written request and without
charge.
(c) All certificates surrendered to the Company for transfer shall be
canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Company as the Board of
Directors prescribes.
6.2 TRANSFER OF SHARES. Transfer of shares of the Company shall be made
only on the stock transfer books of the Company by the holder of record thereof
or by the holder's legal representative, who shall furnish proper evidence of
authority to transfer, or by the holder's attorney thereunto authorized by power
of attorney duly executed.
6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from time to
time appoint one or more transfer agents and one or more registrars for the
shares of the Company, with such powers and duties as the Board of Directors
determines by resolution.
6.4 OFFICER CEASING TO ACT. If the person who signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
7.1 CONTRACTS. The Board of Directors may authorize any officer or
officers, or agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Company, and such authority
may be general or confined to specific instances.
7.2 LOANS. No loans shall be contracted on behalf of the Company and no
evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the Company shall be signed
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by such officer or officers, or agent or agents of the Company and in such
manner as shall from time to time be determined by resolution of the Board of
Directors.
7.4 DEPOSITS. All funds of the Company not otherwise employed shall be
deposited from time to time to the credit of the Company in such banks, trust
companies or other depositaries as the Board of Directors or officers of the
Company designated by the Board of Directors may select; or be invested as
authorized by the Board of Directors.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 SEAL. The corporate seal of the Company shall be circular in form and
shall bear an inscription containing the name of the Company, the year 1910 and
the state of incorporation.
8.2 SEVERABILITY. Any determination that any provision of these Bylaws is
for any reason inapplicable, invalid, illegal or otherwise ineffective shall not
affect or invalidate any other provision of these Bylaws.
8.3 WAIVER OF NOTICE.
(a) A shareholder may at any time waive any notice required by these
Bylaws, the Restated Articles of Incorporation or the provisions of any
applicable law. Such waiver shall be in writing, be signed by the shareholder
entitled to the notice and be delivered to the Company for inclusion in the
minutes for filing with the corporate records. A shareholder's attendance at a
meeting waives objection to (i) lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting and (ii)
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
(b) A director may at any time waive any notice required by these
Bylaws, the Restated Articles of Incorporation or the provisions of any
applicable law. Except as set forth below, such waiver must be in writing, be
signed by the director entitled to the notice, must specify the meeting for
which notice is waived and must be filed with the minutes or corporate records.
A director's attendance at or participation in a meeting waives any required
notice to the director of the meeting unless the director at the beginning of
the meeting, or promptly upon the director's arrival, objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
8.4 ENGINEERING DECISIONS IN WASHINGTON. Engineering decisions pertaining
to any project or engineering activities in the State of Washington shall be
made by the engineer designated by or in accordance with resolutions of the
Board of Directors.
ARTICLE IX
AMENDMENTS
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The Company's Bylaws may be amended or repealed or new bylaws may be made:
(a) by the affirmative vote of the holders of record of a majority of the
outstanding capital stock of the Company entitled to vote thereon, irrespective
of class, given at any annual or special meeting of the shareholders; provided
that notice of the proposed amendment, repeal or new bylaw or bylaws be included
in the notice of such meeting or waiver thereof; or (b) by the affirmative vote
of a majority of the entire Board of Directors given at any regular meeting of
the Board, or any special meeting thereof; provided that notice of the proposed
amendment, repeal or new bylaw or bylaws be included in the notice of such
meeting or waiver thereof or all of the directors at the time in office be
present at such meeting.
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EXHIBIT (4)b
[CONFORMED COPY]
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PACIFICORP
(AN OREGON CORPORATION)
TO
CHEMICAL BANK
(A NEW YORK CORPORATION)
AS TRUSTEE UNDER PACIFICORP'S
MORTGAGE AND DEED OF TRUST,
DATED AS OF JANUARY 9, 1989
----------------------
ELEVENTH SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 1995
SUPPLEMENTAL TO PACIFICORP'S MORTGAGE AND DEED OF TRUST
DATED AS OF JANUARY 9, 1989
----------------------
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ELEVENTH SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of December, 1995, made
and entered into by and between PACIFICORP, a corporation of the State of
Oregon, whose address is 700 NE Multnomah, Portland, Oregon 97232 (hereinafter
sometimes called the "Company"), and CHEMICAL BANK, a New York corporation whose
address is 450 West 33rd Street, New York, New York 10001 (the "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 "Eleventh 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
Eleventh 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
WHEREAS, the Company has executed, delivered, recorded and filed
Supplemental Indentures as follows:
Dated as of
-----------
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
Tenth August 1, 1994;
<PAGE>
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 various 250,000,000 $240,000,000
Notes, Series A
Third --Medium-Term various 200,000,000 160,000,000
Notes, Series B
Fourth --Medium-Term various 300,000,000 281,874,714
Notes, Series C
Fifth --Medium-Term various 250,000,000 250,000,000
Notes, Series D
Sixth --C-U various 250,432,000 185,288,000
Seventh --Medium-Term various 500,000,000 500,000,000
Notes, Series E
Eighth --6 3/4% 4/1/2005 150,000,000 150,000,000
Ninth --Medium-Term various 500,000,000 500,000,000
Notes, Series F
Tenth --E-L various 71,200,000 71,200,000
Eleventh --Medium-Term various 100,000,000 100,000,000
Notes, Series G
Twelfth --1994-1 various 216,470,000 216,470,000;
</TABLE>
and
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,
2
<PAGE>
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 three 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
Eleventh Supplemental Indenture, and the terms of the bonds of the Thirteenth,
Fourteenth and Fifteenth Series herein referred to, have been duly authorized by
the Board of Directors in or pursuant to appropriate Resolutions;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
ARTICLE I
GRANTING CLAUSE
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 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,
3
<PAGE>
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 (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 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
4
<PAGE>
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 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 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
5
<PAGE>
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 Eleventh 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 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 II
THIRTEENTH SERIES OF BONDS
SECTION 2.01. There shall be a series of bonds designated "Adjustable
Rate Replacement Series" (herein sometimes referred to as the Thirteenth
Series), each of which shall also bear the descriptive title "First Mortgage and
Collateral Trust Bond," and the form thereof, which shall be in substantially
the form of attached Exhibit A, shall contain suitable provisions with respect
to the matters hereinafter in this Section specified.
6
<PAGE>
(I) Bonds of the Thirteenth Series shall mature on November 1, 2002,
and shall be issued as fully registered bonds in the denomination of One
Thousand Dollars and, at the option of the Company, of any multiple or multiples
of One Thousand Dollars (the exercise of such option to be evidenced by the
execution and delivery thereof).
(II) Bonds of the Thirteenth Series shall bear interest at the
variable rates specified in the Bonds of the Thirteenth Series, payable semi-
annually on May 1 and November 1, of each year, commencing May 1, 1996, and have
such other terms and provisions as set forth in the form attached hereto. Bonds
of the Thirteenth Series shall be dated and shall accrue interest from November
1, 1995.
(III) The principal of and interest on each bond of the Thirteenth
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. The person in whose name any bond of the Thirteenth Series is registered
at the close of business on any record date (as hereinafter defined) for the
Thirteenth Series with respect to any interest payment date shall be entitled to
receive the interest payable on such interest payment date (except that in case
of any redemption of bonds as provided for herein on a date subsequent to the
record date for the Thirteenth Series and prior to such interest payment date,
interest on such redeemed bonds shall be payable only to the date fixed for
redemption thereof and only against surrender of such bonds for redemption in
accordance with the notice of such redemption) notwithstanding the cancellation
of such bond upon any transfer or exchange thereof subsequent to the record date
for the Thirteenth Series and prior to such interest payment date, except if,
and to the extent that, the Company shall default in the payment of the interest
due on such interest payment date, in which case such defaulted interest shall
be paid to the persons in whose names outstanding bonds of the Thirteenth Series
are registered on the day immediately preceding the date of payment of such
defaulted interest. Any bond of the Thirteenth Series issued upon any transfer
or exchange subsequent to the record date for the Thirteenth Series for any
interest payment date and prior to such interest payment date shall bear
interest from such interest payment date. The term "record date for the
Thirteenth Series" as used with respect to any interest payment date shall mean
the fifteenth day of the calendar month next preceding such interest payment
date.
(IV) Each bond of the Thirteenth Series may be redeemable at any time
on or after November 1, 1996 and prior to maturity at the option of the Company,
at the following redemption prices:
If redeemed during the twelve months ending on the thirty-first
day of October,
1997 ............. 104.41% 2000 ............. 101.76%
1998 ............. 103.53% 2001 ............. 100.88%
7
<PAGE>
1999 ............. 102.64% 2002 ............. 100.00%
(V) At the option of the registered owner, any bonds of the
Thirteenth 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.
(VI) Bonds of the Thirteenth Series shall be transferable, subject to
any restrictions thereon set forth in any such bond of the Thirteenth 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 Thirteenth 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 Thirteenth Series.
(VII) After the execution and delivery of this Eleventh Supplemental
Indenture and upon compliance with the applicable provisions of the Mortgage and
this Eleventh Supplemental Indenture, it is contemplated that there shall be an
issue of bonds of the Thirteenth Series in an aggregate principal amount not to
exceed Thirteen Million Two Hundred Thirty-Four Thousand Dollars ($13,234,000).
Bonds of the Thirteenth Series shall be issued pro rata on the basis of
Class "A" Bonds of the Fifty-ninth Series, designated "Adjustable Rate
Replacement Series," issued under each of the Utah 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
Thirteenth Series issued and Outstanding on the basis of such Class "A" Bond.
(IX) 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-ninth Series, designated "Adjustable Rate
Replacement Series Bonds," issued under the Utah Mortgage and the Pacific
Mortgage which exceeds the principal amount of bonds of the Thirteenth Series
then Outstanding and stating the amount of such excess and the principal amount
of any such Class "A" Bonds to be canceled) 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 Thirteenth 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 Thirteenth Series then
Outstanding. Upon cancellation of any such principal amount of Class "A" Bonds,
the Trustee shall receive from the corporate trustee
8
<PAGE>
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 canceled.
ARTICLE III
FOURTEENTH SERIES OF BONDS
SECTION 3.01. The terms defined in this Article III shall, for purposes
of this Article III, have the meaning specified, unless the context otherwise
requires:
The term "Loan Agreement" shall mean the Loan Agreement dated as
of July 22, 1987, entered into among the Company, the Agent, and the Lenders (as
defined below), as such Loan Agreement has been amended by that certain First
Amendment to Loan Agreement, dated as of December 1, 1995.
The term "Lenders" shall mean The Long-Term Credit Bank of
Japan, Limited, and The Dai-Ichi Mutual Life Insurance Company, and their
successors and assigns.
The term "Advance" shall mean the amounts borrowed under the
Loan Agreement.
The term "Agent" shall mean The Long-Term Credit Bank of Japan,
Limited, and any duly appointed successor, in its capacity as agent for the
Lenders for the purpose of holding the Bonds of the Fourteenth Series (as
defined below) as security for the Advance, interest thereon and other amounts
payable under the terms of the Loan Agreement and the Security Agreement (as
defined in the Loan Agreement) between the Company and the Agent relating
thereto.
SECTION 3.02. There shall be a series of bonds designated "9 3/8%
Replacement Series Due 1997" (herein sometimes referred to as the Fourteenth
Series), each of which shall also bear the descriptive title "First Mortgage and
Collateral Trust Bond," and which shall be in substantially the form of attached
Exhibit B and shall contain suitable provisions with respect to the matters
hereinafter in this Section specified.
(I) Bonds of the Fourteenth Series shall mature on July 22, 1997,
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 Fourteenth Series shall bear interest at the rate
of nine and three-eighths per centum (9 3/8%) per annum, payable semi annually
on January 22 and July 22 of each year, commencing January 22, 1996, and have
such other terms and
9
<PAGE>
provisions as set forth in the form attached hereto. Bonds of the Fourteenth
Series shall be dated the date of authentication and shall accrue interest from
July 22, 1995.
(III) The principal of and interest on each bond of the Fourteenth
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.
(IV) Bonds of the Fourteenth Series shall be redeemable in whole at
any time upon receipt by the Trustee of a written demand (hereinafter referred
to as the "Redemption Demand") from the Agent, which Redemption Demand shall be
received not less than 60 days prior to the redemption date stated therein. The
Redemption Demand shall be signed by a General Manager and Agent, Vice President
and Deputy General Manager, or Assistant Vice President and Manager of the Agent
and shall state (1) the principal amount of bonds of the Fourteenth Series to be
redeemed (which shall be equal to the aggregate principal amount of the then
outstanding Bonds of the Fourteenth Series), (2) the redemption date
(hereinafter referred to as the "redemption date"), (3) that the redemption
required by the Redemption Demand is the result of the Advance then outstanding
under the Loan Agreement having been declared immediately due and payable
pursuant to the provisions of the Loan agreement (hereinafter referred to as an
"Acceleration"), (4) that the Trustee shall call for redemption on the
redemption date the stated principal amount of bonds of the Fourteenth Series,
and (5) that the Agent, as holder of all the bonds of the Fourteenth Series then
outstanding, waives any notice of such redemption required to be given under the
Mortgage. The redemption date stated in the Redemption Demand shall not be less
than 60 days after the receipt thereof by the Trustee, provided that the
provisions of this Article III shall not be construed as limiting any rights of
the Agent, as holder of the bonds of the Fourteenth Series pursuant to Article
XV of the Mortgage and, provided, further, that if after receipt of the
Redemption Demand and prior to the redemption date the Trustee shall have been
advised in writing by the Agent, signed in the same manner as the Redemption
Demand, that the Acceleration has been rescinded, such Redemption Demand shall
thereupon without further act of the Trustee be rescinded and become null and
void for all purposes hereunder and no redemption of the bonds of the Fourteenth
Series and no payment in respect thereof shall be effected or required.
Promptly after receiving the Redemption Demand the Trustee shall mail a copy
thereof to the Company; provided, however, that failure to mail a copy of the
Redemption Demand shall not affect the validity of the proceedings for the
redemption of the bonds of the Fourteenth Series. The Trustee may conclusively
rely on the statements and instructions contained the Redemption Demand.
Redemption of bonds of the Fourteenth Series shall be at the principal amount
thereof, together with accrued interest to the redemption date, and such amount
shall become and be due and payable on the redemption date. The Company hereby
covenants that, if a Redemption Demand shall be delivered to the Trustee, the
Company, subject to Paragraph (VI) of this Section 3.02, will deposit, on or
before the business day preceding the redemption date, with the Trustee, an
amount in cash sufficient to redeem the bonds of
10
<PAGE>
the Fourteenth Series so called for redemption. To the extent the method of
redemption provided for in this Paragraph (IV) conflicts with any provisions of
Article XII of the Mortgage, such provisions of Article XII shall not be
applicable.
(V) At any time and from time to time upon receipt by the Trustee of
bonds of the Fourteenth Series, together with a written order from the Agent
signed in the same manner as a Redemption Demand (i) specifying the principal
amount of bonds of the Fourteenth Series to be canceled and the reason therefor
and (ii) directing the Trustee to cancel the bonds so delivered or to make such
endorsements thereon as shall be appropriate pursuant to Section 12.04 of the
Mortgage to evidence the cancellation of the principal amount of bonds of the
Fourteenth Series stated in clause (i) to be canceled, the Trustee shall cancel
such stated principal amount of bonds of the Fourteenth Series. The Trustee may
conclusively rely on the statements and instructions contained in such order.
(VI) The obligation of the Company to make payments with respect to
the principal of and interest on bonds of the Fourteenth Series shall be fully
or partially, as the case may be, satisfied and discharged to the extent that,
at the time that any such payment shall be due, the then due principal of and
interest on the Advance shall have been fully or partially paid. Satisfaction
of any obligation to the extent that payment is made with respect to the Advance
means that if any payment is made on the principal of or interest on the
Advance, a corresponding payment obligation with respect to the principal of or
interest on the Bonds shall be deemed discharged in the same proportion as the
payment with respect to the Advance discharges the outstanding obligation with
respect to the Advance. The Trustee may conclusively presume that the
obligation of the Company to make payments with respect to the principal of and
interest on bonds of the Fourteenth Series shall have been fully satisfied and
discharged unless and until the Trustee shall have received a written notice
from the Agent, signed by a General Manager and Agent, Vice President and Deputy
General Manager or Assistant Vice President and Manager, stating (i) that timely
payment of the principal of or interest on the Advance has not been made and
(ii) the amount of funds required to make such payment of principal or interest
or both, as the case may be. The Trustee may conclusively rely on the
statements contained in the notice described in the preceding sentence.
(VII) Bonds of the Fourteenth Series shall only be transferable
(subject to the provisions of Section 2.08 of the Mortgage), upon the surrender
thereof, for cancellation, together with a written instrument of transfer in
form approved by the Company 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, to a successor to the Agent pursuant to the
Loan Agreement, and such bonds of the Fourteenth Series will have the following
legend imprinted thereon:
"This Bond has not been registered under the Securities
Act of 1933, as amended, and may not be offered or sold in
contravention of said Act and
11
<PAGE>
is not transferable except to a successor Agent under the Loan
Agreement, dated as of July 22, 1987 among PacifiCorp, The Long-Term
Credit Bank of Japan, Limited, as agent, and the financial institutions
named therein, as amended."
(VIII) Upon any transfer of bonds of the Fourteenth 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 2.08 of the Mortgage, but the
Company hereby waives any right to make a charge in addition thereto for any
transfer of bonds of the Fourteenth Series.
After the execution and delivery of this Eleventh Supplemental Indenture
and upon compliance with the applicable provisions of the Mortgage, as
supplemented, it is contemplated that there shall be an issue of bonds of the
Fourteenth Series for the aggregate principal amount of Fifty Million United
States Dollars ($50,000,000).
(IX) 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 Sixtieth Series, designated "First Mortgage
Bond 9 3/8% Replacement Series Due 1997," issued under the Utah Mortgage and the
Pacific Mortgage, which exceeds the principal amount of bonds of the Fourteenth
Series then Outstanding and stating the amount of such excess and the principal
amount of any such Class "A" Bonds to be canceled) 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
Fourteenth 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
Fourteenth 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 canceled.
ARTICLE IV
FIFTEENTH SERIES OF BONDS
SECTION 4.01. There shall be a series of bonds designated "Bond Credit
Series Bonds" (herein sometimes referred to as the Fifteenth 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.
12
<PAGE>
(I) Bonds of the Fifteenth 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 Fifteenth 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 Fifteenth Series shall be dated and shall accrue interest
as provided in Section 2.06 of the Mortgage.
Interest payable on any bond of the Fifteenth Series and punctually paid
or duly provided for on any interest payment date for such bond will be paid to
the person in whose name the bond is registered at the close of business on the
Record Date (as hereinafter specified) for such bond next preceding such
interest payment date; provided, however, that the first payment of interest on
any bond with an Issue Date (as hereinafter specified) between a Record Date and
an interest payment date will be made on the interest payment date following the
next succeeding Record Date to the registered owner on such next Record Date
(unless the Company elects, in its sole discretion, to pay such interest on the
first interest payment date after the Issue Date, in which case such interest
will be paid to the person in whose name the bond is originally issued),
provided, further, that interest payable at maturity or upon earlier redemption
will be payable to the person to whom principal shall be payable. The "Record
Date" with respect to bonds of the Fifteenth Series of a designated interest
rate and maturity shall be determined by or in accordance with a Resolution
filed with the Trustee. "Issue Date" with respect to bonds of the Fifteenth
Series of a designated interest rate and maturity shall mean the date of first
authentication of bonds of such designated interest rate and maturity.
Any interest on any bond of the Fifteenth Series which is
payable but is not punctually paid or duly provided for, on any interest payment
date for such bond (herein called "Defaulted Interest"), shall forthwith cease
to be payable to the registered owner on the relevant Record Date for the
payment of such interest solely by virtue of such owner having been such owner;
and such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in subsection (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest on the bonds of the Fifteenth Series to the persons in whose
names such bonds are registered at the close of business on a Special
Record Date (as hereinafter defined) for the payment of such Defaulted
Interest, which shall be fixed in the following manner: The Company
shall, at least 30 days prior to the proposed date of payment, notify
the Trustee in writing (signed by an Authorized Financial Officer of
13
<PAGE>
the Company) of the amount of Defaulted Interest proposed to be paid on
each bond of the Fifteenth Series and the date of the proposed payment
(which date shall be such as will enable the Trustee to comply with the
next sentence hereof), and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit on or prior to
the date of the proposed payment, such money when deposited to be held
in trust for the benefit of the persons entitled to such Defaulted
Interest as in this subsection provided and not to be deemed part of the
Mortgaged and Pledged Property. Thereupon, the Trustee shall fix a
record date (herein referred to as a "Special Record Date") for the
payment of such Defaulted Interest which date shall be not more than 15
nor less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date, and in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each registered owner of a bond of the Fifteenth Series at
his address as it appears in the bond register not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the
persons in whose names the bonds of the Fifteenth Series are registered
at the close of business on such Special Record Date and shall no longer
be payable pursuant to the following subsection (ii).
(ii) The Company may make payment of any Defaulted Interest on
the bonds of the Fifteenth Series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such bonds may be listed and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this subsection, such payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each bond of the
Fifteenth Series delivered under the Mortgage upon transfer of or in exchange
for or in lieu of any other bond shall carry all the rights to interest accrued
and unpaid, and to accrue, which were carried by such other bond and each such
bond shall bear interest from such date, that neither gain nor loss in interest
shall result from such transfer, exchange or substitution.
(III) The principal of and interest on each bond of the Fifteenth
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.
14
<PAGE>
(IV) Each bond of the Fifteenth 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.
(V) Each bond of the Fifteenth 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 Fifteenth 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
Fifteenth 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 Fifteenth Series shall be transferable, subject to
any restrictions thereon set forth in any such bond of the Fifteenth 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, her or its 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 Fifteenth 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 Fifteenth Series.
(IX) After the execution and delivery of this Eleventh Supplemental
Indenture and upon compliance with the applicable provisions of the Mortgage and
this Eleventh Supplemental Indenture, it is contemplated that there shall be an
issue of bonds of the Fifteenth Series in an aggregate principal amount not to
exceed Four Hundred Ninety-Eight Million Five Hundred Eighty-Nine Thousand Seven
Hundred Fifty-Three Dollars ($498,589,753). Bonds of the Fifteenth Series shall
be issued on the basis of Class "A" Bonds of the Sixty-first Series, designated
"Bond Credit Series Bonds," issued under each of the Utah 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 Fifteenth Series issued and Outstanding on the basis of such
Class "A" Bond.
15
<PAGE>
(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 Sixty-first, designated "Bond Credit Series
Bonds," issued under the Utah Mortgage and the Pacific Mortgage which exceeds
the principal amount of bonds of the Fifteenth Series then Outstanding and
stating the amount of such excess and the principal amount of any such Class "A"
Bonds to be canceled) 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 Fifteenth 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 Fifteenth 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 canceled.
ARTICLE V
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS REGARDING
PROPERTIES EXCEPTED FROM LIEN OF MORTGAGE
SECTION 5.01. 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
Thirteenth Series, the Fourteenth Series and the Fifteenth 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:
"(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 VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. The right, if any, of the Company to assert the defense
of usury against a holder or holders of bonds of the Thirteenth Series, the
16
<PAGE>
Fourteenth Series, the Fifteenth Series or any subsequent series shall be
determined only under the laws of the State of New York.
SECTION 6.02. The terms defined in the Mortgage shall, for all purposes
of this Eleventh Supplemental Indenture, have the meanings specified in the
Mortgage.
SECTION 6.03. 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 Eleventh 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
Eleventh 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
Eleventh Supplemental Indenture.
SECTION 6.04. Whenever in this Eleventh 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 covenants and agreements
in this Eleventh 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 6.05. Nothing in this Eleventh 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 Eleventh Supplemental Indenture or
any covenant, condition, stipulation, promise or agreement hereof, and all the
covenants, conditions, stipulations, promises and agreements in this Eleventh
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 6.06. This Eleventh 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.
17
<PAGE>
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 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 /s/ R. F. LANZ
----------------------------
Vice President
Attest:
s/s LENORE M. MARTIN
- -------------------------------------
Assistant Secretary
CHEMICAL BANK
as Trustee
By s/s F. J. GRIPPO
----------------------------
Vice President
Attest:
s/s GLENN G. MCKEEVER
- -------------------------------------
Senior Trust Officer
18
<PAGE>
STATE OF OREGON )
)ss.:
COUNTY OF MULTNOMAH )
On this 7th day of December, 1995, before me, Sheryl L.
