UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED).
For the transition period from to
Commission file number 1-3576
ST. JOSEPH LIGHT & POWER COMPANY
(Exact name of registrant as specified in its charter)
State of Missouri 44-04l9850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
520 Francis Street, P. O. Box 998, St. Joseph, Missouri 64502-0998
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 233-8888
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the registrant's outstanding common
stock, based on the closing price therefor on the New York Stock
Exchange at February 28, 1997, was $129,180,854.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, without par value 7,949,591 shares
(Class) (Outstanding at February 28, 1997)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Shareholders are incorporated
by reference into Parts I, II and IV.
Portions of the 1997 Definitive Proxy Statement for the 1997 annual
meeting are incorporated by reference into Part III, excluding
therefrom the sections titled "Report of Compensation Committee"
and "Cumulative Total Shareholder Return."
The 1996 Annual Report to Shareholders and the 1997 Definitive
Proxy Statement will be mailed to shareholders on or about April 7, 1997.
<PAGE>
PART I
ITEM 1 - BUSINESS.
St. Joseph Light & Power Company is a Missouri corporation,
incorporated in 1895. SJLP Inc., its wholly owned subsidiary,
was formed in September 1996 to pursue investments in non-utility
areas. Collectively, these entities are referred to as the "Company".
The Company is engaged primarily in the generation, transmission and
distribution of electric energy to customers in its ten-county
service territory in northwest Missouri. It supplies this service
in St. Joseph, the headquarters city, and 52 other incorporated
communities and the intervening rural territory. The service
area contains approximately 3,300 square miles. At December 31, 1996,
there were approximately 61,000 electric customers. In 1996, electric
revenues accounted for 87% of total operating revenues.
Natural gas for residential, commercial and industrial
purposes is provided to customers in Maryville, a state
university town of about 10,000, and 14 other smaller
communities in northwest Missouri. Natural gas revenues
accounted for 6% of total operating revenues in 1996.
Currently there are about 6,400 natural gas customers.
The Company supplies industrial steam to six customers
in St. Joseph. Industrial steam revenues accounted for 7%
of total operating revenues in 1996.
SOURCES AND AVAILABILITY OF RAW MATERIALS.
The Company's principal fuel for electric generation is
coal. Small amounts of natural gas and oil are also used.
During 1996, fuels utilized for electric generation
consisted of 94% coal, 4% oil and 2% gas.
The Company, Kansas City Power & Light Company (KCP&L)
and Empire District Electric Company (EDE), the joint
owners of the Iatan plant, entered into a twenty-year
agreement with a Wyoming mine for low sulfur western coal.
The agreement provides for approximately two million tons
of coal per year through 2003. The coal is delivered by
rail under an agreement which extends through 2000. The
remainder of the coal requirements at the Iatan plant are
met with spot purchases.
Management anticipates meeting coal requirements for
the Lake Road plant in 1997 with present inventory, short-term
contracts and spot purchases. Natural gas requirements are met
with purchases from regional suppliers and transported under
the industrial tariffs of Missouri Gas Energy as an interruptible
customer. The Company meets all of its oil requirements through
spot purchases.
The Company acquires its natural gas for resale on the
open market and with short-term contracts. An agreement
with ANR Pipeline Company provides natural gas storage and
transportation services until 2003. Management believes the
arrangement is sufficient to fulfill its natural gas
requirements.
FRANCHISES.
The Company currently holds non-exclusive franchises
for its electric utility operations in substantially all of
the incorporated portions of its service area. The Company
holds a perpetual electric franchise without limitation of
time in St. Joseph. Franchises in 51 additional
incorporated municipalities expire in various years until
2016. One small community is served without a franchise.
The Company holds gas franchises in each of the 15
communities served, expiring in various years until 2016.
COMPETITION.
There are four rural electric cooperatives (RECs)
within the Company's service area. These RECs purchase
their total power requirements from generating and
transmission cooperatives which are financed partially by
government loans or grants.
Two municipally owned electric distribution systems are
located in the Company's territory serving approximately
900 customers.
The Company's rates are significantly lower than the
RECs and municipally owned systems in the area and also
compare very favorably with other investor-owned utilities
in the region. Further competition information is
incorporated by reference to Management's Discussion and
Analysis of Financial Condition and Results of Operations
in the 1996 Annual Report to Shareholders, pages 8-12,
which is Exhibit 13 hereto.
FINANCIAL INFORMATION ABOUT SEGMENTS OF BUSINESS.
This information is incorporated by reference to Note 8
of the Notes to Consolidated Financial Statements in the
1996 Annual Report to Shareholders, page 24, which is
Exhibit 13 hereto.
ENVIRONMENTAL REQUIREMENTS.
This information is incorporated by reference to
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the 1996 Annual Report to
Shareholders, pages 8-12, which is Exhibit 13 hereto.
NUMBER OF EMPLOYEES.
There were 338 full time employees and 2 part time
employees at December 31, 1996.
ITEM 2 - PROPERTIES.
The Company has an agreement with KCP&L and EDE for
joint ownership of the coal-burning generating plant at
Iatan, Missouri. The Company's 18% share of this plant is
121 megawatts (mw) of net capability. Refer to "Jointly
Owned Iatan Plant" incorporated by reference to Note 1 of
Notes to Consolidated Financial Statements in the 1996
Annual Report to Shareholders, page 19, which is Exhibit 13
hereto.
The Company owns the Lake Road generating station in
St. Joseph, Missouri with an aggregate net capability of
261 mw (summer rating), of which 107 mw is coal-fired and
154 mw utilize natural gas and oil.
The Company owns a 62-mile segment of a 582 mile, 345
KV transmission line connecting utilities from Kansas City,
Missouri to Minneapolis, Minnesota. A second 345 KV line,
23 miles in length, is used as a tie-line for two
neighboring utilities, one of which pays all fixed and
operating costs. The Company also owns 32 miles of 345 KV
line connecting the Iatan generating plant with the
Company's system. In addition, the Company constructed,
with six other regional utilities, a 103-mile, 345 KV
transmission line, primarily in northwest Missouri, to
strengthen the interconnection network. The line provides a
high capacity interconnection facility directly linking the
electric transmission systems of Nebraska Public Power
District, Associated Electric Cooperative of Springfield,
Missouri, and St. Joseph Light & Power Company. The
Company has 81 miles of 161 KV transmission line which
serves as the "backbone" for its internal
transmission/distribution system, and owns the necessary
lower voltage distribution lines, distribution substations,
transformers and equipment required to provide service in
its territory.
ITEM 3 - LEGAL PROCEEDINGS.
Certain legal actions are pending which, in
management's opinion, are not expected to materially affect
the Company's financial position or results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted to a vote of security holders
during the fourth quarter of 1996.
Executive Officers of the Registrant.
The following are the executive officers of the
Company:
T. F. STEINBECKER, President. Age 51. BSBA and MBA,
University of Missouri and CPA. Employed by the
Company in 1975; executive capacity since 1976;
present position since May 1986.
G. L. MYERS, Vice President, General Counsel and Secretary.
Age 43. AB, Washington University. JD, University of
Missouri-Kansas City. Employed by the Company and
executive capacity since 1979; General Counsel and
Secretary from May 1989 - January 1996; present
position since February 1996.
L. J. STOLL, Vice President--Finance, Treasurer and
Assistant Secretary. Age 44. BSBA, Missouri Western
State College. MBA, Northwest Missouri State
University. Employed by the Company in 1975;
executive capacity since 1980; present position since
May 1986.
J. A. STUART, Vice President--Customer Services and Energy
Delivery. Age 43. BSEE, California Polytechnic State
University. Employed by the Company in present
position since 1994. Prior positions include Senior
Operations Consultant, Pacific Gas and Electric
Company, June 1993-March 1994, and Gas and Electric
Operations Manager, Pacific Gas and Electric Company,
March 1991-June 1993.
D. V. SVUBA, Vice President--Energy Supply. Age 54. BSEE,
Iowa State University. MSEE, University of Missouri.
Employed by the Company in 1966; executive capacity
since 1990; present position since November 1990.
Each officer is covered by a three-year employment
agreement. There are no family relationships between any
officers of the Company.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Information regarding the principal market for the
Company's common stock, the market prices and the dividends
paid on such stock for the past two years is incorporated
by reference to the 1996 Annual Report to Shareholders,
pages 7 and 29, which is Exhibit 13 hereto.
There were 4,893 holders of record of the Company's
common stock as of February 3, 1997, the record date fixed
for the dividend paid on February 18, 1997.
ITEM 6 - SELECTED FINANCIAL DATA.
This information is incorporated by reference to the
1996 Annual Report to Shareholders, page 7, which is
Exhibit 13 hereto.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This information is incorporated by reference to the
1996 Annual Report to Shareholders, pages 8-12, which is
Exhibit 13 hereto.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This information is incorporated by reference to the
1996 Annual Report to Shareholders, pages 13-25, which is
Exhibit 13 hereto.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS OF THE REGISTRANT.
Information required by Item 10 regarding directors is
not answered for the reason that the registrant will,
within 120 days after the close of the fiscal year, file
with the Securities and Exchange Commission a "Definitive
Proxy Statement" pursuant to Regulation 14A of the
Securities Exchange Act of 1934. The information required
is incorporated by reference to such Definitive Proxy
Statement. Certain information concerning the executive
officers of the Company is set forth in Part I under the
caption "Executive Officers of the Registrant."
ITEM 11 - EXECUTIVE COMPENSATION.
Item 11 is not answered for the reason that the
registrant will, within 120 days after the close of the
fiscal year, file with the Securities and Exchange
Commission a "Definitive Proxy Statement" pursuant to
Regulation 14A of the Securities Exchange Act of 1934. The
information required is incorporated by reference to such
Definitive Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
None.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 13 is not answered for the reason that the
registrant will, within 120 days after the close of the
fiscal year, file with the Securities and Exchange
Commission a "Definitive Proxy Statement" pursuant to
Regulation 14A of the Securities Exchange Act of 1934. The
information required is incorporated by reference to such
Definitive Proxy Statement.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
Financial Statements:
This information is incorporated by reference (as set
forth below) to the 1996 Annual Report to Shareholders,
which is Exhibit 13 hereto.
Consolidated Statements of Income, page 13
Consolidated Balance Sheets, page 14
Consolidated Statements of Capitalization, pages 15-16
Consolidated Statements of Retained Earnings, page 16
Consolidated Statements of Cash Flows, page 17
Consolidated Statements of Taxes, page 18
Notes to Consolidated Financial Statements, pages 19-24
Responsibility for Financial Statements, page 25
Report of Independent Public Accountants, page 25
Financial Statement Schedules:
Schedule II- Valuation and Qualifying Accounts - For the
years ended December 31, 1996, 1995 and 1994 (page 10).
Schedules not listed above are omitted because of
absence of conditions under which they are required or
because the required information is included in the
financial statements submitted.
List of Exhibits:
Exhibit 3 (a) - Restated Articles of Incorporation
adopted on May 20, 1987, which are
incorporated by reference to page 16 of
the 1987 Form 10-K. By-laws of Company as
amended on January 16, 1991, which are
incorporated by reference to page 17 of the
1990 Form 10-K.
Exhibit 4 (a) - Indenture of Mortgage and Deed of Trust
dated April 1, 1946, between the Company
and Harris Trust and Savings Bank and
Bartlett Boder, Trustee which is incorporated
by reference to Exhibit (b) (1)-C in File No.
2-62825.
(b) - Seventeenth Supplemental Indenture dated as of
February 1, 1991 between the Company and Harris
Trust and Savings Bank, which is incorporated by
reference to the 1995 Form 10-K.
(c) - Medium-Term Notes Issuing and Paying Agency
Agreement dated as of November 19, 1993 between
the Company and Harris Trust and Savings Bank, which
is incorporated by reference to the 1995 Form 10-K.
(d) - Rights Agreement dated September 18, 1996, which
is incorporated by reference to Exhibit 4 to Form 8-K,
dated October 1, 1996.
Long-term debt instruments of the Company in amounts
not exceeding ten percent of the total assets of the
Company will be furnished to the Commission upon request.
Exhibit 10 (a) - Coal Freight Agreement between Burlington Northern
Railroad Company, Seller, and Kansas City Power & Light
Company, St. Joseph Light & Power Company and The Empire
District Electric Company, Buyers. This exhibit is
incorporated by reference to page 17 of the 1986
Form 10-K. Amendment to Coal Freight Agreement, as
amended on May 20, 1995, is incorporated by reference
to the 1995 Form 10-K.
(b) - Coal Supply Agreement between Atlantic Richfield
Company, Seller, and Kansas City Power & Light Company,
St. Joseph Light & Power Company and The Empire
District Electric Company, Buyers. This exhibit is
incorporated by reference to page 17 of the 1983
Form 10-K.
(c) - CFSI Agreement which is incorporated by reference to
page 17 of the 1989 Form 10-K.
(d) - Form of Key Management Employment Agreements which is
** incorporated by reference to page 18 of the 1990
Form 10-K. Amendment to Key Management Employment
Agreements as amended on December 1, 1993,
which is incorporated by reference to page 18
of the 1993 Form 10-K.
(e) - Directors Indemnification Agreement, which is
incorporated by reference to page 19 of the 1993
Form 10-K.
(f) - Supplemental Executive Retirement Plan which is
** incorporated by reference to page 19 of the 1990
Form 10-K. Amendment to Supplemental Executive
Retirement Plan as amended on November 17, 1993,
which is incorporated by reference to page 20 of
the 1993 Form 10-K.
(g) - Gas Service Agreements with ANR Pipeline Company,
which are incorporated by reference to page 21 of the
1993 Form 10-K.
(h) - Long-Term Incentive Plan, which is incorporated by
** reference to the 1995 Form 10-K.
(i) - Long-Term Stock Incentive Plan for Non-Employee Directors.
*
**
(j) - Purchased power agreement with Nebraska Public Power
* District.
Exhibit 13 * - The 1996 Annual Report to Shareholders.
Exhibit 23 * - Consent of Independent Public Accountants.
Exhibit 27 * - Financial Data Schedule.
* Filled herewith.
** Exhibits marked with a double asterisk relate to
management contracts or compensatory arrangements.
Reports on Form 8-K:
On October 1, 1996, the Company filed a report on Form 8-K
dated September 18, 1996, regarding the Shareholder Rights
Agreement.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To St. Joseph Light & Power Company:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in St. Joseph Light & Power Company's Annual
Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated January
23, 1997. Our audits were made for the purpose of forming
an opinion on those statements taken as a whole. The
financial statement schedules listed in the index above are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. The financial statement schedules have been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
January 23, 1997
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ST. JOSEPH LIGHT & POWER COMPANY
(Registrant)
March 19, 1997
/s/ T. F. Steinbecker, President
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ T. F. Steinbecker
President & Director (Chief Executive Officer)
March 19, 1997
/s/ L. J. Stoll
Vice President--Finance, Treasurer &
Assistant Secretary (Principal Financial &
Accounting Officer
March 19, 1997
/s/ J.P. Barclay, Jr.
Director
March 19, 1997
/s/ D. A. Burkhardt
Director
March 19, 1997
/s/ R. M. Burridge
Director
March 19, 1997
/s/ J. P. Carolus
Director
March 19, 1997
/s/ W. J. Gremp
Director
March 19, 1997
/s/ D. W. Shinneman
Director
March 19, 1997
/s/ R. L. Simpson
Director
March 19, 1997
/s/ G. R. Sprong
Director
March 19, 1997
ST. JOSEPH LIGHT & POWER COMPANY
SCHEDULE V - VALUATION AND QUALITYING ACCOUNTS
YEARS ENDED DECMEBER 31, 1996, 1995 AND 1994
Column A Column B Column C Column D Column E
Deductions
Balance at Additions for Purposes Balance at
Description Beginning of Charged to Charged to for Which End of
Year Expense Construction Reserves Were Year
Created
Valuation accounts
deducted from
assets to which
they apply-
Accumulated Provision
for Uncollectible
Accounts
December 31, 1996 $324,130 $191,624 $ 0 $192,736(1) $323,018
December 31, 1995 $339,147 $161,156 $ 0 $176,173(2) $324,130
December 31, 1994 $390,256 $160,748 $ 0 $211,857(3) $339,147
Other reserves-
Accumulated Provision for Injuries
and Damages:
December 31, 1996 $362,395 $ 45,555 $ 5,394 $ 20,797 $392,547
December 31, 1995 $299,193 $371,991 $ 46,845 $355,634 $362,395
December 31, 1994 $303,110 $222,655 $ 27,854 $254,426 $299,193
Accumulated Provision for
Major Medical:
December 31, 1996 $ 5,525 $830,819 $170,167 $1,000,986 $ 5,525
December 31, 1995 $ 5,525 $622,163 $128,037 $ 750,200 $ 5,525
December 31, 1994 $369,986 $711,900 $148,983 $1,225,344 $ 5,525
Accumulated Provison for
Post Employment Benefits:
December 31, 1996$1,336,809 $1,020,914 $202,121 $1,203,376 $1,356,468
December 31, 1995$1,290,991 $1,030,996 $182,061 $1,167,239 $1,336,809
December 31, 1994$ 838,627 $1,100,200 $210,397 $ 858,233 $1,290,991
(1) Net of $143,935 recovery on accounts previously charged off.
(2) Net of $128,419 recovery on accounts previously charged off.
(3) Net of $126,419 recovery on accounts previously charged off.
(4) Includes Iatan provision of $139,157.
(5) Includes Iatan provision of $133,845.
(6) Includes Iatan provision of $94,432.
