SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) COMBINED QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____TO_____
COMMISSION REGISTRANT, STATE OF INCORPORATION, I.R.S. EMPLOYER
FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO.
1-1443 CENTRAL AND SOUTH WEST CORPORATION 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, Texas 75202-1234
(214) 777-1000
0-346 CENTRAL POWER AND LIGHT COMPANY 74-0550600
(A Texas Corporation)
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
(512) 881-5300
0-343 PUBLIC SERVICE COMPANY OF OKLAHOMA 73-0410895
(An Oklahoma Corporation)
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(918) 599-2000
1-3146 SOUTHWESTERN ELECTRIC POWER COMPANY 72-0323455
(A Delaware Corporation)
428 Travis Street
Shreveport, Louisiana 71156-0001
(318) 222-2141
0-340 WEST TEXAS UTILITIES COMPANY 75-0646790
(A Texas Corporation)
301 Cypress Street
Abilene, Texas 79601-5820
(915) 674-7000
INDICATE BY CHECK MARK WHETHER THE REGISTRANTS (1) HAVE FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANTS WERE REQUIRED TO FILE SUCH REPORTS), AND (2) HAVE BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
Common Stock Outstanding at November 8, 1996 Shares
Central and South West Corporation 210,884,974
Central Power and Light Company 6,755,535
Public Service Company of Oklahoma 9,013,000
Southwestern Electric Power Company 7,536,640
West Texas Utilities Company 5,488,560
This combined Form 10-Q is separately filed by Central and South
West Corporation, Central Power and Light Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company.
Information contained herein relating to any individual Registrant is filed by
such Registrant on its own behalf. Each other Registrant makes no representation
as to information relating to the other Registrants.
<PAGE> 2
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1996
Page
NUMBER
GLOSSARY OF TERMS............................................................3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Central and South West Corporation and Subsidiary Companies.........6
Central Power and Light Company....................................16
Public Service Company of Oklahoma.................................26
Southwestern Electric Power Company................................33
West Texas Utilities Company.......................................40
Notes to Financial Statements......................................47
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................58
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings............................................64
ITEM 2. Changes in Securities...............................Inapplicable
ITEM 3. Defaults Upon Senior Securities.....................Inapplicable
ITEM 4. Submission of Matters to a Vote of Security
Holders...........................................Inapplicable
ITEM 5. Other Information............................................65
ITEM 6. Exhibits and Reports on Form 8-K.............................66
SIGNATURES..................................................................67
<PAGE> 3
GLOSSARY OF TERMS
The following abbreviations or acronyms used in this text are defined below:
ABBREVIATION OR ACRONYM DEFINITION
ALJ..............................Administrative Law Judge
Alpek............................Alpek S.A. de C.V.
First Amended SWEPCO Plan........The plan of reorganization for Cajun filed by
the Members Committee, SWEPCO and Entergy
Gulf States on September 30, 1996 with the
U.S. Bankruptcy Court for the Middle District
of Louisiana
ANI..............................American Nuclear Insurance
Burlington Northern..............Burlington Northern Railroad Company
Cajun............................Cajun Electric Power Cooperative, Inc.
Court of Appeals.................Court of Appeals, Third District of Texas,
Austin, Texas
CPL..............................Central Power and Light Company, Corpus
Christi, Texas
CPL 1995 Agreement...............Settlement Agreement filed by CPL with the
Texas Commission to settle certain CPL
regulatory matters
CPL 1996 Fuel Agreement..........Fuel settlement agreement entered into by CPL
and other parties to CPL's current rate
review
CSW..............................Central and South West Corporation, Dallas,
Texas
CSW Common.......................CSW common stock, $3.50 par value per share
CSW Communications...............CSW Communications, Inc., Austin, Texas
CSW Credit Agreement.............$850 million senior credit agreement entered
into by CSW with a consortium of banks to
partially fund the SEEBOARD acquisition
CSW Energy.......................CSW Energy, Inc., Dallas, Texas
CSW Investments..................CSW Investments, an unlimited company organized
in the United Kingdom which is wholly owned,
indirectly though subsidiaries, by CSW
International
CSW Investments Credit Facility..1.0 billion (pound) senior credit facility
arranged by CSW Investments with a consortium
of banks to partially fund the SEEBOARD
acquisition
CSW System.......................CSW and its subsidiaries
CSW U.K. Group...................Consolidated SEEBOARD, SEEBOARD Group plc
(which has replaced CSW (UK) plc) and CSW
Investments converted to U.S. Generally
Accepted Accounting Principles
CWIP.............................Construction work in progress
El Paso..........................El Paso Electric Company
EnerShop.........................EnerShop Inc., Dallas, Texas
Entergy Gulf States..............Gulf States Utilities Company
EPA..............................Environmental Protection Agency
EPS..............................Earnings per share
ERCOT............................Electric Reliability Council of Texas
FERC.............................Federal Energy Regulatory Commission
KWH..............................Kilowatt-hour
LIFO.............................Last-in First-out (fuel inventory accounting
method)
Matagorda........................Matagorda County Navigation District Number
One (Texas)
MD&A.............................Management's Discussion and Analysis of
Financial Condition and Results of Operations
Members Committee................The members committee of Cajun, which
represents 10 of the 12 Louisiana
distribution cooperatives that are served by
Cajun
Merger...........................The proposed merger whereby El Paso would have
become a wholly owned subsidiary of CSW
Merger Agreement.................Agreement and Plan of Merger between El Paso
and CSW, dated as of May 3, 1993, as amended
Mirror CWIP......................Mirror construction work in progress
Mississippi Power................Mississippi Power Company
MMbtu............................Million British thermal units
MW...............................Megawatt
MWH..............................Megawatt-hour
National Grid....................National Grid Group plc
NEIL.............................Nuclear Electric Insurance Limited
Oklahoma Commission..............Corporation Commission of the State of Oklahoma
Oklaunion........................Oklaunion Power Station Unit No. 1
<PAGE> 4
GLOSSARY OF TERMS (CONTINUED)
The following abbreviations or acronyms used in this text are defined below:
ABBREVIATION OR ACRONYM DEFINITION
Original SWEPCO Plan.............The plan of reorganization for Cajun filed by
the Members Committee, SWEPCO and Entergy
Gulf States on April 19, 1996 with the U.S.
Bankruptcy Court for the Middle District of
Louisiana
PCB..............................Polychlorinated biphenyl
PCRB.............................Pollution Control Revenue Bond
PSO..............................Public Service Company of Oklahoma, Tulsa,
Oklahoma
Red River........................Red River Authority of Texas
Registrant(s)....................CSW, CPL, PSO, SWEPCO and WTU
Sabine...........................Sabine River Authority of Texas
SEC..............................Securities and Exchange Commission
Second Amended SWEPCO Plan.......The plan of reorganization for Cajun filed by
the Members Committee, SWEPCO and Entergy
Gulf States on October 26, 1996 with the U.S.
Bankruptcy Court for the Middle District of
Louisiana (amends both the Original SWEPCO
Plan and the First Amended SWEPCO Plan)
SEEBOARD.........................SEEBOARD plc, Crawley, West Sussex, United
Kingdom
SFAS.............................Statement of Financial Accounting Standards
SFAS No. 52......................Foreign Currency Translation
STP..............................South Texas Project nuclear electric generating
station
SWEPCO...........................Southwestern Electric Power Company,
Shreveport, Louisiana
Tejas............................Tejas Gas Corporation
Texas Commission.................Public Utility Commission of Texas
Transok..........................Transok, Inc. and subsidiaries, Tulsa, Oklahoma
U.S. Electric or U.S. Electric
Operating Companies...........CPL, PSO, SWEPCO and WTU
WTU..............................West Texas Utilities Company, Abilene, Texas
WTU Stipulation and Agreement....Stipulation and Agreement to settle certain WTU
regulatory matters
<PAGE> 5
CSW
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 6
CENTRAL AND SOUTH WEST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------- ---------------
1996 1995 1996 1995
------ ------- ------- ------
(millions, except per share amounts)
Operating Revenues
U.S. Electric $1,028 $933 $2,555 $2,221
United Kingdom 391 -- 1,322 --
Other diversified 19 15 43 36
------ ------- ------- ------
1,438 948 3,920 2,257
------ ------- ------- ------
Operating Expenses and Taxes
U.S. Electric fuel and purchased
power 367 305 945 798
United Kingdom cost of sales 274 -- 961 --
Other operating 199 127 561 399
Maintenance 33 35 109 110
Depreciation and amortization 122 86 356 255
Taxes, other than income 49 47 138 124
Income taxes 110 89 208 66
------ ------- ------- ------
1,154 689 3,278 1,752
------ ------- ------- ------
Operating Income 284 259 642 505
------ ------- ------- ------
Other Income and Deductions
Mirror CWIP liability amortization -- 11 -- 31
U.S. Electric utility plant
development costs, net of tax -- -- (84) --
Other 11 11 15 45
------ ------- ------- ------
11 22 (69) 76
------ ------- ------- ------
Income Before Interest Charges 295 281 573 581
------ ------- ------- ------
Interest Charges
Interest on long-term debt 80 57 240 163
Interest on short-term debt
and other 21 26 76 78
------ ------- ------- ------
101 83 316 241
------ ------- ------- ------
Income from Continuing Operations 194 198 257 340
------ ------- ------- ------
Discontinued Operations
Income from discontinued operations,
net of tax of $-- and $6 for 1996
and $3 and $7 for 1995 -- 5 12 14
Gain on sale of discontinued
operations, net of tax of $71 -- -- 113 --
------ ------- ------- ------
-- 5 125 14
------ ------- ------- ------
Net Income 194 203 382 354
Preferred stock dividends 4 4 13 14
====== ======= ======= ======
Net Income for Common Stock $190 $199 $369 $340
====== ======= ======= ======
Average Common Shares Outstanding 210.3 191.9 206.3 191.4
EPS of Common Stock from Continuing
Operations $0.90 $1.01 $1.18 $1.71
EPS of Common Stock from Discontinued
Operations -- 0.03 0.61 0.07
------ ------- ------- ------
EPS of Common Stock $0.90 $1.04 $1.79 $1.78
====== ======= ======= ======
Dividends Paid per Share of Common Stock $0.435 $0.43 $1.305 $1.29
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 7
CENTRAL AND SOUTH WEST CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
------- -------
(millions)
ASSETS
Fixed Assets
Electric
Production $5,833 $5,888
Transmission 1,521 1,484
Distribution 4,040 3,799
General 1,297 1,209
Construction work in progress 203 346
Nuclear fuel 175 165
------- -------
Total Electric 13,069 12,891
Gas -- 869
Other diversified 57 18
------- -------
13,126 13,778
Less - Accumulated depreciation
and amortization 4,820 4,761
------- -------
8,306 9,017
------- -------
Current Assets
Cash and temporary cash investments 422 401
Special deposits 60 --
National Grid assets held for sale -- 100
Accounts receivable 1,216 1,093
Materials and supplies, at
average cost 179 188
Electric utility fuel inventory,
substantially at average cost 111 129
Gas inventory/products for resale -- 13
Prepayments and other 164 115
------- -------
2,152 2,039
------- -------
Deferred Charges and Other Assets
Deferred plant costs 505 514
Mirror CWIP asset 302 312
Other non-utility investments 292 296
Income tax related regulatory
assets, net 239 253
Goodwill 1,374 1,074
Other 422 364
------- -------
3,134 2,813
------- -------
$13,592 $13,869
======= =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 8
CENTRAL AND SOUTH WEST CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
-------- --------
(millions)
CAPITALIZATION AND LIABILITIES
Capitalization
Common Stock Equity
Common stock: $3.50 par value
Authorized: 350.0 million shares
Issued and outstanding: 210.8 million
shares in 1996 and 192.9 million
shares in 1995 $737 $675
Paid-in capital 999 610
Retained earnings 1,996 1,893
Foreign currency translation
adjustment (3) --
-------- --------
3,729 3,178
Preferred Stock
Not subject to mandatory redemption 293 292
Subject to mandatory redemption 32 34
Long-term debt 4,315 3,914
-------- --------
8,369 7,418
-------- --------
Minority Interest -- 202
-------- --------
Current Liabilities
Long-term debt and preferred stock
due within twelve months 65 30
Short-term debt 378 692
Short-term debt - CSW Credit, Inc. 809 646
Loan notes 97 --
Accounts payable 457 595
Accrued taxes 451 228
Accrued interest 74 77
Provision for SEEBOARD acceptances -- 1,001
Other 175 156
-------- --------
2,506 3,425
-------- --------
Deferred Credits
Accumulated deferred income taxes 2,229 2,306
Investment tax credits 295 306
Other 193 212
-------- --------
2,717 2,824
-------- --------
$13,592 $13,869
======== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 9
CENTRAL AND SOUTH WEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
----------------------
1996 1995
------- -------
OPERATING ACTIVITIES (millions)
Net Income $382 $354
Non-cash Items Included in Net Income
Depreciation and amortization 403 312
Deferred income taxes and investment
tax credits 17 (41)
Mirror CWIP liability amortization -- (31)
Charges for terminated Merger -- 42
Establishment of regulatory asset -- (34)
Provision for bonded rate refund 7 --
Utility plant and other project
development costs 141 --
Inventory reserve 7 --
Gain on sale of subsidiary (184) --
Changes in Assets and Liabilities
Accounts receivable (177) (266)
Accounts payable (92) (24)
Accrued taxes 109 56
Unrecovered fuel costs (84) 68
Refund due customers (2) 22
Other (50) (34)
------- -------
477 424
------- -------
INVESTING ACTIVITIES
Construction expenditures (343) (333)
Acquisition expenditures (1,391) (6)
CSW Energy/CSW International projects (52) 57
Sale of National Grid assets 99 --
Cash proceeds from sale of subsidiary 690 --
Other (5) (23)
------- -------
(1,002) (305)
------- -------
FINANCING ACTIVITIES
Common stock sold 451 42
Proceeds from issuance of
long-term debt 238 337
SEEBOARD acquisition financing 517 --
Reacquisition/Maturity of
long-term debt (178) (263)
Special deposits for reacquisition
of long-term debt (60) --
Change in short-term debt (151) (20)
Payment of dividends (279) (262)
------- -------
538 (166)
------- -------
Effect of exchange rate changes on
cash and cash equivalents 8 --
Net Change in Cash and Cash Equivalents 21 (47)
Cash and Cash Equivalents at Beginning
of Period 401 108
======= =======
Cash and Cash Equivalents at End of Period $422 $61
======= =======
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $261 $225
======= =======
Income taxes paid $139 $68
======= =======
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 10
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Set forth below is information concerning the consolidated results of
operations for CSW for the three month and nine month periods ended September
30, 1996. For information concerning the results of operations for each of the
U.S. Electric Operating Companies, see the discussions under the heading RESULTS
OF OPERATIONS following the financial statements of each of the U.S. Electric
Operating Companies. For supplementary information concerning SEEBOARD's results
of operations for these periods, see NOTE 9. SUPPLEMENTAL INFORMATION -
SEEBOARD'S RECENT OPERATING RESULTS.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
OVERVIEW. Net income for common stock decreased to $190 million or
$0.90 per share for the third quarter of 1996 compared to $199 million or $1.04
per share for the third quarter of 1995. Third quarter 1996 earnings decreased
when compared to the same period a year ago due primarily to increased
depreciation and amortization, increased other operating expense, increased
interest expense, the loss of Mirror CWIP earnings and the absence of Transok
earnings. Partially offsetting these factors were the addition of earnings from
SEEBOARD and increased non-fuel electric revenue due to the implementation of
bonded rates at CPL, increased customer usage and customer growth. For
discussion of the CPL 1996 Rate Case, see NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS. Below normal temperatures in the third quarter of 1996 partially
offset the increase in non-fuel electric revenue.
In the third quarter of 1996, the U.S. Electric Operating Companies and
the CSW U.K. Group contributed the following percentages to CSW's results of
operations.
CORPORATE
U.S. CSW U.K. TOTAL ITEMS AND
ELECTRIC GROUP ELECTRIC OTHER TOTAL
---------------------------------------------------
Operating Revenues 72% 27% 99% 1% 100%
Operating Income 86% 11% 97% 3% 100%
Net Income for CSW Common 96% 6% 102% (2)% 100%
OPERATING REVENUES. Operating revenues increased 52% to $1,438 million
in the third quarter of 1996 from $948 million in the third quarter of 1995.
This increase reflects the addition of $391 million of SEEBOARD revenues and a
$95 million increase in revenues for the U.S. Electric Operating Companies over
the third quarter of 1995. The main factors contributing to the increase at the
U.S. Electric Operating Companies were an increase in fuel revenues as discussed
below, the implementation of bonded rates at CPL in the third quarter of 1996
and the recording of a base rate refund reserve in accordance with the WTU
Stipulation and Agreement in the third quarter of 1995. Total retail KWH sales
for the U.S. Electric Operating Companies increased 2% in the second quarter of
1996 compared to the third quarter of 1995. Residential KWH sales were
relatively unchanged while commercial and industrial KWH sales increased 2% and
5%, respectively. Customer usage and growth contributed to the increase in KWH
sales, while below normal temperatures partially offset the increase.
U.S. ELECTRIC FUEL AND PURCHASED POWER. Fuel and purchased power
expense increased 20% to $367 million in the third quarter of 1996 from $305
million in the third quarter of 1995. Fuel expense was higher at the U.S.
Electric Operating Companies due primarily to an increase in the average unit
<PAGE> 11
CSW RESULTS OF OPERATIONS (CONTINUED)
cost of fuel to $1.77 per MMbtu in the third quarter of 1996 from $1.51 per
MMbtu in the third quarter of 1995, reflecting higher natural gas prices.
Partially offsetting this increase was the reduction in the delivered cost of
coal at the U.S. Electric Operating Companies. Purchased power increased $4
million due primarily to increased economy energy purchases.
UNITED KINGDOM COST OF SALES. SEEBOARD's cost of sales was $274 million
for the third quarter of 1996. CSW did not acquire SEEBOARD until the fourth
quarter of 1995. As a result, there is no amount shown for cost of sales in the
third quarter of 1995.
OTHER OPERATING. Other operating expense increased 57% to $199 million
during the third quarter of 1996 from $127 million during the third quarter of
1995. The increase reflected the addition of SEEBOARD's operating expenses and
higher operating expenses at the U.S. Electric Operating Companies including the
effect of bonded rate implementation at CPL and the recognition in 1995 of a
regulatory asset for previously recorded restructuring charges established in
accordance with the WTU Stipulation and Agreement.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
42% to $122 million in the third quarter of 1996 from $86 million in the third
quarter of 1995 due primarily to the addition of SEEBOARD's depreciable fixed
assets and the goodwill amortization related to the purchase of SEEBOARD, as
well as increases in depreciable fixed assets at the U.S. Electric Operating
Companies. Also contributing to the increase were accelerated amortization of
deferred STP plant costs at CPL implemented with bonded rates in May 1996 and
accelerated amortization of deferred Oklaunion plant costs at WTU in accordance
with the WTU Stipulation and Agreement.
INCOME TAXES. Income taxes increased $21 million to $110 million during
the third quarter of 1996 when compared to the third quarter of 1995 due in part
to the addition of income taxes from SEEBOARD. Also contributing to the increase
was the absence of a tax benefit recorded in the third quarter of 1995 related
to the WTU Stipulation and Agreement.
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased $11
million when compared to the third quarter of 1995 due primarily to the absence
of CPL's 1995 Mirror CWIP liability amortization.
INTEREST CHARGES. Interest on long-term debt increased $23 million or
40% during the third quarter of 1996 as compared to the third quarter of 1995
due to higher levels of long-term debt outstanding related to the SEEBOARD
acquisition. Interest on short-term debt and other decreased $5 million or 19%
during the third quarter of 1996 as compared to the third quarter of 1995 due
primarily to lower levels of short-term borrowings.
DISCONTINUED OPERATIONS. The results of Transok are shown separately in
discontinued operations. Since Transok was sold on June 6, 1996, CSW's results
for the quarter ended September 30, 1996 do not reflect any earnings from
Transok. See NOTE 7. DISCONTINUED OPERATIONS for information, including
comparative statements of income, related to the sale of Transok.
<PAGE> 12
CSW RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
OVERVIEW. Net income for common stock for the nine months ended
September 30, 1996 increased to $369 million from $340 million for the first
nine months of 1995 due primarily to the gain from the sale of Transok, earnings
from SEEBOARD and the absence of charges in 1996 related to the termination of
the proposed El Paso Merger in June 1995 and the CPL 1995 Agreement. Also
contributing to the increase were the implementation of bonded rates at CPL and
stronger KWH sales resulting from increased usage and weather-related demand.
Partially offsetting these increases in earnings for the nine months ended
September 30, 1996 were the recording in June 1996 of one-time charges
associated with certain investments and contingencies, the absence of favorable
tax adjustments made in 1995 and the CPL 1996 Fuel Agreement. For additional
information on the one-time charges, see NOTE 8. UTILITY PLANT DEVELOPMENT COSTS
and NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES. For further discussion of
CPL's Rate Case, see NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS. Increased
depreciation and amortization, increased other operating expense, increased
interest expense and the loss of Mirror CWIP earnings also reduced the increase
in net income for the nine months ended September 30, 1996.
In the first nine months of 1996, the U.S. Electric Operating
Companies, the CSW U.K. Group and Transok contributed the following percentages
to CSW's results of operations.
CORPORATE
U.S. CSW U.K. TOTAL ITEMS AND
ELECTRIC GROUP ELECTRIC TRANSOK(1) OTHER TOTAL
----------------------------------------------------
Operating Revenues 65% 34% 99% --(2) 1% 100%
Operating Income 79% 18% 97% --(2) 3% 100%
After-tax one-time charges 86% -- 86% -- 14% 100%
Net Income for CSW Common 63% 14% 77% 3%(3) 20%(4) 100%
(1) On June 6, 1996, CSW sold Transok to Tejas. See NOTE 7. DISCONTINUED
OPERATIONS.
(2) Transok's Operating Revenues and Operating Income are shown as Income from
Discontinued Operations in CSW's Consolidated Statements of Income.
(3) Net Income for CSW Common for the nine months ended September 30, 1996
includes earnings from Transok for January through May 1996 only.
(4) Includes CSW's gain on the sale of Transok.
OPERATING REVENUES. Operating revenues increased 74% to $3,920 million
in the first nine months of 1996 from $2,257 million in the first nine months of
1995. This increase reflects $1,322 million of SEEBOARD revenues and a $334
million increase in revenues for the U.S. Electric Operating Companies including
the effects of higher fuel revenue, as discussed below, and bonded rate
implementation at CPL. Also contributing to the increase were the recording of
base rate and fuel refund reserves in the first quarter of 1995 in accordance
with the CPL 1995 Agreement and the recording of a base rate refund reserve in
the third quarter of 1995 in accordance with the WTU Stipulation and Agreement.
Total retail KWH sales for the U.S. Electric Operating Companies increased 5% in
the first nine months of 1996 compared to the first nine months of 1995.
Residential, commercial and industrial KWH sales increased 6%, 4% and 5%,
respectively. Increased usage, primarily by residential customers, as well as
more favorable weather in the first six months of 1996 contributed to KWH sales
growth.
U.S. ELECTRIC FUEL AND PURCHASED POWER. Fuel and purchased power
expense increased 18% to $945 million in the first nine months of 1996 from $798
million in the first nine months of 1995. Fuel expense was higher at the U.S.
Electric Operating Companies due primarily to an increase in the average
<PAGE> 13
CSW RESULTS OF OPERATIONS (CONTINUED)
unit cost of fuel to $1.80 per MMbtu in the first nine months of 1996 from $1.57
per MMbtu in the first nine months of 1995, reflecting higher natural gas
prices. Partially offsetting this increase was the reduction in the delivered
cost of coal at CPL and WTU. Purchased power increased $31 million due primarily
to increased economy energy purchases.
UNITED KINGDOM COST OF SALES. SEEBOARD's cost of sales was $961 million
for the first nine months of 1996. CSW did not acquire SEEBOARD until the fourth
quarter of 1995. As a result, there is no amount shown for cost of sales for the
first nine months of 1995.
OTHER OPERATING. Other operating expense increased 41% to $561 million
during the first nine months of 1996 from $399 million during the first nine
months of 1995. This increase was due primarily to the addition in 1996 of
SEEBOARD's operating expenses as well as the recognition in the first quarter of
1995 of a $23 million regulatory asset for previously recorded restructuring
charges established in accordance with the CPL 1995 Agreement and the reversal
of $4 million in rate case costs pursuant to the CPL 1995 Agreement. Also
contributing to the increase was the recognition in the third quarter of 1995 of
a regulatory asset for previously recorded restructuring charges in accordance
with the WTU Stipulation and Agreement. Other factors contributing to increased
other operating expense were the bonded rate implementation at CPL and expenses
incurred with the CSW restructuring recorded in the second and third quarters of
1996. For additional information on this restructuring, see MD&A - COMPETITION
AND INDUSTRY CHALLENGES. Operating expenses for the first nine months of 1995
were unusually high because of a $42 million reserve for deferred merger and
acquisition costs recorded in 1995 from the termination of the proposed El Paso
Merger.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
40% to $356 million in the first nine months of 1996 from $255 million in the
first nine months of 1995 due primarily to the addition of SEEBOARD's
depreciable fixed assets and the goodwill amortization related to the purchase
of SEEBOARD, as well as increases in depreciable fixed assets at the U.S.
Electric Operating Companies. Also contributing to the increase were accelerated
amortization of deferred STP plant costs at CPL implemented with bonded rates in
May 1996 and accelerated amortization of deferred Oklaunion plant costs at WTU
in accordance with the WTU Stipulation and Agreement.
TAXES, OTHER THAN INCOME. Taxes, other than income increased 11% to
$138 million in the first nine months of 1996 from $124 million in the first
nine months of 1995. The increase was due primarily to lower 1995 ad valorem
taxes resulting from revisions of prior year estimates recorded in 1995.
INCOME TAXES. Income taxes increased $142 million to $208 million
during the first nine months of 1996 when compared to the first nine months of
1995. For the first nine months of 1995, income taxes were reduced primarily due
to prior period adjustments, as well as the tax effect from both the CPL 1995
Agreement and the WTU Stipulation and Agreement. For the first nine months of
1996, SEEBOARD recorded $42 million in income taxes.
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased $145
million in the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to one-time charges recorded in June 1996 associated with
certain investments for plant sites, engineering studies and lignite reserves
for the U.S. Electric Companies and project development costs for CSW Energy.
For additional information concerning the one-time charges for the U.S. Electric
Operating Companies, see NOTE 8. UTILITY PLANT DEVELOPMENT COSTS, and for CSW
<PAGE> 14
CSW RESULTS OF OPERATIONS (CONTINUED)
Energy, see NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES. Also, CPL's Mirror
CWIP liability, which has now been fully amortized, contributed $31 million in
the first nine months of 1995.
INTEREST CHARGES. Interest on long-term debt increased $77 million or
47% during the first nine months of 1996 as compared to the first nine months of
1995 due to higher levels of long-term debt outstanding related to the SEEBOARD
acquisition.
DISCONTINUED OPERATIONS. The results of Transok are shown separately in
discontinued operations. Transok's earnings for the first five months of 1996
were $12 million compared to $14 million for the nine months ended September 30,
1995. Since Transok was sold on June 6, 1996, CSW's results for the nine months
ended September 30, 1996 do not reflect a full nine months of earnings from
Transok. See NOTE 7. DISCONTINUED OPERATIONS for information, including
comparative statements of income, related to the sale of Transok.