Stratton, a Notary Public in and for the State of Oregon, personally appeared
Robert F. Lanz and Lenore M. Martin, 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.
s/s SHERYL L. STRATTON
---------------------------------
My commission expires: 5/25/96
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On this 13th day of December, 1995, before me, Emily Fayan, a
Notary Public in and for the State of New York, personally appeared F. J. Grippo
and Glenn G. McKeever, 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.
s/s EMILY FAYAN
---------------------------------
[SEAL] Notary Public, State of New York
No. 24-4737006
Qualified in Kings County
Commission expires:
December 31, 1995
19
<PAGE>
EXHIBIT A
PACIFICORP
ADJUSTABLE RATE REPLACEMENT SERIES
(A SERIES OF
FIRST MORTGAGE AND COLLATERAL TRUST BONDS)
No. $
Dated:
PACIFICORP, an Oregon corporation (hereinafter called the Company), for
value received, hereby promises to pay to or registered
assigns, on November 1, 2002, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, the sum of Dollars, 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, and to pay interest thereon
(computed on the basis of a 360-day year of twelve 30-day months) from the May 1
or November 1 next preceding the date hereof, or, if no interest has been paid
on the bonds of this series, from November 1, 1995, at a rate per annum
determined as provided in paragraph 2 hereof, until the principal hereof shall
become due and payable, and thereafter at a rate per annum 1% greater than said
rate so determined from time to time on any overdue principal and premium, and
(to the extent permitted by applicable law) on any overdue interest, in like
coin or currency at such office or agency on May 1 and November 1 in each year,
commencing May 1, 1996, until the Company's obligation with respect to the
payment of such principal shall have been discharged, provided that the interest
so payable on any May 1 or November 1 will, subject to certain exceptions set
out in the supplemental indenture dated as of November 1, 1995 hereinafter
mentioned, be paid to the person in whose name this bond (or any bond or bonds
previously outstanding in transfer or exchange for which this bond was issued)
is registered at the close of business on the April 15 or October 15, as the
case may be, next preceding such interest payment date.
1. This bond is one of an issue of bonds of the Company issuable in
series and is one of a series known as its First Mortgage and Collateral Trust
Bonds, Adjustable Rate Replacement Series, to be issued under and equally
secured by a Mortgage and Deed of Trust (herein, together with any indenture
supplemental thereto, including the supplemental indenture dated as of December
1, 1995, called the Mortgage), dated as of January 9, 1989 executed by the
Company to Morgan Guaranty Trust Company of New York, as Trustee (Chemical Bank,
successor). Reference is made to the Mortgage for a description of the property
mortgaged and pledged, the nature and extent of the security, the rights of the
holders of the bonds and of the Trustee in respect thereof, the duties and
immunities of the Trustee and the terms and conditions upon which the bonds are,
and are to be, secured, the circumstances under which additional bonds may be
issued and the definitions of certain terms hereinafter used.
<PAGE>
With the consent of the Company and to the extent permitted by and in
the manner provided in the Mortgage, the rights and obligations of the Company
and/or the rights of the holders of the bonds and/or coupons and/or the terms
and provisions of the Mortgage may be modified or altered by affirmative vote of
the holders of at least sixty per centum (60%) in principal amount of bonds then
Outstanding under the Mortgage, all voting as a single class or, if the rights
of the holders of one or more, but less than all, series of bonds then
Outstanding are to be adversely affected, then by affirmative vote of the
holders of at least sixty per centum (60%) in principal amount of those bonds
then Outstanding so to be adversely affected, all voting as a single class
(excluding in any case bonds disqualified from voting by reason of the Company's
interest therein as provided in the Mortgage); provided that no such
modification or alteration shall, without the consent of the holder hereof,
impair or affect the right of the holder to receive payment of the principal of
(and premium, if any) and interest on this bond, on or after the respective due
dates expressed herein, or to institute suit for the enforcement of any such
payment on or after such respective dates, or permit the creation of any lien
ranking equal or prior to the Lien of the Mortgage or deprive the holder of the
benefit of a lien on the Mortgaged and Pledged Property or reduce the percentage
vote required to effect such modifications or alterations.
The Company has reserved the right, without any consent or other
action by holders of bonds of the Eighth series known as First Mortgage and
Collateral Trust Bonds 6 3/4% series due April 1, 2005, or any series of bonds
subsequently created under the Mortgage (including the bonds of this series), to
amend the Mortgage in order to except from the Lien of the Mortgage 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 as now in effect or as hereafter supplemented or amended.
2. Interest on this bond is payable at a rate per annum determined as
follows:
A. Interest on this bond is payable (i) at the rate of 10% per annum
for the period from the date hereof to and including October 31, 1996*, and
(ii) at a rate per annum equal to the Adjusted Rate (as defined below) for
the 12-month period thereafter commencing on November 1, in each year (each
such 12-month period being herein called an Applicable Period and each such
November 1, being herein called an Adjustment Date). The Adjusted Rate for
the Applicable Period commencing on any Adjustment Date shall be (i) the
Base Treasury Rate or the Alternate Treasury Rate (each as defined below),
as the case may be, determined for such Applicable Period in
- -------------------------
*The matter in brackets will be set forth in the bonds of this series
originally issued and in any bonds of this series issued upon a transfer or
substitution or exchange of bonds of this series on or before October 31,
1996. Any bonds of this series so issued thereafter shall specify the
Adjusted Rate then in effect and the last day of the then current
Applicable Period.
2
<PAGE>
accordance with the Procedures (as defined and set forth below), times
127%, rounded to the nearest one tenth of one percentage point or (ii)
under the circumstances described in paragraph F below, the rate determined
by Banking Firms (as defined below) for such Applicable Period in
accordance with said paragraph F, times 127%, rounded to the nearest one
tenth of one percentage point; provided, however, that the Adjusted Rate
for any Applicable Period shall in no event be less than 10% per annum or
greater than 24% per annum. If for any reason beyond the control of the
Company, neither the Base Treasury Rate nor the Alternate Treasury Rate
shall have been so determined for any Applicable Period prior to the
December 1 next succeeding the Adjustment Date for such Applicable Period,
the Adjusted Rate for such Applicable Period shall be the interest rate per
annum in effect on the October 31 next preceding such Adjustment Date;
provided, however, that any rate thereafter determined for such Applicable
Period in accordance with paragraph F below shall be deemed to supersede
such rate for (and only for) any portion of such Applicable Period
occurring on or after the date of such determination.
B. The Base Treasury Rate for the Applicable Period commencing on
any Adjustment Date shall be the arithmetic average of the four most recent
weekly average yields to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to constant maturities of
ten years), as published by the Federal Reserve Board in its Statistical
Release H.15 (or published in another publication or release referred to in
the immediately following sentence) published at least five days prior to
such Adjustment Date; provided that such weekly average yields to maturity
as so published shall have been computed with respect to weekly periods
ended within 50 days prior to such Adjustment Date. If one or more of such
Statistical Releases containing such weekly average yields to maturity
shall not be available, the Base Treasury Rate shall be determined with
reference to any comparable release of such Board substituted therefor or,
if such Board shall not publish a comparable release, with reference to any
official publication or release of any other U.S. Governmental department
or agency that purports to set forth such weekly average yields to maturity
(or purports to set forth daily average yields to maturity from which such
weekly average yields to maturity can be mathematically derived), adjusted
to constant maturities of ten years, in accordance with the Treasury
Criteria (as defined below) or other criteria that are substantially
equivalent to Treasury Criteria, as determined by the holders of at least
66 2/3% in amount of the bonds of this series then outstanding. In August
1982, such weekly average yields to maturity were determined on the basis
of the criteria (herein called the Treasury Criteria) set forth in an
attachment to Federal Reserve Board Statistical Release H.15 dated May 14,
1982, and reflected in such Board's Statistical Release H.15, dated August
16, 1982.
C. The Alternate Treasury Rate for the Applicable Period commencing
on any Adjustment Date shall be the arithmetic average of the average
yields to maturity of the closing bids quoted daily (or less frequently, if
daily quotations shall not be available) by each of the three Government
Securities Dealers (as defined below)
3
<PAGE>
designated in accordance with the Procedures, during the 28-day period
ending five days prior to such Adjustment Date, for actively traded
marketable U.S. Treasury fixed interest rate securities with a final
maturity date of at least eight and one-half years but not more than eleven
and one-half years from the date of each such quotation (other than
securities which can, at the option of the holder, be surrendered at face
value in payment of any Federal estate tax and securities which provide tax
benefits to the holder and are priced to reflect such tax benefits and
securities which were originally issued at a deep or substantial discount).
D. The Adjusted Rate for the Applicable Period commencing on any
Adjustment Date shall be determined in accordance with the following
procedures (herein called the Procedures) or paragraph F below, as the case
may be:
(1) On or before the second day next preceding such Adjustment
Date the Company will deliver to the holder of this bond and to the
Trustee a certificate, signed by the principal financial officer of
the Company (herein called an Adjustment Certificate), either (a)
setting forth the Base Treasury Rate for the Applicable Period
commencing on such Adjustment Date, determined as above provided (and
accompanied by copies of each Statistical Release H.15 or other
publication or release used in determining such Base Treasury Rate),
whereupon such Base Treasury Rate shall be used to compute the
Adjusted Rate for such Applicable Period, or (b) stating that (i) one
or more of the Statistical Releases H.15 (or other publication or
release) necessary for determining such Base Treasury Rate were not
available for the four weeks next preceding such Adjustment Date,
and/or (ii) the Treasury Criteria were not in effect for such four-
week period and, for reasons specified in such certificate, the
criteria determined to be substantially equivalent to the Treasury
Criteria by the holders of at least 66 2/3% in amount of the bonds of
this series then outstanding, pursuant to paragraph B above, are not,
in the reasonable and good faith judgment of the Company, substantially
equivalent to the Treasury Criteria, and setting forth the Alternate
Treasury Rate for the Applicable Period commencing on such Adjustment
Date, determined as above provided (such Adjustment Certificate to be
accompanied by copies of the reports from which such Alternate Treasury
Rate was so determined from three Government Securities Dealers
designated by the Trustee), whereupon such Alternate Treasury Rate
shall be used to compute the Adjusted Rate for such Applicable Period.
(2) A "Government Securities Dealer" shall mean Morgan Guaranty
Trust Company of New York or any other nationally recognized
commercial bank or investment banking firm actively engaged in the
trading of U.S. Treasury fixed interest rate securities of the types
reflected in the Treasury Criteria.
4
<PAGE>
(3) In the event that during any Applicable Period there shall
occur (whether by reason of republication to correct an error or
otherwise) any change in the published data used as a basis for
determination of the Base Treasury Rate (and, therefore, the Adjusted
Rate) then in effect with respect to such Applicable Period, the Company
will, within 30 calendar days thereafter, deliver to the holder of this
bond and to the Trustee a new adjustment Certificate setting forth the
new Base Rate and the other information required by the foregoing Clause
(1) with respect to such new Base Treasury Rate, whereupon such new Base
Treasury Rate shall be used to recompute the Adjusted Rate with respect
to such Applicable Period, and such new Adjusted Rate shall be applicable
retroactively from and after the Adjustment Date on which such Applicable
Period commenced; provided, however, that the Company need only take such
action is such change in the published data shall occur on a date no
later than 90 calendar days after the beginning of such Applicable
Period.
(4) If (i) the holders of at least 33 1/3 %in amount of the
bonds of this series then outstanding or (ii) any of the original holders
of the bonds of this series shall deliver to the Company, the Trustee and
each other holder of outstanding bonds of this series, within 15 days
after the Company's delivery of an Adjustment Certificate with respect to
any Applicable Period pursuant to the foregoing Clause (1) or Clause (3),
written notice to the effect that, for reasons specified in such notice,
the Base Treasury Rate set forth in such Adjustment Certificate has not
been determined in accordance with the Treasury Criteria or other
criteria then in effect pursuant to paragraph B above, then the Company
will deliver to the holder of this bond, within 10 working days after the
receipt of such written notice, a second Adjustment Certificate (a)
setting forth the Alternate Treasury Rate for such Applicable Period
determined as above provided (and accompanied by copies of the reports
from which such Alternate Treasury Rate was so determined from three
Government Securities Dealers designated by the Trustee), whereupon such
Alternate Treasury Rate shall be used to compute the Adjusted Rate for
such Applicable Period, or (b) stating that for reasons beyond the control
of the Company, the Alternate Treasury Rate for such Applicable Period
cannot be determined, and setting forth in reasonable detail the efforts
made to determine such rate, whereupon it shall be deemed that for reasons
beyond the control of the Company neither the Base Treasury Rate nor the
Alternate Treasury Rate has been determined for such Applicable Period.
E. The Company will keep a copy of each Adjustment Certificate at its
principal executive office and permit any holder of any of the bonds of this
series (or any prospective purchaser of any of the bonds of this series
designated by the holder thereof) to inspect such Adjustment Certificate upon
request.
5
<PAGE>
F. If for any reason beyond the control of the Company, neither the
Base Treasury Rate nor the Alternate Treasury Rate shall have been determined
for any Applicable Period in accordance with the Procedures prior to the
December 1 nest succeeding the Adjustment Date on which such Applicable
Period commences, the Company (i) will give written notice to each holder of
any bonds of this series and to the Trustee, in each case within five
business days after such December 1, specifying the reasons why neither the
Base Treasury Rate nor the Alternate Treasury Rate shall have been so
determined and (ii) will keep a copy of such notice at its principal
executive office and permit any holder of any of the bonds of this series (or
any prospective purchaser of any of the bonds of this series designated by
the holder thereof) to inspect such notice upon request. Within 10 calender
days after the giving of such notice the Company shall designate two Banking
Firms, and within ten calendar days after receipt of such notice the holders
of at least 66 2/3 % in amount of the bonds of this series then outstanding
shall designate two Banking Firms. The four Banking Firms so designated
shall, within 10 calendar days after the last of said Banking Firms shall
have been so designated, designate a fifth Banking Firm. (If within such 10
calendar day period, the four Banking Firms do not agree upon the appointment
of a fifth Banking Firm, then either the Company or the requisite holders, as
the case may be, on behalf of both, may request such appointment by the then
President of the Association of the Bar of the City of New York (or any
organization successor thereto) or in his absence, failure, refusal or
inability to act, then either the Company or the requisite holders, as the
case may be, may apply to the Supreme Court, New York County, for the
appointment of such fifth Banking Firm and the other party shall not raise
any question as to the court's full power and jurisdiction to entertain the
application and make the appointment.) For purposes of this paragraph, a
"Banking Firm" shall mean Morgan Guaranty Trust Company of New York or any
nationally recognized commercial bank or investment banking firm that was
within the 12-month period prior to its designation actively engaged in the
trading of U.S. Treasury fixed interest rate securities of the types
reflected in the Treasury Criteria. Each Banking Firm so designated shall
notify the Trustee and the Company in writing, not later than 10 calendar
days after its designation as hereinabove provided, of the yield to maturity
which, in its reasonable and good faith judgement, would then be obtainable
for marketable U.S. Treasury fixed interest rate securities with a final
maturity date of ten years from the date of such notice (other than
securities which can, at the option of the holder, be surrendered at face
value in payment of any Federal estate tax and securities which provide tax
benefits to the holder and are priced to reflect such tax benefits and
securities which were originally issued at a deep or substantial discount).
The arithmetic average of said yields to maturity set forth in said notices
of said five Banking Firms, times 127%, rounded to the nearest one tenth of
one percentage point, shall be the Adjusted Rate with respect to such
Applicable Period, and such Adjusted Rate shall be applicable for the
remainder of such Applicable Period. The Company will give prompt written
notice to each holder of any bonds of this series and the Trustee of such new
Adjusted Rate (such notice to be accompanied by copies of the written notices
of said five Banking Firms). Notwithstanding anything herein to the
6
<PAGE>
contrary, if the Company or the requisite holders shall fail to designate
one or both Banking Firms within the time period set forth above or if
any of the Banking Firms designated by the Company or the requisite
holders shall refuse to participate in the selection of a fifth Banking
Firm required by the third or fourth sentence of this paragraph, then the
arithmetic average of the yields to maturity set forth in the written
notices of the Banking Firms designated or participating, as the case may
be, times 127%, rounded to the nearest one-tenth percentage point, shall
be the Adjusted Rate with respect to such Applicable Period, and such
Adjusted Rate shall be applicable for the remainder of such Applicable
Period.
3. The principal hereof may be declared or may become prior to the
maturity date hereinbefore named on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a Default as in the
Mortgage provided.
4 This bond is transferable as prescribed in the Mortgage by the
registered owner hereof in person, 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 surrender and cancellation of this bond, together with a written
instrument of transfer, if required by the Company, duly executed by the
registered owner or by his duly authorized attorney, and, thereupon, a new fully
registered bond of the same series for a like principal amount will be issued to
the transferee in exchange hereof as provided in the Mortgage. Subject to the
foregoing provisions as to the person entitled to receive payment of interest
hereon, the Company and the Trustees may deem and treat the person in whose name
this bond is registered as the holder and the absolute owner hereof for the
purpose of receiving payment and for all other purposes, and neither the Company
nor the Trustees shall be affected by any notice to the contrary.
5. In the manner prescribed in the Mortgage, any bonds of this
series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, are exchangeable for
a like aggregate principal amount of fully registered bonds of the same series
of other authorized denominations.
6. The bonds of this series are redeemable (as more fully set forth in
the Supplemental Indenture dated as of December 1, 1995 to the Mortgage) at the
option of the Company at any time (or from time to time) on or after November 1,
1996 and prior to maturity, either as a whole or in part, upon the notice (which
may state that such redemption shall be made subject to the receipt of the
redemption moneys by the Trustee before the date fixed for redemption) mailed at
least thirty (30) and not more than sixty (60) days prior to the date fixed for
redemption, at the following general redemption prices, expressed in percentages
of the principal amount of the bonds to be redeemed:
7
<PAGE>
GENERAL REDEMPTION PRICES
If redeemed during the twelve months on the thirty-first day of
October,
1997........104.41% 2000...........101,76%
1998........103.53 2001...........100.88
1999........102.64 2002...........100.00
in each case, together with accrued interest to the date for redemption.
7. As provided in the Mortgage, the Company shall not be required to
make transfers or exchanges of bonds of any series for a period of fifteen (15)
days next preceding any designation of bonds of such series to be redeemed, and
the Company shall not be required to make transfers or exchanges of any bonds
designated in whole or in part for redemption.
8. No recourse shall be had for the payment of the principal of,
premium, if any, or interest on this bond against any incorporator or any past,
present or future subscriber to the capital stock, shareholder, officer or
director of the Company or of any predecessor or successor corporation, as such,
either directly or through the Company or any predecessor or successor
corporation, under any rule or law, statute or constitution or by the
enforcement of any assessment or otherwise, all such liability of incorporators,
subscribers, shareholders, officers and directors being released by the holder
or owner hereof by the acceptance of this bond and being likewise waived and
released by the terms of the Mortgage.
This bond shall not become obligatory until Chemical Bank, a New York
corporation, the Trustee under the Mortgage, or its successor thereunder, shall
have signed the form of authentication certificate endorsed hereon.
8
<PAGE>
IN WITNESS WHEREOF, PacifiCorp has caused this bond to be signed in its
corporate name by its Chairman of the Board, President or one of its Vice
Presidents by his or her signature or a facsimile thereof, and its corporate
seal to be impressed or imprinted hereon and attested by its Secretary or one of
its Assistant Secretaries by his or her signature or a facsimile thereof.
PACIFICORP
Dated: By:
-------------------------------------
Vice President
[SEAL]
Attest:
---------------------------------
Assistant Secretary
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein designated, described or
provided for in the within-mentioned Mortgage.
CHEMICAL BANK, as Trustee
By:
------------------------------------------
Authorized Officer
9
<PAGE>
EXHIBIT B
This Bond has not been registered under the Securities Act of 1933, as amended,
and may not be offered or sold in contravention of said Act
and is not transferable except to a successor Agent
under the Loan Agreement, dated as of July 22, 1987, among PacifiCorp,
The Long-Term Credit Bank of Japan, Limited, as agent,
and the financial institutions named therein, as amended
(Temporary Registered Bond)
PACIFICORP
9 3/8% REPLACEMENT SERIES DUE 1997
(A SERIES OF
FIRST MORTGAGE AND COLLATERAL TRUST BONDS)
No. $50,000,000
Dated: December 15, 1995
PACIFICORP, an Oregon corporation (hereinafter called the Company), for
value received, hereby promises to pay to The Long-Term Credit Bank of Japan,
Limited, as agent, or registered assigns, on July 22, 1997, at the office or
agency of the Company in the Borough of Manhattan, The City of New York, the sum
of Fifty Million Dollars, 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,
and to pay interest thereon from the January 22 or July 22 next preceding the
date hereof, or if no interest has been paid on the bonds of this series, from
July 22, 1995, at the rate of nine and three-eighths per centum (9 3/8%) per
annum in like coin or currency at such office or agency on January 22 and July
22 in each year, commencing January 22, 1996, until the principal of this bond
shall have been paid or duly provided for.
1. This bond is one of an issue of bonds of the Company issuable in
series and is one of a series known as its First Mortgage and Collateral Trust
Bonds, 9 3/8% Replacement Series Due 1997, to be issued under and equally
secured by a Mortgage and Deed of Trust (herein, together with any indenture
supplemental thereto, including the Eleventh Supplemental Indenture dated as of
December 1, 1995, called the Mortgage), dated as of January 9, 1989 executed by
the Company to Morgan Guaranty Trust Company of New York, as Trustee (Chemical
Bank, successor). Reference is made to the Mortgage for a description of the
property mortgaged and pledged, the nature and extend of the security, the
rights of the holders of the bonds and of the Trustee in respect thereof, the
duties and immunities of the Trustee and the terms and conditions upon which the
bonds are, and are to be, secured, the circumstances under which additional
bonds may be issued and the definitions of certain terms hereinafter used.
<PAGE>
With the consent of the Company and to the extent permitted by and in
the manner provided in the Mortgage, the rights and obligations of the Company
and/or the rights of the holders of the bonds and/or coupons and/or the terms
and provisions of the Mortgage may be modified or altered by affirmative vote of
the holders of at least sixty per centum (60%) in principal amount of bonds then
Outstanding under the Mortgage, all voting as a single class or, if the rights
of the holders of one or more, but less than all, series of bonds then
Outstanding are to be adversely affected, then by affirmative vote of the
holders of at least sixty per centum (60%) in principal amount of those bonds
then Outstanding so to be adversely affected, all voting as a single class
(excluding in any case bonds disqualified from voting by reason of the Company's
interest therein as provided in the Mortgage); provided that no such
modification or alteration shall, without the consent of the holder hereof,
impair or affect the right of the holder to receive payment of the principal of
(and premium, if any) and interest on this bond, on or after the respective due
dates expressed herein, or to institute suit for the enforcement of any such
payment on or after such respective dates, or permit the creation of any lien
ranking equal or prior to the Lien of the Mortgage or deprive the holder of the
benefit of a lien on the Mortgaged and Pledged Property or reduce the percentage
vote required to effect such modifications or alterations.
The Company has reserved the right, without any consent or other
action by holders of bonds of the Eighth series known as First Mortgage and
Collateral Trust Bonds 6 3/4% series due April 1, 2005, or any series of bonds
subsequently created under the Mortgage (including the bonds of this series), to
amend the Mortgage in order to except from the Lien of the Mortgage 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 as now in effect or as hereafter supplemented or amended.
2. The principal hereof may be declared or may become due prior to the
maturity date hereinbefore named on the conditions, in the manner and at the
time set forth in the Mortgage, upon the occurrence of a Default as in the
Mortgage provided.
3. The bonds of this series are subject to redemption as provided in the
Eleventh Supplemental Indenture.
4. The bonds of this series have been issued to secure the payment of the
Company's obligations under the Loan Agreement entered into among the Company,
The Long Term Credit Bank of Japan, Limited, as agent (herein called the
"Agent"), and the financial institutions named therein, dated as of July 22,
1987 (the amounts borrowed thereunder herein called the "Advance"), as amended.
The obligation of the Company to make payments with respect to the principal of
and interest on bonds of this series shall be fully or partially, as the case
may be, satisfies and discharged to the extent that, at the time that any such
payment shall be due the then due principal of and interest on the Advance shall
have been fully or partially paid. Satisfaction of any obligation to the extent
that payment is made with respect to the Advance means that if any payment is
made on the principal of or interest on the Advance, a
2
<PAGE>
corresponding payment obligation with respect to the principal of or interest on
the Bonds shall be deemed discharged in the same proportion as the payment with
respect to the Advance discharges the outstanding obligation with respect to the
Advance. The Trustee may conclusively presume that the obligation of the
Company to make payments with respect to the principal of and interest on the
bonds of this series shall have been fully satisfied and discharged unless and
until the Trustee shall have received a written notice from the Agent under the
aforementioned Loan Agreement, signed by a General Manager and Agent, Vice
President and Deputy General Manager or Assistant Vice President and Manager of
the Agent, stating (i) that timely payment of the principal of or interest on
the Advance has not been made, and (ii) the amount of funds required to make
such payment of principal or interest or both as the case may be.