ST. JOSEPH LIGHT & POWER COMPANY
LONG-TERM STOCK INCENTIVE PLAN
FOR NON-EMPLOYEE DIRECTORS
I. INTRODUCTION
1.1 Purposes. The purposes of the Long-Term Stock
Incentive Plan for Non-Employee Directors (the "Plan") of
St. Joseph Light & Power Company (the "Company") are (i) to
align the interests of the Company's shareholders and the
non-employee directors of the Company ("Non-Employee
Directors") by increasing the proprietary interest of the
Non-Employee Directors in the Company's growth and success,
(ii) to advance the interests of the Company by attracting
and retaining well-qualified persons for service as Non-Employee
Directors and (iii) to motivate Non-Employee Directors to act in
the long-term best interests of the Company's shareholders.
1.2 Certain Definitions.
"Agreement" shall mean the written agreement between
the Company and a Non-Employee Director evidencing a Stock
Option or Restricted Stock Award.
"Annual Restricted Stock Awards" shall have the
meaning set forth in Section 3.1(a).
"Board" shall mean the Board of Directors of the
Company.
"Change in Control" shall have the meaning set forth
in Section 4.7(b).
"Committee" shall mean the Compensation Committee of
the Board or any other committee designated by the Board to
administer the Plan.
"Common Stock" shall mean the common stock, no par
value, of the Company.
"Company" has the meaning specified in Section 1.1.
"Corporate Transaction" shall have the meaning set
forth in Section 4.7(b)(3).
"Disability" shall mean the inability of a Non-Employee
Director to perform substantially such Non-Employee Director's
duties and responsibilities for a continuous period of at least
six months, as determined solely by the Committee.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Fair Market Value" shall mean the closing price of a
share of Common Stock as reported in the New York Stock
Exchange Composite Transactions on the date as of which
such value is being determined, or, if the Common Stock is
not listed on the New York Stock Exchange, the closing
price of a share of Common Stock on the principal national
stock exchange on which the Common Stock is traded on the
date as of which such value is being determined, or, if
there shall be no reported transaction for such date, on
the next preceding date for which a transaction was
reported; provided, however, that if Fair Market Value for
any date cannot be so determined, Fair Market Value shall
be determined by the Committee by whatever means or method
as the Committee, in the good faith exercise of its
discretion, shall at such time deem appropriate.
"Incumbent Board" shall have the meaning set forth in
Section 4.7(b)(2).
"Initial Restricted Stock Awards" shall have the
meaning set forth in Section 3.1(a).
"Mature Shares" shall mean shares of Common Stock for
which the holder thereof has good title, free and clear of
all liens and encumbrances and which such holder either (i)
has held for at least six months or (ii) has purchased on
the open market.
"Non-Employee Director" shall have the meaning set
forth in Section 1.1.
"Outstanding Common Stock" shall have the meaning set
forth in Section 4.7(b)(1).
"Person" shall have the meaning set forth in Section
4.7(b)(1).
"Restricted Stock" shall mean shares of Common Stock
which are subject to a Restriction Period.
"Restricted Stock Award" shall mean an award of
Restricted Stock under this Plan.
"Restriction Period" shall mean, with respect to any
Restricted Stock Award, the period during which such
Restricted Stock Award may not be sold, transferred,
assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the
Agreement relating to such Restricted Stock Award;
provided, however, that the holder of a Restricted Stock
Award may, with the written consent of the Board, tender
the shares of Common Stock subject to such Award for sale
or exchange in the event of any tender offer within the
meaning of Section 14(d) of the Exchange Act.
"Stock Options" shall mean non-statutory options to
purchase shares of Common Stock granted in accordance with
Article II.
"1996 Meeting" shall have the meaning set forth in
Section 2.1(a).
1.3 Administration. This Plan shall be administered by
the Committee. The Committee shall, subject to the terms
of this Plan, interpret this Plan and the application
thereof, establish rules and regulations it deems necessary
or desirable for the administration of this Plan. All such
interpretations, rules and regulations shall be conclusive
and binding on all parties. No member of the Committee
shall be liable for any action or determination made in
good faith with respect to this Plan or any Stock Option or
Restricted Stock Award.
A majority of the Committee shall constitute a quorum.
The acts of the Committee shall be either (i) acts of a
majority of the members of the Committee present at any
meeting at which a quorum is present or (ii) acts approved
in writing by a majority of the members of the Committee
without a meeting.
1.4 Eligibility. Only Non-Employee Directors shall be
eligible to participate in this Plan.
1.5 Shares Available. Subject to adjustment as provided
in Section 4.6, 150,000 shares of Common Stock shall be
available under this Plan, reduced by the sum of the
aggregate number of shares of Common Stock (i) that are
issued upon the grant of a Restricted Stock Award and (ii)
which become subject to outstanding Stock Options. To the
extent that shares of Common Stock subject to an outstanding
Restricted Stock Award or Stock Option are not issued or
delivered by reason of the expiration, termination, cancellation
or forfeiture of such Restricted Stock Award or Stock Option
or by reason of the delivery or withholding of shares of Common
Stock to pay all or a portion of the exercise price of such
Stock Option, then such shares of Common Stock shall again be
available under this Plan.
Shares of Common Stock to be delivered under this Plan
shall be made available from authorized and unissued shares
of Common Stock, or issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a
combination thereof.
1.6 Minimum Holdings. The Board believes each director
should be a holder of Common Stock. As a result, on the
date of the 1996 annual meeting of shareholders of the
Company (the "1996 Meeting"), the Board shall establish a
requirement of a minimum director stockholding. The Board,
however, shall retain the authority to reduce or waive this
minimum requirement for any director due to an extraordinary
circumstance to be determined in the absolute discretion of
the Board.
II. STOCK OPTIONS
2.1 Eligibility. Each Non-Employee Director shall be
granted Stock Options as follows:
(a) Time of Grant. On the date of the 1996 Meeting,
each person who is a Non-Employee Director immediately
after the 1996 Meeting shall be granted a Stock Option to
purchase 1,000 shares of Common Stock for each full year
such person has served as a Non-Employee Director through
the date of the 1996 Meeting at a purchase price per share
equal to the Fair Market Value of a share of Common Stock
on the date of grant of such Stock Option; provided,
however, that the maximum number of shares of Common Stock
subject to a Stock Option granted pursuant to this sentence
shall be 7,000. In addition, on the date of the 1996
Meeting (or, if later, on the date on which a person is
first elected or begins to serve as a Non-Employee Director
other than by reason of termination of employment), and,
thereafter, on the date of each annual meeting of shareholders
of the Company, each person who is a Non-Employee Director
immediately after such meeting of shareholders shall be granted
a Stock Option to purchase 1,000 shares of Common Stock
(which amount shall be pro-rated if such Non-Employee Director
is first elected or begins to serve as a Non-Employee Director
on a date other than the date of an annual meeting of shareholders)
at a purchase price per share equal to the Fair Market Value of
a share of Common Stock on the date of grant of such Stock
Option.
(b) Option Period and Exercisability. Each Stock
Option shall be fully exercisable on and after its date of
grant and shall expire ten years after its date of grant.
An exercisable Stock Option, or portion thereof, may be
exercised in whole or in part only with respect to whole
shares of Common Stock.
(c) Method of Exercise. A Stock Option may be
exercised (i) by giving written notice to the Company
specifying the number of whole shares of Common Stock to be
purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's
satisfaction) either (A) in cash, (B) by delivery of Mature
Shares having a Fair Market Value, determined as of the
date of exercise, equal to the aggregate purchase price
payable by reason of such exercise, (C) by authorizing the
Company to withhold whole shares of Common Stock which
would otherwise be delivered upon exercise of the Stock
Option having a Fair Market Value, determined as of the
date of exercise, equal to the aggregate purchase price
payable by reason of such exercise, (D) in cash by a
broker-dealer acceptable to the Company to whom the
optionee has submitted an irrevocable notice of exercise or
(E) a combination of (A), (B) and (C), in each case to the
extent set forth in the Agreement relating to the Stock
Option and (ii) by executing such documents as the Company
may reasonably request. The Committee shall have sole
discretion to disapprove of an election pursuant to any of
clauses (B)-(E) and the Company may require that the method
of making such payment be in compliance with Section 16
under the Exchange Act and the rules and regulations
thereunder. Any fraction of a share of Common Stock which
would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in
cash by the optionee. No certificate representing Common
Stock shall be delivered until the full purchase price
therefor has been paid.
2.2 Termination of Directorship. (a) Disability. If the
holder of a Stock Option ceases to be a director of the
Company by reason of Disability, each Stock Option held by
such holder may thereafter be exercised by such holder (or
such holder's legal representative or similar person) until
and including the earliest to occur of the (i) date which
is three years after the effective date of such holder's
ceasing to be a director and (ii) the expiration date of
the term of such Stock Option.
(b) Death. If the holder of a Stock Option ceases to
be a director of the Company by reason of death, each Stock
Option held by such holder may thereafter be exercised by
such holder's executor, administrator, legal
representative, beneficiary or similar person, as the case
may be, until and including the earliest to occur of the
(i) date which is one year after the date of death and (ii)
the expiration date of the term of such Stock Option.
(c) Other Termination. If the holder of a Stock
Option ceases to be a director of the Company for any
reason other than Disability or death, each Stock Option
held by such holder may thereafter be exercised by such
holder (or such holder's legal representative or similar
person) until and including the earliest to occur of the
(i) date which is six months after the effective date of
such holder's ceasing to be a director and (ii) the
expiration date of the term of such Stock Option.
(d) Death Following Termination of Directorship. If
the holder of a Stock Option dies during the period set
forth in Section 2.2(a) following such holder's ceasing to
be a director of the Company by reason of Disability, or if
such holder dies during the period set forth in Section
2.2(c) following such holder's ceasing to be a director of
the Company for any reason other than ceasing to be a
director of the Company by reason of Disability, each Stock
Option held by such holder may thereafter be exercised by
such holder's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until the
earliest to occur of the (i) date which is six months after
the date of death and (ii) the expiration date of the term of
such Stock Option.
III. STOCK AWARDS
3.1 Eligibility. Each Non-Employee Director shall be
granted Restricted Stock Awards as follows:
(a) Time of Grant. On the date of the 1996 Meeting,
each person who is a Non-Employee Director immediately
after the 1996 Meeting shall be granted a Restricted Stock
Award for 500 shares of Common Stock (the "Initial
Restricted Stock Awards"). In addition, on the date of the
1996 Meeting (or, if later, on the date on which a person
is first elected or begins to serve as a Non-Employee
Director other than by reason of termination of
employment), and, thereafter, on the date of each annual
meeting of shareholders of the Company, each person who is
elected a director of the Company at such annual meeting
and who is also a Non-Employee Director shall be granted a
Restricted Stock Award for 500 shares of Common Stock
(which amount shall be pro-rated if such Non-Employee
Director is first elected or begins to serve as a Non-Employee
Director on a date other than the date of an
annual meeting of shareholders)("Annual Restricted Stock
Awards").
(b) Vesting. Subject to Section 4.7, the Restriction
Period for each Initial Restricted Stock Award shall expire
on the first to occur of (i) the re-election to the Board
after the 1996 Meeting of the person who holds such Initial
Restricted Stock Award and (ii) 5:00 p.m. on the date that
the person who holds such Initial Restricted Stock Award
ceases to serve as a director of the Company for any
reason. Subject to Section 4.7, the Restriction Period for
each Annual Restricted Stock Award shall expire on the
first to occur of (i) 5:00 p.m. on the third anniversary of
the date of grant of such Annual Restricted Stock Award and
(ii) 5:00 p.m. on the date that the person who holds such
Annual Restricted Stock Award ceases to serve as a director
of the Company for any reason.
3.2 Share Certificates. During the Restriction Period, a
certificate or certificates representing a Restricted Stock
Award shall be registered in the holder's name and may bear
a legend, in addition to any legend which may be required
pursuant to Section 4.5, indicating that the ownership of
the shares of Common Stock represented by such certificate
is subject to the restrictions, terms and conditions of
this Plan and the Agreement relating to the Restricted
Stock Award. All such certificates shall be deposited with
the Company. Upon termination of any applicable
Restriction Period, a certificate or certificates
evidencing ownership of the requisite number of shares of
Common Stock shall be delivered to the holder of such
Restricted Stock Award.
3.3 Rights with Respect to Restricted Stock Awards. The
holder of a Restricted Stock Award shall have all rights as
a shareholder of the Company, including, but not limited
to, voting rights, the right to receive dividends and the
right to participate in any capital adjustment applicable
to all holders of Common Stock; provided, however, that a
distribution with respect to shares of Common Stock, other
than a regular cash dividend, shall be deposited with the
Company and shall be subject to the same restrictions as
the shares of Common Stock with respect to which such
distribution was made.
3.4 Termination of Directorship. (a) Initial Restricted
Stock Awards. In accordance with Section 3.1(b) and
subject to Section 4.7, if the holder of an Initial
Restricted Stock Award ceases to be a director of the
Company for any reason prior to such holder's re-election
to the Board after the 1996 Meeting, the Restriction Period
for such Award shall expire at 5:00 p.m. on the date that
such holder ceases to serve as a director of the Company.
(b) Annual Restricted Stock Awards. In accordance
with Section 3.1(b) and subject to Section 4.7, if the
holder of an Annual Restricted Stock Award ceases to be a
director of the Company for any reason prior to 5:00 p.m.
on the third anniversary of the date of grant of such
Award, the Restriction Period for such Award shall expire
at 5:00 p.m. on the date that such holder ceases to serve
as a director of the Company.
IV. GENERAL
4.1 Effective Date and Term of Plan. This Plan shall be
submitted to the shareholders of the Company for approval
and, if approved by the affirmative vote of a majority of
the shares of Common Stock entitled to vote and represented
in person or by proxy at the 1996 Meeting, shall become
effective as of the date of approval by the Board. This
Plan shall terminate when shares of Common Stock are no
longer available under this Plan, unless this Plan is
terminated earlier by the Board. Termination of this Plan
shall not affect the terms or conditions of any Award
granted prior to termination. In the event that this Plan
is not approved by the shareholders of the Company, this
Plan and any Awards hereunder shall be void and of no force
or effect.
4.2 Amendments. The Board may amend this Plan as it shall
deem advisable, subject to any requirement of shareholder
approval required by applicable law, rule or regulation
including Rule 16b-3 under the Exchange Act; provided,
however, that no amendment shall be made without
shareholder approval if such amendment would (a) increase
the maximum number of shares of Common Stock available
under this Plan (subject to Section 4.6) or (b) reduce the
minimum purchase price in the case of a Stock Option;
provided further that, subject to Section 4.6, the number
of shares of Common Stock subject to an Award, the purchase
price of shares of Common Stock subject to a Stock Option,
the date of grant of any Award, the termination provisions
relating to an Award, and the category of persons eligible
to be granted an Award shall not be amended more than once
every six months, other than to comply with changes in the
Internal Revenue Code of 1986, as amended, or the Employee
Retirement Income Security Act of 1974, as amended, or the
rules and regulations thereunder. No amendment may impair
the rights of a holder of an outstanding Award without the
consent of such holder.
4.3 Agreement. Each Award shall be evidenced by an
Agreement setting forth the terms and conditions applicable
to such Award. No Award shall be valid until an Agreement
is executed by the Company and the recipient of such Award
and, upon execution by each party and delivery of the
Agreement to the Company, such Award shall be effective as
of the effective date set forth in the Agreement.
4.4 Non-Transferability of Stock Options. No Stock Option
shall be transferable other than (i) by will, the laws of
descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as
otherwise permitted under Rule 16b-3 under the Exchange
Act. Except to the extent permitted by the foregoing
sentence, each Stock Option may be exercised during the
holder's lifetime only by the holder or the holder's legal
representative or similar person. Except to the extent
permitted by the second preceding sentence, no Stock Option
may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation
of law or otherwise) or be subject to execution, attachment
or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose
of any Stock Option, such Stock Option and all rights
thereunder shall immediately become null and void.
4.5 Restrictions on Shares. Each Award shall be subject
to the requirement that if at any time the Company
determines that the listing, registration or qualification
of the shares of Common Stock subject to such Award upon
any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any
other action is necessary or desirable as a condition of,
or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other
action shall have been effected or obtained, free of any
conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock
delivered pursuant to any Award bear a legend indicating
that the sale, transfer or other disposition thereof by the
holder is prohibited except in compliance with the
Securities Act of 1933, as amended, and the rules and
regulations thereunder.
4.6 Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of
Common Stock other than a regular cash dividend, the number
and class of securities available under this Plan, the
number and class of securities subject to each outstanding
Award, the purchase price (if any) per security and the
number of securities subject to each Award to be granted
under this Plan, shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of
outstanding Stock Options without an increase in the
aggregate purchase price. The decision of the Committee
regarding any such adjustment shall be final, binding and
conclusive. If any such adjustment would result in a
fractional security being (a) available under this Plan,
such fractional security shall be disregarded, or (b)
subject to an Award under this Plan, the Company shall pay
the holder of such Award, in connection with the first to
occur after such adjustment of (1) the exercise or vesting
of such Award in whole or in part and (2) the expiration,
cancellation, termination or forfeiture of such Award in
whole or in part, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to
the nearest hundredth) by (ii) the excess, if any, of (A)
the Fair Market Value on the date of exercise, vesting,
expiration, cancellation, termination or forfeiture, as the
case may be, over (B) the exercise price, if any, of such
Award.