<PAGE> 15
CPL
CENTRAL POWER AND LIGHT COMPANY
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 16
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ----------- ---------
(thousands) (thousands)
Electric Operating Revenues $410,899 $358,790 $1,026,352 $810,597
--------- --------- ----------- ---------
Operating Expenses and Taxes
Fuel 101,994 87,606 256,489 223,670
Purchased power 19,293 4,409 48,593 11,436
Other operating 56,480 52,578 166,242 133,567
Maintenance 11,080 12,842 40,190 44,744
Depreciation and amortization 43,907 37,552 126,044 111,924
Taxes, other than income 22,699 20,426 62,040 50,423
Income taxes 42,774 39,295 85,805 3,677
--------- --------- ----------- ---------
298,227 254,708 785,403 579,441
--------- --------- ----------- ---------
Operating Income 112,672 104,082 240,949 231,156
--------- --------- ----------- ---------
Other Income and Deductions
Mirror CWIP liability
amortization -- 10,250 -- 30,750
Utility plant development
costs, net of tax -- -- (15,481) --
Other 1,498 2,829 4,708 13,288
--------- --------- ----------- ---------
1,498 13,079 (10,773) 44,038
--------- --------- ----------- ---------
Income Before Interest Charges 114,170 117,161 230,176 275,194
--------- --------- ----------- ---------
Interest Charges
Interest on long-term debt 28,407 32,082 83,072 89,176
Interest on short-term debt
and other 3,355 3,991 14,485 15,340
Allowance for borrowed
funds used during
construction (194) (1,150) (1,410) (3,566)
--------- --------- ----------- ---------
31,568 34,923 96,147 100,950
--------- --------- ----------- ---------
Net Income 82,602 82,238 134,029 174,244
Preferred stock dividends 3,386 3,535 10,183 10,899
--------- --------- ----------- ---------
Net Income for Common Stock $79,216 $78,703 $123,846 $163,345
========= ========= =========== =========
The accompanying notes to financial statements
as they relate to CPL are an integral part of these statements.
<PAGE> 17
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
ASSETS (thousands)
Electric Utility Plant
Production $3,108,291 $3,110,744
Transmission 500,320 486,090
Distribution 937,473 879,618
General 265,257 248,629
Construction work in progress 81,370 127,307
Nuclear fuel 174,698 165,087
---------- ----------
5,067,409 5,017,475
Less - Accumulated depreciation
and amortization 1,674,030 1,547,530
---------- ----------
3,393,379 3,469,945
---------- ----------
Current Assets
Cash 5,946 2,883
Special deposits 60,113 797
Accounts receivable 36,301 45,186
Under-recovered fuel costs 22,727 --
Materials and supplies, at average cost 75,856 71,112
Fuel inventory, at average cost 16,132 26,472
Accumulated deferred income taxes 9,304 22,171
Prepayments and other 1,602 1,739
---------- ----------
227,981 170,360
---------- ----------
Deferred Charges and Other Assets
Deferred STP costs 481,295 488,047
Mirror CWIP asset 301,970 311,804
Income tax related regulatory assets, net 337,388 346,993
Other 124,557 93,987
---------- ----------
1,245,210 1,240,831
---------- ----------
$4,866,570 $4,881,136
========== ==========
The accompanying notes to financial statements as
they relate to CPL are an integral part of these statements.
<PAGE> 18
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
CAPITALIZATION AND LIABILITIES (thousands)
Capitalization
Common stock: $25 par value
Authorized shares: 12,000,000
Issued and outstanding shares: 6,755,535 $ 168,888 $ 168,888
Paid-in capital 405,000 405,000
Retained earnings 872,290 863,444
---------- ----------
1,446,178 1,437,332
Preferred stock 250,351 250,351
Long-term debt 1,521,652 1,517,347
---------- ----------
3,218,181 3,205,030
---------- ----------
Current Liabilities
Long-term debt due within
twelve months 60,000 231
Advances from affiliates 58,055 176,334
Accounts payable 49,816 49,507
Accrued taxes 98,851 61,614
Accrued interest 35,719 32,742
Over-recovered fuel costs -- 12,586
Refund due customers 6,642 --
Other 29,727 24,758
---------- ----------
338,810 357,772
---------- ----------
Deferred Credits
Accumulated deferred income taxes 1,149,657 1,151,823
Investment tax credits 148,402 152,744
Other 11,520 13,767
---------- ----------
1,309,579 1,318,334
---------- ----------
$4,866,570 $4,881,136
========== ==========
The accompanying notes to financial statements as
they relate to CPL are an integral part of these statements.
<PAGE> 19
CENTRAL POWER AND LIGHT COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
------------------------
1996 1995
--------- ----------
OPERATING ACTIVITIES (thousands)
Net Income $134,029 $174,244
Non-cash Items Included in Net Income
Depreciation and amortization 144,374 129,827
Deferred income taxes and investment
tax credits 15,964 (41,244)
Mirror CWIP liability amortization -- (30,750)
Establishment of regulatory assets -- (20,652)
Provision for bonded rate refund 6,642 --
Utility plant development costs 21,374 --
Inventory reserve 487 --
Changes in Assets and Liabilities
Accounts receivable 8,885 (16,814)
Fuel inventory 10,340 615
Accounts payable (172) (34,459)
Accrued taxes 37,237 11,312
Over- and under-recovered fuel
costs (35,313) 61,193
Other (13,445) 1,958
--------- ---------
330,402 235,230
--------- ---------
INVESTING ACTIVITIES
Construction expenditures (82,245) (112,868)
Allowance for borrowed funds used
during construction (1,410) (3,566)
Other 2,415 --
--------- ---------
(81,240) (116,434)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 63,967 297,851
Retirement of long-term debt (231) --
Reacquisition of long-term debt (6,140) (253,278)
Special deposits for reacquisition
of long-term debt (60,000) --
Change in advances from affiliates (118,279) (16,706)
Payment of dividends (125,416) (145,836)
--------- ---------
(246,099) (117,969)
--------- ---------
Net Change in Cash and Cash Equivalents 3,063 827
Cash and Cash Equivalents at Beginning
of Period 2,883 642
========= =========
Cash and Cash Equivalents at End of Period $5,946 $1,469
========= =========
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $85,876 $81,377
========= =========
Income taxes paid $26,721 $25,280
========= =========
The accompanying notes to financial statements as
they relate to CPL are an integral part of these statements.
<PAGE> 20
CENTRAL POWER AND LIGHT COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. Net income for common stock increased to
$79.2 million during the third quarter of 1996 from $78.7 million in the third
quarter of 1995. Third quarter earnings increased when compared to the prior
year due to the implementation of bonded rates and an increase in KWH sales
partially offset by the expiration of the Mirror CWIP liability amortization.
See NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information
relating to bonded rates.
ELECTRIC OPERATING REVENUES. Total revenues increased 15% to $410.9
million during the third quarter of 1996 from $358.8 million during the third
quarter of 1995 due primarily to an increase in fuel revenues of $29.6 million
resulting from higher average unit fuel costs and purchased power as discussed
below. Also contributing to the higher revenues was a $22.5 million increase in
non-fuel revenues due primarily to the implementation of bonded rates and a 4%
increase in KWH sales resulting primarily from residential and commercial
customer growth, as well as increased customer demand.
FUEL. Fuel expense increased 16% to $102.0 million during the third
quarter of 1996 from $87.6 million during the third quarter of 1995 due
primarily to an increase in the average unit cost of fuel from $1.31 per MMbtu
in the third quarter of 1995 to $1.69 per MMbtu in 1996 offset in part by an 8%
decrease in generation. The cost of fuel reflects an increase in the spot market
price of natural gas partially offset by a decrease in the delivered cost of
coal.
PURCHASED POWER. Purchased power increased $14.9 million in the third
quarter of 1996 when compared to the third quarter of 1995 due primarily to
increased economy energy purchases.
OTHER OPERATING. Other operating expenses increased $3.9 million or 7%
during the third quarter of 1996 when compared to the third quarter of 1995.
This increase was due primarily to additional insurance, decommissioning and
regulatory expenses associated with the implementation of bonded rates. Such
increases were partially offset by lower nuclear production expenses due
primarily to lower STP employee-related costs and fewer scheduled refueling
outages and decreased transmission expenses resulting from the benefits
associated with the installation of the high-voltage direct-current east tie.
MAINTENANCE. Maintenance expense decreased $1.8 million or 14% during
the third quarter of 1996 when compared to the third quarter of 1995 due
primarily to fewer scheduled steam production maintenance repair projects in the
third quarter of 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $6.4 million or 17% during the third quarter of 1996 when compared to
the third quarter of 1995 as a result of an increase in depreciable property and
the accelerated amortization of STP deferred costs in accordance with the
implementation of bonded rates in May 1996.
TAXES, OTHER THAN INCOME. Taxes, other than income increased $2.3
million in third quarter of 1996 when compared to the third quarter of 1995 due
primarily to higher state franchise taxes partially offset by lower ad valorem
taxes.
<PAGE> 21
CPL RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES. Income taxes increased $3.5 million in the third quarter
of 1996 when compared to the third quarter of 1995 due primarily to higher
pre-tax income.
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$11.6 million in the third quarter of 1996 when compared to the third quarter of
1995. Mirror CWIP liability amortization, which expired in 1995, contributed
$10.3 million to other income and deductions in the third quarter of 1995.
INTEREST CHARGES. Interest charges decreased $3.4 million during the
third quarter of 1996 when compared to 1995 as a result of the refinancing of
higher cost bonds.
<PAGE> 22
CPL RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. Net income for common stock decreased 24%
to $123.8 million during the first nine months of 1996 from $163.3 million in
the first nine months of 1995. The decrease resulted primarily from the
expiration of Mirror CWIP liability amortization and a one-time charge
associated with certain investments for plant sites, engineering studies and
lignite reserves. Partially offsetting this decrease were the net effects of the
settlements of certain regulatory issues, as shown in the table below, and the
impact associated with the implementation of bonded rates. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS for additional information relating to
bonded rates. See NOTE 8. UTILITY PLANT DEVELOPMENT COSTS for additional
information relating to the one-time charge.
PRE-TAX AFTER-TAX
(million)
CPL 1996 FUEL AGREEMENT
Provision for refund $(14.4) $(9.4)
Reduction of fuel expense 9.6 6.2
Increased interest expense (1.1) (0.7)
Litigation and settlement expense (0.8) (0.5)
CPL 1995 AGREEMENT
Base rate refund $(50.0) $(32.5)
Fuel disallowance (62.3) (40.5)
Wholesale fuel refund (3.2) (2.1)
Current flowback of excess deferred
federal income tax 34.3 34.3
Capitalization of previously expensed
restructuring and rate case costs 27.6 17.9
Recognition of factoring income 16.1 10.5
Amortization, interest and other (6.6) (4.4)
ELECTRIC OPERATING REVENUES. Total revenues increased $215.8 million or
27% during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to an increase in non-fuel revenues. The increase in
non-fuel revenues resulted principally from the net change in the provision for
rate refunds, as reflected in the above table, and the implementation of bonded
rates. Also contributing to the higher revenues was a 7% increase in KWH sales
resulting primarily from increased customer demand, favorable weather-related
demand as well as residential and commercial customer growth. Fuel revenues
increased $78.3 million as a result of higher average unit fuel costs and
purchased power as discussed below.
FUEL. Fuel expense increased $32.8 million or 15% during the first nine
months of 1996 when compared to the first nine months of 1995 due primarily to
an increase in the average unit cost of fuel from $1.35 per MMbtu in the first
nine months of 1995 to $1.59 per MMbtu for the same period in 1996. The cost of
fuel reflects an increase in the spot market price of natural gas partially
<PAGE> 23
CPL RESULTS OF OPERATIONS (CONTINUED)
offset by a decrease in the delivered cost of coal and a one-time $9.6 million
reduction in fuel expense as a result of the CPL 1996 Fuel Agreement.
PURCHASED POWER. Purchased power increased $37.2 million during the
first nine months 1996 when compared to the first nine months of 1995 primarily
as a result of increased economy energy and cogeneration purchases.
OTHER OPERATING. Other operating expenses increased $32.7 million or
24% during the first nine months of 1996 when compared to the first nine months
of 1995. This increase was due primarily to the 1995 recognition of a $20.7
million regulatory asset for previously recorded restructuring charges and the
reversal of $4.3 million in rate case costs pursuant to the CPL 1995 Agreement.
Also, contributing to this increase were additional insurance, decommissioning
and regulatory expenses associated with the implementation of bonded rates as
well as higher employee-related costs. Partially offsetting the increase were
lower nuclear production expenses due primarily to lower STP employee-related
costs and fewer scheduled refueling outages.
MAINTENANCE. Maintenance expense decreased $4.6 million or 10% during
the first nine months of 1996 when compared to the first nine months of 1995 due
primarily to fewer scheduled steam production maintenance repair projects in the
first nine months of 1996 when compared to 1995. Distribution maintenance also
decreased due to a change in capitalization policy.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $14.1 million or 13% in the first nine months of 1996 primarily as a
result of the accelerated amortization of deferred STP costs in accordance with
the implementation of bonded rates in May 1996 as well as increases in
depreciable property and Mirror CWIP asset amortization.
TAXES, OTHER THAN INCOME. The $11.6 million increase in other taxes
during the first nine months of 1996 when compared to the first nine months of
1995 was due primarily to lower 1995 ad valorem taxes resulting from revisions
of prior year estimates. Also, higher accruals in 1996 for state franchise taxes
partially offset by lower current year ad valorem taxes contributed to this
increase.
INCOME TAXES. Income taxes increased $82.1 million in the first nine
months of 1996 when compared to the first nine months of 1995 due primarily to
the accelerated flowback of $34.3 million of unprotected excess deferred income
taxes in accordance with the CPL 1995 Agreement. The increase is also
attributable to prior year tax adjustments, as well as higher pre-tax income,
excluding the effects of the one-time charge, as discussed below.
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$54.8 million in the first nine months of 1996 when compared to 1995. Mirror
CWIP liability amortization, which expired in 1995, contributed $30.8 million to
other income and deductions in the first nine months of 1995. Also, a one-time
charge in 1996 associated with certain investments for plant sites, engineering
studies and lignite reserves of approximately $15.5 million, net of tax,
contributed to this decline. See NOTE 8. UTILITY PLANT DEVELOPMENT COSTS for
additional information. Furthermore, other income decreased in 1996 due
primarily to the recognition of $12.4 million of factoring income in 1995
pursuant to the CPL 1995 Agreement.
<PAGE> 24
CPL RESULTS OF OPERATIONS (CONTINUED)
INTEREST CHARGES. Interest charges decreased $4.8 million during 1996
when compared to 1995 primarily as a result of the refinancing of higher cost
bonds partially offset by a decrease in allowance for borrowed funds used for
construction.
<PAGE> 25
PSO
PUBLIC SERVICE COMPANY OF OKLAHOMA
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 26
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ----------- ---------
(thousands) (thousands)
Electric Operating Revenues $250,015 $232,156 $579,021 $542,215
--------- --------- ----------- ---------
Operating Expenses and Taxes
Fuel 93,670 76,434 224,914 209,895
Purchased power 10,012 6,220 28,451 16,614
Other operating 30,818 28,196 88,340 86,201
Maintenance 8,777 8,716 26,487 23,778
Depreciation and amortization 19,559 16,916 57,990 49,981
Taxes, other than income 6,461 6,093 19,870 18,345
Income taxes 27,172 31,057 39,069 37,659
--------- --------- ----------- ---------
196,469 173,632 485,121 442,473
--------- --------- ----------- ---------
Operating Income 53,546 58,524 93,900 99,742
--------- --------- ----------- ---------
Other Income and Deductions
Utility plant development
costs, net of tax -- -- (35,552) --
Other 38 (212) 237 3,543
--------- --------- ----------- ---------
38 (212) (35,315) 3,543
--------- --------- ----------- ---------
Income Before Interest Charges 53,584 58,312 58,585 103,285
--------- --------- ----------- ---------
Interest Charges
Interest on long-term debt 7,821 7,398 22,936 22,196
Interest on short-term
debt and other 1,130 1,352 4,452 4,888
Allowance for borrowed
funds used during
construction (376) (1,120) (1,075) (2,442)
--------- --------- ----------- ---------
8,575 7,630 26,313 24,642
--------- --------- ----------- ---------
Net Income 45,009 50,682 32,272 78,643
Preferred stock dividends 204 204 612 612
--------- --------- ----------- ---------
Net Income for Common Stock $44,805 $50,478 $31,660 $78,031
========= ========= =========== =========
The accompanying notes to consolidated financial
statements as they relate to PSO are an integral
part of these statements.
<PAGE> 27
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
ASSETS (thousands)
Electric Utility Plant
Production $902,271 $939,106
Transmission 370,544 363,692
Distribution 761,107 712,483
General 186,359 182,705
Construction work in progress 45,806 56,576
---------- ----------
2,266,087 2,254,562
Less - Accumulated depreciation
and amortization 973,260 924,186
---------- ----------
1,292,827 1,330,376
---------- ----------
Current Assets
Cash 747 744
Accounts receivable 26,723 17,957
Materials and supplies, at
average cost 36,100 41,179
Fuel inventory, at LIFO cost 15,431 15,765
Accumulated deferred income taxes 1,947 10,389
Prepayments and other 2,272 2,450
---------- ----------
83,220 88,484
---------- ----------
Deferred Charges and Other Assets 57,693 61,956
---------- ----------
$1,433,740 $1,480,816
========== ==========
The accompanying notes to consolidated financial
statements as they relate to PSO are an integral
part of these statements.
<PAGE> 28
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
CAPITALIZATION AND LIABILITIES (thousands)
Capitalization
Common stock: $15 par value
Authorized shares 11,000,000;
issued 10,482,000 shares
and outstanding 9,013,000
shares $157,230 $157,230
Paid-in capital 180,000 180,000
Retained earnings 146,941 150,281
---------- ----------
484,171 487,511
Preferred stock 19,826 19,826
Long-term debt 419,921 379,250
---------- ----------
923,918 886,587
---------- ----------
Current Liabilities
Long-term debt due within
twelve months -- 25,000
Advances from affiliates 29,785 70,510
Payables to affiliates 19,560 40,463
Accounts payable 41,258 23,094
Payables to customers 14,123 32,517
Accrued taxes 44,389 27,014
Accrued interest 10,993 9,025
Other 9,142 8,589
---------- ----------
169,250 236,212
---------- ----------
Deferred Credits
Accumulated deferred income taxes 243,245 264,353
Investment tax credits 44,134 46,222
Income tax related regulatory
liabilities, net 46,236 41,820
Other 6,957 5,622
---------- ----------
340,572 358,017
---------- ----------
$1,433,740 $1,480,816
========== ==========
The accompanying notes to consolidated financial
statements as they relate to PSO are an integral
part of these statements.
<PAGE> 29
PUBLIC SERVICE COMPANY OF OKLAHOMA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
------------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES (thousands)
Net Income $32,272 $78,643
Non-cash Items Included in Net Income
Depreciation and amortization 62,457 54,256
Deferred income taxes and
investment tax credits (10,338) (2,584)
Allowance for equity funds used
during construction (85) (1,180)
Utility plant development costs 50,854 --
Inventory reserve 3,945 --
Changes in Assets and Liabilities
Accounts receivable (8,766) 2,667
Accounts payable (19,769) (28,093)
Accrued taxes 17,375 22,698
Other (3,066) 2,110
--------- ---------
124,879 128,517
--------- ---------
INVESTING ACTIVITIES
Construction expenditures (56,830) (70,942)
Allowance for borrowed funds used
during construction (1,075) (2,442)
Other (4,355) (5,024)
--------- ---------
(62,260) (78,408)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 51,785 --
Retirement of long-term debt (25,000) --
Reacquisition of long-term debt (13,040) --
Change in advances from affiliates (40,725) (11,852)
Payment of dividends (35,636) (40,613)
--------- ---------
(62,616) (52,465)
--------- ---------
Net Change in Cash and Cash Equivalents 3 (2,356)
Cash and Cash Equivalents at Beginning
of Period 744 5,453
========= =========
Cash and Cash Equivalents at End of Period $747 $3,097
========= =========
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $22,686 $21,393
========= =========
Income taxes paid $20,142 $20,949
========= =========
The accompanying notes to consolidated financial
statements as they relate to PSO are an integral
part of these statements.
<PAGE> 30
PUBLIC SERVICE COMPANY OF OKLAHOMA
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. Net income for common stock decreased 11%
to $44.8 million during the third quarter of 1996 from $50.5 million during the
third quarter of 1995. The decrease resulted primarily from decreased non-fuel
revenue, increased depreciation and amortization expenses and increased other
operating expenses.
ELECTRIC OPERATING REVENUES. Electric operating revenues increased 8%
to $250 million during the third quarter of 1996 from $232.2 million during the
third quarter of 1995. The increase was due primarily to increased fuel revenues
as discussed below, offset in part by decreased weather-related demand from
retail customers.
FUEL. Fuel expense was $93.7 million during the third quarter of 1996,
a 23% increase from $76.4 million in the third quarter of 1995. The increase was
due primarily to a higher under-recovery of fuel costs in the third quarter of
1995 and an increase in the average unit fuel cost from $1.70 per MMbtu in the
third quarter of 1995 to $2.00 per MMbtu in the third quarter of 1996. The
increase in the average unit fuel cost is attributable to an increase in the
spot market price of natural gas offset in part by a decline in the delivered
cost of coal resulting from lower transportation charges as well as purchases of
lower priced spot market coal. In addition, partially offsetting this increase
was a 3% decrease in KWH generation.
PURCHASED POWER. Purchased power expenses increased approximately 61%
to $10 million for the third quarter of 1996 from $6.2 million in the same
period of 1995. The increase was due primarily to increases in purchases of
economy energy.
OTHER OPERATING. Other operating expenses were $30.8 million during the
third quarter of 1996, a 9% increase from $28.2 million for the third quarter of
1995. The increase was due primarily to increased employee related expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 16% to $19.6 million in the third quarter of 1996 from $16.9 million
in the third quarter of 1995. The increase was due to increases in depreciable
property and completion in 1995 of the amortization of previously expensed
inventory and supply items that were credited through amortization to cost of
service.
INCOME TAXES. Income tax expense for the third quarter of 1996
decreased $3.9 million from $31.1 million in 1995 to $27.2 million in 1996
primarily due to lower pre-tax income.
<PAGE> 31
PSO RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. For the nine months ended September 30,
1996, net income for common stock decreased 59% to $31.7 million from $78
million for the nine months ended September 30, 1995. The decrease resulted
primarily from a one-time charge associated with certain investments for plant
sites, engineering studies and lignite reserves of approximately $35.6 million,
net of tax, offset in part by increased non-fuel revenue and prior year tax
adjustments recorded in 1995.
ELECTRIC OPERATING REVENUES. Electric operating revenues increased 7%
to $579 million for the nine months ended September 30, 1996 from $542.2 million
for the first nine months of 1995. The increase was due primarily to increased
fuel revenues, as discussed below, and a 6% increase in retail KWH sales
resulting from additional weather-related demand from customers in the first six
months of 1996, as well as customer growth.
FUEL. Fuel expense was $224.9 million for the first nine months of
1996, a 7% increase from $209.9 million for the same period of 1995. The
increase was due primarily to an increase in average unit fuel costs from $1.76
per MMbtu in the first nine months of 1995 to $2.04 per MMbtu in the first nine
months of 1996. The increase in the average unit fuel cost is attributable to an
increase in the spot market price of natural gas offset in part by a decline in
the delivered cost of coal resulting from lower transportation charges as well
as purchases of lower priced spot market coal. Offsetting these factors in part
was an under-recovery of fuel costs in the first nine months of 1996 compared to
an over-recovery of fuel costs in the first nine months of 1995, as well as
decreased KWH generation.
PURCHASED POWER. Purchased power increased approximately 71% to $28.5
million for the first nine months of 1996 from $16.6 million during the first
nine months of 1995. The increase was due primarily to increases in purchases of
economy energy.
MAINTENANCE. Maintenance expenses increased 11% to $26.5 million for
the nine months ended September 30, 1996 from $23.8 million for the same period
of 1995. The increase was due primarily to a $3.9 million write-down of
production inventory in 1996 offset in part by decreased power plant maintenance
activities and decreased distribution maintenance activities.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 16% to $58 million for the nine month period ended September 30, 1996
from $50 million in the same period of 1995. The increase was due to increases
in depreciable property and completion in 1995 of the amortization of previously
expensed inventory and supply items that were credited through amortization to
cost of service.
INCOME TAXES. Income tax expense for the first nine months of 1996
increased $1.4 million from $37.7 million in 1995 to $39.1 million in 1996.
Income tax expense was affected by prior year tax adjustments recorded in 1995
offset in part by lower pre-tax income, excluding the effects of a one-time
charge, as discussed below.
OTHER INCOME AND DEDUCTIONS. Other income and deductions for the nine
months ended September 30, 1996 decreased approximately $39 million when
compared to the same period of 1995 as a result of a one-time charge associated
with certain investments for plant sites, engineering studies and lignite
reserves of approximately $35.6 million, net of tax. See NOTE 8. UTILITY PLANT
DEVELOPMENT COSTS for additional information. Other income and deductions were
also affected by the $2.7 million gain on the sale of non-utility fiber optic
telecommunication property in the first quarter of 1995.
<PAGE> 32
SWEPCO
SOUTHWESTERN ELECTRIC POWER COMPANY
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 33
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ----------- ---------
(thousands) (thousands)
Electric Operating Revenues $278,227 $266,268 $715,671 $648,468
--------- --------- ----------- ---------
Operating Expenses and Taxes
Fuel 116,612 101,811 301,530 243,655
Purchased power 4,845 4,074 20,943 13,806
Other operating 35,887 32,533 99,360 90,482
Maintenance 10,406 10,849 31,444 31,665
Depreciation and amortization 23,010 20,853 67,949 61,496
Taxes, other than income 12,746 12,299 36,158 34,275
Income taxes 20,904 23,969 38,100 37,744
--------- --------- ----------- ---------
224,410 206,388 595,484 513,123
--------- --------- ----------- ---------
Operating Income 53,817 59,880 120,187 135,345
--------- --------- ----------- ---------
Other Income and Deductions
Utility plant development
costs, net of tax -- -- (21,743) --
Allowance for equity funds
used during construction (1) 1,430 325 3,535
Other 12 (1,056) 937 396
--------- --------- ----------- ---------
11 374 (20,481) 3,931
--------- --------- ----------- ---------
Income Before Interest Charges 53,828 60,254 99,706 139,276
--------- --------- ----------- ---------
Interest Charges
Interest on long-term debt 11,542 10,986 33,537 33,423
Interest on short-term debt
and other 2,055 2,235 7,012 7,919
Allowance for borrowed
funds used during
construction (465) (1,440) (1,691) (4,134)
--------- --------- ----------- ---------
13,132 11,781 38,858 37,208
--------- --------- ----------- ---------
Net Income 40,696 48,473 60,848 102,068
Preferred stock dividends 758 854 2,295 2,472
--------- --------- ----------- ---------
Net Income for Common Stock $39,938 $47,619 $58,553 $99,596
========= ========= =========== =========
The accompanying notes to financial statements as
they relate to SWEPCO are an integral part of
these statements.
<PAGE> 34
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
ASSETS (thousands)
Electric Utility Plant
Production $1,406,026 $1,410,546
Transmission 450,336 435,362
Distribution 835,129 789,884
General 272,226 231,276
Construction work in progress 49,881 128,963
---------- ----------
3,013,598 2,996,031
Less - Accumulated depreciation
and amortization 1,175,285 1,116,375
---------- ----------
1,838,313 1,879,656
---------- ----------
Current Assets
Cash 1,857 1,702
Accounts receivable 60,308 54,628
Materials and supplies, at
average cost 28,895 30,097
Fuel inventory, substantially
at average cost 64,151 73,276
Accumulated deferred income
taxes -- 4,636
Under-recovered fuel costs 10,077 --
Prepayments and other 15,966 14,109
---------- ----------
181,254 178,448
---------- ----------
Deferred Charges and Other Assets 83,243 58,615
---------- ----------
$2,102,810 $2,116,719
========== ==========
The accompanying notes to financial statements as
they relate to SWEPCO are an integral part of
these statements.