5. This bond is transferable only to a successor to the Agent under the
aforementioned Loan Agreement, upon surrender hereof for cancellation at the
office or agency of the Company in the borough of Manhattan, The City of New
York, and upon compliance with the provisions of the Eleventh Supplemental
Indenture and, thereupon, a new fully registered temporary or definitive bond of
the same series for a like principal amount will be issued to such successor
Agent in exchange herefor as provided in the Mortgage. The Company and the
Trustee may deem and treat the person in whose name this bond is registered as
the absolute owner hereof for the purpose of receiving payment and for all other
purposes and neither the Company nor the Trustee shall be affected by any notice
to the contrary.
6. In the manner prescribed in the Mortgage, any bonds of this series,
upon surrender thereof for cancellation at the office or agency of the Company
in the borough of Manhattan, The City of New York, are exchangeable for a like
aggregate principal amount of fully registered bonds of the same series of other
authorized denominations.
7. As provided in the Mortgage, the Company shall not be required to make
transfers or exchanges of bonds of any series for a period of fifteen (15) days
next preceding any interest payment date for bonds of such series, or next
preceding any designation of bonds of such series to be redeemed, and the
Company shall not be required to make transfers or exchanges of any bonds
designated in whole or in part for redemption.
8. No recourse shall be had for the payment of the principal of, premium,
if any, or interest on this bond against any incorporator or any past, present
or future subscriber to the capital stock, shareholder, officer or director of
the Company or of any predecessor or successor corporation, as such, either
directly or through the Company or any predecessor or successor corporation,
under any rule of law, statute or constitution or by the enforcement of any
assessment or otherwise, all such liability of incorporators, subscribers,
shareholders, officers and directors being released by the holder or owner
hereof by the acceptance of this bond and being likewise waived and released by
the terms of the Mortgage.
3
<PAGE>
This bond shall not become obligatory until Chemical Bank, a New York
corporation, the Trustee under the Mortgage, or its successor thereunder, shall
have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, PacifiCorp has cause this bond to be signed in its
corporate name by its Chairman of the Board, President or one of its Vice
Presidents by his or her signature or a facsimile thereof, and its corporate
seal to be impressed or imprinted hereon and attested by its Secretary or one of
its Assistant Secretaries by his or her signature or a facsimile thereof.
PACIFICORP
Dated: December 15, 1995 By:
-------------------------------------
Vice President
[SEAL]
Attest:
---------------------------------
Assistant Secretary
TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds of the series herein designated, described or
provided for in the within-mentioned Mortgage.
CHEMICAL BANK, as Trustee
By:
------------------------------------------
Authorized Officer
4
<PAGE>
NOTATION OF PAYMENTS OF PRINCIPAL ON THE WITHIN BOND BY RETIREMENT OF A PORTION
THEREOF
NOTE: NO WRITING BELOW EXCEPT BY THE TRUSTEE
Date Principal Balance of Principal Signature of the Trustee
Amount Paid Amount Outstanding
- --------------------------------------------------------------------------------
5
<PAGE>
EXHIBIT (4)(d)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[CONFORMED COPY]
PACIFICORP
(AN OREGON CORPORATION)
TO
CHEMICAL BANK
(A NEW YORK CORPORATION)
AS TRUSTEE UNDER PACIFIC POWER &
LIGHT COMPANY'S MORTGAGE AND
DEED OF TRUST, DATED AS OF
JULY 1, 1947
----------------------
FIFTY-FOURTH SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 1995
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-FOURTH SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of December, 1995
(hereinafter referred to as the "Fifty-fourth 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-fourth Supplemental Indenture is entered into by and
between 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") and CHEMICAL BANK, a New York corporation whose
address is 450 West 33rd Street, New York, New York 10001 (the "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-fourth 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
Eleventh September 1, 1960
Twelfth June 22, 1961
Thirteenth April 1, 1962
Fourteenth December 1, 1962
Fifteenth April 1, 1963
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dated as of
-----------
<S> <C>
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
WHEREAS, the Original Mortgagor has heretofore issued, in
accordance with the provisions of the Mortgage, forty-seven series of bonds
entitled and designated First Mortgage Bonds, none of which bonds are
Outstanding as of the date hereof;
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
2
<PAGE>
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
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
3
<PAGE>
Fifty-third August 1, 1994;
</TABLE>
and
WHEREAS, pursuant to said Fifty-third Supplemental Indenture,
Chemical Bank was appointed Corporate Trustee in succession to Morgan Guaranty
Trust Company of New York, resigned, under the Mortgage; 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>
48. Forty-eighth--Medium- various $125,000,000 $ 120,000,000
Term Notes, Series A
49. Forty-ninth--Medium- various 100,000,000 80,000,000
Term Notes, Series B
50. Fiftieth--Medium-Term various 150,000,000 140,937,357
Notes, Series C
51. Fifty-first--Medium-Term various 125,000,000 125,000,000
Notes, Series D
52. Fifty-second--C-U various 125,216,000 92,644,000
53. Fifty-third--Medium-Term various 250,000,000 250,000,000
Notes, Series E
54. Fifty-fourth--6 3/4% 4/1/2005 75,000,000 75,000,000
55. Fifty-fifth--Medium-Term various 250,000,000 250,000,000
Notes, Series F
56. Fifty-sixth--E-L various 35,600,000 35,600,000
57. Fifty-seventh Medium-Term various 250,000,000 250,000,000
Notes, Series G
58. Fifty-eighth Series-1994-1 various 108,235,000 108,235,000;
</TABLE>
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
4
<PAGE>
the Mortgage, as supplemented, as the Board of Directors may, in its discretion,
cause to be inserted therein expressing or referring to the terms and conditions
upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other
things, that any power, privilege or right expressly or impliedly reserved to or
in any way conferred upon the Company by any provision of the Mortgage, whether
such power, privilege or right is in any way restricted or is unrestricted, may
(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 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 three 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
5
<PAGE>
WHEREAS, the execution and delivery by the Company of this Fifty-
fourth 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 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
(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
6
<PAGE>
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 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
7
<PAGE>
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 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;
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-fourth Supplemental
Indenture being supplemental to the Mortgage;
8
<PAGE>
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
FIFTY-NINTH SERIES OF BONDS
SECTION 2.01. There shall be a series of bonds designated "First
Mortgage Bonds, Adjustable Rate Replacement Series" (herein sometimes referred
to as the "Fifty-ninth 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-ninth Series shall mature on the maturity date, and in
principal amounts corresponding to the principal amounts, of first mortgage and
collateral trust bonds designated "Adjustable Rate Replacement Series," 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-ninth Series. Bonds of the Fifty-ninth 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-ninth Series shall be dated as in Section 10 of the
Mortgage provided.
(I) Bonds of the Fifty-ninth 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-
ninth Series, upon surrender thereof for cancellation at the office or agency of
the Company in the
9
<PAGE>
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-ninth Series shall be transferable (subject to
the provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-fourth 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, her or its 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-ninth 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-
ninth Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Fifty-ninth 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-ninth 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-fourth
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-ninth Series in an aggregate principal amount not to exceed Six
Million Six Hundred Seventeen Thousand Dollars ($6,617,000).
10
<PAGE>
ARTICLE III
SIXTIETH SERIES OF BONDS
SECTION 3.01. There shall be a series of bonds designated "First
Mortgage Bonds, 9 3/8% Replacement Series Due 1997" (herein sometimes referred
to as the "Sixtieth 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 Sixtieth Series shall mature on the maturity date, and in principal
amounts corresponding to the principal amounts, of first mortgage and collateral
trust bonds designated "9 3/8% Replacement Series Due 1997," 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 Sixtieth Series. Bonds of the Sixtieth 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
Sixtieth Series shall be dated as in Section 10 of the Mortgage provided.
(I) Bonds of the Sixtieth 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 Sixtieth
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 Sixtieth Series shall be transferable (subject to
the provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-fourth 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 Sixtieth
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
11
<PAGE>
Company hereby waives any right to make a charge in addition thereto for any
exchange or transfer of bonds of the Sixtieth Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Sixtieth 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 Sixtieth 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-fourth
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 Sixtieth Series in an aggregate principal amount not to exceed Twenty-
Five Million Dollars ($25,000,000).
ARTICLE IV
SIXTY-FIRST SERIES OF BONDS
SECTION 4.01. There shall be a series of bonds designated "First
Mortgage Bonds, Bond Credit Series Bonds" (herein sometimes referred to as the
"Sixty-first 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
Sixty-first Series shall mature on the maturity date, and in principal amounts
corresponding to the principal amounts, of first mortgage and collateral trust
bonds designated "Bond Credit Series Bonds," 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 Sixty-first Series.
Bonds of the Sixty-first 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
12
<PAGE>
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 Sixty-first Series shall be
dated as in Section 10 of the Mortgage provided.
(I) Bonds of the Sixty-first 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 Sixty-
first Series, upon surrender thereof for cancellation at the office or agency of
the Company in the Borough of Manhattan, The City of New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Sixty-first Series shall be transferable (subject to
the provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-fourth 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 Sixty-first
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 Sixty-first Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Sixty-first 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 Sixty-first 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.
13
<PAGE>
After the execution and delivery of this Fifty-fourth
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 Sixty-first Series in an aggregate principal amount not to exceed One
Hundred Fifteen Million Two Hundred Seventy-Three Thousand Five Hundred and
Thirty-Nine Dollars ($115,273,539).
ARTICLE V
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS
REGARDING PROPERTIES EXCEPTED FROM LIEN OF MORTGAGE
SECTION 5.01. 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-ninth Series, the Sixtieth Series and the Sixty-First 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 VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. The right, if any, of the Company to assert the defense of
usury against a holder or holders of bonds of the Fifty-ninth Series, the
Sixtieth Series, the Sixty-First Series or any subsequent series shall be
determined only under the laws of the State of New York.
SECTION 6.02. The terms defined in the Mortgage shall, for all purposes
of this Fifty-fourth Supplemental Indenture, have the meanings specified in the
Mortgage.
SECTION 6.03. The Trustee hereby accepts the trusts declared, provided,
created or supplemented in the Mortgage and herein, and agrees to perform the
same upon the
14
<PAGE>
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-fourth 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-fourth 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-fourth Supplemental Indenture.
SECTION 6.04. Whenever in this Fifty-fourth 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-fourth 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 6.05. Nothing in this Fifty-fourth 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-fourth Supplemental Indenture
or any covenant, condition, stipulation, promise or agreement hereof, and all
the covenants, conditions, stipulations, promises and agreements in this Fifty-
fourth 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 6.06. This Fifty-fourth 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.
15
<PAGE>
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 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 s/s R. F. LANZ
-------------------
Vice President
Attest:
s/s LENORE M. MARTIN
- -------------------------------
Assistant Secretary
CHEMICAL BANK
as Corporate Trustee
By s/s F. J. GRIPPO
-------------------------
Vice President
Attest:
s/s GLENN G. MCKEEVER
- --------------------------------
Senior Trust Officer
16
<PAGE>
STATE OF OREGON )
) ss:
COUNTY OF MULTNOMAH )
On this 7th day of December, 1995, before me, Sheryl L. Stratton,
a Notary Public in and for the State of Oregon, personally appeared Robert F.
Lanz and Lenore M. Martin, 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.
s/s SHERYL L. STRATTON
----------------------------
My commission expires: 5/25/96
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 13th day of December, 1995, before me, Annabelle DeLuca,
a Notary Public in and for the State of New York, personally appeared F. J.
Grippo and Glenn G. McKeever, 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.
s/s ANNABELLE DELUCA
--------------------------------
Notary Public, State of New York
No. O1DE5013759
Qualified in Kings County
[SEAL] Commission expires: July 15, 1997
17
<PAGE>
EXHIBIT (4)f
- --------------------------------------------------------------------------------
[CONFORMED COPY]
PACIFICORP
(AN OREGON CORPORATION)
TO
CHEMICAL BANK
(A NEW YORK CORPORATION)
AS TRUSTEE UNDER UTAH POWER &
LIGHT COMPANY'S MORTGAGE AND
DEED OF TRUST, DATED AS OF
DECEMBER 1, 1943
----------------------
FIFTY-SIXTH SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 1, 1995
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-SIXTH SUPPLEMENTAL INDENTURE
THIS INDENTURE, dated as of the 1st day of December, 1995
(hereinafter referred to as the "Fifty-sixth 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-sixth Supplemental Indenture is entered into by and
between 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") and CHEMICAL BANK, a New York corporation whose
address is 450 West 33rd Street, New York, New York 10001 (the "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-sixth 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:
Dated as of
-----------
First January 1, 1945
Second May 1, 1946
Third April 1, 1948
Fourth May 1, 1949
Fifth October 1, 1949
Sixth October 1, 1950
Seventh October 1, 1951
Eighth October 1, 1952
Ninth May 1, 1954
Tenth September 1, 1955
Eleventh October 1, 1957
Twelfth September 1, 1960
Thirteenth June 1, 1962
<PAGE>
Dated as of
-----------
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
Forty-second December 1, 1986
Forty-third May 1, 1987
Forty-fourth June 1, 1987;
and
WHEREAS, the Maine Company and the Utah Company have heretofore
issued, in accordance with the provisions of the Mortgage, bonds entitled and
designated First Mortgage Bonds, of the First Series through the Forty-seventh
Series, inclusive, none of which bonds are Outstanding as of the date hereof;
and
2
<PAGE>
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:
Dated as of
-----------
Forty-sixth March 31, 1989
Forty-seventh December 29, 1989
Forty-eighth March 31, 1991;
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
WHEREAS, the Company executed, delivered, recorded and filed
additional Supplemental Indentures to the Mortgage as follows:
3
<PAGE>
Dated as of
-----------
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
Fifty-fifth August 1, 1994;
and
WHEREAS, pursuant to said Fifty-fifth Supplemental Indenture,
Chemical Bank was appointed Corporate Trustee in succession to Morgan Guaranty
Trust Company of New York, resigned, under the Mortgage; 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>
48. Forty-eighth--Medium-
Term Notes, Series A various $125,000,000 $120,000,000
49. Forty-ninth--Medium-
Term Notes, Series B various 100,000,000 80,000,000
50. Fiftieth--Medium-Term
Notes, Series C various 150,000,000 140,937,357
51. Fifty-first--Medium-
Term Notes, Series D various 125,000,000 125,000,000
52. Fifty-second--C-U various 125,216,000 92,644,000
53. Fifty-third--Medium-
Term Notes, Series E various 250,000,000 250,000,000
54. Fifty-fourth--6 3/4% 4/1/2005 75,000,000 75,000,000
55. Fifty-fifth--Medium-
Term Notes, Series F various 250,000,000 250,000,000
56. Fifty-sixth--E-L various 35,600,000 35,600,000
57. Fifty-seventh--Medium
Term Notes, Series G various 250,000,000 250,000,000
58. Fifty-eighth, Series 1994-1 various 108,235,000 108,235,000;
</TABLE>
4
<PAGE>
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 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
5
<PAGE>
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 three 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-sixth 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, 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 (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
6
<PAGE>
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 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.
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
7
<PAGE>
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.
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-sixth 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
8
<PAGE>
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
FIFTY-NINTH SERIES OF BONDS
SECTION 2.01. There shall be a series of bonds designated "First
Mortgage Bonds, Adjustable Rate Replacement Series" (herein sometimes referred
to as the "Fifty-ninth 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-ninth Series shall mature on the maturity date, and in
principal amounts corresponding to the principal amounts, of first mortgage and
collateral trust bonds designated "Adjustable Rate Replacement Series," 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-ninth Series. Bonds of the Fifty-ninth 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-ninth Series shall be dated as in Section 10 of the
Mortgage provided.
(I) Bonds of the Fifty-ninth 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-
ninth Series, upon surrender thereof for cancellation at the office or agency of
the Company in the Borough of Manhattan, The City of New York, 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-ninth Series shall be transferable (subject
to the provisions of Section 12 of the Mortgage and to the limitations set forth
in this Fifty-sixth 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
9
<PAGE>
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-ninth 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-ninth Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Fifty-ninth 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-ninth 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-sixth
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-ninth Series in an aggregate principal amount not to exceed Six
Million Six Hundred Seventeen Thousand Dollars ($6,617,000).
ARTICLE III
SIXTIETH SERIES OF BONDS
SECTION 3.01. There shall be a series of bonds designated "First
Mortgage Bonds, 9 3/8% Replacement Series Due 1997" (herein sometimes referred
to as the "Sixtieth 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 Sixtieth Series shall mature on the maturity date, and in principal
amounts corresponding to the principal amounts, of first mortgage and collateral
trust bonds designated "9 3/8% Replacement Series Due 1997," 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 Sixtieth Series. Bonds of the Sixtieth Series shall be issued as fully
registered bonds in the
10
<PAGE>
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 Sixtieth Series shall be
dated as in Section 10 of the Mortgage provided.
(I) Bonds of the Sixtieth 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 Sixtieth
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 Sixtieth Series shall be transferable (subject to
the provisions of Section 12 of the Mortgage and to the limitations set forth in
this Fifty-sixth 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 Sixtieth
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 Sixtieth Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Sixtieth 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.
11
<PAGE>
Bonds of the Sixtieth 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-sixth
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 Sixtieth Series in an aggregate principal amount not to exceed Twenty-
Five Million Dollars ($25,000,000).
ARTICLE IV
SIXTY-FIRST SERIES OF BONDS
SECTION 4.01. There shall be a series of bonds designated "First
Mortgage Bonds, Bond Credit Series Bonds" (herein sometimes referred to as the
"Sixty-first 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
Sixty-first Series shall mature on the maturity date, and in principal amounts
corresponding to the principal amounts, of first mortgage and collateral trust
bonds designated "Bond Credit Series Bonds," 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 Sixty-first Series.
Bonds of the Sixty-first 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 Sixty-first Series shall be
dated as in Section 10 of the Mortgage provided.
(I) Bonds of the Sixty-first 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 Sixty-
first Series, upon surrender thereof for cancellation at the office or agency of
the Company in the Borough of Manhattan, The City of New York, 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
12
<PAGE>
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Sixty-first Series shall be transferable (subject
to the provisions of Section 12 of the Mortgage and to the limitations set forth
in this Fifty-sixth 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 Sixty-first
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 Sixty-first Series.
The Trustee may conclusively presume that the obligation of the
Company to pay the principal of the bonds of the Sixty-first 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 Sixty-first 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-sixth
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 Sixty-first Series in an aggregate principal amount not to exceed Three
Hundred Eighty-Three Million Three Hundred Sixteen Thousand Two Hundred and
Fourteen Dollars ($383,316,214).
ARTICLE V
THE COMPANY RESERVES THE RIGHT TO AMEND PROVISIONS
REGARDING PROPERTIES EXCEPTED FROM LIEN OF MORTGAGE
SECTION 5.01. 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-ninth Series, the
13
<PAGE>
Sixtieth Series and the Sixty-first 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
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 VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. The right, if any, of the Company to assert the defense
of usury against a holder or holders of bonds of the Fifty-ninth Series, the
Sixtieth Series, the Sixty-first Series or any subsequent series shall be
determined only under the laws of the State of New York.
SECTION 6.02. The terms defined in the Mortgage shall, for all purposes
of this Fifty-sixth Supplemental Indenture, have the meanings specified in the
Mortgage.
SECTION 6.03. 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-sixth
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-sixth 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-sixth Supplemental Indenture.
SECTION 6.04. Whenever in this Fifty-sixth 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-sixth Supplemental
14
<PAGE>
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 6.05. Nothing in this Fifty-sixth 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-sixth Supplemental Indenture or
any covenant, condition, stipulation, promise or agreement hereof, and all the
covenants, conditions, stipulations, promises and agreements in this Fifty-sixth
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 6.06. This Fifty-sixth 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.
15
<PAGE>
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 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 s/s R. F. LANZ
-------------------------------
Vice President
Attest:
s/s LENORE M. MARTIN
- -------------------------------
Assistant Secretary
CHEMICAL BANK
as Corporate Trustee
By s/s F. J. GRIPPO
-------------------------------
Vice President
Attest:
s/s GLENN G. MCKEEVER
- -------------------------------
Senior Trust Officer
16
<PAGE>
STATE OF OREGON )
) ss.:
COUNTY OF MULTNOMAH )
On this 7th day of December, 1995, before me, Sheryl L.
Stratton, a Notary Public in and for the State of Oregon, personally appeared
Robert F. Lanz and Lenore M. Martin, 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.
s/s SHERYL L. STRATTON
-------------------------------------
My commission expires: 5/25/96
[SEAL] Residing at: Portland, Oregon
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 13th day of December, 1995, before me, Annabelle DeLuca,
a Notary Public in and for the State of New York, personally appeared F. J.
Grippo and Glenn G. McKeever, 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.
s/s ANNABELLE DELUCA
-------------------------------------
Notary Public, State of New York
No. O1DE5013759
Qualified in Kings County
[SEAL] Commission expires: July 15, 1997
17
<PAGE>
EXHIBIT (10)d
PACIFICORP
EXECUTIVE INCENTIVE PROGRAM
<PAGE>
PACIFICORP
EXECUTIVE INCENTIVE PROGRAM
PURPOSE
The purpose of the Executive Incentive Program is to provide a means for
rewarding officers for their success in increasing shareholder value.
ELIGIBILITY
All PacifiCorp executive officers are eligible participants. A
participant must be employed in an incentive eligible position for at least
three months and must be actively employed at the time of payout to receive an
award. Individuals with at least three 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 three-month requirement. Participants who change
incentive target percentages during the year will receive prorated awards based
on the appropriate target percentage. Participants in this program are not
eligible to participate in any other Annual Incentive Program.
PLAN TERM
This program will begin on January 1, 1996 and continue from year to year
thereafter unless otherwise amended or terminated. Each calendar year is a new
plan year for the purpose of this program and Exhibits A, B and C, which
describe weighting factors and performance measures, will be revised for
approval by the Personnel Committee of the Board of Directors.
TARGET INCENTIVE
Each participant in the Program has a target incentive opportunity which
is assigned by the Personnel Committee. Each participant's target incentive
opportunity is calculated as a percentage of year-end annual salary, including
any merit and promotional lump sums.
1
<PAGE>
PERFORMANCE GOALS
Participants will have all or part of their incentive award determined
based upon PacifiCorp's Earnings Per Share (EPS) performance. Some participants
may have their incentive award partially determined based upon Business Unit
performance against profitability goals. The proportion, if any, which will be
determined based upon Business Unit performance will be approved by the
Personnel Committee for each new plan year as displayed in Exhibit A.
EPS COMPONENT
The EPS Component will be calculated using the formula displayed in
Exhibit B for the plan year as approved by the Personnel Committee.
BUSINESS UNIT COMPONENT
The Business Unit Component will be determined based upon business unit
profitability or another objective measure as approved for each business unit by
the CEO and the Personnel Committee. Exhibit C for the plan year describes the
approved Business Unit goals and measures for the current plan year.
INDIVIDUAL PERFORMANCE MODIFIER
Individual performance is determined by measuring year-end performance
against specific goals as established and approved by the participant's superior
or, in the case of the Chief Executive Officer, the Personnel Committee of the
Board of Directors. The participant's superior must assign the participant an
individual performance modifier between 0% and 120% depending upon performance
against goals. A rating between 0-70% represents less than satisfactory
performance. A rating around 100% indicates the participant met or exceeded
goals and a rating around 120% indicates the participant greatly exceeded goals.
AWARD FORMULA
The award formula is provided below:
2
<PAGE>
<TABLE>
<S> <C>
EPS Business BU Individual
Guideline X [( EPS X Weighting )+( Unit X Weighting )] X Performace = Final
Award(1) Component Factor Component Factor Modifier Award
- ------------------------------------------------------------------------------------------------
</TABLE>
Participants are limited to a maximum final award equal to 150% of the
guideline.
(1)Guideline Award is Participant's Annualized Year-End Salary multiplied
by the Target Incentive Percentage assigned by the Personnel Committee.
AWARD EXAMPLES
EXAMPLE 1
Participant Position: Business Unit Head
EPS Component: 115%
EPS Weighting Factor: 75%
Business Unit Component: 125%
Business Unit Weighting Factor: 25%
Individual Performance Modifier: 100%
Annualized Salary: $200,000
Incentive Target: 40%
Guideline Award: $80,000
EXAMPLE 1 - CALCULATION
<TABLE>
<S> <C>
EPS Business BU Individual
Guideline X [( EPS X Weighting )+( Unit X Weighting )] X Performance = Final
Award(1) Component Factor Component Factor Modifier Award
- -----------------------------------------------------------------------------------------------
$80,000 X [( 1.15 X 0.75 )+( 1.25 X 0.25 )] X 1.00 = $94,000
- ------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE 2
Participant Position: Business Unit Participant
EPS Component: 115%
EPS Weighting Factor: 50%
Business Unit Component: 100%
Business Unit Weighting Factor: 50%
Individual Performance Modifier: 110%
Annualized Salary: $140,000
Incentive Target: 30%
Guideline Award: $42,000
3
<PAGE>
EXAMPLE 2 - CALCULATION
<TABLE>
<S> <C>
EPS Business BU Individual
Guideline X [( EPS X Weighting )+( Unit X Weighting )] X Performance = Final
Award(1) Component Factor Component Factor Modifier Award
$42,000 X [( 1.15 X 0.50 )+( 1.00 X 0.50 )] X 1.10 = $49,665
</TABLE>
AUDIT AND APPROVAL OF AWARDS
The financial calculations necessary to determine the Earnings Per Share
Component and Business Unit Component, 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.