4.7 Change in Control.
(a) Notwithstanding any provision in this Plan or any
Agreement, in the event of a Change in Control the
Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or
group (a "Person"), including any "person" within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act, of beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act, of beneficial
ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of 20% or more of the then
outstanding shares of Common Stock (the "Outstanding Common
Stock"); provided that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition
directly from the Company (excluding any acquisition
resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised,
converted or exchanged was acquired directly from the
Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this
Section 4.7(b); and provided further, that for purposes of
clause (B), if any Person (other than the Company or any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company) shall become the beneficial owner of 20% or
more of the Outstanding Common Stock by reason of an
acquisition by the Company, and such Person shall, after
such acquisition by the Company, become the beneficial
owner of any additional shares of the Outstanding Common
Stock and such beneficial ownership is publicly announced,
such additional beneficial ownership shall constitute a
Change in Control;
(2) individuals who, immediately after the 1996
Meeting constitute the Board of Directors (the "Incumbent
Board"), cease for any reason to constitute at least a
majority of the Board; provided that any individual who
becomes a director of the Company subsequent to the date of
the 1996 Meeting whose election, or nomination for election
by the Company's shareholders, was approved by the vote of
at least 66 2/3% of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that no individual who was
initially elected as a director of the Company as a result
of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any
Person other than the Board shall not be deemed a member of
the Incumbent Board;
(3) approval by the shareholders of the Company
of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets
of the Company (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (i) all
or substantially all of the individuals or entities who are
the beneficial owners, respectively, of the Outstanding
Common Stock immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the
outstanding securities of such corporation entitled to vote
generally in the election of directors, as the case may be,
of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either
directly or indirectly) in substantially the same
proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock, (ii) no Person (other
than: the Company; any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company; the corporation
resulting from such Corporate Transaction; and any Person
which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 20% or more
of the Outstanding Company Common Stock) will beneficially
own, directly or indirectly, 20% or more of, respectively,
the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such
corporation entitled to vote generally in the election of
directors and (iii) individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation
resulting from such Corporate Transaction; or
(4) approval by the shareholders of the Company
of a plan of complete liquidation or dissolution of the
Company.
4.8 No Right of Participation or Employment. No person
shall have any right to participate in this Plan. Neither
this Plan nor any Award shall confer upon any person any
right to continue to serve as a director of the Company.
4.9 Rights as Shareholder. No person shall have any right
as a shareholder of the Company with respect to any shares
of Common Stock or other equity security of the Company
which is subject to an Award unless and until such person
becomes a shareholder of record with respect to such shares
of Common Stock or equity security.
4.10 Governing Law. This Plan, each Award and the related
Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by
the laws of the United States, shall be governed by the
laws of the State of Missouri and construed in accordance
therewith without giving effect to principles of conflicts
of laws.
4.11 Effect on Other Benefits. The value of any Awards
(either on the date granted or at the time any restrictions
on shares are terminated) shall not be included as
compensation or earnings for purposes of the calculation of
benefits under any other benefit plan of the Company.
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24-b2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
GERALD GENTLEMAN STATION UNIT PARTICIPATION AGREEMENT
BETWEEN
NEBRASKA PUBLIC POWER DISTRICT
AND
ST. JOSEPH LIGHT & POWER COMPANY
This Gerald Gentleman Station Unit Participation
Agreement ("Agreement") made and entered into this 10th day
of July, 1996, by and between Nebraska Public Power
District ("District"), a public corporation and political
subdivision of the State of Nebraska, and St. Joseph Light
& Power Company ("SJLP"), a Missouri corporation; with the
District or SJLP being sometimes hereinafter referred to
singly as a "Party" and collectively as "Parties."
WHEREAS, each Party is the owner and operator of
electric generation and transmission facilities and is
engaged in the generation, transmission, distribution and
sale of electric power and energy; and
WHEREAS, the electric systems of the District and SJLP
are directly electrically interconnected and the Parties
are participants under the Coordinating Agreement governing
the Cooper-Fairport-St. Joseph Interconnection allowing
transfer of the power and energy between their systems; and
WHEREAS, the Parties desire to enter into an agreement
for the sale by the District and the purchase by SJLP of
baseload unit participation power and energy produced by
the District's Gerald Gentleman Station or from other
alternate sources for energy, the source of which is at the
sole option of the District, and the delivery of such
baseload unit participation power and energy to SJLP as
provided herein.
NOW, THEREFORE, in consideration of the promises,
conditions, and covenants contained herein, the Parties
agree as follows:
ARTICLE I
DEFINITIONS
1.01 "Accredited Capability" shall mean Accredited
Capability as defined in the MAPP Agreement.
Page 1
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
1.02 "Capacity Charge Rate" shall mean Capacity Charge Rate
as defined in Section 3.02 hereof.
1.03 "Contract Rate of Delivery" shall mean Contract Rate
of DeLivery as such is defined in Section 3.02 hereof.
1.04 "Contract Year" shall mean the period of twelve
calendar months commencing at 12:01 am on June 1, 2000, and
at 12:01 am. on June 1 of each year thereafter during the
term of this Agreement.
1.05 "Coordinating Agreement" shall mean the Coordinating
Agreement governing the Cooper-Fairport-St. Joseph 345 KV
Interconnection dated March 5, 1990, executed by the
participants to said Agreement, including the District and
SJLP, and as the same may be amended from time to time.
1.06 "Energy Charge Rate" shall mean Energy Charge Rate as
defined in Exhibit "A" hereof.
1.07 "GGS Unit Participation Power" shall mean power and
associated energy which is sold from the District's Gerald
Gentleman Station ("GGS") located near Sutherland, Nebraska
Such GGS Unit Participation Power and associated energy
shall be supplied one half from GGS Unit No. 1 and one half
from GGS Unit No. 2, on the basis that it is continuously
available, except as otherwise provided herein.
1.08 "MAPP Agreement" shall mean the Mid-Continent Area
Power Pool Agreement dated March 31, 1972, executed by the
participants in said power pool, including the District,
and as the same may be amended from time to time.
1.09 "MAPP Loss Repayment" shall mean the energy losses for
which the District has an obligation to MAPP, as determined
in accordance with the then current MAPP Loss Repayment
Procedure.
1.10 "NERC" shall mean the North American Electric
Reliability Council.
1.11 "Prudent Utility Practice" shall mean any of the
practices, methods and acts at a particular time, which, in
the exercise of reasonable judgment in the light of the
facts, including but not limited to the practices, methods
and acts engaged in or approved by a significant portion of
the electric utility industry prior thereto, known at the
time the decision was made, would have been expected to
accomplish the desired result at the lowest reasonable cost
consistent with reliability, safety and expediency. In
applying the standard of Prudent Utility Practice to any
matter under this Agreement, equitable consideration should
be given to the circumstances, requirements and obligations
of each of the Parties. It is recognized that Prudent
Utility Practice is not intended to be limited to a single
best practice, method, or act to the exclusion of all
others, but rather can be within a specimen of possible
practices, methods or acts which could reasonably have been
expected to accomplish the desired result.
Page 2
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BE REPLACED WITH ASTERISKS.
1.12 "SJLP's Reserve Sharing Pool" shall mean the then
current reserve sharing pool of which SJLP is a member,
currently this is the MOKAN Power Pool organized under the
General Participation Agreement of the MOKAN Power Pool
dated April 19, 1989.
1.13 "Transmission Capacity Rights" shall mean Transmission
Capacity Rights as defined in the Coordinating Agreement.
ARTICLE II
TERM OF AGREEMENT
2.01 This Agreement shall be effective upon the date of its
execution, which date shall be inscribed in the first
paragraph hereof, and shall remain in force and effect
through May 31, 2011, except as provided in Section 8.01,
hereof.
ARTICLE III
GGS UNIT PARTICIPATION POWER
3.01 Upon commencement of the initial Contract Year, the
District agrees to sell and deliver and SJLP agrees to
purchase and accept GGS Unit Participation Power in the
amount of the Contract Rate of Delivery. Such GGS Unit
Participation Power shall be comprised of equal
contributions from GGS Unit No.l and GGS Unit No.2
respectively (for example 50 MW from GGS Unit No.l and 50
MW from GGS Unit No. 2 for a 100 MW Contract Rate of
Delivery). Such GGS Unit Participation Power shall be
supplied by the District and received by SJLP without
reserves. When the output of a GGS unit is partially or
totally limited by the District from its then current
Accredited Capability, SJLP's energy entitlement may, at
the District's sole discretion, subject to the provisions
of Section 7.02, be pro rata reduced for the duration of
such limitation, however, neither the GGS Unit
Participation Power nor the Capacity Charge Rate shall be
reduced.
3.02 The Contract Rate of Delivery ("CROD") and the
respective Capacity Charge Rate for GGS Unit Participation
Power sold in each month of each Contract Year during the
term of this Agreement are defned and shall be as follows:
Contract CROD Capacity Charge Rate
Year (in MW) (in $/MW-month)
2000 60 $**
2001 70 $**
2002 80 $**
2003 90 $**
2004 100 $**
2005 100 $**
2006 100 $**
2007 100 $**
2008 100 $**
2009 100 $**
2010 100 $**
Page 3
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERICKS.
3.03 Except as otherwise provided in Sections 3.05, 8.03
and 8.04, the Energy Charge Rate for energy associated with
GGS Unit Participation Power shall be determined by the
District and shall be based upon the average cost of
production for Gerald Gentleman Station plus the cost of
losses to deliver energy to the Point of Delivery and the
cost of losses incurred by the District pursuant to Section
9.01, all as determined in accordance with Exhibit A
attached hereto and thereby incorporated herein.
3.04 SJLP's payment to the District for GGS Unit
Participation Power purchased in any month shall be the sum
of: (1) The Capacity Charge Rate described in Section 3.02
multiplied by the CROD for said month, (2) the Energy
Charge Rate described in Section 3.03 multiplied by the MWH
of energy delivered to SJLP under such rate during said
month, and (3) any payments for taxes, fees or allowances
pursuant to Article XIX of this Agreement. The amount owed
to the District for energy purchased by SJLP at prices
other than the Energy Charge Rate pursuant to Sections
3.05, 8.03 or 8.04 shall also be included in SJLP's
monthly billing but shall be separated from energy billed
at the Energy Charge Rate.
3.05 In the event Gerald Gentleman Station is available to
provide energy but one or both of said units is at minimum
generation output (currently approximately 200 MW net
output per GGS unit), SJLP shall schedule and receive
energy deliveries in an amount not less than 16 MWH/HR from
such a unit; provided however, when the District's
scheduled load on such a unit exceeds the minimum
generation level, SJLP shall not be required to schedule
any minimum amount of energy from said unit. The District
shall notify SJLP as soon as practicable when it becomes
necessary for SJLP to modify its energy schedule to receive
its portion of energy from Gerald Gentleman Station during
such minimum generation periods. The District reserves the
right, in its sole discretion, not to operate a Gerald
Gentleman Station unit at any time it determines that it is
not economically feasible to do so. During times when a GGS
unit(s) is taken off-line by the District for economic
reasons, the District shall make available other energy at
the same or lower price as energy provided from a GGS
unit(s); provided, however, the lower price, including
payment for losses, shall apply only if the District is
purchasing energy for its own needs at such lower price and
additional amounts of energy (not to exceed SJLP's pro rata
entitlement from such unit) can be obtained for SJLP at
said lower price. At such times when such other energy is
provided to SJLP because a GGS Unit is off line for
economic reasons, such other energy shall be deemed energy
associated with GGS Unit Participation Power for purposes
of the District's obligations described in Article VII
hereof.
Page 4
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULAGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
ARTICLE IV
POINT OF DELIVERY AND TRANSMISSION SERVICE
4.01 The District will make the GGS Unit Participation
Power purchased by SJLP under this Agreement available to
SJLP at the GGS switchyard for transmissions pursuant to
Section 4.03, over the District's transmission system from
said switchyard to the point of delivery ("Point of
Delivery") as described in Section 4.02 hereof.
4.02 The Point of Delivery for GGS Unit Participation Power
shall be at the point of interconnection between the
Cooper-Fairport-St. Joseph 345 KV interconnection and the
District's 345 KV facilities at the District's Cooper
Substation all as described in the Coordinating Agreement.
4.03 To facilitate transmission of the GGS Unit
Participation Power from the GGS switchyard to the Point of
Delivery pursuant to Sections 4.01 and 4.02 above, the
District shall provide to SJLP, during each Contract Year,
point-to-point firm transmission service in the amount of
the CROD for said Contract Year in the form of Contingent
Firm Transrnission Service under the District's T-2
Transmission Service Rate schedule, or replacement
therefor. Such Contingent Firm Transmission Service
provided to SJLP shall allow SJLP to schedule GGS Unit
Participation Power, not to exceed the CROD, from GGS to
the Point of Delivery on a contingent firm basis subject to
the terms, conditions and service specifications of said
T-2 Rate Schedule or its successor or replacement, and
further, shall allow SJLP to schedule energy associated
with GGS Unit Participation Power, not to exceed the CROD,
to other points of interconnection on the District's
transmission system, as described hereinafter, on a
non-firm basis subject to the terms, conditions and service
specifications of said T-2 Rate Schedule governing
transmission of non-firm energy under a firm transmission
capacity reservation. The Parties agree that for the
purposes of this Agreement the scheduling of such non-firm
deliveries by SJLP shall be limited to the Distict's
transmission interconnections which are located at or cross
the Nebraska state border for receipt by other energy
purchasers outside Nebraska; provided, however, SJLP shall
have the right of substitution to schedule such non-firm
energy, not to exceed the CROD, to Omaha Public Power
District or Lincoln Electric System unless such deliveries
are prohibited by federal or state law.
4.04 To facilitate transmission of GGS Unit Participation
Power from the Point of Delivery to SJLP's point of
interconnection with the Cooper-Fairport-St. Joseph 345 KV
interconnection, the District and SJLP shall each provide
Transmission Capacity Rights, in the amount of fifty
percent (50%) of the CROD, under the terms of the
Coordinating Agreement. The Parties recognize that such
Transmission Capacity Rights provided by the District shall
be deemed as a portion of the transmission service received
by SJLP from District hereunder and that the District shall
be compensated for providing such Transmission Capacity
Rights by way of SJLP's payment of the District's T-2 Rate
as described in Section 4.06. The parties further recognize
that the impact, if any, of Federal Energy Regulatory
Cornmission ("FERC") regulations issued pursuant to Order
888, as amended, on the Coordinating Agreement and the
Parties' ability to utilize their respective
rights Hereunder is unknown as of the date of this
Agreement. In the event the Coordinating Agreement is
Page 5
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISION IN ACCORDANCE WITH RUEL 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERICKS.
amended by its participants, including the District and
SJLP, to comply with regulations issued pursuant to Order
888, as amended, and if either the District or SJLP
determine that this Agreement shall also require amendment
as a result of said amendment to the Coordinating
Agreement, the Parties agree to conduct negotiations to
facilitate such an amendment to this Agreement. Provided
said negotiations are successful and produce a mutually
acceptable amendment to this Agreement, providing for
compliance with the Coordinating Agreement as amended, the
Parties shall execute such negotiated amendment to this
Agreement. In the event the Parties cannot agree on an
appropriate amendment to this Agreement, either Party may
terminate this Agreement and its obligations and further
liabilities hereunder upon 90 days prior written notice.
4.05 It is recognized that the District is interconnected
with other transmission service providers at the District's
Cooper 345 KV Substation. If SJLP loses, or anticipates the
loss of, its ability to receive GGS Unit Participation
Power at the Point of Delivery, SJLP may at its option make
arrangements with such other transmission service providers
for another means of delivery from the District's Cooper
345 KV Substation to the SJLP electric system as an
alternative to the transmission arrangements provided for
in Section 4.04. In the event SJLP makes such alternative
arrangements, SJLP shall pay all transmission and ancillary
services charged by such other transmission provider and
costs associated therewith, SJLP shall retain its
obligations to pay the District under this Agreement, and
the District shall continue to deliver GGS Unit
Participation Power to its Cooper 345 KV Substation
pursuant to this Agreement for receipt by said other
transmission service providers so long as the District is
provided with all requested notices and schedules under
Article VI regarding the alternate arrangements and the
alternate arrangements do not modify the obligations or
performance burdens of the District under this Agreement.
4.06 The Parties agree that the District's compensation for
the transmission service provided to SJLP under Sections
4.03 and 4.04 above is included as a portion of the total
compensation received by the District pursuant to the
Capacity Charge Rate paid by SJLP as provided in Section
3.02. It is understood by the Parties that payment of the
District's T-2 Rate for such transmission services shall be
received by the District through an allocation of a portion
of said Capacity Charge Rate, in the amount of said T-2
Rate, to the District's transmission accounting function
with the remaining portion of the Capacity Charge Rate
allocated to the District's power production accounting
function. Regardless of variation in the District's T2
Rate, SJLP's payment for GGS Unit Participation Power and
transmission service provided to SJLP under this Agreement
shall not be less than, nor shall it exceed, said Capacity
Charge Rate.
ARTICLE V
INTERRUPTION OF DELIVERIES
5.01 The District shall not be obligated to deliver to
SJLP, even if previously scheduled, power and energy when:
Page 6
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
(1) Delivery from the District to SJLP would endanger the
District's facilities, in the District's sole judgment, or
(2) Transmission of such power and energy is restricted
under the authority of a policy or procedure of MAPP or
SJLP's Reserve Sharing Pool.
For the purposes of this Agreement, conditions under which
delivery would endanger the Distict's facilities, as
provided in item (1) of this Section 5.01, are any
conditions, whether existing or imminent, which could
subject the District's facilities or its electric system to
the threat of failure, damages break down, outage, or
cascading and shall include but not be limited to abnormal
voltages or frequency, excessive loading, system
instability, or exceeding the operating limits established
and observed by the District to maintain the integrity of
its electric system.
5.02 Reductions in deliveries due to conditions associated
with the Cooper-Fairport-St. Joseph 345 KV Interconnection
shall be performed in accordance with the terms and
conditions of the Coordinating Agreement. If at the time of
such reductions the District would have otherwise been able
to deliver GGS Unit Participation Power to its Cooper 345
KV Substation, such GGS Unit Participation Power shall be
deemed available for scheduling by SJLP, for purposes of
Article VII, even though SJLP's schedules are reduced.
5.03 There shall be no contractual or other liability on
the part of the District because of any interruption in
delivery properly invoked pursuant to this Article V.
ARTICLE VI
AVAILABILITY AND SCHEDULING
6.01 Except as otherwise limited by provisions of this
Agreement, the GGS Unit Participation Power supplied by the
District to SJLP under this Agreement shall be available
for scheduling during each Contract Year at the Contract
Rate of Delivery provided for in Section 3.02.