<PAGE> 35
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
CAPITALIZATION AND LIABILITIES (thousands)
Capitalization
Common stock: $18 par value
Authorized shares: 7,600,000
Issued and outstanding shares: 7,536,640 $135,660 $135,660
Paid-in capital 245,000 245,000
Retained earnings 324,887 302,334
---------- ----------
705,547 682,994
Preferred stock
Not subject to mandatory redemption 16,032 16,032
Subject to mandatory redemption 32,428 33,628
Long-term debt 595,971 598,951
---------- ----------
1,349,978 1,331,605
---------- ----------
Current Liabilities
Long-term debt and preferred stock
due within twelve months 4,898 5,099
Advances from affiliates 78,481 101,228
Payables to affiliates 53,127 52,474
Accounts payable 43,600 34,717
Over-recovered fuel costs -- 8,923
Customer deposits 10,719 11,027
Accrued taxes 42,275 25,268
Accumulated deferred income taxes 2,027 --
Accrued interest 11,963 17,894
Other 16,100 30,525
---------- ----------
263,190 287,155
---------- ----------
Deferred Credits
Accumulated deferred income taxes 371,217 377,245
Investment tax credits 72,690 76,237
Income tax related regulatory
liabilities, net 37,857 37,363
Other 7,878 7,114
---------- ----------
489,642 497,959
---------- ----------
$2,102,810 $2,116,719
========== ==========
The accompanying notes to financial statements as
they relate to SWEPCO are an integral part of
these statements.
<PAGE> 36
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
------------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES (thousands)
Net Income $60,848 $102,068
Non-cash Items Included in Net Income
Depreciation and amortization 75,686 69,269
Deferred income taxes and
investment tax credits (2,417) (3,576)
Allowance for equity funds used
during construction (325) (3,535)
Utility plant development costs 29,590 --
Inventory reserve 1,130 --
Changes in Assets and Liabilities
Accounts receivable (5,680) 9,429
Fuel inventory 9,125 (4,121)
Accounts payable 9,588 (3,857)
Accrued taxes 17,007 29,457
Accrued interest (5,931) (3,706)
Over- and under-recovered fuel
costs (19,000) (1,684)
Other (26,294) (3,783)
--------- ---------
143,327 185,961
--------- ---------
INVESTING ACTIVITIES
Construction expenditures (67,837) (79,261)
Allowance for borrowed funds used
during construction (1,691) (4,134)
Other (4,210) (5,064)
--------- ---------
(73,738) (88,459)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 79,273 --
Retirement of long-term debt (3,561) (3,262)
Reacquisition of long-term debt (83,334) --
Redemption of preferred stock (1,200) (50)
Change in advances from affiliates (22,747) (18,803)
Payment of dividends (37,865) (76,237)
--------- ---------
(69,434) (98,352)
--------- ---------
Net Change in Cash and Cash Equivalents 155 (850)
Cash and Cash Equivalents at Beginning
of Period 1,702 1,296
========= =========
Cash and Cash Equivalents at End of Period $1,857 $446
========= =========
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $43,686 $39,402
========= =========
Income taxes paid $25,736 $21,598
========= =========
The accompanying notes to financial statements as they
relate to SWEPCO are an integral part of these
statements.
<PAGE> 37
SOUTHWESTERN ELECTRIC POWER COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. Net income for common stock decreased 16%
to $39.9 million during the third quarter of 1996 from $47.6 million during the
third quarter of 1995. The decrease resulted primarily from increased other
operating expenses and increased depreciation and amortization.
ELECTRIC OPERATING REVENUES. Although KWH sales were relatively stable,
electric operating revenues increased $12.0 million to $278.2 million during the
third quarter of 1996 from $266.3 million during the third quarter of 1995. The
increase is due primarily to an $11 million increase in fuel revenue resulting
from higher average unit fuel cost as discussed below and a $1 million increase
in non-fuel revenue. The increase in non-fuel revenue is attributable to higher
customer demand which was partially offset by a decrease in weather-related
demand.
FUEL. Fuel expense increased 15% to $116.6 million during the third
quarter of 1996 when compared to the third quarter of 1995 due primarily to an
increase in the average unit fuel cost from $1.56 per MMbtu in 1995 to $1.66 per
MMbtu in 1996. The increase in average unit fuel cost is attributable to an
increase in the spot market price of natural gas offset in part by a decline in
the delivered cost of coal resulting from lower transportation charges as well
as purchases of lower priced spot market coal.
OTHER OPERATING. Other operating expenses increased $3.4 million, or
10%, during the third quarter of 1996 when compared to the third quarter of 1995
due primarily to increases in production expenses and prior year adjustments
made in 1995 to customer account expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
approximately $2.2 million, or 10%, during the third quarter of 1996 as compared
to the third quarter of 1995 due primarily to an increase in depreciable plant
and the completion in 1995 of the amortization of previously expensed inventory
and supply items that were credited through amortization to cost of service.
INCOME TAXES. Income taxes decreased $3.1 million, or 13%, to $20.9
million during the third quarter of 1996 as compared to the third quarter of
1995 due primarily to lower pre-tax income.
<PAGE> 38
SWEPCO RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. Net income for common stock decreased 41%
to $58.6 million during the nine months ended September 30, 1996 from $99.6
million during the nine months ended September 30, 1995. The decrease resulted
primarily from a one-time charge associated with certain investments for plant
sites, engineering studies and lignite reserves of approximately $21.7 million,
net of tax. Increased other operating expenses, increased depreciation and
amortization, and prior year tax adjustments recorded in 1995 also contributed
to the decrease in net income for common stock.
ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$67.2 million to $715.7 million during the first nine months of 1996 from $648.5
million during the first nine months of 1995 due primarily to a $50 million
increase in fuel revenue and a $17 million increase in non-fuel revenue. The
increase in fuel revenue was due to higher average unit fuel cost as discussed
below. The increase in non-fuel revenue is attributable to a 4% increase in
retail KWH sales resulting from increased customer demand.
FUEL. Fuel expense increased 24% to $301.5 million during the first
nine months of 1996 when compared to the first nine months of 1995 due primarily
to a 10% increase in generation and an increase in the average unit fuel cost
from $1.61 per MMbtu in 1995 to $1.77 per MMbtu in 1996. The increase in average
unit fuel cost is attributable to an increase in the spot market price of
natural gas offset in part by a decline in the delivered cost of coal resulting
from lower transportation charges as well as purchases of lower priced spot
market coal.
PURCHASED POWER. Purchased power expense increased $7.1 million, or
52%, during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to an increase in economy energy purchases.
OTHER OPERATING. Other operating expenses increased $8.9 million, or
10%, during the first nine months of 1996 when compared to the first nine months
of 1995 due primarily to increases in production expenses, employee-related
expenses and outside services.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
approximately $6.5 million, or 10%, during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to an increase in
depreciable plant and the completion in 1995 of the amortization of previously
expensed inventory and supply items that were credited through amortization to
cost of service.
TAXES, OTHER THAN INCOME. Taxes, other than income increased
approximately $1.9 million, or 5%, during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to an increase in ad
valorem taxes and state franchise taxes.
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$24.4 million in the first nine months of 1996 when compared with the first nine
months of 1995 due primarily to a one-time charge associated with certain
investments for plant sites, engineering studies and lignite reserves of
approximately $21.7 million, net of tax. See NOTE 8. UTILITY PLANT DEVELOPMENT
COSTS for additional information.
<PAGE> 39
WTU
WEST TEXAS UTILITIES COMPANY
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
<PAGE> 40
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
1996 1995 1996 1995
--------- --------- ----------- ---------
(thousands) (thousands)
Electric Operating Revenues $113,314 $87,178 $295,690 $245,148
--------- --------- ----------- ---------
Operating Expenses and Taxes
Fuel 35,177 29,963 102,982 90,891
Purchased power 8,918 4,373 21,442 8,198
Other operating 16,133 2,959 50,835 34,520
Maintenance 3,007 3,133 10,698 10,130
Depreciation and amortization 10,081 8,147 29,591 24,264
Taxes, other than income 5,940 6,108 17,121 17,448
Income taxes 9,367 2,063 14,402 6,183
--------- --------- ----------- ---------
88,623 56,746 247,071 191,634
--------- --------- ----------- ---------
Operating Income 24,691 30,432 48,619 53,514
--------- --------- ----------- ---------
Other Income and Deductions
Utility plant development
costs, net of tax -- -- (10,917) --
Other 204 (468) 861 576
--------- --------- ----------- ---------
204 (468) (10,056) 576
--------- --------- ----------- ---------
Income Before Interest Charges 24,895 29,964 38,563 54,090
--------- --------- ----------- ---------
Interest Charges
Interest on long-term debt 5,815 5,297 16,407 15,435
Interest on short-term debt
and other 1,043 833 3,788 2,987
Allowance for borrowed funds
used during construction (183) (187) (687) (512)
--------- --------- ----------- ---------
6,675 5,943 19,508 17,910
--------- --------- ----------- ---------
Net Income 18,220 24,021 19,055 36,180
Preferred stock dividends 66 66 198 198
--------- --------- ----------- ---------
Net Income for Common Stock $18,154 $23,955 $18,857 $35,982
========= ========= =========== =========
The accompanying notes to financial statements
as they relate to WTU are an integral part of these statements.
<PAGE> 41
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
ASSETS (thousands)
Electric Utility Plant
Production $416,358 $427,547
Transmission 200,066 199,055
Distribution 343,455 326,337
General 93,797 84,326
Construction work in progress 25,757 32,686
---------- ----------
1,079,433 1,069,951
Less - Accumulated depreciation
and amortization 412,494 389,379
---------- ----------
666,939 680,572
---------- ----------
Current Assets
Cash 557 717
Accounts receivable 20,963 28,923
Materials and supplies, at
average cost 15,366 16,660
Fuel inventory, at average cost 8,151 8,281
Coal inventory, at LIFO cost 6,855 5,545
Accumulated deferred income taxes 2,649 5,328
Under-recovered fuel costs 3,901 --
Prepayments and other 2,701 1,042
---------- ----------
61,143 66,496
---------- ----------
Deferred Charges and Other Assets
Deferred Oklaunion costs 23,297 26,092
Restructuring costs 11,326 12,741
Other 32,715 29,713
---------- ----------
67,338 68,546
---------- ----------
$795,420 $815,614
========== ==========
The accompanying notes to financial statements as
they relate to WTU are an integral part of these statements.
<PAGE> 42
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
---------- ----------
CAPITALIZATION AND LIABILITIES (thousands)
Capitalization
Common stock: $25 par value
Authorized shares: 7,800,000
Issued and outstanding shares: 5,488,560 $137,214 $137,214
Paid-in capital 2,236 2,236
Retained earnings 125,627 125,770
---------- ----------
265,077 265,220
Preferred stock 6,291 6,291
Long-term debt 274,178 273,245
---------- ----------
545,546 544,756
---------- ----------
Current Liabilities
Advances from affiliates 4,152 19,820
Payables to affiliates 6,421 8,244
Accounts payable 17,595 20,611
Accrued taxes 18,299 13,182
Accrued interest 9,291 6,081
Over-recovered fuel costs -- 4,060
Refund due customers 5 1,812
Other 3,104 3,121
---------- ----------
58,867 76,931
---------- ----------
Deferred Credits
Accumulated deferred income
taxes 142,252 145,130
Investment tax credits 29,570 30,561
Income tax related regulatory
liabilities, net 14,724 14,464
Other 4,461 3,772
---------- ----------
191,007 193,927
---------- ----------
$795,420 $815,614
========== ==========
The accompanying notes to financial statements as
they relate to WTU are an integral part of these statements.
<PAGE> 43
WEST TEXAS UTILITIES COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
------------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES (thousands)
Net Income $19,055 $36,180
Non-cash Items Included in Net Income
Depreciation and amortization 30,816 25,288
Deferred income taxes and investment
tax credits (930) (734)
Regulatory assets established for
restructuring charges -- (13,213)
Allowance for equity funds used during
construction (232) (260)
Utility plant development costs 14,905 --
Inventory reserve 1,103 --
Changes in Assets and Liabilities
Accounts receivable 7,960 (5,324)
Accounts payable (2,456) (2,231)
Accrued taxes 5,117 1,334
Over- and under-recovered fuel costs (7,961) 6,573
Refunds due customers (1,807) 22,335
Other 874 (10,970)
--------- ---------
66,444 58,978
--------- ---------
INVESTING ACTIVITIES
Construction expenditures (28,243) (31,931)
Allowance for borrowed funds used
during construction (687) (512)
Other (603) (1,329)
--------- ---------
(29,533) (33,772)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 43,368 39,411
Reaquisition of long-term debt (45,639) (2,053)
Change in advances from affiliates (15,668) (34,083)
Payment of dividends (19,132) (27,198)
--------- ---------
(37,071) (23,923)
--------- ---------
Net Change in Cash and Cash Equivalents (160) 1,283
Cash and Cash Equivalents at Beginning
of Period 717 2,501
========= =========
Cash and Cash Equivalents at End of Period $557 $3,784
========= =========
SUPPLEMENTARY INFORMATION
Interest paid less amounts capitalized $11,563 $12,548
========= =========
Income taxes paid $5,384 $14,155
========= =========
The accompanying notes to financial statements as
they relate to WTU are an integral part of these statements.
<PAGE> 44
WEST TEXAS UTILITIES COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. During the third quarter of 1996, net
income for common stock decreased from $24.0 million in the third quarter of
1995 to $18.2 million. The decrease resulted primarily from decreased non-fuel
revenues as well as increased depreciation and amortization. Although the
initial after-tax effect of the WTU Stipulation and Agreement, recorded in the
third quarter of 1995, had an immaterial effect on net income for common stock,
it did have an impact on other income statement items as discussed below. See
NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for additional information.
ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$26.1 million, or 30%, in the third quarter of 1996 as compared to the third
quarter of 1995. This increase was due primarily to recording a $21 million
reserve for a base rate refund pursuant to the WTU Stipulation and Agreement
during the third quarter of 1995. Also contributing to the variance were
increased fuel revenues, as discussed below. The increase was partially offset
by a $4.4 million decrease in non-fuel revenues, which was due primarily to a
decrease in unbilled revenues and the effect of lower rates implemented in
accordance with the WTU Stipulation and Agreement. Unbilled revenues represent
electricity used by customers but not yet billed.
FUEL. Fuel expense increased $5.2 million, or 17%, for the third
quarter of 1996 as compared to the third quarter of 1995 due primarily to an
increase in average unit fuel costs from $1.55 per MMbtu in 1995 to $1.91 per
MMbtu in 1996, which resulted from higher spot market natural gas prices. The
increase was partially offset by lower coal costs resulting from lower
transportation charges as well as purchases of lower priced spot market coal.
PURCHASED POWER. Purchased power increased $4.5 million during the
third quarter of 1996 as compared to the third quarter of 1995, primarily as a
result of increased economy energy purchases at a higher cost per MWH.
OTHER OPERATING. Other operating expenses increased $13.2 million in
the third quarter of 1996 as compared to the third quarter of 1995 due primarily
to the recording in the third quarter of 1995 of a $13.2 million regulatory
asset in accordance with the WTU Stipulation and Agreement for previously
recorded restructuring costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased approximately $2.0 million during the third quarter of 1996 as
compared to the third quarter of 1995 due primarily to increases in depreciable
property and the accelerated amortization of deferred Oklaunion plant costs and
amortization of regulatory assets established in 1995 in accordance with the WTU
Stipulation and Agreement.
INCOME TAXES. Income taxes increased $7.3 million in the third quarter
of 1996 as compared to the third quarter of 1995 due primarily to a $6.9 million
reduction of deferred income taxes in accordance with the WTU Stipulation and
Agreement in the third quarter of 1995.
<PAGE> 45
WTU RESULTS OF OPERATIONS (CONTINUED)
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
NET INCOME FOR COMMON STOCK. For the first nine months of 1996, net
income for common stock decreased to $18.9 million from $36.0 million in the
first nine months of 1995. The decrease resulted from a one-time charge
associated with certain investments for plant sites, engineering studies and
lignite reserves of approximately $10.9 million, net of tax. Also contributing
to the decrease were increased other operating expense and increased
depreciation and amortization. Although the initial after-tax effect of the WTU
Stipulation and Agreement, recorded in the third quarter of 1995, had an
immaterial effect on net income for common stock, it did have an impact on other
income statement items as discussed below. See NOTE 2. LITIGATION AND REGULATORY
PROCEEDINGS for additional information.
ELECTRIC OPERATING REVENUES. Electric operating revenues increased
$50.5 million, or 21%, in the first nine months of 1996 as compared to the first
nine months of 1995. This increase was due primarily to recording a $21 million
reserve during the third quarter of 1995 for a base rate refund pursuant to the
WTU Stipulation and Agreement. Also contributing to the variance were increased
fuel revenues, as discussed below, and an 8% increase in KWH sales resulting
from additional weather-related demand in the first six months of 1996 as well
as increased customer demand. Partially offsetting this increase was the effect
of lower rates implemented in accordance with the WTU Stipulation and Agreement.
FUEL. Fuel expense increased $12.1 million, or 13%, for the first nine
months of 1996 as compared to the first nine months of 1995 due primarily to an
increase in average unit fuel costs from $1.77 per MMbtu in 1995 to $2.00 per
MMbtu in 1996, which resulted from higher spot market natural gas prices. The
increase was partially offset by lower coal costs resulting from lower
transportation charges as well as purchases of lower priced spot market coal.
PURCHASED POWER. Purchased power increased $13.2 million during the
first nine months of 1996 as compared to the first nine months of 1995,
primarily as a result of increased economy energy purchases at a higher cost per
MWH.
OTHER OPERATING. Other operating expenses increased $16.3 million, or
approximately 47%, in the first nine months of 1996 as compared to the first
nine months of 1995 due primarily to the recording in the third quarter of 1995
of a $13.2 million regulatory asset in accordance with the WTU Stipulation and
Agreement. Also contributing to this variance were increased expenses associated
with regulatory activity, increased employee related expenses, and the
amortization of a regulatory asset in accordance with the WTU Stipulation and
Agreement.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased approximately $5.3 million during the first nine months of 1996 as
compared to the first nine months of 1995 due primarily to increases in
depreciable property and the accelerated amortization of deferred Oklaunion
plant costs and amortization of regulatory assets established in accordance with
the WTU Stipulation and Agreement during 1995.
INCOME TAXES. Income taxes increased $8.2 million in the first nine
months of 1996 as compared to the first nine months of 1995 due primarily to a
$6.9 million reduction of deferred income taxes in accordance with the WTU
Stipulation and Agreement in the third quarter of 1995 and prior year tax
adjustments recorded in 1995.
<PAGE> 46
WTU RESULTS OF OPERATIONS (CONTINUED)
OTHER INCOME AND DEDUCTIONS. Other income and deductions decreased
$10.6 million during the first nine months of 1996 as compared with the first
nine months of 1995 as a result of a one-time charge associated with certain
investments for plant sites, engineering studies and lignite reserves of
approximately $10.9 million, net of tax. See NOTE 8. UTILITY PLANT DEVELOPMENT
COSTS for additional information.
<PAGE> 47
INDEX TO APPLICABLE NOTES TO FINANCIAL STATEMENTS BY REGISTRANT
NOTE 1. PRINCIPLES OF PREPARATION CSW, CPL, PSO, SWEPCO, WTU
NOTE 2. LITIGATION AND REGULATORY CSW, CPL, PSO, SWEPCO, WTU
PROCEEDINGS
NOTE 3. COMMITMENTS AND CONTINGENT CSW, CPL, PSO, SWEPCO, WTU
LIABILITIES
NOTE 4. DIVIDENDS CSW, CPL, PSO, SWEPCO, WTU
NOTE 5. CSW EARNINGS AND DIVIDENDS PER CSW
SHARE OF CSW COMMON STOCK
NOTE 6. LONG-TERM FINANCING CSW, CPL, PSO, SWEPCO, WTU
NOTE 7. DISCONTINUED OPERATIONS CSW
NOTE 8. UTILITY PLANT DEVELOPMENT COSTS CSW, CPL, PSO, SWEPCO, WTU
NOTE 9. SUPPLEMENTAL INFORMATION - CSW
SEEBOARD'S RECENT OPERATING
RESULTS
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF PREPARATION
The condensed financial statements of the Registrants included herein
have been prepared by each Registrant pursuant to the rules and regulations of
the SEC. Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
each Registrant believes that the disclosures are adequate to make the
information presented not misleading. These condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Registrant's Combined Annual Report on Form 10-K for the
year ended December 31, 1995 and the Registrant's Combined Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996.
The unaudited financial information furnished herewith reflects all
adjustments which are, in the opinion of management of such Registrant,
necessary for a fair statement of the results of operations for the interim
periods. Information for quarterly periods is affected by seasonal variations in
sales, rate changes, timing of fuel expense recovery and other factors.
The financial statements of the CSW U.K. Group, which are included in
CSW's consolidated financial statements, have been translated from British
pounds to U.S. dollars in accordance with SFAS No. 52. All balance sheet
accounts are translated at the exchange rate at September 30, 1996 and all
income statement items are translated at the average exchange rate for the
applicable period. At September 30, 1996, the current exchange rate was
approximately (pound)1.00=$1.56 and the average exchange rate for the nine month
period ended September 30, 1996 was approximately (pound)1.00=$1.54. All
resulting translation adjustments are recorded directly to Foreign Currency
Translation Adjustment on CSW's consolidated balance sheets. Cash flow statement
items are translated at a combination of average, historical and current
exchange rates. The effect of the changes in exchange rates on cash and cash
equivalents, resulting from the translation of items at the different exchange
rates, is shown on CSW's Consolidated Statements of Cash Flows in Effect of
Exchange Rate Changes on Cash and Cash Equivalents.
Certain financial statement items for prior years have been
reclassified to conform to the 1996 presentation.
2. LITIGATION AND REGULATORY PROCEEDINGS
See the Registrants' Combined Annual Report on Form 10-K for the year
ended December 31, 1995 and the Registrants' Combined Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 and June 30, 1996 for additional
discussion of litigation and regulatory proceedings. Reference is also made to
NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES and PART II - ITEM 1. for
additional discussion of litigation matters and MD&A - COMPETITION AND INDUSTRY
CHALLENGES for additional discussion of regulatory matters.
CPL RATE REVIEW DOCKET NO. 14965
As previously reported, on November 6, 1995, CPL filed with the Texas
Commission a request to increase its retail base rates by $71 million and reduce
its annual retail fuel factors by $17 million. The net effect of these proposals
would result in an increase of $54 million, or 4.6%, in total annual retail
<PAGE> 49
revenues based on a test year ended June 30, 1995. CPL's filing also sought to
reconcile $229 million of fuel costs incurred during the period July 1, 1994
through June 30, 1995. CPL's previous request to reconcile fuel costs from March
1, 1990 to June 30, 1994 in Docket No. 13650 was consolidated with the current
rate review. If the requested increase and other adjustments in rate structure
are approved, CPL will commit not to increase its base rates prior to January 1,
2001, subject to certain force majeure events.
On April 30, 1996, CPL implemented new fuel factors that will lower
fuel costs to its retail customers by $25 million annually. The lower fuel
factors result primarily from the projected decline in CPL's fuel costs during
the twelve-month period following the implementation of the new factors. On May
9, 1996, CPL placed a $70 million base rate increase into effect under bond. The
bonded rates are subject to refund based on the final order of the Texas
Commission. When combined with the fuel factor reduction, the net result is an
increase in annual retail revenues of $45 million, or 3.8%.
On May 10, 1996, CPL and other parties to the fuel reconciliation phase
of the current rate review filed the CPL 1996 Fuel Agreement with the Texas
Commission that reconciles CPL's fuel costs through June 1995. A final order
implementing the settlement was issued on June 28, 1996, approving a one-time
fuel refund of $23 million that was refunded to customers in July 1996. As a
condition of the settlement, CPL agreed not to seek recovery of $6 million of
fuel and fuel-related costs incurred during the reconciliation period. The
additional amount of the refund results from an over-recovery of fuel costs
during the reconciliation period and did not have a material impact on CPL's
results of operations or financial condition.
In a preliminary order issued December 21, 1995, the Texas Commission
expanded the scope of the rate review to address certain competitive issues
facing the electric utility industry. CPL made a supplemental filing on April 1,
1996, addressing a recommended model for restructuring the electric industry
within ERCOT. In addition, the supplemental filing included: (i) estimates of
CPL's potential stranded costs based upon various possible structures of the
electric industry and under several energy price scenarios; and (ii) a
recommendation that the potential stranded costs not be quantified in rates
until any changes in the electricity market and structure of utilities in Texas
are known. In this supplemental filing, CPL estimated its potential stranded
costs could range from approximately zero to approximately $3.7 billion in a
worst-case scenario. The range is dependent upon a number of presently unknown
factors, including the extent to which CPL is compensated for its reasonable
costs and the extent and timing of any implementation of retail competition.
Hearings in this phase of the rate review concluded August 23, 1996.
CPL has filed rebuttal testimony that challenges positions taken by the
Texas Commission staff and other parties intervening in this case. CPL's
testimony challenges the Texas Commission staff's proposals as unreasonable and
contrary to current law and regulatory policy. While the Texas Commission staff
reported the use of a "point estimate" of $850 million for potentially stranded
costs, their testimony actually describes their range of potential stranded
costs as very uncertain and having a range from $200 million to $2 billion. The
Texas Commission staff subsequently revised their "point estimate" to $1.069
billion and their range to $223 million to $2.9 billion. In addition, the Texas
Commission staff recommended (i) a nuclear performance standard that would
penalize CPL unless it operates its nuclear units better than 75 percent of the
U.S. nuclear industry; and (ii) a fuel-recovery mechanism that is based on
prices in an undeveloped energy market; and (iii) a one-sided cap on CPL's
earnings that effectively prevents CPL from realizing its authorized level of
earnings.
Hearings for the final stage of the case, the rate case expense phase,
were completed in October 1996. Other parties to the rate case have recommended
rate case expense disallowances from $8 to $9 million.
<PAGE> 50
A proposal for decision is expected in December 1996 and a final order
from the Texas Commission is expected in February 1997. CPL's management cannot
predict the ultimate outcome of CPL's rate case, although management believes
that the ultimate resolution will not have a material adverse effect on CPL's
results of operations or financial condition. However, if CPL ultimately is
unsuccessful in obtaining adequate rate relief, CPL could experience a material
adverse effect on its results of operations and financial condition.
For further information related to the preliminary order issued
December 21, 1995, by the Texas Commission expanding the scope of the CPL rate
review to address certain competitive issues facing the electric utility
industry, see the Registrants' Combined Annual Report on Form 10-K for the year
ended December 31, 1995 and the Registrants' Combined Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 and June 30, 1996.
PSO REGULATORY MATTERS
As previously reported, on July 19, 1996, the Oklahoma Commission staff
filed an application seeking a review of PSO's earnings and rate structure. The
application does not include language indicating that the Oklahoma Commission
staff believes a rate reduction is needed. Instead, the review is being
initiated to investigate the potential impact on PSO's rates from both the sale
of Transok and PSO's restructuring efforts as well as PSO's improved financial
results. Although rate reviews do not have specific time limitations, a schedule
has been established for PSO's response. In accordance with the established
schedule, PSO filed a package of financial information with the Oklahoma
Commission staff on November 1, 1996. PSO cannot predict the outcome of this
review.
SWEPCO FUEL SURCHARGE
On October 31, 1996, SWEPCO filed with the Texas Commission an
Application for Authority to Implement an Interim Surcharge of Fuel Cost
Under-Recoveries. Through September 1996, SWEPCO had a fuel cost under-recovery
balance of approximately $9.6 million including accumulated interest. SWEPCO
proposes to surcharge its customers approximately $10.2 million which includes
additional interest through the end of the surcharge period. An order in this
proceeding is expected in January 1997 which will allow SWEPCO to surcharge
customers from February 1997 through January 1998.
WTU STIPULATION AND AGREEMENT
As previously reported, in the third quarter of 1995 WTU entered into
the WTU Stipulation and Agreement to settle several pending regulatory matters
that included: (i) a retail rate proceeding and fuel reconciliation before the
Texas Commission in Docket No. 13369; (ii) Writ of Error to the Supreme Court of
Texas - review of WTU's 1987 Texas rate case in Docket 7510; and (iii) the Texas
Commission's proceeding on remand in Docket No. 13949 regarding deferred
accounting treatment for Oklaunion. In the fourth quarter of 1995, the Texas
Commission rendered a final order that implemented the agreement.