PAYMENT
Awards will be paid as soon as practicable following the completion of
the plan year and approval by the Personnel Committee. Awards will be paid in
cash unless the participant has elected to defer part or all of the payment
consistent with the provisions of the PacifiCorp Compensation Reduction Plan.
ADMINISTRATIVE GUIDELINES
Administrative issues not specifically included in the program document
will be included in the administrative guidelines to the program. The CEO will
approve these guidelines and has authority to amend them.
4
<PAGE>
EXHIBIT (10)h
CONFORMED COPY
PACIFICORP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1996 RESTATEMENT
January 1, 1996
PacifiCorp
an Oregon corporation
700 NE Multnomah
Portland, Oregon 97232 Company
<PAGE>
TABLE OF CONTENTS
PAGE
INDEX OF TERMS iii
1. PURPOSE; EMPLOYERS; ADMINISTRATION 1
1.1 Purpose 1
1.2 Employers 1
1.3 Administration 2
2. PARTICIPATION; SERVICE; FORFEITURE 2
2.1 Eligibility; Participants 2
2.2 Service 2
2.3 Vesting 3
2.4 Misconduct Forfeiture 3
2.5 Change in Control 3
2.6 Removal from Active Participation 4
3. PARTICIPANTS' RETIREMENT BENEFITS 4
3.1 Entitlement; Retirement Dates 4
3.2 Normal Retirement Benefit 4
3.3 Actuarial Equivalents 7
3.4 Early Retirement Benefit 8
3.5 Termination Benefit 8
3.6 Time and Manner of Payment 9
3.7 Basic Plan Make-Up 9
4. PRERETIREMENT DEATH BENEFITS 10
4.1 Spouse's Benefit 10
4.2 Dependent Child's Benefit 10
5. DISABILITY 10
5.1 Service Continuation 10
5.2 Benefits 11
6. CLAIMS PROCEDURE 11
i
<PAGE>
6.1 Original Claim 11
6.2 Denial 11
6.3 Request for Review 11
6.4 Final Decision 11
7. AMENDMENT; TERMINATION 12
7.1 Amendment 12
7.2 Termination 12
8. GENERAL PROVISIONS 13
8.1 Nonassignability 13
8.2 Funding 13
8.3 Trust 13
8.4 Notices 13
8.5 Attorneys' Fees 13
8.6 Indemnity 13
8.7 Applicable Law 14
8.8 Company Obligation 14
8.9 Payment for Individual's Benefit 14
8.10 Not Contract of Employment 14
9. EFFECTIVE DATE 15
ii
<PAGE>
INDEX OF TERMS
SECTION PAGE
Accrued Benefit 3.6 9
Actuarial Equivalent 3.3 7
Basic Plan Preamble 1
Benefit Starting Date 3.7 9
Benefit Year 2.2 2
Board 1.3 2
Career Ratio 3.4(b) 8
Change in Control 2.5 3
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) 8
Final Average Pay 3.2(a) 5
Normal Retirement Benefit 3.2 4
Normal Retirement Date 3.1(a) 4
Other Plan Offset 3.2(d) 6
PacifiCorp Primary Insurance Amount 3.2(c) 6
Participant 2.1 2
Performance Benefit 3.2(b) 5
Projected Short Service Factor 3.4(a) 8
Short Service Factor 3.2(b) 5
Year of Participation 2.2 2
Years of Service 2.2 2
iii
<PAGE>
PACIFICORP
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1996 RESTATEMENT
JANUARY 1, 1988
PACIFICORP
AN OREGON CORPORATION
700 NE MULTNOMAH
PORTLAND, OREGON 97232 COMPANY
The Company adopted this plan effective January 1, 1988 to providing
retirement benefits for its executive employees and those of Company affiliates
that adopt the plan with the approval of the Company. The plan is the successor
to several nonqualified supplemental retirement plans maintained by the Company
and its affiliates. The benefits provided by the plan 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 base eligibility for participation on annual salary rate,
replace a portion of the benefit formula with a Performance Benefit, provide for
earlier vesting and an earlier Early Retirement Date, and eliminate the increase
in benefits commencing after earliest normal retirement date, the Company adopts
this 1996 Restatement.
1. PURPOSE; EMPLOYERS; ADMINISTRATION
1.1 PURPOSE
The purpose of this plan is to provide eligible executive officers 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
<PAGE>
Company of a controlled group or group of trades or businesses under common
control under sections 414(b) or (c) of the Internal Revenue 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 ELIGIBILITY; PARTICIPANTS
An executive officer of Employer shall be eligible to accrue benefits
under the plan commencing with the first of any month as of which the officer's
annual base salary rate exceeds $125,000. If an executive officer receives a
lump sum payment in lieu of an increase in annual base salary rate, the
executive officer shall be treated as having received such increase during the
12-month period to which the lump sum payment applies for purposes of
determining eligibility for the plan. As of July 1 of each year, commencing
with July 1, 1996, the $125,000 shall be increased by the percentage increase in
salary provided by the Company's nonunion employee merit pool applicable to
salary adjustments taking effect in such year. An individual who has benefits
accrued under this plan prior to the 1996 Restatement and does not satisfy the
eligibility requirement of this 2.1 shall participate in the plan for the
limited purpose of receiving prior accrued 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(s) covering the participant, except as follows. Any limitation of the
Basic Plan(s) on the length of service counted for periods in which no services
are performed shall be disregarded. A participant shall be credited with a Year
of Participation under this plan for each calendar year during which the
participant satisfied the eligibility requirement of 2.1 and was not removed
from active participation under 2.6. A partial Year of Participation shall be
credited based on the number of completed calendar months.
2
<PAGE>
2.3 VESTING
A participant's right to receive benefits under this plan shall become
vested upon either of the following:
(a) When the participant has attained age 50 and has completed
five or more Years of Participation.
(b) When the participant has completed five or more Years
of Service and terminates, either voluntarily or involuntarily,
from all employment with the Company and its affiliates within 24
months after a Change in Control.
2.4 MISCONDUCT FORFEITURE
Unless a Change in Control has occurred, 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
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.
2.5 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
3
<PAGE>
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.
2.6 REMOVAL FROM ACTIVE PARTICIPATION
An individual who previously has qualified for participation under 2.1
shall be removed from active participation as of the first day of any month at
which the individual ceases to so qualify. Upon removal the participant shall
have an Accrued Benefit determined under 3.5 on the basis of the participant's
Final Average Pay, Projected Short Service Factor, Performance Benefit, and
Career Ratio, calculated as of the effective date of removal, and on the
participant's PacifiCorp Primary Insurance Amount and Other Plan Offset
calculated as of the date of benefit commencement. 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 the benefit precedes age 60.
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 - age 65.
(b) Early retirement - 5 Years of Participation plus either
of the following:
(1) Age 55; or
(2) Age 50 and 15 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 50 percent of Final
Average Pay (FAP) times the Short Service Factor (SSF) plus the Performance
Benefit (PB) minus the PacifiCorp Primary Insurance Amount (PPIA) and the Other
Plan Offset (OPO) as follows:
4
<PAGE>
Benefit = [(50% x FAP x SSF) + PB] - PPIA - OPO
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 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) Performance Benefit (PB) means an additional amount for each
calendar year of participation, commencing with 1996, for which the
Company meets a performance goal set by the Committee for that year
and announced to participants. The additional amount shall be 1
percent of the participant's projected Final Average Pay at Normal
Retirement Date, such projection to be based on increases in pay to
that date under an assumption made by the actuary valuing the
liabilities created by the plan. If the participant is employed by
Employer for less than a full year, including a partial initial or
final year of employment, the 1 percent amount shall be prorated based
on the portion of the year worked. The 1
5
<PAGE>
percent amount shall be converted to an actuarial equivalent lump sum as of the
end of the year the Performance Benefit is earned, increased each year
thereafter by a percentage equal to the average interest rate of the Moody's Aa
Utility Bond Index, and converted back to an actuarial equivalent life annuity
when payment to the participant commences. Actuarial equivalency for purposes
of this paragraph (b) shall be determined under the factors provided in the
PacifiCorp Retirement Plan, regardless of whether the participant is covered by
that plan or a different Basic Plan. The total amount of Performance Benefit
payable to a participant shall not exceed 15 percent of the participant's Final
Average Pay, minus the number of percentage points, if any, provided to the
participant by 9.2(c).
(c) Short Service Factor (SSF) means a percentage, not to
exceed 100 percent, determined by dividing the participant's
Benefit Years by 15.
(d) PacifiCorp Primary Insurance Amount (PPIA) means the
portion earned while working at PacifiCorp of the participant's
primary insurance amount 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.
(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.
(4) The portion earned at PacifiCorp shall be
determined by multiplying the participant's full
primary insurance amount by a ratio of the
participant's Years of Service divided by 35.
(e) Other Plan Offset (OPO) means the sum of the straight
life actuarial equivalents of (1) through (4) below, as
interpreted under (5) below:
6
<PAGE>
(1) Retirement benefits payable under the Basic
Plan, including any benefits assumed from the Utah
Power & Light Company Deferred Compensation Plan and
excess benefits provided by the Utah Power & Light
Company Retirement and Death Benefit 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 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 50 percent of Final Average Pay
(FAP) times the Projected Short Service Factor (PSSF) times the Career Ratio
(CR) minus the PacifiCorp Primary Insurance Amount
7
<PAGE>
(PPIA) times the Early Retirement Factor (ERF) plus the Performance Benefit (PB)
minus the Other Plan Offset (OPO) as follows:
Benefit = ([(50% x FAP x PSSF x CR) - PPIA] x ERF) + PB - OPO
The terms Final Average Pay (FAP), Performance Benefit (PB), and PacifiCorp
Primary Insurance Amount (PPIA) are defined in 3.2. The term Other Plan Offset
(OPO) shall be as defined in 3.2, except the offset for a participant whose
Benefit Starting Date is earlier than age 55 shall not apply until the first of
the month after age 55. As a result, such a participant shall receive a larger
monthly benefit until attainment of age 55 and then a monthly benefit reduced by
the amount of the Other Plan Offset. 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 age 60 if
Benefit Years 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 age 60 , 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 minus .25 percent for each month by which the
commencement of benefits precedes the end of the month in which
the participant will attain age 60.
3.5 TERMINATION BENEFIT
A participant who terminates employment before early or normal
retirement date and after becoming vested shall receive the participant's
Accrued Benefit as provided below. The Accrued Benefit is a single life annuity
for the life of the participant equal to 50 percent of Final Average Pay (FAP)
times the Projected Short Service Factor (PSSF) times the Career Ratio (CR)
minus the PacifiCorp Primary Insurance Amount (PPIA) times the Early Retirement
Factor (ERF) plus the Performance Benefit (PB) minus the Other Plan Offset (OPO)
as follows:
Benefit = ([(50% x FAP x PSSF x CR) - PPPIA] x ERF) + PB - OPO
The terms used in this formula are defined in 3.2 and 3.4.
3.6 TIME AND MANNER OF PAYMENT
8
<PAGE>
Retirement benefits under 3.2 or 3.4 shall commence as of the first
day of the month beginning after a termination of employment that constitutes a
retirement under 3.1. Termination benefits under 3.5 shall commence as of the
first day of the month after the participant's early retirement date. The date
of commencement 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 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). 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.
3.7 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.
9
<PAGE>
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.
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).
10
<PAGE>
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.
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.
11
<PAGE>
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 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 become participants 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, Years of Service, and
Years of Participation shall be determined as though
the effective date of plan termination were a
termination of employment.
(2) The PacifiCorp Primary Insurance Amount shall
be estimated on the basis of the pay level and the
Social Security Act as in existence at the time of plan
termination.
12
<PAGE>
(3) The Other 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.
8.6 INDEMNITY
13
<PAGE>
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:
(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.
14
<PAGE>
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
9.1 This Restatement shall be effective January 1, 1996.
9.2 The following transition rules shall apply at the effective date
provided in 9.1:
(a) The benefit payable to a participant who was covered by
the plan before January 1, 1996, or to the surviving spouse or
dependent children of such a participant, shall be no less than
the participant's Accrued Benefit determined under 3.6 of the
plan, as in effect on December 31, 1995, on the basis of the
participant's Final Average Pay, Projected Short Service Factor,
and Career Ratio calculated as of December 31, 1995 and on a
Primary Social Security Benefit and Qualified Plan Offset equal
to the participant's PacifiCorp Primary Insurance Amount and
Other Plan Offset, respectively, calculated as of the date of
benefit commencement. If the participant had attained age 55 on
or before December 31, 1995, the participant shall have an
Earliest Retirement Date upon attaining age 62 and completing 30
Years of Service. The portion of the normal retirement benefit
of such a participant equal to the Accrued Benefit described
above shall be increased by one-third of one percent for each
month by which the participant's Earliest Retirement Date
precedes the participant's actual benefit commencement date. No
increase shall be made for a month beginning after the
participant's 65th birthday.
(b) An individual becoming a participant in the plan as a
result of the new eligibility standards in 2.1 of this
Restatement shall be credited with Years of Participation for
years before 1996 during which the individual was an executive
officer of an Employer and had an annual base salary rate of over
$125,000.
15
<PAGE>
(c) For an individual who was a participant over age 50 on
January 1, 1996 the 50 percent amount in the benefit formulas in
3.2, 3.4 and 3.6 shall be increased by one percent for each year
of age at nearest birthday above age 50 at January 1, 1996.
Adopted: November 8, 1995.
PACIFICORP
By FREDERICK W. BUCKMAN
-----------------------
President
Executed: February 23, 1996
16
<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,
----------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................. $ 428.0 $ 409.7 $ 377.8 $ 336.8 $ 378.7
Estimated interest portion of rentals charged to
expense.......................................... 20.4 17.1 20.1 19.5 16.7
---------- ---------- ---------- ---------- ----------
Total fixed charges........................... $ 448.4 $ 426.8 $ 397.9 $ 356.3 $ 395.4
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings, as defined:*
Income from continuing operations................. $ 446.8 $ 150.2 $ 422.7 $ 468.0 $ 505.0
Add (deduct):
Provision for income taxes...................... 176.7 90.8 187.4 249.8 238.8
Minority interest............................... 14.1 8.4 11.3 13.3 18.9
Undistributed income of less than 50% owned
affiliates..................................... (1.8) (5.7) (16.2) (14.7) (15.0)
Fixed charges as above.......................... 448.4 426.8 397.9 356.3 395.4
---------- ---------- ---------- ---------- ----------
Total earnings................................ $ 1,084.2 $ 670.5 $ 1,003.1 $ 1,072.7 $ 1,143.1
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of Earnings to Fixed Charges.................. 2.4x 1.6x 2.5x 3.0x 2.9x
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ------------------------
* "Fixed charges" represent consolidated interest charges and an estimated
amount representing the interest factor in rents. "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.
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,
----------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:*
Interest expense.................................. $ 428.0 $ 409.7 $ 377.8 $ 336.8 $ 378.7
Estimated interest portion of rentals charged to
expense.......................................... 20.4 17.1 20.1 19.5 16.7
---------- ---------- ---------- ---------- ----------
Total fixed charges......................... 448.4 426.8 397.9 356.3 395.4
Preferred Stock Dividends, as defined:*........... 37.4 59.9 56.8 60.8 57.0
---------- ---------- ---------- ---------- ----------
Total fixed charges and preferred
dividends.................................. $ 485.8 $ 486.7 $ 454.7 $ 417.1 $ 452.4
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Earnings, as defined:*
Income from continuing operations................. $ 446.8 $ 150.2 $ 422.7 $ 468.0 $ 505.0
Add (deduct):
Provision for income taxes...................... 176.7 90.8 187.4 249.8 238.8
Minority interest............................... 14.1 8.4 11.3 13.3 18.9
Undistributed income of less than 50% owned
affiliates..................................... (1.8) (5.7) (16.2) (14.7) (15.0)
Fixed charges as above.......................... 448.4 426.8 397.9 356.3 395.4
---------- ---------- ---------- ---------- ----------
Total earnings.............................. $ 1,084.2 $ 670.5 $ 1,003.1 $ 1,072.7 $ 1,143.1
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.......................... 2.2x 1.4x 2.2x 2.6x 2.5x
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ------------------------
* "Fixed charges" represent consolidated interest charges and an estimated
amount representing the interest factor in rents. "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.
S-2
<PAGE>
EXHIBIT 13
SUMMARY INFORMATION
Millions of dollars, except per share amounts
<TABLE>
<CAPTION>
5-Year
1995 to 1994 Compound
Percentage Annual
For the year 1995 1994 1993 1992 1991 1990 Comparison Growth
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $3,400.9 $3,506.5 $3,405.4 $3,235.7 $3,163.9 $3,093.9 (3)% 2%
------- ------- ------- ------- ------- ------- ---- ---
INCOME FROM OPERATIONS 1,047.8 1,022.3 969.2 703.5 1,032.5 1,034.5 2 -
------- ------- ------- ------- ------- ------- ---- ---
NET INCOME (LOSS) 505.0 468.0 479.1 (340.4) 507.2 473.9 8 1
------- ------- ------- ------- ------- ------- ---- ---
EARNINGS CONTRIBUTION (LOSS) ON
COMMON STOCK
Continuing operations
Electric Operations 276.4 339.8 322.3 202.9 346.6 334.2 (19) (4)
Telecommunications 103.0 70.5 50.9 57.3 76.6 76.6 46 6
Other (a) 86.9 18.0 10.2 (147.3) (3.1) (19.3) * *
------- ------- ------- ------- ------- ------- ---- ---
Total 466.3 428.3 383.4 112.9 420.1 391.5 9 4
Discontinued operations (b) - - 52.4 (490.6) 60.4 60.5 - *
Cumulative effect of
change in accounting
for income taxes - - 4.0 - - - - -
------- ------- ------- ------- ------- ------- ---- ---
Total $ 466.3 $ 428.3 $ 439.8 $ (377.7) $ 480.5 $ 452.0 9 1
------- ------- ------- ------- ------- ------- ---- ---
------- ------- ------- ------- ------- ------- ---- ---
EARNINGS (LOSS) PER SHARE
Continuing operations
Electric Operations $ .97 $ 1.20 $ 1.17 $ .76 $ 1.34 $ 1.37 (19 (7)
Telecommunications .36 .25 .19 .21 .30 .31 44 3
Other (a) .31 .06 .04 (.55) (.01) (.08) * *
------- ------- ------- ------- ------- ------- ---- ---
Total 1.64 1.51 1.40 .42 1.63 1.60 9 1
Discontinued operations (b) - - .19 (1.84) .23 .25 - -
Cumulative effect of
change in accounting
for income taxes - - .01 - - - - -
------- ------- ------- ------- ------- ------- ---- ---
Total $ 1.64 $ 1.51 $ 1.60 $ (1.42) $ 1.86 $ 1.85 9 (2)
------- ------- ------- ------- ------- ------- ---- ---
------- ------- ------- ------- ------- ------- ---- ---
CASH DIVIDENDS PER
COMMON SHARE
Paid $ 1.08 $ 1.08 $ 1.195 $ 1.52 $ 1.47 $ 1.41 - (5)
Declared $ 1.08 $ 1.08 $ 1.08 $ 1.53 $ 1.485 $ 1.425 - (5)
CAPITALIZATION
Common equity $ 3,633 $ 3,460 $ 3,263 $ 2,908 $ 3,512 $ 3,208 5 3
Preferred stock $ 312 $ 367 $ 367 $ 417 $ 342 $ 342 (15) (2)
Redeemable preferred stock $ 219 $ 219 $ 219 $ 219 $ 150 $ 50 - 34
Long-term debt $ 4,968 $ 3,768 $ 3,924 $ 4,181 $ 4,348 $ 3,944 32 5
Short-term debt $ 1,227 $ 551 $ 709 $ 973 $ 955 $ 1,078 123 3
OTHER INFORMATION
Total assets $ 14,015 $ 11,846 $ 11,957 $ 11,257 $ 11,910 $ 11,201 18 5
Total employees 12,651 12,845 13,464 12,901 13,239 13,411 (2) (1)
Common shareholders of
record (Thousands) 139.8 149.4 157.5 165.7 162.3 164.6 (6) (3)
Book value per share $ 12.78 $ 12.17 $ 11.61 $ 10.75 $ 13.40 $ 12.69 5 -
Market price per share $ 21 1/8 $ 18 1/8 $ 19 1/4 $ 19 3/4 $ 25 1/8 $ 22 3/8 17 (1)
Price earnings multiple 12.9 12.0 13.8 47.0 15.4 14.0 8 (2)
Pretax interest coverage 3.0 3.1 2.6 1.6 2.5 2.4 (3) 5
Cash flows from continuing
operations divided by
interest 3.5 4.1 3.9 3.5 3.5 3.3 (15) 1
Return on average
common equity 13.2 12.8 12.5 3.4 12.5 12.9 3 -
------- ------- ------- ------- ------- ------- ---- ---
------- ------- ------- ------- ------- ------- ---- ---
</TABLE>
*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. and, beginning in December 1995, Powercor Australia Limited,
an electricity distributor in Australia.
(b) Discontinued operations includes the Company's interest in NERCO, Inc. and
TRT Communications, Inc.
24
<PAGE>
The electric utility industry is undergoing major restructuring around the
world, including the beginning of the deregulation process in the United States.
PacifiCorp has recognized that these changes generate both opportunities and
threats and has taken steps to meet this challenge. The Company is responding
to increasing competition and deregulation in the utility industry by providing
additional products and services to its traditional customer base and by
expanding into new domestic and international markets through its nonregulated
businesses, including independent power production, power marketing and
generating plant and fuel management. The Company also continues to look for
opportunities to expand its telecommunications business and to develop synergies
between that business and the Company's energy operations. Through these
efforts, the Company expects to provide increased value to both its customers
and its shareholders.
1995 COMPARED TO 1994
EARNINGS CONTRIBUTION ON COMMON STOCK INCREASED $38 MILLION OR 9%.
- - The Company reached a tax settlement with the U.S. Internal Revenue Service
for the tax years 1983 through 1988, including the issues relating to the
1983 abandonment of the Company's interest in Washington Public Power
Supply System Unit 3 ("WPPS 3"). The settlement had no effect on
consolidated net income, although it had the effect of reducing Electric
Operations' earnings $32 million and increasing Other earnings by
$32 million.
- - Electric Operations' earnings contribution decreased $ 63 million or 19%
primarily due to the $32 million tax settlement. Excluding this
settlement, Electric Operations' earnings contribution decreased
$31 million or 9%. Lower fuel costs and lower spot market prices for
purchased power offset decreased revenues from irrigation customers, lower
prices for energy sold in the wholesale market and lower revenues from oil
and gas industrial customers. However, higher pension, interest and
depreciation expenses led to a reduction in earnings contribution.
- - Telecommunications' earnings contribution increased $33 million or 46% due
to a $37 million gain resulting from the sale of Alascom, Inc. ("Alascom").
Excluding the effect of the Alascom gain and its decreased earnings
contribution of $24 million, Telecommunications' contribution increased
$20 million or 75% due to the acquisition of local exchange assets, revised
local exchange revenue estimates for prior years and growth in cellular
operations. These increases were partially offset by increased interest
expense resulting from higher levels of debt outstanding.
- - The earnings contribution of other businesses increased $69 million
primarily due to a $32 million tax adjustment relating to the settlement
with the IRS described above. Also contributing was a $27 million increase
in financial services' income resulting from the effect of valuation and
impairment charges of $19 million after-tax in 1994 and increased gains in
1995 from sales of finance and real estate assets of $4 million.
- - The average number of common shares outstanding was virtually unchanged.
In November 1994, the Company ceased issuing new shares to meet the
requirements under dividend reinvestment and employee stock ownership
plans. The Company periodically evaluates the advantages of common share
issuances and, on February 15, 1996, began again to issue common stock
under the dividend reinvestment plan. In addition, the Company completed a
public offering of 9.7 million shares of its common stock on March 11,
1996.
1994 COMPARED TO 1993
EARNINGS CONTRIBUTION ON COMMON STOCK DECREASED $12 MILLION OR 3%.
- - 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. See Note 13 to Consolidated Financial
Statements.
- - 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.
NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." This Statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company does
not expect the adoption of this standard in 1996 to have a material effect on
its consolidated financial statements.
25
<PAGE>
ELECTRIC OPERATIONS
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.
FACTORS INFLUENCING EARNINGS
Financial performance is dependent on efficiently and economically balancing
power supply resources with customer demand; improvements in operating
efficiencies; 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; the
success of other marketing initiatives; environmental and tax legislation; and
the cost of debt and equity capital.
Factors expected to place upward pressure on Electric Operations' costs and
pricing structure in the next several years include a higher effective tax rate,
Bonneville Power Administration ("BPA") price increases, the potential for
rising interest rates, hydroelectric relicensing and other cost increases. In
addition, increased competition in the wholesale marketplace is expected to keep
prices and margins low for Electric Operations' wholesale sales.