6.02 The SJLP system operators shall communicate with the
District's system operators to facilitate daily scheduling
of energy and any operating reserves under this Agreement.
SJLP will normally furnish the District with a schedule for
energy and any operating resenes by 2:00 pm. of the day
prior to the beginning of such schedule. Schedules for
Saturday, Sunday, and Monday shall be provided by 2:00 p.m.
on the preceding Friday. In the event SJLP submits a
schedule after 2:00 pm, or SJLP requests a change in a
previously submitted schedule, the District shall use its
best efforts to accommodate such schedule or request.
Page 7
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
6.03 Schedules and schedule changes submitted by SJLP
pursuant to Sections 6.02 shall be made in such a manner so
as not to cause undue hardship on the District's system
regarding rate of change of delivery and continuity of
delivery. The District shall use its best efforts to
accommodate such schedules or schedule changes within
operating limitations, such as ramping rates or unit
start-up time, that are reasonable for SJLP's pro rata
share(s) of the Gerald Gentleman Station unit(s) providing
energy or operating reserves for the schedules submitted.
6.04 Notwithstanding any other provisions of this
Agreement, after 2:00 p.m. of any day, but excepting any
schedule change or initiation by SJLP pursuant to Section
6.02 above, the District reserves the right to utilize any
non-scheduled GGS capacity for producing energy or for
satisfying the District's operating reserve requirements,
including spinning and nonspinning reserves, during the
following day. For the purposes of this Agreement, GGS
capacity shall be deemed non-scheduled if the District does
not receive a schedule from SJLP for energy or operating
reserves as provided in Section 6.02.
ARTICLE VII
DISTRICT'S ENERGY OBLIGATION
7.01 Subject to the provisions of Article Vl, the Parties
agree that the GGS Unit Participation Power purchased by
SJLP under this Agreement shall be available for scheduling
such that the District will provide energy to SJLP in an
amount equivalent to the CROD for not less than *** of
any Contract Year, if scheduled by SJLP up to such amount
during said Contract Year.
7.02 To facilitate measurement of the District's
performance in meeting its obligation to provide such
energy during said hours, the District will record for each
hour of each Contract Year (i) the GAS Unit Participation
Power available for scheduling by SJLP, (ii) the requested
schedule of GGS Unit Participation Power scheduled by SJLP,
and (in) the difference, if any, resulting from subtracting
item (ii) from item (i). During times when one GGS unit,
but not both GGS units, is available for scheduling by
SJLP, the amount of GGS Unit Participation Power deemed by
the District to be available for scheduling by SJLP as
provided in item (i) above shall not exceed for NERC
defined off-peak hours the GGS Unit Participation Power
available from such single GGS Unit dunng NERC defined
on-peak hours except by mutual agreement of the Parties.
Page 8
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
7.03 Except as otherwise provided in Section 8.02, the
District's maximum energy obligation ("Maximum MWH
Obligation') during any Contract Year is established as
provided below.
Contract Year CROD Maximum MWH Obligation
2000 60 MW **
2001 70 **
2002 80 **
2003 90 **
2004 100 **
2005 100 **
2006 100 **
2007 100 **
2008 100 **
2009 100 **
2010 100 **
The calculated amount of such Maximum MWH Obligation for
any Contract Year is based upon the product of (i) 8766
hours/year (the average annual hours agreed to by the
Parties), (ii) a factor of *** and (iii) SJLP's CROD for
said Contract Year. The calculated Maximum MWH Obligation
for the final Contract Year may be adjusted from the
Maximum MWH Obligation shown above as a result of
reductions, if any, provided for in Section 8.02.
7.04 The District's energy obligation ("MWH Obligation")
for any Contract Year, not to exceed the Maximum MWH
Obligation for said Contract Year, shall be calculated by
subtracting from said Maximum MWH Obligation the summation
of the differences, if any, described in item (iii) of
Section 7.02, for all hours of said Contract Year.
7.05 If the sum of (i) the total energy associated with GGS
Unit Participation Power and delivered to SJLP in any
Contract Year plus (ii) Energy Credits, if any, accumulated
by the District pursuant to Section 8.02 and applied toward
its obligation hereunder, equals or exceeds the MWH
Obligation for said Contract Year, the District shall be
deemed to have met its obligation to provide energy during
that Contract Year. However, if said sum is less than the
MWH Obligation for said Contract Year, an energy deficit
("Energy Deficit") shall be deemed to have occurred and the
District shall be deemed not to have met its obligation to
provide energy during such Contract Year; provided,
however, the occurrence of an Energy Deficit shall not
constitute a breach of this Agreement. The Energy Deficit
shall for the purposes of this Agreement be equal to the
difference in MWH resulting from the MWH Obligation less
said delivered energy and shall be provided to SJLP during
subsequent Contract Years as provided in Section 8.01.
ARTICLE VIII
ENERGY DEFICITS AND CREDITS
8.01 The Parties shall record and keep an accounting of any
Page 9
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDIANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERICKS.
Energy Deficits, as described in Section 7.05, occurring
during the term of this Agreement. In the event of an
Energy Deficit, the Parties shall mutually agree upon the
time and the manner in which such energy will be delivered
to SJLP, at the Energy Charge Rate or a price equivalent
thereto, to remedy said Energy Deficit during the remaining
term of this Agreement; provided, however, if such
Energy Deficit remains at the completion of the term of
this Agreement,the District's obligation to remedy said
Energy Deficit shall survive the term hereof until the
balance of said Energy Deficit is delivered to SJLP, at the
Energy Charge Rate or a price equivalent (i.e. - at a price
based on the GGS heat rate, fuel cost and O&M consistent
with Exhibit A of this Agreement) thereto; further
provided, all such Energy Deficits shall be delivered to
SJLP not later than May 31, 2012.
8.02 In the event the District provides energy associated
with GGS Unit Participation Power to SJLP during any
Contract Year in an amount that exceeds the Maximum MWH
Obligation for such Contract Year, the difference in MWH
resulting from subtracting said Maximum MWH Obligation from
the total MWH of such energy delivered in said Contract
Year may be applied, at the District's sole discretion
pursuant to Section 8.04, as a credit(s) ("Energy Credits")
toward the District's then current or future obligation to
remedy Energy Deficits. If, upon commencement of the final
Contract Year the District has accumulated such Energy
Credits and no Energy Deficit(s) exist to be remedied, said
Energy Credits (in MWH) may also be applied as a credit
toward the Maximum MWH Obligation in the final Contact
Year, as identified in Section 7.03, to reduce the
District's obligation thereunder.
8.03 If during the final Contract Year the District's
energy deliveries exceed the Maximum MWH Obligation
(whether reduced pursuant to Section 8.02 or otherwise),
the District shall offer to sell any energy associated with
GGS Unit Participation Power that exceeds said Maximum MWH
Obligation (whether reduced pursuant to Section 8.02 or
otherwise) to SJLP at $/MWH energy prices equivalent to the
then current prices the District would be able to receive
from sales to energy purchasers other than SJLP, and such
offered $/MWH energy prices may exceed the Energy Charge
Rate described in Section 3.03. Upon the District's
offering of such energy to SJLP, SJLP shall have the right
of first refusal whether to purchase or not to purchase
energy so offered by the District. If SJLP refuses to
purchase such energy, the District shall have no obligation
to deliver such energy to SJLP and may sell such energy to
energy purchasers other than SJLP.
8.04 If durring any Contract Year, other than the final
Contract Year, the District's energy deliveries exceed the
Maximum MWH Obligation for said Contract Year, and the
District at its sole discretion elects not to utilize
subsequent deliveries as credit(s) toward Energy Deficits
pursuant to Section 8.02, the District shall offer to sell
any energy associated with GGS Unit Participation Power
that exceeds said Maximum MWH Obligation to SJLP at $/MWH
energy prices equivalent to the then current prices the
District would be able to receive from sales to energy
purchasers other than SJLP, and said offered $/MWH energy
prices may exceed the Energy Charge Rate described in
Section 3.03. Upon the District's offering of such energy
to SJLP, SJLP shall have the right of frst refusal whether
Page 19
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
to purchase or not to purchase energy so offered by the
District. If SJLP refuses to purchase such energy, the
District shall have no obligation to deliver such energy to
SJLP and may sell such energy to purchasers other than
SJLP. If SJLP agrees to purchase energy so offered by the
District, the District shall deliver said energy to SJLP at
the Point of Delivery for the mutually agreed $/MWH energy
price; provided, however, any such energy offered to or
purchased by SJLP shall not be able to be claimed by the
District as credit(s) toward Energy Deficits.
ARTICLE IX
LOSSES
9.01 The District shall compensate Associated Electric
Cooperative, Inc. (AECI) for energy losses incurred on the
Cooper-Fairport-St. Joseph 345 KV Interconnection. The
District's cost of providing such losses to AECI shall be
included in the Energy Charge Rate described in Exhibit "A"
attached hereto.
9.02 Charges for energy losses resulting from deliveries
under this Agreement (i) incurred on the District's
electric system up to the Point of Delivery and (ii)
associated with MAPP Loss Repayment, shall be paid by SJLP.
The cost and amount of such energy losses shall be included
in the Energy Charge Rate described in Exhibit "A" attached
hereto.
ARTICLE X
OPERATION AND MAINTENANCE
10.01 The District shall operate and maintain its electric
system, including GGS, in accordance with Prudent Utility
Practice. SJLP shall operate and maintain its electric
system in accordance with Prudent Utility Practice. Each
Party shall perform such maintenance at such times as it
deems necessary, in its sole discretion, but shall use its
best efforts to schedule such maintenance in such a manner
as to limit the overall inconvenience to the Parties such
that neither Party is significantly penalized. The District
shall provide SJLP reasonable advance notice of any
scheduled maintenance to be performed on GGS or on any of
its electric system facilities which the District, in its
sole judgment, expects to limit or adversely impact its
ability to deliver energy hereunder.
ARTICLE XI
BOOKS AND RECORDS
11.01 The Parties shall maintain such books and records as
are required for the admimistration of this Agreement and
shall upon request of one Party to the other, provide each
other access to such books and records as well as
reasonable access to each other's electric systems to
permit audits or confirmation of compliance with the
provisions of this Agreement. Such access shall be by prior
schedule and during normal working hours for each Party.
Page 11
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES AND EXHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERICKS.
ARTICLE XII
BILLING AND PAYMENTS
12.01 The Parties agree that the delivery and receipt of
GGS Unit Participation Power provided for herein shall be
accomplished pursuant to Service Schedule H, or its like
successor, of the Coordinating Agreement. Pursuant to said
Coordinating Agreement, as soon as practicable after the
end of each calendar month, the District shall determine
and report, in accordance with the interchange accounting
procedures established under the Coordinating Agreement,
the schedules of power and/or energy delivered to SJLP.
12.02 The District's bill for moneys owed for power,
energy, and other charges under this Agreement will
normally be rendered to SJLP within fifteen (15) days after
the end of each calendar month and payment shall be due
within fifteen (15) days thereafter. All billing shall be
based upon scheduled transactions.
12.03 Bills shall be deemed rendered on the postmark date
if deposited in the first class mail properly addressed
with postage prepaid and shall be deemed rendered upon
receipt if another means of delivery is used. If the due
date of any bill falls on Saturday, Sunday, or holiday
observed by SJLP the bill shall be due on the next
following work date of SJLP. Bills shall be deemed paid on
the postmark date if deposited in the first class mail
properly addressed and postage is used. Interest shall
accrue from the date due and be compounded daily until the
date upon which payment is made at the then applicable rate
of interest established by the Federal Energy Regulatory
Commission ("FERC") for refunds as set forth in 18 C.F.R
Section 35.19(a) or in successor sections, as in effect
from time to time. Such daily interest shall be computed on
the basis of actual days and a 365-day calendar year.
In the event SJLP desires to dispute all or any part of the
charges submitted by the District it shall nevertheless pay
in full the amount of the charge when due and give
notification in writing within 60 days from the due date of
the billing statement stating the specific grounds on which
the charges are disputed and the amount in dispute. This
60-day period shall not apply to any disputed amounts that
through reasonable diligence, could not have been
identified during the 60-day period including any disputed
amounts identified pursuant to an inspection of records
under Section 11.01. SJLP will not be entitled to any
adjustment on account of any disputed charges which are not
brought to the attention of the District within the time
and in the manner herein specified. If settlement of the
dispute results in a refund to SJLP, interest shall accrue
from the original date of payment by SJLP and be compounded
daily until the date upon which the refund is made, at the
then applicable rate of interest established by the FERC
for refunds as set forth in 18 C.F.R. Section 35.19(a) or
successor sections, as in effect from time to time. Such
daily interest shall be computed on the basis of actual
days and a 365-day calendar year.
Page 12
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ATERISKS.
ARTICLE XIII
OPERATING COMMITTEE
13.01 An Operating Committee composed of one representative
of each Party shall be formed and shall meet as often as
reasonably necessary to carry out the provisions of this
Agreement, but no less than once per Contract Year. Either
Party's representative may call a meeting of the Operating
Committee by providing the other representative reasonable
written notice prior to the proposed date of such meeting.
13.02 Specific duties of the Operating Committee shall
include, but not be limited to, the following:
(a) Establishing energy and spinning reserve scheduling
procedures as outlined in Article VI of this Agreement; and
(b) Establishing appropriate communication facilities
requirements, as necessary; and
(c) Coordinating energy and spinning reserve scheduling,
communication, and administrative activities.
13.03 The Operating Committee shall make all decisions and
provide all directions authorized hereunder and such
decisions made and directions given must be unanimous. The
Operating Committee shall have no authority to alter,
amend, change, modify, add to or subtract from any
provision of this Agreement nor to bind or to take any
action which would bind the Parties on any issues other
than those arising from the authority specifically given to
the Operating Committee under this Agreement. The Operating
Committee may change operating procedures and standard
practices from time to time to meet changing conditions. If
the Operating Committee is unable to agree on any matters
within its jurisdiction, such matters shall be resolved by
the mutual agreement of SJLP's Vice President - Energy
Supply and the District's Senior Vice President of Energy
Supply or their designated representatives; provided,
however, if the representatives of the Parties are still
unable to resolve the matter, the Parties can proceed as
provided in Section 21.05. Written minutes shall be kept of
all Operating Committee meetings, and decisions or
agreements made by the Operating Committee shall be reduced
to writing. The Operating Committee shall approve the
written contents of such minutes, decisions or agreements
prior to their issuance.
ARTICLE XIV
UNCONTROLLABLE FORCES
14.01 Neither Party shall be considered to be in default
with respect to any obligation hereunder if prevented or
delayed in whole or in part from fulfilling such obligation
by reason of uncontrollable forces, provided that the
provisions of this Section shall not apply to the
obligation for payments to be made under this Agreement.
Page 13
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIY AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMMITED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
The term "Uncontrollable Forces" shall mean storm, flood,
lightning, earthquake, fire, explosion, failure of facilities
not due to lack of proper care or maintenance, civil disturbance,
labor disturbance, sabotage, war, national emergency, restraint
by court or act of a public authority or governmental
regulatory agency, or other causes beyond the control of the
Party affected, which such Party could not reasonably have
been expected to have avoided by exercise of due diligence
and foresight and by provision of reserve facilities in
accordance with Prudent Utility Practice. If either Party
is unable to fill any of its obligations by reason of
Uncontrollable Forces it will exercise its best efforts to
remove such disability with reasonable dispatch, provided
that neither Party shall be required to settle or resolve
labor disturbances or strikes or to accept or agree to
governmental or regulatory orders or conditions without
objection or contest on any basis not acceptable to such
Party in its sole discretion. Notice of Uncontrollable
Forces shall be given by the Party affected as soon as
reasonably possible, but in no event later than 48 hours
after learning of such Uncontrollable Force.
14.02 In the event an Uncontrollable Forces condition is
claimed that reduces the output of either GGS Unit No. 1 or
GGS Unit No. 2 to zero, but does not reduce the output of
both units to zero, and such Uncontrollable Forces
condition exists for a period of five consecutive months
and cannot be removed within the term of this Agreement,
the Parties may amend this Agreement to reduce the amount
of power sold hereunder by the fifty percent (50%) of the
Contract Rate of Delivery that is no longer available. Such
amendment, if any, shall be made not more than 30 days
following the conclusion the five-month period.
ARTICLE XV
ASSIGNMENT
15.01 Except for the transfer or assignment to a trustee or
receiver in bankruptcy of a Party, to a foreclosing
mortgagee of a Party, or to a successor to all or
substantially all of the electric properties of a Party
whether by reorganization, merger, consolidation, or sale,
this Agreement, and any of the rights, duties, obligations
and interests thereunder, are not assignable or otherwise
transferrable by either Party, in whole or in part; without
the written consent of the other Party to this Agreement.
The assignee shall assume all duties and obligations
arising from and after the time of assigmnent of the
assignor hereunder, but such assignment shall not release
the assignment from said duties and obligations unless
specifically provided in the written consent and
assigrunent. All duties and obligations arising prior to
the assignment shall remain the duty and obligation of the
assignor unless the Parties hereto specifically agree
otherwise.
ARTICLE XVI
TERMINATION
16.01 If either Party should materially fail to perform or
cause unnecessary material delays in performance of its
duties and obligations under this Agreement, unless excused
by Uncontrollable Forces as defined in Section 14.01, be
adjudged bankrupt; have a general assignment of its assets
Page 14
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGAED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
made for the benefit of its creditors; have a receiver
appointed for it or for any of its property; or violate any
of the material conditions of this Agreement, then the aggrieved
Party may serve written notice upon the other Party of its
intention to terminate this Agreement. Unless within 30 days
after the service of such notice a satisfactory arrangement
is made to remedy the aforementioned acts or omissions, then
the aggrieved Party at its election may terminate the Agreement by
written notice of termination to the other Party. Nothing herein
shall be construed to limit or restrict any other legal
rights or remedies at law or equity of the aggrieved Party.