Part of the final order also set into motion the actions required to
seek a remand of the appeal of Docket No. 7510 to the Texas Commission to
implement a final order consistent with the WTU Stipulation and Agreement. The
Court of Appeals issued a mandate on April 15, 1996, directed to the Travis
County District Court, that permitted the case to be remanded back to the Texas
Commission. On May 23, 1996, the Texas Commission assigned it a new proceeding
for docketing purposes, Docket No. 15988. Parties to Docket No. 15988 filed a
joint motion with the ALJ on June 21, 1996 that proposed to adopt a finding to
implement the last outstanding element related to the WTU Stipulation and
Agreement in Docket No. 13369, WTU's settled rate case. On October 4, 1996, the
<PAGE> 51
ALJ issued a proposed order that is fully consistent with the terms of the WTU
Stipulation and Agreement. The Texas Commission entered a final order in Docket
No. 15988 approving this agreement on October 28, 1996.
3. COMMITMENTS AND CONTINGENT LIABILITIES
TERMINATION OF EL PASO MERGER
As previously reported, in May 1993, CSW entered into a Merger
Agreement pursuant to which El Paso would have emerged from bankruptcy as a
wholly owned subsidiary of CSW. On June 9, 1995, following CSW's notification
that it was terminating the Merger Agreement, El Paso filed a suit against CSW
seeking a $25 million termination fee from CSW, additional unspecified damages,
punitive damages, interest as permitted by law and certain other costs. On June
15, 1995, CSW filed suit against El Paso seeking a $25 million termination fee
from El Paso due to El Paso's breach of the Merger Agreement, at least $3.6
million in rate case expenses incurred by CSW on behalf of El Paso related to
state regulatory merger proceedings and a declaratory judgment that CSW properly
terminated the Merger Agreement. On June 14, 1996, CSW filed an amended
complaint seeking a first priority administrative expense claim of $50 million
from El Paso based upon El Paso's breach of the Merger Agreement.
The United States Bankruptcy Court for the Western District of Texas,
Austin Division, consolidated the El Paso suit and the CSW suit into one
adversary proceeding. CSW is the named plaintiff in the consolidated adversary
proceeding. A trial date of January 21, 1997 has been set for a two-week trial
of the lawsuit.
Although CSW believes that it has substantial defenses to El Paso's
claims and intends to defend El Paso's claims and pursue CSW's claims
vigorously, CSW cannot presently predict the outcome of the lawsuit. However, if
the lawsuit is decided adversely to CSW, it could have a material adverse effect
on CSW's consolidated results of operations but not on its financial condition.
CSW ENERGY PROJECTS AND COMMITMENTS
CSW Energy is authorized to develop various independent power and
cogeneration facilities and to own and operate such non-utility projects,
subject to regulatory approval. As previously disclosed, CSW Energy owns
interests in five operating projects totaling 648 MW in Colorado, Florida and
Texas. In addition, CSW Energy has a 330 MW project (Phillips Sweeny in the
table below) under construction in Texas. CSW Energy has agreed to provide
construction financing for this project. Construction on this project began in
September 1996 with commercial operation scheduled for early 1998. To date, CSW
Energy has incurred $30 million of construction and development costs. Total
project costs are estimated at $190 million. The following table summarizes
equity investments and loans made by CSW Energy and commitments provided by CSW
at September 30, 1996.
LETTERS OF CREDIT
PROJECT EQUITY AND GUARANTEES LOANS
- -------------------------------------------------------------------------------
(MILLIONS)
Brush II $15.3 $ -- $ --
Ft. Lupton 43.0 56.4 --
Mulberry 24.0 15.7 --
Orange Cogen 53.2 1.7 --
Phillips Sweeny -- 228.0 30.0
Newgulf 10.5 -- --
Various developmental projects 3.8 7.6 5.5
<PAGE> 52
During the second quarter of 1996, CSW Energy recorded a one-time
charge of approximately $14 million after-tax to establish reserves for equity
investments, loans made to development projects and deferred charges associated
with certain operating projects.
CSW INTERNATIONAL PROJECTS
As previously reported, in July, 1996, CSW International announced a
joint venture with Alpek, through a subsidiary, to build, own and operate a 120
MW, gas-fired cogeneration project at Alpek's Petrocel industrial complex in
Altamira, Tamaulipas, Mexico. CSW International and Alpek each will have 50%
ownership in the project, Enertek, which will cost approximately $75 million.
CSW International has agreed to provide construction financing for the project
of which approximately $11 million had been funded as of September 30, 1996. CSW
International has entered into a limited guarantee agreement with the project's
engineering, procurement and construction contractor that provides the
contractor a guarantee of up to $5 million. The Enertek project is expected to
commence commercial operations in the first quarter of 1998.
CSW International is currently negotiating the acquisition of capital
stock in a Brazilian electric utility company. The acquisition is expected to be
consummated by December 1996. See MD&A - CAPITAL REQUIREMENTS, LIQUIDITY AND
FINANCING for a discussion of the issuance of Senior Notes by CSW Energy. A
portion of the proceeds from this issuance will be used to fund the $40 million
acquisition.
CPL DEFERRED ACCOUNTING
CPL was granted deferred accounting treatment for certain STP Unit 1
and 2 costs by Texas Commission orders issued in October 1990 and December 1990,
respectively. In 1994, the Supreme Court of Texas sustained deferred accounting
as an appropriate mechanism for the Texas Commission to use in preserving the
financial integrity of CPL, but remanded CPL's case to the Court of Appeals to
consider certain substantial evidence points of error not previously decided by
the Court of Appeals given its prior determinations. On August 16, 1995, the
Court of Appeals rendered its opinion in the remand proceeding and affirmed the
Texas Commission's order in all respects.
CPL believes that the language of the Supreme Court of Texas opinion
suggests that the appropriateness of allowing deferred accounting may be
reviewed under a financial integrity standard in the first case in which the
deferred STP costs are recovered through rates. If the courts decide that
subsequent review under the financial integrity standard is required, that
review would be conducted in a remand of the STP Unit 1 and Unit 2 orders.
Pending the ultimate resolution of CPL's deferred accounting issues, CPL is
unable to predict how its deferred accounting orders will ultimately be resolved
by the Texas Commission.
If CPL's deferred accounting matters are not favorably resolved, CPL
could experience a material adverse effect on its results of operations and
financial condition. While CPL's management is unable to predict the ultimate
outcome of these matters, management believes CPL will receive approval of its
deferred accounting orders or will be successful in renegotiation of its rate
orders, so that there will be no material adverse effect on CPL's results of
operation or financial condition.
CPL NUCLEAR INSURANCE
In connection with the licensing and operation of STP, the owners have
purchased the maximum limits of nuclear liability insurance, as required by law,
and have executed indemnification agreements with the Nuclear Regulatory
Commission in accordance with the financial protection requirements of the
Price-Anderson Act.
<PAGE> 53
The Price-Anderson Act, a comprehensive statutory arrangement providing
limitations on nuclear liability and governmental indemnities, is in effect
until August 1, 2002. The limit of liability under the Price-Anderson Act for
licensees of nuclear power plants is $8.92 billion per incident, effective as of
January 1996. The owners of STP are insured for their share of this liability
through a combination of private insurance amounting to $200 million and a
mandatory industry-wide program for self-insurance totaling $8.72 billion. The
maximum amount that each licensee may be assessed under the industry-wide
program of self-insurance following a nuclear incident at an insured facility is
$75.5 million per reactor, which may be adjusted for inflation, plus a five
percent charge for legal expenses, but not more than $10 million per reactor for
each nuclear incident in any one year. CPL and each of the other STP owners are
subject to such assessments, which CPL and the other owners have agreed will be
allocated on the basis of their respective ownership interests in STP. For
purposes of these assessments, STP has two licensed reactors.
The owners of STP currently maintain on-site decontamination liability
and property damage insurance in the amount of $2.75 billion provided by ANI and
NEIL. Policies of insurance issued by ANI and NEIL stipulate that policy
proceeds must be used first to pay decontamination and cleanup costs before
being used to cover direct losses to property. Under project agreements, CPL and
the other owners of STP will share the total cost of decontamination liability
and property insurance for STP, including premiums and assessments, on a pro
rata basis, according to each owner's respective ownership interest in STP.
CPL purchased, for its own account, a NEIL I Business Interruption
and/or Extra Expense policy to reimburse CPL for extra expenses incurred for
replacement generation or purchased power as the result of a covered accident
that shuts down production at one or both of the STP Units for more than 21
consecutive weeks. In the event of an outage of STP Units 1 and 2 and the outage
is the result of the same accident, such insurance will reimburse CPL up to 80%
of the single unit recovery. The maximum amount recoverable for a single unit
outage is $118.6 million for both Unit 1 and 2. CPL is subject to an additional
assessment up to $1.9 million for the current policy year in the event that
insured losses at a nuclear facility covered under the NEIL I policy exceeds the
accumulated funds available under the policy. CPL renewed its current NEIL I
Business Interruption and/or Extra Expense policy September 15, 1996.
For further information relating to litigation associated with CPL
nuclear insurance claims, reference is made to PART II - ITEM 1.
PSO SAND SPRINGS/GRANDFIELD, OKLAHOMA PCB COMPLAINTS
In 1989, PSO investigated a Sand Springs, Oklahoma PCB storage
facility and found some PCB contamination. The clean-up plan was approved by the
EPA and clean-up of the facility began in November 1994. In October 1996, EPA
filed a complaint against PSO alleging PSO failed to comply with provisions of
the Toxic Substances Control Act. The complaint has three counts, two of which
pertain to the Sand Springs facility and the third dealing with a substation in
Grandfield, Oklahoma. EPA alleges improper disposal of PCBs at the Sand Springs
site due to the length of time between discovery of the contamination and the
actual clean-up at the site. The complaint at the Grandfield site relates to
failure to date PCB articles at the site. The total proposed penalty for the
three counts is $479,500. PSO has filed an extension to respond to the complaint
and is currently in discussions with EPA. PSO is unable to predict the outcome
of the discussions.
<PAGE> 54
PSO PCB CASES
For information regarding the commitments and contingent liabilities
relating to PSO's PCB cases, reference is made to PART II - ITEM 1.
SWEPCO BILOXI, MISSISSIPPI MANUFACTURED GAS PLANT SITE
As previously reported, SWEPCO was notified by Mississippi Power in
1994 that it may be a potentially responsible party at a manufactured gas plant
site in Biloxi, Mississippi, formerly owned and operated by a predecessor of
SWEPCO. Since then, SWEPCO has worked with Mississippi Power on both the
investigation of the extent of contamination on the site as well as on the
subsequent sampling of the site. The sampling results indicated contamination at
the property as well as the possibility of contamination of an adjacent
property. A risk assessment was submitted to the Mississippi Department of
Environmental Quality, whose ensuing comments requested that a future
residential exposure scenario be evaluated for comparison with commercial and
industrial exposure scenarios. A final range of cleanup costs has not been
determined, but based on preliminary estimates, SWEPCO has accrued approximately
$2 million for its portion of the cleanup of this site, of which approximately
$200,000 has been incurred to date.
SWEPCO HENRY W. PIRKEY POWER PLANT
In connection with the lignite mining contract for its Henry W. Pirkey
Power Plant, SWEPCO has agreed, under certain conditions, to assume the
obligations of the mining contractor. As of September 30, 1996, the maximum
SWEPCO would have to assume is $64.7 million. The maximum amount may vary as the
mining contractor's need for funds fluctuates. The contractor's actual
obligation outstanding as of September 30, 1996 was approximately $58.9 million.
4. DIVIDENDS
The U.S. Electric Operating Companies' mortgage indentures, as amended
and supplemented, contain certain restrictions on the use of their retained
earnings for cash dividends on their common stock. These restrictions do not
currently limit the ability of CSW to pay dividends to its shareholders. At
September 30, 1996, approximately $1.8 billion of the subsidiary companies'
retained earnings were available for payment of cash dividends by such
subsidiaries to CSW. Of this, the amounts attributable to the U.S. Electric
Operating Companies were as follows.
CPL-$771 million PSO-$147 million SWEPCO-$325 million WTU-$126 million
5. CSW EARNINGS AND DIVIDENDS PER SHARE OF COMMON STOCK
Earnings per share of common stock are computed by dividing net income
for common stock by the average number of common shares outstanding for the
respective periods. Dividends per common share reflect per share amounts paid
during the periods.
6. LONG-TERM FINANCING
SWEPCO SABINE SERIES PCRBS
In July 1996, $81.7 million of Sabine, 6.10%, Series 1996 PCRBs were
issued for the benefit of SWEPCO. The proceeds from this issuance were used to
refund the $81.7 million Sabine, 8.20%, Series 1986 PCRBs.
<PAGE> 55
CPL, PSO, WTU RED RIVER SERIES PCRBS
In August 1996, $63.3 million of Red River, 6.0%, Series 1996, PCRBs
were issued for the benefit of CPL, PSO, and WTU. The proceeds from this
issuance were used to refund the $63.3 million of Red River, 7 7/8%, Series 1984
PCRBs.
CPL MATAGORDA SERIES PCRBS
In September 1996, $60 million of Matagorda, 6 1/8%, Series 1996 PCRBs
were issued for the benefit of CPL. The proceeds from this issuance will be used
to refund the $60 million Matagorda, 7 7/8%, Series 1986 PCRBs, which are
classified on the balance sheet as Long-term debt due within twelve months, on
December 1, 1996. At September 30, 1996, the proceeds from the issuance were
held in trust and are reflected as Special Deposits on the balance sheet.
OTHER FINANCING ACTIVITIES
See MD&A - CAPITAL REQUIREMENTS, LIQUIDITY AND FINANCING for a
discussion of the financing transactions that have been undertaken during 1996
related to the acquisition of SEEBOARD as well as a discussion of the issuance
by CSW Energy of $200 million in Senior Notes.
7. DISCONTINUED OPERATIONS
On June 6, 1996, CSW sold Transok to Tejas. Accordingly, the results of
operations for Transok have been reported as discontinued operations and prior
periods have been restated for consistency.
Transok is an intrastate natural gas gathering, transmission, marketing
and processing company that provides natural gas services to the U.S. Electric
Operating Companies, predominantly PSO, and to other non-affiliated gas
customers throughout the United States. Transok's natural gas facilities are
located in Oklahoma, Louisiana and Texas. After the sale, Transok has continued
to supply gas to the U.S. Electric Operating Companies.
Operating results of Transok for the nine month period ended September
30, 1996 and 1995 are summarized in the following table (intercompany
transactions have not been eliminated).
Nine Months Ended
September 30,
----------------------
1996 1995
-------- -------
(millions)
Total revenue $362 $511
Operating income before income taxes 23 32
Earnings before income taxes 18 21
Income taxes 6 7
--- ---
Net income from discontinued operations $12 $14
--- ---
Since Transok was sold on June 6, 1996, the results of operations for
the nine month period ended September 30, 1996 do not reflect a full nine months
of earnings from Transok. CSW's Consolidated Balance Sheet at September 30, 1996
does not contain any assets or liabilities from Transok.
CSW sold Transok to Tejas for approximately $890 million, consisting of
$690 million in cash and $200 million in existing long-term debt that remained
with Transok after the sale. A portion of the cash proceeds was used to repay
<PAGE> 56
the CSW Credit Agreement and the remaining proceeds were used to repay
commercial paper borrowings. CSW recorded an after tax gain on the sale of
Transok of approximately $113 million in the second quarter of 1996. As a result
of the gain, CSW incurred a current tax liability of approximately $195 million.
Approximately two-thirds of the current tax liability results from taxes
previously deferred by Transok. The deferred taxes were generated primarily by
the excess of Transok's tax depreciation over its book depreciation.
8. UTILITY PLANT DEVELOPMENT COSTS
During the second quarter of 1996, the U.S. Electric Operating
Companies recorded one-time charges reflected in Other Income and Deductions
relating to investments made in prior years for plant sites, engineering studies
and lignite reserves for which future recovery is not probable. The charges are
as follows.
Pre-tax effect Income tax Net Income
on income benefit effect
--------------------------------------------
(thousands)
CPL $(21,374) $5,893 $(15,481)
PSO (50,854) 15,302 (35,552)
SWEPCO (29,590) 7,847 (21,743)
WTU (14,905) 3,988 (10,917)
-------- ------ -------
$(116,723) $33,030 $(83,693)
-------- ------ -------
For a discussion of reserves established by CSW Energy during the
second quarter of 1996, see NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES.
9. SUPPLEMENTAL INFORMATION - SEEBOARD'S RECENT OPERATING RESULTS
SEEBOARD's results of operations discussed below are prepared in
accordance with Generally Accepted Accounting Principles in the United Kingdom
and exclude currency conversion, CSW consolidation adjustments and the impact of
interest expense on the debt incurred in connection with CSW's purchase of
SEEBOARD. CSW did not own SEEBOARD during the prior periods presented in the
discussion below. Accordingly, the comparative information has been provided for
information only.
NINE MONTHS ENDED SEPTEMBER 30, 1996
Net income for the nine months ended September 30, 1996, was
(pound)97.6 million compared to (pound)69.1 million for the nine months ended
September 30, 1995. Gross profit (revenue less cost of sales) is higher than the
comparable period last year despite the impact of a reduction in regulatory
allowed revenues following the completion of the regulatory price review of
SEEBOARD's distribution business. This primarily reflects an improvement in
volume in the current period, supplemented by increases in tariffs to customers
from February 1996. Allowed revenue in SEEBOARD's distribution business was
reduced by 14% with effect from April 1995 and a further 13% from April 1996. At
the net income before interest level, the improvement reflects the continued
cost reduction programs of SEEBOARD, the first year contribution from SEEBOARD's
37.5% interest in Medway Power Limited, a company formed to construct, own and
operate a 675 MW power station, and the benefit of a release of a (pound)17.5
million accrual no longer required in respect of a previous liability for
redundancy costs. Partially offsetting these benefits, during the nine months
ended September 30, 1995, SEEBOARD received dividends of (pound)9.9 million as a
<PAGE> 57
result of its shareholding in the National Grid. SEEBOARD's interest in the
National Grid was demerged to shareholders of SEEBOARD in December 1995, and
accordingly, did not receive any dividends in 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1996
Net income for the three months ended September 30, 1996 was
(pound)25.8 million compared to (pound)12.6 million for the three months ended
September 30, 1995. The improvement in net income primarily reflects improvement
in volume, SEEBOARD's cost reduction programs and the first year contribution
from SEEBOARD's 37.5% interest in Medway Power Limited.
<PAGE> 58
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Registrants' Combined Annual
Report on Form 10-K for the year ended December 31, 1995 and their Combined
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June
30, 1996. Reference is also made to each Registrant's unaudited Financial
Statements and related Notes to Financial Statements included herein. The
information included therein should be read in conjunction with, and is
essential in understanding, the following discussion and analysis.
RESULTS OF OPERATIONS
Reference is made to ITEM 1. FINANCIAL STATEMENTS for each of the
Registrants' Results of Operations.
COMPETITION AND INDUSTRY CHALLENGES
INDUSTRY RESTRUCTURING IN TEXAS
In compliance with the Texas Commission's Project 15001, "Stranded
Costs Report," CPL, SWEPCO and WTU each filed information in response to the
Texas Commission's order initiating investigation concerning potential stranded
costs. The filings consist of various scenarios used to estimate potential
stranded costs. Based on the requirements of the filing, no significant
potential stranded costs were identified for SWEPCO or WTU. See NOTE 2.
LITIGATION AND REGULATORY PROCEEDINGS for a discussion of the potential impact
of potential stranded costs relating to CPL.
The Texas Commission's Project 15002, "Scope of Competition Report," is
a report that the Texas Commission is required to present to the Texas
Legislature in each odd-numbered year detailing the impact of competition in the
electric utility industry. In addition, the report will include the Texas
Commission's recommendations concerning the public's interest in a partially
competitive electric market. In June 1996, CPL, SWEPCO and WTU each filed
information for the Texas Commission's report.
INDEPENDENT SYSTEM OPERATOR PLAN
In June 1996, CSW (including CPL and WTU) and more than 20 other
parties, including other investor-owned utilities, municipal power companies,
electric cooperatives, independent power producers and power marketers, filed
plans to create an independent system operator to manage the ERCOT power grid.
The filing marks a major step towards implementing the Texas Commission's
overall strategy of creating the competitive wholesale electric market that was
mandated by the Texas Legislature in 1995. The Texas Commission approved the
independent system operator in August 1996. Such approval made Texas the first
state in the nation to implement a regional independent system operator and a
regional competitive wholesale bulk power market.
INDUSTRY RESTRUCTURING IN OKLAHOMA
In June 1996, the Oklahoma Commission announced that it has begun
soliciting public comment to aid in the potential restructuring of the Oklahoma
electric utility industry. The issues the Oklahoma Commission is exploring
include the extent and speed of a restructuring, the unbundling of utility
services, as well as the legislative and regulatory needs of such a
restructuring. Informal public technical conferences have been held to discuss
<PAGE> 59
these issues. The Commissioners of the Oklahoma Commission are scheduled to
conduct a conference late in 1996 to review such comments and recommendations in
order to prepare themselves for the 1997 session of the Oklahoma Legislature.
FERC ORDER 888
As previously reported, on April 24, 1996, the FERC issued Order 888
which is the final comparable open access transmission rule. The provisions of
the final rule are similar to provisions of the FERC's 1995 Notice of Proposed
Rule Making in that they provide for comparable service between utilities and
their transmission customers by requiring utilities to take service under their
open access tariffs for all of their new wholesale sales and purchases and by
requiring utilities to rely on the same transmission information network that
their transmission customers rely on to make wholesale purchases and sales. In
addition, it also reaffirms the FERC's position that utilities are entitled to
recover, through a formula, all legitimate, prudent and verifiable stranded
costs.
The final rule requires holding companies to offer single system rates.
However, the rule grants CSW an exemption whereby CSW will be given an
opportunity to propose a solution that will provide comparability to all
wholesale users whereby the rates, terms and conditions for the CSW ERCOT
companies (CPL and WTU) would be permitted to differ from those offered by the
CSW Southwest Power Pool companies (PSO and SWEPCO). CSW has filed open access
tariffs that conform to the provisions of the pro forma tariff included as part
of the final rule. CSW filed a system-wide tariff on November 1, 1996 that will,
upon FERC approval, replace the conforming tariffs and comply with FERC Order
888 for a single system tariff.
STRATEGIC EXECUTIVE AND ORGANIZATIONAL RESTRUCTURING
As previously reported, in April 1996 CSW announced organizational and
executive changes as CSW prepares for increased competition and for an
unbundling of the electric utility industry into generation, transmission,
distribution and service segments. This restructuring is expected to provide a
more competitive organizational structure for CSW. In connection with
implementing its 1996 restructuring, CSW has incurred approximately $8 million
in expenses through the third quarter of 1996. Approximately $2.8 million of the
restructuring expense relates to the U.S. Electric Operating Companies of which
CPL's portion is approximately $1.9 million. The remaining amounts range from
approximately $700,000 at SWEPCO to less than $100,000 at WTU. CSW could incur
up to $15 million in additional expenses for the restructuring which is expected
to be completed by early 1997. CPL, PSO, SWEPCO and WTU are currently unable to
reasonably estimate their respective portions of such additional restructuring
expenses.
NON-UTILITY VENTURES
CSW COMMUNICATIONS
In September 1996, the Georgetown, Texas City Council awarded a $4.2
million contract to CSW Communications to implement a communications-based
utility management system for the city of Georgetown. The Georgetown project,
which is expected to be completed in 18 months, will be based on a wireless
network to be owned and operated by the city of Georgetown. The network will
enable the city to offer advanced energy management, water management and
communications services to its more than 25,000 residents.
<PAGE> 60
ENERSHOP
In October 1996, the Hall Financial Group awarded EnerShop a $1 million
energy services contract for a 36-story office tower in downtown Dallas, Texas.
Under the agreement, EnerShop will retrofit the lighting, energy management
system and other electrical equipment for the office tower. EnerShop is
providing low-cost lease financing for the project and is guaranteeing that the
savings on utility bills will more than offset Hall Financial Group's lease
payments for the project. EnerShop expects to complete the project in the first
quarter of 1997.
CAPITAL REQUIREMENTS, LIQUIDITY AND FINANCING
CONSTRUCTION EXPENDITURES
CSW's construction expenditures totaled $343 million for the nine
months ended September 30, 1996. Such expenditures for the U.S. Electric
Operating Companies totaled $82 million, $57 million, $68 million and $28
million, for CPL, PSO, SWEPCO and WTU, respectively. CSW's construction
expenditures, including those for SEEBOARD, were primarily for improvements to
existing production, transmission and distribution facilities. The improvements
are required to meet the needs of new customers and to satisfy the changing
requirements of existing customers. CSW anticipates that the majority of all
funds required for construction for the remainder of the year will be provided
from internal sources.
SEEBOARD ACQUISITION FINANCING
As previously reported, CSW, indirectly through intermediate
subsidiaries, has acquired control of 100% of SEEBOARD for an aggregate adjusted
purchase price of approximately (pound)1.4 billion (approximately $2.1 billion
assuming average exchange rates during the purchase period). As of September 30,
1996, CSW had contributed approximately $829 million of the purchase price for
the acquisition of SEEBOARD shares. Such funds, which were initially obtained
through borrowings under the $850 million CSW Credit Agreement, have since been
repaid by using the $398 million net proceeds from CSW's February 1996 common
stock offering and $431 million of the proceeds from the sale of Transok.
The additional funds necessary for the transaction were made with
capital contributions and loans made to CSW (UK) plc (which has been replaced by
SEEBOARD Group plc) by its sole shareholder, CSW Investments, which arranged the
CSW Investments Credit Facility for that purpose. In August 1996, CSW
Investments refinanced a total of (pound)358 million in two separate
transactions. (pound)258 million was refinanced by the sale of $200 million of
unsecured notes due 2001 and $200 million of unsecured notes due 2006. The
proceeds were then swapped into British pounds through a cross currency swap
and used to reduce borrowings outstanding under the CSW Investments Credit
Facility. The remaining (pound)100 million was refinanced by the issuance of
unsecured 10-year Sterling Eurobonds due 2006 and used to reduce the borrowings
outstanding under the CSW Investments Credit Facility. In addition, SEEBOARD has
entered into a (pound)155 million receivables securitization facility, which is
expected to be drawn upon in the fourth quarter of 1996 to further reduce the
borrowings outstanding under the CSW Investments Credit Facility.
As of September 30, 1996, approximately (pound)467 million
(approximately $729 million assuming the prevailing exchange rate on that date)
was outstanding under the CSW Investments Credit Facility. CSW Investments
anticipates that this amount will be repaid through dividends from SEEBOARD and
other proceeds received from refinancing activities.
<PAGE> 61
CAPITAL STRUCTURE
The CSW System is committed to maintaining financial flexibility by
having a strong capital structure and favorable securities ratings which help to
assure future access to capital markets when required. At September 30, 1996,
the capitalization ratios of each of the Registrants is presented in the
following table.
Common Preferred Long
Stock Equity Stock Term Debt
---------------- ---------------- ----------------
CSW 44% 4% 52%
CPL 45% 8% 47%
PSO 52% 2% 46%
SWEPCO 52% 4% 44%
WTU 49% 1% 50%
SWEPCO SABINE SERIES PCRBS
In July 1996, $81.7 million of Sabine, 6.10%, Series 1996 PCRBs were
issued for the benefit of SWEPCO. The proceeds from this issuance were used to
refund the $81.7 million Sabine, 8.20%, Series 1986 PCRBs.
CPL, PSO, WTU RED RIVER SERIES PCRBS
In August 1996, $63.3 million of Red River, 6.0%, Series 1996 PCRBs
were issued for the benefit of CPL, PSO and WTU. The proceeds from this issuance
were used to refund the $63.3 million of Red River, 7 7/8%, Series 1984 PCRBs.
CPL MATAGORDA SERIES PCRBS
In September 1996, $60 million of Matagorda, 6 1/8%, Series 1996 PCRBs
were issued for the benefit of CPL. The proceeds from this issuance will be used
to refund the $60 million Matagorda, 7 7/8%, Series 1986 PCRBs, which are
classified on the balance sheet as Long-term debt due within twelve months, on
December 1, 1996. At September 30, 1996, the proceeds from the issuance were
held in trust and are reflected as Special Deposits on the balance sheet.