COMPETITION
Although Electric Operations operates as a regulated monopoly within its service
territories, it 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 U.S. electric utility industry is experiencing increasing competitive
pressures, primarily in the wholesale market, as a result of customer demands,
technological advances, greater availability of natural gas and other factors.
The Federal Energy Regulatory Commission ("FERC") has proposed regulatory
changes to increase access to the nationwide transmission grid by utility and
nonutility purchasers and sellers of electricity. Electric Operations has filed
open access point-to-point and network integration tariffs with the FERC and its
transmission assets have been subject to open access since 1989. A number of
states are considering methods to introduce and promote retail competition.
Electric Operations has formulated strategies to meet these new challenges and
capitalize on its competitive position. To give shareholders an appropriate
opportunity to share in the rewards and risks of competition, Electric
Operations is seeking alternate forms of regulation that will include
performance indexes. Electric Operations plans to focus on the development of
new products and services, as well as the use of existing technologies in new
ways. Electric Operations is marketing unbundled 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. Depending upon the success of these
strategies, Electric Operations will continue to adjust its competitive
direction.
REGULATION
On September 1, 1995, Electric Operations filed a request with the Oregon Public
Utility Commission to raise prices in Oregon by an average of 3.8%. The
proposed rate increase amounts to $25 million annually and involves a
performance-based formula. Electric Operations expects that any changes to
prices under this filing would not occur until July 1996. This would be
Electric Operations' first general rate increase since 1987. Oregon customers
accounted for 32% of Electric Operations' total retail revenues in 1995.
On November 8, 1995, Electric Operations filed a request with the Wyoming Public
Service Commission ("PSC") for an overall price increase averaging approximately
4% for its Wyoming customers. The proposed rate increase amounts to $10 million
annually and also involves a performance-based formula. Electric Operations
expects any changes in prices under this filing to occur during the third
quarter of 1996, subject to approval from the Wyoming PSC. This would be
PacifiCorp's first price increase filing in Wyoming since 1986. Wyoming
customers accounted for 14% of Electric Operations' total retail revenues in
1995.
It is uncertain whether or not the Company's proposal or any other alternative
form of regulation will be adopted in these jurisdictions.
For a discussion of accounting for the effects of regulation, see Note 1 to the
Consolidated Financial Statements.
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.
Electric Operations' generating plants burn low-sulfur coal. Major construction
expenditures have already been made at many plants to reduce sulfur dioxide
emissions, but additional expenditures are expected to be required at the
Centralia Plant in Washington and the Jim Bridger Plant in Wyoming. Electric
Operations is studying how to bring the Centralia Plant into compliance in a
cost-effective manner with the emissions limitations ordered by the
environmental authorities in the state of Washington. Electric Operations has
also been engaged in discussions with the environmental authorities in Wyoming
with respect to alleged violations of the opacity standards applicable to the
Jim Bridger Plant.
In addition, the Company and the other joint owners of the Hayden Generating
Station ("Station") in Colorado are parties to a lawsuit brought by the Sierra
Club alleging violations of the Act at the Station, which is operated by the
Public Service
26
<PAGE>
ELECTRIC OPERATIONS
Millions of dollars
<TABLE>
<CAPTION>
5-Year
1995 to 1994 Compound
Percentage Annual
For the year 1995 1994 1993 1992 1991 1990 Comparison Growth
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Residential $ 721.9 $ 724.9 $ 698.9 $ 649.8 $ 663.8 $ 646.6 -% 2%
Commercial 575.9 570.4 543.9 526.9 517.4 509.0 1 3
Industrial 697.6 726.3 696.2 695.6 674.9 673.8 (4) 1
Other 29.7 30.7 29.8 29.9 34.2 34.3 (3) (3)
-------- -------- -------- -------- -------- -------- --- ---
Retail 2,025.1 2,052.3 1,968.8 1,902.2 1,890.3 1,863.7 (1) 2
-------- -------- -------- -------- -------- -------- --- ---
Wholesale - firm 487.7 456.2 422.5 356.5 264.7 209.9 7 18
Wholesale - nonfirm 32.3 76.5 77.3 71.3 59.9 78.4 (58) (16)
-------- -------- -------- -------- -------- -------- --- ---
Wholesale 520.0 532.7 499.8 427.8 324.6 288.3 (2) 13
Other 71.0 62.8 38.3 32.4 36.9 32.5 13 17
-------- -------- -------- -------- -------- -------- --- ---
Total 2,616.1 2,647.8 2,506.9 2,362.4 2,251.8 2,184.5 (1) 4
-------- -------- -------- -------- -------- -------- --- ---
EXPENSES
Depreciation and amortization 320.4 301.6 280.5 286.6 256.0 235.4 6 6
Operations, maintenance and
other 1,494.8 1,526.9 1,442.1 1,398.1 1,212.8 1,204.1 (2) 4
-------- -------- -------- -------- -------- -------- --- ---
Total 1,815.2 1,828.5 1,722.6 1,684.7 1,468.8 1,439.5 (1) 5
-------- -------- -------- -------- -------- -------- --- ---
INCOME FROM OPERATIONS 800.9 819.3 784.3 677.7 783.0 745.0 (2) 1
Interest expense 311.9 264.3 270.4 271.0 265.1 250.8 18 4
Interest capitalized (14.9) (14.5) (13.9) (16.2) (15.8) (22.3) 3 (8)
Other (income) expense - net (25.3) (30.2) (13.1) 25.0 (13.9) (1.4) (16) 78
Income tax expense 214.1 220.2 179.3 157.7 174.3 161.8 (3) 6
-------- -------- -------- -------- -------- -------- --- ---
NET INCOME 315.1 379.5 361.6 240.2 373.3 356.1 (17) (2)
PREFERRED DIVIDEND REQUIREMENT 38.7 39.7 39.3 37.3 26.7 21.9 (3) 12
-------- -------- -------- -------- -------- -------- --- ---
EARNINGS CONTRIBUTION (a) $ 276.4 $ 339.8 $ 322.3 $ 202.9 $ 346.6 $ 334.2 (19) (4)
-------- -------- -------- -------- -------- -------- --- ---
-------- -------- -------- -------- -------- -------- --- ---
Identifiable assets $ 9,599 $ 9,372 $ 9,055 $ 8,192 $ 7,665 $ 7,027 2 6
Capital spending $ 455 $ 638 $ 637 $ 864(b) $ 796 $ 459 (29) -
Number of employees 8,966 9,281 9,304(c) 9,363 9,419 8,974 (3) -
EXPENSES
Fuel $ 446.6 $ 496.4 $ 464.7 $ 479.0 $ 424.1 $ 403.5 (10) 2
Purchased power $ 311.3 $ 310.4 $ 274.9 $ 210.2 $ 176.4 $ 149.6 - 16
Other operations $ 304.1 $ 296.1 $ 287.9 $ 288.0 $ 249.7 $ 259.5 3 3
Maintenance $ 168.4 $ 174.5 $ 172.2 $ 167.8 $ 146.6 $ 151.2 (3) 2
Administrative and general $ 160.5 $ 142.7 $ 138.2 $ 144.5 $ 119.1 $ 139.5 12 3
Depreciation and
amortization $ 320.4 $ 301.6 $ 280.5 $ 286.6 $ 256.0 $ 235.4 6 6
Taxes, other than income
taxes $ 103.9 $ 106.8 $ 104.2 $ 108.6 $ 96.9 $ 100.8 (3) 1
Income taxes - utility $ 213.6 $ 223.0 $ 188.8 $ 170.5 $ 180.8 $ 169.7 (4) 5
Income taxes - other $ .5 $ (2.8) $ (9.5) $ (12.8) $ (6.5) $ (7.9) 118 *
-------- -------- -------- -------- -------- -------- --- ---
-------- -------- -------- -------- -------- -------- --- ---
</TABLE>
*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) Includes noncash acquisition costs of $255 million relating to the
Colorado-Ute properties.
(c) Beginning in 1993, employees of Pacific Generation Company were reported in
other businesses (127 employees in 1993).
27
<PAGE>
Company of Colorado, in which the Company has an interest of approximately
17.5%. The EPA has also issued a notice of additional violations of air quality
regulations applicable to the Station and proposed a penalty of $24 million.
The parties have been engaged in settlement discussions, but the Company is not
able to predict the outcome of these discussions or the level of penalties or
other remedies that may ultimately be imposed on the joint owners of the
Station.
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 ("CO(2)")
emissions have on warming. Electric Operations is investigating cost-effective
ways to offset future CO(2) emissions and is undertaking demonstration projects
involving tree planting as a possible means of offsetting emissions. In 1994,
Electric Operations joined with 37 other investor-owned utilities to sign a
voluntary agreement with the U.S. Department of Energy addressing CO(2)
emissions. Electric Operations' specific agreement includes a commitment to
reduce its 1990 CO(2) emissions to an amount that is 10% less than the emissions
in 1990 and to spend $1 million on offset projects by the year 2000.
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 electricity sales to Electric Operations' customers in the wood
products industry.
Electric Operations 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 12 of Electric Operations'
hydroelectric projects expire within the next 10 years. These projects
represent 664 MW, or 62%, of Electric Operations' hydroelectric generating
capacity, or 8% of total 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. Electric Operations 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 Electric Operations has been
or may be designated as a potentially responsible party. In such cases,
Electric Operations 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 statements.
1995 COMPARED TO 1994
REVENUES DECREASED $32 MILLION OR 1%.
- - Residential revenues decreased $3 million and related kWh volume decreased
1%. Revenues decreased $14 million due to warmer winter weather and
$7 million due to the effect of the sale of Sandpoint, Idaho distribution
facilities in December 1994. Revenues increased $14 million due to a 2%
increase in the average number of residential customers and $4 million from
increased customer usage.
- - Commercial revenues increased $6 million or 1%. Revenues increased
$10 million due to a 2% increase in the average number of commercial
customers and $9 million due to increased customer usage. These increases
were partially offset by weather-related decreases of $7 million and a
$4 million decrease due to the sale of the Sandpoint facilities.
- - Industrial revenues decreased $29 million or 4% primarily due to a 3%
decrease in kWh volume. Sales to oil and gas customers in Wyoming
decreased $21 million due to permanent oil and gas well closures and sales
to irrigation customers decreased $15 million due to increased rainfall and
mild temperatures in 1995, offset in part by a $5 million increase
resulting from reductions in the BPA credit.
- - Wholesale revenues decreased $13 million, or 2%, and kWh volume increased
5%. Spot and short-term market revenues decreased $30 million due to lower
prices and $4 million due to lower volumes sold. The lower prices resulted
from increased competition, the effect of lower natural gas prices,
moderate winter heating temperatures and an abundance of hydro generation
in the region. Partially offsetting the declines were revenues of
$22 million from new long-term firm contracts.
OPERATING EXPENSES DECREASED $13 MILLION OR 1%.
- - Fuel expense decreased $50 million or 10%. Thermal generation declined
3,568,000 mWh or 7% due to a 1,391,000 mWh or 43% increase in hydro
generation and the availability of lower-cost purchased power in the spot
market.
- - Purchased power expense increased $1 million. A $27 million decrease
resulting from lower spot market prices was offset by an increase of
$14 million resulting from higher volumes purchased (1,839,000 mWh or 20%),
a $7 million increase in prices for firm purchases and decreased BPA
exchange benefits of $7 million.
BPA, a wholesale power and wheeling supplier, increased its rates effective
October 1, 1995. The new rates will increase Electric Operations' capacity
and wheeling expenses by approximately $4 million annually and will reduce
the exchange benefits directly received by Electric Operations' residential
and small farm customers by approximately $10 million annually. Electric
Operations has received approval for price increases that will allow it to
recover the loss of exchange benefits.
On July 10, 1995, BPA issued its initial 1996 rate case proposal. This
proposal will be subject to a rate hearing which is expected to conclude
May 31, 1996, with final wholesale power and wheeling rates to be effective
October 1, 1996.
28
<PAGE>
ELECTRIC OPERATIONS
<TABLE>
<CAPTION>
5-Year
1995 to 1994 Compound
Percentage Annual
For the year 1995 1994 1993 1992 1991 1990 Comparison Growth
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ENERGY SALES (MILLIONS OF kWh)
Residential 12,030 12,127 12,055 11,230 11,354 10,990 (1)% 2%
Commercial 10,797 10,645 10,085 9,733 9,416 9,101 1 3
Industrial 19,748 20,306 19,671 19,942 19,322 19,507 (3) -
Other 592 623 602 606 692 690 (5) (3)
-------- -------- -------- -------- -------- -------- --- ---
Retail sales 43,167 43,701 42,413 41,511 40,784 40,288 (1) 1
-------- -------- -------- -------- -------- -------- --- ---
Wholesale - firm 13,946 12,418 11,919 10,455 7,349 6,147 12 18
Wholesale - nonfirm 2,430 3,207 3,030 2,965 2,946 3,323 (24) (6)
-------- -------- -------- -------- -------- -------- --- ---
Wholesale sales 16,376 15,625 14,949 13,420 10,295 9,470 5 12
-------- -------- -------- -------- -------- -------- --- ---
Total 59,543 59,326 57,362 54,931 51,079 49,758 - 4
-------- -------- -------- -------- -------- -------- --- ---
-------- -------- -------- -------- -------- -------- --- ---
ENERGY SOURCE (%)
Coal 74 79 77 81 78 78 (6) (1)
Hydroelectric 7 5 6 4 6 7 40 -
Other 2 2 1 2 1 1 - 15
Purchase and exchange contracts 17 14 16 13 15 14 21 4
-------- -------- -------- -------- -------- -------- --- ---
NUMBER OF RETAIL CUSTOMERS (THOUSANDS)
Residential 1,176 1,155 1,135 1,112 1,093 1,076 2 2
Commercial 158 156 152 149 146 142 1 2
Industrial 20 19 18 17 16 15 5 6
Other 3 4 3 3 3 3 (25) -
-------- -------- -------- -------- -------- -------- --- ---
Total 1,357 1,334 1,308 1,281 1,258 1,236 2 2
-------- -------- -------- -------- -------- -------- --- ---
RESIDENTIAL CUSTOMERS
Average annual
usage (kWh) 10,321 10,568 10,733 10,183 10,464 10,283 (2) -
Average annual revenue
per customer (Dollars) 619 631 622 589 612 605 (2) -
Revenue per kWh (Cents) 6.0 6.0 5.8 5.8 5.8 5.9 - -
MILES OF LINE
Transmission 14,900 14,900 14,900 14,900 14,900 14,900 - -
Distribution 44,900 44,800 44,700 44,500 44,400 44,200 - -
SYSTEM PEAK DEMAND (MEGAWATTS)
Net system load (a) - summer 6,855 7,151 6,554 6,734 6,405 6,407 (4) 1
- winter 7,030 7,174 7,268 6,968 7,019 7,623 (2) (2)
Total firm load (b) - summer 8,899 8,830 8,390 8,477 7,639 7,019 1 5
- winter 8,904 8,903 8,838 8,335 7,710 8,417 - 1
SYSTEM CAPABILITY (MEGAWATTS) (c)
- summer 10,224 10,020 9,757 9,753 9,629 8,551 2 4
- winter 10,994 10,391 9,916 9,982 9,316 9,141 6 4
-------- -------- -------- -------- -------- -------- --- ---
-------- -------- -------- -------- -------- -------- --- ---
</TABLE>
(a) Excludes off-system wholesale sales.
(b) Includes off-system firm wholesale sales.
(c) Owned and contractual generating capability at time of system firm peak.
29
<PAGE>
- - Other operations expense increased $8 million or 3% primarily due to higher
pension expense in 1995.
- - Maintenance expense decreased $6 million or 3% primarily due to lengthening
the intervals between thermal plant overhauls and extending the duration of
maintenance overhaul periods at some plants, thereby reducing the use of
contract employees and overtime pay.
- - Administrative and general expense increased $18 million or 12% due to
increased pension and other employee expenses in 1995 and accruals of
$3 million relating to storm damage in 1995.
- - Depreciation and amortization expense increased $19 million or 6% primarily
due to additional plant in service.
EARNINGS CONTRIBUTION DECREASED $63 MILLION OR 19%.
- - Income from operations decreased $18 million or 2%.
- - Interest expense increased $48 million or 18% primarily due to the
$28 million interest portion of the tax settlement with the IRS referred to
above. The remaining $20 million increase was primarily due to the effects
of higher short-term interest rates and higher levels of debt outstanding
in 1995.
- - Other income decreased $5 million or 16% due to the effect of a $6 million
gain on the sale of Sandpoint properties in 1994 and decreased gains of
$3 million on sales of surplus sulfur dioxide emission allowances.
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 decreased $6 million or 3% primarily due to decreased
taxable income, partially offset by the $4 million net effect of the tax
settlement ($15 million of additional taxes due, partially offset by an
$11 million tax benefit from related interest expense). Additionally,
income taxes rose due to a higher effective tax rate associated with the
reversal of deductions flowed through to ratepayers in prior years.
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.
- - 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.
- - BPA increased its rates effective October 1, 1993. Electric Operations'
capacity and wheeling expenses and exchange benefits were affected by that
increase.
- - 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.
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 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.
- - 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.
30
<PAGE>
TELECOMMUNICATIONS
Pacific Telecom, Inc. ("Pacific Telecom") provides voice, data, enhanced and
other services through facilities associated with local exchange operations in
11 states. Until August 7, 1995, when Alascom was sold to AT&T Corp. ("AT&T"),
Pacific Telecom also provided intrastate and interstate long lines services in
Alaska. Pacific Telecom also owns, manages, or holds interests in cellular
operations and properties, predominantly concentrated in the Midwest, and owns,
operates and sells capacity on the North Pacific Cable ("NPC"), which connects
the United States and Japan.
Pacific Telecom's revenues for 1995 were derived 62% from local exchange
carriers ("LECs"), 30% from long lines, 5% from cellular operations and 3% from
cable and backhaul capacity sales and related cable services.
FACTORS INFLUENCING EARNINGS
Pricing for telecommunications services is subject to varying degrees of
regulation and competitive market effects, in part dependent upon the specific
provisions of individual state jurisdictional requirements. Long-term
profitability is influenced by, among other factors, governmental policies (both
state and federal), technological developments, efficiency of operations, cost
of capital and competitive factors.
COMPETITION
The telecommunications industry is characterized by increasing competition. The
Telecommunications Act of 1996, enacted into law on February 8, 1996
("Telecommunications Act"), removes legal barriers to entry in the provision of
many telecommunications services and is intended to promote the development of
competitive service within the industry. While Pacific Telecom's LECs have
experienced minimal competition with respect to basic services, primarily due to
the suburban or rural nature of their service areas, competition experienced by
these LECs may increase in the future. Alternative or competitive access
providers have historically competed against certain of Pacific Telecom's LECs
in the past. Competitive LECs, including those using wireless technologies, are
likely to emerge in the telecommunications industry in the future as a result of
technological advances and changes in regulatory policy, although their
emergence in the areas served by Pacific Telecom is likely to extend over a
longer period of time than in more urban areas.
The continuing federal auctions of spectrum for personal communications and
other services pose the prospect of increased competition for Pacific Telecom's
cellular operations. Price, quality of service and technical capabilities are
significant competitive factors in wireless communications, although Pacific
Telecom's cellular operations currently benefit from market presence and an
existing network.
Over the past several years, Pacific Telecom's strategy has been to concentrate
its investment and operations in its primary business of providing local
exchange and exchange access services to rural consumers. This strategy has
been implemented through a migration of capital investment away from noncore
activities (usually through disposition activities) and into LEC properties
(usually through acquisitions). The intent of this strategy has been to
maximize the benefits of operational and other efficiencies and capabilities,
resulting in high quality service to rural areas provided by state-of-the-art
facilities. Regulatory, market and other competitive changes in the
telecommunications industry may affect the manner in which this strategy is
executed or the benefits obtainable from the strategy in the future.
Pacific Telecom owns 80% of the NPC and is involved in the operation,
maintenance and sale of capacity. Approximately 55% of the NPC's capacity has
been sold -- 2%, 2%, 1%, 4%, 10% and 36% sold in 1995 through 1990,
respectively. The NPC competes for customers with AT&T's trans-Pacific cables.
However, AT&T has stated that all capacity on its existing in-service cable
system has been subscribed. The southern route of a new AT&T cable system went
into service in December 1995 and the northern route of that system is expected
to be completed by late 1996. The NPC is priced competitively with those cable
systems. The NPC also competes with available capacity on international
communication satellites. Pacific Telecom continues to market the remaining
cable capacity and believes that the $61 million inventory value of the cable
system at December 31, 1995 will be recovered.
The NPC experienced outages in February, May and October 1995. Two of the
outages were caused by failure of components covered under existing contractual
warranty provisions. NPC's warranty provision requires the contractor to pay
for incurred marine operations charges and to replace spares and materials used
during the repair.
UNIVERSAL SERVICE FUND ("USF") SUPPORT
The USF 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 their operations, a number of Pacific
Telecom's LECs receive this support, as the cost of providing local service in
rural areas generally exceeds the national average.
The Federal Communications Commission ("FCC") placed a cap on USF growth,
commencing at the beginning of 1994, which effectively indexes the growth in the
size of the fund to the rate of growth of the nation's access lines (working
local loops). Prior to the enactment of the Telecommunications Act, the FCC had
ordered an extension of the fund and the indexed cap mechanisms through the
first six months of 1996. The Telecommunications Act specifically addresses
universal service issues, requiring a federal-state joint board to examine both
the substance of universal service and the mechanisms for providing universal
service support and to make recommendations to the FCC within nine months of the
enactment date. The FCC is statutorily required to review and determine all
universal service matters in a single proceeding, to be concluded no later than
15 months after the date of the Telecommunications Act. The FCC has announced a
proposed schedule of proceedings to accomplish these tasks in the time period
specified by the Telecommunications Act.
The Telecommunications Act recognizes the need for universal service as a matter
of legislative policy and statute. Further, the Telecommunications Act requires
specific and predictable mechanisms for delivering universal service
31
<PAGE>
support, and expressly provides that only eligible telecommunications carriers
are entitled to receive universal service support funding. Pacific Telecom
intends to seek designation as an eligible telecommunications carrier wherever
appropriate, but does not expect any determination of that status for some time,
pending the conclusion of the joint board and FCC processes described above.
Revenues derived from the existing USF were $46 million in 1995 and $30 million
in 1994 and 1993, and are expected to increase with the full year operation in
1996 of the acquisitions in Colorado, Washington and Oregon.
Continuation of the current indexed cap on USF may have a negative impact on
Pacific Telecom's revenues, but that impact is not expected to be material. The
form and effects of changes to universal service support, if any, under the new
Telecommunications Act are unknown at present. The current USF mechanism
functions by transferring certain defined costs from the intrastate to the
interstate jurisdiction for cost recovery. Any change in this mechanism could
permit some costs to be recovered from intrastate sources, depending upon state
regulatory policies, the competitive condition of specific intrastate markets
and other factors.
OTHER INFORMATION
See Note 2 to Consolidated Financial Statements for information regarding
Holdings' acquisition of the 13% publicly held minority interest of Pacific
Telecom.
See Note 2 to Consolidated Financial Statements for information regarding the
sale of Alascom. The Company recognized an after-tax gain of approximately
$37 million from the sale, based on its 87% ownership interest of Pacific
Telecom when the sale occurred. Excluding the results of Alascom, the 5-year
compound annual growth rate for income from operations would be 7%.