ARTICLE XVII
INDEMNIFICATION
17.01 Each Party shall indemnify, hold harmless, and
defend the other Party, its agents, servants, employees,
and officers and directors from any and all costs and
expenses, including but not limited to reasonable attorneys
fees, court costs and other amounts which said other Party,
its agents, servants, employees, and officers and directors
are or may become obligated to pay on account of any and
all demands, claims, liabilities, or losses arising or
alleged to have arisen out of or in any way connected with
the negligent acts or omissions or willfill or wanton
action of the indemnifying Party, its agents, servants,
employees, officers or directors whether such demands,
claims, liabilities, or losses be for damages to property
or injury or death of any person.
ARTICLE XVIII
APPROVALS
18.01 Except for the obligations set forth below in this
Section 18.01, this Agreement and any subsequent
amendment(s) hereto, shall be subject to the authority of
any regulatory body or approving authority (including the
Parties' respective reserve sharing pools where applicable)
having jurisdiction hereof or exercising control over the
operation of the Parties' respective electric systems with
respect to system reliability. Upon its execution, the
Parties shall submit this Agreement and any subsequent
amendment(s) hereto to such regulatory bodies and approving
authorities, if any, for their required acceptance or
approvals, and said Parties shall take all reasonable and
necessary actions to obtain such acceptances or approvals.
If within 270 days of the execution of this Agreement
either Party notifies the other Party that such required
acceptance or approval has not been received or such
acceptance or approval is conditional in nature and such
condition(s) is unacceptable to either Party, this
Agreement shall terminate unless the Parties agree
otherwise in writing.
ARTICLE XIX
TAXES, FEES, AND ALLOWANCES
19.01 Any federal, state or local tax now, or hereafter,
imposed upon the District and levied upon or measured by
the power and energy delivered to SJLP hereunder or levied
upon or
Page 15
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES AND EXHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
measured by the revenue from any sale of power and energy to
SJLP hereunder shall be added to the billing rendered by the
District to SJLP. This provision shall not be interpreted to
waive any rights against such governmental tax authorities
which SJLP may have to challenge the imposition of any such
tax.
19.02 SO2 allowances required under the 1990 Clean Air Act
Amendments and necessary for providing energy under this
Agreement (including energy for losses) shall be supplied
under one of the following:
(a) SJLP may supply such allowances, or
(b) Some other third party, acting on behalf of SJLP may
supply such allowances, or
(c) The allowances may be purchased from the District, if
available, at a reasonable market price mutually agreed
upon in writing between the Parties.
In the event such SO2 allowances are purchased from the
District, the purchase price of said allowances shall be
added to the billing for energy sold hereunder.
19.03 Environmental compliance costs such as fees, taxes,
or other allowances, not required as of the date of execution
of this Agreement but required subsequent thereto and
applicable to energy production associated with this
Agreement shall be added to the billing for energy sold
hereunder unless the Parties agree otherwise in writing.
ARTICLE XX
DISTRICT'S TAX EXEMPT DEBT
20.01 It is the intent of the Parties that this Agreement
not result in private use of the District's generation or
transmission facilities under the Federal Internal Revenue
Code and regulations governing tax exempt debt. Further,
the Parties recognize that a definitive interpretation and
explanation of this law is still forthcoming and its impact
cannot be predicted or foreseen. It is an essential purpose
of this Agreement that the capacity and energy sold and
transmission services provided will not: (1) impair the
exclusion from gross income for federal income tax purposes
of interest paid or to be paid on any debt issued or to be
issued by or for the benefit of the District, or (2) impair
the deductibility of interest expense associated with
interest paid or to be paid on any such debt, or (3) require
the District to violate any covenant of any existing debt
financial consequences or lose its ability to issue or
use tax exempt debt as a result of this Agreement alone
or as a result of this Agreement in conjunction with other
generation or transmission sales by the District. The
Parties agree that if reuqired by the District to protect
the status of its tax exempt deebt or prevent the
impairments set fourth above, the District may at any
time call for an amendment to this Agreement so as to
allow the District to supply the power and energy
obligations hereunder from some alternative
Page 16
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACOORDANCE WITH RULE 24b-2, PROMULGATED UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
resource, provide transmission service hereunder in some
alternative manner arranged by the District which is
equivalent with respect to reliability and availability of
the power, energy and transmission service provided
hereunder, or such other arrangements as are deemed
necessary by NPPD, at no additional cost to SJLP. Upon such
call for an amendment, SJLP shall agree to such amendment,
or in the event of a material adverse consequence of such
amendment, SJLP shall have the right to terminate the
Agreement.
ARTICLE XXI
GENERAL
21.01 In no event shall a Party to this Agreement be liable
to the other Party hereto for any indirect, consequential,
punitive, or similar damages arising from or in any way
connected with this Agreement.
21.02 Notices to the District shall be sent to the Senior
Vice President of Energy Supply, 1414 15th Street,
Columbus, Nebraska 68602-0499. Notices to SJLP shall be
sent to the Vice President-Energy Supply, P.O. Box 998, 520
Francis Street, St. Joseph, Missouri 64502-0998. Either
Party may change its address or the representative to which
notices are to be sent by providing written notice of such
change to the other Party.
21.03 Any waiver at any time by a Party of its rights with
respect to a default under this Agreement, or with respect
to any other matter arising in connection with this
Agreement, shall not be deemed a waiver with respect to any
other default or matter. Any delay short of the statutory
period of limitation in asserting or enforcing any right
shall not be deemed a waiver of such right.
21.04 It is understood and agreed that all representations,
understandings and prior negotiations are merged into this
Agreement, and that this Agreement constitutes the sole and
entire Agreement between the Parties and no modification
hereof shall be binding unless made a part hereof in
writing executed by both Parties.
21.05 Any dispute or controversy between the Parties
arising out of or relating to this Agreement shall be
submitted to the Operating Committee for resolution. Any
matter that cannot be resolved under the provisions of
Article XIII, upon consent of both Parties, may be
submitted to a mediator mutually agreed upon by the
Parties. This mediation process shall be nonbinding on the
Parties. Any such mediation process shall be completed
within 120 days.
21.06 Nothing in this Agreement shall be construed to
obligate SJLP in any way to the District's past, present or
future obligations regarding nuclear generating facilities.
21.07 The Parties shall perform and discharge their
respective duties and obligations under this Agreement in
accordance with good faith efforts (except as otherwise
specified herein) and honesty in dealing.
Page 17
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
IN WITNESS WHEREOF the Parties hereto have caused this
Agreement to be executedthe day and the year first above
written.
NEBRASKA PUBLIC POWER DISTRICT
By Guy R. Horn
Title: Sr. Vice President of Energy
Date : 7-10-96
WITNESS By Rita L. Pflasterer
ATTTEST:
Gary L. Myers
ST. JOSEPH LIGHT & POWER COMPANY
By D.V. Svuba
Title: Vice President-Energy Supply
Date: 7-9-96
EXIBIT A
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION IN ACCORDANCE WITH RULE 24b-2, PROMULGATED UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
TO
GERALD GENTLEMAN STATION UNIT PARTICIPATION AGREEMENT
BETWEEN
NEBRASKA PUBLIC POWER DISTRICT
AND
ST. JOSEPH LIGHT & POWER COMPANY
The monthly amount billed to SJLP by the District for
energy associated with GGS Unit Participation Power shall
be based upon the Energy Charge Rate multiplied by the
total megawatthous of such energy scheduled and received by
SJLP, durring the preceding month. Such monthly billing shall
also contain any adjustments to prior months billings
including, but not limited to, the difference between the
estimated cost of fuel and the actual cost of fuel in
months pnor to said preceding month. The Energy Charge Rate
shall be:
((Fuel + VOM) (1.0 + MAPP LF + NPPD LF (1.0 + MAPP LF)))
Where: (1) Fuel = An amount in dollars per megawatt-hour
which is the total cost of fuel estimated to have been burned
in Gerald Gentleman Station during a month divided by the
total net megawatt-hous produced by Gerald Gentleman
Station (less utilization for station service) during such
month.
(2) VOM = An amount in dollars per megawatt-hour
attributable to variable operation and maintenance expenses
incurred at Gerald Gentleman Station. Such amount shall be ***
per megawatt-hour in 2000 and shall escalate at the
Consumer Price Index ("CPI")- for each Year thereafter.
(3) MAPP LF = The loss factor for MAPP Loss
Repayment Such loss factor shall be the Small Schedule Loss
Percentage, or alternative thereto, utilized by MAPP for such
Loss Repayment.
(4) NPPD LF = The loss factor for repayment of
losses incurred on the District's system up to the Point
of Delivery. Such loss factor shall be based upon the
District's system incremental losses as determined from
time to time by the District and shall include losses on
the Cooper-Fairport-St. Joseph 345 KV interconnection for
the delivered amount of energy.
CPI as used herein shall mean the percent increase, if any,
in the average ofthe CPI-U [CPI for all Urban Consumers - All
Items (unajusted) (base 1982 to 1984 equal 100)] and the
CPI-W [CPI for Urban Wage Earners and Clerical Workers
(revised) (unadjusted) (base 1982 to 1984 equals 100)] for
the calendar year preceding the calendar year in which any
Contract Year begins. If during the term of this Agreement
the CPI as used herein is discontinued, becomes
unavailable, restructured, reconstituted, or is materially
altered, the Parties shall undertake to agree upon a
substitute index or combination of indices that willl most
closely approximate the CPI as defined herein. If the Parties
are unable to agree upon a substitute index or combination
of indices, the index applied for the remainder of the term
of this Agreement shall be the annual average of the CPI,
as defined herein, calculated for the five year period
prior to the discontinuance of its use hereunder.
Selected Financial Data
(In Thousands Except Per Share Data and Percentages)
The following table sets forth financial data regarding St.
Joseph Light & Power Company's financial position and
operating results. This information should be read in
conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations, and the
Consolidated Financial Statements and Notes thereto,
appearing elsewhere in this Annual Report.
Financial Data: 1996 1995 1994 1993 1992
Operating revenues $95,869 $93,521 $90,782 $88,539 $82,555
Net income 10,357 11,040 11,066 7,922 8,958
Total assets 227,250 219,330 199,699 191,690 178,743
Long-term debt 73,100 73,100 53,100 53,100 51,215
Common stock data (adjusted to reflect two-for-one stock
split in July 1996:)
Average shares
outstanding 7,868 7,813 7,884 8,016 8,038
Earnings per average
common share $1.32 $1.41 $1.40 $ .99 $1.11
Dividends per common
share $ .94 $ .92 $ .90 $ .88 $ .86
Market price per
common share at
year-end $15.375 $17.75 $14.25 $14.50 $17.125
Book value per
common share at
year-end $10.87 $10.42 $9.93 $9.54 $9.42
Return on average
common equity 12.4% 13.9% 14.4% 10.4% 12.0%
Liquidity and capital resources data:
Capital
Expenditures, excluding
AFUDC $14,318 $21,781 $12,224 $12,483 $9,301
Percent of expenditures
financed internally
from operations 92% 58% 77% 86% 100%
AFUDC as a percent of
net income 5% 4% 2% 3% 3%
Capitalization ratios
Common equity 54% 53% 59% 59% 59%
Long-term debt 46% 47% 41% 41% 41%
Common Stock Market Prices
High Low
1995 First quarter $16.938 $13.938
Second quarter 15.750 13.875
Third quarter 15.500 13.563
Fourth quarter 18.250 14.875
1996 First quarter $17.750 $16.063
Second quarter 16.563 13.875
Third quarter 16.875 14.000
Fourth quarter 16.625 14.625
Dividends Paid on Common Stock
1995 First quarter $.23
Second quarter .23
Third quarter .23
Fourth quarter .23
$.92
1996 First quarter $.235
Second quarter .235
Third quarter .235
Fourth quarter .235
$.940
Management's Discussion and Analysis
GENERAL
The financial condition and operating results reflect the
operations of St. Joseph Light & Power Company, a public
utility, and its wholly owned subsidiary, SJLP Inc.
Collectively, these entities are referred to as the
"Company." The Company is engaged primarily in the
generation and distribution of electric energy, serving
approximately 61,000 customers in northwest Missouri. It
also sells natural gas in 15 communities in the northern
part of its service area and industrial steam to six
customers in St. Joseph. SJLP Inc. was formed in September
1996 to pursue investments in non-utility areas. Its
operations were not material to the Company's financial
position or results of operations.
As illustrated by Note 8, Segments of Business, in the
Notes to Consolidated Financial Statements, the electric
segment represents 96% of pretax operating income, 98% of
utility plant expenditures and 95% of identifiable assets.
Since the electric segment is the major portion of the
Company's business, the following discussion focuses
primarily on it.
In August 1996, the Company reached agreement on new
three-year contracts with its physical and clerical
bargaining units. The agreements cover approximately
two-thirds of the Company's approximately 350 employees.
RESULTS OF OPERATIONS
1996 vs. 1995
Earnings Earnings per share totaled $1.32 in 1996,
compared to $1.41 in 1995. The decrease in earnings can be
attributed to several factors: a partial year of a July
1995 rate-design change aided 1995 revenues, increased
energy costs in 1996 and the gain on the sale of unit
trains at the Iatan plant in 1995.
Electric Revenues 1996 electric operating revenues reached
a record $83.5 million, increasing 2% from the $82.0
million reported in 1995. The growth in revenues is
primarily attributable to increased sales. In addition, a
full-year of the June 1995 allocation case price increase
which was designed to increase annual electric revenues
$500,000 increased revenues for the 1996 period. The rate
changes from the allocation case were designed to be
revenue-neutral, increasing electric and gas and decreasing
industrial steam revenues. A rate-design change effective
July 1995 increased electric summer rates and reduced
winter rate prices. The less-than-full-year impact of the
change added approximately $1.7 million to 1995 revenues.
The change, designed to be revenue-neutral to the company,
reflects the seasonal difference in the cost of producing
electricity.
Retail sales increased 3% to a record 1,529,465 megawatt-hours (mwh)
in 1996, continuing the growth pattern of 1995
when sales increased 4%. Sales to all three customer
classes increased residential, 3%; commercial, 4%; and
industrial, 3%. Weather conditions during the year boosted
sales, especially to the residential class, with the
commercial and industrial classes also benefiting from a
growing economy.
The increase in sales for resale and related purchased
power expense reflects the increase in demand from regional
suppliers and energy marketers for low-cost power.
Industrial Steam Revenues In 1996, industrial steam
revenues remained relatively stable despite a sales
increase of 14% from the previous year. Revenues reflect a
September 1995 rate decrease for a major customer and a
full year of the June 1995 allocation case which was
designed to reduce steam revenues by $550,000 annually .
Natural Gas Revenues In the natural gas segment, retail
sales and revenues increased 14% and 20%, respectively. The
increase in sales was primarily attributable to cooler than
normal temperatures which increased heating requirements.
Revenues also were affected by higher unit gas prices which
are passed on to the customer and a full year of the June
1995 allocation case price increase which was designed to
increase annual gas revenues by $50,000. Partially
offsetting the increase was a reduction in transportation
services to industrial customers.
Fuel and Purchased Power Total energy costs (fuel and
purchased power for system energy and resale) were $27.7
million for 1996, an increase of $2.8 million from 1995.
The increase was primarily attributable to increased system
and resale requirements and higher per-unit prices for both
fuel and purchased power.
The average unit cost of fuel rose to $1.131 per million
British thermal units (Btu) reflecting higher costs for all
fossil fuels in 1996. This compares to an average unit fuel
cost of $1.087 per million Btu in 1995.
Consistent with recent years, coal accounted for
approximately 94% of the total fuel burned during the year.
The cost of coal burned increased 3% from $1.014 per
million Btu in 1995 to $1.047 per million Btu in 1996.
The Company derived approximately 58% of its energy needs
from the coal-fired Iatan plant. A Wyoming mine supplies
low-sulfur coal to the plant under a 20-year contract,
which expires in 2003. The coal is delivered by rail under
an agreement which extends through 2000.
The Company met 26% of its energy needs through purchased
power arrangements, as compared to 35% in 1995. The
decrease is primarily a result of reduced purchases due to
significantly higher unit prices for purchased energy, as
higher demand from other areas of the country drove prices
up. Purchased power fixed charges for firm and peaking
capacity were $1.3 million for 1996 and $1.1 million in
1995.
The remainder of the Company's energy needs were supplied
by the Lake Road units.
Other Operations In 1996 other operating expenses
decreased $1.0 million to $18.4 million in comparison with
1995. The reduction was primarily attributable to decreased
pension expense resulting from strong investment
performance.
Maintenance Maintenance expense for 1996 decreased $1.3
million reflecting the overhaul of a generating unit at the
Lake Road plant in 1995.
Other Income and Deductions The reduction in other income
is primarily due to the $.5 million net of tax gain from
the sale of the Iatan unit trains in 1995.
1995 vs. 1994
Earnings Earnings per share totaled $1.41 in 1995,
compared with 1994 earnings of $1.40. Several factors
combined during the year which resulted in the earnings per
share increase: weather extremes, a rate-design change, a
full year of an electric price increase and the gain on the
sale of the unit trains which deliver coal to the Iatan
plant.
The 1994 earnings were boosted by a one-time adjustment
ordered by the Missouri Public Service Commission (PSC)
that reduced pension expense (refer to Note 2 in the Notes
to Consolidated Financial Statements). Net income totaled
$11.0 million in 1995, compared with $11.1 million in 1994.
Electric Revenues 1995 electric operating revenues were
$82.0 million, an increase of 4% from 1994. The growth in
1995 revenues resulted from several factors:
* weather extremes during both summer and winter increased
sales, especially to residential customers;
* the less-than-full-year impact of a rate-design change,
ordered by the PSC in July 1995, which increased summer and
* allocation case increase of $500,000 in annual revenues;
effective June 15, 1995, and
* a full-year's contribution from the electric price
increase of 3% implemented in June 1994.