CSW INVESTMENTS YANKEE NOTES AND EUROBONDS
In August 1996, CSW Investments issued unsecured notes in order to
refinance a portion of the debt incurred to finance the SEEBOARD acquisition.
CSW Investments issued $400 million Yankee Notes ($200 million 6.95% Notes due
2001 and $200 million 7.45% Notes due 2006) and issued (pound)100 million 8.875%
Eurobonds due 2006. See SEEBOARD ACQUISITION FINANCING above for additional
discussion of these financing activities.
CSW ENERGY SENIOR NOTES
In October 1996, CSW Energy issued $200.0 million, 6.875% Senior Notes
due 2001. CSW Energy intends to use the proceeds from this issuance for the
acquisition, development and construction of electric generation assets in the
United States and to make affiliated loans to CSW International. CSW
International, the guarantor of the senior notes, intends to use any such funds
for the acquisition, development and construction of electric generation,
transmission and distribution assets internationally. See NOTE 3. COMMITMENTS
AND CONTINGENT LIABILITIES, for a discussion of CSW International's anticipated
use of a portion of such proceeds.
SHORT-TERM FINANCING
The CSW System uses short-term debt to meet fluctuations in working
capital requirements and other interim capital needs. The Registrants, together
with other subsidiaries of CSW have: (i) established a money pool to coordinate
<PAGE> 62
short-term borrowings and (ii) incurred borrowings outside the money pool
through CSW's issuance of commercial paper. As of September 30, 1996, CSW had a
revolving credit facility totaling $1.2 billion to back up its commercial paper
program.
SWEPCO CAJUN ASSET PURCHASE PROPOSAL
As previously reported, Cajun filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code on December 21, 1994 and is
currently operating under the supervision of the United States Bankruptcy Court
Bankruptcy Court for the Middle District of Louisiana.
On October 26, 1996, SWEPCO, together with Entergy Gulf States and the
Members Committee filed the Second Amended SWEPCO Plan in the bankruptcy court.
Under the Second Amended SWEPCO Plan, a SWEPCO subsidiary or affiliate would
acquire all of the non-nuclear assets of Cajun, comprised of the Big Cajun I
gas-fired plant, the Big Cajun II coal-fired plant, and related non-nuclear
assets, for approximately $780 million in cash, up to an additional $20 million
to pay certain other bankruptcy claims and expenses and an additional $7 million
to acquire claims of unsecured creditors. In addition, the Second Amended SWEPCO
Plan provides for SWEPCO and the Cajun member cooperatives to enter into new
25-year power supply agreements which will provide the Cajun member cooperatives
with wholesale rates starting at approximately 3.74 cents per kilowatt-hour
while permitting the Cajun member cooperatives the flexibility to acquire power
on the open market when their requirements exceed mutually agreed upon levels of
generating capacity available from SWEPCO. The Second Amended SWEPCO Plan would
settle all claims and litigation in the bankruptcy case, including potentially
protracted litigation over power supply contract rights. The filing of the
Second Amended SWEPCO Plan complies with an amended schedule of proceedings
established by the bankruptcy court which provides for the filing of amended
plans, disclosure statements and related documents by October 26, 1996 and for
confirmation hearings to begin on December 16, 1996. The bankruptcy court's
decision in the case is expected in the first quarter of 1997.
The Second Amended SWEPCO Plan amends the Original SWEPCO Plan filed on
April 19, 1996 (as amended by the First Amended SWEPCO Plan filed on September
30, 1996) by the Members Committee, SWEPCO and Entergy Gulf States in the
bankruptcy court. Under the Original SWEPCO Plan, SWEPCO had proposed to acquire
all of the non-nuclear assets of Cajun for approximately $405 million in cash.
In addition, under the Original SWEPCO Plan, the Cajun member cooperatives would
have made future payments with a net present value ranging from $497 million to
$567 million to the Rural Utilities Service of the federal government, Cajun's
largest creditor, by using a portion of the cooperatives' future income from
their retail customers.
Two competing plans of reorganization for the non-nuclear assets of
Cajun have been filed with the bankruptcy court at about the same time as the
filing of the First Amended SWEPCO Plan, including one plan with a higher bid
price. Under one competing plan, Cajun's non-nuclear assets would be acquired by
Louisiana Generating LLC, which would be owned by affiliates of SEI Holding,
Inc., NRG Energy, Inc. and Zeigler Coal Holdings Company. Cajun's court
appointed trustee in bankruptcy is supporting this plan. In addition, Enron
Capital & Trade Resources Corp. and the Official Committee of Unsecured
Creditors have jointly filed a competing plan of reorganization.
Consummation of the Second Amended SWEPCO Plan is conditioned upon
confirmation by the bankruptcy court, the receipt by SWEPCO and CSW of all
requisite state and federal regulatory approvals in addition to the receipt of
their corresponding board approvals. If the Second Amended SWEPCO Plan is
confirmed, CSW and SWEPCO expect initially to finance the $807 million required
to consummate the acquisition of Cajun's non-nuclear assets through a
combination of external borrowings and internally generated funds.
<PAGE> 63
REGULATORY MATTERS
Reference is made to NOTE 2. LITIGATION AND REGULATORY PROCEEDINGS for
a discussion of CPL's, PSO's and WTU's regulatory proceedings.
LITIGATION RELATING TO TERMINATION OF EL PASO MERGER
For information regarding the commitments and contingent liabilities
relating to the termination of the Merger, reference is made to NOTE 3.
COMMITMENTS AND CONTINGENT LIABILITIES.
<PAGE> 64
PART II - OTHER INFORMATION
For background and earlier developments relating to PART II
information, reference is made to the Registrants' Combined Annual Report on
Form 10-K for the year ended December 31, 1995 and Combined Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996.
ITEM 1. LEGAL PROCEEDINGS.
CPL NUCLEAR INSURANCE CLAIMS
As previously reported, in 1994, CPL filed a claim under the NEIL I
business interruption and/or extra expense policy relating to the 1993-1994
outage at STP Units 1 and 2. NEIL formally denied CPL's claim on November 21,
1995. On April 9, 1996, CPL filed an action in state district court in Corpus
Christi, Texas, against NEIL and Johnson & Higgins of Texas, Inc., the former
insurance broker for STP, seeking recovery under the policy and other relief.
NEIL responded by filing a suit against CPL on April 16, 1996, in the United
States District Court for the Southern District of New York seeking a
declaratory judgment to enforce an arbitration provision contained in the
policy. On May 24, 1996, the New York court ordered the dispute, including the
issue of whether the arbitration provision is enforceable, to arbitration and
stayed the Texas proceeding. NEIL canceled CPL's current NEIL I policy effective
July 31, 1996. NEIL also filed a claim in arbitration seeking a determination
that NEIL properly terminated CPL's coverage and that CPL has caused NEIL
damages by opposing NEIL's attempt to compel arbitration and seeking recovery of
NEIL's attorneys' fees. On June 21, 1996, CPL filed a notice of appeal of the
New York court's order in the United States Court of Appeals for the Second
Circuit. Subsequently, CPL and NEIL agreed to dismiss all litigation between
them concerning CPL's claim for NEIL coverage. CPL and NEIL also agreed to
submit their disputes over coverage to a non-binding neutral evaluation process,
although both CPL and NEIL have reserved the right to take their dispute to
binding arbitration. CPL and NEIL also agreed that CPL's NEIL I policy would be
reinstated. CPL intends to assert its rights to recovery under the NEIL I policy
vigorously, but cannot predict the ultimate outcome of these matters. CPL's
management believes that the resolution of these actions will not have a
material adverse effect on its results of operations or financial condition.
PSO GAS PURCHASE CONTRACTS
As previously reported, PSO has been named defendant in complaints
filed in federal and state courts of Oklahoma and Texas in 1984 through 1995 by
gas suppliers alleging claims arising out of certain gas purchase contracts. The
plaintiffs seek relief through the filing dates as well as attorneys' fees.
Through September 1996, complaints representing approximately $11 million in
claims were settled. Remaining complaints currently total approximately $100,000
in claimed actual damages. The settlements did not have a material effect on
PSO's consolidated results of operations or financial condition.
PSO PCB CASES
As previously reported, PSO has been named a defendant in complaints
filed in federal and state courts in Oklahoma in 1984, 1985, 1986, 1993 and
1996. The complaints allege, among other things, that some of the plaintiffs and
the property of other plaintiffs were contaminated with PCBs and other toxic
by-products following certain incidents, including transformer malfunctions, in
April 1982, December 1983 and May 1984. To date, all complaints, except for
certain claims filed in 1996 for additional unspecified actual and punitive
damages, have been dismissed, certain of which resulted in settlements among the
parties. Management believes that PSO has defenses to the remaining complaints
and intends to defend the suits vigorously. Moreover, management believes that
the remaining complaints are covered under insurance. Management also believes
<PAGE> 65
that the ultimate resolution of the remaining complaints will not have a
material adverse effect on PSO's consolidated results of operations or financial
condition.
SWEPCO BURLINGTON NORTHERN TRANSPORTATION CONTRACT
As previously reported, a state district court in Bowie County, Texas
awarded SWEPCO a judgment of approximately $72 million against Burlington
Northern for damages regarding rates charged under two rail transportation
contracts for delivery of coal to two of SWEPCO's power plants, post-judgment
interest and attorneys' fees and also granted certain declaratory relief
requested by SWEPCO. Burlington Northern appealed the state district court's
judgment to the Texarkana, Texas Court of Appeals and, on April 30, 1996, the
Texarkana, Texas Court of Appeals reversed the judgment of the state district
court. Subsequently, SWEPCO filed two motions for rehearing, but both were
overruled. On October 14, 1996, SWEPCO filed an application with the Supreme
Court of Texas to grant a writ of error to review and reverse the judgment of
the Texas Court of Appeals.
OTHER LEGAL CLAIMS AND PROCEEDINGS
The CSW System is party to various other legal claims and proceedings
arising in the normal course of business. Management does not expect disposition
of these matters to have a material adverse effect on the Registrants' results
of operations or financial condition. See PART I - NOTE 2. LITIGATION AND
REGULATORY PROCEEDINGS for a discussion CPL's and WTU's regulatory proceedings,
and also to PART 1 - NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES for a
discussion of litigation involving the termination of the El Paso Merger.
ITEMS 2 - 4. INAPPLICABLE
ITEM 5. OTHER INFORMATION.
PSO UNION NEGOTIATIONS
Since July 1, 1996, PSO and its Local Union 1002 of the International
Brotherhood of Electrical Workers have been engaged in contract renewal
negotiations for the approximately 600 members of the Local. The principal issue
is over PSO's anticipated need for flexibility in a deregulated environment. The
underlying agreement expired September 30, 1996, and the parties continue to
negotiate.
<PAGE> 66
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS:
(3) BYLAWS AS AMENDED AND RESTATED
CPL - (Exhibit 3.1)
PSO - (Exhibit 3.2)
SWEPCO - (Exhibit 3.3)
WTU - (Exhibit 3.4)
(12) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CPL - (Exhibit 12.1)
PSO - (Exhibit 12.2)
SWEPCO - (Exhibit 12.3)
WTU - (Exhibit 12.4)
(27) FINANCIAL DATA SCHEDULES
PSO - (Exhibit 27.1)
(B) REPORTS FILED ON FORM 8-K:
CSW, SWEPCO
ITEM 5. OTHER EVENTS and ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS,
reporting SWEPCO's proposal for the purchase of Cajun assets, dated
September 30, 1996.
CPL, PSO AND WTU
None
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The signature for each undersigned
Registrant shall be deemed to relate only to matters having reference to such
Registrant or its subsidiaries.
CENTRAL AND SOUTH WEST CORPORATION
Date: November 12, 1996 /S/ LAWRENCE B. CONNORS
--------------------------
Lawrence B. Connors
Controller and Chief Accounting Officer
(Principal Accounting Officer)
CENTRAL POWER AND LIGHT COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
WEST TEXAS UTILITIES COMPANY
Date: November 12, 1996 /S/ R. RUSSELL DAVIS
-----------------------
R. Russell Davis
Controller and Chief Accounting Officer
(Principal Accounting Officer)
BYLAWS
OF
CENTRAL POWER AND LIGHT COMPANY
(A TEXAS CORPORATION)
OCTOBER 25, 1996
<PAGE>
INDEX
ARTICLE I OFFICES
ARTICLE II SEAL
ARTICLE III STOCK AND TRANSFERS
ARTICLE IV MEETINGS OF SHAREHOLDERS
ARTICLE V DIRECTORS
ARTICLE VI MEETINGS OF THE BOARD
ARTICLE VII OFFICERS
ARTICLE VIII COMMITTEES
ARTICLE IX INDEMNIFICATION
ARTICLE X ORDER OF BUSINESS
ARTICLE XI INSPECTION OF BOOKS
ARTICLE XII MISCELLANEOUS
ARTICLE XIII REFERENCE
ARTICLE XIV AMENDMENT
<PAGE>
BYLAWS
OF
CENTRAL POWER AND LIGHT COMPANY
(A Texas Corporation)
ARTICLE I
OFFICES
The Corporation shall maintain its principal office in Corpus
Christi, Texas, and may maintain offices at such other places within or without
the state as the Board of Directors may from time to time appoint.
ARTICLE II
SEAL
The corporate seal of the Corporation shall have inscribed thereon
the name of the Corporation and the words "Incorporated 1945 Texas", and such
seal may be facsimile.
ARTICLE III
STOCK AND TRANSFERS
Section 1. Each holder of fully paid shares of stock of the
Corporation shall be entitled to a certificate or certificates representing such
shares, certifying the number of shares owned by the shareholder and the
designation of the class of stock (and series, if any) in which issued and
otherwise complying with any applicable law. All such certificates shall be
signed by the President or a Vice President and by the Secretary or an Assistant
Secretary of the Corporation and shall be sealed with the corporate seal of the
Corporation or a facsimile thereof. The signature of the President or Vice
President and/or the Secretary or Assistant Secretary of the Corporation upon
any such certificate may be facsimile if the certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation itself or an employee of the Corporation, duly appointed by the
Board of Directors. In case any one or more of such officers of the Corporation
who has signed or whose facsimile signature or signatures have been placed or
<PAGE>
impressed or reproduced upon any such certificate shall have ceased to be such
officer or officers of the Corporation before such certificate shall be actually
issued, such certificate may be issued and delivered by the Corporation with the
same effect as if he or they were such officer or officers at the date of such
issuance.
Section 2. Shares of stock may be transferred in the manner provided
by law; and the Corporation, by its officers or agents appointed for that
purpose, shall record upon the books of the Corporation a transfer of its shares
upon receipt of a written assignment thereof, signed by the shareholder or his
legal representatives and accompanied by the surrender of the certificate
representing the shares of stock so transferred. No transfer shall affect the
right of the Corporation to pay any dividend due upon the stock or to treat the
holder of record as the holder in fact until such transfer has been recorded
upon the books of the Corporation or until a new certificate has been issued to
the person to whom it has been transferred. If an outstanding certificate of
stock shall be lost, destroyed, or stolen, the holder thereof may have a new
certificate upon producing evidence, satisfactory to the Board of Directors, of
such loss, destruction, or theft, and upon furnishing to the Corporation a bond
of indemnity, deemed sufficient by the Board of Directors, to protect the
Corporation against claims under the outstanding certificate.
Section 3. The stock transfer books of the Corporation may be closed
from time to time, by order of the Board of Directors, for a stated period not
to exceed, in any case, fifty (50) days, for the purpose of determining
shareholders of the Corporation entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, PROVIDED, HOWEVER, that if the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books as aforesaid, the Board of Directors may from time to time fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty (50) days, and in case of a
meeting of shareholders not less than ten (10) days, prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. Whenever a determination of shareholders entitled to vote at any meeting
of shareholders has been made, as hereinabove provided, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired. If the stock transfer books shall not have been closed and no
record date shall have been fixed for the determination of shareholders entitled
to notice of or to vote at a meeting of shareholders, or shareholders entitled
to receive payment of a dividend, as hereinabove provided, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
<PAGE>
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. The annual meeting of the shareholders shall be held on
the second Thursday in April of each year, if not a legal holiday, and if a
legal holiday, then on the day following, at the hour of 9 o'clock a.m. for the
election of directors and for the transaction of such other business as may come
before it. Such meeting shall be held at the office of the Corporation in Corpus
Christi, Texas. In case the annual meeting shall not be duly called and held,
the Secretary shall cause a special meeting in lieu of and for the purpose of
such annual meeting and all proceedings at such special meeting shall have the
same force and effect as at an annual meeting.
Section 2. Special meetings of the shareholders may be called by the
Chairman, if there shall be one, or by the President or by a majority of the
directors and shall be called by the Secretary upon written application of three
or more shareholders who are entitled to vote and who hold at least one-tenth
part in interest of the shares entitled to vote at the meeting, which
application shall state the time, place, and purpose of the meeting, or in such
other manner as may be provided in Article VI of the Articles of Incorporation
with Amendments of the Corporation, or as may from time to time be provided by
statute.
Section 3. A written notice, stating the place, day, and hour of the
annual meeting shall be given by the Secretary at least ten days and not more
than fifty days before the meeting to each shareholder entitled to vote thereat
and to each shareholder who, under the Articles of Incorporation with Amendments
or under the Bylaws, is entitled to such notice, by delivering such notice to
him or by mailing it, postage prepaid, and addressed to such shareholder at his
address as it appears on the books of the Corporation. Like notice shall be
given of all special meetings, except in cases where other special method of
notice may be required by statute, in all which cases the statutory method shall
be followed. Notices of all meetings of shareholders shall state the purposes
for which the meetings are called. Notice of meetings may in all cases be waived
by shareholders entitled to notice.
Section 4. At all meetings of shareholders, except as otherwise
provided in the Articles of Incorporation with Amendments of the Corporation, a
representation of the majority of the number of shares of stock outstanding and
entitled to vote shall be necessary to constitute a quorum for the transaction
of any business, other than (a) adjournment from time to time until a quorum
shall be obtained, or (b) adjourning sine die, and for any such adjournment a
majority vote of whatever stock shall be represented shall be sufficient.
<PAGE>
Section 5. At all shareholders' meetings, except as otherwise
provided in the Articles of Incorporation with Amendments of the Corporation,
holders of record of stock then having voting power shall be entitled to one
vote for each share of stock held by them, respectively, upon any question or at
any election, and such vote may, in all cases, be given by proxy, duly
authorized in writing, and the vote of the holders of a majority of the shares
entitled to vote and represented at a meeting at which a quorum is present shall
be the act of the shareholders unless the vote of a greater number is required
by law, the Articles of Incorporation with Amendments, or Bylaws.
ARTICLE V
DIRECTORS
Section 1. The property, business, and affairs of the Corporation
shall be managed by a Board of Directors which shall consist of that number of
directors, not less than three, as shall be fixed from time to time by the Board
of Directors or by the shareholders at the annual or a special meeting;
provided, however, that no decrease in the number of directors shall have the
effect of shortening the term of an incumbent director. Such directors shall be
elected by the shareholders, by ballot, at the annual meeting of shareholders,
by vote of the holders of a majority of the total number of shares of stock of
the Corporation outstanding and entitled to vote at the meeting, present in
person or represented by proxy; and each director so elected shall hold office
until the next ensuing annual election of directors and until his successor
shall be duly elected and qualified, unless sooner displaced in the manner
provided by law. The term of any director who is an employee of the Corporation
(other than a President who retires) shall expire concurrently with the
termination of service of that director as such an employee. Directors need not
be shareholders of the Corporation.
Section 2. Vacancies occurring in the Board of Directors, and newly
created directorships resulting from any increase in the authorized number of
directors determined pursuant to the Bylaws, may be filled by vote of a majority
of the directors then in office, though less than a quorum, unless otherwise
provided in the Articles of Incorporation with Amendments or by statute. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office. A directorship to be filled by reason of an increase
in the number of directors shall be for a term of office continuing only until
the next election of one or more directors by the shareholders; provided that
the board of directors may not fill more than two such directorships during the
period between any two successive annual meetings of shareholders. Unless
otherwise provided in the Articles of Incorporation with Amendments or by
statute, when one or more directors shall resign from the Board, effective at a
future date, a majority of the remaining directors then in office, though less
than a quorum of said Board, shall have the power to fill such vacancy or
<PAGE>
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective; and each director so chosen shall hold office as herein
provided for the filling of other vacancies.
Section 3. The Board of Directors may hold its meetings and may have
one or more offices, and may keep the books of the Corporation (except such
records and books as by the laws of Texas are required to be kept within that
state) outside of Texas, at such places as they may from time to time determine.
In addition to the powers and authorities by these Bylaws expressly conferred
upon them, the Board may exercise all such powers of the Corporation, and do all
such lawful acts and things as are not by law or by the Bylaws required to be
exercised or done by the shareholders.
Section 4. Without prejudice to the general powers conferred by the
last preceding clause, it is hereby expressly declared that the Board of
Directors shall have the following powers, that is to say:
1. From time to time to make and change rules and regulations, not
inconsistent with these Bylaws, for the management of the Corporation's
business and affairs.
2. From time to time, as and when and upon such terms and conditions
as it may determine, to issue any part of the authorized capital stock of
the Corporation.
3. To purchase, or otherwise acquire for the Corporation, any
property, right, or privilege which the Corporation is authorized to
acquire at such price or consideration, and generally on such terms or
conditions as it shall think fit.
4. At its discretion, to pay for any property or rights acquired by
the Corporation, either wholly or partly, in money, stock, bonds,
debentures or other securities of the Corporation.
5. To borrow money, to create, make, and issue mortgages, bonds,
deeds of trust, trust agreements and negotiable or transferable
instruments and securities, secured by mortgage or otherwise, and to do
every other act and thing necessary to effectuate the same, but subject
always to all requirements of law, as to the consent or authorization of
shareholders or otherwise, in respect thereof.
6. To remove or suspend, at its discretion, any and all officers,
employees, and agents, permanently or temporarily, as it may think fit,
and to determine and fix, and from time to time change their duties,
salaries, and emoluments, and to require security in such instances and in
such amounts as it thinks fit.
<PAGE>
7. To confer by resolution upon any committee or officer of the
Corporation, the power to choose, remove, or suspend subordinate officers,
employees, and agents.
8. To appoint any person or Corporation to accept and hold in trust
for the Corporation any property belonging to the Corporation, or in which
it is interested, or for any other purpose, and to execute and do all such
deeds and things as may be requisite in relation to any such trust.
9. To determine who shall be authorized on the Corporation's behalf
to sign bills, notes, receipts, acceptances, endorsements, checks, drafts,
bonds, mortgages, releases, contracts, and other papers and documents,
subject always to any requirements of law in respect thereof.
10. To delegate, to the extent permitted from time to time by the laws
of the State of Texas, any of the power of the Board in the course of the
current business of the Corporation to any standing or special committee,
or to any officer, or agent, or to appoint any persons to be the agents of
the Corporation with such powers (including the powers to sub-delegate)
and upon such terms as it shall think fit.
ARTICLE VI
MEETINGS OF THE BOARD
Section 1. Regular meetings of the Board of Directors of the
Corporation shall be held at such place and time as may be designated from time
to time by the Board. Special meetings of the Board may be called by the
Chairman, if there shall be one, or by the President, or by a Vice President
when acting as President, or by any two directors, upon not less than two days'
notice to each director, either personally, by telephone, by telegraph or by
mail. Notice of any meeting of the Board may be waived in writing by any
director, either before or after the meeting, and shall be deemed to have been
waived by his attendance at such meeting.
Section 2. A majority of the authorized number of directors
determined pursuant to the Bylaws shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but a lesser number may
adjourn from time to time until a quorum shall be obtained or may adjourn sine
die.
Section 3. The act of the majority of the directors present at a
<PAGE>
meeting at which a quorum is present shall be the act of the Board of Directors
unless the act of a greater number is required by the Articles of Incorporation
or the Bylaws or law. The Board shall keep minutes of the proceedings at its
meetings.
Section 4. Directors, as such, shall receive such compensation and
expenses of attendance, if any, as may be fixed or allowed by resolution of the
Board. Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE VII
OFFICERS
Section 1. There shall be elected by the Board of Directors, at its
first meeting (if practicable) held after the annual election of directors in
each year, a President, a Secretary, a Treasurer, a Controller, and, if desired,
one or more Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers. The Board of Directors also may provide for and elect at any time,
a Chairman, a General Manager, one or more Vice Presidents, and such other
officers, and prescribe such duties for them, respectively, as in the judgment
of the Board of Directors may be required from time to time to conduct the
business of the Corporation. Any two or more offices, except the offices of
President and Vice President, President and Secretary, President and General
Manager, and Chairman and any other office, may be held by the same person. All
officers elected by the Board of Directors shall hold their respective offices,
unless sooner terminated, until the first meeting of the Board of Directors held
after the next ensuing annual election of directors and until their respective
successors, willing to serve, shall have been duly elected and qualified. Any of
such officers may be removed from their respective offices at the pleasure of
the Board.
Section 2. The Chairman of the Board, if there shall be one, shall
preside at all meetings of the stockholders and of the Board of Directors. He
shall be a member of the committees to which he has been appointed by the Board
of Directors. He shall also have such other powers and duties as may at any time
be prescribed by these Bylaws or by the Board of Directors.
Section 3. The President shall be the chief executive officer of the
Company and have general authority over all of the business and affairs of the
Company and over all other officers, agents and employees of the Company,
subject to the direction of the Board of Directors. He shall have general and
active management of the business and affairs of the Company, and full authority
and responsibility with respect to making effective all resolutions of the Board
of Directors. He may execute bonds, mortgages, contracts and other instruments
on behalf of the Company, except those required by law, governmental
regulations, or indentures and other agreements of the Company to be otherwise
signed and executed or expressly required by the Board of Directors to be
executed by some other officer or agent of the Company. He may suspend the
<PAGE>
authority of any other officer or officers of the Company, subject, however, to
the pleasure of the Board of Directors at its next meeting. He shall have
authority to appoint and to remove and discharge any and all agents and
employees of the Company not elected or appointed directly by the Board of
Directors. In any absence of a Chairman of the Board he shall, if present, have
all powers and duties conferred upon the Chairman of the Board.
Section 4. The General Manager, if one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors. In case the President, due to absence or
any other cause, shall be unable at any time to attend to the duties of the
office of President requiring attention, or in the case of his death,
resignation, or removal from office, the powers and duties of the President
shall, except as the Board of Directors may otherwise provide, temporarily
devolve upon the General Manager, and shall be exercised by such General Manager
as acting President during such inability of the President, or until the vacancy
in the office of the President shall be filled. In case of the absence,
disability, death, resignation, or removal from office of the President and the
General Manager, the Board of Directors shall elect one of its members to
exercise the powers and duties of the President during such absence or
disability, or until the vacancy in one of said offices shall be filled.
Section 5. The Vice President, if one is elected by the Board of
Directors, or Vice Presidents, if more than one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors.
Section 6. The Secretary shall attend all meetings of the
shareholders and the Board of Directors, shall keep a true and faithful record
thereof in proper books to be provided for that purpose, and shall have the
custody and care of the corporate seal, records, and minutes of shareholders'
and directors' meetings. He shall issue all notices required for meetings of the
shareholders and the Board of Directors. Whenever requested by not less than
one-third in number of the directors constituting the whole Board to give notice
for a meeting of the Board of Directors, the Secretary shall give such notice,
as requested, and the notice shall state the names of the directors making the
request. He shall have such other powers and duties as are commonly incidental
to the office of Secretary, or as may be prescribed for him. He shall be sworn
to the faithful discharge of his duty.