TELECOMMUNICATIONS
<TABLE>
<CAPTION>
Millions of dollars
5-Year
1995 to 1994 Compound
Percentage Annual
For the year 1995 1994 1993 1992 1991 1990 Comparison Growth
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Local network service $120.5 $ 96.9 $ 81.8 $ 74.1 $ 68.4 $ 57.7 24% 16%
Network access service 223.7 168.5 183.9 174.9 168.2 147.4 33 9
Long distance network service 150.1 272.0 262.5 275.4 286.1 253.8 (45) (10)
Private line service 34.3 58.2 63.8 70.4 66.0 60.1 (41) (11)
Sales of cable capacity 3.4 4.6 4.9 10.8 30.9 83.2 (26) (47)
Cellular and other 116.6 104.8 105.2 92.6 100.4 80.7 11 8
------ ------ ------ ------ ------ ------ --- ---
Total 648.6 705.0 702.1 698.2 720.0 682.9 (8) (1)
------ ------ ------ ------ ------ ------ --- ---
EXPENSES
Depreciation and amortization 111.9 104.5 110.0 114.1 117.3 101.9 7 2
Operations, maintenance and
other 371.4 435.8 451.3 445.5 443.1 426.8 (15) (3)
------ ------ ------ ------ ------ ------ --- ---
Total 483.3 540.3 561.3 559.6 560.4 528.7 (11) (2)
------ ------ ------ ------ ------ ------ --- ---
INCOME FROM OPERATIONS 165.3 164.7 140.8 138.6 159.6 154.2 - 1
Interest expense 42.3 34.8 44.3 52.1 54.9 39.5 22 1
Other (income) expense - net (63.6) 7.7 14.3 (13.2) (15.7) (22.8) * 23
Income tax expense 47.0 40.8 23.8 32.5 30.9 42.1 15 2
------ ------ ------ ------ ------ ------ --- ---
INCOME FROM CONTINUING
OPERATIONS(a) 139.6 81.4 58.4 67.2 89.5 95.4 71 8
Minority interest and other 36.6 10.9 7.5 9.9 12.9 18.8 * 14
------ ------ ------ ------ ------ ------ --- ---
EARNINGS CONTRIBUTION FROM
CONTINUING OPERATIONS (a) $103.0 $70.5 $50.9 $57.3 $76.6 $76.6 46 6
------ ------ ------ ------ ------ ------ --- ---
------ ------ ------ ------ ------ ------ --- ---
Identifiable assets $1,599 $1,378 $1,413 $1,540 $1,702 $1,732 16 (2)
Capital spending $ 498 $ 153 $ 126 $ 140 $ 236 $ 475 * 1
Number of employees 2,233 2,762 2,834 2,891 3,050 3,412 (19) (8)
Telephone access lines(Thousands) 530 418 399 379 357 340 27 9
------ ------ ------ ------ ------ ------ --- ---
------ ------ ------ ------ ------ ------ --- ---
</TABLE>
*Not a meaningful number.
(a) Does not reflect elimination of interest on intercompany
borrowing arrangements and includes income taxes on a
separate-company basis.
32
<PAGE>
The table below contains summarized income statement data for Alascom and the
effects of the sale of Alascom in August 1995, which included a $66 million gain
realized by Pacific Telecom from the sale, the write off of $20 million of
goodwill relating to Alascom and $9 million of minority interest associated with
the sale. The table below does not include interest allocations made by Pacific
Telecom in these periods.
<TABLE>
<CAPTION>
Millions of dollars/For the year 1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
REVENUES
Long distance network service $148.8 $271.4 $261.3
Private line service 34.3 58.2 56.5
Other 10.0 13.9 20.0
------- ------- ------
Total 193.1 343.5 337.8
EXPENSES 156.2 262.8 278.3
------- ------- ------
INCOME FROM OPERATIONS 36.9 80.7 59.5
Other (income) expense - net (65.9) (2.3) 2.5
Income taxes 14.0 31.4 18.5
------- ------- ------
NET INCOME 88.8 51.6 38.5
Minority interest and other 32.3 7.7 6.0
------- ------- ------
EARNINGS CONTRIBUTION $ 56.5 $ 43.9 $ 32.5
------- ------- ------
------- ------- ------
</TABLE>
The discussion below comparing 1995 to 1994 is presented excluding the effects
of the Alascom gain and Alascom's earnings contributions, which are summarized
in the table above.
1995 COMPARED TO 1994
REVENUES INCREASED $94 MILLION OR 26%.
- - Local network service revenues (local telephone services to residential and
business customers) increased $24 million or 24% primarily due to
$16 million of revenue from assets acquired in Colorado, Oregon and
Washington, the $4 million effect of internal access line growth and a $3
million increase in extended area and enhanced services.
- - Network access service revenues (fees charged to long distance
interexchange carriers using the local exchange network to access their
customers) increased $55 million or 33% due to $43 million of revenues from
assets acquired, $7 million from revised LEC revenue estimates for prior
years and $2 million of increased USF support.
. Cellular and other revenues increased $16 million or 17% primarily due to
the $10 million effect of cellular customer growth, $3 million of revenues
from assets acquired and a $3 million increase in cable maintenance and
restoration revenues due to cable outages.
OPERATING EXPENSES INCREASED $50 MILLION OR 18%.
- - Operations expense increased $9 million or 13% primarily due to an increase
of $8 million from assets acquired and $5 million from growth in cellular
operations.
- - Maintenance expense increased $12 million or 16% primarily due to increases
of $7 million from assets acquired, $2 million from other LEC maintenance
activities, $2 million from growth in access lines and network upgrades and
$2 million due to growth in cellular operations.
- - Administrative and general expense increased $5 million or 11% primarily
due to assets acquired.
- - Depreciation expense increased $22 million or 32% primarily due to
$16 million from assets acquired and $3 million from increased depreciable
plant balances at LECs.
EARNINGS CONTRIBUTION INCREASED $20 MILLION OR 75%.
- - Income from operations increased $44 million or 53% primarily due to a $25
million increase from assets acquired. Excluding the effects of asset
acquisitions, income from operations increased $19 million or 23%.
- - Interest expense increased $8 million or 23% due to the $6 million effect
of increased borrowings used to fund assets acquired and $2 million
relating to the IRS settlement.
- - Other expense decreased $8 million due to the effect of higher overhead and
finance costs in 1994.
- - Income tax expense increased $24 million due to higher taxable income and
reduction of tax benefits relating to amortization of investment tax
credits and excess deferred taxes. The gain on the sale of Alascom was
recorded without income tax expense because the tax basis in Alascom was
greater than the selling price. This caused Pacific Telecom's effective
tax rate to decline.
1994 COMPARED TO 1993
REVENUES INCREASED $3 MILLION.
- - Local network service revenues 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.
- - Network access service revenues decreased $15 million or 8% primarily due
to a $6 million decrease as a result of the shift to extended calling area
services in LECs, the $5 million effect of a decrease in operating expenses
used in setting interstate access rates and lower revenue adjustments of $4
million.
- - Long distance network service revenues 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 the 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 decreased $6 million or 9% primarily due to
Pacific Telecom's exit of certain noncore businesses.
33
<PAGE>
- - 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 LEC 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 LECs in Alaska and a
$3 million reduction relating to noncore businesses that were sold, offset
in part by the $3 million effect of increased LEC 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.
OTHER
Other includes three main businesses, as well as the activities of PacifiCorp
Holdings, Inc. ("Holdings"). PacifiCorp Financial Services, Inc. ("PFS") has
tax-advantaged investments in affordable housing and has leasing operations
that consist principally of leveraged aircraft leases. Pacific Generation
Company ("PGC") has ownership interests in the independent power production and
cogeneration businesses. Powercor Australia Limited ("Powercor"), an
electricity distributor in Australia, was purchased on December 12, 1995 and the
results of operations of Powercor have been included in the earnings
contribution for 19 days. See Note 2 to Consolidated Financial Statements for
information regarding the acquisition of Powercor.
<TABLE>
<CAPTION>
Identifiable Assets
Millions of dollars/December 31 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
PFS $ 697 $ 731 $1,116
PGC 116 113 122
Powercor 1,751 - -
Holdings and other 253 252 251
----- ----- -----
Total $2,817 $1,096 $1,489
----- ----- -----
----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Earnings Contribution
Millions of dollars/For the year 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
PFS $30.4 $3.0 $(3.1)
PGC 5.6 8.5 6.5
Powercor .7 - -
Tax settlement 32.2 - -
Holdings and other 18.0 6.5 6.8
----- ----- -----
Total $86.9 $18.0 $10.2
----- ----- -----
----- ----- -----
</TABLE>
1995 COMPARED TO 1994
The earnings contribution of other businesses increased $69 million primarily
due to the $32 million of tax adjustment relating to the settlement with the IRS
described on page 25 and a $27 million increase in the earnings contribution of
PFS. The increase for PFS was primarily due to the after-tax effects of
valuation and impairment charges of $19 million included in the 1994 results and
increased gains of $4 million in 1995 from sales of finance and real estate
assets. The contribution of PGC declined $3 million primarily due to increased
development activities and expenditures relating to acquisition activities.
Charitable contributions by Holdings decreased $8 million from 1994 and income
tax expense decreased $5 million.
1994 COMPARED TO 1993
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. Revenues and expenses for PFS
decreased due to lower levels of finance assets and lower valuation adjustments
in 1994. Earnings from PGC increased $2 million. Interest revenues from the
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.
34
<PAGE>
PFS
PFS has been selling and liquidating real estate properties, computer leasing
and manufacturing operations and investment and asset-based lending portfolios.
PFS expects to retain only its tax-advantaged investments in leveraged lease
assets (primarily aircraft) and affordable housing projects, which represents
$472 million of its assets. PFS plans to pursue new investment opportunities in
affordable housing as long as there are tax incentives associated with such
investments.
POWERCOR
Powercor is an electricity distributor serving approximately 540,000 customers
in suburban Melbourne and the western and central regions of the State of
Victoria in southeast Australia. Powercor is one of five electricity
distribution businesses formed by the State of Victoria, each comprising a
geographically based, regulated distribution network and a retail function that
supplies a combination of franchise customers on a geographic basis and
nonfranchise or contestable customers on a competitive basis. Powercor's
distribution area covers approximately 57,915 square miles. This region is the
largest franchise area in Victoria, representing approximately 64% of the total
area of Victoria. The Powercor distribution area accounts for over 1,450,000
people (approximately 32% of Victoria's population).
The Powercor acquisition is expected to positively impact earnings in 1997 and
will enable the Company to gain experience in an incentive-based regulatory
environment, which should prepare the Company for the increasingly deregulated
and competitive markets in the United States. In addition, the Company plans to
employ its wholesale marketing expertise in the developing power markets in
Australia. The acquisition also positions the Company to take advantage of
future opportunities in international markets, including those that are expected
to arise in connection with the privatization of Victoria's generating stations
during 1996 and the potential privatization of the electric utility business in
other Australian states.
Powercor was a part of Victoria's integrated electricity business and has
operated as a separate entity only since May 1994. Although a significant
portion of Powercor's future results will be based on tariffs that are
established through 2000, the absence of an operating history for Powercor
creates uncertainties as to its contribution in 1996 and subsequent periods.
Additional uncertainties exist because Powercor's franchise customers will
progressively become able to choose alternative energy suppliers over the period
to January 1, 2001. In addition, operations in a foreign country can present
currency exchange, inflation, convertibility and repatriation risks. Holdings
has mitigated some of these risks in part through use of an acquisition loan
denominated in Australian dollars and certain currency exchange agreements.
PGC
PGC is engaged in the independent power production and cogeneration business,
principally in the United States. PGC has interests in 12 power generation
projects representing 808 MW of generation capacity. The facilities employ a
variety of generation processes, including solid waste, biomass, coal, natural
gas, hydro and wind technologies.
The independent power production and cogeneration businesses conducted by PGC
involve numerous risks relating to the acquisition, development, construction
and operation of power production facilities. These risks include supply
interruptions, work stoppages, labor disputes, weather interferences, unforeseen
engineering, environmental and geological problems, unanticipated cost overruns
and breakdown or failure of equipment or processes.
BUSINESS EXPANSION
Holdings is expanding its nonregulated businesses that are engaged in wholesale
marketing and aggregating of electricity, fuels management, utilities services
and retail energy services. On January 30, 1996, Holdings and Big Rivers
Electric Corporation ("Big Rivers"), a generation and transmission cooperative
based in Henderson, Kentucky, signed a letter of intent providing for PacifiCorp
Kentucky Energy Company ("PKE"), a wholly owned subsidiary of Holdings, to
operate and manage Big Rivers' power plants under a 25-year operating agreement.
Under the terms of the proposed transaction, Big Rivers would retain ownership
of its assets and continue to operate its transmission system in western
Kentucky. PKE would be required to make payments of $30 million per year during
the term of the operating agreement, which obligation would be guaranteed by
Holdings. PKE would sell power to Big Rivers under a long-term contract and the
surplus output from the 1,740 megawatts of generation assets owned by Big Rivers
would be marketed.
Consummation of the proposed transaction is subject to conditions, including
negotiation of definitive agreements, approval by Big Rivers' creditors of a
restructuring of its debt, termination or renegotiation of all fuel contracts to
bring prices in line with current market conditions, and certain state and
federal regulatory approvals. Definitive agreements are subject to approval by
the boards of directors of Holdings and Big Rivers, as well as the boards of the
member cooperatives of Big Rivers. The parties currently expect to receive the
required approvals by December 31, 1996.
The Company believes that the Big Rivers transaction will add to shareholder
value, provide a base in the eastern power markets from which the Company can
implement a national power marketing strategy and allow it to capitalize on its
capabilities in low-cost plant operation and fuel management. The Company
expects to consider additional opportunities for the acquisition or construction
of strategic generating assets in the eastern United States.
35
<PAGE>
The information in the table below and elsewhere in this report includes
forward-looking statements that involve a number of risks and uncertainties,
including the matters identified under "Electric Operations,"
"Telecommunications" and "Other" as factors that may influence the financial
performance and earnings of the Company and its subsidiaries. Financial
forecasts involve estimates as to the future which, notwithstanding the fact
that they are presented with numeric specificity, may or may not prove to be
accurate. This information reflects numerous assumptions as to industry
performances, general business and economic conditions, regulatory and legal
requirements, taxes and other matters, many of which are beyond the control of
the Company. Similarly, this information assumes certain future business
decisions which are subject to change. Among other things, the forecasted
acquisition information assumes the ability of the Company's subsidiaries to
consummate future acquisitions that have not been identified. There can be no
assurance that the results predicted will be realized. Actual results will vary
from those represented by the forecasts, and those variations may be material.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
Millions of dollars
Actual Forecasted
For the year 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH FLOW FROM CONTINUING OPERATIONS
Electric Operations $ 764 $ 747 $ 700
Telecommunications 180 141 152
Other 93 74 60
----- ----- -----
Total 1,037 962 912
Cash Dividends Paid 366 345 346
----- ----- -----
NET $ 671 $ 617 $ 566 $725-775 $750-800 $750-800
----- ----- ----- ------- ------- -------
----- ----- ----- ------- ------- -------
CONSTRUCTION
Electric Operations $ 636 $ 638 $ 455 $ 451 $ 475 $ 493
Telecommunications 103 148 122 114 147 145
Powercor - - 2 69 71 74
Other 3 3 - 56 10 11
----- ----- ----- ------- ------- -------
Total 742 789 579 690 703 723
ACQUISITIONS AND INVESTMENTS
Electric Operations 1 - - 240(a) - -
Telecommunications 23 5 376 263(b) 165 -
Powercor - - 1,589 - - -
Other 41 10 175 83 29 -
----- ----- ----- ------- ------- ------
TOTAL CAPITAL SPENDING $ 807 $ 804 $2,719 $ 1,276 $ 897 $ 723
----- ----- ----- ------- ------- -------
----- ----- ----- ------- ------- -------
MATURITIES OF LONG-TERM DEBT AND
CAPITAL LEASE OBLIGATIONS
Electric Operations $ 62 $ 76 $ 51 $ 183 $ 210 $ 199
Telecommunications 32 17 15 5 16 29
Other 273 61 29 18 19 13
----- ----- ----- ------- ------- -------
Total $ 367 $ 154 $ 95 $ 206 $ 245 $ 241
----- ----- ----- ------- ------- -------
OTHER REFINANCINGS $ 864 $ 295 $ 191
----- ----- -----
----- ----- -----
</TABLE>
(a) In 1995, Electric Operations exercised its option to purchase a 50%
interest in a 474 megawatt, natural gas-fired generating plant in
Hermiston, Oregon, estimated to cost $174 million. Electric Operations
also plans to participate in two wind generation projects, estimated to
cost $66 million.
(b) Pacific Telecom entered into an agreement to purchase certain US WEST
Communications, Inc. assets in Minnesota for $103 million.
36
<PAGE>
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
periodically reviewed. 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 1996 to 2000, annual retail megawatt-hour sales are expected to
increase at an average rate of about 2% per year. In 1996, Electric Operations
currently plans to acquire new demand-side resources that are expected to
conserve about 23 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 1995, Electric Operations invested in construction consisting of
production, $106 million; transmission, $17 million; distribution, $244 million;
and other, $88 million.
Electric Operations' estimated construction expenditures for 1996 through 1998
are set forth below.
<TABLE>
<CAPTION>
Millions of dollars/For the year 1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Production $ 97 $ 97 $110
Transmission 38 47 45
Distribution 185 209 210
Other 131 122 128
---- ---- ----
Total $451 $475 $493
---- ---- ----
---- ---- ----
</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.
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. In 1995, Electric Operations exercised its option to
purchase, subject to certain conditions, a 50% ownership interest in this
project for approximately $174 million. The payment is also contingent upon
commercial operation of the plant, which is expected to occur in July 1996.
Electric Operations also plans to participate in two wind projects located in
Washington and Wyoming, estimated to cost $66 million.
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 will also be
considered. See "Financing Activities" on page 39.
37
<PAGE>
TELECOMMUNICATIONS
During 1995, Pacific Telecom continued to implement its strategy of expanding
its local telephone exchange businesses in rural and suburban markets. The year
1995 was a year of transition as Pacific Telecom exited its long distance
business in Alaska and redeployed its capital into acquisitions of local
exchange properties.
ACQUISITIONS
During 1995, Pacific Telecom purchased local exchange properties from US WEST
Communications, Inc. ("USWC") in Colorado, Oregon and Washington. Assets
serving approximately 90,000 access lines were purchased for $376 million.
Pacific Telecom signed an agreement with USWC in December 1995 to acquire
additional local exchange properties in Minnesota. These properties in
Minnesota serve approximately 26,600 access lines and will cost $103 million.
This transaction is expected to close in 1996.
Pacific Telecom continues to seek expansion of its local exchange operations and
cellular interests through the acquisition of additional LECs and assets and
cellular properties that complement its existing properties and operations. For
LECs, Pacific Telecom seeks to realize economies of scale through these
acquisitions, particularly where the properties are near Pacific Telecom's
current operations or are of sufficient size to support moving into a new
geographic area. For cellular, Pacific Telecom may increase its ownership
interests in certain cellular properties in order to achieve ownership control
and to consolidate Pacific Telecom's cellular service areas into larger
contiguous units for operating and network efficiencies. This plan may be
accomplished through the exchange of existing cellular interests and/or future
acquisitions.
DISPOSITION
In August 1995, Pacific Telecom sold Alascom to AT&T for cash proceeds of $366
million, consisting of a $75 million transition payment in July 1994, an October
1994 down payment of $30 million and a $261 million payment received at closing.
CONSTRUCTION
During 1995, Pacific Telecom's construction expenditures consisted of $106
million for local exchange operations, $7 million for long lines, $7 million for
cellular operations and $2 million for other. These expenditures related mainly
to network upgrades and growth in Pacific Telecom's operations.
Construction expenditures for 1996 through 1998 are estimated to be as follows:
<TABLE>
<CAPTION>
Millions of dollars/For the year 1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Local exchange $102 $136 $136
Cellular 8 7 5
Other 4 4 4
--- --- ---
Total $114 $147 $145
--- --- ---
--- --- ---
</TABLE>
CAPITAL RESOURCES
Pacific Telecom funded the acquisitions of local exchange properties with
proceeds from the sale of Alascom and borrowings under its Series B medium-term
note program. Pacific Telecom expects to fund the pending acquisition in
Minnesota and any future acquisitions through a combination of internally
generated funds and external debt and expects to fund its construction
expenditures primarily through internally generated cash. Pacific Telecom
established a Series C medium-term note program in January 1996.
38
<PAGE>
OTHER
ACQUISITIONS
On December 12, 1995, Holdings purchased Powercor, an electricity distributor in
Australia, from the State of Victoria for approximately $1.6 billion in cash.
The acquisition of Powercor was financed with borrowings of $896 million in
Australia under a $984 million credit facility and with an equity contribution
from Holdings which was initially financed with short-term debt in the United
States. Holdings is not obligated with respect to the Australian borrowings,
which were made by a subsidiary of Holdings.
During 1995, Holdings purchased the minority shares of Pacific Telecom.
Shareholders tendering shares were paid a total of $131 million, or $30 per
share, and an accrued liability of $28 million was established to cover
estimated amounts payable to dissenters.
During 1995, PFS invested $44 million in affordable housing projects. In 1996
and 1997, PFS plans to invest $32 million and $23 million, respectively, in
affordable housing projects. In addition, PFS expects to be involved in the
construction of affordable housing projects with costs of $18 million in 1996
and $10 million in 1997.
PGC estimates it will invest $31 million in independent power projects in 1996.
CONSTRUCTION
Construction expenditures for Powercor are estimated to be $69 million in 1996,
$71 million in 1997 and $74 million in 1998. These expenditures are related
mainly to distribution facilities. Powercor expects to fund its construction
expenditures primarily through internally generated cash.
DISPOSITIONS
During 1995, PFS reduced its identifiable assets by $34 million. Proceeds from
sales of its assets were used to reduce debt.
CAPITAL RESOURCES
The Company's other businesses expect to fund scheduled debt maturities and
financing commitments through cash flows from operations, issuances of
additional debt and, to a lesser extent, through further asset sales by PFS.
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 98%, 78% and 90% of construction
expenditures in 1995, 1994 and 1993, respectively. Consolidated cash flows
provided by operating activities declined $50 million in 1995 primarily due to
the tax settlement with the IRS.
FINANCING ACTIVITIES
COMMON STOCK
Open market purchases of the Company's common stock were used throughout 1995
for the Dividend Reinvestment and Employee Savings and Stock Ownership 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 the Company began to issue common stock under these plans in February 1996.
In addition, the Company completed a public offering of 9.7 million shares of
common stock in March 1996 for net proceeds of $197 million.
The Company paid common stock dividends of $307 million in 1995 and $305 million
in 1994.
SHORT-TERM AND LONG-TERM DEBT, INCLUDING CURRENT MATURITIES
Consolidated debt increased $1.9 billion in 1995. The acquisition of Powercor
was financed with $1.6 billion of debt, $896 million was financed in Australia
and $700 million was borrowed in the United States. The Company's debt
increased $460 million primarily due to increased commercial paper and bank line
borrowings of $247 million and issuances of $176 million of junior subordinated
debentures due 2025 through 2035 with average interest rates of 8.4%, $100
million of 6 5/8% First Mortgage and Collateral Trust Bonds due June 1, 2007 and
$52 million of environmental improvement bonds due 2025. Proceeds were used to
retire $56 million of previously issued first mortgage bonds, with interest
rates ranging from 7% to 7 3/4% and maturities from 1998 to 2002, and to retire
$44 million of maturing debt. The Company exchanged $56 million of the junior
subordinated debentures for 2,233,037 shares of $1.98 No Par Serial Preferred
Stock, Series 1992. Holdings debt increased $401 million due to issuance of
commercial paper and short-term bank line borrowings. Pacific Telecom debt
increased $141 million due to borrowings under revolving credit agreements and
issuances of medium-term notes. At December 31, 1995, the consolidated variable
rate debt totaled $2.8 billion.
At December 31, 1995, the Company had $730 million of first mortgage bonds and
common stock registered for sale with the Securities and Exchange Commission,
including $400 million remaining from the Company's Series G medium-term note
program. Of the amount registered, $200 million of Series G notes were sold in
January 1996 and $197 million of common stock was sold in March 1996.
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.
39
<PAGE>
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 guideline range
of 48% to 54%. As a result of the Powercor acquisition, the Company's
consolidated debt was 60% of consolidated capitalization at December 31, 1995.
The Company sold additional shares of common stock in early 1996 to improve the
equity portion of its capital structure. Within its debt structure, the Company
has attempted to match the life of its borrowed liabilities with its assets and
to manage its exposure to fluctuating interest rates.
DERIVATIVES
The Company has used derivative financial instruments to increase the
predictability of cash flow, reduce net income exposure to changing interest
rates, reduce the overall cost of borrowing and adjust its liability portfolio
to better align with its asset portfolio. In addition, the Company has recently
begun to employ derivative products to manage risks associated with electricity
sales and purchases.
In 1994, the Company adopted a derivative policy recognizing derivative
financial instruments as an integral part of its risk management system. This
policy establishes the involvement of the Board of Directors and senior
management in periodic reviews of the use of derivative transactions and market
positions and periodic assessments of compliance with the policy. The policy
also includes credit criteria for counterparties and formal requirements for
documentation. The derivative policy was updated early in 1996 to include a
risk management program for hedging and trading transactions in electricity
futures and other electricity related financial products.
The Company uses interest rate swaps to adjust the characteristics of its
liability portfolio by hedging portions of its interest expense allowing the
Company to establish a mix of fixed or variable interest rates on its
outstanding debt. Currency swaps are used to hedge against fluctuations in the
Australian dollar and the Japanese yen. At December 31, 1995, the Companies had
interest rate swaps on debt with an aggregate notional amount of $220 million
and currency swaps totaling $350 million. During 1995, Holdings entered into
three foreign currency swaps with an aggregate notional amount of $300 million
to hedge a portion of Holdings investment in its Australian subsidiary.
As the electric industry becomes less regulated and the price of electricity is
influenced more by market conditions rather than price regulation, utilities and
customers will be subject to market price fluctuations. The Company anticipates
engaging in hedging and trading transactions in electricity futures and other
electricity related financial products as the Company and its customers attempt
to reduce risks associated with price fluctuations in the electricity market.