Retail sales totaled 1,480,033 mwh in 1995, a 4% increase
from the 1,425,174 mwh reported in 1994, while sales
revenues increased 8%. Sales to all three customer classes
increased residential, 6%; commercial, 3%; and industrial
2%. Sales to industrial customers were affected by the
closing during 1995 of an industrial plant which was also a
steam customer.
Sales for resale and related purchased power expense
decreased due to fewer transactions with regional utilities
in 1995.
Industrial Steam Revenues Industrial steam sales in 1995
remained relatively stable despite the plant closing
mentioned above, while revenues increased 3% from 1994's
level. The revenue increase reflects a full year of the
November 1994 price adjustment. Partially offsetting the
increase was a $550,000 allocation case reduction ordered
by the PSC, effective June 15, 1995.
Natural Gas Revenues Gas sales remained relatively stable
in 1995. Revenues were down 8% from 1994 primarily due to
lower unit gas prices which are passed on to customers.
Partially offsetting the reduction were increased
transportation services to industrial customers and a June
15, 1995, allocation case price increase of $50,000.
Fuel and Purchased Power Total energy costs (fuel and
purchased power for system energy and resale) were $24.9
million for 1995, $3.2 million less than the 1994 expense.
This decrease was the result of lower fuel costs and fewer
sales for resale transactions. The amortization in 1994 of
ash disposal expense at the Lake Road plant also
contributed to the decline in costs in 1995.
Unit fuel costs were lower in 1995 at $1.087 per million
Btu, down from $1.204 per million Btu in 1994. The 1995
decrease resulted from lower prices for coal and gas.
Of the total fuel burned in 1995, 91% was coal, similar to
the pattern of recent years. The cost of coal burned
decreased from the $1.139 per million Btu in 1994 to $1.014
per million Btu in 1995.
The Iatan delivered unit price of coal was $14.65 per ton
in 1995, compared with $15.17 in 1994. The unit price was
lower in 1995 due to favorable spot market purchases and
reduced freight expense. The older steel unit trains, which
delivered coal to Iatan, were replaced through a lease
agreement in 1995 with aluminum cars which are lighter and
more efficient, thereby reducing freight costs.
The Iatan unit provided approximately 56% of the Company's
overall energy needs in 1995, a decrease from 61% in 1994 .
The Company met 35% of its energy needs through purchased
power arrangements in 1995 compared to 24% in 1994.
Purchased power fixed charges were $1.1 million for 1995
and $1.7 million for 1994.
The Lake Road units supplied the remainder of the Company's
energy needs.
Other Operations Expenses of other operations for 1995
increased $5.3 million in comparison to 1994. The increase
was primarily due to a June 1994 PSC order that resulted in
a one-time adjustment which reduced pension expense (refer
to Note 2 in the Notes to Consolidated Financial
Statements).
Maintenance Maintenance expense for 1995 was $1.5 million
more than for 1994. Expenses at the Lake Road plant
increased $1.4 million, primarily for work on the plant's
main generating unit.
In December 1994, a severe ice storm disrupted service to
about 25% of the Company's customers. Costs incurred to
resume service and repair damages resulting from the ice
storm were $1.3 million. These unusual costs were recorded
by the Company as a regulatory asset based upon the
accounting authority order received in January 1995 from
the PSC. The order authorized the Company to amortize these
costs over a five-year period which began in March 1995.
The Company intends to seek recovery of the amortization of
this deferral in its next general rate proceeding.
Other Income and Deductions Other income increased over
1994 primarily due to a gain on the sale of the unit trains
which deliver coal to Iatan. The gain from the sale was
about $.5 million, net of income taxes. Gains on the sales
of securities and increased interest on investment of
available proceeds from the issuance of $20 million of
medium-term notes in March 1995 also contributed to the
increase.
Interest Charges Interest expense on long-term debt
reflects an increase of about $1.3 million from 1994. This
increase is the result of the issuance in March 1995 of $20
million of medium-term notes.
FUTURE OUTLOOK
Liquidity and Capital Resources The Company's total
authorized capital stock includes 50 million shares of
common stock, four million shares of cumulative preferred
stock and two million shares of preference stock. The
common shares reflect the two-for-one stock split which was
effective July 15, 1996. Common equity was 54%, 53% and 59%
of total capitalization in 1996, 1995 and 1994,
respectively.
Financial coverages are at levels in excess of those
required for the issuance of debt and preferred stock. The
Company currently holds an unsecured debt rating of A- from
Standard & Poors.
At year-end, the Company had $6.5 million in cash and
temporary investments, in addition to $5.5 million in
unused conventional lines of credit.
Cash generated from operations remains strong. Over the
last three years, operating cash flows have been $21.6
million, $19.3 million and $17.0 million, respectively. The
Company's pretax interest coverage was 3.59 for 1996.
The Company projects capital expenditures (net of allowance
for funds used during construction [AFUDC]) of about $13.2
million for 1997. Capital expenditures, net of AFUDC, were
$14.3 million, $21.8 million and $12.2 million,
respectively for the last three years. Capital
expenditures, net of AFUDC and including non-utility
investments, for the five-year period ending in 2001 are
projected to be approximately $87.4 million. The Company
expects to finance these expenditures primarily through
internally generated funds, supplemented by external
financing as necessary.
The combined aggregate amount of maturities and payments
for long-term obligations for the next five years is $5.9
million. See Note 7, Commitments and Contingencies, in
Notes to Consolidated Financial Statements.
Impact of Inflation Under the ratemaking practices
followed by the PSC, only historical costs are recoverable
in revenues. Assuming adequate and timely rate relief, the
Company will recover the increases in cost of service
caused by inflation.
Impact of Accounting Standards Changes The Company will
adopt Statement of Position (SOP) 96-1, Environmental
Remediation Liabilities effective January 1, 1997. The
statement provides guidance for the recognition and
disclosure of environmental remediation liabilities. The
adoption of SOP 96-1 is not expected to have a material
impact on the Company's financial position or results of
operations.
There were no accounting changes in 1996, 1995 or 1994 that
had a material impact on the financial statements.
Rate Matters The Company currently applies Statement of
Financial Accounting Standards (SFAS) No. 71, Accounting
for the Effects of Certain Types of Regulation, and
accordingly, has recorded regulatory assets when
appropriate. Management believes the Company will continue
to have its rates approved and regulated by the PSC for the
next several years. These rates are designed to enable the
Company to recover its service costs and also allow an
opportunity for the Company to earn a return on it
toward deregulation of some or all aspects of the Company's
business may require the Company to discontinue the
application of SFAS No. 71 at a future date. The Company
periodically reviews the criteria specified in SFAS No. 71
and believes this standard will continue to be applicable
to the entire company for at least the next several years.
Environmental Issues The Company is subject to various
environmental regulations, including those related to air
and water quality, polychlorinated biphenyl, ash removal,
underground storage tanks and asbestos. Routine testing and
maintenance programs have been put in place to comply with
these regulations.
The Company continues to plan and implement projects to
meet the Phase II provisions of the Clean Air Act
Amendments of 1900 (CAAA) which establish standards for
electric utilities to reduce certain emissions from coal-fired
generating stations. Final compliance with this
legislation becomes effective in 2000. Missouri's air
quality law is in compliance with and does not contain
requirements that are more stringent than the federal
legislation.
While the Iatan plant meets current emissions standards,
the Lake Road plant is undergoing modifications in order to
meet the new requirements. In 1995, alterations to the
plant's main generating unit were begun to allow for the
use of low and medium-sulfur coal. In addition the
electrostatic precipitator was modified and a continuous
emissions monitoring system was installed. Projects
completed in 1996 include modifications to the ash handling
system.
According to regulations proposed by the Environmental
Protection Agency in December 1996, the Lake Road unit will
be exempt from NOx control requirements due to the
economics of applying controls to units under 155 mw.
The Company anticipates total future expenditures of
approximately $7.4 million to meet the CAAA requirements.
Capacity In July 1996, the Company concluded its search
to secure its future energy supply when it signed a long-term
contract to purchase both capacity and energy
beginning in mid-2000 and running through mid-2011.
In the first year of the contract, the Company will receive
60 mw of electricity. This will increase by 10 mw each year
until it reaches 100 mw in 2004 and remains at that level
for the remainder of the contract.
In total, the Company has contracts to purchase 50-70 mw of
generating capacity from regional suppliers in the next
five years. These contracts will provide the Company with
the ability to economically provide for the growing demand
in its service territory.
Transmission Access The Federal Energy Regulatory
Commission (FERC) issued Order 888, Open Access
Transmission and Stranded Investment in April 1996 which
requires public utilities to file open access tariffs. The
Company does not anticipate the order to have a material
impact on its financial position or results of operations.
In addition, FERC issued order 889, Open Access/Same Time
Information System and Standards of Conduct in April 1996.
This order requires public utilities to separate their
power and energy marketing functions from their
transmission operation function no later than January 3,
1997. In November 1996, FERC granted the Company's request
for a waiver of Order 889.
Competition/Deregulation The Company is taking a
proactive stance in meeting the increasing competition
within the industry. In early 1996, the Company's
management concluded an extensive review of its strategic
plan. The plan focuses on customer oriented activities
designed to provide high levels of customer satisfaction
while continuing to provide low-priced energy.
The 1992 Energy Policy Act promotes competition in the way
electricity is transmitted and marketed. The Act provides
for increased competition in the wholesale electric market
by permitting FERC to order third party access to
utilities' transmission systems (see "Transmission Access")
and by liberalizing the rules of generating facility
ownership. The opening up of the nation's transmission
system is expected to increase the size of the market from
which the Company buys and sells firm and non-firm
(wholesale) energy. This will increase the options for
expanding markets. It is also management's belief that
increased transmission access will increase the demand for
available wholesale energy supply, and possibly result in
higher purchased energy costs for the Company.
The Act also allows wholesale and industrial customers to
pursue co-generation, retail wheeling or relocation to
other service territories. At the present, there are no
customer-owned co-generation projects on the Company's
system. With no projected increase in the Company's current
low energy prices, future co-generation projects are not
anticipated.
The Company currently has no full-requirement wholesale
customers. As a result, wholesale competition as being
implemented today (no retail wheeling) is not expected to
place the Company's retail customers at risk. Even if
retail wheeling were to be implemented, the Company
believes that its current low prices and the excellent
power supply options available to the Company to meet
future requirements will permit the Company to remain
competitive in comparison to other regional suppliers.
While state law prohibits competing with rural electric
cooperatives for existing customers, competition remains
for new customers, especially industrial, in the rural
areas of the state. To meet that competition, the Company
has an economic development rate.
It is management's belief that maintaining its position as
a low-cost provider of electricity, through a balance of
capacity additions and purchased power, will allow the
Company to remain a competitive supplier of electric energy
and retain its customer base.
Forward-Looking Information This report contains
information based on projections and estimates made by
management which are difficult to predict and beyond the
Company's control. Due to these risks and uncertainties,
the actual results could differ materially from those
anticipated.
Consolidated Statements of Income
Years ended December 31 1996 1995
Operating revenues:
Electric - Retail sales
and other $82,052,000 $80,942,000
Sales for resale 1,447,000 1,052,000
Other 12,370,000 11,527,000
95,869,000 93,521,000
Operating Expenses
Production fuel 17,821,000 14,539,000
Purchased power -
System energy 8,739,000 9,594,000
Resale 1,172,000 792,000
Gas purchased for resale 3,376,000 2,746,000
Other operations 18,402,000 19,435,000
Maintenance 8,446,000 9,788,000
Depreciation 10,474,000 10,022,000
Taxes (See Statements):
General 6,511,000 6,333,000
Income 5,235,000 4,559,000
80,176,000 77,808,000
Operating Income 15,693,000 15,713,000
Other Income and Deductions:
Allowance for equity funds
used during construction 316,000 139,000
Other, net 155,000 743,000
471,000 882,000
Income Before Interest Charges 16,164,000 16,595,000
Interest charges, net:
Long-term debt 5,850,000 5,558,000
Interest on bank notes 0 118,000
Allowance for borrowed
funds used during
construction (215,000) (269,000)
Other 172,000 148,000
5,807,000 5,555,000
Net Income $10,357,000 $11,040,000
Weighted average common
shares Outstanding 7,868,169 7,813,372
Earnings per average common
share $1.32 $1.41
Years ended December 31 1994
Operating revenues:
Electric - Retail
sales and other $75,309,000
Sales for resale 3,661,000
Other 11,812,000
90,782,000
Operating expenses:
Production fuel 17,470,000
Purchased power -
System energy 7,448,000
Resale 3,210,000
Gas purchased for resale 3,296,000
Other operations 14,153,000
Maintenance 8,262,000
Depreciation 9,834,000
Taxes (See Statements):
General 6,360,000
Income 5,211,000
75,244,000
Operating income 15,538,000
Operating Income and deductions
Allowance for equity funds
used during construction 117,000
Other, net (129,000)
(12,000)
Income before interest
charges 15,526,000
Interest charges, net:
Long-term debt 4,261,000
Interest on bank notes 182,000
Allowance for borrowed
funds used during
construction (90,000)
Other 107,000
4,460,000
Net Income $11,066,000
Weighted average common
shares outstanding 7,884,292
Earnings per average common
share $1.40
Consolidated Balance Sheets
December 31 1996 1995
ASSETS
Property, plant and equipment,
at original cost:
Electric utility plant $298,995,000 $283,959,000
Other 10,006,000 9,625,000
309,001,000 293,584,000
Less - Reserves for
depreciation (147,539,000) (140,391,000)
161,462,000 153,193,000
Construction work in
progress 4,589,000 7,505,000
166,051,000 160,698,000
Other investments 2,299,000 1,727,000
Current Assets:
Cash and cash equivalents 688,000 287,000
Temporary investments 5,823,000 6,202,000
Accounts receivable, net
of reserves of $232,000
and $324,000 7,719,000 7,568,000
Accrued utility revenue 3,651,000 3,595,000
Fuel, at average cost 2,961,000 4,015,000
Materials and supplies,
at average cost 5,546,000 5,500,000
Prepayments and other 1,310,000 1,208,000
27,698,000 28,375,000
Deferred charges:
Debt expense (being
amortized over term
of debt) 1,553,000 1,668,000
Lease payments receivable 3,412,000 3,536,000
Prepaid pension expense 11,151,000 8,836,000
Regulatory assets 14,769,000 14,126,000
Other 317,000 364,000
31,202,000 28,530,000
$227,250,000 $219,330,000
CAPITALIZATION AND LIABILITIES
Capitalization(See Statements):
Common stock $ 33,816,000 $ 33,816,000
Retained earnings 67,533,000 64,560,000
Other paid-in capital 817,000 380,000
Less - Treasury stock (15,996,000) (17,362,000)
86,170,000 81,394,000
Long-term debt 73,100,000 73,100,000
159,270,000 154,494,000
Current liabilities:
Outstanding checks in
excess of cash balances 3,035,000 2,523,000
Accounts payable 8,839,000 7,935,000
Accrued income and
general taxes 511,000 722,000
Accrued interest 1,962,000 1,961,000
Accrued vacation 1,119,000 1,123,000
Other 423,000 395,000
15,889,000 14,659,000
Non-current liabilities and
deferred credits:
Capital lease obligations 3,271,000 2,512,000
Deferred income taxes 28,734,000 29,304,000
Investment tax credit 4,503,000 4,911,000
Accrued claims and
benefits 1,749,000 1,699,000
Deferred interest 2,372,000 2,490,000
Regulatory liabilities 9,417,000 7,287,000
Other 2,045,000 1,974,000
52,091,000 50,177,000
Commitments and contingencies (Note 7)
$227,250,000 $219,330,000
Consolidated Statements of Capitalization
December 31 1996 1995
Common equity:
Common stock -
authorized 25,000,000
shares, without par
value; issued
9,252,748 shares $33,816,000 $33,816,000
Retained earnings 67,533,000 64,560,000
Other paid-in capital
(principally gain on
issuance of treasury
stock) 817,000 380,000
Less - Treasury stock, at
cost, 1,326,272 and
1,440,010 shares (15,996,000) (17,362,000)
86,170,000 81,394,000
Long-term debt:
First mortgage bonds -
9.44% series due
February 1, 2021 22,500,000 22,500,000
Unsecured pollution
control revenue bonds
5.85% series due
February 1, 2013 5,600,000 5,600,000
Medium-term notes
5.77% due December 8, 1998 5,000,000 5,000,000
7.13% due November 29, 2013 1,000,000 1,000,000
7.16% due November 29, 2013 9,000,000 9,000,000
7.17% due December 1, 2023 7,000,000 7,000,000
7.33% due November 30, 2023 3,000,000 3,000,000
8.36% due March 15, 2005 20,000,000 20,000,000
45,000,000 45,000,000
73,100,000 73,100,000
Total capitalization $159,270,000 $154,494,000
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
Notes:
(a) Common Stock: At December 31, 1996, there were
7,926,476 shares of common stock outstanding.
The St. Joseph Light & Power Company (the Company) has an
Automatic Dividend Reinvestment and Optional Cash Payment
Plan. Under this Plan common shares may be newly issued,
reissued or purchased on the open market. At December 31,
1996, the Company had 298,492 shares of common stock
reserved for this Plan.
In addition, the Company has 609,000 shares of stock
reserved for its stock-based compensation plans. Refer to
Note 3 in the Notes to Consolidated Financial Statements.
On September 19, 1996, the Company adopted a new Rights
Agreement replacing the 1986 Rights Agreement which expired
on December 4, 1996.
Under the agreement, the Company declared a dividend of one
Right for each share of common stock outstanding at the
close of business on December 4, 1996, to be effective
contemporaneously with the expiration of the 1986 Rights.
Each Right entitles the holder thereof to purchase one half
share of common stock at a price of $35 per one-half share.