Section 7. The Treasurer shall have charge of and be responsible for
the collection, receipt, custody, and disbursement of the funds of the
Corporation, and shall deposit its funds in the name of the Corporation in such
banks, trust companies, or safe deposit vaults as the Board of Directors may
direct. He shall have the custody of such books, receipted vouchers, and other
books and papers as in the practical business operations of the Corporation
shall naturally belong in the office or custody of the Treasurer, or shall be
<PAGE>
placed in his custody by the Board of Directors, by the Chairman, by the
President, or by the General Manager, or by a Vice President when acting as
President. He shall also have charge of the safekeeping of all stocks, bonds,
mortgages and other securities belonging to the Corporation, except his own
bond; but such stocks, bonds, mortgages, and other securities shall be deposited
for safekeeping in a safe deposit vault to be approved by the Board of
Directors, in a box or boxes, access to which shall be had as may be provided by
resolution of the Board of Directors. He shall have such other powers and duties
as are commonly incidental to the office of Treasurer, or as may be prescribed
for him. He may be required to give bond to the Corporation for the faithful
discharge of his duties in such form and to such amount and with sureties as
shall be determined by the Board of Directors.
Section 8. The Controller shall be responsible for the installation
and supervision of all accounting records of the Corporation, the preparation
and interpretation of the financial statements and reports of the Corporation,
and maintenance of appropriate and adequate records of authorized
appropriations, and the determination that all sums expended pursuant to such
appropriations are properly accounted for, and the ascertainment currently that
all financial transactions authorized or approved by the Board of Directors are
properly executed and recorded. The Controller shall also have (a) direction of
the accounting system and the functional supervision over the records of other
departments of the Corporation pertaining to revenues, expenses, moneys,
securities, properties, and other assets of the Corporation, (b) custody of all
books and records of account and other papers relating to the accounts of the
Corporation, except such books and records as, in the normal course of business
of the Corporation, shall normally or ordinarily belong in the custody of the
Treasurer of the Corporation or as shall be placed in the custody of the
Treasurer or other personnel by the Board of Directors, the President, the
General Manager, or any Vice President when acting as President, (c) authority
to establish or approve accounting practices and procedures required or deemed
necessary to assure compliance with the accounting rules, regulations, or orders
of governmental authorities having jurisdiction, (d) access to all papers and
records of the Corporation relating to its properties and other assets,
revenues, and expenses, and (e) such other powers and duties as are commonly
incidental to the office of Controller, or as may be prescribed for him. The
Controller may be required to give bond to the Corporation for the faithful
discharge of his duties, in such form and in such amount, and with such
sureties, if any, as shall be determined by the Board of Directors.
Section 9. Assistant Secretaries or Assistant Treasurers or
Assistant Controllers shall assist the Secretary, the Treasurer, and the
Controller, respectively, as the case may be, in the performance of the
respective duties of such principal officers; and in case of the absence,
disability, death, resignation, or removal from office of any such principal
officer, the powers and duties of such principal officer shall, except as
otherwise ordered by the Board of Directors, temporarily devolve upon his
assistant or senior assistant if there shall be more than one. Such Assistants
shall also perform such other duties as may be assigned to them from time to
time.
<PAGE>
ARTICLE VIII
COMMITTEES
Section 1. The Board of Directors may from time to time appoint, by
resolution passed by a majority of the whole Board, standing or special
committees, each consisting of one or more directors, each committee to have
such powers, permitted by law, as the Board may determine.
Section 2. Meetings of a committee may be called by the chairman of
the committee, by any two members of a committee consisting of two or more
members, by any sole member of a committee or by the President. Notice of each
committee meeting, stating the date, hour and place at which it will be held,
shall be given to each member of the committee personally, by telephone, by
telegraph or by mail, at least two days before the day of such meeting. A
majority of the members of a committee shall constitute a quorum for the
transaction of business at any meeting thereof, but a lesser number may adjourn
the meeting from time to time until a quorum is obtained or may adjourn sine
die. A majority vote of those present at a meeting of a committee at which a
quorum is present shall be decisive of all questions before the meeting.
Section 3. In the absence or disqualification of any member of a
committee, the remaining member or members present at a meeting and not
disqualified from voting, whether or not constituting a quorum, may appoint
another director to act at such meeting in the place of such absent or
disqualified member.
Section 4. Notice to a director of any committee meeting may be
waived in writing by such director, either before or after the meeting, and
shall be deemed to have been waived by his attendance at the meeting.
Section 5. In accordance with the foregoing provisions of these
Bylaws, the following committees are hereby established:
AUDIT COMMITTEE
a. The Audit Committee of the Central Power and Light Company Board
of Directors shall be composed of all directors of the Company who are not
presently or formerly officers or employees of this Company or its
affiliates.
b. The Audit Committee shall have such responsibilities and powers,
permitted by law, as the Board may determine from time-to-time by
resolution passed by a majority of the whole Board.
<PAGE>
NOMINATING COMMITTEE
a. The Nominating Committee of the Central Power and Light Company
Board of Directors shall be composed of all directors who are not
presently or formerly officers or employees of the Company or its
affiliates, except that the Chief Executive Officer of the Company shall
be an ex officio member of the Committee.
b. The Nominating Committee shall:
1. Seek out and recommend to the Board of Directors qualified
candidates for election to the Board when, under Article V of the Bylaws
of the Company, a vacancy exists or a new directorship is created;
2. Have and exercise all other powers as it shall deem necessary
for the performance of its duties.
ARTICLE IX
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and is not determined by the Board to have been
guilty of misconduct in the performance of his or her duty to the Corporation.
Provided, however, that no person shall be indemnified for amounts paid in
settlement, unless the terms and conditions of such settlement have been
consented to by the Corporation. And further provided that with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
that his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not of itself create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
<PAGE>
believe that such conduct was unlawful; provided, however, that no indemnity
prohibited by law shall be made.
Section 2. The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation, joint venture,
trust or other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation. Provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for misconduct in the performance of his or her duty to
the Corporation unless and only to the extent that a District Court of the State
of Texas or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which a District Court of the State of Texas or such
other court shall deem proper; and further provided that no indemnity prohibited
by law shall be made.
Section 3. The Corporation may indemnify, to the same extent as
hereinabove provided, any person who is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. Any indemnification under this Section 3 shall be made only
upon the authorization of the Board of Directors, which may occur at any time
prior to, during, or after final judgment or order, in any action, suit or
proceeding to which such person is or is threatened to be made a party. No right
to such indemnification is created by this Section 3.
Section 4. Any indemnification under Sections 1, 2 and 3 (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth in Sections 1 and 2. Such
determination shall be made (i) by the Board of Directors by majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
by independent legal counsel in a written opinion, if a quorum of disinterested
directors so directs, or (iii) by the stockholders.
Section 5. Expenses incurred by an officer or director in defending
a civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of such director, or officer, to repay such amount
<PAGE>
unless it shall ultimately be determined that such person is entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents with respect to which indemnification is
claimed hereunder may also be advanced upon such terms and conditions, if any,
as the Board of Directors deems appropriate.
Section 6. The Corporation may, as authorized by the Board of
Directors, purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by him or her in
any such capacity, or arising out of this status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article.
Section 7. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Corporation pursuant to the foregoing provisions of
this Article or the laws of the State of Texas, in the event any claim for
indemnification against such liabilities (other than for the payment by the
Corporation of expenses, including attorneys' fees, actually and reasonably
incurred by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceeding) is asserted against the
Corporation by such director, officer or controlling person in connection with
the registration of any security under the Securities Act of 1933, the
Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to court of appropriate jurisdiction
the question whether such indemnification by the Corporation is against public
policy as expressed by the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
Section 8. Each person who is or was or had agreed to become a
director, officer, employee or agent of the Corporation, or each such person who
is or was serving or had agreed to serve at the request of the Board of
Directors or an officer of the Corporation as an employee or agent of the
Corporation or as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including the heirs,
executors, administrators or estate of such person), shall be indemnified
(including, without limitation, the advancement of expenses and payment of all
loss, liability and expenses) by the Corporation to the full extent permitted by
the Texas Business Corporation Act or any other applicable laws as presently in
effect or as may hereafter be amended (but in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said laws permitted the Corporation to
provide prior to such amendment); provided however, that no person shall be
indemnified for amounts paid in settlement unless the terms and conditions of
such settlement have been consented to by the Corporation and provided further
that no indemnification for employees or agents of the Corporation (other than
<PAGE>
directors and officers) will be made without the express authorization of the
Corporation's Board of Directors.
ARTICLE X
ORDER OF BUSINESS
Section 1. The order of business at meetings of the Board of
Directors shall be determined by the Chairman, if there shall be one and he
shall be present, or by the President or other person acting as Chairman of the
meeting, unless otherwise ordered by the Board.
ARTICLE XI
INSPECTION OF BOOKS
Section 1. The directors shall determine from time to time whether,
and if allowed, when and under what conditions and regulations the accounts and
books of the Corporation (except such as may by statute be specifically open to
inspection), or any of them, shall be open to inspection by the shareholders,
and the shareholders' rights in this respect are and shall be restricted and
limited accordingly, except as otherwise provided by law.
ARTICLE XII
MISCELLANEOUS
Section 1. No debts shall be contracted by or on behalf of the
Corporation, except for current expenses incurred in the ordinary course of
business, unless authorized or approved by the Board of Directors or by the
Chairman, if there shall be one, or by the President, the General Manager, or a
Vice President when acting pursuant to authority or approval granted by the
Board of Directors. No bills shall be paid by the Corporation unless audited and
approved by the Controller, or individual(s) he may designate, to audit and
approve bills for payment.
Section 2. The dividends on the preferred stock, if declared, shall
be payable on the dates as provided in the Articles of Incorporation with
Amendments. All dividends declared upon the Common Stock shall be payable at
such times as may be fixed by the Board of Directors. Before paying any dividend
<PAGE>
or making any distribution of profits, there shall be set aside out of the
surplus or net profits of the Corporation, such sum or sums as the Board of
Directors may from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board shall think conducive to the interests of the Corporation.
Section 3. The calendar year shall be the fiscal year of the
Corporation.
ARTICLE XIII
REFERENCE
Section 1. The Articles of Incorporation with Amendments, as amended
from time to time, are incorporated herein by reference and shall govern as to
the provisions thereof, notwithstanding any provision herein to the contrary.
ARTICLE XIV
AMENDMENT
Section 1. These Bylaws may be altered, amended or rescinded by vote
of a majority of the shareholders having voting power at any annual meeting or
at any special meeting of said shareholders called for the purpose and, if and
to the extent permitted by law, may also be altered, amended or rescinded by the
Board of Directors.
BYLAWS OF
PUBLIC SERVICE COMPANY OF OKLAHOMA
ARTICLE I
STOCK AND TRANSFERS
SECTION 1. Each holder of fully paid stock shall be entitled to a certificate or
certificates of stock stating the number of shares owned by such stockholder.
All certificates of stock shall be signed by the President or a Vice President
and by the Secretary or an Assistant Secretary and sealed with the seal, which
may be facsimile, of the Company and shall be countersigned by a Transfer Agent
appointed by the Board of Directors. All certificates of Preferred Stock shall
also be countersigned and registered by a Registrar, appointed by the Board of
Directors, and the signatures of the President or Vice President and the
Secretary or Assistant Secretary upon all such certificates of Preferred Stock
may be facsimiles, engraved or printed. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate of stock shall
cease to be such officer before such certificate is issued, such certificate may
be issued by the Company with the same effect as if such officer had not ceased
to be such at the date of its issue.
SECTION 2. The capital stock of the Company shall be divided into such classes,
with such respective designations, preferences and voting powers, restrictions
or qualifications thereof, as are or shall be from time to time stated and
expressed in the Articles of Incorporation of the Company, and amendments
thereto. No holder of shares of stock of any class of the Company shall have any
preemptive or preferential rights of subscription or purchase of any shares of
any class of stock of the Company, whether now or hereafter authorized, and any
and all shares of capital stock of any class of the Company, whether now or
hereafter authorized, may, in the discretion of the Board of Directors, be
offered and sold to the holders of any one or more classes of stock of the
Company to the exclusion of any other class or classes, or may be issued and
disposed of from time to time in such manner and to such persons, whether
<PAGE>
stockholders or not, and for such corporate purposes as may be determined by the
Company's Board of Directors and without first being offered to stockholders.
SECTION 3. Shares of stock shall be transferable only on the books of the
Company, and, except as hereinafter provided, or as may be required by law, or
by order of court in a proper proceeding, shall be transferred only upon the
proper assignment and surrender of the certificates issued therefor. If an
outstanding certificate of stock shall be lost, destroyed or stolen, the holder
thereof may have a new certificate upon producing evidence, satisfactory to the
Board of Directors, of such loss, destruction or theft, and upon furnishing to
the Company a bond of indemnity, deemed sufficient by the Board of Directors, to
protect the Company against claims under the outstanding certificate.
SECTION 4. The Board of Directors shall have power to fix a time, not exceeding
sixty days preceding the date of any meeting of stockholders, or the date fixed
for the payment of any dividend or distribution or the date for the allotment of
rights or the date when any change or conversion or exchange of shares shall be
made or go into effect, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting or entitled to
receive payments of any such dividend, distribution, or allotment of rights, or
to exercise rights in respect to any such change, conversion or exchange of
shares, and in such case only registered stockholders on the date so fixed shall
be entitled to receive notice of said meeting or to receive payment of such
dividend, distribution, or allotment of rights, or to exercise such rights of
change, conversion, or exchange of shares, as the case may be, notwithstanding
any transfer of any shares on the books of the Company after any record date
fixed as aforesaid; provided, however, that the stock transfer books of the
Company may be closed by order of the Board of Directors for a period not
exceeding sixty days for the purpose of holding a meeting of stockholders, or
paying a dividend, or for any other legal purpose, as the Board of Directors
shall deem advisable.
SECTION 5. If default shall be made in the prompt payment when due of any sum
payable to the Company upon any subscription for stock of the Company, and if
such default shall continue for a period of thirty days, then all right under
the subscription in and to the stock subscribed for shall, upon the expiration
of such period, cease and determine and become and be forfeited to the Company;
provided that if at the expiration of such thirty-day period such right shall
belong to the estate of the decedent, it may be forfeited only by resolution of
the Board of Directors declaring forfeiture. The Company shall, within thirty
days after such forfeiture, cause such stock to be sold at private or public
<PAGE>
sale, at its market value at the time of sale, and shall, out of the net
proceeds of sale and upon surrender of any outstanding stock subscription
receipt issued to evidence the subscription, pay to the recorded holder of such
receipt the amount paid on the subscription prior to forfeiture, less the
amount, if any, by which the total subscription price of the stock exceeded the
net proceeds of sale.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders shall be held usually on the
third Tuesday in April of each year. Each such annual meeting shall be held at
the hour of ten o'clock a.m., at the registered office of the Company, or on
such other date in April and at such other time and place, within or without the
state of Oklahoma, as shall have been designated by resolution of the Board of
Directors or by written consent of all stockholders entitled to vote at such
meeting, and at such annual meeting a Board of Directors shall be elected and
such other business may be transacted as may come before the meeting, provided
notice thereof, if required by statute, shall have been duly given.
SECTION 2. Special meetings of the stockholders may be called at any time by the
Chairman, if there shall be one, the President, the Board of Directors, or by
one or more stockholders holding not less than one-fourth of the outstanding
shares of Common Stock of the Company, or in such other manner as may be
provided by statute or by paragraph (7) of Article VI of the Articles of
Incorporation, as amended.
SECTION 3. Notice of the time and place of each annual or special meeting of
stockholders, shall be mailed to the address, as shown by the Company's records,
of each stockholder entitled to vote at such meeting not less than ten days
before the date of the meeting, except in cases where other special method of
notice may be required by statute, in which cases the statutory method shall be
followed. The notice of a special meeting shall state the purpose of the
meeting. Notice of any meeting of the stockholders may be waived by any
stockholder.
SECTION 4. Any meeting of the stockholders, whenever or however called and held,
shall be legal and its proceedings valid if all of the stockholders eligible
<PAGE>
under the Articles of Incorporation, as amended, and the Bylaws to vote upon
questions submitted at such meeting are present either in person or by proxy, or
if a quorum be present in person or by proxy and either before or after the
meeting each of the stockholders entitled to vote and who was not present in
person or by proxy at the meeting signs a written waiver of notice or a consent
to the holding of such meeting or any approval of the minutes thereof.
SECTION 5. At any stockholders' meeting, except as otherwise provided in
paragraph (7) of Article VI of the Articles of Incorporation, as amended, a
majority of the stock outstanding eligible under the Articles of Incorporation,
as amended, and the Bylaws to vote upon questions being submitted at such
meeting must be represented in order to constitute a quorum for the transaction
of business, but the stockholders represented at any meeting, though less than a
quorum, may adjourn the meeting to some other day or sine die.
SECTION 6. No notice of any adjourned meeting need be given to stockholders
unless the adjournment be for thirty days or more, in which case notice shall be
given as of an original meeting, provided, however, that at an adjourned meeting
no business may be transacted other than that which might have been transacted
at the original meeting unless notice thereof shall have been given as in the
case of an original meeting.
SECTION 7. At all meetings of stockholders each share of stock eligible under
the Articles of Incorporation, as amended, and the Bylaws to vote upon questions
being submitted at such meeting shall be entitled to such vote or votes as from
time to time shall be provided in the Article of Incorporation, as amended, and
such stock may be voted by the holder thereof in person or by his duly
authorized proxy in writing duly filed with the Secretary of the Company.
SECTION 8. The Chairman, if there shall be one, when present, or in his absence
the President of the Company, shall act as Chairman, and the Secretary of the
Company shall act as Secretary, of each stockholders' meeting.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. The number of directors of the Company shall be such number, not less
than eight nor more than fifteen, as the Board shall by resolution determine
from to time. Except as otherwise provided in paragraph (7) of Article VI of the
Articles of Incorporation, as amended, the directors shall be elected at each
annual meeting of stockholders except that a majority of the directors at the
time in office, including any director who shall have resigned from the Board
effective at a future date, though less than a quorum, may fill any vacancy
occurring on the Board of Directors or any newly created directorship. Each
director shall hold office until the next succeeding annual meeting of the
stockholders and until his successor shall have been elected and qualified, or
until his earlier resignation or removal. The term of a director employed by the
Company (other than the Chief Executive Officer upon retirement) shall expire
concurrently with the termination of such employment.
SECTION 2. From and after October 28, 1987, the Board of Directors shall not
elect as a director or propose for election by the stockholders as a director,
(a) any person who has attained the age of seventy (70) or who will have
attained that age on or before the date of his election by the Board or proposed
election by the stockholders, or (b) any employee of the Company (other than a
past or present Chief Executive Officer of the Company) whose service as such
employee has terminated or will in normal course terminate on or before the date
of his election by the Board or proposed election by the stockholders; excepting
that any present member of the Board of Directors who has attained the age of
seventy (70) by October 28, 1987 may, at the President's discretion, remain on
the Board under the provisions of the Bylaws in effect prior to this Amendment.
SECTION 3. The Board of Directors by resolution may confer upon any former
director the honorary title of Director Emeritus. The designation and number of
directors emeriti shall be within the discretion of the Board. Directors emeriti
shall not be members of the Board of Directors, nor counted toward a quorum
thereof, but shall have the privilege of attending, without vote, the meetings
of the Board. Directors emeriti shall receive no compensation, but may be
reimbursed for necessary expenses in the manner and amount as if directors.
<PAGE>
SECTION 4. A regular meeting of the Board of Directors shall be held immediately
after the annual meeting of stockholders in each year and at the same place
where such annual meeting shall have been held, provided a quorum for such
meeting be obtained. A regular meeting of the Board of Directors shall also be
held quarterly thereafter, usually on the third Tuesday of January, April, July
and October at the registered office of the Company, or when directed by the
Chairman, if there shall be one, the President or the Board of Directors, at
such other place within or without the state of Oklahoma as may be specified in
the notice of the meeting. Written notice of each regular meeting stating the
time and place and, if required by statute or the Bylaws, the purpose of such
meeting shall be mailed, or telegraphed, at least one week before the date of
such meeting to each director, unless such notice shall be waived by any
director, in writing, either before or after such meeting.
SECTION 5. Special meetings of the Board of Directors may be called at any time
by the Chairman, if there shall be one, by the President, by a Vice President
when acting as President, or by any two or more directors, by mailing to each
director, not less than one week before such meeting, a written notice stating
the time, place and purpose of such meeting, unless such notice shall be waived
by any director, in writing, either before or after such special meeting.
Special meetings of the Board of Directors may be held at any time at the
registered office of the Company, or at any other place within or without the
state of Oklahoma.
SECTION 6. Notice of any meeting of the Board of Directors may be waived by any
director, in writing, either before or after the meeting; and any director, by
his attendance at any meeting, shall be deemed to have waived such notice.
SECTION 7. Five members of the Board of Directors shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors, but a less
number may adjourn the meeting to some other day or sine die. The acts of a
majority of the directors present at a meeting at which a quorum is present
shall be the acts of the Board of Directors. The Chairman, if there shall be
one, or in his absence the President of the Company, shall act as Chairman of
the meeting; and the Secretary of the Company shall act as Secretary of the
meeting. In the absence of both the Chairman and the President of the Company,
the Board of Directors shall elect a Chairman of the meeting. In the absence of
the Secretary, an Assistant Secretary of the Company shall serve as secretary of
the meeting. In their absence, the directors shall elect a secretary of the
meeting. The members of the Board of Directors may be paid such fees for
<PAGE>
attendance at meetings as the Board of Directors from time to time by resolution
may determine.
SECTION 8. The order of business at meetings of the Board of Directors shall,
unless otherwise ordered by the Board of Directors, be as follows:
1. Reading and consideration of the minutes of
the preceding meeting.
2. Reading of the minutes of meetings of the
Executive Committee, if any, held since the
last meeting of the Board of Directors.
3. Report of other committees, if any.
4. Reports from officers or other employees of
the Company.
5. Consideration of any other business of the
Company.
ARTICLE IV
COMMITTEES
SECTION 1. The Board of Directors, by resolution adopted by a majority of the
entire Board, may appoint an Executive Committee consisting of four or more
directors, including the Chairman, if there shall be one, and the President of
the Company. Any three directors on the Executive Committee shall be required
for a quorum. The Executive Committee may be discontinued at any time by
resolution adopted by a majority of the entire Board of Directors; but, after
its creation and until it is discontinued, the members of the Executive
Committee shall be appointed annually, by resolution adopted by a majority of
the entire Board of Directors at the first meeting of the Board after the annual
meeting of stockholders in each year. Vacancies in the Executive Committee shall
be filled by resolution adopted by a majority of the entire Board of Directors.
During the intervals between meetings of the Board of Directors, the Executive
Committee shall have and may exercise all the powers of the Board of Directors
in the management of the business and affairs of the Company except as to
matters in respect of which specific directions shall have been given by the
Board of Directors. All actions of the Executive Committee shall be recorded by
<PAGE>
the Secretary of the Company and be reported to the Board of Directors at its
regular meetings.
SECTION 2. The Board of Directors may appoint other committees, standing or
special, from time to time from among their own number, or otherwise, and confer
powers on such committees, and revoke such powers and terminate the existence of
such committees, at its pleasure.
SECTION 3. Meetings of any committee may be called in such manner and may be
held at such times and places as such committee may by resolution determine,
provided that a meeting of any committee may be called at any time by the
Chairman, if there shall be one, or by the President of the Company. Not less
than one day's notice of all meetings of the Executive Committee shall be given
to each member of the committee personally, in writing, or by mail, or by
telegraph, but no notice shall be necessary where a meeting is held with the
consent of all the members of the committee. Members of all committees shall be
paid such fees for attendance at meetings as the Board of Directors may
determine.
ARTICLE V
OFFICERS
SECTION 1. There shall be elected by the Board of Directors, at its first
meeting (if practicable) held after the annual election of directors in each
year, a President, a Secretary, a Treasurer, a Controller, and, if desired, one
or more Assistant Secretaries, Assistant Treasurers, and Assistant Controllers.
The Board of Directors also may provide for and elect at any time, a Chairman, a
General Manager, one or more Vice Presidents, and such other officers, and
prescribe such duties for them, respectively, as in the judgment of the Board of
Directors may be required from time to time to conduct the business of the
Corporation. Any two or more offices, except the offices of President and Vice
President, President and Secretary, President and General Manager, and Chairman
and any other office, may be held by the same person. All officers elected by
the Board of Directors shall hold their respective offices, unless sooner
terminated, until the first meeting of the Board of Directors held after the
next ensuing annual election of directors and until their respective successors,
willing to serve, shall have been duly elected and qualified. Any of such
officers may be removed from their respective offices at the pleasure of the
Board.
<PAGE>
SECTION 2. The Chairman of the Board shall, at his discretion, preside at all
meetings of the stockholders and at all meetings of the Board of Directors. In
the absence of the Chairman of the Board, the President shall preside at the
meetings of the Board of Directors. He shall also have and may exercise such
further powers and duties as from time to time may be conferred upon or assigned
to him by the Board of Directors.
SECTION 3. The President shall be the Chief Executive Officer of the Company and
shall have general authority over all of the business and affairs of the Company
and over all other officers, agents and employees of the Company. When the
Chairman of the Board is not present, he shall preside at all meetings of the
stockholders, and of the Board of Directors. He shall be a member of the
Executive Committee, if there shall be one, and shall be ex officio a member of
any other committee appointed by the Board of Directors. He shall preside at all
meetings of the Executive Committee, if there shall be one. He shall have
general and active management of the business and affairs of the Company, and
full authority and responsibility with respect to making effective all
resolutions of the Board of Directors. He shall execute bonds, mortgages,
contracts and other instruments requiring the seal of the Company to be affixed,
except where required or permitted by law to be otherwise signed and executed,
and except where such duties shall be expressly delegated by him or the Board of
Directors to some other officer or agent of the Company. He shall have authority
when neither the Board of Directors nor the Executive Committee is in session to
suspend the authority of any other officer or officers of the Company, subject,
however, to the pleasure of the Board of Directors or of the Executive Committee
at its next meeting, and authority to appoint and to remove and discharge any
and all agents and employees of the Company not elected or appointed directly by
the Board of Directors. He shall also have such other powers and duties as may
at any time be prescribed by these Bylaws or by the Board of Directors.
SECTION 4. The General Manager, if one is elected by the Board of Directors,
shall have such powers and duties as may from time to time be prescribed by the
Board of Directors. In case the President, due to absence or any other cause,
shall be unable at any time to attend to the duties of the office of President
requiring attention, or in the case of his death, resignation, or removal from
office, the powers and duties of the President shall, except as the Board of
Directors may otherwise provide, temporarily devolve upon the General Manager,
and shall be exercised by such General Manager as acting President during such
inability of the President, or until the vacancy in the office of the President
shall be filled. In case of the absence, disability, death, resignation, or
<PAGE>
removal from office of the President and the General Manager, the Board of
Directors shall elect one of its members to exercise the powers and duties of
the President during such absence or disability, or until the vacancy in one of
said offices shall be filled.
SECTION 5. The Vice President, if one is elected by the Board of Directors, or
Vice Presidents, if more than one is elected by the Board of Directors, shall
have such powers and duties as may from time to time be prescribed by the Board
of Directors.
SECTION 6. The Secretary shall attend all meetings of the stockholders, the
Board of Directors and the Executive Committee, shall keep a true and faithful
record thereof, and shall have the custody and care of the corporate seal,
minute books and stock books of the Company. Except as may be otherwise required
by law, the Secretary shall sign and issue all notices required for meetings of
stockholders, the Board of Directors and the Executive Committee. Whenever
requested by the requisite number of stockholders or directors, the Secretary
shall give notice, in the name of the stockholders or directors making the
request, of a meeting of the stockholders, the Board of Directors or the
Executive Committee, as the case may be. The Secretary shall sign all documents
and papers to which the signature of the Secretary may be necessary or
appropriate, shall affix and attest the seal of the Company to all instruments
requiring the seal, and shall have such other powers and duties as are commonly
incidental to the office of secretary of a corporation or as may be prescribed
by the Board of Directors or the Chief Executive Officer.