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 $770 million principal amount of additional
unsecured debt could have been outstanding at December 31, 1995.
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 $2.4 billion of additional mortgage bonds
or $3.4 billion of preferred stock could have been issued at December 31, 1995.
However, certain of the Company's credit facilities would have limited
additional long-term borrowings to approximately $190 million at December 31,
1995. In January 1996, the Company's credit facilities were amended and
approximately $940 million of long-term borrowings were available.
Under the Company's principal credit agreement, it is an event of default if any
person or group acquires 35% or more of the Company's common shares or if,
during any period of 14 consecutive months, individuals who were directors of
the Company on the first day of such period (and any new directors whose
election or nomination was approved by such individuals and directors) cease to
constitute a majority of the Board of Directors. For additional information
regarding bank credit agreements, lines of credit and other short-term borrowing
arrangements, see Note 3 to Consolidated Financial Statements.
INFLATION
Due to the capital intensive nature of the Company's core businesses, inflation
may have a significant impact on replacement of property, acquisition and
development activities and final mine reclamation. The effects of inflation on
the Company's utility businesses are not significant to ongoing operations.
While the rate-making process gives no recognition to the current cost of
replacing plant, 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.
40
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA (UNAUDITED)
Millions of dollars,
except per share amounts/ March June September December
Quarter ended 31 30 30 31
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenues $854.2 $807.9 $849.7 $889.1
Income from operations 264.4 217.6 284.4 281.4
Net income 114.8 93.5 169.0(a) 127.7
Earnings on common stock 104.7 83.3 158.9(a) 119.4
Earnings per common share .37 .29 .56(a) .42
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 3/4 19 7/8 19 1/2 21 5/8
Low 18 18 1/2 17 1/2 18 3/4
1994
Revenues $865.3 $836.1 $915.0 $890.1
Income from operations 259.4 210.3 271.9 280.7
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
</TABLE>
(a) The third quarter results of operations includes a gain of $37 million or
$.13 per share relating to the sale of Alascom.
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.
41
<PAGE>
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 were audited by Deloitte & Touche LLP,
independent public accountants. Management 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 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 their 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 distributed to employees throughout
the Company to provide a basis for ethical standards and conduct. The guide
addresses, among other things, potential conflicts of interests and 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 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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results of their operations and their cash
flows for each of three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Notes 1 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 13, 1996
42
<PAGE>
STATEMENTS OF CONSOLIDATED
INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Millions of dollars, except per share amounts
For the year 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $3,400.9 $3,506.5 $3,405.4
-------- -------- --------
EXPENSES
Operations 1,261.7 1,400.3 1,369.9
Maintenance 281.0 292.3 294.2
Administrative and general 246.2 244.6 247.4
Depreciation and amortization 444.0 424.3 404.8
Taxes, other than income taxes 120.2 122.7 119.9
------- ------- -------
Total 2,353.1 2,484.2 2,436.2
------- ------- -------
INCOME FROM OPERATIONS 1,047.8 1,022.3 969.2
------- ------- -------
INTEREST EXPENSE AND OTHER
Interest expense 378.7 334.5 376.9
Interest capitalized (15.1) (14.5) (13.9)
Minority interest and other (59.6) (15.5) (3.9)
------- ------- -------
Total 304.0 304.5 359.1
------- ------- -------
Income from continuing operations before
income taxes 743.8 717.8 610.1
Income taxes 238.8 249.8 187.4
------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 505.0 468.0 422.7
Discontinued operations less applicable
income tax expense of $26.0 - - 52.4
Cumulative effect on prior years of
change in accounting for income taxes - - 4.0
------- ------- -------
NET INCOME 505.0 468.0 479.1
RETAINED EARNINGS, JANUARY 1 474.3 351.3 210.4
Cash dividends declared
Preferred stock (38.4) (39.6) (39.5)
Common stock per share of $1.08 (308.5) (305.4) (298.7)
------- ------- -------
RETAINED EARNINGS, DECEMBER 31 $ 632.4 $ 474.3 $ 351.3
-------- ------- -------
-------- ------- -------
EARNINGS ON COMMON STOCK (Net income
less preferred dividend requirement) $ 466.3 $ 428.3 $ 439.8
Average number of common shares
outstanding (Thousands) 284,272 282,912 274,551
EARNINGS PER COMMON SHARE
Continuing operations $ 1.64 $ 1.51 $ 1.40
Discontinued operations - - .19
Cumulative effect on prior years of
change in accounting for income taxes - - .01
-------- -------- --------
Total $ 1.64 $ 1.51 $ 1.60
-------- -------- --------
-------- -------- --------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
43
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets
Millions of dollars/December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Electric utility
Production $ 4,420.0 $ 4,390.2
Transmission 2,042.5 1,974.6
Distribution 2,829.9 2,628.9
Other 1,655.7 1,583.5
--------- --------
Electric utility 10,948.1 10,577.2
Electricity distributor 1,286.5 -
Telecommunications 1,592.9 1,572.7
Other 65.0 64.9
Accumulated depreciation and amortization (4,280.5) (4,136.9)
-------- --------
Net 9,612.0 8,077.9
Construction work in progress 340.3 368.3
-------- --------
Total Property, Plant and Equipment - Net 9,952.3 8,446.2
-------- --------
CURRENT ASSETS
Cash and cash equivalents 22.2 23.3
Accounts receivable less allowance for doubtful
accounts: 1995/$7.4 and 1994/$9.4 545.0 442.7
Materials, supplies and fuel stock at average
cost 212.1 193.2
Inventory 62.8 66.3
Other 70.1 89.9
-------- --------
Total Current Assets 912.2 815.4
-------- --------
OTHER ASSETS
Investments in and advances to affiliated
companies 187.9 189.9
Intangible assets - net 743.2 237.2
Regulatory assets - net 1,060.3 1,081.2
Finance note receivable 217.5 220.7
Finance assets 453.7 481.9
Real estate investments 179.8 166.5
Deferred charges and other 308.3 206.6
-------- --------
Total Other Assets 3,150.7 2,584.0
-------- --------
TOTAL ASSETS $14,015.2 $11,845.6
--------- ---------
--------- ---------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
44
<PAGE>
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON EQUITY
Common shareholders' capital
shares authorized 750,000,000;
shares outstanding: 1995/284,276,709
and 1994/284,251,024 $ 3,012.9 $ 3,010.6
Retained earnings 632.4 474.3
Guarantees of Employee Stock Ownership
Plan borrowings (12.2) (25.1)
-------- --------
Total Common Equity 3,633.1 3,459.8
-------- --------
PREFERRED STOCK 311.5 367.4
-------- --------
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION 219.0 219.0
-------- --------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 4,968.2 3,768.2
-------- --------
CURRENT LIABILITIES
Long-term debt and capital lease obligations
currently maturing 206.1 95.8
Notes payable and commercial paper 1,021.1 454.7
Accounts payable 345.3 338.4
Taxes, interest and dividends payable 256.4 253.3
Customer deposits and other 176.0 126.8
-------- --------
Total Current Liabilities 2,004.9 1,269.0
-------- --------
DEFERRED CREDITS
Income taxes 1,910.1 1,822.6
Investment tax credits 159.2 190.1
Other 786.2 641.6
-------- --------
Total Deferred Credits 2,855.5 2,654.3
-------- --------
MINORITY INTEREST 23.0 107.9
-------- --------
COMMITMENTS AND CONTINGENCIES (SEE NOTES 8 AND 9)
TOTAL CAPITALIZATION AND LIABILITIES $14,015.2 $11,845.6
--------- ---------
--------- ---------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
45
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Millions of dollars
For the year 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations $ 505.0 $ 468.0 $ 422.7
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities
Depreciation and amortization 466.2 472.5 468.3
Deferred income taxes and investment tax
credits - net 62.5 (7.5) 113.5
Minority interest and other (28.6) 23.6 22.9
Accounts receivable and prepayments (71.5) 5.4 52.9
Materials, supplies, fuel stock and inventory (8.6) 11.8 26.1
Accounts payable and accrued liabilities (13.0) (11.7) (69.0)
-------- ------ --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 912.0 962.1 1,037.4
-------- ------ --------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction (578.6) (788.7) (741.5)
Operating companies and assets acquired (2,002.1) (5.9) (18.8)
Investments in and advances to
affiliated companies - net (7.0) (9.5) (46.8)
Purchase of minority interest of Pacific Telecom (131.4) - -
Proceeds from sales of assets 377.0 381.6 602.8
Proceeds from sales of finance assets and
principal payments 36.6 109.1 168.3
Purchase of finance assets (1.2) (7.8) (57.7)
Investment in finance note - - (225.0)
Other (26.2) (18.9) 55.6
-------- ------ --------
NET CASH USED IN INVESTING ACTIVITIES (2,332.9) (340.1) (263.1)
-------- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in short-term debt 581.5 (98.7) (8.6)
Proceeds from long-term debt 1,530.8 246.6 698.9
Proceeds from issuance of common stock .4 57.2 197.4
Dividends paid (346.5) (344.8) (366.7)
Repayments of long-term debt and capital
lease obligations (285.8) (448.5) (1,230.9)
Redemptions of capital stock (2.6) - (50.0)
Other (58.0) (41.7) (33.4)
-------- ------ --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,419.8 (629.9) (793.3)
-------- ------ --------
DECREASE IN CASH AND CASH EQUIVALENTS (1.1) (7.9) (19.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23.3 31.2 50.2
-------- ------ --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 22.2 $ 23.3 $ 31.2
-------- ------ --------
-------- ------ --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for
Interest (net of amount capitalized) $ 407.7 $ 399.4 $ 435.6
Income taxes 185.5 225.6 145.5
Noncash financing activities
8.55% Junior subordinated debentures
exchanged for 2,233,037 shares of
$1.98 no par serial preferred stock 55.9
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1995, 1994 and 1993
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of PacifiCorp (the "Company") include its
integrated electric utility operating divisions of Pacific Power and Utah Power
and its wholly owned and majority owned subsidiaries. Major subsidiaries, all
of which are wholly owned, are: PacifiCorp Holdings, Inc. ("Holdings"), which
holds all of the Company's nonintegrated electric utility investments, including
Pacific Telecom, Inc., a telecommunications operation (formerly 87% owned, see
Note 2); Powercor Australia Limited, an Australian electricity distributor; and
PacifiCorp Financial Services, Inc., a financial services business. Together
these businesses are referred to herein as the Companies. Significant
intercompany transactions and balances have been eliminated.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
REGULATION
Accounting for the utility businesses conforms with generally accepted
accounting principles as applied to regulated public utilities and as prescribed
by agencies and the commissions of the various locations 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,
1995 and 1994 included the following:
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994
------- -------
<S> <C> <C>
Deferred taxes - net $ 687.1 $ 707.1
Deferred pension costs 116.8 148.3
Demand-side resource costs 110.0 84.6
Unamortized net losses on reacquired debt 71.8 78.2
Unrecovered Trojan Plant and regulatory
study costs 28.4 29.0
Various other costs 46.2 34.0
------- -------
Total $1,060.3 $1,081.2
------- -------
------- -------
</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 relating to those operations not
meeting SFAS 71 requirements.
CASH AND CASH EQUIVALENTS
For the purposes of these financial statements, the Company considers all liquid
investments with original maturities of three months or less to be cash
equivalents.
FOREIGN CURRENCY TRANSLATION
Financial statements for foreign subsidiaries are translated into United States
dollars at year-end exchange rates as to assets and liabilities and weighted
average exchange rates as to revenues and expenses. If material, the resulting
translation adjustments would be recorded in common equity.
47
<PAGE>
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, 1995, the average depreciable life of property, plant and
equipment by category was: Electric utility -- Production, 41 years;
Transmission, 42 years; Distribution, 30 years; Other, 18 years;
Telecommunications, 15 years; and Electricity distributor, 21 years.
Depreciation and amortization is generally computed 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 3.5%, 3.4% and 3.5% of average depreciable assets in 1995, 1994
and 1993, respectively.
INVENTORY VALUATION
Inventories are generally valued at the lower of average cost or market.
INTANGIBLE ASSETS
Intangible assets consist of: estimates of license and other intangible costs
relating to the electricity distributor in Australia ($312 million and
$30 million, respectively, in 1995); franchises of local exchange and cellular
companies ($398 million in 1995 and $263 million in 1994); and excess cost over
net assets of businesses acquired ($43 million in 1995 and $19 million in 1994).
These costs are offset by accumulated amortization ($40 million in 1995 and
$45 million in 1994). Intangible assets are generally being amortized over 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.
FINANCE ASSETS
Finance assets consist of finance receivables, leveraged leases and operating
leases and are not significant to the Company in terms of revenue, net income or
assets. The Company's leasing operations consist principally of leveraged
aircraft leases. Investments in finance assets are net of allowances for credit
losses and accumulated impairment charges of $71 million and $68 million at
December 31, 1995 and 1994, respectively.
DERIVATIVES
Gains and losses on hedges of existing assets and liabilities are included in
the carrying amounts of those assets or liabilities and are recognized in income
as part of those carrying amounts. Gains and losses related to hedges of
anticipated transactions and firm commitments are deferred and are recognized in
income when the transaction occurs.
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 6.2% for 1995, 4.7% for 1994 and 5.1% for
1993.
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 for regulated operations are deferred and amortized to
income over the average estimated lives of the properties. All other investment
tax credits are recognized when utilized.
REVENUE RECOGNITION
The Company accrues estimated unbilled revenues for electric services provided
after cycle billing to month-end.
Pacific Telecom, Inc. ("Pacific Telecom") participates with other telephone
companies in access revenue pools for certain interstate and intrastate
revenues, which are initially recorded based on estimates.
RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform with the 1995
method of presentation. These reclassifications had no effect on previously
reported consolidated net income.
NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company does not expect the adoption of this
standard in 1996 to have a material effect on its consolidated financial
statements.
48
<PAGE>
NOTE 2. ACQUISITIONS AND DISPOSITIONS
On December 12, 1995, Holdings purchased Powercor Australia Limited
("Powercor"), an electricity distributor in Australia, for $1.6 billion in cash
and approximately $50 million of liabilities assumed. Powercor's service
territory includes a portion of suburban Melbourne and the western and central
regions of the State of Victoria and has approximately 540,000 customers.
The acquisition has been accounted for as a purchase and the results of
operations of Powercor have been included in the consolidated financial
statements since December 12, 1995.
The unaudited pro forma consolidated information as set forth below has been
prepared by the Company based upon assumptions deemed proper by it and a
preliminary allocation of the purchase price paid as though it had occurred on
January 1, 1994. The unaudited pro forma consolidated results of operations are
shown for illustrative purposes only and are not necessarily indicative of the
future results of operations of the Company, or of the results of operations of
the Company that would have actually occurred had the transaction been in effect
as of the periods presented. Pro forma adjustments to the Company's results of
operations include: interest expense relating to the preacquisition activities
was removed and interest expense relating to the acquisition debt was included;
depreciation of fixed assets acquired was based on their estimated fair value;
and amortization on a straight-line basis over a 40-year life of intangible
assets relating to the purchase was included.
<TABLE>
<CAPTION>
Millions of dollars, except per share, unaudited
For the year 1995 1994
---- ----
<S> <C> <C>
Revenues $3,942.1 $4,067.4
Net income 498.2 453.6
Earnings on common stock 459.5 413.9
Earnings per common share 1.62 1.46
</TABLE>
On September 27, 1995, holders of a majority of the 5.3 million shares of
outstanding common stock held by minority shareholders of Pacific Telecom voted
in favor of the merger of a wholly owned subsidiary of Holdings into Pacific
Telecom. Shareholders tendering shares pursuant to the merger were paid a total
of $131 million, or $30 per share, and an accrued liability of $28 million was
established to cover estimated amounts payable to dissenters.
During 1995, Pacific Telecom purchased certain rural telephone exchange assets
in Colorado, Washington and Oregon for approximately $376 million.
On August 7, 1995, Pacific Telecom closed the sale of the stock of Alascom, Inc.
("Alascom") to AT&T Corp. ("AT&T"), in a transaction providing $366 million in
proceeds. Under terms of the agreement, AT&T paid $291 million in cash for the
Alascom stock and for settlement of all past cost study issues. AT&T agreed to
allow Pacific Telecom to 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 in October 1994. The
remaining $261 million was paid when the transaction closed. The Company
recognized an after-tax gain of $37 million from the sale of Alascom.
Summarized income statement data for Alascom are as follows:
<TABLE>
<CAPTION>
7 months
ended July 31, For the year
-------------- ------------------------
Millions of dollars 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues $193.1 $343.5 $337.8
Income from operations 36.9 80.7 59.5
</TABLE>
NOTE 3. SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies' short-term debt and borrowing arrangements are as follows:
<TABLE>
<CAPTION>
December 31 For the year
------------------------- ------------------------------
Average Average
Interest Average Interest
Millions of dollars Balance Rate(a) Outstanding Rate(b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
PacifiCorp $479.9 5.9% $407.2 5.9%
Subsidiaries 541.2 6.1 180.0 6.2
1994
PacifiCorp $433.0 6.0% $372.8 4.5%
Subsidiaries 21.7 7.5 95.0 4.6
1993
PacifiCorp $263.6 3.4% $213.4 3.3%
Subsidiaries 289.9 4.2 474.3 3.9
</TABLE>
(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 interest expense for the period by the
average daily principal amount outstanding for the period.
49
<PAGE>
At December 31, 1995, PacifiCorp's commercial paper and bank line borrowings
were supported by a $500 million revolving credit agreement. At December 31,
1995, subsidiaries had committed bank revolving credit agreements totaling
$1.8 billion.
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, 1995, PacifiCorp had $200 million and subsidiaries had $971 million
of short-term debt classified as long-term. Consolidated commitment fees were
approximately $2 million in 1995, $3 million in 1994 and $4 million in 1993.
NOTE 4. COMMON AND PREFERRED STOCK
<TABLE>
<CAPTION>
Common
Shares Shares Share-
Thousands of shares Common Preferred holders'
Millions of dollars Stock Stock Capital
-------- --------- ---------
<S> <C> <C> <C>
AT JANUARY 1, 1993 270,579 10,533 $2,755.2
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)
-------- --------- ---------
AT DECEMBER 31, 1993 281,021 10,532 2,953.4
Sales through Dividend Reinvestment
and Stock Purchase Plan 2,194 - 38.0
Sales through Employees' Stock Plans 1,036 - 19.2
-------- --------- ---------
AT DECEMBER 31, 1994 284,251 10,532 3,010.6
Sales through Employees' Stock Plans 26 - .4
Junior subordinated debentures
exchanged for preferred stock - (2,233) 1.9
-------- --------- ---------
AT DECEMBER 31, 1995 284,277 8,299 $3,012.9
-------- --------- ---------
-------- --------- ---------
</TABLE>
At December 31, 1995, there were 29,777,350 authorized but unissued shares of
common stock reserved for issuance under the Dividend Reinvestment and Stock
Purchase Plan and the Employee Savings and Stock Ownership Plans and for sales
to the public. Eligible employees under the employee plans may direct their
pretax elective contributions 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.
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.
50
<PAGE>
<TABLE>
<CAPTION>
PREFERRED STOCK OUTSTANDING
Thousands of shares/Millions of dollars
December 31 1995 1995 1994 1994
Series Shares Amount Shares Amount
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
SUBJECT TO MANDATORY REDEMPTION
No Par Serial Preferred, 16,000 Shares
Authorized
$7.12 ($100 stated value) 440 $ 44.0 440 $ 44.0
7.70 1,000 100.0 1,000 100.0
7.48 750 75.0 750 75.0
------ ------
Total $219.0 $219.0
------ ------
------ ------
NOT SUBJECT TO MANDATORY REDEMPTION
$1.16 ($25 stated value) 193 $ 4.8 193 $ 4.8
1.18 420 10.5 420 10.5
1.28 381 9.5 381 9.5
1.76 394 9.8 394 9.8
1.98 502 12.6 502 12.6
2.13 666 16.7 666 16.7
1.98, Series 1992 2,767 69.1 5,000 125.0
Auction Rate ($100,000
stated value)(a) 1 100.0 1 100.0
Serial Preferred $100 Stated Value Per
Share, 3,500 Shares Authorized
4.52% 2 .2 2 .2
4.56 85 8.5 85 8.5
4.72 70 7.0 70 7.0
5.00 42 4.2 42 4.2
5.40 66 6.6 66 6.6
6.00 6 .6 6 .6
7.00 18 1.8 18 1.8
7.96 135 13.5 135 13.5
8.92 69 6.9 69 6.9
9.08 165 16.5 165 16.5
5% Preferred, $100 Stated Value, 127
Shares Authorized and Outstanding 127 12.7 127 12.7
------ ------
Total $311.5 $367.4
------ ------
------ ------
</TABLE>
(a) Dividend rates at December 31, 1995 on 500 shares each of Series A and
Series C were 4.7% and 4.6%, respectively.
51
<PAGE>
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 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
PACIFICORP
First mortgage and collateral trust bonds
Maturing 1996 through 2000/4.5%-9.5% (a) $ 987.5 $1,038.2
Maturing 2001 through 2005/6%-10% 644.3 689.5
Maturing 2006 through 2010/6.6%-8.3% 157.6 59.0
Maturing 2011 through 2015/7.3%-9.2% 238.1 240.4
Maturing 2016 through 2020/8.5%-8.6% 35.9 36.4
Maturing 2021 through 2024/6.7%-8.6% 361.5 361.5
Guaranty of pollution control revenue bonds
5.6%-5.7% due 2021 through 2023 (b) 71.2 71.2
Variable rate due 2013 through 2024 (b)(c) 216.5 216.5
Variable rate due 2005 through 2025 (c) 456.6 404.9
Funds held by trustees (12.4) -
8.4%-8.6% Junior subordinated debentures
due 2025 through 2035 175.8 -
Commercial paper and uncommitted bank lines (c)(e) 200.0 -
Leveraged ESOP loan guaranty - 4.6
Unamortized premium and discount 6.6 9.1
Capital lease obligations 24.7 19.5
------- -------
Total 3,563.9 3,150.8
Less current maturities 176.8 45.1
------- -------
Total 3,387.1 3,105.7
------- -------
SUBSIDIARIES
2%-11.8% First mortgage notes and bonds
maturing through 2028 143.2 159.1
6.4%-12% Notes due through 2007 59.8 68.9
Australian bank bill borrowings (d)(e) 896.2 -
Commercial paper and uncommitted bank lines (c)(e) 75.0 75.0
Variable rate notes due through 2007 (c) 42.0 57.6
5.9%-9.4% Medium-term notes due through 2006 223.5 184.5
4.5%-11% Nonrecourse debt due through 2031 155.9 139.7
Leveraged ESOP loan guaranty 12.2 20.5
Capital lease obligations 2.6 7.9
------- -------
Total 1,610.4 713.2
Less current maturities 29.3 50.7
------- -------
Total 1,581.1 662.5
------- -------
TOTAL $4,968.2 $3,768.2
------- -------
------- -------
</TABLE>
(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 6.8% at December 31, 1995).
(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, prime rates or other short-
term market rates.
(d) Interest rates fluctuate based on Australian Bank Bill Acceptance Rate.
The loan agreement requires that within 90 days of initial drawdown at
least 50% of the borrowing must be hedged against variations in interest
rates for an average life of 3.5 years. In January and February 1996,
approximately $450 million has been hedged at an average rate of 7.7% and
for an average life of 4.3 years.
(e) 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
$1.2 billion of short-term debt as long-term debt.
52
<PAGE>
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 junior subordinated debentures are unsecured obligations of the Company and
are subordinated to the Company's first mortgage bonds, pollution control
revenue bonds, commercial paper, capital lease obligations and any future senior
indebtedness.
Holdings guarantees certain debt of the Leveraged ESOP Trust established under
the K Plus Plan. 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 559,543 at December 31, 1995.
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.
The annual maturities of long-term debt, capital lease obligations and
redeemable preferred stock outstanding are $206 million, $245 million,
$241 million, $399 million and $1.1 billion in 1996 through 2000, respectively.
NOTE 6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company seeks to reduce net income and cash flow exposure to changing
interest and currency exchange rates and commodity price risks through the use
of derivative financial instruments. The Company's participation in derivative
transactions involves instruments that have a close correlation with its
portfolio of liabilities, thereby managing its risk. Derivatives have been
designed for hedging purposes and not held or issued for speculative purposes.
Notional Amounts and Credit Exposure of Derivatives--The notional amounts of
derivatives summarized below do not represent amounts exchanged and, therefore,
are not a measure of the exposure of the Company through its use of derivatives.
The amounts exchanged are calculated on the basis of the notional amounts and
other terms of the derivatives, which relate to interest rates, exchange rates
or other indexes.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments, but it does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The Company's credit policy provides that counterparties satisfy
minimum credit ratings. The credit exposure of interest rate, foreign exchange
and forward contracts is represented by the fair value of contracts with a
positive fair value at the reporting date.