The Rights, which expire on December 4, 2006, have no
voting rights.
The Rights are exercisable in the event of certain
attempted business acquisitions. Exercising the Rights will
cause substantial dilution to a person or group attempting
to acquire the Company on terms not approved by the
Company's board of directors. At December 31, 1996, there
were 7,926,476 Rights outstanding.
(b) Long-Term Debt:
In March 1995, the Company issued $20 million of new debt
under a medium-term note arrangement. The proceeds were
used to reduce short-term debt with the remainder invested
for future capital requirements and general corporate
purposes. In June 1995, the Company replaced the secured
pollution control revenue bonds with unsecured pollution
control revenue bonds. The remaining series of first
mortgage bonds is secured equally and ratably by a direct
lien on substantially all fixed property and franchises now
owned or hereafter acquired. The combined aggregate amount
of maturities and unfulfilled sinking fund requirements for
the next five years is $5 million for the retirement of the
5.77% medium-term note.
(c) Cumulative Preferred Stock:
Cumulative preferred stock, without par value, of 4,000,000
shares is authorized.
(d) Preference Stock:
Preference stock, without par value, of 2,000,000 shares is
authorized.
Consolidated Statements of Retained Earnings
Years ended December 31 1996 1995
Balance at beginning of year $64,560,000 $60,708,000
Net Income 10,357,000 11,040,000
74,917,000 71,748,000
Less - Dividends on common
stock of $.94, $.92
and $.90 per share (7,384,000) (7,188,000)
Balance at end of year $67,533,000 $64,560,000
Consolidated Statements of Retained Earnings
Years ended December 31 1994
Balance at beginning of year $56,745,000
Net Income 11,066,000
67,811,000
Less - Dividends on common
stock of $.94, $.92
and $.90 per share (7,103,000)
Balance at end of year $60,708,000
Consolidated Statements of Cash Flows
Years ended December 31 1996 1995
Cash flows from operating activities:
Net income $10,357,000 $11,040,000
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation 10,474,000 10,022,000
Gain from sale of unit
coal trains 0 (806,000)
Pension expense (1,921,000) (950,000)
Other postretirement benefits 17,000 46,000
Deferred taxes and investment
tax credit 768,000 (457,000)
Allowance for equity funds
used during construction (316,000) (139,000)
Net changes in working capital
items not considered elsewhere:
Accounts receivable and
accrued utility revenue (207,000) (654,000)
Fuel 1,054,000 (183,000)
Accounts payable and
outstanding checks 1,416,000 356,000
Accrued income and
general taxes (211,000) (116,000)
Other, net (288,000) 715,000
Net changes in regulatory
assets and liabilities (94,000) 278,000
Net changes in other assets
and liabilities 563,000 164,000
Net cash provided by
operating activities 21,612,000 19,316,000
Cash flows from investing activities:
Gross additions to plant (15,188,000) (22,359,000)
Allowance for borrowed funds
used during construction 215,000 269,000
Investments (193,000) (4,593,000)
Proceeds from sale of unit
coal trains 0 931,000
Other 101,000 (130,000)
Net cash used in investing
activities (15,065,000) (25,882,000)
Cash flows from financing activities:
Notes payable (decrease)
increase 0 (6,300,000)
Principal payments under
capital lease obligations (129,000) (16,000)
Long-term debt reacquired 0 (5,600,000)
Long-term debt issued 0 25,600,000
Common stock purchased (17,000) (50,000)
Common stock issued 1,384,000 0
Dividends paid (7,384,000) (7,188,000)
Net cash provided by (used
in) financing activities (6,146,000) 6,446,000
Net increase (decrease) in
cash and cash equivalents 401,000 (120,000)
Cash and cash equivalents at
beginning of year 287,000 407,000
Cash and cash equivalents at
end of year $688,000 $ 287,000
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 5,872,000 $ 5,275,000
Income Tax $ 4,795,000 $ 5,257,000
Consolidated Statements of Cash Flows
Years ended December 31 1994
Cash flows from operating activities:
Net income $ 11,066,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,834,000
Gain from sale of unit coal trains 0
Pension expense (6,700,000)
Other postretirement benefits 452,000
Deferred taxes and investment tax credit 2,418,000
Allowance for equity funds used during
construction (117,000)
Net changes in working capital items
not considered elsewhere:
Accounts receivable and accrued utility
revenue 429,000
Fuel (1,002,000)
Accounts payable and outstanding checks 840,000
Accrued income and general taxes (49,000)
Other, net (288,000)
Net changes in regulatory assets and
liabilities 157,000
Net changes in other assets and liabilities (65,000)
Net cash provided by operating activities 16,975,000
Cash flows from investing activities:
Gross additions to plant (13,325,000)
Allowance for borrowed funds used
during construction 90,000
Investments 39,000
Proceeds from sale of unit coal trains 0
Other 27,000
Net cash used in investing activities (13,169,000)
Cash flows from financing activities:
Notes payable increase 6,300,000
Principal payments under capital
lease obligations (15,000)
Long-term debt reacquired 0
Long-term debt issued 0
Common stock purchased (2,919,000)
Common stock issued 68,000
Dividends paid (7,103,000)
Net cash provided by (used in)
financing activities (3,669,000)
Net increase (decrease) in cash and
cash equivalents 137,000
Cash and cash equivalents at beginning of
year 270,000
Cash and cash equivalents at end of year $407,000
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $4,146,000
Income taxes $3,484,000
Supplemental disclosure of non-cash financing activities: A
capital lease obligation of $874,000 was incurred in 1996
when the Company entered into a lease agreement for
computer equipment.
For the purposes of the Consolidated Statements of Cash Flows,
the Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
Consolidated Statements of Taxes
Years ended December 31 1996 1995
Components of income tax expense:
Taxes payable currently
Federal $4,097,000 $4,838,000
State 403,000 766,000
4,500,000 5,604,000
Provisions for deferred
taxes (a)
Depreciation and other
plant-related
differences (b) 252,000 (80,000)
Pensions (c) 948,000 429,000
Other (24,000) (394,000)
1,176,000 (45,000)
Amortization of investment
tax credits (408,000) (412,000)
Total income tax expense 5,268,000 5,147,000
Less - Income tax applicable
to nonutility operations (d) (33,000) (588,000)
Income tax expense charged
to utility operations $5,235,000 $ 4,559,000
Reconciliation of income tax rates:
Statutory federal income
tax rate 35.0% 35.0%
Timing differences flowed
through as required by
regulators (.2) (2.2)
Amortization of investment
tax credit (2.6) (2.6)
Amortization of excess
deferred taxes (1.0) (1.0)
State income taxes, net of
federal income tax benefit 3.4 3.1
Other (.9) (.5)
Effective income tax
rate (e) 33.7% 31.8%
Components of general tax expense:
Real estate and personal
property $2,629,000 $ 2,506,000
City license tax 2,681,000 2,658,000
Social Security and Medicare 1,050,000 1,037,000
Other 151,000 132,000
Total general tax expense $ 6,511,000 $ 6,333,000
Components of income tax expense: 1994
Taxes payable currently
Federal $ 2,441,000
State 397,000
2,838,000
Provisions for deferred taxes (a)
Depreciation and other
plant-related differences (b) 105,000
Pensions (c) 2,787,000
Other (53,000)
2,839,000
Amortization of investment tax credits (422,000)
Total income tax expense 5,255,000
Less - Income tax applicable to
nonutility operations (d) (44,000)
Income tax expense charged to
utility operations $ 5,211,000
Reconciliation of income tax rates:
Statutory federal income tax rate 34.0%
Timing differences flowed through as
required by regulators (2.1)
Amortization of investment tax credit (2.6)
Amortization of excess deferred taxes (1.0)
State income taxes, net of federal income
tax benefit 3.1
Other .8
Effective income tax rate (e) 32.2%
Components of general tax expense:
Real estate and personal property $ 2,630,000
City license tax 2,549,000
Social Security and Medicare 1,050,000
Other 131,000
Total general tax expense $ 6,360,000
Notes:
(a) The Company follows the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes, which requires the use of the liability
method of accounting for income taxes. Under the liability
method, deferred income taxes are established for the tax
consequences of temporary differences by applying the
expected tax rate to differences between the financial
statement carrying amounts and the tax bases of the
Company's assets and liabilities. Such temporary
differences are the result of provisions in the income tax
law that either require or permit certain items to be
reported on the income tax return in a different period
than they are reported in the financial statements.
The Company has recorded regulatory assets and liabilities
to account for the effect of expected future regulatory
actions related to unamortized investment tax credits,
income tax liabilities recorded at tax rates in excess of
current rates and other items for which deferred taxes have
not previously been provided.
The principal components of the Company's deferred income
tax balances at December 31, 1996 and 1995, consist of the
following:
1996 1995
Accelerated depreciation
and other plant related
differences $22,737,000 $22,146,000
Unamortized investment
tax credits (3,060,000) (3,317,000)
Regulatory assets 12,728,000 12,179,000
Regulatory liabilities (6,356,000) (3,970,000)
Other, net 2,685,000 2,266,000
Net deferred tax Liabilities $28,734,000 $29,304,000
(b) The Company has elected, for tax purposes, various
accelerated depreciation methods allowed by the Internal
Revenue Code.
(c) The Missouri Public Service Commission (PSG) issued a
Report and Order in 1994 that required the Company to
change its method of recognition of pension expense. In
response to the rate order, the Company recorded a one-time
adjustment reducing pension expense and eliminating a
regulatory liability established as a result of a prior
order. The tax effect was to increase deferred income taxes
by $2.6 million.
(d) The tax effect of items applicable to nonutility
operations is included in Other Income and Deductions.
(e) The effective income tax rate is computed by dividing
total income tax expense on these statements by the sum of
tax expense and net income.
1 Statement of Accounting Policies
PRINCIPLES OF CONSOLIDATION The consolidated financial
statements include the accounts of St. Joseph Light & Power
Company, a public utility, and its wholly owned subsidiary,
SJLP Inc. Collectively, these entities are referred to as
the "Company." The Company is engaged principally in the
production, purchase, transmission, distribution and sale
of electricity and the delivery of natural gas. The Company
serves approximately 61,000 customers. SJLP Inc. was formed in
September 1996 in order to pursue investments in non-utility areas.
All significant intercompany transactions have been eliminated
in consolidation.
Property, Plant and Equipment Property, plant and
equipment is stated at original cost. These costs include
payroll-related costs such as taxes, pensions and other
fringe benefits and an allowance for funds used during
construction (AFUDC).
Improvements to units of property are capitalized. Property
units retired are charged to accumulated depreciation
together with any related removal costs, net of salvage.
Maintenance costs and replacements of assets which do not
constitute units of property are expensed as incurred.
Depreciation Provisions for depreciation have been
computed on a straight-line basis by applying rates
approved by the PSC to the classified account balances. The
Company's annual composite rate was 3.6% for 1996, 1995 and
1994.
Jointly Owned Iatan Plant The Company has an agreement
with Kansas City Power and Light Company and The Empire
District Electric Company for joint ownership of a coal-burning
generating plant at Iatan, Missouri. The Company's
share of operating expenses for Iatan is included in
operating expenses in the Consolidated Statements of
Income. The amounts below represent the Company's 18%
interest in the 670-megawatt unit.
December 31
1996 1995
Electric utility plant $61,193,000 $60,534,000
Reserves for depreciation 31,515,000 29,667,000
Revenue Recognition Revenues relating to service rendered
but unbilled are recognized in the period the service is
provided.
Accounting policies The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Effective January 1, 1997, the Company will adopt the
provisions of Statement of Position (SOP) 96-1,
Environmental Remediation Liabilities. This Statement
provides authoritative guidance for recognition,
measurement, display and disclosure of environmental
remediation liabilities in financial statements. SOP 96-1
is not expected to have a material impact on the Company's
financial position or results of operations upon adoption.
Restatements And Reclassifications All common share
information for prior periods has been restated to give
retroactive effect to a two-for-one stock split which
became effective July 15, 1996. Certain reclassifications
have been made in the financial statements to enhance
comparability.
2 Benefit Plans
Pension Plans The Company has two non-contributory
defined-benefit pension plans, one for bargaining and one
for non-bargaining employees, covering all employees with
one year or more of continuous service. Benefits for both
plans are based on years of service and compensation,
utilizing the final average pay plan benefit formula. The
Company's funding policy is to comply with the minimum
funding requirements of the Employee Retirement Income
Security Act.
In 1994, the PSC issued a Report and Order that required
the Company to recognize pension expense on an accrual
basis. Prior to that order, the Company was required to
record pension expense on a cash basis, with a resulting
regulatory liability. In 1994, the Company eliminated the
previously recorded regulatory liability.
Net pension credits, including amounts capitalized, are:
1996 1995
Service cost-benefits earned
during the period $777,000 $755,000
Interest cost on projected
benefit obligation 2,053,000 2,000,000
Less: Actual return on plan
assets (6,754,000) (10,619,000)
Less: Amortization of
transition asset (431,000) (431,000)
Amortization of prior service
cost 138,000 134,000
Deferred gain (loss) on plan
assets 1,903,000 7,016,000
Regulatory adjustments
Net pension credits (2,314,000) (1,145,000)
Less: Amounts credited
to construction 393,000 195,000
Net pension credits included
in operating expenses $(1,921,000) $(950,000)
Assumed discount rate 7.75% 7.75 %
Assumed average increase in
future compensation 4.3% 4.3 %
Assumed rate of return on
assets 9.0% 9.0 %
1994
Service cost-benefits earned
during the period $765,000
Interest cost on projected
benefit obligation 1,913,000
Less: Actual return on plan assets 319,000
Less: Amortization of
transition asset (431,000)
Amortization of prior service cost 134,000
Deferred gain (loss) on plan assets (4,369,000)
Regulatory adjustments (6,022,000)
Net pension credits (7,691,000)
Less: Amounts credited
to construction 991,000
Net pension credits included
in operating expenses $(6,700,000)
Assumed discount rate 7.75 %
Assumed average increase in
future compensation 4.3 %
Assumed rate of return on assets 9.0 %
The funded status of the pension plans at December 31 is
shown below:
1996 1995
Actuarial present value of
accumulated plan benefits:
Vested $22,988,000 $22,140,000
Non-vested 639,000 737,000
Accumulated benefit
obligation $23,627,000 $22,877,000
Plan assets at fair market
value $53,813,000 $48,987,000
Less: Projected benefit
obligation (27,544,000) (26,884,000)
Plan assets in excess of
projected benefit
obligation 26,269,000 22,103,000
Less: Unrecognized transition
asset (2,156,000) (2,587,000)
Unrecognized prior service cost 1,240,000 1,323,000
Less: Unrecognized net gain (14,202,000) (12,003,000)
Prepaid pension expense $11,151,000 $8,836,000
The assets of the plans consist primarily of common stocks,
corporate bonds, United States government securities,
collective investment trust funds and commingled employee
benefit trust funds.
Retirement Savings Plan The Company has a Retirement
Savings Plan under Section 401(k) of the Internal Revenue
Code. The plan covers all regular full-time employees with
one year or more of service. Under this plan, eligible
employees may defer and contribute a portion of current
compensation in order to provide retirement benefits. The
Company makes a matching contribution of 25% of employee
contributions, up to 6% of compensation, on a monthly
basis. Discretionary matching contributions up to an
additional 25% may be made based on an incentive formula.
The Company made contributions of $377,000 for 1996,
$369,000 for 1995 and $366,000 for 1994 .
Postretirement Benefit Plan In addition to providing
pension benefits, the Company provides certain
postretirement medical and life insurance benefits.
Substantially all of the Company's employees become
eligible for these benefits if they reach retirement age
while working for the Company and have 10 years of service.
Employees hired after December 31, 1992, are not eligible
for postretirement life insurance benefits.
The Company accounts for other postemployment benefits
(OPEB) pursuant to SFAS No. 106, Employers' Accounting for
Postretirement Benefits other than Pensions, which requires
the accrual of the actuarially determined costs for life
insurance and medical benefits during an employee's period
of service. In accordance with the standard, the Company is
amortizing the estimated unfunded accumulated obligation at
January 1, 1993, of $7,761,000 (transition obligation) over
20 years.
In 1994 the PSC ordered the Company to account for OPEB
costs on an accrual basis for ratemaking purposes. The
ruling did not change the Company's financial policy of
accounting for OPEB expenses on an accrual basis as
required under SFAS No. 106. However, the ruling permits
the accrual level of expenses to be recoverable in
revenues.
In addition, the 1994 order required the Company to
externally fund the obligation. The Company established
Voluntary Employees' Beneficiary Association trusts in
October 1994 which cover both active and retired employees.
The following table summarizes the net postretirement
benefit costs for 1996, 1995 and 1994:
1996 1995
Service cost-benefits
earned during the period $213,000 $167,000
Interest cost on accumulated
postretirement benefit
obligation 707,000 608,000
Less: Return on plan assets (161,000) (103,000)
Amortization of
transition obligation 388,000 388,000
Deferred gain on plan assets 42,000 7,000
Net postretirement
benefit costs 1,189,000 1,067,000
Less: Amounts charged to
construction (202,000) (182,000)
Net postretirement
benefit costs included
in operating expenses $987,000 $885,000
Assumed discount rate 7.75% 7.75%
Assumed rate of return
on assets 9.0% 9.0%
1994
Service cost-benefits
earned during the period $179,000
Interest cost on accumulated
postretirement benefit
obligation 656,000
Less: Return on plan assets (4,000)
Amortization of
transition obligation 388,000
Deferred gain on plan assets 4,000
Net postretirement
benefit costs 1,223,000
Less: Amounts charged to
construction (212,000)
Net postretirement
benefit costs included
in operating expenses $1,011,000
Assumed discount rate 7.75%
Assumed rate of return on assets 9.0%
The following table summarizes the status of the Company's
postretirement benefit plan and the related amounts
included in the Consolidated Balance Sheets at December 31:
1996 1995
Accumulated postretirement
benefit obligation:
Retirees $4,343,000 $4,413,000
Other fully
eligible participants 1,175,000 1,496,000
Other active participants 2,463,000 3,228,000
Total benefit obligation 7,981,000 9,137,000
Plan assets at fair
market value (1,955,000) (1,198,000)
Unrecognized transition
obligation (6,183,000) (6,597,000)
Unrecognized net
gain (loss) 1,088,000 (448,000)
Accrued postretirement
benefit cost $931,000 $894,000
For measurement purposes, an 8 percent annual rate of
increase in the per-capita cost of covered health care
benefits was assumed for 1997; the rate was assumed to
decrease gradually to 6 percent by 2020 and remain at that
level thereafter. Increasing the assumed health care cost
trend rates by 1 percentage point in each year would
increase the accumulated postretirement benefit obligation
as of December 31, 1996, by $1,373,000 and increase the net
periodic postretirement benefit cost for the year then
ended by $145,000.