SECTION 7. The Treasurer shall have charge of and be responsible for the
collection, receipt, custody and disbursement of the funds of the Company, and
shall deposit its funds in the name of the Company in such banks, trust
companies or other depositories as the Board of Directors may authorize. Such
funds shall be subject to withdrawal only in such manner as may be designated
from time to time by resolution of the Board of Directors. The Treasurer shall
have the custody of such books and papers as in the practical business
operations of the Company shall be convenient or as shall be placed in the
Treasurer's custody by order of the Board of Directors. The Treasurer shall have
such other powers and duties as are commonly incidental to the office of
treasurer of a corporation or as may be prescribed by the Board of Directors,
the Chief Executive Officer or the Chief Financial Officer. Securities owned by
the Company shall be in the custody of the Treasurer or of such other officers,
agents or depositories as may be designated by the Board of Directors. The
Treasurer may be required to give bond to the Company for the faithful discharge
<PAGE>
of the treasurer's duties in such form and in such amount and with such surety
as shall be determined by the Board of Directors.
SECTION 8. The Controller shall be responsible for the preparation, installation
and supervision of all accounting records of the Company, preparation and
interpretation of the financial statements and reports of the Company,
maintenance of appropriate and adequate records of authorized appropriations,
determination that all sums expended pursuant to such appropriations are
properly accounted for, and ascertainment that all financial transactions are
properly executed and recorded, and shall have such specific powers and duties
as shall be delegated by the Board of Directors, the Chief Executive Officer or
the Chief Financial Officer. The Controller may be required to give bond to the
Company for the faithful discharge of the duties of the controller in such form
and in such amount and with such surety as shall be determined by the Board of
Directors.
SECTION 9. Assistant officers, if any, shall assist the principal officers in
the performance of the duties assigned to such principal officers, and in so
doing each shall have the powers of their respective principal officers. In case
of the absence, disability, death, resignation or removal from office of any of
such principal officers, their duties shall, except as otherwise ordered by the
Board of Directors, temporarily evolve upon such assistant officer as shall be
designated by the Chief Executive Officer. Such assistant officers shall also
perform such other duties as may be assigned to them from time to time by their
respective principal officers, by the Chief Executive Officer or by the Board of
Directors.
ARTICLE VI
MISCELLANEOUS
SECTION 1. The corporate seal of the Company shall have inscribed thereon the
name of the Company, between concentric circles, and the word "SEAL". Such seal
may be used by the Company by causing it, or a FACSIMILE thereof, to be
imprinted, impressed or affixed or in any other manner reproduced.
SECTION 2. The funds of the Company shall be deposited to its credit in such
banks or trust companies as the Board of Directors from time to time shall
designate and shall be withdrawn only on checks or drafts of the Company for the
purposes of the Company. All checks, drafts, notes, acceptances and endorsements
<PAGE>
of the Company shall be signed in such manner and by such officer or officers or
such individual or individuals as the Board of Directors from time to time by
resolution shall determine. If and to the extent so authorized by the Board of
Directors, such signature or signatures may be facsimile. Only checks, drafts,
notes, acceptances and endorsements signed in accordance with such resolution or
resolutions shall be the valid checks, drafts, notes, acceptances or
endorsements of the Company.
SECTION 3. No debt shall be contracted, for other than current expenses, unless
authorized by the Board of Directors or the Chairman, and no bill shall be paid
by the Treasurer unless previously certified by the head of the department in
which it originated and the Treasurer is otherwise satisfied as to its propriety
and accuracy. If the Treasurer is not so satisfied, the authority of the
Chairman shall be secured before payment.
SECTION 4. All dividends shall be declared by a vote of the Board of Directors.
SECTION 5. The fiscal year of the company shall close at the end of December
annually.
SECTION 6. (a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and is not determined by the Board to have been
guilty of misconduct in the performance of his or her duty to the Corporation.
Provided, however, that no person shall be indemnified for amounts paid in
settlement, unless the terms and conditions of such settlement have been
consented to by the Corporation. And further provided that with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
that his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not of itself create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
<PAGE>
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that such conduct was unlawful; provided, however, that no indemnity
prohibited by law shall be made.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation. Provided that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for misconduct in the
performance of his or her duty to the Corporation unless and only to the extent
that the District Court or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the District Court or
such other court shall deem proper; and further provided that no indemnity
prohibited by law shall be made.
(c) The Corporation may indemnify, to the same extent as hereinabove provided,
any person who is or was an employee or agent of the Corporation or is or was
serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. Any
indemnification under this Subsection (c) shall be made only upon the
authorization of the Board of Directors, which may occur at any time prior to,
during, or after final judgment or order, in any action, suit or proceeding to
which such person is or is threatened to be made a party. No right to such
indemnification is created by this Subsection (c).
(d) Any indemnification under Subsections (a), (b) and (c) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Subsections (a) and (b). Such determination
<PAGE>
shall be made (i) by the Board of Directors by majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable, by
independent legal counsel in a written opinion, if a quorum of disinterested
directors so directs, or (iii) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of such director, or officer, to repay such amount unless it shall ultimately be
determined that such person is entitled to be indemnified by the Corporation as
authorized in this Section. Such expenses incurred by other employees and agents
with respect to which indemnification is claimed hereunder may also be advanced
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(f) The Corporation may, as authorized by the Board of Directors, purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by him or her in any such capacity, or
arising out of this status as such, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of this Section.
(g) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Corporation pursuant to the foregoing provisions of this Section or the laws of
the state of Oklahoma, in the event any claim for indemnification against such
liabilities (other than for the payment by the Corporation of expenses,
including attorneys' fees, actually and reasonably incurred by a director,
officer or controlling person of the Corporation in the successful defense of
any action, suit or proceeding) is asserted against the Corporation by such
director, officer or controlling person in connection with the registration of
any security under the Securities Act of 1933, the Corporation will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by the Corporation is against public policy as expressed by the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
<PAGE>
ARTICLE VII
Unless otherwise ordered by the Board of Directors, the President shall have
full power and authority on behalf of the Company, either in person or by proxy,
at any meeting of stockholders of any corporation in which the Company may hold
Stock and, at any such meeting, may possess and exercise all the rights and
powers incident to the ownership of such Stock which, as the owner thereof, the
Company might have possessed or exercised, if present.
ARTICLE VIII
AMENDMENT OR REPEAL OF BYLAWS
The Bylaws may be altered or repealed or new Bylaws may be adopted (a) by a vote
of the holders of a majority of the Common Stock present in person or by proxy
at any regular or special meeting, duly convened after notice to the common
stockholders setting out the purpose of such meeting, at which meeting a
majority of the outstanding Common Stock is represented; or (b) by a majority
vote of the entire Board of Directors at any regular or special meeting duly
convened after notice of the purpose of such meeting, subject to the power of
the stockholders to alter or repeal such Bylaws; provided that the Board of
Directors shall not adopt, alter or repeal any Bylaw fixing the number,
qualifications, classifications or terms of office of the directors, or any of
them.
* * * * * * * *
BYLAWS
OF
SOUTHWESTERN ELECTRIC POWER COMPANY
(A DELAWARE CORPORATION)
(A MEMBER OF THE CENTRAL AND SOUTH WEST SYSTEM)
As amended to OCTOBER 30, 1996
(Recompiled October 30, 1996)
ARTICLE I
OFFICES
The Corporation may maintain offices at such places as the Board
of Directors may, from time to time, appoint.
ARTICLE II
SEAL
The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware";
and such seal may be facsimile.
ARTICLE III
STOCK AND TRANSFERS
SECTION 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock, stating the number of shares owned by such
stockholder and the designation of the class (and series, if any) in which
issued. All stock certificates shall be signed by the Chairman of the Company,
the President, or a Vice President of the Corporation, and also by the
Treasurer, the Secretary, an Assistant Treasurer, or an Assistant Secretary of
the Corporation and shall be sealed with the corporate seal of the Corporation
or a facsimile thereof; provided, that, however, if such certificates are
countersigned by a Transfer Agent and/or registered by a Registrar, the
signature of any such Chairman of the Company, President, Vice President,
Treasurer, Secretary, Assistant Treasurer, or Assistant Secretary may be
facsimile. Any such Transfer Agent or Registrar shall be a person other than the
Corporation or employee of the Corporation, and shall be duly appointed by the
Board of Directors. In case any one or more of such officers of the Corporation
who have signed or whose facsimile signature or signatures have been reproduced
upon any such certificate or certificates shall have ceased to be such officer
or officers of the Corporation before such certificate or certificates shall
have been issued or delivered by the Corporation, such certificate or
<PAGE>
certificates may be issued and delivered by the Corporation with the same effect
as if such former officer or officers remained in office at the date of such
issuance or delivery.
SECTION 2. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation and, except (a) as may be
required by law or by the order of a court in some proper proceeding, (b) as
hereinafter provided, or (c) as the Board of Directors may otherwise expressly
provide by resolution from time to time, shall be transferred only upon the
assignment and surrender of the issued certificate or certificates representing
such shares. Except as the Board of Directors may otherwise provide by
resolution from time to time, in the event any issued certificate representing
shares of stock of the Corporation shall be lost, destroyed or stolen, the
holder thereof may have a new certificate for an equivalent number of shares of
the same class issued to him in lieu of and to replace such lost, destroyed or
stolen certificate upon producing evidence, satisfactory to the Board of
Directors, of such loss, destruction or theft and upon furnishing to the
Corporation a bond of indemnity, deemed sufficient by the Board of Directors, to
protect the Corporation against any loss, damage or liability that may be
sustained by reason of such lost, destroyed or stolen certificate and the
issuance and delivery of such new or replacement certificate.
SECTION 3. The stock transfer books of the Corporation may be
closed by order of the Board of Directors for a period not exceeding fifty days
preceding the date of any meeting of stockholders or the date for the payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go into effect. In lieu of
closing the stock transfer books as aforesaid, the Board of Directors is
authorized, in its discretion, to fix in advance a date, not exceeding fifty
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, and in such case only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to such notice of, and to vote at,
such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.
ARTICLE IV
MEETING OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the
Corporation shall be held on the second Wednesday in April of each year, if not
a legal holiday, and if a legal holiday then on the day following, at 10:30
o'clock a.m.; for the election of directors and for the transaction of such
other business as may come before the meeting. Such meetings shall be held at
the office of the Corporation in the City of Shreveport, Louisiana.
<PAGE>
SECTION 2. Special meetings of the stockholders may be called by
the Board of Directors or by a majority of the directors individually, or by
stockholders holding not less than one-third in number of the total outstanding
shares of capital stock of the Corporation entitled to vote, or in such other
manner as may be provided in Article Fourth of the Certificate of Incorporation,
as amended, of the Corporation, or as may at any time be provided by statute.
Such special meetings shall be held at the office of the Corporation either in
the City of Shreveport, Louisiana, or in the City of Wilmington, Delaware, as
the notice of the meeting may specify.
SECTION 3. Notice of the time and place of each annual meeting
shall be sent by mail to the recorded address of each stockholder entitled to
vote, not less than ten days before the date of the meeting. Like notice shall
be given of all special meetings, except in cases where other special method of
notice may be required by statute, in all which cases, the statutory method
shall be followed. The notice of a special meeting shall state the object of the
meeting. Notice of meetings may in all cases be waived by stockholders entitled
to notice.
SECTION 4. At all meetings of stockholders, except as otherwise
provided in Article Fourth of the Certificate of Incorporation, as amended, a
majority of the number of shares of stock outstanding and entitled to vote must
be represented in order to constitute a quorum for the transaction of any
business other than (a) adjourning from time to time until a quorum shall be
obtained, or (b) adjourning sine die, and for any such adjournment a majority
vote of whatever stock shall be represented shall be sufficient.
SECTION 5. At all stockholders' meetings, except as otherwise
provided in Article Fourth of the Certificate of Incorporation, as amended,
holders of record of stock then having voting power shall be entitled to one
vote for each share of such stock held by them respectively, upon any question
or at any election, and such vote may, in all cases, be given by proxy, duly
authorized in writing.
SECTION 6. A full list of the stockholders entitled to vote at
the ensuing election, arranged in alphabetical order, with the residence of
each, and the number of shares held by each, shall be prepared by the Secretary
and filed in the office where the election is to be held, at least ten days
before every election, and shall at all times, during the usual hours for
business, be open to the examination of any stockholder.
ARTICLE V
DIRECTORS
SECTION 1. The property and business of the Corporation shall be
managed by a Board of Directors, which, except as otherwise provided in Article
Fourth of the Certificate of Incorporation, as amended, shall consist of not
less than three nor more than thirteen members. Except as otherwise provided in
Article Fourth of the Certificate of Incorporation, as amended, the Directors
shall be elected by a majority of votes of the stockholders entitled to vote,
<PAGE>
present in person or represented by proxy at the annual meeting of the
stockholders, and each Director shall be elected for a term of one year, and
until his successor shall be elected and shall qualify.
SECTION 2. Except as otherwise provided in Article Fourth of the
Certificate of Incorporation, as amended, any vacancy in the Board of Directors
shall be filled by the Board, and each Director so appointed shall hold office
until the next annual election, and until his successor shall be duly elected
and qualified.
SECTION 3. The Board of Directors may hold its meetings and may
have one or more offices, and may keep the books of the Corporation (except the
original or duplicate stock ledger) outside of Delaware, at such places as they
may from time to time determine. In addition to the powers and authorities by
these Bylaws expressly conferred upon them, the Board may exercise all such
powers of the Corporation, and do all such lawful acts and things as are not by
law or by these Bylaws required to be exercised or done by the stockholders.
SECTION 4. Without prejudice to the general powers conferred by
the last preceding clause, it is hereby expressly declared that the Board of
Directors shall have the following powers, that is to say:
1. From time to time to make and change rules and regulations,
not inconsistent with these Bylaws, for the management of the Corporation's
business and affairs.
2. From time to time, as and when and upon such terms and
conditions as it may determine, to issue any part of the authorized capital
stock of the Corporation.
3. To purchase, or otherwise acquire for the Corporation, any
property, right or privilege which the Corporation is authorized to acquire at
such price or consideration, and generally on such terms or conditions as it
shall think fit.
4. At its discretion to pay for any property or rights acquired
by the Corporation, either wholly or partly in money, stock, bonds, debentures
or other securities of the Corporation.
5. To borrow money, to create and issue mortgages, bonds, deeds
of trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.
6. To appoint and at its discretion, remove or suspend any and
all officers, employees and agents, permanently or temporarily, as it may think
fit, and to determine their duties and fix, and from time to time change their
duties, salaries, and emoluments, and to require security in such instances, and
in such amounts as it thinks fit.
7. To confer by resolution upon any officer of the Corporation,
the power to choose, remove or suspend subordinate officers, employees and
agents.
<PAGE>
8. To appoint any person or corporation to accept and hold in
trust for the Corporation, any property belonging to the Corporation, or in
which it is interested, or for any other purpose, and to execute and do all such
deeds and things as may be requisite in relation to any such trust.
9. To determine who shall be authorized on the Corporation's
behalf, to sign bills, notes, receipts, acceptances, endorsements, checks,
releases, contracts and other papers and documents.
10. To delegate any of the powers of the Board in the course of
the current business of the Corporation to any standing or special committee, or
to any officer or agent, or to appoint any persons to be the agents of the
Corporation, with such powers (including the powers to subdelegate), and upon
such terms as it shall think fit.
ARTICLE VI
MEETINGS OF THE BOARD
SECTION 1. Regular meetings of the Board of Directors of the
Corporation shall be held at such place and time as may be designated from time
to time by the Board. Special meetings of the Board may be called by the
Chairman of the Company, if there shall be one, or by the President, or by a
Vice President when acting as President, or by any two directors, upon not less
than two days' notice to each director, either personally or by mail or
telegraph. Notice of any meeting of the Board may be waived in writing by any
director, either before or after the meeting, and shall be deemed to have been
waived by his attendance at such meeting.
SECTION 2. A majority of the authorized number of directors fixed
by the Bylaws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but a lesser number may adjourn from time to
time until a quorum shall be obtained or may adjourn sine die.
SECTION 3. At all meetings of the Board of Directors, 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, unless the act of a greater number of directors
is required by statute. The Board shall keep minutes of the proceedings at its
meetings. Unless otherwise restricted by the Certificate of Incorporation, as
amended, any action required or permitted to be taken at any meeting of the
Board or of any committee thereof may be taken without a meeting if, prior to
such action, a written consent setting forth the action so taken shall be signed
by all members of the Board or of such committee, as the case may be, and such
written consent shall be filed with the minutes of the proceedings of the Board
or of such committee, as the case may be.
SECTION 4. Directors who are not officers or employees of the
Corporation shall be entitled to receive such compensation, if any, for their
services as directors of the Corporation, as may be fixed by resolution of the
Board of Directors. Directors who are officers or employees of the Corporation
shall not be entitled to receive any compensation for their services as
<PAGE>
directors. All directors of the Corporation (whether or not officers or
employees) may be allowed such sum for attendance at any regular or special
meeting of the Board as may be fixed by resolution of the Board and shall be
reimbursed by the Corporation for any out-of-pocket expenses incurred for
attendance at any such meeting. Nothing herein contained shall be construed to
prevent any director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE VII
OFFICERS
SECTION 1. There shall be elected by the Board of Directors, at
its first meeting (if practicable) held after the annual election of directors
in each year, a President, a Secretary, a Treasurer, a Controller, and if
desired, one or more Assistant Secretaries and Assistant Treasurers, and
Assistant Controllers. The Board of Directors also may provide for and elect, at
any time, a Chairman of the Company, a General Manager, one or more Vice
Presidents, and such other officers, and prescribe such duties for them,
respectively, as in the judgment of the Board of Directors may be required from
time to time to conduct the business of the Corporation. Any two or more
offices, except the offices of President and Vice President, President and
Secretary, President and General Manager, and Chairman and any other office, may
be held by the same person. All officers elected by the Board of Directors shall
hold their respective offices, unless sooner terminated, until the first meeting
of the Board of Directors held after the next ensuing annual election of
directors and until their respective successors, willing to serve, shall have
been duly elected and qualified. Any of such officers may be removed from their
respective offices at the pleasure of the Board.
SECTION 2. The Chairman of the Company, if there shall be one,
shall when present preside at all meetings of the stockholders, of the Board of
Directors, and of the Executive Committee, if there shall be one. He shall be a
member of the Executive Committee, if there shall be one, and may attend any
meeting of any committee of the Board, whether or not a member, except that
attendance at an Audit Committee meeting may be only upon invitation of that
committee. He shall have such other powers and duties as may at any time be
prescribed by the Bylaws or by the Board of Directors. In the event of death or
incapacitation of the President and Chief Executive Officer, the Chairman, if
there shall be one shall assume the duties of the Chief Executive Officer until
a successor is elected.
SECTION 3. The President shall be the Chief Executive Officer of
the Company and shall have general authority over all of the business and
affairs of the Company and over all other officers, agents and employees of the
Company. When the Chairman, if there shall be one, is not present, the President
shall preside at all meetings of the stockholders, of the Board of Directors,
and of the Executive Committee, if there shall be one. He shall be a member of
the Executive Committee, if there shall be one, and may attend any meeting of
any committee of the Board, whether or not a member, except that attendance at
an Audit Committee meeting may be only upon invitation of that committee. He
shall have general and active management of the business and affairs of the
Company, and full authority and responsibility with respect to making effective
all resolutions of the Board of Directors. He shall execute bonds, mortgages,
contracts and other instruments requiring the seal of the Company to be affixed,
except where required or permitted by law to be otherwise signed and executed,
and except where such duties shall be expressly delegated by him or the Board of
Directors to some other officer or agent of the Company. He shall have
authority, when neither the Board of Directors nor the Executive Committee is in
<PAGE>
session, to suspend the authority of any other officer or officers of the
Company, subject, however, to the pleasure of the Board of Directors or the
Executive Committee at its next meeting, and authority to appoint and to remove
and discharge any and all agents and employees of the Company not elected or
appointed directly by the Board of Directors. He shall have such other powers
and duties as may at any time be prescribed by the Bylaws or by the Board of
Directors.
SECTION 4. The General Manager, if one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors. In case the President, due to absence or
any other cause, shall be unable at any time to attend to the duties of the
office of President requiring attention, or in the case of his death,
resignation, or removal from office, the powers and duties of the President
shall, except as the Board of Directors may otherwise provide, temporarily
devolve upon the General Manager, and shall be exercised by such General Manager
as acting President during such inability of the President, or until the vacancy
in the office of the President shall be filled. In case of the absence,
disability, death, resignation, or removal from office of the President and the
General Manager, the Board of Directors shall elect one of its members to
exercise the powers and duties of the President during such absence or
disability, or until the vacancy in one of said offices shall be filled.
SECTION 5. The Vice President, if one is elected by the Board of
Directors, or Vice Presidents, if more than one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors.
SECTION 6. The Secretary shall attend all meetings of the Board
of Directors, shall keep a true and faithful record thereof in proper books to
be provided for that purpose, and shall have the custody and care of the
corporate seal, records, minutes and stock books of the Corporation. He shall
also act as Secretary of all stockholders' meetings, and keep a record thereof,
except as some other person may be selected as Secretary by any such meeting,
shall keep a suitable record of the addresses of stockholders, and shall, except
as may be otherwise required by statute or by the Bylaws, sign, and by order of
the Board of Directors, issue all notices required for meetings of stockholders,
and of the Board of Directors. Whenever requested by a requisite number of
individual stockholders, or individual directors, to give notice, for a meeting
of stockholders or of the Board of Directors, he shall give such notice, as
requested, and the notice shall state the names of the stockholders or directors
making the request. He shall; sign all mortgages, and all other documents and
papers to which his signature may be necessary or appropriate, shall affix the
seal of the Corporation to all instruments requiring the seal, and shall have
such other powers and duties as are commonly incidental to the office of
Secretary, or as may be prescribed for him. He shall be sworn to the faithful
discharge of his duty.
<PAGE>
SECTION 7. The Treasurer shall have charge of and be responsible
for the collection, receipt, custody and disbursement of the funds of the
Corporation, and shall deposit its funds in the name of the Corporation, in such
banks, trust companies, or safe deposit vaults as the Board of Directors may
direct. He shall have the custody of such books, receipted vouchers, and other
books and papers as in the practical business operations of the Corporation
shall naturally belong in the office or custody of the Treasurer, or as shall be
placed in his custody by the Board of Directors, by the Executive Committee, by
the Chairman of the Company, by the President, or by a Vice President or a
General Manager when acting as President. He shall also have charge of the
safekeeping of all stocks, bonds, mortgages and other securities belonging to
the Corporation, but such stocks, bonds, mortgages and other securities shall be
deposited for safekeeping in a safe deposit vault to be approved by the Board of
Directors or by the Executive Committee, in a box or boxes, access to which
shall be had as may be provided by resolution of the Board of Directors or of
the Executive Committee. He shall have such other powers and duties as are
commonly incidental to the office of Treasurer, or as may be prescribed for him.
He may be required to give bond to the Corporation for the faithful discharge of
his duties in such form and to such amount and with such sureties as shall be
determined by the Board of Directors.
SECTION 8. The Controller shall have general supervision and
direction of matters pertaining to the function of the Accounting Department and
related sections, including all matters pertaining to preparation of budgets,
statistics, taxes and corporate matters, without excluding by this enumeration
any other accounting functions not mentioned herein. He shall have general
supervision over all books and accounts of the Corporation relating to receipts
and disbursements, and the form of all vouchers, accounts, reports and returns
required by the various departments. He shall see that the accounts of all
officers and employees are examined from time to time and as often as
practicable, and that proper returns are made of all receipts from all sources.
He shall be responsible for the audit, verification and payment of all billings
and voucher requisitions for any and all purposes which shall be submitted
currently to him or to someone he designates on his staff. Payments shall be
made forthwith if found satisfactory and correct unless deferment is properly
requested and approved. No payments of billings and voucher requisitions shall
be made unless previously certified to or approved by the head of the department
in which it originates and by others authorized to approve such disbursements
and unless he is satisfied of its propriety and correctness. He shall have full
access to all contracts, correspondence and other papers and records of the
Corporation relating to its business matters, shall have the custody of its
account books, and other papers relating to the accounts of the Corporation, and
shall have such other powers and duties as are commonly incidental to the office
of Controller, or as may be prescribed for him. He may be required to give bond
to the Corporation for the faithful discharge of his duties in such form and to
such amount and with such sureties as shall be determined by the Board of
Directors.
SECTION 9. Assistant Controllers, Assistant Secretaries and
Assistant Treasurers shall assist the Controller, the Secretary and the
Treasurer, respectively, as the case may be, in the performance of the
respective duties of such principal officers; and in case of the absence,
disability, death, resignation or removal from office of any such principal
officer, the powers and duties of such principal officer shall, except as
otherwise ordered by the Chairman of the Company, the President, the Board of
Directors or the Executive Committee, temporarily devolve upon his assistant or
<PAGE>
senior assistant if there shall be more than one. Such assistants shall also
perform such other duties as may be assigned to them from time to time by their
respective principal officers or the Chairman of the Company or the President or
by the Board or the Executive Committee.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. Each person who is or was or had agreed to become a
Director or Officer of the Corporation, or each such person who is or was
serving, or had agreed to serve at the request of the Board of Directors or an
officer of the Corporation as an employee or agent of the Corporation, or as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including the heirs, executors,
administrators or estate of such person), shall be indemnified (including,
without limitation, the advancement of expenses and payment of all loss,
liability and expenses) by the Corporation to the full extent permitted by the
General Corporation Law of the State of Delaware or any other applicable laws as
presently in effect, or as may hereafter be amended (but in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said laws permitted the Corporation
to provide prior to such amendment); provided, however, that no person shall be
indemnified for amounts paid in settlement unless the terms and conditions of
such settlement have been consented to by the Corporation, and provided further
that no indemnification for employees or agents of the Corporation (other than
Directors and officers) will be made without the express authorization of the
Corporation's Board of Directors.
ARTICLE IX
COMMITTEES
SECTION 1. The Board of Directors may, by resolution passed by a
majority of the whole Board, appoint an Executive Committee consisting of not
less than three members of the Board, including the Chairman of the Company, if
there shall be one, and the President of the Corporation. The Executive
Committee may make its own rules of procedure and elect its chairman, and shall
meet where and as provided by such rules or by resolution of the Board of
Directors. A majority of the members of the Committee shall constitute a quorum
for the transaction of business. During the intervals between the meetings of
the Board of Directors the Executive Committee shall have all the powers of the
Board in the management of the business and affairs of the Corporation including
power to authorize the seal of the Corporation to be affixed to all papers which
may require it, and, by majority vote of all its members, may exercise any and
all such powers in such manner as such Committee shall deem best for the
interests of the Corporation in all cases in which specific directions shall not
have been given by the Board of Directors. Vacancies in the Committee shall be
<PAGE>
filled by resolution passed by a majority of the whole Board of Directors. The
Executive Committee shall keep regular minutes of its proceedings and report the
same to the Board when required.
SECTION 2. The Board of Directors, by the affirmative vote of a
majority of the whole Board, may appoint any other standing committees, and such
standing committees shall have and may exercise such powers as shall be
authorized by the Bylaws or by the resolution appointing them.
SECTION 3. In accordance with the foregoing provision, the
following standing committee is hereby established:
AUDIT COMMITTEE. The Audit Committee of the Southwestern Electric
Power Company Board of Directors shall be composed of all directors of the
Company who are not presently or formerly officers or employees of this Company
or its affiliates. The Chairman of the Committee shall be appointed by the
Chairman of the Board of Directors of the Company.
The Audit Committee shall have such responsibilities and powers, permitted by
law, as the Board may determine from time-to-time by resolution passed by a
majority of the Board.
ARTICLE X
ORDER OF BUSINESS AT DIRECTORS' MEETINGS
SECTION 1. The order of business at meetings of the Board of
Directors shall be determined by the Chairman of the Company, if there shall be
one and he shall be present, or by the President or other person acting as
chairman of the meeting, unless otherwise ordered by the Board.
ARTICLE XI
INSPECTION OF BOOKS
SECTION 1. The Board of Directors shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations, the accounts and books of the Corporation or
any of them, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account or book or document of
the Corporation, except as conferred by statute or as authorized by the Board of
Directors or by a resolution of the stockholders.