Interest Rate Risk Management--The Company enters into interest rate swaps in
managing its interest rate risk. The following table indicates the notional
amount of interest rate swaps used at December 31, 1995 and 1994 and their
interest rate ranges at December 31, 1995. Swap contracts have between two and
five years remaining.
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994 Interest Rates
---- ---- --------------
<S> <C> <C> <C>
Electric Operations $150.0 $150.0 6.9% - 8.9%
Other 69.9 86.8 5.7% - 8.6%
----- -----
Total $219.9 $236.8 5.7% - 8.9%
----- -----
----- -----
</TABLE>
The Company uses interest rate swaps to adjust the characteristics of its
liability portfolio by hedging portions of its interest expense, allowing the
Company to establish a mix of fixed or variable interest rates on its
outstanding debt.
Through February 1996, PacifiCorp Australia LLC entered into 12 interest rate
swaps with an aggregate notional amount of $450 million. These swap
arrangements effectively fix interest rates on the Australian bank debt used to
acquire Powercor at rates ranging from 7.4%-7.9%. Terms of these arrangements
have an average life of 4.3 years. Also in February 1996, Holdings entered into
interest rate hedges having an aggregate notional amount of $200 million to
hedge interest rate fluctuations relating to anticipated debt issuances.
Foreign Exchange Risk Management--At December 31, 1995, the Company held four
foreign currency exchange agreements, one of which provides for the exchange of
$50 million for 7.4 billion yen to meet a 1997 yen-denominated obligation of an
equivalent amount. In December 1995, Holdings entered into three currency
swaps, that terminate in 2002, with an aggregate notional amount of $300 million
to hedge a portion of Holdings' exposure to fluctuations in the Australian
dollar relating to its investment in its Australian subsidiary.
Electricity Price Risk Management--Holdings' Australian subsidiary, Powercor,
has entered into forward contracts structured to hedge exposure to electricity
price risk on anticipated transactions or firm commitments. Under these forward
contracts, Powercor receives or makes payment based on a differential between a
contracted price and the actual spot market price of electricity. At
December 31, 1995, Powercor had 21 forward contracts with electricity generation
companies to exchange payments calculated on notional quantities amounting to
approximately 38,000,000 mWh through December 31, 2000. At December 31, 1995,
the Powercor average fixed price was $26.59 per mWh compared to an average spot
market price of $28.08 per mWh.
53
<PAGE>
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, 1995.
The fair value of redeemable preferred stock, based upon bid prices from an
investment bank, is estimated to be $240 million, or 110% of the carrying value
of $219 million at December 31, 1995 and $219 million, or 100% of the carrying
value at December 31, 1994.
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 $5.4 billion, or 105% of the carrying value of
$5.1 billion, and $3.7 billion, or 97% of the carrying value of $3.8 billion, at
December 31, 1995 and 1994, respectively.
The fair value of interest rate and currency swaps and forward electricity price
contracts is the estimated amount the Company would pay to terminate the
agreements, taking into account current interest and currency exchange rates,
electricity market prices and the current creditworthiness of the agreement
counterparties. The estimated termination cost would have been $37 million and
$27 million at December 31, 1995 and 1994, respectively.
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, 1995, 1994 and 1993 was
$50 million, $59 million and $60 million, respectively.
Future minimum lease payments under noncancellable operating leases are
$21 million, $13 million, $12 million, $6 million and $4 million for 1996
through 2000, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
CONSTRUCTION AND OTHER
Construction and acquisitions are estimated at $1.3 billion for 1996. 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 statements.
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 currently believes that disposition of these matters will not have a
materially adverse effect on the Company's consolidated financial statements.
JOINTLY OWNED PLANTS
At December 31, 1995, Electric Operations' participation in jointly owned plants
was as follows:
<TABLE>
<CAPTION>
Electric Plant Construction
Operations' in Accumulated Work in
Millions of dollars Share Service Depreciation Progress
----------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Centralia 47.5% $177.8 $104.2 $3.9
Jim Bridger
Units 1,2,3 and 4 66.7 782.5 299.6 5.0
Trojan (a) 2.5 - - -
Colstrip Units 3 and 4 10.0 201.8 58.0 1.8
Hunter Unit 1 93.8 259.0 94.1 1.3
Hunter Unit 2 60.3 186.9 62.1 1.0
Wyodak 80.0 303.0 88.5 1.0
Craig Station
Units 1 and 2 19.3 147.0(b) 53.8 3.2
Hayden Station Unit 1 24.5 16.9(b) 11.8 .2
Hayden Station Unit 2 12.6 16.9(b) 8.6 .3
(a) Plant, inventory, fuel and decommissioning costs totaling $28 million
relating to the Trojan Plant, were included in regulatory assets-net at
December 31, 1995. Recovery of these costs is pending approval of certain
regulatory commissions.
(b) Excludes unallocated acquisition adjustments of $124 million.
</TABLE>
Under the joint agreements, each participating utility is responsible for
financing its share of construction, operating and leasing costs. Electric
Operations' portion is recorded in its applicable operations, maintenance and
tax accounts.
Substantial amounts of power are purchased from several hydroelectric projects
under long-term arrangements with public utility districts. These purchases are
made on a "cost-of-service" basis for a stated percentage of project output and
for a like percentage of project annual costs (operating expenses and debt
service). These costs are included in operations expense. Electric Operations
is required to pay its portion of the debt service, whether or not
any power is produced. The arrangements provide for nonwithdrawable power and
the majority also provide for additional power,
54
<PAGE>
withdrawable by the districts upon one to five years' notice. For 1995, such
purchases approximated 3.4% of energy requirements; an additional 14% was
obtained through other purchase and net interchange arrangements.
At December 31, 1995, Electric Operations' share of long-term arrangements with
public utility districts was as follows:
<TABLE>
<CAPTION>
Generating Year Contract Capacity Percentage Annual
Facility Expires (kW) of Output Costs(a)
- ---------- ------------- -------- ---------- --------
<S> <C> <C> <C> <C>
Wanapum 2009 155,444 18.7% $ 5.0
Priest Rapids 2005 109,602 13.9 4.0
Rocky Reach 2011 64,297 5.3 2.1
Wells 2018 59,617 7.7 2.0
------- ----
Total 388,960 $13.1
------- ----
------- ----
</TABLE>
(a) Annual costs, in millions of dollars, include debt service of $8 million.
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 32% in 1995, 35% in 1994 and 31% in 1993. The
difference between taxes calculated as if the statutory federal tax rate of 35%
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 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Computed Federal Income Taxes $260.3 $251.2 $213.5
------ ------ ------
REDUCTION (INCREASE) IN TAX RESULTING FROM
Depreciation differences (flow-through
basis) (9.7) (8.4) (9.4)
Investment tax credits 12.3 15.5 15.1
Excess of tax over book basis 24.4 1.4 -
Audit settlement 16.8 - -
Affordable housing credits 8.4 8.2 8.7
Other items capitalized and
miscellaneous differences (4.8) (.7) 19.1
------ ------ ------
Total 47.4 16.0 33.5
------- ------ ------
FEDERAL INCOME TAX 212.9 235.2 180.0
STATE INCOME TAX, NET OF FEDERAL INCOME TAX
BENEFIT 25.9 14.6 7.4
------- ------ ------
TOTAL INCOME TAX EXPENSE $238.8 $249.8 $187.4
------ ------ ------
------ ------ ------
</TABLE>
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Millions of dollars/For the year 1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
CURRENT
Federal $152.2 $222.7 $ 70.3
State 23.1 34.6 3.6
Foreign 1.0 - -
------ ------ ------
Total 176.3 257.3 73.9
------ ------ ------
DEFERRED
Federal 56.5 17.8 120.9
State 17.3 (9.8) 7.7
Foreign 1.0 - -
------ ------ ------
Total 74.8 8.0 128.6
------ ------ ------
INVESTMENT TAX CREDITS (12.3) (15.5) (15.1)
------ ------ ------
TOTAL INCOME TAX EXPENSE $238.8 $249.8 $187.4
------ ------ ------
------ ------ ------
</TABLE>
The tax effects of significant items comprising the Company's net deferred tax
liability are as follows:
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994
-------- --------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Property, plant and equipment $1,213.1 $1,134.1
Regulatory asset 756.8 797.8
Other deferred liabilities 52.5 41.5
DEFERRED TAX ASSETS
Regulatory liability (69.7) (90.7)
Book reserves not deductible for tax (42.6) (60.1)
-------- --------
NET DEFERRED TAX LIABILITY $1,910.1 $1,822.6
------- -------
------- -------
</TABLE>
During 1995, the Company and the Internal Revenue Service (the "IRS") agreed on
a settlement of all issues related to the IRS examination of the Company's
federal income tax returns for the years 1983 through 1988, including matters
relating to the Company's abandonment of its 10% interest in Washington Public
Power Supply System Unit No. 3.
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 $10 million, $10 million, $9 million, $8 million and
$4 million for 1996 through 2000, respectively.
NOTE 11. RETIREMENT PLANS
The Companies have pension plans covering substantially all of their employees.
Benefits under plans in the United States 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
55
<PAGE>
federal income tax purposes. Unfunded prior service costs are amortized over
the remaining service period of employees expected to receive benefits. At
December 31, 1995, plan assets were primarily invested in common stocks, bonds
and U.S. government obligations.
All permanent employees of Powercor engaged prior to October 4, 1994, are
members of Divisions B or C of the Superannuation Fund ("Fund") which provides
defined benefits in the form of pensions (Division B) or lump sums (Division C).
Both defined benefit Funds are closed to new members. Division B members
contribute at 6% of superannuation salary, and Division C members can contribute
at 0, 3, or 6%. During 1995, contributions were made to the Fund at the rate of
10% for the defined benefit. The net periodic cost from the date of acquisition
to December 31, 1995 is assumed to be zero.
Net pension cost is summarized as follows:
<TABLE>
<CAPTION>
Millions of dollars/For the year 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned $ 24.4 $ 26.4 $ 19.2
Interest cost on projected
benefit obligation 80.1 74.1 70.8
Actual (gain) loss on plan assets (153.5) 4.9 (89.5)
Net amortization and deferral 100.5 (59.7) 44.0
Regulatory deferral (a) 29.4 .7 3.4
------ ------ ------
NET PENSION COST $ 80.9 $ 46.4 $ 47.9
------ ------ ------
------ ------ ------
</TABLE>
(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.
The funded status, net pension liability and significant assumptions are as
follows:
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994
----- -----
<S> <C> <C>
Actuarial present value of
benefit obligations
Vested benefit obligation $1,033.9 $ 779.1
------- -------
Accumulated benefit obligation 1,090.1 820.6
------- -------
Projected benefit obligation 1,262.1 943.7
Plan assets at fair value 895.6 673.3
------- -------
Projected benefit obligation
in excess of plan assets (366.5) (270.4)
Unrecognized prior service cost 9.8 6.5
Unrecognized net (gain) loss 104.0 (.2)
Unrecognized net obligation 89.5 94.7
Minimum liability adjustment (65.2) (11.6)
------- -------
NET PENSION LIABILITY $ (228.4) $ (181.0)
------- -------
Discount rate 7.25% 8.5%
Expected long-term rate of return
on assets 8.5-9% 8.75-9%
Rate of increase in compensation
levels 5-6% 5.5%
</TABLE>
Electric Operations offered early retirement incentive programs in 1987 and
1990. Included in the table above is the present value of all future
termination benefits provided of $61 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 through various plans 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. 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 $40 million and $29 million of postretirement benefit expense
during 1995 and 1994, respectively. These funds are invested in common stocks,
bonds and U.S. government obligations.
The net periodic postretirement benefit cost is summarized as follows:
<TABLE>
<CAPTION>
Millions of dollars/For the year 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits earned $ 8.3 $ 9.5 $ 7.6
Interest cost on accumulated
postretirement benefit obligation 32.6 30.7 28.8
Amortization of transition obligation 15.7 16.3 16.0
Regulatory deferral (4.5) (5.2) (5.6)
Net asset gain (loss) during the period
deferred for future recognition 3.7 (4.4) -
Actual return on plan assets (10.7) .3 (.2)
------ ---- ----
NET PERIODIC POSTRETIREMENT BENEFIT COST $ 45.1 $47.2 $46.6
------ ---- ----
------ ---- ----
</TABLE>
56
<PAGE>
The accumulated postretirement benefit obligation ("APBO") was as follows:
<TABLE>
<CAPTION>
Millions of dollars/December 31 1995 1994
---- ----
<S> <C> <C>
Retirees and dependents $ 267.7 $ 237.1
Fully eligible active plan
participants 23.5 20.1
Other active plan participants 174.5 125.9
------- -------
APBO 465.7 383.1
Plan assets at fair value 117.4 68.8
------- -------
APBO in excess of plan assets 348.3 314.3
Unrecognized prior service cost .6 .7
Unrecognized transition obligation (266.7) (286.8)
Unrecognized net gain (loss) (50.1) 3.8
------- -------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION $ 32.1 $ 32.0
------- -------
------- -------
Discount rate 7.25% 8.5%
Estimated long-term rate of
return on assets 8.75-9% 8.5-9%
Initial health care cost trend
rate - under 65 11% 11%
Initial health care cost trend
rate- over 65 10% 10%
Ultimate health care cost trend rate 4.5% 5.5%
</TABLE>
The assumed health care cost trend rates gradually decrease over eight 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, 1995 by
$32 million, and the annual net periodic postretirement benefit costs by
$3 million.
NOTE 13. DISCONTINUED OPERATIONS
A gain of $52 million and proceeds of $195 million were recorded in 1993
relating to the sale of an international communications subsidiary.
NOTE 14. BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Australian
Consoli- Electric Tele- Electricity
Millions of Dollars dated Operations communications Distributor Other(a)
------ ---------- -------------- ----------- ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Revenues $ 3,401 $2,616 $ 649 $ 26 $ 110
Income from operations 1,048 801 165 5 77
Depreciation and amortization 444 320 112 3 9
Capital spending 2,719 455 498 1,591 175
Identifiable assets 14,015 9,599 1,599 1,751 1,066
------ ----- ----- ----- -----
------ ----- ----- ----- -----
YEAR ENDED DECEMBER 31, 1994
Revenues $ 3,507 $2,648 $ 705 $ - $ 154
Income from operations 1,022 819 165 - 38
Depreciation and amortization 424 302 104 - 18
Capital spending 804 638 153 - 13
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 969 784 141 - 44
Depreciation and amortization 405 281 110 - 14
Capital spending 807 637 126 - 44
Identifiable assets 11,957 9,055 1,413 - 1,489
------ ----- ----- ----- ------
------ ----- ----- ----- ------
</TABLE>
(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.
57
<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 Energy, Inc. ......................................................... 100% Oregon
PacifiCorp Financial Services, 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
PacifiCorp Power Marketing, Inc. ................................................ 100% Oregon
Pacific Telecom, Inc. ........................................................... 100% Washington
PacifiCorp Trans, Inc. .......................................................... 100% Oregon
PacifiCorp Australia LLC ........................................................ 100%* Oregon
PacifiCorp Australia Holdings Pty. Ltd. ....................................... 100% Australia
Powercor Australia Limited .................................................. 100% Australia
</TABLE>
- ------------------------
*Owned indirectly through two wholly owned subsidiaries of PacifiCorp Holdings,
Inc.
Pacific Telecom, Inc., a 100% 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>
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. ..................................... 100% 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 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
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 Telecom, Inc. ........................................................... 100% Wisconsin
Wayside Cellular, 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>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-51163, 33-55309 and 33-62055, all on Form S-3; in Post-Effective Amendment
No. 1 to Registration Statement No. 33-17970 and Registration Statement Nos. 33-
51277, 33-54169, 33-56625, 33-57043, 33-58461 and 333-01545, all on Form S-8;
and in Registration Statement No. 33-36239 on Form S-4 of our report, dated
February 13, 1996 (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, 1995.
DELOITTE & TOUCHE LLP
Portland, Oregon
March 28, 1996
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Kathryn A. Braun
------------------
Kathryn A. Braun
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Frederick W. Buckman
----------------------
Frederick W. Buckman
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/C. Todd Conover
------------------
C. Todd Conover
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Richard C. Edgley
--------------------
Richard C. Edgley
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996
s/Peter I. Wold
----------------
Peter I. Wold
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Nolan E. Karras
-----------------
Nolan E. Karras
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Keith R. McKennon
--------------------
Keith R. McKennon
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that said
attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Robert G. Miller
------------------
Robert G. Miller
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her 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, 1995
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 or she
might or could do in person, hereby ratifying and confirming all that
said attorneys and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: February14, 1996.
s/Verl R. Topham
----------------
Verl R. Topham
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her name, place and stead, in any and all capacities, to sign the
Annual Report of PacifiCorp on Form 10-K for the year ended December31, 1995 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 or she might or could do
in person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Don M. Wheeler
----------------
Don M. Wheeler
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her name, place and stead, in any and all capacities, to sign the
Annual Report of PacifiCorp on Form 10-K for the year ended December31, 1995 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 or she might or could do
in person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Nancy Wilgenbusch
-------------------
Nancy Wilgenbusch
<PAGE>
EXHIBIT [24]
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned constitutes and
appoints Kathryn A. Braun, Richard C. Edgley, Nolan E. Karras, Don M. Wheeler
and Nancy Wilgenbusch, and each of them, his or her true and lawful attorneys
and agents, with full power of substitution and resubstitution for him or her
and in his or her name, place and stead, in any and all capacities, to sign the
Annual Report of PacifiCorp on Form 10-K for the year ended December31, 1995 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 or she might or could do
in person, hereby ratifying and confirming all that said attorneys and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Dated: February 14, 1996.
s/Richard T. O'Brien
--------------------
Richard T. O'Brien
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACIFICORP'S
DECEMBER 31, 1995 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
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8491100
<OTHER-PROPERTY-AND-INVEST> 2392300
<TOTAL-CURRENT-ASSETS> 912200
<TOTAL-DEFERRED-CHARGES> 308300
<OTHER-ASSETS> 1911300
<TOTAL-ASSETS> 14015200
<COMMON> 3000700
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 632400
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3633100
311500
219000
<LONG-TERM-DEBT-NET> 4892400
<SHORT-TERM-NOTES> 367000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 704100
<LONG-TERM-DEBT-CURRENT-PORT> 204600
0
<CAPITAL-LEASE-OBLIGATIONS> 25800
<LEASES-CURRENT> 1500
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3656200
<TOT-CAPITALIZATION-AND-LIAB> 14015200
<GROSS-OPERATING-REVENUE> 3400900
<INCOME-TAX-EXPENSE> 238800
<OTHER-OPERATING-EXPENSES> 2353100
<TOTAL-OPERATING-EXPENSES> 2591900
<OPERATING-INCOME-LOSS> 809000
<OTHER-INCOME-NET> 74700
<INCOME-BEFORE-INTEREST-EXPEN> 883700
<TOTAL-INTEREST-EXPENSE> 378700
<NET-INCOME> 505000
38700
<EARNINGS-AVAILABLE-FOR-COMM> 466300
<COMMON-STOCK-DIVIDENDS> 307100
<TOTAL-INTEREST-ON-BONDS> 212800
<CASH-FLOW-OPERATIONS> 912000
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.64
</TABLE>
<PAGE>
EXHIBIT 99
PACIFIC TELECOM, INC.
ITEM 1. BUSINESS AND
ITEM 2. PROPERTIES
1995 ANNUAL REPORT ON FORM 10-K
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 investments in cellular telephone operations, international
communications, including the construction of a trans-Pacific fiber optic cable
and, until August 1995, the provision of long distance services in the State of
Alaska through Alascom. 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 has been implemented through the acquisition of LECs, the sale of
certain international operations, the consolidation and sale of cellular
holdings, and the completion of the sale of Alascom to AT&T. With the sale of
Alascom to AT&T, the Company resolved its uncertainties related to the Alaska
long distance market place restructuring issues.
The Company is a wholly-owned subsidiary of Holdings, which is a
wholly-owned subsidiary of PacifiCorp. On September 27, 1995, holders of a
majority of the approximately 5.3 million shares of outstanding common stock
held by minority shareholders voted in favor of the merger of a wholly-owned
subsidiary of Holdings into the Company. As a result of the merger, the common
stock held by minority shareholders (other than shares as to which dissenters
rights were perfected) were converted into the right to receive $30.00 per share
in cash, and the Company became a wholly-owned subsidiary of Holdings with 100
shares of no par value common stock outstanding. In addition, a liability in the
amount of $41.6 million was accrued for amounts to be paid to dissenters in the
merger based on $30.00 per share fair value for their shares. Payments totalling
$14.3 million were made to dissenters in November and December 1995. The Company
is accruing interest on the remaining liability at a rate equal to the Company's
average short-term borrowing rate. The Company also recorded a receivable from
Holdings in the amount of the accrued liability to dissenters. PTI had been a
majority-owned subsidiary of PacifiCorp since 1973.
TELECOMMUNICATIONS OPERATIONS
LOCAL EXCHANGE COMPANIES
The Company's LECs operate under a common business name and logo, PTI
Communications. This marketing concept was established in 1991 to create a
unified identity for the local operations, improve communication with customers
and assist in the marketing of new products and services. As one of the major
independent telephone companies in the U.S., the Company's LECs provide both
local telephone service and access to the long distance network for customers in
their respective service areas. The LECs also provide directory advertising and,
through contracts with interexchange carriers, billing and collection services.
At December 31, 1995, the Company operated 15 LECs within eleven states
comprised of 530,400 access lines in 344 exchanges. The average number of access
lines per exchange is approximately 1,542, 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 24,935 access lines at December 31, 1995. 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.") The Company provides
centralized administrative and support services to field operations from its
corporate offices in Vancouver, Washington.
As a result of acquisitions in Colorado, Washington and Oregon, the Company
added 90,000 access lines in 1995, an increase of 22 percent. The LECs also
experienced strong internal access line growth in certain service areas, as
evidenced by a 5.3 percent increase in access lines served during 1995. In
December 1995, the Company signed an agreement with USWC under which the Company
agreed to purchase certain local telephone exchange assets in Minnesota
representing 32 exchanges serving approximately 26,600 access lines. The
transaction is expected to close in late 1996 following receipt of approvals
from the FCC and Minnesota Public Utilities Commission.
LONG LINES
Through Alascom, the Company provided intrastate and interstate message toll
service,wide area telephone service, 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. In August 1995, the Company sold Alascom to
AT&T.
5
<PAGE>
CELLULAR OPERATIONS
The Company's wholly-owned subsidiary, PT Cellular, is a holding company
with subsidiaries in Alaska, Michigan, Oregon, South Dakota, Washington and
Wisconsin. The Company has ownership interests with respect to 25 MSAs and RSAs
and manages 10 of these interests in Alaska, Michigan and Wisconsin. The Company
also manages five other RSAs in Minnesota in which it has no ownership interest.
Revenues from cellular operations represented approximately five percent of
total Company revenues in 1995.
The Company may 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 and
network efficiencies. This plan may be accomplished through the exchange of
existing cellular interests and/or future acquisitions.
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 NPC. 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 NPC 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. (See Item 7.
"Managements Discussion and Analysis of Financial Condition and Results of
Operations" for information about cable outages during 1995.) At December 31,
1995, approximately 55 percent of the cables 17,010 circuit capacity had been
sold.
PT Transmission provides restoration services for the eastern end of the NPC
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.
REGULATION
The Company's LECs operate in an industry that is subject to extensive
regulation by the FCC and state regulatory agencies. Virtually all services 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, judicial and Congressional proceedings
regarding the deregulation of certain aspects of the industry. The FCC and some
state regulatory agencies are also pursuing alternative forms of regulation that
depart from traditional rate of return regulation for telecommunications
companies such as the Company. These alternatives include opening local exchange
franchises to encourage greater competition.
On February 1, 1996, the Congress adopted the Joint Conference Report on
S.652, thereby passing the Telecommunications Act of 1996 (Telecommunications
Act). The legislation was subsequently signed into law by President Clinton on
February 8, 1996. The Telecommunications Act addresses a substantial number of
telecommunications matters, and generally seeks to promote competitive service
in all telecommunications markets, including local exchange services. Among
other issues, the Telecommunications Act addresses removal of barriers to entry,
universal service mechanisms, eligibility for access to universal service
support funds, interconnection waiver or exemption provisions for rural and
mid-size companies and infrastructure sharing. Management believes these
provisions will prove consistent with the Company's current and planned
operations. In many instances, how-
ever, specific aspects of these matters are referred by the legislation to the
FCC for further proceedings and
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implementation; the final actions of the FCC with respect thereto cannot now be
predicted. Proceedings before various of the Company's state regulatory agencies
are also likely as a result of the scope of the federal legislation. In
addition, oversight hearings to monitor FCC interpretation and implementation of
the legislation, as well as technical corrective legislation later in 1996, are
possible as implementation of the legislation proceeds.
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.
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.
Approximately 38 percent of plant assets 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.)
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 NPC 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 66 percent of the 225,000 square-foot building.
The Company owns two mainframe computers and leases most of the other equipment
used in conjunction with providing data processing services.
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