3 Stock-Based Compensation Plans
In May 1996, the shareholders approved a long-term stock
incentive plan for non-employee directors (the Plan). Under
the Plan, non-employee directors are automatically granted
restricted stock and non-qualified options to purchase
shares of common stock. The Company reserved 300,000 shares
of stock for issuance pursuant to the Plan. In May 1996,
the Company awarded 11,000 shares of restricted stock and
granted options for 106,000 shares at $15.125 per share,
the fair-market value on the date of grant. Compensation of
$166,000 for the restricted stock portion was expensed in
1996. All options remain outstanding at year-end and are
exercisable in full from the date of grant through ten
years after the date of grant.
The Company accounts for the option feature of the Plan
under Accounting Principles Board Opinion No. 25, under
which no compensation cost has been recognized. Had
compensation cost for this plan been recorded consistent
with SFAS No. 123, Accounting for Stock-Based Compensation,
net income would have been reduced by $473,000 and earnings
per share reduced by $0.04 for the year ended December 31,
1996. The fair value of each option on the date of grant
was estimated at $4.46 per share using the Black-Scholes
pricing model with the following assumptions: risk-free
interest rate of 6.85 percent; expected dividend yield of
3.0 percent; expected life of ten years; and expected
volatility of 19 percent.
The shareholders in 1994 adopted a long-term incentive plan
for officers and certain other key employees. This plan
provides for overlapping three-year performance cycles with
stock awards established on the first day and earned on the
last day of each performance cycle. The Company reserved
320,000 shares of stock for issuance pursuant to this plan.
Compensation of $14,000, $188,000 and $61,000 was expensed
under this plan in 1996, 1995 and 1994, respectively.
4 Short-Term Borrowings
At December 31, 1996, the Company had bank credit
arrangements of $5,500,000 in conventional lines of credit.
No borrowings were outstanding under the agreements at
December 31, 1995 or 1996.
5 Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value:
Cash and Temporary Investments The fair value of these
investments is estimated based on quoted market prices for
the same or similar issues and approximate the carrying
amount.
Other Investments The balance includes investments in
convertible preferred stock of a non-publicly traded
company, a loan to a business park, community betterment
projects and a retirement trust. The fair value of the
investments in the preferred stock, the business park and
the community betterment projects are stated at the
original cost of $200,000, $500,000 and $73,000,
respectively, due to the impracticability of estimating the
market value. The fair value of the underlying instruments
of the retirement trust is estimated based on quoted market
prices for the same or similar issues. The investment in
the trust is offset by a corresponding liability for future
obligations in Other Non-Current Liabilities.
Long-Term Debt Most of the Company's long-term debt is
not publicly traded; therefore, a market price does not
exist for these bonds. The fair value of long-term debt is
estimated based upon market prices for comparable
securities with similar maturities.
The difference in carrying amounts and fair values of
financial instruments is not expected to result in a
material impact on the Company's financial position or
results of operations. Under the ratemaking principles
followed by the PSC, any gain or loss on early refinancing
of the Company's long-term debt would be used to reduce or
increase the Company's rates over a prescribed amortization
period.
Carrying Fair
Amounts Values
1996
Cash and temporary investments $6,511,000 $6,524,000
Other investments 2,299,000 2,413,000
Long-term debt 73,100,000 78,154,000
1995
Cash and temporary investments $6,489,000 $6,489,000
Other investments 1,727,000 1,837,000
Long-term debt 73,100,000 80,837,000
6 Rate Matters
The Company is subject to rate regulation by the PSC. Rates
are established to enable the Company to recover its
service costs and also to allow the Company an opportunity
to earn a return on its investment. The Company currently
applies SFAS No. 71, Accounting for the Effects of Certain
Types of Regulation, which recognizes the economic effects
of rate regulation. The continued applicability of SFAS No.
71 is continually reviewed based on the current regulatory
environment. While national developments indicate the
industry may become more competitive, there are no
proceedings at the state level to open the markets to
greater competition. Therefore, the Company continues to
believe the utilization of SFAS No. 71 is still
appropriate. Accordingly, the Company has recorded
regulatory assets and liabilities on the Consolidated
Balance Sheets, consisting primarily of deferred taxes as
noted in Note (a) to Consolidated Statements of Taxes.
In June 1994, the PSC ruled on an electric rate request
increasing annual revenues by approximately $2.15 million
(3.1%), effective June 15, 1994. The 1994 order required
the Company to change its regulatory accounting policies
for pension and OPEB expenses. Refer to Note 2 for
discussion of accounting for pension and OPEB expenses.
The PSC approved an industrial steam rate request in
October 1994, which increased annual revenues by $800,000
(12.2%), effective November 2, 1994.
The Company incurred approximately $1.3 million in costs to
restore service to customers following an ice storm in
December 1994. The PSC approved a request to defer and
amortize the expenses over a five-year period, beginning in
March 1995.
In February 1995, the PSC approved a stipulated agreement
regarding the allocation of investments and expenses among
the Company's three business segments. Revenue neutral to
the Company, the agreement was designed to annually reduce
industrial steam revenue by approximately $550,000 and
increase electric and natural gas revenues by $500,000 and
$50,000, respectively. In addition, electric rates were
restructured among various classes. Summer rates were
increased to reflect higher seasonal production costs in
the summer months, while winter rates were lowered. These
revised tariffs were implemented on June 15, 1995.
The Federal Energy Regulatory Commission (FERC) issued
Order 888, Open Access Transmission and Stranded
Investments, in April 1996, requiring electric utilities to
open their transmission lines to other wholesale buyers and
sellers. In response to this order, the Company filed open
access transmission tariffs. It is the Company's belief
that this order will not have a material impact on the
Company's financial position and results of operations. In
April 1996, FERC also issued Order 889, Open Access/Same
Time Information System and Standards of Conduct, which
among other provisions, requires public utilities to
separate their power and energy marketing functions from
their transmission operations. In November 1996, FERC
granted the Company's request for waiver of these
provisions.
7 Commitments and Contingencies
Leases In April 1992, the Company entered into a 50-year
capital lease agreement (36.4-year amortization) with six
other regional utilities for a transmission line and
related facilities. Electric utility plant as of December
31, 1996, includes $3,271,000 for the leased joint
facilities and other property acquired under capital
leases.
The future minimum lease payments under the capital leases
together with the present value of the net lease payments
(obligations under the capital leases) are:
1997 $ 426,000
1998 426,000
1999 426,000
2000 426,000
2001 267,000
Later years 5,750,000
Total minimum lease payments 7,721,000
Less: Amounts representing interest 4,450,000
Present value of obligations
under capital leases $ 3,271,000
The Company also entered into 50-year direct financing
lease agreements (with amortizations ranging from 31 to
36.4 years) for terminal and associated leased joint
facilities. The future minimum lease payments receivable
together with the present value of net receivables under
the leases are:
1997 $ 123,000
1998 123,000
1999 123,000
2000 123,000
2001 123,000
Later years 2,797,000
Total minimum lease payments
receivable 3,412,000
Less: Amounts representing interest 2,372,000
Present value of net
receivables $ 1,040,000
OTHER Commitments The Company's capital budget for 1997
is approximately $13,623,000. The five-year capital budget
is estimated to be $88,784,000, including AFUDC and non-utility
investments.
The Company has entered into long-term contracts to
purchase generating capacity and fossil fuels. Minimum
annual amounts to be purchased under these contracts
approximate $6,559,000, $6,761,000, $7,570,000, $9,514,000
and $11,603,000 for each of the next five years,
respectively.
ENVIRONMENTAL CONTINGENCIES The Company is required to
meet various environmental regulations governing air and
water standards. In order to meet the requirements of Phase
II of the Clean Air Act Amendments which become effective
in 2000, the Company anticipates future expenditures of
approximately $7.4 million at the Lake Road plant.
OTHER CONTINGENCIES Certain legal actions are pending
which may impact the Company. In management's opinion, the
ultimate resolution of these matters is not expected to
materially affect the Company's financial position or
operating results.
8 Segments of Business
The Company is principally a public utility engaged
primarily in the business of generating and distributing
electric energy in a 10-county area in northwest Missouri.
The Company also is engaged in the limited sale of natural
gas and industrial steam. The following table sets forth
certain information regarding the Company's segments of
business.
1996 1995
Operating information (years ended December 31)
Operating revenues:
Electric $83,499,000 $81,994,000
Other 12,370,000 11,527,000
$95,869,000 $93,521,000
Pretax operating income:
Electric $20,073,000 $18,931,000
Other 855,000 1,341,000
$20,928,000 $20,272,000
Other information:
Depreciation expense
Electric $ 9,975,000 $ 9,526,000
Other 499,000 496,000
$10,474,000 $10,022,000
Utility plant expenditures
Electric $14,864,000 $22,032,000
Other 324,000 327,000
$15,188,000 $22,359,000
Asset information (at December 31)
Identifiable:
Electric $204,372,000 $196,936,000
Other 10,189,000 10,550,000
$214,561,000 $207,486,000
Assets not allocated (a) 12,689,000 11,844,000
$227,250,000 $219,330,000
(a) Principally includes investments, cash and deferred
charges.
1994
Operating information (years ended December 31)
Operating revenues:
Electric $78,970,000
Other 11,812,000
$90,782,000
Pretax operating income:
Electric $20,248,000
Other 501,000
$20,749,000
Other information:
Depreciation expense
Electric $9,228,000
Other 606,000
$9,834,000
Utility plant expenditures
Electric $12,950,000
Other 375,000
$13,325,000
Asset information (at December 31)
Identifiable:
Electric $182,457,000
Other 10,481,000
$192,938,000
Assets not allocated (a) 6,761,000
$199,699,000
(a) Principally includes investments, cash and deferred
charges.
9 Quarterly Financial Data (Unaudited)
First Second
Quarter Quarter
1996
Operating revenues $23,619,000 $22,937,000
Operating income 3,540,000 3,829,000
Net income 2,142,000 2,494,000
Weighted average common shares
outstanding 7,822,158 7,851,217
Earnings per average common
share $.27 $.32
1995
Operating revenues $22,800,000 $20,425,000
Operating income 3,585,000 2,814,000
Net income 2,804,000 1,505,000
Weighted average common shares
outstanding 7,815,782 7,812,738
Earnings per average common
share $.35 $.19
Third Fourth
Quarter Quarter
1996
Operating revenues $27,304,000 $22,009,000
Operating income 6,596,000 1,728,000
Net income 5,260,000 461,000
Weighted average common shares
outstanding 7,885,649 7,913,133
Earnings per average common
share $.67 $.06
1995
Operating revenues $29,743,000 $20,553,000
Operating income 7,530,000 1,784,000
Net income 6,218,000 513,000
Weighted average common shares
outstanding 7,812,738 7,812,738
Earnings per average common
share $.80 $.07
Responsibility for Financial Statements
The management of St. Joseph Light & Power Company is
responsible for the preparation and presentation of the
financial information in this Annual Report. The following
financial statements have been prepared in accordance with
generally accepted accounting principles consistently
applied and reflect management's best estimates and
informed judgments as required.
To fulfill these responsibilities, management has developed
and maintains a comprehensive system of internal operating,
accounting and financial controls. These controls provide
reasonable assurance that the Company's assets are
safeguarded, transactions are properly recorded and
resulting financial statements are reliable. An internal
audit function assists management in monitoring the
effectiveness of the controls.
The Report of Independent Accountants on the financial
statements by Arthur Andersen LLP appears on this page.
The responsibility for the independent auditors is limited
to the audit of financial statements presented and the
expression of an opinion as to their fairness.
The Board of Directors maintains oversight of the Company's
financial situation through its monthly review of
operations and financial condition and its selection of the
independent auditors. The Audit Committee, comprised of
board members who are not employees or officers of the
Company, also meets periodically with the independent
auditors and the Company's internal audit staff. The
auditors have complete access to and meet with the Audit
Committee, without management representatives present, to
review accounting, auditing and financial matters.
Pertinent items discussed at the meetings are reviewed with
the full Board of Directors.
Terry F. Steinbecker
President and Chief Executive Officer
Larry J. Stoll
Vice president-Finance, Treasurer and Assistant Secretary
Report of Independent Public Accountants
To the Shareholders of St. Joseph Light & Power Company:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of St. Joseph Light & Power
Company (a Missouri corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated
statements of income, retained earnings, taxes and cash
flows for each of the three years in the period ended
December 31, 1996. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion of these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of St. Joseph Light & Power Company and
subsidiaries as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in
conformity with general accepted accounting principles.
ARTHUR ANDERSON LLP
Kansas City, Missouri
January 23, 1997
DIRECTORS
* JOHN P. BARCLAY JR., 67
Chairman, President and Chief Executive Officer
Wire Rope Corporation of America, Inc.
(Manufacturer and distributor of wire rope and wire rope
products)
St. Joseph, Missouri
Director since 1974.
* DANIEL A. BURKHARDT, 49
General Partner
The Jones Financial Companies
(Investment banking and retail securities firm)
St. Louis, Missouri
Director since 1988.
RICHARD M. BURRIDGE, 68
President
The Burridge Group Inc.
(Money manager)
Chicago, Illinois
Director since 1987.
JAMES P. CAROLUS, 46
President
Hillyard Industries, Inc.
(Manufacturer of maintenance cleaning products)
St. Joseph, Missouri
Director since 1989.
* WILLIAM J. GREMP, 54
Managing Director and
Senior Vice President
First Union Capital
Markets Group
(Banking)
Charlotte, North Carolina
Director since 1995.
DAVID W. SHINNEMAN, 58
President
Shinneman Management Co.
(Operator of McDonald's restaurants)
St. Joseph, Missouri
Director since 1994.
* ROBERT L. SIMPSON, 63
General Partner
St. Joseph Riverboat Partners
(Riverboat casino)
St. Joseph, Missouri
Director since 1983.
GERALD R. SPRONG, 63
President and Chief Executive Officer
The Morris Plan Company of St. Joseph
(Financial management and lending)
St. Joseph, Missouri, and
Director, President and Chief Executive Officer
First Savings Bank, F.S.B.
(Banking)
Manhattan, Kansas, and
President and Chief Executive Officer
Noble Properties of Iowa, L.L.C.
(Ownership & management of hotels)
Des Moines, Iowa
Director since 1976.
TERRY F. STEINBECKER, 51
President and Chief Executive Officer
St. Joseph Light & Power Company
St. Joseph, Missouri
Director since 1985.
OFFICERS
TERRY F. STEINBECKER, 51
President and Chief Executive Officer
GARY L. MYERS, 43
Vice President, General Counsel and Secretary
LARRY J. STOLL, 44
Vice President - Finance, Treasurer and Assistant
Secretary
JOHN A. STUART, 43
Vice President - Customer Service & Energy Delivery
DWIGHT V. SVUBA, 54
Vice President - Energy Supply
* Member of Audit Committee
STRATEGIC INTENT
Northwest Missouri's Energy Choice
STRATEGIC PRINCIPLES
*Increase the level of service to our customers.
*Provide low-cost energy to our customers.
*Provide a competitive return to our shareholders.
*Manage the resources of each business to maximize its
potential, recognizing its unique regulatory and market
characteristics.
*Promote a culture of teamwork, empowerment, and
recognition that challenges employees to be successful.
*Respect the environment.
*Enhance the economic vitality and the quality of live of
Northwest Missouri.
CORPORATE INFORMATION
CORPORATE OFFICES
520 Francis Street
Post Office Box 998
St. Joseph, Missouri 64502-0998
(816) 387-6434
(816) 387-6332 (fax)
1-800-367-4562
http://www.sjlp.com
email: [email protected]
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1500 Commerce Tower
Kansas City, Missouri 64199
STOCK LISTING AND PRINCIPAL MARKET
New York Stock Exchange
Eleven Wall Street
New York, New York 10005
Symbol: SAJ
COMMON STOCK TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60690
ANNUAL SHAREHOLDERS MEETING
The annual meeting of shareholders will be at 9 a.m.,
Wednesday, May 21, 1997, at the Albrecht-Kemper Museum of
Art, 2818 Frederick Boulevard, St. Joseph, Missouri.
Form 10-K
A copy of the Annual Report to the Securities and Exchange
Commission, Form 10-K, will be furnished without charge to
any shareholder upon contacting:
St. Joseph Light & Power Company
Investor Relations Department
520 Francis Street
Post Office Box 998
St. Joseph, Missouri 64502-0998
This report and financial statements contained herein
are submitted for the general information of the security
holders of St. Joseph Light & Power Company, and are not in
connection with, or to induce, any sale or offer to sell or
to buy any securities of the Company, or in connection with
preliminary negotiations for such sale or purchase.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by
reference in the Form 10-K, into the Company's previously
filed Form S-3 Registration Statements (Registration No.
2-90732 and No. 33-64687) and previously filed Form S-8
Registration Statement (Registration No. 333-03839).
/s/Arthur Andersen LLP
Kansas City, Missouri,
March 31, 1997
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