<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 1. The funds of the Corporation shall be deposited to its
credit in such banks or trust companies as the Board of Directors, or its
designee, may, from time to time, designate, and shall be drawn out only for the
purposes of the Corporation, and only upon checks or drafts signed as herein
authorized. All checks, drafts or orders for payment except "transfer checks"
and "payroll checks" as hereinafter provided drawn upon the "General Account,"
the "Deposit Refund Account," and the "Mid-South Towers-SWEPCO Account" in any
depository shall be signed on behalf of the Company by the President, a Vice
President, the General Manager, the Treasurer or an Assistant Treasurer, or by
any such officers or employees of the Corporation as may be designated for the
purpose from time to time by resolution of the Board of Directors or of the
Executive Committee; provided, however, that all such checks in amounts over
$50,000 shall be signed manually by such officer, and provided that all such
checks or orders drawn in an amount of $50,000 or less may be signed by the
mechanical or facsimile signature of said officer. "Transfer checks,"
transferring funds of the Company from its General Account in any depository to
its General Account in any other depository, may be signed on behalf of the
Company by the mechanical or facsimile signature of said officers as defined
above. "Payroll checks" drawn upon the Payroll Account or Accounts of the
Company may be signed on behalf of the Company by the mechanical or facsimile
signature of said officer as defined above. All deposits and funds of the
Company in any depository shall be made, in the first instance, directly to the
credit of the Company in its General Account in such depository, and no such
deposit shall be made, in the first instance, directly to the credit of the
Company in any Special Account, fund or deposit (herein called a "Special
Account") of the Company in any depository, whether now or hereafter authorized
or maintained.
SECTION 2. Promissory notes issued by the Corporation shall be
signed by the Chairman of the Company or the President or a Vice President and
by the Treasurer or an Assistant Treasurer of the Corporation, or shall be
signed in such other manner as the Board of Directors or the Executive Committee
shall by resolution provide. When the Board of Directors or the Executive
Committee shall by resolution so provide, the signature of an officer or
employee designated or authorized to sign or countersign bonds, debentures,
notes, drafts or checks issued by the Corporation may be facsimile.
SECTION 3. No debt shall be contracted, except for current
expenses, unless authorized by the Board of Directors or the Executive
Committee, and no bills shall be paid by the Treasurer unless audited and
approved by the Controller, or by some person or committee expressly authorized
by the Board of Directors or the Executive Committee to audit and approve bills
for payment.
SECTION 4. The dividends upon the preferred stock, if declared,
shall be payable quarterly on the first day of January, April, July and October
in each year, unless different quarterly payment dates shall be fixed, in
respect of any series of the preferred stock of the Corporation, by the
Certificate of Incorporation, as amended, or by the resolution of the Board of
<PAGE>
Directors creating such series. All dividends declared upon the common stock
shall be payable at such time as may be fixed by the Board of Directors. Before
payment of any dividend or making any distribution of profits, there shall be
set aside, out of the surplus or net profits of the Corporation, such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such purpose as the Board shall think conducive to the interest of the
Corporation.
SECTION 5. The fiscal year of the Corporation shall be the
calendar year.
ARTICLE XIII
AMENDMENT
SECTION 1. Subject always to Bylaws made by the stockholders, the
Board of Directors may make Bylaws from time to time, and may alter, amend or
repeal such Bylaws at any regular or special meeting of the Board, but any
Bylaws made by the Board of Directors may be altered, amended or repealed by the
stockholders, at any annual meeting, or at any special meeting, provided notice
of such proposed alteration, amendment or repeal shall have been included in the
notice of such special meeting.
WEST TEXAS UTILITIES COMPANY
BY-LAWS
---------------------------------
ARTICLE I.
Offices.
The corporation may maintain offices at such places in the State
of Texas as the Board of Directors may, from time to time, appoint.
ARTICLE II.
Seal.
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, 1927 Texas". Such seal may be a
facsimile.
ARTICLE III.
Stock and Transfers.
Section 1. Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock stating the number of shares owned by such
stockholder, and the designation of the class in which issued. All certificates
of stock shall be signed by the President or a Vice-President of the Company and
also by the Treasurer, Secretary, an Assistant Treasurer or an Assistant
Secretary of the Company and sealed with the seal of the Company, which
signatures and seal may be facsimile. All certificates of Common Stock shall be
countersigned by a Transfer Agent appointed by the Board and all certificates of
Preferred Stock shall be countersigned by a Transfer Agent and registered by a
Registrar, appointed by the Board. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate is issued, such
certificate may be issued by the Company with the same effect as if such officer
had not ceased to be such at the date of issue.
Section 2. Shares of stock shall be transferable only on the books of
the Company, and, except as hereinafter provided, or as may be required by law,
or by the order of a court in some proper proceedings, shall be transferred only
upon the proper assignment and surrender of the certificates issued therefor. If
<PAGE>
an outstanding certificate of stock shall be lost, stolen or destroyed, a new
certificate may, in the discretion of the Board of Directors, be issued in lieu
thereof upon receipt of evidence, satisfactory to the Board, of such loss,
destruction, or theft, and upon receipt by the Company of a bond of indemnity,
deemed sufficient by the Board, to protect the Company against claims under the
outstanding certificate.
Section 3. The transfer books may be closed by order of the Board of
Directors for short periods, not exceeding twenty-five days at any one time, for
the purpose of paying a dividend, or holding a meeting of stockholders, or for
any other legal purpose, as the Board of Directors shall deem advisable.
Section 4. If default shall be made in the prompt payment, when due, of
any sum payable to the company upon any subscription of stock of the Company,
and if such default shall continue for a period of thirty days, all right under
the subscription in and to the stock subscribed for shall, upon the expiration
of such period, cease and determine, and all right under the subscription in and
to the stock subscribed for shall be forfeited to the Company, but no right
under the subscription in and to the stock subscribed for shall be forfeited
unless and until the directors have caused a written notice to be served on the
subscriber personally, or by depositing the same in the post office, properly
directed to him at the post office nearest his usual place of residence, stating
that he is required to make payment, setting forth the amount, at the time
(which payment day must be not less than thirty days after the day the notice is
served) and place specified in said notice, and if he fails to make the same,
his stock and all previous payments thereon will be forfeited to the Company;
and provided further, that if at the time for payment fixed in said notice, such
right shall belong to the estate of a decedent, it may be forfeited only by
resolution of the Board of Directors declaring forfeiture. The Company, shall,
within thirty days after such forfeiture, cause such stock to be sold at private
or public sale, at its market value at the time of sale, and shall, out of the
net proceeds of sale and upon surrender of any outstanding stock subscription
receipt issued to evidence the subscription, pay to the recorded holder of such
receipt the amount paid on the subscription prior to forfeiture, less the
amount, if any, by which the total subscription price of the stock exceeded the
net proceeds of sale.
ARTICLE IV.
Meeting of Stockholders.
Section 1. The annual meeting of the stockholders shall be held on the
last Tuesday in March in each year, if not a legal holiday, and if a legal
holiday, then on the day following, at the hour of 11 o'clock A. M., for the
election of Directors, and for the transaction of such other business as may
come before it. Such meeting shall be held at the principal office of the
Company in the State of Texas.
<PAGE>
Section 2. Special meetings of the stockholders may be called by the
Board of Directors, or by a majority of the Directors individually, or by the
holders of not less than one-third in number of the total outstanding shares of
capital stock of the Company entitled to vote, or in such manner as may be
provided by statute or by Paragraph (7) of Article VI of the Charter, as
amended.
Section 3. Notice of the time and place of each annual meeting shall be
sent by mail to the recorded address of each stockholder entitled to vote, not
less than ten days before the date of the meeting. Like notice shall be given of
all special meetings, except in cases where other special method of notice may
be required by statute, in all which cases, the statutory method shall be
followed. The notice of a special meeting shall state the object of the meeting.
Notice of meetings may in all cases be waived by stockholders entitled to
notice.
Section 4. At any stockholders' meeting, except as otherwise provided in
Paragraph (7) of Article VI of the Charter, as amended, a majority of the number
of shares of stock outstanding eligible under the Charter, as amended, to vote
upon questions being submitted at such meeting, must be represented, in person
or by proxy, in order to constitute a quorum for the transaction of business,
but the stockholders represented at an meeting, though less than a quorum, may
adjourn the meeting to some other day or sine die.
Section 5. At all meetings of stockholders each share of stock eligible
under the Charter, as amended, to vote upon questions being submitted at such
meeting shall be entitled to such a vote or votes as shall be from time to time
provided in the Charter, as amended, and such stock may be represented by the
holder thereof in person or a duly authorized proxy in writing duly filed with
the Secretary of the Company.
Section 6. A full list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the residence of each,
and the number of shares held by each, shall be prepared by the Secretary and
filed in the office where the election is to be held, at least ten days before
every election, and shall at all times, during the usual hours for business, be
open to the examination of any stockholder.
ARTICLE V.
Directors.
Section 1. The Board of Directors shall consist of such number, not less
than three nor more than fifteen members and, subject to the provisions of
Paragraph (7) of Article VI of the Charter, as amended, shall be elected at each
annual meeting of the stockholders. If for any reason such election shall not be
held at an annual meeting, it may be subsequently held at any special meeting of
the stockholders duly called for the purpose. Except as otherwise provided in
Paragraph (7) of Article VI of the Charter, as amended, directors shall hold
<PAGE>
office until the next succeeding annual meeting of stockholders and until their
respective successors shall have been duly elected and qualified; provided,
however, the term of any director who is an employee of the Company or its
Parent Company (other than a past or present Chief Executive Officer of the
Company who retires), shall expire concurrently with the termination of such
director's employment by the Company or its Parent Company. No person who has
attained age seventy (70), and no former employee of the Company (other than a
former Chief Executive Officer) who has retired from the Company shall be
eligible for election as a director of the Company. Directors need not be
stockholders.
Section 2. Except as otherwise provided in Paragraph (7) of Article VI
of the Charter, as amended, any vacancy occurring in the Board of Directors may
be filled with the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
Section 3. The Board of Directors may hold its meetings and may have one
or more offices, and may keep the books of the corporation at such places as
they may from time to time determine within the State of Texas. In addition to
the powers and authorities by these By-Laws expressly conferred upon them, the
Board may exercise all such powers of the corporation, and do all such lawful
acts and things as are not by law or by these By-Laws required to be exercised
or done by the stockholders.
Section 4. Without prejudice to the general powers conferred by the last
preceding clause, it is hereby expressly declared that the Board of Directors
shall have the following powers, that is to say:
1. From time to time to make and change rules and regulations,
not inconsistent with these By-Laws, for the management of the
corporation's business and affairs.
2. From time to time, as and when and upon such terms and
conditions as it may determine, to issue any part of the authorized
capital stock of the corporation.
3. To purchase, or otherwise acquire for the corporation, any
property, right or privilege which the corporation is authorized to
acquire at such price or consideration, and generally on such terms or
conditions as it shall think fit.
4. At its discretion to pay for any property or rights acquired
by the corporation, either wholly or partly in money, stock, bonds,
debentures or other securities of the corporation.
5. To borrow money, to create, make and issue mortgages, bonds,
deeds of trust, trust agreements and negotiable or transferable
<PAGE>
instruments and securities, secured by mortgage or otherwise, and to do
every other act and thing necessary to effectuate the same.
6. To appoint and at its discretion, remove or suspend any and
all officers, employees and agents, permanently or temporarily, as it
may think fit, and to determine their duties and fix, and from time to
time change their duties, salaries and emoluments, and to require
security in such instances, and in such amounts as it thinks fit.
7. To confer by resolution upon any officer of the corporation,
the power to choose, remove or suspend subordinate officers, employees
and agents.
8. To appoint any person or corporation to accept and hold in
trust for the corporation, any property belonging to the corporation, or
in which it is interested, or for any other purpose, and to execute and
do all such deeds and things as may be requisite in relation to any such
trust.
9. To determine who shall be authorized on the corporation's
behalf, to sign bills, notes, receipts, acceptances, endorsements,
checks, drafts, bonds, mortgages, releases, contracts and other papers
and documents; subject always to any requirements of law in respect
thereof. If and to the extent authorized by resolution of the Board of
Directors, the signature or signatures on checks and drafts may be
facsimile.
10. To delegate any of the powers of the Board in the course of
the current business of the corporation to any standing or special
committee, or to any officer or agent, or to appoint any persons to be
the agents of the corporation, with such powers (including the powers to
sub-delegate), and upon such terms as it shall think fit.
ARTICLE VI.
Meetings of the Board.
Section 1. Regular meetings of the Board of Directors shall be held at
such place and time as may be designated from time to time, by the Board.
Special meetings of the Board may be called by the Chairman or the President, or
by a Vice-President when acting as President, or by any two Directors upon two
days' notice to each Director, either personally or by mail or by telegram.
Notice of any meeting of the Board of Directors may be waived in writing by any
director, either before or after meeting, and will be deemed to be waived by his
attendance thereat.
<PAGE>
Section 2. A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board, but a less
number may adjourn from time to time, until a quorum is obtained, or may adjourn
sine die.
Section 3. In all meetings of the Board a majority vote shall be
decisive of all questions before the meeting, except as may be otherwise
provided by law. The Board of Directors shall keep minutes of the proceedings of
their meetings.
Section 4. Directors, as such, shall not receive any stated salary for
their services, but by resolution of the Board, an annual retainer payable in
monthly or other convenient installments, a fixed sum for attendance at each
regular or special meeting of the Board, or of any standing or special committee
of the Board, and expenses of attendance, if any, may be allowed; provided, that
nothing herein contained shall be construed to preclude any Director from
serving the corporation in any other capacity, and receiving compensation
therefor.
ARTICLE VII.
Officers.
Section 1. There shall be elected by the Board of Directors, at its
first meeting (if practicable) held after the annual election of directors in
each year, a President, a Secretary, a Treasurer, a Controller, and, if desired,
one or more Assistant Secretaries, Assistant Treasurers, and Assistant
Controllers. The Board of Directors also may provide for and elect at any time,
a Chairman, a General Manager, one or more Vice Presidents, and such other
officers, and prescribe such duties for them, respectively, as in the judgment
of the Board of Directors may be required from time to time to conduct the
business of the Corporation. Any two or more offices, except the offices of
President and Vice President, President and Secretary, President and General
Manager, and Chairman and any other office, may be held by the same person. All
officers elected by the Board of Directors shall hold their respective offices,
unless sooner terminated, until the first meeting of the Board of Directors held
after the next ensuring annual election of directors and until their respective
successors, willing to serve, shall have been duly elected and qualified. Any of
such officers may be removed from their respective offices at the pleasure of
the Board.
Section 2. The Chairman of the Board, if there shall be one, shall
preside at all meetings of the stockholders and of the Board of Directors. He
shall be a member of the Executive Committee, if there shall be one, and of such
other committees to which he shall be appointed by the Board of Directors. He
shall also have such other powers and duties as may at any time be prescribed by
these By-Laws or by the Board of Directors.
Section 3. The President shall be the chief executive officer of the
Company and have general authority over all of the business and affairs of the
<PAGE>
Company and over all other officers, agents and employees of the Company,
subject to the direction of the Board of Directors or Executive Committee. He
shall have general and active management of the business and affairs of the
Company, and full authority and responsibility with respect to making effective
all resolutions of the Board of Directors. He may execute bonds, mortgages,
contracts and other instruments on behalf of the Company, except those required
by law, governmental regulations, or indentures and other agreements of the
Company to be otherwise signed and executed or expressly required by the
Company. He shall have the authority when neither the Board of Directors nor the
Executive Committee is in session to suspend the authority of any other officer
or officers of the Company, subject, however, to the pleasure of the Board of
Directors or of the Executive Committee at its next meeting, and authority to
appoint and to remove and discharge any and all agents and employees of the
Company not elected or appointed directly by the Board of Directors. In any
absence of the Chairman of the Board he shall, if present, have all powers and
duties conferred upon the Chairman of the Board.
Section 4. The General Manager, if one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors. In case the President, due to absence or
any other cause, shall be unable at any time to attend to the duties of the
office of President requiring attention, or in the case of his death,
resignation, or removal from office, the powers and duties of the President
shall, except as the Board of Directors may otherwise provide, temporarily
devolve upon the General Manager, and shall be exercised by such General Manager
as acting President during such inability of the President, or until the vacancy
in the office of the President shall be filled. In case of the absence,
disability, death, resignation, or removal from office of the President and the
General Manager, the Board of Directors shall elect one of its members to
exercise the powers and duties of the President during such absence or
disability, or until the vacancy in one of said offices shall be filled.
Section 5. The Vice President, if one is elected by the Board of
Directors, or Vice Presidents, if more than one is elected by the Board of
Directors, shall have such powers and duties as may from time to time be
prescribed by the Board of Directors.
Section 6. The Secretary shall attend all meetings of the Board of
Directors, shall keep a true and faithful record thereof in proper books to be
provided for that purpose, and shall have the custody and care of the corporate
seal, records, minutes and stock books of the Company. He shall also act as
Secretary of all stockholders' meetings, and keep a record thereof, except as
some other person may be selected as Secretary by any such meeting, shall keep a
suitable record of the addresses of stockholders, and shall, except as otherwise
required by statute, or by the By-Laws, sign, and by order of the Board of
Directors, issue all notices required for meetings of stockholders, and of the
Board of Directors. Whenever requested by a requisite number of individual
stockholders, or individual Directors, to give notice, for a meeting of
stockholders or of the Board of Directors, he shall give such notice, as
requested, and the notice shall state the names of the stockholders or Directors
making the request. He shall sign all mortgages, and all other documents and
papers to which his signature may be necessary or appropriate, shall affix the
<PAGE>
seal of the corporation to all instruments requiring the seal, and shall have
such other powers and duties as are commonly incidental to the office of
Secretary, or as may be prescribed for him. He shall be sworn to the faithful
discharge of his duty.
Section 7. The Treasurer shall have charge of, and be responsible for,
the collection, receipt, custody and disbursement of the funds of the Company,
and shall deposit its funds in the name of the Company, in such banks, trust
companies, or safe deposit vaults as the Board of Directors may direct. He shall
have the custody of such books, receipted vouchers, and other books and papers
as in the practical business operations of the Company shall naturally belong in
the office or custody of the Treasurer, or as shall be placed in his custody by
the Board of Directors, by the Executive Committee, by the President, or by a
Vice-President when acting as President. He shall also have charge of the safe
keeping of all stocks, bonds, mortgages and other securities belonging to the
Company, but such stocks, bonds, mortgages and other securities shall be
deposited for safe keeping in a safe deposit vault to be approved by the Board
of Directors or by the Executive Committee, in a box or boxes, access to which
shall be had as may be provided by resolution of the Board of Directors or
Executive Committee. He shall have such powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him. He may
be required to give bond to the company for the faithful discharge of his duties
in such form and to such amount and with such sureties as shall be determined by
the Board of Directors.
Section 8. The Controller shall have general supervision over all books
and accounts of the Company relating to receipts and disbursements, shall
arrange the form of all vouchers, accounts, reports and returns required by the
various departments, shall examine the accounts of all officers and employees
from time to time and as often as practicable, and shall see that proper returns
are made of all receipts from all sources, and that correct vouchers are turned
over to him for all disbursements for any purpose. At such time in each month as
may be found practicable all bills for the previous month, properly made in
detail and certified, shall be submitted to him, and he shall audit and approve
the same, if found satisfactory and correct, but he shall not approve or audit
any voucher unless it has been previously certified to by the head of the
department in which it originated, nor unless satisfied of its propriety and
correctness. He shall have full access to all contracts, correspondence, and
other papers and records of the Company relating to its business matters, shall
have the custody of its account books, original contracts and other papers
relating to the accounts of the Company, except such as in the practicable
business operations of the Company shall naturally belong in the custody of the
Treasurer, or shall be placed in the custody of the Treasurer by the Board of
Directors, by the Executive Committee, by the President, or by one of the
Vice-Presidents when acting as President, and shall have such other powers and
duties as are commonly incidental to the office of Controller, or as may be
prescribed for him. He may be required to give bond to the Company for the
faithful discharge of his duties in such form and to such amounts and with such
sureties as shall be determined by the Board of Directors.
<PAGE>
Section 9. Assistant Secretaries, Treasurers or Controllers, when
elected, shall assist the Secretary, the Treasurer or the Controller, as the
case may be, in the performance of the respective duties assigned to such
principal officers, and the powers and duties of any such principal officer,
shall, except as otherwise ordered by the Board of Directors, temporarily
devolve upon his assistant in case of the absence, disability, death,
resignation or removal from office of such principal officer. They shall perform
such other duties as may be assigned to them from time to time.
ARTICLE VIII.
Executive Committee.
Section 1. The Board of Directors may, by resolution passed by a
majority of the whole Board, appoint an Executive Committee of not less than
three members of the Board, including the Chairman of the Board, if there be
one, and the President of the Company. The Executive Committee may make its own
rules of procedure and elect its Chairman, and shall meet where and as provided
by such rules, or by resolution of the Board of Directors. A majority of the
members of the Committee shall constitute a quorum for the transaction of
business. During the intervals between the meetings of the Board of Directors
the Executive Committee shall have all the powers of the Board in the management
of the business and affairs of the Company, including power to authorize the
seal of the Company to be affixed to all papers which may require it, and, by
majority vote of all its members, may exercise any and all such powers in such
manner as such Committee shall deem best for the interest of the Company, in all
cases in which specific directions shall not have been given by the Board of
Directors.
Section 2. The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board when required.
ARTICLE IX.
Order of Business at Directors' Meetings.
Section 1. The order of business at meetings of the Board of Directors
shall, unless otherwise ordered by the Board be as follows:
1. Reading and consideration of the minutes of the preceding
meeting.
2. Reading of the minutes of meetings of the Executive Committee
held since the last meeting of the Board.
3. Reading and consideration of communications.
<PAGE>
4. Reports of standing and special committees.
5. Reports from officers of the Company.
6. The consideration of any other business of the Company.
ARTICLE X.
Indemnification.
Each person who is or was or had agreed to become a Director, officer,
employee or agent of the Company, and each person who is or was serving or had
agreed to serve at the request of the Board of Directors or an officer of the
Company as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, (including heirs,
executors, administrators or estate of such person), shall be indemnified
(including, without limitation, the advancement of expenses and payment of all
loss, liability and expenses) by the Company against any liability asserted
against him in such a capacity or arising out of his status as such a person,
even though due to his own negligence, whether sole or joint and concurrent with
the negligence of others, to the full extent permitted by the Texas Business
Corporation Act or any other applicable laws as presently in effect or as may
hereafter be amended (but in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than said laws permitted the Company to provide prior to such amendment);
provided however, that no person shall be indemnified for amounts paid in
settlement unless the terms and conditions of such settlement have been
consented to by the Company and provided further that no indemnification for
employees or agents (other than Directors and officers) will be made without the
express authorization of the Company's Board of Directors.
ARTICLE XI.
Inspection of Books.
Section 1. The Directors shall determine from time to time, whether,
and, if allowed, when and under what conditions and regulations the accounts and
books of the corporation (except such as may be statute be specifically open to
inspection), or any of them, shall be open to the inspection of the
stockholders, and the stockholders' rights in this respect are and shall be
restricted and limited accordingly.
<PAGE>
ARTICLE XII.
Miscellaneous.
Section 1. No debts shall be contracted, except for current expenses,
unless authorized by the Board of Directors or the Executive Committee, and no
bills shall be paid by the Treasurer unless audited and approved by the
Controller, or by some person or committee expressly authorized by the Board of
Directors or the Executive Committee to audit and approve bills for payment.
Section 2. All dividends shall be payable at such time as may be fixed
by the Board of Directors. Before payment of any dividend or making any
distribution of profits, there shall be set aside, out of the surplus or net
profits of the corporation, such sum or sums as the Board of Directors from time
to time, in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the Board shall think
conducive to the interests of the corporation.
Section 3. The first fiscal year of the corporation shall be the period
commencing October 1, 1927, and ending December 31, 1927, and thereafter each
calendar year, commencing with the year 1928, shall be the fiscal year of the
corporation.
ARTICLE XIII.
Amendments.
Section 1. These By-Laws may be altered, amended or repealed by vote of
a majority of the shareholders having voting power at any annual meeting or at
any special meeting of said shareholders called for that purpose and, to the
extent permitted by law, may also be altered, amended or repealed by the Board
of Directors.
EXHIBIT 12.1
CENTRAL POWER AND LIGHT COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(Thousands Except Ratio)
(Unaudited)
Operating Income $291,977
Adjustments:
Income taxes 68,612
Provision for deferred income taxes 27,183
Deferred investment tax credits (5,789)
Utility plant development costs, net of tax (15,481)
Other income and deductions 6,714
Allowance for borrowed and equity funds
used during construction 1,943
Mirror CWIP amortization 10,250
Earnings $385,409
Fixed Charges:
Interest on long-term debt $110,100
Interest on short-term debt and other 19,071
Fixed Charges $129,171
Ratio of Earnings to Fixed Charges 2.98
=======
EXHIBIT 12.2
PUBLIC SERVICE COMPANY OF OKLAHOMA (CONSOLIDATED)
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(Thousands Except Ratio)
(Unaudited)
Operating Income $105,927
Adjustments:
Income taxes 29,841
Provision for deferred income taxes (5,054)
Deferred investment tax credits (2,785)
Utility plant development costs, net of tax (35,552)
Other income and deductions 64
Allowance for borrowed and equity funds
used during construction 1,272
Earnings $ 93,713
=======
Fixed Charges:
Interest on long-term debt $ 30,334
Amortization of debt issuance cost 1,643
Other interest 4,276
-------
Fixed Charges $ 36,253
=======
Ratio of Earnings to Fixed Charges 2.58
=======
EXHIBIT 12.3
SOUTHWESTERN ELECTRIC POWER COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(Thousands except Ratio)
(Unaudited)
Operating Income $147,619
Adjustments:
Income taxes 23,907
Provision for income taxes 15,249
Deferred investment tax credits (4,744)
Utility plant development costs, net of tax (21,743)
Other income and deductions 719
Allowance for borrowed and equity funds
used during construction 3,681
Interest portion of financing leases 1,601
Earnings $166,289
Fixed Charges:
Interest on long-term debt $ 44,582
Amortization of debt issuance cost 3,355
Other interest 6,445
Interest portion of financing leases 1,601
-------
Fixed Charges $ 55,983
=======
Ratio of Earnings to Fixed Charges 2.97
=======
EXHIBIT 12.4
WEST TEXAS UTILITIES COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(Thousands Except Ratio)
(Unaudited)
Operating Income $54,590
Adjustments:
Income taxes 9,927
Provision for deferred income taxes 1,775
Deferred investment tax credits (1,321)
Utility plant development costs, net of tax (10,917)
Other income and deductions (150)
Allowance for borrowed and equity funds
used during construction 1,177
Earnings $55,081
Fixed Charges:
Interest on long-term debt $22,385
Interest on short-term debt and other 4,911
Fixed Charges $27,296
Ratio of Earnings to Fixed Charges 2.02
======
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<ARTICLE> UT
<CIK> 0000081027
<NAME> PUBLIC SERVICE COMPANY OF OKLAHOMA
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,292,827
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<CAPITAL-SURPLUS-PAID-IN> 180,000
<RETAINED-EARNINGS> 146,941
<TOTAL-COMMON-STOCKHOLDERS-EQ> 484,171
0
19,826
<LONG-TERM-DEBT-NET> 379,921
<SHORT-TERM-NOTES> 29,785
<LONG-TERM-NOTES-PAYABLE> 40,000
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0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 480,037
<TOT-CAPITALIZATION-AND-LIAB> 1,433,740
<GROSS-OPERATING-REVENUE> 579,021
<INCOME-TAX-EXPENSE> 39,069
<OTHER-OPERATING-EXPENSES> 446,052
<TOTAL-OPERATING-EXPENSES> 485,121
<OPERATING-INCOME-LOSS> 93,900
<OTHER-INCOME-NET> (35,315)
<INCOME-BEFORE-INTEREST-EXPEN> 58,585
<TOTAL-INTEREST-EXPENSE> 26,313
<NET-INCOME> 32,272
612
<EARNINGS-AVAILABLE-FOR-COMM> 31,660
<COMMON-STOCK-DIVIDENDS> 35,000
<TOTAL-INTEREST-ON-BONDS> 22,936
<CASH-FLOW-OPERATIONS> 124,879
<EPS-PRIMARY> 0.15
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